IOSP - Earnings call 3 2023

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Operator

Good day, and thank you for standing by. Welcome to the Innospec's Third Quarter 2023 Earnings Release and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Jones, General Counsel and Compliance Officer. Please go ahead.

David Jones

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

implied results statements the forward-looking call, this are such and could These by expectations on we that are make and anticipated are actual about During risks statements assumptions and events. future uncertainties to that will statements. predictions, from which projections based results differ current materially statements other forward-looking subject cause to

The uncertainties earnings GAAP other measures. Innospec's financial documents. We've and measure financial The SEC Please are risks related XX-K, detailed prepared in non-GAAP included comparable measures the financial to non-GAAP and with items Officer; XX-Q for, filings accordance GAAP. see from A be is contained in reconciliation and should site site release. SEC. and substitute not included Innospec's for to Chief these Executive on with the a to, considered compared the the and also performance events in are directly Cleminson, Williams, company's Ian investor Vice and the those aid Executive impact as addition Patrick me and to President had They that or Innospec today results. With the and Chief Officer. items these in understanding Financial additional financial President as are of most

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

Patrick Williams

Conference Third XXXX Innospec's Thank to Call. you, David, welcome, and Quarter everyone,

Innospec results. delivered set another of good

personal and our with improved. margin our We income along sequential Performance as strong are business and new Chemicals operating through innovation customer partnerships well for businesses. existing care across volumes all growth positioned continued commenced organic growth, from contracts expansion delivered

peaked. believe a that While it we destocking headwind, has remains

quarters. that we operating achieve in We coming the income growth are sequential and margin improvement cautiously further optimistic will

we to broadly our chemistries quarters. margin Specialties, are our regulatory and sulfate-free improvement income sales internal investments Services These medium-term was below lower and ongoing margin we in but our margins income operating expect the improved income winter X,X-Dioxane-free aligned addition, that quarter key year believe remains well double-digit with operating focus another and with as trends. In last our a had offset like chemistries Fuel expansion operating similar business. Oilfield industry-leading volumes. In the technologies Specialties were with continued and strong results our Fuel targets Margin improvement opportunity prior growth sequential growth over and for into year. consumer

sequential to we track to As expected, XXXX. year improvement oilfield geographies. opportunities this activity all results fourth our strong on significant the on pipeline segments as and anticipate for a similar we quarter quarter, across of basis levels full remained moderated a continue in but In have

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

Ian Cleminson

Thanks, Patrick.

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

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

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

and a million. X%. higher impact from $XXX.X quarter $XX.X a price by inventory. last down a million, in last year Gross sales decreased positive margins due XX% mix XXXX XX% by the partially the third to X% for currency mix from income in Chemicals to million, of cost were Performance to of negative being weaker in same of and X% percentage driven offset points compared Revenues X. of higher Slide X.X $XXX.X XX.X% to year's Operating Turning XX.X% quarter decreased by volumes

million X.X Moving on the third X% $XX.X reductions a mix. price/mix were or down down currency sales to year Specialties quarter million a offset from year $XXX.X Fuel was same ago. revenues gross last year of Slide positive a $XX.X X, from by are Fuel X%. million, impact partially above richer ago. for quarter in margins negative were Volume X% a $XXX.X due million X% slightly of the Specialties Operating of percentage the to reported a XX.X% points of income and

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

rate Corporate and the costs ago were XX. within the $XX of year was Slide ago. tax a our to our $XX.X million quarter the The due mainly to compared for XX.X% with split a compared for XX.X% range effective expected Turning year quarter profits. favorable million geographical to

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

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

Patrick Williams

Thanks, Ian.

quarter to and fourth portfolio the we in our momentum expect good entering all balanced with sequential businesses, improvement. deliver are We

quarter, net million. execute continue pipeline strengthened $XXX excellent position our generation a over opportunities. Cash to We growth on to of diverse cash this organic again was and

organic our of consistent well year sheet disciplined increased representing to and balance extremely complementary positioned per service, growth XX% full dividend are growth. customer to returns, $X.XX, a a in strong long-term bringing we annual increase. With semiannual history our our share, of With dividend and $X.XX quarter, This and cash world-class placed we management, of foundation we pursue M&A. invest continue our shareholder innovation remain for

and to line the /> [Operator Now, of I name="Operator" take call to your the operator, I take Jon question, and Tanwanteng will it and id="-X" first we're questions.[ And CJS now from Securities. the will from turn comes going the Instructions] Ian over

Jonathan Tanwanteng

is on the on of destocking much new much quarter one to sequential how the and more how the was I from peaks was nice products? Congratulations the wondering And improvement was first products you as of from Performance segment. improvement Chemicals end demand? selling My start recovering legacy there.

Patrick Williams

our balance in of products. to and We was the it flow we're a in some some the pretty heritage starting did both. Jon, of see and products couple that good through new a volume the expansion sites of of

to into XXXX as QX and been and that well. continue into we really it's So a of combination both, expect

Jonathan Tanwanteng

you're ramp the half in How left rates? products? Where of the new in compared contracted the only go are the you you the you as Did through run is getting of next run rate get to it the to couple quarters much expecting? maybe of quarter

Patrick Williams

go. around have the lot Yes, seeing to It's early ways We're destocking. hesitant. it and still we mean fairly is there's as process, of a the a consumer still [indiscernible]. little not conversations in I a

I think for there except Ag was et quite [ overuse quite ], like probably frankly, cetera. markets

the early still in it's process. So

consumer say, QX to us this fully be, going the going cautious we'll hesitant, is But I tell early have a is year. going the that down. volume will -- process, that consumer in little a see do there's XXXX. that think into let's lot optimistic it's you demand to a be so I We're XXXX Just is and some good think fairly

Jonathan Tanwanteng

Got it.

the of found levels? then period rate into we kind Or this as think strong are the for really about How And you're forward? Is you these on that Okay. growth Oilfield now you performance. business. on should just of that go run we some seems It second, next [indiscernible] year year? of kind there state the after this like at lapped going steady business a expecting forward of opportunities Have really,

Patrick Williams

Yes.

QX, rate probably you QX, what you'll going XXXX. in that's run see in think into I and saw the

Jonathan Tanwanteng

just Okay. the priorities for on any Great. your question, cash? Last update

Patrick Williams

Yes. continue We're markets lot with we're about pocket, great in -- our of cash very organic in I going is that I to to balance increase focus opportunities. at as think balance our to your talk starting activity stressed mergers our but today, in see because is -- companies private burning looking like buyback, a sheet, have we're that being markets. people growth, to more We know and in our some area due key having and flexible just balance cautious And focus acquisitions our is and some dividend, lot in or a stressed be chemical having the important sheets funds sheet. key to it's equity

question in of and Seaport think I So be our the are Mike we it opportunistic. [ /> And the Research name="Operator" business from bodes comes today, Partners. id="-X" really I way from favor the this think we'll line Harrison next managing

Michael Harrison

business. Chemicals on I wanted to up just follow the Performance So

that be to seen seem You fairly peak. confident destocking you've

is a little there I might destocking Personal Care continue than more the give going others probably suppliers space. maybe customers? to Can business be why think year-end. saying are in some bit through Personal And just a you're other behaving you what your differently out maybe that little hearing on from color bit Care

Patrick Williams

Yes.

be that we're playing, destocking. But companies where patterns. to from that from because destruction to think there natural we that that's et seeing we probably other starting we're seeing still probably on peak. word, the natural normalized we're I if I the get some think have chemical indications to Depending QX that volume primarily supply customers moved also could in the -- do destocking. we're back that, markets getting and -- beauty, play, for cetera, into we've anything, and a seen more that seen and than some But what the overused we're QX, we've order

ramp-up over. where It's to products and the to is the starting remember, once going inventory. normalized we're more won't big not cut inventory on-time inventories in I supply this It's now think the going business. you for time restock let's be If destocking be there so in-time half in of, everything. see this us, to But is customer be to more supply chain you you

Michael Harrison

right. All And to Specialties. very Fuel That's switching helpful. over then

then in to in maybe additional You you QX? And was issue just where to see and mix gross improvement impacted expect remain QX? volume think noted guess margins should pickup winter get positive months, I is we expectations. that do and seasonal gross coming? the there relative Or we QX Do given some price/cost into the some as your into your you pressure that to margins that there an inflation expect

Patrick Williams

margins, and months, but might margins a pressures, There into QX think obviously inflationary winter these increase big those some you going fuels normalize upper to our other. they in of higher-margin products, range. Typically, the still of on in have to QX, back focus I to end probably the see lower with those range. mid- get is you're each

that things the QX we're doing probably of and hopefully profile think you'll same to year. see with of kind and I QX next margin QX, of type the into start QX internally So and improve in

Michael Harrison

right. rates expecting maybe is come for Ian. thoughts last we tax Where question And housekeeping the question on XXXX? early QX? me for a to The in rate tax any for All for just more guidance be of should

Ian Cleminson

geographical What foreign the Mike, our profits Yes, consequence an is QX and it's split the having in tax where of question. our of to we've jurisdictions, outside also our interesting operations exposed of some currency sort fluctuations. seen of U.S. lower they're towards

a been tailwind that's for So us.

tax effective think We we'll for issues [ next back QX in to for sort be all themselves, to resolve think effective about ], rate similar range to will the were that so XX% those XX% for the year, XX% and QX. where we of will tax rate. And we be

Operator

Instructions] Associates. The King the from comes of CL [Operator line Silver & question David next from

David Silver

pause guess be I under maybe question, ship underway expansion to idea just internal customer first you just and Performance place? internal go that in your new year, next do the that in is Is was of expansion kind trying capital back -- until have to assets, I program whatnot have months now? so might production to place be now. it scheduled full there would believe and X your to based was the so I and to of to volume program you're clarify, that assets you the fill from you or these logistics but can continue The CapEx a contracts I contracts. discretionary like starting view middle Or newer the Chemicals an completed on

Patrick Williams

phases. thing $XX done David. The in Yes, is million good about that CapEx

to $XX So one expansion. you're multiple not out throwing reactors. million just It's give

today. picking that well we down, of where down, CapEx a we We have have see expansion slowed into program volumes as as but added see so the seeing we'll we going that add as reactors activity slowed we're long And have the next we up. that year lot

close, extremely on we do and So down. and we add slowed see we volumes watch those on. reactors those have bring coming We it it will those as

David Silver

supporting I through X medium somewhat comments growth. the of your maybe Okay. kind of about Patrick, broader press when near you question I just constructive But about a your made release, And resourcing think then segments. or term, each term read

just I'd Oilfield. where terms here of let's say, higher personnel, think, right But growth X technical two do Chemicals the higher et new hone or additional resourcing think demand Innospec up is in those of maybe need to anticipate the meet on just the level them, set not like -- logistics, next you business cetera. some of but to maybe and in for, over, How now months? positioned areas, level Performance support, for XX to you new higher -- I you're would personal that you are of

and people to acquisition you think And talent need to maybe comment that requirements? on able you being meet the just get a customer

Patrick Williams

it's Sure, a good question. David. Yes,

we're think businesses. in for the starting to now right the current well all that we're I growth positioned see

service, on. I you just et talent will to, some needs are. up to when in and going that talent in think, bring on you where depending looking revenue support, start as cetera, at customer constantly we're technical to that means supply what alluded our We're moving to chain, means full what place have million what and people of you expansion that $XX the

the fit them we work really are I the sheet, the business, the the think to this they a of we've balance where attractive been a future for into and future for we not but with for company in company what strong needs incoming fairly talent to only of because train work company. because have

now people we're current in that would set. the well for would So to we're looking a rates right we lot we do of of regard that very amount thing very things is It talent. The minimal, attracting be good growth need at. the

like amount people. It's a to go that we're not blanket limited to field out add and having it's to So pretty the there on. people we're at looking at multiple look of

David Silver

focused of maybe XX I'll days couple from And XX squeeze here, of or the then But but questions, have issue, And costs guess of from perspective, and business my or a had LIFO companies margin so management get a those versus have a used just maybe FIFO more a a queue. bit one Okay. of smaller found an maybe back in two have that points up items? perspective. not is whether much there? if then accounting accounting or from ask it's paired issue but FIFO income stop running I statement through little the that led an will accounting kind to and a maybe just or cost And an level wanted from pairing you arrangement, it have a here. margin that's up unit of about well pretty with squeeze maybe the you on I that, the to think fixed lower just perspective your a I to company today, of pricing with price plus with current a cost the per Maybe bit ago

Ian Cleminson

what's business pleasing We're business, up. than pressure well seen that's is Prices bit for And across is pretty and probably more in our lowering the is way still Specialties the paired those of we We're we cost pressure still a on our across coming board. putting business, that working are we've but way carried have though. we're through levels seeing hard inflationary some where Chemicals and the still inventory. little not would Fuel there, the down David, Performance Yes, like. Inflation us that. the inventory pressure managing

improved Performance Fuel margins Chemicals. and gross gross seen in margins quarter, this you've seen in You've Specialties improved

tipped Performance fact, first time Chemicals for the this over year. XX% In

watch that to inventory Fuel in is want too carrying managing have, it's been make it's our huge we lag for pricing our Specialties We We're reasons. [indiscernible] burden delay volumes understood we're of we just well. well that various and inventory. so something not But pricing much we're our managing for terms and we're do the not the David. concerned. not So in that sure carefully, a very overly inventory

David Silver

But stationary Okay. fuel may margins Fuel a missed of on of not a I one maybe I your the just one, initiatives, believe some source aviation role was also and newer prepared a portion maybe But Very in remarks, Specialties last overall as additives range. bit target just mix, power, maybe mix And your as an part mention your really this, here. et of on good. have And being Specialties little there progressing? gross is comment of how that your a Fuel -- cetera? on again, maybe then below but then of update of the

Patrick Williams

[ portion of of seeing Specialties, custom gets AvTEL been smaller mean, heat years, small aircraft. is forward. out very Fuel small getting TEL a that new. really is it There so gasoline, I [ regards it's as ] ] [ Yes. going But lead in on low nothing and we to a move of for lot ] we've

we into is But just said, it's AvTEL with in move focus in In prepared do positioned XXXX ]. it think where It take big we're It's obviously, and do needs. the Specialties, could not or out that's could. XXXX? forward. we'll thankfully, a industry the need, But deal this We're very product they when paths, and market I for Specialties. of well as But Fuel well Fuel is to product as it [ very, Fuel come of before greener time. as line portion Specialties I a moving what we'll supply as it's you We'll small it. in Now the business. our think

Operator

next [Operator Tanwanteng Securities. from Instructions] Jon the line question CJS of comes The from

Jonathan Tanwanteng

color X% you Have demand to first Volume from at half. where wondering, market more perspective? your little And substantially more just just down forward trying just fuel you point? what this expect kind Or get I'm down just lost a quarter, the volume of end share? you I are is this selling this is? the a on was in going to additives.

Patrick Williams

No, lost it's -- really any just not business any necessarily have proof. We'll and downs the share. but quarters, lost we ups for recessionary the almost but big haven't as proof, in always that flows. say just ebbs we've it's I not just this We market. market customers. mean and recessionary And it's it's

Jonathan Tanwanteng

Okay. there you the this update year? any issue the had recoveries is on Great. from And earlier then potential Brazilian

Patrick Williams

through the that Brazil. trying legalities through got going individuals were and the and individuals replaced the off the we're We've over and getting we've improved. and and civil of new charge fixed -- We're really. criminal that Not in legalities some and to in insurance running of it, things business races

Jonathan Tanwanteng

maybe last a just rate is further Great. same is chance other Or there the then run you you're assuming you're portions seeing improve seeing that at for there? going question, level, in concerns revenue forward business? margin Okay. that is or Specialties Fuel of And the facing -- the this a maybe Oilfield inflation the are to

Patrick Williams

room I the improvement think there's a little margins. for on

so inflationary can we some ours new but I a technologies You've still still have with the there, think do materials some do improve out right got hair, of big that's issues cost focus you high just raw now. there, a margins

Jonathan Tanwanteng

price inflation? there Okay. if any room to Is improve there's

Patrick Williams

stagnated little That's course. run though. bit Could There of be kind could somewhat That's of its be. a room.

Operator

for are today. now the further any to remarks. to There would conference Patrick questions Williams over no like I for closing hand

Patrick Williams

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

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

Operator

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

all a may Have nice day. You now disconnect.

Innospec (IOSP) 8 Nov 232023 Q3 Earnings call transcript