Second Quarter 2019 Results Presentation August 6, 2019
General Disclosure This presentation includes “forward -looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. When used in this presentation, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” or future or conditional verbs, such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management’s examination of historical operating trends and data, are based upon our current expectations of future events and various assumptions which may not be realized or accurate. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will be achieved. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this presentation. Such risks, uncertainties and other important factors include, among others: future global economic conditions, our ability to transfer production of certain specialty and differentiated products from our Pori, Finland manufacturing facility to other sites in our manufacturing network, the costs associated with such transfer and the closure of our Pori facility, our ability to realize financial and operational benefits from our business improvement plans and initiatives, impacts on TiO2 markets and the broader global economy from the imposition of tariffs by the U.S. and other countries, changes in raw material and energy prices, access to capital markets, industry production capacity and operating rates, the supply demand balance for our products and that of competing products, pricing pressures, technological developments, legal claims against us, changes in government regulations, geopolitical events, cyberattacks and other risk factors as discussed in our annual report on Form 10-K filed on February 20, 2019. This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the U.S. ("GAAP"), including EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow and net debt and certain ratios and other metrics derived therefrom. We have provided reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures in the Appendix to this presentation.
Second Quarter 2019 Highlights Financial summary $ in millions, except per share amounts 2Q19 2Q18 1Q19 Revenues 578 626 562 Net income (loss) attributable to Venator 21 196 (3) Adjusted net income attributable to Venator 14 91 14 Adjusted EBITDA 61 157 60 Diluted earnings (loss) per share 0.20 1.84 (0.03) Adjusted diluted earnings per share 0.13 0.85 0.13 Net cash (used in) provided by operating activities (21) 254 (29) Free cash flow (50) 159 (82) See Appendix for reconciliations and important explanatory notes 3
Titanium Dioxide Stable sequential TiO 2 price and a seasonal volume improvement Revenues Adjusted EBITDA $ in millions $ in millions 500 165 160 $147 155 $455 150 $439 145 450 140 $425 135 $23 130 125 120 115 400 110 105 100 95 (2) 90 22% 27% 85 350 80 75 70 $61 65 $55 60 300 55 50 45 40 35 30 250 14% 25 13% 20 15 10 5 0 200 2Q19 2Q18 1Q19 2Q19 2Q18 1Q19 Titanium Dioxide Adjusted EBITDA margin Pori EBITDA adjustment Second Quarter Highlights Outlook TiO 2 prices were flat Q/Q (1) (declined 9% (1) Y/Y) Near Term Functional TiO 2 price stability Volumes increased 9% Y/Y due to increased sales of Volumes to reflect historical seasonal patterns new products and higher availability of certain products Favorable outlook for specialty TiO 2 Specialty TiO 2 price and demand remained stable Raw material cost inflation EBITDA benefit from the 2019 Business Improvement Program of $3mm Longer Term Benefit from 2019 Business Improvement Program EBITDA benefit from the transfer of specialty technology Favorable industry fundamentals for TiO 2 (1) In local currency 4 (2) Adjusted EBITDA margin excluding the Pori EBITDA adjustment
Performance Additives Softer demand partially offset by restructuring benefits Revenues Adjusted EBITDA $ in millions $ in millions 200 195 25 190 $23 185 $171 180 175 170 165 160 155 $139 20 $137 150 145 140 135 $16 130 125 $15 120 115 15 110 105 100 13% 95 90 12% 85 11% 80 10 75 70 65 60 55 50 45 40 5 35 30 25 20 15 10 5 0 0 2Q19 2Q18 1Q19 2Q19 2Q18 1Q19 Performance Additives Adjusted EBITDA margin Second Quarter Highlights Outlook Prices decreased 1% (1) Y/Y Near Term EBITDA benefit from prior restructuring Volumes declined 16% Y/Y due to lower construction Volumes to reflect historical seasonality; pricing stable activity in North America and Europe, soft demand in automotive, electronics and plastics applications and a Longer Term discontinuation of sales of a product to a Timber Benefit from 2019 Business Improvement Program Treatment customer Continued optimization of manufacturing network EBITDA benefit from the 2019 Business Improvement Program of $1mm (1) In local currency 5
Delivery on Business Improvement Program Expect to deliver ~$40mm annual EBITDA benefit Expected Annual EBITDA Capture Areas of EBITDA Improvement $ in millions $ in millions $40 ~$30 >$10 TiO2 efficiencies Performance SG&A reduction EBITDA 2019 2020 Additives costs Improvement and improvements 2019 Business Improvement Program Highlights Target $40 million of annual adjusted EBITDA benefit Benefits from: – $4 million of incremental EBITDA benefit in 2Q19 – TiO 2 manufacturing costs and efficiencies – $7 million of cumulative benefit captured through – Performance Additives costs and improvements 2Q19 – Reduction in SG&A – Expect to exit 2020 at the targeted run-rate (1) (1) Compared to year-end 2018 baseline 6
Adjusted EBITDA Bridges Second Quarter 2019 Year / Year EBITDA Bridge $ in millions $157 $(64) $23 (1) $134 $(18) $7 $4 $61 $(6) $4 2Q18 Adjusted Price/Mix Volume COGS Carbon Credit 2019 Business SGA / FX 2Q19 Adjusted EBITDA Improvement EBITDA Program Quarter / Quarter EBITDA Bridge $ in millions $60 $11 $7 $(12) $(7) $61 $2 1Q19 Adjusted EBITDA Price/Mix Volume COGS 2019 Business SGA / FX 2Q19 Adjusted EBITDA Improvement Program See Appendix for reconciliations and important explanatory notes 7 (1) Pori EBITDA adjustment
Capital Resources Sequential moderation in cash uses in the second quarter Financial profile Actual Estimate $ in millions Liquidity of $307mm as of June 30, 2019 Cash Uses 2Q19 YTD 2019E – $50mm of cash and $257mm available under the Adjusted EBITDA 61 121 ABL – Upsized the ABL capacity by $50mm in 2Q19 to Capital expenditures (1) (20) (48) (130) $350mm Cash interest (5) (23) (40)-(45) Net debt leverage (3) of 3.0x Primary working capital change (43) (91) 25-40 – No significant debt maturities until 2024 (4) Taxes Restructuring (10) (17) (30)-(35) – 2019 expected adj. effective tax rate of ~35%; cash Other (includes pension) (14) (18) (60)-(70) tax rate of 10-15% – Long-term adj. effective tax rate of 15-20%; cash tax Cash income taxes (2) (3) 10 - 15% rate of 10-15% Pori cash expenses, net (2) (17) (53) (65)-(70) – ~$1.1bn of Net Operating Losses Total free cash flow $(50) $(132) See Appendix for reconciliations and important explanatory notes (1) Includes specialty technology transfer capital expenditures 8 (2) Includes Pori wind-down costs, closure costs and prior capital expenditures at Pori unrelated to the transfer program (3) Defined as net debt divided by trailing 12 month adjusted EBITDA as of June 30, 2019 (4) Scheduled maturities of our debt, excluding debt to affiliates and excluding borrowings under the ABL
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