ASIX - Earnings call 4 2023

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Operator

Good morning, and welcome to the AdvanSix Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Adam Kressel, Vice President of Investor Relations. Please go ahead.

Adam Kressel

Thank you, Andrea. to Quarter welcome Call. Earnings and morning, AdvanSix's XXXX Fourth Conference Good me and and Vice President today CFO, Erin Preston. With are Senior CEO, here Kane; and Michael President

on including of projected, our elements presentation could business and Those best we elements and contain are differ presentation. forward-looking see the reconciliations can you our and view materially earnings Note that this any them statements ask as on call and results at investors.advansix.com. we webcast, are This of available release based in our forward-looking press consider We those today. that it of refer light. website that the from statements world non-GAAP change, our that included and actual to in the you

risks filings identify XX-K uncertainties the in annual we our performance including principal subsequent SEC Form report on addition, in affect with the our updated that filings, our SEC. further and as In

results year morning, for key and This our quarter end for markets. and product our XXXX and our lines we outlook fourth the share will review financial full

your time Finally, questions for at the we'll leave end.

that, call I'll turn AdvanSix's to and Erin with Kane. over CEO, So President the

Erin Kane

interest for Thanks, morning, good everyone. your Thank AdvanSix. us Adam, and for you continued and in joining

portfolio profitability. improved press in you out for market including environment on the a XXXX. focus investment release, to year further through-cycle We in As simplification saw continued our priorities, long-term close navigated and AdvanSix challenging end maintained our

Our as shareholders. investments healthy maintained to balance cash supported of and sheet our performance return organic we our

business continuous accelerating earnings the improvement model. cost areas long-term most our our power and portfolio, profitable advantaged our underlying is strategy business the strengthen in sustaining to Core of this growth to of

within the industry demand on We'll pressured plant acetone later more quarters in environment our for nutrient our our by for While performance business. portfolio call. to continued unfavorable been several the see solid and outlook from supply resilient XXXX has results and global now, we've provide conditions nylon color

as potential, headwinds current year. key the deliver is working focus dynamics our enterprise operational mitigation perform to as to the our including execute look and So invest in will optimization capital SUSTAIN on cost key IT and we be levers control also our industry like we that risk long-term in we of to set our to started our achieve forward, that address is digital our and to mitigation, To projects it support growth the advance have program. platforms through discipline transformation

the to turn me let over Mike. call Now

Michael Preston

good where of Erin, Thanks, on the summary Okay. and I'll financials. X, morning, full I'm everyone. year provide a XXXX Slide now

in declined benefits Our pointing year. prior EBITDA raw $XXX results portfolio pricing. and XXXX our was overall of Volume diverse material the primarily XX%, the XX% down prior year was million against a from position. driven by unfavorable driven Sales of of product flat record net cost by advantaged down pricing were Adjusted primarily to costs. market-based

Adjusted by EPS to XXXX. to per We and relative achieved expanding business was annual earnings our of $X.XX resilient through-cycle power continue on performance XXXX in troughs profitability evidenced as prior the focus the improving share. and

XXXX, compensation. equity versus tax vesting the year to XXXX We effective anticipate rate related full benefits primarily XX.X% effective XX.X% approximately was tax research to in be Our and credits of by XX%. tax our tax driven rate

and income as investments. a as higher working changes year-over-year as flow well cash result the in the of unfavorable declined capital impact of Free lower net capital

raw more pricing approximately supply of cost year. and pricing both net Slide input benzene shipments X% to fourth the sulfate ammonium nitrogen turn by Raw well export amid material primarily in pricing nylon of was quarter higher lower X% approximately stable as reduced by the million as primarily material reflects costs pass-through favorable by performance. a Sales Market-based was volume and prior driven let's ammonium in versus quarter as a decreased increase nylon. the in a unfavorable $XXX discuss XX% and propylene. Now increased pricing. XX%. to sulfate X low Sales global This environment result

by margin gas spread in utility a reduction increase favorable, higher $XX the portfolio material a was primary the EBITDA basis propylene approximately of down by and price net Adjusted material tailwind by prior natural by costs, was on with decline. up, on gas items raw modest in a Ammonium earnings nylon offset significant pricing, our Pricing was and sulfur Plant the price supported million, an raw primarily $XX also natural a headwind export of caprolactam were volume in lower costs. also while across of sulfate quarter, reflecting down period. were was ammonium on far sales. million other input raw lower asset intermediates and from driven in partially costs. Chemical materials the sulfate year-over-year. costs year driver over and Performance nylon presented

year, impact earnings increased a the million of $X.XX. primarily of The operations projects. in on in cash This reflecting was enterprise of working in million the Capital $X prior $XX programs $XX roughly decreased in $XX offset quarter tax million million expenditures the And free rate lower prior was spend versus approximately increased XX.X% the and net Adjusted was the to was per primarily effective changes flow million income, due Cash other of by partially capital. quarter. $XX share maintenance versus finally, from favorable loss the year. quarter. flow

me let call the to back turn Now Erin.

Erin Kane

product nylon. lines. Mike. I'm to now discuss Thanks, Slide with our X on of each Starting key

industry While fourth improvement sequentially significant begin and continued did stabilization some spreads of prior to quarter, we see declines levels. trough through the in year-over-year

rest encouraging, the regional of to in seen economy led underperforming exports low-priced the to see dynamics reach weak and all-time China and in flows, We've the nylon the is as varying continue highs trade resulting we increased global the this demand fuller While benchmark. XXXX composite world. Asia to global exports growth

and interest applications. impacted consumer as packaging Here has impacting well as the construction in higher North America, rate markets building spending, unfavorably environment

Consumer resilient. the also have remained weak, durables all engineered been applications space within plastics has while more

sales, we've resin, which business, share higher both with a of mixed nylon export As for a consideration seen and previously our performance. does come caprolactam our for shared,

XQ While our not first are year-over-year. to XXXX half higher expected exports levels, be at

fertilizer multi-quarter seen a nitrogen amid reset in the a space, supply energy we've pricing lower costs. In more and stable environment

follow averages. nutrient to While demand fundamentals prices, underlying cautious expected the by with sequential fertilizer the buying into see remain did supported we line that and the XXXX behavior did year, pricing industry exiting crop support will fill historical initial confident in continue affordability fall application. We acres planted spring the

inflation-adjusted projecting crop is profitability rising of USDA decline as costs lower result and a farmer in The prices. a

customers level demand long-term we to and we the remains the are heart domestic historical planting However, absolute at remains up the our averages. key gearing serve move into as of season. Overall, stable,

Lastly, continue in quarter. costs to the Chemical grade intermediates. propylene in Industry realized prices over improve fourth acetone refinery

seen demand lower This has and our chain supply has rates large has acetone buyer applications. by industrial phenol global on into been we rest Across applications, supported demand While other reduced particularly see remained to tight persistent building of construction portfolio, end the serving demand softness, value soft. intermediate the and operating globally. is balanced into

destocking as largely which face through serves U.S. amines inventory. growers work to and our retailers we've business, the higher chemical headwinds For continued space, ag

turn let's the So to next slide.

XXXX. our risk address we of health, facing $XXX the core million we're investments. and some release, in CapEx As addition and in in reflects we to million maintenance We our growth enterprise of end critical This to expect replacement challenges and $XXX environmental in spend shared press increased to projects mitigation safety recognize markets. our

support However, long-term we necessary our to to investments performance. the time continue on the focus right making at

We plan medium of compliance, profiles long over asset to the short, process a and factors, term. prioritization and rigorous execution evaluates a factors, return that other have an culminating variety life, including risk,

discrete are spend first our operational unrelated programs targeting We phenol Frankfurt enterprise XXXX. X efficiency. and are increased projects to plant, upgrades primarily operational have to These that infrastructure driving quarter disruption in critical at the the

customers The integrated intermediate of first chain suppliers. within to is and raw rehabilitation to value and from dock, critical system key and which a movement own our our support our and and materials of is

the emissions. upgrade which expect as a an benefits is new of second drive to installation cost The savings well and NOx reduced operational and we boiler, as

detail savings Slide the investments. X Let's more cost on to turn growth of for

to is need. program with growth approximately the meet required million SUSTAIN consumption for go-to primary primary nutrition driver a spend growing strong program XXXX. growth. customers capital investment of and and is XXXX the Ammonium sulfur of to of granular continued that sulfate be between our SUSTAIN designed with Our $XX near-term continues American form North sulfate

As we of timing our clarity we provide and program, greater progress this outcomes. to endeavor investments the expected to multiyear

nearly conversion targets tons XX% a emissions. production of multiple of by expansion predominantly fronts per no XXX,XXX That SUSTAIN This represents increases year. energy it a our increased in also approximately wins series is targeting or program consumption As as net a projects granular on sulfate increase. ammonium reminder, through

logistics customer up proceeding are for X domestic expected execution All in and priorities engineering efficiency improves online. project also are through as loading. years. of come rail in front-end individual with firmed period the to next projects over It components investment design phase Benefits investment now truck for improved each and the

XX% XXXX to we of roughly And milestone to granular by approximately a capability program, as of our We of current completion target the anticipate expect by XX% reach of to conversion XX% this production conversion. end XX%. compared

our SUSTAIN our hurdle expected XX% return approximating rate. program for with profile The robust remains target IRRs

funding from through grant the supporting expansion the innovative production. fertilizer USDA also program, to We progress continue domestic on production fertilizer

to Now to before moving wrap Slide turn let's Q&A. to up X

business as the chemistry ever, navigate serve strength the more Now than of will sort position of company our a as and dynamics. diversified us we well current model our

In margins weak we We industry pricing industry means And near by our in term. balance demand. expect tight a higher demand, and global do supply year-over-year we near levels fundamentals. to that amid intermediates we acetone demand the lower nylon year-over-year first plant anticipate declines XXXX continued stabilized our seasonal strong exports chemical nitrogen favorable to nylon pricing in solutions supported nutrients ag half continue anticipate conditions. This expect portfolio, expect amid to we current business, remain But environment.

Operationally, approximately million be pretax this quarter. will $XX million plant to impact in we incurred compared in of turnarounds expect million $XX majority XXXX planned a of to in XXXX. to income impact the The $XX third be

Frankfurt I on process-based update providing previously an wanted operational sites. to before moment conclude, a Now spend our the we disruption at manufacturing disclosed

planned $XX to total a of we result incremental comprised utilization of million. of impact the in including ramp and plant As lost purchases $XX delayed additional million are This a replacement other income quarter unfavorable of anticipating now to the products first of and impact rates, spend. pretax is costs, sales a to

its ramp to rates. back the us We Frankfurt up XX% path are at of and currently planned is to to utilization right XX% enabling Hopewell which targeted have and operating on Chesterfield rates,

like our would value I this thank and And safe While operationally, collaboration to to difficult been a the has I'd to start to commitment on their chain that sites and mitigate the have AdvanSix operation for getting our of acknowledge done. been our this impact. job focused for during time, their on the like customers year partners teammates focus also

ahead and We to stakeholders. us year are With Adam, our have let's of for move key Q&A. much committed that, of the delivering to

Adam Kressel

Great. can for open you line Thanks, the please Erin. questions. Andrea,

Operator

of from Instructions] Anderson [Operator Vincent And comes our first question Stifel.

Vincent Anderson

higher-value The the up see to placing wanted most start pricing overall you market-based quarter. Amsul. lingered with than, volumes where of export in did were expecting revenues just in in better better December, I or was I Or your tons the whether to pricing at quarter had given least Were regions? year-over-year? start for

Michael Preston

thanks for from was here. year-over-year up. Vincent, a volume question perspective, the Yes,

look growth, sulfate, of worth where of perspective. amount about a XX% of that a line that exports. we at of were from looking nylon A the caprolactam increase ammonium and volume million also Most perspective year-over-year roughly at year-over-year. good top was improvement a amount good $XX that's was you If volume from

and really quarter, for AS, volume what of majority the the drove that's had from particular, a a in So we perspective. strong year-over-year export

Vincent Anderson

pre-buys next Was income consciously And Got kind advances. that year? of of into kind of the but were you Or and this managed deferred feeds you. absolute lower largely lower pricing? which may answered, my question, that your result customer recorded be partially

Erin Kane

program sort market when program. certainly, fundamental of and signals the No, fill our take about and here where as prebuy we as think customers' well approaching year's we Yes. is, every

entire pricing So we values long-term say down. was on volumes but at of nutrient complex given were averages, that and our energy the sort nitrogen historical just would

Vincent Anderson

than All we of a intermediates, was Okay. question better a around similar kind Excellent. expecting. Then bit right. that were

curious assets was I'm recovery some pricing? if on use? So in and amines that go we Or maybe are that to really early agricultural oximes starting the all into see

Michael Preston

of most intermediates the really of pricing was and that favorable conditions market-related majority overall. more to the improvement mean I was supply acetone. Yes. and strengthened Acetone end

Vincent Anderson

Sure.

a around any is one, real in we to turnaround turn. quarter? risk the the terms just this someone of that But inventory the Okay. or XX% were don't you build year there else enough good And planned here XX% and to still I'll second output Or see more purchased Frankfurt quarter of have is a ahead from utilization give then risk? at product of of balance third the planned quick

Erin Kane

Yes.

current So this us supporting at Chesterfield certainly, back rate at level with the we're modest rates to and at are full the bring Hopewell some the here. purchases

XX%, system normal numbers level to average works on are how you relative our long given sort those to can out Just -- integration, the of XX% stretches. over of there

and returns, and key we who our with customers are for and we successful. of flow focus our pulled now the in very running to maintenance you the Frankfurt Hopewell, and is remainder facility execution on reevaluating time, given have work nature. get so during to the the right that the just at forward return certainly, And slowdown our proactive this collaborative be stabilized year up systems We expect, timing our to as plans might been we're the us of

Operator

comes question Silver David King. CL from of next The

David Silver

that just wanted it particular, but touch in wasn't SUSTAIN of aspect USDA details right the with or guess, Is funding it process. I directly, it word, you I Is is just request be which What Could of And maybe the that? maybe I attributable but to of missed think opportunity the maybe Yes. is just the maybe the maybe start on before, can't the couple grant a of program. from project funding there. I aware to? tied in would emissions regarding the your performance? most actual something I

you talk broadly? about could Just just that if

the would that the grant amount could size that grant range the or Or is million be potential funding any And figure funding? gross then funding. helpful. And any before if CapEx of also you whatever, is $XX of net the

Erin Kane

Certainly.

U.S. from grant farmers. the of growers and So increased the is support for production in actually USDA U.S. fertilizer

a are So really with we country capacity that process generate ability of needs, through them. the more think to the -- are sulfur great we those given the with our growing match and certainly need working in grow and and

really So we improving the increased produced U.S. market. have about locally just that fertilizer for

to process, think we us $XX the the proceed. right? between there. There is opportunity $XX And key set, to that are so And steps million opportunity to it's we the against spend. So million grant about continue when for our total

David Silver

don't just some producers are suitable I'd your you global over get are and of to to in in there switch that reactions your stabilization cited balance current Okay. to in and like that producers fundamental who competitive But that the is the but some sense guess, with sustainable. even I about there are to charts would not consider supply-demand the making I some environment. my particular, thoughts nylon maybe returns caprolactam know,

guess, facilities be balance, operating might that over in Europe medium fundamental concrete your lower a have I don't regionally, in you rates elsewhere. a the other bit, shifts, here the have lend in in shifting Chinese the perspective see reducing term? adjustments or have to behavioral response you strategies But know, beyond let's production that some firmer around noted Or words, would producers or, domestic little been your marketing shifts any production say, to I demand? from you And noticed there any

Erin Kane

on closer which them. provide strong, they of China export rate need effect. the That of current you, start a be to is So context rate their And internal to had seen domestic the vis-a-vis continues year, it's to sort operating XX%. for for I'll we've certainly of of needs. a rates, healthy little running has a a David, That sort at ripple

the when got into of world, flows, the we Asia, Europe operating operating rest into around is begins sort XX% Asia about about of rest the of of the these as export at So trade rest of the You've right? impact talked to China well. XX%, Europe. to

a higher cost is it Structurally, region.

regional the Asia market And long as slightly is to is China as America, continue North long. think relatively area is well. balanced about structurally Rest to degree long. as some that structurally watch. that to When you the Europe recovers, balances, so is demand of are and the we

the asking structurally seen that are long. fee. closure. certainly, definitive I but But -- that of sign lines that a seeing announcing have area So that in Again, yet that think are would around, we curtailed you're those are yet would are watch definitely lines not not running, we regions we anyone rates, cost be there are

David Silver

chemicals a feel Okay. -- analyst and always at here. term. points, like dumb about apologize, the Maybe in critical you the I for a talking investments question, last of long I couple But

the I'm head that activities scratching included mean little it? my types you of risk a enterprise I you flesh critical -- kind mitigation, is thing? just And right? envision You I program terminology, as a of a in guess but used could enterprise are Or what kind cyber mitigation there, of defense critical more. risk you out this bit

Erin Kane

Sure.

larger but scale. of So replacement potentially is sustaining our we sort our could, may projects right? we CapEx nature, I maintenance would some need be you are probe the within in then of say, framework, here some our sacrifice trying one these then they base right? at Because we that us to And may lumpier why to ongoing, sites, of these would programs are ask in manage couldn't

think we cyber risk. think risk you of about think supply that totality -- And the chain risk, about risk, XX-K. about disclosed so it of factors We we risk, in think when think we about enterprise our we climate

for needs Frankfurt dock an of now, And it's Frankfurt it's a right? se. scale. for that is right, the of its large entirety right not projects to the our start the entire per we've service got project is these and about dock advanced the think chain, the length And necessary we at when of system. a feedstocks, value and Now, that It's maintain

boiler, chain, this changes to the And think a base one a into replacement adding our resiliency for this. framework. is approach our this that's significant the at category. into in in of integrated that and And maintenance a because of site key value But compliance utility site, we program that put again, took forward. Likewise, a great standard handling regulatory critical sort risk, long-term switch fall would boiler again, again, to moving we is we put it could redundancy might

we If to program critical that enterprise spun, you with that associated think we back have a would when above for right? manage would and risk the each, things we multiyear feel our CapEx over did So that are these of as this. $XX what mitigation types NOx million maintenance are prudent reduction for view program, and within the base to be we manages our base into sustaining

Let helps I bit. pause, hope little me that a

Operator

[Operator like Erin Instructions] This I would the remarks. to any session. will conference conclude Kane back turn our question-and-answer to for over closing

Erin Kane

all morning. again this time interest your for Great. and Thank you

With While and forward profitable have and speaking our next smart again long-term on investments Stay playbook we puts areas accelerating there quarter. markets to record and growth look focus disciplined track in for portfolio. be the well. you a a and continue macro We'll safe to through most with that, sustainable we of demonstrated our broader these performance takes uncertainty, position end across our are business and and to dynamics. navigate

Operator

may has Thank disconnect. attending now today's conference and you you now The presentation, concluded. for

AdvanSix (ASIX) 16 Feb 242023 Q4 Earnings call transcript