ferro second quarter 2016 conference call presentation

Conference Call Presentation

July 28, 2016

Ferro Second Quarter 2016

Safe Harbor Cautionary Note on Forward-Looking Statements

Certain statements in this presentation may constitute “forward-looking statements” within the meaning of Federal securities laws. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements and that could adversely affect the Company’s future financial performance include the following: demand in the industries into which Ferro sells its products may be unpredictable; Ferro's ability to successfully implement its value creation strategy; Ferro’s ability to successfully implement and/or administer its cost-saving initiatives; Ferro’s ability to access capital key markets; the effectiveness of the Company’s efforts to improve operating margins; the availability of reliable sources of energy and raw materials; currency conversion rates and economic, social, regulatory, and political conditions around the world; Ferro’s ability to successfully introduce new products or enter into new growth markets; limited or no redundancy for certain of the Company’s manufacturing facilities; Ferro’s ability to complete future acquisitions or dispositions, or successfully integrate future acquisitions; competitive factors, including intense price competition; Ferro’s ability to protect its intellectual property; Ferro’s multi-jurisdictional tax structure and its ability to utilize significant deferred tax assets; the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations; stringent labor and employment laws and relationships with the Company’s employees; the impact of requirements to fund employee benefit costs; the impact of interruption, damage to, failure, or compromise of the Company’s information systems; exposure to lawsuits in the normal course of business; and other factors affecting the Company’s business that are beyond its control, including disasters, accidents, and governmental actions.

The risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently believes to be immaterial also may adversely affect the Company. Should any known or unknown risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition and results of operations.

This presentation contains time-sensitive information that reflects management’s best analysis only as of the date of this presentation. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events information or circumstances that arise after the date of this presentation. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the period ended December 31, 2015.

Also, this presentation will include certain financial measurers that were not prepared in accordance with generally accepted accounting principles. Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our Current Report on Form 8-K dated July 27, 2016, and in our other reports filed with the Securities and Exchange Commission, available on our website at www.ferro.com in the “investor information – SEC Filings” section.

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http://www.ferro.com/





Quarterly Net Sales cc and Operating Trend - Continuing Businesses @ Constant Currency cc

Acquisitions include Nubiola, Al Salomi, Ferer and Pinturas; Acquisitions owned for more than 12 months are included in the base business, including Vetriceramici which was acquired in Dec

2014. Vetriceramici net sales for 2015 Q2 CC were $16.5M

Continuing Businesses exclude discontinued operations and other divestitures

CC Constant currency: 2015, 2014 and 2013 results restated using 2016 average FX rates

3

$251.7 $249.3 $259.4 $298.0

251.7 249.3 259.4 258.6

39.4

7.5%

10.5%10.7%

15.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0

$50

$100

$150

$200

$250

$300

$350

2013 Q2 CC 2014 Q2 CC 2015 Q2 CC 2016 Q2

Op

Pro

fit %

of N

et S

ales

Ne

t Sa

les

$(M

M)

Base Acquisitions Operating Profit

Full Year and TTM Net Sales cc and Operating Trend - Continuing Businesses @ Constant Currency cc

CC Constant currency: 2016 TTM, 2015, 2014 and 2013 results restated using 2016 average FX rates 4

$930.6 $949.6 $1035.2 $1106.9

Acquisitions include Nubiola, Al Salomi, Ferer and Pinturas; Acquisitions owned for more than 12 months are included in the base business , including Vetriceramici which was acquired in Dec

2014. Vetriceramici net sales for 2014 CC and 2015 CC were $3.7M and $58.3M respectively


930.6 949.6 976.2 968.3

59.0138.6

5.8%

8.7%

11.0%

12.6%

0%

2%

4%

6%

8%

10%

12%

14%

$0

$200

$400

$600

$800

$1,000

$1,200

2013 CC 2014 CC 2015 CC 2016 TTM CC

Op

Pro

fit %

of N

et S

ales

Ne

t Sa

les

$(M

M)

Base Acquisitions Operating Profit

Quarterly Adjusted EBITDA Trend - Continuing Businesses @ Constant Currency cc

Acquisitions include Nubiola, Al Salomi, Ferer and Pinturas; Acquisitions owned for more than 12 months are included in the base business


CC Constant currency: 2015, 2014 and 2013 results restated using 2016 average FX rates 5

$26.6 $34.2 $36.2 $56.6

26.634.2 36.2

44.5

-

-

12.1

10.6%

13.7% 14.0%

19.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

$0

$10

$20

$30

$40

$50

$60

2013 Q2 CC 2014 Q2 CC 2015 Q2 CC 2016 Q2

EBIT

DA

% o

f Ne

t Sal

es

EBIT

DA

$(M

M)

EBITDA from Base EBITDA from Acquisitions % of Sales cc

Full Year and TTM Adjusted EBITDA Trend - Continuing Businesses @ Constant Currency cc


CC Constant currency: 2016 TTM, 2015, 2014 and 2013 results restated using 2016 average FX rates

6

$85.3 $114.5 $149.0 $180.6

85.3

114.5135.1 143.9

-

13.9

36.7

9.2%

12.1%

14.4%

16.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2013 CC 2014 CC 2015 CC 2016 TTM CC

EBIT

DA

% o

f Ne

t Sal

es

EBIT

DA

$(M

M)

EBITDA from Base EBITDA from Acquisitions % of Sales cc

Adjusted EBITDA and Cash Conversion Trend

- Continuing Businesses @ Nominal Currency

Notes:

1) Cash Conversion = Free Cash Flow as a percent of Adjusted EBITDA

2) Free Cash Flow = Adjusted EBITDA from Continuing Operations Less Cash Expenses

7

100.8

128.1

152.9

182.3

26.0 37.4

76.4 85.6

25.8%

29.2%

50.0%46.9%

0%

10%

20%

30%

40%

50%

60%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2013 2014 2015 2016 TTM

% F

CF C

on

vers

ion

EBIT

DA

$(M

M)

EBITDA Free Cash Flow FCF Conversion

Segment Results Performance Colors & Glass (PCG)

($MM)

8

(1) Adjusted GP CC : Gross profit less non recurring items


Q2'16 Q2'15 Q2'14 Q2'13

Reported Sales 95.9 98.7 106.1 106.4

SalesCC 95.9 98.1 94.3 96.1

Reported GP 36.7 33.4 35.4 31.2

Adjusted GP cc (1) 36.7 33.3 31.8 28.5

Adjusted GP cc % of Sales cc38.3% 34.0% 33.8% 29.6%

Q2 Financial Metrics - PCG

FY'16 TTM FY'15 FY'14 FY'13

Reported Sales 362.7 376.8 407.7 390.0

SalesCC 362.8 373.6 365.5 346.9

Reported GP 128.9 128.2 135.0 112.8

Adjusted GP cc (1) 128.7 127.1 121.9 101.5


Full Year Financial Metrics - PCG

($MM)

Segment Results Pigments, Powders & Oxides (PPO)

9



Q2'16 Q2'15 Q2'14 Q2'13

Reported Sales 61.5 30.0 31.3 31.2

SalesCC 61.5 30.0 29.6 29.4

Reported GP 22.4 9.3 7.1 8.5

Adjusted GP cc (1) 22.4 9.3 6.8 8.2


Q2 Financial Metrics - PPO


Reported Sales 231.3 165.2 115.4 116.8

SalesCC 231.5 165.0 109.3 110.0

Reported GP 71.2 45.7 28.5 30.2

Adjusted GP cc (1) 71.3 45.6 27.2 29.1

Nubiola Purchase Price Adj ("PPA") 5.8 5.8 - -

Adjusted GP cc Incl PPA % of Sales cc33.3% 31.2% 24.9% 26.4%

Full Year Financial Metrics - PPO

($MM)

Segment Results Performance Coatings (PC)

10



Q2'16 Q2'15 Q2'14 Q2'13

Reported Sales 140.6 139.5 156.8 157.0

SalesCC 140.6 131.3 125.5 126.2

Reported GP 39.2 35.1 37.9 35.6

Adjusted GP cc (1) 39.2 33.5 31.0 29.4


Q2 Financial Metrics - PC


Reported Sales 525.8 533.4 588.5 600.4

SalesCC 512.6 496.6 474.8 473.7

Reported GP 134.2 126.9 131.0 134.1

Adjusted GP cc (1) 130.8 121.6 107.6 108.9


Full Year Financial Metrics - PC

SG&A Expenditures Trend

- Continuing Businesses @ Constant Currency cc

$184.2 $170.7 $185.4 $196.8

11



71.1 61.6 63.0 68.8

89.5 89.5

104.2 105.8

4.6 9.9

23.7 19.5

13.7 12.4

19.8% 18.0% 17.9% 17.8%

0%

5%

10%

15%

20%

25%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2013 CC 2014 CC 2015 CC 2016 TTM CC

SG&

A %

of N

et

Sale

s

Full

Ye

ar S

G&

A $

(MM

)

Functional Services including acquisitions Base Strategic Svcs Acquisition Strategic Svcs Incentive Comp % of Sales

Note: Included in functional services SG&A shown above is pension income for the U.S. defined benefit pension plan. From

2015 CC to 2016 TTM CC, the income for the U.S. plan declined by $3.2 million, from $10.5 million to $7.3 million.

Adjusted Return on Invested Capital (ROIC) Trend

- Nominal Currency

Notes:

1) ROIC = Adjusted after tax return on invested capital

2) Invested Capital = Total Invested Capital including acquisitions

3) Adjusted ROIC excludes the impact of recent acquisitions. In Q4 2015, Adjusted ROIC also excludes the release of tax valuation allowances

12

584.1 677.4

828.0 943.5

7.7%

11.2%

13.7%

11.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2013 2014 2015 2016 TTM

RO

IC %

Inve

sted

Ca

pita

l $(M

M)

Invested Cap ROIC

$0.33

$0.62

$0.85

$1.03

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

2013 2014 2015 2016 Guidance

Fu

ll Y

ea

r E

PS

QT

R E

PS

Q1 Q2 Q3 Q4 FY

Adjusted EPS Trend - Nominal Currency

13

2016 EPS is equivalent to mid-point of Company guidance of $1.00 - $1.05

ferro second quarter 2016 conference call presentation

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