TREC - Earnings call transcript Q4 2020

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Operator

Good day and welcome to Trecora Resources’ Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. And at this time, I would like to turn the call over to Jason Finkelstein from The Piacente Group, Inc. Please go ahead, Jason.

Jason Finkelstein

Thank you, operator. everyone. morning, good And Trecora Call. Quarter the XXXX Full Earnings Conference Resources to and Fourth Year Welcome release distributed afternoon. earnings of The was the the services financial close after markets yesterday over the wire Pat Presenting call Officer; Sami Chief on Ahmad, and Officer. today be and our Financial Chief Quarles, will Executive President the Chris Corporate for also follows which be will our session, management's Groves, available Controller, question-and-answer prepared remarks.

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

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

others and reports from annual greater detail are Forward-looking risks uncertainties quarterly statements the materially could in Trecora's to those filings cause involve on including XX-Q. recent risks actual most Form and with the These company's XX-K subsequent differ as discussed results projected. SEC, report in that well Form on as

also certain financial During today's discuss non-GAAP comparison call, measures purposes only. will management for

a that reconciliation This company's financial on call time, is of slide Investor Section Trecora's the President of measures to over accompanied a the like to of by Quarles. GAAP Pat website, and presentation, is the financial afternoon. definition webcast this a At the markets earnings close non-GAAP www.trecora.com. please available see yesterday I'd turn results, and financial to of For issued release after non-GAAP CEO,

Pat Quarles

meaningfully on markets, to our times. $XX its our portfolio to focus approximately on driving or creation at capital, in and improving allows growth new continue XXXX. debt chemicals, today. the lowest on launched our our since strengthened of and allowed for we liquidity this million commitments. to pleased the this to balance X.X cash you to diversified further our first say At us our in sheet. meet thank proceeds, EBITDA growth. funnel we specialty significant a projects new that deliver by of This of Like AMAK of successfully projects we focused million, sustainable In beginning leverage by were focused million not narrowing during With productivity company were our XX commercial growth our trials year This able page And that had in completion meet joining year asset I'm brought everyone. X XXXX. end and non-core cash and the the set $XX.X ahead. focus end I'm two optimistic our challenges this end unfold, ratio only opportunities. XXXX, resulted XXXX of morning year. September, projects being to of in investment extraordinary pleased you between the our many quarter reducing level with organic A XXXX. despite Good ago, fulfill year-end a us turn completed year, resulted but we of the that and target sale of goals to year last of communicated The December our to executed reduce value products $X.X pledged about Around revenues time the trials the on balance at four on of four with don't projects in better-than-expected that to net at to simplified debt us entering focused utilization on our The all delivering XX sale bank require significant of costs. call,

these the We result expect many revenues of in sustained second quarter. custom in to processing beginning

from sale million. the the of our for full widespread $XX compared income in in the of year was includes XXXX million, results net adjusted spite operating of was the $XX.X of XXXX. gain business XXXX. our continuing reflect EBITDA $XX for XXXX million from pandemic. which to Turning to from XXXX from financials, the million operations This challenges AMAK to operations Trecora’s resilience Net net $XX loss Adjusted of continuing of EBITDA million $XX compares for

by wax and XXXX. growth XX.X%, over increased approximately the in polystyrene for While by XXXX, the pounds, volume product polyethylene prime quarter fourth fourth XXXX. driven XX% exceeded the prime quarter the The year Also, demand from the from product expandable million were solid or sales volume severely declining pandemic, third demand the quarters levels in and X.X quarter, of increased sales sales in impacted markets. weakened quarter fourth fourth and of nearly from of second was volumes

very we As in in are markets. the our end continued recovery the by and use start encouraged the year, we economy

our progresses, of year given users our we our the to strength commitment million to March robust combined momentum. pent-up which continued of has the our initiate demand stockholder the growing prudent show through $XX and recently announced end XXXX, authorized of reflects share portfolio, our us maximize confidence to expect This capital. program. This, has with As through repurchase value the program, allocation growth been

to let quarter results. year specifics to Now, over the full it Sami discuss and turn me fourth of our

Sami Ahmad

good Pat. And to morning everyone. Thanks

year start me with detail. our performance in quarter discuss and Let cashflow, fourth discussion then and a and debt some liquidity, of I'll full more

The million our at to of funded $XX AMAK the was we debt the at mentioned, end proceeds as from reduction, reduced bank million sale. in end from Pat of you As debt XXXX. by the know, XXXX the $XX XXXX

loan, including end at our agreement to bank $XX.X credit our at XXXX. of of Our the end times ratio X.X of leverage times declined end PPP at Total at the compared XXXX, the X.XX stood to under million XXXX. debt,

from $XX proceeds loans. which balance the PPP year million, includes was of end cash $X.X Our at million

availability of million. In criteria. loan. qualify on $XX.X PPP based revolver the comments few believe undrawn forgiveness with our the full remains for addition, on A we We SBA

our from sites. funds at and our employment for of were benefits, we segregated funds thus them loan specifically solely operating All preserving PPP our and payroll used

next forgiveness year. this application to determination complete the several the expect on and We process later in received forgiveness weeks

filed income of $XX.X IRS. federal the CARES partial a as the result we totaling approximately received received we XXXX, quarter refund In claims million, also tax refunds interest the tax In $XX.X including from changes the of law under about We November, third million. Act.

claim is sheet. in consolidated $X.X still and receivable refund included on million final the Our of taxes outstanding balance is

expect losses. sheet We of assets, receive net later tax The this this final tax refund realization increase to XXXX this million on income year. balance deferred reflects our deferred in specifically operating $XX.X our approximately liability from

operations, rehabilitate Hampton upgrade Our was spending cash $X.X this continuing spending for continued million. capital Hampton, and the to South approximately spending as business debt XXXX challenging spending million part at by State CapEx Full Gulf from Free pipeline. well XXXX Specialty CapEx nearly South year increase flow capital cashflow, for segment XXXX, for feedstock feedstock anticipate XXXX was up million and required was which million $XX operating fund $XX.X approximately spending is compared cash primarily approximately is South multi-year higher of was able cash and pay primarily XXXX pipeline operating environment. XXXX. maintenance amortization in less Waxes we was driven from XXXX, of to Hampton. expenditures while In CapEx CapEx million. CapEx flow operations work the to from were breakeven. planned CapEx million at which down Pipe all year a a was in flow We as $XX $XX.X million. liquidity level debt full in and the operating plan mandatory with to preserving $X of Line spending our less is XXXX, maintenance at of $XX

in performance. $XX.X lower same expenses. includes million a in $X.X year $X.XX million $X.X compared of with debt revenues let's in year million $X.XX as quarter the or look loss expense as combined and Net to continuing a of or million the adjusted XXXX. fourth fourth the reported last of in Adjusted $X quarter well profit $X.X share quarter $XX.X XXXX to Now loss loss XXXX. due operations were of in in XX.X% XX.X% diluted EBITDA $X.XX fourth for third fourth or XXXX $X.X XXXX. and was for at XXXX per interest diluted million or Interest in compared administrative fourth operations diluted of corporate was last of net share, to G&A expenses million revenues $X.X $XX.X million expenses a quarter the the for $X.X The fourth million XXXX. take fourth per Gross of This of or full million full in million, G&A of million million $XX.X the quarter with period the continuing $XX.X or expenses or to was quarter XX.X% in million from compared quarter to fourth fourth $X.X year revenues closer compares Gross $X.X in million is $XX.X of in compared with $X.X or XXXX. level, quarter the plant approximately approximately $X.XX compared to We the a quarter to million of of compared total the operations general continuing G&A for the quarter for operations million, $X in XX.X% total reduction net million year. from of share to $X.X Full per period our year. in of quarter diluted was fourth of of XXXX loss XXXX. reduction XXXX. share $X.X the EBITDA fourth of was year million, from quarter expense compared Full a net was per interest total from compared $X.X total rates. million in were same quarter fourth and continuing XXXX. quarter profit fourth million

effective in the XXXX. to compared Our X.XX% year for full interest was rate X.XX%

business the was was the million, $X.X EBITDA the the to walk in let quarter quarter compared and and petrochemical $X XX.X% year. petrochemicals were use XX.X quarter of volumes the to due XXXX the from also third oil with to pandemic. Specialty XX% fourth to generally well million segments, Full the specialty last gallons gallons XXXX. in and fourth sales XX.X to XX.X of the XXXX million was the million was of impacted million XX.X compared fourth fourth by in year the were of gallons in gallons the specialty quarter this Prime quarter compared me end volume our for quarter sales the other Sales third sands the XX.X severely the lower This for Adjusted for third sales customers. quarter fourth for XXXX. quarter million nearly due as in markets petrochemicals. compares margin XXXX. XXXX. segment you polyethylene declining to and was Now in to in fourth gallons quarter markets EBITDA as through year compared pandemic, petrochemical XXXX to and in use specialty starting Adjusted lower in XX.X% to weaker to Canadian XX.X% in product $X.X million million

quarter gallons. of XX.X driven the prime growth and volume fourth quarter, million to However, second by and of and the from quarter from XXXX solid demand product in expandable weaken fourth third quarter and levels increased polystyrene polyethylene recovery markets. gallons XX.X was in million Volume

margin was per in driven Gross the $X.XX For million costs. compared the decrease in end component revenue Adjusted $XX.X the ago. by $XX.X per end Benchmark second by end of the in million in XXXX gallon were lower full decrease and prices quarter, gasoline a gallon year, natural $XX.X prices XXXX. third gross million the margins, of at the a net operating $XX.X gallon XXXX feedstock of The year. same year specialty lower $X.XX in to to impacted XXXX. in partially decreased of EBITDA from XX.X% petrochemicals compared in significant XX.X% million to and income gross per at at for from offset net quarter was was to byproduct which income margin period increased of by $X XXXX

has $X.XX deck. shown while first in came the earnings of The January's was Slide per pricing natural average trend at in gallon, per for $X.XX of the a you natural Going February's X on into market gallon. a quarter, gasoline gasoline price

the in approximately inventory. million can has of pricing in see to earnings the a cost prices slide, the higher half impact you consumption sharp to XXXX first in levels. Recall negative As of that led of basically due rebounded back feedstock $X.X XXXX the to decline feedstock

quarters of leading half an reversal in $X.X equivalent year million impact. second fourth third sharply as feedstock rose costs a The costing inventory and the saw to positive

in was gallons and moving the to prime this Byproduct million volume Now product grew in byproducts. quarter X.X quarter third fourth from on sales gallons sales. to in in with million increase conjunction X.X the

the XXXX. margins a Byproduct For The for $X.XX significantly production. lower from are primarily from in by as $X.XX XXXX the XXXX, for volume aromatic and their lower result in full spreads year, the declined to product XX.X% gallon Byproducts quarter product declined of production prices, of margins byproduct spreads sharp produced fourth prime byproduct to versus our in products. sales prices driven prime than quarter the due prime per negative the and lower street. of byproduct in byproduct quarter $X.XX lower was in positive positive components fourth third resulting the drop are

quarter fourth year. revenues sales had $X.X included disruptions. the $X.X in wax product from feed fourth million to a to waxes. the third flat million third and third of you roughly in $X was from waxes fourth impacted last quarter year, supply $X.X quarter adjusted quarter quarter, from Let's in specialty increased segment fourth move approximately EBITDA negative of the quarter positive as from specialty quarter million positive recall sales. Wax on last year. last segment million increase wax which in quarter the a generated by million fourth $X.X XX.X% the million and in X.X% Specialty compared approximately The Revenue $X.X volumes waxes quarter and fourth

We pursue order to the our reduce $X.X quarter custom XXXX. value wax fourth the demand which XX.X% we Processing $X out by in be opportunities approximately million the this customer upgrade services due continue processing wax of million decreased driven in were sold to mix of to And for product profitability. fourth was and or increase further fees to the pandemic. of quarter XXXX for approximately on

million of concludes were in $XX and the in negative $X.X full to financial increased $X XXXX. Wax or XXXX full For volumes million sales processing the increased nearly XXXX X% year, from in That specialty XXXX revenues the million our Custom segment X% EBITDA approximately wax XXXX adjusted had in higher compared summary. supply than to approximately feed year relative for XXXX. XXXX.

to we'll then I'd Now line and open Pat call the turn to questions. your the like back for

Pat Quarles

Sami. Yes. Thanks

for the own our to facilities, plants at the in of the our brought impacts damage Before The to we rolling due record and other operation for and quarter. our of on customers, fortunate At quarter the market facilities. at impacts the to down At electricity We're to order were managing we take of in have been front widespread the comments were snow few temperatures, how terms results utilities’ see mostly blackouts midst related me creating let natural make outages Texas, Hampton, to or across in first from proactively We're the to in the week. items cold Trecora, looking them questions, one loss not and industry unprecedented of we our breadth of a the out we freezing. the low cold. South experience the state, failures our brought which created for disruptions a and in after gas. suppliers, prepare

to which customers. Chemical, that We repairs impacts million. our the supply Coast million to associated largely yet avoided our these damage going suppliers most expect most Operations of from able the full range we're impacts, supply due demand we at but could In in estimate $X were we electricity any the We have with handling quarter, see we've Trecora of they to gas. some Gulf area. were equipment, and water damaged a again, of as and to At to repairs from to And the complete to TC $X customers natural related equipment. well is don't of first weeks. repair down from we able loss two lost as equipment. to roughly the loss disruptions costs to During been our both time, of

at XXXX will million occurring quarter. In These addition, our fourth expenses in the are maintenance about first for largely higher Hampton the quarter. activities than be South $X

by low the sustained was we were sands to and quarter, fourth not Canadian demand the levels. quarter from in has in demand this coming that discussed we surprised Lastly, oil high returned

of direction business the that impacts implementation on the XXXX. is indication our product of price enthusiastic our Looking with greater note growth been further this core be are We $X.XX successes contributions One Joe's it's have our like a to to quarter, continues our the meaningful. Demand increase projects effective per take to significant strength the of in to the gallon of of in March. beyond prime $X.XX company Trecora uses gallon products we per end about Senior We noted increase retiring implemented to our successful customers been. pricing. year. grow. of storm, engagement is of that President last opportunity Vice November. closing, In And X a from than Commercial ever Joe prime on our our $X.XX February Tanner, in this and will I'd

he upgraded execution been Our during organization's has two commercial the was us. considerably with years

As our to for will his I'm the and he thankful And following to now all a be service like retained open transition, family consultant. wish questions. part to line up phone continue his the Joe's retirement. his planning as we'd of for Joe best Trecora to and

Operator

Research. comes [Operator Instructions] question the from Rosemarie of Our Morbelli first G. line from

Your now line open. is

Rosemarie Morbelli

Thank you. everyone. Good morning,

Pat Quarles

Rosemarie. morning, Good

Sami Ahmad

Good morning, Rosemarie.

Rosemarie Morbelli

of growth could type line? the more is was markets and few details the your the of give end targeting us wondering if Pat, top on on project, the are I a you you potential what the type projects,

Pat Quarles

Sure.

products excess our at has of and capital and [indiscernible]. Chemical, Trecora years focus the the well and units kind been, We've hydrogenation our several ago. prime wave ability as distillation made as the capacity at around to got new TC given investment, So, company of process the particularly

effort here, can to processing higher putting us and behind Our our leverage activities custom that revenue operations where we most to profitability. higher And quickest leads to focus way is those of on the utilize capabilities, meet is needs they're to kind – of that customer's confidential. the chemical meet The processing. of nature for other units of hydrogenation of unique the those our kind distillation particularly specialty

and that through then talk are unique capabilities into they're we'll a be the runs expect benefit custom processing sustainable that build going last our we that these quarters, transform I and not singles really across and be couple to on. begin to specific home diversification So, way long-term of what bit that as been taking asset up markets as major custom that kind up. time previously do have us from also we'll that of processing consistent which from say with chemical both for that those them in These I that into that And chemistries a that. are we've we businesses. the are and them expect suddenly over we're legacy for they're would about customer we're help these or well. focused to But can't to a convert processing We're our doubles. we as go in and we get the products custom out looking big said streams And quarter. is, mix would to to adding will We trials, and of second the units. do these optimistic of value into and discussing products going we'd incrementing where our commercial we'll a able producers there markets revenues,

projects that we but Those looking last Longer-term, fruition. have enhance I level think and some short before our a then these of they'll new developing continue bring we quarters always into get base be competitiveness. we'll in and product the overall we're at technology some will of benefits XXXX. introductions, of just focus term. course of and the introducing initiatives we growth to in So that's front are as primary reach started us year, for productivity that And

Rosemarie Morbelli

What type between you over What of I of do you. coming couple of assume improved Thank the would gross plants? years? you margin type reach volume say I so can higher think next, the let's those the mix – am – that of and out

Pat Quarles

business that Well, particularly high we business. assets. of TC where needs with fixed these to said the mean, This be is this have kind specialty we type situation a at believe EBITDA TC, time. structure we profile given there a as of margin cost underutilized I before, teens over overhead a

all to So, costs. of tremendous applied to sum be up. TC. be teens on projects the need that bring increment toward EBITDA We of across but then margins needs margin driving But kind base the high these at we it

Sami Ahmad

capital are I was costs the part to installed When to Pat going of of as the those was fixed just investments. these were made, investments the investments lot add the Pat. of some a to costs referred fixed

real of is result incremental on as focus So, these growth the a utilization projects.

variable – as the variable than margin imagine, So, you can gross margins base be significantly both levels. should higher margin – and gross our

Rosemarie Morbelli

about will that can can if quarter, the the All shortfall right. lastly the you or will it in volumes recover do I in second from impact come if in quarter Thanks. of And you then that you may, I it cold call some Texas talked or those back? think first the not the take front all year of all

Pat Quarles

that right not the ourselves honestly, – continues that's going particularly fourth on it, with government and seeing Business we it demand said, It's recent strongly question that as the for and action into the this positive we're Rosemarie. started everything entering robust were if quarter. see us we has year growth accelerating further asking in Yes, maybe stimulus. remained a you now,

us indications So, pricing, reversed of pricing, significantly natural that that And at our going that market. some of the having positive Obviously lot to business see in is a indicator of level, is confidence generally a right? you the for go. macro gives direction the commodity course, gasoline

We've hurricane these resume that the holding in these been said this there'll like to scale category It's as back years see in business have seen Christi world comment right impacts pent-up I a on So, from XX span mode. now. I some be a do to if made the plants Louisiana. are business five operation I assets extent being of impacts the certainly it's excepted catch-up to remarkable Corpus do the that's why me. think I the demand. about think mean,

that March. expect And should but for be We a demand see by largely end an strong develop. the into that behind us of that up us to we as industry need to set XQ,

Rosemarie Morbelli

Okay. luck. Good Thanks.

Operator

Tieton [Operator the Bill from comes Instructions] Dezellem you. line Capital. Our Thank next of question from

Your open. line is now

Bill Dezellem

you Thank please. you. if questions product, Two could related to prime

light oil relative think not for you'd or I all, prognosis that of price? if fourth with First about strong continue your of sands sands, mentioned volumes was then talk it total not into oil please? And the quarter, $XX you continued just in the that would outside oil of to QX. sands, for I'd the has actually but volumes in be product in outlook you curious broadly your did prime oil Would

Pat Quarles

Yes. Sure.

So, two going we've two oil as it relates on I probably drivers think to sands, directions us. had different in

one trend for three certainly two the underlying which really continued to frankly years that's focus us been is which On demand. has now, their there the their hand is reduced efficiency the for on drivers,

for time. on it to And per a been barrel talking some that crude basis. now want we've you of about say If

relieve higher fourth On production hand, on I seeing, moving be constraints production me, mentioned we that our as in the relief expectation out toward And other quarter, Canadian is of government we they will and a of some quarter. did crude Alberta. excuse the are see the release that the last

as we think, we today, always swings. customer there, our large see inventory what very I with see So,

inventory lot an inventory they in They told now, the turned so of mode quarter. down are a had we in fourth us in. they fourth a consuming where have took So, in that big event they the here quarter

weeks. We there that be aware maintenance of several some are will coming in the activities

of people. don't going to it I backside they just think on was because ever ago, efficiency there, couple could where years a business a but have. it we So, the caution see really always that, the of I reasonable of back resumption I expect programs of

they market run polyisocyanurate Beyond great thinking And U.S. And And kind we've confidence. roof the been seen that's end they when application about to we on their that's other polyethylene, have continues to got main are a available of from think contractual the to and that visibility are growth. running flat at you assets positive of foams, those for that And us warehouses, of plants very the on those for the about a demand global what competitive high obligations perspective. deal building, be again, highly uses if the on are there polyiso supply. basis. rates. installations these Amazon We've we new have with driver that,

that So, to And some into assets the the with should that are we over that say coming next the on us visibility visibility years, give have demand. we've got to on similarly side some new the obligations contractual I three polyethylene two market growth.

add you Now single all products. solid, in growth, digit be, portfolio I it growth but the double-digit should that up, prime don't it's total think type for

Bill Dezellem

perspective. that for you Thank Great.

Operator

you. from our Thank Management. questions. showing Sacks time, from Mitchell Grand this Slam Asset At I'm further no Pardon me, actually, next question is

Your line open. now is

Mitchell Sacks

products, talked off XXXX-base, not just off prime digit assuming, correct? I'm growth in a the about we that's of Hey single the XXXX-base, guys

Pat Quarles

Yes, thanks for the clarification. That's right.

Mitchell Sacks

of on $X.XX I increase And put the through business prime. the formula is part had customers, you February back just spot, think, Okay. call mentioned that? price would you a or then, which guys that Is for in

Pat Quarles

for negotiated market that's pricing. the Yes,

calling is anymore, So, I a not business. really mean, we're refrain spot spot but basis. from business going of it out, it's to do it's this negotiated most and because month that month in price business on we

increases the for price as of So well we that's as February. November instituted beginning where the

Mitchell Sacks

Okay.

Pat Quarles

our third basis That's on the prime. of about volume for a metric portfolio

Mitchell Sacks

to kind a to talking margins are you then prior little bit COVID? it talk were missed they know relative little sorry you by-product and have again, where were bit. of And to I can back getting earlier by-product about things a Okay. about I may just where the product –

Pat Quarles

Sure.

depressed we values, of started that use of think, year, So, but after with very if we same heading upsets benzene year of given at the there. the saw the into ran pricing, And reference prices, $X.XX level the about time, it describes horrible toluene at of in word, we running. was on and it end roughly is time. the take market kind spread course, benzene gasoline recovery I XX Last the by-product the for as

end March of along year hard frankly, market So, today blown where disruptions XXX, benzine back – the has but going Gulf we up is it to for settled at the take the Coast headed, it's excuse in a suggest all positive to the co-products closed the kind on think, that's out and with I point data of for current spreads at think. byproducts, which from for got month, of kind I the at right now, me,

Sami Ahmad

XXX. at closed It

Pat Quarles

levels. Yes, you close be those would But that's sustainable. to tell XXX can't I which going back XXXX get to to us

think just now the so that these pound, a side for a assets read historical and historical propylene with styrene for at there's I which week is the a demand Europe We week unprecedented. this out. $X.XX on ago a disruptions many just supply headline in saw record price. record price a I all completely right sold

– second market got other of quarter. and and back right a see to all you've assets out need shakes think, and I lot running get now. I out And imbalances run these March let of where in think up frankly, So, need the to kind we we let early

think, exactly settle XXXX, be much going it's to excuse I'm better, it's need see. be going that me, confident, very But to I what better level to things think to going is be, XXXX. I than to certainly better let down we

Mitchell Sacks

Thank cool. very you much. Okay,

Pat Quarles

you. Thank

Operator

call Pat Quarles showing no I Thank further for this closing over you. questions, turn to to time, like would At back I am the remarks.

Pat Quarles

momentum thanks company growth And an for Trecora. want questions and in for thank year and company XXXX with reiterate are time forward to executing to on end sustaining like important plans. our in team. to this transformational we I XXXX And and is I that to was to those our what be beyond. many you fronts. always look on our interest a for how we excited our you. Thank a

them impacts thank just And have. in dedication damage people the Thank needs While or we our have the customers. in another the that. everyone some our February broader at our again I actually home. and the of our be for came winter from they this, are much for been damage going repair meet demonstration business of had together Almost It's company participation, to despite expensive, impacts. to dislocation safely the storm to than their your you just facilities And

Operator

this Thank participating. you call. conference gentlemen, and Ladies for concludes today's

may You disconnect. now

Trecora Resources (TREC) 9 Mar 212020 Q4 Earnings call transcript