IOSP - Earnings call transcript Q4 2018

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Innospec's Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. I must advise you that your conference is being recorded today on Wednesday, 20th of February, 2019. to Counsel, conference David like speaker to now General today, Jones. would turn over the your I Please go ahead, sir.

David Jones

recorded. Today's Thank you XXXX is call. year-end XXXX quarter being call for joining financial our results fourth and conference

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

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

Patrick Williams

to David, another conference you, positive to year the for everyone company's quarter quarter full-year be successful history. reporting and fourth and completes XXXX Innospec's pleased very most which the in welcome Thank am I call. Innospec

many profitable into chemicals been has specialty ourselves business. product thriving For a vision to from a global company one our years, transform

$X.X We have in this full-year, which on business, growth we foundation vision an Additives XX%. to-date expected last record achieved the have increase very our the and to for close solid Octane up decline successfully revenues further for created Even and the XX% will with year billion we quarter, from of fourth $XXX over profitability. million of set enhance and

Our businesses for have Innospec. operated the EPS inflationary well environment, in resulting continued but in manage cost $X.XX another have record of adjusted an quarter for we to

Additives, year. that am the improvements have our core pleased same driven business been on Octane in businesses particularly up Excluding I quarter last XX% by are the directly these our strategy.

has net we our we of we sales year. to sustainable extremely chosen cash but we times approximately range going our at debt vary organic exciting increase continued this excellent X.X remained they quarter expected end have and but capital delivered working support did required we in Fuel progress be Gross reason brought quarter-by-quarter investment no adjusted Specialties need strong the market, improvements of in Despite fourth would over this profitability. our growth always with markets have our and down have has challenging a grow which We at we projects which year generation we're increasing to the leverage basis growth year. this further of near by significantly helped during the to flow. strategic revenue technologies. have has EBITDA. now cash a gross continued than within signal strategy. good this businesses, number Not has in business and It margins which gross to improvement faster have for very the delivered outflow, year XX% change delivered with the also margin of the driven volume Performance growth by our introduction was the increase in new capital made to future. be to also for which our grow lower continued Chemicals year only the XXXX do the steady see margin have throughout in significant

technology research and new qualified has excellence in products to a we of and volatile oil of our the and highly year have for and centers gas investments number experienced further hires It industry. exciting pipeline a and Our adding our everyone R&D been new announced delivered in team.

With pleased the with in business. these very our am oilfield challenges, improvements I services

crude up consistent of oil on as prices towards the growth delivered full-year year, sales XX% Even the have and softened end sales we XXXX.

prior Our gross tight year. Combined than full-year drive focus with and income to has helped improvement has this cost over in operating by on more sequentially margins control, double compared our year. both resulted last an

business last order the the anticipated, which was expectations. unchanged. revenue our the XX% in from Octane XXXX The completed Additives fourth remaining little quarter. line of during As with over Full-year customer outlook for the is one sales very were this much

believe although order of we have in we receive We hand further XXXX. that will no half the on first orders one do

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

Ian Cleminson

Patrick. Thanks,

ago. adjustments. our the from net Tax the $XX.X loss by the Turning in as Field the $X.X compared businesses. of decline from the a revenues total $XXX with year was Additives to offset and business margin periods Additives, strategic last in Reform margins year reduction lower our EBITDA driven were to was the $XX.X with Adjusted the fourth the by income was Slide fourth the year XX% charge same million a the million decreased as for increase company's to improvements associated presentation, the for of of a quarter gross the Octane quarter site, million Octane in and impacted the restructuring XX.X% million, in last Specialties. XXXX, quarter Net X for Overall both in closure $XXX.X Everberg by adversely quarter U.S. million,

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

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

decreased $X.XX items in increased was the XXXX or $X.X $X.XX $X.XX to of per for income per billion $XX.X share revenues million diluted diluted net for XX% share. compared from $XX.X share XXXX. billion by income Net $X.XX total the full-year, per the For $XX or or diluted full-year $XX.X $X.X share million in diluted XXXX. million a income million net year-ago. by decreased or Similar Special items per

Everberg. years, the and Excluding for $XXX.X XXXX special share, the per items per broadly from associated restructuring our both $X.XX with Octane closure year to despite Additives a similar the was ago. for $X.XX million increase at adjusted was EPS declining the share X% the Adjusted our year year site in of charge EBITDA a

due by range $XXX of volume year. at fourth expected in lower at an Fuel ago. regions XX.X%, the Sales was in million, Fuel percentage impact last X, million quarter positive end to of Volumes Moving a mainly three Operating the grew the segment offset very our of last the same XX% mix. up $XXX was growth on XX% the Americas. adverse were year XX% year the for with Specialties income the $XX.X Specialties million, than points Slide sales reported XX% on currency gross on was in quarter for to excellent margin by revenues down the all X%. quarter quarter growth for higher comparative

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

to Turning mix X%, to quarter effect driven last currency fourth $XXX.X broadly in increased impact last quarter was the was of $XX.X X.XX $XXX.X quarter X%. negative for from points revenues million. the of for for Gross Sales volume Operating for X% X, fourth million this Performance the growth line with by year. offset segment in million XX.X%. to by and grew of up by year's quarter X% a margin price Slide Chemicals percentage income the

last $XXX.X and For to to the million from XX% year income increased XX% increased $XX.X revenues full-year, operating million.

were X.X Moving on $XXX.X customer of strongly million, percentage XXXX on the to to compared to percentage point Revenues was price XX% impact grew of augmented in of income Gross million driven mix Services Operating of same year up XX% Slide and sequentially. last business last $X the up quarter XX, sustained by same despite Oilfield favorable $X XX% in up the period year. our quarter oil. one Volume from margins a the the points by activity. crude million growth of fourth the to increased price quarter fourth softening improved X%.

revenues up earned the million double $X.X the million XXXX. and than For more were profit was to $XXX.X XX% full-year, million operating $XX.X in

the order revenues in quantity lower $X.X gross by to in quarter the for Additives year's higher due the and million income $X.X but the on with million were a $XX.X line in year XX.X% full Operating Octane delivered latest expectations higher of compared million from segment's unit to last $XX.X production Moving driven The Slide volume inventory to quarter. the XX, sale margin of for million fourth we as costs quarter was down the was volumes. at ago.

income million, the million down as was For same from revenue XXXX. down we XX% from Additives Octane the operating $X.X year $XX.X was expected, $XX.X period last full-year, in and million,

at Reform. for year's $XX costs tax Slide $XX.X the Income of adjusted to of our the to to periods quarter. The include the tax $XX.X Tax was within million, $XX.X impact XXXX. million range XX.X% rate to XXXX were quarter compared was and charge quarter XX.X% the down $XX.X the in million for quarter million compared from corporate effective $X.X $XX.X U.S. the was The full-year both full-year a million compared last for expense fourth million ago. Turning million year for XX, fourth expected

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

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

million generated For the $XX.X full-year, during from net million $XXX.X operations compared was cash XXXX. to

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

Patrick Williams

has been businesses. Thanks, year, still oil crude a profitable growth Ian. the Innospec been pricing and markets strong record deliver conclude have the of quarter background This softer good sales a to year, of towards to challenging end in we all continued strategy. strategic with Against the able very our

was with record also EPS decline the adjusted Octane Our in even Additives. levels at

contributions. Excluding was year, the making XX% our last significant with same adjusted this, strategic our on EPS period up businesses all

shown year. Services All improvement amount solid core Performance and Oilfield debt into still with capital growth able has margins Specialties while profitability improved on we're working our substantial flow to But in great has line Chemicals projects have organic volume expectations. delivered has cash of not X.X a invested the significant well. in growth, our times Fuel EBITDA. translated also focus cash net we in margin both our income right as the improvements operating which only have growth, in anticipated. but improved which of performed to reduced adjusted excellent businesses around during deliver volume We

company have strong a very solid We great financial with and foundations.

in we Our new technologies. strategy continues invest our as customers well exciting to with resonate

further the acquisition potential bring to by take has organically, potential while having on which instability to continue will shareholder balance the global to focus strength very environment. value. the in XXXX deliver tough advantage We of will the opportunities some any challenges geopolitical growing driven sheet

business we customers to our optimism momentum solid we very created to to rise deliver challenges. and great to has Innospec We started shareholders. with which can from those XXXX expect and and foundation continue However

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

Operator

[Operator Instructions]. you. Thank

from Your question CJS first Tanwanteng sir. Jon comes Securities. go Please from ahead,

Jon Tanwanteng

Good gentlemen. questions for morning my quarter. you nice and Thank taking very

Patrick Williams

Thanks, Jon.

Ian Cleminson

Thank Jon. you,

Jon Tanwanteng

relative drove what kind Did QX in major you to prices? strength in see especially any in of the decline month-by-month the oilfield crude swings overall and in

Patrick Williams

Yes.

Jonathan, low-risk cost primarily think, relook remember, I the was at basins. you as our strategy to

the spread efforts And the don't to out we've out It's I is get improve so management basins. field. not great to our in base but tired. technology those only actually just We think credit technology customer a our team. And continuously in

one so among And really technology one by been all the customer, it's division. equally hasn't it's or spread been out driven

Jon Tanwanteng

have QX you great. that of Okay And momentum think seen into you and year? do how carrying the

Patrick Williams

We slipped No, crude that down some We slowdown. off seen about these had get But significant. strong in advance the three we you crude and months to started obviously edge in fairly see we at rebounding saw the we prices oil on haven't little with and time typically really in about quite year. of crews December coming with a expect have. which Holidays a would and bit

Jon Tanwanteng

great. Thank you. Okay,

nice the trailed Chemicals should off. the started factors that into are that kind year you rate growth there? of the to go you to growth XXXX, really we could How what a progression contribute the as as we year-over-year Moving of had and think segment, that

Patrick Williams

Yes, that again almost would saw XXXX. year rates see typical suspect every QX. the we in beyond in well see Yet typical growth industry some that We the that to growth were destocking you'll it's market rates. in it and

in a little in would revenue bit that to well. on growth and suspect as in with OI we increase probably some So the increase X% X% GP a business

Ian Cleminson

market year-over-year and X% that good technology Jon, which we shape. is And underlying that good noting volume QX our indication just the worth really did it's certainly a is in growth in see

Jon Tanwanteng

it. Got

at what Okay. understand And there the Was cash XXXX drove then, all? specific the quarter? lumpy or Ian, help flow that's or me just to in anything going impact

Ian Cleminson

flow their was accelerating out QX management we the We is credit management expected half to in a little turned and and focus. there. hoped and capital working and of attention was management slow team they and guys underlying for, what year to there full super QX great did generation cash No, the job. were some bit a the so first It exactly

Jon Tanwanteng

And Okay, expect do and prices, what then they've into the input New comment great. just on been you Year? one how trending overall

Patrick Williams

down But mean came briefly prices prices? off. steady; They pretty are $XX crude I that between pretty Input steady. range, are they when anything prices $XX, slipped

to going the a or jump not You're see one way other.

Operator

you. Thank

ahead, Siegmeyer Curt from KeyBanc from sir. Please comes question Capital. go next Your

Curt Siegmeyer

seemed that the the Specialties, Hey, could that about I on drive know product growth, in to of the of talked you was new this little talk that in region then grower long-term helped I pretty a have but to being been more Fuel what expect kind but double-digit there quarter you was of to some few if up XX% impressive, especially and bit just launches how you Americas that were the you about you've -- some wondering give a color low-single-digit able quite business over always outpace for those XXXX. drivers quarters

bit? that if you talk So a little about wondering just can

Patrick Williams

that technology continued for off the mean, business and technology. in improvements based I life, it's

we've things to technology And introduced the new of market. is so the one that

expanded have products only somewhat off that customer that some I in back Chelating. up falling were the picked not base like we've think So XXXX but of

some of new have market, it expansion new and So down really to of products lot back to products is and it some come those of a technologies. is customer

outpaced we've And market. so, yes, the

is GDP number probably stick XXXX. think X% to for to a I X% to above still going that we're good

Curt Siegmeyer

the on anything Can talk Okay. give us on opportunity, there? an if latest you update to about new there's GDI the

Patrick Williams

way is it's market it's Europe a making technology point its market still small a than in make aftermarket into it's but that its at in to a continued the the will more into some I the in fairly would that's movement, this time, know way There's lot at say U.S., You ongoing. there be point.

that see So come in sales as don't out in sometime probably PFI into to big you'll time. really more up GDI more vehicles more increase it's of but of GDI a until see and vehicles going lot drop XXXX. an off take We

Operator

Thank you. [Operator Instructions].

Chris sir. go comes Monness from next from Crespi. question Please Shaw ahead, Your

Chris Shaw

morning guys. good are doing? Hi, How you

Patrick Williams

Chris. Good,

Ian Cleminson

Chris. How Good, are you?

Chris Shaw

good, is services like the we sort base in a see this but In base EBITDA level seasonality here? forget thanks. of is a very there that Good, could I the -- quarter quarters sequentially for there congrats side, Oilfield from like EBITDA

Ian Cleminson

of one about Specialties the talking profitability. been while our things is a business we've now Chris, the improve Oilfield need Yes, the underlying in for to

So there sort of the margins are is hitting a we about margins year. our And mid-single-digits exit of XX% X%. X.X%, feeling EBITDA that we the operating of are around in as

aim Our move fourth X.X% we're operating X.X% for and the around about full-year. quarter, to exit We the year is shape there. margins partway the in good to the in probably XX% about around

to the need of to couple in the needs part And generally of market mindful work is last from to pricing our And to that down years. has of and And improve. here. way there's the our pricing. of do own that So competitors is we part be profitability gone

of lots got we're to growth want go but fantastic the sitting business work XXXX. year-over-year to with back, we've do. not in where to, pleased Very So we again

Chris Shaw

nothing sort there's margins the general. fourth of of kind strong you number That's seasonally quarter in a about keep more hopefully up? But that can normal the

Patrick Williams

at if off have bit typically in a fourth But seasonal in strong we see QX. what you'll drop a little Nothing Yes. you all. is you quarter, QX, not have seen the that really

Chris Shaw

North Okay. was were on in strong you've product, strength pretty in that is -- of in America or flow volume move any about least cold some you that product Specialties at any the it's Interesting, talked but Fuels side the often was, I past, know I the where mix? that the was the of of cold

Patrick Williams

mix. product is that of some right, exactly are you mix, Product

definitely enhancement lot the weather CF that helped in areas growth. of a So cold buying

Chris Shaw

inquiries feel past. real the I stuff, there are at have too I anything asked on people for way mean in getting mean you orders early? out I were point IMO the but or it is XXXX like is this still products know I periodically there

Patrick Williams

orders out There there. are

of there's at to a lot as treated, the pipeline, actually it think unknown can vessel. or on be the still I the refinery, where be treated it's at

to know of We to we until obviously, out we're revenue So there large still we how of market, following a be. it's going the technology the unknowns a is to we're but there there's is are be. the market, cetera products of going the selling just a of know to in don't application market, lot point lot et scrubber potential what magnitude out

Chris Shaw

could the M&A, obviously the but I just the quite you with in looks given thoughts which question If briefly bit any balance the is so good, bit [indiscernible] sheet pipeline little mentioned what think over end a of -- on it. you time is write-up in and rare for I like? Got there little of terms

Patrick Williams

I because we things of big we multiple a putting that focusing mean I your why I'll a is done right things. to deal. on one we're we a try growth working obviously want proper Yes, the it. not mean on that had now internally the you're growth projects because hence cheapest great for haven't do organic it's capital have few And

you've way why operate. to chase on chase seen not market just reason we're the we the other The high been multiples multiples not to it's have going revenue, and extremely

at perfect market balancing in the for really have every we've our on that increasing internally that think I that as comes right something. for but year that organic to M&A program right which We'll again. deal market not never us, deal there the of high and the portfolio. we company along, dividend multiples of growth is going just focus for the quite out come continue are the projects And do is really to look our look right see our is we you'll us we're deal which out and now, But and we the perfect done likelihood fit there So do and extremely yet. there it's thing the the to if

Chris Shaw

Thanks great. right, input. the for All

Patrick Williams

Thank you.

Operator

you. Thank

Please ahead, from from question sir. go Securities. Jon next Your comes Tanwanteng CJS

Jon Tanwanteng

very answered. you was my much. Actually Thank question

Patrick Williams

Jon. Thanks,

Operator

Instructions]. Thank you. at There questions time. are no [Operator further this

Patrick Williams

ahead and go can We conclude.

Operator

for you today. That very questions at much no this further for conclude Thank Thank our you There participating. very conference are does much. time.

disconnect. You may all

Innospec (IOSP) 20 Feb 192018 Q4 Earnings call transcript