GRA - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 W.R. Grace & Co. Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeremy Rohen, Vice President, Investor Relations. Thank you. sir. ahead, go Please

Jeremy Rohen

and Good Officer. Grace’s thank call. third is President our this Takane. Dockman, and us Senior our With for today morning Vice President Force, La for quarter Chief Hudson Executive morning you, Officer you Bill Financial and and joining me Chief Thank XXXX earnings

our our Investors grace.com. principal Please on note Our earnings posted view that are statements at presentation current will could on our forward-looking some affect our uncertainties identify businesses section future of comments SEC our release and website today contain the under materially. filings, which and and the may results of that recent Please based performance. future risks actual see differ

in of this morning, earnings contained posted We the assumptions. will overview discuss value financial certain non-GAAP financial discuss in and This non-GAAP provide associated described an detail materials. our morning’s and more our of website. financial key disclosures Reconciliations will sustainability. will on on and and are measures, planning key other quarter, trends measures materials third results are focus Hudson earnings in Bill our from our highlights creation, which end-market

call the open then questions. will We for

X in will with that, please Hudson. earnings turn to the presentation and So, I call our Slide turn to over

Hudson La Force

gross solid cash in Thank you, growth in hope delivered everyone. flow. financial quarter, safe We strong morning, you I sequential results and Jeremy. earnings all the Good and healthy. your families and and are including margin third strong

us. are our is worst many the end-markets of by and trends behind the demand of in We believe recession encouraged improving

our opinion which Reiland’s detail, strategic I about recent followed results a Before we resignation to want in of discuss address our our direction. difference quarter Kathy board, from third

about think business won’t it I is disagreement strategy that underscore important details, there unit or was no I to operations. Grace’s the While discuss

value We of portfolio have businesses. a specialty high

the spin-off business Today, often that pandemic. leading from approach successful the creating of value impacted to acquisitions we them. Catalyst significantly pursued by drive GCP to built years, our to business. the value is This open-minded the have and led Over opportunities our the most Specialty

Our executing value and the am competitive investments advancing board and confident advisors practices growth and our plan all on our working will accelerate value thoroughly with and to discipline commitment shareholders. longstanding with management our for carefully time, creation improve is and to evaluating strategy opportunities, capital growth portfolio. shareholders. our significant we our growth, allocation long-term are At I our discussing financial create same our consistent strengthen advantages focused our and

to on third turn highlights X. our let’s Slide quarter Now,

were down with Third quarter QX assumptions. our sales XX% line year-over-year in planning

actions Improved by production was demand. of encouraged the XXX business basis demand in was grew coatings are the consumer X% recession. year-over-year demand each adjusted Technologies Adjusted Laura. margin pharma to of aggressive and Adjusted XXXX. to spending, operating by would in flow sequentially quarter flow sequentially. XX% capital lower the been than working cash more capital delivered million financial up X% up rates and QX trends points. believe solid reduce another by driven We and drove cash impacts sequential Materials Hurricane of in strong sales strong of have EBIT improve $XXX trough EBIT We improving without improve on higher our gross the demand improvement costs

the Year-to-date, $XXX was cash was Year-over-year, to working cost benefit flow actions reductions. the capital operating health We continued our consistently and flow we throughout cash discipline safety have million XX% deliver adjusted have world and free adjusted and free up X% that even flow was the spending operating year are adjusted captured the the full capital $XXX track and cash of EBIT million. met on though during pandemic. the I customer like their focus employees to would lower. thank X,XXX has around was commitments Their Grace’s on ensured for year.

In worked Charles customers Their in end-markets addition, our supply company again after to of Lake employees commitment Hurricane and Charles Hurricane after to extraordinary at to maintain of Delta. throughout manufacturing who want significant operations and the restart to to a I tirelessly Lake safely Laura recognize efforts our our In the time will but customers personal particularly and levels exceptional. our next turn remain Durable end-market show show year. all to below likely Slide signs Please and XXXX hardship is truly demand segments. strength, Catalysts, in packaging regions and applications. hygiene is of certain in recovery, X. segments polyolefin catalyst Specialty improving to demand applications Non-durable continue

to continue improve. sales to Catalyst Specialty expect We

products new activity introduced increase growth customer These and of strong robust in sales XX steps accelerating trials next in our year. pandemic. for the in QX a we delays week, We important due have license and XXXX fifth XXXX. to are trial announced This seeing pipeline a have recently significant after are

consistent visible a for provides business us revenue stream significant and licensing sales. Our and future catalyst positions well

global on technology Please remain fuels our fully our pandemic operations. remain as from value production they recovers We to fuel about X. maximize customers selling refinery our and utilization optimize year. has of Refining The their XX% transportation difficult environment. operations profitability fuels helps we recovery focused and demand to the customers the transportation effects strongly plant of below headwind seen their lifetime levels. have will deep demand the bottom service demand in continue in In a Still, normal Our the be quarter. until next offering turn for refinery to Technologies, stabilized a Slide performance transportation polypropylene a second of more

the demand use their our average they use customers high-performing continue operating year. catalyst to up switched effect the Some lowering this to of and until average FCC price now to recovers, to before This slightly be our has we customers the pandemic. have to the catalysts lower of performing prices sales flat expect but vast majority minimize cost

savings overall end-market, our weak the about this as XXXX we proactively costs cost Given effort. by in conditions part reduced million $XX of operating

managing QX line with Please and Materials Technologies in well during are X. demand. our additional market to our driving Slide current productivity capital X% end-markets demand and and Grace’s are costs to the QX coatings. turn QX. in We to year-over-year used its in outperforming the many manufacturing consumer pharma product fight pharma by against COVID-XX. performed and capacity led grew pandemic, technologies plants sales ensure been Strong due has in in spending better has performance of

are In aerospace automotive pharma sectors. but been to markets tied perform recovery our segment. slower continues to consumer process expect the We in demand markets continue we well. And improve, to has and hard rapid coating by markets, recovery hit in the chemical the to encouraged

profitability to Slide X. growth Please to turn innovation and going forward. commercial customer-driven for Our excellence improved continue higher position MT and

They has For highest to Grace else But investors, more XX performance. achieving focused stakeholders do years, the today, other customers, than can we on to what expect EH&S sustainability more. been levels and for improve know want employees everyone. of

sustainability XX% We our our year, contributed customer are doing Last directly already. sales of lot to objectives. a

Our packaging, content in technologies help materials reduce water plastics consumer manufacturing products. in use consumer harmful processes, in and

use Our improve reduce economy, reduce emissions. energy technologies help refinery and also fuel

of technology the each operations. two more manufacturing their metric own example, Technology, For than is orders customers by This emissions SOx reduce used eliminate in our greater of tons is XX,XXX to SOx customers than Grace operations. magnitude from SOx our With emissions year. our emissions

one our these and our Grace. technologies can turn are XX% to fuels. impact and growth not R&D renewable at these in are commercialize. of our expect recycling least game-changing sustainability as know to create to satisfied opportunities positive we Slide tied customer future. contributions We XX. see to with projects and plastics more We and increase These Please we do are driver innovation of sustainability the sustainability additional for opportunities customer-driven to to in trends two areas technologies the link approach Today, advanced

significant the is small potential our plastics long-term. Most to markets have in recycling. become are these opportunity in me exciting They So, very advanced the today. for

of technologies before Our catalyst economically can waste. be are in technical this needs plastics know-how long-term can and the significantly addressed And solution plastic recycling plastics reducing today. to be Mixed streams scale. contribute plastics to hard to at this challenge viability for and recycle waste recycled economic

to works problems complex a useful products. on this everyday, FCC how into looks For like feedstock a valuable us, challenging lot team turn our carbon

Our help us are invest I this opportunity economic. plastics scalable applications for application. business opportunity know-how our fuels, over scientists but high potential existing This long-term renewable chain. the points the to that, recycling technologies models customers today, but to opportunity, an to important at business in our our are in as sales value Similarly, With – away, and and and is an with is years develop the technologies customers the Bill. more compelling. a working call turn Significant where still is will make advanced small multiple growth one is sustainability

Bill Dockman

Slide to turn Please morning. good and XX. Hudson Thanks,

which quarter, very As with environment. Hudson a we is in what reflect execution businesses operating are results the by our pleased still solid strong our challenging for noted,

we trends seeing of in demand most are So, positive end-markets. our

we pandemic, to cash impacts early actions rates operating highlighted potential and to and levels, costs Looking production inventory of our back the to maintain QX, financial generate the we when position. strong reduce took

company recovery. positioned capture exit actions the prepared As have fully the us mitigation to a recession, result, well and a the stronger to

up global rates. and costs strong The sales of leverage. On the was by Now, effects pandemic slightly higher down refinery points in XX%, turning demand Adjusted basis, were the demand adjusted due margin sequential operating Sequentially, hurricane-related share on was of quarter. EPS to per included from QX. QX. X% $X.XX and the gross third a sales transportation driven million up XX% or adjusted year-over-year, primarily quarter basis results, $XX XXX was up from was improvement fuels were to the and up which sequential EBIT operating improved

total do any an While insured so was this insurance deductible, exceed we do costs expect recoveries. our event, not not the

year, capital X% our flow, focus capital strong on was flow cash year-to-date team’s spending. reflecting free the reducing adjusted our working and over cash prior and execution up Regarding

and we $XX our QX. ART dividend received additional are addition, in from dividend joint expecting venture In a ART from million

recall, dividend parents paying hydroprocessing the Charles. may you the to plant in self-fund in Lake stopped to catalyst at mid-XXXX, a order ART As

to dividends. expect that ART the is complete, Now plant paying annual will return we

progress to capital by At of our year deliver $XX we $XXX working on operating and reductions million million. improve million and million point, have $XX of by this confident and mitigation our have $XX to flow $XX our We lower are in track capital targeted million million excellent cost deliver actions $XX our will to achieved to spending are we targets improvements. made cash full in we target

cost As return are a reminder, most temporary recovers. these as will and reductions of demand

of ability flow actions these our will the benefit flow actions will not cash cash While XXXX, limit to strong XXXX. generate $XXX million in

let’s look Technologies well remains as but timing. the order to results. versus as Refining fuels to quarter rates demand, decline sales sequentially of continue QX. Slide effects impact were pandemic Catalyst the and essentially sequentially down turn flat Specialty primarily sales miles ongoing prior stabilized, normal were at the over Technologies driven. Catalyst segment down operating due versus the X% to refining sales X% XX in quarter Now, and prior below levels, the operating, transportation demand global global the were

trailing improved pricing the approximately months, points. For FCC XX XXX catalyst basis

QX, gross joint in Third down income sequentially sequentially which reflecting margin down quarter prior not points Hurricane $XX improved versus Income $X quarter reductions costs repeating. ART the significant the to quarter, Operating segment related included our million venture inventory in XXX was X% Laura. million. of from was

compared quarter turnarounds some significantly of half ART’s XXXX, fourth as up QX. the refinery to have second be sales we XXXX shifted While from expect into to

to on Slide turn let’s Materials the XX. Technology Now,

saw strong Coatings the inventory as QX on both were QX gross and COVID-XX materials as Demand repeat sequential Gross end-markets sequential improvements. pharma and quarter. higher Third sequentially demand the XX% X% quarter strong reductions did Operating well XXX production over margin QX. and versus QX of end-market kits. both points used and QX, up MT improved up volumes demand higher basis remain improved not year-over-year quarter so a it diagnostic and applications were demand was from up quarter a prior result strong on in for QX. to as that prior was sales in over margin QX in for income significant levels up from from consumer the below customer’s versus and basis in chemical benefited process sales the

turn let’s Now, Slide to XX.

I flow drawn At our As speak cash had a performance pandemic strong and The mentioned businesses. the results driven resiliency we cash the $XXX debt cash by quarter, and hand. the flow began. significant on debt total strength moment including on until From to not to maximize revolver million, we $XXX liquidity the have over our since of ago, perspective, of actions was end million have a maturities of our XXXX. no our

of to Xx, de-lever outside our expect on record balance and a we X.Xx have target range of quickly was recover. pandemic QX the and sheet temporary of leverage had EBITDA. the the reflecting strong end net has of Our at Xx as markets de-leveraging our But adjusted impact to

to turn deployment and temporarily productivity we funding framework. we our our to and liquidity capital discussed, XX. We on cash let’s to Now, long-term have remain near-term targeted as investments. committed focus Slide flow and growth shifted priorities But have

our technology our These were made and focus customer-driven organic Importantly, grow our decisions growth will ability to maximizing with accelerating investment not support on XXXX beyond. or and innovation. opportunities decisions a impact innovation to in near-term

Regarding resume shareholder in net returns, our share reducing we and leverage. to XXXX, investment while expect to in repurchases businesses prioritize continuing

to Finally, XX. let’s Slide turn

Catalysts, are customer inventory to both impact expected which expect Specialty Demand in in in transportation Specialty and XX% improve expect Technologies led growth signs up catalyst demand For utilization sales the for end-markets increase be sequentially fourth we Refining solid and and as a in improvement Catalysts versus for as drive both FCC refinery from in to of expect XX% to QX an sales lower Technologies. well sales in quarter, Materials solid to we as In QX, recovery QX. QX, draw-downs. sequential fuels by growth showing we are continue will

to For and automotive. business of and sequential QX industrial certain strength offsetting we and Materials pharma particularly recovery coatings sales by in consumer end-markets, continued QX the are Technologies, expecting from growth demand weaker our driven

improvement expect basis in QX of We QX. to points margin continued from sequential XXX approximately gross

pre-pandemic it XX% this to XX% to levels return pandemic. we fully recovers year gross demand as will Our continue more of margin beyond confident to will the from also are improve and

million XX% adjusted expect remaining an the reminder, as costs EPS of QX. reflecting range for to versus approximately in share. includes a of the the We per or quarter million impact to And per $X $X hurricane-related range this $X.XX of to be share, of $X.XX XX% increase $X.XX to the

I to the turn will back Now, call Hudson.

Hudson La Force

solid you, and in Bill. encouraged to Please by Thank financial quarter turn results demand trends. We really better Page delivered are the XX. we

showing focused is we team remained operating shareholders. results excuse are as recovers. results will will challenging Throughout in made fully growth have Our on showing and our and strongly – we in the executing excellence will confident for commercial well payback excellence demand executing me, we I growth strategy growth, environment. and investments are The our create and payback am a our have will pandemic, value we strategy. significant

questions. your for call the open Let’s

Operator

[Operator Instructions] Chris comes of Your from Parkinson first Credit Suisse. question

open. is line Your

Kieran de Brun

lower have is This was for morning. I if quarter give what Kieran color pricing specifically, as but catalyst – me XQ you this to XXXX of catalyst Good more to into customers, wondering just in on terms can how terms Chris. down in how you patterns you different customers and not recover have a little guess how seen Thank I the expect bit done of many or you many a quality demand in you. recovers? splitting that or

Hudson La Force

making that save a something their lower a a we at them catalyst we help with seeing our way the Kieran, customers. sure customers, to to it their catalyst. current environment. is is are Hi, operating is What is to them where alternative And time We closely determine meets Thanks a costs decision This for challenged. performing on the needs catalyst an economic question. profitability the in Hudson. oftentimes, reformulating work make is are for we this use

will of operating choice. obviously, think with to change our customers decision. made switch using customers were performing made customer for We begin the think will them make that year, that this we work catalyst the next like customers improve continue believe have high-performing their to that number the the with small them this a is high were this using vast when do as the catalysts will it they We change. this year pandemic same majority we And into next make closely The using they to but back is help of temporary. to they Now, rates this, before. a began, that still wants before have are

Kieran de Brun

continued expect give can it’s XQ, one then is I Catalysts, into little chemical a high of guess mean, remaining these of of Specialty just Great. And what you demand de-stocking quick been trending sense XQ customer on most it’s you that just amount bit as a on us a and for into end-markets and XQ preliminary such catalyst demand of still thoughts how I you XXXX? de-stocking back then view comes into any close,

Hudson La Force

Sure.

we the de-stocking quarter. customer saw second the So, greatest amount of in

did we Catalyst to to to part, a because occurred we On the an for discussion, that to expect QX fourth reasons. think on sequential occur made may we a de-stocking year’s as de-stocking year-over-year that end. in they safety – Specialty own their own that noted. had that customers do you of their in basis reduce a are had be inventories. the safety you sales building of Catalyst we quarter, last some well Specialty that year-over-year basis, quarter, stock expect the in to recall made comparison and that As decision We catalysts. cash improve negative because end show flow to were from stock growth to QX, from management where of de-stocking were Most close QX coming still their These customers still QX as will the in fourth of decisions

a be And so on basis. we think a headwind that will year-over-year

that pretty business we Kieran, Catalyst into As has. the Specialty growth good head opportunity XXXX, about I our feel

business, test introduce regular gotten couple our the the long-term look And routine new their exceptional This had it’s into of this dropped the through products it these over into up. working team in next an element prepared a during an part activity the ultimately because X of and job the close commercial into now first As we of us that’s has the to to back is for this this trialing It’s hands operations. highlighted disruptive we that’s activity for to really zero as materials them starting last business. for year. of in but getting the pandemic. Trial growth driving very OF important our pandemic morning, customers products some encouraging of done months our customers and necessary of to months, pick

Kieran de Brun

much. very you Thank

Operator

of Your next from Markets. McNulty comes Capital BMO question John

open. is line Your

John McNulty

to of around high driving guess even the forward, guess like Specialty getting have middle, kind you kind end where got maybe of Catalyst happening around big methodology kind portfolio I thanks oil and guess maybe first of and the a consumption more of beginning revolutionary job it Yes, refineries of with strategic evolutionary you of how period taking look looking a good adds, for in is question. saying the some kind you you presentation a a changes peak growth. at highlighted refinery done value the be to this one, of the that oil my the with have at for for decade, some but I looks level closing. of look going shareholders been – of create you especially have companies that, have got I of

I thinking in the that the changing the move and you directions and growth? how board guess that about are can for opportunities of So, maybe you growth all how to speak you maybe

Hudson La Force

a is you question this I John, asking it. and great appreciate

me address two Let in it parts.

means touch strategic part second I discussions your about refining for thinking about as what company. our businesses we will then our today. talk on a And are of how me the about this Let question

for would clear As years thought at looked XXXX data peak markets to demand in peak will few long-term, be fuels. a XXXX this ago, we a the When be first area. it’s there over refining look the the we the at we transportation that

refinery the peak early with the by part as it’s And even propylene pool. FCC come advanced the only With the I ways about that the a also – used transportation high you is itself in gasoline petrochemical technologies, of for The is accounts after some as demand XXXX that important maybe or in fuel. the FCC maybe for gasoline may the demand that will one peak. as think are importantly, fuel sooner, operations. XXXX gasoline indicated, It but most make very for make a in gasoline more units don’t important producing to to very pandemic remain it’s demand it in peak part FCC feedstocks, of of its of reaches catalyst. XX% unit a corresponds primarily economic which

the the of so FCC role the transportation role remains in refinery just its unit important producing in And beyond fuels.

the Hydroprocessing is years hydroprocessing and that catalyst to to technology out in of fuels, The primarily fuels venture. demand benefits. transportation ART other part to take of other are sulfur will our come. make joint strong catalysts this the remain cleaner used And in

flow continue right built of Catalyst right Grace pursue have are we our bolt business to our to find that will the done other – reach And growth its business. year, expect with opportunities. us some is add capabilities historically, customers a business. ways I seeing significant operations standards the acquisitions, specialty looking this but make to have of Materials our right we And financial near-term. and opportunities increasingly hydroprocessing objectives. to grow achieves Materials prospects. describe investing the reinvest to slow at demand business the to our are us business. opportunities good on a investments that their those cash Both flow so Technologies Part is in and at peak, continue Technologies and this would that to that said want when our opportunities Part to long-term And investors those Specialty throws stringent in looked have businesses heard returns, to we of the we growth in continue acquisitions We profiles catalyst point, smart That on we its commented, cash that are add businesses we off in fuel meet in into investing at there is for to make lot business. have and that as growth a Grace existing growth as have company. sure like

John McNulty

about demand you said, just can the thanks for a a push I for I they things XXXX only assume so color on I demand we or pent-up could just that business out were it. pushed almost is at or we we much mean, before way all things right you work a got and it’s pandemic looking about how ART were maybe think how guess in excited it are the at of came other obviously, the the out are year, I maybe out aggressive just on that bit. look maybe when these much question. on maybe bit potential But come helpful out, when That’s that. as long, off question, That one the little where nuanced and know we in, you maybe based doubling you smaller to is the see growth, that Got it also so for side? XXXX? pushed And business, a

Hudson La Force

they operations John, have their primarily the would existing – two do because hard quarter, to Customers as parts. Well, run in of address going and made supply am planned fourth can push XXXX that pandemic. that have. been delayed decisions catalyst turnarounds to they into normally turnarounds out to the of me that let those has the had in I not as operations. have because They

might turnaround the in the that was delay a bed planned might high fixed by and catalyst that pushed effectiveness in to And in to QX out is one they get QX time, pushed the planned still catalyst change so the QX application. get same to QX. can the turnaround But

just expect the that demand year been For life of second has which our in business. be the the customers unit is partly running new our then of lengthened, a said for And growth been catalyst XXXX to was startups. stronger same the startups, is ART bed XXXX That not as because have new I reason, hard. fully because driver,

will visibility to made our next start have have We online plans in startup years. And units. those customers we that in investments new a and number up There come to of customers XXXX are XXXX, to expect XXXX. the that new good X very got

John McNulty

very for thanks Great, color guys. much the

Operator

Research. Your McCarthy next question the from Kevin of Vertical comes line of

is line Your open.

Kevin McCarthy

Good Grace? morning, advanced you and for related How opportunity do of the the the recycling characterize to magnitude Hudson. technology timing plastics

Hudson La Force

that are just by technical lot At other also be there to a There something really is business requirements, capital happening availability, business to model in Grace is experiments and This point, by of be addressed and are that. this challenges like with developmental with are terms technology industry in the models. and challenges Kevin, of stages. participants addressed. feedstock There things

think the And availability a take but process, some sort will time knowns, is are around the of some so unknowns to are some well there I and process this pace Pyrolysis understood capital feedstock out, there investment.

And so time, will Kevin. think I this take do some

Kevin McCarthy

likely talk secondly to liability you you financials flow-through may, the how and years? expect Then spend about in projected I would aggregate if to out can environmental Okay. increase your coming that an press release, is for work in be you in proceeding the your called that is what the in Montana and

Bill Dockman

X still the getting of Libby, EPA, in part dam the within over can the million, it estimated. have ensure solution will Kevin, potential a did the this overall through spillway that couple this finalizing we a release, Libby important we site as $XX an keep Mine at to done cost that the hey, the increase it’s the ago might that the for we risk with recall, cost, of strategy done separate are higher you we to right project Bill. alluded adjustment of we the at ranges help $XX spent work mine that and that now doing we the the of around million, is to charge we this get that our quarter that a But took we estimate had years. will kind work to was years remediation the with spillway which Yes, and next getting And this being as related dam. as of

a it’s So, here. are long-term making process. progress And we

well. located. that I the think taking we Libby where County of the it’s well-aligned as town Lincoln support and we approach They also the with are are

a million will couple I of all implication not from that X work lot the over we time still of dramatic now. for said this. be years, be period even a to single It have million not this any casual $XX accrued So, and years any $XX finalize will other in over done year. to of a starting longer be

Kevin McCarthy

helpful. much. you That’s Thank see. I very

Bill Dockman

Sure.

Operator

Your comes Securities. Mike next of Seaport Harrison question Global from

line is open. Your

Mike Harrison

with thoughts when point, and visibility initial there wondering or differ Hi, there? good that your costs the did you impact, question grid some still running morning. up stop and was you timing grew this I back the incurring and of Hurricane Hurricane good at Laura are impact just pretty on Delta and marks to the regard guys have from do

Bill Dockman

Yes, grid – backup we Mike, the on this the is back at utility. point are

from our are utilities, the local running. We the plants and up getting so energy back Entergy,

still of the and are cleanup on are the finishing being supplied We the up back energy running, the but is site the is site, some running, locally. plants

And we to so the efforts. I we on think, wrapping are – well a cleanup got have our way up

Mike Harrison

the around on maybe can overall better a that bit regions that? and that where refinery operating business, you then you Alright. are the color rates at of you in look give what And refining perspective, quite from than catalyst little world, terms as some XX% regions decline than were you a you bit a were that worse there regional posted are doing seeing

Hudson La Force

Rates given August, flat better seen have they improving have see world around other parts than saw been we October in the the conditions Mike, the back forth. so stopped do this, everybody same markets have they September, then region some Asia we and QX, the at in real of If rates the and Operating variations. been trough, is in We just time, is pandemic what look in of roughly that. higher throughout it’s those been over and Hudson. against sequentially came at aware July, September. rate a real, in back September QX, has we regional

And so illnesses watching to the we second has Europe. and closely America affect develop wave as North started are of this

seen We haven’t significant but real demand, seen progress improvement. haven’t change any we demand in in

Mike Harrison

much. very Thanks Alright.

Operator

The from next Sison Mike question Fargo. of Wells comes

open. line Your is

Mike Sison

almost Hey, you the think Specialty doubled that last business, business I guys. years. The Catalyst several over

or technology? of parts there acquisitions maybe years? to broaden strategically to about portfolio the current the that last of over that of kind And chemical of are do into part some industry so you opportunities going have which your maybe grown different maneuver the when you forward, organically correlates you do has And can think that can with several that sort in business do the nicely you

Hudson La Force

Hudson. Mike, it��s

the acquisitions that we that technologies On needed Specialty we to given Catalyst business, the all made have. the have us of have

got broad have now. right footprint We technology a

polypropylene. to able customers of the are across polyethylene supply our We and needs

lot that add certainly portfolio. catalyst would in to financially of be likely so it’s about that significant And, If our And do interested chemical would is tend in polyolefin an manufacturing opportunity be would an catalysts to was is a available look niche markets. think there not technology, interested. there interest markets remain in. nothing to that our not for we an entrant, strategically years we attractive that or us, would that that is a became and catalysts, market, But and organic make some at catalysts but have there the businesses we footprint, we in to we at additional we not be that to Outside current room we to that that have maybe would additional business. of are complements this the investments investing chemical commented point. we nice certainly if new It’s in would do nothing those it. These asset something have over they

Mike Sison

looks in you I quick think And, can look XX% and it. of I get those gross follow-up, at of post second it to prepared XX% the of Got to chart line, to blue margin. slides a post And back look you when pandemic, your pandemic as and now refinery, that, like levels then sort crude global the ‘XX half first get you the the comments a at run versus noted half.

implied the it a in sort forecast is number? early ‘XX it know that maybe half second challenging unfolds that to ‘XX? of guidance of get So given of doable a and in half assuming it’s I the first forecast it’s little as maybe there to

Hudson La Force

is full comment I analysis some combination we a This is a leverage. gross all is cost back things. have all as There historical our not importance tied, to morning, effort we that our are items tied basis, makes have we try we that added of thinking plants and we give on as the of in that historical Mike, of are our But on specifically of managing raw Well, do we work a we levels, improve obviously way we improves to sense our And levels, as that day have way margins, side. our operations going productive and operating productivity getting think is everyday, position made volume lot certainly costs we to our including levels, there back is make and, historical to possible, on other we to sure in getting getting back something views improves historical are do to productivity that back margin to to to well day material well, our because of But that margins. why our inflationary other are getting driver the as can. gross factors your and share to we leverage February. to as year to to when the volume why ‘XX the that XXXX. for margin will That

Mike Sison

you. Okay, thank

Operator

question from John Roberts next Your UBS. of comes

open. is line Your

John Roberts

the increase wins The sustainable Materials from Thank that sales you. back cyclical down? that just cycles then the be increase pharma is big within a in will that that was Technology, or new pandemic

Hudson La Force

pandemic. both. thanks There of on, for It’s by John, that an driven touched question. is important your part just of combination the a is this

say that technologies, in also COVID-XX that pandemic, of and technologies silica COVID-XX are supplying should specialty used treatment used specialty and are I therapy are not We we test silicas pandemic patients. are providing in a kits

The and which has with customers business the improvement year. the so is, is new that significantly. existing with in sense financially. underneath customers, has new the developing pandemic But business in And team our demand unfortunate a also pharma remained It’s that job, strong, business. a business done continued. is new nice that increased pharmaceutical in underlying good strong for But I remain next about it’s optimistic us the

John Roberts

pre-COVID work the or lost half share to to back the that? And then have replace runs back you from you of in get XXXX, to levels secondly, do do PES by assuming refinery still some then have on will

Hudson La Force

believe We basis. Yes, the have volume but not we a John. basis, on of already the share replaced on market a percent

to basic That’s this we refinery are rates that our profitability obviously strategic to business focused drive this We maintain And share. expect And intent in our volumes intent our couple years. changed. hasn’t value market of as for is that. in selling a market really on on our improve, customers. so want our improve, our our technology been business to share That’s maintain and but we strategy and growth our focusing by to

John Roberts

Great. Thank you.

Operator

next Laurence Alexander of from Jefferies. comes Your question

line Your is open.

Laurence Alexander

in question you for Good And your other the going than for I process, gasoline? opportunity traditional all produced is developing gallon how to into or [indiscernible]? exiting a significantly going on this about renewable year, be Material per morning. catalyst total of was materially I is is you technical platforms, similarly, consumer XXXX-XXXX? grades the sales this of the diesel was year a new comparable there on whether then a where percentage plastic sale I of the Technologies, would a where guess revenue the segment the compared ton into the just mix first per why pharma or reason year? ton mean, catalyst can next different it catalyst sense different cycles give as shifting had current think is fuel And than the and side, per as

Hudson La Force

questions. those Thank you, Laurence, for

the been That’s although question even see a went our a changing process will on did have we the third, grow year shift profitable the ago, a growth focused a segment. Let mix That were of – MT, third growing to or between a our pharma we third, chemicals, segment we lot pharma me I the MT the aside, a demand and our classified. you questions. consumer On where been to parts chemicals. the expect has we consumer, process other of back to shift and in segment faster And start portfolio. with future than industrial coatings then faster to chemical roughly and the other pharma pandemic is mix, if new consumer, colloidal setting the segments the expected more good as

and years. over we had within were doing was about last over mix of driving time, those X and towards faster more end-markets had a what seen sub-segment level, progress. X we segments shift the three seen three the points shift so growing XX And we segments mix lot of among the or those At profitable

but the that The not – we continue for with me shift mix long-term, catalyst we two hopefully for that advanced us continue on question There about shift there as the recycling That growth strong are a mix opportunities, pharma. your plastics may move be the moment. sustainability Now, absolutely drive will touch let mix to actually in opportunities catalysts consumer to the end-market. in three are expect – shift. it’s as the pandemic On this pandemic, winds accelerated COVID forward. as year next favor quite down, as in of

also waste process It process can where pressure. oil, The be catalyst. an like a itself. a similar us FCC that into with is It’s opportunity technology one an and a first that’s application, done very pyrolysis is catalyzed. process this This the lot stream is can that’s similar in be for commercial very technical heat plastic the It’s converted That is as evolves. challenges.

cracker a an in catalyst, then is co-processed require That matter into to opportunity or going the of is different of oil. And convert the whether process, us. with pyrolysis second catalyst but FCC an of creates basis, reformulated unit itself, catalyst. into unit type a That the for crude product polyolefin unit, an catalyst, is be PDH a to need in of a unit if The a propylene fed is a a on amount a this FCC question, same terms an opportunity catalysts on of FCC pyrolysis the doesn’t you unit still oil the it to of your polypropylene. from specific this it unit feedstock process, to

Laurence Alexander

difference to significant in a basis? there touching a just renewable fields is the on per lastly revenue ton per fuels, the on or processed opportunities traditional just gallon then And compared

Hudson La Force

existing to we in economics. are economics markets and technology renewables our the are what our processing hydro similar This, in selling uses with into a today line the

Laurence Alexander

fantastic. Okay,

thank you. Okay

Operator

of question Capital comes from Your Chris Loop next Kapsch Markets.

Your line is open.

Chris Kapsch

Yes. hear Hopefully morning. Good me. you can

region, the deemed the with at in, bit from visibility their in about processes. Southeast and in strategic was was this little stepped capacity and East and Asian presumably curious but designs Middle if refinery Hudson, Jeremy point. UAE those I you the conversations of into address one could getting and, your broader FCC your Southeast of pipeline wondering your in given effectively builds project regions agreeing a this the cancel So to decision

of bit a this view or I little a a would if is be helpful? you just potential am if just a revised could Thanks. wondering So, longer pivot, of elaborate the term of function markets, that

Hudson La Force

a And to. happy term for in This important project as that an an to in long us time, view catalysts. opportunity demand for world. Chris, we at on capacity FCC Sure, in XXXX had new conceptualized add the was region a

term We outlook the has be catalysts we technology also it the for a intervening years, not demand is And back thought the developed would have evolve things moderated two opportunity today how in what refining had over time. in would XXXX. our growth view on long

quite into of And honestly, technology has pretty business pace few last our the evolved. had fast catalyst the so been decision has how advance was technology we Chris to bigger issue, the The in our But factor FCC that over around years. making.

and decision We big for our over years. that that to feed our sophisticated demanding manufacturing business refining has us, in are keep in And the plants. more has demand a that increased particularly petrochemical better have what last units invested to stocks our capability us is in catalysts refinery few the our from it’s customers more led as

And and of efficient in to technologies of we that manufacturing that lot to have a they global able two strategy one efficiently got in our flexibility. are best we United a flexibility, that a capability provide And capital without ensures And, footprint, it because new continuously that’s have from based. us. are of big as an technology lot wherever customers commercialized new for to States, plants, lot manufacture better our able customers the Europe, investment. We are of are those three the

Chris Kapsch

FCC and, when probably customers enough. What is follow-up is, are customers, business in helps fair answer, and demand sort the we down their bigger in flexibility kerosene. had probably under demand, that like prior having refineries, into these cycles a where picture profitability yield others their in each get holding worst refinery became the iron that And drifting the the pressure. the in has play, in their refinery the some of your I type FCC Okay, to this that for on this your this changed and you that second about catalyst thing, dynamic a develop up plants out innovate And diesel dovetails tracking am part have and situation were the seen is when certainly dramatically. could Catalysts I some probably trade with curious in and light obviously, of feedstocks gasoline pronounced able more that, instance, that areas

not are for – your to cost a there better an just refined other than I addressed some, in base I is they the to So hysteric for providing through am helpful? wondering, yield sort but again, recovery, all market just that this opportunity trying of cost the would products to on these change – any them know, other this is this lower of end understanding, play I be to help demand than color hope and is get just, or just this customer is Catalysts lower operations, and providing

Hudson La Force

their majority our you are to analysis, thoughtful refinery. able performing using producing customers Chris, is of because spot they of want are a on. are the that It’s lot what high The the maximize technology. they be to vast and value of at And

where margins, dramatically, working How Our optimize our them technical do identify they changing. to refinery teams how environment their time they changing do began, demand value the with products changing, their and been is have have with of is spent relative an amount profitability? demand optimize customers the an since in pandemic enormous of their

maximizing at and And superb that customers our what this teams majority best. strategy. is then working that are to profitability a pursuing still so catalyst customers, strategies for exact identify the And vast are of formulation. our They our do our into turning with customers

Chris Kapsch

appreciate Alright, I color. the thanks, Hudson.

Operator

of King. Your CL next from comes David question Silver

line Your open. is

David Silver

good little Hi, follow-up background are license. was on UNIPOL to I just when morning. you Yes. and polypropylene of get bit earnings dynamics, dynamics a hoping revenue the awarded

production. touched you all So award related revenue maybe it comment, that pay create for upfront period a term I I or on a of would ways particular longer is over made that technology to award noted or you to multiple a that guess when there stream. a time And

you longer payment might mean, I longer referenced? the sale the can that technology just So either would kind revenue there for flows? the and show if tied lapse that the time production words, term award or you you. of the it quarter, Is an wouldn’t level other is through you Thank was mind if received there a payment? me is maybe to term there up that not, for be in of is to In have or of a for stream And when finally, pain accompanying payment catalysts? your an revenue get or upfront a Is in results? where award technology really it then a the walk case payment upfront

Bill Dockman

David. Hi, it’s Bill.

licensee. and will project is we as a till or get from number payments the from running time license is the a they way years Regarding sign X, on during contract X straight works, time recognition time, of over the sign unit the and so up And be we and might that sign we business, the we arrangement estimate line revenue the be UNIPOL what with typical depending at our value the the we the a straight revenues, we when the a X until anywhere milestone happens we running. that different contract from so unit other up that the line And cash it the there signing is contracts, standpoint, milestones. a then, contracts of cash sign but from license and the will period the

throughout in fairly provides XX, given licenses year open revenue steady, So us, X and of are plus signing, are on X, the revenue time, stages licenses could point you got at X, if time and stream coming a milestone X do XX have we in, predictable they taken licenses, X number of any a a in recognition, you the as any for at to this payments years, well. math various year,

provides, that then, generally construction. beyond the have that, flow, that, we then catalyst with cash and, long of catalyst stream So arrangement then a longer do steady licensees. provides supply And term our the beyond revenue, period we of throughout the sales which term, have a opportunity sales

continue service, his as beyond run well to technical and from have to mentioned provide come also, We startup effectively, to as continue units think provide, years help for remarks, I that. most service to during Hudson the

opportunity. long these we So, the term provides are very And, sign relationships. once long license, it us, term

David Silver

Okay, Appreciate it. me. thanks very it much. for That’s

Jeremy Rohen

think I for Okay, have we final time question. one

Operator

Shaw Moness, Crespi. of Chris from comes question last your And Okay.

open. is line Your

Chris Shaw

Thanks me everyone. in. morning, taking good Hey, for

or gross Just the I bit XX% there XXX in expected, for less sales. margin given that little margin sort for growth think of that I going guide seasonality XQ? some XQ also are sequential improvement the that given thought expect basis a you is gross at than sequential you forecasting was points, benefit of or above mix on

Bill Dockman

driven really by recovery, It’s the Chris. right. Yes,

both volumes our production. We rates and sales are historical to on still not back

it we will incremental this QX improvement. to continue to from so, We And QX. see saw

into QX. margins recovery We to continue XXXX, And we the continued improve will QX see will assuming it see to there.

not leverage. overall our issue, it’s operating – really So, there is seasonality a it’s really tied to

Chris Shaw

doesn’t But gross a increase just generate margin that’s better sales sequential improvement, a XX%, a higher math?

Bill Dockman

and That’s factor math. for businesses pretty but that’s the forth and And have the where well, to of we confident. we math land QX. the That’s feel mix pretty, you will as got the so

Chris Shaw

broad to, catalyst the scale am PES the more same? did have – it. a in in Got strategy that sort where refinery curious, in when is change are refineries refinery of the it’s you And growth there than more, they just the don’t part that sure, been has that is recently. one a the then new or East am know, in then basically efficient there has catalyst any the I other and actual new done use geographies because been, use I I see that. mean, the or I they Middle in I newer, know, less past volume? finally, of growth one the relative other is has I more Is it just use closed not does besides mean, what and

Hudson La Force

difference built they biggest are Middle value focused in propylene, Chris, being it’s they The biggest are on and and in Africa, The that maximizing East that really they to is output of Hudson. new Asia, the difference. high the a need the fuels. around using. petrochemical transportation refineries that’s to in feedstocks are performing addition catalyst And objectives their the achieve catalyst very

Chris Shaw

Thanks. That’s all I had.

Operator

remarks. back call to the turn the over will I closing for presenters

Hudson La Force

interest with the you Thank Grace. over today months. you time and you. everyone for look to We Thank in coming your forward your engaging

Operator

Ladies participating. and Thank for you conference concludes gentlemen, call. this today’s

disconnect. now may You

W.R. Grace & Co. (GRA) 28 Oct 202020 Q3 Earnings call transcript