Eastman Chemical Company recently held 2018 Innovation Day, where executive management discussed the company's current focus on innovation to drive growth and value creation.
Mark Costa, Chairman and CEO of Eastman, said: 'We have built an innovative and efficient growth model unique to Eastman that encompasses world-class technology platforms, continuous market expansion and differentiated application development. Among them, as a key driver of growth, application development not only demonstrates the value of innovation, but also accelerates value conversion while helping to deepen our understanding of the value of our products. In addition, through proactive and efficient product portfolio management, the company's profitability, The cash flow structure has improved thanks to these efforts, despite the macroeconomic downturn, from 2010 to 2017, the company's adjusted EBITDA profit growth still exceeded 90%, of which organic growth and acquisitions about Half the company has generated nearly $ 3 billion in free cash flow over the past three years.
Mark Costa said: 'In the future, we hope to continue to create value with innovative growth models and strong cash flow generating capacity. In the next three years, our specialty product revenue growth is expected to reach twice the market growth rate. Adjusted EBITDA The pre-amortization profit margin will continue to grow on the basis of the current 23% and is expected to generate approximately $ 3.5 billion of free cash flow. In addition, return on investment capital is expected to remain at 10% to 15%, well above the cost of capital. In the meantime, our adjusted CAGR of EPS is expected to reach 8% to 12% over the next three years. The strong expected growth is proof of our strength in product portfolio and innovation capability. '
Financial Outlook: Strong financial strength
Curt Espeland, executive vice president and chief financial officer, said a good financial position remains one of Eastman's strengths, highlighting the company's advantages in terms of assets and liabilities and free cash flow, which will give Eastman a grasp in the future Organic and inorganic growth opportunities laid a solid foundation in the three years from 2018 to 2020, Eastman is expected to create about 3.5 billion in free cash flow, return on investment is expected to be 10% to 15%, higher than the cost of capital 3% To 8%. The company will continue to maintain a reasonable capital allocation and strike a balance between capital expenditures, joint ventures, acquisitions and shareholder rebates. In addition, Curt Espeland reiterated his company's commitment and determination to maintain an investment-grade credit rating. Eastman has increased dividends for eight consecutive years, the future, with the profit growth, this increase is expected to continue.
Subsequently, Curt Espeland announced that the Eastman Board of Directors has approved a $ 2 billion common stock buyback program, saying: "The Board's move shows that we are confident in our cash flow generating ability, And will continue to bring returns to shareholders. '
Specialty Materials: Driven by innovation, providing material solutions
Brad Lich, executive vice president and chief commercial officer, explores how Eastman Specialty Materials can deliver the company's strategy of great value, including specialty plastics, advanced interlayer and high-performance film product lines, according to Brad Lich Focusing on specialty applications with potential for sustainable innovation and covering a broad range of engineered polymers and specialty membranes, he explains how products like Saflex® automotive interlayer, LLumar® high performance membranes and medical copolyesters innovate through Eastman innovations Growth model to achieve customer win-win best practices.In addition, he also said that specialty materials business will continue to open up the market to explore the growth potential of two to three times the market average growth in the professional field, through the application development to activate the market and create value.
According to Brad Lich, the specialty materials business achieved growth primarily due to sales growth of core products that are above or above the market average, high value products whose profit growth is above core products in the product portfolio, and fixed cost advantages. The Specialty Materials business has been successful With innovation driving growth, new business revenue in 2017 is approximately $ 175 million and is expected to reach $ 250 million by 2020. He also predicts that specialty materials businesses are expected to achieve single-digit median single digit percentages of sales revenue from 2018 to 2020 Growth, operating profit margin will exceed 20%, operating profit compound annual growth rate will reach 7% to 10%.
Fiber: Stabilize core business and accelerate growth in new applications
Fibers Business Unit While maintaining its core business of acetate tow steady development, we are also developing new applications in the textile market. According to Brad Lich, two-thirds of the acetate tow business has signed multi-year trading contracts and 2017 25 new-grade acetate tow products have been put into commercial use and are planned to offset the adverse impact of the declining demand in the acetate tow market through a multi-year value-added plan. He also said that to develop new applications, MAN launched three new textile-oriented brands in 2017 - Naia ™, Vestera ™ and Avra ™ - and the Fibers business reported strong annual sales growth in Q4 2017, up about 30% in Q4 2017 from a year earlier. According to Brad Lich, operating profit margin for the fiber business is expected to exceed 25% from 2018 to 2020, and operating profit is expected to reach a CAGR of 1% to 3%.
Additives and functional materials: a good trend of high performance additives and formula products business
Lucian Boldea, SVP for Additives and Functional Materials, describes how the business implemented the company's growth strategy, including the introduction of a range of high performance additives and formulations to meet key performance needs and engage with customers in depth. Lucian Boldea discusses the Tetrashield ™ Eastman's Enhanz ™ Animal Nutrition Additives and Eastman Impera ™ High Performance Resins have been able to grow their business and grow sustainably with Eastman's innovative growth model. In addition, he analyzed how to use Eastman and rival size differences brought about by the cost and R & D competitive advantage to promote the sustainable growth of the business.He pointed out that with the differential application development capabilities, Eastman can penetrate the various areas of the value chain , So as to strengthen in-depth cooperation with customers.
According to Lucian Boldea, the growth of the additive and functional materials business is mainly attributed to the sales growth of core businesses outperforming industrial production growth, the innovation initiatives that are driving growth, and the competitive advantages resulting from larger and more integrated businesses Additives and functional materials have successfully driven growth through innovation, with new business revenues of about $ 100 million in 2017 and expected to reach $ 250 million by 2020. He also predicts that from 2018 to 2020, the business of additives and functional materials business Revenue is expected to exceed 4 billion US dollars, operating profit margin of about 20%, the compound annual growth rate will reach 5% to 7%.
Eastman innovation: effectively improve people's quality of life
Steve Crawford, senior vice president and chief technology officer, talks about how Eastman can enhance innovation, including enhancing effective innovation through portfolio management, developing investment transformations to improve efficiency, and building on Eastman's unique and innovative growth model. Innovations in the textile market include differentiated solutions based on application development as well as innovative cellulose acetate and modified polyester technology platforms, as well as analysis of how rubber additives, coating formulations and animal nutrition Steve Crawford concluded that Eastman has achieved some success with innovation, with revenue of about $ 300 million for innovative business in 2017 and is expected to continue to increase to around $ 500 million by 2020.
Eastman Board of Directors Approves New $ 2 Billion Share Repurchase Program
The board of directors has approved a $ 2 billion Eastman Common Stock Repurchase program which will be done through open market or private purchases in batches. The timing, amount and manner of stock repurchases will be determined by management based on market conditions , Relevant securities laws and regulations and other factors, may be suspended or terminated at any time. Eastman also may be completed under one or more '10b5-1' terms in full or partial repurchase, which will enable Eastman to be protected against insider trading The repurchase is done according to the pre-defined terms when either the law or the rules of own trade are limited.