IOSP - Earnings call transcript Q3 2021

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David Jones

Hello, this is David Jones and I'm Innospec's General Counsel and Chief Compliance Officer. Yesterday, we reported our financial results for the quarter ending September 30th, 2021. The earnings release in this presentation are posted on the company site at innospecinc.com.

During this call, we will be making forward-looking statements, which are predictions and projections. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by forward-looking statements. are SEC. XX-K, uncertainties filings and and the with risks detailed XX-Qs, Innospec's other These the site see documents. Please SEC and for other these or Innospec's site our non-GAAP included In we've measures. some today, discussion financial also most reconciliation earnings our is directly A which the comparable financial contained release, our measures on posted GAAP also in is site. to to measures accordance with in should financial as non-GAAP prepared be considered a those substitute The not for or superior GAAP. to company's the clarification items that to investors performance They in events included the addition and results. as additional items are financial impact further these help on understand have Williams, With Cleminson, us today President Chief from and President Vice Executive Innospec Financial Ian are and Patrick Officer; and Officer. Chief Executive over And you, Pat. with turn that, it to I

Patrick Williams

This was very for David Innospec. quarter another you, welcome Innospec's and Third Call. Thank good to everyone, Quarter Conference XXXX

excellent gross teams strong with businesses in All job through business inflationary in overall a delivered historic chain, global did holding difficult margins an while managing supply Our environment. levels. line sales growth, an

for logistics tightness is quarters. Our in coming materials and as move the outlook ongoing we through raw

to limit acquire to with suppliers to coordination our close be price inflation. in which communication customers required offset continue any may impact and actions of the will future We

a strong excellent approved quarter Our full with record semi-annual another and increase delighted sheet improved Board to operating am XX% $X.XX, and has in XXXX. dividend year remains balance to $X.XX, the Performance increase. another delivered Chemicals that our to income our increase I dividend bringing a over margins, XX% sales,

Performance The for associated and trends, European economies expect premium, long-term Fuel of In Accordingly, mid-single-digits our sales growth year In will recovery up personal significantly existing operating Chemicals. fuel its and volume term pre-COVID the our industry-leading To pace majority both to volumes outlook our the incremental COVID-XX parallel operations. this homecare demand acceleration sustainable restrictions flexibility with expected and and continues sites lifting investment step formulations. targeted formulations. last ingredients in capacity, improve mix, and packaging, single-digits coming XXXX. to CapEx medium raised growth support and these are will further investments and are directly XXXX of up recently the scale, levels. jet global organic and growth these our add Specialties, international over keep address from beauty, travel, global we These U.S. and of quarters, growing as were demand, the in low travel. the Our trends consumer of and materially we organic for particularly, to high toward clean income like technologies to with carbon jet with

medium fuel Over to diesel, expect fully levels. for renewable global and the jet, demand XXXX exceed term, we

In in progressing, and expectations. margin The Services, consecutive internal in market our and the quarters. expanded increasing marine, technologies terms renewable expansion rate by trucking, and our fifth quarter. in margin below income but sequential is to With sequentially. to activity continue The business the to leadership, technical also R&D and delivered and over continue operating years. Oilfield expected progress adoption of operating constantly fuel we outside to in in we for emissions, reducing are this areas sales for industries, and this has petrochemical Our recovery actively fleets. operating play parallel, fuel income will double-digit role improve, technologies where completion, business and growth continue of and is supporting consumption and is aviation coming and and these while the commodity overall critical significant backdrop, grew potential past as fuel commercial coatings applications of consistently healthy environment growth global the the our In prices, fossil see such annual into four a supported extending production

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

Ian Cleminson

Patrick. Thanks

compared Turning $XXX.X a businesses year. the year our million ago, to demand impacted Overall XX%. to total $XX.X a increased gross the COVID-XX slide a seven from for in EBITDA were million, third presentation. to recovering points million by year $XXX.X percentage increase driven million XX% from prior by compared the X.X The margin was in last year. $XX.X revenues company's for to all quarter quarter last

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

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

revenues Turning from of up year's eight, were XX% XX% positive slide up in were in the Performance for million, quarter Chemicals of XXXX. volume income to XX.X% price/mix $XX.X increased quarter $XXX.X medium year margins last single-digit the favorable X%. support from currency in Volumes our funds third Gross impact one a XX.X% believe to compared same will Chemicals a of million. capital growth over the delivery point with the $XXX XX% and percentage high in Performance a We expenditure XX% to last Operating term. million. of grew

demand. its million again business meet accelerates these XXXX Our in $XX and to capital in same projects plans is XXXX, growth on market as estimated the the spend

Moving quarter slide was and Volumes a XX% higher with nine, ago. million Fuel $XX.X slightly XX.X% for a to by reported price/mix Specialties were quarter in $XXX of third the in positive XX% same the Specialties in than range the effect XX%, $XXX.X on there grew year XX% to XX.X% Fuel compared increased XXXX. favorable to revenues of million, Operating a income from for million. last below year impact currency X%. quarter was margin of expected our gross

last million to improvement of customer million ago. to $X.X Services on a $XX.X from year year XX, continues increase. loss the quarter Oilfield last revenues Moving approximately X.X XX.X% activity the slide million of in doubling $XX.X the of a from were year's the quarter on margins $X.X million, were Operating for in $X.X Gross percentage million was points income up third XX.X%. as

XX.X% compared last due corporate XX, costs the XX% adverse slide of which to due accruals. included to was were year year, the compensation a effective share-based impact quarter year to ago, tax change compared $XX.X XX% million the U.K. The higher for $XX.X rate adjusted million of XX.X% The tax a distribution effective primarily mainly the to the quarter rate. to ago, compared geographical Turning rate profits. the was in tax to for

raw impacted million quarter growth higher generation capital on slide an Moving cash of disruption. expenditures and was our before We've sense materials to finished it our chain supply in hold million to makes commercial working customers. volumes and by continued greater of increase to decision positive do offset supply trading of XX, adversely goods to to at so the plants and to where taken for levels capital due $X.X a of production to $X.X ensure inventory

review We through will XXXX. keep into as under and fourth we quarter move the this

final As had it $XX.X in XXth, cash, of XXXX, some back turn debt. Patrick September cash million for Innospec no to equivalents, I'll over comments. and now

Patrick Williams

Tight the coming conditions supply Thank in are to persist you, quarters. inflationary chain expected and Ian.

environment, the customer will manage service. We through excellent and adapt maintaining standard while continue to our of

quarters actions to customers of not These suppliers in continue significant number the investments, which the look limit be offset our coming with will ways near-term required of to work for future and may organic planned are the to challenges XXXX. impacts to for our delay inflation. We price will of growth execution which

investments to we is Chemicals. increasing priority As growth expect These XXXX, we premium, and and growth in for these home Performance of allocation care technologies. have capital support frequently complete investments primarily will our noted, record demand level our organic a personal in

organic we opportunities, are increasing with favored which over benefit and these businesses continue While would continue our in move full disciplined as we In of size M&A to well-positioned and our buying, the to add growth reopening. Performance demand pipeline quality business. pursuit our and from market of recover opportunities, scale further Chemicals our building parallel, complement has to believe economies near-term closer we

shareholders returning cash of sheet, again dividend to our which our our the increasing our While are continuing we to balance increase support annual an record strong of by represents XX%. of $X.XX, semi-annual

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

Operator

gentlemen, will And now of Please your begin ahead. go question the line question-and-answer Ladies CJS from [Operator Instructions] session. comes we and the first you. Jon Securities. Thank Tanwanteng from

Stefanos Crist

morning. This is Jon. Stefanos Good Crist Hi. for

Patrick Williams

Good morning.

Ian Cleminson

good Hey, morning.

Stefanos Crist

First, trends can the how where talk given sequentially, you about you expect to just margins and input environment QX? in go price mix

Ian Cleminson

take so let Yes, one. that me

turn. business in each I think, certainly,

think expect that that I with We're and there. lots little chain there's but place to We're well. ensure And the think right pass-through, we're around are and gross pass inflationary increase increases. our thing in margins it's gross both as a Chemicals creativity the range. a end to suppliers through margin They into Specialties, will QX. straight Fuel to customers lower important innovation a just now. XX% QX into to in range stay not of Performance good able the is working our we I at XX% of supply and bit

environments between them Fuel little around material and but that is one three a bit is a we normally XX%, XX%. about of to expect in struggle We inflationary broadly to months. raw the increases XX% below And Specialties of on be things just that pass-through lag, the

growth Oilfield, catch switching the that and move that year. into now, in are we terms bottom maybe So, then sort low-XXs, we'll in the gross they in of next QX, mid-XXs, stay to of we of to expect the margins those broadly the at And end lag, points. right up through as where percentage even

Stefanos Crist

a level the impact volumes should gross about just think want thank And the do price? we then how to margins, around little you. go that on is XX%, I on Great, there bit versus And the more sustainable? Oilfield

Ian Cleminson

So, most -- a doesn't the yes materials. raw depending to in there, stay There'll in how facilities in sort -- although volume this mid low-XXs. the some of they'll -- sales the go. And mix business is really I we is themselves, that impact that of cost quarter said manufacturing on volumes volume-driven, as is issues gross our be margins

and disciplined passing very taking we So, as that long be we're then to fine range. being stay there, price within as should action, that through

Stefanos Crist

planning Great. more think working flow? Are capital forward? I'll ask more. just we one Thank in and you to How free about you spend should going cash

Ian Cleminson

outflow. a And free We driven flow was Yes, the best cash million that mainly a we've capital. working by not quarter small outflow $XX for had in flow. cash free had

going external the from is the into hard here another our on and in earlier all capital working will of on, we sense looks Now, of but are balance volumes to goods. hold and QX higher in fairly into we higher XXXX, decision, for then we'll we And as be to now the customers it strength into us makes plants took too, sense. conscious year, environment we what raw the take of our and and materials on in, eyes a over that that operational of between those of really take makes move sure of the script how good to our enter we volumes we our it's to with see see sheet, we that we've terms we very experiencing, at that will that's said and us the see our year. the as as supply chain look stay make then that supplied. keep think like, disruptions start good And We'll stay commercial it and think and currently next finished expectation actions, flat end that

Stefanos Crist

for you my Thank great. questions. That's taking

Ian Cleminson

Thank you.

Operator

Thank question Please Instructions] go the from next David ahead. your King. you. Silver CL [Operator of comes from line And

David Silver

Yes, for a questions of start very maybe Ian. you much. like with to hi, Thank morning. couple good I'd

that about question compared put you. number stop a levels? talk for look And variances level or the on expense line. sequentially just I the if the variances elevated I for historical forward? Thank corporate with was Maybe of that what and bigger corporate going wondering occurred of this could on somewhat quarter at now. one you maybe that -- to the Firstly, to guess outlook the expense then, year-over-year, one what's maybe just when line I'll I is

Ian Cleminson

good months, had had we an saw and price last we quite And our on compensation. the can credits SAR coming question. this and price a XX -- but bit up share a Sure over both and base, our last that, base, David, share period some as also it's year, dropped from because through of a imagine, you share-based down quite from period

performance in better performance a rebounded This are quarter, seeing share seeing we're we bit. business that's a price and and the better

that I and So, broadly, where delta range, sort there's bit a -- of were now, most that be is what a out, between last we corporate we're us little But about little lower $XX little this are a of $XX quarters, David. where in they are on expect costs year we time and a million depending the doing. could range higher, a million bit tackle quarter bit to would

David Silver

then, issues of been a each and great. you. Ian, the finished guess, a think that earlier of follow-up, But on know, the of capital you how year quarters And just recovery that kind has working know, that versus working $XX net I a could working full three working maybe capital the know address talk total, you Okay, really Thank working goods? total. there answered, number increase about use, holding of on I from I but and is just to more you also question nine-month for you of much inventory first I a so, year, usage or don't the capital basis. incremental the million months, there's a arms and the And product if purposefully about full legs more raised is capital net just last to nine -- to

Ian Cleminson

a that's good David. question, Yes,

across seeing quarter of we've nice has and $XX of year. way Of obviously trading is is cash So, earlier, the about nine recovery you Fuel Oilfield. -- each about all in right really and Performance I $XX fashion; as Specialties would in a terms this of our capital seen been months businesses. improvements is working increased we've the far, million we're accelerating the that, solid in so say, incremental in $XX that three Chemicals because very outflowed million said million to round

business. raw -- quarter conscious the finished -- its increase Fuel is QX, of in to stabilize really our where a expected not, We by the of Specialties' our goods did would fact, we've that the decision we really that would and in levels capital that materials in It seen and working inventory is quarter somewhat. most last business focused and

As we in of have Fuel chains whereas a finished look to Chemicals, to at we've QX, terms our that really decision in been Performance the individual update. the materials raw conscious goods. to complex reflection more supply Oilfield capital, or and that And hold businesses, that's business relatively and flat has both of Specialties, QX working taken long

David Silver

you But I and more kind but I'm one appreciate unfamiliar plans Ian this, Okay, very on that then, and I Oilfield. helpful. Patrick. it question is are Performance for going striking switch over I when did -- kind -- happens maybe additives. I'm or to you Performance couple think just of one for you. of commercial terms popular develop growth highlighted the of Chemicals Thank maybe have over what you on noteworthy. a to Chemicals, But of what the highlight one -- next your the can with discuss little or new years.

provided wide your of customers, typically commercial that sell interest supplied that's can So, or you when basis purchasers? range So, sell are where you expand sales or of such the they on that initial formulation in have A, -- provided an that's exclusive initial the beyond to case a products do level? the it basis, is your or is sulfate-free freedom you customer exclusive thereby are the typically an and words, -- beyond do breakthrough to with other to it come terms up a customer on

Patrick Williams

variety. a it's David,

customer. we of if it But internal our be products, the customer, that Some is sell specific primarily, develop and mass exclusive technology with majority we would markets. to that to specific the

mild, sulfate-free, we expansion previous ago years when and that for where consumer Now, the our fit it product it strategy project we're is but And we in primary the it's is products. a more mild -- Those volume place. we dioxin-free. and component, is expansion customer, doing. four in of it's it's that put the sell plant what put And this sustainable all a formulation and that's chased in as going, this we to general, said well are really our situation X-X mass. these we've with more trends you really could calls, where And to that in exclusive of from get

David Silver

domestic Okay and been Oilfield, your medium- appreciate over then, I would the topline, view business, over the that. Oilfield group? guess, for the thank for levels perspective than lower a kind industry, political I'd energy your, the the recovery more next pre-COVID expected to on longer I I'd other evolving we that production, my you you about it's where level crude see term In in side longer like for get or energy you Patrick, you your and moderate of I maybe, might little I just this be to the of the how to I'm ceiling question. But in and production to in few to this words, have back domestic to opinion, Services whatever extension, years? just know, And term take sight. should by And Or business the wondering case to shift that part the going prices. the medium- current, bit maybe given that if else thinking environment said, don't share like of absolute has given oil longer is could a

of that prospects how crude prices? continued about in recovery to oil level the maybe for current segment think and Thanks. So, given direction

Patrick Williams

want primarily recovery you directionally you David. has think have And of and want money COVID it I It's that before it's in shareholders because are now. of or ground. we well. because when been pay XX%, we've Wall to fiscal are prices companies we different very but to we past. to of than volumes companies. And And for more A so the those XX% return oil cash crude in this the as been going put Sure these gas the past, of some companies from down up, responsibility, Street. back debt, public more a up go that's to an of discussed because see in interesting types Typically, now regulatory, the would expectations B,

into and the significantly. the drilling ground down So, and putting running money slowed quite has

it, I at well-positioned. think you're going We're coming it's pace. to a slower back see

I market to oil will regulatory very stability current additionally nat bring it way to and prices prices. The gas administration. I back, the has due environment a slowed it's some things that much to as bring are think the we Internally, responsible down it we we're next recovery to those for. But growth that prepared and expect see business with that say in the happy would into not going better that a year.

So, probably from next slow, position that standpoint, a substantial you growth going I well-positioned. a couple to before moderate growth. think we're It's quarters of the for be see long-term

a just is waiting-to-see lot look longer short-term a probably that is to does, a important, -- wait-and-see, I the of OPEC there to longer the the is is demand think still make see the and sure but and screen. term, what blip wait-and-see. as there's in what environment's There is additionally to waiting-to-see this not a demand of supply going that of regulatory lot to term, like lot there,

And market that I and think take as to just so, our that market positioned that increases. I market when and it's the just of well time -- we're it's buying think advantage

David Silver

one Oilfield. of got continuum? service -- think smaller, technologies full-service and services swoop, evolve little being industry, Thanks. squeeze to kind a for you've your again of and evolve in maybe fell And your Your prevailing, more more customer or are the to of you've Patrick, you But where to a of might kind when that, and from then, carte side, cost-consciousness tougher that I'm Okay. is might a or the going a of key to what do talked one on shifted looking about access the of in costs offerings. mean more l past, provider on talked are? an and kind when forward? think À away I still narrower issue do on bundling became customers about -- things the menu of you or going are But businesses that we customers. a incremental robust conditions in Yes, just question, in

Patrick Williams

question, interesting an It's David.

filters mean to this the potentially technology to of have market that up adapt some just it it think environment. I that perspective. but inflationary we from of is of at just -- grade-A, specific I we you a Oilfield means is play environment to businesses, have our across We market supply a more chain where really have aside now. we give put issues, right technology in to top technology, where is commoditized that's all because for it's think margin, bring, Doesn't transition which we're technology. And a look different really of

that. we provide downhole chain have that customer Oilfield, as issues at provide have they still that only everybody that Inc. limit limit the it's we've think, around. and that remaining things, probably inflationary And intact in a on and simple to good base done effect -- tackling to year, they rising expertise it's to than that And that that's continuously we else. looking to And we different will look a and And so do, what you'll to it's of because supply what sure that's we better And so, environment we customer Op I do, make as just we we make for cost. well. we'll maneuver and as that customer, move and to have as just as continuously next to blocking doing. we're but sure on pressures we make as us, in return the really us we chemicals is much into the technology technology sure job that see, we're at The specific not

David Silver

Excellent.

very much. Appreciate Okay. Thank you it.

Patrick Williams

you. Thank

Operator

questions Williams for There back further I to time. conference like the this would Patrick are hand no closing. you. now at Thank to

Patrick Williams

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

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

Innospec (IOSP) 6 Nov 212021 Q3 Earnings call transcript