h.b. fuller state of the u.s. adhesive and sealant market 2014

An Overview of the North American Adhesive and Sealant Industry

Content

1. Adhesive and sealant market overview

2. General trends impacting industry

3. H.B. Fuller view on trends

Harmonized market definitions

(ASC-CATIA-FEICA)

Detailed definitions can be found at

www.ascouncil.org, under Industry Intelligence – Resources section

2013 market size for adhesives & sealants

$42.5 billion (sales demand) global CAGR 3.2%

$11.8b

$8.7b

$1.6b2012-2015CAGR 4.3%

2012-2015CAGR 5%

$13.8b

$4.5b*

ROW = 2.1b

2012-2015CAGR 2.3%

2012-2015CAGR 3%

2012-2015CAGR 4.4%

2012-2015*CAGR 3%

Source: 2013 ASC/DPNA North America Market Report

Note 2: * = Calculated Average Growth Rates in % (CAGR) are based uponlbs. of material sold (Demand) – not revenue

Adhesives market segment definitions

1. Paper, Board, Related Products

• Converting/packaging

• Dry and wet lamination

• High-gloss laminating for graphic arts

• Bookbinding, graphic arts industry

• Nonwoven fabrics

• Pressure sensitive products

2. Transportation

• Passenger cars/light trucks

• Repair, maintenance (aftermarket)

• Trucks, buses

• Bicycles, motorcycles and RVs

• Aircraft/aerospace

• Railway

• Shipbuilding and offshore

3. Footwear and Leather

• Footwear

• Leather goods

4. Consumer/Do-It-Yourself (Retail)

5. Building/Construction/Civil Engineering

• On-site applications

• Civil engineering

• Factory assembled parts

• Prefabricated houses

• Thermal insulation materials, curtain

wall panels, etc.

6. Woodworking and Joinery

• Cabinet making

• Furniture manufacture

• Window frames, door manufacture

• Upholstery

7. Assembly Operations

• Sandwich panels

• Appliances and electrical/electronic

• HVAC

• Fabric/apparel

• Medical applications

• Sports equipment and toys

• Abrasives, filters

Source: ASC Market Report

6

North America

(Percent Share of Adhesive and Sealant Demand)

Value: $11.86 Billion

Formulated Product Demand: 7.9 Billion Lbs. 3.6 Million MT

2012-2015 AGR: 2.3%

Source: ASC/DPNA International Inc.

7

North America market statistics 2013 estimated


8

North America adhesive market: 2013 est.


Formulated Product Demand: 7.20 Billion Lbs. 3.3 Million MT

2012-2015 AGR: 2.2%


Paper, etc., 58.8%

Transportation 5.3%

Footwear 0.5%

Consumer 2.8%

Bldg. & Const. 14.1%

Woodworking 8.3%

Assembly 10.2%

9

North America outlook: 2014 adhesive market growth

forecast estimates

Paper, Board and Related Products 2.0%

Consumer/DIY 3.0%

Woodworking/Joinery 2.7%

Assembly 1.8%

Footwear and Leather 2.2%

Building and Construction 2.4%

Transportation 3.1 %

(Annual growth in pounds of consumption)


10

Sealants market segment definitions

1. Transportation

• Passenger cars/light trucks

• Trucks, buses, trailers

• Repair and maintenance (Aftermarket)

• Commercial, recreational watercraft

• Aircraft/aerospace

• Railway

• Ships

2. Consumer/Do-It-Yourself (Retail)

• Household

3. Construction

• Construction/renovation

• OEM, maintenance

• Insulating glass/glazing

• Civil engineering, infrastructure

4. Assembly Operations

• Appliances

• Electronic equipment

• Metal cabinets and housing


11

North America sealant market: 2013 est.


Formulated Product Demand: 716 Million Lbs. 325 K MT

2012-2015 AGR: 2.3%


12

North America outlook: 2014 sealant market growth

forecasts

Assembly/Other 2.7%

Consumer/DIY 1.4%

Transportation 2.4%

Building & Construction 1.8%

(Annual growth in pounds of consumption)


13

Trends the Adhesives and Sealants Council (ASC) is

monitoring

• Growth of mergers and acquisitions

• Transparency in chemical formulations

• U.S. shale oil and gas production

14

Trends ASC is monitoring

Mergers and acquisitions continue to drive value within

North America – and the world

Forbo and Tonsan

ADCO, APS and Clifton

ISP and Hercules

$5.5 billion in cash

15

Trends ASC is monitoring

Expecting more transparency in chemical disclosure

• NGO and regulatory agencies are increasingly adopting hazard-

based tools and requiring companies to disclose chemical make-

up/footprint

• ASC collaborating with industry to ensure risk models are

included for more accuracy

16

U.S. oil and gas production provides raw material

capacity

Fracking oil rich shale deposits + natural gas availability is providing

United States with strong capacity for major raw material feedstocks

17

After 30 years of production decline, the U.S. is

producing crude at 20-year highs

18

Fracking is allowing for growth

Source: North Dakota Department of Mineral Resources

19

And it’s not just oil…

Rising Shale Gas Production:

Marcellus: 11.5 BCFD

Barnett: 4.4 BCFD

Eagle Ford: 3.9 BCFD

Fayetteville: 2.9 BCFD

Woodford: 1.6 BCFD

Bakken: 0.6 BCFD

Rese of US: 3.6 BCFD

Peaked:

Haynesville

Peaked November 2011

Antrim

Declining Since 2000

20

Ethylene impacts key raw material supply

Heavy feeds

100/160

Eth

yle

ne

By-p

rod

ucts

Steam

Cracking

Process

Ethylene

Butadiene

Isoprene

Resin Oils

Aromatics

Gas

Feed (Light)

Liquid

Feed(Heavy)

Light feeds

100/25

Eth

yle

ne

By-p

rod

ucts

Critical to

Adhesive

Polymers

By-products

propylene

crude C4s

pygas

Polypropylene(film grade)

Economic

Driver

21

Benefits to U.S. adhesive and sealant formulators

• Raw materials sourced from light feeds more supply stable

• Formulations based on light feed expected to provide most price stability

• Solid competitive framework for industry

H.B. Fuller View on Trends in Key Growth Markets

The markets H.B. Fuller serves

Packaging AutomotiveBuilding and

ConstructionHygiene

General

Assembly

Paper

ConvertingConsumer

Products

Woodworking Emulsion

Polymers

Electronic

and Assembly

Materials

Targeted growth in key markets

HygieneBaby diapers, Feminine products, Adult incontinence

PackagingConsumer Packaging, Labeling, Flexible Packaging, Packaging Integrity

Durable AssemblyAutomotive, Water Filters, Panel Assembly, Electronic & Assembly Materials, Engineered Textiles, Insulating Glass

Construction ProductsResidential, Remodel, Commercial and Industrial Construction, including Ceramic Tile and Flooring Installation

Global visionStronger teamworkBetter accountability

Hygiene industry market trends

Healthy

Comfortable

Safe

Convenient

Premiumisation

• Low odor

• Breathable

• Natural materials (pure cotton or cotton containing top sheets)

• Soft hand feel

• Moisture management

• Thinner is better

• Leak-proof

• Stretchable waistband or ears for baby diapers

• Wetness indicator becoming the norm

• Consumers demanding higher quality

• Looking for value-added features

• Easy to wear and change

• Online shopping more and more popular

Packaging industry market trends

• Packaging integrity through supply chain

• Wider operating temperature window

• Adhesion to a variety of substrates

• Hassle-free adhesives for ease of use

• Food safety

• Use of bio-degradable and recyclable materials

• Reduce dependency on volatile natural raw materials

• Improved mileage

• Down-time reduction

• Lower total cost in use

Durable

Adaptive

Efficient

Economic

Sustainable

• Reduce non-value added manual labor

• Faster line speeds

• Clean machining

Durable assembly market trends

• Consistent performance

• Proactive problem solving - FMEA

• Leaner

• Faster

• Thinner

• Implementation of industry standards

• Bluesign / Ecopassport for textile

• NSF for drinking water elements

• UL for air filtration

• VOC reduction

• Commitment to environmentally-friendly solutions from manufacturer to consumer

• Sustainable materials

Reliable

Innovative

Standardized

Sustainable

Electronics industry market trends

• Smaller, thinner devices

• Lighter weight devices

• Wearable, portable devices

• Flexible, touchable and reliable devices

• Functionality in watch, shirts and shoes

• Fashion forward, trendy

• Challenging substrates

• Appearance

• Ability to function in today’s active lifestyle

• Durable and long lasting

• More functionality while devices get smaller

• High performance under extreme conditions

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Compact

Wearable

Fashion

Multifunctional

Reliable

China manufacturing trends

• Labor costs increasing in mainland China

• Shift from low cost to high quality mentality

• VOC reduction

• Industry standards developing

• Greener solutions desired

• Employee safety a priority

• Business ethics becoming more important

• Conversion from solvent-based technology to environmentally-friendly solutions

• Manufacturing excellence

• Process improvement to drive efficiencies

• Shift from price per unit to total cost of ownership focus

• Moving from coastal provinces to lower cost inland provinces is encouraged by Chinese government policies

• Some labor intensive manufacturing moving to lower cost countries such as textile and footwear industries

Automation

Green

Safe

Cost Effective

Relocation

Thank You!

h.b. fuller state of the u.s. adhesive and sealant market 2014

Economy & Finance