IOSP - Earnings call 4 2023

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Operator

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

David Jones

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

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

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

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

Patrick Williams

fourth in end we M&A performance. Specialties the Services year, acquisition welcome, margins construction manufacturing agriculture, last call. strengthen to serve Oilfield of Innospec. another and double-digit maintained and for the personal further delivered Innospec's care, complement David, meaningful goals excellent full December, Performance stated mining. conference with industrial, This present completed previously home markets Fuel over while add a income Chemicals I Chemicals growth aligns America. strategic capabilities of that and you, Thank South to QGP XXXX many quarter care, segment improved and our we strong our brings the operating Performance everyone, acquisition Química. pleased . In QGP including quarter to fourth and am year quarter and

In addition, flexibility organic for future manufacturing expansion. there are significant

transaction of XXXX. and immediately accretive this EPS expect to in $X.XX approximately add We be

in In double grew Performance year Chemicals, operating prior quarter over margins the by income improved. the digits and

to focus Our with margins the operating returning run year and levels XXXX. full remains and rates on income consistent

While the are challenged, remains economic environment progress we against objective. making that

income basis, consecutive and sequential On Performance of operating margin second quarter a its Chemicals growth delivered improvement.

end and organic We continue markets. to all in growth strong technology pipeline opportunities have

the to by Specialties, Fuel operating and same income In within digits double year gross XX%. of target our range XX% grew over were quarter margins last

operating inventory Brazil, operating first Excluding grew incurred by full to and XXXX, XX%. income improved the half of charges in year margins X%

improvement. operating to focus We margin on will continue

quarter compared In Oilfield Services, in levels as the last to expected, year strong. moderated but remained activity

For the XX%. expanded margins and full year, operating above operating income approximately doubled

While all we to remain growth geographies moderate improvement segments sales expect to quarters, opportunities and in coming margin and for the continue at we levels in production in see XXXX. activity chemicals

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

Ian Cleminson

Thanks, Patrick.

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

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

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

billion For was $X.XX compared year, in $XXX.X EBITDA $XXX.X XXXX. $X.XX the decreased total billion million million for full X% the year from to revenues in of XXXX.

income was ago. Our $XXX.X compared to net a million million $XXX year

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

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

year's and mix X% down X. Slide million, were XX% from million. to currency XX% Performance increased last quarter price from A offset of in last points $XXX.X negative Revenues year. up a higher was for X% X.X margins of Chemicals were $XXX.X of Turning the fourth from X%. $XX XX.X% income percentage year impact last Gross to million. positive Operating volumes of by

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

was offset $XX.X for gross income a X. Fuel percentage XX% year Specialties last fourth million, year. of improved X% Moving reported X% Fuel $XXX.X positive X.X price/mix last Specialties points than from Volumes from ago. negative a at the $XXX.X flat Slide to by were were in and million. increased XX.X% on by year lower Revenues million to the quarter Operating X%. currency margins XX.X% a impact of

declined down the the operating in were XXXX, $XXX.X and by X% half first to XX% nonrecurring million. full X% inventory Adjusting of million, For impacts income charges income grew operating revenues of million. $XXX.X year, $XXX.X to Brazil the for to

to X% margins points million was percentage Gross million on the fourth year. were Revenues income operating the $XXX.X $XX.X XX. from of Moving year ago. XX% million last quarter XX% XX.X%, down and in $XX.X down year's last X.X $XXX.X of Oilfield for from Services in down a Slide quarter were from million,

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

decrease effective driven rate mainly from XX% was additional together profile by to fluctuations, profits with charges year. full of last they costs. XX% to our year compared year-on-year. of costs changing XX. and taxable consequence Slide last The year increased having Corporate a $X.X million to currency where by acquisition-related are outside by foreign Turning the U.S. operations of $XX.X primarily remediation is the tax territory exposed adjusted million The of

effective rate we full expect around to be XXXX, the tax year XX%. For

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

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

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

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

Patrick Williams

our teamwork global results that in quarter across with teams and pleased our am I innovation, the Ian. customer the full all year. the service is achieved success operating business businesses. of and The Thanks, foundation

Our technologies end first-in-class and customer serve. in partnerships we markets the that are

We XXXX. will continue to growth as leverage target further and improvement strengths invest in we and margin those

to our over QGP flow full After and upfront continued be increase, acquisition portion position $XXX of quarter cash XX% in extremely the dividend remained million. the a strong net Cash year. and the funding

growth significant and balance further and We flexibility sheet dividend continue have organic M&A, for investment. to strength

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

Operator

from the [Operator come questions question. CJS. of Instructions] to proceed Tanwanteng going from We with Jon the are now our And line first

Jonathan Tanwanteng

My in set after tried quarter? bit are to think first heading expectations is, rate expectations little your the one oilfield And strength a driving I last what's what you again, 'XX? run level to

Patrick Williams

business, It's it's still whether over Saudi, year-over-year. mean, a whether bit when little parts I -- the strength leveled off driving look still you I it's Yes. our of other a of global in lot in we're country. in

that improve balancing which portfolio, it's still that in grow business. helped out So us has and

still see growth has of stated, maintain good business that the will you the But some as and the business. margins. in think us side within the a we pretty good helped good with portfolio diversification, moderation in offtake And I Jon, production to

a now. really done strong business that You will but guys little in area. still slowdown XXXX, The again see very a right have it's job good a in

Jonathan Tanwanteng

Okay.

in business growth an be that's Just you Or decline? something overall on that to basis that is going to the for do clear, year? see

Patrick Williams

going to think be little a probably I it's flat.

to would tiny for of flat growth, bit growth I get a You say but a little might little XXXX. probably just

Jonathan Tanwanteng

Okay. come from to And guidance I rate then XX%, tax that the hear. geographic on to expect that's for Great. the a revenues expect you just basis? great that's No, reflecting where

Ian Cleminson

Yes. correct, That's Jon.

Jonathan Tanwanteng

Okay. expect in Great. the tell And was jumping could if what over EBITDA to and you business for QGP. I and you was wondering contribution 'XX? revenue the that us

Ian Cleminson

from what at is, to -- about deliver Yes. of it $X.XX. said not Jon, we're sort the earnings that. We've you and It's it's moment. going the that can We've tuck-in. of reengineer small back revenue It's nice off a $X.XX EBITDA but disclosed pretty

And by We're working we've really in now the -- are the excited really together. acquisition well the teams completed actually QX.

folks We acquisition. that it's have drive a revenue going technology got synergies products the really their that crossover, both lots opportunities perspective and from and down we've the of can the to confident And of very sales there. we products drive we're our a and nice from

super it. So by excited we're

Jonathan Tanwanteng

Okay. on the from inventory but you've issues lapped, guess, trends last as updates Great. Performance coming you year, and it I mix And the see organic then forward? demand in what's just both trend any going in Obviously, Chemicals.

Patrick Williams

I product to go we've pretty it's We've is talking issues starting definitely think inventory that growth some, see back. of come most disruption are what a There about. marketplace, the would that say, lines. in but demand the seen still been the I mid-single-digit much in away we

year. growth pretty we're growth probably I Again, low talking mid-single-digit So to excited about business. think you're in that single-digit the

Operator

going Research to questions the come [Operator next proceed Harrison question. And Instructions] our Mike Seaport with from now are line We from of Partners. the

Michael Harrison

strong a the on finish Congrats year. to

Patrick Williams

Appreciate Mike. it. Thanks,

Michael Harrison

Maybe Performance just a question Chemicals. continuing on on of kind

you talk what's seen more to to expected than just top of kind bit mostly rather growth about curious I I growth. that little terms of see mix of in mentioned a pricing of, in mid-single-digit about But you're erosion growth you're believe, talking talk mix? line a erosion. seeing if terms can we've what lot low- You some maybe there. But you assume I'm

the that And in in then over here to about the Performance X-ish that progress the at percent margin dramatic Where I see should starting year time Chemicals? to kind change guess the business pretty we've year seen in range, margin a in of we finishing operating expect XX%.

Patrick Williams

starting done see to can are guys top improvement. back. we general I anticipated. the if like We're growth really come margin The to as look focusing of that have on Yes. mean a good starting you line you job the at tell, businesses,

situations difficult some raw still are materials. There with

the You -- saw out came still you that yesterday. have CPI numbers

base We the from point to raw a make overall, problems material focused marketplace. I customer most seeing that keeping as we've on them technology a We've well. inflationary we're of not but inventory. filtered that standpoint, the in But only competitive view through obviously sure really are high-cost some improvement, still think to margin of the from

So good the done we've you and really I margin obviously a that area, improvement. saw think job where that's in

moving forward, carry and higher, the probably I see and into today will little right that's our XXXX. margins go that you focus a probably It now. think our anticipation, may that's forward

Michael Harrison

looking the Fuel that, to Specialties to that in a switching going drivers there expected the pointed believe, in going operating that you kind for I margin then over back What lot And the right. is to All are on had XX% of Fuel noise business? the stuff there. of Brazil. business, improvement some to about to XX% But sustainably of on understand what with margin we talked you Specialties get key

Patrick Williams

raw product materials the It's in business is to Specialties high you when those. it But are our expansion markets. in This today. that the is a a environment. Fuel -- see mix recessionary happen a environment, differentiation negativity of this been one high that's that and you on in get continues into business, really discussing focused difficult lot most and business that of we A inflationary group is of -- the thing do you in about one consumer-facing don't about

the it. some And business. we're see have improvement as in our total managing key all really is starting to a business well, in which folks their done And of through to volumes that way good job

Michael Harrison

for And to imply past the this year? as roll guess is $X.XX in that front. could more guidance me and compared different then last the I did on you the I right. kind All in question your this QX, expectations XXXX segments, of up on the EPS year -- for thoughts any guess you for what

Ian Cleminson

Mike, question. Yes, that me take let

believe, I thinking -- out just QX, So and is $X.XX, about the be to consensus $X.XX the there about around for about first we be we'll quarter. around expect

income Specialties $XX where business move full somewhere million quarter. Brazil quarter about between each Fuel to million be that a of was around in to we Chemicals. expectation million $XX similar take $XXX this into Performance As full throttle, $XX you broadly year, inventory out for for once million XXXX in the our operating it to our close should is write-offs. The We're will -- oilfield targeting year

together, So think pretty that's you year number you a I analysts. the wrap all basically full with consensus for and that our close out come to

we So can to we'd full continue we be the and right, year. that QX the the about as numbers have people for through we move guiding update year for that you are

Operator

are comes Jon Securities. Tanwanteng now from And going to from question. proceed We our question next CJS the of with line the

Jonathan Tanwanteng

quarter the Just legacy costs ask in details what to wanted help in expenses kind you the with there? corporate the understand was me dealt and of

Ian Cleminson

some where the a scoping had changes are Jon, item legacy sort Yes, us. remediation and it's And of just for for charges to sites the our costs, we've operations close. of that's all

operations. it's our So not of continuing part

Jonathan Tanwanteng

a Okay. else? that that something is TEL And Or business? was

Ian Cleminson

Yes, Yes. Octane you're old Additives the It correct. was business.

Jonathan Tanwanteng

forward, priorities allocation? Okay. for cash the capital still a in then position of terms dividend. What expectations acquisition, the And just cash Great. despite going have and obviously you are your of use raising fantastic

Patrick Williams

portfolio on I still additionally, rebound, at we that focus to focus we're The that dividend Jon, a to really continue or America. forward. the there's and as really few from and organic to in made continue changes. -- product to think those We continue move starting to geographic M&A as of We us we'll acquisition portfolio. our markets increase it see look fit acquisitions the don't standpoint, that we and nice out South there growth is a a at those look that as we think fit a do,

core we're now get make we for synergies really right cash and integrate that growth is those are the priority same the expecting. of remain time. of to we a it out the But of acquisition as period to use made three give one sure Number have the just they the

Jonathan Tanwanteng

question. Got corporate that it. housekeeping going one expecting rate And forward? expense the run What's just you're

Ian Cleminson

be sort full year, year, going to the of somewhere For closer I Jon. this it's think $XX million to

Jonathan Tanwanteng

X-X?

Ian Cleminson

Yes. Yes.

Operator

Patrick time. no will this further have hand We to at back remarks. for now Williams closing I questions Mr.

Patrick Williams

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

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

Operator

call. you This participating. for Thank concludes conference today's

You lines. may now disconnect you. Thank your

Innospec (IOSP) 14 Feb 242023 Q4 Earnings call transcript