TSE - Earnings call transcript Q2 2024

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Operator

Good morning ladies and gentlemen, and welcome to the Trinseo Second Quarter 2024 Financial Results Conference Call. We welcome the Trinseo management team, Frank Bozich, President and CEO; David Stasse, Executive Vice President and CFO; and Andy Myers, Vice President of Investor Relations.

Today's conference call will include brief remarks by the management team followed by a question-and-answer session. The company distributed its press release along with its presentation slides at close of market Tuesday, August 6. These documents are posted on the company's Investor Relations website and furnished on a Form 8-K filed with the Securities and Exchange Commission.

now call will Myers. to I Instructions] hand over the Andy [Operator

Andrew Myers

brief follow you, everyone. session. a are our morning, and listen-only instructions this After Thank good participants At Abby, 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

describing presentation, expectations. we forward-looking During future make this statements, including our certain may issuing guidance and

set Factors from update that you other forth XA filings risk or that statements. cause revise not annual undertakes in actual what Exchange materially is caution our our the differ implied Form are with discussed, must company to We report these and such factors results could Securities forward-looking on in statements. Item made Commission. could in actual but differ to XX-K obligation or described results include, or to, The of no limited

Today's our will the website will presentation until to replay the financial on measures August measurements following non-GAAP presentation. transcript investor conference GAAP is of company's X, Investor A the replay XXXX. release archived shortly these call. of A the earnings be call measurements. reconciliation includes The of our certain and provided be available and in corresponding Relations appendix in

I'd Bozich. the Now like call turn Frank to over to

Frank Bozich

million net This straight sequentially in we second second of the EBITDA that higher the second Thanks, continued through were quarter conditions in which results, XXXX unfavorable quarter Andy, our our which to the timing. $XX earnings The welcome discussing to highest despite profitability. market quarter our QX quarter the start second adjusted the of line and resulted at our call. by first end I'd quarter, like expectations. saw was XXXX, since with of of

Materials environment of moderating the EBITDA will sales due in level the over demand profitability is of and second We applications second while as XXXX. it continue macroeconomic footprint We costs, in and and restructuring our MMA of higher adjusted dynamics second the since believe for challenging that that volumes positive to segment's positive segment in input highest steady normalization free market half. this our Engineered taken downstream years. see momentum cash negative to significant actions to anticipate led we X turn quarter, And past the sustainable in the flow remained the current we've quarter

to sustainability PMMA of made progress continued facility our about the sustainability. on ground helped milestones critical like In we to of strategy. I'd which Responsibility and we Sustainability toward in decarbonization Social our polycarbonate XXXX. in the implementation XXXX depolymerization achieving a how employees very transformation company exceptional shows gears talk XXth proud on breaking our circular issued Corporate facility, July, our progress and I'm our goals, our shift and especially Annual dissolution report, cultivate the

recycled We product in material. containing to to responsibly. recycling economy QX a in record investment order of sustainable creating are carbon had our products another for committed We continued support and quarter operating offerings in workforce technologies footprint, sales while and circular sustainable reducing a

future. investments off, paying in growth our So we are the already more anticipate and

its returns industry that the With virgin major Italy. second utilizes yields MMA recycling standards. Rho, ongoing in MMA chemical COX that on waste depolymerization a in like post-consumer brief a monomer facility At amount the to end of we mind, of update X of continuous projects. quarter, while exceed emitting I'd provide facility announced industrial PMMA The our production constituent that of the our X/X to and novel acrylic as with the recycling process opening

recycled, that previously advantaged several creating to not circular could recycle us truly economics. Our process technology also a solutions be allows PMMA with

to recycled MMA in exceptional virgin to The for the is properties. purity our such process as windows that of solutions end higher with concentrations be also the allow monomer of properties MMA. high-quality purity the comparable MMA recycled high product. used levels caravan to levels higher-end without and vehicle in content taillights used of result sacrificing be This applications optical recycled The desired require enables certain acrylic

also levels that of exciting us plant waste made polycarbonate of I'd at technological we've lower newly polycarbonate back residual pilot that in advancements containing some into magnitude recycle that BPA like than our are of virgin the to highlight orders polycarbonate levels of pilot dissolution technology BPAs The resins high facility. contain allows the developed PC. to

to elements and that due reused by we Additionally, weight is as waste most its the even can natural applications. are restoring humidity end-of-life polycarbonate over to it recycled sunlight, molecular the temperature current in so degraded such demanding able time be exposure that repair to and

These and technological depolymerization have journey, The more costs. future advantaged. testament PC have in to not to Trinseo our been PMMA are examples minds for are the help of due bright dissolution, time, recycling sustainable be same continues innovations a the in at investment build waste at industry-leading suitable advancements how sourced solutions until mechanical will now to can beginning we and that along with and degradation the our sustainable at advantaged span of economically streams PC are

under of agreed first a expect process, we And to should quarter. to pursue in lead with on joint joint I'd this give Before like over steps XXXX. the to of Chevron venture. the joint the I our which Styrenics ordinary The of Americas definitive exit turn Chemical Therefore, have venture Phillips the defined planned procedural in sale have a we course, update call a provision partner, sales the off the kick to half our David, agreement to brief progressed. agreement

Now our Dave second results. discuss will quarter

David Stasse

Thank you, Frank.

previous net EBITDA electronics styrene guidance $XX applications Materials decline and to and case was latex in million a adjusted binders, led $XX volumes. applications in EBITDA battery consumer of despite our This growth falling and improvement year-over-year in and in volume growth X% Second plastic with and line of was building Engineered areas, compounds for driven Mix by of formulated in targeted our solutions. automotive prices. quarter resins construction a and from unfavorable higher included adjusted million timing all including

volume decline uneconomic resulted shed capital. Europe Substantially, was Asia was million, working to cash free used the and $XX which all the polystyrene, optimize $XX where and in in of quarter we volumes Cash million. operations plant in operations in year-over-year during flow negative

with financing We the turn flow total lower the from million positive from seasonal We to prices ended expect fourth committed our of cash factors the liquidity, free cash and and facilities. second half $XXX quarter in million of X in styrene $XXX quarter. including

date to January a continue securitization XXXX be XXXX. receivable into as the entered accounts the preservation our downturn. this will facility future Liquidity we July, navigate In new prolonged maturity priority to industry we for that top extends from foreseeable

over back Now to I'll Frank. turn call the

Frank Bozich

Dave. Thanks,

to ahead we adjusted third expect Looking similar to conditions market to the and quarter. EBITDA the quarter, be second

construction electronics dynamics impact timing decreasing our to an in normalized higher-margin and third expected are unfavorable Materials. expected While quarter to negatively the improved through to in not building to Americas margins are Seasonal and net same continue Styrenics, outage Engineered unplanned applications consumer margins support market improvements should and repeat more QX. continue expected MMA at the is and styrene magnitude as

$XX of a adjusted As EBITDA million. QX expect to million result, we $XX

normal do the to While not specific year-end QX we profitability expect range we quarter, lower sequentially for seasonality. a fourth due be than are providing to QX

QX capital typically a to we flow free increase to working from substantial anticipate year-end. at QX as we have sequentially However, release cash

challenging We environment. end consecutive are of quarter profitability to macroeconomic market persistently extend third encouraged and profitability similar sequentially expect this the by the demand in weak and higher of second despite level quarter

we We will to the demand continue actions see taken benefit cycle from confident emerge this low have the we stronger before. we than are of that were cost and

And your now we're questions. happy to take

Operator

Thank you.

your begin now comes with the Frank Fermium Research, will session. first from of Mitsch [Operator line We the question question-and-answer Instructions] And LLC.

Frank Mitsch

good flow of expecting more styrene prices want the a all. a and of drill I to that morning year, you in $XXX you're the monomer been first balance it's little down use expectations million Thank of given understand cash down. to for into year. half free the close I the bit the

-- out? release the You mentioned a -- mean where capital free looking seasonal so, investors you half we're to the as that are that second flow to of get And play fact the neutral? the get given to $XXX answer factors we we cash hole can forward I if expect working year. million by back Should that Again, year-end. and at how does

David Stasse

said, expect to as we be it we I think positive. Look,

think neutral, QX QX be then kind flow I fairly will of free and flattish will positive. cash be

year, I this mean, year, For the started the year, looking in if our of because negative. and million so highest restructuring for sum of where totals that interest, cetera. our our year million in be you restructuring, forward kind cash will we prices, show think free $XXX of styrene that us puts a outflows CapEx, of because the where cash for presentation year, year. clearly, that's have flow I we for $XX next this full includes year, slide And -- situation the about the of to et spend the a it how

level, the cash neutral. $XXX million that this is from to think you flow at EBITDA need I be So of takeaway

So Cash to to the position today I look, But we're year page give also next X have lower. to closed. if clearly not a year, be We of that in the still styrene guidance a lot expect they restructuring roll this lower. will think we forward be plants for costs this spend I for XXXX. interest,

And debt. think everybody rates We followed have recently. floating billion rate going has with I on $X.X of what's

So is to lead -- interest set that's the think going million interest points current to it's will $XX up rate interest a you be be -- trajectory XXX cuts year us. basis not of of the would for every rates forecasted --

the I that there's year X today alone. So this I baked in think curve cuts for mean, forward

be that So year. number the will lower interest numbers think those will I next --

that, QX, a far us should or in year a million closer right next year's of EBITDA not million million $XXX to EBITDA, all now cash position And $XXX flow run from where in of And this where rate $XXX $XXX think, are be million. is QX. as neutral I we of puts

Frank Mitsch

if that benefit that cetera, an just mentioned, a see to benefits and $XXX still And 'XX $XXX million is between nat versus spending expectations that And as sense give Trinseo's 'XX. as in trending? XXXX? million hedges, we'd the would is see you David. you for restructuring expectation $XX us how that a gas et Can was stick could with I the million restructuring helpful, very That's there

David Stasse

sum The of X for fully we natural Yes. million which benefits is recognize the plants. no is. savings, away numbers confident the very running the plus gas It cost this longer again, absolutely the those in going -- is year. $XXX We styrene both that hedges of will the

this very full realize that So that year. we're XXX confident million we'll

Operator

And of question Matthew TPH. your next with Blair comes the line from

Matthew Blair

end which markets your is commentary maybe which little pretty segment, in you, Engineered Can thought are looking talk little Materials a the are improvement for markets I volume end PMMA still encouraging. about better a the softer? you on

Frank Bozich

into I a and where look, automotive and applications offering has and Those a actually for saw building be and solution steady demand. been be steady construction strong of sort we applications -- Capstock. to unique would many to example, say building very construction we're

say would were of has geographical thing volumes I steady last our where so recovering European in come than really The is growth Europe. volume Europe PMMA. markets, And the this it's stronger they have sort in volumes year that much in in back year. end been It's

Matthew Blair

include, a guess QX net the does little timing. not guess, on then And any guidance, on big sort of surprised assumptions number was I I the I

second in prices for versus think styrene the and I are down the third quarter contract U.S. Europe quarter. in

So an quarter? styrene is lower factor there those again offsetting this once prices to

Frank Bozich

outage -- In the -- well of end at expect have you to one because period have we styrene markets, in of Europe. weaker QX, they August then AmSty And be have due as some QX in as prices will our be to lower AmSty some as to a have of unplanned -- compared their headwinds plants. the vacation you usual,

that's -- you looking that's at QX. how look at how So we're

David Stasse

something. Matt, this is I'd Dave. add

One an did would month into increase. you're you There the Just prices probably infer of contract by have related timing, in timing. prices styrene that, term short influence was at we've to you European prices any QX that significance, offset But in an the point, North net QX, which that referenced that the the America There's specifically, duration and of Asian I outages, really, have increase negative from timing. will the It's the a We be in time. doesn't of big -- our that a in think largest, prices see far, is seen probably largely couple prices, doesn't we'd would of right. end August. other second. drop in

of timing we're significance any here earlier, don't I said Matt, I as So today, sitting in anticipate the quarter.

Operator

line Alembic next question Advisors. comes Hassan with your of from And the Ahmed Global

Hassan Ahmed

are businesses to talked normalizing, be it the MMA certain within away other levels. quite conditions from about business, seems on certainly, far You surface, more how the guys seem normalized

just you basis, the mind, in company $XXX I wouldn't you the an annualized what revisit mean, if could is. obviously power earnings guys So you million on QX. of your of EBITDA in assumption did normal around,

obviously, business popped margin-wise, And to nicely the close EM EBITDA XX%.

you wouldn't of sort sales of of way stand with reminding state the in where they if the we terms normal power So the earnings of company. the mind us are the

Frank Bozich

Yes. I really right predict now. to mean, almost difficult like Hassan, and normal it's impossible looks what

of of end So backdrop the really continue predict see And to that But our a difficult. additional from market have the all think, to against many improvements being actions to uncertainty what expect I taken. I like uncertainty, we we geopolitical think the pursue. forward segments market can normal going in opportunities looks we'll we've is

Hassan Ahmed

separate during QX the guys market nylon, on in and And about obviously the production, MMA was which was intern forward call, production. in you how that phenol China, note, there a and asset-owned within limiting on within weakness epoxies polycarbonate talked impacting

regards do to stand with So we now? where that

Frank Bozich

coatings still tight by is the the factors the all call the thing almost to And in see that as significant And that regions. it the of see has back. exists. you market architectural MMA market we in improved and into coatings. but that volumes the MMA half that say as additives polymer it come have almost MMA need remember We region, varies goes would -- market highlighted other And -- a in can is it are coming also of I portion basically QX you well architectural

tightening the in effect limited. the created feedstock's that's time availability at are a same So Asia

current see So something the changing? it's dramatic for see MMA a and changing, I tight we market, don't absent don't conditions

Operator

comes Alexander question from the Jefferies. next with Laurence of your And line

Daniel Rizzo

Laurence. Dan is This on for

when the to Within a potentially guys don't have to time Italy EBITDA in I going of know, of -- PMMA do EBITDA? what you now and to what of contributing earnings. line positively could mean kind terms be that's mid-cycle, in facility ramping And it up, is you that the

Frank Bozich

analysis as time. demonstration in right do and because the a current that that a front-end don't load for We forecast bigger matter, that a for have have in to investment we'll now that's practical facility this much future, is engineering at the

contribution with occur. production an for But a So expectation I can't really standpoint we timing give exact for quality. favorable you that say will I when that from EBITDA what can it the and as similar or see virgin to cost

very So it's for opportunity us. a exciting

Daniel Rizzo

for general. -- And market at altered wondering reading that's I being or battery the highlighted your fairly in demand then doing outlook know headlines lot the a you I market one mentioned was vehicles just as I think electric that been all if well. of given has with battery just you we're

Frank Bozich

Our battery growth significant in and this into growth. a continues year

technology that into cobalt binding energy anode our producer advancement. our higher or captive growth allows EVs, nickel goes technology the solution Now our And like and an manganese energy the battery the in in have our density NCM, to a the battery technological driving battery. what's into is goes

innovation because So of have the EV we're market anticipate small market. at growth as advantage sort our penetrate -- a we we our the even a to -- of and and matter technology other technical solution. of But in no producers, flat of is because to percentage see qualified going the

Operator

from Leithead And your Barclays. with final line of question comes the Michael

Michael Leithead

understand change decided million your just it you I in of this that interest. incremental number you forecast amount? looks to that? or by versus the million the sort last that, First, cash rise related $XX versus say quarter, X, then there help thinking I of us to year. Dave, like had X $XX for in a at higher can million $XX how cost lower on deferring updated just pick you that guys And guess, One, you for on interest cash is what interest

David Stasse

benefit place Mike to of And carries coupon. in the put option, the pay-in-kind or pick what loan on the term do we plus ability have to September term is we in that of pay-in-kind interest to just here, X.XX% year. have SOFR The of the last referring option loan that X.X%. So PIK is we

the spread, So about today, about coupon is XX.XX% now. SOFR right X.XX%, X.X that's plus a

X% ability have to of say, pick We penalty doing points and which percentage And the the pay that. in is of or about coupon. a not there's interest capitalize X.X that, X/X for

the about -- the was just I that if interest And for was was that in will, picking was capped Again, that payable what picked, Mike. at capitalized. you about July, amount it option. million, $XX it -- described, So amount of we coupon it's elected the pick of or

the interest we last time that referring think I from the in change you're is million this. $XX saw the to probably

that The right? is says curve, number that, influence that other thing the forward

So we're in be versus year. this cuts like looks it less there's obviously in an going environment more today to where

absolute to I other about to this in And preserving debt There's year we why prepared been we're I is this in of. our did mean, I mean, to So to what's no this speak I year from when further is question top recovery, my issued do your that? priority. changed mean downturn. as decide recovery demand environment Mike, you -- ago get no the that a said into liquidity remarks, a

We'll cash reach we the actions in just revisit possible to to in dates. think coupon future or obviously future the prudent election as So take all we preserve it's to liquidity. pay take

Michael Leithead

given for the that maybe confidence AmSty, guys before? now, getting your before obviously you whole Frank, surveyed CP kind influence do market going for now done going Chem the here attractiveness say, for think of just then how about And with, your the with asset how sale AmSty the that by have now the with this you does experience deal of kind And of sale? changes sale

Frank Bozich

we clear there overhang an I into a previous from their mean that very signals on interest our was Yes. joint got participants process to enter venture. in the because

So great a I think people to the performed asset. because strong want buy and AmSty a of XXX% control, preference It's it's very consistently JV. own into to was not

to that related that expressed And any it of the make the participants this those previous so process, signals got that market by some be clear concerns we the minimized. were -- we to and experience in will us

Operator

conference for today's call, gentlemen, you And this ladies concludes and participation. thank we and your

You may disconnect. now

Trinseo (TSE) 7 Aug 242024 Q2 Earnings call transcript