TSE - Earnings call transcript Q4 2017

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Operator

Good morning, ladies and gentlemen, and welcome to the Trinseo Fourth Quarter and Full Year 2017 Financial Results Conference Call. We welcome the Trinseo management team, Chris Pappas, President and CEO; Barry Niziolek, Executive Vice President and CFO; and David Stasse, Vice President of Treasury and Investor Relations. Today’s conference call will include brief remarks by the management team, followed by a question-and-answer session. The company distributed more detailed remarks on its financial results, along with a press release and presentation slides at close of market yesterday. These documents are posted on the Company's Investor Relations website and by means of a Form 8-K filing with the Securities and Exchange Commission. now call will Stasse. to I Instructions] hand over the David [Operator

David Stasse

brief follow you, everyone. session. a are your morning, and listen-only instructions this After Thank good participants At Marianna, the participate to in time, all mode. remarks, question-and-answer will in

disclosure on statements on cautionary are note X. and rules noted Our forward-looking Slide

described describing actual measurements. presentation, We discussed, Annual must earnings measurements provided XX, expectations. replay not Report we on transcript on presentation. forward-looking call under implied available Investor the results forth XXXX. Item will During what set future differ or and XA, release make A this A from Risk conference statements archived in XX-K including be Factors. the conference but to, limited statements. could of of you that non-GAAP these our replay in certain may is issuing could Reconciliation our February materially our our factors to are Today's and guidance until Factors and actual call. cause be will the certain in Relations following caution in differ appendix presentation is that the investor website include, shortly Form results company's of these the includes

like hand Chris Now to I'd to the Pappas. over call

Christopher Pappas

to initiatives. Thanks, like strategic few a highlight our fourth results and quarter results to points and conference and key Trinseo's welcome call. full year I'd financial financial of XXXX

$XX exceeded gave $XX EBITDA. million These million $XXX $XXX to favorable of guidance income, our $XXX million million of Fourth quarter related and our million inclusive net of a plans. million a $XXX on we was the of with net million pretax earnings continue income XXXX ended fourth $XX positive. one made as impacts. million to to included fundamentals we call to adjusted strong quarter third a EBITDA gain which of change portfolio First, $XX Adjusted pension quarter business to of be timing very our across results was

full-year achieved earnings income EBITDA. record and adjusted the For we net per share

operating our made record Binders, to from in increasing addition Performance achieving our results, in EBITDA progress towards and XXXX. significant to Rubber of segments we Plastics Synthetic Second, XXXX by $XXX Latex million goal

to are the some the those as broad to and published European adhesives, to footprint Latex a construction and growing added well. a briefly paper diverse capacity business beyond chemistries We've last several globally and yesterday, markets transforming such board. to industry faster Although Latex SB made to serve Latex over the North industries. predominantly spectrum in manufacturer in grow of as commentary a we've SB products Latex want from management explained I tremendous our the of we of In & traditional details Binders in we've of years leading China review a progress developing paper now invested as supplier in American

Rubber and this out working we pilot and capacity. continue performance we capacity rolling tires has resistance by European plant be qualify EBITDA last this the enhanced us will in of XXXX. American with we what also noise this We've In in $XX and We'll markets, call offset levels. portfolio Plastics additional to was from expansion the declines ship are North million on XXXX China, XXXX SSBR enabled believe that Performance for in late year. Synthetic beyond we EPS volume capacity Synthetic million our we products superior expanded completed as more was where tire include we to the sold in mix made progress SSBR, SSBR the Rubber significantly most XXXX, created grip, a In selling lot our and SSBR. grades grow grades half that These adjusted graphical to $XXX All in of of half market. that paper and we of the advanced and improved about our and performance provide of

and the technical which a Center, opened consolidated two Research one existing roof in Netherlands. Plastics support also research centers new We modernized lab and under a

completed that API expanding polymers complement markets. Plastics our in soft automotive rigid consumer polymers acquisition, strength first we Trinseo's to and adding our Finally essential offerings

Third, styrene like week. duties to I China that by address were would the imposed last

further continue been We form occur and is rebalancing has the closely import cost China some will continue as situation the flows. monitor nonintegrated expecting of to to end rebalancing plants there high the material believe anticipation especially perform at curve. this and of some this, styrene the already been in duties market of trade we of A since Chinese could

how but starting XXXX, in develops to segment of Fourth, Trinseo We expect the the to XXXX. not do material we're process will see quarter change we our a in introducing market any first reporting. and impact legal

will six Plastics, Rubber, Feedstocks Performance be Latex financial We reporting now for Polystyrene, the Americas results following Synthetic Binders, segments; Styrenics. and

portfolio and internal new also agenda. of business Our together reduces with businesses groups both order engages and management. to presidents our in growth segmentation complexity improve our It efficiency similar

Styrenics, As Global made Business as Services. a Vice has as we now have will plastics He Presidents Integrated integrated named and for have Business result, services. Senior well been Feedstocks, all following for responsibility Stedman management Tim monomer, changes; and businesses, President styrene the Plastics business Americas and

the an segment have Global for Binders specialized to Performance Synthetic polycarbonate, Asia-Pacific responsibility and Latex Asia-Pacific. Procurement President add integrated in President we've has continue Synthetic Yarkadas, area more Latex part Binders, will Rubber region, growth. and Procurement and important Trinseo's segment. will plastics As Business He and Senior one responsibility for business one concentrates for Rubber, added this, our for in SAN Plastics Vice ABS leader. the business under been into to Hayati named This of

discuss quarter and XXXX to like I’d first guidance. Now

our we assumes and our million, $XXX across and impacting outages, income expect a known EBITDA net includes between and and other unplanned from all favorable $XXX the million well first quarter, solid of AmSty impacts, Feedstocks of $XXX This segments. and net segments, For adjusted million as performance between timing as outlook minimal planned million. styrene impact $XXX of and

timing, into full million, per $XXX the from from $XXX outages to net and we that XXXX, what and between EBITDA targeted This segments. Latex styrene impact XX% visibility net of share. first to and earnings Rubber in $XXX $X.XX expect Synthetic year Moving income unplanned have for and adjusted Performance assumes EBITDA impact of million includes it about $X.XX outlook and minimal quarter, of million diluted million, $XXX growth no we currently beyond we of the Plastics $XXX million per between of have Binders, share

I how proud of repurchases. will we And Finally, Trinseo's as part I team to we of spend $XXX XXXX delivering In million continuing want anticipate reiterate Marianna, am profitability for into closing, balanced XXXX, We allocation this XXXX. and results approach, record in for in capital about look on our open strong cash to generation. delivering and the line questions. may you now forward share momentum

Operator

Frank question the line of Securities. with comes first Your Fargo Instructions] from [Operator Mitsch Wells

open. Your line is

Frank Mitsch

after Can are what Chris, be some polycarbonate Performance sell I the coming on as and area, that you sense you versus would move you us of compounded make products compounds guess percentages of Plastics? Performance of those of a give Performance the sell-out it that are sold of this movement in ABS of that as out is the currently part the is Plastics SAN into Plastics to from - materials.

Christopher Pappas

Frank. Sure,

our we world sold open will and certain and that on of move for have on the that numbers. as One, high-value external in reporting concentrates We’ll better our this but we of into ABS to the really of just segment. will agenda And the course of really the Plastics also Performance in view under in terms comments, Plastics that we polycarbonate compounding same Presidents, amounts its volumes business growth of Performance the said the into you Latex a polycarbonate Rubber. if The of the products three and Performance reconfigured, segment. company. talented not now we that. is very the believe market have But the insignificant We also on both all newly Plastics, into do into areas. importantly we First all change is executives engaged of and defined of goes continue do Synthetic Binders subtle always as and two part integrated

our an you internally, that’s is now Plastics moving we So, is of Performance compounds product Roughly our change and as China not goal I real Frank. number only that includes is said a the know blends. and polycarbonate historic there and consumed was what goal in is call third un-compounded was in - to new to make that. more Performance ABS as other less a increase The sell Plastics into we automotive capacity our as and the that that is that polycarbonate

concentrate on segments of markets our Performance Latex on Binders. we basis we those structural of represented specific about the Rubber So, by in numbers think new give Plastics, have I Synthetic the the XXXX and to rather change and our that’s than combination thing value and are business highest the of the call XX% now EBITDA a what of kind is,

Frank Mitsch

this other on are the that side side? you lower business. might of on the your and part strategic styrene side thinking it side for see equation up on the monomer as business of the how Trinseo businesses on some or commodity those Does the the or activity a the your about portfolio I with allows we Plastics outlook guess in open and possibilities value Basic more transparency Feedstocks And certainly and greater polystyrene

Christopher Pappas

segment Well said, change company. other by harder what driven really is driven for easier I strategic either then in or step it's just this the not structural reporting an not anything by

Our strategic remains same. outlook the for company the

have operate terrific that dynamics polystyrene, growth We delivering same. supply going all positive. that the a very of a proven We going think committed level. our high to set in a have We EBITDA the the million think so to of continue We're to at styrene, level. $XXX of assets polycarbonate they’re stays all demand operate are at forward high

be in to if consolidated might believe steps changed it’s strategic have primary still will, a could company. were do we thing to there commented take strategically and attractive for the this that of the the would then We continue But segmentation, world result styrenics step of that focus if any you as hasn't an that we take.

Operator

comes next from Begleiter with Bank. Your question David Deutsche

Your open. is line

David Begleiter

China? Chinese your terms to the position did of what Chris they duties, do just antidumping into cost on importing styrene in

Christopher Pappas

kind there's most capacity any adds this nothing terms Number industry. one, about for at deck. to - be styrene deck of will think We the chart least in some the the the it's showed last have maybe that this the two, flows. of to important David and period been around of trade rebalancing, has flow number of adjusting been the XX the that - year that I Page important some world. announcement note chart market market There is in time this known in It's on slide

are of the tons importing around imported of this bit. a as So, still X probably where Chinese result little million will they shift styrene a

this how plays probably to of that trade at expectation really East high see limited and shrink from on in in East Middle demand relatively the their a that call, imports amount the have certain Our the the a is that of of U.S. but will styrene grow Middle to the of They'll from business. And We'll goes we it to flows as happen. we from in fundamentals result from U.S. run high a integrated the not that's to rebalancing go what certain don't may of cut The will of our Chinese to could see not said Europe very not producers from cost high probably styrene our it's rough as changed, that ability supply rates XXXX expect of out, go amount fundamentals level we material at Europe. any has And changed. a view. impact a have with Europe,

David Begleiter

Synthetic to And XXXX up. progression the do you evolved XXXX this earnings new think and Rubber, Chris qualifications just about know on segments? in how ramping expansion is the there how I from

Christopher Pappas

is well. is important will tell which running also plant rubber. plant plant product. the The producing you in for commissioning very excellent is The I the pilot we're equation whole

rapidly possible as time. take as qualifying are does We

in XXXX so that compare growth to that of the could the placed perhaps new XXXX If the that EBITDA guidance from in or see you notice of you it of of for going XXXX the rubber results but said from qualify. majority will We a the rubber and it's XXXX, it’s at in there's growth XXXX we've some David rubber, some gave you’ll XXXX, correct capacity the to occur guidance new to XXXX takes the especially as capacity. third to XXXX, into that go say in when you’re also to for look in long it but to we anomalies as fair majority in if of that

Operator

Hassan comes Global. question Alembic next Ahmed with Your from

open. is Your line

Hassan Ahmed

obviously oil with since it - has impact the had that seen year-end year prices year. benzene Chris, of an some volatility start well. in as Obviously crude beginning call this we've last on

when side of come of go destocking crude/benzene that in sort and historically the rollers these had inventory see stabilize things on well. rollers being seen down pricing some you’ll and So Obviously, as obviously the of as notion up. an sort swings re-stocking we've they’ve some impact as

be? now to So we’re just materially pricing any where across you where right where - it be volatility are of seeing may destocking, hear broadly whatever the views this levels, sort various you the on of impact restocking love your of that inventory you raw sort products case are on see inventory levels produce

Christopher Pappas

in where concept know, us. that experienced just electing of styrene to year-end business for the to that rubber there’s off example goes oil our in you which and price Well of lot the are on customers relationship were there course of as rising benzene of drive But certain - customers. purchases. Feedstocks, we not what Hassan affect inventory, timing butadiene a on put and the

forecast our you given if for and expect profile February on we've February. unplanned plan the the that is styrene in and would buying which Now month polystyrene, at the XX outages or of certain now, got month driven gray March very March, derivatives bars heavily that the that styrene the customers by not are you right Page then particularly in of look for

a case would So a this example. a will purchases to later many what in if very were wait planned and certain outages. is in due hold be and to buy will and better year. We and this in driven by unplanned styrene they Customers some oil, polystyrene come think much to they example opportunity by times case live ABS good rise for back so where in this styrene, the when that not driven to down but degree

today. to So effect polystyrene affect think speak that dynamic unless rise feedstock about that's have clearly movements. buying in And the Hassan happening business the the tire has butadiene I we that one producers would way to to sharply, most about and the the styrene think that us. think for from case margin were in being Otherwise polystyrene in is as rises is these that we the rubber business styrene really oil see main producers be I rise do the of the clear with oil about the right styrene you the general, buying. or and think actors feedstocks. unrelated But I styrene anything rise, want now, price and that really

the In has pretty several fact months. last benign recently recently in benzene been

styrene So function. a the margin is you in see

the company demand As margin we've be thesis going been unplanned supply since our to times, driving that's said and many our outages planned forward. and thesis started we the it dynamics continues and

Hassan Ahmed

are guys should side are, way, side China that obviously you is the in as obviously of sort prevalent those whole sort pollution things and whole Now we of sustainability sort of China magnitude there there about if of of of the Is live in world well. things those the in duty within the antidumping have curtailments you any impacting they of think and chart curbs how you about the sort a there of curbs? but any

Christopher Pappas

styrene about talking you’re I to sure. mean You be just want

Hassan Ahmed

Correct.

Christopher Pappas

seen You're still anything speaking we like okay. No, haven't styrene, that.

is Now styrene. of of course an America Styrenics export

So further will be these to flows. to - they they would and have trade have adjust

don't going comment of I should China. about the that to the make antidumping with over believe make that. that view Chinese people continue with these will adjust anything has it's duties my - do a to be I So one now other you're this difficult exacerbate anything it they make moment exerting styrene outside trade would antidumping, to anything no in in have the very flows time, but to company and is because from for investments on we I to we has think that at do see sense that

ago, investment planned if would six than a even today other would future you what's that that So complicated, less likely making argue look kind about for China. months uncertain imagine it styrene been at of I can somebody a were already that’s

Operator

Your question next from Sachs. with Goldman Koort Bob comes

open. is line Your

Bob Koort

interesting XX me curve industry. tell line I the you Could price Slide Chris, an where give market liked there the would you the cost cost the draw show would curve? to across we that current relative

Christopher Pappas

And this cumulative of XX the answer XX the Well to the good. is the somewhere XX that margins so the and margins about somewhere guess three kt, so in chart middle are pretty between XX into zone that bifurcate this great. left margins question the obviously, I beyond maybe you not not and the and right I are between good of are the maybe are left today. XX would that, reasonable way, that margins could And zones okay and

the I on Bob know So question pin cost there. to exactly you that’s price why on without would trying answer

your I root know question be think might of I don’t hopefully that the but.

Bob Koort

to for of the is regions then the of that genesis And China concept were what that them? product, dumping those that basis conclusion say three from

Christopher Pappas

No, - process not data on no party in actually that we it, we're at we’re all. to not the have involved so real

So to it hard us be for comment? would

Bob Koort

polycarbonate years which prices like and things know a I from better reinvestment bit maybe few sound money enough from what inspiring few making could a cost dramatically better quite ago, now possibly have would crazy you on guess certainly relative to happen? that would years a similarly gotten curve the then are ago. And polycarbonate you're that where but Do look some

Christopher Pappas

small player We're you not I in polycarbonate times polycarbonate. said we’ve can many as are period. building tell we

Europe. as North on the you Europe recently XX% in our selling one exited we region world in JV. really the Asia Our and polycarbonate know we it’s position We're now America the XX% and world exited in of about is by in

are So capacity certainly and would we’re business three polycarbonate major the polycarbonate. the minimal. been be players course in the very [inaudible]. low years And announced are in to small. around of two expansions They that two The and producers to takes have world Sabic build it cost that

moved Bob You're a but at They’re But would plant we certainly to right are plants substance. hands plant quite they that pretty capacity strongly. announced low-cost the two margins plans have major high those they well, again producers have operating margins any is the build our of up competitive today. of as and suggested quite the in have no

Operator

comes question Alexander next with Your Laurence from Jefferies.

Your line is open.

Nick Cecero

Nick is Laurence. This Hi. Cecero for

So to able wondering might by just trends be region, you that any be if and decelerating? if see there demand where areas demand some provide on might you color are

Christopher Pappas

Nick, that operating of said we Europe believe. have than people is kind continuously better

couple I think accurate is think now I better you your other caught have What have years read about with Europe and would as said as in the a ago, press. up the. is Europe long press about words I said than the is I

to again concerned the that call say pretty some there or about perhaps about I concern China would think were in today U.S. continues good. some I'm two a that. I less China. expressed ago look slowing we on

So business. to the reflected I'm look in economies beginning to of where that's the our be be starting in in and the good world we’re that generally believing mode zone pretty

Operator

with Tudor, next Matthew Your question from Blair Pickering, comes Holt.

is line Your open.

Matthew Blair

you’re Asia constructive forward. styrene that going reducing on you’re mentions styrene your pretty XXXkt exposure to from XXXkt release but also The

with here. production more that and consumption, to will you additional says hoping it this but expect exposure, styrene your I we just decision little your any was this provide forward? align I background should it reduce styrene going production was a your So could know better

Christopher Pappas

the it. said has relationship to production it that aligning that a the characteristics have was Asia styrene portfolio been purchase activities the in that decision along It styrenics with of to again is purchased of styrene We we reducing an in make - base, that the we exception include place our component. talking polystyrene cost that region. have we We the just our we for ABS, world that world by under in styrenics all of some why way. based not have capacity felt attractive to a contract purchase our our about difficult our that's ABS the that's I'm invested but It’s part most and money

a the have polymers. we felt it. to more styrene do to and bit of just match to we'd of profitability that production polystyrene part in of rather was and world, of its so And right that our In both thing the get lowest less little that end world the

Matthew Blair

cash million cash is the reflect then that in and guidance, the there $XX of guidance just the is Could discrepancy flow still has interest number? your I $XX And The terms just of chance net guidance showing so in remind guess expense a the income $XX - here on us would interest. income guidance million. net million

David Stasse

currency $XXX via we which second that million effect The putting debt, synthetic reason accounting that last we swapped our synthetically cross a natural euro that lowers because the issued that euros. year. of we us. is, did we discrepancy for rate bonds We swap case September and just swap as the about U.S. us rules first reason But have for swaps transaction accounting year those did is across year. $XX the interest our on of debt by million the for cash of in dollar interest have those currency is derivative. is into reason the it has is a through nice a currency gives the changed of recently And cross reducing on in absolute for that of The when it albeit because one hedge our bonds two-fold,

on policies of just apply in the and accounting of the case change the accrual match it would fully accounting process over swap. reviewing we’ll haven’t will in swap able need month that do to we we the hopeful next our such We applicability the Now, that. the currency hopefully that the the our be gone are cross through course yet of - to change and and that the cash

the guidance expect be to accrual the impact swap or the after basis So XX reduced P&L pay do XX that accounting or so. reviewing a will to for or hopefully on new we cash finish we the million

Operator

P.J. from Your comes Citi. with next question Juvekar

Your line open. is

Eric Petrie

It's Eric Petrie for on P.J.

online in with more cost rather Just a their of any China. production you ramp antidumping you of seen styrene? question back see actually own or a seeing adjustment Have styrene trade for produce the China than the higher could

Christopher Pappas

China. tell, is they three issues they remember Hard cost, most third is really, inputs. well have but to one cost, interiors have is One in is in maybe two plants just styrene availability important and capability, one the of

to have competing benzene to they great So able often ethylene a away. be often distance from the and get

I would So we think fundamental shift material but no impact. other my flows expect again said the the short why thesis than margins answer would perhaps in we we be basic yes, have no of that some that that's trade

could see to there how expect to have that's say out. - get plays point. be how marginally but plays it higher let's benzene, run all They don't see this we'll have it We and any some rates. material ethylene impact So, out can we at

Eric Petrie

the you're not into are that for now As so reduction styrene of any outside tons? XXX,XXX Asia market with selling AmSty, XXX,XXX styrene follow-up, neutral a open in to you the

Christopher Pappas

Outside of been AmSty been. of are always We and we a have purchaser net styrene. have

Eric Petrie

Okay.

Christopher Pappas

one. day From

Eric Petrie

XXX. quarter, see didn't guidance went last that million unplanned from the in to like rest by during XXXX know but segment I the last you Was XX drivers did of the XXX in due it midpoint EBITDA first underlying And it you at just any the looks provide businesses? quarter, outages from to

Christopher Pappas

we and continue a you we EBITDA. of the we’ll view XXXX our the Obviously, in we strong the of view guidance as $XXX we which for of update go change At very that good a to million forward. across all constructive have gave year It's this quarter guys businesses XX, of guidance. midpoint first the point February of be have summation would of

Operator

time. now turn will no call presenters. this to back the are There the over questions further I at

Christopher Pappas

everyone. Bye, Okay. We’ll a you, in Thank Take bye. talk few care. you to months.

Operator

concludes conference today's call. This

You disconnect. now may

Trinseo (TSE) 20 Feb 182017 Q4 Earnings call transcript