1. Stock Presentation: Materials Sector
Summer 2018 SIM
Stock Presentation: Materials Sector
July 25, 2018
Kyle McKee & Ken Morris

2. Agenda Sector Overview - Recap SIM Holdings & Allocation Overview
Stock Analysis
Conclusion/Final Recommendation
Appendix

3. S&P 500 Sectors - Materials
Materials Sector represents 2.66% of the S&P 500 by weight
Second smallest sector beating only the Telecom sector at 1.8%

4. YTD Sector Performance vs S&P 500
- Represents cumulative appreciation return from 1/1/2008 through 7/23/2018
- Seemed to be on track with S&P 500 until around 2012 -

5. Sector Overview - Recap
SIM Holdings & Allocation Overview
Stock Analysis
Conclusion/Final Recommendation
Appendix

6. Containers & Packaging
SIM Portfolio Holdings & Allocation as of June 30, 2018
Containers & Packaging
Chemicals

7. Materials Sector Company Overviews
Item
Sub-Sector
Containers & Packaging
Chemicals
Employees
24,000
3,700
26,500
14,600 HQ
Philadelphia, PA
Columbia, Maryland
Perrysburg, Ohio
Lake Forest, IL
Primary Products
Steel/Aluminum Food and Beverage
Specialty chemicals
Glass containers for food and beverage
Containerboard and corrugated packaging
Market Cap
$5.83B
$4.9B
$2.7B
$10.9B
Current Price
$43.40
$72.42
$16.84
$115.70

8. Sector Overview - Recap
SIM Holdings & Allocation Overview
Stock Analysis
Conclusion/Final Recommendation
Appendix

9. Crown Holdings (CCK) Overview
Manufactures primarily steel and aluminum food and beverage containers
Also manufactures caps & closures, aerosols and specialty packaging
78% of consolidated sales are made abroad, representing significant operations

10. Crown Holdings (CCK) Recent Performance and Events
Recent stock performance has slipped due to higher leverage and uncertainty based on some potential anti-trust litigation in Europe
Recent Events
Total debt increased through Q1/Q2 from $5.2B at 12/31/2017 to $9.3B in order to fund the acquisition of Signode, a protective packaging manufacture for various industries
Represents new line of business, not intended to provide significant synergies
Potential litigation settlement
German antitrust investigation charges have been turned to governing body in Europe, could result in significant penalty
Revised Guidance as of Q2 Earnings Release
EPS reduced from $5.30 to $5.15 for 2018
No change in estimates to adjusted free cash flow of $625M in 2018 and $775M in 2019
Signode: Manufactures protective packaging such as plastic and steel strapping systems,

11. Crown Holdings (CCK) Valuation
DCF Valuation
DCF performed with a very conservative 8.3% WACC discount rate, consensus (Morningstar) estimates a 7.8%
Conservative long-term growth rate of 2.5% for terminal value
Modeled in a $150M payment for the litigation summary in 2020
Results yield a $52.62 market value per share representing a 15% discount to the market (as of 6/29/2018), updated DCF as of 7/22 represents a $59.18 price per share with a 27% discount
Ratios
Currently trading at P/E close to 52 week low
Materials index currently trading at 20.32x P/E
Segment
Net Sales
6/30/2018
6/30/2017
Income
America’s Beverage
$1,606
$1,403
$211
$213
European Beverage
776
705
114
121
European Food
942
838
141
122
Asia Pacific
669
565 91 84
Transit Packaging
620 94
Non-Reportable
630
551
-17
-19
Total
$5,243
$4,062
634
521
Multiple
High
Low
Med
Current
P/E
21.04
9.27
13.93
10.68
P/B
2,260
7.61
29.43
7.86
P/S
.99
.31
.71
.67
P/EBITDA
7.37
2.53
5.67
4.57

12. Crown Holdings (CCK) Outlook
Increased focus on reducing leverage coupled with wage and population growth abroad provide opportunity for continued growth
Growth Drivers
Consumer discretionary income
Beverage preferences including beer and soda
Population growth
Continued favoritism towards flavored soda water
Continued expansion of craft brewers utilizing aluminum cans
Risks
Company recently revised estimates for the year downward due to increased freight costs
Highly leveraged
Pending litigation could be substantial
Uncertainty of operations abroad which make up 78% of consolidated net sales
Signode: Manufactures protective packaging such as plastic and steel strapping systems,
CCK has a focus to reduce leverage over the upcoming years
CCK estimating over $3B in free cash flow over the next three years which will be used to pay down debt

13. Crown Holdings (CCK) Recommendation
DCF Analysis
Discount Rate
8.3%
Terminal Growth Rate
2.5%
Company and sector have underperformed overall market YTD (company YTD down 31%).
Crown Holdings recently acquired a new line of business that is set to generate additional cash flow in the coming years
Poised to enter emerging markets abroad and continue to expand
Settlement may not be as bad as assumed and Company will continue to pay down debt
Recommendation
Stock Rating
HOLD
Current Price
$43.40
Target Price
$59.18
Implied Upside
27%

14. Stock: W.R. Grace & Co. Business Overview
Founded in 1854, W.R. Grace produces and sells specialty chemicals and materials worldwide
Operates through two reportable business segments:
Grace Catalysts Technologies
Includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications
Grace Materials Technologies
Includes specialty materials, including silica-based and silica-alumina-based materials
Used in coatings, consumer, industrial, and pharmaceutical applications
Headquartered in Columbia, Maryland.
Company Overview:
Supplier of specialty chemical
Serves food beverages, consumer products, petroleum refinery worldwide.
Segment:
Grace Catalysis Technologies
Refining
Refining: Fluid catalytic cracking (help distill crude oil)
Used to produce plastic pipes and automotive parts
Advanced Refinery
Hydro processing catalyst (Upgrade heavy oil into lighter products)
Polyolefin
Application, such as high pressure pipe, medical device and textiles
Grace Material Technologies
Coatings and sealants used to coat paper for magazines as well as produce food, personal care products, and pharmaceuticals

15. W.R. Grace & Co. – Financial Performance
Market Data
Market Cap (USD)
4,933.5M
Shares Outstanding
67.3M
Beta
1.17
52 Week H (11/1/17)
77.37
52 Week L (4/4/18)
58.48
Financial Data
Net Sales (in millions)
2017
2016
2015
Catalysts Technologies
1,276.5
1,163.7
1,162.1
Materials Technologies
440.0
434.9
466.1
Total Revenue
1,716.5
1,598.6
1,628.2
Operating Income
272.80
269.60
279.30
Operating Margin (%)
15.89%
16.86%
17.15%
Company Overview:
Supplier of specialty chemical
Serves food beverages, consumer products, petroleum refinery worldwide.
Segment:
Grace Catalysis Technologies
Refining
Refining: Fluid catalytic cracking (help distill crude oil)
Used to produce plastic pipes and automotive parts
Advanced Refinery
Hydro processing catalyst (Upgrade heavy oil into lighter products)
Polyolefin
Application, such as high pressure pipe, medical device and textiles
Grace Material Technologies
Coatings and sealants used to coat paper for magazines as well as produce food, personal care products, and pharmaceuticals

16. W.R. Grace & Co. – Investment Outlook
Opportunities
Rising demand for refining catalysts and silica for coating (in particular in Asia market)
Increase in prices for catalysts can result in increase in sales/EPS for 2018
Benefits of improved product mix for silica and catalyst products – substantial spend in R&D in 2017
Risks
Foreign currency exchange rate fluctuation - 75% of 2017 sales outside of U.S.
Volatility of energy and commodity prices – company uses petroleum-based materials, metals, natural gas to manufacture product
Competitor Multiples
Ticker
P/E TTM
P/S TTM
P/B
P/CF TTM
EV/EBITDA TTM
Industry Avg.
21.21
2.20
4.02
15.77
9.56
GRA
21.35
2.80
15.21
40.46
12.47
Peers
LYB
8.03
1.19
5.17
6.54
6.49 CC
9.61
1.27
10.22
7.07
6.89
CC- THE CHEMOURS CO
LYB – LYONDELLBASELL INDUSTRIES NV

17. Recommendation DCF Analysis Discount Rate 9.5% S&P 500 Discount Rate
10%
Terminal Growth Rate
5.5%
Recommendation
Stock Rating
HOLD
Current Price
$72.42
Target Price
$73.67
Implied Upside
1.7%
GRA PE vs. SPX = vs
GRA PS vs. SPX = vs
GRA EV/EBITDA vs. SPX = vs
GRA P/EBITDA vs. SPX = vs
Returns YTD
GRA – 2.95%
SP 500 – 5.81%
MATERIALS SECTOR -2.86%
GDP growth estimated at 3% - believe there will be growth opportunities for this company through M&A activity and in the catalysts refining space

18. Stock: Owens-Illinois
Business Overview
Largest manufacturer of glass containers with 78 manufacturing plants in 23 countries.
Sells glass container products to food and beverage manufacturers primarily in Europe, North America, South America, and the Asia Pacific.
Customers include Anheuser-Busch, Coca-Cola, Diageo, MillerCoors, Nestle and many others.
Headquartered in Perrysburg, Ohio.
Market Data
Market Cap (USD)
2,682.7M
Shares Outstanding
161.7M
Beta
1.08
52 Week H (10/11/17)
25.90
52 Week L (6/28/18)
16.22
Financial Data (TTM)
Revenue
6,869.0M
Rev Growth (1 Yr.)
2.5%
Profit Margin
4.0%
Earnings Per Share
2.65
Price to Earnings
11.85
The Company produces glass containers for malt beverages, including beer and ready-to-drink low-alcohol refreshers, liquor, wine, food, tea, juice and pharmaceuticals. It also produces glass containers for soft drinks and other non-alcoholic beverages.

19. Revenue ($ in millions)
OI Segment Information
Historically, the company had four reportable segments based on geographic location: Europe, North America, Latin America and Asia Pacific.
Starting in Q1 2018, North America and Latin America segments were merged – resulting in three segments: Americas, Europe, and Asia Pacific
Revenue by Geographic Segment
Segment
Revenue ($ in millions)
Europe
2,375
North America
2,160
Latin America
1,551
Asia Pacific
714
Segment Total Revenue
6,800
Other Revenue 69
Total Revenue
6,869
The Company merged segments to better leverage scale and presence across a larger geography and market and to reduce administrative costs.
It is aligned with the Company’s internal approach to managing and reporting performance.
Approx. 70% of the company’s revenue comes from non-US operations

20. Owens-Illinois – Investment Outlook
Risks
Changing consumer tastes – away from glass to alternative packaging solutions (in beer & soda)
Decline in beer consumption in U.S. (beer is primary end market for OI glass bottles)
Fluctuation in foreign currency exchange rates (70% of sales from non-U.S. operations)
High debt levels – debt/capital ratio of 0.84
Geopolitical risks – trade war escalation with China, Europe, and Mexico.
Opportunities
Growth prospects in Asia Pacific and Latin American markets due to population growth and surge in flavored beverage industry (natural, organic, detox, flavored water, etc.)
Asset improvement investments and cost reduction initiatives will create efficiencies and improve operating margins.
Continued strong performance of joint venture with Constellation Brands and Vitro Food and Beverage acquisition.
The Company produces glass containers for malt beverages, including beer and ready-to-drink low-alcohol refreshers, liquor, wine, food, tea, juice and pharmaceuticals. It also produces glass containers for soft drinks and other non-alcoholic beverages.
Both the JV and Acquisition has helped OI improve its competitive advantage in the Mexican beer glass packaging market
Constellation 50/50 Joint Venture - Uses plant in Mexico to produce glass containers exclusively for Constellation brewery, which brews beer for export to the U.S. (Corona, Modelo, and other Mexican beer brands)
Vitro was acquired in 2015 and accounted for an addition $608 million in 2016.

21. Owens-Illinois – Key Ratios (10 YR)
OI Valuation
Absolute Basis
High
Low
Median
Current
SPX Current
P/E
2.7906
6.271
P/B
1.1865
5.3778
3.1255
3.3564
P/S
0.593
0.234
0.492
0.3865
2.2338
P/EBITDA
5.1045
1.0584
3.4677
2.5201
Competitor Multiples
Ticker
P/E TTM
P/S TTM
P/B
P/CF TTM
EV/EBITDA TTM
Industry Avg.
15.38
10.28
18.26
21.04
9.59 OI
11.85
0.39
3.28
3.66
6.23
Peers
BLL
31.07
1.17
3.49
11.05
11.03
CCK
18.79
0.59
7.92
9.49
9.95
Valuations as a whole would indicate that the stock is currently undervalued. The ratios compared to historical valuation is lower than the median as well as the overall market.
Additionally, the ratios compare favorably to the industry average, which points to the stock being undervalued.

22. Owens-Illinois – Recommendation
DCF Analysis
Discount Rate
11.5%
S&P 500 Discount Rate
10%
Terminal Growth Rate
2.5%
Company and sector have underperformed overall market YTD (company YTD down 31%).
Beta is elevated compared to overall market and key peers in the industry
Q Earnings released on 7/23/2018 – EPS beat management guidance/estimates at $0.77 vs. $ However, revenue missed estimates $1.77B vs. $1.82B (global shipments down 1% YoY in Q2 and stronger U.S. dollar)
Business operations should improve for Q3 2018, though uncertainty on currency fluctuation impact and rising energy costs.
Recommendation
Stock Rating
HOLD
Current Price (as of
$16.84
Target Price
$22.21
Implied Upside
31.9%
The Company produces glass containers for malt beverages, including beer and ready-to-drink low-alcohol refreshers, liquor, wine, food, tea, juice and pharmaceuticals. It also produces glass containers for soft drinks and other non-alcoholic beverages.

23. Packaging Corporation of America (PKG) Overview
Manufactures corrugated packaging and containers
Approximately 80% of sales are coming from containerboard / packaging
Significant sales to major plays including Amazon and Walmart
Growth Factors
Consumer wages due to increased purchases of discretionary products
Earnings rise and fall with input prices to include cardboard and paper fibers
High profit margins for materials industry
Market Cap (USD)
11.0B
Shares Outstanding
94.3M
P/E
15.8x
Materials
20.38x

24. Packaging Corporation of America (PKG) Recent Performance and Events
Recent Events
Exceeded estimates for Q1 EPS - $1.53 per share
2017 revenue represented a 12% increase from 2016
Metric
PKG
Gross Profit Margin
29%
Operating Margin
15%
Net Margin
10%
Return on Equity
33%
Other
2.7% Dividend yield

25. Packaging Corporation of America – Recommendation
DCF Analysis
Discount Rate
9.6%
Terminal Growth Rate
2.5%
Recommendation
Packaging products are a crucial component to online retailer’s business models which continue to expand
PKG has shown consistent increase in revenue growth over the periods with increased margins
Low amount of debt of $2.0B represents opportunity for increased cash flows to equity holders
Risks
Profit margins do not continue to hold the same as historicals
Economic downturn limits consumer spending
Recommendation
Stock Rating
HOLD
Current Price
$115.70
Target Price
$128.10
Implied Upside
10%

26. Sector Overview - Recap
SIM Holdings & Allocation Overview
Stock Analysis
Conclusion/Final Recommendation
Appendix

27. Final Recommendation Company Current Price Target Price
Upside (Downside)
SIM Weight
Buy (+)/Sell (-)
Recommendation
Crown Holdings Inc. (CCK)
$43.40
$59.18
27%
1.16%
HOLD
W.R. Grace & Co. (GRA)
72.42
73.67
1.7%
1.77%
Owens-Illinois (OI)
16.84
22.21
31.9%
Paper Packaging of America (PKG)
94.30
128.10
10%

28. Sector Overview - Recap
SIM Holdings & Allocation Overview
Stock Analysis
Conclusion/Final Recommendation
Appendix

29. Appendix – Crown Holdings Inc. DCF
Enterprise Value
FCF in last forecast period (t)
1,334
FCFt+1
1,367
Long term growth rate (g)
2.5%
Terminal value
23,576
Present value of terminal value
10,254
Present value of stage 1 cash flows
7,310
Enterprise value
17,564
Value per Share
Enterprise value
17,564
Less: Net debt
9,606
Equity value
7,958
Diluted shares
134.46
Equity value per share
59.18
Market premium / (discount) to fair value
-27%

30. Appendix: W.R. Grace & Co. DCF

31. Appendix - Owens-Illinois DCF

32. Appendix – Packaging Corporation of America DCF
Enterprise Value
FCF in last forecast period (t)
1,377
FCFt+1
1,411
Long term growth rate (g)
2.5%
Terminal value
19,880
Present value of terminal value
7,630
Present value of stage 1 cash flows
6,855
Enterprise value
14,484
Value per Share
Enterprise value
14,484
Less: Net debt
2,399
Equity value
12,085
Diluted shares
94.35
Equity value per share
128.10
Market premium / (discount) to fair value
-10%