Earnings call transcript Q4 2022

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Operator

Good day, and thank you for standing by. Welcome to Innospec's Fourth Quarter 2022 earnings release conference call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to our first speaker today, David Jones, General Counsel. Please go ahead.

David Jones

you. Thank fourth Innospec's earnings quarter to call. Welcome David Chief Compliance is Jones and and Counsel General Innospec's Officer. I'm This The earnings release Company's and this presentation are website. posted on the

and predictions, risks based on During statements expectations results and The about other anticipated for results will to with and we are current Innospec's that implied events. projections, subject risks statements. could that are and actual from forward-looking to in site uncertainties future materially Please are differ XX-K, these this statements SEC. uncertainties and statements such make XX-Qs, These filings the assumptions SEC documents. other see detailed are and by and the related call, site which forward-looking Innospec's cause

those A is the financial for additional measures had a to to our that comparable GAAP in superior results. in prepared directly contained should reconciliation as addition items to The They In we've the with not financial aid today, discussion GAAP. the financial non-GAAP measure performance most substitute earnings of events also and the release. included to considered or understanding these items financial included Company's be accordance measures. as non-GAAP on impact in are investor

Executive Innospec Williams, are me President With from today Ian President Officer; and Cleminson, Chief Officer. Patrick Chief Financial and and Vice Executive

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

Patrick Williams

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

results set pleased Innospec. am I of for present strong very another to

destocking Chemicals. and the Our operating steady Strong in the XX% with results XX% operating up aggressive effect offset balanced activity in quarter in margin in year the Overall, achieved portfolio Fuel excellent Services Performance and expansion. for was overall year-end Oilfield results income in quarter. Specialties the of

an strong year excellent up income customer the full-year operating XX% The an growth delivered business destocking over in had operating of margin income and the impressive with XXXX. fourth quarter. expansion Chemicals impacts Performance despite

a drove lower business in quarter. inventory and lower margins in and U.S. the volumes Personal higher-cost negative mostly our product Care was and mix Destocking

We continue expect to this in XXXX. first half of the

and will are optimistic volume projects the will the customer second volumes return remain we coming on that the new in in of However, half growth track, year. quarters, and to we normalize

excited construction, other in increasing In industrial collectively prospects end which about and XXXX. our profit registered growth agriculture, mining, very markets, our we're addition, in double-digit

by been by In price for and EMEA an Fuel XX% action very income inflation, impact the continued the high. target between Specialties, and to XX% inflation year. in primary margin year our operating the Gross over quarter where lag grew particular impressive region, same remains range. XX% last track The margins input has full cost below of on the to X% in

We a below in and but our business expect quarter, opportunity our margins to XXXX. target stay into significant coming range back the in margins range returning target is for priority to the

to help our the priorities and remain footprint, efficiency Over customers' in operating medium and applications. fuels term, non-fuel long to transportation fleets advance we'll both well drive deploy positioned carbon to cleaner lower

strong order significant quarter a Services full-year fourth in in have Chemicals drove very operating activity Production to and Oilfield income. record strong continue excellent a the increase had income. which quarter, operating an sequential

the portion sales In a production will we that continue moderate. these anticipate quarters, of coming to

growth can our other However, and very deliver top in improvement we line we and expect margin remain full-year optimistic XXXX. sequential further in that we Oilfield income Segments, operating

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

Ian Cleminson

Patrick. Thanks,

net million, and the million compared XX.X%. compared year from last to quarter $XX.X points $XX.X EBITDA Turning quarter X.X to gross for $XX.X the was to for a $XXX.X percentage a increase the ago. from last X fourth Slide a quarter revenues million by million margin year, $XXX.X presentation. $XX.X The the year Overall, in Company's for was ago. income total year increased million were million to XX%

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

$X.XX compared in a $X.XX operations quarter, exposed also an EPS higher to our quarter our impact EPS due the arising Excluding currency adjusted items the special charges, years, tax primarily ago. adverse to In both for year was of included from foreign fluctuations. to $X.XX

in million $X.XX in compared $XXX billion XXXX. the from net increased XXXX EBITDA ago. billion of year XX% year, $XX.X For $XXX.X million million the income to a and compared total for $X.XX was million year full revenues $XXX.X to was

$X.XX earnings of $X.XX per share, per were we decreased impact items negative including full-year which $X.XX $X.XX per of from GAAP XXXX, a earnings special Our earnings share by In per full-year our special share. reported items, share. included GAAP which

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

Turning to Chemicals up in the million. from year's $XXX.X quarter were last X% Revenues million, for Slide $XXX.X X. Performance fourth

by of and to destocking currency decline production primarily costs, percentage impact by volumes from an down Gross X%. Our was lower raw customer and offset positive of U.S. high adverse the points margins were of X material price/mix XX% a due volume last year, in XX.X% X% impacted

last from X% year to decreased $XX.X million. income Operating

to $XXX.X million and year, million, of full income XX% were by operating the up For last XX% $XX.X from $XXX.X million. increased revenues year's

in volume impacts demand quarter. customer continued of see lower to have We destocking and the first the

expect margins levels. comparative volumes gross XXXX currently and the below the year first in significantly half of We to prior be

and However, online, volume of growth as that period XXXX. customer confident comparative deliver new in the we we remain can levels half second contracts come normalize trading

Specialties X%. Slide of by XX% for the of in higher million XX% A in was X% ago. fourth favorable on Fuel the to reduction and year offset currency X. were million, a Moving reported quarter $XXX.X volumes Revenues negative a $XXX.X than price/mix a impact of

range XX.X% moderate costs normalizes. year last year and million. from from last of lower slightly improved and until will XX.X% our inventory the at inflation increased of margins X% Operating gross Specialties $XX.X remain Fuel income to expected end

and $XXX.X income to were million, full million. XX% the XX% up operating For year, to increased revenues $XXX.X

XX. Moving $XX.X on the chemicals strong quarter in from quarter production the million million, recovery Revenues year. in to $XXX.X orders were fourth in the sequential Oilfield in segments and Very for Services last up Slide continued. other XX%

improvement were Gross on margins X.X last percentage of of income XX.X% a ago. points operating XX.X% a up $XX.X year $XX.X from was and million year's million

last million $XXX.X full up year, of $XXX.X of and year's million million XX% the operating $XX.X For revenues million, $XX.X last from year. from quadrupled income were

$XX.X the The was $XX.X mainly million year full Corporate remuneration higher to ago accruals. Slide XX. were for year quarter adjusted performance-related effective compared XX% Turning due tax ago. to costs year to a compared a million to XX.X% rate

of tax year consequence of are to on in outside fourth share. rate where The foreign having the increase negative an operations the exposed per the increase currency fluctuations. in causing This in is caused they earnings have primarily U.S. and items the impact and a quarter, other $X.XX specifically a

we effective XX%. tax expect remain at full-year the For rate to XXXX,

of In on capital quarter $XX.X XX. $X.XX excellent million Moving the generated previously semi-annual share. dividend to operations $XX.X Slide announced of cash paid This was before from quarter, common per we the million. with for expenditures an of cash

increase full $X.XX a total share, This year brought per for the XX% dividend to XXXX. over the

full $XX.X was million $XX net million during compared the XXXX. to For cash year, expenditures from operations capital after

and equivalents XXXX, no XX, in December of Innospec had $XXX.X million cash and debt. cash As

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

Patrick Williams

Thanks, Ian.

the Fuel proactively Our in growth. made operating contributed in quarter In business order the higher results uninterrupted in businesses we customers. for double-digit and businesses excellent year. strong Specialties teams XXXX, meaningfully and hold to our inventories delivered decision reliable, supply Chemicals our the ensure All full Performance our to to

quarter, best-in-class inventory cost innovation, first expect short-term to continue be lead half headwind in service. higher and XXXX. will partnership our in and this customers, to a the continue to This impacted with of In supply technical we reliability, we margins with final the

Our is competitive is and in term position medium-to-long unchanged. strategy serve we the the end markets that of strong drivers our fundamental

deliver value portfolio short-term despite balanced headwinds. shareholder to will Our continue any

$XXX extremely expect improved is mild natural Cash strong on our million million. flow to the cash position Performance of personal the program, we our technologies. XXXX, leading complete net In $XX expansion and our which was and Chemicals care majority to quarter, over focused in

balance growth and dividend strong complements well will and are our to we positioned shareholders M&A repurchases. position to we that competitive pursue our through and value share expands sheet, continue With to deliver

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

Operator

of Thank Harrison Mike question, question you. Research line Partners. Seaport take [Operator from our to going from Instructions] Now comes the and first we're the

Your line is question. your please ask open,

Mike Harrison

morning. good Hi,

Patrick Williams

Good Mike morning,

Ian Cleminson

Good Mike morning,

Mike Harrison

additional business. been quarter, not bit a Performance the Was little would if commentary color guess is the timing cadence the of more hoping based kind on have because guess, volume destocking thoughts the your I volume, seems your half, in further are for continuing. first the impact? what some I for it pressure on destocking up, like like guess Chemicals the fourth I in in And of destocking, on for volumes maybe

we've But end and I the Care guess should can you believe you're Performance its course comment a or on I seeing within you Chemicals? what guess market pronounced of people the maybe serving sooner. very underlying of the that's an other just destocking you're in beyond underlying that unusual from And dynamic what impact, hearing run little that portion in bit been Personal markets the markets at what was QX seeing

Patrick Williams

companies probably QX. little started the of be part destocking. see Patrick. in there. the it finished latter it's of latter in the lot quarter. We of Mike, lot a will delayed destocking part to saw will It's the Yes still QX. probably sometime I A first in of say destocking a the in a lot We were of

that with But same destruction seen probably has the it. is volume little heard been and you've what there have a we along commentary

of bit You've got a in little disarray Europe. market

a got destruction. to U.S. volume the and some we You've starting see, heard in from bubbling multiple recession the And are waters people, little we've of

as That does much. us concern not

think diversified I take the forth first effect help XXXX, up. get see that, and half, quarters we in and to the portfolio put expansion having -- is a us. you'll say, two think should I the going to that that that through of I is But kick will volumes us back latter into second we'll benefit these part

our pretty while cost while I round second So, our things of behind prepare some manufacturing we're work mean, think And the on we're destocking. we do going sites, to confident. some seeing seeing volume. destruction, that I ourselves volume for multiple scene, bases; to we're going feel that things we're to

in sometimes you some the it's as the you're we you we're And things while fix that speak. ability I -- tapping to So, gives doing know such that fast growth. break think

Mike Harrison

should how right. gross expecting still the you're margins to a progress goes little target QX. on what's XX% Fuel everything Specialties the that XX% on color within going according below sounds there. be And been range maybe to plan? to in like more it But bit All if business, during with year just And that

Ian Cleminson

Yes. Mike. I'll take that one, Ian. This is

you're So, surcharges see inflation lag Specialties, materials also energy we've of increases. mechanisms. in in in have fuels as to continued pricing that labor and inflation we that number our And in aware, always a Fuel raw and from

behind on So, up. price curve bit the action Field still we're Specialties, the we're and do taking continue always way that. in a to little And we'll

at of For XXXX, of we're Specialties remain where We'll end the lower range. the the Fuel remainder expecting price it's action required. margins take to

some help a fuel. EMEA bring top on reopening right will in will jet and is because focus we're that us now. of for Specifically, us, China that higher-margin

we've is really that that return the the we through the of that carry and range of inflation to and normalizes year. hopefully through we through of Specialists we Fuel by high-cost the it's and got to blocking that work second lower through middle view time And tackling out. basic to start need by the range in our the But half should year the move end inventory, the that,

Mike Harrison

QX. then on roll thought would the or the kind strength you Perfect. had in of business, that And QX normalize initially Oilfield off

additional going well, So, to just than customer be forward? QX might even QX? lead not to And presumably wins be why help sustainable some stronger what of as us understand business, maybe changed this new some

Patrick Williams

introduced some to off Patrick. it's we market. Mike, technologies based We picked the accounts some up Yes new that

is some is some onshore, And of it of offshore. it

lot fields. was initial the so, And it of a

forward, see presented. it say pull lot, a bit but will technology that you will look that Oilfield. I our So, at It's a back we in very in side a business, as and beat great we little these we've that initial we of why should still XXXX QX. business beat other moving think, year-over-year, in we that we're wouldn't well, you It's production that's still marginally the in the still if improved after and XXXX confident even numbers. fills

Mike Harrison

that hoping growth, profit putting particular, QX of kind just should of in kind I you thoughts maybe on year together, maybe than earnings could this like QX the then terms flat? all look of And or and or I right. of in what could All was be higher guess some lower provide full operating

Ian Cleminson

This Yes businesses just Mike, of each let at I'll me level. high take run a is that through one. of sort Ian. the

First to Fuel in no us. about for going Specialties, able of be headwinds, a Eddie operating XXXX. in number recessionary even of we business, that $XXX why be the business with that's see all, match XXXX. to And our biggest We income million we steady shouldn't delivered reason,

We've covered off Oilfield previously.

we business be we expect some confident were as but where business, We we where upside that more that in to that move of may that about we're there the throughout XXXX. even we'll to ahead And year. are slightly -- be know

Chemicals. recover in we'll I unknown, The quickly is guess, Performance how

Mike, the of you first QX, a weak much stronger When half will where half the the little that the the all bit we three weaker year, quarters is QX to XXXX. in be and particularly were does start a in and back saw Our is four have wrap recover of first that levels. QX, view that in together, right mean to will to going to going we be and than we're XXXX and now that

that to Chemicals if think we match be down, the and that I overall, a performance, remain but Chemicals' do $X Field just in primarily bit business we're bit XXXX. But will of that that faster, a positioned It's both may And number. we little EPS because of able pegging Oilfield of for little can portfolio. did get Performance our confident earnings are growth. right be businesses now, we benefits Specialties we people slightly having balanced our Performance the back against recovering the

Mike Harrison

Excellent. much. very Thank you

Ian Cleminson

Welcome Mike.

Patrick Williams

Thanks Mike.

Operator

you. Thank

to the from our question and comes next CJS the Tanwanteng from going we're of take question, Jon next line Now Securities.

please question. open, ask Your your is line

Stefanos Crist

calling is morning. in This Good Stefanos question. John. for Thanks for Crist taking our

Patrick Williams

Stefanos. morning Good

Stefanos Crist

break QX? much And just geography? you down the anything itemized should going in was tax impact unusual can versus First, just we expect Maybe forward? how

Ian Cleminson

unusual. saw particularly seen us back dollar, but books, those strengthening U.S. against little Group. is the entities was taxable of non bit and overseas is in our local at functional a QX What caused gains, sterling. have a to a real which out we currency Yes, we've of number that some have local we books, That

primary items. And effective tax distribution high just quarter our so quarter. So, the tax the rate rate geographical forced and the up it or effective fourth in other was for along that the some smaller one was reason with of profits two

are pressure As we They Kingdom. are increasing. XXXX, we rates look into Stefanos, from tax United the our under in

our a geographical of bit distribution will be some profits And higher. of little other

XXXX. heard prepared the the expect rate we effective tax comments, in be you So, say me XX% for to that

Stefanos Crist

color have you what It on great. and Do Oilfield the just That's QX? you. large then, QX about Thank can bit talk are any going upside. they little And forward? you to a plans surprised particularly seems more in your like customers, their

Patrick Williams

the interesting, not It's U.S. in Yes. just it's

expansion. Saudi the have We

is America. South over in Some of it

there were confident just whole a least as little such at that regards to pretty my first to as have fact XXXX basis, probably QX in match see but is feel the we QX I last earlier of QX in back And on in again, to quarters then and that pulled bit and it. if to commentary can business areas. on it very it's So, And some due we'll monitor We match it geographical still continuing the year. that fill. a broad was commentary, just beat will a large QX, the of said

Stefanos Crist

questions. taking Thanks Great. for our

Patrick Williams

you. Thank

Operator

Thank you.

line comes Associates. from CL the & next we're to our from question Now David Silver King and the take of question going

question. line please Your your open, is ask

David Silver

I'm my Hello. that had me? Was sorry. five -- about blanked seconds. I call out for

Ian Cleminson

it's David, you. Yes,

David Silver

Okay, you me. hear can

Okay, thank you.

Sorry about that.

Okay.

cited those But hadn't to but Oilfield just So really into and particular, of fourth so just first, lines of little the much did Patrick, the product want a said your you subsegments quarter. bit, that services Oilfield think I'm about you or I aspects participated. I -- those kind that in within delve chemicals not paraphrasing, non-production results

highlight the you And of in in it robust becoming said one what to -- and change the terms two But I aggressive, the at E&P maybe more participated few just plans certainly does wouldn't or to-date? I over some major could least? domestic seem of there's quarterly on are the of if guess, more that mean, other those certainly perspective, in companies production results, at And some you quarters really from like lead a fully side. those why next join and oil subsectors hadn't they

Patrick Williams

Yes.

stimulation, saying were now lot first side our a growth the we in a QX, like and a little they lot completion, that see was of is some the chemical filled. starting that lot because the what have pullback like massive David, businesses contribute QX. areas in had geographical other of of XXXX. We A in So, are drilling commentary Saudi more production of than to bit

Therefore, we that I XXXX us to say in the, beat gives numbers. that XXXX our probably confidence guess, will,

in other starting And are to in position other is we anticipated. right to which So, sitting we're happy business what the the we're the regions we now. with see very pick-up, starting

David Silver

I it jump to And kind of the the participate about think begin side. completions for general first there in the is or regarding just stimulation thank qualitatively join wooden there? a upturn that. detail to production when they mean, to and fill have But on activities I you start chemical I follow-up different a mean, also and

Patrick Williams

CapEx more gone up in Drilling than different, cautious we originally mid-majors to that a and XXXX. be much. even in has and majors got that -- It's the coming but did are you're in lot they the not a saying putting little back ground

steady. rig count has So, stayed fairly

see you're to oil they're going today's political prices pretty in disciplined environment, today's their with think I capital. not right now -- and in

And at so, drop rig North see don't we count least a in massive America.

activity areas is well. which America, in We are to where North see in that we outside some you'll continue benefit. as seeing increased XXXX other I think And

David Silver

a great. of to like questions. ask financial-oriented maybe couple Okay, I'd

First on capital spend.

XXXX a Performance case there So, to some number and activity. just the simply that's or year less. all expansion CapEx penciled being for I million are into $XX summarize, CapEx XXXX higher pretty I'm maybe assuming going Could just about in you the that had the related this much total to some elements other in on? deferred this is of Chemicals came

Ian Cleminson

David. is from of Yes, into some Ian. in the you're going got spot timing pretty there, parts the half year. got on first early This much just XXXX. We've we've the a coming No, thing. on additional capacity rollover XXXX That's of

we'll But slow is cautious as our right and the sit down. well Now, we little bit a beyond now back that more will that here strong. things business be perhaps may we intention really come

that to expecting volume going that million original need going additional by Chemicals. capacity. have we need We're of the Performance to We're year to the in $XX and middle additional fundamentally our are program completed

a thoughts little our our you've really of are unchanged. but programs of bit and got little fundamentally, a delay, just bit So, timing delay,

David Silver

Great. Thank you for that. working other regarding capital. And then maybe just question one

in was of think the I And that for year over still pretty this the fourth working working for Can just this of that year XXXX? overall a maybe capital. run as a kind I working is follows current continue XXXX? you So, talk the build-up capital a on capital quarter. of use think source Is level you. to to business course in to meaningful But something the level in be working of by the current full XXXX my So, funds your there planning of in measures, should use for net a year, regards about of release I use, sizable a that? Thank in I well. the capital working mean, of rate in think regarding just capital of

Ian Cleminson

So David. Yes, Ian, again,

that our very we reason could high three successful of the decision businesses. took and inventory the did was of levels that part we things of of materials And patch. So, the and that, to hold was conscious talking across is we that that about supplied and we the one so throughout all keep so year raw a we've were across customers been

a going somewhat of Performance But Chemicals Oilfield bit. see certainly, business nicely. Specialties kept in did We as an and really the slowed little unwinding Fuel QX

the as to that of expect in both are, We towards increase Performance increase probably working Chemicals grow higher end continue of with the steadily do at the capital But probably volumes end XXXX working Oilfields. system, as small Specialties a inflation in the and Fuel we in and capital. we we

So, in next a strong not of XX see quite the will an be months, expect in big to expansion use EBITDA lower where as year. capital bigger cash you flow were a capital, working But in a a we of cash but see you and level expansion, bit. nicely this little above with we will fully our working

David Silver

this ago? more -- improved Just characterized that the Okay. translates very your level No, a valuation or may Thank the little Is just deal Thanks. Has be project question for last and comfortable in elevated last helpful. uncertainty on quarters? the in current your how then anything a on that's funnel relative M&A from into a or trigger so to perspective? are particular current outlook. you of the year And thinking valuations you. pulling few the -- either environment about over environment Patrick your meaningfully maybe shifted maybe by one,

Patrick Williams

Yes. an I'm I up. Thanks, strategic it our gets necessarily don't opportunist, [technical changes with rates, and dried Dave. think difficulty] thinking. the high-interest

point a at there's you some into who going think obviously, multiples. negative balance time do And sheets, in effect I there. a so, have companies rollover where have be leveraged there's And to

to starting some we on So, are multiples. see extraction

are would interesting coming to We see to market. I starting say, more deals some, the

active. very remaining are We

do to in the down scare quite market you that frankly, sheet can rates if our interest to when -- balance multiple. right with right that's deal I And going a me buy at the high not with It's very very, get well.

will transformational. do a everything. find that But looking We yet. or they're And few disciplined We're we're that hope this so, we buyers, and ones is at very something don't way. whether things we whether tuck-ins, we'll remain smaller the that know year,

sheet. We're very disciplined with our balance

to Our in view, be take we time, increase David, in we active we'll shareholders. can more But able to the deal dividend to to dilution. point and, market. repurchases prevent And and we'll the importantly, announce advantage and in the when we're actively be to is at continue a continue hope to of share market, some our

David Silver

I appreciate Thank Great. all you. the color.

Patrick Williams

Thanks David.

Operator

next Thank Instructions] the comes Shaw Crespi, the of Hardt. from [Operator you. line from And question Christopher Monness,

your Your line please open, is questions. ask

Christopher Shaw

How Yes, hi. Good guys. you doing? are morning,

Patrick Williams

Good morning, Chris.

Ian Cleminson

Chris. morning, Good

Christopher Shaw

most ask, products guys You pocket winter, of quarter cold covered flow Europe, the given everything. But I well? the or the be America year in bad an and to North was am there in as it Specialties to in just is warm going first going from air last both Fuel

Patrick Williams

No, it had I there. about well. or the quarter It as the have think fourth hasn't way a a decent that same first decent year. other. last affected quarter we as us was We'll And one really

Christopher Shaw

impact AvTel just move but the aviation sustainable thought it at you just And is the second, a I something of does it. require... still does to business that Got fuel, know or all

Patrick Williams

mean a We're happening, until way the quite it's away. everything off I a ways on going goes -- sit that's that panels. watch off AvTel on. We long We're we Chris. from

Christopher Shaw

Got right, lot. a All it. thanks

Patrick Williams

Chris. Thanks,

Ian Cleminson

Thanks, Chris.

Operator

Williams Thank our to over I would conference further now remarks. hand Patrick There speaker, you. questions. no closing to are the for like

Patrick Williams

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

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

Operator

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

day. You may Have now all nice disconnect. a

Innospec (IOSP) 22 Feb 232022 Q4 Earnings call transcript