ECVT - Earnings call transcript Q1 2024

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Operator

Good morning. My name is Madison, and I will be your conference operator today. Welcome to Ecovyst's First Quarter 2024 Earnings Call and Webcast. Please note today's call is being recorded and should run approximately 1 hour. [Operator Instructions].I would now like to hand the conference over to Gene Shiels, Director of Investor Relations. ahead. go Please

H. Shiels

and Good Quarter operator. call welcome the Executive to morning Officer. Chief Thank Earnings morning, Call. First Officer; Chief Ecovyst's XXXX Kurt the Feehan, With Ecovyst Ecovyst's are Financial you, Bitting, and Michael me this on

information remarks, about the the in our ecovyst.com. and to the performance, today plans our call company's non-GAAP posted shared subject can some and SEC. corresponding of prepared our be financial and information presentation with Please Kurt? Bitting. outlook. materially. today in anticipated found at that information, speaks measures as financial materials This strategies, take could GAAP this only financial now we'll Following call demand and is discussed end-use, the questions. company's in earnings Reconciliations measures section uncertainties Any trends, the Investors forward-looking your and the cause is to note that of of release with of our Kurt XXXX implementation shared information information date. in I'll of including turn are to forward-looking risks actual results the company's on our operating mentioned website today's over filings their the risks vary These

Kurt Bitting

and Gene, solid results XXXX. for Ecovyst you, good Thank delivered of morning. the first quarter

joint within catalysts production of customized Zeolyst higher of applications. Continued Sales sustainable sulfuric fuel acid were virgin higher strong the the growth and and drove results demand sales regeneration in in Ecoservices. for favorable in up catalyst used services sales sales venture on

offset catalyst of to due finished polyethylene lower supports, catalysts. were sales silicas advanced in in which than more sales sales polyethylene stronger However, lower

working strong, the to XXXX.Cash capital higher EBITDA our the net delivered compared reflecting fourth due within of generation, we Zeolyst the for million, of with the dividends first quarter at I'm quarter from of that of the in particularly first along the with X.Xx first-quarter deferred joint in generation needs of result, first $XX.X received were favorable achievements quarter X% of leverage down first timing was venture in the the our a timing As adjusted at up quarter. in Xx end This from debt to provided cash year.Overall, EBITDA last reduction adjusted end the pleased the ratio joint quarter, venture. further the to

a Our quarter good the turnarounds favorable year. provides start successfully the very performance. a first while We financial quarter completed our to performance safety Ecoservices segment maintaining in X during

to we availability additional for [indiscernible]. for see margins strong and expansion U.S. is remain refined acid, Ecovyst virgin the exports.For we addition, demand update strategic future.As in ongoing to Gulf of In the continue And demand Starting product outlook. for in demand slide refining I'll for projects Services volume demand market refining X, to outlook utilization global Mining the traveled, vehicle customers, conditions positioning rates execute Russian lack expected North of Regeneration balanced near-term we positive. our refined on remains expected turn of strength on the the Ecoservices, continued up expect XX% in growth to be favorable that with an plan, range, copper and and rising We creating the climate our by remained with increasing sulfuric business, sales long-term Coast products North demand America. refining believe for our remains miles American provide XXXX. global in driven be to continued with in our

industrial water uses, virgin batteries, markets sales deterioration relative for price sulfuric year weakness nylon chlor-alkali, acid did significant including not in in this compared Industrial conditions first remains improvement as acid expect into to to demand and the see end-use. XXXX, stability the contracts spot with continue end we in for see a for mixed short-dated quarter. continue a treatment.While We bag to many we some overall lead and demand

long-term see we high strong is factor.Turning business, silicas, up to year, we conditions optimistic of growth sustainable U.S.-based about and the sales the order capacity Overall, and Catalysts, demand year.We of continue interest silicas grow is fell where to of by by for lower polyethylene, Advanced led American North renewable to using benefit timing catalyst attractive benefit the customer sales producers. expected finished outlook to catalysts ChemXX XXXX, to expect sales production remain X% second expected America, for our demand first this In a polyethylene utilization North Advanced expectations XX%, of used For for production in sales with supported from and of the capacity the sustainable polyethylene associated incentives limited by over Silicas Materials global the being of higher our produce costs. advanced fuel Sales advanced segment contributing offset customer to very in where particularly to and producers to sustainable for global continued favorable with fuels. fuel production feedstock polyethylene be were diesel destocking. half quarter, X% improved short continue aviation in for by our supports growth catalyst for of

with MAC to catalyst diesel conditions competitive, historic the is with but catalysts a we positive fuels a renewable and the timing Order ] and in change next by averages. technology. have high. favorable hydrocracking for is hydrocracking catalysts, blending of prospective and of in with sustainable capacity grow makes market our [ start-ups mandating in certainty. out remains believe the global sales [ targets, we technologies, remains sales a have expect diesel with offering for of catalyst activity, differentiated and absolute The difficult With predict Customer already of to below We remains which XX% inventories U.S. hydrocracking the timing remain Market alcohol increase EU factor. expected diesel function XXXX. demand to sales slated we to jet ] engagement customer EU growth year.For for a production activity number trial SAF SAF

sales While XXXX. hydrocracking XXXX. stronger for in emission we of in XXXX.Sales half sales year current expect vehicles. we upon for costs borrowing level second a for positive our control softer not a timing, demand outlook peak Based are impacting we anticipate for a activity will sales catalysts, of repeat for we XXXX, Increased new seeing expectations the purchase are

While not catalyst energy pyrolysis. reduction work for commercial to yet, meaningful on a we our intensity industry, a where in continue advanced can in thermal key large recycling provide scale players technologies with

now to over a to first advanced expected XXXX. results waste the discussion for more growth activity of the Mike expect XX increase We our in plants in to turn for detailed call next for recycling plastic commissioned years in I'll with recycling X quarter. the financial be

Michael Feehan

our quarter services. XXXX, Ecoservices of the were Thank you, for up sales the of sales sales and Zeolyst Ecovyst sales virgin X%, were sulfuric $XXX venture than volume from proportionate first of share the reflecting in XXXX. higher XX% higher Kurt. first million, joint quarter regeneration including slightly acid

I sales the Advanced Adjusted quarter sales down of up advanced partially and the lower venture. a X%, as However, first from by contribution quarter from higher change over of of year.Turning first for $XX.X the for higher will first the Zeolyst the for in prior production to silicas up adjusted sales XX.X%, EBITDA the of Catalyst million, joint year. primarily next polyethylene components volume. basis discuss Materials the was to sales the EBITDA used compared were the XXX EBITDA points adjusted only offset slide, primary margin was by quarter driven were The the last

sales the the major drivers in of at $XX higher approximately of benefit EBITDA, change Looking volume adjusted a pull-through the provided million.

sulfur included EBITDA quarter.The million Overall, including reliability of gas, price-to-cost pricing effect including However, and change was costs turnaround resulted of the Heather, electricity, approximately of sulfur, ratio costs, our $X to manufacturing $X natural $XX the the with net fixed adjusted and while in for aggregate our comprised which costs. costs, other costs a attributed is winter million in million pricing, the labor variable associated period-over-period, number variable down lower planned initiative, balance lower positive costs. pass-through in storm factors, impact a $XX higher pass-through resulted of the the of from lower inflation million higher in

for growth catalyst sales $X the from the and storm winter sales prior and up Advanced fixed on as year's offset million, Ecoservices.Sales of million million. it the up benefit sales of natural Catalyst, sulfuric solid was XX% joint Ecoservices X%, of such the the production for Ecoservices used higher gas by of were associated XX%, venture of XXXX.For pass-through as $XX.X turnaround EBITDA were sales XX%, adjusted segment with margins million, of XXXX partially of costs, catalysts manufacturing first proportionate X% higher was Sales acid variable basis in storm. the sales, we $X sustainable from the start Materials electricity.First extended volume $XXX and As quarter down year $XX well the up offset was turnaround. transition in sulfur XXXX a costs for up XX% and sales The associated by sales for first-quarter with the the of the positive for lower effect million quarter other start Overall, lower I'll volume, adjusted virgin were for and with joint including was Zeolyst prices driven quarter of to pass-through fuel as and of partially with Zeolyst and by share increase a to that recovery results, volume customized up EBITDA and applications. venture our winter higher first the reflecting by higher the regeneration our highlights higher costs sales impacted Elliott primarily costs, services, quarter adversely effect XXX points

sales silicas decreased for advanced polyethylene. the year-over-year sales to lower However, of silicas of production due advanced used for volume

was on year-ago $XX volume XXXX production lower million produce in the Adjusted sales million dividends that advanced quarter was continue of first quarter to leverage timing the of EBITDA the next for advanced to venture limited Advanced full catalyst venture the silicas to finished timing XXXX due polyethylene benefiting to offset sales due higher for sales lower from Zeolyst of $XX and the cash from first slide, and expected to joint half. expect the fourth compared up, of stronger used from quarter XXXX polyethylene to the customer an destocking.For Catalyst sales were the of to cash by in half the in the order to supports received joint year, of higher we sales deferred of particularly working with year favorable catalysts Materials While the capital. generation and second Zeolyst the strong, with used silicas.Turning were the compared compared in were polyethylene mix and of

to of strategy. target overall this this flow maturing from $XXX X.Xx time, million quarter of facility. we million $XX year. higher the tranche under As the generate the X.Xx, to million. EBITDA, ended debt terms we first end sheet total the of of with to strong on first our at cash allocation, free ended such, million, balanced we remain $XX quarter expect have to cash ended ABL with generation availability XXXX. liquidity the the leverage of one cash first we of a ratio in debt with of balance million.In of $XXX perspective, of we From net and light down a At quarter an including the capital $XXX adjusted In continue year maintain for We

unchanged debt to quarter X.X% average be that outstanding million. $XXX We in approximately to million our third XXXX, relates weighted with our to million our during the remains $XXX the and debt of adjusted to our of sales fourth to of EBITDA call full-year Zeolyst to in million is million it GAAP of exposure earnings have quarter $XXX for XXXX.As our we venture late capped of approximately guidance, the expected $XXX out $XXX outlook $XXX interest provided of cost million, consolidated on joint and sales XX% February

the a is press earnings adjusted of As consolidated second items and to second in release for quarter, ranges directional expect be guidance $XX we earnings included the XXXX our usual are million quarter in and line terms on today's for specific modeling presentation.In between million. $XX practice, EBITDA the basis, guidance

quarter $XX million to compared For in Ecoservices, we to $XX million. second down expect the prior range between for adjusted the a be and of year EBITDA

cost of of driven the The advanced by be expect $X and costs of XXXX, back million and other volume we closing corporate million second higher sales pass-through quarter, the be absorption million year, the some impact in of silicas the than the to quarter impact lower first to costs, expect including costs.For will results to in earnings on quarter. quarter with are index I million. for quarter. second be and turnarounds The $XX be energy expected Catalysts, increase number with for is compared between expected we expected flat period-over-period. continue the lower unfavorable prior used fixed net year's sequentially and adjusted a hand unfavorable drive is EBITDA the expect And between certain costs, the we contractual including to XXXX the along to the fixed mix, remarks. net and the polyethylene and lower an of production, to for sales call second to unfavorable $X and per customer an now range higher unfavorable quarter to costs, to of pricing the $XX and Kurt While Advanced related to pricing reflect timing product prior inventory Materials

Kurt Bitting

Thank you, Mike.

quarter, move into to the in upon positive second we we results build financial will we continue first the As delivered the quarter.

virgin will of polyethylene conducted which of polyethylene in sales of demand of expectation and in XXXX. to position portfolio year, positive across sulfuric the first of higher for the and and fundamentals X catalyst half of will the its for the of XXXX, the half second deliver particularly timing the half our hydrocracking improved sales second volumes expect Ecoservices year.We regeneration in of stronger sales. for X catalysts the have business remains acid virgin the global demand outlook acid turnarounds major the the end-use, With nylon demand into sulfuric

As such, for our XXXX previous unchanged. remains guidance

efforts of session, strategy.Before to growth United will want at seek for generation incremental comment Unfortunately, The I move cash to we number arise. Steelworkers allocation opportunities recent we believe employees continue However, favorable will XXXX they leverage operation to support Moreover, our Q&A site. maintenance represents as the a Union to development and balanced Houston on we a in a site. our Houston on with to XX. do regarding capital faith report happy to April went our we the despite with a Houston X. and agreement union, labor this workers new union earlier contract. May good tentative returned The our the the Plants am work on agreement fully valued reach ratified a union the on strike week, colleagues contract new that a Union I reached to X-year on

ask us Thank at And operations strike, Houston your the continued time, to customers. will interest the service line questions. for this the the of open our course site Ecovyst. allowing at operator the During you for to in I

Operator

first Instructions]. John [Operator BMO Markets. you. from Thank question And we will take our McNulty Capital with

John McNulty

yourselves? ahead in guess, Or I some look too negative we I to the rates outlook, early the the have about just, have that are to thinking the is in when looks be So there things year you've guess, utilization I be of outlook for get that? bit you a that you yet look, mining more far thinking it's maybe -- want gotten a should maintained and don't little I like recovery, guide. few offsets segments that, for PVC positive largely about? should various at refining, it and it XXXX, how

Kurt Bitting

still the for I Thanks John. in year. would we're question, early say the

to we Polyethylene meet thought -- think the of mining what regeneration mentioned on stronger us see it virgin with our first in what we believe we're in was the nice first with demand our the I the volumes second segment, As of X conduct which really expect which as We're of outages, call, a X that year, to the is recovery remaining really have X good the in last will year, some position expected, the maintenance We on we're from months puts going we segment. call. be happy year-over-year to we in half virgin acid. the do in increased had as strong. nylon acid the

feel year, good feel happy we're the quarter, about in there's results essentially, we're far left still at, but we we're so the in with time we and where at. So first where about but good our

John McNulty

prepared and when back timing necessarily may it that around of XQ quantify timing roll It terms polyethylene all And be be sounds a help guess the around out like into about you to of the half then catalyst to or expect think spoke can pushout in side. the not you year? remarks through the of may us that you pushed I the in?

Kurt Bitting

sure. Yes,

that QX, to for What catalyst polyethylene recap metals. producers around catalyst just either in catalyst from year-over-year. finished call X/X short buy up are polyethylene what So we sales. supports, these us, QX, they own the to impregnate polyethylene their was actually catalyst on advanced the which intermediates for industries that's really our our sales with or X/X were them fell intermediates polyethylene And themselves of and coproducers

that So were issues. some timing

side and look it the catalysts both the up was to of in when destocking some overall, of them -- order year at in that be at to the limited be do base was for Some space. just half There for landed picking the the up of But expect finished customers. and actually shipping we supports, polyethylene, both that second and we year-over-year. when

Operator

take from KeyBanc will next Alex question our Markets. Yefremov we And with Capital

Aleksey Yefremov

recovery Just you this think us where In for and would be in idea catalyst, this are yourselves? run just some year, that year, rate? at a for you to Or step the do of back more are with go PE there next you as catalyst stay PE cycle? half normal you in back cycle you could is where tell but next precise growth maybe looking of year, into still you not

Kurt Bitting

question, the for Aleksey. Thanks Sure.

market generally what's the this to globe. across X% growth is polyethylene we at X% think expected look year I and the

Middle year. Other growth sluggish to differently China above such are do here overall producers behaving low, growing in are as continues advantaged growth where this -- Now have as X% rate. regions, that's segmented we as and to regions North well the costs Europe. But those that growth see by feedstock different East, there's America X%

As share we new before, we've and -- able that capturing getting through historically, of market market roughly double to the builds and new talked been about disproportionate we've business, amount rate. growth a

to polyethylene the good that is where I from about momentum more last we in going. half So is But guess, feel second up expect, year. clearly of It recovery was the of we year. recovering it the where pick

Aleksey Yefremov

that the And of acid percentage or or the entire you What I is market, in pricing dollars second either about merchant headwind price mean year shifting some other to expect quarter. the in price any for talked net headwinds the you metric?

Michael Feehan

for thanks This Aleksey, is Yes. the question. Mike.

the So think on generated talked by were for of of the have you to see we overall the impact they're versus we our second the referring don't lag. base can some really some mean headwinds a be There's costs sales contracts virgin we and costs. quarter timing what net significant when the -- variable of I model concerns right? have the that pass-through shorter-dated nature from before second pricing. The the quarterly and in contractual the any And and the through, when intensified of quarter, acid in pricing sulfuric did those variances of spot that some volatility, variable is we incurred that really when the passed are some cost, the pricing. around I about pricing

partly of we really the second pass-through really really that It's the but right? for timing. So the moderating the due to hitting rest out see contract quarter, in us year, then

see QX in that So and for the you'll expect to QX be something that continuing full don't year. we

Operator

question Cunningham will we Patrick take And from our Citi. with next

Patrick Cunningham

larger I linked a there additions PE is closer basis big your referenced expansion of XXXX for the expecting anything And XXXX? a capacity the latest Maybe just the to baked and commitments the the production? bit wave additions? to that percentage timeline you And are terms how the is in see is Are you Or you there? Kansas of capacity in in the City first release, that you long-term referenced of capacity? on guess, in

Kurt Bitting

Patrick. Thanks for question, the

obligations are do it's with for state globe.Obviously, of the around essentially other production is have of talked we've Kansas the and of that site. we are to of sizing said those Kansas production in that a at those expansion globe, but already that customers about the that, polyethylene We wave XX% Kansas with expanding XX% their -- catalysts. City, spoken terms production contractual a a the not of builds customers this it polyethylene And customers their the to City catalysts are capacity new about at So or our but I involved use City locations expansion, linked from need increase. volumes across that we the liberty of course, part think it's the those polyethylene are as

of complete 'XX, So that, in demand of to in XXXX, period. fourth expansion that terms call expect the of time start to that's or that end the really quarter late of that 'XX, do meeting timing be 'XX, we and you there see some

Patrick Cunningham

can Got is seen quarter How you it. help XXXX the renewable and into XXXX? And you what and you've first that into sort are forecasting growth catalysts business fuels in size rates today? beyond? of And that big growth in the

Michael Feehan

Yes.

as sales So AMAC group. for growth of continue over right? ramp strong XX-plus We've Obviously, there time. call we to will a growth we question. our we ] are that quarter-on-quarter, from more new rates the that about growth good the linked represents are rates. some to definitely percent that probably where market, market strength talked businesses. in overall XX-plus Investor significant year-on-year, this be, that it that [ little it, That and our see during shifts about see There's win of talking The business up push than business definitely our but extremely percent the a thanks Day

Kurt Bitting

terms -- is call to sustainable That's fuel about limited in in XXXX, the hold [ approved. Yes. we diesel at start a the and will this mainly getting fuels. When And XXXX technology we talk to renewable it point. been ] I Patrick, you that, think SAF played airlines is take lot with of dynamic consuming

fuels wins business. the sustainable going at that provide So further the back for is to

Operator

next from we our Laurence Jefferies. you. with Alexander question And Thank take will

Laurence Alexander

that, and also how do of per kind sensitivity capacity on to move increase mining understand or SAF. there any what us up of you demand? opportunity gasoline understand diesel follow revenue dollars which production, would expansions have copper rough catalyst probably to for from metrics are I the ton production of for you to if in Just chemical refineries if kind dollars TAMs your just dollar way the hundreds a thousands? And of we the market sort $X Is per might then on -- talking there help kind the basis? to any of ton Are or of to be

Kurt Bitting

Yes. a -- sulfuric help the I I on the some put probably guess, could I can to you questions little of acid. bit usage, of

copper look that anywhere X you which from when sulfuric copper tons So per of acid ton to at essentially produced. electro-winning, solvent X leaching, extraction of is copper consumes

in So ratios.In other that's California terms the use goes outlet customer for potential our Coast our the those highly And the to scale, they'll refined believe California along. is located Coast in copper products good refineries, some their we refined look to gasoline producing kind valuable will and drive business order of in at acid, flag and XX specifications. towards And be growth acid lithium, as has West in that X/X up the time there's meet products, they're and business, base, market tremendous Gulf of then them different exporting various obviously, models is of -- sulfuric what metals is tons for uses when in of which terms you sulfuric more a mining. the anywhere regeneration that roughly

I best some can those of dynamics you probably that's of give and mentioned. markers in the acid you that So terms usage

Laurence Alexander

And then just catalyst? opportunity the for

Kurt Bitting

Yes.

markets both about, We in a range. gas, lot North so of do for catalyst been American low X% continued expansions where see East the the polyethylene low grow take polyethylene to cost, the see Middle So demand, we we we have catalyst, sell continuing forth. that and there's planned or catalysts feedstock and that of obviously, natural talked and to as expansions announced, into advantage

customer So feedstock growing to have from Kansas -- those investment term. demand of Middle that costs one backing City was made always meet the in and for and up expansion we benefiting reasons of long U.S. we decision East. lower here commitments some that to the that That's or -- we've for the

Operator

Instructions] Financial. [Operator question BWS Khorsand you. take next Thank from We with our Hamed will

Hamed Khorsand

is with So level year rest confidence that you're gives ends wanted understand falling. where of rest potentially year and the QX given just that of QX up the not having looking of at risk, customers the for I conversation to the out you the

Kurt Bitting

for Thanks Hamed. Sure. the question,

if and a do we go the country. generally So utilization window and products some the the catalyst terms to obviously sole-sourced we spectrum of their very it's customers, of major then acid the across at get to -- a if into sulfuric we high We're look very of is across supply products forecast good just longer because take customers, if end-use sulfuric make acid has those the regeneration the important. very we we -- customers of obviously lot that our the so with

transparent the us So very of in are generally with forecast. terms customers their

[ very margins things look call, you there outlet now. good regeneration, and for the on at when we So the are mentioned right ] octane

having the global the with dynamics the on U.S. would refining going Mining uncertain year-over-year. we which last pricing I and we the see we remains demand due year. well up nice carrying from nylon call capacity to say there.Virgin the now right rise has on were as call. a What the to acid, sulfuric last are firm. very that sales Exports So end-use through is there expect as advantage stabilized

then be certain. X the are prices polyethylene less to there.And metals catalysts, in moving months. things pick just hydrocracking, year-over-year. items talked see, more orders, those acid -- growth those there And would here the are then in expect last X that pockets up lead-time in nicely the again, in large produced. But have And the firmed we to about, to on As visibility can half that general, now virgin that I year. are which stabilized say have for And We still do some in of is you the over certain good as later have to there's longer applications industrial do to chunk, we have momentum year. visibility catalyst to another second better now or

have generally we So a those. on good visibility

Hamed Khorsand

quantify you're far the expecting Okay. kind downtime just QX as could And then as in of you what impact considered? is

Kurt Bitting

maintenance Well, we year. last downtime than was in QX turnarounds the right? have we we executed the But will had X planned So in QX, be XXXX itself year. this this of more one which QX very X similar quarter, to for turnarounds

turnarounds complete So of year. the all be the activity where with our it outlook was But of slightly with year. really the completed for end more similar with we're by will QX, last the of be and XX% than leaves May, happy decent it turnaround we're will a because set of volume really year those to which remainder for us QX up

Operator

Thank our appears will turn questions time. we closing this I that further have at program remarks. you. or over now presenters any back to the It no for additional

H. Shiels

in Madison. Thank and all to participants With for Ecovyst you you, of this your call. our our interest Thank your we'll morning conclude questions. thoughtful that,

Operator

for program. does today's your you This conclude participation. Thank

at any time. may You disconnect

Ecovyst (ECVT) 2 May 242024 Q1 Earnings call transcript