KRA - Earnings call transcript Q1 2020

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Operator

Good morning and welcome to Kraton Corporation First Quarter 2020 Earnings Conference Call. My name is Cath and I will be your conference facilitator. At this time, all participants are in a listen-only mode.

Following the company's prepared remarks, there will be a question-and-answer period. [Operator Instructions] Today's conference is being recorded.

objections disconnect any this have you you at may time. If

over now Gene turn will to the Relations. I Investor call Mr. of Shiels, Director

begin. may You

Gene Shiels

Kraton Executive earnings and Thank first are the Vice Kevin Cath. Good President President and Chief Atanas morning to you, and Atanasov, Kraton's Chief Senior morning call this Officer. quarter and With call. the XXXX Fogarty, me Officer; on Financial welcome Corporation Kraton's

this presentation the website. of release quarter is material Investor we the first review our related copy A and Relations will news morning of in available the section

we like on attention Before review use in draw first and and information this I'd quarter of disclaimers release. to in the presentation measures earnings included results, the to the non-GAAP your forward-looking morning yesterday's

make not different be there that that other implied we we by that thus could comments any actual and fact forward-looking cause statements call, and statements to expectations historical be forward-looking the statements. today. significantly are make are constitute Kraton's factors from or risks, the uncertainties, During may stated Investors of may cautioned certain performance

only speak update the as such in the are made date statements and obligation we statements forward-looking Our future. to they have no of

factors. outlook to number business a Our of subject risk is

in the available discussion the As permit other Investor forms our this section factors. does Please to filings a presentation Relations of our not of format morning's full refer risk and website. these XX-K regulatory of XX-Q

the financial a was presentation financial in morning. of its use measures With each earnings GAAP non-GAAP the use of this yesterday's for release provided measure measure regard to non-GAAP to reconciliation most material comparable in and financial we

line Following for our the we'll prepared your questions. comments open

Kevin? Kevin call the to I'll now Fogarty. turn over

Kevin Fogarty

you taking to morning and those this certainly and safe. healthy appreciate our the that close our as Thanks Gene call everyone. sincere you to remained We hope and have time good morning. And join you

continued have of COVID-XX current and the on prudently around these because first our fortunately stakeholders, COVID-XX China value. few we then ensure as safety Kraton, addressing our a in the our of is employees our measures in of locations comments priority. to steps, be few cases employees, I confirmed extraordinary COVID-XX company. want taken We've first we crisis are company. environment, health began, operate our We Before first the to other the safety within quarter of the how the in first our about in and our impact At we review our globe. had very the results, core communities to which customers, share our Accordingly of our and

our thank this serve a basis commitment I new that all and possible staff working work global organization exception lab and under effectively efficiently their want needs customers. our with to proud operate been remotely. model. has perseverance efforts on and Where the very personally have and employees continued personnel, for our daily of critical how I'm to plant continues and our adapted employees and to our to company of our of the ensure their rapidly in

to global evolving the oversee rapidly challenges to we approach force task have our response COVID-XX. In by environment, a posed to established

Our and daily operational multidisciplinary time a basis following real market to on in teams collaborating continuity. are ensure developments

our procedures communities operate. regional, our federal, and complying and the the we and customers, We processes internal ensure and to are employees, with all implementing of protocols are own suppliers, local health

inputs Kraton current of terms in products of are but a operate priority, jurisdictions reality the supplier of infrastructure where a in or essential the provides the we vital that those light critical more the range not deemed Today, operating and Security other to critical in that terms wide business context Department Kraton companies is around the of are our whereby conduct Homeland of globe in U.S. of chemical market importantly, definition only needs.

As a globe. result the our remained around operational have plants

raw to continue disruption in experienced we date or to our minimal have global customer have essential materials in and access capabilities. our to fulfillment We supply chain

over maintained diversity geographical is this we market essential serve who virus' world, more in but supply-chain-constrained needed fight advantage ability we much Kraton's our vital believe time, needs, perhaps As today's a our supplying in have are especially to customers' those COVID-XX and to spread. distinct materials

production we address our flexible to we portfolio market have and real-time believe needs. a positioning are We base

commercialized successfully in Taiwan an As Mailiao, state-of-the-art during improve our made facility wearing facemask is quarter the to polymer that first being in example manufacturing a to HSBC manufacture comfort. we new used

up ramp quarter. to the second sales expect We during

and in to a with flexibility manage we these critical believe our environment. we that importance current uncertain significant have will times, the in the business financial sheet Of liquidity us strong balance provide

focused prudent plans. are capital and on will cost We in control and cash our in we generation flexible and deployment capital spending remain

the to first -- beginning turn and a slide quarter or five. let's Now, results on page little discuss our bit

results. we quarter environment, very with pleased global our challenging the Given are first

have first yesterday's will release, for the quarter in As attributable $XX March XXXX Xth, of ownership which $XX.X of you sale million EBITDA EBITDA adjusted Cariflex to includes prior to date. the adjusted closing reported we our approximately seen XXXX, million press of for

basis, the as such Kraton's clear noted, a and is demand end-market a strength. times In these picture as is just evolving diversification when global on geographic day-to-day

deemed given for saw tapes as adhesives we we labels, many in are home in delivery. which increase resilience and the shopping the are applications online where in During such -- quarter and end-market demand

medical in food adhesives of in specialty and seen masks. packaging, demand variety favorable have We medical in and gowns a used applications, including trends

will points first of Kraton's just a full quarter financial in did relative to highlight results review some COVID-XX the quarter. material I few the want moments, but impact Overall key quarter. the the not have through on Atanas walk you to a for

of management the generation, cost management intently active results capital. First reflect our are reduction deployment costs, teams fixed And focused other on as our such third-party cash spending. for in and quarter of prudent and cost

project deliver XXXX. in track million $XX targeted we we announced, annualized we on And savings. of have run-rate this to cost previously are As

we Cariflex quarter provided sale outstanding a of our the transaction first for the debt. completed significant and the in reduction business During

debt consolidated $XXX the first net As of we a excluding result, exchange. by during foreign the reduced million, quarter effect

remains a with Kraton. of we debt our making reduction XX. $XXX with very critical $XXX available had year. cash we no first scheduled target we under toward our maturities, million of comprised balance $XX million a balance our and approximately facility, March this we view three only remains outstanding million of believe million the borrowing currently Debt excellent for until XXXX. And progress ABL liquidity of We reduction $XXX Of ended In are our importance leverage expect the for healthy believe further which solid of position, critical turns. quarter base sheet at priority

facility Further, announced the for as ago maturity the mature, XXXX. an of extended additional to January have years two of weeks two ABL in we we

recognition medal Lastly a rating in we pleased that are commitment business at its our extremely to to gold EcoVadis, for was sustainable a recently sustainability continuing announce awarded of Kraton model.

Kraton's the XXth point industry. in by in EcoVadis score percentile put us our

this enable for We of our sustainable in It achievement. our tangible to evidence bioeconomy sustainable our progress in more in serves are promoting striving business customers. future the and as a proud of processes, and expanding

the Atanasov, Atanas? move into turn call as later over to Financial some follow-up about who second At on. quarter. for thoughts share the to financial the quarter And Atanas this we results I'll will Officer, I'll Chief our review our point, our outlook,

Atanas Atanasov

good and morning Kevin everyone. Thanks

raw the XXXX revenue look to with decrease first in materials The principally selling I and Turning Consolidated was the in driven segment, to of $XX.X lesser lower lower lower quarter lower and first results, sales for volume chain, to slide Polymer a begin by X, XXXX. Chemical the pricing, financial compared segment. a will million chain first $XXX.X our in with the TOR at average of our revenue the average quarter. CST prices down the extent for consolidated quarter associated was million, and

the decrease foreign $X currency by on Changes largely of consolidated cost favorable in sales. offset million million accounted approximately $X.X exchange revenue, for foreign in impact of of

for EBITDA we're Kevin quarter ownership, delivered including pleased Cariflex adjusted for first March have $XX attributable $XX.X to XXXX to the prior sale adjusted As million million XXXX, of of very approximately Xth date. of EBITDA the indicated, consolidated to

to chemical consolidated products, primarily non-cash for million, to $X.X Relative sale attention first I million like your would of $XX.X to quarter margins due also down $XX.X of of our chain. lower amortization, adjusted to upgraded consolidated EBITDA that, our the the CST adjusted out was EBITDA segment's includes point in related XXXX, Cariflex. to million of

isoprene have recognized supply income received deferred the $XXX Daelim. of rubber be sales agreement. GAAP will Upon supply agreement life transaction, the is consideration associated multi-year with gain as income for closing we entered terms a part the non-cash, of of product received price. as agreement already amortized the The as the the approximately recognition which it at we purchase of a million, the into are cost, into supply part over consideration and under Since income we million the of $XXX.X

To the million The is month portion in adjusted we our total $X.X of was XXXX XXXX attributable XXXX to the of in not approximately XXXX. EBITDA our in prorated amortization, March, consolidated part the that guidance discussed $XX million be of million consolidated or February to adjusted the date. to of In amortization we million $XXX sales which Xth clear, for $XXX EBITDA. $XX amortization of of of expect March QX, closing million after recognize

first XX.X%. quarter the And this first XXXX. of consolidated was the compares The to adjusted EBITDA in for XX.X% margin quarter

applications, the to strong product quarter into This first the Polymer roofing margins sales fixed -- all and up first segment-adjusted grades XXXX. quarter the compared stability continued SIS lower For paving into sales lines XXXX paving costs applications product quarter compared partially increased in of lower particularly the adhesive to and of adjusted EBITDA million, was reflects polymer XXXX, offset sales applications. of X.X% by first $XX.X in increase across

reported first of adjusted compared the up for points, EBITDA to basis segment XX.X%, the first The XXXX. XXX quarter was Polymer margin quarter

pricing $XX.X by and XXXX. First compared the offset sales upgrades. TOR raw volumes chains Chemical $XX.X of the XX.X% for EBITDA of first and adjusted segment down decrease, of to partially was was this was $XX.X in quarter million CST higher the the the or and in materials TOR million Lower driver the million primary quarter

both and compares CST year first Given seen and XX.X% margins We're stabilization ago we the quarter the and have to in these the margin of TOR margin segment XX.X% quarter. to XXXX. pressures, since encouraged year-end particular this in that EBITDA however, pricing adjusted was know, for

for quarter the highlight sale significant reduction, following was Cariflex the business. debt also the of the A

$XXX.X a million As net reduced sale million, effects the consolidated of by indicated $XXX.X exchange. foreign we Kevin of whereas, the for debt result adjusted

lower associated first and by slide lower of the was to cost to quarter prices or XXXX. X.X% million million costs, $XXX.X volume to in was The of foreign a The of accounted XXXX. $X.X revenue $X.X favorable review exchange negative offset million, the the sales for quarter compared which raw average $XX.X compared results. for Polymer of foreign changes decrease selling revenue let's quarter Now, material revenue with decline, the first of was decrease of by segment driven on for X partially segment turn currency Polymer sales. of lower XXXX our of a million effective first effect

sales sales to first by lower principally or of of segment the paving tapes. anticipation the Performance of first positive and quarter down of X% Europe lower SIS to season winter labels demand Polymer to effect customer higher Products due in North a Performance in in grades America first a sales favorable applications offset applications XXXX paving compared quarter relative XXXX packaging purchases adhesive field customer were in such was pre-buys by the summer the partially driven particularly of X.X% XXXX, paving volume year-end compared the Products. of volume grades volume strong. XXXX was of with to down sales into sales in sales which lower relative reflecting was and quarter quarter XXXX, The in fundamentals first decrease in as

quarter large of Looking additive at a primarily lubricant timing the Specialty XXXX compared sales of function X.X% Polymers. increased and customer. volumes a to of Sales to was first this

China in quarter However, the that we base outbreak. the prolonged again ramp after HSBC signs the during to see encouraging following working -- and our up intensively New COVID-XX was Year against production Chinese the did customer outage

Xth. down XXXX quarter March three for compared of As our months mentioned, the closed two roughly the was of of full ownership volume in XXXX. months the sale of first for first on our Cariflex to X.X% quarter of business the results Cariflex Sales

lower quarter in the and increase first $X,XXX Continued of margin the stability gross were in in segment compared Polymer drivers adjusted the profit XXXX. of fixed the quarter ton per in of of costs first XXXX the to $X,XXX

X. slide X.X% was was on first the down and compared segment quarter segment Chemicals million the XXXX. to to Turning XXXX first Chemicals of revenue results quarter of for this the $XXX.X

revenue primarily volume selling a chain prices of to associated X.X%, Given to with chain quarter lesser and lower decrease upgrades the up the was rosin for pricing the average that first sales in XXXX. lower compared was CST extent

pricing You XXXX of TOR will gum and to recall CST chain declined in affecting our extent adversely that significantly pricing our in rosin third gum quarter turpentine lesser the a and upgrades.

pricing we're encouraged CST XXXX While quarter in end stabilizing by levels, pricing first below since the XXXX. is the overall of dynamics

was we addition, million and offset with changes impact this X.X% the Overall reflecting and volume of in part of sales. half which volumes and latter raw accounted TOFA in up negative from the lower sales the the in effect XXXX was currency Hurricane volume with cost from higher In material by associated disruptions of in $X.X opportunistic absence TOFA derivative foreign fully the sales Michael. constraints, Chemicals by decrease changes the faced of revenue sales first with CTO of higher favorable TOR for segment currency offset

for volume applications, sales of those adhesives quarter demand such as reflecting used good to well medical X.X% and in and gowns for labels grew packaging applications including Adhesive in by facemasks. solid construction XXXX, as the first demand tapes as compared

Performance also volume by materials. X.X%, first X.X% for Sales sales was raw quarter. volume opportunistic higher up sales Chemicals driven of Tires in up was the

represents transpired for the of second material. many of be announcing approximately Chemicals therefore the in plant business and has Tires overall the manufacturers revenue tire impact in shutdowns what Tires X% markets not on given However, overall and the automotive expect segment with some is Chemicals quarter. beginning chemical segment we weakness the our temporary expected to overall

remains X. critical for a slide reduction to Kraton. Turning priority Debt

As reduction Cariflex facilitated significant in mentioned, the outstanding the sale quarter debt. of a during first

$XXX and by U.S. quarter, During the loan of million our million. reduced the tranche euro paid the off we under outstanding term tranche $XX first

consolidated As debt the net $XXX.X excluding reduced by consolidated a $XXX and million, result, was currency. we reduced million, foreign of during the by quarter debt effects

quarter net times XXXX consolidated The XX-month adjusted leverage significantly X.X trailing ratio of debt first times improved of to EBITDA our year-end March debt leverage X.X reduction based as consolidated us XX. from has upon at taking

trailing Excluding Cariflex consolidated adjusted EBITDA X.X ratio our leverage EBITDA for XX-month be the March would net XX, approximately adjusted times. debt

note receipts quarter usage facility million. $XXX cash ended borrowing over to Kraton enjoys a bridge has been strong first with of that, of liquidity disbursements.\ timing base generally historically, $XXX of ABL light with minimal We availability position. the with approximately million of in the I and quarter cash should usage the first

announced we As years in maturing two with now the maturity of for of previously mid-April, it XXXX. facility in extended the January ABL

response flexible have planned of for we in the year million to conditions unfolds. view year our full changed reassess to respect while XXXX, the $XX balance Finally, of with the we remain not of to as market CapEx the

call the his to this, And for I'll turn with back closing remarks. Kevin

Kevin Fogarty

Atanas. you, Thank

outlook and with slide year. Now, our you as expectations balance share of the XX for to I'll turn we the

quarter and significant we the demand of April, portfolio picking that particular broad our in any markets the And is seen we are are particularly encouraging buffering in our attraction impact diversification most plays that signs with mentioned, seeing consistent Through our is market. noted, expectations. with first from that role have up. as China in we activity in As our results pleased end

the Kraton. in quarter. a quarter Europe our are of first adverse material for must have began throughout first not North COVID-XX results spread These important did impact we America the acknowledge on markets and COVID-XX later

today distinct these to see market pullback business to resulted supply that through and Kraton of reaction right-hand COVID-XX markets chart from are diversification reasonable an at indicates system to will that slowdown, innovation directed our in side quarter, of the it the assume believe, because global or to have markets through resilient in demand. the While and as clearly contraction the second sales our either created global leading we more majority commitment might be the consumer on we the towards impact increased that our has of we in macroeconomic are

from in adhesive construction Kraton revenue applications, Polymer the one-third medical applications. the of our demand and and revenue. sales in packaging applications segment's in for tapes business applications including quarter accounts approximately for adhesives and many labels and example, adhesive used segment of XX% first increased Chemical packaging benefited into over For

seeing market are ester the traction good rosin which that of to We sustainable revolution is provide and for a alternative resins. our hydrocarbon-based technology, new family formulations compelling

printing care personal strong economic and for saw key end-use generally approximately in Polymer of and of also sales we markets quarter, packaging printing these first medical are applications for not into food used both cycles. labels accounts applications. impacted XX% and segment food the During in believe revenue in packaging hygiene plates Similarly, we demand by

today's of noted Moreover, as we COVID-XX in in certain increased sectors seeing of demand these indications markets. world are

sales In of and sales marking revenue applications terms XX% accounts roofing revenue. paving of of and segment into X% into Chemical infrastructure applications represents approximately segment approximately for road the Polymer

around believe paving is Given an we it accelerate world the and stay-at-home time traffic is road to down orders opportune projects.

addition, as pricing include might which of cost infrastructure. crude commitments asphalt very are inputs. additional to also the in In we new given the invest expect stimulus, in attractive. watching specifically for Such economic We're decline

broader into of well developments of expectations, segment Polymer industrial revenue, accounts wide consumer segment revenue line products watching this Chemical revenue. X% X% XX% we demand are revenue doable applications At Polymer segment are for in of approximately largely and Chemical These with variety geographically. Sales distributed closely. time XX% sales for while and is however, of a accounts segment sales of into

driven and our on polymer Weaker At road are additives. the may additive people the will to commuting weak not enhancement into tires in sales segment. agents work an automotive we adversely will into sales and do fuel also of trade time, expect reduction traveling remain demand impact near-term and lubricant miles components automotive we sales for automotive and have or our this impact Chemicals in as sales same sales project our

approximately Collectively, these account of markets XX% revenue. Polymer of for segment segment and end Chemical XX% revenue

than saw not for in TOFA, as TOFA sales expect segment demand has the product oilfield in demand, in in further have the Chemical weakening it while but decline account only segment and could XXXX. oilfield we impact less X% activity also sales, sales potential to drilling pricing these impact contraction a on demand other of X% redirect as manufacturers We Polymer in to an and response approximately for of

our and exposure of COVID-XX and stability end results portfolio in of for the the believe the meaningful in we contraction market While and second a the balance quarter and beyond diversified year. uncertainty the America of North further progression the specifically significant provide globe, measure prospect across in demand Europe for

the As we not release, have determine global markets the press noted balance or for in to of it do progression believe COVID-XX of is possible we the duration will magnitude yesterday's the year. on

we behavior can demand while Moreover, even general more customer predicting about overall specific make is assumptions challenging.

is it specific time, financial not at accurate scenarios result, if a XXXX reasonable are planning we full providing this not very guidance year a forecast. difficult for into impossible synthesize As EBITDA. to Therefore, adjusted

steps of this we year. navigate annual underway assure million I through for reflect we to business $XX developments will not this at with want market specific I to reduction take to you we do the time. our have to concerns this or emphasize, plan we cost any are that of we efficiencies however, the that want balance the year. deliver as intend Cost adverse measures appropriate

in crude side, we and related our or in sound. the We locations. near-term to believe energy conditions is balance should view help dictate believe also costs our be pricing maturities good shape, material appropriate at our manufacturing market liquidity measures position will with to of deployment. on not additional We recent terms sheet decline Should take in no but inputs us capital raw cost only the we

stabilized. Chemicals our gum remain year the half segment, decline based unit we over the we and stable. In have pressure our last project last upon segment latter in expect margin in Polymer quarters, from several In margins of to seen pricing what we has resulting the turpentine

demand at we to when forward. guidance specific of expect regarding trends absence this transparency possible in that as continued and is market realized importance, developments time, utmost move updates provide we and We've

With to those up comments, we'll now questions. open operator. Back be the call for happy the to

Operator

Thank you.

Loop question-and-answer We will the begin first Chris Capital Markets. from is question Instructions] Kapsch of session. now [Operator Our

is line Your open. now

Chris Kapsch

for the but not you and Good I'm morning. the caught sure Cariflex color. of much all it, first if One, the Thank EBITDA to you one say couple I how A to did business contributed quarter? questions.

Atanas Atanasov

contributed business approximately results. EBITDA adjusted $XX Yes. the The of million QX Cariflex to

Chris Kapsch

Okay.

Atanas Atanasov

$X.X but And I to clarified in we operations have additional remarks $XX is purely million. then that Cariflex Cariflex the related also million sale, an my

Chris Kapsch

And also quarter. it. minimal one -- business Got Tires. guidance sort auto get businesses Does of -- usual. and suspension first of there your there's quarter suggested then But it. month And from Right. overall like into I you COVID, as feel in but some end of like the well. get that second it example markets, shutdowns totally your disruption sort of are Obviously, are performing some for other -- we're

of like even quarter? just So in you second kind the characterize qualitatively if far thus the business can cadence

Kevin Fogarty

I up well Chris. think it summed you yourself very

like of to As at we business. going given continue this the in of our guidance today than it see was other the reflective uncertainty based all providing where what in is not decision we I not on my comments, anything not said look just prudency today

Chris Kapsch

other Yes. I just, so Got in so helpful. prices Asia. have of last the reduced presumably are just That's trees then on rosin recovering question it. gum And tapping

yet of the signs turpentine affecting that that's And any so are market? gum there the oversupply

but it's that about, say, And new margins then normalized elevated business, given margins thinking you tranche Thank normal for a way in sort of What for like is Chemical a you. unfair look know EBITDA the segment we margins might like? like? that good that now context in segment? the look that of And EBITDA might for what what's normalize be the whatever it when do there I should guess of is

Atanas Atanasov

last the incentive tapping half a is a trapping for the coupled your China that decline yes, tree of less evidence in obviously combination are of turpentine happen. The is are output. we overall to we've into as turning happen the year this year rosin gum seeing some in obviously COVID-XX answer rise and to of price -- in causing that in beginning to decline second rosin, seeing of we tree a And that first with seen steep result question

With respect think to along your margins, said margins reason to segment our we there's believe won't all second Chemical around Polymer business able with question consistent I what that be like our specialty we've sustainable when segment, no things truly. or to achieve high-teen stabilize

Chris Kapsch

you Okay. much. Thank very

Operator

you. Thank

Our Sheehan question Jim from is of SunTrust next Humphrey. Robinson

now open. line Your is

Jim Sheehan

Thank you. Good morning.

following rosin pricing gum is with lower What first expectations, full indicated recently? on given million for just pricing So previously on $XX up be the view what year. your would headwind just seen about that you you've prices updated that

Kevin Fogarty

Yeah.

that think think holds. results had versus the end I first I of XXXX quarter at headwind the to a And the I related is still mean was the in side. day, turpentine projection we that

Jim Sheehan

at question that then And your cash if necessary? Great, even preserve related will what thanks. you Are a with kind this to be debt expecting year, downside looking to of flow goals. a cash free levers you generation scenario? And pull what as reduction can you're positive

Atanas Atanasov

have -- some very expectation Obviously can and Yeah, could levers will Yeah. a our utilize. we Obviously, we see as of is working capital. run This very, indicated we're also cost approximately there's management the that to remain is we you number capital a with flow cash have as Atanas. of positive, prudent expect our that call, which of the comes rate million deployment upon embarked on allocation. we the cost CapEx reduction and program of $XX And deliver to savings. it when which flexibility Kevin will

if working respect necessary. management discipline So and capital with cost, CapEx fiscal rationalization, to

Jim Sheehan

Thank you.

Operator

Thank you.

is UBS. of Matthew next Our Skowronski from question

is now line open. Your

Matthew Skowronski

Good morning.

on slide outlook So the by region. you XX, have

years? normalized what the CapEx, if a Just you you time the guided is future how clarification that. year? And for secondly, for or full level CapEx in going then line for think not, Or it Is we about thank for should forward? it is XQ this

Kevin Fogarty

of Again the to I'll have everything -- and I with -- sit we we we situation alone what the hope I'll to first let can happening, us the today, into It's the view. year. the answer let to Atanas. a just turn see. first company for half what's about think, then back comments see today. That's difficult any over question made I this that's is imagine in-store the second the for Kraton second But how we going very as you

Atanas Atanasov

to respect remain historically, Kraton CapEx that ballpark This of look unfold we're watching flexible. at year to within million. $XXX spent closely we With if said, very how Yeah. you as about CapEx, we're million and annually. $XX events the million I $XXX But we're very

Going forward, reasonable I ZIP assume. assume that $XXX to million code seems

Matthew Skowronski

Very helpful. Thank you.

Operator

you. Thank

next from is Vincent Anderson of question Our Stifel.

Your line is now open.

Vincent Anderson

good and you, Thank Yeah. morning.

of much the just that at demand pretty where excess pulling Would particular rates just drumming back continue prices to run almost or we you operating rates choice of down of where So gum came now, current I curious exporting in rosin it. kind would normal demand given to stand and expect where market rosin kind was on derivatives, right the you if have crude regardless enough destruction year? this your TOR plants and is

Kevin Fogarty

Yeah.

a consider. get question, to anytime think balance have asked I you we this

We have in isolation versa. vice both decision without -- implications a TOR considering well, we and make don't, TOR's

and So it's cases year an demand line adhesive But as in good depending revolution the But our This particular in new presenting I opinion. first in suggest technology in business indication much attributable many end say marketplace. of I outlets. difficult statements from to perspective, our market the clearly would COVID would to come just that, also is decision that a different adhesive for technology the me any More to has demand. of to a to light what with certain been at respect team in in commented what is I the happens the start with this on my be that. my day mentioned, the the product

Vincent Anderson

winning of business, chemical your Great. of kind Is share put primarily favorable on question a possible kind environmental to due anyways. It leads me the number yet my footprint? pine are sales the rough into of it that to next

Kevin Fogarty

that? Vince. repeat sure not you Can followed you, I I'm

Vincent Anderson

apologize. I Yeah,

of So, footprint? put around yet kind their are share buyout-based because of is to business, number it of a possible chemical sales the pine that primarily winning your

Kevin Fogarty

Oh, going I with you're see where that.

big I environmental solution looking use because commented last esters think consumers as winning that seeing we versus examples yet, the probably calls, hydrocarbons. would at many a benefit. And we're I decision solution two hydrocarbon its in are to versus of I've rosin we're be making don't where think in biochemistry a that where OEM footprint

time believe more Those situations I are purchasing awareness to as drive with be starts will as frequent that they more not as behavior. and

of very clear. view Our is course

are than this We in else equal other cost. all at of looking being performance, any terms terms quality, of in of way in not terms

We that wins. think think thing right are we customers as It's thing the for we environmental are. and bit model for world. the footprint sustainable sustainable the as obviously business every of right supportive Kraton possesses the model the that It's a solution but is

Vincent Anderson

That's very helpful.

If just on CST. you I'd turning don't more ask mind to want – to one

rest how to your the for are the up CST product very on you side, volume shaped the similar contracts the portfolio? your into the demand applications versus or directly for are of sending demand CTO contracts CST cleaning curious products in Just linked? CTO or kind and then is cleaning if your And much contracts how of

Kevin Fogarty

obviously it's at You Kraton, that is can imagine in we I'm or think contract conditions CST like just Polymer But going to sensitive. everything that. was. I question, different energy whether Chemicals, energy do world again And leave there's the it highly play. comes And a With me component picture. is respect I'm to today's that to second much remind your sorry that what have you an into

Vincent Anderson

Yes no problem.

So just...

Kevin Fogarty

reminded. got I you. Thank

So it's a small think cleaning is – portion. I

one being perhaps X% on into you. places, in and it generally called as Slide on cases as Chemical our of XX it a business, in for also into flavors as different And out acid surfactant up it that demand it goes segment probably sales we think as as speaking a our – demand. fatty those well the overall in fragrance – probably couple I shows of in goes

Vincent Anderson

Thank Very Okay. you. helpful.

Operator

you. Thank

Roberts is question from of next Our John UBS.

open. Your is line now

John Roberts

is the feedstocks but about way your any can there don't Yes. will to talk help want chemical Thank think how Kevin about movement? you. I you WTI And respond conceptual contracts to realize that you feedstock us

Kevin Fogarty

it's the our see energy that components pretty lag to or design, the into expect obviously, costs. delay raw Well, some that you'd if what material with flow will contract there's I you John obviously think much we'll extent in

John Roberts

think we right about volatility obviously a mean, average. I monthly now? daily the And is incredible

Kevin Fogarty

some it's it's Yes not you monthly; that. daily it's assure a cases In I pricing. quarterly. some can in cases of

John Roberts

mode this that's is bottom to And out much mix in shift run guess else end barrel significantly but you worth Can always don't the the either I not environment in of you either. a of given – your Okay. do? there's anything there to I coming refinery the know make products then different you refineries as the higher-value can want

Kevin Fogarty

CTO the component where But the think makeup, in choice which there can components end of the of region. where do the chemical day, makeup and it we All we about the predetermined. we CTO is at a feedstock, is have constituent the in run

what to described, So no, ability nice we promote another. -- to it would ability the one be don't we don't fraction versus have have the but you

John Roberts

you. Thank Okay.

Operator

questions time. are of GSO. queue this question Instructions] We [indiscernible] no at [Operator from have there Speakers, in another

Your line is now open.

Unidentified Analyst

questions. two you the Sorry. are quick for I presentation. guys? have just How Thanks

relatively DRT as So if if what recently so guys multiple that I to new guys at know -- where business or And Kraton for thought you about was don't just a just familiar look And that I did the you well. was then, there? are sold. not you trade? to wondering you if I'm had

the So we more a guys think to looks the just you what now just lot why stuff do? relative not Thanks. attractive do fall in the given hydrocarbon -- oil,

Kevin Fogarty

comment much the DRT going we on with not DRT. familiar are I'm too to transaction. Certainly, So

familiar its in officially that don't by being was owner the it a with the acquired think who and I out there's of We there. very market are sponsor number sold business. previously familiar course

hear speculate So the I'm on you but do had, not was multiple reference healthy going one. to it we a

me obviously let to are going have it cost of business. second guess, answer the question, hydrocarbons context overall with Now to in I oil crude general as Well try well. our in base in decline, of with the respect a part to lower your

like as energy pool previous we when against well. the it cost to asked a would hydrocarbons, from I of that's types input CTO our CTO that comes the and question just you pool has that But coming our obviously compete remind was to businesses connection

there's cost within ours. driven that more much know dealt underlying cost several don't structure the was offering past between I energy it years difference -- demand cost than than by driven the distinct competitiveness any our rosin advantage. we've energy their So new to by Everything respect with hydrocarbons is supply of versus

Unidentified Analyst

it. Got

Okay. Thank you.

Operator

there you. at no in are questions this queue time. Thank Speakers,

Gene Shiels

will be thank for this our this like by prepared replay will I our Okay. the for take thank and remarks. replay thoughtful XXX-XXX-XXXX. That participants call you, their We'd all may that today later morning available and Kat. opportunity access concludes of you. questions. Well dialing interest Thank to you their to of a this note

Operator

This Conference Kraton Call. concludes the Quarter Corporation XXXX Earnings First

You may now disconnect.

Kraton (KRA) 1 May 202020 Q1 Earnings call transcript