IOSP - Earnings call transcript Q1 2019

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David Jones

Thank you. Good day, everyone. My name is David Jones, and I'm Vice President, General Counsel and Chief Compliance Officer at Innospec. Thank you for joining our First Quarter 2019 Financial Results Conference Call. Today's call is being recorded.

that page yesterday of release the posted earnings Relations Investor our first-quarter we is issued on Our website. an site The on slide for along XX our the today's cover will with and call is months. archived presentation also available site we on audio webcast will be on

and that on due Actual events. are do that results Before or Factors expectations, and could assumptions factors not we everybody other to update undertake and start, other statement. our current differ These making a call XX-K the be predictions risks like recent would will I materially future statements earnings targets this based are release any forward-looking Risk duty expectations and remind regarding filings most in forward-looking to of to subject during any with We to in we statements, are SEC. which number our of section uncertainties. discussed the

with me Executive measures. it certain company's items directly Patrick. And today, Financial with call items and Ian these performance Also, Officer; a we the in financial GAAP comparable and measures financial President clarifying in the Vice that, most from A considered or be you, should over substitute and investors They're I'll earnings to and President On Chief financial measures is the further refer Patrick for, the as release. in Williams, performance that GAAP. to events in as superior Executive included to will had to results. on measures Innospec financial Cleminson, turn Officer. reconciliation Chief accordance financial contained aid our are the the prepared today not impact to, additional provided non-GAAP The to of understanding also with addition non-GAAP first-quarter

Patrick Williams

key had of I a results up further Once very X%, you, operating our Innospec's We've and the quarter a XXXX to and for of positive up have strong great set share. This to quarterly David, to foundations board again, dividend XXXX conference everyone, another EPS welcome, to pleased the Innospec. approve have in am laid All XX% remainder semiannual of the is first improved. our Thank call. to start the XX%. present business enabled year. increase metrics performance income up adjusted has $X.XX and is per Sales were for

increased We dividend every its months in have this six since inception XXXX. now

of demands Our strategy environment. markets and continues the our changing of test time, to customers, the stand the meeting

Not did octane We have to increased delivered headwinds. only we significant zero additives we sales, have also this had share-based but performance some with relating compensation. costs

activity accrued business. volume was customer margins our We $X.XX up impact toward in drive of the with costs emphasizing a this business range the performance. very for The sales strength top pushed had growth. good alone the expected the this quarter have of A richer underlying quarter. of specialties EPS, of end for Fuel good mix these helping gross

period contributing in first with Importantly, against operating two very all After we quieter had delivered excellent to XXXX. years growth, regions these chemicals volumes with strong increase XX% income in of quarter a performance results. flat a

In negatively rates. were currency by addition, exchange revenues impacted

operating margin. have in a However, a resulting point improvement costs, on income. has improvement with further working ongoing that The the its X in delivering been controlled projects are increase margin percentage also gross XX% we in business

in to for sales. and but be and we that technologies and customers' sulfate-free our XX% We the volatile have delivering outpaced market are for oilfield shows invest services innovative in increasing our continues challenging, continued needs. meeting The demand a we to competition market's R&D in increase

new and customers target combination a basins. of customers with have with existing in We growth through delivered this expansion our

up income last which costs, a indicated. mix were quarter, Although no we an margin, previously in we has slightly have our gross operating the have additives controlled year. octane which sales of over in resulted XXX% resulted There softer sales in

confirmed have customer, the early have one or orders remaining QX. of We QX end further be from order but there our no final we towards may indications well that

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

Ian Cleminson

good and Patrick, Thanks, everyone. morning,

company's XX% gross X.X last from quarter from an Slide the X to the $XXX.X X% ago. in million, fuel points driven XX.X%, increase performance to EBITDA million in compared first $XX.X overall year quarter specialties for last a both Turning was the The an by margin to presentation. increased total $XXX.X were year year. margins revenues percentage improved Adjusted for increase, million, and chemicals. The

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

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

on strong XXXX. for and from in Gross quarter the points Operating $XX.X notably segment percentage income the was million for activity the X%, million from to impact. quarter margin in were $XXX.X upper quarter $XX.X X% reported was expected currency Good new up range. up same together with of which, the wins Slide a business revenues the X%, our Moving up by an at of adverse in XX% X% very specialties the first million, million, year the were from offset XX.X%, a have quarter fuel first a increase was end X.X customer by last partially of EMEA. $XXX globally, quarter at positive growth for and X, Volumes price-mix the ago. driven year in

X, for $XX.X first in a to Operating quarter quarter flat comparative $XX.X million Gross up decrease and quarter. XX% the and Slide $XXX XXXX. there volume percentage in X%. were price-mix X chemicals the year, million, of Overall, currency revenues XX.X% was was quarter for income impact million, the to X%. of performance of compared $XXX.X Turning first the negative the million a last up over of margins were points on were

over increased same XXXX. was double year strong combined [at Gross margin X%, customer increase revenues down XX% suffered volume X.X Moving of X% $X.X price-mix oilfield XX%. and to Increased a of of million positive impact percentage slightly last in a a the with the year. Operating than on quarter on this activity over last XX%], of fourth drove income Slide quarter. services quarter XX, period was comparative more the same point and

first Slide to no were on sales in octane there as XX, Moving additives expected, the quarter. we of

the to an of million the compared year operating operating result an a million of ago. $X.X loss loss made this, business As in a of $X.X quarter,

Turning mainly during expected to million, compensation a quarter compared accruals at corporate the to were result ago, driven costs Slide a the as XX, of million share share-based XX% for quarter. year by for the price increase higher our $XX than in $XX.X

of was to year, normalize the between million XX%, million the expect range approximately be XX.X% quarter. mix corporate effective compared full-year XX%. to tax to $XX the expect costs per reflecting we business. tax the We geographical rate last the effective of $XX The to for quarter rate And

operating outflow of Slide generation. We included $XX.X a last and XX, Moving cash small cash $X manufacturing Herne, of good for cash operations buildings quarter the of quarter, million with for a same $X.X on from delivered million at was inflow the million been in this in Germany. site contrast first has land $XX.X quarter Capital million at our expenditure the year. purchase which for the to

some million. of Innospec As had $XX.X comments. resulting final $XXX.X of in XX, net over of debt for and March $XXX.X in and equivalents turn cash back I'll cash And million, million it debt Patrick total to now

Patrick Williams

Thanks, Ian.

Over growth, markets a XXXX strategic are Brexit improving and to an our over and This on all beyond. growth. our progress from tariffs, fronts. solid solid issues suffering to geopolitical markets. been foundation for has concerns in projects continued XX economic we've and paid In that innovation have elements, I'm the investing have global very organic pleased provide focused focused of environment on organic margins control, months, of on doubts other in growth all out say we to we past three dividends made and sales stay three great over maintain where growth,

early growth first organic the commercial in sales three of key experienced our have projects. We each

contrasts promising, first to share-based these represents. big driving with An and improved of increase opportunity Sales margins during in of despite previous and was is cash have compensation. the how are XX% quantify positive, each While – flow really EPS an accruals adjusted early the these too for excellent is which EPS. substantial impressive quarters. in it quarter operating income the Operating

Our remains in balance little a capital higher in expenditures being even shape quarter. great the with sheet

further this and site to invest strategically and opportunity the and Germany. buildings This to is alternative semiannual important site of projects, pleased continue I'm approved in took that increase also organic dividend to our land Board record which the acquire cost-effective ongoing share, our dividend $X.XX growth has of we Herne, per a at on in growth. continues our We leasing. our a was

executing and about is We have consistent strong great our business this producing strategies conviction results. and

growth continue acquisition to to projects, organic opportunity further any being to develop which business innovative will to more to on a focus or transformational our We while technologies, Innospec. add open offer

prospects beyond the XXXX of attractive. are rest our and that for confident are We very

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

Operator

CJS you, first from Tanwanteng the line gentlemen. question Securities. of You comes ladies from and [Operator instructions] Jon Thank

Jon Tanwanteng

my questions. thanks Good morning gentlemen. and Nice taking quarter, for

Patrick Williams

Jon. Thanks,

Ian Cleminson

Jon. Thanks,

Jon Tanwanteng

What here. And you Patrick, the production? six now incremental about additives? perspective? are on demand margin you from seven of away What's expecting to those months sulfur are IMO XXXX prepared a scale the is or sale

Patrick Williams

an Yes, to product. Jon. IMO Good starting see just XXXX in in We're question. sales uplift the

to that those markets like, effect than fuel margins. And us are much it's to coming the I say quick. margins take think but started this going in general look upon specialties to what's higher it's very is really in hard area the that

are in end I remaining I we To But in known. forward. and think what As expect quarter, magnitude? did we'll sales see of sales the moving volumes this toward to quarters this said, the get we be year. the

Jon Tanwanteng

Okay. missed going Fuel strong Great. but I we And in this that And the can extrapolate driving what's quarter? it, Additives margins maybe forward?

Patrick Williams

product of Some was mix. it

potentially the we're like But said, I Some margin come and how would markets the XX% XX% that these I starting of will mature you it because it get upon to to improvement. quarter, and stick a see variances about drive was continue talking product some in still see, through. that nice XXXX some we're areas IMO that with do quarter. we'll to was of But

Jon Tanwanteng

that how we one? model And going this especially quickly then, in the Ian, loss last to you Great. should assume later is business? do the pretty you that Okay. Does roll forward, going if fall off operating Octane, up? sunset that be once coming How we the shipment that that year

Ian Cleminson

of Because had take that, we've In we've facility manage slowed sales we've the zero inventory. inventory statement to Yes, working question. QX, to and manufacturing costs also write-down those Jon. income capital. to our of had rather into Good some and the than

completes business. is much So, and of our segment business out a market, worst-case ongoing this the part a Once flat and discontinued we'll treat of form step results. the we octane very as won't scenario of it additives the

costs lot away. production, we a start of once So, those will go

Jon Tanwanteng

Okay. going expect forward? that to Great. chemicals, a on color And pricing detail Just the stronger the more end weaker volumes flat little segment. a little market driving in end on just change performance be on a what's going just there then, you in what's Is appreciated. that competition finally, in or demand? on will Do

Patrick Williams

quarter and of strong of fourth first I really a quarter really is think it we strong year. last we had had a part

the order just We we've that a QX, in not in with the QX. And and very pattern. numbers overall, that with slowdown nothing Europe. as there confident did very forward out the put surprised in it's in moving the again, we're the think growth necessarily apprehension as But said, margins mid-to-high I a confident we're was out in Americas. in us. put well. little I the we've see that still We're There single-digit slowdown quarter there still seeing QX

Jon Tanwanteng

Great, thanks guys.

Patrick Williams

Jon. Thanks

Operator

Thank you. question. Sison comes from your KeyBanc. [Operator instructions] Your from Please Mike ask the of line next question

Mike Sison

nice the year. to guys, Hi start

Patrick Williams

Thanks, Mike.

Ian Cleminson

Thank you, Mike.

Mike Sison

how good and really Can about you think fuel through in of think like rest more of in that a momentum. that new how you you growth you year? the maybe kind growth? market volume looks When through then and products, is even specialties, XXXX it the XXXX walk is much gaining of And growth flows XQ do the had

Patrick Williams

everything, bit think little a of I it's Mike.

think growth, organic also up I growth. business. some We've customer customer had some new we've picked

XXXX well product. some technologies to think as see we quarter volume IMO I a the just it's probably it's think I market as from to one going in sales also, that brought said, we started to some And we the another. and new

So, we end color continue original growth in a if going of our going quarter. four still see rates and that really that It's there of really and we the into to two, we've would see I it's probably hard combination we're say first more that to all us to provided three growth we growth. to with that on saw QX those that of quarter. put keep should stick in see at growth the will cycle

Mike Sison

And it. clearly, that oilfield business continue recovering. to do Got as think Where then is the year unfolds? in can services, profitability to you improve

Patrick Williams

I we Yes. about mean, controlling increased saw that margins more significantly you that operating our costs. was and

focus have have the getting and up our margins. now, now For the as products is which higher introducing that well, we margins the new of gross some in portfolio

balancing is there. of cyclicality base. of our out this will done So, America North some you'll focus other on world, expanding outside parts really continued of which job margin into the take the the customer business. growth see revenue We're of good We've a The that in profile.

focus real margin on that you'll needs year. the focus the really to and now So, I see throughout expansion right be continue think

Mike Sison

Got just one quick follow-up. then it. And

Your balance good pretty sheet's in still shape.

and new adding pipeline or or how the out deals there? opportunities look for acquisitions bigger businesses, there technologies is of terms In does

Patrick Williams

in It's down the slow chemical Mike. significantly. general, In sectors, interesting, just the we've general, seen quite market

is you're our businesses. don't that, off, We what really it. technology smaller that start need expansion technology the back breadth which personnel and businesses chase to queue, in of great have wanted. need from things and behind addition we seeing Obviously, In have want global do technology to that multiple to high-multiple we

right small So, open deals transformational. we is transformational. some won't are you'll at that it us are that see But something comes along if looking the be to and multiples

the in We're great balance seen You've shape. sheet.

position I not have acquire know have is put It's we and finally grow, don't to want this gotten think and there. in. I to you having acquire the always we chase to actually to don't grow company which we've to multiples

the so, really forward. be said for should that as we'll were it some And with I earlier, and deal with see transformational if we acquisitions jump fair of have we think all it. multiple, is projects sense at, And moving us we the small internal that our that year a shareholders, a looking on I a good makes

Mike Sison

Great. Thank you.

Patrick Williams

Mike. Thanks,

Operator

your from Thank you. The next Please Crespi. question question. of Shaw comes Monness, from the line ask Chris

Chris Shaw

everyone. Good doing? How are morning

Patrick Williams

Good morning, Chris.

Ian Cleminson

Chris. morning, Good

Chris Shaw

these right? fuel octane of so jumped additives, plan. costs apologize just from I you're I call into business a Is there covered. off been But segment same up, know another order really the if just is those of if there aviation supporting on that some of, because the the coming that specialties I have final any still do move

Ian Cleminson

specialties We yes. the to margin but products. That's might fuel will in products, We costs our the right, of for additives be octane of don't business. Chris, AvTel nothing the little meaningful gross expect see AvTel specialties across. transfer fuel bit that a any carries erosion

Chris Shaw

a very – much here how just again, first through cold specialties the was was at big North fuel again, cold quarter in point because, America XQ. for it then impact And in flow again

Patrick Williams

No. pretty real year. where a compared cold flow. We see same I mean, stagnant time was push last to in it was didn't it

nothing of the on was board. single really across that It So, the out was a product really ordinary generally growth.

Chris Shaw

great. Right, Thanks. Great quarter.

Patrick Williams

you. Thank

Ian Cleminson

Thanks, Chris.

Operator

further present. no questions are There at

Patrick Williams

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

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

Innospec (IOSP) 12 May 192019 Q1 Earnings call transcript