TREC - Earnings call transcript Q3 2018

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Operator

Good day and welcome to the Trecora Resources Third 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 with Piacente Group Inc. Please go ahead ma’am.

Jean Young

Thank you, GG and good morning everyone. Resources XXXX Trecora conference the to third earnings quarter call. Welcome the release markets after was earnings wire yesterday distributed financial The the over service of the afternoon. close Chief be on and President Officer Chief Upfill-Brown, Presenting today Ahmad, Manufacturing Dick will Sami Officer. call President Executive our Chief and Financial Executive and Vice Officer, Townsend Simon Chris Groves, also will for available our be Corporate Controller session. the Q&A

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

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

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

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

Simon Upfill-Brown

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

strong in profitability operational experienced product from and in and we recovered revenue levels QX, volume quarter. prime remained cost QX the While impacted operating pressure, in feedstock that challenges costs higher wax

reliability and quarter net demand, $X.X ongoing operations focus continued results. year decreased in sales executing and to income drive to from AMAK to encouragingly heightened product to our Reported of million. period included EBITDA our more more same yield financial wax losses consistency compared prime predictable last improved adjusted transformational quarter plan XX.X% on strong equity Third in the third million, $X.X the

capital leverage program. a our updated assets committed multi-year following are to We

to South customer in feedstock quarter volume to X, Slide at in from details Now dip operating and costs the QX. led higher the expenses related saw product looking prime back Hampton, margins. lower we of higher the bounced But,

were we Advanced to that we the the this our power QX unit as catalyst issues delivering impacted unit uplift margin experienced the was Reformer supplier Unfortunately, was late delivering in expected. external addition, discovered In the we pleased electrical see activity unit. from recently in

came on Turning revenue. to impacted volume which with quarter were weeks we Trecora Chemical, first supply solid few the that despite we issues discussed business of quarter July. results feed performance pleased to The of and wax call deliver the wax strong the the that the in second continued the

was quarter Third at plan. custom below processing TC

of hydrogenation one and amortization improved to first the improve second, Chief supply he helpful South the transformation performance positive, shows to concentrates. down Slide volume evidenced The negative Cash East. running Dick XX.X% him and as Hampton by more Middle net the compared show sales operations it be depreciation volumes the have reduction product sales quarter increased to from in about we and has SHR. TC was our total prime X in experienced ground volume AMAK the thought sequentially AMAK quarter with as is before million both $X.X orders product in from decline share would in in year-over-year $X.X plan, hit income quarter, details to flow third and and earnings. unit plans Canada reliability quarter-to-quarter, from million. International continues well our were value and often international in in few were of leading. of the XXXX. byproduct quarter, for Dick our about unit QX. primarily Total copper to breakdown sequential issues Manufacturing As plant and of of fluctuations this third speak distillation Townsend, and quarter the equity will performance the due as prime but process the detail a A strong deferred along We due but from to zinc the is in total, MX minutes delivered was the we a and of while XX.X% as inventory and in at in implemented Officer in in was XXXX, at most third quarter down improvements. both plant Resources. feedstock volumes safety

European last shared the we we in currently, quarter, no Union. conduct China or As material business

and proposed continue no actions. while expect impact So tariffs monitor from we such existing we Today, tariffs. to

quarter Our impact in customers SHR, to only XXXX XX,XXX XX.X% XXXX. compete of under of capacity ability in to well. Feed appear about and confident was as unlikely feedstock the third prices of utilization quarter result XX.X% XX% the utilization for second adjust of market with quarter fresh years. day end per and barrels the that their slow Capacity third at tariffs pricing. margins remained compared based just is a as in to Petrochemical on both elevated pressure feed are

these plan will and pressures this have Sami other We a discuss in place and to in more address cost detail.

Reformer. engineers a been activity impacted. discovered catalyst Advanced but of as catalyst as the the After July, to we we the plant experienced outage unit disruptions the the on our Advanced thorough supply an shutdown margin the the as power The provider, following X, view well reduced and caused performance run continues of by had expected. that entire in Slide performance. Reformer that our In restart by late was Moving delivering external commissioning the and uplift to of at reformer the QX,

decision the catalyst, months. this estimated the next execute to This XX-day which replace over units the the result cost the $X shutdown underway of The We work Pfenex to new planning the at few a continue to Advanced have cost is with made in Reformer will includes catalyst. million, run. will of

supply utility have and program, what our improve an through ride to to see of the power can our to be the SHR improve electrical ongoing near to with completion which external working disruptions. are to power done We power ability is robustness

Reformer annual million from contribution changed. of million $XX an in Advanced run the rate EBITDA and for annual not has to expectation Our XXXX million $XX by XXXX $X

Turning demand reflecting results delivered QX with Similar drove increased wax Average XX%, revenue value mix. update price in the Chemical at an year-over-year. year-over-year. TC to our wax and higher X, up continued solid volume increased quarter improve waxes performance. for selling Slide XX.X% sales Trecora enhance XX% pricing last to marketing revenue and our strong on Wax to increased quarter XX.X% strategy

but third had we stronger custom not been XXXX, quarter revenue struggled Third much XX.X% experienced would grew processing have demand. to quarter compared issues meet and have plant the of to

plan past As we run over executing have the aspects manufacturing by described months, Dick all a a address to operation. minute detailed we improvement of are few

on We significant are that five are we months progress implementation. into making plan and

remember, asked made this to that today, and some the plan. Board you of to-date. As to him our broad Dick due the manufacturing down importance may outline step I transformation the from to progress we effort, have the of of plan And share have agreed to lead the

Dick, ahead. that, please with So go

Dick Townsend

and investment community. to Simon for the share plan with Thank opportunity you, this the thanks

the experience at X, South Chemical. Turning to performing and Trecora and poor XX at with familiar my the and opportunities the plants turnaround board am work very to strengths years of had manufacturing Slide Hampton lead through ExxonMobil, of several through at I my opportunity I

feel addresses on assets, all real new excellence our to that end these shift very our of of nearing So, and benefits our operations, plan execution the Knowing to capital we the safety, and change. ability we of exploiting aspects culture. need implementation operational I April in in the fully This began year. focus from plan a reliability, crafting work plant this confident to would that of were building deliver company

processes simplicity, goal grow. our operational speak and drive efficiency will sustainable same as excellence establish continue of a all change standard to and be to that Our processes sites. us allowing plant focus on consistency, we improvements will will work at replaceable is and the step language suite to Those

work. are principles and work work, safe guiding Our quality productive

parts first, So, turning and of safety to made Slide plan. our progress highlighting we already on have X

have have assessments. by significant of gaps plans, these Process developed closure end well year closed closing identified underway gaps Safety and on We’ve Management a We we are XXXX. percentage these will and PSM, conducted defined our gaps

the contractors the as tracking and modest in capital implemented some years. that be of and for safety require to initiating and behavior oversight additional as standards greater in metric may future detail, on of will implemented employees investment safety well corrective based based include improvements We field, data. attention both Some management redefined actions sites at higher programs

operational next history. process is is place Hampton, operation level increased Trecora will Hampton to on consumption focus unit reduce take South stages and areas established plan in Turning cost of life stability, therefore implementing technology capacity and different and a procedures and different along yields, energy South with long are the improve Chemical of The already that quality performance. focus. are reduce we Hampton’s South here availability, production. technology At of executing have process will The to and

year see to we XXXX. improved expect move We results as in the throughout

of execution in We wax major a our focus higher and products production acquisition the the the are business. of into was few Chemical. years Trecora assimilation the of and investments organization, hydrogenation of margin on facilities distillation The in initial

our in the wax and major products capital margin progress completed excellent producing have process, assimilation investments We made the with business. have higher

assets the have driving business. Chemical in focus A both faced our we Now, exploring Trecora reliability our by built been process fully challenge and cost stability, by shift will and feedstock structure constraints improvement. purchased wax to has

processing our supply. We the hydrogenation work processing products plan improvement a ensure match performance our We the between is currently business for rigorous customer of will growth, identified distillation our are experiencing unique processes, includes to our processing, design some producing running. The feedstock execution gate challenging, huge in business a we team is them campaigns, believe because generates we are our deficiencies we productive which the more and opportunities short to strong the the will goal and be is a to new stakeholders. and good in returns us So, modest custom of believe customers excellence developing investments sources allow not and is our ensure set expected have for have end, of effective our and have capability The date. for currently work yet correct that opportunities our additional assets. demand the requirements. implementation and In we stage yielded to of process of we our to very success able operational we the to with robust varied few our a be investments for and capture screen because

our by equipment of utilizing through predictive operations and operations, are advanced focus, and analytics our stabilize capability we XX/X organizational skills reliability data our drive Improve of deeper at appropriate detection reduced to core we of working early and manufacturing capabilities. availability hone As and critical warning needed degradation sensor operations and improve by staffing understanding technology competencies, identifying our capacity to early enhance the of monitoring leading levels. and a to costs, improved use

revenue you your I would Finally, to I times of before culture will I future we organizational change opportunities to executing, customers to standards, turn our to and on reliable, Thank it delight to profitable on we huge plan confident have many again. safe, back maximize capitalize the to our and assets. the Simon. are accountability the transform are visits am and see facilities. our like higher meeting return deliver during to facilitating many over which drive I the in drive and And that predictable you discipline. production forward our cultural implemented look we

Simon Upfill-Brown

lead transformational Dick you, for this to and Thank ongoing thanks change. efforts your

and quarter. during for update dry depreciation profit progress. AMAK, up and third of Slide Turning the which QX before copper a amortization was continued the tons We X sold total concentrate to had metric of was quarter, an during mine showed and XX% good from a million the net on quarter and XX,XXX zinc $X.X

look to revenue during QX. coming throughput. have investment mine. recent silver be metal mine in our of shipments the first to at continues enhance occurred XXXX our that booked the able and monetize precious even Improving XX improvement and the AMAK highs. show year we to quarter during circuit, expect and the gold quarter negotiations shows be the mill operations banks investment corresponding and continued improvement initiated expects reached the with we in marketability recoveries the confidence be of better in Slide consistency On to again in will once as the an year. increased the we solid sustained in to and QX Metal the grows months

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

Sami Ahmad

of provides brief good and financial quarter everyone. Thank the to you, Simon a of summary third Slide XXXX. morning XX

adjusted losses impact margins was losses $X.XXX impact was year of of compared had million a of gasoline diluted Third quarter of X.X% EBITDA the In year-over-year of $X.X third in South specifically XX% of to ago million which of quarter million a of share we income loss disappointing increase million $X.X share and per share. in EPS natural or to quarter. and TC. an included XXXX. XX.X% for million, same share. an the EBITDA the AMAK net margin per $X.X in quarter diluted includes of or quarter period, the adjusted Adjusted a period compared estimated $X.XX per $X.X XXXX. net for second the mainly quarter squeezed of for diluted AMAK or cost with Hampton, about $X.XX an the was third per year the margin XXXX. equity or South compared for in which $X.XX but million lower negative with higher at approximate adjusted feedstock EBITDA excludes the due a diluted At cost were AMAK Hampton, representing were quarter EBITDA $X.X net share AMAK EBITDA excludes $X.X equity in third equity $XXX,XXX increase ago of margins of after-tax at quarter, $X.XX with income per Net diluted loss for Adjusted

quarter impact product due margins Although natural negative was second second recently Hampton’s elevated stabilized to cost of South quarter. of on costs cost relative have to the inventory and compared higher materials had gasoline the to prime a this

was for from higher costs. to million for amortization increase additional In the Depreciation due quarter, this $X.X also increased quarter the operating Advanced Hampton addition, South to and had DNA the second Reformer.

the Compared year and increase were operating maintenance X% higher labor product overtime, costs up gas, contract higher and with second natural at a Additional the compared costs costs, to for labor primarily electricity, start third experience and were associated ago all drivers were South Operating to for to to second that quarter. costs. Hampton cost utility XX% the issues and primarily training, quarter, due the the Advanced about the Reformer. we quarter transportation compared up

many higher were cost were significantly Advanced rail capitalized are Reformer third-party from expensed. because primarily the Transportation of With and increase at which to year startup of higher ago, of costs the a yards. these costs, storage higher of an rates costs previously due the rail in freight

previously We that quarter these were the about million and than that they starting Advanced personnel costs the more training unit were and although capitalized. were $X reported up Reformer, costs for third in have the there of go offset that to expenses second overtime and related one-time were that optimization costs away they by in did quarter previously for were

fronts We so now up cost, experienced operating in due capital plant reduce of TC projects plant on, costs all team on operating maintenance to for quarter logistics the and year-over-year are to are in and the primarily reliability focused actively costs complete. equipment labor and working improving these on time. as areas, higher costs that higher all

improve I impact specifically taking the While Advanced we spot At is appropriate. low and sales to our XX% announced of XX% many increases products have margins. June increase Simon October the steps increases margin start-up prime to costs costs. active Hampton are as additional been us the are Hampton, discussed about feedstock considering for the Reformer as also the generally we’re relatively sales. temporary for rate in price and headwinds South business, thus for of These South utilization at earlier, The we increases facility at prime allowing volume indicated, price product is our and which successful variable to

$X.X $X.X quarter. third to We’re for freight from rail the logistic CapEx options million down in second at quarter costs also pursuing reduce was Hampton. the our South specifically million,

million, Simon catalyst quarter the For for addition in of additional this discussed CapEx of $X that the million replacement normal costs the earlier. approximately fourth we of to Dick year, and expect $X

$X.X XXXX expected million year-end $X compared for of XX the excluding Prime that was as and and byproducts. gallons next to product million debt quarter due million million second the X.X% spending petrochemical quarter were to quarterly is in expenses the at volumes quarter million including we at but million revenues. quarter G&A completed of Our broken Long-term were products X.X% in million $XX $XX.X volume $XXX.X out in loan fees XXXX XX G&A end September XXXX a at be our compared third approximately the from $XX Year-to-date, the range. for should or capital July. refinancing of year $XXX.X prime or presents $XX of in expenses the Slide were were the summary the current XX.X year $XX.X to by borrowings the of revenues. the revenue million sales end million to of million million of and Revolver gallons, the third down million at XX, portion, gallons second and ago. the of second quarter. the XX.X quarter quarter, a end

we design full which Thus, the second for in uplift with quarter. increase Advanced $X.XX up margin reflects quarter, didn’t normal million Byproduct quarter, compared operate the discussed Reformer experienced volumes margins that X.X prime from in gallons per feed that gallon volume approximately in recovered was issues customer per and product the above was that the $X.XX specs As byproduct from second partial with byproduct in third the compares In started earlier, ago. we July, a year the margin we million at quarter. gallons the X.X third the in gallon quarter.

chart, month’s In in in prime per this based XX, average show the suppliers the well market of a gallon we can The on as from natural to prior as feedstock reflects basis. higher squeezed delivery quarter feedstock this below get from the costs last XX% contracts environment, Slide costs. price of third a was amounts. minimum as and the that fees costs on rising and flat The year XXXX, formula-based we quarter year. contractual contract period our feedstock gasoline second were of when approximately relative products are our process volumes cost to petrochemical compared same margins incurred shortfall Turning feedstock spread the the on as a any

XX, Chemical volumes Trecora the from to Slide from XX.X% Moving a the but second down at wax sales quarter, in quarter. third $X.X were XX.X% million year up ago,

uplift price of for and that the over distillation TC. the quarter third South first quarter, And pricing revenues revenues business turn back $X.X increases the supply. constrained the revenues Custom custom XX increased second down the is million, increase Hampton in processing at XX% the For units revenues call specific we quarter. that, This were customers. Hampton XXXX. up same the to presents XXXX, the million, third part quarter most X.X% were B year in compared approximately increased from I $X.X quarter to particularly the due third of quarter, mix increased TC wax but those in minimal period Simon. the processing were last from at improving concludes XX% the the overview were third due also in financial achieved with Custom was were down at Average review. XX.X% feed third processing were to by of sequentially. to year-over-year and an our as XX% quarter the wax hydrogenation will Plant third Wax primarily of from well up a South and XXXX revenues two price in with as Slide quarter sales were quarter. third as quarter

Simon Upfill-Brown

the catalysts volume continued and and increase Thanks, and disruptions strong. And recovered improved to for efficient impacted costs, mufti-year in execution. were Sami. our products revenue, and AMAK mine elevated quarter profitability. we production, drive capital revenue margins go feedstock to have operating we Demand but plan shifted To operational recap volume With as the to forward, and our product strong increased remained reliable we see on quarter. wax profitability Slide full prime margins and complete, QX, many focus during pressured XX, from our

executive call, us. achieve Humby as and strengthened Mike have our help whose we with of on We guide transformational experience Townsend a significantly today’s and team are Dick excellence. additions will to described the implementing And have developed plan operational Dick

will strengthen prepared the This we open deliver driving us our that, cost I improvements, confident of are competitive this We time, value like concludes remarks. to the and reliability by stability, and ask call that operator position exploit structure process position to have assets stakeholders. the my At built for fully Q&A. to to all would our effort

Operator

Instructions] first Reagor from question Partners. Capital Joseph [Operator Our ROTH from is

line is now open. Your

Joseph Reagor

taking morning, Good questions. for guys. Thanks the

Simon Upfill-Brown

morning, Good Joe.

Joseph Reagor

in you Advanced just a through guess, thing this I the be kind happening maybe walk little the to first what you doing from us with thing on detail future? going Reformer are to bit more the of prevent

Simon Upfill-Brown

did not now take ensure just Dick will then big We join the has not world. in can as it carbon system ability everything power ride is been that, that us so the storms been to and again, catalysts because happen first the stab important power touched experience that and to we the down part fully to very to as and function in build catalyst a on and us. recently of It a go through prevent we I outage. confirmed protect up on can does at place put this

And able power so outage. be to to through need ride we the

our distribution with have of down. a squirrel main whole visited transformers the and bit little of You system took a at hurricane. preparation the one plant that This the in was least

in what’s a now So, am and very the called do Joe, place comfortable ride to this systems we a have I lot during experience learned we that through.

place. those additional systems, all now in kind involves all and automatic it So, of training, things are those

Joseph Reagor

Okay.

saw think lost over on you the can Do wax you up questions lot TC, of the of that to a volumes back I or quarter. keep was two as pricing volume pricing revenue the tick items? lower kind one Moving in there,

Simon Upfill-Brown

We we another additional through road business wax on of the No, our we transportation that business can We and costs can optimistic prices. so increased for been freight are those actually wax in some base charges we experiencing. and I we’ve hold to put increased October that prices. think we the hold coves price increase

So it price fairly was a significant increase.

And so far of a those or with have delays, couple those agreed exception increases holding. of the we to price prices are

So, able that we drive to continued see find us improvement some. wax we are we also, it should mentioned as looks and supply. Peter be and optimistic able have are is Sami find we that mentioned Dick like additional and to trying to been program, helping

we to hoping that eliminate short are early of experienced the issues of third quarter we we were some in where supply. So, the

going with volumes as help absolute So, that’s us to certainly well.

Joseph Reagor

guys expectations enough. QX there TC can were additional fair and portion Any provide down you then And hydrogenation quarter. of Okay, distillation mentioned for the for you there? also units at color good the a

Simon Upfill-Brown

some we in were have exchanges process we unit size some third measurements might systems, major, past the we we as well during and of heat hasn’t like feed – release need install. we do have hydrogen things the Nothing that this to initial we other had to we the a it valves is modifications some outside couple which haven’t design, missed into there and that on would been pressure primarily of Well, been the safety been and pumps install running the think and down quarter, like has studies as and catalyst to the the the in now reactors. increasing quarter on some running on significant both used also flow so, that improving help and it’s further got Joe,

changes, will I whatever in real we although in things of minor XXXX, we can fourth think to benefit quarter not soon that the we improve see as do the to can. but will as much we so relatively So, start probably

Joseph Reagor

thanks. turn Okay, over. will I it

Simon Upfill-Brown

Joe. Thanks, Thanks.

Operator

Thank you.

Tanwanteng next question is Our CJS from from Jon Securities.

now is line open. Your

Jon Tanwanteng

gentlemen. morning, Good

margin already? prime guys, feedstocks can do As to and sequentially increase this increase product you you than you far for price declining to in you environment have have get anymore as

Sami Ahmad

recent crude historically natural Jon, we and there. have Brent seen in as Well, in are has in have seen they we crude correlated October, decline prices. off gasoline decline come with weeks been

as the And successful well on will we mentioned of in increases. think I benefit I get fourth mentioned, also and Simon price have So, that quarter. been we as

piece it of our really those formula will increases. not affected was business, business, the contract Now, they spot the price really by impact

Simon Upfill-Brown

thus the by it’s lag. decline, for is should where it if there whacked natural if as that price renewal, gasoline decline course that’s then lag the far the the contracts in every we of up time benefit the come in the no month that’s go can flat, benefit for it’s going get of benefit really lot And increasing increases, is a decline it’s year month-over-month recent for energy from we but is we and right, us it there as those has where certainly Jon, in, done the prices most provided, of continues

Jon Tanwanteng

all responsibility they or Got outage, the replacing your that from all at occurred that it. catalyst does facility? power in replacement the to Thanks. that’s any just – damage And for regarding any the the are share cost utility

Simon Upfill-Brown

very the have they are that jumping way to than like up with We the from absolved you down they and getting and of No, utility, unfortunately, to unfortunately. issue other They no think screaming would that and back manage are to at yelling we that be is any in that them. it to it be but we can will that do have able and it up we to responsible, ourselves. have but pick do we a through ride frustrating future, able to fully

Jon Tanwanteng

updates down update to start for expect you EBITDA start expect generating just where you paying these your on flow cash guys? really then give Okay, great. situation, do an projects to kind And with you capital on you of when all debt the

Sami Ahmad

John. Right,

available key pretty mentioned cost million the higher itself that are catalyst cash we In is expense to fourth to the as debt much CapEx free the good. debt things cash to declines labor the is $XX for so flow $X quarter, fund to I $X of the talked related year, and for some discussed reduction. and the replacement XXXX flow we out as the about. and costs partially quarter and and of Operating replacement to borrow both other I way. for is need to fourth so to the may So, the the our you CapEx expense plus expect million that’s to do million be be catalyst significant In for the mentioned quarter, we going going into as as that, then for increased

Jon Tanwanteng

just little the bit is on that there sale finally loss is mark-to-market And down at process something and a simply issue and thanks. AMAK that going the going for finally your update only that the an just more Okay, asset? or to else inventory there was on color on

Simon Upfill-Brown

things else. because costs and were we so in lower reduction was was and market the mark-to-market two actual sold efficiencies it of we the of – cost came the than a but to so quite a also more down the inventory, one volume a bit and there There on a during have we books produced, inventory on quarter there issue, wasn’t everything

in also inventory. was there of drop the a the value So,

negotiating significant we think, that, fairly banks discussions a hence I strong. yes, significant how are number beyond anything we’ve briefly we we in been I to was fairly really And to prices the has or impact, cash touched discussions, on the, are are been investment deal. do this and like pretty So cash mean but it not I on talking

what keep So forward. things will to have but where we guys are. move we say Obviously, informed we you as circumstances, that’s under those be careful we

Jon Tanwanteng

Great. Thank you much. so

Simon Upfill-Brown

Jon. Thanks,

Operator

you. Thank

Riley was question from from next B. Our Sarkis FBR. Sherbetchyan

Your is open. line now

Sarkis Sherbetchyan

my thanks Hey, good and question morning here. for taking

Simon Upfill-Brown

Sarkis. morning, Good

Sarkis Sherbetchyan

was flow cash Just the XQ? cash to what flow operating on situation, for touch

Simon Upfill-Brown

Operating the X filing Q week was we Sarkis, next flow well, ended our for XX, $XX.X for will it but XQ, million. cash be months September

Sarkis Sherbetchyan

And seems Got it. then taking bit little quickly on catch think Hampton, are up switch if lag and real you effect the of a South at price to to actions a we be about margin. gears it

XQ anticipate having were back here, you ticking of XQ for frame kind that? that up Now to would similar you period can or the help margins

Simon Upfill-Brown

as but there in touched in been natural Sami guidance gasoline very steady giving are October, on we Well, about prices. has on Sarkis things, decline a nice these nervous

increase has that is comes something lag, have the – a most well, in increase our done up So, small impact often we business right. in in led and a very small it’s of The that real benefit we held past, that come there we impact this October, was but it we from renewal. a should price price piece for but led not contracts cases when

what pricing decent be as and the quarter. depends the So, purpose lot that make years able should that our the and benefit for and Mike December, thus aggressive at that on return pricing be really to have over customers is the of pentanes, But haven’t on start only sure, a as one these off to this in for least some of we increases is we forced us is far a cost to capture we experienced. very lead the helping our so a where there need in understand on good does being but the in get we lag we some October we that have so I cost are November increases by and things far think been of helping manufacturer can capturing of

Sarkis Sherbetchyan

inside Understood. bucket And perhaps Can costs inside XQ, the be were of of a to $X cost mentioned more offset that some maybe talk out about of costs it I seems number million of than you about one-time absolute of think that that. from XQ XQ? Sami more the non-recurring but

Sami Ahmad

talk away. hesitant is million say okay, we much not QX that is of through nonrecurring, what the I as most can I that go but am we going because of go the sure on referenced number, be to this did process, Yes. to how about to am I absolute

optimizing there the So they in came variety quarter had construction QX for a related that in Airmax were time in the and being were were all to is to out just unit that and training related the over really and startup capitalized costs into and a we experienced progress, we done. period. What related shutdown lining expense CIP, was then costs that the of to during

So, was of it combination a things.

Sarkis Sherbetchyan

sounds is right And it? to cost of line, way that Sami, think hit that of like the about it goods the most

Sami Ahmad

Yes.

Sarkis Sherbetchyan

some some the or kind to then of would million look of had and And associated the capitalized of $X there, at in issues it. if the Got with hit we reformer the writing all the be cost going that P&L you period? is

Sami Ahmad

going be that both the of the cost capitalized. and so labor associated to That’s would capitalized. costs replacements, catalyst will No, be catalyst and all that get

Sarkis Sherbetchyan

all helpful. you. Thank That’s that’s Yes, for me.

Simon Upfill-Brown

Thanks, Sarkis.

Operator

you. Thank

from from question Slam. is Mitch next Our Sacks Grand

Your line is open. now

Mitch Sacks

how look the margins, do for that you QX, put of think for then again about Reformer, shutdown, from think per you your are for know we how but have at when gallon, that presentation into I and when think for at sales do to respect how year next it into next the QX business I a when sort the we I that With Advanced byproduct that I about you and much byproduct guys. to year, generate, looking because about look cents Hey, for reformer? expecting

Simon Upfill-Brown

gallon. running, uplift when we that $X.XX $X.XX to was Well, to down even with $X.XX in and we quarter were I averaged shutting the Sami this gallon expecting the July a during mentioned Mitch, in we September, think the thing And then were startup that uplift. as the getting

quarter, to will $X.XX, going the is XXXX, spend financial days so it I catalyst. million sense get able it’s down to on or and run, which it then the in the XX uplift. that $X replacing why a the but to catalyst we So, be makes continues the already on and should we while much, running replace sub-optimally, through $X.XX we are forward fourth wouldn’t of be But in I because gallon count unit think October for

all by very it expect up the the started in but we I we efficiently in So, XXXX fourth year. would benefit full little X should the January get quarter, for have provided

Mitch Sacks

inventory you of save QX? So, some will the over properly BTX for running to it in

Simon Upfill-Brown

for unit? The the feed

Mitch Sacks

Yes.

Simon Upfill-Brown

on as will are can running we than we production. normal what we the we faster what do that, can we run because can Yes,

up have know. Mitch you space do as we space a little that, inventorying of will but will for was. we what before we store much bit started things, July on in it So, we did but limited as whatever we XX for as the can, can lot we we We don’t as a have

Mitch Sacks

this? you help spend insurance interruption is all with it at this $X the business not or million Does covered by of

Simon Upfill-Brown

not it’s unfortunately. No, covered

Sami Ahmad

not event, It’s insurable Mitch.

Mitch Sacks

you obviously design terms the And have is of done it this the to forward? possibility past of reformer, could going and alleviate that in done then what the in or should have

Simon Upfill-Brown

we Well, was that needs outage, to ability this right, catalyst while it mean absolutely a it’s carbon were debates, power so catalyst a one recover the is with be turned off the the is what with to I is coked burn robust, burn carbon and can essential. because very ago oxygen you catalyst. system very, having is was this the if that this we October happened ride out not feasible discussing with little with of Joe during through thing it’s protecting early to I can the

catalyst those that we you goes have and all a now very, fully and through will automated. are that unit So immediately. to down of systems very The place and goes ride the robust now the unit that get you drop immediately the have and in we temperatures fully and have down means installed hydrocarbons

why you have it’s waiting or the no The something mentioned impact just have that into this to So, is this unusual, that employee automatic we have are controls. provider catalyst for problem, and some react not there to completely us to not so is guys has technology is automated this we again. everything like this cut setup but that, have thing the issue, to first won’t right,

Mitch Sacks

Are those situation there in plans operations? for those two systems you do need other that plants your any to similar in in avoid to that

Simon Upfill-Brown

automate but is more think of is our and optimally. know on wherever that? can want more you anything are maybe always transformation have use you can you systems this to a there plan little a part that we the step I I Dick and if in have big bit mean add to here, Dick, don’t I trying to you

Dick Townsend

say we It’s for have Yes, said the the a – is while. pretty of material most been of around I process. rest would the as plant

startup is just unit, so protective got issues, you I built rest a on believe So few new the the the capability. as we far as unit as it up a in have and place. This in of it we shape we but systems good pretty are know, started

Mitch Sacks

some startup are that normalized XXXX, running still more be QX then hydrogenation and expecting that unit, respect rate to And expecting distillation to with and we see to going ‘XX revenues think we the from when I we are to expecting at we about to dealing the before with of in some so issues? start be were that

Simon Upfill-Brown

at a underway. and should been well, mentioned, catalyst and there running And I there. work October. It engineering introduce while running we an we the it the possible changes as to some unit is is been have and that make is has of have of month we ago Well, little that running changes we company through some looking hasn’t as the issues we have expert would as expert some certainly had smoothly like a to

work have we plan I clear is done bit to the the the a quarter, little since that what Mitch, to fabrication a think should optimistic, we hydrogenation fully delayed of that that a bit is expectation work unit action but bit be have Our to too but in mindset too take bit it engineering needs thing up or of a have have and little all we be a XXXX, very maybe but shouldn’t functioning be different in of first we started loath little year, this unit very under-delivered to over-promised last a and now. little executed, but long, has on so

Mitch Sacks

that the service high for on unit? still there demand Is

Simon Upfill-Brown

Yes, it’s strong. very

Sami Ahmad

have know Mitch consistently efficiently. we that been really Yes, you our the restriction the it’s as run saying on side, to inability and is and unit that demand not

Mitch Sacks

this supply start Okay. extra another look you had question, that And then about we revenues that do have increase said starting I and supply? quarter, in you regarding of you to in found that quarter an final supply talked this I guess wax think to wax ability for

Simon Upfill-Brown

yes. so, think I

have should in some we this think I more quarter.

and then One to well source outage through us another and of our has that first of also. ride suppliers have as that in should outage year supply next quarter are be of the to wax ongoing planned a hoping we

order some are different there will optimistic the to two placed we additional wax, for and other. we get that of So have potentially first and Mitch the is sources one continue from the we

some and see should additional increase in as for mentioned a did earlier, as we think October we waxes I well. yes, volume put in So, price

Mitch Sacks

about you the question with call you price, a about final purchasers. I are then I And they to banks you on are you mentioned guess you, actually asset AMAK, on with then to mentioned Okay. are respect were the was expecting talking that at sell investment confused for different talking that? were and talking little you what you looking

Simon Upfill-Brown

negotiating what the investment will No, fees bank their be. with we are

Sami Ahmad

negotiation investment than… banks with more rather It’s

Simon Upfill-Brown

of I mean, purchasers it’s the all Not purchases. potential for listed bank. with the investment bunch a the yet is getting but one with us, right terms about

these success As a guys on with fees and you can know, expectations things. demanding their be bit little

Mitch Sacks

Yes, thank very much. you

Simon Upfill-Brown

Thanks, Mitch.

Operator

you. Thank

Our Greg from from next question is Research. Eisen Singular

Your line is now open.

Greg Eisen

earlier in you so for answered Simon, the Good call, on may apologize I a little this for out how Thanks. during have question jumping And late, call long but morning. the was outage? already power this the

Simon Upfill-Brown

plant was but to know enough down. can’t was. the it long take I remember whole I It exactly,

switch hold up for to It over a but UPS down can significant of few that’s the transformers outage. these that Greg, and this was systems main one took cycles, the tough have from. at a you We very substation

So, that squirrel and… got it little was a there in nasty

Greg Eisen

Are we hours? talking

Simon Upfill-Brown

hours. occurred the of severe connecting a period Yes, dips couple had to some due over voltage to the from that the very a We in it power. was system faults of the animals

yes, it So pretty severe. was

Greg Eisen

trying am place do backup this do you power to you in I situation, Okay. the understand, in generators actually have at what plant?

Dick Townsend

capability at, that do power It’s plant. something will we generators for We small but capability now. buildings forth. for the look and so have have don’t provide we have total office right We to the not

Simon Upfill-Brown

nothing to megawatt able the hurricane And and Dick to and of we UPS – us through X keep before kind you blip, that will of had we got we thing and Harvey, Greg hit you at have offices the You like run able when of systems recall be capability present back. do three switch but computers the a running rain. that’s couple the flick a much cycles to of don’t we to the described. all hold in time, power We with generators so are plant a that but just bring can got

Greg Eisen

outages, of future I working idea wouldn’t one same I through understand you trying differently hurt the you the if this be these could Because don’t do way? again the how see and to of what in Okay. happened am

Simon Upfill-Brown

from reactors the and can thing under inert reactors. to safely residual the able gasses do the systems. inert do don’t not you the the pump all catalyst is blow out Well, to you that, unusual will the hydrocarbon hydrocarbon big of that, off need you Greg, have that, with and to be all drop the be and protects and out getting that your on pressure power temperature liquids do it’s do catalyst. you the able gas because the with that equipment this And you need without shutdown any and heating cutting to to

Greg Eisen

Okay.

So all you intents essentially had catalyst not…. catalyst purposes, was your and for this it’s destroyed –

Dick Townsend

we catalyst get preventing coke, platinum, being It’s, coke coke. and is It has a layer can’t is there able the contacted the be to off. of from metal the precious which

Greg Eisen

it. Got

are intents shot it’s for So, and you all and capitalize material put to purposes, catalyst going that you in new place. the

for quarter no and a question is, that was there I recoverable? perspective this the at that’s from accounting look So closely couldn’t my press release, the longer write-down cost,

Sami Ahmad

Right.

catalyst that the assessment, fourth quarter week weeks week we old a write-down. yes, in there no a So, quarter, whether was is full the of catalyst we third there assessment the third looking fourth not write-down because exactly. – until yes, based on could that nothing we of or – the quarter, past have in so, just the in did catalyst, that In X are at that in could there a be the use

Greg Eisen

Okay.

Sami Ahmad

a it’s not probably going there is $XXX,XXX, material. to write-down. And the expected of be Greg, on if a order it’s $XXX,XXX to couple be

Simon Upfill-Brown

asking And a you is be such why might difference. there

Greg Eisen

am. I Yes,

Simon Upfill-Brown

is is it with technology. purchase initial from to catalysts $X the is catalyst able versus of recycled we Greg, $XXX,XXX, that issue Because the it’s were this why, million other users

is this that and none catalyst that catalyst before fresh a was catalysts used have bigger been had active extremely a platinum there catalyst very, low and are there much we – we we the that able and at It’s at make of to mentioned, multipurpose, that a very purchase As price. and than and are purchasing were still very are is expensive. process so that we this very they available is expensive. This multi-step was time backbone to

new are life is it that why much longer is the initially. we use activity so catalyst, and from difference because more and So much price expecting we

benefits the catalyst. fresh of this are those So, using

Sami Ahmad

price from As we the about just catalyst is discussed, the of numbers that you can tell X relative XX the to

Simon Upfill-Brown

Right.

Greg Eisen

life, pretty long yes, would you a Yes, difference. longer last? that’s a I how catalyst say When see a new big

Sami Ahmad

through the pushing it’s that. dependent were If talking to running out, X units, the On that throughput flat rate probably X years. so we’re on we we totally are

Simon Upfill-Brown

out. So, we are flat be running not going to

of X So get take we should least years, at depends on but it. it we all how care

Greg Eisen

Hampton operations would is guess, really of closer I call we tick full that through top guess as the kind for your people to utilization at which I bring where get is XX% are you with most thinking I to plant flow going we big at XX% the maintenance can all rate I in up utilization a where those of are Resources. that. business rate utilization. be to XX%, that kind look your the your question on and I business a XX% South expect to of utilization along, volume more up success have at getting I drive to get When the most that to been order the factor, rate utilization would up profitable? incrementally customers of that at keys additional all one are have to very And is and at core

of around sitting We stagnant this quite rate XX% been utilization for time? are kind some

Simon Upfill-Brown

investment Yes. we time, some to we feed at cost Greg, because has there in there is in issues able touched a ongoing costs, utilization leverage Louisiana. Sami but quarter had operating quarter asset polyethylene, of been company didn’t and on polyethylene extraordinary is up some but some starting even this margin returns have issues customer good the I work low did mean, make the this as rates. And pretty this

We next in There big starting few have Pennsylvania the XXX% another one of years is up that the up in business. area.

by additional sands business think we’ve to business, chase that expecting continue And million there and $X is exports. foam we additional at timeframe in to continues looks $X ongoing Canadian we EBITDA business pentane to investment fairly oil that of to the I grow XXXX million volume reasonable. we a are The X% X% polyisocyanurate another continue So and from to year. chase said,

some growth, been generally have business like one unplanned issues customers some but with good outages that, our like these things experience some and on we unplanned export So, there wild having we swings and planned and is do some have through. we the

in sort industry. the is of being chemical this So, of part

Sami Ahmad

And I versus Greg, out, look at XXXX year-to-date are over year-to-date up volumes you year-on-year. X% prime would point that if XXXX, product

reflecting I mean slumped you are saw, what in have rate you the utilization leverage. volume growth, about So, decent the had think in we third operating addition that costs of the I quarter, kind to

Operator

and At would back showing Chief I President am over you. call time, closing Officer Executive for Upfill-Brown, remarks. Thank I turn further the questions. this no to Simon to like

Simon Upfill-Brown

in listening you all today. Thank for

to hard continued people the few thank that forward would you months. has we with make answer you company. team wanting see always schedule time have will on as and the our those updating try try employees as of a wonderful successful to our you Thank to had. over you to look can Our be out, but of their days run support might to to as so much. questions questions, for all like We thank in I ask the shareholders gladly our next that coming did some work to very this call progress We business we we

Operator

Ladies program. your thank and the for This participation conference. today’s you gentlemen, in concludes

disconnect. now may You

Trecora Resources (TREC) 4 Nov 182018 Q3 Earnings call transcript