Univar Solutions (UNVR) 22 Feb 232022 Q4 Earnings call transcript

Good morning, ladies and gentlemen and welcome to the Univar Solutions' Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Charlie, and I will be the operator today. Currently, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions]

the Kos, to and Vice Univar turn today's host Communications now Solutions. Heather call, President, will meeting your over for at I Investor Relations go please Heather, ahead.

quarter morning. webcast. Univar and call Welcome you, year earnings good Solutions' Thank fourth and full and to

today Jukes, President call and Executive and Chief and David Vice Executive Alexos, President are Financial our Chief Officer; Joining Nick Officer.

slide financial posted presentation on quarter ended univarsolutions.com XXXX, and to Last call. corporate presentation fourth a go The night, earnings been December should along to the which supplemental we with today’s be posted results for has also website. released with at our our release, website slide our XX, the viewed

which slide we release reconciliations summarized of this the which non-GAAP financial to comparable you to regarding as the During additional most for supplemental use financial the will also earnings can two, our call, includes measures in information directly find certain on presentation, refer slide GAAP and measures, non-GAAP measures. financial our

of for and in of not Please are future. referenced statements on guarantees expectations All SEC the risks and estimates, our filings business performance. two, future. our involve uncertainties risks our and a and our see about while summary the for detailed forecasts statements such inherent projections, they make more outlook, forward-looking. reflect estimates, our and/or And future they current As are the we uncertainties expectations slide for

over turn to opening call for now I’ll the that, With David remarks. his

afternoon, and for call. thanks morning, you, Thank everyone, Heather joining good and good to good evening and our

at inorganic efforts and to my markets, to customer as diverse customers the achieved who and a organic to demonstrates and range we deliver the colleagues needs the a of solidifying position tireless proud more. of our transformation the growth. solutions put of we successful many meeting year the center XXXX and in results end healthcare record do provider, The immensely leading from to value-added the of both continue nutrition, throughout I'm service across of all of electronics, many, our

over million to shareholders strategy adjusted investments capital $X and share on We've as return a billion EBITDA allocations sustainable delivered for in and acquisitions, growth. during repurchases, year, execute we bonds the over between $XXX

in believe foundations in our our to a are we've built sustainable our success commitments and deliver for and We position value, long-term to the while communities. confident we're and strong shareholder purpose people fulfilling

and Now and me QX guidance over to He'll through let will discuss Nick. and it full talk results, Nick? XXXX. hand for you also our year our assumptions

am morning to to business, Good share I David. outlook. QX results, financial Univar hello our and pleased all. and Solutions you, general Thank provide XXXX update

earnings by an diluted the in XX% was in per quarter, operations higher from of prior $X.XX in cash quarter, was a QX fourth share, $XXX a increase in whereas was share networking year $X.XX from was million, capital, the EPS for full $X.XX Adjusted the full decrease reduction $XXX XX% million year-over-year. Cash year-over-year. a from adjusted operations year year's reflecting and

our able than $XX year quarter to investments. driven year reflect primarily XX.X% customer Full capital Capital totaled annualized were mix inventory prior slightly the by anticipated. we for to capital of was networking ROIC expenditures sales, high higher million million, million, Year-end good destocking. versus of projects of were QX complete $XXX expenditures a due $XXX as above which guidance more

in XXXX. beginning shareholders the shareholders of returned $XXX net of and driven cash through and XXXX during earnings These program at by million stands our of asset for Our QX million year return now performance over leverage are efficient our our of since strong X.X ratios are ROIC the was share year, XX.X% repurchase times. utilization, program fiscal $XXX with and ratio the to

growth demand lower pricing with constant discipline in a goods was on approximately gross pricing gross primarily lower was X% increased while from the benefits. our all down to across X.X%. inflationary destocking more quarter customer better fourth the while in were is as higher higher gross in benefited performing planned. due The basis up sales of year-over-year Canada's the offset geographies, markets, Sales profit corresponding currency profit than than acquisition, the U.S. EMEA cost and profit from sold and and LATAM's which Sweetmix were

anticipated. partially efficiencies than was was primarily was slightly offset some QX margins and regions. gross in QX as due except customer Adjusted significant which our LATAM, $XXX by destocking for board million below for more EBITDA profits, to the operating decreased lower across EBITDA Adjusted were guidance

For and basis, profit our was profit up the throughout for margins year regions, the inflation, largely up Gross XX%. gross input currency by by on discipline. lower a full sales XX% were cost driven offset constant pricing partially year, the corresponding were

For in in leverage margins regions gross U.S., the year, to led operating other adjusted EBITDA than higher lower margins whereas offset this the benefit. more

Moving end our XXXX. during onto trends in markets

grow in as partnership and Sciences, growing Life formally such trends as Sciences, solutions, year address care to and known Solutions. our Life continues consumer as channel and Within and food products. our consumer customers suppliers beauty and strength that Industrial Specialty formulations and the throughout both clean Ingredients with personal label next-generation Our saw provided

Within maturity actives, working pandemic. and Pharmaceuticals cleaning industrial since other and Solutions, ingredients increased pricing to due further metal development. discipline and for grow through to excipients, continue demand growth the Industrial homecare and lubes supplier necessary saw and the high

was the housing the Our back the product construction and of higher for impacted of rates during year, half interest by slowdown the much case business in and tightening from year. resulting inflation

with and of demand pricing. In many channel accelerated Services resilient Chemical of core and our over course saw year growth strong the seeing industries the

center on the and above mining, to has growth the chemical customer in continued manufacturing, all led at market focus energy. of we clean Our putting do

chemistries provide with solutions Our robust purifying allows water for municipalities water. offering treatment of industrial and customers managing both to and us

are high the American North purity our into chemistries market microchips. to beginning accelerate manufacturing for also We electronics necessary offerings with

and in pulp and paper, agricultural the general chemistries, sectors. growth in Additionally, we manufacturing saw

assumes into year-end outlook Our XXXX a continuation destocking QX. of

U.S. expect a expect softer significant we in chemical the XXXX, and recent first at with to XXXX. demand not in do growth weaker year and expect throughout In been all full generally change GDP half. in prices has we the our regions. levels Overall, we current stabilize Canada EMEA, low the For

We roughly expect These DGP annualized annualize of half occurring million over for and year will WS&A. savings the $XX transportation in other million. $XX in with efficiencies, from cost the half over

lower of growth Given range XXXX will the margin be the expected environment, to adjusted EBITDA our X.X% X.X%. in

XXXX we for market margin share, the beyond we expect as have achieve with our execute to several periods. otherwise growth We target grow continue well last normalized X%-plus to EBITDA as and

of performance to $XXX quarter performance of the range As $XXX in we million $XXX be in a our the first expect result, to for we million expect our the be million. and to EBITDA for million, the year, $XXX range to adjusted full

review cash Let's our for of highlights our flow XXXX some outlook.

to quarterly For in a of to sales capital expect and by of lower improve our of year efficiency. XXXX initiatives ended source be annualized to and networking targeting year-end, networking cash XXXX, XX% XX.X% capital sales our networking we are capital the given

year. debt expense interest and the use due expected on Our is during our higher cash is of the to that the rates XX% rate floating rising of

estimated effective lower Our Consequently, tax flow XXXX capital given mix from prior than $XXX adjusted million of the of EBITDA. an a expected are approximately And free cash is assume the for range, and net be expecting expenditures which XX% million, to for XX% our geographic approximately XXXX earnings. rate XXXX. we're cash to taxes XX% conversion in the is $XXX year

we of XXXX, return plans $XXX capital million. During our in the expect continue range to to to shareholders

our to will plans Board the review as coming allocation capital year this dividend continue component months, of our additional Over implement a strategy. to an

We for year our in the are execution beyond. our and confident outlook XXXX full and

David?

Thanks Nick.

to that are ourselves customers of most our quarter As we addition metrics and independent last our in markets, prices. the growth chemical highlighted in which to value hold accountable

competitive reliability, progress We differentiation, score, four rate. continue a injury a pricing, lost key record technical well of with NPS areas year to and record make the low high our measurable safety, as time as in and in

satisfaction solutions suppliers to in and customer for and have shown we'll support based and growth our improvement, in sustainable ESG investments innovative customers. to steady, continue invest technology Our

for month, dedicated is and Kimya, entered an EMEA personal and develop, cleaning in based the and we've distributor presence specialty our existing and care strong to agreement our chemical on of the I'm that broader renowned plan highly specialty a beauty Kale homecare, in a supports so industrial acquire complimentary in to pipeline and acquisitions builds continuing leading growth markets. we Our Turkey announced two region. the specialty be This into far region investment Last year. to inorganic opportunities to pleased this distributor

our and South acquired America, extends opportunities and identifying Honduras. ingredients a and our Earlier Group, believe with our Guatemala, acquisitions and The Ingredients and this El distributor these disciplined customer ChemSol provides in further on shareholder Rica, supplier serve enhance month, in enhanced locations chemical partners. Specialties platform our essential specialty and our that we decretive, M&A Salvador, and Panama, growth Costa acquisition opportunities value. tuck-in supplier focus relationships to for We extend demonstrate leading

to acquisitions and anticipated. supplier as we're Spain proving are than Our plan and be more schedule, new already of higher accretive earlier ahead benefits Brazil realizing in authorizations and extensive

global and pipeline the Our highly remains robust very growth within distribution attractive opportunities fragmented inorganic of industry.

and North and successfully delivered time. long-term Ingredients the us the through customer-centric provides We've chemical reduced to and America highly distribution successfully navigate We we've cyclical market a of to well as tools. global end promise suite three sales our growth, And synergies exposure strategic a migration digital delivered date established successfully and for leadership past Over dynamic environment. on strong as executed our to growth and some on markets. and in foundation ability in years, solidified we've largest digital which SAP delivered with the plan, leadership the acquisition Specialties. We've significant our established macroeconomic integrated in channel the

drive margins Beyond overall authorizations, flow. now growth, achieving new in we're share cash tuck-in these product will collectively and growth M&A, market accomplishments, which executing and

million in billion EBITDA a cash free to mentioned, previously buyback adjusted in which XXXX, net shares. with use $XXX over positive flow, we we $X over sustained delivered of As

demonstrated well macroeconomic provide effects to some of as insulation navigate the transformed the business and against positions the Our to an past, continue environment specifically, economic of more dynamic as downturn. we've in

of Whatever circumstances, fed, ingredients and suppliers focus bring and essential need safe, of our structure we to and so and to governance unrelenting them leader to as with social, we help work healthy, We're given sustainable working communities clean safety closely with day a and every customers keep provide, on more the nature solutions as we macroeconomic company. our consultative us and partner. environmental, the innovative thought the chemicals do an and our our

come we've expect and do of putting to we questions years at and your regardless over to transformed customer consistently all the deliver the last three the the results we of company the macro environment. to Before summarize, center resilient

and expect investments EBITDA acquisitions. $X.XX. margin free ROIC deliver a XX% goals cash XXXX initiatives We greater net and XX%, to our to to an flow fund conversion, high capital free continue X% opportunistic use with than plan believe ROIC in flow and selected adjusted greater combination of through than cash our than net adjusted greater of growth We to EPS

commitment our years. XXXX business capital authorization to fulfilling business buyback allocation purpose We against in we're strong capital to Board's along to cash the with a net from share expenditures, over returning Our in expect dividend long-term in well billion four initiate XXXX, people of a execute of Net XXXX, in serious our through as $X.X cash XXXX free long-term commitments capabilities, our believe communities. our generation shareholder to approximately our continued our and $X.X the confidence to company. we intention the demonstrates we as flow capital and our and position to a strategy in deliver reflects shareholders. and will our generate our while believe next billion confidence our to value value to This, continue

our related to we've results, to to whilst interest with I do outlook, strategies, to transactions. business our the I or XXXX respect of announcement in additional in not on your intend regards comment January indications welcome Now, questions, potential any our X, regards received making made XXXX

assurance no interest any in has previously regarding will indications there of the transaction. noted, discussions As be been can result

for up to open thanks will that, and lines listening With you. the

Thank you. [Operator Instructions]

line first Roberts question. John Our Please of your proceed with begin. now your John, is John, question open. from Suisse Credit to please comes ahead. go

Sorry, on Thank I mute. was you.

why and than in USA about business, is you the think EMEA. it growing slower XXXX, I C&S in I&S the faster shift the in business mix grew on but comment occurred? Can same it grew of that

advantages portfolio, Yeah. the of our of of I the businesses performance. which Good very right mean, both in and that delivered one consumer have. the do is much morning, have business, the we is last entire question. facing. grew John. Thanks across On an year, business growth for opportunities We some I&S outstanding blender

dip destocking of chemistries. would've great than that last which a so, from business, have of our due bigger And the C&S the execution, more to and seen quarter both we essential sides in great business. be results tends to But

$XX And there is things then, XX that's just Nick, or is million driving big together? that of something on of that's small other -- of slide cash, eight, bunch use a that aggregated

morning. that given and disproportional the the were payments Yeah. paid reflects Good a guidance. XXXX the that accrued John. principally That XXXX be normalized level XXXX Sure, for accrued bonus for target would in in out versus

So, difference. it's timing the really

All of that in QX. is paid

to number see the you So, be through positive year. that a will of than rest the

you. Thank Great.

you. Thank

Please Favre go comes next Lauren from Paribas. is question of your Lauren, BNP open. ahead. Exane Our line

strategy. got all. morning, on Good Yes. David question for a I

in and group talk about you cons of I us the and you are more, pros disclosing performing guess wondering was the keeping you're to if As well I&S, I could together.

two the bit a run you think started would sense? together. a over do -- bit last year Would separately and to now more to more it this the little make a started it keeping about business have Or businesses any think you let's So, that half? say, you the or

best our margins. and Laurent strategies leverage value our thanks growth regularly business. businesses and view to ensure our I very drive customer developed infrastructure to all question. Good Board positioned And morning, management and for and focused we're across Look, the grow strategy that to shareholder enhance our we've to mean, and

suddenly and relative the recent So, yield the and valuations ROIC of total whilst we of company cash the markets, believe expected equity performance in business highlights our the strategy. recognize our we flow

up, there where follow Thank of you. still would the you say a part portfolio And as is overearning? any then, are you

say all. so. don't I wouldn't No, that I think at

you. Thank Okay.

Thank you.

proceed. Mitsch Frank line from Fermium comes question Frank, next Please Research. is your Our of open.

pace good worth Were as to back was. curious stock morning The you buying buybacks what $XXX of folks. you Thank during the million the and I'm quarter, of fourth December? during that

Nick Frank. Hey, speaking. It's

know, last our As ASR earnings you right after we call. executed an

so that that being our And and that Sachs was agent date, as process. executed was Goldman in transacted of via

nothing that buyback all period. a little that the through all was did So, but ASR bit in of stock of a of really the $XXX we were the million, period, doing and -- third-party. We during million that part most early $XXX

Gotcha.

any that so And have wouldn't impact.

ASR regarding is may a may correct? a So, not the company, or in going any to discussion that you is not transaction that's place that material with be the since having have impact that, on

as I'm earnings not but right as sure I I we the in the was said, the understand directly not transacting after stock exactly the ASR were buyback and executed company. question, call

Understood.

an speaking probably like -- just may would this plan conference that early what clarify the shareholders, just any to to ASR -- comment million was would the in having, implement was the the year, be the returning that I Board implementing to last that latest isn't what today call it just on be, year. of I you're under being $XXX during a you The the commentary was on on the may return of planning but dividend So, dividend? are was impacted not trying a on have there. thoughts the this year. was part to shareholders that sound curious impact doing you if discussions or And

to speak Nice Frank. Morning, to you.

generation we reflects capabilities. strategy that billion Our in current repurposed XXXX That's allocation by share our X.X our really confidence have. evidence cash further program

continue business confident. I not generation shareholder We're dividend. still in are value. the of right assessed. to that reasons deliver It's we are mean, time, to the something position now strong we for But do of flow long-term prospective Now very nothing a the cash is with that our they're

David. you, it. Appreciate Thank

Thank you.

from next Kevin, Vertical is Kevin Our question your comes open. McCarthy line Please of Research Partners. ahead. go

prices If think you prices be were XXXX? to Yes. from what Good today, sales higher your do morning. could frozen in contribution

execute that hypothetical. I dynamic about where we that's be operate Prices in are macro well, we're mean, and Kevin, don’t know, I environment. for ability today, dynamic thank confident the incredibly going to to and environment in aren't question. our they macro very you a frozen

don't I got no know. idea. So, I've

context perhaps $XXX of go to be XXXX would price flow economic sales which billion down. midpoint a very I $XX have bit gross may environment take I seems help. thought given that the would've in exciting, margin, I I EBITDA positive XXXX, to not get been chemical XXXX versus I imply it's of so uncertain X.X%, that of your and Well, an If experiencing. of but would that, and for recognize up at midpoint million about many sales, you expect would wave Nick's companies volumes that through inflationary be

So sort of was thinking of I the how was that genesis about that.

basis, on exceptional on will full answering, was a think XXXX. we go given early I basis, exceptional in Kevin, you. we've which benefit no And Yeah. But down, pricing what the in current our level pricing was a that they guidance really expect year given is David

be year going correct EBITDA sales you on down our margin that So, number the basis, to prior and year versus discussed. the total level we to is the extrapolation of exact did a

Gotcha.

example. can Okay. that a or was context, experience what supplier mistaken, enhanced guidance, Thank million. is secondly, that. your help What put from think And not that if XXXX, today, for you in an not future the authorizations in in for of you've I wins? new us expectation for included sure $XX contribution And maybe to I'm you number

answer. had XXXX. I'm that and That's new We XX authorizations easier Kevin. me in hypothetical for to sure closed we

to in XXXX. million We deliver $XX expect them

from million in remember about $XX authorizations into $XX correctly, million, new maybe we $XX think says I My if talked I think, XXXX. memory XXXX, I million. going closed

will XXXX. $XX in XX what we generate, that's million we're were expect, There XXXX, closed around they seeing. and So, in

you very Thank I much. see.

you. Thank

David, question of Bank. proceed. is from David line your comes Deutsche Begleiter Our open. Please next

Thank can is on wrapping the David, the the timeframe up maybe current you. you either of decision making just speaking please about provide discussions, or Board discussions? terms in of a round

for David. thanks question. Hi, No. the And

As No. any all sorry. I said so making I'm on earlier comments at this, on, not

comment your Understood. And destocking both on your went as just you destocking through occurred. customers on can destocking, as that's you well that

as unwind It's of around to that bit full supply We QX. -- in million were there's and border destocking last a something at quarter. $XX like expecting many chains around year. well. of you've probably mean, the pretty that's little are appreciated, But a $XX EBITDA impacted on our I carried fourth think the we as it to and that some suppliers put million trying like points are QX is our in into

Thank you.

Thank you.

next Our comes open. Please question is line America. of your go of Byrne Bank ahead. from Steven Steven,

So, between split discussion in volume price under be the in what that volumes would destocking, Was were just revenue constant this continuing positive? would say the currency gain -- X% about quarter? the you and

you. to Hey, talk we Thanks call. often. Steven. speak volumes Nice the mean, now very I for don't to about

as in were were Our volumes down QX, destocking. people

I which But I instance, the or coatings was piece. very As mentioned beauty are little those for it that more to construction a generally consumer, mean, of close care. markets whole noted across earlier destocking right on, in type the like was

range, is of point look the then in the where pricing what up through offsetting to fourth been Are indeed flowing getting price your the purchases that raw your So, than your material lofty margins were at double-digit you quarter, destocking in more a XXXX when the have so costs, that we was three would've year-over-year. were excess material that in occurred costs? if back raw didn't in margins you was when quarters you prior

of we first last There $XXX the did year. the very We the we about more open very have did last clear over that of that. amount million, was earnings quarters were so, we over running net and been were couldn't three about about a we amount year. for open So,

But to over that. for about with the we upswings We we'll we our that we of transparent our open market also very continue margins. earning And were we value or generate the value disciplined customers advantage if have be and been the and pricing, downswings can take around intrinsic we provide. last services our year. can recognize And think about the

just the was regional offset insufficient price. Yeah. one to was in to attributed raws. price down volume sounds in appendix, It a being like the -- the really of it fourth not I'm being impact more every segments, margin of and the quarter

a that The volume we Yeah. we a of up not a we noted, this was expect as Steve, no destocking. spread because was destocking. would it in thought, as of was and destocking. at normalized exceptional right. prices. it in nor inventory was issue as We Pricing had QX, in I good our during mean, sold QX was or our least And than definitely with a a between you're But more impact of issue what result cost any year ended also do view we profits guidance. volume principally absolutely forecasted

Okay. Thank you.

you. Thank

is go Josh next ahead. Please Our of Josh, open. UBS. from question line comes Spector your

for Thanks Yeah. taking my question.

whole Just lot the want I we of of and And guess destocking a not talked of better we've lot points if on don't lot to firms data the so December looking yet. know I February. about a some than a have continue talked commentary. January far to

other about the growth destocking your the I that guess curious Thanks. you I'd just provide yet? can year. So, assumptions go I of And seen any through about easing. order on you rest as in the Have commentary you talk be patterns you mean,

morning $XX about thanks and Yeah. we And said, I the million Yeah. as QX. destocking to Josh, question. attribute in

QX, that guidance on As and into million million. a I to reflecting that's said on earlier $XXX little bit $XXX of carried our

past guess, Okay. patterns Well, would you're your seeing order on, carrying so you're destocking in now not normal, say February that? then, I you

are starting guidance. carrying think destocking I There there all reflected markets which some pick are depends end the to There our others that's on, that market. again. it then -- up which end on are in

acquisitions. to just guess, I Okay. shifting

in to for they the and you there the in notable? Just that and is I way the close, not the in what's guidance a guess, deal - to guidance, clarify XXXX, deal is that's are completed to yet

no in no proceeds. There's our are guidance. acquisitions the from There benefits Sorry.

would the and the to the for acquisitions $XX would number. added for we've any Josh, level. be the million when we Josh -- guidance transactions. on use would $XX reported about, benefit those other year I million million full be how on million depending expected a expected two a -- probably basis, basis many to that a EBITDA on to complete And year $XX $XX $XX the But million And talked

Got it. Very helpful. Thank you.

you. comes question the Fischer go Duffy, of is Goldman open. And your ahead. today Thank from final of Duffy Please Sachs. line

Yeah. Good guys. morning,

back Just back the want to million shareholders, dividend under cash to new $XXX is the just flow, plus buyback, go you is or guys coming that talk about the both buyback? that

It's Duffy. Hey, Nick.

is Our return larger shareholders. for our could on year. structured to total amount the approach The be M&A depending

for it'll say number be would on the depending plus $XXX what happens the I dividend. a year with So, million

what where to as be? the range And of Board mean, as will what can far you should you give the Okay. us thinking guys a dividend about? I recommend you're

with I Duffy. Board, -- think we'll have that's we'll continue a to have the conversation

flow cash that that's from then, if is XXX And to million, $XXX eight, the going from delta reason your if free up assume perfect, -- should build from above that that ends the if this there, there's again, no that here? is all cash that enough. Fair slide net it's Okay. to M&A, we

correct. That's

That's correct.

right. you All Okay. Thank guys.

Sure.

any Heather closing have I'll to further We over for questions, hand no Thank you. currently Kos, you, remarks. back so

your you, and Thank Univar in Solutions. gentlemen ladies interest for

does This If up relations to follow any investor conclude have call. reach questions, today's you please team. out the

that today's for you Ladies so call. much joining. gentlemen, Thank concludes and

your disconnect now lines. many You