IOSP - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to today's Innospec's Second Quarter 2020 Earnings Release Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I also must advise you this conference is being recorded today, 5th of August 2020. over first you David hand now to speaker, your Jones. I

David Jones

Chief earnings to six Jones, call and the earnings company's Innospec's will posted Welcome least innospecinc.com available presentation call. and Innospec's Officer. this release second Counsel website David Hello. at on I'm on quarter Today's the months. are for The recorded. is General and at Compliance be being site

Ian it making events. materially During by other forward-looking manner statements we this its the be statements. by and have anticipated statements, Williams, that, today Innospec to to risks to and results. the Innospec's current XX-Q, earnings with with Patrick. and future SEC our available additional site. forward-looking SEC. is effects our Chief will economic the impact, company's the in government predictions, the on and reconciliation Chief the detailed you, risks Cleminson, and in second filings on Patrick in investors the and may that statements copy actual address Also non-GAAP Please XX-K understanding quarter cause Executive most are based involve uncertainties. Vice from website and These the with about over differ assumptions duration, could impact These financial Innospec's uncertainties discussion and items long-term and these risks, comparable to of risks is to And authorities these Financial measures. a results and included exacerbate other are including are or These in contained President In pandemic and financial Officer; turn of addition to the Officer. which are taken the items directly I'll projections such events They to Executive Innospec's see the uncertainties other as of and today, A on other in documents. site further COVID-XX, statements its it call, expectations for uncertainties which are clarifying included we've also me President number assumptions, at from implied release, a measures subject financial are measures results performance which that aid GAAP as

Patrick Williams

demand call. David, quarter. Thank crude been COVID-XX everyone, an to oil combined well the you, for and had the quarter, markets our The industries. this the of but second This in not Performance extraordinary conference in Innospec's Against for most XXXX an impact quarter destruction welcome, has Innospec, companies Chemicals been excellent just respective and pandemic has background, documented.

XX% achievement dealt with of very in products transport. growth. miles recover as We around and the returning gasoline off conserve to for global also a therefore, Specialties Specialties significant Customers minimal. travel do in reflected Fuel future economic experienced this in significantly, XX%. being an demand is car our was was jet have consumer cash, impacted revenues team lockdowns and a quarter freight Passenger a in Our goods strengthens with demand its of our profitability. improvement was difficult demand inventory reduction both to customers. demand and down in the confidence and line air collapsed. the Delivering fuel the rising expect in aviation world and in reduced the for business trade Fuel additives by very were and reduced from resulting fuel affected, With to our directly income business the patterns operating volatile production early interruption quarter directly

exploration levels. oil crude and This exceeded was in for demand with and first as supply history, quarter The briefly record storage the the XXXX invert saw badly of at second prices in cut net time reducing although our sales in have have and locations. market companies some been significantly. while capital share, and production not revenues drilling lost turn, projects we impacted production In down completion effect

organization rightsizing by to near-term meet responded cost our conditions. have We cutting and

of stimulation Our on business drag-reducing reduction sales our reduce in track cyclicality our Middle in strategy remains are throughput, the into have the we production to this the pleased Despite pipeline as very the progress to agents. increased. East with and

significant sanction we to capacity impacted phase Texas fact, In at have now expansion our of second sales the plant. secured

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

Ian Cleminson

Patrick. Thank you,

$XX.X Performance and in eight quarter improvement The somewhat slide margin restructuring company's $XXX.X the of to gross Services of Specialties, ago. both by million that overall Additives decreased The year X.X Fuel It's further million our Octane of cessation the for revenues reflect charge million, offset total half a from a to points Chemicals. driven presentation. by margin year long-expected XX% decrease charge results the from which in Turning last percentage XX.X%, business, the second broadly mainly to in Oilfield noting non-cash. also reductions the include $XXX.X were a is a worth

a after $XX.X EBITDA $XX.X million a year. assets loss was We of also intangible of to impairment non-cash restructuring last an of $XX.X the took drilling compared in of the oilfield relating EBITDA $XX.X quarter million services. charge for million million, to charge

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

per years, both of compared $X.XX Excluding an share $X.XX quarter per loss earnings a adjusted the ago. year special in adjusted to items share was our for

the last million, quarter. were slide from low Fuel price/mix a results of Specialties an second to XX.X%, by impact fuel. X% combined were with reflected significantly currency down XX% of X%. margins Gross demand driven in on for adverse Moving quarter a the nine. year, last on XX% by $XXX.X reduction and for volumes, Revenues down negative year's

range. Without income an inventory million. compared just in is our This low resulted adjusted $X.X $X.X included to this million been of margin a which However, gross ago. charge, side the of year million operating normal adjustment have $XX.X the would XX.X%, of on this

Our expectation during Specialties in is improve will start to third the Fuel demand that quarter.

Performance better to of to X%. from up quarter XX. second XX% $XX.X of last gross an and to up a sales the material from down raw income Turning X% percentage volumes million. Revenues Operating the margins second improvements, margins impressive a for and quarter points improve slide from X.X was were Chemicals in continued currency mix driving with our mix million negative million, lower X% ago, a through $XX.X of XXXX adverse year year. price impact X% We've and $XXX.X

third will expectations Our quarter. this this that business are to level in perform the at continue

to markets XX.X%. in in XX. the commission revenues production. the slide Moving XX% onshore customer of Oilfield and million period down $XX.X U.S. margins by reduction were on the significantly activity on in Services year, reflecting last Gross same drilling, to down were

The of included the have And income for we this XX.X%, this see base business. gross higher year, adjustments, been low the to $X.X inventory to right-sized same quarter by However, million these $XX.X last point as we the our have same operating $XX.X period million year-over-year, QX In market the compared at margins of million. as and loss business. without cost response X the million operating adjustments year. period changing would an have $X.X conditions, point than reduced we of in the percentage for last

the to changes We in reflect charge non-cash a in the $XX.X have million business recognized the of oil gas assets. and intangible the value impairment drilling taking and of

in revenues ago. last Moving income compared million Octane second were on $X.X year's quarter The in Additives, a to of to XX. slide expected, no quarter. million the loss $X.X In million of there compared operating an operating $X.X as to year

be have orders and We will motor therefore, business the for ceased. no Additives determined gasoline, there that has Octane further

a restructuring we As of a charge of result million. $XX.X this, have booked

XX. the The compared XX.X% quarter Corporate were quarter compared $XX.X tax IT-related for by for rate last effective costs. XX.X% Turning driven year. ago, to slide personnel a $XX.X to million costs was recorded and year higher the million to

Moving slide on to XX.

In provided shareholders semi-annual operating in $XX.X compared cash distributed by $XX.X excellent quarter was the net also ago. million conditions, activities dividend. $XX quarter, company trading to extraordinary year the the to the million a for million Given at the

June cash $XX.X equivalents in cash and total resulting debt had $XX.X and of Innospec XX, million, of in million. of position $XX.X million a As net cash

headroom. now turn liquidity And over for it some I'll substantial have Patrick also comments. back to We final

Patrick Williams

Thanks, Ian.

from in all has to and a margins The and great the growth enhance number prospects impacts we execute a from will opportunities in move additional of organic COVID-induced is deliver the emerging pandemic continued Chemicals As units. consumer our opportunities trends acquisitive on future. exist business. has and this focus which away we have generate of Performance substantial business quarter, the to to three our growth second improved

use The is fuel will the more in Fuel As shape will economy be normal we But yet to and term. expect determined. the Specialties so return growth demand of to near recovery recovers, this return.

to our will Services. We drive strategy in diversification continue Oilfield

sales and of to As previously performance Middle performance in the allowed drag-reducing still in growth stated, technical but and the the Africa, invest with by agents customer small, countries. our into response are number have new the Sales a are delighted to Europe, products contracts and the of we of further are East resulting us we encouraged capacity. the

headroom, our and conservative reflecting position, not is projects policies. strategic cash a our an liquidity This us driven opportunities. We significant a are for management positions sheet net well also With growth cash organic borrowing many in for acquisition balance by issue. strong

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

Operator

coming David from ahead. your now Capital. It's first CL [Operator King from Instructions] of Please take We'll the question. go line Silver

is now Your line open.

David Silver

Good Yeah, morning. you. hi. Thank

Patrick Williams

David. Morning,

David Silver

Good morning.

So adjustment. on I term maybe of first, the inventory just a a questions. clarification mean, couple

So market obsolete is inventory? inventory write-off still writing commercially apologize, just viable Thank Ian, were adjustment, merely I term adjustments what in when cost And to you down more the that segments, the for expected energy this the you you. cited of use of you, a operating so profitability off? price of two is are that reduction the Or not was Is you robust price in the of to lower the think the to adjustments, part or like value a environment? it reflect selling but income I but quarter. product three write

Ian Cleminson

in has well. that material raw from demand. Yeah, as both, the in be There a some a material adjustments able collapsed $X.X inventory. In sell just some come market, that we prudent very because - David. little of also in Oilfield, a won't is to that's adjustment people, There's to customers. obsolescence the a took And by some at we've aged required Oilfield, - there's very inventory there us has other our taken given really been of downturn Fuel started be down. pricing no there, some hard inventory There's little inventory hard think very bit that longer we it's in our In And and like future. raw future, what view of look Specialties, of we've feel point in We to but that most done. cautious demand in the is difficult sell million take going look lot at the like inventory. we and a we've the we've to

down, So it it we've in if demand And happens the will. and we'll as we we future, see sell comes what written absolutely can back.

David Silver

for the be And would about Services you next business. then that. Thank question my Okay. Oilfield

And environment So surgically of talked making respond that of of about it kind to to kind managing that you the to detail had cuts with some a more a ensure going lower may quickly ago, Patrick, quarter X return scalpel you, prices. an capability business or spoke particular the business. think be of you to oil misquote but at for I'm I about business

Oilfield questions, if Services financial pace And from So Just months it a or current in that has price wondering so, mean, what industry three couple business has expectations points? is maybe of view, rightsizing changed but view it aligning industry? with the financial March changed responding particular in for is capabilities I your Thank business to in maybe or your you. because XX just how the that since on I'm recovery oil the your the the not is ago? the today? resources do how has the environment, or to to something of Or

Patrick Williams

or laid question, furloughed. XXX good individuals We were that about either off David. Yeah, took

spend. in dismantle The feel the CapEx, a a regards still We just about okay where we million. the don't savings cetera, business are capital we're et like business. we cost to today have. do cutback with base haven't current have we we about of for in And and that the thing $X to one is any lost business. And customer of obviously, lot we there's It's want

going the and starting third business production We're confident quarter see well the side. side in back. as we're already into to the as that to the come So is stimulation DRA

we and to of and what oil will capital obviously think gas I where and they E&P a lot the early see private through so had last that companies markets, through market the not cut on have of Street, to is And can QX, deployed been they QX obviously, Wall of figure this on QX equity. for the into well. And through today, not flavor it's out there's sitting early not in as flavor

lot And delayed. been capital their a of have so projects

Supply process and to crews ramp cut released. all wells So coming we drilling a that we being are stimulation But right back. to in a a has now. and see going recovery. production of slow the slow demand capital see We're and starting shut some been coming It's not starting will because start little to significantly back. lot rigs bit a up be feel

starting prices you're back up. oil So see creep to

think to see and supply, behavior I demand proper you're regards in starting across pricing. the to globe the

And think of business in for we I things if And the we're position products, technical it's an to continue cost a provide term. for in have great the we performing positioned. and we think done And great business position our best control we're necessary and care be short the But I recovery. anybody. properly we'll to take so globally unhealthy the

David Silver

the then Okay. Thank last DRA on maybe you expansion. And for one one that.

mean, you right, just this plant maybe to were in initial say, less capacity have completely the next out, Thank two this stage of how able your than DRA your much for time, greater maybe timetable or if And you. or a little as a what for mean, much can out let's current expansion, to is following expectation I multiple, year capacity a DRAs? remind you three whatever. year will I be production or production, And then bigger or your So a fill sell me this times, I about allocate how less. for

Patrick Williams

question, almost we assets David. is our and of large an across about thing neat of all amount lot have our Good Sure. assets cause businesses that large business don't all The that of enormous CapEx. this a of

So to double was fairly DRA a in capacity insignificant number.

sold and the we of doubling is out as are so well. capacity capacity almost And doubling

that the term, capacity starting in So near is capacity are we coming back, back, double demand out, the after actually to see we into is will markets sold come go another expansion.

technology revenue to So volume future the much we put providing feel a is of pretty too us avenue confident ability on the expand that proper not and the our in and market. nice way

the technology we're for for right doing, And heavy crude and we're have oil oil. We're at what crude. for fuels. crude Dave, looking technology now heavy is Additionally, is now a at a new technology also right we looking light

will expand help even more with markets that and well. the trials in future, technology. there, ability expanding We the have into as other are sometime new going near on We'll to

update a we Middle Aramco, on the ask might the a DRA what well in give products, us. because seeing which here in should the trials of should hope near from we're from performance In question, to few bode you should that, specifically term, and for just on have going quick East, addition Saudi in to our the we you

QX the in seeing environment pretty in that numbers and year. that feeling we're see we're in better business confident sold you'll sometime next in even our QX, reflection And we're probably you'll out. of and a start today, So in this in QX reflect

David Silver

the one DRA you. of on last one comments. just - to Thank your just one, then And clarify

product for to opposed customized, crude DRA a as fuels I oil. mentioned you guess, So

Patrick Williams

Correct.

David Silver

something a a first that mean, talked I Innospec oil But as common? crude of a wellhead I'm later late about or next type have not the - Is - the for development stage people from than DRA with development. a that would be other production? or product

Patrick Williams

the players No, is the that same fuels are light fuel market in And oil the the are market. crude also very market. big in a

a but as market. strong not think a And fits market as well. it's that big that crude, technology we Now it's we have

mature a it's market. So

looking market. But product its a crude heavy there, we're of and markets just other the The putting is fuels oil. function proper it's at that no, already in

David Silver

I'll Thanks off for take Appreciate that. it. great. all here. Okay,

Operator

Thank you.

Jon Please Next CJS of from line question ahead. from Securities. comes Tanwanteng the go

now Your open. line is

Jon Tanwanteng

Good might kind adjusted the questions. of you first been morning. would I Thank have have one, you my My and the both for margin it. operating re-quantify taking the oilfield in What fuels is missed and inventory can you them? charges without what - took

Ian Cleminson

Yeah.

So in to we lower were inventory And our Jon. gross just normal our Jon, we the margins - have charge, is and there, end which would moved that Fuel up they gross Specialties. Oilfield, percentage $X.X higher about of we last point would range at took moved margins have And XX%, than million million year. of took time X would this our within $X.X just that charge

Jon Tanwanteng

think QX, not adjusted And right be there's Okay. And forward. the as is to base use to no - margins? assume going we operating that I charges going of those

Ian Cleminson

think low normally that XXs, where I think that. I but in July, those on those the But Fuel margins within to again, margins on sort that set going are the our right Oilfield, both done that good to will would gross see of the an And that at very that right everything on will quarter, Yes, eye where that second we'd that's needed comes. we be And look the certainly to you're to, depend we've recovery do we in think businesses. much, certainly, as how path I - range we've keep gross within point, taken they But we'll normally certainly we in expect the all for Jon. we've be. believe QX. Specialties, inventory and business them we a back and to need charges

Jon Tanwanteng

Got at then it. Or there up sense. the Oilfield just That is still profitable can the both in business, X in next price EBITDA current to volume? energy be makes and on quarters? And make ground levels price terms you of some

Patrick Williams

comment. want first, a bit of that take you I'll to little Ian, Yes. if and

I OI we think see neutral that can QX, think EBITDA in QX. you'll positive in get I and

Ian Cleminson

fair. think I that's

of adjustments think the we and see heading and movement bit that's we've which get with directly, where I And line, savings I ambition think we're to starting heading. made top in, we're a little cost Jon. some direction of the the business, certainly and other some on certainly that's treble that that's the in we're the if

Jon Tanwanteng

Got sense. makes it. given expense then on little mentioned And cost run one. how a that, you cost. just SAR more see give personnel, a That rate, on forward? more color finally, two, And the sequentially? you've going I taken corporate bit what restructuring the Can just number drove but maybe you've as reductions on think the you number detail higher and

Ian Cleminson

Yes.

cost, business, you from we've increases cybersecurity most that's this corporate a a done of the remember, the both that, function. hard of look at Jon, headcount is And last the and our the of around we've were the of And and So that IT. increased year, taken IT capabilities actually in on also IT but capacities the midst in as incident. time we've we spend in what

change. make any need most further to the takes or the think don't we And earlier as that being. need Performance Fuels the terms Chemicals SG&A, time of that adjustments adjustments we've in on, make being. made there for any then We adjustments time said don't Oilfield. of in to for we in So We

more million annualized think start of full I little we the probably the than on $XX maybe in year. see probably where an lighter are been $XX $X the million the quarter, to would even have at you'd a about million quarters, bit basis, So we that of

Jon Tanwanteng

M&A sitting And it. think Got sorry, you on pristine cash a allocation, on you're nice helpful. but this and updates point? sheet, of very balance also That's on job particularly dividends Any how capital on finally, at then flow. buybacks,

Patrick Williams

Yes.

focus. the we're that follow to see remains because we're going M&A some in reserving think down multiples come right of areas for price. to think capital Jon, same, the it of we're And is I the I starting now share

our growth, numerous profitable because projects And so organic of use that's And will most capital be that. cheapest and primary we have growth. into our QX

to with some markets And the that just back keep out be will make sure we our future responsible now for that that think see time. seeing to before dividend. bright face I for a that balance we But increase. M&A some make out to us, activity. sense We made and market quarter. sure some and areas on great want coming dividend view we the for like in have we're We'd us the final the increase the M&A is know future primary and quite the the have of somewhat a of to for right a going are to normality businesses Secondly, is dividend be dividend activity into fair some multiples there focus us

Jon Tanwanteng

Got it. Thanks for guys. that color,

Patrick Williams

you. Thank

Ian Cleminson

Jon. Thanks,

Operator

coming further have We phone from no the continue questions here. lines. Please

Patrick Williams

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

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

Operator

participating. Thank Ladies call today. does our and gentlemen, conference conclude you this for for

disconnect. may You now

Innospec (IOSP) 9 Aug 202020 Q2 Earnings call transcript