Trinseo (TSE) 4 Nov 172017 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Trinseo Third Quarter 2017 Financial Results Conference Call. We welcome the Trinseo management team, Chris Pappas, President and CEO; Barry Niziolek, Executive Vice President and CFO; and David Stasse, Vice President of Treasury and Corporate Finance. Today’s conference call will include brief remarks by the management team, followed by a question-and-answer session. The company distributed more detailed remarks on its financial results, along with a press release and presentation slides at the close of market yesterday. These documents are posted on the company’s Investor Relations website and by means of a Form 8-K filing with the Securities and Exchange Commission. Instructions]. [Operator hand to now Stasse. call the will David over I Please go ahead.

remarks, and Michelle, listen-only At brief to good this question-and-answer you, in mode. will the participate time, our a everyone. in morning, Thank session. follow are all After instructions participants

rules on forward-looking and Slide noted statements note cautionary disclosure are on Our X.

what may or non-GAAP results forward-looking future Report presentation, earnings of in X, statements replay limited on in Form transcript on presentation. must call the We available Investor is During in XXXX. provided will could expectations. forth Factors cause guidance and measurements release materially A you A issuing measurements. conference that archived our described are be Reconciliation the conference factors we to, actual differ of under caution this Risk actual is replay includes including these XA, statements. make Item the November results Annual our set certain not these and that until implied include, differ call. from be will the Factors. our Relations following discussed, in and appendix Today’s could describing the investor website but shortly XX-K to company’s of certain the presentation

like turn Chris Now to I’d to the Pappas. over call

a Thanks highlight points key few results third I XXXX quarter strategic to our initiatives. would and on Trinseo’s welcome like financial results to and call. financial conference

fundamentals strong to continue we portfolio. business see our First, across

of $XXX our million, call. which to included quarter $XXX for debt the EBITDA $XX quarter Third guidance financing. the income quarter million pre-tax million, net our second $XXX charge million related $XX a was to which was from million exceeded Adjusted

Latex margin supply timing primarily unfavorable segments. as performance Binders pre-tax million to as Our and net This our in higher due well improved Basic included result $XX from Plastics was a unplanned styrene improved margin impact. outages, operating

$XX interest our million will September, we our balance that sheet cash of in annual Second, refinancing by reduce per closed the year.

increased would Investor EBITDA of our our laid along million million. Materials XXXX, EBITDA from $XX identified a Performance at increase actions, to of contribution making goal. $XXX actions one the to are a in report XXXX time, this Day by November XXXX million. with $XX that we out were year of from said from later, total I’m at These towards by an EBITDA with series that Third, significant yet we that pleased not that progress actions segments we

working these the Plastics Let quarter, me API provide of already an the technology complementary acquisition business. identifying In we we particular, of some and on to are third actions. In executing on opportunities, integrate the update closed on and China, differentiate we Also, products automotive where on XX-month in was we our recently and completed Trinseo’s new offer an of ABS can consumer to plant completed free. that to project the and time essentials injury construction the offerings markets. are

on to market we formulations SSBR testing. our innovation commercialization. required of tire begin year. will This from allow plant operating call. to comparison expect for will quantities life ABS from of and in quarter up use this outlook the the tire also the of our the our pilot higher we plant We in deliver performance pilot quarter selling second pilot lab Fourth, sufficient in new Trinseo quarter, production for The more Also speed to in results in full-year open SSBR facilities real plant help sample Germany. will expect fourth plant efficient new fourth this provided

$XXX adjusted between million $XXX of EBITDA $XXX We of and expect income million $XXX and between million net and million.

of $X.XX $X.XX share, and to $X.XX. adjusted earnings diluted we of EPS to For expect per EPS $X.XX

strong And third questions. operating conditions million, $XXX Basic may of quarter looking timing million fourth expected share quarter. additional of Plastics. performance $X.XX EBITDA million minimal including earnings of by was from earlier, impact basis, market discussed fourth well about in impact earlier. target $XX $XXX between assumes Michelle, $XXX Our EBITDA outlook line you and $XXX now, Materials This This And in no phone million the quarter unfavorable income diluted the from on stronger styrene as lastly, described open pre-tax the higher and net adjusted outages of $XXX impact million to XXXX, assumes net improvement of the outlook expect to into of XX% between is and as Performance a in driven we unplanned includes growth per the material that for $X.XX. million

[Operator Okay. Instructions].

David question comes Begleiter. from first Your

line open. Your is

Good looking you. and market what’s morning. progresses of in course how would styrene the for through trend expectations your Chris, that year? year guidance, Thank at out XXXX the the next

Hi, generally and move that Yes, the continues saying, David. dynamic we you, would as XXXX you know sense supply/demand of in that Yes. in into see that David. styrenics styrene to market the time Thank favorably, We’ve some the styrene. positively all general continuing are for trending the thanks. now, and been for market

David, small a forecast of limited be in improving growth. would to year there years. to couple only continues And So supply, see China plants next coming generally X.X% Demand interior is per couple on in conditions. on that of we really over the the basis, X%

of the styrene for view, if really will, So us. that’s baseline you

about now, of I’m have year. at the view somewhat than the perhaps next outages. appear unplanned We and a however, a they Now, forecast of our planned not guidance. and outages have do, not And series outages that in would of of do unplanned do XXXX. of course, we be, any business higher this industry include to we you in had least as those, we talking slightly know,

we that we have constructive several So are up, add if been I generally think, as last year-over-year you now continuously the for all years.

on think the all Materials you. that balance Chris. incremental the incremental, $XX I pilot And Very projects, $XX SSBR on plant the million and XXXX? will expansion EBITDA from in good, million Performance XXX of is Thank on just – growth million a the that the be

we have our other of expansion to of will the contribution Performance going $XX will the next items, it Materials some latex see business Well, rubber growth year, course, are Yes. and year binders in, API. from additional from next kicking from of million. we have, but be about for We’ll

So, from expansion David. major But rubber from yes, is in the that. XXXX, rubber occur growth and the the part later will of XXXX into

you Thank much. very

comes next question from The Bob Koort.

Your open. line is

inventories the include from outages, would post for essentially just you that during the outages they understand time Hi, include of of million some where during this Bob. question. quarter? a period? styrene that unplanned kind on during us time Does industry or unplanned probably $XX that got Campbell is Dylan you Can rebuild does margins outages, help how the the impact Quick to

tried been Well, it’s to estimate. exercise clearly We’ve And combination quantify an this the outages. it’s before unplanned effective of all the where kind we generally, of of through that.

outages and that we do number. assessment, would to put an is number. margins in how efforts So obviously a try of going judgment to if that did And that I building a forward? inventory there come we And outages, an not that, the not unplanned lot including and would up you a our best and make think a we on precision occur, It’s number rebuilding want with into the the calculation been calculate. we have

it’s it’s that’s you not unplanned the possible outages. unplanned a should that think effect to because you estimate we reason, you. to think, that, clearly sense that an as of as It’s take disclose event. I precisely we But important of of it’s it effect. And calculate So an have stated, calculation the the

those saw think year, And additional Thank outages of guidance we that first-half of some the during rate imply the unplanned does I outages, normal you. first-half of Okay. per of during of kind the that… and a year, that kind in your the se unplanned

are industry. be be yes in on really the Yes our of substantial would going the past future smaller There events monetization the events a in tried that not and way event. characterize in we’ve significant first-half numbers. again, and a think the to in the give significant in the – view you that And Obviously, the the characterized of was a during I hurricane year again, year. and happened styrene financial effect always anything just to will

you. Thank Okay.

Mitsch. comes question from next The Frank

Your line is open.

Hey, back Performance of you Basic I that Hey, Chris, being greater when but Plastics, XXXX, Materials, ahead Materials think about last go back to two was good XXXX that’s Basic major well, than the Performance – believe I the time, Are was you to if How I think, guidance, XXXX at looking segments? Plastics? we between interplay coming should the think. morning, the guys.

think, that’s XXXX. for correct I compositionally,

to be we’ll on the year you take and if you $XX little of Frank, kind than higher at you bit call, takes, and more million about Basic we’ve talk If Performance puts this of the would expect a Materials lot our forecast February look million, the $XXX and next in a that Plastics.

in of construct a little pretty guidance, the close, they’re would but the year. higher yes, Performance be still aggregate in next than Plastics So Basic bit Materials

Asia. great on looking happen regular your trends, with just estimate, styrene and Europe December flat assumptions the forecast Is which right, potential a that And doesn’t November? very margin start European seems the to or are December placeholder flat a we take obviously, that on behind what at All November industry, outages of is almost account some in holding because into forecasting, And in it both basis. be and then, with to can slide

more it’s placeholder. I think, than a

world. in not the put be November we X, margins but to fairness, takeaway XX as call a It’s it have think difference, call bar precise similar November. I to But to on similar, of Frank, it’s – here XX sitting a pretty be basically think, meant same than are either be way, and view we the of and think we similar going we decent I the grey try think will and rather would We in. just the obviously, or

terrific. right, so Thank much. All you

Yes.

Ahmed. question comes Hassan next The from

Your line is open.

Chris. morning, Good

Hey, Hassan.

How them of of about Chris, specifically, if see QX destocking progressed, how I China, think sort sit of the it more are and seems sort thereafter. in there I there do a question of by around restocking, inventories? major And you was obviously sort major a followed globally? has mean, where call inventories, in year that generally sort it,

with regards help as any to more global just specifically you Chinese styrene? inventories and where see inventories for So, well

I’m sorry, the right, styrene, you for at said Hassan? end

Yes. correct. For styrene,

Yes.

For styrene, yes.

up, XX% inventory. into are XX% QX. and been quarter have. the There styrene in China. end exactly as and There think a bill. third now, are in the back down are little a normal what they Today, normal But was came best call just the running a we we had they of level of we they bit actually are a lift are moment, we then fact quarter, the but head There data about we about that would a they I was lower little At you talking the was as is right. they depletion. at

helpful. That’s Understood.

Now…

answer So, The they’re low. still pretty low. it’s is pretty

got it. Yes,

supply to talking reps of Now be China there I smaller of on expansion look as one for of well. some to coming have capacity online then moving side Brazil, at incremental styrene of about, the was the sort supposed in been things, what had sort industry one China, take of sort styrene – one then coming monomer line facility in you and in as a

those online? So What’s been on market? the facilities Have come the by have those? they digested status well quite

facility to we you primarily later on was have pushed. to will. was data discussions, regulatory come that year The China been in has of that pushed believe supposed that. if pretty And We continued due good this kind up

capacity shifted we not the I has Brazil fourth answer we are think, would they’re added, Hassan, but – have to question Maybe XXXX, that make in they’re as it’s to going And is, XXXX in Korea. into up. it’s that, up, Brazil on But up inventories. we in but in far latest. about it’s our precisely, And goes, maybe early As probably smaller your net capacity believe maybe coming hard say they going some is, quarter, the to tell if should fact, be.

turnaround the into think to QX. it’s important stated season them head generally the that I we high in China, we inventories in note as the way

part first a next as of I we that’s look least So think year. at positive into the construct

Thanks much. Understood. so Very helpful, Chris.

The next Laurence question from comes Alexander.

is line open. Your

on is How Nick Laurence. [indiscernible] for you? Hi, this Yes. are

are How doing? Good. you

Good.

downstream the So can differentiated businesses? an more pipeline you five-year and three give update of to growth on products your

Sure.

the gave include commercially progress. I our of main coming then ago. detailed gave driving of it selling is our of Performance start SSBR of quite we’re of are at overview Plastics, year making I that the SSBR pilot to up Materials in also of the the we free high-level think, the quarter, Day fourth going and described up just we’re the in growth for of made I plant million January running and a Latex $XX ABS allows SSBR quarter, and version the in series in fourth identified projects expansion main XXXX, Performance China out up a that footprint capacity that is to rubber coming that a in changes. that’s in expansion about And some But that in we the kind us in plants a up some Investor investments

Day, Now investments $XX had that I at for growth, pipeline we million are said in we are ones those we Materials Investor making the identified Performance described. the

an Performance the of that to we projects of course, TPE and our Plastics we’re to own one business that API be our we of Materials. additional we acquisition growth set create buying said is offering also take for in growth. of towards $XX across it technologies add identified We Italy, think can to in that million be a very And would working globally a customers way we the footprint where of those can Performance EBITDA our very, good

So on that million about some as to be that, of as can landscape we acquisition. of the that’s by way an have of Nick. composite deliver And already probably think, I $XX we committed

Thank very you much. Great.

[Operator next comes Instructions]. Blair. question The Matthew from

open. is line Your

Chris. morning, good Hey,

Hi, how are you doing?

Good, thanks. in question on capital I a allocation had XXXX.

EBITDA guidance falling. moving on CapEx your on is is your So guidance up,

landscape? sort on free pretty is guess, Thanks. repurchases thoughts be it So next already on the general year? Any great next cash in shape. seems targets M&A flow, year, strong sheet And any share I balance of could

in look we it’s mean, I Hey June in of XXXX, that years, first shareholders. a a is maybe return I would with growth And over as think, past balance we what we’ve to two by initiated of is XX% shares. of XXX we increased to take step going back about at dividend, Barry. the ever that, we cash our investment Matt, said repurchased XXXX. million We

we you about used cash $XXX quarter this for So debt and even think as a acquisitions, of refinancing. we million about forward, for move million $XX

But unfolds, we our So lighter. XXXX. bit with we’ll as a returning share growth shareholders to the cash balance as to repurchase move was investment into future continue

these thanks. could on styrene. potential hoping then, was And for you duties I comment Okay, anti-dumping China in

Some is of on is numbers been styrene, to one of U.S. anywhere have the countries net the around a list. from of XX% the X% U.S. a turn tariff, exporter

the going view comments styrene So how do to market? change impact have it any overall going it be you this your thanks. pricing? impacting is JV? How on to is helpful, Is AmSty Any there would

Yes, I Chris. think, it’s this early to tell, is

anything. a on certain a supply landed for the they sure, there can the But out what obviously are still start amount this and demand run number, dynamics haven’t are. especially at to shift it including capacity in China. around. trade flows We rates, that’s large But relatively of is will fundamental is There plants styrene interior certain it

start numbers be have economic But on shifting bit and on may there the gave view a flows. find not Europe in really in see for styrene action, it our out we would so that view And might on see impact an should to be the in the depending until effect that earlier. run trade styrene large harder the example. flows, construct, a trade We in assets that little we it

trade of think, how in I then kind see deals see numbers, market of let’s flows terms with it the dynamics. So other the wait to and and

you. Thank Great.

program from our question portion Q&A And today’s final comes for of Andrews. Vincent

is Your open. line

working cash come to more end working It looks I the you of flow on free get like – flow will that little sorry, you’re capital trends. if starting think or Thanks. the that true of a get was wondering as just up going you prices I’m XXXX? bit capital more release and the the are Do you through year, by to the down. into detail butadiene those

that. don’t answer over to see some is, in get minute. let there again short Vincent, down we hi, in QX, comment very can But Barry did are on came I all butadiene we think, But you in dynamics it’s other Chris. back now. of are I’ll this And QX. QX. actually turn I’ll the right, a And in it some Barry that

So, gone back come it back it’s down. up, had

working detail way pretty the dynamic. you flows? But Barry, capital So it’s the anymore on see

pick to about Year-to-date, $XX million it’s up just of flow. overall maybe Yes, it flow. free cash cash our free little

about million our flow, million, shrinks. cash year-end the would that receivable it’s mean these So $XXX a current shipments $XXX about in around again recover but that now, million outflow would $XX sense and working still seasonally, about $XXX at million quarter, see fourth quarter. slow particularly But That’s And move start the of lot. in as of our a to capital as strongest we balance that’s Vincent. free we it, net receivables

– the you year. that build, a will, forecast the if the So that have from you end the free – so cash beginning know capital still but of working would flow to of year

Right.

recover you things that theoretically XXXX on normal So top of could your generation. all if in equal

synthetic Okay, mentioned other bit sense on what you of little a any went like just destocking so rubber, But of seems back, was, issue. an only not come on it’s there? maybe it question my

of I price People was bought quite think rubber. in the drop a first-half heavily They in it price were – had year. anticipating of behavior-driven.

sales year this were than XX% year. Our for of higher year the last first-half the rubber in

that prospect ahead a was started buying there of growth. they to going And see butadiene, on, as would dropping rapidly reasonable clearly, So of general amount I of the call they then demand retrenched.

basic quarter. back we you And to ‘normal’ dynamic. fourth mentioned, enter as that’s coming levels already think, as the it’s I the

very Okay, much. great. Thanks

welcome. Hey, you’re

turn no queue. over for I remarks. presenters the the have closing call in back to questions I

you, Thank Okay. Michelle. everybody. Thanks,

conclude This everyone. today’s you, call. conference Thank will

disconnect. now may You