IOSP - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Q4 2017 Innospec Inc. Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Williams, General Counsel. sir. ahead, go Please

David Williams

and good Vice My Chief President, Thanks being Fourth at and Call. Results Williams, call Today's Compliance is and Innospec. is Quarter our joining I'm General for XXXX day, you, Financial name Conference everyone. recorded. David Officer Year-end Thank Counsel and

of posted reported An As ended The XXXX. archived December we results call on company's the www.innospecinc.com. our the is website, the know, webcast slide the on now you the yesterday, full the for audio XX, are press financial site. results be late available presentation year quarter and release and will and on also

involve it today and statements start, Patrick during expectations, President Securities future to on Executive Litigation under you, Financial some certain earnings would I presentation Generally number by that and SEC. contained These have that President those directly We are statements. remind included is Ian to refer is measures. implied and to And documents. Reform recent comments in Act we I'll we uncertainties of financial and release In other the and this These our differ these everyone GAAP actual Chief Patrick. forward-looking any follows, from beliefs, a With results be made might discussions available well results you and the are uncertainties cause statements. of management's which could the turn as officer; that, XXXX. website us our we in comparable for comments regarding Innospec's Williams, other with SEC's measures risks the as a to also of that from predictions non-GAAP Cleminson, the Officer. forward-looking the forward-looking A anticipated XX-K site most Chief the in over to Before Vice financial today, Executive have at Innospec our filings and are call speaking, statements materially the targets Private like as Innospec or other or detailed of report most copy website. characterized risks reconciliation

Patrick Williams

we Thank call. Services you, opportunities with XXXX company. year started and major challenges adjusted acquisition to full $X.X the quarter our sales to Oilfield Innospec's fourth managing largest in everyone, risen year and for date Chemicals. conference EPS integrated delighted We David, report established Full XXXX the and the to am to our grew some billion $X.XX recovery our exceeded Performance the per businesses, of record while team We of also welcome, challenges. delivered time, and share. for I first has and

As strategic the we contributing in year and key including we growth are an metrics, per increase expected, to cash continue share. ended earnings businesses with a and growth, strong adjusted flow XX%. All sales, with our EBITDA many of our to improve we quarter our in of

end we which Our forward. reduced that $XXX.X strong reduce year a which and combination us approximately our of at very debt, leverage gives enabled X.Xx now moving stands with at sheet debt improved the earnings to flow million. us strong net EBITDA, net cash balance has The means

Cash was excellent. steady although our continued on range, largest this its quarter Our slightly strong from expected remains growth. generation last year. Specialties, was very Fuel Profitability business, it a in down business

assets. to business almost is geographical balanced for addition but well growth $XXX have of only It dividends, great year location which also of Chemicals, a has positioned the in been products, of investment full The Performance acquired The the customers continued cash business market and new new to well aligned technology and generation. is future end needs. mass we delivered a pipeline Our transformational and with year not our growing paying has for critical million. sales is our

Additionally, our growth the heritage QX. to made particularly contribution in strong a business

contribution operating the they a invest continued technologies, make which and growth to added $X.XX to remained new as in full business own gross per quarter, steady continued focus target incorporate further in we accretion and margin to expansion. into our We to significant on share post The and per of brands. exceeding customers' driving Margins formulations share. acquired of financing, $X.XX EPS, year

overall we'll As as the the Chemicals segment Oilfield mixed integration is quarter quarter, Performance track. report had next onwards. from single but now a remains a on Services complete,

was impact materials, and away While raw resulting in the Harvey high-margin number These residual a a mix of include sales Hurricane short-term factors shift one impacted customer. from and cost, stable, of sales revenue of availability margins. transportation from

improvement are is operational in demand margins in year. on customer for and XXXX. and improving focusing continued The levels activity encouraging overall the leverage We upcoming therefore

Octane strong we discussed. had order, quarter Finally, Additives the the delivered quantity of as a previously as full latest

nothing confirmed, have first order we believe be XXXX. half we While could one the during that there further

financial call will our in the that, more Then, your with After Ian? Ian who return comments. Cleminson, turn results concluding will to will take some questions. over Now I'll I review we detail.

Ian Cleminson

Patrick. Thanks,

in $XXX.X was the margins increase in The XX% quarter million the increase $XXX.X a from in total the a a fourth Adjusted revenues year ago. million, to million, year last to acquired XX.X%, business. lower X driven company's the decreased for main the the last compared gross year. EBITDA XX% Slide to Turning from Overall for presentation. $XX.X by quarter margin were

loss per including of which of year special our decreased GAAP tax loss share to reported per quarter a As for for fourth effect U.S. $X.XX, earnings $X.XX our a ago. of which of share. one-time included $XX.X special of per reform, ago, by earnings A income compared million $X.X was impact net negative share. $X.XX, a reported $X.XX charge of from share a the we result per tax net million million we the a net quarter items, Consequently, items the GAAP $XX.X year

share share, per from XX% quarter per items $X.XX special adjusted EPS increase years, Excluding a was $X.XX in our ago. year both the for a

$XX.X tax XX% or revenues Net increased diluted XXXX. share $XX.X billion to charge share. reform, year full XXXX, was million total per per $X.XX income $XX.X share. the $X.XX compared per or diluted income from diluted $X.X $X.XX a million million For tax in million decreased items $X.XX net one-time for $XXX.X share per million million year, by the U.S. of items decreased income year for or ago. to similar or In $XX.X Special including the XXXX, due $XX.X full of by net diluted

$XXX.X Excluding years, million EPS the in for $X.XX XXXX. special $XXX.X in up XX% from the ago. year year XX% per a was share, both EBITDA share a our for adjusted $X.XX per increase Adjusted from was items million, year

the the the Volumes good quarter Specialties X.X of revenues positive million, Slide of margin segment million. Americas. year. comparative down was strong broadly offset Sales was for quarter was gross for Moving Operating The in X% X, Specialties than points Fuel million growth currency flat a quarter was our price on the fourth to the business Fuel favorable by the earlier very and the year X%, a growth in mix in Asia-Pacific impact. income ago. last were reported higher for down XX.X%, year. and parts product on good $XX.X X% range after percentage the in in EMEA of expected and by were $XXX both X% $XXX.X

income revenues $XXX.X million and up was down $XXX.X Specialties X% Fuel year, full were at X% million. the operating For to

price volume was Chemicals Revenues the Slide as in the remained last in sales for down heritage impact million tripled to XX%, to basis. year's a with on last up the had X. XX% a acquired quarter year. currency fourth was for business, $XXX.X $XX.X $XX.X sales offset but $X.X last of quarter the really to adverse steady The million Gross a X% XX.X% Turning year of sequential the strong from of and on to million XXXX income compared growth segment quarter positive due mix mix an the than Performance margin same Operating impact in XX%. more for million. from overall business period by final of was

doubled X% $XX.X tripled income million heritage the to full revenues up million. For year, sales operating $XXX.X more to and than with

Patrick last we acquired will our and be report quarter the As businesses separately. this indicated, that heritage

integrated, in the Chemicals report are for numbers businesses set consolidated completely of we now Performance will single future. As a

Moving Slide on XX. to

XXXX. continued recovery mixed. during lingering X.X the the points this, $X.X percentage driven softened XX% Revenues the X%. the to its as customer increased continued by quarter of continued $XX.X the as sequentially quarter, quarter was business. on although continued Services of recovery. operating XXXX up same Gross million million profit, performance price was its million, to Despite impact its activity of business delivering market Hurricane a augmented favorable in XX% an effects to $X were Oilfield make mix the the impact Harvey the XX%, in segment fourth , Our to in compared down margin quarter growth by Volume of

revenues to XXXX. XX% were $XXX.X million For profit and loss the up in full million, to $X.X compared $X.X was million of a year, operating

XX. $XX.X million the we in from to of $X.X Moving was The compared up at million, ago. for full year million latest and with year's Slide the last as Octane XX.X%, million quarter. Additives the in gross segment's a and fourth in quarter on the line expectations margin to for were quarter the $X.X income quantity Revenues delivered operating order was $X.X

from operating XXXX, million, $XX.X For revenues income were the an up million, increase and full $XX.X a year ago. its year, Octane Additives' on XX% was XX%

effective related million to XXXX, fourth We the tax impact based to number for million $XX.X in a in $XX.X rate for $XX compared tax from on the deemed expense full the to contained quarter was to million fourth the new positions Turning ago. The one-time a tax quarter of tax a effects our in U.S. $XX.X recorded primary was our extent Slide The increase $XX.X quarter tax items. the the Corporate XX%. Tax adjusted the and range fourth quarter for for the an a quarter, one-time was additional to was compared million, the of million Income expected at XXXX were at $X.X to compared headline rate year compensation last year million expense year's repatriation the down estimates end tax deferred driver year top full of costs Reform of XX. by for remeasurement to $XX.X and of offset Act. acquisition income charge XX.X% of XX.X% the of of U.S. our XXXX. which million positive

expect full XX%. tax XXXX, year rate the be to effective we approximately For

XX. quarter the of last flow million quarter from year Slide generated of million. cash $XX.X to had operations strong cash Operating on cash in a before with million. Moving fourth $XX.X $X.X net very We in expenditures was total capital the the year dividend for repurchases million paid of previously but quarter, a share representing increase per during This no dividend we the $X.X share, semiannual per were XX% brought full $X.XX $X.XX the year-over-year. There to share. the announced

compared capital the net as from XXXX during million full invested cash Performance Services. both year, For in Chemicals $XX.X generated and to was million Oilfield we $XXX.X working operations

and Innospec I'll turn our reducing As million, $XXX.X X.Xx XXXX, back it of of over the million to December beginning leverage from Patrick final at year adjusted and had at in some year for total EBITDA XX, end. to the debt of cash the X.Xx around now, cash $XX.X comments. equivalents around And

Patrick Williams

maintained excellent us focus continue recovery, investment its gross balance enhancing will which in margins the of our in Fuel first to firmly to been of exceeding $X.X operating income improving Ian. Oilfield while and controlled we success of to am I sales Services been largest a managing the core allows date. Revenues Growth solid in able has all and billion Performance cash rising successful three to contributing Specialties time, and the businesses Chemicals Services opportunities our our challenges for in of performance the It's good, growing on to quite our Innospec. are portfolio, coming flow. integration our priorities. Oilfield continue the and team acquisition operating in delighted and a will work the Thanks, XXXX. continue year on recovery our With for year. has both businesses that the to been and

solid All foundations have of our backed strategic technology. with businesses great

start of balance growth the lower with we on a expected that businesses these with very focus fourth we excellent XXXX This cash generation with Our strong in than improvement of margins combined sheet. leverage the delivered quarter. means

the We that coming to in growth I we to our year. participate finances the shareholder fund about as confident positive as businesses, continue to expanding markets, on continue the customers core believe well of organic deliver shareholders. focusing very while have acquisitions our that value. can and to ability cautiously feel adjacent deliver into to strategy value am will We

Now I'll turn the and questions. operator, and Ian take to the call over will I your

Operator

[Operator Instructions].

our KeyBanc. Sison take from question now from first Mike will We

Michael Sison

Nice end through about growth can into some what see look Fuel growth? see as like you next you walk year? think you profitability the heading And But when Specialties could year profile could you to us XXXX, where there. maybe the that

Patrick Williams

Yes, Mike. It's Patrick.

I balanced it's forward. it's to movement Asia-Pacific you going GDP EMEA guys Americas. As-Pac, to well be pretty but to we've steady been gross between telling be a as at can the boost eight the regions, day But see last that moving years. upcoming will to which think as in going you pretty plus the We're one, steady that in margin not growth quarters, think business, probably between from I it's X%. pretty the XX% see the in from in profits X% four, And regulatory growth is and some starting only three revenue the region,

Michael Sison

Okay. recovers? good an noted. XXXX is that shape, you at can some Performance there look end you're advantage that and in of as Is sheet Oilfield you beyond, position you strictly good Great. Services? as Is And market maybe still take -- then taking pretty Or have opportunities do is that focused in when the on Chemicals? a this balance area for

Patrick Williams

increasing is us few Innospec at Yes. to believe what see see over We really made. it's dividend And last we quarters. done at think you've integrate probably looking took EDS the I now, look the we've what earnings we've we that fully time, the the as the in with there. year done that seen I off you'll when capital and you'll acquisition

I think that we're you'll to going what is else driving organic some see growth. be

active on growth. a for stated see right, And could I ingredients think always And it's multiple announcements paying out coming natural we've some be doing think, that's to you're now. side. look are we're organic As be on secondly, you'll growth ingredients lot that starting your a in we things to I at of going not cheapest acquisitions and there the It And it. Chemicals. Performance some and

is technology see You organic the in from Oilfield. up players pick and that really revenue us sectors, religious consolidation Oilfield you'll be acquisition. And growth ag there Fuels, growth with major or there growth geographic And a in standpoint some there, will starting the where with some until and from is there's in could to mining X growth. only we expand thing either see

Operator

[Operator Instructions].

next from question Securities. Tanwanteng We CJS Jon will our now take from

Jonathan Tanwanteng

that first Huntsman else heritage the is, in what's The that new one into on? driving strength that's the products rolling the or something Performance Chemical assets going business? Is you're

Patrick Williams

Yes.

John. it right, is. You're It's exactly what

that products out the expansion EDS our and technology. business of its products rolled coming we into of new New

of a nice really really the a balance in bit So quarter. it's little It's both. fourth been

Jonathan Tanwanteng

Got it.

are to those go So continue I going that to we would expect the ramp through year? still as

Patrick Williams

should. They Yes.

Jonathan Tanwanteng

from in much you the products those roll incorporating new just that of expecting planning? the out? you're some -- initiatives on And Maybe are on growth of segment. How much it. how Got update going back you're question an us to Fuel give benefit prior to Specialties that

Ian Cleminson

John, Yes. Ian. this is

know, absolute lifeblood and we As business, products XX% continue our about new to revenues Fuel the new products introduced the from is put you in of the last X years. of Specialties

pretty we're can range, of coming see you there, important. all Lots coming year our product which is the across excited and pace change opportunities well. So through as of of really the about

doing XX in the to expect us business see So you'll some months. next interesting

Jonathan Tanwanteng

Okay. expect Oilfield when your Great. and How in margins? some freight finally Harvey in modeling? And recovery issues long kind linger we do then the should the And of business. on

Patrick Williams

Yes.

latter that additional recovery caused of outside tough a Harvey. QX. You winter part obviously just of well We should seeing problems as had the towards start

Oilfield operational leverage to that's and ourselves of really that one turn It's is And thing this to focus revenue thing guys turn get It's give to in are going We on EPS. into operational leverage revenue. the revenue Services. Oilfield to Services our better another EPS. year, the focus into

you say, QX, will it coming be the improvement part latter into of fully would and and see to to improved X. I that So X QX, going start should

Jonathan Tanwanteng

into a how pretty think What's the that forward? could. frame impact follow I Do big if where going does think your oil business that exposure. announced more, Exxon Permian others one you Maybe recently And for you've happening? pretty time Great. strong I investment the suit?

Patrick Williams

in well put not basins, We in have time. in We're Texas Oklahoma. the a capital but Bakken, set think you variety just being of basins. up in up, it only in that over are us those investments customers and I that the I Mexico, Colorado, mean, New the benefits see

spot. that investment in for we're from good companies, think E&P we're and capital positioned So a well I

Operator

Instructions]. [Operator

Bill We from will take now Capital. the Tieton question from next Dezellem

William Dezellem

questions. of Couple

relative first be on is that Specialties, the driving First quarter. Fuel that strength though some would business? having What the It this all, to as Europe cold of there? in seems impact

Patrick Williams

it's really starting -- it's the -- in Bill, well. Yes, it's cold been U.S. as

will think I impact cold have I Specialties is in cold the And big Fuel Obviously, QX. flow think being business. in which you of we a you'll weather. QX taken so mover that And in improvers, in see advantage the that see

William Dezellem

would So be business quarter? a extrapolation that in that natural get average this you it would growth above

Patrick Williams

good get can We above little That's this average in bit quarter. Yes. statement. a growth a

William Dezellem

Yes.

Okay. that should can XX the talking in be a important we doubling capacity product the pronounce impact? And on don't that that And capacity? I about earnings you discuss thinking correctly, of that release then press Iselux? implications out I about but an doubling Would December put of know you how

Patrick Williams

Yes.

and some been a in natural. that's patented you look our at Iselux, If product quite it's it's for portfolio time,

well dry surfactant dry but So have only acquisition. capabilities we've the We done in U.S., we've the new have is, now it surfactants. as Europe not with what we launched in

take the from on is Europe water application U.S. really from product shipping of so is. the direct to or we're where the over able instead product Bill, direct And pond, we've what done, depending

So we given operational in business to just that and the for well I the think it's have more margins. as regions our using preparing more ourselves leverage as better

William Dezellem

specifically revenues? happening on Great. showing what did for mention directionally that about And about might more signs referring Asia would you China, you're China is than talk there, broadly then Would that about front? turn talking into the that, you. talk you other you what you that see if in regulatory some positive then timing to something the in meaningful environment And you were also

Patrick Williams

specific, sulfur trick stick ULSD Yes. It's in The be is, standard. around the it actually and to either tighter looking fields. they're or a are made get to here when going lower to standard India, at regulatory China going some to they're when and and to starting to come a Euro to announcements

So We're And China, lot seen, there [indiscernible] as we're it announced we're a hearing we've coming. is that just in that so noise a ourselves now our outcome. preparing out hearing lot. of right you've potential for

know can't it's But I you give because yet. going date, soon. would don't So getting to we Bill, pressure here some I start a real assume,

William Dezellem

So dates actually really are those may that, you when mentioned hearing, that not confirm you you are you that floating will are back are that happen. recognizing we look can't them? around, that dates the that hearing What some although on mean anything

Patrick Williams

Yes.

people in looking but probably 'XX. XXXX, up will more into You're ramping start

Operator

to for this additional call to go remarks. further would there As any turn I Williams no questions Please back ahead, are like closing time, at or Mr. sir. Patrick the

Patrick Williams

invaluable of from retiring to company many Before service. General thanks years special who record like a Counsel, our to vote Williams, the I David is close, of I'd after

David Counsel, for for and all our us next will interest employees for [ph], and new join customers all joining shareholders, thanks over Jones support. to be will Innospec his today, and Thank responsibilities the you your taking Our General call. us and

meeting give look questions us further in to you any a discussed to day. again have call. May. results discuss with XXXX about or you Innospec up please great forward matters QX a our We Have If today,

Operator

call. Ladies all and conference gentlemen, your this will conclude Thank participation for today's Innospec you today.

may You now disconnect.

Innospec (IOSP) 14 Feb 182017 Q4 Earnings call transcript