Earnings call transcript Q1 2023

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Operator

Hello, and welcome to the Calumet Specialty Products Partners, L.P.

First Quarter 2023 Results. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today’s event is being recorded.

to Relations. conference like McMurray to would Investor in now turn over the Brad I ahead. go Please

Brad McMurray

Good morning. on Sustainable EVP for Bruce Obermeier, XXXX Todd Thank EVP you CEO; Products Fleming, earnings first for Borgmann, and Corporate call. and quarter EVP our of Montana/Renewables Strategy. With Development; Donargo, Specialty; of me Vince today's and are joining call CFO; Calumet Scott today Lawn, Marc

can download the at today's slides that accessed remarks Relations the Investor on which webcast www.calumetspecialty.com. replay website now accompany conference of will made section call, site our this few may on within be a our hours. the in call You of available a be Also

affect for like to cause the that everyone of this factors the provide this filings release issued forward-looking was may we with actual as during presentation, various remind well may slide call, latest to from Please partnership's a expectations. can press list on to the our I differ refer find our to statements. as results you SEC morning, that that Turning them statements. X and our cautionary

With Todd? that, over turn I'll Todd. it to

Todd Borgmann

welcome quarter call. XXXX Calumet's Brad, to earnings Thanks, and first

slide to Let's turn X.

We was now fully at and operational. The one first two specialty are and we final units Renewables generated an strong started our at as achieved quarter in Calumet. Montane earnings milestones impactful business new up the

business business combination from XXXX. $XX results year's in quarter, the a first in of like million specialty of unit continued volume, specialty the and of quarter, first up in versus while step a adjusted million and the and of first up specialty QX The products Results last we specialty change the day $XX During margins company ongoing hovering XXXX. demand in product we into year quarter day solutions our per execution. strong around $XX.X versus a quarter. were mark. XX,XXX generated XXXX hit our were EBITDA, per saw to And XX% million last constructive barrels see We XX,XXX barrel all volumes market, specialty of

run strong Further, and to margins. continues Calumet's integrated compelling specialty max system demand rates at given

Our major plant and our the positive the fully expected expect reconfigured in operating in cash started continue quarter, newly strong took asphalt generate to we to and year flows. performance brands step Montana this should business the forward stable, strong, business

consumed all of past somewhat eased these airtime segments million reconfigured seamlessly it The the adjusted even shortly. plant, to core been operation into nice specialty in market, slower getting in of local things team the Rockies. typically months take was most the winter Montana years, the This does, months. being past over will us the while and EBITDA I'll are delivered at XX in into see the our further that it has a Renewables couple output of our of And business has before highlight $XXX Montana through when

two flows Renewables it's be We of metrics more talk even business. unlocks Montana years, roughly And noting continue past over that Calumet out to to committed MRL system $XXX debt monetization. worth million cash through excess also of the taking improved, and the completed credit extreme shortly. our about the we have Renewables flow that We'll power Montana project dramatically now of just generation though cash that the

call And for to Vince? the now, I'll turn Vince. over

Vince Donargo

morning. good and you, Thank

our business, specialty on as mentioned, products slide Calumet and strong shown X. solutions quarter had Todd As another by led

commercially. million generated both in operationally quarter of $XX.X to and SPS the this Our business first continues business EBITDA and deliver adjusted

over and time was came specialties and in fuel off limited from in versus production plant back the saw for fuels margins this our year. early over plant specialty largest levels the the repairs XX% increased to continue from Shreveport, increased margins some we margins half since that strong strong last XXXX, we then, as maximum expect XX% mode, expect we While made to environment. in fuels quarter the current current in at the -- continue Arctic and the is the team running December's and margin freeze, of

forward summer hedges we see reinforced a segment and as look to this for into segment confidence paving per we of market XXXX, and we $XX barrel. enter X-on-X day driving constructive barrels XX,XXX this in our crack continue As the by season is the spread per at

Moving to Slide X.

quarterly Performance results EBITDA have in the and drives business expected for the Input a costs quarter. improvement on Brands adjusted $XX.X million the in stabilized that's in performance results generated Our what quarter, marked brands XXXX. financial for our

has business are years, the price the by the catch-up business mode. leaving increased, time and costs For in had over been also increasing increases prices two input enacted, continuously

more of margins stable representative in we first quarter's environment. what a expect should are The

profit a we proceeds million business year. still EBITDA business Majeure delivered throughout gross for Further, increase received XXXX supplier gallon, resulted payment quarter $X.XX adjusted the $X results and in interruption fourth partial Adjusting from insurance last adjusted XX% quarter both and first the over that that an for Force first our quarter an impacted that of TD of for payment, delivered versus Greece XXXX. a over $XX and million

specialty paving is both Montana quarter, Slide and of at MRL our plant. businesses the our season. ran experienced up first renewable of operations We to first on plan $X.X Falls quarter quarter. to gearing EBITDA reconfigured plant for ramped our X. Both during Moving million asphalt Great and diesel at our asphalt adjusted produced in full up operations the

the potential to Most up, business. entering and new cash importantly, realize Falls hydrogen new Great this renewable a are pre-treater plant, we look period in of with staff the generation in operations and forward

the XX, back let's concluding Todd? I call Todd Slide for remarks. turn flip to will and to that, With

Todd Borgmann

Thank you, Vince.

reports Montana accomplishment. are years, quarterly calls our and report to huge that have progress included now on two operating For Renewables units is a all

over operational focus past delivering our potential take the from announced the to cash to months. of construction As MRL, milestones shifts minutes I'll a full start-up listeners of flow the and few few remind key

the operations to commissioned plant was in feedstock First, a increase year. commenced hydrogen rate barrels renewable renewable day to the a X,XXX diesel barrels initial day. late from QX, Then last XX,XXX

intensity the our gray by opposed plants fossil and carbon by Our fuels. renewable it hydrogen hydrogen traditional product system fed as of is more that hydrogen to are unique lowers end that creating

talked to increase low-risk project are to our to barrels on next have that the at engineers creep about derisked fully a and nice operating at least our how existing MAX rates In meantime, our we've plant the making it's additional could Previously, achieve required figuring which day. rates plant units. and work out hard up XX,XXX expansion, be expected future existing An our venture. a SAF hydrogen will step, to

up to at value the single Montana/Renewables biggest opens the sets is The lasting driver advantage that up that pre-treater advanced has of which pre-treater, logistically in is our apart. started competitive key the regional April, feedstock so Montana/Renewables. Next, all

pre-treater the As hypotheses both and we in renewable a market, treated the advantages perspective, a our untreated $X.XX To than more gain feed experience buy value a geography feed. cheaply gallon approximately regarding regional large our currently we into reinforced that put feedstock initial provide. we've can

slate As feed trader we financial stock pre- expect we of of full transition of existing clearing into our treater quarter, majority steady-state clean the benefit our receive the the to our to in QX. this operation, safety process

product added aviation and Last the was demands the milestone the project to producing was SAF confirmed team sustainable in project fuel. premium our the in Montana/Renewables marketplace. this significant

than fuel this value more Calumet comfortable very boutique chain As resembled a closely specialty the product, a SAF and high-margin was environment. a product in

Inflationary the was Since the exploded. outlook Act SAF for Reduction announced, has

North last scalable of topics proven has Montana/Renewables week, only in as largest of travel, America. turned the the air of the As de-carbonizing energy. solution sustainable producer And fuel hottest to in it into aviation one is

are margin SAF. all renewable units rate also run processing per hydrogen to of $X.XX We by our With the hit reconfirmed recently we which expect sight and a Montana/Renewables of of feedstocks, scale when economies of from plant the cost uplift our clear all gallon, EBITDA expectation. running, feed. With dirty line enabled into expectation we EBITDA to reconfirmed $X.XX recently we untreated

leading from has amount to idea operating a short XXXX business very Montana/Renewables in time. of an renewable evolved an in

is a man thank an time with time, our that you partners quite on During Montana/Renewables reality. that and the and worked accomplishment, to million made X.X no lost incidents. team were site have This hours

number remains new priority In demonstrate continue look power this business. to and we earnings is to of As the engineer We strategy will cash we it forward, expansion. clear parallel, our is one SAF the unchanged. MAX potential

of the progress ultimate partners and the renewable of path And engaged Montana/Renewables IPO course, believe continue the is and the valuable. way. opportunistically remain we'll along an we potential ours to of down we to pure-play advantaged expect of growth with profile as diesel Last, with extremely SAF flexible competitively business

With turn for operator I'll it Operator? to the questions. that,

Operator

the At Goldman from you. Thank [Operator will session. Neil Mehta first this time, And question-and-answer begin comes Sachs. with Yes. the Instructions] question we

Unidentified Analyst

[ph] Seltzer Nicole is This time. the taking for for .Thanks morning Meda. good Hey, Neil on

the this just talk Montana/Renewables. go-forward And you way question guys see through first one I one $X.XX understand another end on the Can range? then of you reconfirmed EBITDA The skewing year? of you guidance $X.XX upper to of And the here kind is between the might per recently drivers where lower gallon. and the us or later

Bruce Fleming

giving That's back published of of is volatility. a bit Bruce a captures Nick, Hey, market We've what's lot that on little simply a Fleming. going and We're there. and margin look range. information, gross simply out a There condition.

Unidentified Analyst

here. I pays Thank like the Performance Helpful. just obviously, here seems then and right. it the then And stronger you. for of been rest has talk inflection quarter Thank and is performance the Can the you mean, about point just inflecting, on a follow-up and All you. Brands business that of year?

Scott Obermeier

is Obermeier. Great. Yes. Scott This

first as what the we up cost in think, As in in earlier, as to past stabilized. Vince rising been was think price quarter and talking pricing lag the market and well alluded commentary saw I the XX the you the market. has catching what finally up during rising structure first finally saw costs to increases. And our caught about solid months I in we demand the for We've our the quarter the

So to we expect to that continue move forward. would

Unidentified Analyst

Great. Thank you.

Operator

comes question next the Dayal with from And you. Thank Wainwright. H.C. Amit

Amit Dayal

questions. Hi. morning, guys. Thank taking Good for my you

Todd Borgmann

Hi, Amit.

Amit Dayal

on these delivery manner, very a First impressive. milestones all in against timely of all, congrats

managing new of from side terms you with set -- for of your are the setup? thinking to in this sort are priorities story? about are that the now Just now how potentially cash debt you What of flow the generate up

Todd Borgmann

to It's continues priority. leverage a Todd. be Hey. strategic Reducing Yes.

I consistent think that. about we've been pretty

do We have ways of to a number it.

one. certainly from mentioned That's Renewables. operating Montana flow cash You

not-too-distant also point the proceeds expect in Renewables monetization another. at that's from Montana We future some

pretty a you a right give take. now out our or at level. $XXX of at restricted of that, position which in I being the think is versus kind we think our million to actually when long the EBITDA decent look current want coming that you quantum run, we're at look That ratio, in We're when pretty table, in take reasonable we a off X.X said, more debt.

that with Montana Renewables do to is operating cash So flow plan the or monetization.

Amit Dayal

Thank there at we XX,XXX we facility, focused Okay. in And expanding already level, sort then capacity capped on of get you room this day. or to out is Once SAF you. per are to further Montana? for capacity expansion barrels that

Bruce Fleming

The to be already Amit, feedstock finding renewable day going wins. of in limits project are are natural something small that out figure. creeping we a Fleming. field The project guideline online, the capacity our get to we'll going as may than that. a Bruce And is the do anyway. existing guys we're find better We're kind a We to XX,XXX barrels discover. facility without

ultimate will But limit there. be single some operation to the train there

to be gotten to we got any So in we've really that us that study best the competitive continues And out for the bank this the with us, good do advantages every industry we've that point, simply machine the position think around there. puts as unfold have aggregator to structure a in at that space. consultancy us we or with

pretty So activity. rotating to we're forward looking to some conventional M&A

Amit Dayal

That's Thank really me, you just for one And last Understood. that. guys. for helpful.

macro seeing potential in cetera, environment customers that players given you of adjustments keeping from sort around talk et cetera, about any Let's the type et mind demand, what or industry Are recession, scenario? is. of

Scott Obermeier

is Scott here. This Yes.

seen we've out certain more We've retail become in areas levels. -- down the published little I there But seen it a So, overall, slightly consumer choppier to remains demand and the and within taper space. start to normalized cracks think solid.

overall, and feel and bullish has been about We've the Although, the we're resilient, the And we past at. through business up we're over I well. three, on think We're four the performed extreme where good plan. downs. diversified, we're go-forward years,

Amit Dayal

I have. That’s guys. all you, Thank

Todd Borgmann

Thanks, Amit.

Operator

The Brody with Gregg of America. Bank next from question comes

Gregg Brody

morning, Good Hi. all.

Todd Borgmann

Hey, Gregg.

Gregg Brody

that IPO? and you you're considering release the And in a highlighted is the talking things of your other the you alternative around been bunch the So IPO change press of about potential had timing there in in all the release plans. putting the the indicate something past? Does fact you've a talked in sort any is amongst that about

Bruce Fleming

Hi, Gregg, Bruce.

Let a there. what three-parter me I was take think

options represents And going to I'm want Montana of our comment really. to parent riches, after the Renewables as well. that abundance cascade So that's strategic And an on through. may over to Todd

But of loan that our Energy here the their key is going posted. that pivot decides is and material guarantee application, points one and going say of diligence Department well. their do keep what the anchor. we will be with I'll conversations And strategic to But underwriting to is a you

So sheet, the months, both nine we're over/under that that, is, let's can the with banks that from is, -- the a way bracket it about say, balance plays centered quicker. the go out enabled nine IPO on talking is months that clean to

we conditions market And speculation so, have available. the that future the offering are what is, as

So, we'll see.

Scott seen footing, North And nobody is, in things a America from thing at the a if that have producer be wood, biggest of. to of heard on we're knock on Obermeier going mentioned suddenly lot is ever thrown years more in going economy a SAF to of context, couple last the compelling a different not transition stable And pure-play pretty just the world macro. I've small be a everybody it's and offering. to energy The

We've unitholder project. that's down our look not value we're this. market. The build seeking there, to back how in no to it's of out had going business maximize And What is projects a longer We're promoters. We doing not more just the that We're to developers. real. all worth off the be financing of in head finding to running this. build the forward

Todd Borgmann

potential on read signal pile at -- what not-too-distant like the end, I'll a in future. maybe a I accretive. think It's too we The of extremely items kind Yeah, doable. it's a pointed bit. it little is out wouldn't of about into, much other the It's Bruce is IPO doable there

at, pretty it's to looks positive supportive look know destination. a We like we'll -- we and of actions. that mean continue So But any majorly you that like this evaluate is of it not other controllable opportunistic be anything we we're what that the to now, won't by and what normal, options. take evaluate is does going in context in supportive a us

So of kind through makes the if we're that's lens looking that sense, Greg.

Gregg Brody

say. terms business improving, clarifications. at of I the cracks you It sounded you're you like in It Are any for anything least does. the weakness Thank maintaining, all in or like see economy in should demand? you seeing seeing and

Todd Borgmann

in We -- I think, Greg, Scott commented a little earlier on not specialty. too much

of earlier. to continue margins, seen see where so in obviously, cracks, We kind that come played little bit. from On pretty a strong we've specialty them

should plan QX, So these we're with our they comfortable like levels. pretty at in

environment out we're anything expect saying we reach What not and they around the current levels absolutely like that. that we're last we So to to cracks year or were rates. business saying plan running turn is max to play can support our

those on volatile could And in of we looking forward got out be we and our we it make market, put were that a to last saying, want too. sure potentially a time hedges when plan environment risk. bit any "Hey, business a plays isn't year we've there, at little and And in

that's of it think and levels we've very on environment. the we're how So current at the plan we're in kind looking is market viable our at, still planned current I

Gregg Brody

me, for the guys. it Thank for time. That's you Great.

Todd Borgmann

Gregg. Thanks,

Operator

Gabelman Jason with from comes question next the And you. Thank TD Cowen.

Jason Gabelman

morning. million Good On to gave guidance $XXX the $XXX MRL you guys. Hey, million. of

$X.XX. year, I a about case, you think it when last base talked was

So $X.X per gallon.

the than going you economics that on market year? indicative provided base bit the now last than I'm what's just that. the a lower wondering different So are in case

Bruce Fleming

Bruce, I'll start. Jason,

And our out ask logistics better simply us in advantage. on constant Coast, tell the a to gross and not We're had put margins a just actually than $X the going Gulf what margin. a out talked We've put margins. guidance differentials net we've and gross the of reference. us done change and about reducing lot We've people have earn. we location frame gallon-ish EBITDA So to we've we're

So probably feedstocks that's look little market. anything, a upon the local no gallon of SG&A, gathering put $X.XX a That's EBITDA if up in backs untreated including fully from answer some we've based that to bit $X.XX our the change, out. loaded, of is

Jason Gabelman

And as amount and the running you're it. implies you're gallon, use what should that XQ a amount math EBITDA now, then that then, of on from plan. up you what assessment at feet? the and you Is running higher ramp Got $X.XX Okay. renewable for gallon earn apply of diesel feed higher per kind QX use per -- fair of untreated per $X.XX on $X.XX just that a it if XQ, gallon, I some you're

Bruce Fleming

feeds direction. untreated the right rolling compelling advantage You're mentioned. the thinking in clean has The that purchase fees Todd purchased from to

think performance is going without broadly looks to think I And understood of a you a start-up some what that's give I industry benchmark in the peers, market. for our pre-treater of the the like.

in Our on announced it as weeks last did. come that We the so. couple pre-treater literally of or

So, We've we we're on to of that safety is How the have inventory optimization. work we got a untreated that up clean speed the supply chain. benefit fast to do site. the going going be an to as partial get out we stocks,

value. going fast we We prefer that, But I'd the we it's accelerate and going may to to be optimization stocks, to converse. gone. hold time we inbound How So an find try simply technical do that the find from guidance we're clean the away feeds safety gain quarter-over-quarter. we probably and stay eat they'll to shifting. may the We're

Jason Gabelman

Got it.

Todd Borgmann

bit I there. just add a be on May

we're a kind in a numbers. they the But exceptional them backed you $X.XX give bit run in we hydrogen So SaaS, a they've start-up done proud when toss talked -- have field. as of record talking in at that next We'll We're the they're plant or and $X.XX equipment, but really about the then little track from pre-treating guys $X.XX, to of so the and when of now and doing look Our real so chance new far, have to of rate an you what their learn this learn far, up equipment. job initial couple the RDU months out to of two good. right?

Jason Gabelman

And still released Is some IPO you timing, the earnings indicative wanting think IPO the Are have you talked year, discussed about going you it? or I will think more about to Because, then two last it. that when a an on a through IPL it quarters of you operations seems be trailing going to XQ. amount how Got pursue earnings before potential IPO want record little in to of consistent like two you of first quarter the track is before of enough? one process.

Todd Borgmann

we're guide a think that have to at going market I us. the look let and

process. do that right, audited about rate think the in run point of months IPO the I also we kind financials, trigger think of process the that say confidential. launching quarter first as a You're I'd full providing key are few first that, of can that

all So the think I it of think they out It's don't I sense. to thinking about expect all in But be to lot to right there. a we're you're And to have numbers necessarily put series. to benefit make going way. the it going

there. see Renewables Let a bottom-line business. we'll go from fully the operating as people stand-alone And of Montana

Jason Gabelman

a of came of total the the more to kind ended amount could just that Great. if it thought costing capital one that, would some kind the would in, And for than biofuels of we if cost Thanks. completion helpful. XQ. plant? be And I of little that which up related was Was you higher in project could squeeze give CapEx

Bruce Fleming

some announced on go figures. business. program we here want are start pile top Renewables end opportunistically That on years exact Vince was I'll things as of Montana correction. that midcourse the Bruce, our its first live three may happening the we ago. Jason, two at We of kind But did a SAF to add and game,

on we've And The this approved got ramping of some, last some that. run We've so expenditures spending that got fall up. there. Board you've the And us through. Renewables starting to year got expansion Montana

sequentially that's the opportunities. you indicated, bunch not whole the startup/one-time a relatively as We a is then, of quarter. teething short in units without period in time, commissioned a some of first consideration And

eventually the of question came literally sort answer But running is -- just in. online still we XX-day the have with on And pre-treater cost. will your to the some a that of We terms payables full on total are of and some thing. that

at back in future. we'll So the some do a point look

Jason Gabelman

Great. Thanks for color, guys. the

Bruce Fleming

Thank you.

Operator

concludes like to this the floor I'd now turn comments. And session. to you. any Brad closing Thank the McMurray, question-and-answer for

Brad McMurray

room and of Yeah. your Executive On entirety Team Calumet, really and appreciate interest we the behalf the this of here the morning. time your in

And have thanks, a weekend. So good everybody.

Operator

Thank you now attending Thank presentation. conference for has today's you. The concluded.

lines. You may now disconnect your

Calumet Specialty Products Partners (CLMT) 5 May 232023 Q1 Earnings call transcript