1 1Q 2022 Financial Results April 28, 2022. Prepared remarks These slides should be reviewed with the accompanying prepared remarks posted on our website. Forward-looking statements During this presentation, we make certain forward-looking statements concerning plans and expectations for Eastman Chemical Company. We caution you that actual events or Results may differ materially from our plans and expectations. See these slides, the accompanying prepared remarks posted on our website, the remarks during the conference call and webcast, the first-quarter 2022 Financial Results SEC 8-K filing and news release, and our Form 10-K filed with the SEC for full-year 2021. and Form 10-Q to be filed for first-quarter 2022 for risks and uncertainties which could cause actual Results to differ materially from current expectations.
2 Non-GAAP Financial measures Earnings referenced in this presentation and the accompanying prepared remarks exclude certain non-core and unusual items. Adjusted EBIT is Earnings Before Interest and Taxes ( EBIT ) adjusted for non-core items. Adjusted EBIT Margin is Adjusted EBIT divided by GAAP sales. Adjusted EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization adjusted for non-core items. Net Debt is total borrowings less cash and cash equivalents. Net Debt to Adjusted EBITDA is Net Debt divided by EBITDA adjusted for non-core items. Reconciliations to the most directly comparable GAAP Financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in our first-quarter 2022 Financial Results news release which is posted in the Investors.
3 Section of our website, at the end of this presentation, and in the Management's Discussion and Analysis of Financial Condition and Results of Operations sections of the Forms 10-K filed and 10-Q to be filed with the SEC for the periods for which non-GAAP Financial measures are presented. 2. 1Q22 highlights Strong commercial execution, including aggressive pricing to offset inflation Cross-functional collaboration by the Eastman team to safely return to normal operations and limit customer impact after the Kingsport steam line incident Innovation-driven growth model delivering wins in a challenging operating environment Entered exclusive negotiation with site in Normandy for molecular recycling facility in France Received a score of 100 on the Human Rights Campaign Foundation's 2022 Corporate Equality Index Successfully completed divestiture of non-strategic adhesives resins product lines; received $1 billion of proceeds 3 3.
4 Corporate $M (except EPS) 1Q22 1Q21 1Q22 vs. 1Q21 highlights Continued strong demand in durables, building &. Revenue 2,714 2,409 construction, medical, and animal nutrition end Adjusted EBIT 366 400 markets Adjusted EBIT margin Higher selling prices across all operating Adjusted EPS segments to offset significantly higher raw material, energy, and distribution costs Revenue change* Total Vol/Mix Price FX. 1Q22 vs 1Q21 13% -5% 19% -1% Kingsport steam line incident reduced adjusted *Sales revenue increased 19% excluding revenue from divested tire additives and EBIT by ~$125 million adhesives resins product lines 4. Advanced Materials $M 1Q22 1Q21 1Q22 vs. 1Q21 highlights Strong demand in durables and medical end markets Revenue 737 716. Estimated $100 million Financial impact from Kingsport steam line Adjusted EBIT 62 151 incident included in Advanced Materials Results Adjusted EBIT margin Higher selling prices kept spreads approximately flat despite Revenue change Total Vol/Mix Price FX significant inflationary pressures 1Q22 vs 1Q21 3% -6% 10% -1% Product mix improvement partially offset weakness in the transportation end market FY22 Outlook Tailwinds Innovation and market development leading to strong volume/mix improvement Strong underlying end-market demand except transportation Higher selling prices to recover spreads from 2H21 on track for ~$100 million spread recovery through remainder of the year.
5 Also offsetting 2022 inflation Headwinds Expect to recover a significant portion of Financial impact of Kingsport steam line incident through higher volume in remainder of the year Persistent logistics constraints Impact from both spread of COVID-19 in China and slowing European economy Continued investment in growth Expect FY22 adjusted EBIT $650 to $700 million 5. Recent progress validates Eastman's strategy for building a Circular Solutions Platform High confidence in feedstock strategy as team secures new streams >75% of annual requirement is already being procured, under contract or in active negotiation Tennessee Continued great progress validating a variety of hard-to-recycle feedstocks with project update our pilot plant Supply chain challenges delaying mechanical completion to end of 1Q23.
6 Exclusive negotiations with Port-J r me-sur-Seine as the preferred location Port-J r me-sur-Seine chosen because of excellent access to reliable feedstock, green France energy, and a highly skilled workforce project update Progress continues to secure feedstocks, off-take agreements, and incentives On track for >$450M EBITDA from three molecular recycling projects 6. Additives & Functional Products $M 1Q22 1Q21 1Q22 vs. 1Q21 highlights Double-digit volume/mix growth driven by building & construction Revenue 805 609 personal care, and animal nutrition end markets Adjusted EBIT 145 107. Aggressive price increases to keep up with inflation Adjusted EBIT margin Cost pass-through contracts represented approximately 40 percent Revenue change Total Vol/Mix Price FX of selling price increase 1Q22 vs 1Q21 32% 10% 25% -3%.
7 FY22 Outlook Tailwinds Price increases recovering spread compression from last year and keeping pace with current inflation Strong underlying demand, including building & construction, personal care, and animal nutrition markets Lower manufacturing maintenance shutdown costs in FY22. Headwinds Persistent logistics constraints Impact from both spread of COVID-19 in China and slowing European economy Slower than expected recovery in global auto market Expect FY22 adjusted EBIT >$500 million 7. Fibers $M 1Q22 1Q21 1Q22 vs. 1Q21 highlights Strong price increases across the segment Revenue 213 217. Adjusted EBIT 24 45 ~$15 million of lower sales volume and higher operating costs resulting from the Kingsport steam line incident and Adjusted EBIT margin the Russia/Ukraine conflict Revenue change Total Vol/Mix Price FX Strong growth of sustainability focused textile products, including Naia , continues to outpace the underlying market 1Q22 vs 1Q21 -2% -9% 7% 0%.
8 FY22 Outlook Tailwinds Price increases recovering spread compression from last year and keeping pace with current inflation Continued strong growth in textile products Headwinds Modest decline in acetate tow volumes with the underlying market Partial recovery of lost volumes from steam line incident Expect FY22 adjusted EBIT up modestly compared to FY21. 8. Chemical Intermediates $M 1Q22 1Q21 1Q22 vs. 1Q21 highlights Revenue 799 605 Revenue up across the segment due to higher selling prices Adjusted EBIT 135 73 Significantly higher spreads driven by strong commodity Adjusted EBIT margin market conditions Strong demand in the agriculture end market Revenue change Total Vol/Mix Price FX. 1Q22 vs 1Q21 32% 1% 33% -2%. FY22 Outlook Tailwinds Continued tight commodity market conditions in 2Q22.
9 Strong underlying demand in key end markets including agriculture Headwinds Spreads moderating in certain product lines to normal levels in 2H22. Normal seasonality of sales volume in 2H22. Higher maintenance shutdown schedule in 2H vs. 1H. Expect 2H22 EBIT to be below 1H22 EBIT. 9. 1Q cash flow and other Financial highlights On track for strong cash flow Balance sheet and tax rate Solid investment- Forecasted FY22. Forecasted FY22 Working to mitigate adjusted effective operating cash flow grade balance sheet impact of increasing tax rate approaching working capital with ~$500 million $ billion cash on hand at the 15%-16%. end of 1Q. Meaningful stockholder returns Disciplined capital allocation Attractive and Expected to repurchase Investing in Solid pipeline of growing >$1 billion high-return attractive of shares using organic growth bolt-on M&A.
10 Dividend operating cash flow and divestiture proceeds 10. Full-year 2022 guidance Tailwinds Headwinds/Uncertainties Strong underlying demand growth with low supply Divested EBIT from tire additives and adhesives resins chain inventories product lines Innovation and market development driving growth Expected normalization of spreads in Chemical above underlying end markets Intermediates in 2H22. Pricing actions on track to recover spread compression Continued investment in growth, particularly from 2H21 and to offset inflation occurring in 1H22. circular economy Disciplined cost management underpinned by our operations transformation Geopolitical uncertainties: global inflation, China/COVID lockdowns, and Russia/Ukraine conflict Deployment of strong operating cash flow and divestiture proceeds includes share repurchases to Slower than expected auto recovery due to supply at least offset dilution of divested EBIT chain issues Expect FY22 adjusted EPS $ $10.