Eastman Chemical : 4th Quarter - 2020 Presentation

Fourth-Quarter & Full-Year

2020 Financial Results

Mark Costa, Board Chair & CEO

Willie McLain, SVP & CFO

January 28th, 2021

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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 fourth quarter and full-year 2020 financial results 8-K and news release, and our Form 10-Q filed for third quarter 2020 and Form 10-K to be filed for full- year 2020 for risks and uncertainties which could cause actual results to differ materially from current expectations.

GAAP and Non-GAAP financial measures

Earnings referenced in this presentation and the accompanying prepared remarks exclude certain non-core and unusual items. "Free Cash Flow" is cash provided by operating activities minus net capital expenditures (typically cash used for additions to properties and equipment). "EBIT Margin" is Earnings Before Interest and Taxes ("EBIT") adjusted for non-core and unusual items divided by GAAP sales revenue. "EBITDA" is Earnings Before Interest, Taxes, Depreciation, and Amortization adjusted for non-core and unusual

items. "Net Debt" is total borrowings less cash and cash equivalents. "Net Debt to EBITDA" is Net Debt divided by EBITDA adjusted for non-core and usual 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 fourth-quarter and full-year 2020 financial results news release which is posted in the "Investors" 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 and 10-Q filed with the SEC for the periods for which non-GAAP financial measures are presented.

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2020 highlights

Took decisive action to protect employees and preserve operational integrity

Fourth consecutive year of free cash flow greater than $1 billion

Resilient performance driven by innovation portfolio, diverse end-markets, and decisive cost actions

Accelerated progress on our circular economy platform

Launched bold new commitments in our 2020 sustainability report

Recognized by several institutions as a leader in sustainability, diversity, and ethics

Tritan™ Renew named one of Popular Science's Greatest Innovations of 2020

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4Q and FY 2020 financial results - Corporate

$2,186	$2,205							4Q20				4Q19
(1)% change
1% volume/mix		$329
	$279
		(3)% price				$1.69	$1.42
		1% currency
		Sales revenue		Adjusted EBIT				Adjusted EPS
$8,473	$9,273								FY20					FY19
				$1,389
(9)% change		$1,216
									$7.13
						$6.15
(5)% volume/mix

(4)% price

Sales revenue

Adjusted EBIT

Adjusted EPS

4Q20 vs 4Q19

• Record 4Q adjusted EPS
• Strong recovery led by Advanced Materials
• Continued progress on cost reduction actions

FY20 vs FY19

• Portfolio proved resilient during global pandemic
• Quick action taken to protect employees and ensure operational integrity
• Earnings impact of aggressive inventory management partially offset by cost reduction actions

($ in millions, except EPS)

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4Q and FY 2020 financial results - Advanced Materials

$674

$638

4Q20

4Q19

6% change

6% volume/mix

$138

(2)% price

$112

2% currency

Sales revenue

Adjusted EBIT

$2,524

$2,688

FY20

FY19

$518

(6)% change	$448

(4)%

volume/mix

(2)% price

Sales revenue

Adjusted EBIT

4Q20 vs 4Q19

• Strong rebound in automotive end market
• Continued strength in specialty plastics
• Performance films mid-teens topline growth

FY20 vs FY19

• Demand negatively impacted by COVID-19
• Specialty plastics record EBIT
• Strong recovery in 2H20

($ in millions)

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4Q and FY 2020 financial results - Additives & Functional Products

$773							4Q20 vs 4Q19
$763			4Q20		4Q19	❖ Recovery in transportation,
							excluding aviation fluids
1% change							❖ Continued solid demand in building
2% volume/mix		$118	$109			and construction

(3)% price

2% currency

• Care Chemicals double digit topline growth

Sales revenue

Adjusted EBIT

$3,022	$3,273			FY20		FY19
		$550
(8)% change		$448

(4)%

volume/mix

(4)% price

Sales revenue

Adjusted EBIT

FY20 vs FY19

• Care Chemicals 5 percent volume/mix growth
• Transportation end market, including aviation fluids, impacted by COVID-19
• EBIT declined due to lower volume/mix and lower capacity utilization

($ in millions)

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4Q and FY 2020 financial results - Chemical Intermediates

$531	$578			4Q20		4Q19
	$36
(8)% change
(6)% volume/mix		$22

(3)% price

1% currency

Sales revenue

Adjusted EBIT

FY20		FY19

4Q20 vs 4Q19

• Lower volume driven mostly by site maintenance shutdowns and the discontinuation of certain product lines at our Singapore facility
• Demand strengthened during the fourth quarter
• Lower pricing due to lower raw material and energy prices

$2,443

$2,090

$171

(14)% change

(7)% volume/mix

(7)% price

$192

FY20 vs FY19

• Strong performance in functional amines
• Reduced demand due to COVID-19 for olefins, acetyls, and plasticizers
• Substantially lower operating costs

Sales revenue

Adjusted EBIT

($ in millions)

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4Q and FY 2020 financial results - Fibers

$208	$226		4Q20		4Q19

(8)% change

(6)% volume/mix	$50
$40
(2)% price

Sales revenueAdjusted EBIT

$837	$869		FY20		FY19

$180	$194
(4)% change

(2)% volume/mix

(2)% price

Sales revenue

Adjusted EBIT

4Q20 vs 4Q19

• Acetate tow volume stable
• Price decline due to previously negotiated multi-year contracts
• Volume/mix lower due to the discontinuation of a tobacco specialty product and weakness in textiles due to COVID-19

FY20 vs FY19

• COVID-19negatively impacted the textile end market
• Price declined due to previously negotiated multi-year contracts
• Capacity utilization headwinds

($ in millions)

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Full-year 2020 cash flow and other financial highlights

$1.5

billion

cash from operations

$1.1

billion

Free cash flow

Returned $418

million

to stockholders by dividends and share repurchases

Increased dividend for

11th

consecutive

year

Net debt

reduced by

greater than

$600

million

excluding the impact of FX

Net debt to

adjusted

EBITDA

~2.8x

2020 adjusted

effective tax rate

~15.5%

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2021 outlook

Growth drivers		Near-term uncertainties / headwinds

• Significant asset utilization tailwind of ~$100M
• Cost structure ~flat vs. 2020
• Sales volume growth driven by:
• • Benefit of innovation-driven growth model
  • Continued recovery in key end markets, including auto, building & construction, and durables
  • Product mix improvement

• Visibility limited due to continued impact of COVID-19 and other macroeconomic uncertainties
• Rising raw material, energy, and logistics costs

• Lower pension costs
• Disciplined capital allocation

Full-year 2021 adjusted EPS projected to be 20-30% higher than 2020 adjusted EPS

Projected 2021 free cash flow > $1.0 billion for 5th consecutive year

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Three simultaneous global crises need solutions

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Macro trends have been central to our strategy for over a decade

CARING FOR SOCIETY

CLIMATE

CIRCULARITY

Carbon Renewal Technology

Replacing	VOC/odor-free	Light-weighting	Naia™ Renew	Treva™ in
antibiotics in	hygiene	electric vehicles		in textiles	ophthalmics
feed additives
			Polyester Renewal Technology

BPA-free in	BPA-free in food	Improving energy	Improving energy	Tritan™ Renew	Cristal™ Renew
medical	and beverage	efficiency in housing	efficiency in auto	in durables,	in cosmetics
	packaging coatings			electronics,
				hydration, etc.

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Plastics are essential to the quality of life

HYDRATE FEED CARE

Plastics help to deliver hydration		Advanced packaging technologies preserve		Plastics improve sterility, patient safety,
to those who need it		fruits, vegetables, & meats		and comfort in therapies

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Global brands making significant commitments to reduce plastic waste

	40% recycled content	50% recycled content
		by 2025	To source 100%
50% reduction in	by 2025
			recycled or renewable
virgin plastic by 2030
	30% recycled content			materials
Use only renewable or		50% recycled content
by 2025
recycled materials in
		by 2030
all products by 2025
30% recycled content for all	By 2030, MOVE TO	100% circular products by 2030	20% renewable and
ZERO is Nike's journey
		25% recycled content
plastic packaging by 2025	towards zero carbon			recycled plastics by 2025
	and zero waste				by 2025

35% recycled content for all	25% recycled content	30% recycled content	Iconic bricks 100%
plastic packaging by 2025	by 2025	by 2025	sustainable by 2030

Source: Ellen McArthur Foundation website for signatories to New Global Plastics Economy Commitment and company public information

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Both mechanical and molecular recycling are required to eliminate waste and create a truly circular economy

	+
MECHANICAL RECYCLING
Most carbon efficient when possible

Optimal GHG footprint, existing infrastructure

Limited to clean sources; majority must be downcycled or not recycled at all

Performance and quality limitations

Quality degrades with each cycle…eventually, everything becomes waste

MOLECULAR RECYCLING TECHNOLOGY

Necessary to renew material and avoid end of life

Eastman technologies deliver an improved GHG footprint when compared to processes using fossil feedstocks

Can recycle materials that have little value or can not be mechanically recycled

A+	No performance tradeoffs…upcycles the material
	back to premium quality / performance

Enables infinite ability to recycle polymer for a truly circular economy

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Consumers are paying premiums for sustainable products to solve these challenges

Average Western European recycled food grade PET pricing	Nalgene	+25%
(% over virgin PET)	Sustain
	Made with Eastman Tritan™	Made with Eastman Tritan™ Renew
	Copolyester ($11.99)	copolyester with recycled content ($14.99)

Philips		+20%
Senseo
	Viva Café €66	Viva Café Eco (50% PCR) €79

-5%	Sustainable	+25%
Nike Pro
	93% polyester
	7% spandex
	100% vPET $28		50% rPET $35

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Polyester renewal technology creates value from waste

Eastman is providing technology solutions for the circular economy

Feedstocks		End products

PET-only waste such as colored PET, films, and fibers from textiles and carpets

Polyester renewal technology (PRT)

Our polyester renewal technology reduces greenhouse gas emissions

by 20-30% when compared to processes using fossil feedstocks

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Eastman to build one of the world's largest plastic to plastic molecular recycling facilities

Taking the next step on our circular economy journey

2021-2022: ~$250M capital investment

ROIC >15%

• Polymer intermediate capacity to make 150
  - 200 kmt of polymer
• Unique ability to use low-quality /low-cost feedstocks

• Begin construction mid-year 2021
• Mechanical completion expected by year-end 2022

• Advantaged scale and integration, including carbon renewal technology
• Product mix upgrade over time
• Option to add capacity as adoption gains momentum

Expect molecular recycling initiatives to contribute to >$600M of new business revenue in the coming years

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Methanolysis facility to have a positive impact on the planet

PLASTIC CONSUMED AS

RAW MATERIAL

~110,000 MT1

per year

or the equivalent of

	or	or
~11 BILLION	~790 MILLION	~2.7 BILLION
water bottles	polyester t-shirts	shampoo bottles

REDUCTION IN GREENHOUSE

GAS EMISSIONS

>45,000 MT2

or the equivalent of

115,000,000 miles driven3

Pursuing partnerships to scale up our innovative solutions across the globe

1 - Projected Eastman annual capacity for methanolysis facility 2 - Projected greenhouse gas improvement over conventionally produced intermediates 3 - Calculated using the EPA Greenhouse Gas Equivalency Calculator

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Enhancing the quality of life in a material way

• We are proving what can be done today.
• We expect to use ~250 million pounds of plastic waste annually by 2025 and ~500 million by 2030.
• We are committed to reducing our absolute greenhouse gas Scope 1 and 2 emissions by one-third by 2030 to achieve carbon neutrality by 2050.
• We will not move forward with a technology that does not have a better carbon footprint.
• Eastman can help enable a circular economy
  while making an attractive return on our investment.

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Appendix

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Key underlying assumptions and guidance for FY2021

Modeling items:

• Interest expense of ~$200 million
• Income tax rate, as adjusted, of 15 - 16%
• Depreciation and amortization of ~$570 million
• Capital expenditures between $500 and $525 million
• Net debt to be reduced by ~$300 million
• Available strategic cash $350 to $400 million
• • Bolt-onM&A / share repurchases
• Pension tailwind of ~$25 million recorded in Corporate Other

Key assumptions:

• Economic activity recovering from the impact of COVID-19 but pace of recovery is uncertain
• Brent crude oil prices ~$60
• Euro to USD ~$1.20

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2021 quarterly forecasted change in manufacturing maintenance shutdown cost by segment - year-over-year & sequential

		Q121	Q221	Q321	Q421	FY21 vs		Q121 vs	Q221 vs	Q321 vs	Q421 vs
		y/y	y/y	y/y	y/y	FY20		Q420	Q121	Q221	Q321
Advanced Materials		-	-	-	-	-		10	(5)	-	-
Additives & Functional Products		-	(15)	5	5	(5)		5	(20)	15	-
Chemical Intermediates		-	(15)	5	5	(5)		5	(15)	15	-
Fibers		-	-	-	-	-		-	(5)	5	-
Total		-	(30)	10	10	(10)		20	(45)	35	-

favorable/(unfavorable) approximate change in manufacturing maintenance shutdown period costs, in millions ($)

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Net Earnings to Adjusted EBITDA reconciliation

	Adjusted EBITDA to Net Earnings reconciliation
	(Dollars in millions)			2019		2020
	Net earnings	$	762	$	489
	Plus:
	Depreciation		450		445
	Amortization		161		129
	Net interest expense		218		210
	Provision (benefit) for income taxes			140		41
	EBITDA	$	1,731	$	1,314
	Add back:
	Mark-to-market pension and other postretirement benefits (gains) losses		143		240
	Asset impairments and restructuring charges (gains), net		126		227
	Early debt extinguishment and other related costs		-		1
	Adjusted EBITDA		2,000		1,782

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