Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the Innospec's Second Quarter 2023 Earnings Release and Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advice that today's conference is being recorded.

hand over to today, the like Jones. David now the to conference speaker I’d ahead. go Please

David Jones

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

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

measure to or earnings GAAP. A Executive Officer. items directly Chief the and had not In those With comparable and non-GAAP company's are financial measures for financial of as our investor aid in addition measures. be in Officer; accordance Ian financial prepared contained from to They Innospec also included should considered discussions and a President the performance most today me Cleminson, today, Vice Financial The President non-GAAP is substitute to reconciliation additional prior in we've GAAP understanding Chief on Williams, as with impact release. included and the items to these results. Executive of the events financial Patrick are

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

Patrick Williams

have call. quarter. in to quarter Brazil, a another in further to in first continued everyone offset Oilfield our for the Chemicals. weaker Specialties, and conference exit charge Innospec. David, you, Innospec's misappropriated was second we in relationship results Field welcome, good In inventory quarter Performance trading to where taken activity Services was Excellent this Thank Overall, XXXX

EPS our and charge, gross which over grew, Excluding and improved $X by reduced margins EBITDA sales $X.XX, this million year. our prior the

was inventory, customer again Chemicals in volumes, As cost the impacted expected, margins and high destocking drove by Performance and mix quarter. lower which

will drive Care headwinds operating margin of sales, expect half income second Personal to improvement. contracts our we these likely into new sequential the and While carry the year,

focused sequential operating and order Our priorities remain XXXX sales our to improvement to levels. in executing run on margin to rate income return

price action offset continued Specialties, lower slowing quarter. Fuel partially the In volumes inflation and in

noted XX% our in expect this last balance the million As unchanged gross Brazil remain to earnings gross we of of charges expect versus Brazil for range quarter our margins related margins target to We $X same range XX%. do the and in XXXX. in to remain and adjusting were release, further not for charge, the year any

on margins We Global Fuel team. focused In impressive margins, very to continues to growing had our terms as another of operating XX%. focus be Specialties key opportunity Oilfield quarter. sales, and remain while a maintaining XX% target for the Services

segments growth. with Continued strong significant combined chemicals, production further drove in activity improvement our oilfield other organic sequential in

will percentage operating on points. for lower over year the significant track we year was activity, margin sequential XXXX. In prior that income times by X.X remain full Operating gross we moderate in X chemicals quarter, and but income the growth anticipate expanded production on

and line We continue our to Oilfield all pursue opportunities segments. top margin expansion across

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

Ian Cleminson

Patrick. Thanks,

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

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

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

matter Our expect exiting EPS continue pursue do to adjusted and trading insurance charge both legal any the to reduced $X and from further We recoveries. Brazil which our EPS charges of not $X.XX. million $X.XX includes by the related relationship, this we

in down negative X. same last million, decline Turning the Revenues margins last Operating $XXX of weaker and XX% X.X lower XX%. by Chemicals to by to percentage of from mix, inventory higher in variances XX.X% to Slide million. resulting compared and Performance manufacturing year's sales year in XXXX, a million, from decreased volumes. adverse income X% volume Gross XX% due quarter a to points decreased $X.X of production cost were mix driven from $XXX.X quarter XX.X% second for a

positive Slide from same to million, gross last $XX.X on below from Specialties year the the year second partially Revenues and gross Brazil at margins unchanged operating were a in million year margins Adjusting income $XXX.X X. last $X was Specialties ago. Operating were million. for Moving quarter X%, adjusted were XX% of a was charge, versus points percentage Fuel same a income the of volume. offset X.X million Fuel reported $XX.X XX.X% the price/mix A $XX.X quarter reduction year. million ago. down in quarter down million $XXX.X for XX%

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

the primarily as acquisition million to $XX.X proportion accruals ago, of share-based tax were costs. $XX.X were year XX% quarter other The Turning effective XX. related was XX.X% for profits compensation in effective compared partially million Slide company's to a compared because costs a year rate decrease Corporate lower lower with offset and quarter The generated jurisdictions. in the for a ago. the higher tax rate was the

Free on cash Slide expenditures the an of quarter capital operating $XX.X before strong with cash was Moving very million. inflow XX. for of $XX to million generation

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

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

Patrick Williams

headwinds. in another Thanks, Innospec. last Ian. end overall and Throughout for quarter This our year. XXXX, first face significant for of was Brazil performed growth good balanced charge, delivered of very the expansion has we market half the over portfolio EBITDA Adjusted the margin gross well

business stay focused of its runs on long-term will to return and course normal key patterns, growth, drivers service. destocking the we and As our best-in-class Innospec's innovation customer namely order teams customer

to and on cash returning our shareholders, excellent the With of in investing in growth organic quarter record we value continue flow M&A. cash $XXX million, to over and complementary of deliver pursuing net

dividend return to of with million continue long-term our well growth. placed $X.X we semi-annual and quarter, This repurchases. with to share In partnership for shareholders value $XX.X we million our customers, remain

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

Operator

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

Please open. question. Your ask line your is

Michael Harrison

Good Hi. morning.

Patrick Williams

Good morning, Mike.

Ian Cleminson

morning, Mike. Good

Michael Harrison

the you about you're terms order expect and Can Chemicals. detail monthly and to start you rate from start with trends, of terms of of might more when in to what hearing normalize seeing little Performance maybe customers patterns again? I volume you in what see to in Wanted destocking are bit a talk guess those

Patrick Williams

the But in starting Yeah, Volumes QX. pick view fairly Mike. patterns to pick were It's patterns we Patrick. stagnant we see QX. good we're a difficult We and days pretty of in order quarter, end get about up. towards XX No, see the saw advance. to up obviously started a the

behind at slower they quarter, go are And pace than markets up, are starting we're that continue and us the to the that up we're albeit destocking So cautiously the going a but we'd volumes in been normalize. third has optimistic quarter-over-quarter. to seeing hoped, put

I So suspect we volumes activity. be to hope somewhat beginning next by would normalized that and back QX will year QX and and

Michael Harrison

decline, you And that that Chemicals in listed categorized price/mix. right. would normally All Performance as see X% we

what what mix, a in with happening quarter give and on was on pricing basis your lower? can called just color the drove You you some more it year-over-year mix

Ian Cleminson

the preference is hard higher with higher businesses hang the and that's (ph). not a of on were of sales very We've year-over-year. with that mindful little of and business Ian. really sort is mix disciplined the the very margin Mike. worked lot end, of backdrop the we're been business prices Yeah. customers down maintaining the price. high against We inflation to Yeah, really bit has pleased been This But ability a and in easy

was So we price didn't yeah, by this and quarter. why there. business And job great it as out call It the just mix a mix. that's

Michael Harrison

kind in declines of than additives you business seen just and Specialties a we But know that expect on All you that revenue on seasonality. bit participate was were this right. some that opportunistic then we've seems there. or of some normally what the volume exit basis. business it business more you step just a that of just And sequential prior in showed due and related that margin lower down little I the bigger Fuel reselling like to might to be curious the decline might those

in curious, just customers business, from underlying any other some Specialties saw that you destocking there or maybe is there? I'm on So going in Fuel that your changes demand

Ian Cleminson

Yeah.

business drop a We that. probably any there's away certainly saw And more very what similar saw think we I margin some business. we Specialties Fuel higher destocking. think year-over-year, we've in little I bit QX seasonality lower it the in volume, covered not seen and to probably

we winter been be bit like in this QX seasonality pandemic, the For and relatively business of we we it's QX and based flat back feel do year, we'll couple as have QX. years, of the off as come the little last a lower come of will out the season, on but

Patrick Williams

at did a dropped wasn't that. as we There off Ian that big some there's like a into looked products lower (ph) I commodity it when Yeah, we Mike. dive because quarter. was said, deep (ph). mean It a cetane AvTel concern do

would nothing us. and There's business. that ask of no So customers or the loss look there really at concern was that, of that any you immediately

not think quarter. in with concerned whatsoever volumes saw I that overall, the the So we're we

Michael Harrison

-- million sounds be then maybe you see of right. earnings get Fuel is decline, and it a sequential do adjust $X don't like impact. sense kind sequentially what sequentially. bit the expectation maybe out But And expectation Perfect. then Chemicals is net-net, softer sounds for my All be little that where last it to of just better, would Performance like a little Specialties the question is let's Brazil going a to know better going sequentially? would but And I be to your bit Oilfield similar that

it So should Thank similar to or net-net, you. be does QX pretty QX higher? look

Ian Cleminson

Mike. Yeah,

Let me pick over come Patrick up on that top. and will one to

QX in volume little improved So especially Performance be quarter in business-by-business, through, And feel started is we expect we our And that we're we comment confident. shape. say more better more sequentially. getting to Chemicals to the a bit

to we've that million be think We'll around. that's income. Specialties, now. to think are of had it around be there again, operating $XX somewhere we'll don't go expectations Our $XX our plus $XX million $XX time above In a probably right of Well, Fuel range. in very quarter I expectations similar million I this operating what million will that income.

of is We've of in range we expectations some more sort growth still to think that businesses. -- be will income. tempered terms other parts Oilfield little of million We're a business. year-over-year $XX $XX bit But that difficult. in million of more in our seeing that do our operating in tremendous the

$X.XX similar Now EPS between that some as $XX best two. package to range. be around expect go here guess might broadly together, When now, quarter. to on all you somewhere in now depending $XX our where that operating that are up we in and is the But could is to later I million very orders right we sit income million Mike, which that would come quarter $X.XX higher

Michael Harrison

Thank Excellent. very much. you

Ian Cleminson

Mike. Thanks,

Operator

Thank you.

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

question. open. your line ask Your is Please

David Silver

But a just morning. to going I'm to Thank minutes had Good late. in Hi. I join questions. I the do Yeah. apologize several have few call you. advance.

just wouldn't just I quarter record the say in if quarter, third both you mind, the Services, So and this probably would a revenues operating it's row. record was firstly, in mean I income. a Oilfield And

that. have was that and may was was some a guess, think initially, like or initial I I there this there sale Patrick there when So Ian thought commented that benefits things pickup,

Is just substantial Is the you comment products? whether new of on outsized But pickup? especially just the quarter. this some of -- the new continued strength it's if could kind Maybe say to it the what's sustainable? think with this share products this competition. if and gains cyclical, with you or Is whether it or exit were different it's your performance you

characterize your let's quarters of could you quarter? the if let's Thank this three what's Just especially comments the third kind led strength, you. and comments considerable sustainability on your say, last beyond the of say, to it, on one. And the

Patrick Williams

David. one Patrick. -- It's Yeah, specific everything. share little It's just of gain. It's it's with continued pricing bit a not progress global. It's and area. It's

a all enabled and a I fills, we the think job share more done really little picked all. we across And within look quarter. strong have been have pricing, really it's Oilfield us good to of really up at bit and expansion, so saw another margin business guys the where businesses technology Specialties that initial of second gains, and to

kind could last think started quarter just to of and We really have on. continue guys it this get strong but we thought going some the But that really -- be quarter, forward job think, he I will very overall, fourth a in it pushing quarter. to don't got the some I would point gals alluded But would Ian moderate. and be latter to third strong. the it's made, out we're bigger the toward a managing to good that of just as we time. be part think keep the know just I say when, done of business, in We path at and some and can quarter seen, quarter. on done could orders moderation another have this remains make We the be And comments there

David Silver

one opportunities segments. in follow-up. margin Oilfield discussing the expand I said to if could but in all comment we of you continue and on Oilfield, line expansion to just And I'd top for love pursuing last or you paragraphs plan across the sentence

pertain inorganic mix I'm organic comment interpreting So what of maybe But maybe to? if on a that and could might expand that you as opportunities. just

Ian Cleminson

Yeah.

Let me David. take that one,

getting that's really growing about the think pricing, we're margins. on in when about growth. been gross business We've profitable the we're sure that discipline I that on making disciplined disciplined and

we've here, business last last over said the just of way. of a in quarter, out Patrick come job and it. we technology, delivering great They've delivering the really down We've but done the focused delivered has the a over the with and great pleased hard great not customer. terrific to on and more service As the important business really be we're we're number and strong couldn't what's quarters, results, pandemic

focus about full just and and pricing, customers discipline that go got So it's the keeping focus that. on and execute in we've discipline to out confidence and on team

Patrick Williams

Patrick David, And again. it's

Just to add comments. to Ian's

expensive we It's all a looking we the have that's where at change a across provide of technology prices, our technologies we at project We where better looking at cost. manufacturing of to get our customer accelerated less businesses at and sites. looking And cost savings. a can with can it's raise all can

we're out to internally the business can cost we everything that's of we're b, make much can. businesses at all that staying general. looking taking and and And out we all across sure we're as competitive; units So system that, in a,

David Silver

going time you. the switch new Got kind that I'd to in at able Chemicals like contracts up of pretty the over it. Personal aspect And element the to a where same Performance pick on. just Thank destocking I'd third gain beginning quickly. you on to substantial to Care quarter, were like there's

So from? I opportunities where characterize was wondering, new if you maybe the are could contract coming

to while this from customers inventories environment at might newer of In your or some customers? completely you. would gain your Just pretty products access a SKUs of or within anticipate improvement overall are how characterize legacy tough Thank such the down other to to seeking new they you ability some interest nature new a pretty continue day-to-day words, how difficult we think is some that work your about existing your you contracts within sequential even environment?

Ian Cleminson

plant carrying in hence, actually has we is to this the been spend addition year. $XX fourth -- to so for. why And manufacturing natural heading. not are we last in contracts to That David. were that lot it's Sure, That's and looking expand less of and closures the or the expansion reformulation these we volume a last had the were the year's close And had more quarter. toxins in a mild, where lot we're that those forward plant something a we hit stopped. customers These year natural. on requirements third necessarily the build the is the A of of this that not more beauty actually side -- million X,X-dioxane, business, it market's product,

down You why going we fourth But might a of or the on. that well. or And slow have lot quarter destocking. as this it what's will and is improve improve third some should the -- think seen quarter hence,

as normalize contracts So start business that that to take that to we in this and we're forward. moving some nice confident effect the growth see market should starts the new

David Silver

And maybe new big I point, Okay. as agreement. picture one, kind starting picture to a a last your credit would bigger use financing -- question. one of But then maybe or facility recent like financing

$XXX $XXX that -- additional. And of the opportunity sheet pristine about the for features sense package a should years looking a million add for size few balance of capacity that's I in – absolutely maybe, the had just the talk now. why here? made company timing to financing you that the and base an you at How So context if that could and I'm plus million

or not with Chemicals a for other to optionality? after addition words, so a could you history mean facility? credit and your of you on round maybe financing waive I any the on company dry Performance thinking of pure in fair us holding Oilfield In on round the the do Thank debt. organic in is to of maybe -- nature to round the that give balance How this put size you're growth of amount sheet just on powder cash is this need us maybe -- of the next and the and redo timing you.

Patrick Williams

let about I'm the use a I'll the going Ian talk to activity of David, the M&A refinancing and of capital. and address bit little

Ian Cleminson

Yeah.

our a of It's about in out the were the They refinancing, probably probably due lapsed. quantum. really previous a year was of David, rollover terms same that it's So facilities.

with and that banking we've a covenants. less with renewed So group different slightly probably

shape, there for good in like years. available business has it, number as dry and we're of is for the just So it there call I you think the power, been last

supportive So and bank use. very to go just out yes, to it supportive group, we the strategy, very of good and want put

Patrick Williams

Ian's the David, to Patrick. we've sheet. information activity. And M&A out of We're you've are Yeah. put looking we it's a at not add seen having to that ashamed some pristine of balance comments. just And that

QX. We We are deal, by a hope looking won't at It the some done much. have to end be not of early necessarily going to something sheet QX, large so it's affect deals. balance

our the capital normalize, So let's markets as is put have we'll growth more obviously, focus to work. back organic to key on

dividend, we've way as as will we and And some we plan some more in think addition, have know, to in is where dry you so. the do remain M&A we moving We've little deploy move and powder buybacks forward. cash, very responsible that the forward. to continue we're which bit I plan we for market, increased In of the a done to

we're our to proud going forward to We're very we're responsible, it, stress move not sheet. in again, conservative of So way. a and balance going

David Silver

color. very much. all you appreciate the Thank I

Patrick Williams

Thank you.

Ian Cleminson

You’re welcome.

Operator

now hand Thank questions any time. closing at you. no there for remarks. this to over speakers, yourself further to I are like would Dear

Patrick Williams

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

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

Operator

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

disconnect. You may nice now a day. all Have

Innospec (IOSP) 9 Aug 232023 Q2 Earnings call transcript