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Plumbing Products Richard O’Reagan / Group President, Global Plumbing

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Page 1: Plumbing Productss1.q4cdn.com/274414510/files/presentation_and... · Plumbing Products Segment Overview ... rough plumbing, water filtration, etc. ... Supplies products to more than

Plumbing ProductsRichard O’Reagan / Group President, Global Plumbing

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Safe Harbor Statement

13%

This presentation contains statements that reflect our views about our future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements.

Our future performance may be affected by the levels of home improvement activity and new home construction, our ability to maintain our strong brands and to develop and introduce new and improved products, our ability to maintain our competitive position in our industries, our reliance on key customers, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to improve our under-performing U.S. window business, the cost and availability of raw materials, our dependence on third party suppliers, and risks associated with international operations and global strategies. These and other factors are discussed in detail in Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The forward-looking statements in this presentation speak only as of the date of this presentation. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

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Agenda

3

The Business Today

Growth Plan

Future Outlook

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Plumbing Products Segment Overview

4* Operating profit, as adjusted excludes $13M of rationalization charges for Plumbing Products and $22M of rationalization charges for Masco and before general corp expense.

Rest of Masco

PlumbingSegment48%52%

Revenue $3.5B

Margin as Adjusted* 18.6%

% of Masco Operating Profit, as adjusted* 55%

% Revenue outside N. America 37%

12/31/2016

Currency Exposure USD / EUR / GBP / CAD / RMB

Commodity Exposure Copper / Zinc / Resins

% Repair & Remodel Sales 82%

Masco Corp.(Breakdown of 2016 Revenue)

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Strong Brands with Industry Leading Positions

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®

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Broadest Product Range in the Industry

Faucets &Showers

Bath Systems / Bath Accessories

Sanitary Wares / Kitchen Sinks

Rough Plumbing

Wellness Products

BroadestProduct Range

Multiple PriceSegments

ExpansionOpportunities

6

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Masco #1 in Global Faucets & Showers with Significant Growth Opportunities

7Source: Masco estimates, BRG, industry reports, expert interviews

88%

Global Faucet & Shower Industry$23B

12%Masco global

faucet & shower sales

Competitorsales

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$3.0 $3.2 $3.3 $3.3

$3.5

2012 2013 2014 2015 2016

Diversified Portfolio Delivers Solid Sales Performance

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Sales Performance($B)

5%CAGR

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Leverage and Operational Excellence Drives Faster Growth in Operating Profit

9

Adjusted Operating Profit($M)

$332

$418

$517 $521

$655

11.2%

13.1%

15.6% 15.6%

18.6%

2012 2013 2014 2015 2016

19%CAGR

* Excludes business rationalization charges for $25M in 2012, $24M in 2013, $5M in 2014, $9M in 2015, and $13M in 2016.

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Agenda

10

The Business Today

Growth Plan

Future Outlook

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Growth Opportunities in Other Plumbing Categories and Geographies

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* Non-Decorative – rough plumbing, water filtration, etc.** Other Decorative/Wellness – sinks, tubs, toilets, etc.Source: Masco estimates, BRG, industry reports, expert interviews.

Expand in core businesses Grow in targeted markets

Faucets &Showerheads

U.S.~$5.5B Faucets &

ShowerheadsEurope~$5.5B

Non-Decorative*

U.S.~$20B

Faucets &Showerheads

China~$6B

Other Decorative/ Wellness**

~$70B

(Dollars = Market Size)

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Three Key Growth Strategies

12

123

Extend leadership position in North American plumbing

Grow in priority international markets

Pursue category expansion

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Leverage Leadership in Brands, Innovation and Distribution to Drive Growth

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Delta Faucet Company share

BrassCraft® -preferred rough plumbing brand

Hot Spring®

portable spa brand

#1

#1

#1

Vitality Index ~30%

EPA WaterSensePartner of the Year

3years

Retail locations

Trade locations

Hot tub dealers

~12,000

~7,000

~1,000

Brands Innovation Distribution

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Key InitiativesThe Opportunity

Invest to Grow in Light Commercial

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• Capitalize on demographics

• Utilize our commercial infrastructure positions

• Engage dedicated team

• Gain national specifications

• Drive advocacy with designers and contractors

Multi-family and hospitality market size

Current share

Repair & remodel

Multi-family

Share target

$450M

70%

10%

70%

20%

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Drive Leadership Position in $600M* E-commerce Channel

15* Company estimate for E-commerce faucet & shower market in 2019.

2015-2016

On-going

• Innovation capability building

• Leadership in shopper experience

• Enhanced productivity

• Dedicated team• New logistics and

supply chain solutions• Retail omni-channel

strategy support

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Key Execution Initiatives

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Leverage leadership in brands, innovation & distribution

Estimated Sales Opportunity:~$275M-$350M

over the next three years

Invest to grow in commercial segment

Drive leadership position in E-commerce

+

+

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Three Key Growth Strategies

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123

Extend leadership position in North American plumbing

Grow in priority international markets

Pursue category expansion

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Hansgrohe Focuses on Growth in Six Key Markets

Germany

NetherlandsUnitedKingdom

France TurkeyChina

• Generated ~80% of revenue outside Germany in 2016• Supplies products to more than 140 countries

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Targeted Expansion Plans in Each Market

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PushE-commerce

Expand kitchenfootprint

New price segmentsin emerging markets

Push global projects(i.e. light commercial)

Attack DIY(focus on top 5 retailers)

Grow luxurybrand Axor

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Enable Growth in Expanded Price Points Through Improved Efficiency

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• Improve cycle time

• Improve E-commerce delivery

• Reduce COGS to pursue new price segments

• Gain market share and growth above market rates

Enablers to GrowthOperations ExcellenceValue Engineering

• Operations optimization• Expand value engineering pipeline

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Key Execution Initiatives

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Estimated Sales Opportunity:~$175M-$225M

over the next three years

Hansgrohe focuses on 6 key markets outside of U.S.

Under penetrated segments selected by geography

Improve efficiency & expand margins

+

+

Pursue inorganic growth

+

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Three Key Growth Strategies

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123

Extend leadership position in North American plumbing

Grow in priority international markets

Pursue category expansion

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Hansgrohe Expands into Kitchen Sinks in China

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C H I N A

Offer bundle option with kitchen faucets & granite sinks

Distribution setup with kitchen partners & point of sale displays

Achieved three times our forecast in first year

Launch proprietary designs in 2017

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Expand Non-Decorative Plumbing Offering

24*Includes water, gas, fittings & pipe and maintenance & install segments.

Market

U.S. non-decorative plumbing* market size

Current share

Initiatives

1. Create uniquely differentiated product offerings2. Operate at multiple price levels3. Service customer-specific needs

$11B

$0.5B

Example of ExecutionImplementing a multi-tiered product strategy

Good: Better: Best:Private Label

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Watkins Expands into Wellness Platform Leveraging Strong Distribution Network

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14%Sales CAGR2011-2016

Acquired AHS

Launched SwimmingMachines

Acquired Endless Pools

2011

2015

2016

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Key Execution Initiatives

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Estimated Sales Opportunity:

~$50-$70M over the next three years

Hansgrohe kitchen sinks in China

Expand non-decorative plumbing offering

Continue to expand Wellness platform

+

+

Pursue inorganic growth

+

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Agenda

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The Business Today

Growth Plan

Future Outlook

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2016 2019

~$3,525MExtend North

American plumbing

Pursue category expansionGrow priority

international markets

~$275M-$350M~$50M-$70M~$175M-$225M

~$4,000M-$4,200M

Plumbing Segment 3 Year Outlook

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Plumbing segment is expected to generate 18-19.5% operating marginsin 2019 with sales growing at 4-6% CAGR during the next 3 years

Plumbing Net Sales

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Masco’s Plumbing Segment is a Powerhouse of Global Industry Leading Brands

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• Masco’s Plumbing segment has a strong track record of execution

• Portfolio has broad product depth and leadership positions in the industries served

• Plumbing segment has identified clear strategies for growth

Sales growing: 4-6% Margins: 18-19.5%2019 Targets