![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9911.jpg)
James J. O'Brien, Chairman and Chief Executive Officer
Lamar M. Chambers, Senior Vice President and Chief Financial Officer
John E. Panichella, President, Ashland Aqualon Functional Ingredients
Paul C. Raymond III, President, Ashland Hercules Water Technologies
Eric N. Boni, Director, Investor Relations
KeyBanc Analyst Day
August 14, 2009
August 14, 2009
Formula for growth.
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9912.jpg)
2
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based
upon a number of assumptions, including those mentioned within this presentation. Performance estimates are
also based upon internal forecasts and analyses of current and future market conditions and trends;
management plans and strategies; operating efficiencies and economic conditions, such as prices, supply and
demand, and cost of raw materials; legal proceedings and claims (including environmental and asbestos
matters); and weather. These risks and uncertainties may cause actual operating results to differ materially
from those stated, projected or implied. Other risks and uncertainties include the possibility that the benefits
anticipated from Ashland's acquisition of Hercules will not be fully realized; Ashland's substantial
indebtedness may impair its financial condition; the restrictive covenants under the debt instruments may
hinder the successful operation of Ashland’s business; future cash flow may be insufficient to repay the debt;
and other risks that are described in filings made by Ashland with the Securities and Exchange Commission
(the “SEC”). Although Ashland believes its expectations are based on reasonable assumptions, it cannot
assure the expectations reflected herein will be achieved. This forward-looking information may prove to be
inaccurate and actual results may differ significantly from those anticipated if one or more of the underlying
assumptions or expectations proves to be inaccurate or is unrealized or if other unexpected conditions or
events occur. Other factors, uncertainties and risks affecting Ashland are contained in Ashland's periodic
filings made with the SEC, including its Form 10-K for the fiscal year ended Sept. 30, 2008, and Form 10-Q for
the quarters ended Dec. 31, 2008, and March 31 and June 30, 2009, which are available on Ashland’s Investor
Relations website at http://investor.ashland.com or the SEC’s website at www.sec.gov. Ashland undertakes no
obligation to subsequently update or revise the forward-looking statements made in this presentation to reflect
events or circumstances after the date of this presentation.
of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based
upon a number of assumptions, including those mentioned within this presentation. Performance estimates are
also based upon internal forecasts and analyses of current and future market conditions and trends;
management plans and strategies; operating efficiencies and economic conditions, such as prices, supply and
demand, and cost of raw materials; legal proceedings and claims (including environmental and asbestos
matters); and weather. These risks and uncertainties may cause actual operating results to differ materially
from those stated, projected or implied. Other risks and uncertainties include the possibility that the benefits
anticipated from Ashland's acquisition of Hercules will not be fully realized; Ashland's substantial
indebtedness may impair its financial condition; the restrictive covenants under the debt instruments may
hinder the successful operation of Ashland’s business; future cash flow may be insufficient to repay the debt;
and other risks that are described in filings made by Ashland with the Securities and Exchange Commission
(the “SEC”). Although Ashland believes its expectations are based on reasonable assumptions, it cannot
assure the expectations reflected herein will be achieved. This forward-looking information may prove to be
inaccurate and actual results may differ significantly from those anticipated if one or more of the underlying
assumptions or expectations proves to be inaccurate or is unrealized or if other unexpected conditions or
events occur. Other factors, uncertainties and risks affecting Ashland are contained in Ashland's periodic
filings made with the SEC, including its Form 10-K for the fiscal year ended Sept. 30, 2008, and Form 10-Q for
the quarters ended Dec. 31, 2008, and March 31 and June 30, 2009, which are available on Ashland’s Investor
Relations website at http://investor.ashland.com or the SEC’s website at www.sec.gov. Ashland undertakes no
obligation to subsequently update or revise the forward-looking statements made in this presentation to reflect
events or circumstances after the date of this presentation.
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9913.jpg)
3
3
Agenda
• Ashland Overview and Strategy
• Ashland Hercules Water Technologies
• Ashland Aqualon Functional Ingredients
List of Abbreviations Used in This Presentation
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9914.jpg)
4
To be a leading, global specialty chemicals company
that is a market leader in all major businesses
that is a market leader in all major businesses
Ashland Vision for the Future
• Built on three growth platforms
– Ashland Aqualon Functional
Ingredients
Ingredients
– Ashland Hercules Water
Technologies
Technologies
– Ashland Performance Materials
• Investing in two primary
chemistries
chemistries
– Water-soluble polymers
– Thermoset resins
• Sharing three common capabilities
– Application expertise
– Formulation expertise
– Polymerization expertise
• Focused on five key markets
– Paper and packaging
– Personal care
– Pharmaceutical
– Construction
– Transportation
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9915.jpg)
5
Ashland
Consumer
Markets
Consumer
Markets
(Valvoline)
Ashland
Performance
Materials
Materials
Ashland
Hercules
Water
Technologies
Water
Technologies
Ashland
Distribution
Ashland
Aqualon
Functional
Ingredients
Functional
Ingredients
#1 global leader
in unsaturated
polyester resins
and vinyl ester
resins
in unsaturated
polyester resins
and vinyl ester
resins
#3 passenger-
car motor oil
and
#2 quick-lube
chain in the
United States
car motor oil
and
#2 quick-lube
chain in the
United States
#2 plastics
and #3
chemicals
distributor
in North
America
and #3
chemicals
distributor
in North
America
#1 global
producer
of
papermaking
chemicals
producer
of
papermaking
chemicals
#2 global
producer
of cellulose
ethers
producer
of cellulose
ethers
Ashland
Strong Leadership Positions
in the Markets We Serve
in the Markets We Serve
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9916.jpg)
6
1 For the 12 months ended June 30, 2009.
Ashland
Ashland
Distribution
Distribution
11%
11%
Ashland Consumer
Markets
29%
Markets
29%
Ashland Hercules
Water Technologies
Water Technologies
Ashland Hercules
Water Technologies
Water Technologies
21%
21%
Ashland
Ashland
Aqualon Functional
Aqualon Functional
Ingredients
Ingredients
28%
28%
• 60 percent of EBITDA comes from specialty chemicals
• More than 25 percent from renewable materials
Pro Forma Ongoing EBITDA1
by Commercial Unit
by Commercial Unit
ASH
NYSE Ticker Symbol:
~2,600
Active patents worldwide:
~650
Active patents in U.S.:
More than
100
100
Number of countries
in which Ashland
has sales:
in which Ashland
has sales:
~15,000
Employees:
Corporate Profile
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9917.jpg)
7
Ashland
Distribution
37%
Distribution
37%
Ashland
Distribution
37%
Distribution
37%
Ashland
Consumer
Markets
18%
Consumer
Markets
18%
By Commercial Unit
20%
20%
1 For the 12 months ended June 30, 2009, including intersegment sales.
North
America
68%
America
68%
North
America
68%
America
68%
Latin America/
Other - 4%
Other - 4%
Europe
Europe
21%
21%
• 32 percent of total revenue comes
from outside North America
from outside North America
Trailing 12 Months' Pro Forma1
Sales and Operating Revenue
Sales and Operating Revenue
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9918.jpg)
8
North
America
America
North
America
America
42%
42%
Asia
Pacific
Pacific
Asia
Pacific
Pacific
17%
17%
Europe
37%
Latin America/
Other - 4%
Coatings
26%
26%
Coatings
26%
26%
Energy & Spec.
Solutions
25%
Solutions
25%
Regulated
Industries
28%
Industries
28%
Regulated
Industries
28%
Industries
28%
Revenue
by Geography
by Geography
Revenue
by Market
by Market
For the 12 Months Ended June 30, 2009
Pro Forma Revenue: $1.0 billion
Pro Forma Ongoing EBITDA: $216 million
Pro Forma Ongoing EBITDA Margin: 21.6%
Business Overview | |
Customers | • Diversified, global customer base |
Products | • Broad product line based on renewable resources - Water-soluble polymers (cellulose ethers and guar derivatives) - Refined wood rosin and natural wood terpenes |
Markets | • Water-based paints • Regulated markets - Personal care - Food - Pharmaceuticals • Construction • Paper coatings • Oilfield (chemicals and drilling muds) |
Revenue
by Product
by Product
CMC
17%
17%
CMC
17%
17%
HEC
28%
28%
HEC
28%
28%
MC
22%
22%
MC
22%
22%
Other
17%
17%
Other
17%
17%
Stumpwood
Derivatives
Derivatives
6%
6%
Construction
21%
21%
Construction
21%
21%
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9919.jpg)
9
• Use leadership position in cellulose ethers
to drive growth through product innovation
and geographic expansion
to drive growth through product innovation
and geographic expansion
• Invest in additional water-soluble polymers that can be
leveraged across multiple growth platforms and markets
leveraged across multiple growth platforms and markets
• Leverage deep customer relationships
in core markets (coatings, construction,
personal care and pharmaceutical) to introduce
high-value complementary products
in core markets (coatings, construction,
personal care and pharmaceutical) to introduce
high-value complementary products
Ashland Aqualon Functional Ingredients
Strategy
Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99110.jpg)
10
North
America
America
48%
Latin America/
Other - 6%
Other - 6%
E&PS
16%
16%
E&PS
16%
16%
Pulp/Paper
59%
Business Overview | |
Customers/ Markets | • Pulp and paper processing • Industrial and institutional • Mining • Municipal wastewater treatment |
Products/ Services | • Process chemicals for microbial and contaminant control, pulping aids and retention aids • Functional chemicals for sizing and wet strength • Utility water treatments • Process water treatments |
Revenue
by Geography
by Geography
Revenue
by Market
by Market
Asia
Pacific
11%
Pacific
11%
Europe
35%
35%
For the 12 Months Ended June 30, 2009
Pro Forma Revenue: $1.9 billion
Pro Forma Ongoing EBITDA: $165 million
Pro Forma Ongoing EBITDA Margin: 8.7%
Ashland Hercules Water Technologies
A major global supplier of process and functional chemicals
A major global supplier of process and functional chemicals
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99111.jpg)
11
• Build on leadership position
in specialty papermaking chemicals
through product-line extension and
geographic expansion
in specialty papermaking chemicals
through product-line extension and
geographic expansion
• Extend best-in-class, market-focused business model
to additional water-intensive verticals, leveraging
core process chemical technologies
to additional water-intensive verticals, leveraging
core process chemical technologies
• Continue to optimize operational efficiency
of high-volume functional chemical assets
of high-volume functional chemical assets
Ashland Hercules Water Technologies
Strategy
Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex9922.jpg)
12
North
America
America
North
America
America
56%
56%
Europe
27%
Latin
America/
Other - 8%
America/
Other - 8%
Trans-
portation
portation
Trans-
portation
portation
18%
18%
Ind.
Constr.
Constr.
30%
Business Overview | |
Customers | • Auto manufacturers; foundries; pipe and tank fabricators; packaging and converting; bathware, countertop and window lineal manufacturers; pipe relining contractors; boat builders; wide and narrow web printers |
Products/ Services | • Adhesives and Composites - Unsaturated polyester resins - Vinyl ester resins - Gelcoats - Pressure-sensitive adhesives - Structural adhesives - Specialty resins • Casting Solutions - Foundry binder resins - Chemicals - Sleeves and filters - Design services |
Markets | • Construction, packaging and con- verting, transportation, and marine |
Revenue
by Geography
by Geography
Revenue
by Market
by Market
For the 12 Months Ended June 30, 2009
Pro Forma Revenue: $1.3 billion
Pro Forma Ongoing EBITDA: $81 million
Pro Forma Ongoing EBITDA Margin: 6.3%
Res. Constr.
11%
Infra-
structure
structure
14%
Asia
Pacific - 9%
Pacific - 9%
Ashland Performance Materials
A global leader in specialty chemicals
A global leader in specialty chemicals
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99113.jpg)
13
• Use market insight and thermoset chemistry expertise
to create innovative substitutes that are stronger,
lighter and more resistant than traditional materials
for core transportation, construction and
infrastructure markets
to create innovative substitutes that are stronger,
lighter and more resistant than traditional materials
for core transportation, construction and
infrastructure markets
• Use leadership position in unsaturated polyester resins
and vinyl ester resins to catalyze growth
in Brazil, Russia, India and China
and vinyl ester resins to catalyze growth
in Brazil, Russia, India and China
• Further build position in packaging and converting market,
capitalizing on strength in high-end, solvent-based systems
to drive innovation from our new water-based and
radiation-cured technologies
capitalizing on strength in high-end, solvent-based systems
to drive innovation from our new water-based and
radiation-cured technologies
Ashland Performance Materials
Strategy
Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99114.jpg)
14
Lubricants
84%
Filters - 2%
Valvoline
Int'l
20%
Int'l
20%
Valvoline
Int'l
20%
Int'l
20%
Do-It-
Yourself
Yourself
38%
Business Overview | |
Customers | • Retail auto parts stores and mass merchandisers who sell to consumers; installers, such as car dealers and quick lubes; distributors |
Products/ Services | • Valvoline® lubricants and automotive chemicals • MaxLife® lubricants for high-mileage vehicles • SynPower® synthetic motor oil • Eagle One® and Car Brite® appearance products • Zerex® antifreeze • Valvoline Instant Oil Change® service |
Market Channels | • Do-It-Yourself (DIY) • Do-It-For-Me (DIFM) • Valvoline International |
Revenue
by Product Line
by Product Line
Revenue
by Market Channel
by Market Channel
Do-It-
For-Me
40%
For-Me
40%
DIFM:
Installer channel
29%
Installer channel
29%
Specialty/
Other - 2%
Other - 2%
DIFM:
Valvoline Instant
Oil Change - 11%
Valvoline Instant
Oil Change - 11%
Antifreeze - 5%
Appearance
products - 3%
products - 3%
Chemicals - 6%
For the 12 Months Ended June 30, 2009
Pro Forma Revenue: $1.7 billion
Pro Forma Ongoing EBITDA: $227 million
Pro Forma Ongoing EBITDA Margin: 13.4%
Ashland Consumer Markets: A leading worldwide
marketer of premium-branded automotive lubricants and chemicals
marketer of premium-branded automotive lubricants and chemicals
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99115.jpg)
15
• Use superior consumer insight to create channel-focused
solutions that leverage the Valvoline brand
solutions that leverage the Valvoline brand
• Build brand loyalty in key Do-It-Yourself (DIY) growth
segments, such as youth and Hispanics, through
highly targeted advertising, promotions and programs
segments, such as youth and Hispanics, through
highly targeted advertising, promotions and programs
• Continue to deliver preferred customer experience
in oil-change business through superior employee training,
store traffic optimization, point-of-sale enhancements
and highly targeted service offerings
in oil-change business through superior employee training,
store traffic optimization, point-of-sale enhancements
and highly targeted service offerings
Ashland Consumer Markets
Strategy
Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99116.jpg)
16
Chemicals
Chemicals
49%
49%
Plastics
39%
Environmental
Services/Other
- 3%
Services/Other
- 3%
Construction
Construction
24%
24%
Other
15%
Business Overview | |
Customers | • Diversified customer base in North America and Europe |
Products/ Services | • More than 28,000 packaged and bulk chemicals, solvents, plastics and additives • Comprehensive, hazardous and nonhazardous waste- management solutions in North America |
Markets | • Construction • Transportation • Chemical manufacturing • Paint and coatings • Retail consumer • Personal care • Medical • Marine |
Revenue
by Product
Line
by Product
Line
Revenue
by Market
by Market
Trans-
portation
portation
15%
Paint & Coatings - 10%
Medical - 6%
Marine - 4%
Com-
posites
posites
9%
Chemical Mfg.
- 11%
- 11%
Retail
Consumer - 8%
Consumer - 8%
Personal
Care - 7%
Care - 7%
For the 12 Months Ended June 30, 2009
Pro Forma Revenue: $3.4 billion
Pro Forma Ongoing EBITDA: $88 million
Pro Forma Ongoing EBITDA Margin: 2.6%
Ashland Distribution
A leading North American chemicals and plastics distributor
A leading North American chemicals and plastics distributor
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99117.jpg)
17
• Continue focus on efficiency to create
highest-value channel for customers and suppliers
highest-value channel for customers and suppliers
• Build best-in-class product offering by aligning
with globally leading suppliers that:
with globally leading suppliers that:
– have low-cost production
– can ensure continuity of supply
– are investing in their business
– are industry leaders in quality and reliability
• Leverage Ashland's technical resources and asset network
to provide mass market penetration for specialty products
to provide mass market penetration for specialty products
Ashland Distribution
Strategy
Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99118.jpg)
18
Ashland Recent Performance and
Near-Term Outlook
Near-Term Outlook
• Repayment of debt through cash flow is a priority
to achieve investment-grade credit statistics
to achieve investment-grade credit statistics
– Reduced gross debt to under $2 billion at June 30
• Focus on generating and growing cash flow
– Generated cash flows from operating activities of $649 million
for fiscal year-to-date at June 30
for fiscal year-to-date at June 30
– Can be supplemented with noncore assets sales
• Exceeded $265 million cost-reduction target by $22 million,
three months ahead of plan
three months ahead of plan
• Margin and price management mitigating significant volume declines
• Resizing business and cost structure to reflect
20-percent volume-reduction environment
20-percent volume-reduction environment
• Ashland is well-positioned to outperform as the economy improves
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99119.jpg)
19
Ashland's Strategy
• Focus on specialty chemicals supported by Hercules acquisition
• Generate cash flow for paying down debt
• Manage cost structure and leverage new scale
• Reduce volatility of earnings and cash flow
and retain conservative financial position
and retain conservative financial position
• Invest in sustainable technologies to decrease reliance
on petroleum-based raw materials
on petroleum-based raw materials
• Continue to grow in water-intensive industries
to capitalize on increasing demand for clean, usable water
to capitalize on increasing demand for clean, usable water
• Leverage formulation and application expertise
into adjacent markets that value our customized-service model
into adjacent markets that value our customized-service model
• Accelerate investment in long-term high-growth nations
such as Brazil, Russia, India and China
such as Brazil, Russia, India and China
• Improve position in core specialty chemical businesses,
while reducing investment in noncore businesses
while reducing investment in noncore businesses
![](https://capedge.com/proxy/8-K/0001305014-09-000070/water2.jpg)
Paul C. Raymond III, President
20
Ashland Hercules Water Technologies
Formula for growth.
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99121.jpg)
21
Microbial Control
Contaminant Control
Foam Control
Retention Aids
Softness
Strength
Printability
Sizing
Cooling Water
Wastewater
Influent Water
Boiler Water
Process
Additives
Additives
Water
Treatment
Chemicals
Treatment
Chemicals
Functional
Additives
Additives
How Our Products Are Used
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99122.jpg)
22
Application Expertise -
Understanding Customers’
Unique Applications
Customer Intimacy -
Sales and Market
Alignment
Technology Expertise -
Process, Water Treatment, Functional
Core of the Business … How We Make Money
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99123.jpg)
23
0
2
4
6
8
10
12
14
16
18
20
2004
2005
2006
2007
2008
0
5
10
15
20
25
30
% Sales
# Platforms
AHWT Platform Launch
• Reflects strategic priorities
• Emphasizes high-margin
products
products
• Showcases platforms that
build competitive advantage
build competitive advantage
Organizational
Alignment
Alignment
• Dedicated team in each region
• Specific accountabilities
Platform Launch
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99124.jpg)
24
Time
(years)
Traditional Cooling
Water Chemistries
Water Chemistries
Corrosion Inhibitors
Scale Control
Biocides
Incubator Market
Identification
Bus Plan
Dev.
Incubator
Commercialization
Value
Capture
New Growth Curve
Growth Step Change
Hybrid Technology
SONOXIDE + chemical treatment
SONOXIDE®
ultrasonic
water
treatment
system
ultrasonic
water
treatment
system
Incubator Businesses
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99125.jpg)
25
Sonoxide Ultrasonic Water Treatment System
• Nonchemical, microbiological control
for cooling water systems
for cooling water systems
• Market: $800 million in cooling water
• Improved environmental profile
• Energy optimization
• Reduced chemical use
• Improved worker safety
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99126.jpg)
26
Global Technology Footprint
• Research & Development
– Wilmington, Delaware, U.S.A.
– Krefeld, Germany
• Customer Applications Laboratories
– Wilmington, Delaware, U.S.A.
– Krefeld, Germany
– Shanghai, P.R. China
– Paulinia, Brazil (2010)
![pg27](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99127.jpg)
27
17. Beringen, Belgium
18. Busnago, Italy
19. Helsingborg, Sweden
20. Krefeld, Germany
21. Perm, Russia
22. Sobernheim, Germany
23. Somercotes, United Kingdom
24. Tampere, Finland
25. Tarragona, Spain
26. Voreppe, France*
27. Zwijndrecht, Netherlands
14. Americana, Brazil
15. Leme, São Paulo, Brazil
16. Paulinia, Brazil
1. Burlington, Ontario, Canada
2. Chicopee, Massachusetts
3. Franklin, Virginia
4. Greensboro, North Carolina
5. Hattiesburg, Mississippi*
6. Houston, Texas
7. Kearny, New Jersey*
8. Louisiana, Missouri
9. Macon, Georgia
10. Mexico City, Mexico
11. Milwaukee, Wisconsin
12. Portland, Oregon
13. Savannah, Georgia
28. Beijing, P.R. China
29. Kim Cheon, Korea
30. Nanjing, P.R. China*
31. Nantou, Taiwan
32. Perawang, Indonesia
33. Shanghai, P.R. China
34. Singapore
35. Chester Hill, Australia
* Facility closure announced.
Global Manufacturing Footprint
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99128.jpg)
28
Business Strategy
• Follow Responsible Care* principles to ensure that safety
and environmental excellence are core values
and environmental excellence are core values
• Achieve leadership positions in all of our growth
and base markets
and base markets
• Improve sales mix through new product introduction
• Grow top line in adjacent markets and emerging geographies
• Leverage external technology to augment internal efforts
• Balance service delivery investment to maximize
profitable growth
profitable growth
• Maintain reliable and efficient global supply chain
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99129.jpg)
29
Water
Test
$4 B
Test
$4 B
Municipal Water &
Wastewater
Treatment
Wastewater
Treatment
Municipal Water &
Wastewater
Treatment
Wastewater
Treatment
$138 B
$138 B
Infrastructure $40 B
Valves
$40 B
$40 B
Valves
$40 B
$40 B
Pumps $25 B
Other Water-Related $20 B
Residential $18 B
Water Market
~$365 B
~$365 B
Industrial Water
Treatment
Treatment
Industrial Water
Treatment
Treatment
$80 B
$80 B
Functional
Chemicals
Chemicals
Functional
Chemicals
Chemicals
$10 B
$10 B
Pigments & Fillers
Pigments & Fillers
$7.4 B
$7.4 B
Coatings
$5.5 B
Bleaching
Bleaching
$4.7 B
$4.7 B
Pulping
$4.3 B
Process Chem $2 B
Deinking $1 B
Global Water/Pulp & Paper Market $400 Billon
AHWT Target
Markets
Markets
$28.5 B
Water
Treatment
Treatment
Water
Treatment
Treatment
$17.5 B
$17.5 B
Pulp & Paper
Pulp & Paper
$11.0 B
$11.0 B
Non-Focus
Water Segments
· Equipment and
hardware
hardware
· Infrastructure
· Residential
· Water test
Non-Focus
Paper Segments
· Pigments and fillers
· Coatings
· Deinking
· Bleaching
Sources: Poyry Global Pulp & Paper Market Review, 2008: Goldman Sachs Water Sector Primer,
June 2005; Global Water Intelligence (GWI) Global Water Market Survey, 2008; The Future
of Global Water Treatment Chemicals Market, Pira International; Citi Investment Research,
“A Rising Tide of Growth” (March 2008), internal estimates.
June 2005; Global Water Intelligence (GWI) Global Water Market Survey, 2008; The Future
of Global Water Treatment Chemicals Market, Pira International; Citi Investment Research,
“A Rising Tide of Growth” (March 2008), internal estimates.
Defining AHWT’s Markets
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99130.jpg)
30
• Pulp
• Other
$2.0 B
• Size
• Strength
• Retention aids
• Boiler water
• Cooling water
• Waste water
• Recovery boilers
AHWT Position
• Leading position in boiler &
cooling water treatment
for paper, commercial &
institutional, food & bever-
age, general manufacturing
and marine
cooling water treatment
for paper, commercial &
institutional, food & bever-
age, general manufacturing
and marine
• Significant player in highly
fragmented market
fragmented market
$0.9 B
$1.1 B
• Leading position in size,
strength, retention aids,
MB
strength, retention aids,
MB
• Complementary ultrasonic
technology to current MB
control offering
technology to current MB
control offering
• Sizeable, but underperforming,
position in polyacrylamides
(municipal)
position in polyacrylamides
(municipal)
Water
Treatment
Treatment
Water
Treatment
Treatment
~$900 MM
~$900 MM
Process
Chemicals
~$450 MM
Chemicals
~$450 MM
Process
Chemicals
~$450 MM
Chemicals
~$450 MM
Functional
Chemicals
Chemicals
Functional
Chemicals
Chemicals
~$650 MM
~$650 MM
Water
Treatment
Treatment
Water
Treatment
Treatment
$17.5 B
$17.5 B
Pulp & Paper
Pulp & Paper
$11.0 B
$11.0 B
$28.5 B
• Defoamers
• Microbiocides (MB)
• Contaminant control
Target Market
AHWT
AHWT Business Overview
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99131.jpg)
31
Process
Chemicals
~$450 MM
Chemicals
~$450 MM
Process
Chemicals
~$450 MM
Chemicals
~$450 MM
AHWT
$2.0 B
$2.0 B
Water
Treatment
Treatment
Water
Treatment
Treatment
~$900 MM
~$900 MM
Functional
Chemicals
Chemicals
Functional
Chemicals
Chemicals
~$650 MM
~$650 MM
Vertical Markets
Growth
• Pulp and paper segments
with high growth rates
with high growth rates
• High-margin water segments
with process expansion
potential
with process expansion
potential
Segmentation
Base
• Paper segments with
moderate growth rates
moderate growth rates
• Water segments with
reasonable growth
in water treatment
reasonable growth
in water treatment
Municipal
Oil Refining
Power
Metals
Printing &
Writing
Writing
Mining
Chemicals
Gen’l Mfgr.
Packaging
Tissue/Towel
Pulp
C&I
Food & Bev
Opportunistic
• Low service, underperforming
• Water segments with limited/
no expansion into process
applications
no expansion into process
applications
Stand-alone
• Lubes
Commercial &
Institutional (C&I)
Institutional (C&I)
Chemicals
Food & Beverage
General
Manufacturing
Manufacturing
Lubes
Metals
Mining
Municipal
Oil Refining
Printing & Writing
Packaging
Power Generation
Pulp
Tissue/Towel
AHWT Strategic Market Segmentation
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99132.jpg)
32
Focus on markets with inherently higher growth
Demand | Customer Profitability | Key Drivers | |
Tissue | • Fiber types/recycle - Biocides/contaminant control • Emerging markets growing • Absorbency and strength | ||
Packaging | • Machine productivity - Dry strength • China expansion | ||
Commercial & Institutional (C&I) | • Urbanization driving market growth • Purchasing consolidation driving demand for global suppliers • Geographic expansion in industrialized markets • Energy-reduction requirements driving treatment demand | ||
Food & Beverage | • Industrialization driving demand for processed foods • Increased water and food regulation driving chemical demand • Emerging markets growing rapidly | ||
Pulp | • Changing paper, board, tissue grade needs and fiber source • Emerging market growth (Brazil, Chile, Russia, Indonesia, China and India) • New technologies for new fiber sources |
Growth Market Segments
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99133.jpg)
33
• Paper: MB, retention, contaminant control, dry strength
• Water: Scale inhibitors, defoamers, cooling/boiler water
treatment applications
treatment applications
• Rapid deployment in growing geographies
(Latin America and Asia Pacific)
(Latin America and Asia Pacific)
Seed Key
Industry Verticals
Industry Verticals
Expand via
Core Technologies
Core Technologies
Seek Sustainable
Critical Mass
Critical Mass
Align Resources
Actions
• Dedicated marketing leader for each growth vertical
• Develop and staff R&D pipeline
• Align platform-launch teams and programs
on high-margin, high-growth applications
on high-margin, high-growth applications
• Build knowledge and credibility in key verticals
for future expansion
for future expansion
• Use “incubator” model across high-potential segments
• Carve off verticals that have achieved critical mass
into market-focused virtual teams
into market-focused virtual teams
• Established market-specific product lines and
service offerings
service offerings
2009 Strategy for Growth Verticals
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99134.jpg)
34
Protect and maintain the business base
Demand | Customer Profitability | Key Drivers | |
Printing & Writing | • Reduce costs - Increase filler loading, reduce overall chemical costs • Resume significant expansion in Asia, mainly China • Building larger machines and shutting the smaller ones | ||
Mining | • Global slowdown has led to high reserves of aluminum, copper, nickel, zinc; prices flat in 2009, down from 2008 • Precious metals and coal demand increasing • Increased need for process chemicals to improve metals yield and water removal | ||
Chemicals | • Process-focused, performance-driven and seeking more sophisticated programs and service expertise • Accommodate volatility in supply and demand • Typically engage in long-term corporate and/or global agreements • Energy conservation | ||
General Manufacturing | • Optimize efficiencies and reduce total cost of operation • Cost - Economic slowdown has significantly reduced production in most sectors • Need for restructuring will open door for innovation in water treatment |
Base Market Segments
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99135.jpg)
35
• Cross-train field sales team to cover multiple markets
• Improve sales and applications expertise in Latin America and
Asia Pacific
Asia Pacific
• Develop R&D relationships with early-adopter customers
to develop game-changing products
to develop game-changing products
Protect Profit Engine
Standardization
Actions
• Maintain product differentiation in base printing & writing and
chemicals via healthy R&D pipeline
chemicals via healthy R&D pipeline
• Rationalize manufacturing assets to lower unit costs
• Commercialize new technologies in emerging geographies
Grow Water
Treatment
Treatment
Channel to Market
• Expand geographical coverage in underdeveloped markets
• Develop products to fill gaps (e.g., equipment for dosing and
monitoring)
monitoring)
• Identify supply chain synergies to remove costs
• Rationalize water treatment product lines across geographies
• All regions reporting via SAP* platform
Strategy for Base Verticals
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99136.jpg)
36
• Municipal market
• PAM distributors/contract service companies
• Paper sizing
• Paper wet strength
Implement Alternate Business Model
• Low/declining margins in sizing/wet strength
• Lack of vertical integration in polyacrylamides (PAM)
drives uncompetitive cost position in municipal segment
drives uncompetitive cost position in municipal segment
• Overall trend toward product commoditization
• Inability to monetize service offering
• Low value of innovation to customers
• Some competitors have moved to low-cost model
Business
Trends
Product Lines and
Verticals Impacted
Consolidate
FTEs
Lower Raw Material
and Freight Costs
and Freight Costs
SG&A Savings
Cost Leverage via
Lower Complexity
Targeted Outcomes
Alternate Business Model
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99137.jpg)
37
Summary
• AHWT Business Overview
– $2.0 billion business
– Provides process, water treatment and functional chemistries to paper, pulp,
commercial and institutional, food and beverage, chemical, marine and
municipal industries
commercial and institutional, food and beverage, chemical, marine and
municipal industries
– Products are used to improve operational efficiencies, enhance product quality,
protect plant assets and ensure environmental compliance
protect plant assets and ensure environmental compliance
• Business Strategy
– Leverage platform-launch and incubator processes to accelerate growth
through delivery of innovative, low-cost products to current and adjacent
markets
through delivery of innovative, low-cost products to current and adjacent
markets
• Use segmented approach to AHWT vertical markets
– Resource growth verticals with dedicated sales, marketing and R&D teams
– Manage base verticals primarily by sales to maximize profitable growth
– Alternate business model enables cost-effective approach to volume growth
with enhanced profitability in segments that do not require high service levels
with enhanced profitability in segments that do not require high service levels
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99138.jpg)
John E. Panichella, President
38
Ashland Aqualon Functional Ingredients
Formula for growth.
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99139.jpg)
39
Flow and Leveling
Conditioning
Stabilizing
Drilling & Fracturing
Extrusion
Protective Coating
Flow Properties
Suspending
Binding
Thickening
Gel Formation
Water Retention
How Customers Use Our Products
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99140.jpg)
40
Technology Expertise -
Application Expertise -
Understanding Customers’
Unique Applications
Core of the Business … How We Make Money
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99141.jpg)
41
• Cellulose is cut from sheets/rolls
into fine particles
into fine particles
• Cellulose is air-conveyed to reactor
and swollen with caustic
and swollen with caustic
• Ethylene oxide, propylene oxide
or other reactants impart
water-solubility
or other reactants impart
water-solubility
• Solvent recycled via distillation
• Viscosity reduction and purification
• Hot-air drying
• Grinding to control dissolution rate,
dry blending, packing into bags/
sacks
dry blending, packing into bags/
sacks
Caustic
Caustic
H2O2
Cellulose
Cellulose
Distillation
Solvent
Washing
Grinding/Sifting/
Blending/Packaging
Viscosity
Reduction
Reactor
Drying
Cutting
How We Make Our Products
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99142.jpg)
42
CMC
MC
HEC
HEC
HEC
HEC
CMC
HPC
CMC
HPC
EC
Rosins and
Phosphate Esters
Guar
Aquaflow
Aquaflow
MC
MC
Parlin, New Jersey
Hopewell, Virginia
Kenedy, Texas
Dalton, Georgia
Alizay,
France
Doel,
Belgium
Zwijndrecht,
Netherlands
Luzhou,
P.R. China
Suzhou,
P.R. China
Jiangmen,
P.R. China
Guar
Brunswick,
Georgia
CMC
Nanjing,
P.R. China
(Under
construction.)
construction.)
Aquarius®
Wilmington,
Delaware
Global Manufacturing Footprint
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99143.jpg)
43
Zwinjdrecht, Netherlands
Facilities and Processes
• Eleven world-class
manufacturing facilities
including one joint
venture
manufacturing facilities
including one joint
venture
• New 10,000MT HEC
facility under
construction
facility under
construction
• Low-cost facilities
• Combination of batch and
continuous processes -
24/7 operations
continuous processes -
24/7 operations
• All facilities ISO-certified,
well-maintained and in
compliance with stringent
EH&S guidelines
well-maintained and in
compliance with stringent
EH&S guidelines
• Capital intensive
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99144.jpg)
44
Regional Technical Service
External Technology Partner
Construction
Technical Service
Technical Service
Coatings Additives,
Personal Care
Technical Service
China
Engineering and
Pilot Plant
Specialty Resins
and Adhesives
Technical Service
Latin America
Hopewell, Virginia
Mexico City,
Mexico
Houston, Texas
Düsseldorf,
Germany
Zwijndrecht,
Netherlands
Oil and Gas
Technologies
Brunswick, Georgia
Nanjing,
P.R. China
Central R&D
Technical Service North America
Wilmington,
Delaware
Natural
Hydrocolloids
Delhi, India
Technical Service
Asia Pacific
Singapore
Global Technology Footprint
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99145.jpg)
45
• Follow Responsible Care* principles to ensure that safety
and environmental excellence are core values
and environmental excellence are core values
• Expand Ashland Aqualon Functional Ingredients' portfolio
of water-soluble polymers while adding
complementary adjacent technologies
that enable us to provide broader solutions
to meet our customers’ formulation needs globally
of water-soluble polymers while adding
complementary adjacent technologies
that enable us to provide broader solutions
to meet our customers’ formulation needs globally
Growth Strategy
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99146.jpg)
46
Core Organic
Adjacent Organic
Acquisition
„ Geographic expansion
• China, Russia, India, Japan
and South America
and South America
„ Accelerate new product
introductions
introductions
„ Productivity … cost/unit
reduction
reduction
„ Pricing leadership
„ Capital investment consistent
with growth
with growth
„ Commercialize existing
programs … film coatings,
phosphate esters and
redispersible powders
programs … film coatings,
phosphate esters and
redispersible powders
„ Launch adjacent
technologies consistent
with strategic direction
technologies consistent
with strategic direction
„ Align resources (capital
and work force) to deliver
this growth
and work force) to deliver
this growth
„ Accelerate growth via bolt-on
acquisitions … good
opportunities and consistent
with the strategy
acquisitions … good
opportunities and consistent
with the strategy
Ashland Aqualon Functional Ingredients
Strategies
Strategies
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99147.jpg)
47
Voice of Customer
Solutions Mode
Broad portfolio of
functional ingredients
Specialty Blends
A product customized to
individual customer needs
Innovation
New products to
solve clients' needs
Regulatory
Products that help
customers solve their
regulatory issues
Total Costs
Products and solutions
to drive down the total
cost of ownership
Current
State
Core products
in a narrow
technology
technology
area …
rheology
control,
water
retention,
etc.
Future State … Solutions Platform
Core products, plus additional functionality
• Broaden the rheology portfolio
• Adjacent functionality … redispersible
powders, antifoam, color, etc.
powders, antifoam, color, etc.
• Specialty blends
• Synthetic functionality
• Expand hydrocolloid functionality
Solutions Offering … How We Win!
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99148.jpg)
48
Segmenting Our Markets to Develop Our Growth Strategy
Redefined Markets
(estimated market size)
(estimated market size)
Industry
Targeted Markets
(estimated market size)
(estimated market size)
Construction
$6.2 billion
$2.1 billion
Food
$5.8 billion
$2.2 billion
Personal Care
$3.5 billion
$1.4 billion
Pharmaceutical
$2.0 billion
$1.0 billion
$2.3 billion
$1.7 billion
Coatings Additives
Energy
$1.0 billion
$0.5 billion
Specialties Solutions
$3.0 billion
$1.9 billion
Regulated Industries
Source: Internal estimates.
Market Segmentation
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99149.jpg)
49
Industry
Construction
Food
Personal Care
Pharmaceutical
Coatings Additives
Energy
Specialties Solutions
Regulated Industries
Targeted Markets
(estimated market size)
$1.7 billion
Targeted Segment
Water-Based Architectural
Cementing and
Stimulation
Stimulation
Dry Mortar and Gypsum
Hair Care
Rheology and Conditioning
Oral Dosage
Binders and Coatings
Binders and Coatings
Civil Engineering
and Ceramics
and Ceramics
Bakery, Process Foods
and Beverage
and Beverage
$2.1 billion
$0.5 billion
$1.9 billion
$1.0 billion
$1.4 billion
$2.2 billion
Targeting Segments to Focus and Align Resources
Source: Internal estimates.
Ashland Aqualon Functional Ingredients
Targeted Segments
Targeted Segments
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99150.jpg)
50
Industry
Construction
Food
Personal Care
Pharmaceutical
Coatings Additives
Energy
Specialties Solutions
Regulated Industries
Primary Target
Future Target
Water-Based
(rheology, surfactants)
Cementing and
Stimulation
Stimulation
Dry Mortar and Gypsum
Hair Care
(rheology, conditioning)
Oral Dosage
(binders, coatings)
Civil Engineering
and Ceramics
and Ceramics
Bakery, Process Foods
and Beverage
Targeting Segments to Focus and Align Resources
Industrial Coatings
Emulsion Polymerization
Concrete
Skin Care
Oral Dosage
(disintegrants)
Targeted Segments
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99151.jpg)
51
• Products have a long history of effective
performance
performance
• Strong brand recognition with Klucel HPC
• Vertical integration strategy with Aquarius
coating systems
coating systems
• Strong position in the nutritional supplement
industry
industry
Pharmaceutical
The $2.0 billion business of producing and marketing excipients (i.e., inactive ingredients)
for pharmaceuticals and nutritional supplements.
• Long approval cycles
for new formulations
for new formulations
• Pending patent
expirations for key
drugs
expirations for key
drugs
• Fragmented market
Key Challenges
• AAFI’s highest-margin
segment and relatively
recession-resistant
segment and relatively
recession-resistant
• The growth of generics
offers opportunity and
threat
offers opportunity and
threat
Health of Industry
• The formulator is
traditionally the
decision maker
traditionally the
decision maker
• Highly risk averse -
compelling value
proposition required
to dislodge incumbents
compelling value
proposition required
to dislodge incumbents
Buying Behavior
Sources of Differentiation
Economic Model and Path to Win
Target
Excipient
Market
$1.0 B
Major Competitors
Binders
$400 MM
$400 MM
Coatings
$500 MM
Immediate-release and controlled-release binders - AAFI’s
traditional focus with Klucel® HPC and Benecel® HPMC.
traditional focus with Klucel® HPC and Benecel® HPMC.
Polymers and formulated systems that deliver aesthetic (color)
and functional (controlled release, moisture barrier) properties.
AAFI introduced Aquarius coating systems in 2007.
and functional (controlled release, moisture barrier) properties.
AAFI introduced Aquarius coating systems in 2007.
Dow/Colorcon
FMC
ISP
ISP
Colorcon
Evonik
• Large industrial base needed for cost-effective
excipient manufacturing
excipient manufacturing
• Excipients are low-volume, high-value
• Continue to optimize the customer mix:
branded, generic, OTC and nutritional
branded, generic, OTC and nutritional
• Continue to build mind-share with application
studies, publications and frequent customer
seminars
studies, publications and frequent customer
seminars
• Need to improve positioning in the emerging
markets
markets
Disintegrants
$100 MM
Additives that enhance tablet disintegration. AAFI does not
participate in this space.
participate in this space.
FMC
ISP
DMV International
BASF
Source: Internal estimates.
Key Chemistries
• EC
• HEC
• HPC
• MC
• Film coatings
51
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99152.jpg)
52
• Technical leadership and product performance
• Brand recognition
• Technical support and collaboration, including
regional labs
regional labs
• Global channel to market and depth of
relationships with key commercial and
technical decision makers
relationships with key commercial and
technical decision makers
Coatings
The $2.3 billion business of producing and marketing specialty additives for water-based
architectural coatings.
• Weak global economy
and paint demand
and paint demand
• Mature product lines
contribute a lot of profit
today
contribute a lot of profit
today
• Rate of growth of new
product sales
product sales
Key Challenges
• Although current crisis
hurts industry profit-
ability, long-term pros-
pects for growth are
solid, especially as
housing standards
improve in developing
world
hurts industry profit-
ability, long-term pros-
pects for growth are
solid, especially as
housing standards
improve in developing
world
Health of Industry
• Most customers value
technical excellence
in products and
technical service
technical excellence
in products and
technical service
• Customers prefer to
align with strategic
suppliers that are
innovators and have
broad portfolios
align with strategic
suppliers that are
innovators and have
broad portfolios
Buying Behavior
Sources of Differentiation
Economic Model and Path to Win
Target
Additives
Market
$1.7 B
Major Competitors
Rheology
$700 MM
$700 MM
Surfactants
$300 MM
Chemicals used to improve flow, leveling, water retention
and anti-spatter.
and anti-spatter.
Chemicals used for surface wetting, dispersion of
pigments, improved gloss and color stability.
pigments, improved gloss and color stability.
Dow/Rohm & Haas
Akzo Nobel
SE Tylose
Dow/Rohm & Haas
Rhodia
Air Products
• Requires new products and strong regional
technical service
technical service
• Must maintain premium/price leader status in
key products, e.g., HEC
key products, e.g., HEC
• Grow emerging markets via continued
investment in people
investment in people
• Grow via adjacencies that allow us to leverage
our strong channel and bring more value with
the “total solutions” approach
our strong channel and bring more value with
the “total solutions” approach
• Maintain HEC market leadership with
technology and manufacturing capacity
technology and manufacturing capacity
Foam & pH
Control
Control
$400 MM
Chemicals used to neutralize and stabilize paint.
Cognis
BYK
Rhodia
Preservatives
$300 MM
Chemicals used to ensure long-term stability.
Dow/Rohm & Haas
Arch
Key Chemistries
• HEC
• Synthetic (Aquaflow)
• Phosphate esters
• Antifoams
Source: Internal estimates.
52
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99153.jpg)
53
• Technical depth in focus areas
• Global account management
• Chemistry based on naturally occurring raw
materials
materials
Personal Care
The $3.5 billion business of producing and marketing specialty additives for the
personal-care and cosmetics consumer markets.
• 3- to 5-year
development timeline
development timeline
• Replacement of cationic
chemistry with less eco-
toxic molecules
chemistry with less eco-
toxic molecules
• Competition from small,
lower-priced suppliers
in China and India
lower-priced suppliers
in China and India
Key Challenges
• Recession is hitting
even P&G and Unilever
hard as retailers manage
to lower inventories and
consumers switch to
generics
even P&G and Unilever
hard as retailers manage
to lower inventories and
consumers switch to
generics
Health of Industry
• Customers value
technical excellence
in products and product
support
technical excellence
in products and product
support
• Customers value
interaction and input
to their R&D processes
interaction and input
to their R&D processes
Buying Behavior
Sources of Differentiation
Economic Model and Path to Win
Target
Specialty
Chemicals
Market
$1.4 B
Major Competitors
Conditioning
$300 MM
Rheology
Control
Control
$300 MM
Chemicals that are substantive to hair and skin and provide
conditioning performance such as softness, smoothness
and de-tangling.
conditioning performance such as softness, smoothness
and de-tangling.
Chemicals used to provide flow control, formulation
stabilization, syneresis-control and suspension of active
ingredients in a wide variety of personal care compositions,
including toothpaste, shampoos, shower gels, shaving gels
and conditioners
stabilization, syneresis-control and suspension of active
ingredients in a wide variety of personal care compositions,
including toothpaste, shampoos, shower gels, shaving gels
and conditioners
Rhodia
BASF
ISP
• Must maintain premium/price leader status
in key products, e.g., Natrosol HEC and Klucel
HPC
in key products, e.g., Natrosol HEC and Klucel
HPC
• Follow multinational corporations into
emerging regions and source the demand
from local plants at price points required
to win in these geographies
emerging regions and source the demand
from local plants at price points required
to win in these geographies
• Engage with multinational corporations
at R&D level and focus R&D programs
on a key few opportunities where AAFI
is competitively positioned to win
at R&D level and focus R&D programs
on a key few opportunities where AAFI
is competitively positioned to win
Dow
Noveon
Other
Specialty
Polymers
Specialty
Polymers
$800 MM
Silicones, proteins and fixative polymers. AAFI does not
participate in this space today.
participate in this space today.
Momentive
Dow Corning
BASF
ISP
Akzo
Key Chemistries
• CMC
• HEC
• Guar
Source: Internal estimates.
53
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99154.jpg)
54
• Technical leadership and product performance
• Product portfolio scope
• Brand recognition
• Large-scale Chinese operations
with high quality … Tianpu joint venture
with high quality … Tianpu joint venture
• First-mover abilities in establishing JDAs
with key clients
with key clients
• Global channel
• Sustainability
Construction
The $6.2 billion business of producing and marketing additives for the tile cement,
gypsum and exterior insulation markets.
• Cellulose supply and
costs
costs
• Commoditization
• Mature vs. emerging
markets
markets
• Changing construction
practice
practice
• Cost vs. performance
• Regional needs
Key Challenges
• MC global demand has
grown steadily over the
past 10 years. Continued
growth expected, but
economic crisis has
impacted this market
grown steadily over the
past 10 years. Continued
growth expected, but
economic crisis has
impacted this market
• Redispersible powders
will continue to grow
as more formulated
products are developed
and job-site mixing is
reduced in emerging
regions
will continue to grow
as more formulated
products are developed
and job-site mixing is
reduced in emerging
regions
Health of Industry
• Customers value
technical excellence
in products and product
support
technical excellence
in products and product
support
• Customers expect just-
in-time supply and
formulation support
in-time supply and
formulation support
Buying Behavior
Sources of Differentiation
Economic Model and Path to Win
Target
Additives
Market
Market
$2.1 B
Major Competitors
Cellulose
Ethers
Ethers
$1.1 B
Functional
Additives
$100 MM
MC, HEC and EHEC used for water retention and rheology
control to achieve workability, adhesion and strength.
control to achieve workability, adhesion and strength.
Starch ethers, air-entrainers, polyacrylamides, set-time
additives and defoamers used to enhance workability and
durability.
additives and defoamers used to enhance workability and
durability.
Dow Wolff
SE Tylose
Samsung
Akzo
Chinese suppliers
• Tianpu joint venture to serve low-end and
price-sensitive markets
price-sensitive markets
• Must maintain premium/price leader status
• Grow in emerging markets via investment
in plants/people to seed the market as
technology advances
in plants/people to seed the market as
technology advances
• Technology differentiation via formulation
expertise
expertise
• Grow mature markets via adjacencies; however,
need continuous product evolution
to offer alternatives to lower-priced products
need continuous product evolution
to offer alternatives to lower-priced products
Redispersible
Powders
$900 MM
Redispersible latex polymers added to improve adhesion,
flexibility and water repellency.
flexibility and water repellency.
Wacker
Akzo (Elotex)
Dairen
Dow
Hexion
BASF
Avebe
Agrana
Emsland
Sichel (Henkel)
Cognis
Key Chemistries
• MC
• Redispersible powders
Source: Internal estimates.
54
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99155.jpg)
55
Guar and guar derivatives used for rheology control and
proppant carrier for high-pressure fracturing of gas wells.
proppant carrier for high-pressure fracturing of gas wells.
• Innovative manufacturer of novel products
• Industry application expertise
• Broad portfolio of additives for drilling,
stimulation and cementing
stimulation and cementing
• Global manufacturing footprint
Energy
The $1.0 billion business of producing and marketing drilling, well-stimulation
and cementing additives for the production of oil and natural gas.
• Current downturn in
global oilfield market
global oilfield market
• Global applications
expertise
expertise
• Geographical expansion
• Emerging market
competitors
competitors
Key Challenges
• Current downturn in mar-
ket due to lower global
price/demand for oil and
natural gas. N. A. rig
count down to levels last
seen in 2004
ket due to lower global
price/demand for oil and
natural gas. N. A. rig
count down to levels last
seen in 2004
• Industry turnaround
expected 2010
expected 2010
Health of Industry
• Customers value techni-
cal excellence in prod-
ucts and product support
cal excellence in prod-
ucts and product support
• Customers expect to buy
a full range of products
from a single supplier
a full range of products
from a single supplier
• Customers value
suppliers with global
reach both commercial
and technical
suppliers with global
reach both commercial
and technical
Buying Behavior
Sources of Differentiation
Economic Model and Path to Win
Target
Energy
Market
Market
$500 MM
Major Competitors
Drilling
Additives
$200 MM
Additives
$200 MM
Well
Stimulation
Stimulation
$200 MM
Cellulosic ethers (CMC) used for rheology and filtration
control as additives with drilling muds.
control as additives with drilling muds.
CP Kelco
Lamberti
Lamberti
Dow Wolff
Benchmark
Rhodia
Economy Polymer
Other
• Requires supply chain efficiency and ability
to maintain local inventory near well sites
to maintain local inventory near well sites
• Must maintain premium/price leader status
in key products, e.g., cementing, synthetics
in key products, e.g., cementing, synthetics
• Grow emerging markets via investment
in plants/people
in plants/people
• Expand global applications expertise
to support regional requirements
by service companies
to support regional requirements
by service companies
Cementing
Additives
Additives
$100 MM
Cellulosic ethers (HEC) used for rheology and fluid loss and
gas migration control as additives into high-density cement.
gas migration control as additives into high-density cement.
Dow Wolff
SE Tylose
Clariant
Key Chemistries
• CMC
• Guar
Source: Internal estimates.
55
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99156.jpg)
56
Significant Potential for Growth
One-Step Adjacencies
Superplasticizer
3%
Enzymes
6%
Silicones
5%
Diluents
7%
Film Coatings
6%
Emulsifiers
11%
Antifoams
6%
Redispersible
Powders
6%
Dispersants
13%
Biocides
15%
Surfactants
and Other
22%
Total = $9 Billion
Core
Total = $4 Billion
Total = $23 Billion
Cellulose
Ethers and
Resins
Resins
17%
One-Step
Adjacencies
41%
Natural
Hydrocolloids
19%
Synthetics
23%
CMC
$800 MM
Resins
$1,100 MM
MC
$1,200 MM
HEC
$700 MM
HPC
$80 MM
(Water-Soluble Polymers)
EC
$80 MM
Grow the Core First ... Then Adjacencies
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99157.jpg)
57
AAFI 2008 (MT) | Food | Pharma | Personal Care | Energy | Construction | Specialties Solutions | Coatings Additives | |
HEC | 42,000 | L | L | M | L | L | H | |
CMC | 55,000 | H | M | H | M | L | ||
MC | 39,000 | M | L | H | M | |||
EC | 900 | L | H | |||||
HPC | 1,900 | H | L | |||||
Guar | 53,900 | M | M | H | L | |||
Polyterpene Resin | 31,500 | L | H | |||||
Film Coatings | 100 | H | ||||||
Redispersible Powders | 300 | H | ||||||
Synthetic (Aquaflow) | 600 | L | H | |||||
Phosphate Esters | 1,000 | H | ||||||
Antifoams | 200 | L | M | H |
Relative Consumption: H = High, M = Medium, L= Low
Products by Industry Segment
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99158.jpg)
58
ü Market size and growth rate
ü Channel strategy
ü Target existing customer base
ü Competitive landscape
ü Intellectual-property landscape
ü Technical capability requirements
ü Relative cost position vs. market leader
ü Value chain analysis
ü Regulatory environment and trends
ü Formulation expertise
ü Voice-of-customer interviews
One-Step
Adjacencies
Adjacencies
Total = $9 Billion
Superplasticizer
3%
Enzymes 6%
Silicones 5%
Diluents 7%
Film Coatings
6%
Emulsifiers
11%
Antifoams 6%
Redispersible
Powders
6%
Dispersants
13%
Biocides
15%
Surfactants
and Other
22%
Adjacent Products Selection Criteria
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99159.jpg)
59
Core Organic
Adjacent Organic
Acquisition
„ Geographic expansion
• China, Russia, India, Japan
and South America
and South America
„ Accelerate new product
introductions
introductions
„ Productivity … cost/unit
reduction
reduction
„ Pricing leadership
„ Capital investment consistent
with growth
with growth
„ Commercialize existing
programs … film coatings,
phosphate esters and
redispersible powders
programs … film coatings,
phosphate esters and
redispersible powders
„ Launch adjacent
technologies consistent
with strategic direction
technologies consistent
with strategic direction
„ Align resources (capital
and work force) to deliver
this growth
and work force) to deliver
this growth
„ Accelerate growth via bolt-on
acquisitions … good
opportunities and consistent
with the strategy
acquisitions … good
opportunities and consistent
with the strategy
Ashland Aqualon Functional Ingredients
Strategies
Strategies
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99160.jpg)
60
KeyBanc Analyst Day
August 14, 2009
August 14, 2009
Formula for growth.
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99161.jpg)
61
Investment Highlights
• Among top 10 specialty chemicals companies worldwide
– Diversified business portfolio serving wide range of end markets
– Leading market positions across platform
• Strong emphasis on cash flow generation and debt pay-down
– Reduced debt by $616 million in eight months since Hercules acquisition
• Over-delivering on cost-reduction program
– Achieved $287 million in total Ashland run-rate savings at June 30,
three months ahead of plan
three months ahead of plan
– Total Hercules run-rate synergies of $130 million by fiscal year-end 2010
• Additional sources of cash available
– Working capital, auction rate securities, divestitures
• Management committed to conservative financing structure
– Total leverage of 2.4x
– Aim to achieve investment-grade credit statistics within 12 months
• Equity market capitalization of approximately $2.0 billion
• Experienced management team
![](https://capedge.com/proxy/8-K/0001305014-09-000070/ex99162.jpg)
AAFI = Ashland Aqualon Functional Ingredients
AHWT = Ashland Hercules Water Technologies
BWT = Boiler Water Treatment(s)
C&I = Commercial & Institutional
CMC = Carboxymethylcellulose
CWT = Cooling Water Treatment(s)
EC = Ethylcellulose
EH&S = Environmental, Health & Safety
EMEA = Europe, Middle East, Africa
FTEs = Full-time employees
HEC = Hydroxyethylcellulose
HPC = Hydroxypropylcellulose
MB = Microbiocide(s)
MC = Methylcellulose
PAM = Polyacrylamide(s)
RDP = Redispersible powders
® Registered trademark, Ashland or its subsidiaries
* Trademark owned by third party
62
Abbreviations