shane fleming, chairman, president ceo...

Investor DayInvestor Day

Shane Fleming, Chairman, President & CEO

March 3, 2009

Forward Looking Statement and Non‐GAAP Measures

During the course of this meeting we may make forward‐looking statements. All statements that address expectations or projections about the future are forward‐looking statements.

Some of these statements include words such as “expects”, “anticipates,” “plans,” “intends,” “projects,” and “outlook.” Although they reflect our current expectations, these statements are not guarantees of future performance because they involve a number of risks, uncertainties, and assumptions.

We recommend that you review Cytec’s SEC filings for a discussion of some of the factors which could cause actual results to differ materially from its expectations and projections. This and other Cytec information may be accessed at www.cytec.com.

In sections of this presentation certain ‘non‐GAAP” measures are provided and identified as such. We believe that the “non‐GAAP” measures can more accurately reflect comparisons of year to year trends and is consistent with how we review the information. A reconciliation of all “non‐GAAP” measures to the applicable GAAP measure is provided in the appendix at the end of this presentation.GAAP measure is provided in the appendix at the end of this presentation.

Today’s Agenda

Our Cytec of CashOur Team

Our Vision

Cytec of Tomorrow

Cash Businesses

Dealing With the Times

Working Capital

InitiativesClosing Q&A

Initiatives

Our Team

Shane FlemingCEO

Bill AvrinDave Drillock

CFO

Bill AvrinVP, Corporate & Business Development

Our Team

Frank AranzanaPresident,

Cytec Specialty Chemicals

Roy SmithVice President, General Counsel, and SecretaryChemicals and Secretary

Steve SpeakSteve SpeakPresident,

Cytec EngineeredMaterials

Regina CharlesVP, HumanResources

Today’s Agenda

OurOur Cytec of CashOur Vision

Our Team

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Our Vision

“Delivering technology beyond our customers’ imagination”

S i bl d Ch ll i dSustainable and profitable growth

Challenging and rewarding culture

Technology leader Positively impact society

Today’s Agenda

Our Our Cytec of CashOur Team

Our Vision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Cytec of Tomorrow

Growth Platform

In Process Separation

Engineered Materials

Eco‐FriendlyCoatings

Cash Product Lines

Growth Platform Attributes

Attractive Growth MarketAttractive Growth Market


Cytec Market LeadershipCytec Market Leadership


Cytec Technology LeadershipCytec Technology Leadership


Adjacent Growth OpportunitiesAdjacent Growth Opportunities

Growth Platforms

Growth Platform Today




Ph hi Mi ib dAd d St t l Phosphines Mining Chemicals

Waterborne RadcureAdvanced Composites

Structural Adhesives

Growth Platform Components

Growth Opportunities

Future Growth Opportunities – Market & Technology Adjacencies

Enhanced MagneticSeparation

Electrostatic Separation

ElectronicCoatings

StructuralAdhesives

Industrial Composites




Growth PlatformGrowth Platform

Cytec of TomorrowFuture Growth Opportunities

EnhancedMagneticSeparation

Electrostatic Separation

ElectronicCoatings

StructuralAdhesives





Phosphines Mining Chemicals

Waterborne RadcureAdvanced Composites

Structural Adhesives

Growth Platform Today

Cytec of Tomorrow

Growth Platform




Cash Product Lines

Engineered MaterialsCore Business Portfolio

Advanced Composites Structural & Specialty Adhesives

Carbon Fiber and Textiles

Engineered MaterialsAttractive Growth Market

Global Market Reinforced Materials$20B

High Performance Engineered Materials $4B

Industrial Aerospace & Defense

• Technology and performance driven • Long‐term growth story

Market Attributes

gy p

• High development and qualification hurdles

– Expanding base market– Conversion from metals/fasteners

to composites/bonded structures


Value Drivers for Engineered Materials

Stronger and Stiffer• Lighter weight• Higher performance • Lower fuel costs

Hi h C i d• Less maintenance

High Corrosion and Fatigue Resistance

• Lower repair cost• Lighter weight

Design and Fabrication of Complex Integrated

• Lower production costs• Lighter weightI d d i

Complex Integrated Components

• Improved aerodynamics• Stealth


Commercial Transport

Large Transport

Regional & Business

Jets

Military & Space High Performance Industrial

Engineered MaterialsMarket Trends: Large Commercial

gh ≥ 50%

Compo

sites Hig

Percen

tage of C

%PLow ≤ 10%

1970 1980 1990 2000 2010 2020

• Long‐term growth in air travel

Market Factors

• Fundamental shift to composites

Growth Drivers

• Large order backlog and multiple new programs

• Increased need for structural and specialty adhesives

Engineered MaterialsMarket Trends: Regional and Business Jets

Growth Drivers

• Fundamental shift to composites ‐following large transport adoption

• Long‐term growth in air travel

Market Factors

following large transport adoption

• 12 new platforms in long‐range development cycle

• RJ programs in China, Russia and Japan – “building blocks” for future large transport programs

• Increased performance critical to RJ and BJ business case

g p p g

Engineered MaterialsMarket Trends: Military & Space

50%

60%

EuroFi ht

UCAV

ent

20%

30%

40%

AV 8BRafale F18 E/F

F/A 22

B2

F35Fighter

mpo

site Con

te

Joint Strike Fighter will drive segment growth

0%

10%F15

F18CD

Mirage C17

1970 20101980 1990 2000

Com

Increasing Composite Usagewill drive segment growth

Engineered MaterialsCytec Market Leadership

2008 Sales ‐ $748 Million / Operating Margin 21%

Engineered MaterialsCytec Market Leadership

Engineered MaterialsTechnology Leadership – Composites

Next Generation Composites

• Toughening technology and materials forToughening technology and materials for automated processing

• Higher performance carbon fiber composites

• New processes: non‐autoclave curing

Resin Infusion Materials

• Materials heritage used for engineered textile competency

• PRIFORM™ solution for 787 rear pressure bulkhead

Engineered MaterialsTechnology Leadership ‐ Adhesives

High Performance ThermoplasticsHigh Performance Thermoplastics

•Strong internal competency

•Out of autoclave processing, highly complex structures

Adhesives, Surfacing Films and Primers

•Industry‐leading surfacing film portfolio

•Bringing to market next‐gen adhesive bonding performance

•Eco‐friendly non‐chromated primer systems•Eco‐friendly non‐chromated primer systems

Engineered MaterialsTechnology Leadership – Carbon Fiber

• Core technologies – important for long‐term growth

• Investing to develop next generation of materials technology

• Pursue balance between external and internal supply

12K Nameplate Capacity (MM lbs)

2002 3.5

2008 7.0

2011 11 02011 11.0

Future Carbon Fiber Manufacturing Site

Engineered MaterialsTechnology Leadership

• Europe (Germany) high volume production plant (2005)

Matching Capacity and Supply to Customer Demand

• China Prepreg plant (start‐up 2009)

• Adhesives – North America Expansion (start‐up 2008)

• Carbon Fiber pilot plant and new capacity (pilot line – 2009, expansion –2010)

• North America –New prepreg plant (planning phase)North America New prepreg plant (planning phase)

Manufacturing Center Östringen, Germany

Future China Manufacturing Site

Engineered MaterialsAdjacent Growth Opportunities


• Accounts for 10% of current revenue

• Industrial market adoption rate growing

L t h l f li ti t id f t f• Leverage technology for applications outside of current focus

Engineered MaterialsAdjacent Growth Opportunities

Adhesives

• Focus has been aerospace film and primer technologies

• Opportunity to leverage full Cytec portfolio across multiple markets

Cytec of Tomorrow

Growth Platform




Cash Product Lines

Eco‐Friendly CoatingsAttractive Growth Market

$90B Global Coatings Market

Source: BCC Research 2007, Irfab 2008


2007 Market = 13 Million Tons

Source: Irfab 2008


Waterborne Coatings

General Industrial Protective Coatings

Metal Packaging Automotive OEM


Radcure Coatings

ElectronicsWood Coatings

Graphics Plastics


Europe and North America have introduced legislation which places limits on the emission of VOCs in paints

• Solvent Emissions Directive

Europe US & Canada

• National Ambient Air standards

• Paint Products Directive • Clean Air Act

• EPA/State rules


Industrial Coatings Technologies by Region

EuropeUSA

Asia

ROW


Global Market Growing at 2x GDP


Market Drivers

EfficiencyEnvironmental Performance

Eco‐Friendly CoatingsCytec Market Leadership

Leadership position in fragmented competitive environment

Waterborne ‐ $270 mln in sales Radcure ‐ $457 mln in sales

Eco‐Friendly CoatingsCytec Technology Leadership

RESYDROL® & DAOTAN® for Waterborne Architectural Paint•Designed for high gloss wood trim and direct‐to‐metal coatingsDesigned for high gloss wood trim and direct to metal coatings•Driving market share gain as tech shifts away from solvent borne

BECKOPOX® for Waterborne Anticorrosion•Protects heavy duty metal and concreteProtects heavy duty metal and concrete•Enables VOC‐compliant coating formulations

PHENODUR® Phenolic Crosslinkers •Protects metal for use in food preservation Protects metal for use in food preservation•Enables Bis‐phenol A and BADGE free coatings for metal packaging

Eco‐Friendly CoatingsCytec Technology Leadership

Radcure Expansion in Asia

• Monomers Fengxian, China plant startup 2001startup 2001

• Oligomers Fengxian, China plant startup 2008

• Further expansion in the pipeline

First Waterborne Resin ProductionFirst Waterborne Resin Production in North America

• RESYDROL*alkyd Wallingford, CT plant startup in 2008startup in 2008

• BECKOPOX*epoxy Langley, SC plant startup in 2008

Eco‐Friendly CoatingsAdjacent Growth Opportunities

UV CURABLE WATERBASED • Broad product rangeBroad product range

• Addresses stringent environmental regulations

• Cutting edge primer for wood and PVC flooring

• High‐end spray for furniture and cabinets

• Top coat for plastic and electronics

COIL COATING • Compliant with new regulations

• Replaces 3 steps of the current process with 1

• Low temperature and fast cure speed

• Exterior durability and excellent surface performances

Eco‐Friendly CoatingsAdjacent Growth Opportunities

FIELD APPLIED COATINGS• Broadens potential for radcure productsE i t ll f i dl N VOC• Environmentally friendly – No VOCs

• Target markets ‐ factory floors, high traffic areas

PHOTOVOLTAICS• For integrated and off grid applications• Roll‐to‐roll printing opportunities• Barriers/light management/conductive inks

UVEKOL® FLAME RETARDANT• Resins for fire retardant glass and safety impact resistance• Patented technology• Passed UL‐94 certification

Cytec of Tomorrow

Growth Platform




Cash Product Lines

In Process SeparationAttractive Growth Market

World Alumina Demand GrowthWorld Copper Demand Growth

9 6%

10.0%

95000

100000

105000

18500

19000

19500

0 3%

6.3%

4.1%

5.0%‐4.0%

3.8%

9.6%

80000

85000

90000

000 MT

17000

17500

18000

000 MT 0.3%

1.0%

‐4.6%

Source: Brook Hunt Copper Metal Service – March 2009 Source: CRU Market Outlook for Alumina – February 2009

750002007 2008 2009 2010 2011 2012

165002007 2008 2009 2010 2011 2012

2008 Cytec Mining Sales +13%driven by new products & improved mixdriven by new products & improved mix

In Process SeparationAttractive Growth Market

Geographic Expansion Opportunities

Former East Bloc Countries% f l b l C d i 20%% of global Copper production 20%% of Cytec sales 3%

• Russia

• China• Mongolia

• Kazakhstan

Rest of WorldRest of World% of global Copper production 80%% of Cytec sales 97%

In Process SeparationCytec Market Leadership

Unmatched Leadership Position The Leading Share

#1 in Market Share

#1 in R&D InvestmentCytec $300mln

#1 in Technical Service

#1 in Sales CoverageOver 50 other smaller players

#1 in Products Offered

#1 in Production Sites

#1 in Geographic Reach

$1.4B specialty mining chemical industry

#1 in Geographic Reach


I P M k C P i iIn Process Market Cytec Position

Flotation:

Collectors, Modifiers, Flocculants, FrothersGlobal leader

Alumina:

Antiscalants

Filter and Dewatering Aids

Innovator in alumina

Filter and Dewatering Aids

Metal Extractants Industry leader in solvent extraction

Adjacent Opportunities:

Electrostatic Separation Enhancers

Magnetic Separation Enhancers

Proprietary position in industrial minerals


Leadership position built with strategic bolt‐on acquisitions . . .

1997 1997 1999 2003

ACORGA® solvent extractants for

copper

Xanthates and derivatives for the South American

Custom reagentsfor industrial minerals

Specialty frothers for mineral processing

mineral processing markets

Flotation Flotation Flotation Extractant

In Process SeparationCytec Technology Leadership

…and by leveraging in‐house R&D

Innovative tray flocculant for the

Novel process for customized reagent

Breakthrough anti‐scalant for the

Improved gold collectors for higher

alumina refining industry

selection for base metals, precious

metals and industrial minerals

alumina refining industry

flotation yield and greater recovery

2004 20062005 2007

In Process SeparationCytec Technology Leadership

Future Technology Innovation

500 900 Acorga®

Next generation anti scalant

Magnetic separation

Innovative anti scalant

Novel solvent extraction reagentsanti‐scalant

technology for the alumina refining

industry

separation enhancing

technologies for industrial mineral

applications

anti‐scalant technology for the alumina refining

industry

extraction reagents for nickel, rare earths, precious

metals

2009 20112010

applications

2012

In Process SeparationAdjacent Growth Opportunities

Separation Technology Opportunities

Separation TechnologyCurrent

Market Presence

Cytec Growth Opportunity

1 – 3 Years 4‐8 Years

Copper Molybdenum Gold PlatinumMineral Flotation

Copper, Molybdenum, Other Base Metals

Gold, Platinum, Nickel

Bauxite

Solvent ExtractionCopper, Cobalt, Rare

EarthsMinor Metals,

NickelEthanol

Scale Control Alumina Phosphoric Acid

Magnetic Separation KaolinCarbonate, Fine

GoldWater

PurificationGo d u cat o

Electrostatic Separation Rutile/ZirconElectronics recycling

15 Minute Break

Today’s Agenda


Our Vision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Cash Businesses

Growth Platform




Cash Product Lines

Cash Businesses

Cash Product Lines

Cash product lines remain important to our success

Cash Product Lines

Powder & SolventBuilding Block AdditiveResinsChemicals Technologies

Cash Businesses

Focus on Existing Products

Lower R&D investment,focus on process innovation

Focus on immediate customer needs

Capital Uses

Safety/Maintenance Quick payback projects

Cash Businesses

Maximize Cash Generation

Low cost service model Operational Excellencep

Working Capital Management

Cash Businesses

Divestitures/Asset Sales

Cash Generating BusinessCash Generating Business

M k t I t t E i tM k t I t t E i tP i NPVP i NPV Market Interest ExistsMarket Interest ExistsPrice > NPVPrice > NPV

OpportunisticOpportunistic

Today’s Agenda


Our Vision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Dealing with the Times

Our values will help us weather the storm

Focus on customers & suppliers

Ethical behavior

TransparencyStrong governanceHard working TransparencyStrong governanceHard working


Customers are suffering

Fasten Your Seatbelts: Aerospace Cycle Slowing Down Jan 30, 2009,

February 17, 2009


Challenges – Chemical Industry

Adverse trends:

• Higher cost of creditd i d• Harder to invest and grow

• Industrial demand contracting


• “Depression Era” mentality

• We’ve bounced back from tough times before

2008: Deal 2005: UCB Acquisition

with the Times

2001: 9/11


$90 million benefit on an annualized basis

Restructuring Actions Announced

• Reduction of excess manufacturing capacity

• Consolidation of manufacturing facilities

• Migration to regional shared services

• Simplifying business processes and

Utilize lean

organization

“Right‐Sizing” Assets

10% reduction of workforce

Utilize lean manufacturing and

Six Sigma


History of Prudent Fiscal Management


Strong Balance SheetLong‐term Debt/Good Maturing Profile = $806.1B

Investment grade rated by Moody’s and Standard and Poor’s


Actively Manage Liability


Uses of Cash

• Maintenance of business capital

• Capital projects to support the growth businesses

• Pay down debt (next tranche due Oct 2010)

• Bolt‐on acquisitions (stock buyback hurdle rate)

• Dividends/Stock buyback

Focus on Free Cash FlowFocus on Free Cash Flow


Maintain Capital Spend at $200Mable to fund the growthable to fund the growth

2008A 2009E


Staying opportunistic ‐ capital spend

• All‐Site Safety Investments

• CPC ‐Max HT Mining Chemicals Expansion ‐Thailand

CSS Radc re Plant Shanghai China• CSS ‐ Radcure Plant –Shanghai, China (completed 2008)

• CSS ‐Waterborne Resins –Wallingford, CT, Shanghai, China

phase 2 underway

• CEM ‐ Composites Plant –Shanghai, China

CEM N C b Fib Pl t G ill SC• CEM ‐ New Carbon Fiber Plant –Greenville, SC

• CEM ‐ Carbon Fiber Pilot Line –Greenville, SC

• CEM High volume composite line TBD• CEM ‐ High volume composite line, TBD

Wallingford, CT

Today’s Agenda


Our Vision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Working Capital Initiatives

Working Capital Blocking and Tackling

A P bl A R i bl• Create standard payment terms

• Change payment clock from “date ” “ f

Accounts Payable Accounts Receivable• Segment customers

• Proactive vs. reactive to late payerson invoice” to “receipt of invoice date”

• Classify (80/20 rule)

D fi i l l f t

Inventory Management Compensation System• Approx. 35% of incentive comp tied to working capital• Define service levels for customers

and products

• Produce to schedule

to working capital

Goal: One Inventory Turn, $200 Million

Working Capital Initiatives

Cash Conversion Efficiency = Cash Flow from Ops.Net Sales

Our near‐term goal is 10%, top quartile 16%

Major Drivers

• Receivables • RestructuringsReceivables• Inventory• Payables

Restructurings• Other Assets &

Liabilities

Today’s Agenda


OurVision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Growth Platform




Cash Product Lines

Portfolio Transformation

Increase percentage of revenue coming from growth platforms

EBIT %of sales

2009

Revenue Growth %

• New products and applications

• Penetrate new markets

• Operate to maximize cash generation

• Utilize cash to fund investment in

Revenue Growth %Cash BusinessesInvest in Growth Platforms

• Expand services offered

• Bolt‐on acquisitions / technology

growth platforms

• Monetize certain product lines

Cytec of Tomorrow

Drive expansion of growth platforms across Cytec portfolio

Growth Cash

25%

50%

Operating Margin 7% Operating Margin >10%

Forecast Financial Metrics (%)Forecast Financial Metrics (%)

Top Line Growth Growth Platforms 2x‐3x GDP

EPS Growth > 10%

Operating Margin > 10%

ROIC > WACC

Today’s Agenda


Our Vision

Cytec of Tomorrow

Cash Businesses


Working Capital


Initiatives

Appendix

Appendix

Reconciliation of “Non‐GAAP” Measures to GAAP Measures

Management believes that net after‐tax earnings and diluted earnings per share before special items, non‐GAAP measures, are meaningful to investors because they provide a view of the Company with respect to ongoing operations. Special items represent significant charges or credits that are important to an understanding of the Company’s overall operating results in the periods presented. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.

Th f ll i bl li h i l i d dj d i d dil d iThe following table lists the net special items used to adjust reported net earnings and diluted earnings per share for the years 1996 through 2006. The excluded net special items are explained in the Management’s Discussion and Analysis Section of the annual report on Form 10‐K and in the Company’s year end financial press releases both of which can be found on the Company’s website, www.cytec.com.

YearReported Net Earnings

Net Special Items

Non-GAAP Net Earnings

Reported Diluted Earnings per Share

Net Special Items

Non-GAAP Diluted Earnings per Share

1998 124.7 (2.8) 121.9 2.68 (0.06) 2.621999 121 3 (5 8) 114 5 2 73 (0 13) 2 61999 121.3 (5.8) 114.5 2.73 (0.13) 2.62000 178 (55.9) 122.1 4.15 (1.30) 2.852001 71.1 6.5 77.6 1.71 0.15 1.862002 79.3 3.2 82.5 1.96 0.08 2.042003 77.4 13.6 91 1.93 0.34 2.272004 121 1 3 0 124 1 2 96 0 07 3 032004 121.1 3.0 124.1 2.96 0.07 3.032005 59.1 83.5 142.6 1.27 1.80 3.072006 195.2 (27.1) 168.1 4.01 (0.56) 3.452007 206.5 (14.6) 191.9 4.20 (0.30) 3.902008 (198.8) (366.0) 167.2 (4.16) 7.62 3.46

shane fleming, chairman, president ceo...

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