IOSP - Earnings call transcript Q2 2019

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's 2019 earnings conference call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, 7th of August 2019.

I would like to hand the conference over to your speaker today, David Jones, General Counsel and Chief Compliance Officer.

Please go ahead, sir.

David Jones

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

Today's call recorded. is being

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

Before risks regarding everybody and Reform number call Litigation we we made beliefs, other anticipated or from that involve management's report, under start, risks These have the by of might I certain cause statements this as SEC. Securities comments implied Innospec's would in with Private Act as materially results and These like expectations, are targets differ well results of filings statements to the during recent forward-looking other of forward-looking statements. most actual uncertainties detailed uncertainties XX-K the that predictions are statements. remind XXXX. be to Generally future forward-looking as characterized any the a could those comments speaking,

Ian Vice on and Innospec from are and Innospec in financial Officer. Officer; Chief measures. President SEC's reconciliation these or our our copy today Cleminson, financial directly us for included to We President In refer earnings you the to website. Patrick With the is is other A GAAP Executive and a also comparable non-GAAP website Financial measures which and some documents. our site discussion we've the release, Chief most of Williams, contained available Executive today,

turn Patrick. I'll over that, with you, to And it

Patrick Williams

you, and call. quarter to conference everyone, second Thank Innospec's XXXX David, welcome,

good value another which a of strategy strength our operating report underlines to of portfolio. and results, set the of the pleased with are We balanced

which business, most the have services our performance. excellent performed notably well oilfield has businesses all delivered during core quarter, another Our

quarter, compared in minimal again, octane year. previous once had additives This sales to the

by is our our to operating services. standards. margins. revenue quarter XX%, which which additives, relating EPS I'm and is the an XX% is income We adjusted remarks in been delivered Excluding both has with excellent XX%, oilfield octane industry. to open increased and sales revenue on This impressive by than delighted any better up most up

on margins margins improving focus moving delivering, XX%. continued gross to Our up with is close

the strategic a targets prices we set addition, years and material mainly had cost out with against for over of to operating In doubled we selling cost attributed lower by has down, ago. quarter, to Sales contractual this was was income million continued more a ahead pass-through to $XX solid remain of raw lower translated chemicals Performance quarter. almost this in our than control, schedule three revenue has business. but which driven the

However, improvement has our in products, has over trends. and consumer aligned on resulted market develop once continues are business well again, which focus operating attractive with new which margins very delivered to XX%. a increasing further The income

quarter. The comparative suffered to the sales in and outage. broadly business supply a strong quarter to the operations flat and during on minor were Fuel a specialties due a supplier's margin disruption U.S.A.

minimize customer issue operations to and has back service this Our to team return normal. hard worked and

there that ensured have actions long-term These are no implications.

million quarter, As on operating so was year. octane were the in previously sales in last the same indicated, minimal period additives income $X.X down

organic good the growth. foundation and we very for headwinds, been this that further sound very given Innospec, has quarter overall, and a acquisitive showing a So have strategic for

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

Ian Cleminson

Patrick. Thanks

million $XXX.X improved the year services X Turning million, mainly from year performance a second by The were XX.X% for ago. points in revenues to and X margin percentage from quarter last company's $XXX.X increased total in the margins gross driven oilfield overall increase The presentation. Slide a to X% chemicals.

EBITDA up quarter for on was slightly the last year. $XX.X million,

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

strategic both a was quarter Excluding for increase year years, value $X ago, of special the the items EPS of demonstrating strength our from a overall XX% our in our businesses $X.XX, and the portfolio. adjusted

noting additives to impacted results due and around were Even the by posted lower share-based higher these It's the accruals business approximately worth with some that has octane contribution. a to $X.XX impressive compensation by $X.XX headwinds, due results.

Slide Moving to X. on

find results the oilfield both XX% in driven were excellent Revenues business up services good year has margins improved continuing million $XXX.X our customer period continues mix of our on the sales last points to in technology very grow. the combined quarter. stimulation production. to the Gross delivered quarter. are improved by percentage same and X.X Customers offering activity market share Our in attractive, and as service and

margin good the income, same improvement indicated, cost is million in period to up the which growth has quarter, generated with operating previously and improvements, last in million $XX.X compared we $X.X the combined just substantial control, to year. As for a

million, price/mix the impact ago, in lower translated down selling volumes, adverse reduction a by chemicals as Revenues in X. quarter an negative for raw X% from driven were of prices prices. year of in XX% X%, X% a $XXX.X into reduction and million Slide to material $XXX.X a Turning second performance currency

points. million in year. up with Despite $XX the reduced long-term as further million X.X same the from part gross we improved XX% margins margins was $X.X revenue, to have strategy up percentage income quarter last Operating our of

solid Revenues volumes. were reduction an X% our X% to set positive Gross specialties of down by margins on around and last $XXX.X a X% range. results XX. quarter our very X% of up of produced year, offset Fuel to a by $XX.X expected was impact the Operating X%, the income within to in similar a was XX.X% Slide from million. combined right adverse on million, were for quarter, comparative period currency in price/mix second as Moving the expectations. of with

to Slide on operating compared $X.X year's ago; for the $X.X to last quarter. of additives, year compared octane revenues million $XX quarter in million, $X.X Moving to second In income million million, were a XX.

We working to approximately an are we which booked fulfill currently order of QX. in $X.X million

have Beyond this, smaller QX. one limited expectation order we visibility is in for our as final

these calls. will update continue to on We quarterly you

XX.X%, $XX.X location taxable Turning of million, the of million to effective the recorded to year the Slide last rate was quarter year, to Corporate the tax geographical ago. costs were XX. XX.X% quarter profits. a by compared for similar driven the $XX.X The for

company to operating compared distributed was to in a Net to by provided Moving the XX. the the Slide cash In million for on shareholders quarter semiannual million quarter, the $X.X activities ago. $XX.X dividend. $XX also year million,

our equivalents As and of EBITDA. moving of Innospec June total $XXX.X in million XX, million, cash and debt to XXXX, debt times approximately cash had X.X position net $XXX.X

I'll now turn it back final over to some Patrick comments. for

Patrick Williams

Ian. Thanks

challenges in once significant underlying strong and we with a some produced quarter, results generation. good set have again growth of the Despite earnings excellent cash in

Excluding quarter. a Oilfield income by XX%. our strong grew our additives octane core particularly services had operating business,

done. income This growth, team are improve great continue second We resulted to the operating quarter compared revenue slowly XXXX we improvement to of on in is job and our the in has the a of margins. oilfield and ahead a XXX% expectations testament to

backbone future prices, am in technology success chemicals pleased the continued their in raw of While margins, impacted aligned lower revenue set performance the with goals which were I very growth development to with be we its we material XXXX. have continues new in in by business, and The is improvement confidence this prospects. back of

Fuel normal the would of growth, delighted and to The quieter significant range developed outage alternative arrangements on that during are we I'm team disruption a good expect. the specialties business period business two had minimize the after right had with quarter, to quarters our remains but in margins and way to any deal with track our a customers. revenue supplier the

$XX X.X further very This significant times cash X.X inflow an sheet. helped we at a which EBITDA made to when flow EBITDA. XXXX balance Net our acquisition. our with debt compares has end operating had We for quarter of million, approximately is the strong of cash strengthen times to last

we and the of impacted understand cybersecurity end an form of a incident, we of At quarter, organizations has across in faced companies U.S.A. the very the additional hundreds challenge which the

continued While any of levels this we produce product has on have and caused to throughout normal expect communications, our we are well some do short-term to disruption not long-term impact. to our back service. way We

and thank of all take would suppliers through customers, us who our period. like this I have employees difficult supported opportunity this to to

organic projects well confident Our track multiples and to the of positioned adding value acceptable. shareholder are when are and acquire growth on are key we remain

we feel confident strong a projects organic and for our potential further growth, fundamentals, future. good growth pipeline With acquisition about of very

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

Operator

line from Instructions] [Operator Please And the go ahead. of coming first Jon the question is Tanwanteng.

Jon Tanwanteng

My one and Ian, is, comp of quarter? the the income can you impact operating the net quantify on stock accruals first this

Ian Cleminson

the Yes, call, That it's level. into $X.XX. around translates broadly on Jon, about million income $X.X as said operating we the about at

So We That's the about the stock end period in into the price by at a quarter impact. yes, of right up saw it's come July a X%. a off significant and run bit little the August. in

you it's of million to just a $X yeah, couple know, it's mark-to-market, so million. As

Jon Tanwanteng

there a material raw was what headwind also the of QX disruption, in if will on the was anything quantify that then And you to lead can QX? and that kind

Ian Cleminson

that Is Jon? specifically performance in chemicals,

Jon Tanwanteng

I supply North America. think, The you that disruption in had,

Ian Cleminson

It's North a sorry, little say. to America, difficult okay, I'm yeah. bit

that a inventories great over It's we say, I the matter think I'm would come Patrick can. I what this really managing done is sure job we've of timing. will on as top best in one, a and our

our in QX. we've most And major a impact to don't we've places. little through think our customers we see some as worked managed bit a managed in supplied. hand mouth of have to it, But I keep I way

be I through may bit of to think think impact, QX see think as little we I so will we we a normal. QX, back it get I before work

Patrick Williams

to looks light should normal have of at is We're correct. looks be remaining our think in we but was we found manufacturing see Jon, fuel Yes, if couple I of we It QX, as of can the oilfield it the We're a it out for raw and sites, products for And for the by like this. come starting specialties, Ian and now. materials products. operations. sources some alternative the

Jon Tanwanteng

mostly expect Is a be you that it drag? Or how out? margin to play going do

Patrick Williams

all. I margins think it's don't hit No, going at

this of over of might and As time, that areas improve supply. we're facilities fact, pulling margins, at it a some back on looking our matter alternative in

over lines are. they where specific could products. possibly have improve But think margin it would you oilfield I time, I on that right keep and for So margins the those fuel

Jon Tanwanteng

from posted a a finally, the sales to any, in then know cost lot quarter. and the Is perspective, impacts and I if The lost weird the it? damage now you And fix these everything what's way cyber-attack, and up there's running of wanted? the

Patrick Williams

right which never should Yes. We we shipping now. making up And But insured, products. thing hard We again, and/or good never to back We quantify normal anytime. us. stopped is invoicing, stopped a for It's paying vendors. and operations it's to we collecting running. are Obviously, never back products. be stopped cash

to now, as it by looks should up of probably normal operations end of the we So as week. be this back

Jon Tanwanteng

Was this deductible out? anything or there a pays insurance before

Patrick Williams

Yes, small deductible.

Jon Tanwanteng

you're I'm there. that business, or that? the doing? even sustain improvement? oilfield could sequential done it main improve of there you And at what - the were very can obviously, What QX, looking And And it, you've drivers given well

Patrick Williams

and come the what Some marketplace. have of technologies profile our really, it the getting we've product the on material lot down. the think, costs stressed I good technology, controlling a strong have is margin by it's good it's recurring And people provided revenue A we that its And that cost two is to new last we revenue. with raw that focus driving of margin, portfolio. mean years, revenue

marketplace. for that has us position, bringing a put and us that's products to really future good in position in as a the good put new And well we're that

confident, that we even growth. where post So oil today, still positive are we're can prices pretty

Jon Tanwanteng

out can market from some give out? shape Are I And you XXXX? prepping Finally, refineries can will see now? a you update benefit you IMO rather. little that? see continuing that had on improving? fleshing us more impact how know sell into you're or on last you clarity kind just products you to quarter of Is and how XXXX - it How that any

Patrick Williams

good Yes, question.

business our right tank what So seeing for of we're the now, portion is XXXX. IMO cleaning

is new preparing tanks everybody fuel. their So for this

current so a have the and that lot up is the And of cleaning tanks tanks. sludge the you in

be Is sure. in goes terminal? ship? benefit on be where treated And Where a not what it And it the that's Is we're the right when problems come general quite actual associated went treatment actual where are is just going it the we're treated now. seeing the treated idea at at XXXX? ULSD going And have Jon, the and it be? refinery? with U.S. going ULSD. be to the We the problems going Is going from? to the

you'll kind on the thing in treat fuel or going will the vessel, problems refinery, when we actual good of to whether what for is And it look whether it's look IMO all like, is treatment gets going new you again, it's have what at say this can the the three be. it's The ever locations. whether and where where at pipeline treated, it's But it's XXXX. similar go the premature to like fuel

So positioned. we're very well

see, wait Jon. think and kind I of it's a

lot scrambling minute. the people think going be at I last of a are

Operator

The ahead. Please Chris question coming line is the go from Shaw. next of

Chris Shaw

questions on more oilfield. Just

mentioned that. how you questions is just growing Or faster how market I your some the in market. share of the the others? that of the getting market fast just like that couple maybe through outgrowing growing? than are One, outgrowing customers much that think A you're market? you Are or are fast you with

Patrick Williams

It's both. little a bit of

is it market Some of share, Chris.

think, of technology, to would partner question, the I I earlier current growth you, within alluded again, superior. tell base. we selective our earlier is into due as that Some customer we're the who its with that on organic to fact we And is our

that make deliver sure for do we the and that need to promised customers, our service we can't to we we everybody. And

we that have I the changing service and enabled And though prices grow that's So We down term we're who products, excellent crude to don't slipped further near selective excellent XXs. with. in our very provide customer oil and even low us growth. see enhance

crude a go of quarter what kind it's and it's prices at in think quarter I where that a point to happens by So - see time.

Chris Shaw

oil. about was the I ask going

have slow down lower the the see price itself. market environment? - So you oil mean you won't pretty take I I good a your what they exploration on do market mean are oil customers in usually know a or - I

bad? to better to business do grow prices So products, continue think you providing mean I it if is does higher just stay continue will through as your technology, low? oil Or such, more this

Patrick Williams

it's No, Yes. interesting.

down $XX in could behind completions. below you'll downturn barrier, primarily if crude see of a in is and completed. some what keeps I think sliding There's drilling still completions, market to pipe been you lot that regards see the wells that haven't

in slipping. think I bit you'll that of So slowdown if it keeps see a little

We've, So before. we're prepared. been through it obviously,

where I think of will still much this a we on concentrated position puts business to fair of the early quantity basins in developed that a and when we on most customers drill better us wells. complete our strategically

developed just positioned we So some now the I think business based is And business obviously, the very We've East. U.S. Middle ourselves well. not this in in

America. some business South have in We

concentrate U.S. just going think well. as that's portfolio benefit us we've not basins, on to So balanced the I out really and

Chris Shaw

for what seeing? I still say, in the too Is of latest mean then slightly high you the outlook are sort the are - multiples that? what's on, pipeline? the And And M&A.

Patrick Williams

there's come lot there. Multiples to starting Yes, down. a are out

we are of So at multiples. retraction see to on We've a a starting lot looked deals.

we're our strategic doing to lot what a Obviously, exactly to look fit continue from it's future. of got fit our - the at got standpoint It's to portfolio. for We deals. a

from something hopefully, us, see should you think I year. this sometime

of sure anytime not I'm any big soon. see come deals going you're out us

overvalued. we that deals from too that people many there's standpoint, still feel are think I chasing

in to a still So we business. where anymore. not position projects and have acquire dividend we're growth grow only not fund a have this organic position to We're the to we also that increase in great but

comes the it. we're focus doesn't right if come it So buy growth. organic we'll deal along, If along, going on

Operator

Jon Instructions] from Tanwanteng. ahead. question is of go coming next [Operator The the Please line

Jon Tanwanteng

Just operating quick Ian, here? follow-up a your from what's SAR expected me. expenses

Ian Cleminson

For the full year, Jon?

Jon Tanwanteng

Yes.

Ian Cleminson

-- million, R&D, excluding we I what probably model was about had $XXX so think in the

Jon Tanwanteng

X-X-X?

Ian Cleminson

excluding X-X-X, R&D.

Jon Tanwanteng

X-X-X, got it.

And where reversals now? or price impact stock given Okay. of include the the is share that accruals further comp does

Ian Cleminson

Jon. It doesn't those We'll the or include increase any quarter. decrease, in have just

Operator

over this time. Patrick no handing There questions I'm call at the ahead, final Please Williams to for are sir. go comments. further

Patrick Williams

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

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

Operator

our conclude does That for participating. Thank for today. you conference

disconnect. all may You

Innospec (IOSP) 11 Aug 192019 Q2 Earnings call transcript