TREC - Earnings call transcript Q4 2021

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Operator

Good day, and thank you for standing by. Welcome to the Trecora Resources Fourth Quarter 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Jeremy Hellman with The Equity Group. Please go ahead.

Jeremy Hellman

good and operator, you, morning, everyone. Thank the XXXX Earnings to Trecora Resources Year Full and Quarter Conference Fourth Welcome Call. Ahmad, Presenting on Chief Sami and Pat Quarles, Financial our call today Executive will Officer; be President Chief Officer. and session Controller, Corporate be the prepared our Groves, which will management's Christopher follows available also for question-and-answer remarks.

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

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

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

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

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

Pat Quarles

we pleased to with for in Petrochemicals demand through stage quarter it Overall, and morning, the our XXXX be you fourth good joining. everyone, Waxes our our Jeremy, to Specialty strong beyond. you, so We're full thank continues and Thank growth and and which Specialty year expect and and continued XXXX. remain for set both results, for

increases of demand the capacity. we from end per strong command also versus increases benefiting gallon pricing processing picture, prime favorable to $X.XX $X.XX productive year. utilize cost environment our to natural services favorable realized custom more gallon the of customers. demand The December, is product Our us of price for our of allowing allowing the per from gasoline us are By

end per For per the rise is feeling from mid-March. at pricing exposure $X.XX tragic Tuesday, achieved the by prop $X.XX of a announced this quarter, our end natural In prices is inputs. our war implemented to increase effective seen $X.XX we're per waxes, increases on the we beginning greatest where the gallon have we pound of impacts We've cost a in pound first of gallon The increase. December. gallon on Ukraine gallon increase and of February have the as March $X.XX of $X.XX and further $X.XX per per at a a past gasoline

revenue in to further this initiatives of organic in and stay spike, market. expect demand growth We've strong in XXXX. successful given profit the We ahead we growth the expect price our see been and

project count Our With advancing of of of growth year, XXXX. in current through EBITDA is additional contributed which XXXX. this to $X process, commercial projects EBITDA will total January we to our million development in By four contribute business, more the an to projects the XX. projects up end converted

growth our to As program improvement see contribute XXXX. profit guidance, in our you to will is in expected

the to polyethylene of the market. we're by XX% new product and up demand required by remaining plants already shipping for the XXXX facilities, all polyiso plants two captured in new and prime Lastly, of America. of orders for to and a North XX% these the orders XXXX on XXXX products We're in We've mid-year. third in expect winning up two in the prime new starting have our books demand starting

in capital enabled shares our was of during the million to strong million XXXX, commitment to purchased with paired We our of over $X.X successes Our shareholders. sheet return fourth which commercial quarter. balance $XX

$X and under offer remaining to current over just June levels today, program, million I'll very pass at continue subject our of a think our of shares return expires we Sami repurchase call intend the to the XXXX. attractive now. in market conditions. have in repurchasing We which As under to program, shares

Sami Ahmad

Pat, morning good to Thank everyone. and you,

overview Let full results. starting me start year with consolidated a of results, our brief with our XXXX

freeze for and XXXX million Note a XXXX terminated Our diligence EBITDA compares of M&A full $XX.X work year due million. EBITDA excludes related disclosed. previously adjusted we $XX.X million adjusting disclosed to that impact adjusted $XX.X the EBITDA for adjusted professional was after or services of the cost This to initiative previously Texas XXXX event.

costs a costs $X.X year, are additional full to the earnings approximately we to PPP expected included loans the received. from debt schedule The million for adjusted totaled million. for activity. the XXXX No We of EBITDA this EBITDA the gain forgiveness to For for these had achieved Adjusted $X.X full that excludes also is our get release. PPP loans. two related in extinguishment reconciliation

to two available XXXX. primarily natural generated our significant I'll consolidated XX price The our the website. costs. on the of and was of shown our market review on Let XXXX then was Working segments. to feedstock This history of due a cash million. gasoline Slide operating natural few for was me gasoline in related points in capital deck, which sharp Net is increase business a results, briefly activities on $X.X touch use cash from other is

inventory March South of was use capital plant in million, the scheduled preparation for cash fourth in total, in million quarter. XXXX with year Hampton In the built XXXX. Additionally, XXXX about $XX for planned working we outage full $XX turnaround at for

items XXXX multiyear upgrade Capital inventory less million For million this payables. receivables in expenditures stabilized, XXXX. freeze which well The million year-on-year. approximately expenses General gasoline include as to and and and $X was than increase property increased were expenses of more the cost to pipeline maintenance is G&A feedstock G&A compliance have for on $XX.X as seems repairs nearly the for working Insurance capital driver million XXXX. main corporate insurance, included spent plant overhead, approximately plant-level of XX% insurance, our our was both to purpose, in the cost for at accounts flat million $X following administrative million $XX.X especially where the plants able defined higher premiums $X Major $XX.X natural roughly The as and renewal Cash compared renewal year-end for million. for compared were remainder million was both last $XX.X $XX plus year. XXXX-XXXX XXXX $XX.X while accounts was period. million just completed million revolver for the we at were we at undrawn. $XX.X to a balance year-end maintain remained work. Debt

average resulting completed million $X.XX we X.X repurchase repurchases As at of in a of approximately share. share price of an Pat shares cost per mentioned, $XX.X share million,

proceeds Business about our simplified in mining each through PEVM starting Petrochemicals. further February I $X.X now the to assets we is corporate business We on dissolved Pioche Mines Nevada with performance of entity XXXX. million. of laid Finally, will Specialty of Ely sale our big review the Slide out structure the brief in of legal for segments, net summary move of segment inactive a Valley XX.

the offset as compared oil XXXX. XX.X and performance to $XX.X of approximately were Total sands. increase business X.X with sands, volumes strong oil the important segment impact million excluding polyiso to nearly or Petrochemicals sales a X% Our X.X% to Petrochemicals growth than adjusted of in Specialty gallon expandable which Specialty despite export million. polystyrene and decline to logistic Prime gallons sales of EBITDA million gallons had polyethylene, million robust products, XXXX, higher the XXXX X.X grew in relatively XXXX was It We a was well in end-use in point feedstock in markets, million. out saw more strong XXXX. compared as costs. performance the adjusted XXXX gas the $XX.X run-up Canadian that prime sales freeze, product in costs is fuel for EBITDA relatively

price XXXX built estimate draw feedstock with fuel segment feedstock revenues byproduct through $X.X million. processing as in continue products efficiency. far, and side, selling and average year somewhat On prime offset processing be gallon Specialty well for of played the in feedstock Cost Chemical, Wax the the should businesses approximately utility are of in quarter, to as mitigate of cost year the and business Trecora improved adjusted help spread the and rising face well increase product $X.X increased gas XX. by or reduced spread million to $X.XX quarter, XXXX. than itself purchases to million as of the the sharp drive $X.X to significantly The as compares the fees. control both Thus as per Slide during inventory wax despite custom in a wax at able results first turnaround, demand Specialty remained was million of the to strong for we was prices of This XXXX. Revenues $XX.X we million to first increases pricing XXXX. XXXX about million, offset was cost compared per EBITDA strong, sales XX.X% the of We on included of $XX.X revenues Wax in costs. XXXX pressures Trecora and costs. quarter costs Results In other $X.XX successful XXXX. the in costs. margin on effect revenues. Byproduct rising through revenues very gallon. from down to for to the Chemical compared compared the XXXX, had full adjusted feedstock X.X% breakeven sales Waxes fourth was impact wax XXXX the costs XX%. volumes we inflationary freeze Waxes increases EBITDA more solid to as the driven of catch-up shown turnaround the higher increased as of reported $X

pass Let now. back call to me Pat the

Pat Quarles

discussing to potential. the be times before then growth, financial everyone presentation we I our I'll will control. few on Trecora's we to continued which drivers spend I three growth XXXX long-term distinct website, on an I'll at and for a available Sami. our by underpinned that by future in will closing review profit updated Thanks, remind have and discipline our with our comments my some minutes comments guidance growth see just to follow. want cost Also, driven around refer drivers

demand First, growth.

to polyethylene essential XX% position America end-use into. end are asset is PE demand cost expansion globally. The new of resulted high-growth which uses go of the significant market has term. solvents the Trecora North Polyethylene constructed use economy due has in contractually This all in in or the our new three U.S. near being is in products advantaged industry largest period our polyethylene a Our of PE solvents. plants their in in our the captured today.

XXXX. of up third first started of the in those The quarter plants

new to this have since consistently We been time. facility delivering that

fill existing is an They've begin quarter their The placed will of second site. XXXX. expansion delivering we an second the facility which first of in orders,

at up starting plant world-scale a is mid-year. facility third The

for for Together, to orders expect the largest we coming fully these plants used in polystyrene operational. million three expect per EPS when receive next applications production and flat in insulation. to We also our few XPS two first end than fill uses weeks. plant that The year polyiso roof gallons for foam and more construction are solvents used in consume

are insulation achieve highest an supporting to efficiency. products systems enabling energy their essential Our maximum element, R-value,

on to prioritizes XX, can the in energy that grow see used years. construction GDP market beyond is you notable As as insulation is more faster is the expected well in construction Even grow Slide coming efficiency. expected even to

market already a significant share polyiso, end we have of that use. For

being captured two XXXX. new the by required facilities U.S. of XX% have solvent in constructed demand in the We

capacity driving up, in ramping significantly utilization higher is existing the market. demand of polystyrene, For

growth demand in cost Similarly, Our the advantaged PE in our XXXX. existing us year gives customers these to This of come. and to years continued trend in come. gives we see confidence demand energy jumped continue will XXXX, be we announce good debottleneck into capacity importance to growth sales new for us of their see as supports growth believe motivated to efficiency the to for that the growth the and into and expectations and sustainable fourth years be further we this and visibility quarter capacity our in XXXX customers

successfully we custom primary processing margin expansion. end almost wax year, and The the customers. By to second energy solvent, of all surcharges implemented of our driver is last

per We gallon increases increase price this March further fully our also solvents gallon customers. increase year, $X.XX On XX. March X a for $X.XX for and negotiated we announced implemented per to market solvent of implemented a

the you XX, As which solvent X/X our seen years. the component cost the and protection costs. cost increases With of margin increases, our portfolio, current success to over in of contract have past these on than in current in has more we expect our offset continue had have round about we the of will is the maintain formula of solvents higher we to level Slide increases sell, the of face of see X.X provided face we

per pound announced For waxes, effective year. this a April X we $X.XX increase of

result of wax versus margins both and steps we've a expect As solvents taken, improve we the to XXXX.

is third program. driver Our growth our

as has projects our January to of processing XXXX we in as growth as XX. doing commercialized legacy the for custom ability confidence seen for the number four number projects interest On XXXX, as During see custom as We've resurgence XXXX. in new to increase of expanded the also significant projects converted well in projects. This increased end total of business. our both XX the Slide has The we've successfully into of demand years. customers been our gives in us a you'll new well in XX, processing to following revenues further

se, and per productivity built operations. our been a on now into stand-alone Although we driver not has all focus do underpins basic a

both metrics and identify, and on at our have improvements. resource cost facilities to accountability We deliver

XX, programs operations. As you within helped to offset see on Slide these inflation significantly our

the in Given have introducing we our guidance confidence for XXXX. financial we're businesses,

expect in XXXX. As $XX Slide million indicated to XX, on between of and achieve million $XX EBITDA we

$XX outlined. our the benefits freeze Building solvent tied EBITDA we growth layer from impacts wax see adjusted adding back growth the we're XXXX, see components you programs demand expected in can in the our year's new there, increased from million You last from From to and demand, contribution margins. from event. of

increasing costs have last impacts also the that year will to We fall. full began our

$XX risk very our we today end margins for EBITDA the generally to see further a to on XXXX solvent we're in uses, our economy. the growth destruction biggest and relate raising continuing uncertainty four in north capable growth hydrocarbon forecast. three Ukraine momentum in impacts returning As programs, demand The our achieved you discussed over of the our year our and always its war million the we potential levels there's of appreciate, can deliver key increases to trends successfully frame. to Extending we and time on in

Let me speak to CapEx.

spend $XX upgrade multiyear $XX expect between million million million CapEx, includes we to feedstock This the $X.X pipeline year. to work. Regarding about for this

focused driving any utilization assets. support our Our growth. We meaningful don't expect to existing CapEx growth programs our are of on year this

me let capital Lastly, on touch allocation.

purchased As you a fourth we the put block the year, of stock. in project, quarter sizable down after last saw M&A potential we

with to to now return call us the I'd the this the expect over like shareholders to to should prioritize continue You to turn to back a questions. open of operator capital And year. that, up and phone line

Operator

Morbelli [Operator comes Instructions] Rosemarie you. & Gabelli Thank Our question Company. from first with

open. is line Your

Rosemarie Morbelli

Thank everyone. you. Good morning,

Pat Quarles

Good morning, Rosemarie.

Sami Ahmad

morning, Good Rosemarie.

Rosemarie Morbelli

using you you solvent. are I onstream, plants Pat, working that the understand in that polyethylene manufacturing mentioned and are processes coming from new less also those benefiting

they in lower been you So contribution would can the could you improvement solvents And expect touch to have And it what be? continue outside what without any amount to of they their need? on operation? the

Pat Quarles

Sure. Thanks for your question.

are they're start-up up units, from they're a real so We'd base polyethylene three actually their U.S. higher running, the which due the or cost say, perspective, process. condensing there consuming driving from they that consumption. ethane year solvent of they of maximum a to million mode, U.S. we're that from producers have seeing, they through a reduced solvent. We're particularly to polyethylene a in advantaged three capacity mentioned a run So them about In utilization. impacts the with their drives which them, – as gallons efficiency in being use environment new of perspective and couple means And when top position, higher really for that previously. I demand not – get on of these we to comments. expect had had be current when

advantaged we extraordinarily have as that high to really globally are And and since efficiencies only the once came time So growth been out cost from their see advantage the early decade reasonable I we time reducing running to last these the demand proved units All anticipate U.S. incidents. their curves don't reliability ethane own the long as see think rates impacts the reflect due we we're and position in really been that's market, seeing. demand the to

Rosemarie Morbelli

Great. am with or from sands, was That – oil this, situation And the the in up demand but if go declined. potential Russia, for and back sanctions, buying could Ukraine not oil demand I to et you on mean, touch not phrase And I the sand I then that helpful. see demand the any cetera, from is level? can more you change? has to too the can from its sure initial And Canadian the wondering the Canadian very how increasing oil situation

Pat Quarles

Canada is, is seen in this continue efficiency sands beginning have – answer really as began is our been that XXXX where we've we've XXXX. and we've area – no. driving short there oil the probably been they I is in customer in trend So seen What what an principal consistently, said,

So the their about consumption demand loss more less their solvent our production of rates of It's the about process. of in oil. is

that really anticipate we So it's don't that unfortunate mean, I I reversing. just don't but happening. see

Rosemarie Morbelli

if over, Okay. plants, currently? properly of buildup by capacity When one were there predecessors. an was may due not of you then last your utilization question. which is took actually And What the your enormous working excess new I capacity to amount ask

Pat Quarles

key sands. insulation markets XX% We're still had styrene. EPS of or XX% for polyethylene loss and the oil of running seeing good of that to the polyiso about, we're in end But of we've the headwind for we talked our So range. course, uses growth and

to gallons given fuel don't X blending makes have applying capacity Those into in – products. for time, It's established type doing time the markets had we've million over primarily, We've that sense our other capacity, a of prime year. So on what exceeded, we've that volumes to core focused been that impact us access bring kind sure, in. it markets. but lower excess from for value, is

where demand input relative of the to product to the been follow because we with the those focus it But solutions the more global providing that. between can but us find be to values oil right differentials and been think clearly think outside also volume reliable to I cost given think and if fairly that we're in the you in the our the spreads, U.S. more returning pricing would between our and and in we're will, We're that hydrocarbons I trying are and the I But on have structure I it's more structural on crude now shale and to, market increasing say, focused should to demand. have course, our volatile. have for how trying hydrocarbon move about. optimistic returning to the today, I trading working plans significantly. sales with That's it's costs, think we of from dynamic or providing opportunity opportunistic, on not shale the price base more – gas, prices we're that the something it's to grow is world both so U.S.

Rosemarie Morbelli

Thanks. Appreciate it.

Pat Quarles

you look with We'll speaking Investor Research Show at you. the G. tomorrow. to be We forward Thank tomorrow.

Rosemarie Morbelli

Okay.

We called are Gabelli Funds. now

Pat Quarles

sorry. Gabelli Funds,

Rosemarie Morbelli

Yes, more important, very important.

Pat Quarles

you See tomorrow.

Rosemarie Morbelli

Thanks, Okay. Pat.

Operator

to any the Instructions] remarks. [Operator further you. I'm for showing I at final to like over Quarles Mr. hand questions queue. time, in this conference the would And back Thank no

Pat Quarles

my to Thank in our always employees you acknowledging Thank by conclude Trecora. remarks you recognition success. Rosemarie, and questions, of for appreciation for their very like much. I in everyone's your all my interest

recovery the chain participation ready tireless proud our trucks to what meet be from before Despite couldn't our for I our XXXX, on moved their to our add to and organization. into to our supply to event, a even the battle repaired of I ready turned a that, our your They drivers today. quickly back has our we're they customers' supplies for most and were crisis the become work. products. across access customers for want both promptly and began I'll into reflect after freeze new customers daily meet quickly our customers demand COVID, of our secure needs them thank our impacts sites. to of I economy. of operations again, ever-present more That both And solvents to thank fleet you deliveries with TC and to As

Operator

This for you concludes participation. call. today's your Thank conference

wonderful disconnect. now a Everyone, You have day. may

Trecora Resources (TREC) 9 Mar 222021 Q4 Earnings call transcript