IOSP - Earnings call 1 2023

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Operator

Good day, ladies and gentlemen, and welcome to Innospec's First Quarter 2022 Earnings Release and Conference Call. [Operator Instructions]

I would now like to turn the conference over to your speaker today, David Jones, General Counsel. Please go ahead, sir.

David Jones

Thank you. quarter first Innospec's to earnings call. Welcome release posted on earnings for the are presentation this and the quarter The company's website.

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

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

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

Patrick Williams

present set welcome Innospec's good Quarter I First to and pleased XXXX to David, everyone Call. you, results another for Thank am of Innospec. Conference

misappropriation and results offset million of activity margin in partially improvement strong $X.X balance lower Specialties. in Our Fuel and portfolio Chemicals Performance oilfield delivered this inventory quarter. growth outlining Sales again in services a

we impact destocking to soft Weaker believe Performance a that Chemicals. will in a term, uncertainty In demand headwind. for negatively and margins efforts customer remain As and quarter. near the expected, economic the this was continue volumes quarter

customers' formulations. in plans medium- see to and natural to we more to our mild no long-term change However, shift

that opportunities well any margin focused technology beyond remain developing on will Our short-term position recessionary and improvement priorities concerns. us

sequential quarter. begin new gross we inflation The growth personal contracts required. This our prior As margin of with and margin to and sequential a have care margin some where for In to Specialties over take continued the quarter, improvement. improvement. price in strong improved the markets, sequentially pace of combined our operating slowed has mix income targets action sales third contributed Fuel

As and to income Specialties Brazil. Fuel in in Fuel Specialties' by XX.X%. were expanded million this, Adjusting XX% release, our earnings gross results grew margin impacted operating $X.X of misappropriation for million $XX.X by indicated to inventory

matter. Global We actions pursuing event, business to are improvement opportunity legal related a this Fuels XXXX. aggressively for and focus our margin Despite remains in this key isolated

at expect year. of these efforts lower end the of gross the to We through the range end support target our margins

further quarter. Strong drive an with to combined had Operating Oilfield operating in in excellent income growth activity, year X.X potential Services Production growth. optimistic X that year XXXX. we deliver significant can over improvement Oilfield the orders prior Chemicals and sequential percentage we in times our Despite was Chemicals, feel continued segments Production growth margins by points. for moderation some order full expanded in gross income

continue business. the improvement across In addition, pursue we to opportunities margin

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

Ian Cleminson

Patrick. Thanks,

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

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

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

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

the Our decreased decline of in due of XXXX positive same and sales last a to a by was compared from currency offset weaker XX% volume X.X decreased margins lower mix income Operating XX% adverse and impact production to volumes. year price percentage mix XX.X% from resulting manufacturing Gross by of X% X%. of points an to million. adverse variances quarter XX.X

points X. was the stabilizing XX.X%, of from $XX.X a to Slide pricing X%. million, catch A and below allowing $XXX.X million. ago. XX%, offset richer million of prices, the operating ago. in Adjusting the million Specialties down year million XX% slightly raw Operating to from the adjusted quarter Brazil, positive material on Fuel benefiting mix $XXX.X of Fuel reduction from income of a partially mix was year margins X.X $XX.X volume reported price from down impact percentage same gross a year. sales adverse first were last for of gross $XX.X a in for Moving XX.X% in margins currency Revenues were up. misappropriation quarter $X.X Specialties Adjusted income million inventory and

million, the X.X year's million in Revenues $XXX.X third were quarter up $XX.X $XX.X the increase percentage were XX. Oilfield year. million $XXX.X the year. in of XX.X% was Slide over last margins Operating services income last $X.X to Gross on for prior XX% from up in of the a quarter XX.X%. on points Moving million million

million rate company's higher ago. being to compared the of was XX.X% of The the in costs effective tax jurisdictions. increase year are to share-based compensation primarily $XX was was XX. $XX.X lower to quarter for to tax accruals. tax Corporate ago, the a the XX.X% compared for The mainly quarter because effective the higher a due proportion million Turning profits rate Slide year generated in

Innospec with inflow of generation back March on over quarter and cash broadly Slide had Free $XX.X $XX I'll Moving debt. million in neutral comments. XXst, final cash operating low for some of cash with million $XXX.X software Patrick to developed it And internally cash expenditures XX. no turn and to equivalents million. was capital now an for the and At costs

Patrick Williams

start income year Thanks, a good Adjusting for fuel Ian. to for margin Innospec. specialty misappropriation and oilfield was and the our operating services This the both expansion. businesses one-off achieved inventory, growth

continue supporting results balanced the We coming expect quarters. our our portfolio to in

million, improvement to pursue on along in focus our and Our to record Chemicals. M&A flexibility continue to operating growth on sequential net $XXX while in margin in maintaining growth. With invest businesses, with potential over income all cash we deliver of value shareholders organic return Performance remains

board to This quarter, in approved our share. increase our a semiannual per further dividend XX% $X.XX

leadership, innovation well customer medium pristine over partnership to positions balance navigate and through term. with volatility. customers, service remain we growth In footprint sheet, economic the technical to any excellent Our for global technical well our us and long placed

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

Operator

first Mike Partners. Seaport [Operator Research Instructions] The from Harrison from question

Michael Harrison

you hear me Can okay?

Patrick Williams

Mike. Yes,

Michael Harrison

of terms guys your We're pass-through actually some been strength the Fuel business of margin inflation interested up the inventory seeing? on have you lot where a pricing are you've know caught in maybe exclude strength? very we in And you index that are comment with you sustainable has margin Great. exceeding Are costs. you've do of can point now your your moderated? -- input I where you a to Specialties some Or at contractual that costs the How of pricing with input now a maybe with that if issue. view the we

Ian Cleminson

Yes, me Mike, let take one. that

material So where some yes, material parts coming Fuel stable, do pricing pleased raw seeing Specialties. down, that. we've from on in in needed we're to really are still It's and little the patchy a that taken some environment inflation with some action bit areas. the raw are quarter of We've

a So it's not picture. uniform

certainly our pricing a on up high-volume, of the we've more high-margin we've a [ of that quarter, the right to lower volume, quarter And sold in first It's our much and lot this mix achieved ability proportion a year. seen business, done in we've where lower really You're the low-margin first strong also business. catch sales of of ].

there's strong in really us. there So a mix for

We we full margins XX% be full So to we're still and what that's customers, we the feel year, going and If keep we're XX% the aiming that to in the going to achievable, think at suppliers pace at, keep gross pricing good our is for. very is strong. underlying we're across year for be can our the working going with and focused shape.

Michael Harrison

of the see any if even in on All chance guess a there mostly curious is any that occurred I that take that can think to is Brazil? you color inventory provide action portion that And you misappropriation there recoup loss? right. we're can you I And

Patrick Williams

of we but recovery a are not at to it's inventory, recovery of situation, fluid the dollars Obviously, only of legal Mike. under but go it's lost. now, right loss the full the going Yes,

It charges. all $X.X criminal So There's full could sitting civil to it's million. be recoup legal. definitely are there, we after out but that go going under charges

Michael Harrison

on, All to you've Chemical's right. there. Performance business destocking I there the looking where destocking like dynamics underlying what business? patterns have guess, any and for is inventory the And last are seen still the within the Are started with do weak, demand order of I course? then that on going sense that have PC now question some pockets that customer are run you Has its

Patrick Williams

There's still guide inventory some some at. still on. Yes, there's sitting destocking high going

part a bit see volume of coming see with of quarter, consumer the the all coming that part not year, the from second to We but the second we second into we are erosion half little that the year, signed have starting of that the contracts during improvement but time. the of the

we QX. we'll quarter quarter and seeing as then improvement first QX, think sequential a in start see you'll I QX, in similar So in saw

Operator

And the Securities. from Tanwanteng next Jon is from question CJS

Lee Jagoda

Jon Lee Jagoda for this actually morning. It's

speak on kind sits of your any remind at on amount Just that to normal compare Chemical's today? where the inventory and take I then are the there comes customers weakness. more down piece. to question maybe you that and pricing are -- is inventory of situation us period and today? Can kind the hoping piggyback contracts we And last of for the the Performance consumer you at trying customers waiting some mentioned the where know a to versus But to new

Patrick Williams

No.

the lot early of preordering tightness I was of raw of material the in to length there on, and a get the because materials locations. time to raw think

of lot during preordering a was there that prepurchasing time. So

We're slowed they've obviously, as order little there. days destock they're inventory. or had what trying we of again. X had X saw bit, to a people There's instances sitting where market starting the now to Now

to So it's X down. quarters slow everything of mix last that's caused really the a

I quarter, QX, and QX start which said earlier, second new see it we'll itself think shaking this start that it's bit and on But it's as will little the industry. then seeing improvement in coming a we'll our really contracted in again, just I the but cause of volume not and and and company a you're throughout it's out, seeing process. everything, effect, chemical the throughout

Lee Jagoda

gears to that you're at it. the multiples? the level projections Got Can to environment. targets And all your how seeing around those you're switching your of what out in M&A you macro of just the terms you balance speak there, And sort EBITDA uncertainty both things given comfort then looking and then and together?

Patrick Williams

at we We're seeing portfolio don't volatility out, Yes. that seeing think, it. and compression. and to X to not there's shake to to If between our something still the come months. the but I look next will fits that purchase they look multiple down. buyer market think we're is I over timing acquire. multiples need seller, or good, disconnect itself acquire a But we'll X we mean find as we some

needs they are and what rationing it's starting are. people portfolios their We saying at and to should wants could looking and -- see

see are businesses to we more come so And starting out.

done by or the multiple, at if our be this disconnect there. think year. And where the along, it's have should with there's rates at one But get a they still they balance and a and to again, don't that have is opportunistic with they there They We're getting looking being market we're right is, offered we hoping lot. it's volatility, lot. a an time they looked something see are comes think I issue interest disconnect. sheet. think still x We

Operator

from The David next Silver Associates. is CL from King question

David Silver

had I questions. a few

the follow on from feedback maybe could up down. that's your caution, shift customers. let's in shampoo I been to I that background temporary personal company typical trade think idea economical Performance Chemicals. follow to say, that some higher cited. issue of down mentioned more other purchasing thing? consumer, hoping is phase I your was product and a from surfactants a And be the to variety. back of guess, to Is care customers' you related and that I first you've a one I'd before But they'll And from some share the like Is value, is their a that from for product? one of by perspective kind a particular, makers, would the trading the sulfate-free

know, once longer a the move is if more personal perspective, consumer from your passes? or stickier last kind don't maybe thing. by I Or their situation recessionary or of a trade period down

additives So going trade on is planned trading tend economic about some down long course, here perspective? expansion ramp-up is sticky your customers' and in a of other words, And formulations. decision it those down some be? that of lasting that -- and your I'm to there business of does terms thinking if of or period in from is higher-value in uncertainty, that in How how

Patrick Williams

been before. through We've this interesting. it's Yes,

in things a the and recessionary had we be first found we point process through when Chemicals and high some went end, we diversifying of Performance out is inflation end. the time that portfolio in low mid was time. And to One of our this at about in

done a of portion that so portfolio. we've job of the that. diversifying We've really And good done

towards see So to coming what you end. high end of is right you moving mid-tier back towards a the they low see recession, mid-tier and start the a go moving you the out do high end. once But do

been it. we've so prepared And through for We it.

balanced Chemicals. in in well we're portfolio think I our Performance

we out more times see had you'll so uptick natural, consumer QX. uncertain contract the mild uncertainty would And you coming the start over in cetera. us that as think et the these see up just -- start you the QX, see work of And to buy think couple in next of back from I I quarters, will the that to

David Silver

meaningful They in the spending in quarter you're think me each over my year, that perspective model, I'm capitalizing us outlays What's long, so capital let can portion amount forward a you the your little that last last of a only addition portion. to -- or question give for maybe now on anticipating? shift the going you're going that some amounts, fourth software actually, And here. costs. the what it's And hold to starting But Actually, just out in you're project total hopefully. how about Could booking we investing noticed normal think budget? now I for the about quarters. is? to X a should CapEx

Ian Cleminson

David. Yes,

preparation global So into preparing then what be of implementation ERP we'll a and XXXX years. but we upon done all throughout a to million, and that embarked our SAP around our business, We've to consolidate the roll is and probably and Americas X in total, that APAC systems. work lot of project EMEA next put over the business. off of XXXX, spread In 'XX. also the we'll to over our most will $XX roll about be will

And our to and we our have lots a us business better, profitable in on track. system shape. of simplifies good is we're business, here we're So make insight of target gives that that pretty early global fairly leverage more so in design, stages Everything can and decisions. is

David Silver

or first business Patrick want sales I I over characterized top operating then And results. Oilfield and ago, fill Corbin up correctly, this lot quarter had X-parter. to quarter you've it. is temporarily one that mean, will if swing Services the a do this may and think outstanding second really recall volumes. income And probably it end I where I as consecutive Got be line a But of being of to have might boosted kind

of attractive Or be still very might blush new from the your something you've Are by the the Is case? fill growth of early gains water-based on? you Looking of, some of, kind first that margins. fill or customers? and else this quarter of there this another at suite is Is products Or historically -- introduced? going there kind it extremely still that know second your share factor? incremental new consecutive

Patrick Williams

of bit both, little a It's David.

some pleasant, of of expansion customers, volume little also expectations but surprise, of but some up I wouldn't technologies, have think and fill, saw there offshore business. areas and as was business I all we've first maybe as We a a similar picked that with new were And other grown say growth that growth. really a a quarter I QX. balanced bit new there in it large QX, think for you out in still internally, delivered see you'll expanding the into quarter, strong you'll see probably customers similar

sure where working working we're all in businesses very we those still and that quest times. like and pleased strong, inflationary we high But some Oilfield where this on we're pretty we're is our there customers margin make There's been with continue hopefully, diversify technology to growth. we continue areas, that that happy of improvement on are. to as this long-term during with of some in just And It's best our portfolio, the very of is.

David Silver

I could the just if naive, please. follow from And value that, highlight too here. water-based but sound other new this new customer's are just up doesn't of could being effectively so products your suite marketed or how I the hope But you maybe or on if perspective products proposition

I know, an up other expert, not much really a whatnot recall, coming So the to you the in in shift need drilling water-based words, formulation, but I'm and fluids energy to past. don't

know, would the really the superior you -- traditional factor? growth? it's, So of are is suite your with basin products, know, you you you But success, know, attribute, kind of shale your with what this you know, know, what, outsized is both? customers? recent Or another environmental there the formulations it that this is Or you the it basis is the performance? case where for driving Or,

Patrick Williams

It's service. ESG it's changing service. Yes, technology, It's onsite footprint. the excelling and in all and customer of customer the It's excellent above.

in and company, of business this us those X enabled that provided, the we're So opportunities year. it. it's looking given grow finally many conjunction expected, last and to have over the change that we’re and the that's literally, growth the for us obviously, it's business this all getting of and to dynamics And we

for the long-term is make sure it's key that's for management the key -- to our sustainable, Now and focus and team. key

David Silver

one I Okay. And it. appreciate last just one.

With kind not an tremendous Just Oilfield think I perspective, I But a meriting kind of mean, building discretionary from was the be Oilfield. of of you've excluded from on considered amount to couple it again, M&A year, are. best last quarter of M&A the from quarter. regardless kind record quarters last perspective -- second an earnings guess, of, capital first best opportunities what of this this I of

I use assuming some I'm an in are mean I'm kind advancement and business. the assuming of But are there. there your implemented who some maybe, just attached targets maybe product less to some cross-sell this this for opportunity that some there's additional people M&A opportunistic do kind gateway is strengthen overall commercialized you've this know, to you or offering? to or product of or you get

Patrick Williams

Yes.

think don't at very you of what's organic depressed that's Dave, growth go acquire, it's as in said, need necessarily growth because where though we I enabled more growth, to today. now right not for are We're even out the multiples, -- geographical us and oilfield we're market. the

think of shakeout XX going falling, X crude months. going there's to a some a bit be over the I quite be shakeout, next prices especially when there's to to

chemicals if again, up diversification it. diversification, oilfield is of focus right sense, M&A, more it and geographical product be right lot is to the specialties. But as that dollar makes probably growth, at But organic focus oilfield of there the there in on in or opportunity something a pennies either is that now, diversification. would on pick comes now, very of our look or could the fuel And we a price? up, the performance something Absolutely. Now side on low for an time at

Operator

Research now Mike We Seaport line question Partners. are the the Harrison from of taking from

Michael Harrison

more couple was in about you came me. I mix ask Chemical's where weaker wanted kind that for a And of the to mentioned than been Just lower. Performance trending. I That pricing. it's know

still price some the us pretty maybe in on Performance strong So front you're Or give seeing is the there? Chemicals? color pricing mix what on pure

Ian Cleminson

performed of like. lot the as for Performance helped mix hasn't higher-value sure. as A quarter. Mike, would this products That's our we Yes, and sales well Chemicals us haven't

pricing a pretty prices. holding a We're Pricing the Performance it's say Chemicals. customers with under not lot and through having work is there's isn't pressure mix to of quarter So quarter to work certainly mix of, in But certainly generally is And reduce impact I helping our easy. work and in holding the in us. the we're suppliers there. up well to to with having sales that. What third would second generally, way

Patrick Williams

Yes, we inventory I some sitting too. that there, still think have there's higher-priced still

that's we need as hasn't get that that's We that -- to speak. close helped rid as said, to that, of and Ian we're So us. happening pretty

Michael Harrison

issue. earnings. seems of sense an And I that All you're maybe guess either inventory half approach maybe you as little $X.XX guidance it looking My bit to or just as probably get looks year if Performance that next on level. Chemicals, for right. the for thinking a back number some add improvement this to we in full that the get with quarter all we then the quarter And could similar is full year next quarter, you second up, kind we're into the add EPS like expecting the when about

you math issues kind curious any if there? of with Just my there's think

Ian Cleminson

up by okay. quarter I that's I'll set of just Mark, if quarter, sort think

in winter to little that better. stronger all a of the income. where usually QX about performance do tend X, perform business round $XX be the a And broadly, same the we Performance Fuel million the that quarter in the of QX period we and as first heard Oilfield operating the do yourself say business for to So quarter. you've that be Chemicals Patrick the we probably Specialties, remember million $XX bit and In you expect to see will and because

that things. the the and current expect going look to that. like is how bounce to lot I oilfield we retain of are the absolutely level. in And it -- to we year our think One it Performance are expectations full X business long at depends see on will a we we the year, back out and of As middle really Chemicals the

probably but We a be a the we'll $X.XX I would at right lower guiding certainly say So be that top end than of your now. that will bit that's target probably towards range. little aiming for.

Operator

There the Patrick closing back are moment. the ahead. remarks. at go Williams conference no further hand I for questions to Please will

Patrick Williams

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

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

Operator

you That concludes today. for the conference Thank for participating.

You may disconnect.

Innospec (IOSP) 4 May 232023 Q1 Earnings call transcript