Hexion (HXOH) 8-K Fourth Quarter & Fiscal Year 2009

1

Fourth Quarter and Fiscal Year 2009

Earnings Conference Call

March 22, 2010

a

Exhibit 99.2

2

Forward-Looking Statements

Certain statements in this presentation including but not limited to those made under the caption “Outlook”, are forward-

looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of

the Securities Exchange Act of 1934, as amended. In addition, the management of Hexion Specialty Chemicals, Inc.

(which

may

be

referred

to

as

“Hexion,”

“we,”

“us,”

“our”

or

the

“Company”)

may

from

time

to

time

make

oral

forward-

looking

statements.

Forward

looking

statements

may

be

identified

by

the

words

“believe,”

“expect,”

“anticipate,”

“project,”

“plan,”

“estimate,”

“will”

or

“intend”

or

similar

expressions.

Forward-looking

statements

reflect

our

current

expectations and assumptions regarding our businesses, the economy and other future conditions. Actual results could

vary materially depending on risks and uncertainties that may affect our markets, services, prices and other factors as

discussed in our most recent Annual Report on Form 10-K and in our other filings with the Securities and Exchange

Commission (SEC).  We caution you against relying on any forward-looking statements as they are neither statements

of historical fact nor guarantees of future performance.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include

regional or global economic, competitive and regulatory factors including, but not limited to, the current credit crises and

global economic downturn,  interruptions in the supply of or increased pricing of raw materials due to natural disasters,

pricing actions by our competitors that could affect our operating margins, changes in governmental regulations

involving our products, and the following:

-

our inability to achieve expected cost savings,

-

the outcome of litigation described in our SEC filings,

-

our

failure

to

comply

with

financial

covenants

under

our

credit

facilities

or

other

debt,

and

-

the other factors described in the Risk Factors section of our Annual Report on Form 10-K and in our other SEC filings.

Any forward-looking statement made by us in this document speaks only as of the date on which it is made.  Factors or

events that could cause our actual results to differ may emerge from time to time.

This presentation contains non-GAAP financial information. Reconciliation to GAAP is included at the end of

the presentation.

3

Overview of Fourth Quarter & FY09 Results

Craig O. Morrison

Chairman, President & Chief Executive Officer

4

Fourth Quarter 2009 Results

Fourth quarter 2009 results reflected positive volume comparisons, strength in certain specialty product lines

and the Company’s comprehensive cost control initiatives

Hexion Specialty Chemicals Q409 results included:

–

Revenues

of

$1.09

billion

versus

$1.18

billion

in

prior

year

due

to

declining

raw

material

costs

offsetting

volume gains and pricing actions

–

Operating

income

of

$36

million

compared

to

an

operating

loss

of

$876

million

in

prior

year

–

Segment

EBITDA

(1)

of

$106

million

compared

to

$46

million

in

prior

year

quarter

The

Company

continued

to

accelerate

the

pace

of

its

productivity

actions

as

Hexion

realized

$51

million

in

productivity savings in the fourth quarter of 2009

–

Throughout 2009, Hexion responded aggressively to the global economic headwinds and achieved

$148 million in productivity savings

Hexion’s ongoing focus on cash management and working capital has yielded significant results:

–

Working capital investment decreased from $679 million at year end 2008 to $376 million at 12/31/09

–

2009 cash generated from operations totaled $355 million

Liquidity remains strong at $367 million at 12/31/09

The Company was in compliance with the senior secured bank leverage ratio under the covenants for its

senior secured bank facility

Fourth Quarter 2009 Results Reflected Improved Volumes and the Cumulative Impact of Productivity Initiatives

(1)

Segment EBITDA and Adjusted EBITDA are non-GAAP financial measures. The closest GAAP financial measure is Net Income (Loss). A table that reconciles these two measures is at the end of this presentation. Management 

believes that Adjusted EBITDA is meaningful to investors because the Company is required to have an Adjusted EBITDA to Fixed Charges ratio of greater than 2.0 to 1.0. At December 31, 2009, on a pro forma basis for the 

January 2010 refinancing, the Company was not in compliance with the Adjusted EBITDA to Fixed Charges Ratio incurrence test. Under Hexion’s indenture for the Second Priority Senior Secured Notes, failure of this 

incurrence test does not represent an event of default. However, Hexion may not be able to incur future debt outside of its revolving facility or make acquisitions in certain circumstances. The Company was in compliance with 

the senior secured bank leverage ratio under the covenants for its senior secured bank facility. December 31, 2009 LTM Adjusted EBITDA includes $125  million of in-process productivity program savings.

5

Fourth Quarter 2009

Summary Financial Performance

Quarter Ended December 31

130%

nm

nm

(8)%

46

106

Segment

EBITDA

(1)

(921)

(6)

Net income

(loss)

(876)

$1,178

2008

36

Operating

income (loss)

$1,089

2009

Revenue

($ in millions)

Q409 EBITDA Improved Sharply Despite Lower Revenues

Q409 EBITDA Improved Sharply Despite Lower Revenues

(1)

Segment

EBITDA

excludes

in-process

synergies.

6

Fiscal Year 2009

Summary Financial Performance

(16)%

nm

nm

(34)%

385

92

94

$4,030

2009

461

(1,190)

(893)

$6,093

2008

Segment

EBITDA

(1)

Net income

(loss)

Operating

income

(loss)

Revenue

($ in millions)

(1)

Segment

EBITDA

excludes

in-process

synergies.

Year

Ended

December

31

7

Contractual Pass Through of Declining Raw Material

Costs Significantly Impacts Revenue Comparisons 

(17)%

2%

(8)%

(16)%

Net Sales

Performance

Products

Coatings

& Inks

Formaldehyde

& Forest

Products

Epoxy &

Phenolic

Resins

FY09 vs. FY08

Summary

Raw material driven price decreases accounting for $216 million of the fourth quarter

2009

sales decline, while Hexion recorded a foreign currency translation benefit of $75

million and volumes increased revenue by $52 million

(42)%

(29)%

(30)%

(33)%

Q409 vs. Q408

8

Quarter

Ended

December

31

4%

nm

(12)

nm

%

23

24

Performance

Products

(4)

8

Coatings & Inks

41

$ (2)

2008

36

Formaldehyde &

Forest Products

$ 51

2009

Epoxy &

Phenolic Resins

($ in millions)

Fourth Quarter 2009

Segment EBITDA Results

Summary

Fourth quarter 2009 EBITDA reflected continued strength in Hexion’s specialty

products

9

(11)

66

(44)

(1)

% 

80

58

108

$  190

2009

90

35

194

$  192

2008

Performance

Products

Coatings &

Inks

Formaldehyde

& Forest

Products

Epoxy &

Phenolic

Resins

($ in millions)

Year Ended December 31

Fiscal Year 2009

Segment EBITDA Results

Summary

FY09 EBITDA supported by Hexion’s cost reduction and productivity initiatives, as well

as

strong

performances

in

specialty

epoxy

resins,

Versatic™

Acids

&

Derviatives

and

global coatings

10

36

Productivity Achievement Increased Steadily in 2009 

Summary

Productivity actions continue to

improve Hexion’s cost structure

Hexion achieved $51 million in

targeted productivity savings in

Q409

Achieved $148  million in

productivity actions in FY09

–

Headcount reductions of 18

percent in FY09

–

Ceased production at four

sites and idled production at

certain other facilities in FY09

Hexion is pursuing $125 million in

remaining savings

–

Hexion expects these actions

to over the next 18 months

–

Estimated net costs of $69

mm to obtain remaining

savings

125

36

148

Actions

achieved

in 2009

Productivity Program

Hexion Continues to Focus on Aggressively Reducing Costs

Hexion Continues to Focus on Aggressively Reducing Costs

$ in millions

In-process

savings

12/31/09

(1)

The Company achieved the following productivity actions per quarter: $22 million in Q109, $32 million in Q209, $43 million in Q309 and $51 million in Q409

(1)

$309

12/31/09

TOTAL

PROGRAM

TARGET 12/31/09 

In-process

savings

12/31/08 

$119

Actions

achieved

in 2008 

12/31/08

Actions

achieved

in 2008 

11

Broadly-Focused Cost Reductions in FY09 

(26)%

Purchased

Services

(14)%

Other

(33)%

Office Expense

(41)%

Travel

(15)%

Salary & Wages

(29)%

Mfg. Variable

(30)%

Utilities

2009 vs.

2008

Focus on Reducing Variable Costs Continues in 2010

FY09

Cost

Reductions

vs.

FY08:

~

$272

million

12

(31%)

(27%)

5%

(14%)

(19%)

Segment EBITDA Continued to Recover Despite Softer

Year-over-Year Volumes for much of FY09

46

61

90

128

106

Q4

Q1

Q2

Q3

Q4

($ in millions)

2008

2009

Volume Change vs. Prior Year Qtr.

2009

2008

Q2

Q1

Q3

Q4

Segment EBITDA

(kMT)

Generally Improving Trends in Hexion’s 2009 Results

Q4

13

$376

$679

Working Capital at December 31, 2009

13.1%

11.1%

9.3%

Net Working Capital as a Percentage

of LTM Sales

Hexion Reduced Inventory by ~ 5 Days in 2009

Hexion Reduced Inventory by ~ 5 Days in 2009

through

through

Structural Improvements in Managing Working Capital

Structural Improvements in Managing Working Capital

12/31/08

12/31/09

Net Working Capital

12/31/08

12/31/07

12/31/09

$ in millions

14

Versatic™

Acids & Derivatives Expansion Marks the

Latest Strategic Investment in Key Product Lines and

High Growth Markets

Oilfield Technology

Group:

•Oklahoma City, OK expansion

•

Rock Springs, WY

•

Cleburne, TX

•

Sites were functional in FY09 

Formaldehyde & Forest Products:

•

Montenegro, Brazil

•

Began production in First Quarter 2010 

Specialty Epoxy

•

Esslingen, Germany

•

Under construction

Formaldehyde &

Forest Products:

•

Joint venture in

regional Moscow with

OAO Shcheckinoazot

•

Final commissioning stage

Versatic™

Acids

&

Derivatives:

•

New construction

within existing

Onsan, Korea site

15

William H. Carter

Executive Vice President & Chief Financial Officer

Financial Review

16

Epoxy and Phenolic Resins (EPR)

Fourth Quarter 2009 Segment Highlights

$ (2)

$ 446

2008

nm

$ 51

Segment

EBITDA

2%

$ 457

2009

Revenue

($ in millions)

Quarter Ended December 31

Q409 Sales Comparison YOY

2%

6%

(11)%

7%

Total

Currency

Translation

Price/Mix

Volume

Summary

Ongoing strength in volumes for

specialty applications, including:

–

Specialty epoxy, boosted by

Asian-based wind energy

customers

–

Versatic™

Acid & Derivatives

–

Phenolic specialty resins, with 

improved volumes in N. America

partially offset by softer demand

in Europe

Lower processing costs and

productivity actions supported

improved EBITDA

Base epoxy resin volumes improved

vs. Q408 although competitive

pressure continued to hamper earnings

Selective price actions partially offset

rising raw materials  

17

Formaldehyde and Forest Products (FFP) Resins

Fourth Quarter 2009 Segment Highlights

$ 41

$ 405

2008

(12)%

$ 36

Segment

EBITDA

(16)%

$ 339

2009

Revenue

($ in millions)

Quarter Ended December 31

Summary

N. American volume was flat versus

prior year; no significant recovery in

housing yet

Volumes increased in all international

regions

Hexion has a higher percentage of

customers with a contractual pass

through of raw materials in this

segment, which is reflected in a higher

sales variance

Softer earnings in Europe accounted

for majority of the year-over-year

Segment EBITDA decline, partially

offset by improved results in Hexion’s

Australia and New Zealand

businesses

Montenegro,

Brazil

-

completed

in

Q409; Russian JV -

final

commissioning stage

Q409 Sales Comparison YOY

(16)%

8%

(32)%

8%

Total

Currency

Translation

Price/Mix

Volume

18

Coatings and Inks (C&I)

Fourth Quarter 2009 Segment Highlights

$ (4)

$ 238

2008

nm

$ 8

Segment

EBITDA

(8)%

$ 219

2009

Revenue

($ in millions)

Quarter Ended December 31

Summary

Hexion’s efforts to streamline

C&I operations evident in

YoY

earnings gain despite

8% revenue decline

EBITDA in both businesses

increased YoY, although

sequentially declined primarily

due to seasonality

EBITDA improvement was

driven primarily by productivity

gains rather than market trends

Multiple price increases have

been announced in an attempt to

keep pace with rising raw

materials in early 2010

Q409 Sales Comparison YOY

(8)%

6%

(11)%

(3)%

Total

Currency

Translation

Price/Mix

Volume

19

Performance Products (PP)

Fourth Quarter 2009 Segment Highlights

$ 23

$ 89

2008

4%

$ 24

Segment

EBITDA

(17)%

$ 74

2009

Revenue

($ in millions)

Quarter Ended December 31

Summary

Results reflect a slight increase

in Oilfield volumes offset by declines

in Foundry resins, as well as falling

raw materials impacting sales

Hexion experienced another strong

quarter in its Oilfield business and

a slight improvement in Foundry

earnings

The Oilfield business reflected

increased drilling activity in Canada

and slightly positive trends in U.S.

rig counts during Q409

Benefited from the continued trend

of increased average order size for

oilfield proppants from fracturing in

horizontal wells

Q409 Sales Comparison YOY

(17)%

1%

(14)%

(4)%

Total

Currency

Translation

Price/Mix

Volume

20

Balance Sheet Update & Financial Summary

The Company reduced working capital by $303 million in 2009

FY09

cash

generated

from

operations

totaled

$355

million

versus

$(632)

million

in

prior year

FY09 capital expenditures totaled $131 million 

–

In FY09, ~ $26 million in Capex was related to productivity savings initiatives

–

Hexion anticipates full year base Capex target of ~ $123 million

in 2010 and ~

$37 million in additional investments related to productivity initiatives

Hexion redeemed $34 million in face value of Industrial Revenue Bonds in Q409

Net debt decreased $367 million during FY09 despite worst recession in years

Liquidity remained strong with cash plus borrowing availability of $367 million at

Dec. 31, 2009

Net

Net

Debt:

Debt:

~

~

$3.36

$3.36

billion

billion

(12/31/09)

(12/31/09)

(1)

(1)

Includes $100 million of affiliated debt. See detail of Hexion’s total debt in the Appendix of this presentation. Excludes impact of January 2010 refinancing.

21

Hexion amended its Senior Secured Credit Facilities

during Q1 2010 and extended the maturity of ~ $957

million of term loans by two years 

The Company also issued $1 billion aggregate

principal amount of senior secured notes due 2018

–

Net proceeds of $993 million from the issue were

used to repay $800 million of Hexion’s U.S. term

loans

–

Provided $162 million of incremental cash 

Hexion renewed its revolving line of credit facility

commitments, which total $200 million

–

Commitments will extend the availability of the

revolver to 2013

$529 million in total liquidity pro forma for the January

2010 refinancing

January 2010 Refinancing Summary

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

2010

2011

2012

2013

2014

2015+

Debt Maturities (Prior to Refinancing)

Debt Maturities (Pro forma for Refinancing)

Refinancing Improved Hexion’s Debt Maturity Profile

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

2010

2011

2012

2013

2014

2015+

(1)

(1)

The Company renewed its revolving line of credit facility commitments from lenders, which will take effect upon the May 31, 2011 maturity of the existing revolving facility commitments

22

Craig O. Morrison

Summary

23

Summary: Hexion Q409 Results & Outlook

Hexion’s fourth quarter 2009 results reflect positive volume comparisons, strength in

specialty product lines and the Company’s aggressive cost control initiatives

–

Hexion achieved $51 million in productivity savings in Q409

–

Total in process productivity actions of $125 million remained at December 31, 2009

New plant construction in Korea follows recent expansions in Russia, Germany and Brazil as

part of Hexion’s increasing focus on high-growth international markets

A

high

level

of

uncertainty

regarding

customer

demand

remains

in

2010, but Hexion is

guardedly optimistic that the signs of stabilization in several end markets will continue to

drive a gradual improvement in volumes

–

January and February 2010 volume trends were positive compared to prior year

Hexion is focused on creating value from the continued achievement of its productivity

initiatives and growth from specialty product applications in 2010

Recent refinancing improved Hexion’s liquidity and debt profile

–

Focus on cash management continues in 2010

24

Appendices

25

Reconciliation of Non-GAAP Financial Measures

26

Fixed Charge Covenant Calculations

27

Fixed Charge Covenant Calculations Footnotes

28

Debt at December 31, 2009 

a