IOSP - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the Innospec Second Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Jones, Vice President, General Counsel and Chief Compliance Officer. Please go ahead, sir.

David Jones

you. Thank everyone. day, Good Jones, at President, Innospec. David Chief Counsel Compliance Officer I'm is General Vice and This Thank XXXX call. financial for results you joining conference our second quarter This recorded. call is being

will for we As on late is our archived now an months. presentation posted be website, both XXXX. reported on the company's release quarter audio the website, the The our The you and website press ended yesterday, slide the webcast available financial for www.innospecinc.com. know, on the XX, June is presentation results on and slide results six

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

Patrick Williams

Second welcome, Call. and everyone, David, Conference to Innospec's you, Quarter XXXX Thank

for show and strategy in continues that quarter the results Our second business line develop long-term right expectations. our Innospec's to with

income Our core the operating same businesses all both last and compared year. quarter good in revenues showed growth to

of year-over-year As If expected, $X.XX $X.XX and in adjusted markedly was Octane Additives $X.XX. Additives, by businesses delivered the a we XX% ago performance at Octane same lower impacted we quarter year-over-year. year EPS EPS the excluding look underlying to from a the in this improvement

also our experienced price, substantial in just which quarter. a share in X increase XX% gained We

technically up good for great combined is raw cost better continued up adjusted environment This in $X.XX we revenue margins year-over-year. progress. solid to report improved have operating progress regions. our through oil revenue, being EPS While in of by its Fuel of a still to in crude the factors our in push These were costs Chemicals' up driven higher XX%, reward XX% Specialties improvement again, and business from products. challenging, XXXX. equivalent Once XX% which have of advanced EBITDA prices. share-based Performance increase shareholders, accrued by increased Sales Chemicals have income compensation, quarter sales parallel. The we rises material and have all we XX% our with am business this where also is second delivered do the compared contributions I was with to Performance delighted

on margins. consequently has both Additionally, for higher put prices transportation pressure labor and some

we that period stability. XXXX. income of raw similar enter a We cost has delivered material broadly control operating ensured good However, have to

range. from margins improve of the We to expect our pricing current the end low

remains Services Oilfield in to focus improve profitability. Our

year. these activity costs and which the by transportation is on share have in quarter driven market XX% and continued up XX% revenue last to labor underpinned service last rise materials, is in of customer In headwinds, same growth, spite excellent technology and Continued Raw quarter operating over year our have and XX% up income operating the tempered and up XXXX. improvement the income. first gains

We as an down the operating anticipated. income have $X.X strong of improvement. was of continue comparative Octane extremely revenue, business delivered compared quarter. stabilized almost we XXXX. business The Additives, were single sales will order a margin to which XX% was In we on and to see million down XX% Consequently, slower exactly

one in similar the We size potentially further in of a the and third later quarter order more expect a year.

the Our portfolio coming drive us our the further leaves years. growth well and continues to in plan, strategy deliver all to placed

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

Ian Cleminson

Thanks, Patrick.

quarter were million XX.X%, $XXX.X contribution expected Fuel and $XXX.X Oilfield overall from Turning and Services. Specialties to presentation. margins in end at Adjusted percentage ago. EBITDA range XX% an for XX% a revenues from decrease to of from compared with last was year. to low total Octane million, Slide the decreased a year X both with million, second a last lower $XX.X for The the Additives the of quarter the The gross the margin increase X.X company's year points

share earnings including we share ago, per which per which from $X.XX. of the GAAP reported special items, per impact adverse items were included A special $X.XX effect earnings by GAAP year of $X.XX, net second earnings Our of our share. an decreased $X.XX, quarter

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

$X.XX, in from businesses. the $X.XX remains excluding Additives growth year reflecting a ago quarters, in our from both strong, underlying Patrick our to EPS increasing mentioned, core strength Octane XX% However,

demand Performance customer for there Good currency for of and $XXX.X Turning advanced contributions million, our all $XXX.X to a from year was X% quarter of a technically Slide helped million ago, volume and regions, X. positive X%. were our the XX% product impact Revenues in the increase up Chemicals products in from second with particularly lines Americas. drive

last percentage anticipated, year on the have points $X.X been further same we income improvements at last million. up we margins, up in to year. from period X.X was As Operating XX% deliver able gross

from to mix impacts X%. Fuel also growth in the effect new X. a the Pacific. XX% offset of EMEA increase Asia and unfavorable second million a drove Americas and Revenues a These delivered were an Specialties X%. increase leading with technologies impact adoption on volumes million, from positive the year X% by creditable uplift for $XXX.X revenue of Slide our a performance, XX% reported quarter were $XXX.X improved an very in was Moving Customer of regions currency XX% All and there the way price partly with both of ago.

by down under points income rising XX.X%. range. the indicated, gross low X.X comparative margins quarter Comparative the broadly last at was year therefore, the normal Patrick been of Operating margins quarter. for end percentage million, As and affected are very quarter $XX.X on was costs have the strong, flat

Slide on XX. Moving to

up Our in were with same and of mixed Oilfield there and customer a XX% we $X.XX. results. continue well growth favorable focus continues million business being stimulation share. on Revenues quarter our of XX% as grow to activity $XX have were last by the market was Revenues up have year, completion. to Services Volumes improved and a price of is strong mix

points depress was future margins, gross cost same sequentially. business continues of have which we expect we quarters. percentage Operating indicated, to in $X.X year, on further XX% period previously this pressure down improvements X.X the as last up were However, income million and in

an $XX order quarter Octane XX. Slide $XX.X in revenues In to ago. last were Gasoline quarter. Motor income operating million year a million million the latest was $X.X second Additives, remaining our on XX%, compared million last margin customer. for the from year's of completed to $XX Moving compared We to Gross

further the year. will While further no confirmed on we hand, is our the that have second expectation in half be orders orders there of

will update quarterly Beyond this, you visibility continue these we have we on to but calls. no

Turning the Innospec the Corporate million share accruals a $XX.X We rate to expect full quarter XX% year The compared XX.X% to XX%. driven ago, be recorded to rate driven geographical of tax quarter by by effective a Slide $XX.X million effective for was result the for stock-based tax XX% now costs from last to increase year, higher price the as year location compensation in profits. the XX. the taxable were quarter. previous the compared of

activities Moving cash operating provided on to in was to quarter $X.X $X by million compared the ago. XX. Slide Net a year million

cash expenditure of to In indicated We are the included the be that semiannual $X.X the million generation drag our half distributed also investments $X.X have quarter, agents. new year, Capital second shareholders dividend. in the in the early the company million and of for reducing encouraging. will signs better

million, $XXX.X over remains Patrick some trailing and have now, adjusted $XX Innospec debt As EBITDA. equivalents of debt net June turn million months to that XX, and under comments. cash total of back cash final it in I'll position our Xx XX And for XXXX, ensuring

Patrick Williams

Ian. Thanks,

second challenges has The of the we performance produced continue that some the highlighting inflationary solid quarter face current while a environment. to in also business

conditions. which strong further continue strong increases. improvement revenue technology margin the Chemicals the from and to revenues margins delivered much market programs Oilfield sales recover our same over the to materials in Additives, sales period Performance coming excellent its improved, light raw Fuel that and operating we challenge growth have margin XX% and programs continues income continued changing Specialties core we our Octane in of from quarters. have great growth we last demonstrates Excluding post all delivering performance of expect businesses, year. were of to to improvements research rise Services

a position, below very a in EBITDA. strong have We sheet, maintained comfortable with debt Xx very net remaining adjusted balance

there's that indeed We stronger the expect year, evidence this in cash the half case. the and generation be one of to second be early

capital strong track priorities, the organic number entry schedule we balance us position in on in future. our still trials project to growth invest to run are is a Drag projects, We the on of including Reducer in market. our customer This near into to are a and allowing

but allow will deliver remain sheet the a continue we shareholder very us cautious continues feel base, be With believe improvement, strategy balance will multiples projects confident participate create could where where further in we clear we to to a future. solid high. opportunities and which value, about Our to we for very acquisition

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

Operator

[Operator Instructions].

Jon first have our We Tanwanteng from question CJS from Securities.

Jonathan Tanwanteng

margin as reductions the QX? it expect a us stock forwards, to those little with and comp. quarter cost you as each headwinds seems price a Can nice just into forward what actually expand going was go in increases businesses to me even give to going of you the It color whether are up back pretty you actually margins

Patrick Williams

We Yes, a agree solid pretty by Jon, you, it thought was way. We with good the question. quarter.

have plans trend the in three throughout There's and now businesses. been have obviously improvement QX right businesses. place. increases our our market. all we do in We in times putting price of in QX been inflationary a in We But all margin expect towards of

and talking not businesses. margin the of each talking but X% we're massive here there improvements, Now in we're

I So believe QX improvement as yes, place. in see are you'll improvement plans and well. in definitely And QX in

Jonathan Tanwanteng

on what that quantified Great, kind that's run very agent opportunity, might look beyond the XXXX And helpful. reducing get and of you just and the there? then rate in have to drag like

Patrick Williams

Yes, it's difficult.

running year, start next this of likely more will trials We than in of early part latter year. part the

a So and million well. fair our our quantify think to to the product. is what a is share expectations $XXX size about overall And as for globally. kind market not market But it's $XXX difficult overburden to the will market of the we get market be million

Jonathan Tanwanteng

of Or meet? Okay, is is great. this new to similar just to you Octane. of in in go to terms size terms more plan likely seen Are your And there year? already you've then what what thinking

Patrick Williams

to little in And say be I similar the a might as you size bit Yes, is bigger our see probably QX. expectations. order maybe a similar is going in would or QX, QX

Operator

Our Curt Siegmeyer KeyBanc of Markets. next question comes Capital from

Curtis Siegmeyer

specifically, up follow If more Fuel Specialties. just I margins, the could on the

pricing, end maybe kind the and of expect the costs progress an with the with raw price we and there issues should margins about of with some and being by freight case? expectation the material think make of keep lag kind up line so whatnot in given you Or forth, cost, that the If the to logistic versus you there last of year? headwinds and of kind the that other from expect maybe year is

Patrick Williams

norm were and this business see for which Yes, would to got margins to to inflationary the typical XX% And now, range right double-edged crude jump, top this prices in crude have and back over prices, pressures, range we've which And into last is which last down net year. really When to we in tough some we range a kind QX got XX%, margins the overall, we over this the QX a is sword expect see that is get XX% business. we've you XX%, higher get to the you up. we But you're XX% and range, But obviously, -- low of we prices mentioned when do should that jump year. that end once XX% the than on -- a remainder there, of pressure going prices pricing. for the normalize of more at back comparison year.

Curtis Siegmeyer

Okay, great. on quarter? year that the line one year, $X How we given costs. And then for should relative in last the corporate about to million just the the the rest increase item of think

Ian Cleminson

Curtis, Ian. Yes, it's

per million be $XX roundabout think I will rate. run normalized quarter our

share accruals share-based on I we've million. normalized we've a earlier had of call, say, $XX but would the roundabout is comp As the increase bit little price, made, we an from there that said

Operator

is Advisers. question Scott of from [ph] Bloominghall Our Emerald

Unidentified Analyst

that Patrick, on order you in were? actions during of margins. you had some elaborate to able taken to Might you quarter the those improve what mentioned be

Patrick Williams

recovery Yes. raw three market of have which price, transportation Services, importantly, mean, increase on affected we've of on that and an And of lag crude Obviously, and put control. lot had know, pressure the the materials, I labor raw and at a costs, and tight businesses. we've in charging materials more which a as costs issues you Oilfield spiraled similar for this all had pricing point. out the in that have in

I an think month and a materials typically seen raw that those points. X that lag exercise one So the is X had of the of most it's inflationary important addressing been And this three all really in we've to of we've quarter.

in up QX. more so we and So should marginally in catch back to start QX

Unidentified Analyst

half might to Okay, what evidence think you early seen I maybe you've maybe there's great. us That's Ian an flow really give cash helpful. second that you also improving in mentioned evidence And as can and that -- mentioned of that the idea be.

Ian Cleminson

seen Yes, inflow July certainly We've Scott. great cash real our all businesses. a in from

year, inflow call, half expand in fair -- As very where to our cash to to second very as the in cash. our XXXX. in bigger a highly the for back now we've you working can of had that's and nicely in we the similar the in And capital earlier invest a we the expect how amount half set of We're we've said year. very were positive revenues of of to

seen So we're far so we've pretty with July. pleased in what

Unidentified Analyst

of Ian, thing the to trend different in a a the bit Or what raw that a out is with pulling that that second or is cash material using been of struggling a and of maybe first little kind perspective? you've little expect seasonal continue in from capital this bit that half? of year we half a because working some should

Ian Cleminson

Yes.

growth a have positive the it's organic very down we about growth time seen, things the was last position think that it's made. a the in were very This we more time I we've which partly fund. acquisition but all that trend. This would to to in that we've year, the around, similar business,

where So business, form are this getting we momentum great what going we're and profitable growth do. I to here revenue on make line, we're now, think to that's here we're we're that to right

mindful So It's of revenue, won't great where We're we continue very be. profits as we that can that grow stop we form cash, long we'll to make we can. need continue the continues to as out and that the but business. business where to we of important

But good it's we're or So we'll at a a and not, cash see. trend whether wait position. in

Unidentified Analyst

investment the to Patrick, off investing taper I And types the second that still for here last a half? bit of meat investment in Or expect the know that I Should into coming investments those question the Reducer. in in Drag super. of little we you're guess my Okay, is kind were cycle? of

Patrick Williams

Specific still Yes. meat I probably DRA, would QX. you'll off the in the say seeing in we're trail cycle. start to of the

when you'll but QX investment. QX in on seeing movement trail-off some the see still is You'll that start

Operator

[Operator Instructions].

Sean comes Johnson of next from Rice. question Milligan Our

Sean Milligan

been talk about a driving you Fuel And Can address price? Can year strong. for Specialties, kind trend? in terms very progression? has specifically, fact year-over-year it bit net revenue of know this of what's a you maybe the maybe little I that

Patrick Williams

XXXX at mean, but the expected we did see that. It's pretty the good it's mix, really pretty business, and helped we look help moving technology of I And good IMO going the for it, which both comes brought and all not credit helping product this balance, gasoline that constant, pretty quarter. a the as forward in think back think come well is I And when market a and good play, balanced I center, in a us comes back. of now. pleasing regions into if Especially the gains to have was Yes. in technologies those 'XX we being -- this markets. you it's well one balance XXXX injection that, us. been has well. And right growth across But to I direct our it's technology into product to Americas that's products think is which and the in quarter as just

Sean Milligan

-- And into [indiscernible] Okay. the a question. then good that's second

in then terms us And opportunities [indiscernible] of of you of then the maybe of gasoline side? can [indiscernible] that on order in that gasoline timing? terms In DRA, the and IMO, growth the right second where is we timing part are update

Patrick Williams

market-changing look I are now. Yes. what at it, right say, probably if the technologies three, you those mean, would I

function IMO And so is of first, XXXX; a which obviously, just GDI, comes timing. one market

will sometime where commercial and XXXX. business marketable get DRA, in we sometime in early So be

is goal markets more products the we're So now. new obviously That's to forward for next are on new in all XXXX. working moving our what XXXX the and and year, three -- the plays these right of for introduce

Operator

Williams, to back like questions would closing time. Mr. further the no Patrick this are for any hand there at additional or I to you appears It remarks. conference

Patrick Williams

for today employees interest your you customers thanks support. all Innospec us and and shareholders, for Thank joining all and our to

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

Operator

This participation. for call. your you concludes Thank today's

You disconnect. may now

Innospec (IOSP) 11 Aug 182018 Q2 Earnings call transcript