Trinseo (TSE) 6 Nov 232023 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Trinseo Third Quarter 2023 Financial Results Conference Call. We welcome the Trinseo management team, Frank Bozich, President and CEO; David Stasse, Executive Vice President and CFO; and Andy Myers, Director of Investor Relations.

Today's conference call will include brief remarks by the management team followed by a question-and-answer session. The company distributed its press release, along with its presentation slides, at close of market Friday, November 3. These documents are posted on the company's Investor Relations website and furnished on a Form 8-K filed with the Securities and Exchange Commission.

I'll over now Andy And Instructions] hand to things Myers. [Operator ahead. go Please

noted you, everyone. note and are morning, and on Slide Instructions] statements Thank good rules [Operator Bo, Our disclosure forward-looking on X. cautionary

factors and results Factors may or we implied discussed, must forward-looking issuing expectations. our presentation, risk this forth could on Securities are made results not that materially XA cause our describing in that with Commission. to but from make of to, future actual During actual our Item you described statements. include, Form differ statements, in differ certain limited XX-K including other the set these annual report guidance Exchange or and could caution in is We what filings

no conference statements. in to its presentation. following corresponding and measurements. obligation certain appendix the investor shortly non-GAAP GAAP revise or our available of Today's and replay the in on will reconciliation provided call. includes earnings website be until undertakes of call measurements forward-looking A transcript The update our release measures The XXXX. these will A company's Relations to X, provided presentation be company of is the Investor November replay the

call the to I'd to like Now turn Frank Bozich. over

to Thanks, a like to discussion XXXX Andy, start and our earnings welcome with results. of quarter third call. I'd our QX

exports weaker year. in over in and past as to leading consistent particularly as market with and and the building roughly reflects the customer QX Europe. higher As level Asia, customer our construction, flat volume demand we've sales demand destocking durables to expected, seen was QX lower well to consumer lower continued demand, This end

will destocking hopeful this numerous prolonged feel near and our Boehlen, customers, plant of the seeing asset taken we America. our on a other footprint period the last Late in this slowing Germany at Despite Germany, our and of in polycarbonate year, cost PMMA are announced consolidating reduced styrene of we've chain. improve to depending future, looking actions of demand, our we the and production value we North are end Stade, in sheet reduction closures half with production in our profitability. along However,

This year, profitability I the flow are recently to highlighted announced, actions. refer would additional like from cash seen improvements these significant actions to deck. free of investor X on and we've we've which our Slide

the First, and Netherlands certain consolidations; sheet including of the Terneuzen styrene of second, reductions, elimination cost the lastly, optimization of closure our in plant; our the Europe, including corporate network PMMA positions. executive plant

significant $XX to are increase only of realized actions annual aggregate, million these actions that expect in and market investing material cost but our current we approximately potential We in offers enable recent In will in these recycling not reductions also environment. result will be profitability generation growth transformation innovations, us cash the which expected continue XXXX. projects such and believe substitution in even to as to

and for margin, variable current is is of level has environment. to XXXX. part While benefit margin oriented. our of entire and In shift of this better more This remained the XX% the has see about portfolio in portfolio specialty sustainability continue double comprise solutions shown sustainable resiliency about XXXX, to we in our market demand the one industry, challenging of that solutions the and specialty the our

levers on remains cost-sensitive to more also focus demand gives depressed. profit on and assets Continued these our market growing action decisive while taking technologies improve additional us

at prices, of in was net mainly profitability, spot buying the expectations million. below unplanned operations This short-term million during the a we loss while QX a our the styrene-related quarter, Terneuzen. including result were of due outage we on European market of an reported at Looking impacts $XX all EBITDA our adjusted and continuing to spike during $XX styrene styrene from the

continued our focus I'm to However, to third proud quarter. positive capital, the cash on that we for consecutive were generate flow able working say free to due

XXXX over of In successfully all refinanced loan term we've and announced, XX% addition, loans. of previously as our our XXXX

Going be styrene we that styrene closure not plant profitability back the this lightly, take negative but I the to clear X of closure, did want has the for to Terneuzen been quarters. last

planned styrene supports will region elevated be we recent result energy of this capacity long positive structurally end lower costs. production prices Plus in cost Europe, With styrene we in Therefore, action. announced our highest Boehlen course decade. additions, world. our given correct one the will the in purchase remain closure feedstock as at this believe than the of the the of is the styrene prices able through the we and The of believe to production previously global

and also reduces carbon capital intensity ongoing turnaround production and closure while energy our risk, footprint. costs lowering This

With the produce will we styrene the world. in styrene, closure of no anywhere Terneuzen longer

our We will, all therefore, needs purchase of third parties. styrene from

our of styrene needs Asia significant purchased of America always our all as European have requirements. a We percentage in well as North and

not So us. is model to this new

product have via with and diversified will arrangement, buy styrene flexibility the providing plastic styrene segment to operate Because and the we longer These of all in of our formulas. generally economics solutions plan businesses to our in downstream pass-through us the to we binders. styrene via reporting will feedstocks with passed either will flow margins through to through buying the of geographic latex or in and Starting polystyrene, we costs volatility positive businesses, don't results. purchases. a purchase our no see optimize We through prices XXXX, price commercial mechanisms be and expect styrene our derivative QX segments, in actual market

year-to-date a to over sustainability and details progress This our sustainability. for On on excited our continued to from I'd our Before be in I hand about. volume bright in about this like was more recycled up content sales to containing continues XX% particularly like area. of call important that products topic, very spot, to I'm our projects one provide focus this talk you Dave, I'd to the

pilot to report facility of happy our recycled I'm pilot that year, the been qualifying fully announced Netherlands. has streams and operational, the of producing that this waste facility dissolution samples Since we in is Earlier announcement, our and mixed for this the polycarbonate inauguration idle be scale introduced XXXX our line for Through in low in achieve investment production Stade, customers. to repurpose production able Germany, to beginning expect polycarbonate to a with ongoing we capital the industrial this process, ability polycarbonate expenditure.

technology Now some to in future. of our highlight of provide unique I'd like the features it the the will advantages and

recovery proprietary our traditional recycle and of mechanical that recycling uses consumer via enables plastics polymer electronics difficult process Our methods. as polycarbonate automotive to the such physical recycling end-of-life from that are advanced technology parts

from meaning metal stream, that mixed us waste allows with containing to polycarbonate be Our waste unrecyclable. waste process technology plastic, a polycarbonate other us to mixed otherwise glass polymer giving or mixed ability would extract the

that automotive, good waste sent an can currently end-of-life electronics be landfill be As consumer could only enable incinerator produce a closed-loop to and and recycled recovered partnerships will or This result, a customers technology. with using certain plastics. our that

These highly are partnerships solutions. they attractive circular to as customers provide our

sustainability recycled our A. could with In polycarbonate types is addition dissolution through of bisphenol of the extract lower which PC levels expand we and of reduced to quality the that the residual for technology, of levels contains These par virgin BPA approved. advantages process potentially is PC applications on

virgin production, less COX Our both Xx and than products more process the up making end to process PC also emits sustainable.

at polycarbonate to cost of circular for a feedstock, dedication research we creating work PC more use technology value this to team cleaner, like it the thank feedstock development and our production. compared waste technology. savings scale, as lower and towards truly and innovative anticipate result because Finally, will in I'd virgin their their permits

to This is just exciting specialties increase continue one and our continue in sustainability goals of projects order many that we growth the the achieve mix of on focus and XXXX our portfolio. to in to

to to Dave. call like I'd the Now over turn

you, Frank. Thank

raw below impacts net styrene-related EBITDA materials. to million $XX margin million from was hedge adjusted and mainly our from our quarter Terneuzen natural as million from outage, timing. due outage from lower well at Results third included unfavorable timing losses styrene $XX related negative gas Terneuzen net $X expectations of the Our unplanned as to decreasing

in $XX $XX from the that the note million impact has decreased quarter. the and quarter in hedges first gas Please natural second $XX from million million

this we million, the $X XXXX. and million, about reduction expect flow $XX capital of be quarter the in about cash fourth by driven quarter, cash overall which working In in was of $XX to free We a $X impact had initiatives. including second million million continued

over opposed capital have million, over of reduction by this reduced is price. to from $XXX as working we and days Year-to-date, XX% working capital lower

We with working demand of ended the bank our $XXX We liquidity, as are quarter of cash this $XXX comfortable persists. environment reduced and level operating facilities. third as at long of capital undrawn million million including this

is like recent our refinancing. The I'd last item discuss to

notes, senior due $XXX the we notes and no As the Slide loan XXXX leaves in refinanced XXXX XXXX. XX of and XXXX. of million these our $XXX $XXX in This $XXX shows, September deck until term maturities to million million million extending other maturities of

to turn the for about call who our expectations talk I'll the of XXXX. Now remainder over back will Frank,

Thanks, David.

million our $XXX unfavorable EBITDA at primarily in well updated adjusted to year, million year margin $XXX QX. of rest impact seasonality below and loss net full the adjusted forecast full million. as more outlook as the guidance, Looking QX timing $XXX guiding in a to from year-end of million is we're pronounced lower styrene-related of This to for year net prior and our EBITDA a $XXX

cash by a expected benefit navigate hedges, $XXX EBITDA action we've million taking As our proactive combined enhance liquidity to asset year-over-year sustained cost initiatives losses natural lower over and to of actions, of environment, from including generation, optimization, numerous we these in reductions continue demand The improvements. low and improvement. results with regarding profitability gas significant been

fixed higher the year-to-date EBITDA includes of in In cost and from unfavorable addition -- actions. million Therefore, expect we million outlook net profitability $XX $XX XXXX. from materials under our improvements, these reduction inventory raw to declining absorption from timing impacts result significantly in these XXXX to to tailwinds QX related adjusted

happy questions. Now take we're to your

Frank We'll Instructions] at LLC. Fermium this Mitsch to morning Research first go [Operator

a refi. expectation bit Congrats drill little versus on 'XX the want into 'XX. to more I the

actions from You outlined shutdowns that million well cost taken, plant as benefit as you've natural hedges. the $XXX a the gas

-- under-absorption the million $XX your far this year, And late. running had so from you assets mentioned you

Of you million I $XX that -- something less also of expecting had got unplanned like you in outage. up, of If million $XX course, gas you're nat this terms $XXX impact. that another hedges million add

$XX restructuring million benefit the So that implies actions. from of

expected bit benefit just you from of said bridge we 'XX more previously Can you million items? the to from talk a various million about you've these $XX rounding from Are here? $XX like 'XX restructuring of to believe actions. the noise some I little

hedges, at Frank, best and shows the that $XX there is $XXX tailwinds. think look gas presentation Yes, Slide timing, million to There's plus the asset X about fixed way unfavorable talk related call-out under deck, of where cost million of to box restructuring $XX I the net million the it we look little the at and a cost natural to absorption.

I of. say with that are year benefit into tailwinds would those the we So would go next the

And I we levels is of in the we demand that bounce levels. QX would think as expect these along at environment representative to this again, see

to plus way environment. in So good is a think a normalized about those it QX probably this

Got you, got you.

like $XXX well million includes based You shutdowns, the $XX actions previously million nat the plant $XX million $XX looks et million cetera. that the as on the just that to from as It benefit indicated from gas. restructuring like

million that previously implying expecting Are to said. be to $XX less that not you're you've $XX that the million you? than You're benefits

amount range is we right, $XX the $XX to savings from $XX the gave restructuring actions, No, original the is you're Dave. million million Frank, million. and No, the is this

So to that of what million. out expect $XX today is we get

$XXX Frank that to the was in was slide. referring million So the

the is it sum So plus $XX gas natural million the of that savings.

it... looks like It Okay.

from getting some some right? year, benefit this actions benefit we're getting of -- from Frank, some we're these partial

Right.

Okay. All right.

year-over-year... So

portion you that there is So getting. just -- can't yes, we're a of it

corporate the late QX. restructuring were example, in those in For effect actions,

already portion And going we've so get those of a -- to we're gotten.

year-over-year benefit that that's we've next as in year and that So tailwind box. the highlighted tail call-out -- we'll a only get what

this end And be and markets All might some And was it terms to be building then be seeing in you I you Any provide construction, mentioned or on where of slowing whatever. specialty where seeing right. able there that, whether of color you Very lastly, packaging seeing if might a color destocking. wondering you're helpful. slowing? paper the that you're

well In binders in automotive we're slowing been electronics, has we're applications, the as very seeing well, -- steady. the slowing in in CASE -- seeing consumer Latex -- the as some

bath-type seen ongoing applications we've pronounced construction. chain the that for still I'd some still and been the kitchen supply So a also, areas building with consumer resilient. most or pretty that's related appliances, It's is in say has to goods and where white and in slowing we various destocking destocking. -- goods Probably, see technologies.

David We'll go next now . Bank. Deutsche to at Begleiter

sale? have the an on update [indiscernible] you do Frank,

So David, real no we update. --

but imminent. parties field are We nothing interested, from questions that continue to is

Dave, think levels, do capital? And volumes in rebuild normalized just much when you'll more capital, Understood. how need working back on come working to do you

Well, in said over Dave, is as the remarks, of days. the reduction from year XX% I prepared this

of we've and because ERP So out processes and that systems that working taken days capital implemented of capital taken that the We've and we believe all taken of working and -- structural. in days is -- out specifically our around S&OP we've out that we've substantially new system. those

-- out XX% probably of or price less. So is I think, that look, prices

recovering prices I indicative rise, be think do environment. of that when likely will

other taken of we higher working structurally see need back. the So vast we days as out we think we've inventory of the that and to capital add and of majority remainder But it, days that is probably don't think EBITDA in well.

to The next TPH. now at Matthew Blair

us hoping you on EBITDA from help a was to the QX little QX. bit could I bridge

I maybe like from well $XX quarter-over-quarter. million, It guidance moving sounds gas $X seems off is effectively think nat going as in the considerable the a about impact headwind rolling only million to pretty midpoint has feedstocks it have $X about QX EBITDA tailwind. tailwinds some you up QX, be would million as like

would think the the that it? as I delta increased is as way hit styrene be margins? the about on guess So benzene the to right the seasonality well And

taken -- during outlined and benefit I styrene be shutdowns the about extended good somewhat results the from think of we've the that's expect because way customer as a year-end. will to actions we Yes, we in We'll those it. have and think muted some from the

I that everybody Look, it's just but mentioned one think Matthew, And other Frank point. his in understands. important remarks, prepared

earnings, is, bringing you that -- benzene pressure our And So -- on right? happening. benzene, higher fact, styrene mentioned margins. elevated Benzene in the

in the the styrene fourth third to seeing lower me, have we're margins. -- AmSty. in quarter QX quarter to AmSty a Now -- in performance going or has excuse that is due

results because we're longer a margins and do styrene they to. no styrene used like our impact But higher producer, benzene not

So margins only some But styrene in results. our to I AmSty, affect us take now for not know that's to really used in getting own us. going

and add ask to -- just Maybe one more question. ahead Sorry, your go

Please ahead, go Frank.

year. begin secured No, for that do largely other year, the purchases we've on want to through of January the market. the styrene point the needs of I is the that in thing out negotiated have the next spot just contracts We've we remainder

So for to the the is of timing contracts kick in January next year.

will be will Got be that it. And then around Will will negative feedstocks feedstocks be some QX? X? Or for still through QX? flowing be there in that like EBITDA a -- still for residual

will QX, there It in be Matthew.

negative to it fourth that. don't be quarter. of transfers reflect be businesses. of don't expect that, segment. styrene it production have internal just going I will a not to reporting It's expect still to will It styrene a I wouldn't reflect internal and We -- and styrene Yes, the in number our internal -- a to make because we of purchases I sales the that of so

then cash from and And last from $XX was believe flow other question can reflected it. $XX third or million I that in What for? million remind sale the what the Got you us -- statement quarter proceeds business of the assets. is,

even not -- the It assets. was of business. assets. kind of immaterial a call. It's it worth It's of miscellaneous small on That time wasn't was kind sales the

Leithead go at now next Barclays. Michael We to

portfolio? Frank, this lower-cost better First, the it earlier speak intensity can to to across of maybe worse imports or relative Asian you just Is getting your year?

capacity cost the pressure still but the or and Asian and better, the pronounced a European getting underutilization and assets of due of capacity it's Asia. there's between because free to or say would has lack in -- lack the cost differential that's I of decreased, production Yes,

So a there's still in and dislocation is pressure cost from imports, Asia. between still there and Europe

nonexistent pronounced pronounced most EM. in our binders it's it's being to say nature products, a solutions or would plastic the least of And water-based most and I latex in business there. due

Great. with help rate you current Dave, recent us is? That's after And what then, run your annual super interest can cash the refinancing, helpful.

Yes. Mike. It's year, $XXX million a

next Alembic We'll at Ahmed Advisors. to Global go Hassan

impacts sort is which with, call you 'XX, moving it, some of about I have and EBITDA. with fixed come that, under timing of the So costs $XXX QX unfavorable EBITDA Then initial up million associated right? absorption, revisit the the parts XXXX in given. and tailwinds which to and guys of $XX million. a is talked of from of way analysis mentioned sort to the another sort $XX The another $XX asset run about I restructuring, million. of or XXXX wanted Frank, sort another think which you is is in cost quarterly nonpresence rate bridge you guidance good million levels, annualize Guys,

of you least So in Am that, million the way that from course, any you am benefit contract. it? And sum come right not of of is in EBITDA. And $XXX to that I assuming, the in styrene it does million, about the up right demand XXXX and this in thinking I factor new and of factor the first all, it at $XXX potentially correct doesn't improvements thinking sort about way?

guess Frank about question. think think asked I've play it when to I would and earlier how about So the or let how I me we been you I thinking discussed it, back it

the have million, that for back So performance million a performance $XX and tailwind about of related million from to in we natural $XXX that, take the $X an to timing, from QX us outage we $XX negative hedges. and gas run And the million QX. gets underlying styrene plus if add of restructuring -- additional impact million $XX

here We'll next yet. year. how would guide we're that's this about I think February. would guiding in that's Again, I about sitting But how So -- today, not think it.

understand with the just, quarters X had earnings destockings Fair been lasted we've was of historically again, post Fair enough. historically call, during quite and of of seen. talked massive impressive. the destock about Back, this side it those of sort X demand things restock of enough. I believe, trying quarters that And destocking sort 'XX QX to how you the

later destocking here with continuing. the Now are several we quarters

So happens I mean, it level of should restocking? we and after as impressive when an equally expect this destocking

and seen we you, forward, years, industry, know honest is geopolitical my think to an in expect I that about and Asia, that chemical the XX because what don't in general, point to I've this at dislocations -- overcapacities effects, costs. not be with I I in talked inflection before with going

hard to expect based on I'm I what predict me when history, itself, would will for prior Based like. yes. it's say to So if today, forward. would happen it's difficult to say it how here again, or look not we -- what history and going experience, on repeat our sitting would will But that

We'll Alexander to go Jefferies. at next now Laurence

the that shutdowns? around industry? Could January comments the about you it Or you spilling Is automotive? them that concerned seeing unpack in terms of than in And more you are kind in normal? over usual? also extended you appliance are also starting Or shutdowns thinking about into are than just of earlier

managing customers -- that be capital by think the We through working will No. year-end. working reducing the stocks

so chains. again, probably is across exception, will automotive. probably across the their say And value shutdowns there's if would And this an I And earlier. start -- it's

positive effects, demand, visibility... least -- level QX comparisons in nervous is the of underlying kind away high volumes are comps in just customers of your of customers take a kind comp Or there talked at year-over-year? the secondly, their confidence are if sense And that confidence about on more you terms of the

make understand, Just -- compared just to so to what I volume QX... I I compared sure positive the -- want understand sure to make

your think much about based you they QX the year-over-year too Just saying? we should by trends? thing what to on of positive volumes, destock of are indicating year are in the on be customers when back demand on uncertainty Or next -- Should cycle? about trying last cadence territory think

Yes.

across general, portfolio. demand we're we So low the single-digit is signal say, the I in would improvement getting see would

would as some about varies about think in. so how it it's Hassan it when how will I right it recovery, improvement, but specific demand -- asked That's that a improvement segment now. not thinking low and So we're by and single-digit kick

polycarbonates. on lastly just the then And recycled

You they telling then of how we pay be and polycarbonate. gap sort that a you will that made expect that customers so a -- like would kind in just you they than thumb be a to plastics advantage see your just a Do product? properly, cheaper heard comment, And get a version you sense other split Or of margin? of willing much is healthier structural if them as to there of do with should I you an like to actually get you a rule cheaper have? that are they premium a have

enjoy chains based many customers would type Well, for say, our for goals. we recycling our recycled the product their I circularity that demand we -- a premium in the achieve would in helping in significant and of general, product value on of

on depend as So market we we I all standpoint, our begin get return technologies expect cost would customers. to it a will these healthy back a on From what to those with. feed

quality and think get can what's take that a contain virgin to and purified explain polycarbonate. what can of that tried like metal, extract I we unique materials an other would stream or colors, to mix the our from plastics, other technology almost we and glass polymer types polycarbonate is we about And

-- It's So virgin. landfilled, it don't be previously a difficult helps. depend partnership would depending know able lower are -- waste, an largely get produce on very quantify a been lower with to which to get feedstock, me end I example. that inexpensive secure than these to And let give the to on scale cost have customer. expect in all we if we or mixed you that what will our cost at because

can that to scrap and production, it our from be we off-grade material recycle life that or headlamps or might quality return by could take be our of low waste customer and So end them. we could their

taken interior and recycled made the that byproduct them door customers and it So door thing. an they've made we've or delivered their We from from back and about panels actually virgin and existing to scrap panels We polycarbonate they a requirements. think same recycled meet quality panel have our car door company.

the So it's consumer electronics. same we've in thing -- done

excited to and yet But of they're excited us. our from about we've are a significant have it. partnering and with indications very about it early So see customer we're that base, the we potential full demand

morning. And we end to all ladies would much this this conclude Again, us the Third that wish session for you bring and the of conference Conference like And gentlemen, a Results will XXXX joining Call, you morning's our all so thank question-and-answer call. Trinseo and I Quarter Financial to great day. Goodbye.