IOSP - Earnings call transcript Q3 2018

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Operator

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

David Jones

Thanks for joining our third quarter 2018 financial results conference call.

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

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

Patrick Williams

demonstrated Innospec’s time. welcome to saying we've quarter Innospec’s call. third quarter and performance David, some you, Thank conference what XXXX has been third everyone for

improve to continued all strategic and to generation. in am underlying the businesses strongly with of direction. profitability delighted growth although I and improvements more Our are with our opportunities is good are and strong, of portfolio metrics the moving improvements and key there strategic with cash three right the come, all

revenue the fourth in order is there similar first operating improvement yet the again of once the a further year. delivery recognized generation net four are quarter of in drive as the on After sales possibility down helped the with of to while value one income grew solid The X still year XX% quarter, top an back the XXXX. margin by or increase to to good cash the already operating we Again, Octane our and improvement impact debt the gross with returned market, reduction Performance attention been we’ve and sheet. quarter our expectations not technology Gross Fuel delivered This year in income. the healthy filtered the towards quarters Services early number at increasing Additives is during improved volume quarter significantly quarter several fold just customers. sized by exceptional expected sequential prior range. is percentage delivered a grew faster and corner and same a service in had of an Just as either up with by ever of which which margins, rate by last balance improving growth, importantly, XX%. turned the a provide has and Oilfield end a of Specialties profitability, compared on X%. this steady as growth Chemicals income further into margins operating growth than points. paying in

the in of to finally have next into business XXXX. we visibility, but limited Looking further with order expect half this first year, one end

conclude our sales of operations. This improve the functions and us and service. While we effectiveness constantly where the particularly our to to improvements, margin European of Centers Excellence, R&D involves on looking led of our focus some major should focused critical this that be customer of our remains growth technical are operations

As we’ll all Port, at investment be Ellesmere our Italy. UK, centers previously in announced, specific and making a Castiglione, in

We will acquisition at was Belgium, facility the therefore of be Everberg, end exiting at the XXXX. part the made which of our we

charge have will first the of the this concludes. in project in results the remaining the QX, charge of for part half be XXXX We taken as XXXX and taken smaller

Board in increase to We over payment have approved increasing dividend. $X.XX pleased taken dividend, has great XXXX is XXXX. increase that further for a brings and the has very which XX% I'm total Board to which simply The per the in report our gone from confidence a further performance share, this quarter’s the

three measure years. sanctioned will As which Gap] program, new return an value additional to next [Audio the shareholders, they over to to purchase have share $XXX million stock a of up

are has quarter improvements to there we and portfolio further excellent delivered an believe Our come.

turn with the further I'll take review on our will to Cleminson, Ian. that Now, and our some Then comment over return quarter will we your questions. in call results the After detail. I who Ian will more outlook.

Ian Cleminson

Thanks Patrick.

year, and year, X% to from million for our operations $X.X and to Specialties Everberg a year last a up restructuring XX.X%, Chemicals. $XX.X just of related overall Turning associated The margins the Adjusted driven gross last seven of Fuel slide revenues charge the was company’s EBITDA in for exit million, the was the in European million by Belgium. Performance but in of presentation, ahead included the $XXX.X from both third site were quarter the a ago. quarter increase improved XX.X% $XXX.X from total margin million

of reported per earnings of of special third effect by year a special decreased share. earnings impact per from Our which ago the the $X.XX several which per net items included our $X.XX, quarter A share GAAP $X.XX share items, per GAAP share. earnings $X.XX negative of included we

XX% per third share was to improvement. reported compared Excluding special quarter the in $X.XX a our items of adjusted in the EPS XXXX, both years, $X for quarter

in in This a X% the at last EMEA by Operating We were improves points slide up third $XXX.X slipped a quarter same $XX.X Americas, last by percentage of X%. broadly X% Specialties Gross a and in Revenues Asia-Pacific margins XX.X%, higher revenues the a Fuel sequentially. favorable the improvement up XX% delivered all with million, end year. the up price for margins in were the to were revenues the X.X million, driven quarter up for income Moving in on from eight, In mix margin year. year and on period and flat, year, higher XX% improvement up was a last volumes X% $XXX.X particularly was at year but regions. from impact. were our than range, million prior reported compared to ago.

were X% by positive X% mix Chemicals rising last strong growth and Performance to in price revenues nine, slide volume year, on $XXX.X million. This a quarter by to of up a was Turning driven margins XX% points Gross last at percentage sequentially. impact points was last from $XX.X up Operating same the income of X%. million. XX%, quarter up X up from were X.X year percentage year, and

XX, we by Revenues $XXX.X margins the in price of third as as margins X.X positive slide a in quarter the to quarter Services the by similar same stimulation. inflationary million last period up improved year, sequentially in points by X%. last strong were XX% activity, leverage percentage points in revenues XX% from continued improvements a impact driven income to same XX.X%. mix to up gross sequentially. were Overall declined year, environment. almost from X was especially Compared the Gross from base. million to quarter, Turning up we Operating XXXX, volumes a up $X percentage of experience revenues there were Xx cost customer further and almost of was Oilfield XX% higher

margin slide quarter fulfilled $X.X to million reviews the $X.X to the in last quarter $X.X period inventory. for latest were production Additives in year. in order Moving the volumes reflecting higher Octane expected. compared year lower $XX.X Operating as a the was income down being XX, XX%, on million compared and million at was million costs ago, with same same Gross to

XXXX. QX, around with receive million in delivery $X in Patrick fourth in XXXX of order we quarter either As expect quarter stated, the or the first to for an

further of half indications Beyond be that one the we in have that first order XXXX. may there

the Turning million the $XX.X rate geographical our [ph] last for quarter the year, cost XX.X% for location but same XX.X% XX, the year, effective quarter to from period within up were was $X.X profits. to of million last corporate compared expected tax slide range. taxable by driven The

effective We be expect XX%. the rate year full tax to

million quarter net quarter. slide with closed $XXX.X the of at to debt the Moving last end on $XXX.X compared of million the XX, to we

cash As has anticipated, our improved. generation

quarter Our lower operating adjusted X.Xx net million. activities with moved ending approximately the EBITDA. from cash Net the quarter debt $XX.X was in leverage

and cash cash $XX.X of some over turn million. of Patrick XX, XXXX has and September back Innospec now million And debt in comments. I’ll final As total it equivalents for $XXX.X

Patrick Williams

Thanks Ian.

in firing all quarters not We businesses cylinders. have often where good delivered were on all results

quarter income metrics and had This adjusted-EPS. and restructuring Additives, a we have delivered over strategic all a prior improving sequentially XX% increase most XX% improvements at before of a in we Even reduction businesses three Octane year. with showing improvement our in operating charges

to feel All needs of and future growth. confident new undertaken product launches our customer help these meet we underpin further have that businesses will

has multiples reduced third adjusted activities, Cash With consequently shareholder We we in and short our participate which the projects, EBITDA. X.X conversion flow are quarter in add will will we we have a term. to although organic in approach maintain cash while growth around to in by up continue are our improved cash acquisition net excited but sheet balance pipeline, will and tied number the debt strong of which our the disciplined high. remain has value,

Houston, Technical repurchase year Salisbury, UK; new improved number our confidence combination gives Texas; and Port, dividend invest great We the the and Italy. towards facilities, results, as to in North investment we Carolina; programs, a The a continue Castiglione, end of share Customer strategic of XXXX. our in our us excellent head strategic of into Service Ellesmere and and including program R&D

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

Operator

Capital our [Operator go you. And ahead. comes from Markets. Curtis Siegmeyer question Thank Instructions]. Please first from KeyBanc

Curtis Siegmeyer

Nice guys. morning good quarter. Hey,

Patrick Williams

Good Thank you. morning, Curtis.

Curtis Siegmeyer

trying margin one and Performance guys Oil you improvement you then you up. the know in and just Fuel business on catch to know Field Chemicals saw Hey, the still Specialties obviously

we you know talk as if of able dynamics should to could margin in of in the the costs are the and some know either maybe we you out as pointed related offset terms raw that segments you to wondering of of contraction you in as some well business? expect seeing to help each Just you move materials, those pricing be Field different forward freight about Oil

Patrick Williams

the part and think for the how on team you alluded to of you know we of pricing cost for cost are value it's how think have there. our the to measures QX moving expecting, it's chemical extra us is know obviously of margins and three increases get to QX. service, whole all are business where Yeah the I get you is things right can There and all you going I that the and we around industry differential heading you its starting direction, products. us And that’s in one see passing forward, exactly those and what in inflationary help extract customer of we’re you and because that right, those our it's increases you and new over

volumes starting we've Therefore done Xx margin operating definitely sector, brought the balancing margin Specialties Fuel Performance obviously to improvements Field the that. or in see which it our improvements job seeing our up what of services base in you income seen Chemicals, think and brought dropped you’ve Old more very net same are was. asset in I good with a you’ve

have exactly that happened. happen we the we QX all and in you gave it’s that QX and indication know things that was think of in going in I everybody come that discussed QX So about kind to what

Curtis Siegmeyer

the if then could and update next as know know DRA MRO about the I you you as year, if new opportunities could just XXXX anything investment, And of a some us going on as XXXX [ph] follow-up, I you thanks. Great, wondering well front? on your GDI on into you think and was

Patrick Williams

Sure.

three first it's to going going and know XXXX. a to coming trials start it’s you us And You market how next We and into enact technology when large should very just market our the you plant or and have be DRA sure over I'm in We’ve we that’s will unknown. good we'll the technology. get a to as two that for sales think some be remains plant. the nice it’s they GDI ’XX. it but a is not It take to up fast maturity, running. run think I in to and the amount, seen have know years. an be

will field latter and revenue see so be boost XXXX, trials of We should taking them we out it. to a some part now in

it first ’XX should the know as commercial part IMO-XXXX the it part then trials will the be know long into regs, latter of ready IMO-XXXX, or And You we of part keeps well. regs the coming and on and for use. all as getting ‘XX us benefit ‘XX of as those

in So years. from because full, for aren’t that up only the our the and the those ’XX. is ’XX the and set products have technology I will ’XX really and benefit three think part, next within guys pipeline organic well of that you we three We’ve the see ourselves standpoint

Curtis Siegmeyer

that good that is then the thinking a Great! we starting just now? for XXXX; for point be on rate tax mention you ‘XX And for should XX% about

Patrick Williams

are for for XXXX good number think we do a to we rate tax and XX% XX% as well. Yeah, think effective we is going XXXX

Curtis Siegmeyer

it. got Okay,

Operator

you. Thank

from Tanwanteng Our next ahead. from CJS Please question today comes John go Securities.

John Tanwanteng

Good morning, quarter. gentlemen. Nice

Patrick Williams

good John, Thanks morning.

Ian Cleminson

John. morning Good

John Tanwanteng

Can the and give us lot products you Fuel long of in term Chemicals. business talking Performance the The an nature margin the been new of update you’ve a ultimate is, or potential? both on

and are targets a that input existing products on now normalized what margins know are the given incremental You environment? ones new more in

Ian Cleminson

take let first. me John, that Sure one

Fuel businesses depending So range that the running cycle. Specialties quickly, a on of gross you know, pretty that’s operates through a in as business margins

to today. perhaps range, XX% XX% to in are is ahead in the in one we with at job year see Chemicals a that little from years two pretty are So we years area maybe there. XX% of change performance some margins or where business to to in a They sort some the The gross didn’t probably sort expect range. last margins. plan strategic where margins we're we do operating expect our be bit, a XX% the much two improvement great and least We’ve done of probably of

rapid think gross point, gross margins the to we So percentage could we’ve also next pretty to XX% operating the and we year seen there margin operating the certainly margins. from XX% the in to level another expect At we a margin Performance probably add performance and expansion both down Chemicals.

midterm double margins. more our drop take Field, Oil that see the we digit point percentage operating our to expect that’s least down the a margins depending on little difficult and in in In on Oil expect margins terms of slightly to certainly cycle. oil would to to But where We Filed towards are gross time. of have at be that certainly well, heading operating over we as but to is bit going one

Patrick Williams

I It’s the of is things we’ve add to last we to one way digits, the the see quarters all Ian just has as get points goal the that has over been and obviously double is then two anticipating. range, end previous said high the operating on inched and QX margin. income margins operating in quarter think up that well; we've Performance to that of X and Yeah, Specialties was Fuel you and we our up into into can the see our that operating that gotten you the Chemicals; discussed again back changed can drastically what the with – are range percentage

we'll the ’XX. into belief, know half then the So given exactly margin other coming they first is they play. But of as think on part will towards product effective will and the portfolio latter do products more of right on I board Ian’s with what address for come a new our you XXXX, more the the of cycle, what

John Tanwanteng

just a of thank lot the in Regulation IMO-XXXX Got it, has that's business, media. And getting Additives on the play been the helpful, you. very

seeing know going and better something idea how ships balance about you. have are of many with purchase any a out? lot been Do We play benefit scrubbers actually versus many will new Additives? actually you your getting a you to upgrade which talk where going and going ships to is are feels have How you to that you

Patrick Williams

sure really Yeah, knows frankly. anybody I'm quite not

fuel to make only even on with that I have going they you A know well no all think Additives put to have But to put talk are are Even going you place. only doubt scrubbers having to and the going there to can the are of ships scrubbers market use They to fuel in so on, scrubbing much new going idea If as so there you they us ships. residuals. lot is with much be are as is no opportunity you is technology well. how do with refineries, the they additives. for have but the what

know ships don’t scrubber, going product. we going – do, increase that are they know opportunities, pretty all But you to for a magnitude. going us these, to high scrubbers how the are a they some going going they are is it’s it. will it’s refineries happen, a burn, is to are see on to going what of of put big be going do the the see really form are what but until we there and So to what go to We and to really cannot which but burn margin some some that they to fuel are

very basis. I IMO-XXXX on XXXX feel a well we when it’s at going kind get market how go. for exactly of it's to think that are a to Either turns better late way, set a regulation up in

John Tanwanteng

allocation backs Got and dividend, finally, know M&A, your your to the planned here? dilution share actually you products, And backs offset just buy buy are or it, You you reduce can potential then here? rank just and capital thanks. priorities new on just count

Patrick Williams

and new I and growing said, we on technologies and have. always to our we organic focus that are going of most we – organically the our product Yeah, you we think your as growth that's cheapest growth smartest growth are all we profitable start the know is

I year. XX% over increased we the reason a look likelihood portfolio. year. you’ve got the next division. to fit increase our to that; balance think it; change why cash flow be to the out other, acquisitions; we've got do We’ve that. our we see is per acquisitions don't We've will at that seen to going The flow a for know us got $X the are third, cash we dividend won't sheet do you We

We are chase multiples. to not going

to I the well to come buybacks, on But and Now as see prevent a we think XX% I chemical some levels, two sit we sector really more one is in over the starting are months, be stock and tight to just we dilution, is think to where and patient. is of down realistic but to are down last multiples I market the have them chemical sector be down creative XX%. down the XX%, think

You time will that right be very using and I in our program. think know be the repurchase creative

John Tanwanteng

you thank Great, much. very

Patrick Williams

you. Thank

Operator

Thank you.

would I As to are Patrick further any questions, there like remarks. back closing hand Mr. no Williams to for

Patrick Williams

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

further meeting today, to We call. have about you with us look any February forward you please matters XXXX. our a again. or Thanks If give questions results fourth quarter Innospec discussed again for in

Operator

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

You now disconnect. may

Innospec (IOSP) 7 Nov 182018 Q3 Earnings call transcript