Element Solutions Inc (ESI)

Investor Day 2016

← View all transcripts

Sep 12, 2016

And I think today we have a team that I couldn't be more pleased with in the overall. We're back to being focused completely on our businesses. And during the last year, as I think most of you have seen, we've delivered on our commitments to shareholders, while at the same time achieving significant synergies between the businesses and setting them up for success on a forward basis. At the end of the day, businesses are all about people. And as I said before, I think the team is really delivering and is focused on strategies that seem to be working at retail at the industrial level and you'll see that as we get into the detail. The original strategy was to build a portfolio of asset light high touch businesses crossing two divisions. That strategy has worked when we look at the portfolio, but the road hasn't been easy. Today and I was joking with Rakesh earlier, we like to think of these types of combinations usually two and two make five. At the moment, it feels like two and two are making three. And as somebody who's sort of committed my entire business life to trying to create value for shareholders that doesn't make us feel very good nor is it something that we intend to live with for the long term. So we are trying to think of strategies that investors will appreciate don't just create value from an operating level, but create value from a strategic level. What we have found is that we have a business that has the portfolio that we set out to achieve, but has been left with a balance sheet that Wall Street doesn't particularly like. From my perspective, I can tell you that the leverage that we have today is extremely manageable. These are tremendous strong free cash flowing businesses. They are in markets that are very protectable. We have the defensible moats around the businesses that we sought to achieve. We have pricing power that we sought to have and we have the margins to go along with it. But Wall Street being what it is and we're acutely aware of this would rather see us at our target leverage ratios than where we are. So to that end, there's a few things that we are starting to focus on. You'll see that we filed for those of you who didn't see it, we filed an eight ks this morning with a view to cleaning up what has been described to me by some people as a death spiral preferred, which since I was the architect of it I'll take full responsibility for, which to try to turn that around and become maybe a virtuous spiral. We have reached an agreement with Premier who sold Arista to have the option and I repeat the option because it's not an obligation to pay off their preferred on a basis that is about $90,000,000 less than the face amount. We have until December 15, I believe, to do that. And in this case, we would in this scenario, we would pay them $460,000,000 in cash and 5,500,000.0 shares of the company. For those of you who don't remember, the original face amount was $600,000,000 backed by 22,100,000.0 shares. So we have a choice. It will obviously be something that we will consider based on obviously the market and based upon our share price. And but it does give us another layer of optionality to clean up what in our view and in talking to investors has been a real overhang on the stock. The way I look at life and if you go to the next slide, I look at life on a relative basis. Whatever one thinks the platform as a company there is no question that our ag business has real value and real strategic value. And the same could be said about our Performance Solutions business. We trade below the comps on both a strategic or transactional basis and on a trading basis. I would blame our balance sheet on that if you like. If you want to find a reason, it's certainly not because we don't have the margins or the cash flows or the management or strategy. So it goes back to what are our choices. Three ways to delever a company and at least if anyone has a fourth I'd love to know. But the first is to bring in capital or generate free cash. The second is to make a divestiture of a piece of a business. And the third is to buy another company using equity. We don't feel that we have the currency today because we don't have the multiple, but we do have the other two choices always open to us. And I think if I go back to Jarden's days in my previous life in about 2009 when we brought some capital into the company, I'll never forget and some of you in this room were probably advised in that offering with I think our stock was $12.5 We decided to bring some more shares into the company to delever. And when we actually did the deal they were $17.5 I'm not saying that's going happen here. But the reality is we have an environment where I think the investors would prefer a less levered company than a more levered company. So at the end of the day, comes down to what are our choices to create value? How do we get recognition for that? And what are the catalysts? And what I can tell you is you have a management organization and a Board that are value oriented shareholder focused. We have a at the end of the day our view is that if we take care of the business and let the business perform eventually the market will recognize this. But I do want to highlight that at the end of the day you've seen a lot of transactions of very comparable businesses in both sectors. There's a lot of activity going on in the ag specialty chemical space and there is a lot of activity going on in the industrial space. You've got companies like Astotech. You've got other transactions that are up here that have already been announced and closed happening at sort of mid teens multiple. So we have a lot of upside available to us. It's a question of whether or not we want to pull those levers or if we continue to drive the businesses as we're driving them. And our obvious preference in everything that we do every day is to build on the portfolio and create an organization that is built to win in the market. What I hope you'll see when you leave today is two things. One is that there is optionality to create significant upside on the business from a valuation perspective. We're trading 50% below where we should or could be trading. And the second is that the underlying businesses have strategies that are very interesting. We've got solutions to win in each of our major markets, strategies that are being implemented in the management organization to deliver. So I couldn't be more pleased with the team. It's an interesting journey that we've been to get to this point. But today, it is a very harmonious synchronized management organization working at great pace to achieve their objectives. And I credit much of that to a very steady hand that Rakesh Sachdev has brought to the table. And hopefully you'll see that during the course of the day. So Rakesh with that please join us. Thanks, Martin, and good morning, everybody. It's really great to be here on this beautiful day in New York. I think we have a great story to tell you this morning. I've been with the company now about eight months, And I can tell you I've had now time to really digest the business, understand our customers, our industry. And I got to tell you I think we are in a great place. Obviously, there's a lot of work yet to be done from an operations and business standpoint. But I think our goal as managers of this business is always to set it up so that when some of our markets recover or whatever happens that we are positioned for success. And hopefully, that's what we're to talk about today. We have the whole team here. I'll introduce our team here in a little bit. But in terms of what I want to do over the next forty five minutes is to give you a very quick overview, just bring everybody into context of the business that we have at Platform, just do a refresher on how we got here, revisit our Platform thesis of what we are trying to do, and then I want to specifically talk about our strategic goals over the strategic planning period. So when you look at Platform today, on a pro form a basis, in 2015, this business was about $3,600,000,000 in sales. It assumes that the acquisitions we made in 2015 were there at the beginning of the year, so that's why it's on a comparable basis. We have an EBITDA in this business, which is pretty impressive, about 21%, over 8,000 employees. And we have two businesses, as you heard Martin talk about. We have the Ag Solutions business, which is really focused on the agricultural segment. It's crop protection chemicals, it's seed treatment, and in biosolutions. And you'll hear a lot more about the different segments of this business. And then we have our Performance Solutions business, which is really business of specialty chemicals in the industrial automotive and electronics side. And again, that's a business also about $1,800,000,000 slightly higher in EBITDA. You will see the geographic footprint is somewhat different as you would imagine. Our Performance Solutions business, which is heavily influenced with the Electronics segment, is fairly large in Asia. Our Ag business is fairly large in Latin America. Just doing a slightly deeper dive into the Performance Solutions business, we have and Scott Benson, who runs our business, is going to talk about a lot more in detail about these segments. But we have five global segments today. We have we're taking the brand McDermott Enthon after we bought Allent. We have got the industrial business. So we have one global business that's focused on the industrial segments around the globe. We have another business that's focused on the electronics segment. And then we have a third segment, which is our assembly business, which is also focused on electronics, but it's more around metalization of electronic PC boards, and that's the business we call Alpha. And then we have two other small but very important businesses that came from the original McDermott acquisition, and that is the focus on graphics and packaging and also the fifth business which is the focus on offshore. And we'll talk more about that. Just the geographic footprint, as I mentioned, if you look at our Performance Solutions business, our biggest segment or geographic segment is Asia. 40% of our business is derived from Asia and then you have Europe and North America, which are about the same. And you can see we have a much smaller presence in Latin America and Africa. And then finally, if you look at the bottom right side, you can see that our electronics and assembly business make up about 60% of our business. And while offshore is only 5% and that's where we have most of the headwinds today given what's happening with the oil and gas industry, it is a small piece of our business. Overall within platform, it's about 2% or 2.5% of our business. And there we have seen, obviously, this year some headwind because of what's happened in oil and gas. Just macro trends, and Scott's going to talk about this. The overall electronics components and sub segment business is growing somewhere in the 2.5% to 3%. However, within electronics, clearly, they are much faster growing segments. If you look at electronic content and automotive and cars and trucks, it's growing about twice the rate. Also if you look at electronics and medical devices, that's growing much faster. And so as we look at the different sub segments that Scott and his team look at, clearly our focus is to put an overemphasis on faster growing segments, because one of the things you're going to hear today is how do we intend in both the businesses to grow faster than the end markets. And so clearly understanding our segments is very important. I won't go into this, but I think it's I think most of us know that the electronic content in cars has been growing. It has grown quite substantially in the developed world in The U. S. And Europe, but it's clearly happening now in the emerging markets. And even though I think we can all sit here and argue and wonder if car production on the globe has peaked and if it's going to decline, I think we feel fairly confident that even if the automotive production in units declines, the content, the electronic content on average per vehicle is going to continue to grow. And that's a good story for us in our business. Again, if you and some of the points here Scott's going to make, so I'm going to skip this, but it's all it's what are we going to do to grow faster than the end markets. And the three things that I would point out that the business is doing: one is, as I said, an overemphasis on markets or sub segments that are growing faster. Two is developing products and technologies that give us an ability to differentiate ourselves. And the third one that Scott's going to talk about is our whole selling approach and the things that we are now able to achieve by putting scale together in this business. We both have the push pull concept of selling where we are pushing through distributors, but we are pulling through our end customers. And you're going to hear Scott talk about that. Just turning very quickly to the ag business, again about the same as I said. When you look at the kind of products that we take into the marketplace, because there may be a misconception that we are fairly narrow, But if you look at the products that we have and whether it's fungicides or herbicides and insecticides and biosolutions where, by the way, we are one of the leaders, we have a very broad range of products and brands and very successful brands globally. And if you look at, again, geographically and the kind of crops that we favor, fruits and veg we are a specialty crops company. So we are less of a mainstream crop protection company that's protecting only, soya and corn. So you can see that only 30% of our business is tied to row crops and that also it's in international markets. We have a fairly significant presence, an important presence in segments like fruits and vegetables, which is much higher than the overall market. And then again, you can see our presence in different geographic segments, again very strong in Latin America, which has been a good business for us. And one of the things you're going to hear because I the questions I was getting earlier this morning is how are we growing in Latin America? And Diego is going to talk about the fact that we have certain products that addresses weed resistant herbicides that's taking place in Latin America, and we have good solutions. We are also not very big in insecticides, which has been affected negatively by GMO seed. And so I think we have had a good run and we continue to have a good run-in places like Latin America. Again, think we all know the climate within the ag industry in the last few years. We've been we have seen fairly significant decline in commodity prices, which has obviously affected pharma incomes and therefore affects what's happened in the business. I think the other thing that's happening is the cost of discovering new active ingredients or new molecules has grown. A lot of the discovery took place early on And now trying to discover a molecule that gives substantially higher incremental benefits gets tougher and tougher. It's not very unlike the pharmaceutical industry, where I think a lot of the pharma companies initially had a phenomenal success in discovering what's called small molecules and then realized that it was very, very difficult and expensive to continue to discover new small molecules and moved into what's called large molecules, a biological drug. And it's very similar to what's happening in the ag industry. And we're going to see that. I think that's also causing a consolidation of discovery companies, especially companies who spend a lot in R and D. They are realizing that by coming together perhaps they can be more efficient. And that's what you're seeing in the ag space, and you heard Martin talk about that. But we'll talk about how we are positioned because we have a different position as a niche player and how we're going to be successful in this changing landscape. Overall, if you look at the ag industry, it's a growth segment. So from a secular standpoint, you're looking at an industry that continues to grow. It's cyclical. If you look over the last thirty five years, on average, it's grown in the mid single digits, 4% or 5%. But the point to make is that when the markets do come back, they come back a lot faster than that. And I think we all know we are in a period of a trough. And I think it's people are obviously, we are all trying to figure out when the markets come back, maybe if it's not this year, then sometime in 2017. But what we have to do is make sure we have positioned our businesses for success. Again, one of the fundamentals in ag, think we all know the population in the world is growing. The wealth in the world is growing. So the requirements for food is growing because food, and especially in the emerging markets, is becoming one something that people seek, a higher protein. But what's not growing is the arable land. So you're not seeing land growing in the same proportion. And so the only way to solve this huge problem in the world is to have much higher yield in crop production, which is why I think the whole ag business over the coming few decades is going to be a very interesting space for those who win. This is a huge market. If you look at the overall addressable market for crop protection and seed, it's close to $100,000,000,000 a little over $90,000,000,000 If you take away the seed markets, if you just look at crop protection, it's over $50,000,000,000 I think within that segment, the way we look at our business, there are again faster growing segments. That's about $13,000,000,000 today. Diego is going to talk about how we have sub segmented out the faster growing segments. We have five sub segments and Diego is going to come and talk about that. But about half of our ag business is in what we call as our primary focus markets. These are the faster growing markets. And clearly, the strategies that we are putting together and have put together is to grow much faster in this over the next several years. So we've got two fairly self standing independent businesses. We've got the Ag business and Performance business. So the question is what's the role that platform plays at a corporate level? And clearly, think as we all know today, we are a public company. We have public company requirements. There are obviously governance requirements to make sure that we're managing these businesses. I think we have an interesting situation where we can be fairly unbiased in thinking about how capital is allocated between these businesses to maximize shareholder value and also then to make sure that we have the right leadership and the bench to run these operating companies. On the other hand, these businesses today are fairly independent in terms of running the day to day business. And Scott and Diego will talk about the commercial strategies they drive, the R and D and the product strategies that they drive, and how they manage their supply chain and operations. And then we have some shared responsibility of how we work together between corporate and the businesses in terms of defining the strategy and being aligned around the strategic path, some of the shared services that we decide that makes sense for the operating companies and making sure that we have risk management on key risk factors within the company. I would say this, though, and you've heard me say if you were listening to our earnings calls, we have increased our investment in corporate and partly that was because we brought a lot of acquisitions together in the last year. They were fairly disparate businesses. We wanted to make sure we had all the right control systems, the IT systems. And so we have had to put together resources both external and internal more than I think what we will need long term. Clearly, our goal is to have a very lean corporate environment. And I would say that we have peaked. We will start seeing, as we go into 2017, a reduction in that as we get more efficient, and that's our plan. I think we have as you heard Martin say, we have assembled and we've got a great leadership team. Martin is obviously our Founder and Chairman, has been very involved. We have got a great Board. We've got another Board member here this morning, Ryan Israel, who's here sitting with us. And then on my immediate team, we have several people here. In fact, this entire team is here. I'll ask them to stand up. We've got Ben Glicklish, who's our Head of Strategy and Operations. Many of you know Ben. He was has been an architect of much of what we have done over the last two point five years. We've got Scott Benson, who runs our Performance Solutions business, and you'll hear Scott quite a bit this morning. He's been with the company for a long time with McDermott. We've got Diego Lopez, who joined us earlier this year from BASF and runs our Ag business. And we've got our CFO who joined us a year ago, Sanjeev Khatri, you're going to hear from. And we've also got John Kaps. So you're not going to hear from, but our General Counsel. And John is sitting at the back there. He comes to us from Jordan, and it's great to have all these team members. We have some additional platform people here too. We've got Mark Gibbons, who's our Treasurer. I think he's supposed to be somewhere here. We've got our Corporate Controller, John Connolly. And we've got Tricia, Matt and you heard Carrie, who's our Head of Investor Relations. So very pleased to have a very have our team here. So let's quickly do a quick refresh of how we got here. We obviously, it's been a very busy last two and a half, three years. As you know, we started this journey with the acquisition of McDermott in the 2013. That was the first acquisition we made. And on the heels of that, the following year, we got into specialty chemicals. On the ag side. We bought the Chemtura business and then we bought the AgriFar business. And then shortly thereafter in 2015, we made a very significant acquisition as you know is the Arista life science business. And then we found ourselves to be a fairly large ag company, and we were looking for opportunities to even out on the industrial and performance side. And then late last year, we made I think two very impressive acquisitions. We bought Allent and we bought OMG. And so as we sit here now with these acquisitions made, I think we've got the scale, we've got the capability, we've got the management team. And I think we have what we need to really take this forward from here. And that's what you're going to hear today. So why did we make these acquisitions? Very quickly, if you look at the Performance Solutions business, we bought three businesses. We bought McDermott to start with. We got Alent and we got OMG. The things that were common for all three businesses, all three businesses were in electronic chemicals. All three businesses were in industrial surface treatment. So there was obviously a commonality of what they did. But more important, all these businesses were asset light and high customer touch, which is what we liked as part of the platform thesis. But in addition, we also got some uniqueness from these businesses. So Lent gave us the Assembly Solutions business, which is our alpha business. OMG got us into the memory disk business. And then, of course, McDermott gave us exposure to both the packaging or the graphics business and then the offshore business, which today might seem a little tough, but it's been a fantastic business for us. And again, on the Ag Solutions, why did we put these three businesses together? We have again Arista, AgriFar and Chemtura. Again, the common elements of these three companies all were in crop protection. And again, just like the Performance Solutions business, all three of them are asset light and high touch. So we don't have to invest these are not large bricks and mortar companies. But we also got some interesting businesses from the three of them. So in the case of AgriFar, it was very Western Europe centric, but they were also very, very good in proprietary off patent products. And we learned a lot from the AgroFar side. Camtura got us in the seed treatment business. And Arista, which is truly a very global company, also got us an entry into biosolutions, which is going to be, we believe, a real growth driver for our overall ag business, and you're going to hear Diego talk about that. While this is a busy slide, it's a GAAP slide. Have a couple of financials, but I think as you know with the SEC rules, we need to bring you the GAAP information. And here you can see what the GAAP sales were and the profits were of the predecessor and the successor companies, just to point out 2015, the GAAP sales were $2,500,000,000 You remember I talked about 3,600,000,000.0 So the $3.6 was as if we had these businesses from day one in 2015. On a GAAP basis, we had $2,500,000,000 And then you can see also on a GAAP basis, our EBITDA last year was about $568,000,000 or $570,000,000 On a comparable basis, it was more like $740,000,000 This is again on an adjusted pro form a basis. What I'd point out is that these businesses have been incredibly stable. So if you look at the level of EBITDA margin and the profitability, it's been quite impressive. Now you can see a dip in 2015, and the dip in both sales and in profits largely driven in the ag business, I would say was exclusively because of the change in the FX environment. So if you exclude the currency environment that took place in 2015 relative to 2014, our businesses both on sales and profits would have been fairly flat compared to 2014. And I think what you're going to hear later on this morning is looking forward how we're going to drive both sales and EBITDA up in some impressive ranges. Again, this is a business that generates a lot of cash. If you look at the conversion that we have, our capital investment numbers are fairly modest. And so again, to the extent that we can grow our EBITDA, we're to generate a lot of cash. And clearly, that's going to be important because one of the objectives that we have is to delever the company through the cash flows. I'm not going to go into this. This is just our guidance for the full year. I think you've seen we are guiding between $735,000,000 and $775,000,000 in EBITDA for this year. And this also calls for a stronger second half than the first half. And we think the second half is going to be stronger than the first half because we've got more synergies that we're extracting. We've got a slightly more favorable FX environment. And we are actually seeing a little more growth in our end markets than we did. So I think for those reasons, we think this is a good place to be. So eight months into the journey, and these were some quick observations that I had of where we are in the businesses. Again, I think platform today is a highly diversified specialty chemicals business. And we are very global. Over 70% of our business is outside The U. S. Our margins are stable. Even we may not be recession proof, but we are fairly recession resistant if you look at the overall portfolio that we have. And I think the things that make platform fairly unique, there are four things I'd like to point out. One is most of the products that we provide to our customers have a critical element in the functionality of the end products. So whether it's if it's surface chemistry on an electronic component or if it's a certain type of chemical in the ag industry, we play a very critical role. But what's interesting is that the relative cost of our products, to the cost of the final product, it's very, very small. So you're going to hear the example of mobile devices. What we do for whether it's Samsung or Apple, again, what we provide is very, very critical, but it's a very small piece of the total cost. So it makes us a little more resistant in terms of being just a commodity player. And that's why we have the kind of margins that we do. I think the third thing is that we have a lot of diversity. There is no single product or no single customer that we have that makes up any meaningful part of our business. And I think that gives us tremendous leverage in the way and the courage to do the kinds of things that we do. And then finally, I would say it is an asset light business. Now having said that, we obviously have challenges. I think I mentioned about the ag business. In North America, ag business has been soft, but we also have opportunities. And the opportunity really is drive further organic growth in this business. I think you've heard me say in many of the calls that we are really focused on growing this business, because we are taking a slight lull on the acquisitions and this is giving us an opportunity to really focus on growing the business. Our platform thesis remains unchanged. Our thesis again is to focus on asset light and high customer touch businesses. We want to become even more customer intimate. We realize that for a while we are going to probably not be thinking about very large acquisitions. But as I said, this is the opportunity for us to continue to grow. I think we are in markets and we have adjacent markets that can give us even more growth. This I think many of you have seen. If you look at the markets that we are in, we are in some huge markets. As I said, the ag market itself is over $50,000,000,000 The industrial electronics markets are huge as well. And we can get into adjacent markets when the time is right. So I think that's the exciting part of the journey is that in the near term, we can focus on the organic growth. But in the medium and longer term, we are going to have ample opportunities to continue to grow the portfolio. Again, five clear objectives, long term objectives that we have at Platform. We want to make sure that we are not a meaty commodity player, and that's not who we are. We have collected a portfolio of very high quality and differentiated businesses. We are striving for leading positions in what we do. Again, as I said, our goal is to grow faster than the end markets. We know we are in some of the end markets that are fairly mature. And it is our goal through the strategic planning process that you're going to hear is how we're to grow faster. The other thing that's important and you heard Martin say this is we want a healthy balance sheet, right? We think that we have the cash flows even today, but we're going to continue to focus to driving and improving our balance sheet. And then one of the things that we are clearly doing more of is making sure the businesses are focused on the return on invested capital or return on assets. I'm going to skip these next couple of slides, but what you're going to hear, Scott, and this is at a high level one page of the three things that the business is going to talk about is growth of sales, so what are we going to do? How are going to enhance our margins during this strategic planning period, and how are we going to focus on cash. And what I would say, it's slightly different for the two businesses. If you look at the growth that we are striving for in our Performance Solutions business, you're going to hear Scott talk about how we're going to become integral to the supply chain in which we do business, how we're going to get closer to the customers. And in the ag business, what you're going to hear is how are going to increase our partnerships, whether it's with technology companies and other providers of technology. So I'll let Scott and Diego talk about some of their strategies. I think on the margin enhancing front, one commonality that I'll talk about is I think we have a huge opportunity at Platform in managing our supply chain. I think sometimes it gets lost. We have a business model where we acquire a lot from the outside. We don't manufacture active ingredients in the ag business. We acquire them. We develop suppliers. So we are acquiring a lot of material. It's a fairly variable cost structure that we have in the business. And to the extent that we can get more efficient in the way we manage the supply chain, the margin opportunities are fairly significant and fairly impressive. And you're going to hear that from Diego as well as from Scott. Corporate has to play a role in addition to the role that the businesses are playing. I think we have opportunities on the tax side. Today, the way we are structured, we have a loss position in The U. S. Because this is where we pay most of our make most of our interest payments. But we have many other regions of the world where we make a profit and we pay taxes. Unfortunately, because of the structure, we are unable to get the benefits of the loss in certain parts of the world and offset it against the profits that we make in other parts of the world. So we end up paying, I think, higher tax cash dollars than we should. And we are working hard at the corporate level to try and starting to optimize that. And you're going to hear Sanjeev talk a little bit about that. On the treasury side, we have been doing a great job, think, on the FX management and hedging programs, especially in places like Latin America where it's important, and we are continuing to strive to do more of that. On the IT side, as I said, we have been doing work on the IT infrastructure. We have so many legacy systems. As you can imagine, when we bought all these companies, they all had fairly different legacy systems at different stages of the development. And I think we're putting our arms around that. We still want to leave the uniqueness of the businesses and the businesses, But I think there's a lot of efficiency to begin around infrastructure, around security and those are things that we are working on from an IT standpoint. And then also introducing new HR techniques for our operating companies is what we're doing. I just want to pause on this slide a little bit. So when you put all this together and say what does this mean for platform? Where can we take the company over the next several years, leaving aside right now any acquisitions that we can or would do? Organically, I think we can grow this business on average in the mid single digits. 4% to 5% is what we are planning. A little higher growth in ag, but not much for the lower end Performance Solutions. If you look at the opportunities we have to enhance margins, we think we have some very significant opportunities. We can expand our margins in the mid single digits. So when you run the math of this, if you can grow the business in mid single digits and you can expand the margins, we believe we can grow our EBITDA at twice the rate of our organic sales growth, which means in the high single digits. And I think this is important because if we can grow the EBITDA, which I feel pretty confident we can in the high single digits, And we can do some of the things we can do on the tax side and some of the other things we talked about. We can generate a lot of cash. And I think we can get our debt to EBITDA to 4.5 times, which is what we've stated as a goal in less than three years. And that's kind of what we are striving for. You're going to hear the different elements of from Scott and Diego and Sanjeev on how we're going to put this together. But this is just at a high level a snapshot of what we are going to try and achieve over the next few years. Last slide from my side. Again, everything that we do and everything that our organization does kind of fits in five buckets. I think everybody understands in the company, we've got to achieve our financial targets. We are making the company more customer intimate. So customer intimacy is becoming extremely important because that's how we're going to win. We have to focus on expanding our products and services. We can stay still. Operational excellence, whether it's the management of supply chain, is very, very important. And then the enterprise development, whether it's developing our processes or developing IT systems, developing our people. So it's in these five buckets that we think about. If you think about the financial targets, it starts with 2016 and we are committed to delivering on our commitments for this year. We are on track to delivering our $150,000,000 in synergies from the acquisitions and I feel very good about that. And as I said over the planning period, we are we have plans to grow our organically our revenues in the mid single digits, which by the way would be higher than what we have done historically, and then achieving our profit growth at twice that rate the high single digits. And then be focused on delevering the balance sheet. So that's those are high level goals in achieving our financial targets. On the customer intimacy, and you're going to hear Scott and Diego talk about this, we have a push pull strategy in most of our businesses. And when I say push pull because we have very important delivery partners such as our distributors. Now they are not our final customer. The end customer is the pharma or the company that actually uses our products, But we have to have a great relationship with our distributors. So we push our products through them and then we create a pull through our end customer. And I think what you'd hear Scott and Diego talk about how they have reframed their sales and marketing organizations to do exactly that. On the products and services, again, you're going to hear our leaders talk about the innovation and how we are partnering with companies to get access to technology. On the operational side, you heard me talk about supply chain. We are also very focused on working capital management. We have a lot of money tied up in working capital. And it's we have incentivized our people, I guess, for the first time in bigger way in making sure that we are getting more efficient in managing our working capital. And finally, the enterprise, as you heard Martin say, it's all about people at the end of the day. And we want to make sure that we have the best people, the best leadership teams, and we're giving them the best opportunities. For example, even when we put Allent and McDermott together and Scott's put a new team together, we get the opportunity to pick the best of the breed and put them in positions of great of responsibility and support them in their execution of their job. So again, we are going to come back. We're going to have a Q and A. That's my remarks. I'm going to have Scott Benson come up and give you a deeper dive into the Performance Solutions business. And Scott? Thank you, Rakesh. So, beginning on page 42, first of I'd like to say good morning. I'm very happy to be here with, everyone today. We're going to be talking a little bit about the current structure of the Performance Solutions business as a result of the acquisitions over what has been a pretty busy year for us. I'm also going to give you an overview of our businesses and their markets, the key end markets that we participate in. We'll talk a bit about our strategy and then also a little bit about the performance of the business kind of historically. So as I said, been it's a busy year for Performance Solutions. The next slide, Slide 43, you kind of see the result of the integration of these three companies over the past twelve months. Clearly, very diverse international business with truly global end markets and very diverse end markets as well. So in over 50 countries, we now have over 4,500 employees, over 14,000 customers. So you see the five business units that Rakesh mentioned earlier. Within a couple of those, we have some sub segments that are also extremely important, but we'll be focusing today mostly on the top tier, the top five operating units, okay? Next slide. Here you see our revenue split by those top five business units. So you see it's fairly evenly split between our Alpha Assembly business, our Electronics and Industrial units, with the balance made up of our Graphics and Offshore businesses. All segments have had strong historical gross margin performance, And as a matter of fact, even some gross margin improvement over time. And you'll see that all of them continue this trend. We expect it to continue into the future as well. So strong gross margin performance across all of our segments. Alpha, you'll see is impacted a bit because we include metals pricing in our results. So that's why you'll see that a little bit below the line. But on par, we're extremely happy with the margin performance across all these segments. What I'd like to talk now a little bit about is each business segment. Just to give you a little bit of a flavor for what each business does, our Alpha business supplies metal solutions and processes for the assembly of electronic components. And this is across every spectrum of electronics. We have an extremely strong OEM relationship within this business, ties to all the direct electronics OEM customers and end use markets. And we have a mix of distribution and direct market depending on the part of the world that this business is in. So we have a lot of direct selling, but we also utilize distributors around the world. Next slide, 46, you see the footprint of this business. Manufacturing and research centers are strategically located around the world in the key assembly electronics assembly markets, really matching, including emerging markets and growth segments such as India and Southeast Asia. So we're really happy with the diverse footprint that this market or that this business brought to us. It was new to the Performance segment. It also allows us to leverage R and D centers in areas we might not have had them in our electronics and industrial space. So we are going to leverage those relationships as well. Next, on Slide 47, I'd like to talk briefly about our Industrial Solutions business. This business primarily supplies processes that do one of two things. We either prevent corrosion on metallic parts across a diverse number of industries, including automotive, housewares, but we also have processes that make things decorative, so decorative plating on automobile exteriors, interiors, etcetera. We are now one of only two truly global suppliers in this space. The combination of Enthone and McDermott allowed us now to compete on a global basis, in a way far greater than either company would have been able to do on its own. So we're extremely happy about that. And we follow almost primarily a direct selling model in this business. The technology requirements that our customers have for our service and support, really makes that the only path to market, that we think will be effective. You can see that the addressable market in this space is well over $1,000,000,000 1,000,000,000 point dollars So we have very strong and we'll talk a little bit more about this later, a very strong strategy on growth to follow this market around the world. Slide 48, you see the Industrial Solutions footprint. This is following the acquisitions. This is a busy slide. We have a lot of facilities around the world now. We have opportunity here to improve our efficiencies and a lot of that work will begin in 2017 into 2018. As you see, we have multiple facilities in very near proximity to each other. This is just as a result of all three companies having set themselves up close to the markets that they serve. So this gives us a lot of opportunity. Our research for this business is located primarily in Europe, both in Germany from the legacy Enthone business and in The U. K. From the McDermid business. The nice thing about having these redundant facilities is that we were able to now take researchers and research groups that were competing against each other and now focus them on the rest of the competition, freeing up a lot of innovation talent. Next slide, 49, is our Electronics Solutions business. Again, a very large market, over $2,000,000,000 of addressable market space for us. This business provides solutions that generally make things conductive. So whether it's through hole on printed circuits or bump plating for semiconductors or circuit formation in printed circuits, that's primarily what this business does, transferring current from one place to another and clearly being driven a lot by miniaturization, which allows the innovation side of our business to stay ahead of any commoditization that may occur in this space. As a result of the combination of these businesses, we now have a complete product portfolio from semiconductor all the way through printed circuits. The combination of Enthone and McDermid really gives us an unparalleled addressable market. No single supplier has as many touch points in the electronics space as McDermott and Nthone. And we are very, very focused on utilizing and leveraging these relationships and also following the automotive growth in this space, as Rakesh mentioned. And I'll talk a little bit more about that in a couple of slides. Next slide, you see the very similar footprint to our industrial space. Again, Cove, we had all three companies were located in very similar areas, again giving us a lot of opportunity for efficiencies over time. A lot of these facilities are co located with our industrial business. So again, giving us a lot more opportunity for efficiencies, which we will be doing over the next year, year and a half. The next business I want to talk about a little bit is our Graphic Solutions business, very different from our Industrial and Electronics businesses. This business provides media which allows for the printing of images onto packaging substrates primarily, so whether it be flexible packaging or corrugated packaging. A key market area that we're focused on is flexible packaging. That's the fastest growing segment of the market. It's the most profitable segment of the market. There's a shift going on around the world of gravure printing, which is an expensive process used for very long run printing that flexographic printing has been able to make inroads into that market due to the cost. We are a leader in new technology development in this space. We utilize a very direct selling market. It's a little bit smaller market than some of our other ones. As you can see, about $1,000,000,000 of potential but growing. Basically, we look at this as a GDP type business. And this Graveer to Flexo transition, we believe, will allow us to continue the growth we've seen over the past few years well into the future. And similarly, the footprint for this business, a little bit smaller footprint. Manufacturing is done primarily in The United States. We do have a manufacturing plant in The UK as well. We export products from The U. S. All over the world. And we back that up with technology and service centers in the developed parts of the world where flexographic printing is used primarily. But as markets emerge and more people move into the middle class and have disposable income around the world, packaged food becomes more and more prevalent. So this market will grow for a long time. There's built in growth in the printing market simply due to people wanting packaged food. So we think we're extremely well positioned as a technology leader in this space as well. And lastly, on slide 53, briefly our offshore fluids business. This business provides environmentally friendly valve control fluids for deepwater oil and gas drilling and production. Market's clearly under a bit of pressure today, not from a production standpoint. The production of oil is fairly consistent. It's the new exploration, new drilling, new underwater tree implementation, things of this nature. Capital investment in the oil and gas space has an impact directly on this business. But as that business comes back, we believe we remain historically very well positioned. We have great OEM relationships in this space. We have great specification in this space. We are a leader in new technology for things like extremely high temperature operation. Right now, of course, North Sea drilling is on hold. There's not a lot of North Sea exploration, but the North Sea oil needs fluids that operate at extremely high temperatures because of how deep the wells are. We have products and we were commissioned almost by oil companies to develop products for that market. So we stand ready for when this market comes back. The footprint as you would expect mirrors the oil, the offshore oil production areas around the world. We have research and technology centers in The U. K. And in The United States and then we manufacture around the world close to the end users in this space. Moving on briefly, slide 54, very diverse end markets. Now you can see, this helps mitigate any single end use market risk for us. You heard Rakesh say we are not recession proof, but this does make us a bit recession resistant. So you see very diverse end markets, very diverse customer bases, and again, very truly global. All these business operates around the world. The management team, extremely experienced management team. This came from a combination of the acquired businesses. We approached this with a best of the best mentality. We wanted the best leaders from the acquired companies to run these businesses going forward. And this represents a truly diverse group of people that came from both Alent and McDermott, all with extremely long careers and experience within the industries that they manage. Moving on to talk a little bit about the market growth in our segments. We'll talk first about Electronics. You saw this slide earlier from Rakesh. Basically, we look at the Electronics market kind of in GDP thing as a blended growth rate. Constantly buying electronic components more this year than last year and that will continue even in mobile device market, which is fairly mature. Most of these market spaces are fairly mature. However, are segments within this that are growing faster than the market rates, which is where our sales strategy is focused and we'll talk a little bit about that in the future. So again, although these are fairly mature markets, there are segments within each one, although smaller, that are growing at much higher rates than the overall market. These markets require innovation. They require extremely responsive delivery from the supply chain. And we're focused here. These are the areas that we're making strategic investments, not only from an innovation standpoint, but even from a capital standpoint in order to address going forward. Automotive, I was a clear example in this space. So what does the automotive growth opportunity for us look like? This is a key driver for the business going forward. Automotive growth has been outpacing GDP growth in the number of units. We do not expect that to continue forever. However, as Rakesh mentioned, that doesn't really matter to us because what we're focused on is the content and value available to us within every car produced. We definitely see the electronics content in and per unit to accelerate or to grow faster than the overall market itself. We've seen that day in and day out. You see the use of these things every day in your own life. You can't get in any vehicle today and not see more electronics content than you saw even a year ago. If you even look, you can't even ride in a taxi without being bombarded by electronic content. These things are extremely important to us. The reliability required in the automotive space is different than that in consumer electronics, which also allows for innovation and specification. Those are the holy grail for us to achieve specifications. As this market globalizes, they want local supply of content everywhere they assemble vehicles. There are only now a couple of companies in this space that can provide them the same process and support everywhere in the world. This is key for us. Whether it's an under underhood engine control module or an infotainment screen, etcetera, warranty and repair costs are the death knell for the auto industry. They do not want recalls. So the reliability requirements in the automotive space will provide us long term strong margin opportunities. You can see in the upper right hand corner of this slide all the different places in an auto that our units participate. This is more than just electronics. This actually includes some of our industrial space, but there's a huge amount of opportunity for us within every single car produced. And as car requirements increase in places like China, that exponentially grows this content available to us. The amount of electronics in a car in China are clearly very different than they are in North America, but that's changing because the reliability requirements are changing. Some of our key growth initiatives across our businesses. In our assembly space, there's an increasing amount of influence by the OEMs as to how they want circuits or semiconductors, etcetera, assembled and the reliability requirements. Again, this ties very heavily into the automotive space. We have some exciting new technologies in that Alpha assembly space that nobody else has. We have a group called Alpha Advanced Materials that is working solely on next generation products and we've already made some really, really nice traction in those. In our industrial space, there's a strong environmental push to replace, what's called hexavalent chrome. You can imagine hexavalent chrome is a carcinogen, it's a very toxic material, and the industry is being asked to come up with a replacement for that material, and we are absolutely the leader in this new technology. Electronics, we talked a little bit about the automotive growth and the miniaturization that's also going on in that space provides us innovation and long term business growth opportunities. The graphic space, this Graveer to Flexo conversion and again being a leader in new flexographic printing technology will enable us to outpace the market in this space. And then as we talked about with offshore, we are in a preparation for return to normal in this market. So we think we're very, very well positioned for that. Next slide, slide 60. Growth in industry, we'll kind of put this in a little bit of context. We said on a weighted average, you call it GDP, 2%, 2.5% on a weighted average, but we are positioned to grow faster than this in all of our segments. In our assembly business, one of our key initiatives is a cross selling between electronics industrial and our Alpha assembly business. We have more touch points in the electronics space than any single competitor, more touch points in the industrial space more than any single competitor. This allows us knowledge ahead of time. This allows us the ability to focus our resources and to innovate to meet these future demands, particularly around reliability requirements. The same thing goes for electronics. We're a leader in copper replacement technologies for the plating of electronics. This is the future of that business, eliminating copper, which is a huge cost in the assembly and creation of electronic components. We are the leader in that technology. We are also making very strategic investments in wafer level packaging and semiconductor plating technologies. Our industrial business, we talked, we're the leader in hex chrome replacement. We are also now, like I said before, one of only two truly global players that's enabled that will be able to meet the requirements of the global automotive companies as they relocate to less expensive assembly areas, Mexico for example. We're extremely well positioned. We're the number one supplier in Mexico into the automotive space by our estimates and that space is going to continue to grow much faster than market in general. In our Graphics business, we're the leader in new technologies for print. And then again, offshore, we're waiting for the market to return to a normal position, but we maintain our industry leading position in that space as well. Slide 62, we talk a little bit about our strategic objectives. And to me, this is where it becomes the most fun. This is where we decide how we're going to win. We decide where we're going to make our investments and why we think we're going to win. We're trying to create the most responsive innovative company within the industries we serve. This is utilizing and leveraging the relationships that we have across all of our businesses, gaining knowledge to the future needs of the customers faster than our competitors do, making decisions faster than they do, and then innovating products to meet those needs faster than our competitors do. We have an extremely broad based interaction with the entire supply chain, which I'll show graphically here in a few more slides. And we have a deep we will have a deeper understanding of every supply chain we serve than any single competitor in our space. You heard Rakesh mention being integral. Being integral is something we talk about internally all the time. Once you're integral, whether it's to an OEM, whether it's to an applicator, whether it's to an end use market, you now become how they do business. And our goal is to become integral in every industry that we participate. Once you do that, you change the game. We're trying to create an environment internally where everyone has an opportunity to win and to contribute to our success. We're trying to develop a group of 4,500 people all aligned towards the same objective. And so far, I can tell you right now that that initiative is well ahead of schedule. Our business leaders across all of our units interact on a regular basis so that everyone has an understanding of where each business is trying to go. And then again, we will consistently grow faster than the markets we serve. Slide 64, this is where we again get back to talking about it being integral. Our people are integral to our customers' success. The processes that we supply are complex. You'll see a short video in a little while of some of our chemistry in action. Again, they're very small in terms of the overall market but have a huge impact on the performance of the products either the end user requires or that our customer manufactures. Our technical service on-site at our customers is key to the operation of these processes. And we have people that spend all day every day within our customers. That's how it works. Our customers just want the processes to work the same way every day. They're not chemistry experts. That's what we provide. The solutions we provide are also integral. Without them, our customers' lines do not run. They cannot manufacture products without the specialty chemicals that are supplied by us. Again, a very small portion of their cost, but they all have a huge disproportionate amount of value to the end product. And without the specialized chemistry, lines do not work. This is a busy slide, slide 64. But this is a graphic of what our selling process looks like. This is the push pull that Rakesh was referring to. Multiple touch points within every supply chain that we operate. We have a team of people around the world, highly skilled technical sales people, commercially focused people working with the end users, and this can be anything from a mobile device designer manufacturer like Apple or Samsung, all the way through to their applicator base and their platers around the world. We're working across our businesses. We took people from each segment, from our assembly business, our electronics business, our offshore business, our industrial business and put them on the same team. So if you can imagine the depth and breadth of scope of a supply chain of a major Tier one automotive company like Bosch or Continental or a company like Samsung, who is in so many different industries, well we have more touch points in that industry than any single competitor and we brought people from all of our groups together to be now focused as global account managers for these companies. So they now marshal all the resources within MPS to make sure that every opportunity gets to the right people, has the right relationships. I'll give you a real example of this. We were in a meeting very early in the process in Japan, and there was a major electronics manufacturer in Japan that had a relationship with our assembly division. Through a presentation we were getting from our assembly division, we found out that the person they have their primary interface with at this major electronics OEM also specifies the final printed circuit finish used prior to assembly. Well, clearly, we're going to leverage that. It hadn't been leveraged before within the businesses that we acquired, but we are now working with that OEM not only on the assembly specification, but on the final finish that's used on the printed circuit prior to assembly. So this is a very real example of how this process works. And again, we're building across all of our units, leveraging all these relationships and building more touch points than any competitor in our space. A lot of investors have asked us questions about our selling process and how we go to market. I'd like to walk you through briefly through kind of what our sales process looks like. So everything starts with the customer. I think Rakesh mentioned this. And in this context, the customer can be two things. It could either be the person who actually sends us a check, issues us a PO and sends us a check, or in some cases it's the end user. Every market has an ultimate end user. We view those as the ultimate customer. So whether it's a handheld device manufacturer or the plater, we view them both as customers. We do a lot of traditional things that you would imagine, trade shows, direct sales, legacy relationships, things like this, and then working within the supply chain. But everything for us begins with the customer. Next, we perform a strategic analysis, whether it be on a market or an opportunity. And then we apply resources, whether they're innovation resources, whether they're direct selling resources, whether they're marketing resources, etcetera. So first comes understanding the customer and then making decisions internally on what resource allocation that we need. The nice thing about it is ultimately, we look to see will this qualify as a sticky sale. I'll talk a little bit about that as we get a little bit further through. And then the ability to utilize research centers around the world gives us a distinct advantage against any single competitor in our space. From innovation to service, this is where innovative and responsive comes in. We take that customer knowledge and then we have the ability to strategically, tactically, opportunistically apply innovation resources to meet a customer requirement. And we do this on a routine basis. If the opportunity is big enough, strong enough, or warrants it, we can dedicate a team of people almost at a moment's notice to develop products for the customer. We do this either through our innovation group in the research centers or we use one of our global development centers around the world. We take products from our research group, send them out to the field, and then we have research facilities around the world that then optimize that process for the application in their specific region. We do this on a very routine basis. Not every region in the world needs exactly the same performance out of our product, but we're able to take a single product, for example, and make very minor adjustments in the field to meet field requirements. We do training both internally and externally. We train our customers. We had an automotive OEM event in China this year, for example, where we had over 300 attendees from the Chinese industrial business, including automotive OEMs, engineers, design people, and we gave them an education on what it means to plate automotive parts and what the requirements are, etcetera. So we do that on a very routine basis. Next slide, 68. What does a typical sale look like? So people ask me all the time, well, how do you get paid? Really comes down to fundamental selling. We have a direct sales force. We package our products. Generally, they're liquid. We package them in multiple different container sizes. The nice thing about our business is it's all repeat. So our products are consumed in the everyday operation of a customer's process, so they have to continually reorder. So once you make a sale initially, you can count on repeat orders. Typically customers are they can be anywhere from $100,000 to $2,000,000 on average, so anywhere in that range. You saw we had 14,000 customers for our $1,800,000,000 And then we provide a service staff to make sure that we maintain that business over time. Our supply chain. We utilize a global supply chain now, something that we were not able to do or had never done before. None of the three acquired companies managed their own supply chain on a global basis. We now have a global supply chain group. Rakesh mentioned to you what that means for us. It allows us to leverage. We have a goal of being the low cost manufacturer in our space. That is the ultimate goal for our global supply chain team. It's made up of very seasoned supply chain managers. They are focused solely on serving our business units. The specification and quality requirements, we took the manufacturing plants and operations out from underneath our commercial teams and put them into this global supply chain. They now have five direct customers and they service them equally. The fact that we're first to know about new designs within the customer supply chain, matching our supply chain to theirs is extremely important to make sure that we source raw materials to meet the new requirements. We now think that having this global supply chain allows us the ability to do that on a much more efficient basis. And ultimately, what this results in is what we call a sticky sale. Our sales, of course, this is also a challenge when you're trying to capture market share, but it's also a defensible mode. The processes, as I told you, are very complex. They require a lot of on-site understanding and knowledge from our teams. So we have extremely long term in-depth experienced people servicing our customers. A lot of times, our products, we do have patents on specific processes, which gives us a moat. And then there are OEM specifications. Again, the Holy Grail for us is to receive a specification from an automaker, for example, that says this is the process you will use. They're difficult to get, but we have them. And that is ultimately what we try to achieve through our OEM group. But really it's a customer dependency on our technical service that is our primary mode. It's not expensive to get into this space. You could open a chemical blending operation tomorrow. The cost comes in finding the centuries literally now of the combined experience that we bring to the chain. And I believe we have just a short video, Kerry, of some of our processes. It's very short, I think. So not overly impressive, but that's okay. I like simple, but the thing about our products is you don't know they're there, but then you end up seeing them every day. So if you and next time, you won't look at a car differently. You will look at a car differently after today. Everything you see on the outside of a car that is chrome, okay, first of all, it's plastic. So it's hard to get electrical current through plastic. So our processes make non conductive parts conductive and therefore we can make them decorative. So it's a very complex process. You saw a couple of process steps in that video. There are literally a couple dozen in a line to produce a grill, for example, in that thing. It's a plastic grill that of course looks metallic at the end of the day. So the processes, like I said, although not the most impressive to see, you do see them every day. And the quality of that finish and the requirements of the automotive company and the consumer ultimately is what allows us to maintain our business. And it also is the opportunity for us to globalize this business because local suppliers cannot achieve the same quality that we can on a global basis. So that is kind of the key to our long term success. So what is our competitive advantage? Slide 73. As a result of the combined companies, we created a new group within McDermott, within the Performance Solutions business that we call our end user market group. This is a bridge across each of our industries because every industry, like I said, has an ultimate end user, an end use customer, whether it's a mobile device manufacturer, an automotive company, a consumer product company, for example, in our graphics space. All of our companies have the same basic approach to our selling model, where we leverage these relationships from the ultimate end user all the way through the applicator. This team is comprised of very seasoned, very commercially oriented salespeople with very big picture lenses. These are ultimate relationship managers. We call on these people for opportunity recognition. So as somebody's going through an Apple, for example, and this is a great example, Apple asked us specifically to appoint a global point of contact. They wanted one person to go to that they knew could coordinate all the activity within McDermid McDermid Zone and AlphaAssembly Solutions around the world, preferably same time zone, close to the same time zone as they were in. And then what they do is they come to us with future project needs and they say, This is what we're going to want to be doing. Where can we get it done? So our team works directly with Apple, Apple engineers, Apple designers, and then applicators around the world, not only for prototyping capability, but then also for ultimate production of parts. So not only does that give us access into Apple very early in the process, as an example, but it also then gives us the ability to direct work when possible to existing McDermott customers or to help them develop a supply chain in a certain region of the world. This is how we will win long term and this is how we will grow faster than the markets we serve. This group of people dwarfs that of any single competitor. As a matter of fact, I would challenge our competitors combined to match the level of experience, the depth of knowledge, and the number of people we have working on this. They spend all day every day. As a matter of fact, I leave here to go to an automotive strategy session with this group in Europe this week. So we meet on a very regular basis. All of our business leaders are plugged into this. The gentlemen running this organization reports directly to me. It is our number one strategic initiative, which is this bridge not only across our industries, but across the entire supply chain for all the customers that we serve. And you'll see some examples at the bottom right hand of this slide. So in the automotive space, it's our electronics and our industrial groups, communications, you have infrastructure, mobile devices, in our energy space, oil and gas. We have a big push, especially in our assembly business around photovoltaics and LED lighting. And then in the home goods market, appliances and hardware. So we have people crossing all these major end group industries and we have a strategic global account management for the top automotive companies, top tier companies and top electronics manufacturers. Electronics, for example, on slide 74. We have expertise at every step within the electronics manufacturing supply chain now. Nothing we could not have done this on our own as McDermid nor could have Evinthone done it on their own. So anything from semiconductor metallization all the way through the assembly of a final printed circuit or device, we now have again more touch points than any other single supplier in our space. What did the combination of these businesses mean to us from a process availability standpoint in the electronics industry? And this is in the chemical space primarily. So you see pre and post integration on slide 75. We are now extremely well positioned in almost every target market that we participate with world class market leading technologies and offerings. The combination of these two companies, three companies, this is primarily McDermott and Enthone, but this combination was far more synergistic to us than we'd even imagined where Enthone was strong, McDermott wasn't particularly strong and vice versa. We are now complete across the board with a couple of small opportunities still to improve, but we have products and processes being developed to address the yellow areas. We're not although we do sell precious metals, we are not a precious metal company. That's a skill set, that is very different than one that we normally possess, although we do sell some. But we are not primarily a precious metals company as you'll see up there. But everything else, we think we're extremely well positioned now within the electronics supply chain. Next slide. What does this look like? Again, end user market experts calling primarily on device designers and the OEM. Combined with the tactical approach from our local sales organization on the bottom, with a goal to be relevant, and that's really important, relevant and integral to the development of technology. So working directly with an Apple or a Samsung, for example, on what they're designing, understanding how it's manufactured and then deploying resources in the local regions of the world to provide the services and support for those processes. Next slide simply states, again, we believe that no other supplier to our target industries has the reach into all aspects of design, manufacture, and end use. Slide 79. What I'd like to do is just show you a little bit about what this means to be able to participate across this entire spectrum. This is the blowup of a high end smartphone. And you see everything from the phone housing itself to solder balls and preforms for assembly, the printed circuits, there's damascene copper for silicon wafer processing, There's flexible circuits, is that copper replacement technology I talked to you about that is metallized using copper replacement technology, silicon packaging, wafer level packaging, and then even down to the antennas within your phone. So these are all the spaces that we now participate across the entire spectrum. So there's a lot of touch points for us within a high end phone, and this is what it potentially could mean to us. This is the market available to us within every smartphone, every high end smartphone. Of course, this is an estimate and it depends on the manufacturing complexity of the phone, etcetera, but you're talking approximately $0.90 a phone, a high end smartphone. They're not all high end smartphones, but there are 1,400,000,000 phones being sold every year. So you can see there's a huge opportunity for us to leverage these relationships and we have the ability to participate in all those segments. The next slide graphically shows you on slide 79, what does this look like within the automotive supply chain for component manufacturers? So again, end user market experts, we are directly tied in to every major automotive company at the design level. We have people that spend their day with the designers, And it's a fascinating industry. For example, with FCA, Fiat Chrysler in Turin, it's amazing how fashion focused the automotive industry is. They're working on designs for the interior of cars based on what they think fashion trends will be. Our ability to understand that gives us an idea of what colors will be required, what materials will be used, and the ability for us to develop products and processes to match those requirements in the future. We believe that we are much more integrated into that part of the automotive supply chain than any of our competitors. And then again, highly tactical salespeople on the ground prepared for the areas that these companies think that they're going to be building and assembling cars. Right now, today, are a lot of parts shipped around the world because local manufacturing of parts isn't there. We are extremely well positioned as they are able to develop those markets and we will actually even be able to direct work towards our installed customer base. Next slide, a reiteration of the touch points. I won't belabor that, although it's extremely important. Slide 81 gives you an actual example of how we're doing this and how it crosses not only all of our business units, but how it crosses the industry itself. This is a supply chain for brake systems within the automotive space. So you see at the bottom, it starts with not only electronic components and sensors, which are serviced by our Alpha and our electronics business, but the brake calipers themselves, which are supported by our industrial business. Brake calipers have a lot of anti corrosion and anti wear chemistry used in the manufacture of calipers. You then see braking hardware systems, braking electronics systems and then ultimately to the car maker, the OEM and or the tier. So this is where a company like Bosch or Conti comes in as the major Tier one to the automotive maker. They actually do the specification for these products, and we have global account management focused on those companies as well. So this gives us direct access into not only the automotive company, but directly into their tier structure. And again, in the automotive space, the Tier 1s do a lot of the work themselves. They do a lot of the specifications themselves. So we are tied directly into them. And what does this mean to us from a business perspective on a car? Here you will see all the areas of a car that we participate, all the areas of the supply chain we participate, everything from decorative wheels, electronics assembly, center stack components, decorative trim, engine components. There aren't many components on a car that we don't participate. And you can see depending on the car, and this depends on the market it's in, you can have upwards between $30 and $50 available of value to us per vehicle. 80,000,000 light cars and trucks produced every year, not all of them have this level of content obviously, but they're going to all migrate to more and more and more content. So as that happens, it's why ultimately we look at what is the automotive unit manufacturing going to do year in, year out. It doesn't matter that much to us because the content per vehicle is going to continue to increase. And again, next slide, Slide 83. This is the addressable consumable material market for a car, dollars 3,000,000,000 to $5,000,000,000 a year. And you'll see on the right hand side of this chart all the areas that our units participate. So our industrial business, our electronics business, and our assembly business across an incredible array of technologies within the It's why I focus so heavily on the automotive space. It's a huge growth driver for the industry in general and one that we're extremely well positioned for. So ultimately, what does this mean for the business from a financial perspective on Slide 86 or 85 in this deck, Slide 85. There's a history across all these companies of extremely strong earnings, even in the light of top line challenges. So you'll see a dip in 'fourteen to 'fifteen. This is a result of metals prices in the alpha space on the sales side, for example, and the decline in Asia. However, you do see consistent earnings growth even through difficult times. Again, a little bit more impacted in the former Olent business due to the Alpha assembly component, but you'll see the businesses continue to perform well over time. And at a constant currency basis, even though sales decline in that period, you see a positive growth from an earnings perspective. We think this will continue. Our strategy is for this to continue with margin expansion across our businesses and innovation allowing us for higher gross margin products to the market. Next slide, very low CapEx requirements in this business for a company or an operating unit our size. So we spend 1.5% to 2% of sales as our target for CapEx. What this allows us for is a tremendous amount of cash to strategically make decisions and investments in growth areas. For example, we're making a major investment this year and next year and the following year in wafer level packaging and semiconductor plating, the old historic end zone damascene copper business. We are making a much stronger, much more aggressive investment in that technology. That business is going to continue to grow for us far in excess of the rate of the overall electronics space and this allows us to do that. It gives us a lot of cash as long as Rakesh says okay. So it gives us a lot of cash, gives us the opportunity to grow strategically within these markets. Next slide, Slide 87. A very highly variable cost business, which provides us opportunities. Improvements in our cost of goods has a direct impact on our financial performance. Most of our cost is directly at raw materials. Again, it's very easy to get into this space. You can increase capacity simply by adding tanks to our manufacturing process. It doesn't require new plants. So we have the ability to make improvements. Our global supply chain has objectives to make improvements and to decrease our cost of goods. And you can see a 1% decrease in our material costs would improve our EBITDA margin by 50 basis points. We have procurement initiatives as a result of the combined company that are already well underway. We're leveraging the new buying power of the business and we will have incremental savings ongoing in 2017 into 2018 and beyond. So stable and improving gross margins over time. This trend will continue. Our goal is to grow faster than our markets, higher margin products and to grow the top line. So you heard Rakesh talk about the fact that we are focused on top line growth as well. We have initiatives within each business for top line growth as well as margin improvement. And I think you will be happy to know that we plan this trend to continue that you see here. We have a very strong history of margin improvement. We talked a little bit or more specifically, we talked about our commercial opportunities, our sales structure, our strategy within our markets. There is, however, it does remain some meaningful cost synergies and efficiencies within our business as a result of these combined companies. We are well underway to meeting our stated objective from a synergy standpoint. I was talking earlier to a few people. The businesses have come together exceedingly well. They've come together faster than we had even anticipated and I'm extremely happy about that. We are ahead of our synergy run rate as we go into the end of the year. We will begin we've begun already some factory rationalization, primarily in North America. We definitely have G and A synergies as we build shared service around the world. And then we have meaningful factory consolidation opportunities in the future. And these things will begin in earnest in 2017 and carry on into 2018. And then we do have additional SG and A opportunity. However, as I've stated before, we have been extremely cautious and those are decisions that you only get to make one time. We have a great selling and technical force around the world and a tremendous innovation team around the world. All those talents and skills we want to maintain and retain. So we are making very tactical decisions as it relates to anything that would have anything to do with selling and tech or our innovation staff. We'll be taking a thirty minute break and we'll start again promptly at 10:40. Thank you. Okay. Thank you. I guess I'm done, Kerry. Thank you. Keep going. No. Thank you all very much. Ladies and gentlemen, if everyone could start to take their seats, we'd like to resume in a few minutes. So good morning everybody. My name is Diego Lopez Casanello. I am President of the Agricultural Solutions segment of Platform. I joined Platform in February. In March, we put a team together to develop a new strategy for Arista. This is what I'm going to share with you today. We had people from different regions. We had people from the different legacies, different functions. And we gave these guys two suggestions. The first one is to look into those markets those segments in Arista where we are leading today. These are areas like in Brazil, like in Eastern Europe, Mexico, Vietnam, Hungary, so that we can take conclusions for the entire Arista based on what we know that works. We also tell the team to look to develop a strategy where we know we are not waiting for grain prices to recover, but that is robust enough to do well and grow in a more tougher environment in the next year. So having said that before I go into the strategy, let me give you an overview about who is Arista today. When I was offered the job back last year, I saw the opportunity to lead the birth of the next great Ag Chem company and I have forty minutes to try to convince you of that. I'll do my best. But the next two slides I have is really what caught my attention and I wanted to share this with you from the beginning. First of all, I mean, you look at the new Arista, every legacy on its own was well positioned and doing well in its own segments, in their own geographies. When you put these companies together, you get a global player with a broad portfolio, a very compatible portfolio. But I would say today in this market is not enough to be global or to have a broad portfolio. There are two things that make Arista unique in this space. The first thing is that we play in segments that are specialty niche in nature. So away from the mainstream of the agricultural chemicals industry. The second unique characteristic of Arista is that we are asset light and we have a very viable cost structure that has advantages beyond the expected financial advantages, also operational advantages that I will mention today in the presentation. So probably this slide shows best how our business model works. You see on the middle of the graph the current business model of I would say the larger discovery based companies. And you see on the left hand side the business model of a generic company. And on the right hand side are Arista model that we call asset light high touch. Why high touch? We focus on specialty niche segments. Here it is not about the new active ingredient. I mean, are active ingredients that can do the job in these segments, but it's really about developing the delivery system, the right mixture, the right formulation that will do the job in those niche segments. Why asset light? Because when you look at the discovery based companies, Rakesh mentioned before, you have to invest around $280,000,000 to bring a new active ingredient from discovery to the launch in one of the key markets. On top of it, you have to also count with another 205,000,100 million dollars dollars investment in CapEx on a new active ingredient manufacturing plant. We don't do this. We are we have a library of active ingredients. We continue to expand this library of active ingredients by accessing technology from these discovery based companies. Why is that? Why are we interesting? Why are we attractive for discovery based companies as a partner? Because once you invest $700,000,000 in an active ingredient in a manufacturing plant, you better get the volumes very fast to get a business case for it. So what we do is we offer a potential for segmentation and enhance entrance into these niche segments. At the same time, we don't produce the active ingredients ourselves. So we are sourcing these active ingredients from multinationals. We are tolling these active ingredients in India, in China or from whoever that can secure for us a competitive cost position. So with this, we are able to capture high margins and at the same time get a high return for the investment. Our footprint is relatively simple. We are present in all major key markets in the ag industry, more than 100 countries, 6,000 registrations. Our headquarters are in Cary, North Carolina in what we call the Silicon Valley of the ag industry in The U. S. We have around 4,000 employees. Most of our employees are in marketing, sales, technical service close to our customers. We have of course less people working in production. We do have 13 formulation plans around the world. We do formulate some of the products in house. This around 60% of the volumes are being formulated in house. And why is that? Because we want to keep the flexibility, the speed and the quality to serve our customers fast. Now this of course is our simple blending and mixing processes that don't require a significant amount of capital. When looking at our portfolio, you will see and also comparing it with the industry, you see that we are present in all major crop groups. However, as Rakesh pointed out before, we are more fragmented and less exposed to the major rock crops where probably you will see the highest level of competition in the market. Looking at our geographic presence, we are stronger present in emerging markets like LatAm, like Africa, like Eastern Europe, also set there to grow in the future with the growth of these markets. And from the perspective of our portfolio, we have a balanced portfolio of fungicide insecticides and herbicides. But we also have a very strong position in biostimulants. Arista is top three in the biostimulation space. I will talk later on about the unique possibility to differentiate through biostimulants and participate on the growth of that segment. This is just an example of core brands that we have in all major crop groups. And of course that now with the combined portfolio in front of our distributors, we have the chance to be more appealing. The same from the perspective of our regions. We have core brands in all key regions and this represents the backbone for us to continue to grow in those regions. Looking at the business performance in the last years, the business has been growing so the legacy business has been growing steady. Last year, as you know, we have been hit by the currency impact. We have more than 85% of our business outside The U. S. However, when you look at the numbers on a constant exchange rate basis, you see that we have outperformed the market in 2015 in a year where we were in the middle of the integration and we have been able also to increase our margins. We are seeing these trends in the first half of this year where we have outperformed the market and we believe that we can repeat this in the second half. The strategy of course is about consolidating this trend. It's about accelerating the trend. You will see in a minute what our objectives are. So Rakesh showed this slide. The market has been growing over the last years at around four percent in average. And what are the fundamentals that explain the growth of the agricultural industry and also moving forward what can we expect? Population is growing 40% population growth is expected until 02/1950. 70% is the growth that we expect for the food production due to changes in human diet due to the trend towards more meat consumption. At the same time, you see limited arable land. There are around 7,000,000,000 acres available for cropping. And there are at the same time 5,000,000,000 acres that are at risk of becoming unsuited for farming due to water scarcity, due to soil erosion. So at the same time, climate change is putting certainly more risk into farming. And we see food regulatory requirements increasing due to the environmental and health concerns. What are the impacts of these trends in our industry? I mean, first of all, we expect the industry to continue to grow in real terms because there is no other way for the farmer than to increase yields per acre and doing this through technology. There's no other way around. At the same time, we see the regulatory environment becoming more stringent. So the cost of the entire value chain is are increasing. This is driving consolidation in the industry. I will talk in a minute about what are the consequences of that consolidation for the industry and for Arista. And we will continue to see cycles. I mean, is an industry that goes through cycles. Don't expect from me a forecast about grain prices for next year. You won't get it. But you can count with the fact that the 2,007 food prices won't be the last one. There will be times of increasing grain prices followed by productivity investment and then followed by further downturns. So what we said and I said at the beginning, we are not betting on increasing grain prices for our strategy. Our strategy needs to be robust to those cycles. So moving to industry consolidation, I know that this is very top of mind. What is the consequence for the industry and how are we coping with this as Arista? First of all, we will see some new players with broader portfolios with increased leverage in distribution. This post risks and opportunities. What we are working is on mitigating the risk, but building on the opportunities. We see, for example, that we are a niche player in specialty niches. These niches will become more nichey for those larger companies and we will be betting more on continue to collaborate with these companies on getting access on IP to increase and further expand our library of active ingredients. At the same time, Arista is going to focus there where Arista can differentiate. And I will show you in a minute what those focus segments are where we can lead and where we can be where we can grow above the average of the market. At the same time, if you talk to distributors, you will see that distributors are concerned of having to deal with players that are less flexible, that might be slower in decision making. We have a very entrepreneurial, very customer oriented team and we see this as a window of opportunity for us to position ourselves as best in class in customer orientation. There will certainly be a portfolio divestments in the coming months and we will be evaluating and eventually participating. There is nothing we can of course today mention, but we will be informing you in due time. Our strategy for growth. So let me start with our midterm objectives. First of all, our objective is to grow and to grow above the average of the agricultural market. We set ourselves a goal to grow two percentage points above the market, while at the same time growing profitably. We want to maintain an EBITDA margin of not less than 20% year on year. At the same time, we want to be a leader in those segments that we have defined as primary focus segments. And very important and I will talk later on about it, we want to be the number one in biostimulants. At the same time, it's also important how we get there. We have a strong pipeline that we will leverage to produce 50% of our sales year on year with products that have been registered in the last three years. And how is that we plan to win as Arista? And this is a kind of an in nutshell chart. First of all, is that we know that we cannot be everything to everybody. We want to focus. And then when we put the focus, we want to lead. So we have defined five segments that we call H3 segments. And why we call H3 segments? Because they show high growth compared to the agitomical market where we have the chance to achieve high margins, higher margins than the average of our business and where we have the potential to differentiate where we have a strong portfolio today. So these are segments like crop establishment. What we do here is protect the crop in its early stages. So it's about crop count, crop stands, root systems. And this is a segment that grows together with the introduction of GMO seeds because when the farmer makes a bigger investment in paying for a GMO seed, it also has the need to protect that investment. And that is why this segment grows above the market. Plant stress and stimulation, this is about boosting the metabolism of the plant to increase yield. So it's not about killing pests and diseases, it's about working on the metabolism of the plant. And I will talk about it in a minute. Here is where biostimulants come into play. Resistance weed management. There are several high volume commodity herbicides in the market that are becoming increasingly ineffective against certain weeds. These are herbicides like glyphosate for example. And this is creating a new market for mixtures of new herbicides and also established herbicides. And we're here in that segment. For those of you that follow this market, there are certain new traits of GMOs that are coming into the market that will be competing with glyphosate. We have a portfolio of herbicides that is very complementary to those products and we also see the chance here to grow with it. Specialty protection niches. Here is if you put yourself in the shoes of the big discovery based companies, what you're doing in R and D is you screen for major disease families, major pest families. What we look here is we look around those major families for opportunities, niche opportunities where we can participate. These are things like acaricides. These are things like bacteria vector control, very interesting high margin opportunities. Crop residue management is our fifth segment. Of course, the trend towards higher regulatory requirements is also driving the need for the pharma to reduce residues. And here we are entering that market with biocontrol products and in combination with conventional crop protection products to reduce the level of residue at the end of the season for the farmer. There is a sixth segment that you see here in the slide. And this is because once we define in each of the markets who are the distributors that will help us grow in those segments, we sit down with those distributors and we develop tailor opportunities, tailor mixtures that will help us round our portfolio in those distribution companies. So Rakesh shared with you the slide already. You see that based on starting from the $54,000,000,000 market that includes BioSolutions, we extracted a primary focus market of $13,000,000,000 We have 40% of our sales in those markets today. And but we do more than 50% of our gross profit already in those markets. And the idea is to increase that share, to increase our market share the coming years. At the same time, the question is what about the rest of the portfolio? These are high profit highly profitable opportunities. We have, of course, a tail cutting exercise like everybody every year. And we our target in those segments is to continue to defend our market share. But obviously, most of the capital, most of the management attention is going to go into this priority segment. There is also a big opportunity for Arista in cross selling. Now this is about that there where legacy had its stronghold in a geography to bring the rest of the portfolio from the other legacies and leverage that position. These are things that take a bit more time in the ad business because you have to register these products, you have to launch those products. So it might not be in your synergy capture potential that we show you, but these are sizable opportunities for Arista moving forward. So coming back to our plan to win in these segments. The first point is very important because with the combined portfolio we have today the chance not to offer single products, but to offer solutions in those segments where we are present today. And this is just to bring you an example of our crop establishment H3 segment where we have the seed treatment competence from Chemtura. Chemtura basically is a pioneer, developed the seed treatment business worldwide. They have tremendous formulation technology where we can put anything that works on the seed. From Arista, we have biosolutions, biostimulants that we are also adapting into this segment. We are already commercializing this year and in farrow applications. So altogether, we have a complete one of the most comprehensive portfolios in the industry. And we are able to offer not a product, but a program to the farmer who's thinking something like the sticky sales concept that Scott was talking before. Historically, in this industry, there has always been opportunities for increasing yields. The farmers have always managed to increase food production by adopting technology. And we are convinced that biostimulation is going to be a key driver in the future for additional yield increase. And why is this? Because around 70% of the potential of the genetic potential of crops to produce yield is lost to what we call abiotic stresses. These are environmental stresses like water scarcity, like heat, like cold. And what biostimulants do is basically exactly that, work on the metabolism of the plant to make the plant more resilient to these environmental stresses. We have now tools like functional genomics where with these methods we can identify which compounds in the plant extracts and seaweed extracts that we use for biostimulation. What are the compounds that work? It can help us substantiate our claims and adapt the application timing of our products. So there's a significant potential here moving forward. Arista is a leading player among the top three players in the world. None of the big discovery based companies are present in this space as of now. And we have a portfolio that acts on each stage of the growth of the plant that we can today offer as a complete solution. We are registering these products across boundaries and we see a unique opportunity to participate in this segment. As I said before, our of course, we will like to know what is our pipeline, how strong is our pipeline today and very important how are we going to continue to increase the value of that pipeline. And the answer is through technology partnerships. The legacies Chemtura, Arista have a strong track record of cooperations with major multinational companies. You can see here major acquisitions in the last couple of years and selected licensing deals. And since we built the new Arista, we have seen increased momentum in collaborating. We have done a lot of efforts in communicating our strategy, explaining our strategy to our partners. And as you can see right now, we're working on several very interesting in licensing deals that are not yet included in the pipeline that I will show you next, but that can help us increase the value over time. So in the last couple of months, we have worked on aligning the strategic focus of our pipeline to our new priority segments and cleaning up those things that really don't make sense and putting trials in place for those projects that we want to push. We also have introduced a new process, a new R and D prioritization process to push for the right projects. And as you can see, our pipeline is valued at around $700,000,000 of peak sales with products these are incremental sales starting in 2016. And we are I think this is a good solid pipeline. However, I personally see the opportunity here to continue to increase the value. I think we can do more with the R and D investments that we do year on year through efficiency gains. For example, I mean, just an example is the opportunity to use our South American trial station to do off season trials for the Northern Hemisphere. So we're working on several things that will help us get more traction with our pipeline. Our target is to add to this pipeline value $100,000,000 year on year. And I feel like we can get there in the next years. Let me show you some examples of projects we're working on that hopefully will give you a better picture of what we do. This is a new unique model to fight insects. The technology is called Noctobi. What we do here is instead of going into the field and applying hundreds of pounds of products. We apply a very thin stripe of I think it's even animated. I will give it a try. I think you can see here we apply a thin stripe of this formulation, which is a natural product that has a special attractant to this particular insect that we want to eliminate. So what happens is that the insects go into that stripe and eat on the product. Insecticide we use is the normal insecticide that is available in the market. And the beneficial insects are protected and we reduce the amount of residue in the crop by 99%. So as you can see here, this is a product that fits perfectly in our crop establishment sorry, crop residue management segment that where you don't see an innovation in terms of a new active ingredient, it's an innovation in terms of a new delivery system. We can bring this formulation to other crops, use existing registered active ingredients and have a product concept for that particular crop. Another example is a technology that we call Terpera Plus. And here you have to picture a Midwest corn farmer. What a farmer does is they go to the field. They use the seed drill to apply a liquid fertilizer. They will go again to the field. They will apply an insecticide. They will eventually go again to the field and apply the fungicide. What we do with Terpura Plus is we offer the farmer a fungicide insecticide liquid formulation that is compatible with that liquid fertilizer and can be applied in one shot to have a early insect and fungicide protection. The fungicide has a bio stimulant effect, which allows us to increase yields that are additive to other products that are being applied later in the season. So a tremendous innovation. This product is going to be launched in 2018. And again, here a clear example of innovation in crop establishment with not a new active ingredient, but a new delivery system for an existing active ingredient. As I said before, we have a strong customer oriented team and we believe that we can make this a core competitive advantage of Arista in light of the increasing consolidation of the industry. And our business model has a unique advantage already. If you are a discovery based company and you make an investment in active ingredient research, you have to invest in a new facility, You have to sell what you discover, what you produce. We don't have that limitation. We can define together with the distributor, with the farmer our offer to that particular segment. And we have the flexibility to then use our available active ingredients or access those missing ones through cooperations. So that gives us a tremendous opportunity to be more customer oriented and react to changes in the market. At the same time, this is a busy slide, but of course, we are talk about our strategy, structure follows strategy. The idea is now we're starting already at the end of the year, align our organization through our new priority focus segments. And that means that we will have crop establishment teams working locally together with our distribution partners communicating with global crop establishment teams and other regions, at the same time being supported by an excellent center on crop establishment in The U. K. That consolidate the formulation and technical application expertise and technology teams that are feeding those teams with active ingredients whatever needed. We don't rely on steel, on chemical manufacturing plants. We are in a business that relies on people, on their attitudes, on their expertise, on their skill sets. And we're conscious that our team has to be best in class in front of distribution. We have a strong, very strong management team here with people that are ex Arista, ex Chemtura from other AdChem companies with more than twenty, thirty years of experience. We have not had a significant turnaround despite all this integration. So we were able really to keep those folks that are recognized. And today, I'm very happy This leadership team has tremendous stacks in front of us. Of course, after having the integration behind us, now we're driving those behaviors that we need in order to get to our objectives. And I listed here the top five behaviors we want to see in our teams. And we are on it. The teams are responding well. And I'm happy that in the next three years, while others will be distracted with integration, we have already the full focus on our customers. So last but not least, also the fact that we have a viable cost structure that we want to keep and we want to strengthen in the coming years. And you see in this graph that around 70% of our costs are direct in nature and 90% of them are viable. So that said, we have made sourcing a core competence of Arista. And we have a great opportunity to drive cost of goods savings in the next coming years. You see that our teams have incentives that are tied to cost savings that bring margin improvements. We have multidisciplinary teams that are sitting on a weekly basis to discuss sourcing. I'm in contact with the head of purchasing and with the head of supply chain operations on a daily basis. And so we have a good track record also with our leg acies and we can improve that even going in the future. This is very strongly tied with net working capital management. We have been top tier in performance in 2015. And as you can see also net working capital is a standing target in all our incentive schemes. And we have a target in the next two years to have a net paid a positive net paid inventory, which I see a good chance to get there and that will make us benchmark in the industry. My team has done a tremendous work in capturing synergies. We have collected $38,000,000 of incremental synergies in 2015 and another $20,000,000 are expected this year. We have secured $69,000,000 of incremental synergies sorry, of run rate synergies in as we speak. And I see that very soon we will be able to be at the 80,000,000 Now beyond the synergies that we have been informing, we have opportunities for further cost savings in Arista. Things like, for example, we're consolidating right now our laboratory footprint. We have opportunities to further consolidate our formulation site footprint. We're working on the rollout of a new ERP system that will help us reduce significantly the complexity that we have, the system complexity that we have. We are working on a shared service center for the European region. And far and so on, I think we will see, especially in G and A, significant cost savings moving forward. So just to summarize what I said before, we have several levers in the next couple of years to increase profitability and improve the management of our capital. The more we move towards our HQ segment in the next years, the more we drive mix and the more we increase our pricing power. We will work on year on year cost savings and I have a good feeling that we can drive this. We will further reduce our G and A costs. We will invest on selling costs to drive growth. We have opportunities for expansion, geographic expansion. We will be investing on sales teams and technical teams. We can do this growth with not more than 5% of CapEx from sales. And very important, the focus of our entire team in both pricing management and net working capital. So I thought to wrap it up, but then I think I brought a video so that you can see a few other faces from Arista and hopefully it delivers the message that I want to deliver to you. Similar to Scott, please don't expect any fancy videos, a simple one. Let's put it. Despite the great progress of the agrochemical industry in recent decades, current average yields of key row crops like cereals, soybeans and corn could be increased around 30 to 40% through better adoption of pest management tools. Our sales are creating solutions not products. When we say problem in sales, we ask ourselves what is the right combination of active ingredients and technology to solve it. The second view boxes for pests also called biotic plant stresses Another 60% to 80% of the genetic potential of major crops are lost to a biotic stresses such as heat, cold and water scarcity. Arista Life Science has a unique approach. We look to eliminate pests, but at the same time give the plant time to fight in the field. These products are called bio stimulants. These natural substances stimulate the metabolism of the plant to equip it to better resist biotic and abiotic stresses. The result is higher crop yield and quality. Lehigh has numerous innovation centers throughout the world, high-tech formulation labs, greenhouse testing facilities and state of the art field stations. Thanks to hopeful collaborations with partners across the industry and academia, Arista Life Science has secured access Very good. I have good actors in my team. We tried to get the cricket sound out of the cornfield, but it wasn't possible. Thank you very much. Have nothing so exciting as a video unfortunately. I'm Ben Glicklish, Executive Vice President of Operations and Strategy and amongst other things integration falls under my purview. As you've heard me say many, many times, platform isn't just about buying great companies, it's about making them better and that's really where integration comes to the fore. I'm going talk just a little bit about our integration principles, how we go about integration and give a couple of case studies and a progress update. So first on principles, asset light high touch businesses by their very nature rely on people. And so stabilizing the organization of companies that we've acquired is fundamental and critical right from the get go. The way that we do that is really by prioritizing organizational design. Essentially, we want every single person in the entity to know what their role will be down to the account manager as soon as possible and you accomplish that through very thorough communication. Part of our moat as an asset light high touch business is our proximity to the customer. You've heard that from Diego, you've heard that from Scott, and so all integrations have to have the customer first, right? And so our integration framework will always be prioritizing the customer, making it such that the acquisitions actually don't impact the customers and over time doing business with us should be easier. The way you accomplish that is really by very quickly converting to one brand. So Arista was the one brand and we brought AgriFar and Chemtura AgroSolutions under that umbrella very quickly. Similarly with McDermott Performance Solutions, we came out with a new logo, the new branding for the Enfone Alpha and OMG businesses very quickly. One phase of the customer is effectively saying that when you've got an account, there's going to be one salesperson, one sales organization that's responsible for that account. There's a communication, the wires aren't ever crossed, the invoices are quickly just from one organization. It's actually a very challenging exercise, but one that we've prioritized. Cross functional ownership. So while integration is overseen by corporate, it needs to be led and owned by the business because when integration is over, the business unit is going to be running that business and owning it. And so the way we do that is we have a very cross functional approach to integration and you'll see that from due diligence when we're making an acquisition, you've got business unit folks who own each of the specific segments, if you will, of the operation involved in the diligence that transitions into the execution and realization of synergies. And lastly, wins, right? In the planning for an integration, in the diligence, we're going to identify a handful of things we can do to garner some momentum, to get some synergies, find the low hanging fruit and get a rhythm around integration. We've been pretty good about that thus far. So how do we do that? It starts really early on. It starts in the planning phase. So while we're evaluating a business, while we're doing our diligence on the business model and the financials, we're also thinking about the synergy opportunity and how it fits. We're doing our IT work, we're doing our HR work, we're doing our supply chain work and so forth. The execution phase is all about regular tracking, right? So we are measuring results, we're monitoring on weekly calls, monthly calls with the leadership of the organization to make sure that we're setting up guidelines what we're going to accomplish with achievable timelines and we're hitting those timelines. And lastly, talking about cross functional ownership, the integration doesn't end when the synergies are realized. There's always more to do and there's a continuous improvement mindset here. And so that's when we talk about optimization and the business unit really running the business and looking for continued opportunities. You'll see that later in the presentation a little bit about where we are in those three phases with the different integrations we're working on. Just quickly on some highlights, as I think most folks know, we've been delivering the synergies we've committed to. These integrations have been very consuming and successful exercises. On the agricultural solutions side, here we are two years from having closed the first of the three acquisitions, about a year and a half from closing the last of them. And we've brought them together pretty successfully. So these are three global organizations that we've integrated with very diverse business units, extremely spread out operations and nuanced regional operations and we brought them under one umbrella. We've nearly completed the one phase to the customer exercise. So we've got sales forces consolidated very early on, legal entity rationalization, so that has to do with invoices and billing to rationalize the organizational structure. And lastly, registration transfer, which is something specific to the ag business. But in order to sell a product, need a registration, which is attached to a legal entity. And we've had to move the registrations to line up with the entities as we rationalize them. Clearly, as Diego mentioned, there's more opportunity around footprint, so that's office consolidation. Supply chain procurement, we've had great savings and it continues to be an area we're looking to harvest and cross selling. So that's sort of the step and that's really taking advantage of the broader AI library and the larger sales force we have to drive revenue synergies and sales growth. The Performance Solutions side is a little bit earlier in the evolution. We're only seven, eight months out from the close of the Olin transaction or the last transaction, which was the OM Malaysia transaction. But we've as we talked about earlier, put the organization together. So here we are nine months later with a full organizational design, account management's been divvied up effectively, the brands have been consolidated. We're still in the earlier phases of one phase to the customer. So legal entity rationalization and getting invoices rationalized and some of the nitty gritty. The next very compelling opportunity for us is facility and office rationalization. These are as you saw from Scott's slides, very diverse operations, lot of warehouses, a lot of manufacturing facilities and there's a pretty compelling opportunity there to reduce the footprint, get rid of some of the steel in the ground and generate some savings. So where are we? As I just said on the performance side, it's physical footprint is one face to the customer, the back office integration and product rationalization and revenue synergies are where we're spending our time right now. Sort of in the early innings, I would say, of the Performance Solutions integration and it's going quite well. Whereas on the Agricultural Solutions side, we're just about getting to that optimization phase. We're almost run rating the full synergies we've committed to and beginning to look at harvesting the additional opportunities from having combined these entities. I'd be remiss not to mention headquarters. We made six acquisitions and we've got a major initiative in building our corporate infrastructure and what Rakesh would call enterprise development and Sanjeeva is going to talk about that as well. From that standpoint, it's really an IT integration effort right now and building appropriate business intelligence and financial reporting systems to manage a company as big as ours has become in a relatively short period of time. One case study to sort of bring to the fore what we've done for each of the businesses. For Arista, we'll talk about supply chain and procurement, which continues to be a key focus area, but it's been a very rich vein of savings for the Arista team. As Diego pointed out, we spend over $1,000,000,000 in COGS a year. And in the process of our integration and synergy planning, we set an ambitious goal of saving $30,000,000 from COGS, is about 2.5% over three years. We looked under every nook and cranny for savings. So AI procurement is clearly a big opportunity leveraging the scale of the broader organization, manufacturing and tolling is also an obvious one. We looked at things like freight and where we're warehousing and, and, and a long list of opportunities. Where we are today about two years in is we're just about at the run rate of $30,000,000 and there's upside next year. To make it real, cypermethrin is a great case study. So cypermethrin is an active ingredient that Arista and AgriFar were procuring and selling a large quantity of six eighty kiloliters, but they were sole sourced. And so by combining these businesses and taking advantage of some of the procurement capabilities of this organization, you just saw Stephen Pierce talking about it, we were able to make it a multiple sourced active and we were able to negotiate better terms. We're saving 1,000,000 point dollars on that active ingredient alone. And there are many other active ingredient case studies that you can look at where those savings are coming through. The McDermott side is really about footprint consolidation, I've mentioned that previously. These are globally distributed businesses, but they don't have any big manufacturing facilities. There's a lot of warehouses, there's a lot of formulation plants, a lot of sales offices and they all tend to be in similar areas because the customers are similar end markets. So there's significant presence in Asia for the electronics business. There's significant presence in Western Europe for the industrial business. And we're in the early stages of working through that facility rationalization opportunity and we're looking at every facility we have and the opportunities that they present. One where we're well progressed is in North America. So what you see here on the left hand side of the page are the facilities that we have in North America for the electronics business. There are really three that are core electronics. The West Haven facility is more of the semiconductor business that we got from Alens and the Altoona facility is Alpha, so that's assembly. But the three on the top left are really overlapping facilities. You can see the volume we do in each of them on the top of the slide. And we're combining the three into one and that process is already well underway. It costs about 1,000,000 point dollars of initial CapEx to upgrade the Ferndale facility to fit the Maple Plain and Bridgeview capacity, but we'll get $2,000,000 of savings on a run rate basis just from that opportunity. Now if you look at the bottom, you can see how much overlap there is in other geographies. So you see the European Union footprint, I would look at Enstone, the combined facilities McDermott and OM to get a sense for what the opportunity set there is in terms of redundancy and similarly in Asia where we have many, many overlapping facilities in the same countries. So this opportunity is still early stages. We're doing great against it in North America. We expect to continue to make meaningful progress in Europe and Asia over the next year or so. Lastly, just a reminder of where we are on synergies. So we came into 2015 committed to generating $20,000,000 of synergies from the Ag business. We finished the year with $38,000,000 This year, we committed to 40,000,000 and we're well on track to achieve that. The remaining Ag synergies are 28,000,000 We should be run rating the balance. So we said we'd get 80,000,000 We should be close to run rating 80,000,000 by the end of the year. So that exercise is nearly complete. And then on the performance side, there's still a bit more work to do, but we have a high level of confidence we'll get there. One thing that we get questions about, we got a question about on our last call was are we going to raise our synergy guidance. For us, we're two years in, almost three years into the Ag integration and at that point you sort of flip to optimization, If we're making the business better still and it is a product of combining the businesses, there's some blurred line of synergies versus optimization and we're focused on making the business better and it's a little late to be calling it synergies. On the performance side, it's still early days. So we'll see how we continue to progress in that regard. And with that, I will turn it over to my colleague Sanjeev. Thank you so much, Ben, and hello everybody again. It's fantastic to see such a good turnout. And on behalf of all of platform, we are grateful that you are spending the morning with us. Before I hand it back to Rakesh to conclude and also to take all your Q and A, I thought I'd spend a few minutes on a couple of key financial updates. Let me first of all, I'm on Slide 140 for people who are on the phone. A quick couple of quick comments on our balance sheet. As you heard from Rakesh, we are very committed to the 4.5 times leverage structure. That's a key takeaway that you should take and over time in less than three years, we expect to get there. Having said that, I think it's very important for all of you to note that the business as it stands can withstand a lot higher leverage. I think it's very important as you look at our margins, you look at our variable cost structure, you look at the geographic focus, the business focus, the low amount of CapEx we have, the business can afford a lot higher leverage. So it's important second point takeaway. Third, we continue to enjoy a significant access to capital. If you just do a mark to market right now, we have over 800,000,000 of capital available to us that includes our unused credit lines, corporate line, our local line, and obviously it includes the significant amount of cash we have on hand. And then finally, we continue to have those significant maturities, which gives us a lot of flexibility to raise capital in different ways for any needs that we may have. So I think it's important as you assess our balance sheet, you peel the onion and look a step beyond regardless of our key priority to reduce it to 4.5 times. One key use of our capital is working capital. So I thought I would spend a minute on that. It's one of the biggest uses of our capital about over $1,400,000,000 as of June 30, And that is also a number that varies from a seasonal point of view. Really, most of it is in the ag business and it really depends on the growing cycle, the state of the financing market of that local market, what is the cycle of the crop, what is the growth cycle in terms of when the crop is being sown and when it generates the revenue for the farmer. Q1, Q2 historically are the biggest use of our working capital. Peak use could be as much as $200,000,000 and then late Q2 for the rest of the year, especially in the second half of the year, we claw all that back. It is important to note that even as we generate this big use of working capital, as Diego pointed out, credit collection and management of that receivable is a key core competency of ours. This is also a personal priority under the leadership of Rakesh and Martin, we have actually rehanced our whole bonus structure. So from a compensation point of view, our ability to manage working capital throughout the year is a key metric. And I'm very confident that you will see results and we will claw back some of this capital. The last other comment I would make on working capital is, because most of our business is overseas, a lot of that working capital is in local currency. So, some of the volatility you see in the balance is actually FX related. It has nothing to do with what is economically happening to the business. It has to do with how the numbers are reported. So please keep that in mind as you assess the change in balances to working capital over time. Quick comment on foreign exchange. One of the great things about our globally diverse business both from a type of business and from geography is that we have significant FX exposure. Over 70% of our revenue in 2015 was non U. S. Dollar. So our ability to manage this FX properly is a key part of our value proposition. I break up our FX exposure into two buckets. The first is translation, which is just non U. S. Dollar balance sheets and income statements when they get reported into U. S. Dollars what the current exchange rate is and that impact of that. That is something that we don't actively hedge. We do have about 20% or so of our debt currently is euro denominated, so that creates a natural hedge. We're always looking for non U. S. Dollar debt, so we can continue to naturally hedge it, but this is not something we will actively hedge overall from a financial markets point of view. However, as we have done over the last several earnings cycles, we will be very transparent with you in terms of the impact of this translation on reported results by showing you our underlying operating performance on a constant currency basis, which then allows you to better evaluate our performance adjusting for FX. The second bigger impact we have on FX is our transaction exposure. This is the fact that in many markets, we have a cost revenue mismatch. In a lot of the ag market, the raw material is delivered in hard currency, so either U. S. Dollar or euro, and the revenue is generated in local currency. Operationally, I think the team is doing a very good job of managing that exposure. Over time, that's about matching your sell way build where you sell. It's about payment terms. It's about changing currency of billing. It's all these operational things that we can do and we are quite good at that and over time we are getting better. The second way to manage it is with financial hedging. I'm pleased to inform you that we continue to roll out a global FX hedging program, where over time all our FX exposures on a transaction basis will be prudently hedged when they are exposed. So we will take this volatility off the table as much as possible. Finally, a lot of our FX exposure relates to cash and accounts receivable. And I believe the team does a very good job of trying to manage that. There could be some post transaction pricing adjustments. There could be some offsets to price as the exchange moves in certain directions. So net net, this is a very key priority for us, FX management. A quick comment on uses of free cash flow. Again, I know we're sort of repeating ourselves here, but debt pay down is a key priority. It's important that in less than three years we get to 4.5 FX as our earnings go up, we will generate more free cash flow. We will use that to pay down debt that will obviously also reduce the amount of interest burden we have currently in the business. I already referred to working capital, it's very important that while working capital is a use of free cash flow, even a small improvement in working capital will generate a lot of cash flow considering the size of the denominator. So this is a key priority for us as we focus. Rakesh, Scott, Diego all talked about organic sales growth. It is very important that we continue to allocate capital to support that. For a business with revenues in the $4,000,000,000 range, we are a very low capital business. For 2016, currently we reduced our outlook for CapEx. We are looking at give or take $100,000,000 of CapEx for an enterprise of close to $4,000,000,000 in sales. We will continue to invest in that. That is how we are going to achieve low single digit growth in organic sales and high single digit growth in EBITDA. So very key and efficient use of capital. And finally, as you saw from the update from Ben, but also from Diego and Scott, acquiring businesses and then integrating them is a core competency of this business. And we will always be on the lookout for appropriate tuck in or other acquisitions. However, that for the time being is deprioritized as we continue to focus on improving the balance sheet. One big use of cash flow near term is our tax payments. This year we expect to pay between 100,000,000 and $125,000,000 of taxes. In a simplistic world, you would like to make money where you spend money. Unfortunately, because of the legacy structure and the disparate businesses we brought together, we currently have a mismatch. We have expenses most significantly in The U. S. And then to some extent in couple other countries where we don't have natural tax shelters. On the other hand, we generate a lot of cash and a lot of income in countries like Brazil, China, Mexico, France, where we don't have natural tax offsets. This is a key priority of the business. How do we make structural changes to our structure so that this number can continue to come down and a key priority for me and everybody else in the business. We are looking at it both tactically and structurally. Tactically, you've already seen an improvement. We had an outlook from 100,000,000 to $150,000,000 Now we are down to 100,000,000 to $125,000,000 and I'm hoping that we continue to make some tactical improvements. The structural changes looking at aligning our revenues with our costs, looking at ownership structures, looking at commercial supply arrangements, those will all take time, but will be much more sustainable in terms of savings. And I expect this is a two to three four year effort. However, a key priority and a key benefit as we get this going, it will reduce a meaningful use of cash that we have today. Before I hand it back to Rakesh to wrap up, a quick comment on enterprise development, both Rakesh and Ben also alluded to it. This is a key priority as I talked about, we brought together a bunch of desperate businesses. They were not desperate, are actually fantastic. And we are happy to have them. But we are bringing them together and creating an environment and infrastructure where we can scale them up as appropriate. And I am pleased to report that we've made meaningful progress. In the end, it's about people, process and systems. And in all three areas, we have made meaningful progress. We are in the process of globalizing, commonizing many of our key processes. We are prudently investing in certain systems, environmental systems issues that will pay off. And most importantly, we are beefing up our team whether it is in finance, whether it is in other commercial areas that will continue to pay off dividends over time to manage this enterprise and to reduce this expense over time. Shared services without compromising in any way the independence, decision making and commercial nimbleness of our segments, we are globalizing certain capabilities like IT, legal, tax, treasury, accounting, so that we can have common best practices without in any way compromising independence. Finance and controls, we need to continue to improve the speed with which and the accuracy with which we close our books and continue to improve the controlled environment we have. We have made significant people and process investments in that and over time some of the IT projects we have going on will help us in that regard. And then finally, the payoff of investing in capability in tax and treasury is immediate. You are seeing some of that already playing out in terms of how we are managing our effects, how we are tactically reducing our tax burden. And this will be an area we the Board, Martin, everybody have been very supportive and so we continue to invest in that regard. Over time, this amount total spend at the corporate level will come down and will allow us to have a platform that we can scale up or down based on the needs of our shareholders. With that, I thank you for your time and it's my pleasure to hand it back to Rakesh to wrap up and before we take questions. Thank you. Thanks, Anjeet. Thank you. Well, we had told the team that we wanted to wrap this up by about 12:15 and we are just about twenty, thirty minutes ahead. Hopefully, it's a sign of things to come where we keep exceeding expectations. So but I know we have thrown a lot at all of you this morning. We have a number of slides. We really wanted to share with you as much as we could. And hopefully, you'll take the material back and get a chance to reflect on that. I just wanted to bring back the last slide that I had earlier when I showed you. And in fact, I'm going to put this again, try and summarize again the highlights of what we have presented today. So the first thing you should take away is that as a team, we are absolutely committed in meeting our financial commitments. We have had a good start this year. We have given you guidance for 2016. We have now given you an outlook on our long term objectives on the financial commitments, and we are absolutely committed in getting there. Going to take work in terms of growing the business, in terms of enhancing the margins in the business and focusing on our cash flow. I think the second thing I would say is if you look at the next two boxes of improving customer intimacy and expanding our products and services, both are incredibly important for us to grow our business. And I think what you heard both Scott and Diego talk about is how we intend to become more customer intimate in our businesses and how we are approaching innovation and the expansion of our products and services. And for us to exceed end market growth, which is absolutely our objective is to grow above how the end markets are growing Both those are going to be very critical. Our ability to gain the confidence of our customers around the world and our ability to deliver the innovation and the products that we have to deliver. And then I would say the operational excellence piece is also very key if you have to expand our margins. We are committed to expanding our margins in almost half the company's revenues, about $1,800,000,000 of our $3,600,000,000 in sales is material that we buy from other people. And if you think about how we manage the supply chain and how we can affect and make our supply chain more efficient, every 1% that we reduce in that buy, we're going to expand our margins by about 50 basis points, all things else being equal. And so that's going to be a huge focus, including working capital. We have $1,400,000,000 of working capital today in the company. And I know it's made up of receivables, which is a big piece, especially in the ag business, but it's inventory. And we are very focused. We are very focused because one, it's the right thing to do. It's our ability to generate more cash and pay down debt. And then the final thing is again the enterprise development. We know we're not going to achieve this without having the best people on the bus, focusing on the right things. We have work to do on the systems and the processes. You heard Sanjeev talk about we are making sure that we have the right control systems. We have the right IT systems, but we are not doing an overkill, right? At the same time, we don't want to create a Cadillac when we can do it more prudently. So there's a lot of work to be done. At least I can tell you on behalf of the Board and the management team, we feel we are in a good place. We've got good people. And more importantly, I think we have great customers. As I say, if you're in industries where your customers are resilient, where they're successful, I think it's a great place to be. And so that's where we are. So with that, I'm going to ask the presenters and Martin to come up. We have a little bit of time for some Q and A. And I think this will be the opportunity for you to ask us questions and we'll try and give you as honest answers as we can. Is this mic live? Can we have both mics live at the same time? Fine. We can speak up. John Roberts, UBS. On slide 26, you gave us a free cash flow bridge from EBITDA. If we were to look at equity free cash flow to equity and compare that to adjusted EPS, you if look out 2017 or whatever you want to call kind of normal or run rate, do we get free cash flow to equity equal to above or below adjusted EPS run rate? I think if you look at as we stabilize yes, I've never been accused of being soft spoken. I think if you look at our run rate year over year comparisons are difficult right now because so much of the stuff is pro form a or what we call comparable. So if you look at year over year, it's difficult to make sense. But if you compare twenty fifteen twenty sixteen to 2017 or you compare 2015 to 2016, I think over time cash flow will exceed EPS should exceed EPS. Right now as you look at integration expenses we have, you look at non EBITDA expenses we have, it actually does not. But as we made progress in our tax management, we made progress in our working capital management and the amount of cost we are incurring to have synergies goes down, then you will see the benefit happen. Because remember, your EPS is burdened by a lot of non cash expense related to acquisition accounting. Maybe a question to Martin. At adjusted EPS, where we try to adjust for the huge write up in our intangible assets. Sanjeev. John, you have a question Yeah. For A follow-up to Martin. Back at the last meeting, one of the original premises of the company was that M and A valuations would move inversely with interest rates. And in a these things are really expensive for now. We've kind of broken that rule I guess. We have very high M and A valuations with very low interest rates that's there. Do you think that we get back to that kind of environment longer term? Is the current environment kind of shaking your confidence in that long term view of Thinking back to the I misspoke about that. High valuations tend to go hand in hand. Right. But we had a breakdown of that I want to say earlier this year. We had actually pretty high yield rates that you kind of ended up with your balance sheet the way it is because you paid high multiples or you paid multiples reflective of a low interest rate environment, but you didn't get to actually take as much advantage of that I guess in the balance sheet. Yes. I think that that's true. And look part of it was with all the turmoil we had last year, we really didn't have the opportunity to round out our capital base for what we had bought and it's cost us money. We're paying more in interest than I think than we had expected to. But you've heard an outline of a number of initiatives. One of them is to pay less taxes on a cash on cash basis. As the EBITDA picks up on the business the leverage ratio comes back in line. I think one of the things that we've talked about was at what point can you go back on the offense? And we talked a little bit about that. And I think that the truth is we've got so much that has been going on in the last year. I don't think we've sort of missed anything from our own perspective. We've had a lot of integration to do. It's been good for our business to be if you like inwardly focused. At some point if we have a currency we will have the opportunity to take advantage of things that are out there at some point. There's no rush. There's certainly a lot going on. I think as I said at the beginning of my remarks what's going on in M and A world for ag and for industrial, it's certainly active, but I think there'll be plenty of opportunities down the line. Thank you. Jim Sheehan from SunTrust. Guys you mentioned that your acquisition plans are kind of on hold because of your goal is to deleverage. And you also mentioned that in the ag space there's a lot of consolidation going on in the industry where there might be some forced divestitures. Do you guys see yourselves as disadvantaged competitively in that environment? And how do you expect to mitigate that situation? Yes. So I think I was mentioning to some of the folks on the break. We are going to be opportunistic. We are not expecting to do any major transformation. Frankly, we don't need to. But to the extent there are opportunities that fall out of the consolidation game either in performance or in ag, absolutely we're going to look at it. We're going to try and figure out if there are interesting opportunities how we might structure that. But yes, we're not going to turn a blind eye to opportunities that might pop out from that. And I would say I don't think we're structurally disadvantaged. I think if anything we're getting better at knowing how to integrate businesses through the experiences that we've had. I mean I think you've got a management organization that's very well geared to change. We've managed to pick up a lot of talent in the M and A process. But we did a lot in a relatively short period of time. So there's been a digestion period that I think shouldn't be rushed. Thanks. Ian Bennett, Bank of America. What was Premier's incentive to renegotiate the terms of preferred? The short answer to that is it's not so much to renegotiate. They have a similar interest to what we have, which is to not have the equity of the company damaged by the pressure from the preferred. So they've been willing to work with us. We were the initiators of a discussion on repositioning the paper. From their perspective, if they get their money in the structure that we've discussed, it's worth something to them. And when you say worth something, that's $90,000,000 So we negotiated that. We negotiated it, I would say, pretty hard to frame it. And that's where we ended up. So it was a combination of discussions. Rakesh was the good cop. I was probably not the good cop. But at the end of the day, we reached an agreement that we were all I think everyone was happy with. And it's an option for us that we think is in the best interest of the company, which is why we negotiated it. Okay. And then for the long term sales guidance, maybe this is for Rakesh and Diego and Scott. For the 4% to 5% you've kind of outlined some markets are growing faster, some are growing slower. If we look out three years, what are the areas that you have the most confidence in achieving that high level of sales growth that's pretty certain to you? And what areas are less certain that there could be more volatility as we move forward in time? Yes. I'll hand the phone to Scott and Diego. But when you look at the businesses that we're in, in the Performance Solutions business, I think automotive, electronics. So that's going to be something that And I think we feel very good about it. We have where we have most of the headwinds in the ag business is in The U. S. I think partly because the markets have been soft and still there's more correction happening in the channel. That business was less than 25% for us in the ag business. So I would say that clearly we intend to focus on faster growing segments. We don't want just rely on the end markets itself. But having said that, to the extent that we get some tailwinds in the ag business in North America that would help. I think to the extent that we get some additional tailwinds in the electronics business, especially in China that would help. And if we get those two, I think we have every confidence that we will not only meet, but perhaps exceed our growth goals. So with that, let me just see if Diego and Scott want to add something. Yes. So we put a guidance out there as you saw relative to market growth, right? So we said two percentage points above market. I feel confident about our ability to deliver the growth in the five segments that we show there. We are working in North America. Just maybe to be more specific there, we have been destocking the channel, but our sales on the ground have been moving compared with the market. So I feel confident about it. Obviously, there are segments which are more exposed to grain prices than others. It will help to have the market revamping, but we're not betting on the market to turn around. Yes. And just to reflect on what Rakesh said, each of our business segments in the Performance Group have opportunities within them that are growing faster than the markets are. And we're going to focus on being the best positioned to address those. On the macro side, clearly the automotive business not only content of electronics content per vehicle, but decorative content per vehicle as well is increasing around the world. So that crosses over our assembly business, our electronics and our industrial space. There are big refresh rates coming in the handheld phone space, which is going to continue to grow that business we think over time. And then even in our graphics business, although there were some areas of that business that are under a little more pressure than others, we think that the switch and printing technology going on in that space will enable us to continue to grow. And then offshore really is dependent on the capital investment of the big oil companies, but we're really well positioned for when that begins. Thank you. Joe Rager from ROTH Capital. Two questions for Sanjeev, I guess to begin. First one being given the focus on debt repayment, what is the like minimum cash balance you guys feel comfortable with so we can forecast out how you might repay debt early? And then also on the tax side, you didn't give a lot of exact details. And I know it's kind of a longer term item to reduce taxes, but maybe give a few specific examples of how you guys could reduce the tax burden? So let me take a shot at the second question first and then the first it's a subset of the first question. I'd rather not be too specific, but I'll give you some examples. Currently, certain parts of our assets are structured under a Japanese jurisdiction. That is a very unfriendly structure in terms of withholding taxes and moving of capital and profits. So to the extent that there is an efficient way to move that ownership away to a more tax friendlier jurisdiction, that would be a good transaction. Things like that take time. You have to structure, you have to create basis, you have to create business reason and you structure it. Another specific example is source where do you source your supplies, where do you invoice them and where do you do the value add. Again, depending on where you are, which part of the world, certain areas present opportunities both in terms taxable income, value add tax and customs tax. And to the extent that over time you can rationalize that footprint, that translates to a big ownership move. The third area, something that has been in the press a lot, which is where does your technology reside and what are you being paid for that technology. We are a global company. Both businesses generate technology on a global basis. In the case of performance, it's a lot more global in terms of how they sell also. But in the case of ag, they sell very locally. So are there opportunities? And then finally, would be remiss if we did not flag things like tactical items. There may be certain areas where if you push it back as much as you can and over time that will generate some value. Stepping back, there is hard to have a minimum cash balance for the business. The way I look at liquidity, I look at both reported cash and I look at unused revolver. So when you assess the both, the unused revolver gives you protection against unforeseen expenses and then the cash is used to manage the business. There is no hard target that I should offer you, but clearly over $800,000,000 is a bit much. And I would expect that number to come down. Okay. And then one quick one for Martin. You opened by saying that maybe part of the reason the valuation is lower than peers is because of debt. Do you think that there's also an impact from the diversification of the business where a lot of the peers are either specifically Performance Solutions or specifically ag based? Yes. The reality is we set out with a strategy of having different verticals in asset light high touch areas of the specialty chemical space. I'm not sure that we get the full bang for our buck because of the diversification. Having said that, again, I go back to my history with Jarden where you could say the same thing about Jarden's diversification and its brands in different spaces and we managed to create a lot of value at the same time. So we like where we are. We like how we're developing it. But as I alluded to, as a management team and as a Board, we're not stupid and we're not unaware that we have to keep a flexible and open mind. And we've always maintained a structure in the company that gives us optionality. And so that's something that we will continue to evaluate over time. Dan, you had a question? Go ahead and just I think I'll take it over here. Dan Jester from Citi. Maybe a couple of longer term questions for Diego. You outlined your HQ strategy. Top couple of products seem to be targeting the key row crops like corn and soybeans. But say you're very underweight those markets. So if you look out three to five years, does Arista's sale by end market look more like the industry overall? And maybe to put another way, to get your 2% outperformance compared to the market, do you have to have more exposure to these big row crops? That's a good question. As part of strategy, what we're saying is we don't want to say no to participation of raw crops. What we do is we go into niche segments in the raw crop field. I mean the case that I showed with Terpera Plus is the best case where we have innovation, we can differentiate and we can play in those uses that are less dependent on grain prices. So if those characteristics are given, we go into raw crops too. So I'm expecting the overall distribution that you saw of the portfolio to stay relatively similar in the next five years from looking at the pipeline. Okay. And it might be a bit early days, but some of the larger ag competitors have been rolling out digital ag platforms. And some of the initial application seems to be targeting optimizing crop chemical use especially in row crops. So again acknowledging that it's early days, but what are sort of the opportunities and the risks as that type of technology becomes more prevalent? Thanks. Thank you for the question. We believe that we are not a technology company that should be investing big in new platforms for precision farming. Having said that, our expectation is that there are several open source platforms that are going to become a benchmark. We are in discussions in The U. S. For example with some of these platforms. And here we are the idea is to deliver the right formulation for the different systems and participate on that. So it's interesting to also watch in the coming years, which platforms are going to succeed in the market. We believe that our distribution partners will take a leading role on that and that these platforms as we're seeing will be open source. And here is about delivering the right innovation that will add value and participating on it. And this is exactly what we're doing. So the geographies like South America and North America, we want to be part of that game. Alex Zukrema from Nomura. First question for Scott. You've discussed the breadth of products and market access, especially in electronics. How do you get value for that? Is there an opportunity to take market share or improve mix or raise prices perhaps? I'm sorry, could you repeat the beginning of the question? You had discussed the breadth of your products, the strength of your technology, access to top clients, how do you get paid for that? So the key to that is being involved early enough to know the innovation requirements that are coming down throughout the chain. So as we innovate new products and the requirements on the electronics manufacturers increase from a reliability standpoint, miniaturization, etcetera, those products as they're developed inherently carry more value, more value not only to our customers but more value in the supply chain itself. So our goal is to develop and bring those to market faster than our competitors do so that we can capture that value early. And once you're in the space, it's got a long value tail, so to speak, so the margins are sustainable over quite a period of time. So it's all about understanding where the market's going quickly and then deploying the appropriate resources fast enough that we can innovate and then having a great selling force on the ground that can support it once it gets to the field. Thank you. And a second question for Diego on what is your current strategy for IP? Could you discuss any upcoming patent expirations for major products? And how you expect to deal with that? Sorry, can you repeat the question because I The couldn't hear question is centered around intellectual property and any major patents that might be coming up for might be expiring over the next, let's say, three to five years, what is your strategy of dealing with those expirations, Yes. If there are So if you look at the composition of our business, we don't have a large patent protected position. So our business does not depend on active ingredient patents. It depends on formulation development, innovative formulation development, innovative delivery systems and being fast at developing the mixtures that the farmer needs in that particular application. So it's a lifecycle we're a lifecycle management machine. We're continuously we're renewing our portfolio, but we don't need a patent protected active ingredient to be successful in achieving high margins. This is the business model that Chemtura and Arista have been running since many, many years, so it's nothing new. What we do is we do development in formulation development and we do development delivery systems. And here we do look for certain patents that can add to our overall IP. But we are not there is nothing I can tell you right now in terms of a patent that is going to expire and put our business meaningfully at risk moving forward. Just to add to what Diego said. So even though we don't patent the active ingredient or the new molecule, we are able to protect the intellectual property around formulations. So in many countries where we are formulating a solution for the farmers, we can protect that intellectual property. And I think the other thing is that because we are so global and we are so strong in so many niche markets that a lot of the more innovative smaller companies and larger companies want to work with us to license a lot of the patents and a lot of the active ingredients with us. And that's been part of our model that has worked so successfully. In fact, in a consolidating landscape where these niche businesses will become even smaller for the larger companies, we will play, I believe, a more active role working with these large companies as being a partner to them and going into a lot of these geographic areas that otherwise they wouldn't think is important enough for them. Hi. John Denham, thanks for CJS. Just a follow on to one of the other questions about diversification. You mentioned earlier in the presentation that divestitures could be a path to further deleveraging. You talk about what parts of the business are either non core or you could realize good value for to help you achieve that goal sooner rather than later? No. I have another one on margins then. In your five year goal, have maybe 400 basis points of leverage from cost reductions, SG and A leverage. How much of that is actually what you're getting from expected synergies in the future? And what is maybe what you call optimization from Ben's presentation? So some of that is just going to come through operating leverage, right? So we don't expect to increase our SG and A at the same level as we expect to grow sales, right? So if anything, we expect SG and A will grow less than half of our revenue and earnings growth. So the expansion of 400 basis points, which you said 200 is going to come from SG and A leverage and the other 200,000,000 is going to come from COGS is very achievable. As I said, I think we have just only just begun the game of improving our supply chain. Again, dollars 1,800,000,000.0 of a $3,600,000,000 company sits in what we source from our suppliers. And we haven't been as proficient as many, many companies. I come from an industry where there's a lot of what we do or what was done in different industries actually we put in practice here, we will see some significant margin expansion. So I feel pretty good. If I could add one small point, it's as Rakesh mentioned earlier, corporate cost has peaked at this point and that's a meaningful opportunity to drive cost down. So when you think about SG and A opportunities that's another one that could be a big driver. Thank you. Hi. It's Omar Malik from Holbrook. I wanted to know if are there areas of the business where over the long term I know some years are stronger than others, but where over the long term pricing has trouble keeping up with inflation. And I guess what I'm getting at is on the one hand we're selling value added chemicals where they're a small component of customer costs. And on the other hand Scott there pockets the electronics business where even though you have volume growth your customers are facing some deflation and this is a market environment where people obviously think about deflation. So just love to get your thoughts on that. Yes. You're exactly right. There are segments that remain under pressure. There are some historical segments, particularly in the electronics space around metalization, copper metalization of through holes on printed circuits, for example, that has really experienced a lot of pricing pressure from local suppliers in China in particular. The move away from copper is our defense in that. These are processes that involve equipment and engineering support technology that helps mitigate that pressure from that side. Having said that, we're looking at opportunistically where can we still participate in those markets to help us from a top line growth perspective rather than just ignoring them in total. So we think that we can balance those two by going after selectively where it strategically fits for us to participate in that market, but then mitigate it with development on the other side. So you have a bit of that in most of our businesses. It's in our industrial business as it relates to anticorrosion technologies under can be under some pressure in certain segments. But the continued increase in reliability requirements helps us mitigate that because not local commodity suppliers or local suppliers just can't meet those reliability requirements. They can't stand behind it. So we will continue to mitigate those risks through development and through increases in technology. Okay. Thanks. And then just my last question was for Diego. We talked on the Q2 call about the North American ag business. And I was just trying to understand, it sounded like that's a business that long term we're still excited about. I was trying to understand the relative attractiveness long term of that business versus the European ag business. And I wanted I was just curious if you agree with my take. I mean my take was that they're both attractive, but the European business benefits from the fact that the distribution base is less consolidated and the registration process is just more a little more complicated, a little more fragmented. So there were some structural things that made the European business more attractive, but we wanted to get your thoughts on that. Okay. So the business in North America the market in North America is very attractive, because you can achieve much higher margins than in Latin America and Asia. Have farmers are looking for innovation. The regulatory system they're talking about one single market that has a very thorough regulatory system. So it takes you two years to get a registration. You have a fairly well protection once you get the product to market. Our issues in North America were rather stock related. So we are destocking the channel, but our sales on the ground are developing according to market. So once we get this behind us, we see North America as a very attractive market to invest in the future. Actually, legacy companies were stronger in LatAm, in Europe, in Japan. So here we know we can bring our products, we can continue to grow in North America. So to your thesis, right, I am not so concerned about the consolidation of the distribution. I think the issue in North America right now is the combination of low grain prices and strong U. S. Dollars. So the situation that you have in Brazil where you have the low grain prices, but farmers especially export oriented farmers are now profiting from a lower real even if the real has appreciated in the last couple of months. So that is not the case in The U. S. You're right with respect to Europe. Europe is more complex. It's more protected. There are subsidies that play also a role. So Europe remain in the short term an easier market, I would say, than North America. But North America, it's important to stay in North America, to do the right things in North America because we are going to see better times in North America also. Thanks. We'll take a couple of more questions and then we'll break for lunch and continue the discussions downstairs on the Third Floor. Hi. Chris DeCarlos, Kingsland Capital. Rakesh, you mentioned return on invested capital as a priority. Do you see that improving over the next few years? And is that explicitly listed in your management compensation program? Thanks. Yes, it is. So I think for the first time we put return on invested capital as an incentive metric in our long term incentive plan for our executives. So it's clearly going to be not just because it's an incentive metric, but it's we're trying to drive just thinking about making sure that we are optimizing a return on the assets. I mean for the businesses, return on assets is synonymous with return on invested capital, although at the corporate level, we clearly look at ROIC and how we can drive an improvement year over year. So we have year over year improvement targets in ROIC and the businesses have year over year improvements in return on assets. And I think they go hand in hand. So clearly that's going to be an area of focus. I think John has another question. Follow-up on McDermott. Do you see the electronic mix of combinations if they are presenting any opportunities to the business? And then longer term, it seems like semiconductor customers, printed circuit board customers have been distinct segments of the electronic materials market. Do you see that coming together over time at all? Do you see yourself staying primarily focused on electronic printed circuit board customers? So, address the first part. The activity going on, the consolidation activity going on particularly the one you mentioned, yes, we view all of those as opportunities for sure. We think that we're positioned to respond and to move very quickly when opportunities come up much more responsibly than some of these large integrations that are taking place. So we do see that as an opportunity. Of course, it depends how well they execute those plans and how long they take. As it relates to the second part of your question, we have a very distinct targeted investment program around what we call advanced electronics, which is a semiconductor wafer level packaging space. Combined with our Alpha Advanced Materials space, who also calls on the same customers, we expect to continue to grow our participation in that space even faster than in traditional electronics. So several years from now, we plan to be sitting here talking to you about a much larger Advanced Materials and Advanced Electronics business than we have today. Thanks. We'll take one last question. You spoke a lot about e ball, the high touch component of your business, the synergies that you're trying to execute and let's call them the cross selling efficiencies that you could realize. Those are pretty tall tasks. For those of us that are familiar with Martin's background, maybe he can run through anything. But can you give me the elevator pitch on why this is the team right here that's facing us? First of you're right. Becoming more custom element, if you go beyond just the words, it takes time, because it requires a transformation. It requires a mindset change. And just many of you know, I came from a company in the life science business and we did exactly that. It was an over two year journey changes in people that got us there. I can tell you that this team is very driven by the customer. So everybody you see on including myself, actually believes that all begins with the customer. And I think Scott and Diego have given a lot of thought to who they put on their top bench. And I know that many of you don't know them, but there was a lot of thought that went behind who are the people who are going to take us where we need to go. And all I can say is just stay tuned. It's a journey that we're going to go through. And I'm pretty optimistic that if we do the right things for the customer, I think the business will benefit hugely and that's our goal. So with that, again, I want to thank all of you for having taken the time this morning. I know hopefully most of you will join us for lunch. I know some of you have other commitments. But to the extent you can have a quick bite, we are going to go down to the third floor. Ben or maybe Carrie, is the lunch at 01:00? Can we pull it up? It's ready. Okay. So it's on the Third Floor. Thank you very much.

• Slides