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| 8-K - FORM 8-K - Kraton Corp | d8k.htm |
 Oppenheimer 5 Annual Industrials Conference
September 29, 2010
th
Exhibit 99.1 |
 Forward-Looking Statement Disclaimer
This
presentation
may
include
“forward-looking
statements”
that
reflect
our
plans,
beliefs,
expectations
and
current
views
with
respect
to,
among
other
things,
future
events
and
financial
performance.
Forward-looking
statements
are
often
characterized
by
the
use
of
words
such
as
“believes,”
“estimates,”
“expects,”
“projects,”
“may,”
“intends,”
“plans”
or
“anticipates,”
or
by
discussions
of
strategy,
plans
or
intentions.
All
forward-looking
statements
in
this
presentation
are
made
based
on
management's
current
expectations
and
estimates,
which
involve
risks,
uncertainties
and
other
factors
that
could
cause
actual
results
to
differ
materially
from
those
expressed
in
forward-looking
statements.
Readers
are
cautioned
not
to
place
undue
reliance
on
forward-looking
statements.
These
risks
and
uncertainties
are
more
fully
described
in
“Part
I.
Item
1A.
Risk
Factors”
contained
in
our
Annual
Report
on
10-K,
as
filed
with
the
Securities
and
Exchange
Commission
and
as
subsequently
updated
in
our
Quarterly
Reports
on
Form
10-Q,
and
include
risks
related
to:
conditions
in
the
global
economy
and
capital
markets;
our
reliance
on
LyondellBasell
Industries
for
the
provision
of
significant
operating
and
other
services;
the
failure
of
our
raw
materials
suppliers
to
perform
their
obligations
under
long-term
supply
agreements,
or
our
inability
to
replace
or
renew
these
agreements
when
they
expire;
limitations
in
the
availability
of
raw
materials
we
need
to
produce
our
products
in
the
amounts
or
at
the
prices
necessary
for
us
to
effectively
and
profitably
operate
our
business;
competition
in
our
end-use
markets,
by
other
producers
of
SBCs
and
by
producers
of
products
that
can
be
substituted
for
our
products;
our
ability
to
produce
and
commercialize
technological
innovations;
our
ability
to
protect
our
intellectual
property,
on
which
our
business
is
substantially
dependent;
infringement
of
our
products
on
the
intellectual
property
rights
of
others;
seasonality
in
our
Paving
and
Roofing
business;
financial
and
operating
constraints
related
to
our
substantial
level
of
indebtedness;
product
liability
claims
and
other
lawsuits
arising
from
environmental
damage
or
personal
injuries
associated
with
chemical
manufacturing;
political
and
economic
risks
in
the
various
countries
in
which
we
operate;
the
inherently
hazardous
nature
of
chemical
manufacturing;
health,
safety
and
environmental
laws,
including
laws
that
govern
our
employees’
exposure
to
chemicals
deemed
harmful
to
humans;
regulation
of
our
customers,
which
could
affect
the
demand
for
our
products
or
result
in
increased
compliance
costs;
international
trade,
export
control,
antitrust,
zoning
and
occupancy
and
labor
and
employment
laws
that
could
require
us
to
modify
our
current
business
practices
and
incur
increased
costs;
our
relationship
with
our
employees;
loss
of
key
personnel
or
our
inability
to
attract
and
retain
new
qualified
personnel;
fluctuations
in
currency
exchange
rates
;
the
fact
that
we
do
not
enter
into
long-term
contracts
with
our
customers;
a
decrease
in
the
fair
value
of
our
pension
assets,
which
could
require
us
to
materially
increase
future
funding
of
the
pension
plan;
and
concentration
of
ownership
among
our
principal
stockholder,
which
may
prevent
new
investors
from
influencing
significant
corporate
decisions.
We
assume
no
obligation
to
update
such
information.
Further
information
concerning
issues
that
could
materially
affect
financial
performance
related
to
forward
looking
statements
can
be
found
in
our
periodic
filings
with
the
Securities
and
Exchange
Commission.
2 |
 GAAP
Disclaimer 3
This
presentation
includes
the
use
of
both
GAAP
(generally
accepted
accounting
principles)
and
non-GAAP
financial
measures.
The
non-GAAP
financial
measures
are
EBITDA
and
Adjusted
EBITDA.
The
most
directly
comparable
GAAP
financial
measure
is
net
income/loss.
A
reconciliation
of
the
non-GAAP
financial
measures
used
in
this
presentation
to
the
most
directly
comparable
GAAP
measure
is
included
herein.
We
consider
EBITDA
and
Adjusted
EBITDA
important
supplemental
measures
of
our
performance
and
believe
they
are
frequently
used
by
investors
and
other
interested
parties
in
the
evaluation
of
companies
in
our
industry.
EBITDA
and
Adjusted
EBITDA
have
limitations
as
analytical
tools
and
should
not
be
considered
in
isolation
or
as
a
substitute
for
analysis
of
our
results
under
GAAP
in
the
United
States. |
 37%
21%
42%
4
4%
7%
31%
26%
32%
Kraton
Overview
We
invented
and
commercialized
Styrenic
Block
Copolymer (SBC) technology nearly 50 years ago
We believe that we hold #1 market share positions in each
of our end-use markets providing industrial, consumer and
geographical diversification that is second to none
We design and manufacture customized SBC polymer and
compound solutions to meet our leading customers’
specific innovation needs
We produce the following:
•
Unhydrogenated
Styrenic
Block Copolymers
(USBC’s)
•
Hydrogenated Styrenic
Block Copolymers
(HSBC’s)
•
Isoprene Rubber and Isoprene Rubber Latex
We currently offer approximately 800 products to more
than 700 customers, in over 60 countries
We employ approximately 830 people in 9 locations in all
major regions of the world
First half 2010 revenue of $605 million and Adjusted
EBITDA
(1)
of $106 million; 17.5% margin
(1)
Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related
charges, non-cash expenses, and the gain on extinguishment of debt
(2)
Management Estimates
2009 Revenue by End-Use
(2)
2009 Revenue by Geography
(2)
North and
South
America
Europe,
Middle
East &
Africa
Asia Pacific
Paving and
Roofing
Adhesives,
Sealants and
Coatings
Other
Emerging
Businesses
Advanced
Materials
Clear SBC Market Leader Globally |
 5
Investment Highlights
Leadership
Clear leader in the fast growing, attractive SBC market
More
than
1.6x
the
size
of
our
largest
competitor
in
each
of
our
end-use
markets
The only producer with a global footprint and service capabilities
Innovation-
Driven Top-
Line Growth
Most-productive innovator of new SBC polymers
Successfully leveraging product knowledge and technical expertise to commercialize
next generation of innovative solutions
Earnings
Growth
Driven by compelling organic growth platforms, expanding presence in Asia,
sustained volume growth and new product introductions
Margin
enhancement
through
continued
“Smart
Pricing”
strategy
and
innovation
Created meaningful operating leverage through significant improvement in cost
structure Investing
capital
in
high-return
projects
–
driving
profitable
growth
in
key
products
and
geographies
Experience
Strong leadership team demonstrating continuous improvement in productivity,
innovation and margin improvement
High
Barriers to
Entry
Patented technology, custom designed product, process excellence, global reach
and customer relationships create strong competitive position that cannot
be matched by existing or potential competitors
Competitive position allows for price leadership
Best-in-class service levels: 100% of products delivered on-demand
on-time |
 6
SBCs
Enhance Performance Attributes
Durability
Elasticity
Impact
Soft Touch
Clarity
Adhesion
We are a Highly Engineered, Performance Materials Business
Recyclable |
 7
Clear Leader in Attractive Markets
Market Position
2009 Revenue
(1)
#1
77%
Adhesives, Sealants,
and Coatings
Advanced Materials
#1
74%
Paving and Roofing
#1
63%
Emerging Businesses
(4)
#1
100%
32%
31%
26%
7%
1.9x
2.0x
1.6x
N/A
Source:
Management estimates
(1)
Based on 2009 sales of $920 million (excludes by-product sales which are
reported as other revenues) (2)
Industry
volume
growth
from
2001-2009,
Emerging
Businesses
growth
rate
refers
to
Kraton’s
Isoprene
Rubber
(“IR”)
and
Isoprene
Rubber
Latex
(“IRL”)
growth
from
2005-2009
(3)
Management’s estimates vs. next largest competitor based on 2009 sales
(4)
The Emerging Businesses end use market includes our IR and IRL business. We believe
that we are the only major third-party supplier of IR and IRL, and therefore end use market share
metrics are not meaningful
#1 Market Position and More than 1.6x the Size of Our Closest Competitors
Growth
(2)
5.9%
7.4%
6.5%
26.8%
Kraton
Market
Share Relative
To #2
Competitor
(3)
Top 4 Market
Share |
     8
Before Kraton
After Kraton
Kraton
Makes Products Better
Stretch in legs only
(Spandex)
Not a fitted garment
High leakage rate
Overall improvement in stretch
(where it’s needed)
Better fit
Low leakage rate
Kraton
market share: 50%
2001 –
2009 CAGR: 11.5%
Kraton
material as % of Diaper cost: <2%
Phthalate plasticizers are
used to make PVC soft
but they can leach from
finished products and
create health concerns
Limited recyclability
PVCs
are unsafe when
burned or incinerated
improperly
Environmentally friendly –
100% recyclable
Kraton
imparts softness, toughness and clarity
Plasticizer & chlorine free
Kraton material as % of finished product cost: <5%
|
 9
SBCs
Are a Growth Industry
SBC Industry Volume (kT)
(1)
SBCs
Grow Faster Than GDP
Adoption and penetration of SBCs
into
new applications and end-markets lead to
industry growth of ~2x GDP
Growing demand from emerging
economies
Innovation and new SBC product
introductions
End use application growth (e.g.,
PVC alternatives for wire & cable
and medical applications such as IV
bags, etc.)
Growing demand for
environmentally friendly and greener
alternatives in electronics, medical
and baby care markets
Low cost relative to value added /
performance with limited substitution risk
(1)
Management Estimates. Excludes footwear end-use in which Kraton
does not actively compete
675
1,112
1,599
2001
2009
2014 |
 10
Sustainable Competitive Advantages
Almost 50 years of process know-how and
expertise
Performance-critical products and manufacturing
complexity
Technical
Barriers
Globally recognized brand –
Kraton
®
Industry-leading R&D infrastructure
Global low-cost manufacturing footprint
Significant regulatory hurdles / barriers to new
manufacturing sites
Stable raw material base with multiple sources of
supply and contracts / relationships
Collaborative customer relationships –
15+ years
with majority; sole source with several customers
Infrastructure
Barriers
Superior and
Innovative Products
+
High Customer
Switching Costs
+
Long-Term
Customers
Relationships
=
Leading
Market Position
Products designed collaboratively to meet
specific customer needs / applications
Preferred partner based on manufacturing
consistency and process know-how
Ongoing technical service offering
100% of products offered with no lead times
High
Value
Added |
 Compelling Organic Growth Platforms
11
Advanced
Materials
Adhesives,
Sealants &
Coatings
Paving and
Roofing
Emerging markets growth
Expansion into new and differentiated markets, such as
protective films, oilfield service applications, spray and
extrusion coatings, hot melt adhesives, elastic adhesives,
labels and sealant applications
Superior performing SBS modified emulsions for
asphalt
modification
Low VOC roof coating formulations for superior water
resistance, improved adhesion and reduced installation cost
“Green”
PVC alternatives to the wire and cable industry
Enabling technology for high performance fabric solutions
“Soft Touch”
covers and solutions to the automotive industry
NEXAR
®
–
high-end membrane technology markets for
performance clothing, HVAC applications and fuel cells
Co-extrusion technology for surface protection
Applications
Isoprene
Rubber Latex
Medical applications –
surgical gloves
Material substitution –
condoms
HiMA
Protective Films
Soft Skins
IRL Gloves |
 12
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