TREC - Earnings call transcript Q1 2018

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Operator

Good day, and welcome to the Trecora Resources First Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Jean Young, Piacente Group Inc. Please go ahead.

Jean Young

Thank you, Ruth and good morning, everyone. Resources XXXX Trecora conference the to first earnings quarter call. Welcome the release markets after was earnings wire yesterday distributed financial The the over services of the afternoon. close Chief be on Officer. Financial Upfill-Brown, Presenting today and will call President Ahmad, our and Executive Chief Officer; Sami Simon Controller President Corporate be Connie our Cook, and Groves, the Accounting of Vice available Compliance; for and Chris new will session. Q&A

remarks, Q&A session. a there be will prepared management’s Following

to Statements review found we this the Reform harbor Private Before would get not is X. I Securities XXXX. statement, forward-looking defined are on that like Slide are statements in started, presentation which Litigation facts in of safe historical Act as the

are date as upon based and beliefs of statements of expectations May the teleconference, only Forward-looking this management’s XXXX. X,

uncertainties differ for XX, Form results and Simon the webcast on SEC, is with risks, cause Forward-looking including turn over President in are year ended These projected. filings company’s statements materially on a like those This Form At well detail time, annual that available to by XX-K as that’s CEO, I’d as to others, XXXX on the reports the the greater discussed risks actual could Trecora’s from in involve report December call this presentation and to slide website, accompanied Upfill-Brown. XX-Q. www.trecora.com. company’s the quarterly subsequent Trecora’s and

Simon Upfill-Brown

morning. and Jean this joining to thanks call Thanks, the everyone

cover report XX.X% to results the will at later. quarter of last for trends and volume financial at pleased growth solid the compared reflecting detail in to TC. SHR increasing are same total product We prime our continued revenue financials year, first with Sami encouraging period

in recorded Hampton, delivered especially prime XX.X% volumes in the markets demand product increase record gallons in Now the and Slide to quarter of period. of We the robust X. an end across company saw million polyethylene. quarter many At in in XX.X sales South a overview we the

Canadian a oil a project advanced the new a reformer sands XXXX America. new QX. polyethylene from and We projects North customer plant the second anticipate sizable of continue continue to on piece reformer in in and the we including demand anticipate progresses in Work of commissioning to

for high the as revenue trend demand We we sustained year-over-year modest are processing. sequential recorded growth As by production but from saw we for encouraged improves. TC, a custom QX

are improvements in AMAK We continue report in also to that $X.X contributed in pleased hold. take and quarter million operating to equity the earnings

significant will remaining We complete project increases EBITDA. our in our and drive investments XXXX capital expect to in

chemicals exciting participate positioned Hampton North to be of with and at in in U.S. volumes We along of Slide Resources. X, a total chemical shows time resurgence are in the byproduct is prime South deferred American sales This the breakdown the an to industry. quarterly

rising material prime revenue prices raw was volume Our growth driven I record products. and of earlier, mentioned by as

for volumes in advanced later which year-over-year byproduct reformer saw also set the growth year. this commissioning We our stage helped

As focus international of you to first in continue sales business. we quarter know, to this quarter as were compared XXXX first the will produce volumes as in the on deliberative revenue XX.X% stream. growing XX.X% International

with We plants in have the three-year East. Middle a PE contract new the

February. in shipped were contract this under volumes First

order First made customer. also large shipments a under PE Asia a purchase from were to in plant that

new the product customer bulk expect of sands our for quarter. we of one in more approximately be We show A-Train production oil the volume. customer XXXX. Canadian did continue first in used sold fourth North the later this product, new we in up XXXX the XXX,XXX starts of the then quarter fourth the for with PE gain although second year, quarter for to customer gallons of we the growth some competitor American additional continued volume in this in under as their is A contract

capacity Despite Capacity and demand in Sami volumes result fourth more utilization based the feed utilization pressure in and strong first SHR gasoline end was of in also customer, margins a natural quarter which the compared market revenue this in to in first is XXXX. resulted on XXXX under a the at was XX,XXX the and years. TC-processing for day as first there of for first step XX% per in good Petrochemical quarter of quarter used in to A-Train We with discuss robust adjust slow of detail. barrels XXXX. quarter complete XX% the fresh increases will prices pricing. XX% of both a

most moving have with photographs have good reformer cranes on along advanced in the progress the gone, process As that operating X byproducts to represented would advanced and protocols, quarter. you can up we be Slide the QX, since In start in safety ahead to scaffolding. standard have we systems processing the The repairs for million suitable of made all see of Training, well. approximately last procedures are from reformer. X, you generated

nearly TC’s hydrogenation another a America, for own Trecora on and high revenue difficulties. update X.X% quarter the Turning sequential had increased of performance revenue Slide X. year-over-year The from product Latin lubricant did the XX% We party melt improve to unit collective Chemical product XXXX. distribute of fourth the year-over-year effectiveness production improvement focus value hot finally wax deliver. supplier in markets. products developed to starting specifically revenue we versus to drop first PVC upgraded execution higher an for adhesives quarter but Trecora wax significant see we quarter our was in as for a the in and record resulted Chemicals in decreased to

Plant, that revenue increased we custom quarter the to use quarter had the of fees non-used X.X% through from First rent. overall quarter excluding XXXX XXXX. quarter paid B revenue processing both be first revenue in and first the Plant processing compared the record B We custom unit a to record hydrogenation

are The changes four on TC. three at emphasis. details although In joint COO we are the recruiting to place closer safety mind changes significantly have X are Good is again We headcount priority both role as shared clear delivering in signs to predictability volume operating at focused progress set we engineering have as we can all work I pillars safety are Slide were for been is and we of my three organizational main always making request the TC production still number recent much and produce. continue Nearly CEO additions and as customers, driven the plants site. months process being to more as I seen March, custom made improve about In one. for at we processing help positions. and to in particularly hold taking shown discipline a

consecutive ahead XXXX but with months. metal concentrate total in been to sales in shipments. were to to also shows a the update with gold coming improvement AMAK are show that to throughput the we encouraging further about Slide expect circuit The QX what a is half of in in fourth sustained in in due and sales on quarter. first quarter expects solid X has doré metal be they will silver next Turning the the were slow of continues even able this Progress strong mill optimistic It commission to couple improved recovery. quality improvement project plans AMAK good of in the timing on XXXX. the Concentrate start be have equity Trecora precious and AMAK XXXX to of quarter months to half an though in Guyan the year. the second X, to contribute AMAK. Slide in for earnings move

I’ll turn Officer, more Ahmad a update the results. over Sami our call Financial on Now, to for Chief the detailed

Sami Ahmad

sales XX% compared or a first lower equity squeezed year-over-year XXXX. of $X.X quarter estimated of in Hampton Adjusted of AMAK to EBITDA XXXX. representing to provides the losses first the of first for ago adjusted fourth million due South of for as includes are income in diluted $X.X you, mainly income earnings a Thank same impact sales. margin first impacted recovering impact Net products or margins in gasoline tax TC. quarter XX% of non-TET EBITDA a situations share. XX.X% per $X.X AMAK period income diluted million $X.XX were Belvieu In of with financial compared Hampton excludes $X.XX XXXX year brief compared adjusted Slide these equity of Simon everyone. in for of feedstock period of $X.X per us for summary share. feedstock spot which or a prevented specifically the EBITDA quarter $X.XX share equity to was and million with QX were Mont over an representing our AMAK Spot a in primarily which EPS quarter per adjusted increase share Adjusted ago million for excludes sales increase prime and at and was net to with per nonformula $X.X in $X.XX costs little the million was million income based margins prime product margin or quarter South diluted compared included total the and cost of good XX, $X costs. an of our diluted At XX% $X.XX XXXX. QX. diluted AMAK per after increase Net EBITDA in morning increase share. year the a about net The quarter the both X% cost the from competitive EBITDA natural

cost. on prior also is by were impacted based feedstock as rising margins costs Formula formula feedstock pricing month

equipment the bankruptcy. costs. uptime costs improving labor higher we due the cost well associated and utility higher higher quarter labor specifically primarily to at Operating in the of the experienced focused costs from increase shutdown recorded were TC associated on maintenance XXXX as freeze with as and first as In with also volume. governmental were effect XXXX well higher quarter that addition as related South quarter in customer for in due operations operating costs had freight XXXX. and connection took the including as charge first overtime which cost higher fourth flat greater sales Transportation TC Hampton transportation roughly operation costs debt in with logistic of of and an in TC quarter and bad to receivable labor year-over-year also Brazilian filed costs to from third-party $XXX,XXX were stream. a mandates

at the As for processing advanced also TC, start priority At revenues price will quarter facility. future. CapEx effective quarter that XXXX. QX $XX.X project million, $X.X to custom million million Simon repairs Through expect $X are further reformer the reformer a and in the the on increases deductible. reformer Hampton but unit at XXXX the while we insurance including the Revolver million from about the portion of initial for million in was the the our additional a estimate compared is at was for end all the up quarter weeks. was $XX South of and XX, mentioned, the the the policy million, loading year-end. addition X.X% considering an At receive the margins. it’s products increases $XX spent advanced the including fees million while will approximately of to rail in primary and compared improve rate new rate is cost approximately up XXXX increased we the are year Under million have approximately third current in reformer first is The POA at expenditures the debt management G&A end increase steps price of borrowings first a $XXX.X QX expense we our clearly tax we under for margins. million of capital Cost end our $XX costs. advanced next ramping excluding advanced XXXX. taking was payment to quarter the of unit for prime quarter, first XX%. loan $X.XX unit the a March of spur to insurance $XX for and as tax the quarter managing increase current to to of Hampton Long-term few the use South during was the $XX.X announced XX%,

end an million refund. down income the revolver of $X on with tax the the paid quarter we Following

quarter fourth quarter approximately and of above per our of $X.XX were We Prime price were In of our the produce Slide year-over-year gallons prime have need products increased increased more first Margins in approximately summary XX.X the volumes, the in and petrochemical support quarter facility. revenue XXXX. presents $XX in million quarter gallons margin first first the sales byproduct prime in in ago. sales gallon for million fourth costs was byproduct and additional compared of in under the by quarterly compressed products to million XX.X the volumes quarter X.X because XX, million gallons than million quarter increase the to byproduct the to the XX.X Byproduct per to first volumes broken $X.XX compared out the approximately compared availability quarter. million volume product was the gallons of Due and approximately XXXX. gallons with quarter year feed in feedstock byproducts first $X.XX volume the in first with XX% a byproducts. X.X gallon volumes. the

have said third for advanced these our unit margin uplift we once quarter. in a comes we new significant the As reformer before, anticipate online byproducts

quarter Turning any first to cost volumes were when well QX. X% relative Slide to of chart fees rising can price reflects products cost In feedstock contractual and the environment gasoline feedstock below we’ve in our as first average get of gallon per market this XXXX basis. priced suppliers higher a spread compared as XXXX show the minimum contracts our The Average In from we processed are the incurred prime a based delivery feedstock that XX% and formula contracts was our cost feedstock margins XX. on then squeezed on costs. shortfall as months to the amounts. prior higher petrochemical quarter on natural

we business through push stock a to Additionally when unable on price to competitive increases we’re margin can due nonformula lose reasons.

quarter XXXX mentioned, I first both As these of by were margins impacted pressures.

Wax Moving but XX.X% in at up X.X were XXXX million XX.X% of quarter. Chemical the sequentially. down year XX. Wax fourth QX from first but revenues the pounds down volumes quarter, Slide from from up XX% to X.X% were a ago Trecora

significant increase sells production waxes The uplift in pricing due improving sales wax Average ramp to project Hydrogenation processing that TC. Plant The Simon. wax the approximately price of first the quarter. at a translated a Slide $X.XX year I’ll relative breaking in revenues processing due and has of in quarter step Custom completed QX a explained, to year-over-year overview a more compared the revenue processing revenues custom in margin million to million, higher in South South $X.X quarter $X.X was volumes period. were processing back ago first significant mainly was custom of and TC TC $X QX were This for X% at in and we QX. an compared processing saw a XXXX primarily approximately that Simon compared And first to first first As in revenues financial TC higher-value distillation to $X.X B concludes Hampton record process increased quarter. to mix feed to XX, quarter. as and at turn the at the XX.X% ago. was increase was $X.X fourth a in million million increase a million in in Custom South year Hampton. presents over the compared revenue. wax with last our year. Hampton the that with million is the call

Simon Upfill-Brown

and expanding from expect organizational as on petrochemical the the volume of a sequential of In revenue prime near-term we with of responsiveness. towards increases AMAK. polyethylene at we quarter the on product pleased the sales drive we deliver TC to changes resulting in Coast recap committed strong while implemented and capacity at remain Sami. to improvements we consistency, Thanks, are operational stronger dynamics margin the South have from continuing by at growth To delivered growth. many Gulf reliability and progress Industry seen Slide the solid momentum volume world. I’m safety, a we positive capitalize manufacturers excellence, the on and we grow have culture vision XX, to parts highlighted production Hampton, demand

well TC allows of customer EBITDA after not-too-distant coming XXXX, byproduct. U.S. operating half will some second customer our on delivered more AMAK our sands volume third is value delivering in and at consecutive unit advanced time in with in to continued great progressing showing boost optimism operating and my come improvements to months. us a forward oil incident the second like quarter concludes strong progress about in for Improving operational reformer the our our in the to This this the operator second The Canadian The online open to improvement prepared in ask investment by is and demand. just improvement future. the capitalize the industry. time of increasing the from Q&A. be unit expected the is quarter, significant to ability Ruth chemical to look remarks. monetize also the this I’d the hydrogenation We distillation call AMAK earnings considerable and At in discipline reliability and equity

Operator

Tanwanteng We’ll Jon Instructions] to [Operator first you. Thank with Securities. CJS go

Jon Tanwanteng

questions. morning. my Good you taking for Thank

Simon Upfill-Brown

Jon. Hey,

Jon Tanwanteng

in there advanced rise potential are contribution is or reformer EBITDA from Sami, that in year next. when change just thinking given or the either the raw cost byproducts from finished your Simon this material a you the

Sami Ahmad

Sami, morning. is I’ll Hey, take This Jon that. good

on So margin gave you is, in aromatics gasoline sharply natural as grow what they the and byproduct we the and natural didn’t have side cost saw the therefore seen we much that in compressed. rise gasoline as explanation byproducts, margin they feedstock I

that trend reformer margin the the if will that So up. advanced uplift affect continues when starts then

have what on hear, oil a those why those tied aromatics. hear crude not fundamentally with be very and brand. described reasons gasoline we oil case we know, XX% has close are also to like prices. that as one-off correlation products market those we’re specifically Now, But you to before tie And but – might the natural as aromatics we something

not So first they in happened quarter. but should that’s keep the up,

Simon Upfill-Brown

that historically being being But uplift, a for or is expected the fully round I currently still XX, – byproduct Jon. getting optimistic XX we’re about getting think what we’ve

Jon Tanwanteng

helpful. That’s great. Okay,

the gas natural So price spread expect the of with it you and as inline kind in has oil do past. normalize to

Simon Upfill-Brown

the expectation. That’s Yes.

Sami Ahmad

because ethene. lot is But America still of North cracking being a there in

crack you make benzene how So when do ethene? you

Jon Tanwanteng

of can do the differential to pricing the all. products. How turning competitive markets – just if much given any prime then you can you And the recover in the you think it. Got spot or at pressure

Sami Ahmad

know, We competitor these been of But couple, a been our this the need us you byproduct to lot to need and And we has some only products, get for purpose. a the time on them, in they as capacity need there fair base if gasoline we always our they customers of and price they’ve aggressive we gasoline. price It’s long-term, of has that make to of came to to spent it reminding get the value make is amount people fairly of there. a increase business a some decent price. are

our In just got We we’ll to get We’ll friendly that we the what So of do the we we unusual. two to upward best continue – keep situation will can. us exactly the And gasoline do. Jon. pushing trend our of us, that’s there lot a like formula going on It’s in very that of pricing. the because well as pushing and products waked double products based pricing. pricing as a to time very And spot competitors relatively the on the hard on to and so this natural be discipline should really only lead. this what know a keep

Simon Upfill-Brown

the we couldn’t increases but announced quarter for In reasons. them those competitive we price first support

Sami Ahmad

we of them on. were with stuck, customers, some a of Partially to of unable stuck hold couple them most

Jon Tanwanteng

after market cut there Simon. announced I and out say in think last price the Did spot the that. happened increasing you for you what second, you

Sami Ahmad

price customers few quarter, of competition. and large we announce weren’t first supported mentioned increases but on they Simon them part by the the stuck as In did some

Jon Tanwanteng

going Simon, the Got monetize forward. update And plan you finally how any then it. on to timeline AMAK Thank in you. just

Simon Upfill-Brown

who’s they with industry, better discussions potentially the mean, price get with they I we anonymous very on well more basis. connected initiated We’ve we with Jon. mining of that discussion a the started people an results good know have have can Yes. somebody quarters the the

those We things the and are are to those prepare some yet stage. them a kind preparation of are that clear document of – in

success concern on for where us There prices I results really decline. copper we is for remain we way delivering metal guiding the because prices have is expectations know have are to the AMAK both the outlook with point keep is, in that, it that’s a will positive that future. the and but going way you right, we more and think So, foreseeable it there good all a away strong zinc to for metal

on to I out will want need sensible next the So I this we really think and do think and think what over I methodical of do months a have six scaler basis of timing business, but get picture to we it will be. the we

Jon Tanwanteng

can great. squeeze If more. one just Okay, in

terms the unusually in was for was just or both. week me, QX combination QX it of shipments unusually remind strong Just of maybe AMAK or

Simon Upfill-Brown

first right QX a quarter It’s third bit strong the at because shift in the and we started shift the of we the particularly in was early little early relatively quarter. of end building fourth both, we then And the in quarter quarter.

to I bit go look So there was very throughput continues all Slide if in as it. are numbers the continue concentrate direction. of the a concentrate quality right grew, little and rates both was it in the to But production at suggest trends you – so you think overall the the much slide, up. of And one the the X,

Jon Tanwanteng

Great. Thank much. you very

Operator

Roth We’ll to Reagor Joseph go Capital next Partners. with

Joseph Reagor

the morning, questions. Thanks taking Good for guys.

Simon Upfill-Brown

Hey, Joe.

Joe. You like the time the of spoke

Joseph Reagor

us Yes, Coast. it’s little later West the in for a here

So that’s appreciated.

hydrogenation company’s what guys distillation in. get goal you bought was you TC the guys, margins unit new for would revised given today. haven’t to still a ultimately margin. XX% been Is you are what market or goal the with that obviously And when be if the hope is the question, about to able there you expectation First think gross conditions and I

Simon Upfill-Brown

No.

can think Joe. get we I still there,

on limits wax Sami for to us but are feed attain point continue pricing. wax to limited wax we can wax we continue but we we at volumes look As feed the draw that which on this the pointed out,

little the you issue to just to to processing cost a a at that the about but cover. as said processing custom bottom we’ve of once breakeven the that’s revenues increase So line. above direction just bit are flows have incremental revenues drive us to project any because that perhaps energy custom of you is help It’s big number going all TC in times,

lot So there capabilities, time so continues are which so ramp interest so our projects spend we custom processing revenue much and a and of which right and deciding just not on. are on is the to in in our and

it haven’t I able to there we up been and hydrogenation, But there. now. was the can all there add. exchange issues been if Sami the those difficulties we get B know think anything up eliminating And to catalyst It’s of been kind up set to of don’t should and now. way addressing be get things. Plant we the get starting had able all that Those well, most us are if Joe. the so like been behind I frustrating generating the technical we’ve we has is you with have to

Sami Ahmad

Yes.

the head, couple of Simon, things in You Joe. the nail hit

quarter about $X.X the which call as talked segment expense million it roughly debt about information adjusted I in So shown bad add TC in $XXX million we and EBITDA margin. is was the X% at that you the EBITDA if

and follow increased a a million you Simon’s – custom I’m to leverage you number show to XX%. you processing processing you custom So margin for of add if on then the their X% up logic just making just

then in benefit forward. production custom we state largely drive leverage pricing in wax to important. what’s steady mix as We’ll So going and are come really on sales growth The wax of roughly were going versus as volumes from we improve processing. really is get at that the revenues terms

Joseph Reagor

cash sheet, stock get too. the balance I detail then there. raising you as reasonably you well of in and would say draining guys through the to use that the to looking capital How review item Okay. rise months, line contributing like unit do you last Thanks loads and sheet. comfortable about guys shifting and balance flow. performed you QX or finish kind then gears consider you reformer to to a do feel would Then expenditures just the cash XX for over can mean have your feels worked these I continue equity all the stat

Sami Ahmad

Simon add don’t equity and board think – I to has debt. this. down the to influenced I can right think pay now raise

liquidity we I small about standpoint we that think $XX did. a down availability the pay million following from talked

hitting We’re up against covenants.

if then covenant covenants did that this that lose you a basically original the of it it And reset XXX – pushed through those year one. resets recall won’t we last back covenants to year. So pushed

availability the I there’s So covenant bit But little $X couple bulk just million is done from with. will carriers starting on or we’re as we under repairs. And for reset CapEx the from that next reinvestments that get get or highlighted the of really the the all and the availability. a so weeks the over pay or POA that few on million expense insurance of squeeze

we a So starting out cash QX debt done into of think would now and would with reduction. we expense period the bulk I to of and good – that enter the we’re apply we will in free flow coming of business

Joseph Reagor

has the $X.XX compare then you planned that consistent And wanted that gallon the all that point get in reformer? been when that as I number in expectation to the I of clarification you that kind increase building the with one enough. does per guys How on Okay, market. the know, throughout. is embarked of guys to at price current byproducts fair my just or notes, changed but don’t on have a

Sami Ahmad

it’s No, Joe, that’s been the been we’ve pretty consistent about. talking number

since I between or $X.XX we’ve the years started like we something that this $X.XX anywhere thing. said over and think

Joseph Reagor

Okay, so to midpoint your the of you’d take for what it time the follow expected at just long-term. right on

Sami Ahmad

yes. Yes,

Joseph Reagor

guys. I’ll Thanks turn it Okay. over.

Sami Ahmad

incident. was nobody through other longer are months we and went there Hampton. think very side. frustrating here The the story three I that showed of least was the repair And have that’s thing photo production big At of – tells hurt a South it good that units course and that didn’t the up at any that ramping we on the we damage things

Joseph Reagor

good. That’s Thank you.

Sami Ahmad

Joe. Thanks,

Operator

B. Sherbetchyan Riley with go FBR. to We’ll Sarkis next

Sarkis Sherbetchyan

here. morning taking and Good my thanks question for

Simon Upfill-Brown

Hi, Sarkis.

Sarkis Sherbetchyan

what kind of future off a to And wanted into may some experiencing. perhaps of into that this more bit spot costs based initiatives. dive in may understand the to increases little this help formula dive bit first South pricing input be you further. rising price a at So confidence little us you some Can set opportunity on plus you’re give the Hampton

Sami Ahmad

we’ve think CBOB Well, this and so blended I CBOB to think of that which standpoint XX price past. off the as a it about Coast. we The competition specifically talked far way U.S. is gasoline as about is the understand they conventional competitor from Gulf in prices the

the So based going that’s up. about by to value blending prices affected response is competitor on way think be going the to gasoline and

with significantly in prices gasoline natural also over producers the That driving gasoline it $X.XX more from get your we could up think question, just I increased talked may it’s were leaders to purpose it quarter. think reformer CBOB then prices finally pricing. So quarter of then been to in And we in time that going higher if margins that byproduct improve talked in $X.XX be think quarter the require than we $X.XX these quarter some to Simon as go we first sense look we summer as what that about you the I to was we And at then fourth here the about on we trend market on And way. result support recover CBOB and will secondly I a the $X.XX need then margin components. we’re and into perhaps about. up squeezed in to here was And about third it’s in April. – starts when more as season, to the fourth leadership the byproduct typically more that are our first that get just will beyond quarter,

Simon Upfill-Brown

moderate negative over if lag of been experiencing then the also – the our the we’ve if then And you lose months. that last three prices gasoline impact natural

throughout look maybe. generally that I we’re buying a increase at gasoline you we benefit the pricing XXXX stabilize for as was that consistent quarter throughout you it and so the just to the was the year. steady there you that’s as And that in means previous some quarter of both we prices that And sort that but which benefited was start semi-slide that the point And get then trend natural If downward gasoline prices think of lose when from in trend downwards current when things a from recall differential or lag. quarter.

Sarkis Sherbetchyan

generated for sounds think in XQ what $X respect processing the That’s million to reformer be like of assuming the start the And sounds remind the scheduled units and is processing? it’s you And so in helpful Thanks it’s be I byproduct, if throughout super with XQ on us would here. margins. It that about reformer. Can to suitable byproduct the may reformer illustration. ask I like that. you up for online for may still limit

Sami Ahmad

through go cannot that byproducts some reformer. have do the we Well,

the head unit barrels some sea we We we X,XXX have process those through can’t a the my be to of quarter the streams, make million quickly the but that some math that Southeast. the significantly have reformer bulk quarter that’s a first gallons more in and through able a had in will than reformer. the And put day can’t X do I that the we but lights, those we force, byproduct

up day, we extra barrels X,XXX reformer I well than XX,XXX a a – still to the running expecting think are be when utilizing on more that have we’re think, some capacity. capacity to We we advanced fully barrels then as day I got day have unit. even saw, we’ve or you enough And a the barrels XX,XXX, X,XXX we’re

Simon Upfill-Brown

constrain not We time. shouldn’t for be long capacity all at a

Sarkis Sherbetchyan

this up an back if sands customer plant making reminder think of your in comments about with first the And oil respect sounds contribution That’s start from volume step some the should starting also there’s other kind The the I to standpoint. modeling I of be and the piece, prime to order. year. that it at right higher assumption that polyethylene product in like trending sounds Asia of shipments And Canadian will the and mean, a potentially is helpful. year. it start under like so

Simon Upfill-Brown

Yes.

it’s I trend a we think for first really And good America, – is definitely was particularly Latin I January where volumes, of quite us, very so prime the volume strong product had Sarkis high. we bit up mean, the product into but quarter volume on it’s shift

Sarkis Sherbetchyan

comments incremental in Understood. that to and/or of through on that cost some the labor and that in you the Maybe about experienced step kind costs. think And of then if additional I cost structure some storage distributions sure the quarter. mitigate back walking of taking

Simon Upfill-Brown

I’ll that Yes. kick Sarkis. off

Southampton costs to as we at want much through reasonableness. the to as freight pass within So competitive customers possible

those those approach to our adjustments recover in first to the make is costs that’s pricing. so And

leases, to are lease things our looking specifically some leases Secondly, we of payments. reduce at restructuring like rail car

from exited have We reduce those at some off TC to side storage costs.

have We leases this and us way. since of trucks at auctions values have some they bought again tank money low never got out sold that in restructured some tank trucks whereby very we and

amount. maybe in looking incremental amount themselves So are by we’re kinds all but they aggregate should good to at things of modest,

generally Secondly, tightness and about due reasons regulations. carriers just from the for rates with coming the we in car a talked we’re market rail faced higher and to

through the try takes terms reducing going to so rack I will push rail we’re a that steps at Southampton on. to as like costs I then about the and rail reduce project sales to those costs. quite talked mentioned help bit the loading of well of in switching expenses that spur And some as So that expenses

is the about sitting So are we I point not mean idle this.

doing mitigate can of increases. and we hopefully We’re cost some these things

Sami Ahmad

And other What right. the to are to very rail the have us of here low that they of adjust there that to price. one a one that where was rail rail withdrew for very, big store things to we by allow and companies local brought national that, we we’re companies, used cars out the big this

only that doing of a and that describing so how change. kind to of cheaper will optimizing I good that and other all those rail a store have things the is impact. to one lot adjust our like we each we’re And and positive had the that’s cost is have of what to there a to anywhere then of think going minimize to it things And attendees is big that’s store impact impact

Sarkis Sherbetchyan

what And ops Great, cash that in million remind generally providing I do saw one the CapEx that. deck quarter. the final the contain from thanks for slide number, which $X me, believe the is you One for that is for I quarter?

Simon Upfill-Brown

Cash with million. $X.X from ops will be probably Q shortly here

Sarkis Sherbetchyan

Okay, back thank I’ll in. you all.

Simon Upfill-Brown

Yes.

Operator

We’ll Tieton go with Dezellem Capital. next Bill to

Bill Dezellem

in you. you million gallons incremental so doing you rounding. and example reformer opportunity Couple thank we produced million this Yes, just you when quarter are the math $X.XX with where for profit byproduct that the X Where had – pretax $X advance have correctly of that’s the questions. an another volume of

Simon Upfill-Brown

reasonable relatively that’s Bill. That the close, close number. relatively That’s

Bill Dezellem

And optimized Great, making clearly profitability how this thank prime talked profit about the incremental was you your product that the quarter be $XX.X gallons that that the you. because issues you produced on then should many the we about this be with not thinking of you million quarter. here should profit

Simon Upfill-Brown

Well, I to the impacted past. cost your doesn’t bit in It incremental a those cost an decent Bill incremental think as and is you bit low We byproducts much of and provided gallon of of pentene gallon discussed a of were an of the can pretty producing we’ve by both course those things. at a really kind price. that energy sell little have little produce

there’s be So during on of incremental number kind trading I but expenses have kind should covered a benefit it’s… some start actually but don’t really We should mitigate additional I very of incremental on the costs some given the exact to on an we much we’ve volume of did the things, experience these some those mean Sami the of see quarter, going impact still third line, better we that volume. distribution those of know bottom all things. and

Sami Ahmad

it’s the us is a but for haven’t, we really gas. energy, cost incremental No, fuel

of for kind that think reasons. that, can you disclosed so competitive obviously we And haven’t

Bill Dezellem

would but experienced? not may and incremental the lagged be would if to be to flat mechanism this you be to and the want effect, were the that try. catch maybe pricing Relative I were one, the I to guess, catch mechanism up. pricing to will mechanism disclose up. next were prices And What profitability that

Simon Upfill-Brown

we that significant. competitive really it’s but reasons, about want I’m to sure, talk for not

Sami Ahmad

our the the to is that, will from the other of scale the formula, come if gallons we I million a round number, of chart, volumes $X.XX charts, XX.X prime significant. was I a looking if it so mean product right. And sell natural a that there’s increase to on be $X.XX in gallon price that price roughly stabilized, just would us, gasoline back but the as month those XX% at think one

in quite So it that, be than some months, telling significant. been not the increase can it’s higher $X.XX, I’m but was right. that’s

So…

Simon Upfill-Brown

It month a could be effect. one

Sami Ahmad

Yes.

effect. month one So

Simon Upfill-Brown

Wouldn’t be three months…

Sami Ahmad

wouldn’t be but million X effect, a It gallons. quarterly

we’re So that.

dodging So question. your we’re carefully

Bill Dezellem

And nice you very job it. a have navigating done

Simon Upfill-Brown

little of bit indication an We gave you as a lead Bill.

Bill Dezellem

you. It’s directionally. Thank

Simon Upfill-Brown

in byproduct to if we a XX%, XX% up Let’s could were volumes switch on increase product volumes. prime

so for a the this in than function volumes that really a are moving higher byproduct at product. and the growth prime why much smaller so as two base, and percentage those together of think was I Now time their your of

Sami Ahmad

else to pentane Well, we happens if what jump in month. get big

We convert into more that to in that’s So sell. take And lot and hexane finished can don’t capacity of be what have we product. a for sold – we hexane hexane to as has all than the byproduct example.

and So we result a pentane a as excess that January hexane byproduct we happens, goes what product the the into made requirement that market. jump. of to byproduct. and of very And had generally strong course lot And that’s a had is quite sell to

and important when is that’s is of advance you to in jumps have reformer volume it pentanes happens, there So this the so is how why us.

Bill Dezellem

action then Great, lack final pricing that more pricing And competitors conversation? is, add to would relative What action. or – competitive question thank like to you to you. the of

Simon Upfill-Brown

need I’m that with selling just and able where polyurethane. in the volumetrically, these wise you’re very market the but question, polyethylene, not now headed doing sure of we about growth we segments right talk probability segments recover are to and well. costs be many that wise. to to want but not I’m – we Those marketplace

take and we aware that will steps. we’re so of Okay,

Bill Dezellem

Thank you, both.

Simon Upfill-Brown

Yes, Thanks, Bill.

Operator

Research. Eisen with We question will take last Singular Greg our from

Greg Eisen

questions. of Thank you, Couple morning. good

Simon Upfill-Brown

Greg. Hi,

Greg Eisen

Hi, Simon. Hi, Sami.

byproducts. on First

started started talking first On the with byproducts, you. when – when talking I we first

it $X.XX. lot making over I the be of, terms like than to what would of this When $X.XX You at $X.XX that? referenced will byproduct benefit, in incremental could well, the or a of be than $X.XX, opposed or being gallon was look normal to more on say or byproducts thinking standard incremental If maybe that to a be byproduct driving was a Should quarter’s existing at you average. $X.XX. I’m to at $X.XX you a $X.XX margin? as more you time time, top deviation I be sort more $X.XX, margins $X.XX below a on more your remember margin $X.XX when margin, trying the

Simon Upfill-Brown

your understand question. I Yes,

increases in is the driver the aromatic causes – uplift margin substantially it and for basically that’s uplift, detail reformer the increase the the but into what So margin will it concentration makes those byproduct behind the uplift valuable. more only getting it new about talk of all we it, not what when the components,

instance, for $X.XX, those the it’s – period that so time, in that components time. were $X.XX quarter value at market that in in the last because reflects to of of relative $X.XX point any the at $X.XX So byproducts margins or

to over suggest you year components were back we wouldn’t So $X.XX, ago might I go and a say it’s it now. those relative $X.XX where that when are have different, been

Sami Ahmad

So, If may in fit first quarter in. quarter situation I first we’re XXXX. going to like think the the – be it’s above it a I $X.XX of would

going But a does it’s take to what’s there. number and in toluene So is particular $X.XX It’s to that aromatics of average the multiple versus an years break on. depend take it average a uplift I product across from would the benzene, on think out so then and tough the because of marketplace. $X.XX, – the to it’s it year uplift happening kind

Greg Eisen

hydrogenation the move was and unit. which Understood, understood. on question, to I’ll my next distillation

of You it is revenue kind but that its quoted number a amount of nominal working. for possible revenue

your – be number? hiccups pick XX%, distillation to post if field? or how wanted and where like Is last terms as could in this? to think it’s be quarter. Is long you of hydrogenation be my a operating had to is guess it along we XX% question going improved you I had it it sounds far it. You it unit is drive the And with over everything of percentage at

Simon Upfill-Brown

more we’re the No, distillation I And Greg. don’t but know it’s doing as lot tower a that, the through that. than number is, below it’s also exact well. lower significantly what

the eliminating running that think we’re will still they is unit run have we’re I progress on can And Penhex be hiccups, we So on and when we’ve so what these here that, pushing, we still on. definitely hydrogenation significant have shown continued we other steady, there.

product, feel runs We need optimization it, go to makes we want coming at through. call but are the that that’s mentioned we least still can on will know I there be, to it where we quarters. be from the but progress of we there it a what long part way continued good is now in And

Greg Eisen

Understood, okay.

I was I high little question could, One So last there a on if Simon. bit my understood. number,

– On Chemical recent of a into stepped on in Trecora months. the more you a hands role at

to previous share? any to you’d that operations that time closer period from this want than surprises Is got were learned could the that. probably about what anything to You’re you now there about share you the you’ve business there

Simon Upfill-Brown

we driven, before records, sort a a think an lot change on doing fact are that real No, touched you of I and something a adjustment. or less work little becoming make the process analyzing folks of analysis more really bit use intuition,

then had with So the we mean, was And the overwhelmed there’s issues just that with were stuff big that. was of done. to do one lot I additional of more resource, amount the more. it we a first certainly we’re be having that can of

why more. that’s still to we’re added going So people add additional we’ve a few and

approach a we needs way to the new made, modification in the things. project, kind of we approach that those improvement significant is way there a be So all and

to the run starting I’m So way is excited very place about now. the

Greg Eisen

thanks my Great, answering for questions.

Simon Upfill-Brown

Thanks. Thanks, Greg.

Simon Upfill-Brown

would We time, your that we voted to events shareholders be look are at on May XX. us need vote especially it’s So important will our AGM company. in Conference please like at call. those next on X. Monica fact those today, I Thank Boston to we in Riley shares very progress greatly of to two Annual all voted. Institutional thank interest. at their for May our you Santa you our and our B. shares, Sami have in IDEAS will updating very than much. be thank on you that are and in to the all the be Conference And at remember weeks we our listing support your continued in And less all forward for appreciate to

Operator

you conclude Thank participation. call. for does your today’s conference This

may disconnect. You now

Trecora Resources (TREC) 2 May 182018 Q1 Earnings call transcript