PQG - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the PQ Group Holdings Third Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operators instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Nahla Azmy, Vice President of Investor Relations. ahead. go Please

Nahla Azmy

Welcome quarter Elissa. joining for us Thank earnings to results third XXXX call. our you, everyone

We will Executive start President today session. we with formal remarks a with Executive Chief Officer. Q&A and will and follow and from Officer; Mike President Crews, Vice Financial Then Chief Belgacem Chariag,

Reconciliations of Please and could plans company’s we to the are the non-GAAP call today in note www.pqcorp.com. at risks company’s section measures the our discussed filings corresponding the cause the materials with and materially. their about and are measures that some statements of today’s can Investors that the the subject of SEC. results posted on actual our company’s release found implementation that uncertainties the in earnings vary of website mentioned risks to be forward-looking GAAP make financial results with plans and These presentation on

pleased the with turn call that, now Belgacem. I’m to And to

Belgacem Chariag

us you Good Nahla. expectations consecutive you, Thank results, we quarter discussed our business. of earnings largely for joining morning, On our another Catalyst strong and thank our last by call, driven for this everyone, morning.

us our adjusted targets have are EBITDA, to and We growth which year. free the well for free on positions in cash to significant deliver cash margins flow flow, leverage adjusted extremely delivered pleased and

from of This evident specialty performance in within performance financial underpins demonstrates is businesses. This businesses our the positive the macroeconomic benefit and four portfolio all and businesses, our which our environment. year-to-date to of operating leverage pricing diversified three the the our resilience across changing our

of you numerous as know, been and reporting That global economic slowdown. has said, there

demand immune pockets completely some mainly our and We in of in Performance are experiencing businesses, are softer Chemicals. not

Refining seeing our overall, high. to in Despite backdrop, briefly America, Services. North outages services businesses. a in the alkylate with Starting I’d regeneration we’re are This utilization as that markets favored unplanned numerous customer underlying With refinery our the line. what cover like rates

market, to product other another When markets, the uses focus weakness work we lines, is general acid virgin for end the diversity such a batteries applications. end industrial strength. to demand shift and is one there sulfuric As mining, of as end from

Turning our fundamentals. global drivers macroeconomic Catalysts are to business. largely from insulated Demand

catalyst polyethylene driven For capacity and serve specialty for with capacity industry And that benefits of change-outs, products is our the expansions. by refining coupled our example, catalysts increased from timing expansions. demand customer hydrocracking

In rainfall. due we our first-half of had to soft striping levels to business, Materials a start the season in exceptional Performance the

the we maintenance industrial and However, largely has accelerated In are the of this the year. slight in safety business, softness seeing of transportation from rest cycle in China. Europe the second-half demand, product

Chemicals. in Finally, on This is end base. its uses global and business largely diverse customer Performance reach,

to However, like certain case rate industrial on coatings, intermediates, and inventory. segments reduce it customers is construction, recently has impact or exchange chemical our also market partially product slowdown, direct is silicate in and as global general the large destock and it cleaning line pulp sodium as susceptible This industrial painting, paper.

efficiency optimization from on indicated and Performance in some earnings actions we that As we our are you portfolio focusing recall may the pursuing business. previous Chemicals capacity call,

operational you update will we and on way our mid to performance. drive efficiencies is and under financial We expect these long-term capital will and progress. This enhance

the now strategic third highlights turn Slide to X to review quarter. the Let’s and of financial

First, on safety.

we environmentally workplace our completely program. each that in incident-free. basis, it On to rolled injury environmental Days Perfect daily the safety collective improvements business a health, XXXX, drive continue We and and HS&E unit out performance. and In is tracks

of metric, above performance safety work over day. single HSE XX% about on and excitement transformation tremendous perfect of are XX% a our to Year environment. our generated our the four businesses positive work date, locations of every this global This three had tracking

margins. EBITDA and as well Materials Performance higher services, efficiencies. our on adjusted result of and was execution products This on as Second, on Catalysts, operating of value continued The differentiated improved commercial. Services pricing the improved Refining focus our delivered teams

In key Zeolyst our venture qualification we multi-year tolling customers Performance Chemicals terms. business, our European a key news market minimal China. an one successfully customer emission PQ, product a exciting for our joint And we favorable received growing on control final investment. with completed the from to for contract of participate a in extension is This in catalyst as position within China of

optimization. portfolio on Third,

In stronger. into we with INEOS, the advance announced step, and this of We customer a while portfolio segments of recently to multi-year The key continue market. portfolio agreement simpler make our enhances a polyethylene already to our strategic another current pathways our industry technologies relationships, leader. and agreement meaningful support global providing

it The of specific enables that catalysts existing customer. expands to this us our for Catalysts offering benefit to commercial Ziegler–Natta finished most worldwide. our is processes product agreement Silica This supply significant

catalyst In broader to selected provide it addition, positions to better new requirements processes. offering us meet plants and the of

an third achieved same we EBITDA of adjusted more nearly XX%. increased of the basis the XXX is quarter, expansion the versus XX% to points of last highlights. year. nearly Moving EBITDA In adjusted an This than period margin financial and

$XXX Further, generated million. we free cash flow of

$XXX last total is million cash and Our the XXXX. This opportunistic We previous with $XXX debt expect our full-year, repayment asset from anticipated to generation coupled at up expectation our capital to restructuring year. allow million. of to swap sale, for million least repay us free raise of now target $XXX million efficiency, and between cross-currency flow our for $XXX

financial to I guidance. the XXXX a Mike for that, of the will turn review With detailed Mike? results and call

Michael Crews

you, thank good and Well, morning. Belgacem,

for in have delivered adjusted our We and quarter margins debt are increased repayment financial cash the another free significant and performance. target year. flow review pleased to EBITDA, We of growth strong

our higher in of businesses softening Slide million Sales Performance and Silica line discussion in of on with as prior the with demand lower consolidated the X Beginning the lower higher from year within sulfur and $XXX Catalysts across were revenues results. offset pass-through of a demand Chemicals. costs pricing

This product three margin This a favorable with sales our attributable four Performance pricing is EBITDA and of above largely business the points business million. to to to margin second portfolio, margin Adjusted XX%. achieved the in across driven Materials. quarter along XXX in segments. $XXX and was we Refining increased demand XX% consecutive XX%, Services mix the rose EBITDA that increased basis Adjusted the in expansion by Catalysts

a more by detailed and Services Moving business $XXX segment Sales to discussion X. to for Refining X% declined Slide on million.

regeneration slowing partially In to pass-through, was sulfur addition demand cost sales, services. lower which acid customers by virgin from reduced orders in offset higher certain

largely X% product mix, EBITDA to increased to points $XX EBITDA than basis increased Adjusted XXX adjusted customer sales unfavorable more which margin XX%. by and million,

to Catalyst Slide XX% sales for Next review $XX a X million. Catalysts. on of Silica increased

growth new production favors Silica-based polyethylene technologies. deliver as to continue capacity We double-digit

Additionally, from orders top-offs. related methyl and we higher benefited methacrylate refills to customer

Zeolyst XX% sales were up JV $XX million. to

of in year This the strongest quarter quarter hydrocracking of orders. catalysts marks the terms

catalysts, We orders slowing extend specialty catalysts emission-controlled from for acceleration our $X European benefited This into we fourth the orders believe million than of offsets fourth will customer also the from of the more which quarter. quarter.

than Silica than JV. margin mix higher Zeolyst XX% and EBITDA of doubled, points $XX Catalysts more in resulting basis XXX of on to and in Adjusted more product expansion both the million sales favorable

mix safety Sales Europe currency offset applications improved highway Materials period, but a in of and Asia. Performance prior with basis. Moving slightly constant Slide were more sales to up demand in on than lower and $XXX the million increases for on X. Price line and industrial

XX% a Adjusted margin the million a Adjusted on to of constant year currency XX%, quarter. due was $XX efficiency basis largely and point prior increased or basis. EBITDA price operating EBITDA the XX%, improvements versus that XXX increases lowered benefit of expansion, costs

demand Sales caused for of X. I down currency on Slide were broad, scale on orders a not Chemicals, the And characterize deep, year. silicate for which sodium due to back Performance to that for constant a or from X% outlook, customers largely would economic lower as second-half the X%, weaker but basis,

reduction with shipments and Adjusted EBITDA a results XX%. million expedited costs we sales $XX result costs was to commitments and constant higher of lower planned impacting basis, outages of meet North currency XX% America. customer volume. during operating or largely in logistics Also decreased the unplanned both on were maintenance as margins of This XX%,

X. on free flow cash adjusted Turning Slide to

Given generated free third our flow the portfolio, cash our we the quarter. seasonality of strongest in

adjusted adjusted primarily prior and million $XXX This million, were lower free are million date, expenditures for million. of expenditures to capital quarter, targeting cash $XXX the from $XX delivered we flow, higher to now year, $XXX million Year capital in range the we in from EBITDA. up $X year

As August. last repay loan we our to cash call, noted on we that flow used term $XXX of free million in

of As times cash the the quarter. debt-to-EBITDA was at swap restructured $XX October, end And be in debt net used portfolio, which for in our our will million that additional resulted proceeds cross-currency we a of result, repayment. net X.X

outlook. XXXX for discussion XX a our Slide to Moving on

Performance in largely We to the are the expectations only portfolio. results improved our Chemicals offset is of for demand updating by partially XXXX from reflect that guidance, rest weaker our

$X.XX We are sales to in to be now billion. billion XXXX targeting $X.XX range the of

year-to-date With respect place with million or to Chemicals Refining to and $XXX an our and unplanned anticipate of range, results. million lower we $XXX given based for outage in being our XXXX customer slightly recently below the outlook the margins EBITDA, Performance on bottom adjusted versus at results that took end slightly Services, favorable

to to adjusting of for interest year-to-date in expected expenditures, a for balance lower capital include $XXX D&A lower of reflecting the $XXX $XXX million interest PQ year. million, revisions accounting and million $XXX for our range to expense the Other and million rates

XXXX. EPS cash diluted to be million. in million $X.XX This We the free we raised flow, million are, us project per flow XXXX to along to have half cash million. revising range in adjusted repayment of our year adjusted in for to guidance And to $X.XX reduction to with continue of per therefore, $XXX $XXX restructuring track our debt asset keep year range $XXX share. should This the our turn for leverage and proceeds, expected on swap sale the $XXX

summarize, a some we to despite quarter softness. So had demand strong

and leverage meet solid puts achieve excess a cash performance Our financial we to business us in reduction And continue our execute goals. creatively flow financial to free to generate year-to-date adjusted cash objectives. to our additional flow levers position

the to will I call turn Belgacem. back now

Belgacem Chariag

Mike. you, Thank

the business reviews providing the units. we of Over of quarterly have of series in-depth each calls, course our of been last few a

addressed will have their competitive business on I focus and Materials. specialty fourth today’s We Performance And call, drivers. unit, our advantages on growth

than The for XXX an more is in and consumer Potters, known global as for industrial glass has applications. overview. XX innovated and also Slide customer Materials, to Performance products. transportation the years, Turning solutions microsphere providing safety for technology business leader

increased safety standards the material trends Demand growth from business benefits transportation, global substitutions. and towards and

production a efficient global innovative have We highly and network.

and have broad around differentiated of world. a the customers specification We products high-performance a supply X,XXX reputation meet quality reliability than ensure for built more strong that for array of

retroreflectivity runways, highway lanes markings. enhance and both on for transportation microspheres of airport area the brightness sign safety, and markings barrier In our performance visibility and guardrails,

Europe America, North We Latin are in and the number bead road marking solid America. one supplier

position and Our logistics country, region. chain also frames, requirements customer given demand offers It short time variability storage inventory the lack state by weather and and meet supply specification support of the conditions of order and on to quality and capacity. ability

In and expertise with applications, production product lines. our our efficiently highway we industrial co-produce utilize know-how engineering to

or a and industrial of provider include We strengthening microspheres lightweighting electronics uses. one surface and are cleaning conductors two the plastics, for for These and highly applications cement of mobile specialized environmentally-friendly in substitutes metals. number number coating, for our

of XX, discuss transportation largely to for and replacement product by our the is in existing funded is This countries. budgets with vagaries infrastructure. of of for safety. gasoline subject lines. key growth taxes Slide new not In roads funding these a of the and is product or I’ll restriping developed Starting markings legislative demand drivers XX%

with vehicle standards reflective trend needs beads consistent is standards balance or and climates, the all products safer autonomous markings. developed the greater auto-assist value-added of developing more of either an requiring population driven easier both in line rising in countries towards by and wider higher visibility construction with and that to and aging are demand safety These performance new and/or glass are install, regulatory the navigation. The

through our This industrial our materials, with engineered glass of close industrial applications. global line product EGM, On consumer evolves are used variety products customers. collaboration or and in a

of in performance, customize application to costs to stringent products. our size in meet specifications strong wide industrial to and customers innovation has to enabled and range input Further, glass position a our microspheres ability allow end their Our requirements. achieve us the lower

ability materials, conductivity for global Our for is mold strength by to favored solutions environmentally-driven compromising plastics demand EGM in and other metal some surface other surfaces without of and and for displace electromagnetic are an business several which cleaning protection. for flexibility lightweighting preference cost-effectively interference and trends, materials

in In earnings near favorable summary, leading Performance to growth and demand expectation continue and Materials’ support flows. position drivers long-term cash for to our sustainable

like would points. I leave for with closing In call, to this you the following

Our plans. year is has performance track team and and with to deleverage well on to financial date continued our solid commercial execute delivered and

and taking enhance optimize steps capacity business. for our to Performance are We efficiency Chemicals

strides We assets, growth. and driving channels stronger optimizing make new our continue to and make through for portfolio efficiency simpler to capital developing

And on progress focused value to finally, improved we near shareholder free the efficiency, strong delivering to capital through flow in target. remain and our enhanced leverage long-term cash

our concludes remarks. This prepared

now to questions. ready We’re take your

Operator

you. Thank

[Operators will ahead. Capital of from BMO We first instructions] begin Please The John now question-and-answer the McNulty go session. today comes Markets. question

John McNulty

morning. Good question. Yes. for Thanks taking my

pull in So I guess, obviously was I specialty hydrocracking much with the there – first in strength versus guess, one had regard a demand? of catalysts strength how of the Zeolyst you from forward and the or overall a total on the lot catalysts to QX just the business, lumpiness side. that

Michael Crews

John, this is Hi, Mike.

going was strongest to the we said the third The of be year. quarter quarter,

catalysts, pull side, catalysts would have on the and much what hydrocracking came orders more quarter for strong in was that orders in expected. specialty we it had methyl the forward Silica as Catalysts methacrylate pretty were line well. with through So been The some we where our

John McNulty

for actually Got or reduction, guess, Like of efficiency CapEx environment, what that. – I of the investment, then it of it and macro is more with a the the With CapEx? the cut, regard on? is function on to what cut greater kind with to question lack regard drove it. spending to just actually you’re given Thanks. the need And squishy the a

Michael Crews

couple of there. a components There’s

$X decided defer we’ve to million had we work little a large that about one more and do project of is, on. Some

deferral, generally in what amount can CapEx that out a a certain given that’s have Some it macro is a – we every that if year, figure bit is lower And given push some needs out priority, the improve get of to to there’s flow a environment, year. maintenance we critical bit free we done a pool a we can something this a year. cash where

So it’s those. a combination of

John McNulty

very much Thanks for the color. Great.

Operator

today David from next The question of comes Bank. Deutsche Begleiter

David Begleiter

I an for thoughts Bel, Thank you XXXX for EBITDA know notes. it’s might XXXX, morning. Good guidance you. I Any there. you QX out mental have basis? early now on on look some got but how given early

Belgacem Chariag

right explicit we Well, look, and me February now. kind we see the our are in you planning to let call. few of give through run how guidance a But business-by-business guidances market

Chemicals me First, the environment. start with let Performance

seeing. weaknesses an As accelerated you know, there is that we are

the believe revised of the have and that weakness depend reverse. for probably at taken We QX on we’ve continue will will guidance this destocking in through actions. the will We our least recovery environment first-half activity when the year, and that

On given application, continue, Asia. in the the to offsetting is some in highway in softness business, its Performance particularly industrial expected value, Materials, minor and Europe replacement the probably

turnarounds. due strong In capacity. the a was catalyst be strong Catalysts of we new XXXX see PE part, a continuing the to very for year HCC the on timing to

next year. this slightly still a we likely While it on expect be year, year from to is good down hydrocracking,

this Refining but regenerations. actually working as own stage. next were to on can on rebound On performance by to get that’s We volumes run year, impacted our the our side, And up and don’t margin at we’re a I as Overall, in turnarounds the solid expectations, think and efficiency We any change for I in see well you way to we margin David, very nice XXXX everything. expect customer and expect margins was year. tell we much our speed XXXX. in a

David Begleiter

further on lastly, asset non-core non-core Very, quarter. progress one disposals? of helpful. some you’ve sales, did asset very last some of just And on made you announce these Any these

Belgacem Chariag

mentioned. there’s on obviously as active. nothing But laser-focused be not we quarter. on working continue did future. happens in portfolio Yes, what We sure our several last the said, see we rightfully and opportunities I very shall We, missed. as that scrutinized this opportunities we’re is we But quarter, making you one and are would

David Begleiter

Thank you very much.

Operator

comes question next Stanley. of Morgan from The Vincent Andrews

Angel Castillo

for for on is Hi. taking Thank you Vincent. Angel Castillo question. my This

follow-up So the to the as looks environment what like. on just review, just curious a portfolio

what’s So the And little perhaps, you up, announced it further haven’t is terms are of anything, it environment valuation? laser-focused, Is holding of divestitures? seeing you any as remain what in how tougher? you getting you that timing? impacting a in and mentioned, but terms Is bit

Belgacem Chariag

That’s a great question.

part is know, your the your then that cases. out do in control you rest and of You these absolutely typically,

been continue of have understanding we we that the and it interested how think, I what we part do to is are of our opportunities value we opportunity. in what and want and

value it when – do make that of is components couple then sense. of of makes times a will will we the smaller mentioned important. transactions the we assets the the or And I’ve assets

what know a conditions has We and the okay. opportunity still the match want, ready. other are market we few is We but to

the the just not We’re right right opportunities pairing time. up with at

Angel Castillo

That’s think little of your another that year, you do we in curious next more very is XXXX times, that that gain I a put But or you. helpful. do for to able that Thank allocation? mean, of to Curious, towards event you question. in allocation? capital start the range. below capital to and terms at repayment, how higher-end targeted if what you half asset X debt do turn then should X.X sales, advanced about next slightly perhaps should least year, as are this And kind to you you means an the bit

Michael Crews

Yes.

M&A I growth growth, point. gives that more range, lot a with to be with get inorganic further organic assist think it looking a that’s potentially. flexibility, whether we bolt-on financial good into at dividends us our be Once think that I more we’ll

balanced a flexibility. do appropriate leverage first down would point of we’ll right have And level. the because be once getting But capital approach. is we that, more lot into allocation, a at take terms to in you now So that everything think, priority have the table I clearly on our

Angel Castillo

you. Thank

Operator

question Credit next Christopher comes from Parkinson The Suisse. of

Christopher Parkinson

the be on the you. closely been front. driving monitoring factors Thank of should about key and over expansion my long-term the questions as on external enter real internal just intermediate time? XXXX? to of been answered, walk of XXXX you. through how us thinking Most Can but should you just be we some have the to margin Thank have kind that we even just that quick we And variables and

Michael Crews

Hey, Mike. Chris, it’s

because front, we margins of improvement Part the average this higher at that the contribution the in the some strong group, slight say that margin we Catalysts relative On year. expect to the is versus which year prior see we is from did of portfolio.

time, of same out some the really business. At margin we’ve expansion seen nice Performance the Materials

So we down We’ve on be may favorable and pricing there. had very mix. volume why also things, two strong

while been So And we’ve those Performance outweighed it’s there. seen side, had factors. drag a good I margin a bit on think of the we’ve expansion Chemicals by

time we as as this EBITDA the margins become larger portion the a we blend up contribution. of into next – expect what group Services Catalyst the So and we’ve get and previously talked Refining is over about year our is do overall to

Christopher Parkinson

Got And perception their of long-term? would have just Does you less when color the go of portfolio appreciated. community? curiosity, out the how are that is portfolio just Any your your perceive it. in you. be or out of the key question, differentials managements, versus those reflect that dialogue, accurately more on and kind shareholders kind on to of the Thank intermediate or you there to regarding composition the portfolio investment

Michael Crews

portfolio, diversification, our go of markets I businesses and it’s we the we appreciate may that out that or see And when of the some by we of think times whether that. pockets that and business, four resonates that where about really product the testament of quarter. portfolio, investors. think in in our of economic you by this to lack geography. PQ think, cyclicality or of resilience And see is I were certain talk one think up even the our it’s the see a with in I geographies slowdown end I And three people hallmarks

Christopher Parkinson

you. Thank

Belgacem Chariag

you. Thank

Operator

Koort Sachs. next Goldman comes from Bob of question The

Thomas Glinski

is This Glinski everyone. Hi, for Bob. Tom on

QX implied on a So guide. quick the question

under guidance the which implies million is bottom-end of slightly EBITDA. EBITDA $XXX So range, below the a or for touch the at of

to is you. incrementally XQ decline bring XX%? what to So of around from to XX% XQ growth down worse getting from a Thank

Michael Crews

Yes. This is Mike.

was if had we where So pull quarter, look forward. third Catalysts some in at some out of you came the group. the orders accelerated We that a that in

outperformance demand fourth the that of some third in had Performance that we Chemicals weakness impacts expected some QX that in we’ve and is the the is seen to while into So quarter. the quarter And carry weakness in volume other QX.

Thomas Glinski

real quickly impact then there or factors? mostly there, the in to on XXXX thanks. JV. Awesome, is Services going other Refining it from any be Is IMO And Zeolyst

Belgacem Chariag

talk the about that’s a Services Refining IMO, JV let’s – is connection. The The story. because and different Zeolyst

out that seeing There any not the moment diesel all of we’re Refining, for a – place that’s that isn’t we is way. seeing with shift increase right see now. and were year IMO Capacity least, So the terms – right demand an is next – impact now. on that. this what in limited on volumes the at in higher, at gasoline. the And as there always Alkylation these is is year between unplanned we’re we And refiners. of not taking issues

a and fits hydrocracking refiners. the timing for timing the we’re that I’ve level schedule had between side, that we refiners. saying that therefore, continuity results this of a On challenge the with year, only of we’ve quarters and JV, in the might continue, scheduling in not in anticipate production production year. on some the that that and the increasing, pretty been And earlier that and the that The we this change but year. why had strong capacity said movements be how a lower. and difference We’ve their – – see sustainability it’s weakness, you increased. That’s Zeolyst next only this it’s has But has slightly will of reflected just is hydrocracking year of the

Thomas Glinski

Thank Awesome. you.

Operator

Laurence Alexander question next Jefferies. comes from The with

Laurence Alexander

inflation in you down bit should Catalysts, about how think then Hi. versus of Good pin could expected little efficiency on the in cost sustainable And below the we rate? rate a guess, think on And morning. business? net what or QX below going is Two to questions. above we run tailwind EBITDA And run programs, the the be is I XXXX? the – first-half to One, be for XXXX? terms is XXXX

Michael Crews

is the first. take Yes. I’ll part This Mike. second

third Catalyst as the runway, had strong expected. So we very quarter the we in a quarter

be we fourth catalysts would expect we the timing, we in of due to in clearly, expect just had quarter high And down So in quarter. sales to be because to the hydrocracking a down. concentration quarter-over-quarter XQ, such third

additions catalyst look That on the hydrocracking XXXX, I be get front, XXXX. we As we been you has the into think year because what expect that polyolefin expect into a down to to capacity demand, continue Zeolyst which on Belgacem that had such come strong still those in. year be strong strong is, would been for it’s catalyst year-on-year this noted to we being side, that said, as as

Laurence Alexander

first-half I XXXX Catalyst that is guess total? the than maybe in just think then, Catalysts to the XXXX in better in clarify second-half you do

Michael Crews

had strong we pretty second Well, a quarter.

So they’re close. fairly

a be to I think going second-half, we’re probably down bit.

Laurence Alexander

you. Thank

Operator

instructions] next question of The [Operators today from PJ Juvekar Citigroup. comes

PJ Juvekar

Yes. morning. Hi, good

Belgacem Chariag

morning. Good

Michael Crews

Good morning, PJ.

PJ Juvekar

So gasoline also on funding most believe you traffic important. local but of for and that paint, their Performance your spending mentioned is microspheres is taxes, I Materials from

that? there an give you mention much talk surprise, a spending? us didn’t also Can on update government ThermoDrop. can in you trends So you about And about

Belgacem Chariag

state-to-state, and Okay. about infrastructure. The plans county-to-county based – on that. always on funded. talk is let’s the of happening new It’s activity, The funding, volumes spending tax their been first all, local like

authorities they and products That’s then why of from of region-to-region quality is and I said vary happening, do, quality local what depending specifications. and they do want spending it spend. the state-to-state would the the prefer from on what that to So how to the fast specifications

for or on or want the they – that quality, states some extensive Therefore, in product value a in ThermoDrop, efficiency of are they It’s price placement value the every the not over pay where instance, the states value efficiency. is only states, volume placements. willing state. like and to regular value they they products in the And they value maybe applied

We I that transitions we’re expand. So we up sure that the told value pricing can before on before, ThermoDrop focus ThermoDrop. right the value has current limited terms decided capacity, to that creating so the in that been our me as the expansions make with sell lately. going we we the to of you to at picking decided, product products. We we

The uptake the with market grown in has time.

year been to has valued. very the efforts increase price we aggressive, wanted better because be very product and this Our well

accepted they’re it and pricing. limited reordering with based that and on coming customer running Some and really it some and back

we’re value the growth what ThermoDrop So remained we’re while is year better a tremendously the than versus ago. was volume controlling it past And strong this and pricing that, preferring than at stage.

PJ Juvekar

Would that you terms your behind expectations ThermoDrop sales? in of is say

Belgacem Chariag

is the want that make beginning, manage that’s and didn’t, at sure total can why to the of ThermoDrop reason volumes, that we return behind it my volume sales not to try the on anticipated we do. personally it to in high. go expectation value, is generates And really now. The because sales we we that choke volume of

will with pick is up time. So this expectation my that

PJ Juvekar

your were sort these side? of you Chemicals, A the some Thank your margins go seeing and of weakness? in consumer Where more you. And industrial it products industrial economies as lot with is consumer into on then secondly, sales the and Thank in side, weak you. economy. down or Is products that are well. on Performance dropped the

Belgacem Chariag

silicate, consumer. I impact different activity, a impacted the applications. into activity industrial a depleting like five inventory sodium which It’s into kind more few there destocking which has into four – for has goes of us. been a The results And an translates so or slowdown main for which industries that slowdown, been is mentioned primarily product portfolio than where our or

in sit value chain, customers kind we effect. we because way destocking of bit start the that And we’re see of and chain, the lower the a value some on late our PJ,

product. later primarily well even later the And is we’re products, silicate. sodium position going of to because a one to then bound when rebound value And rebound, it’s So be of when see – chain and couple probably we effect. to as are on it’s this going to

is of ramping capable capacity fast. Our up

making time We’re portfolio efficiency taking through when flex optimize up and that again we to and optimizing our the of maintenance ready we’re the advantage sure comes.

PJ Juvekar

Thank you.

Belgacem Chariag

You’re welcome.

Operator

today John from a Markets. next BMO of The question is Capital McNulty follow-up

John McNulty

should get Yes, was bit know you might be to this? pulled that? just you point, thanks. when guess, I I from think kind getting a better but hoping this about of it’s little demand the thinking INEOS see I color early how stages agreement? at on And we

Belgacem Chariag

John. Hey,

you but value so agreement us, that. total of in and the will component the for chrome-on-silica backdrop catalyst market. why the explain We I is it’s Let important and a which smaller me though give market, catalyst the on be probably a even is later, to INEOS critical operate going

agreement operating going sell of largest the to catalyst. the is us able involved And the be site agreement only that and market, is to to allow which final in Ziegler–Natta, products the sell market, to this single to three, is to to those continue The chrome-on out the to sell get the products customers didn’t support Ziegler–Natta now in that going not but we we’re in to.

to Ziegler–Natta, products to different qualifying, expand expand these chrome To organic side. allow opportunity products John, a is the on then because growth in these works, an way talking The to opportunity our our bigger a increase as also start customers. this and customers. to portfolio – new great you will be sell are me, further take to us participate is market. customers we new you to start it to exposure the able it’s will our about So It we

six products nine You that least. at to months takes qualify process and the

then should XXXX, that of the product, start chunk to mature I stream revenue of of going seeing Once they That’s the of ramp-up start start for we’re qualify a a and like capital. that you application. why the we cost see to think up nice and a and XXXX by end PQ any didn’t producing they year growth

John McNulty

Got do that out you to it. That’s opportunity I is to no to requires Would given on really spoke that, of require that. if at this I close now? hugely multiple number release you’re assume I spoke, your example same have ones it helpful. maybe sheet an the the right, ones just I that product do you one the right balance And guess, even or to? was broadening out only is other capital, leverage your not this But guess, guess, there the optimize, time, the capital. leverage priority portfolio. one in you to but And is you opportunities consider

Belgacem Chariag

channels number sense, sell, are if a growth. Well, opportunity to and a the we opportunities today there for deal be scale, of growth find important our can I with the them, they at If will growth increase – those where we number to we way leverage where is but them. larger because channels, that’s priority one honest, call could broaden make to for

product. our portfolio increased to emission-controlled to introduced catalyst. capacity we the tolling INEOS a increase our just mean, by we at this other I and opportunity toll of looking for new in We sales China in of with a opportunities. with We Korea created collaboration are concept few

portfolio know looking to enhancing we’re and that So portfolio channels let that a at and various the least capital. grow a the through reduction our improvement also ability we’re you selling. looking But at require possible through just to stronger from costing

John McNulty

color. very the Great. much Thanks for added

Operator

Silke Kueck JP today of The from comes Morgan. next question

Silke Kueck

you? How are morning. Good

Belgacem Chariag

morning. Good

Michael Crews

Good morning.

Silke Kueck

You’ve nice to might costs first-half do being out year? year. the turns of what more more flattish your a And see be? those have growth, that levers If sales job this with year next done the also your costs then you it control controlling other SG&A probably SG&A flattish

I gotten be was expect have which second, CapEx And capital you expenditure next projects wondering postponed? requirements And might to your would year?

Michael Crews

Yes.

controlling taken approach pretty hard discretionary have that a a projects front, it what deferred we we to take our or at have. the be may we positions open be look On tight costs may SG&A SG&A

be. we So market levers should XXXX, to we pull, where get not have process similar it want for the budgeting the be would as we to into

On the other what – sorry. question? was your I’m second

Oh, had $X on that the time capital we at yes, just was project for side, about a not ready had one prime mentioned this we – point. million earlier,

been analysis back to look in going tight more and We’re has the control really XXXX do on may maintenance. rest some economic add to and that

in guidance, that year $XXX million of can million. get that. is probably to closer a as would I we you to normal $XXX say, we And Some providing update XXXX. would can any deferred run assume into rate then get given

Silke Kueck

you. Thank

Operator

session. questions, also no has this are question-and-answer today’s The concluded. now our concludes there presentation. for conference more you attending Thank If

your disconnect lines. You may now

Ecovyst (ECVT) 2 Nov 192019 Q3 Earnings call transcript