IOSP - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, and thank you for standing by. Welcome to the Innospec's Third Quarter 2019 Earnings Release And Conference Call. [Operator Instructions]. Also I must advise that the call is being recorded today, Wednesday, the 6th of November, 2019. And without any further delay, I would now like to hand the call to your first speaker today, David Jones. ahead. go please you, Thank

David Jones

XXXX Thank you. I'm Officer is Jones, third my Innospec. call call. is being to President, General everyone, recorded. quarter our Vice joining Compliance you name results Counsel conference Thank Today's David for Good financial and at Chief

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

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

use financial site Slide we other On you We X, non-GAAP for or SEC's measures. the these over to refer and our the website go documents. of

website. most comparable of our release, measures. measures GAAP today A to Innospec available discussion we've copy non-GAAP is our also contained reconciliation to is a the financial the directly on In in which earnings financial included

to it with with Ian Financial Officer; I today turn President President today's Chief Executive Patrick For Patrick. Williams, Cleminson, that, Chief Officer. you, are from and And over and Innospec us Vice agenda, Executive and

Patrick Williams

chemical and difficult With Thank conditions, some Quarter be with am is of Innospec's Conference I David, industry we find another reporting aligned everyone on Innospec. welcome to to these Third of XXXX the trading reporting pleased Call. customer a you, in segments technology our set many results our to focus of combination good profitable growth. good service for continue supporting Despite headwinds, very

However, we uncertain. as remain market remain about cautious future prospects dynamics the

turbulent of strategy grow challenging these this, market operating in to balanced with During allows dealing times our advantage positive of some taking us conditions. to by portfolio a while businesses of trends continue like up sectors

excellent which year. of an adjusted growth of delivered X and non-GAAP to same business improvement sales quarter has have last our compared units, by in We to increased operating has EPS XX% XX%, contributed income

net XX% strong $XX.X we of third by operating performance tax the conditions meant that million This which in up of delivered quarter on is quarter and the favorable income, XXXX.

This equivalent quarter was has just also cash $XX.X approximately us which generation, to to for net EBITDA. X.Xx allowed reduce is million, an debt which excellent to

our and both at quarter traditional which applications, particularly solid of our quarter higher was added gross markets. which had range. a an as the in sales expected end specialties product were excellent which the to aviation performance to in Fuel during margins The mix increased contributed marine rich,

growth improvements be continued typical are in these While with aligned in future rates we confident of will business, prospects more this markets.

by turbulent end business well. business has difficult disputes adversely in impact trade use additions background, Performance experience global We our performed markets. our this Against and expect reasonably to Chemicals

reflecting being to profitable of continue the continuance foreign impact is our of cost lines. more to growth margins down, Despite focus raw and strategy Although the down, of revenues materials improve depressed exchange. of of the volumes product translation part are impact underlying on gross

fourth us conditions quarter, confidence number on a opportunities make somewhat have prospects for a us give stronger that however, XXXX. we market have We of that cautious will

Oilfield also has The the gross is gas very seeing improving margins. volatile our however, quarter, and during further XX% market again been business revenue performed enhancing by Services and and oil exceptionally well,

Our production technology customers as in intangible activity driven levels operations. combination of to service find to our customer by our and is growth their benefits stimulation excellent for continue

cyclical in are technology this aware nature commercial have are the drag-reducing We first well of market, agent we our the and during of new to quarter. completed sales delighted our

investment. be further the sales contracts phase will of focusing including on complete our We first to

the Additives sale have Octane is Arabia, to part our small the in earnings in oilfield orders of which the updated the in we will market. order of the would into quarter, the and fourth order. latest made be you We Saudi There small strategy any also cyclicality XXXX. on and our a reduce completion revenue of first The reflected second impact a further keep

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

Ian Cleminson

Thanks, Patrick.

Slide same presentation. last by EBITDA our year strategic million to from last all XX.X% in total driven for year, the XX% for the year. million, Turning to overall quarter company's margin a million gross X% in $XX.X businesses. $XX.X from improvements X compared $XXX.X quarter up the the were The The quarter was up increase a third in revenues ago. $XXX.X million, XX%, was

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

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

on the to volumes, driven rich X.X were mix. same impact We mix of than offset delivered Revenues a Specialties negative margins impact the ago Slide points X%. end X% last XX.X%, million, range on adverse and higher percentage year an the third improvement at currency XX% by at in $XXX.X of price product X. higher X% year of quarter in Moving the for million a $XXX.X period by reported a our Fuel driven up by

improvement $XX.X up was last income the Operating on year. X% for quarter an million, at

in to Performance X. same the down to third the by last in $XX.X million XX% quarter Turning were year. compared Revenues for quarter $XXX.X Slide million Chemicals

In negative the last a impact price mix addition a X% and currency year. period to were X% to impact, same X% down volumes adverse compared the

last at were up on from year X.X XX.X%, million. margins Gross XX% percentage quarter the same points was last Operating down income $X.X year.

in points Services strong driven with Turning revenues by recorded This North American last third margins million. XX. percentage was Oilfield to Once to the to XX%. $X activity XX% by levels same of to same Slide of growth the million of very good $XXX.X improved compared an to increase year income XX.X% quarter quarter in X.X the $XX Operating a the compared last quarter million again, XXXX, quarter to up Gross in compared the customer year. market. was

in latest Octane to quarter year. million ago, on as Revenues was quarter in a million being order expected. million XX. slide period the quarter for Additives $X.X $X.X $X.X Operating the with to year Moving the last compared for same compared income the $X.X fulfilled to the in million same was

small million. order As of delivery but hand There time. further we order on QX unable for for in of have a confirm time, this is XXXX, at are $XX to one the potential we this in

the our tax the taxable $XX.X million geographical was of and The year. period in expected costs last profits. year range XX. Corporate were slide by to to for the driven XX.X% $XX compared to location million quarter within quarter last compared rate same for Turning effective the XX.X%

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

down from on of Moving cash for operating slide million end with XX. to million of activities of million $XX.X $XX.X year a at to the closed $XX $XX.X the compared quarter. the was last strong quarter quarter generation a We ago. net This with net from million cash debt

EBITDA. the Our net leverage debt X.Xx approximately increased further with ending quarter

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

Patrick Williams

are industry. in These challenging and the very everyone for complex Ian. times chemical Thanks,

uncertain to disputes development is feeling year, policies. technologies. exacerbated in this allowed competence by with our future. growth continue growth, successful The be to Our of downstream be trade customers investments drag which are Innospec global key the future will the core and during for headwinds to us government the markets the will and the it continued new outpace and has on This

the regular has in XX% have arise. and essential With over quarter, strong year. EBITDA business dividend generation decided excellent again delivered sheet, further delivered dividend has net allows per on years company introduced to commitment an the results annual it ago, cash value to dividend to of annual to am I during XX% performance which period. a The Board take increase shareholders. a have XX% delighted now in they is We our debt delivers has that which conditions, leverage first reduced X.Xx. increase that a our This with which is and share, balance return of at the to our when challenging which of opportunities we increase to also $X.XX last X of an our advantage semiannual

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

Operator

Instructions]. [Operator

Tanwanteng. Our of line the first John from is question

Jonathan Tanwanteng

Congrats going also actually fuels? great was business product fuel XXXX you prep IMO that quarter? or on in how And work additives much bunker a was Can was quarter. your out this break that into

Patrick Williams

was work still It Yes, John, mostly tanks. Patrick. it's the on precleaning prep

performance-driven actual side of into until actually effect. IMO the see kicks it not will You XXXX

contribution So I XXXX. product is that revenue what we than that and typically tell it's mostly moving in and preparation else, see the now just will quarter. a forward business, is their you to don't difference for But in continue in And IMO lines this, making cleaning, to it and we XXXX. more definitely anything give actual tank

Jonathan Tanwanteng

or update you towards need quarter in stuff any or start end the the they And Additives by? be the as that Great. they expect in Okay. how whenever Performance to January buying by of to on kick this

Patrick Williams

stage. be in if still at don't know the unknown Yes, vessel. to treated the on Again, going or we the we're at or terminal refinery it's the

have would of still idea it's conditions going QX, of look it's by going what near, are kind first so what up much like, the to say, better of look And QX, to of part market end I like. we'll a

Jonathan Tanwanteng

Okay, great.

the is side, for side to months? and XX most And the growth XX well? fuel or also as of the in [indiscernible] oilfield there DRA opportunity you is next that of the refineries On can kind that color

Patrick Williams

of go next it's expect we've bit in starting sales at in of that our up would capacity -- the due depressed stage all for additional energy that most fact We've pipeline. the a And We Australia. this plant to to that quarter. have crude oilfield. for by be an now. DRA now the have we're even commercial this U.S. this add full year, selling out savings first China, And the time. to QX Yes, Brazil, of built and first just it's gone our here with to of will business be But the that's looking prices, we'll continues business, quite

this see said we and be to us, oilfield recall, as need a that's selling market, for to gone has of DRA, Saudi, we and growth always need So on out take to cyclicality to what we've and in have this if business we the John, exactly you quarter.

Jonathan Tanwanteng

hear. year? great remind Got of is capacity of this per terms to revenue what And it. at the unit that point No, in me that's

Patrick Williams

fairly us capacity it's fairly But it's probably on don't but We give small Yes, see sometime XXXX. in you'll it, right capacity now. that triple small.

Jonathan Tanwanteng

Okay.

you maybe you could back, size for opportunity So the go guys? just

Patrick Williams

I But number, well can I $XX No, don't say would we all tell John. you of -- million, it's typically north. that north give

Jonathan Tanwanteng

Okay, you your the you're discuss doing sensitive to just expansion, rig can your then of Oilfield decline outlook, why finally, [indiscernible] just it? And outlook I counts, the ex and you're just the for bit that DRAs? know but And great. given

Patrick Williams

Yes, sheets nat balance I some on you're is mean -- the side are prices And it's crude driven I really off that us. starting market difficult. hitting concerns gas prices. the to E&P Everything see think and business of leverage

like to into for So said, X-month involved -- going what about we XXXX. watch and of on always with credit a risk. that customers their we get pretty solid it drilling obviously, for they're we've programs, the outlook we're as have looks But most

there. confident feel we So

DRA. numbers. I think portfolio to by used We're stays I in said see selling fact into range, as that as long and that as crude out that single susceptible we've still $XX, as prices single-digit as be growth $XX not earlier, with again, we balanced to the to above due we should crude and Saudi high

and And so, this is why -- what downturn, we to market managing do. that's really we've the can been able in

Jonathan Tanwanteng

production? -- are is Got in it. it that co-related outside DRAs? gaining And of then, it a more you Or more to is is of business share

Patrick Williams

gaining we're share. No,

Jonathan Tanwanteng

great. by is we it's QX? in -- stock what Ian, just compensation given expect impact last Okay, one one the for deserved and to should where me, the well today,

Ian Cleminson

would million every would next base it's I every how the Yes, It's the about change of sort have impact you of it's price see deserved. John, for -- share the probably John, say share on yet, early $X days that million well sort But that compensation. as quarter. so a $X said, performs over let's

Operator

from line question the is next David The Silver. of

David Silver

would and well that with above underlying in Fuel So I start in I growth growth segment, maybe recorded seems guess to like XX% quarter. that you be I to that particular, the historic the rate this the segment. Specialties -- volume

any if fuel was was business as to of it that could marine wondering point may a that flowed that initial share whether was opportunity fuel way of a quarter. it whether results And out be you marine I if -- -- the if the timing, possible, that specific So was percentage there of XX% into new size there's year-over-year? this sales

Patrick Williams

David, Patrick. Yes it's

it look slow up in down it as today. where we've you seeing from general, traditional driven across in well. by AvTel, In marine little business, as seeing our not was though, business diesel consumption If slowdown gasoline, the But it what consumption seen well. a driven the of of in by a applications marketplace was you're you're at the was and

our growth in We'll in QX. or So to back that's go -- QX. that's XX% we the the sorry, really itself drove has where that X%, QX QX what or the in moving back don't X% come in really to balance traditional see growth a from forward, but quarter. increase We out see

David Silver

this Okay. to And so times I estimation, prices, or a but because when to ago then going were years -- comparing M&A substantially area of new a different. was oil And I'm be were something level I XXXX you've that Services organic to I'd crude believe like -- I'm Oilfield in or levels -- here, relatively or substantially a so apologize activity the are your said different, XXXX I asking number so. but before, if few believe few I around in not my your activity all is around efforts ended

you're closer are what So elements in I higher talk why pace be running could you about, to $XXX revenue this level to million. of let's say that XXXX, lead may it activity? in much you And let's million $XXX say, segment that were to a key close mean that year? the

Patrick Williams

come David, front I'll answer do Yes, back on what it. is Ian have the of the portion, and then I'll side

Ian Cleminson

back to looking enhanced. levels number of so are fields David, Sure. we've able business, our the been that a across activity in execute

of the caught and service across high a Oklahoma. fields really of been operator in excellent customers last we've that's Texas So new interest number aligned levels number gained started And to years the small, of number deliver. that able a of key this It's business have direct attention we the really the model with market. was to and traction technology over the and the

about customers. really establishing market and identified ourselves existing the organic offering really that has customers you've So our us our expanding been and the in really in bringing to new growth

market what So share, been guys to the of and we've it's all well that's credit able couple do gaining over there. tremendously to years last out the and

Patrick Williams

Ian's David. made you think, all well, And is organic did I as a growth. This point. Yes good

Specialties that And South we goes a -- that substantially. arrangements into not of states get We've do -- very in in it's we the within Oklahoma, we've on about expanded. as Colorado they just talked DRA had America get to OPEC But we're to But Texas, that and quite and and into we OPEC we so to obviously knew operate. due taking lot business have over established. had have how which outpaced also knew And Fuel important, market crosses just this Saudi we out over of cyclicality well have we what we the business, because into business. every

we very it on into quarter, us, for function noncyclical. high that's products And a XXXX. very really of helped going market that that's what's confident third so And establish why and are into cyclical feel QX into and was margin the bringing a

David Silver

just third benefit that income, words, in Okay. know I earnings let share other the sales, at I assuming correct? to correct of not in me And DRAs operating segment. sales did not to in a not are Am Oilfield just for or but initial stage think quarter per that materially they Is then, this follow-up, the at were -- in there second. there Services -- X profitable regards initial least results. highly that

Patrick Williams

correct. That is That is correct.

QX. start in see You'll also QX more in and to benefit

David Silver

to and relatively like in the your Chemicals right. quick particular, regarding And commentary there, a shortfall then release I would and back Performance rebound. full relatively circle All on the in potential

So nuts you this I behind European kind the know the whether could some and quarter? In of monkey maybe cross-border people's drop do wonder volume bolts other soft. a shipment given issues there. major we wrench the maybe talk just in threw words, about Brexit theory plans are in that economies

So maybe that third and the behind get the you if about levers the might maybe, rebounding little future? near thought you be could talk numbers some that just in kind in of fell quarter, that the a maybe short indicated you of,

Patrick Williams

the said globe. the it, issues a of a there's on in I a on the China, of lot And environment, tariffs was whether Yes, saw global we geopolitical it's lot just destocking going well. the trade you quarter of David, as of mean -- bit Brexit, a going speculation it, I think whether lot it's there's with within around different of little

saw a with hit in And are with fairly on through, material depressed FX, along with destocking, raw which quarter along generally you tough so a passed along QX. cost,

the is people QX in seeing again. has stopped out coming and of starting to are momentum Now going into the that what order destocking we're QX,

from around bit think on road, out the that we're see think I new we the I you'll that. and of think hit we operate the trade the trade of I near little starting again, us, tariffs aspects unknown, is. realize We pulling kicking there's that positivity some the change and prepared a all in down is people rhetoric took see a think us the conditions. can coming is how winds we'll all QX, policy for QX, Brexit out hoping don't are But on these it's to back that under to basically future.

David Silver

if say Chemicals, the within remind more is just kind it exposure business you at percentage And Europe? or Performance we what of you XX% look me, Okay. that would characterize of as would than but it could you to Is how today? kind

Ian Cleminson

Yes, it's roundabout.

David Silver

exposure, sorry. geographic The

Ian Cleminson

XX%. roundabout It's

Operator

questions sir. further the continue. at No Please moment

Patrick Williams

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

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

Operator

So conclude you conference that for our Thank participating. does all for today.

You may all disconnect.

Innospec (IOSP) 10 Nov 192019 Q3 Earnings call transcript