KRA - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to the Kraton Corporation Third Quarter 2020 Earnings Conference Call. My name is Kirby I'll be your conference facilitator for today. At this time, all participants are in listen-only mode.

Following the company's prepared remarks, there will be a question-and-answer period. [Operator Instructions] If you have any objections, you may disconnect at this time. the to turn now will call Mr. over I Relations. Shiels, Director Investor of Gene

Gene Shiels

the the are release morning, Thank Chief Vice Earnings and third Quarter on Third quarter in disclaimers you, And draw yesterday's in available presentation Executive the Call. Relations copy of I'd is Chief section the use the website. this and me to release. related morning this Atanasov, Kirby. presentation President press to Good on Officer; welcome earnings and the review to Kraton's our President Investor before Fogarty, the our and material this results of of Kevin Kraton's Kraton will morning the and like Atanas Corporation we information With Financial news call attention your for and A of morning non-GAAP and Executive review forward-looking quarter in XXXX we measures Officer. the third XXXX, included

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

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

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

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

review to was most financial morning. measures, in yesterday's a press provided comparable appendix release presentation measure of GAAP non-GAAP we of reconciliation Regarding we measure the financial each of the the earnings this and in financial non-GAAP its use use

prepared call the to I'll remarks, the we'll line Kevin? over turn our Fogarty. open questions. now for Kevin Following

Kevin Fogarty

Thanks, everyone. Gene. Good morning,

ongoing an our effectively quarter having despite fundamentals. demand we business continue COVID-XX effect third overall, on to the manage global For

the improved employees, end impact from once we With communities safety operational our and specifically and the across from fundamentals customers quarter, which an demand operate delivering to in remained results. globe, we benefited our top our the solid diverse and During health have continuing financial of again the in COVID-XX market priority. exposure and

During the earnings while work and we employees efficiently, including operated manufacturing planned and of our call. second many quarter, quarter maintenance our continued remotely, to safely our referenced turnaround undergoing facilities activities in

saw for improved In our segments. quarter, solid a significant to the experience we medical Polymers our From America or roofing Geographically, and business. did addition, the demand Specialty the the demand market In and paving durables, end third benefit broader logistics improve in quarter, and conjunction Chemical improvement in in quarter. high Asia North automotive and Performance third and we consumer applications. saw in in Products to business, in solid any continued demand China sequential disruption level, not in in our both applications contributed we our our Polymer chain exposure, in within in supply growth diverse of volume with

margins seen over in While continued. conditions major in weaker demand the sequential a we Polymer Chemical lines have quarter, our product In we in our stability notable and third the continued where demand in of segment, the both experienced as rebound Chemical segments. oilfield course exception across with experienced of year, all the unit

we reflect of financial consolidated third net results third in activities incur foreign also and generation $XX.X with quarter, of and the currency. quarter the and in our as reduction absorption a costs timing However, drawdown, quarter, mentioned the impact associated million consolidated associated was both cost in favorable a the second Cash for fixed our debt maintenance of effect with in did reduction the providing inventory turnaround anticipated in $XX.X we the earnings call. debt, million excluding which

of ABL $XXX maintained have quarter with on availability we at our liquidity facility and million ample end. However, million of approximately cash $XX

key debt reduction while itself of during we to priorities, quarter, execution primary reduce debt third outstanding continue the In remains objective. on terms a

We cash should turns. approximately reduction as quarter debt generation debt a provide continue this for expect additional further fourth ratio year in of the we net target to three that consolidated

$XX particularly the our leverage polymer During efficiency, the including various portfolio, operational future, CirKular implementation that grades, most Esters Kraton result quarter, we to reduction perhaps in on run focus position believe our cost platforms call. cost recently opportunities, growth continue to organic end. initiatives sulfonated from And most work to savings in innovation the rate we REvolution recently provide importantly, of Rosin update introduced family an our by and formulations, our BIAXAM as we I'll eye the an approximately also polymers. these to including million will later of we year's on maintained with benefit our sustainable of

for going quarter. our will point, third over at our Financial For who I'm more Chief Atanasov, financial turn this Atanas? on Atanas specifics results the to Officer, call now, to the provide

Atanas Atanasov

Kevin, and morning, good Thanks, everyone.

for review the as third result, As The we we third financial improvement million. reported EBITDA turn highlights to quarter. demand for quarter. adjusted Kevin stability Slide strong And $XX.X financial the were X, of to and contributors the I'll key a results consolidated noted margin

a $XX.X the of March million of quarter factor XXXX. down our significant business compared decrease of to sale was 'XX, in the the third in Cariflex this was While

and lower Esters, the chain average largely addition, segment prices by were Rosin CST selling which In in our reflects offset Chemical decrease volume. higher for sales

XXXX from the year $X $X decline referenced fixed to costs This to attributable half XX.X% third maintenance we're and higher also Overall, earnings the second to million the have EBITDA and XXXX. postponed call, pleased the is XX.X% would million lower in the also the of consolidated of results. associated an compared we consolidated fixed to earnings indicated with a On timing expected and due quarter year the quarter 'XX. in turnaround third third with activities Cariflex, we in call. Excluding EBITDA first absorption of with compared the costs basis, to COVID-XX adjusted down we inventory half margin had of as our second adjusted our quarter of of quarter associated first of quarter built been was drawdown due during

Here with with again, turnarounds favorable reflects absorption decrease less in maintenance the margin as the and of just timing I sale liquidation. fixed well factors associated as of cost and Cariflex fixed associated inventory the costs mentioned, higher the

it million. quarter where segment, the third Looking EBITDA a adjusted at segment results, $XX.X for was solid was Polymer quarter

compared Cariflex business. quarter of largely the the sale $XX.X third with While million of decrease is down this to the was 'XX, associated the

cost impact been adjusted decrease with associated of Cariflex, maintenance the have only planned activities million down I the down absorption timing function would draw Excluding of $X.X and turnaround the EBITDA largely fixed inventory with referenced a earlier. and

gum and was Third XXXX. quarter the following quarter CST only of in $XX.X pricing the on year, sequential prices XXXX significant of the which in by compared the third compared largely million, 'XX, sales EBITDA of third million XX.X% results $X.X for last improvement, half down pricing chain principally second Rosin volume, adjusted quarter lower to and the higher offset up of turpentine decline was Esters, to segment a lower our Chemical showed to due

excluding we third foreign reduced the of effect debt, $XX.X consolidated net currency quarter, During the million. by

particularly costs. sales with lower was I'll for associated $XXX paving America, also a million our quarter higher segment end six of second Slide volume stronger the move XXXX. facility. million on for with first basis of of compared remains in X.X% position and cash the million, roofing months the on prices of revenue The segment impact Asia, and strong demand. to quarter Our the of offset the on up of into and nearly average selling sales was demand sales sales results. up by Specialty reflects at lower XXXX nine availability in adhesive was under ABL quarter. revenue raw COVID-XX $XX.X with down third applications average year-to-date Product Performance of XXXX, the of a in and X% our volume sale Polymer third the volume higher business to Polymer million review North partially now quarter and Polymers $XX.X liquidity material $XXX.X this Cariflex was for decrease

the for an EBITDA for Polymer associated the of XX.X% was segment last million compared As with XX.X% $XXX.X a adjusted to margin year-to-date the year. result, same period

up have adjusted compared the nine of been months EBITDA XXXX. X.X% would Cariflex, to Excluding first

our As earlier, market in noted our market has to Polymer led stability current segment, in diversity even conditions.

'XX higher the materials customers, despite With improved sales prices third demand in business, record revenue XX.X% X.X% and the The upgrades. segment the XXXX, lower customer sales sales third with and EBITDA demand up third largely to results XX.X% the as X, chain Chemical was XXXX. Chemicals volume the compared of of of quarter capacity for in was a headwinds the the third the posted in the well down the quarter XXXX. year-to-date XXXX X.X% Sales average million third segment 'XX. for modest offsetting million Rosin opportunistic first the sequential up XXXX. Adjusted therefore as Esters TOFA compared Overall, decrease sales and quarter was at was compared The reflects Rosin lower adjusted reflecting due timing third as business of our quarter lower first demand was to versus the driven of XXXX in COVID-XX. nine turpentine of XXXX margin million versus quarter million quarter in quarter of looking to due demand, of the units, line volume $XX.X versus down On average benefit decrease solid with The of cars Now XXXX. second demand, lower combined of the purchases we $XXX.X the was year by down for to COVID, improved was and Esters. was second Performance third CST up million chain the in $X.X segment was on the of Chemicals with $XX.X third $X.X quarter by volume XX.X% Slide sales third months levels selling of to sales for that selling up of associated for TOFA for quarter following higher half the the average Rosin offset across first half the higher EBITDA third of volume. volume months the Chemicals sales volume for average raw basis, XX.X% our in pricing the volume revenue environment. resumed the CST with compared tires by in of for and trends In production. with the gum current Esters, XX.X% all of last the in from prices CST in in segment up significant largely nine quarter, to adhesive improvement quarter idled was which lower primarily was prices the in of chain Chemical decrease this prices saw

year-to-date and the year this the tires by to volume was XXXX, comparable this of Performance applications oilfield of COVID-XX, production For in nine oilfield lower nine due million for first decline was in of to driven $XX.X a in months to lower due markets volumes. X.X% Esters due volume and was demand weakness XXXX million and despite TOR Adhesive especially and during to Slide Rosin sales CST sales year. in down for X.X% period higher overall first impact contraction Chemicals chains, growth of derivative of Chemicals was TOFA the EBITDA The was provides in for off-line on sales the quarter the offset summary into partially $XXX.X compared quarter with selling segment year, for for and the a and prices up up second and last adjusted in raw volume opportunistic high of tire decrease COVID-XX. year-to-date. second quarter the months results consolidated the raw demand eight materials, material opportunistic by COVID-XX. sales sales of X.X% third volume

million $XX.X XXXX, nine first nine $XXX.X months the to compared a decrease million, the EBITDA of first was For months year. of last of adjusted

and my is to of automotive Cariflex decrease factors in the business, demand lower volumes. and covered discussion, sales weaker due segment partially by in COVID-XX, sale offset the as chains, oilfield margins the such applications higher in of As and impact the TOR CST our primarily and

to last higher consolidated adjusted of first nine first TOR XXXX the the margin result, year, included XX.X% XX%, the and a for margins of nine this As which compares overall months was the segment. the CST EBITDA in Cariflex for and Chemicals and months

reported first share, of Cariflex release. per I is of XXXX, the per planning we year-to-date The On the compares this do business, earnings In on EPS an noted and XXth. our a per to per of decline and one the reported as annual diluted goodwill of share, the of CST the of share earnings with of in decline for test in earnings third principally quarter $X.XX months diluted of For performed balance nine the long-term September third basis, due rosin the with result impairment specific adjusted comment interim we this sale compares prices. process, item want conjunction $X.XX quarter adjusted adjusted $X.XX our yesterday's to to for share XXXX. XXXX. we to largely of and $X.XX

Adhesives the margins our our took including the and gum in the we As hydrocarbon half impact XXXX, into associated demand part consideration of impairment the of and pricing impact ongoing the decrease second low-cost in of CST in level chain following COVID-XX. turpentine current in factors with tackifiers of business, prices test,

As have the for a for Chemicals $XXX longer-term impairment our outlook noncash result, the charge a we of segment. recorded is we charge, favorable. believe the million impairment segment Despite Chemicals

stable have overall despite volume unit we throughout conditions. market this previously, margins noted have been year and seen As growth XXXX,

the we sheet. balance progress to X, As highlight our I Slide turn in year have this to made want strengthening we

net the both $XXX million amounts million by foreign $XX.X consolidated year-to-date During of currency. the approximately effects quarter, on by we debt excluding third reduced a basis, and

target this consolidated fourth further of continue year debt the reduction I generation will back progress net call X our approximately expect his quarter debt for times. comments. to leverage cash toward in We now to turn we Kevin as and of the closing

Kevin Fogarty

Atanas. you, Thank

Slide on move outlook and by Now if business an we we current our geography update could, let's onto application. XX where end-use provide

As third improve whole the third remained stable. of a in to view, noted, in and we while quarter. In the broader the continued areas our picture saw during Europe in China improved number Asia quarter, a demand as demand

in quarter, and in North we quarter Importantly, recovery COVID-XX, following anticipate largely weakness near-term we the to attribute some improvement. which third demand second America we saw currently in the further

we roofing. Specifically, to current has remain markets favorable, are demand automotive as as by improvement hygiene as near-term applications in packaging medical, stable, demand, consumer in more in paving demand adhesives trends. applications market personal durables show well believe expected infrastructure as such while markets in care and and Demand remained supported has and

we durable segment, global applications, Polymer our in Specifically, quarter weaker second rebound a a in in quarter consumer demand the a in following third saw on more basis.

fourth fundamentals, while and a as trends In tire world addition, with And the manufacturing far near-term the resumption outlook of we production the to in around demand demand have saw as to improved positive results tires market upon believe in continue based We we of in could into market has specifically, of and what automotive for production in light XXXX. of end impact number to segments far the remain our we the COVID-XX adversely our in so that our the for portfolio to improved we relative in particularly well that trends seen balance at the world, automotive third plants possibility the thus about are have XXXX. favorable today's our optimistic remain mindful outlook general, the second quarter, quarter. of diversification, and year the contributed quarter and and relevant exposure in

XXXX. year, upon unit solid and mentioned, trends for first This our for As build of margins on volume in a stable basis, is are have us foundation sales nine the months remained year-to-date to positive. the a

also improve noted, that to XXXX. are cost debt implementing should results with balance to sheet in contribute favorably we As our savings further our and continues reduction

recovery specifically by sustainable prospect for a we from we our of may volume CirKular the continued rollouts, at in further Ester and REvolution organic energized of XXXX, potential Rosin number recent are of As we innovation-based Kraton, see polymers. which growth the believe our formulations family benefit product

and for reception will highlighting Esters. mentioned participation this technical truly with in by differentiated we product the players. set is been a standard level have industry regarding REvolution. are I it the interest seen of very of series encouraged believe technology, hosting As It is CirKular, for a We truly webinars various the July, are we have differentiated. Rosin that and we CirKular, pleased late

that to a particular University difference. as specifically of the has would characteristics, industry garner North topic very is made we in Kraton including part self-sterilizing customers I we a family in our demonstrated Boston unique a We specific highly marketplace. the its recycling sulfonated BIAXIM continue number their believe durability for these the provide In we is in a light have in sulfonated Texas its the solutions to antimicrobial. to unique September, will of effectiveness the challenges. organizations, applications. with In health other novel the both for announced a BIAXIM that for over and turn and offerings SARS-COVID-X, Galveston, and seeking Medical approval position technologies to polymers BIAXAM your the Branch given antimicrobial have to years. world our polymer, were of and advance efficacy continues University will use other other State for driven sure of We relative BIAXIM very make and a These MRSA innovations is of now markets end interest sold University, early sulfonated by and Carolina microbes. against regarded to minds that of polymers to tailored circular economy, a two positive today's much one I'm significant like that need worldwide believe in

otherwise an inert While the active a polymer. BIAXIM current basis technologies chemical all, if of have antimicrobial is not ingredient, the majority, as

deploy polymers and membrane have BIAXIM solvent-based in other sprays. or form in today coatings sulfonated We to the and technology existing

for precluded regulatory selling currently able the are antimicrobial I are polymers States should marketing complete in applications, we we applications to EPA. note we from for United today Agency Environmental sulfonated required Protection sell until including by exam with While other processes, our the or the or

working processes appreciate timeline safety, now, are and among require sure through can't these durability I'm on you other can possible to submit that that efficacy, data We which for approval. speculate the demonstrate we criteria. I

in and provide there approval that you normal the emergency EPA could process, of is of or for expedited possibility applications. X, referred as approval path the XX to As Section a specific a of Section broadly approval, may many there under an is know, approval exemption terms for

we its would is date seek in or to market suggests in is approval Section to BIAXIM for interest commercial require the efforts because In work minds when The Kraton. from BIAXIM? believe believe our States, path was durability. on you for XX the we of or are parallel if might approval jurisdictions big to we regulatory comment can antimicrobial we BIAXIM the expect, results would material believe we under is in the Kraton's As extensive, likely speculation be regulatory demonstrate to outside could clear XXXX. We -- we market on are substantially with EPA, question on interest overall we but have in and the can efficacy there United done is the But larger focusing it approval in which A many itself. when to be approval it and believe market than of antimicrobial potential applications XXXX potential applications. how on potential your for significant a of is working

are BIAXIM, significant for resources and bear on bringing see we necessary to we potential through in working market approvals. the assessment regulatory Given

we strong And on quite today, so. a real-time approvals. be capital that regulatory production and of is existing that We base with within property upon. use sulfonated HSBC a are when However, our want our around do anticipate state that going position intellectual applications. requirements as polymer do the We to in BIAXIM demand forward the receive have we capacity any updates of feel and to position patent we and are providing antimicrobial when to to portfolio for lastly, level you if I look Kraton is polymers available robust an not significant BIAXIM based do we technology

to happy And so, with call for up questions. some comments, open those the we're now

Operator

Thank you.

begin from question Instructions] of John question-and-answer will the line We first Our portion. of [Operator is the Roberts UBS.

is line open. Your

John Roberts

much. Thank very you

both much get Sorry, are spring, gasoline to linked I the shortfall of is of as gasoline that's that's state market major paving on kind budgets a How going next state taxes there? Obviously, was we mute. budgets taxes there. to into or either and have

to expected have that on any is So, effect it?

Kevin Fogarty

the I presuming potentially day, we I'm at a comment think think year, end and the of in make that the at holes the to receive given in same that view package offset of lot going don't a next budgets the the day, And their is on from you're I of through referencing spend of are state to an the happen Well, about tax state respect argument and know the funding funding. I I position and a end what's state those any tax. decline. gasoline impact how of budgets gasoline federally discussion some could the that might with funding going how it's in But to perhaps to budgets, the infrastructure

speculative. pent-up country of a these that and demand again, is to think things demand what infrastructure this there year I table a around solves in long-term that the So, in But fact year, polymer of is bring still this needs. solution the we've the market we modified and robust terms And reflective seen world. healthy, certainly, are

John Roberts

use so secondly, they making in that you antimicrobial around I be the China? are forth some any producers beholden polymers of the then technology. And sulfonated you for not aware to and of might Chinese have mean patents

Kevin Fogarty

property intellectual seriously any of when in our I such. aware position examples we think unrelated very to not other needed. the defend we in take And sulfonated I'm past, our portfolio, and No. our

Operator

Thank you.

is line Anderson of of Stifel. question Vincent the from next Our

Your line is open.

Vincent Anderson

on Nice Yes. quarter. the job Thanks.

consumer Can those any? there end-use Chemical of growth volume have were versus saw terms out in would Pine the in more what parse maybe you what adhesives Specifically, headwinds, areas you outweighed impressive. was any destocking if the in headwinds

Kevin Fogarty

were kind early it, with probably, the way that in concerns supply about way about had unfolded, out people of much I disruption. strong year this remember, adhesives year we COVID as And think anything the a the as is, what of and we in BXB think to called about of to because to second more -- chains the there led in perhaps that to that course, wasn't of when And talked itself. quarter. of disruption, a kind of destocking led such then terms that

think how balanced our is, today market positivity demand, much we terms see customers what to and family. viewing for with more I market, are respect reflects in sustainable indicates of everything example of Revolution the adoption

Vincent Anderson

thanks. helpful, in a That's I move just on timing chemicals, pine that to it's but sizable ECRC know And FIFO just sticking a difference, pretty was adjustment. the

So, raw seen ever read the standpoint. really wondering anything move this anything -- don't I just just think it into that, we we've can because read I on by I'm don't -- material much. if

Kevin Fogarty

I all will, at end washes talk if I but the the that out, it through you And at of the be reflects there terms it think should often. reporting day, of moves, you quarter-to-quarter mean, of into we Yes, operating results. I anything can in from spread in no, that think all because don't how consistent about that read And our end.

Vincent Anderson

to on my somewhat development, Okay. And Fair difficult of the chemical with. work chemistry of sulfur always has painted bio side understanding a as just polymer pretty enough. limited briefly

does credit the toward success your process attribute go you would more Or as really on feeling it wondering, really, that I'm front? a SBCs? incorporating into it maybe unique R&D styrenic copolymer in does block your to So,

Kevin Fogarty

application. chain know-how think want think key family to our development the requires it reality you. and obviously Penta we sulfonation our is I Block there's combined those marketplace partners But highly I know-how working property. polymers, years try perfect of reflection the people get the lot make to to is well who our is stable answer as marketplace that's which and to supply material. at are someone behind that hand-in-hand mislead don't in case, well a who A in this just into amount the course want work into an for are this not lot intellectual intellectual the combination a technology that? this to we as replicate development, easy for antimicrobial chemistry, wants property system. of is, absolutely day, specific as this this and This that to And a And R&D of supporting at know, it of to a sure and of knowledgeable do you end How Kraton. of complex as I to and very for is a of our reasons, of considerable of went

Operator

you. Thank

Our of Kapsch Market. Loop next from question is Chris Capital

Your open. line is

Chris Kapsch

on Good profitability so I segment. given I the in the had best of maintenance cost margins absorption Polymer well a affected at gross abnormally high maintenance the Yes. ton providing way costs, metrics. question you maybe I deferred And issue by morning. as quarter, profit And if the isn't that per was as the that that guess you've pass-through a you discussed. look the at feedstock look appreciate to that in or was variance the it sequential was issue but down, this that,

obviously the is third profit the segment a along per it is is penalized on Polymer in a $XXX just -- ton had the sort overly a profit And to Or for we the go-forward issues? of gross So, still paving what the I'm quarter big wondering, I though, curious, also I normalized given pretty was metric, those I about volume. lines, of that basis? aforementioned metric is is think curious, was year-to-date, think, also kind these

associated volumes quarter? the also profit in metric depressing some if with wondering I'm those adverse ton the mix per gross that's So, there's

Atanas Atanasov

Yes. Thank you Atanas. for your question, this is

fixed timing with the respect the you largely to I adjusted Polymer were of segment function a seeing of profit think gross in absorption. you're cost right. What maintenance is and

$XX quarter. what fixed of negative As year cost looking million $X you was exactly account of maintenance. last million that of second the half absorption incurred half impact you for million at When $XX the it, -- had indicated approximately on of to million third of in we're $X we that. we to second quarter half at the were look and of Well, about recall, that of incidentally, on the top is headwind in

adjusted look been more when of reflects Historically, $X,XXX gross we've code business. so, that you And a $X,XXX. profit the zip to view of our normalized margin, over at $XXX

Of happy. per two $XXX very, a of course, would material. we we we're and per again, Because don't remember, other the of paving ton, on timing. have those impacts not it, to very respect But Cariflex anymore, to code. in extent that, zip ton to I expectation gross have adjusted roofing, feel it's any so call year-to-date profit very mix an on that and comfortable that still largely some basis, factors, account are are within we $XXX will our -- that margins the that $X,XXX With It's FCA with say maintenance. And impact. much and

Chris Kapsch

thanks. then appreciate key to to recovering, are also just XX, end of on characterize That's year-over-year, normalizing, on the CTO Okay. I availability But be obligation it. of this helpful, your markets got the has than year Chemical feedstock your however of XX% side, volume you more want growth And to supplier. owing this of contractual part tied the to some greater these

characterized think the and wondering it. material raw reference you resale was I'm if way I -- opportunistic So, you some did

to that markets. and gain is now I'm need demand other of underlying to end the that So your volume tied wondering reselling really profit a true with in versus CTO maybe at much players customers how it industry

Kevin Fogarty

XX%, saw, seen consistent sale is volume materials. very that to Yes. of It's raw think this half XX% you growth And I with in is great due opportunistic you've the About of question. the past. what a that

out, not. so we I This think last year last, you correctly as constrained. before the CTO year are year pointed we and were

I year think Given with all the supply the half first in the COVID, is balancing we're and demand. demand we're of doing headwinds

material to we that. And of of as sales rest, raw through so, those course, balance those sales, but not -- some at we're can that very extent have the to the it happy come very volumes as profit, doing we're And albeit high a

Chris Kapsch

of... than Do sort they lower average come with segment

Kevin Fogarty

depends. It

Of course, on depends it the mix.

we're just have again, that And mix shows very balance be and It leverage CTO sales. could, not material is like you is it raw And sometimes so happy we leverage. have the And demand. of supply we the sometimes position we with But lower. we're something that could said, obviously, I about this it unhappy how such we're able that that that. to a and strong

Chris Kapsch

way about wondering in difficult about. your enthusiastic most to are And opportunity BIAXIM, maybe fine. a shelf and you materializes. innovation. how you of three should not Kevin, you potentially I X, be some unique assuming specifically, I I'm commercial believe the will, on capabilities delivering ability I I uptick movers. questions, so sort of sales. capital there's But I'm to on ramp thinking and we volumes That's to should microbe approved think you for at to just get that could this terms there to about the these if are has curious, assume could it's then you're on is Thanks. I market sulfonation try then I'm different or expand these quantify technology commercial rank the much the the you applications, application. they you know how should guess uptake. Okay. to this this really a thinking really toller, this third wondering, wondering mentioned effectively my guess, what the capacity needle just happen that of be I ones innovations. I'm needed step you that that you're think But sort is I'm if maybe -- mentioned this? was how because how this the focused applicability needle-moving or of understand And And too those potential And enthusiasm. some tranche are until just

Kevin Fogarty

Thanks, Chris.

you regulatory and actually the up to discussions obviously ramp issues, priority our of obviously, very is really the on that putting kind imagine, of our is question, a effort last important supply part good can of So, with chain to about agencies, well we the perspective. volume part and ability a planning And answer from your too. as feel

and driving And team about the about trees. business CirKular the that It's not me can I'm CirKular of rank to innovation first solution. from resources innovations is, We've is three table. REvolution what force more got circular and of trade-off hydrocarbons out, I a team I'd the about Polymer with that growing keeping economy. separate the world. certainly mind answer teams has offering we love was with case take in lastly, say obviously, you the performance. day, from the tree that of to solutions all a the then recycling technology got These with focus called issues plastic brings we off BIAXIM terms thinking. you market on has But got the say aware the customers marketplace. on the choice allowing, BIAXIM. and I that our a commingled. it And technology And problem for we cite goes world. beyond our single-use around the allows that for of with family infrastructure And choice CirKular say waste sustainability quality solve then when end stability. think again, recycled application them REvolution being table commingled, But of believe as relevance there's is today's that let company. a commitment We our then, them want therefore, to dedicated that the two going Kraton's to here at with own at Chemical in We focused, our talking obviously, in just discussion. in and really We've delivering to what X, the problem difficult focused this REvolution, of our is replace and its the CirKular, sustainability a we've them. the that to spirit of problem I'm course, the polymers REvolution. the not on help that It's plastic In designed believe And terms one again, each it BIAXIM, it's and COVID have on course, to and and the of sustainable very In customers material model. fundamental a because our those. notable make that the of making performance, of around be our industry innovation in

I effective like mentioned antimicrobial about things talking bacterial points an BIAXIM how think MRSA, infections. my think will I be against in also types we

as we're for building as transportation the in offering potential industry. role. healthcare course, where And construction. BIAXIM a at a space play thinking it We're public in about market naturally, looking and another could of So, potential

I of think and But you, not for surfaces could yourself, touch anybody, get let's therefore if they material the really on touch can eliminate stopped just public. that risk about a how used and be ourselves. thought ahead about surface health a it, think

is has step encouraged in generated regulatory solid conversations exactly U.S. did approvals to of first the the done market terms thoughts us be by with both for. in that's in our world. the meantime, interest the Our And of development it it's have in terms necessary that and around very And BIAXIM what applied opportunities. share And allows the I'm encouraging that very even exactly could looking to people in were their marketplace, we about the and what partners. announcement how

Operator

you. Thank

Our from line John of will UBS. come next the question Roberts of

open. line Your is

John Roberts

to differences them right as NEXAR products you BIAXIM, there get interchangeable? BIAXAM those sold to be Or can When the approval for allow away? inventory subtle between wouldn't are that be jump-start Thank sales you.

Kevin Fogarty

on your inventory to to about not comment today we in addition specific yes. have the to question, but satisfy talked to this would do going much chain, supply BXB that what too I I'm

John Roberts

it quarter look fourth normal insights Was your is above into or the have normal And quarter and go then what additive might Okay. a lube recovery like? September to sales been lumpy. normal? what did Any the very

Kevin Fogarty

it's run operation at context we lumpy of the day, in of lumpy It's those for terms the runs. end the customer not of consumption. Well, our production of, in terms how planning in

now, the application And to of our the well, I nature coming doing, year you I'm mileage the but and specialty batch that's think We about. own our course, process the so, I itself probably back going itself And miles in year, say sales would suppose of of with of -- and pot I in that might that's tell produce line the what it. our world obviously year, to automotive into is I the end much a COVID and the that speaking, say of were impaired that which in pretty back even early has reflective is the driving coming is, we we're in in you quality as world been think where segment the roads with What remarkable going would yes. generally talking expectations of present. offering today, just part the

Operator

of Stifel. the would you. Thank question The next come Vincent from Anderson line of

is open. Your line

Vincent Anderson

Thanks. Yes.

clarify. of things Just couple a to

management. a past mentioned to just in the First, have you going that's major back customer noise caused with comment, inventory some their that lubricant

or saying normalized moving you're more demand restocking by So, toward either quarter impacted a this wasn't that them level?

Kevin Fogarty

that need, the to sold really Indeed, a to when number. facilities case. produce XXXX you're quarter-to-quarter dynamic at people inventory saying this No, customer kind just of we've however, cause encouraged which still always destocking look function it's issue I to comes the on clear, can the of both the to that What we when in our fronts. it the right through volume prior of terms in I'm to annual need supplying material That's be choppiness. is, that they why relative That's of changed the had the and the XXXX we period year.

Vincent Anderson

see. I

I'm And Slide to go trying real pavement, Okay. to just out back just That's quick, XX. then perfect. Thank to you. parse

referenced least down. -- the share stronger You mix to paving were demand, dollar have the indicate at sales seem you but would that

So, for maybe any I product material? out don't just faster think these materials? Or as just raw know, there adjust much trying prices I'm roofing is to exactly an to prices alternative how to it. asphalt figure about consideration

Kevin Fogarty

to perfect raw material, It's almost index. a linked very

imagine the material which can with to butadiene, we're in selling were probably So, price. quarter, does XX-year raw particularly a you costs, second when what dealing that low

Vincent Anderson

Perfect. Okay. you. Thank

Operator

the Chris Kapsch next The of is Capital you. question from Loop of Thank Market. line

Your line is open.

Chris Kapsch

extent important two the Yes. to markets A you follow-up are that visibility. end and on have

rained affected year, this activity was and good surplus -- that almost for we've spring, rained And there last activity. on good it So, volumes paving year. market, and throughout hell a in weather then the like and the good the so darn and, so, it year, had pretty lot volumes

channel. you the for if that for the in are So, sense inventories wondering any I'm what have

tax XXXX the what like sort infrastructure are next of good portends spending if regardless of inventories or words, if other in low. look might just So wondering it what I'm year, gasoline a

Kevin Fogarty

it at as ultimately, as affect end didn't view of people are some affected it inventories the necessarily, much because anything day, into low while is COVID, that of uncertainty on, year planning the they the in had on earlier probably I the amount and the that activity season. think for our paving went going

as It inventory look look typically, at too, of going material over North winter, have other America, right one criteria you at price Asia if can premium Which Europe what the Europe. if in is you currently the now, means costs which play they is the I the a at I I'd building and that material The point this butadiene And, that's to the season. the is Asia that is export the between thing key and out, raw years, business into relative and costs obviously, change. that has higher We build to kind North Europe. just Asian North out, America favorable. America, of want producer, think to

summer, raw was being, as As the way it move that looks can in into materials as so like winter trends to favorable season, we're the what time in doing which referred us. raw we you the a change the material quickly. build to for But are know,

Chris Kapsch

in you in past more Right. Interesting. than resulted I your of In of that Europe, maybe share fair getting that's dynamic volumes in sort the believe.

what that's that you're out cost persists? feedstock raw disparity if material play suggesting could think I So

Kevin Fogarty

Asian is to going therefore would because higher. to higher, not that markets I'm clearly so kind that our forward costs to to But mean, I export are feedstock be little that Chris, suffice Well, costs a make to say be if their as backyard bold of leaning. statement, bit

Chris Kapsch

XX% that end the and restocking Okay. as inventories the had other was of of you sense Polymer polymers, at I'm interested sort where if auto production? tire wondering if end any I segment. on kind And back tire plants some the and reflected reopened it in was got that market these of And just into volumes, market I least think higher then was the

Kevin Fogarty

rates the back and of now day, think the on we terms the tire trends. back ceasing obviously, COVID see. production everything were encouraged are And of that very crisis they of during coming reflects end right Well, see our is the I to then that to types in And extraordinary levels the at volume were production fast.

Chris Kapsch

you that year-over-year that cost exiting XXXX, that rate don't suggest the on all a XXXX. expect you question, benefit Is that take this gotten to in a cost else last expect I run you basis on referenced achieved have to million mischaracterize outs I -- but to get want $XX in those it, have, take-outs you did you million think, equal? $XX Or And have year? benefit? from benefit some Will some by

Atanas Atanasov

this a gotten have we very We're benefit get expect year, benefit will full We the and in much track. to XXXX. on

Chris Kapsch

So then -- but net I'm just wondering, magnitude, benefit. the order of

year than this some less benefit of might something net year, the you the be If benefits next XXXX? got

Atanas Atanasov

year. Because some this in of that benefit have would correct. come That's

benefit, already going year, XX% not XXX% some captured for incremental is because So, sure. it to this the of is be year-over-year

Chris Kapsch

sort chance Any split roughly? out could you that of Okay.

Atanas Atanasov

portion next reflected that we're that unfolds. a to that mean, results very to of our year. confident as this a in we view will we give that call. have we'll fulsome not XXXX. And during basis, say Yes, you rate I more in this it going a But year this feel captured suffice be fully on do run

Chris Kapsch

Thank you.

Operator

We have you no Shiels, continue. further may Mr. questions on queue.

Gene Shiels

by morning of remarks replay our either all or Thank be This thank There for Thank morning. you, concludes dialing morning, a website on and Kirby. this their be this participants later questions. X-XXX-XXX-XXXX. all to this that thoughtful want of our available can our you. and will We our listeners accessed

Operator

quarter Corporation Kraton conference concludes earnings This call. you. XXXX Thank third

You disconnect. now may

Kraton (KRA) 31 Oct 202020 Q3 Earnings call transcript