TREC - Earnings call transcript Q2 2021

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Operator

Good day and thank you for standing by. Welcome to the Trecora Resources Second Quarter 2021 Results Conference Call. [Operator Instructions] I would now like to hand your conference over to your speaker today, Mr. Fred Buonocore of The Equity Group. Please go ahead.

Fred Buonocore

good and Nita you, morning everyone. Thank the call. to Trecora Resources conference earnings XXXX quarter second Welcome The Group firm. at Trecora We Equity as working to their with be Investor Relations are very excited

the bottom Christopher Our was over also President and wire on management’s markets after contact services our financial earnings close the Sami Financial for afternoon. listed Officer. Officer the the of information the be follows yesterday release of and at call will distributed the Presenting Ahmad, Controller, will Executive Groves, session Chief Quarles, Corporate prepared Pat be our which question-and-answer available Chief remarks. today

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

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

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

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

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

Pat Quarles

everyone. and Fred good you, Thank morning

appreciate and our that interest your can morning. are As join happy Trecora we always, call this you in

continued over of earnings second Texas and COVID-XX our are event challenges pleased last quarter illustrates extreme including quarters, the the potential the quarter our the freeze, economic the the pandemic five both results after weather with second We of businesses.

made headwinds to taken external reliability, transformative yielded performance productivity processes of as our we operational these with have by evidenced respect the easing, benefits our the actions the have safety, quarter. measures with results, positive have With we investments and during coupled

EBITDA the $X quarter million over and an Our nearly first was second improved second products. from last quarter year. improvement double million $X.X of the quarter for all Demand of

demand solvents, our rubber and agent U.S. end the back the higher-margin demand pricing synthetic Domestic supported to in sales strong our our For uses. us polyethylene was also led increase initiatives. quarter, the toward polyethylene environment by grew allowing wax shift The customers. blowing

for the formula-based gasoline Solvent customers market-based despite feedstocks. margins our expanded rise with our rose natural costs, in prices where

$X.XX price Our polyethylene increased first quarter. per wax average versus the selling pound

and during shortages. at also in very June program and May values our end the we These benzene at Like new We due focused which executed to QX. the the asset quarter. negative At markets, reducing we $X benefited delivering by on X quarter, investment a not from products costs, We mentioned driving require many, us focused in supply disruptions. quarter. projects second as projects capital April, pricing. Of at projects, impacts project We driven utilization by-product third-party the These chain margins from business asset significant to and utilization the availability we freight very costs. in both and XX customers XX challenged by-product were the truck in we TC. range record improving new had of by the advanced strong converted high of quarter on estimate organic of last to demand million reduced reduced projects processing due second lack availability two load allowed chip and to productivity rates resulted in significantly reduction quarter. We projects productivity, TC. on of the successful a automotive end our custom commercial do had column we focused in feedstocks the distillation trials quarter, On other any significant running growth about new users this have entering or our cost beginning in to impact non-Trecora

growth to contribute executed improving on further will outsource cost focus of project trial to a Since commercial commercial the projects performance. asset activities, X the that in which product total South program, we Our earnings a TC’s structure benefited Hampton, our to quarter. begin we financial utilization the phase. At have with the X in our and significantly business’ handling site’s third cost-saving we a started are are that

We midyear, we also share $XX under Through shares $X drive of our program. share stockholder totaling commitment to by repurchased our repurchase value XXX,XXX repurchase our of on advanced total million million authorization. a executing

it Sami more Now, in quarterly results detail. let discuss me our turn over to to

Sami Ahmad

debt, Thanks, loans Pat will bank then I a second quarter start discuss XX in $XX at detail. and flow good more stood cash of I discussion our liquidity with Total and at June PPP to excluding performance morning everyone. million. my will and debt our comments

bank Our X.XXx leverage quarter We X.Xx Xx. articulated at covenants XX. previously second to below remain leverage to of X.XXx March target ratio was compared our under our

XX. increase sequentially cash of million, March balance XX. an of $XX revolver was XX capital down the million availability by the decrease as second primarily $XX from approximately in have was June on working as quarter. million as sheet June in driven We Cash on of The $XX approximately the of in

of trade the cash. million increase receivables in was significant payables. and saw activity, capital second in increase two quarter second cash and in consumed a Just working items the these quarter as of Together, in a volumes prices, with we $XX the sales source of with year business last decline XXXX, approximately a in sharp in

in of additional in increased turnaround approximately quarter resulting We for first preparation cash. also partly use at in planned $X inventory Hampton a the South XXXX, maintenance million of

million $X.X accounted approximately of repurchases share cash. in Finally, for quarter the second

final CARES Act of received the under Changes tax Law million. the on earnings Tax As we quarter call mentioned in $X.X X, refund first April we our

addition flexibility We balance from balance remain quarter. sheet, our of In sheet liquidity positioned than standpoint the million, advance and on negative from cash Operating a to growth to CapEx fund quarter second the second more adequate with while as $X.X remains flow our undrawn quarter million. cash well of operations was initiatives. continuing for our end operations the revolver and the a $X.X for the were second

operating million, flow the months CapEx $X.X continuing first operations negative X was XXXX, For cash $X.X and was million. of from

following year event. pipeline second is and million. XXXX feedstock evaluating higher flow level replacement defined due to $XX cash primarily of by million expenditure This February Free negative CapEx for may less of to the continued approximately the million year plant We’re to the work slightly driven operations from full a freeze capital spending for our capital related full repairs XXXX. maintenance CapEx increase spending. estimate $XX cash was less $X.X as flow quarter, and required as amortization, as well debt turnaround additional

months cash For the free million. of X $XX.X was negative first flow XXXX,

now of have loans our applied forgiveness for approximately We PPP full totaling $X.X million.

know on based full Although when forgiveness will for SBA we we the believe qualify forgiveness, don’t we on receive criteria. determination we

liabilities, PPP reflecting note will now as As May XXXX. their these in are balance sheet, loans on current you X/XX shown of the maturity

loss million $X.XX quarter $X.X quarter second from our diluted million in was million compares We continuing with closer a and quarter the compared of $X.X per a to report the from operations QX share. a continuing per in operations $X.X $X.XX QX EBITDA from second $X.X operations look continuing XXXX. million and QX or million operations share of continuing from million of net This for of negative XXXX. income diluted net XXXX performance. loss share diluted continuing in $X.X of $X.XX Adjusted a second EBITDA in at or take adjusted operations let’s or Now, $X.X from per

administrative quarter benefit to plant the of expenses and and with level as as higher $X.X $X.X results in stated, million, the previously XXXX. benefited Second The million. for freeze expenses – were general million of to compared administrative approximately million as compensation corporate event costs. second to reduced G&A impact from estimated to General related $X.X due is quarter event. QX consulting, provider includes to million and increase February $X.X expenses. the stated $X.X utility well a insurance our This million $X as freeze from a settlement

combined expense of reflects end higher G&A largely due For $XX.X The is The of reduction was debt the debt was Bank compensation consulting, of million lower approximately $XXX,XXX the to reduced X $XX XXXX months first last at to XXXX. from has quarter $XX interest QX with end million of been million compared last rates. in at Interest insurance reduction increase the year. XXXX, QX expense interest year. $XXX,XXX with and in costs. second to second million quarter $XX the compared the for

$X.X X.XX% QX Our tax for of effective tax reflecting dropped of XXXX. second approximately interest quarter rate the in quarter rate to was an XX.X%. X.XX% million, Income effective for expense from the

for expectation tax year XXXX XX%. is full Our rate effective of an the

segment top XX.X% in in quarter improving segment. second economic walk in $X.X quarter QX and to Now, XXXX. was XXXX and Specialty Petrochemicals the QX the increased line both million in for million for Adjusted EBITDA XXXX for you $X.X bottom XXXX. second starting me with QX Adjusted compared through X.X% margin our in business EBITDA Specialty Specialty our Petrochemicals Petrochemicals. XX.X% environment the and QX The this let $X compared segments, was in million to

for quarter segment results million mentioned Specialty settlement utility the Petrochemicals $X.X Second I the from benefited earlier. that

sales to X.X This second benefited gallons the for in from is Specialty feedstock gallons, sales Specialty million as strong was costing to Petrochemicals QX the Petrochemicals well seeing in positive the of QX increase of gallons million of the the Additionally, XX as an demand due products. we’re the also of the quarter. inventory volumes increase the in increase largely course XX.X million million a due impact Prime million XX.X in XXXX. quarter build our gallons XXXX. QX XX.X to and approximately pricing QX product XXXX in quarter, or gallons during was in from segment inventory compared total volume XX.X%

$X.XX posted on in at have of increase Specialty natural to the trend to gasoline reached gallon. the increased of second gallon quarter of of year out Prices that of natural last per gasoline $X the on the priced market end on July. earnings is approximately was per bottoming gallon, the in QX $X.XX The by and increases feedstock benchmark website. upward At $X.XX June, pricing continued of natural Moving per is quarter Petrochemicals prices our continued is XXXX a average illustrated feedstock, per end per gallon. since gallon in at deck X XXXX. end it followed by to The $X.XX Slide and July of gasoline trend second

XXXX. in As you back to has can see the feedstock higher pricing and rebounded in than slide, levels XXXX

improved volumes in increased. the in million X.X sales QX by-product by-products, also gallons to volumes product to million as on from moving X.X Now XXXX second prime quarter gallons sales

their XXXX. reminder, gallon for $X.XX and a in the result benzene aromatic by-products spread per product quarter to and the second in lower prime a are stream. for gallon prices in our a As driven by-product $X.XX higher prime margins $X.XX a as sharply produced in QX as margins of components, than The specifically was significantly by-product are toluene, upward prices result of products. per of per and By-product as by second main turn component spread improved by-product gallon quarter higher negative the in from production,

a QX of Specialty to had included million quarter Specialty in approximately $X.X Waxes generated $X.X in last in negative the to and adjusted Revenue quarter product in first compared Moving $X.X segment year. Waxes EBITDA second quarter sales, QX in $X.X million increase to segment, of on $X.X the million Waxes the the compared of XXXX. million second $X.X million $X.X compared million XX.X% Specialty quarter QX segment wax in of revenues of quarter second of and second million XXXX. the in to an

high-value We in wax experience continue hot our adhesives especially to demand melt markets. products strong for our end

in ramp-up million I waxes. to combined decreased price longer The Pat disruptions the fees, back also concludes now decline which quarter on increases processing the the second quarter. approximately X.X% we caused was to implemented And projects customer financial call with take over summary, Texas as mentioned, further XXXX. during to the second of supply continue expected. impacts in new be the and residual were We second quarter, in due This from freeze the modest will turn Pat. than sold-out custom $X.X chain the to event, which Processing

Pat Quarles

excited Thanks, up Sami. prepared will remarks I Trecora’s emphasizing about growth wrap our by we how opportunities. are

half second the our saw markets. the the products expect the demand of persist We second our through end for in strong that favorable outlook quarter year for to the we use key given

number are as to respect we the see growth portfolio, our the we year. move from remainder a expect we projects of through further contribution of with to Additionally, executing the

business improve quarter both wax in mostly and the polyethylene the will this past the in utility expect to spread. offset received volume and we We credit the Hampton by-product on third which decline expected quarter at price South

we remain goal value to creating for always, committed of our stockholders. As our long-term

growth advance all projects, where we capital allocation we higher to flows. options, cash and inorganic including believe our organic While explore we we can continue achieve earnings opportunities

Now the phone I’d like line call the questions. open to the operator turn to back to up and

Operator

And Instructions] question comes first Asset the line with Slam your of from Sacks Grand Management. [Operator Mitchell

Mitchell Sacks

quarter. nice Really guys. Hi

could ballpark and pentanes you custom a affected of revenues And first or in do processing in of you how want however So – question affected terms sort to how give QX also it businesses has then it volumes both of the poly if frame a your freeze from us it? to well, hexanes. and with your

Pat Quarles

Sure.

came kind case, So and point heard supply across been you business, variety about for, can our freeze we didn’t say solvent to And can we shortages of we’ve of all event. whole chip in we In the things. any issues. to think challenges COVID, of point you once hearing, industry. the have million impacts entire aggregate, operations, the the chain of They side as of or across $X together all a to negative me return on company supply you the the

our over Mont connection operations Belvieu, no pipeline solid. were was Supply and to the problem. have We

So a the the downstream was Early comprised it of in became a only market, and few nightmare. trucking was there then us, as we’ve challenges the things. been of quarter, hearing, all

of Now deliver we owned we have a through fleet for portion trucks. an demand benefit significant solvent that of the our

– But had trucking We we for think, – us. we We had third-party impacts, additional third-party pretty impacts trucks, bolster certainly expecting action. customers, bolster added to that’s of of – of trucks. to So supply will our addresses situation also started availability the our our certainly, begun quick our our the taking advantaged I there. and the unfortunately. And and And were our increase structural capabilities in just that’s to that well, firms that anticipates current we’ve growth we’re then in own both fleet expansion business. that

quarter, things. beginning It’s freeze, very had of solvents the a we their production our a our recovered impacts processing. as focus, on So was getting from combination the custom wax few At of the up.

getting kind we as to supply over then through move processing. So of the plant, up custom prioritized wax we moved and

of well. demand a custom that materials some issues chain their processing market getting little in into behalf lag supply of started issues conduct their running we customers the QX. So in into raw then with impacted instances, either had bit a and, in But our the as on frankly, to

end lots generally, by of the and and the of So just there, were to – running. need still quarter. down we is and supply Operations wrestle processing, significant no the did this chain challenges. the during it But thing, demand was but we single The okay. up things were custom scattered throughout, that quarter,

Mitchell Sacks

units with long new and Or go? are to the And respect in, are processing, a TC, distillation coming have with you have commercial still customers these custom utilization? way to that you at you do getting full to closer hydrogenation

Pat Quarles

about unit that in this distillation the we we of significantly the new part quarter. up loaded during the with projects that Well, talked second –

really for COVID. of potential went us. a that up the That hydrogenation, largely large due quarter helped still hydrogenation is a off XXXX that the unit. kicked load On That may project So out away to we recall, us. you in had there did that first very

actually unit, projects have XQ. the a that but didn’t targeting are it hydrogenation in We run few

So projects still are delivered. to those be

Mitchell Sacks

additional then you increase And Okay. that in to going? talked sources know is with the respect the some past I wax, getting volume. to about How feedstock

Pat Quarles

we’re bolster commercial that doing we waxes. moving cycle feed. It’s to and are into that getting have projects And also of time, Yes. relates polyethylene too would offering sources then would our that we I of forward. supply our one longer details, growth other say projects have for many product in additional – XQ without,

– So to clear, have stuff XXXX. going is not to That’s That’s come just be to that later. that’s XXXX. not

Mitchell Sacks

Okay. the you insurance, consulting about expenses, the in is of And just normal? G&A reoccur those consulting new a and expected both is if then and talk of terms things, can of to kind insurance the

Pat Quarles

So I’ll start with incurred insurance absolutely because rates. we higher insurance have

another last renewal we’ve As – go went renewal. gone we year, through we through our will

is unfortunately, that increasing market us, are don’t just nature in. for the of So for today increasing costs I they but rolling those differentially the is think us. are

going that’s to structural. So be unfortunately,

say, On projects. from to the time a we improvements from or would consulting for time variety I things, of use consultants projects, external

they at hard expect go to down up we’re it’s time. so where would just depending any and I but predict on are to And to what them going go, at, particular looking

Mitchell Sacks

get will I queue. Thanks. cool. Okay, in back the

Pat Quarles

Excellent.

Operator

comes Your from of the Management. Tieton Capital with Matt next question Dhane line

Matt Dhane

implemented price and discussed Thank that on have of whole were was would the been what at curious earnings the if quarter, for quarter you. increases that you’ve have basis. place your impact revenue beginning a been the I or in

Pat Quarles

I most on that Okay. really head. done wax started in But haven’t I May math June. and of in think those I into – side, the increases my didn’t

for the probably higher we’re through of as in wax halfway only So us. contribution XQ the about reflected

So that’s into roll benefit to said why I going expect XQ. we’re we further as

have we such like. as that just the price success certainly dynamics On market-based announced a would much were was didn’t increase increase it side, challenge. for that as our listen, May solvent we real We on a pricing. competitive The

increase. customers contract me, XQ for a to is significant excuse solvents it’s and for XQ, contracts of a – but bit suggest be ASP market-based going I increased the wouldn’t or kind little negotiated of there very So the for

Matt Dhane

it. Okay. That’s I appreciate helpful.

Operator

of from line Call Management. question [Operator with Capital the your And next Instructions] The Tim comes

Tim Call

Hi, on good quarter. a congratulations

And Your fall we count the the share stock that to options count and up expect went because Was prices? in ahead? of strike share during quarter. should quarters

Pat Quarles

I mean, look Well, right. you compensation at yes, mean when number. the expense share I has particularly impact you’re count on an diluted

Sami Ahmad

year that earnings diluted versus... last Remember

Pat Quarles

the other thing And we Yes. year, a is, had last loss.

loss. So net income was

So on so increased year, count, get rolled share share in. it a count the the profit, share was and didn’t diluted This count. that

Tim Call

with products, or been only pricing have one Okay. in there pricing has pricing And any been in of direction? rollbacks

Pat Quarles

more be in wanted It’s direction. direction. that one only been to just We in

Tim Call

again Congratulations you. thank Okay, such on a improvement.

Pat Quarles

you. comment question. Yes. maybe I just still last Is one on open? mic want that Thank to the

I exception by-products So we’re benzene aromatics. there drive pricing, index related. the is just And has an just be guess to clear, the the from want again, the our don’t that quarter. to to on because, by-product make while prices, tied it’s come down second we reference clarification. But I

Operator

And the Harenburg question Hennig. M. your comes with of line from next Tom Carl

Tom Harenburg

I Hi, volume noticed good Can update of month of for morning was you a share give days. a there folks. repurchase the number July? an us on the substantial on

Pat Quarles

rather will actually our Yes. with a giving – not Tom, we I forward-looking kind nothing consistent it’s July. comment, know of for report to report quarterly the but than reporting

report of will the we’ve quarter, done. end at every what So we

let One of we of the have reasons then it is program certain a launch I’m nature a criteria little and repurchase because the that program run. sensitive under is share our to to

be comment really So current anything I that the can’t impacting just on quarter. may

Tom Harenburg

Okay. Sami? And – you can yes,

Sami Ahmad

We second quarter. the be details filing our you’ll that the Q, in will for so see

Tom Harenburg

you us the give July, I meant update For for in period. a quarter, an Can status increase yes. though, of Pioche-Ely on right, activity trading the with at second Valley?

Pat Quarles

status. in change No

meet We time on to They the have in of that amount certain property. a contract have a agreement. milestones sales

still some is left. time So there

is I some think I next delivering them in it. coming test it’s cash up against September, for – they believe, the

Tom Harenburg

Okay.

should we the or by consummated not? QX, been that’s So know whether end of

Pat Quarles

as Yes. know, expect. of That’s be unfortunately, but get a de we’d amount value, up. minimis it’s mean, And I it cleaned good to would what you it

Tom Harenburg

Okay, thank you.

Pat Quarles

Tom, thank you.

Operator

[Operator Instructions]

Pat Quarles

think wrap we will see questions. don’t any just more maybe I Operator, we up.

Operator

the to back I to turn Patrick like would Quarles. now Mr. over call

Pat Quarles

safely battle success. my to you repairing questions want to our with and all realities deal levels thank surging our reconfigured recognition appreciation always interest before in They quarter, facilities, value repairs, from capture their drove it. demand an the I the our meet your supply the our they we acknowledging want step a completed the product and continuing from remarks for was, growth while your for Listen, our change the participation. for successes. this pivoted second advance chains operated contribution provide for focused of customers a of of I those to pricing the And to frankly, facilities we resurgence organization you thank plans, did to all freeze. conclude quite my like In thank all pandemic safely to And you. to to virus. facing demand, Trecora. and our their of everyone again on you Thank employees by I that to to continuing while reliably resurging

Sami Ahmad

you. Thank

Operator

And this today’s conference call. concludes

may disconnect. You now

Trecora Resources (TREC) 7 Aug 212021 Q2 Earnings call transcript