PQG - Earnings call transcript Q4 2018

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Operator

Good day, everyone, and welcome to the PQ Group Holdings Fourth Quarter and Year-End 2018 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. And I would now like to turn the conference over to Nahla Azmy, Vice President of Investor Relations. Please go ahead.

Nahla Azmy

Thank you, Will. us fourth joining results XXXX everybody call. to for quarter our earnings Welcome

today make from cause the are that risks subject some we Vice formal and and forward-looking will the and section company's the will with the We start release and With These Q&A with a in of the remarks posted be company's uncertainties non-GAAP turn Financial at Then today's statements the are Officer; note plans Reconciliations session. GAAP pleased Mike www.pqcorp.com. about Belgacem. follow SEC. with our presentation Chief Chief of I'm and website Belgacem call their materially. Crews, to found financial filings and results could Investors Executive actual turn, President Officer. we to risks I'm implementation the results that, Executive President Please measures to that that company's of with today and mentioned plans on earnings vary on the call the of measures to Chariag, materials discussed over the corresponding in can

Belgacem Chariag

Thank morning, you, everyone. Nahla, good and

we the agency And higher latter the strategic value environment, and agency with launched that completed of all year, start executed progressing a portfolio planned. is few health, that a the our by behind that our to largely stronger growth our first performance engagements intensifying quartile year part did reinforced And goal public We while delivering metrics develop improvements performer. being and confidently first important and now we a more employees to us. on customers facts me towards a Let company our highlighting and on as in a our We our businesses. of a focus as safety XXXX path transitioned and goal our plans. assessment, finally, on with our XX% than top

growth highway XXXX, we virgin Services end X%, At captured pricing and of volumes pricing from Performance and application Performance for rising by increased improved Slide both results support, business lines. regeneration volumes control the as from ThermoDrop acid finished and on demand summarized hydrocracking stronger in industrial Refining for and record a well volumes sales driven emission improved microspheres and The product products. level, robust underlying silica catalysts and our Catalyst posted and other of sodium catalysts our sales and for X, products. our both As drivers business growth for most and secular for safety demand polyolefin business from unit had as delivered Chemicals accelerated The specialty silicates solid And Materials business gas markets. the deployment.

offset or Refining anticipated higher costs was have costs We manufacturing primarily The solid by logistics adjusted in MMA, and of half growth modest from which silica we during operating corporate in cash our as and year. Performance in deferred catalyst total of the Services to all in methyl debt million generated orders methacrylate, performance down free EBITDA. adjusted With $XXX a well flow we the of as million Materials $XXX in second increased the year, XXXX, of used pay business.

free the in driving to our the units results the our margins, second stable stage, business turn segments fourth despite to will details And demonstrated the allocated our call deleveraging drivers, will our at and year, ahead range debt to our are with committed $XXX of again continue toward adjusted from of and XXXX, strong this million. of outlook. cover to gives macroeconomic $XXX diversity with in confidence share on outlook. flow us Further, growth of growth trends. we deliver the to to we additional capability Looking all slower This objective. to expecting million I will business cash The XXXX in are some quarter progress be half market this some Mike, reduction who global combined

Mike Crews

you, morning. Belgacem, good and thank Well,

sulfuric repay quarter Belgacem comments on my discussed our on saw margins X% on constant million. services results in million an $XXX has for with year on I Favorable prior on covered pricing sales X the in virgin striping in the adjusted coupled pass-through and Performance EBITDA season increased the Services, and and free regeneration Slide in growth the was and highlights Refining highway X% this demand with expectations that acid our line flow will basis with along used healthy with again sulfur outlook. already extended debt. cash top of year, As currency in a we line Performance Most Materials. call. drove as continued results, generated of to Higher in strong Materials Refining the the with was mix for consolidated increase, earnings X% $XXX quarter quarter quarter. we and the the the Services. focus Adjusted line sales Performance the Chemicals substantial in were third fourth to growth contributed to quarter costs notably, Beginning XXXX We of higher volumes EBITDA

Refining & proceeds Performance was offset XX%, margin segment. to corporate in Materials insurance from largely line anticipated gain Chemicals a and cost was EBITDA down XX with higher XX Adjusted Hurricane by in all related basis was lower which, the to Zeolyst Services outperformance higher points in points the the Joint due year, points and Continued of due and volume. third quarter. cost basis This to prior Venture corporate Harvey basis from XXX was

to Services virgin by approximately in Environmental and regeneration in to growth. industrial with million, and pricing segment. discussion $XXX Moving high Catalyst services, due our higher to demand XX% a increased rates operating line driven volumes acid of and X product robust Sales customer Slide for the

with catalyst. the This Joint Zeolyst down to due methacrylate polyethylene double-digit customer silica-based was growth hydrocracking sales volume Venture benefit polyolefin expected methyl had from largely we to growth by were product Catalyst group, capacity as demand lower offset on lower Silica deferrals. Within for as higher catalysts the Adjusted sales, continue year. EBITDA the first due volumes insurance largely coupled and strong hydrocracking lower increased Services, refills with offset quarter. by catalyst volumes recovery in of as basis to XX%, Refining margins timing XXX pricing than more occurred customer Higher this in points. volume continued improving half the

Moving demand to the including PM&C constant on Chemicals by was and pricing a Slide on higher to $XXX personal pricing. to declined offset highway Chemicals approximately million. Performance segment EBITDA X, care in consumer sales approximately improved Performance North and Materials XX%, nearly X% on products, & on lower volumes primarily $XX XX%. million Adjusted leading partially for down X% margin in cleaning, of consumer of safety currency rose America Materials Performance a XX%, striping beads ThermoDrop. increased for basis

discussed As impacted chain Europe. with be modestly demand also quarter, impacted currency supply or operating across operating continues PM&C by higher in cost by performance the million align approximately last Unfavorable Performance $X results to to Materials X%.

Turning the quarter to Slide for adjusted year free the and cash flow X. on

the fourth lower to significant as cash approximately cash proceeds million debt of for $XX quarter, adjusted repayment, capital land flow, attributable free expenditures, million cash interest generated a This was cash we During million the largely as result payments benefit leading improvement from $XXX lower of of as the well year. reduced a sale. taxes to $XXX

X, to expect of As outlook cash can $XXX debt. repay continue I we adjusted of will On generation Slide see XXXX. discuss cash million used this flow to we in you level in free section, the that that

floating X.Xx marks year. that ended results, interest As to the This Slide And compared now leverage. X.Xx a XXXX review limited of a of we interest X.Xx goal XXXX ratio rate a last to EBITDA result, let's to turn fixed XXXX, XX:XX to year With with debt of adjusted have progress to interest our solid for net and our as we extend rates. rising to with toward ratio X X exposure our caps with guidance. leverage to of continued

are forecasting full to sales We billion $X.XX in $X.XX the range of year billion.

in both of expect This sulfur show sulfur product changes for improvement XXXX. the to at fluctuate and with in of due in pricing these revenues We current pricing Refining reflects levels, guidance our pricing pass-through costs volume Services. may to all growth groups

range million. We of are $XXX adjusted million EBITDA in the targeting to $XXX

higher the the Materials, expected turnaround $X discussed cost offset non-recurrence approximate and environment, gain compared of guidance EBITDA of Performance Zeolyst depreciation hydrocracking margins range introducing reflects Harvey for Services in Refining higher from and year per guidance share. current higher Adjusted in $X higher costs of XXXX. is with EBITDA impact for mixed sales approximately reflects a the growth diluted rate higher million XXXX. Joint we are addition adjusted coupled Refining to recovery in Services. sales Venture the income $X.XX by for I levels, insurance tax margin exchange given improved range, with rate just In this the XXXX This the Also EPS XXXX the XXXX of our catalyst expense to outlook adjusted to Hurricane higher and $X.XX the million and in

adjusted higher in We with capital million, free expenditures range robust of to cash in $XXX even $XXX flow million expect the XXXX.

this the first that quarter, first year working to the and cash primary we quarters. expected the the half in seasonally in of a and due Due And $XX Joint adjusted of to would cash the as past with were be we the of the the for cash be will to EBITDA capital using to will results of the continue prior respect Venture. first the lower half business. And expect approximately to than hydrocracking the exception We reduction I to of note our similar second third venture quarters years, as in prioritize to expected year seasonality flow. sales, the our of to catalyst XXXX. as be for With debt generating reminder, Zeolyst strongest timing usage be million a second year, are quarter quarter, first joint

Venture; XXXX first his expand opening Belgacem Materials, will X we includes the remarks, segment Performance Services; results. which in Refining Catalyst, as the product our Joint Finally, Performance and discussed to beginning Zeolyst groups: quarter reporting with Chemicals; our

cash conclusion, and debt volumes reduction. adjusted in pricing XXXX growth that So and we meaningful solid in strong delivered to led free flow

I to of expect that, and turn in be portfolio in growth We With sale allocated by across is will to will half the the mid-single-digit and and back deleveraging expected XXXX, further year. adjusted EBITDA driven volume call robust Belgacem. to remain adjusted second and increases to cash the the free pricing flow our low

Belgacem Chariag

Thank you, Mike.

were a last In Turning fresh review our I XX. of that strategy. call, earnings to explained Slide November our we taking

and focused we model delivery have business fronts. it completing we simpler evaluation, and key advanced Since our our on objective two portfolio Specifically, implementation with on an technology our make stronger. to

history and of expertise of bench established catalyst technology premier new our silica, from long technologies. and key that developing the glass we we our our successes technologies front, with in competitive On to in and partnerships advantages confirmed have are silicates, solutions. customers derived Further, date a zeolites,

have to for also one We transformation mindset was technical there grades ability R&D connected to large demands support from determined priorities a we commercialization's. the is directly scale to technical said, specialty our scale support business meet that tailor cultural with end-users. and and autonomously-oriented need That more strategic drive to development that our a and changing and growth

realigning speed spite and we methodologies. mid-to of to to impacting of long-term. our value of us current universal the technology our resource the are we through enable needs of to and commercialization will accelerate processes Therefore, directly drive in will improve. pipeline Additionally, healthy allocations, course year, of increase as products, the the optimizing and our investment our be our commercial structure This

their front, only a a also and individual visibility We delayering PM&C of the X our eliminate business reporting we that EC&S but in to not feel the for internally specific current groups. our is investors. business to need and our increase teams there exercise performances, units for On embarked

drive strongly improved culture the and believe a and overall components stronger structure more of efficiencies will will the actually costs. The as active results. we and more new our focused visible and operating significant accountability design autonomy and and of and well a the Additionally, nurture commercial focus of intensity create ownership key that efficiencies stronger as

we recall, you give color to business you in lines few to this Turning calls deep you continue will to with the and practice last Slide our specific as provide started forward. XX, dives going business on more

well result and a like as structure products and units, reviewing X why positioned I individual is business my delayering, minutes spend market own the specialty business we few a nature, would and focus call, this its of for and announced is on as a each the of areas. end believe in to differentiated However, key

production their has production First, become gasoline. rated me increasing service and spent of The expertise the let through in North alkylates, acid to a Services. acid record the and is critical octane sulfuric rating with reliability for driver underlying a production In of refiners in in in acid. start the catalyst we Refining or have provide demand the America, Sulfuric of end-to-end leading higher gasoline. need octane for track regeneration alkylation

position With our and scale with and the specifically scope integrated through the to California, X- on stable XX-year provisions. Coast transportation able leading predictable type U.S. network pass logistics, and contracts, in are the take-or-pay based supply and long-term, Gulf XX% structure of facilities of in to cost our we

to Venture catalysts is lightweight for global Catalysts, with XX% which to plastics. includes consumer our our Turning expected catalysts Joint and demand Shell. silica silica high-strength The accelerate Zeolyst and

business, finished silica-based specified this for support their broad the for the manufacturer portfolio long licensors are largest record track exclusive with leading Also, supplier tailored Given and global we alpha catalysts. our global formulations, technology. producers we within and catalyst both of are for the PE and catalyst MMA silica-based

Venture, Joint fuel is removing Zeolyst growth diesel support control a their gasoline expertise maximizing is capture for and resulting largely remove leading vehicles system supply standards finished provider producers, ZI, in top tail a both distillate, catalyst global from catalysts also heavy-duty gases, expertise the to strong PQ for positioned zeolite sulfur. to providers. of oxides Further, emissions. all tighter nearly to our Our technology for has diesel, while positioned us technology. emission [ph] global also nitrogen ZI hydrocracking and customizing catalysts X increasing from its yield environmental to

driven Demand standard Materials. continued for is higher largely by Performance safety. to transportation Moving

an are innovation for in leader glass, striping. We highway particularly

in application in innovating safety. including been have for thermoplastics we for adjacencies, Additionally, microspheres industrial transportation

U.S., and large value customization, our America and drive base. for do customer our and the the and safety, through largest product Europe are We network bead diverse transportation supplier production leading with given years Latin history, in XXX-plus positions pricing we broad our

personal Demand fourth beverage, sustainable products products and and such Performance our and tires industrial unit, in surface by care, preferences consumer business on and Finally, driven consumer Chemicals. friendly environmentally coating. is from green as food

global an supply, largest optimize our localized part end contracts of requests we most of to and silicate We long-term and products the users. sodium to contracts, the with passthrough for materials established ability customers' to with cost. are production tailored our are network mid- allowing of specified diversified supplier, global offer to and with sales With large able

operate is have Those network. units performance. see, their different business can and and include well the growth you XX, ownership with and business as leading described, a and direct these So the each strength same Slide in closing, furnace engineering and portfolio. positions global representation in is and their expertise, science growth potential. technology, just capabilities independently distribution of uniqueness across I of accountability we demand drivers is that on materials In respective drive markets their production unique and key of to capabilities our positioned leveraging best-in-class there time, and opportunity substantial to this improved At the believe as

intensity innovation, We a operational to drive strong technology through efficiencies. will and commercial growth organic continue

on individual to creation We portfolio, our our businesses path well as continue strategic with overall will a the optimize mindset. further value as clear also

are our confident in to value towards executing We key ability continue our drivers.

strive will improved profitable to maintain We growth stable a capital and efficiency.

now ready questions. also we prepared path our to free targets. cash on will remarks This our towards leverage are our our continue We flow to and deliver concludes in take

Operator

with today's Credit [Operator Suisse. be question Instructions] And Christopher first will Parkinson

Kieran De Brun

of quarter little is key if a you and more strength, This services can in the Chris. has Kieran give Regeneration little how cadence both and a seen earnings, bit in of discussed higher bit activity pickup you the about a but strong on for and XQ think this turnaround pickup insurance really XXXX from XXXX, what's on plan maybe the it. demand. driving should benefit I'd considering specifically we recoveries. color the Then that appreciate pockets

Mike Crews

this is so Kieran, Sure. Mike.

On was distributed in It turnaround we a the was quite has the demand Actually, good. services, of virgin on year. all very the variety underlying the lot industrial to but year 'XX incurred been 'XX. talked the from year. regeneration were that of first the costs A full a about applications of strong sales acid higher half across basis,

was So fact the and way, manufacturing in in capacity out XQ some of had achieve turnarounds half that the function got those and this a to those really the we're second of those XQ able additions we of we that results.

years, next we In have the of going costs. As for turnaround next additional has we Refining just fact puts Refining some we that that that had have think about Services been we're growth part limit this Services insurance couple last a nonrecurring year, year. to the XXXX, growth a do is of so some larger against whereas the the over of given recovery

So those factors. in digit Refining overall, growth expect we Services low single based on

Kieran De Brun

And leverage a of follow-up seems cash Great. but quick capital you year to out year Xx, just strides you get to another in of you then any reducing achieving Delevering about of that made the kind capital about free great you this like, X.Xx got kind forward? and primary Bill, and closer think you focus, of on talk and when as deployment, generation. strong target, be you uses to to going look flow 'XX 'XX other can how

Belgacem Chariag

priorities. has the capital Well, allocation

The for you is first payback noted, debt. us, immediately, one the as

expansion. more year is one of do expand to them us our growth we second is have a some We customers on of more investing expecting with going are The capital and growth customer that towards and every capital.

portfolio get on positive our we the be side. should might to cash some result will our where a level The delivery depends a that on to And on continue organically, activity we our It point we on that execute year-on-year to we on get happens. optimization that, will performance anticipated, that what will we'll Beyond of continue. in basis.

to all focus just those sure is are us. and our all forward that place our with optionalities initial pathways intact is So the we ahead and we of today baseline delivery make in going got

Operator

today next will with And Robert Goldman Koort Sachs. be our question

Unidentified Analyst

Thorum is This Rynel [ph] for Bob.

XXXX seen You're expansion guiding XQ a margin 'XX. to to haven't level in since really of that some we

this? you little comment maybe the behind a can drivers So on

Mike Crews

with Mike. The, in XXXX what company I've would are for our in Yes, is remarks thought in in they this margins prepared for line the be total said we XXXX. that where

that for double-digit the of result function we additional of out of JV, Joint margin that, down that for costs because Joint on mix with So XXXX, margins sales X in with growth Zeolyst with associated the pull being mentioned the sales Refining the that's expect that limiting will Venture while coupled Services, just factor will, in of some those. for and hydrocracking items the for in the which the one Zeolyst a of Venture, margin turnaround catalyst will the the expansion higher I the

Unidentified Analyst

Okay, see the Zeolyst the for in performing Venture down were this sense. and that you as this so quarter, Also, makes Joint XXXX? in XQ, how one sales same year-over-year

Mike Crews

Well, associated $XX lower Joint the the in we expect Zeolyst relative with Venture. in million just quarter XXXX, the I as prior to of EBITDA quarter mentioned, first

that. the follow So sales would

For a bigger from to half. look stronger lumpy second can This first we second XXXX, half expect the be the than half quarter-to-quarter XXXX, but it the than be was first half. at as we

Operator

Nomura will Aleksey next Instinet. questioner the Yefremov And today be with

Aleksey Yefremov

does this portfolio within the Belgacem, reporting are given this new structure, to alternatives? suggest pieces those strategic subject business today

Belgacem Chariag

It does.

will on and improve all the goal. the have that efficiency. immediate up and of have business need we And be strategic to as an clear. the business looking will timing. time, the options will there We for table a could components, accountability have primary opportunity, the these optimizing and all At and we that businesses each creation, when business, is the which to structure it capture comes options is portfolio same creation. in we approach first be on business, That's that do said the probably the something value at many quarter ago based of right us do while and we're our mind made we of in we efficiency that independent an because efficiency mind, each execution. team's We efficiency improve So my made are will, internal for

Aleksey Yefremov

on free currency headwind your flow swaps asset Does guidance. XXXX include the guidance question or And items? benefit cash of a sales or from or any similar

Mike Crews

or in similar it to did continue driven likely we'll nothing are I to to swaps. was the that going the flow's That's But or look we looking not areas related what forward monetize at cash more currency next can operationally, are be assets in just flow have operating. any not sale asset to to generating say. XXXX. current year, would where be nonstrategic We There to year, the cash

something look we through we'll to continue go as XXXX. that's at So

Aleksey Yefremov

so just this it's says clarify, Mike, point? guidance just OpEx CapEx to the minus at

Mike Crews

it nothing significant Yes, relates sales. in there for really to as the, asset there's

Operator

will the with questioner be Stanley. next today And Morgan Andrews Vincent

Jeremy Rosenberg

Vincent. put up 'XX? kind This the yet wanted associated other to of be on the expect over are identified helpful. could of is going hand, synergies that costs that realignment. what you Have numbers for And Jeremy strategic follow on you the be in any I with Just you would kind just the on the next to few years? on the,

Belgacem Chariag

Good question.

that's the efficiencies all, to a and headcounts X. layers. is with a It's going that's business. 'XX in associated or is debt going to saving meant savings meant or be to restructuring restructuring initially, of this to people synergies, First generate on be, the enable with The in restructuring not this costs

be synergies, they the while number, going most don't half forward. second in year identified more will likely, the be a XXXX will I in of the and So have impactful

Jeremy Rosenberg

how think then revenue to in just would of follow And PM&C? the talk a trend helpful. growth Just the that what just kind can as about you will Okay, helpful. think kind key of EC&S got it. XXXX are drivers of versus That's be about and how terms guidance, in to up, just about

Mike Crews

talked Refining going be Services, growth before in range. which single-digit low we to is about Yes, the

expecting we're Polyolefin that's top toward by silica-based more and double-digit participating in. line continued the side, trend catalyst silica driven growth the Catalysts, actively which On we're

growth 'XX than deferred out then fact associated about we we some there. of to expect with the had by due would 'XX growth with be MMA double-digit sales that the catalyst. that an coupled Zeolyst, there, sales And into that growth, continued the fact were hydrocracking that's just that's we probably so So a customer the lower talked growth that with EBITDA little there the mix some

single-digit the we've Performance worldwide pretty is diversified think that If toward But to good high XXXX. growth margins highway the we there. you expect those And Materials, then growth side, improvement in our issues really, worked range. got to EBITDA highway business as then PM&C Chemicals mid- we've due we're flip in and European we've growth, we operational in GDP the in on what to side, over and call steady rationalizing some Performance expecting of plus incurred

Operator

our today Begleiter Bank. And with Dave next questioner will Deutsche be

Dave Begleiter

the could the of Belgacem, X-year you rank basis? businesses X building potential answer, over maybe X- up to sales these a organic last

Belgacem Chariag

In I going this through to Mike is right similar terms potential, potential, just what been think growth now. of great had

So would the and business be potential, the growth business Chemicals. organically, biggest our Refining followed our Catalyst Materials by

Dave Begleiter

the year given on the can in Very EC&S XXXX? business good. actually full EBITDA in QX, for just this guidance, XXXX in headwinds grow Mike, And

Mike Crews

For EC&S in total, is that what referring to? you're

David Begleiter

Yes.

Mike Crews

Zeolyst will Venture. It growth the of Yes. Joint we and the in catalysts silica see because

of expect said limited groups, So do overall, product expect Refining we before, 'XX as but is we growth bit in the a across EC&S. in we growth little all do the

Operator

Capital The Instructions] Markets. with to McNulty next BMO [Operator going questioner John is be

Colton Bina

Can you John. on Colton any, might from your is business? for about if a bit little see IMO what you talk on impact XXXX, This

Belgacem Chariag

programs created some nothing IMO we available contact, reduce low be are from good. the compliant had deviation regulation hydrocracking there's is is we in X.X% fuel of from on which some there's that with preparing heard fact before which to activity to some in from are some an the have sulfur initial the requirement our the market, which that which XXXX, means in what program implementation volumes establish on let's support dilution to The all, is fuels. different there sulfur and of and X.X% created, that to to first no saw XXXX customers some Well,

us, XXXX probably seeing in from to see is growth. but from in going line in strong all for not double-digit hydrocracking We that. component lift big It that are IMO actually a orders is we'll top a of sense, where IMO necessarily a

Colton Bina

had second of sounds And positive that's you pricing helpful. Okay, like then some ThermoDrop, it there. on all

So competitive quarter of does some of that last pressures mean pricing you saw kind that have the abated?

Belgacem Chariag

We going referring when to because we're year, and the find in and weather perspective. guess, late to last have season season really perspective QX I from early was we're data a the out starts. from to I QX raining QX, mean, is saw positive that, our to, going in that pricing. not They're or in want fact banking an amazing is to yet, attraction we traction saw to, be on the where which volume. to we're go. We going them and, traction momentum

well. in Now what's in the don't improvement and direction what expect reaction in as know we pricing find to driving but that, we're out QX. volumes continuous we'll going We is be trending right the the on

Operator

will And Laurence with Alexander the next be today Jefferies. questioner

Laurence Alexander

bridge about have other or help between will what do for issues for that other in of thinking you already you reverse XXXX? be and should factors XXXX the we there? XXXX Can outages visible that Or sort bridge are

Mike Crews

furnace I'd place Services efficiency those based the that had in Mike. programs turnarounds, put saw X when expect we've XXXX. in we've side, companies, the say just we've in in years, will different is upon X we merged This higher abate 'XX as the cost higher that costs extended we 'XX on Refining and

part expect our growth the We in of catalyst business. polyolefin solid continued

in that's may say so growth she see likely as goes. seen that a are to XXXX. it are can Zeolyst that we the with plans the as big expansion improves. large double-digit we where we'll and drivers. bit I'd the probably relates 'XX be lumpy say to those that it steady but temper likely, say business as So the mix I are are those I'd remains biggest Joint movers and just highway what the Venture, our look then to be would

Operator

this there And well at call. further look conclude our Okay. no session conference time, question-and-answer so questioners this will Instructions] [Operator be to as as today's

thank and your may you attending today's now lines. I disconnect So, all for you presentation,

Ecovyst (ECVT) 24 Feb 192018 Q4 Earnings call transcript