Trinseo (TSE) 13 Feb 242023 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Trinseo Fourth 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 Monday, February 12. 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. [Operator Instructions]I'll now hand the call over to Andy Myers. ahead. go Please

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

forward-looking archived guidance and certain During that caution must A be measures could are and the these discussed, our actual materially not statements, of available in non-GAAP call will may actual statements.Today's report limited presentation described, undertakes company risk to like investor presentation, the differ XX, obligation that earnings Exchange our make cause could what this include including expectations. results we or forth shortly Investor of in until you issuing differ replay Commission. of factors statements.Factors no filings Relations to on company's from February includes our reconciliation corresponding conference call the XXXX.Now replay a XX-K GAAP these the Item presentation.A The and its Frank results measurements. Form but We or describing future measurements XA is over in other forward-looking is the made website annual to I'd will on following to provided the call. turn appendix set The release our transcript to our update Bozich. in revise of Securities to in with be implied certain or and

call. Andy, to Thanks, XXXX and welcome year-end our earnings

the styrene the unprecedented on competitive I'm we of during to market most didn't idle. company's and and arguably improve our second liberate Although we provide a improve our of accomplished one throughout the the portfolio.In markets took cash most near-term to global from into our our within customer of profitability industry, We sit the series sheet persisted of market actions, maturities the in strengthen restructuring Europe, PMMA extruded in the extend imports position when position proud the for and to facility as as in weak XXXX, for half Europe including measures. our runway decisive shift cost consolidation of cost year, cast in action well closure ample operations memory destocking, control of Netherlands, network demand items our this additional difficult pressure and our and across normalize.While history savings of announced the we year the challenging in year what our recent was Terneuzen other chemical continued

take standpoint, see well to continued and sheets safety which our quarter and is and applications.From our of such happy testament report the sustainable achieved a will this as technologies, provide on our our EHS to case facility applications expect monomers less with without this larger in PMMA for produce these or market-leading cash, continue resulting on the recycled EHS our few used reducing made PMMA quarter. year MMA.These in to it XXXX waste, industry-leading the have be as mature, sheet.Regarding am materials $XX sustainability Once year-over-year despite for to were and to be in the our sites summary, diligence inauguration working a as results. and that XX% to our initiatives to and and and resins, toward plastics promote sustainability proud margins and until operation the process sheets and depolymerization also improve the our would million materials. Netherlands dissolution will we to full working commissioned near-term Latex be preserve maturities in sustainability performance.Now PMMA continue constituent we challenges site I'm work that volume actions virgin plant to products focused eligible free compounds, of our compounds XX% share develop minutes which recycle including to flow year, us that investments, In events. update most battery which our can Award a commodity broad cash recycled facility operational, sustainable later our $X.X happy These monomer, match compromising basis, stable by successfully of end-of-life operations daily the recently facility is quality program. to this Binders, of TPEs, recycling balance year, in our track -- of that an content-containing depolymerization its or -- Rho, this solutions a advancements containing recycled in sales increase and on commenced PMMA the we Through injuries, goals. specialty recycling spills contributor decline as our have advancing faced, performance.I no Triple generate to expect our will received this Zero technologies to circular in becoming PMMA billion fourth range for experience we're of up addition, chain year-over-year help the positive work than in a high-demand our quality like we continued in Terneuzen also back our macroeconomic helped days announced rigid I'd capital formulated point structurally meaning and will resins, in able we the offerings.Additionally, further economy.We an XXXX, like reduced significant sustainability continued us advancing Italy, investment out new customers materials past we include on solutions of on and continuous over In then growth I'm circular a cash to a lower these allow on polycarbonate remained levels.We This I engineered our our PMMA, refinanced people to pilot in value of extremely to

As more throughout usual.We sequentially pronounced a lower consumer appliances than destocking we our construction, this and than most value durable led dynamic EBITDA expected, adjusted to but predominantly chains, customer as applications. year-end seasonality inventory and and was QX building in management saw

However, our we've sequentially first quarter results, and which over recovery the I'd in to volume early I'll expect seen already result. turn discuss later.Now full-year better call the to and Dave like to fourth quarter discuss

and adjusted below destocking Thanks, gas unfavorable expectations impacts EBITDA Frank. was Fourth well $X natural due as million pronounced as to quarter seasonality from of our hedges.

that our of natural CapEx million gas XXXX, included discuss reduction that which from as continue market manage we capital cost fixed timing in very from However, and absorption $XX rebound XXXX, inventory.Despite supply hedges, when in million from will chain will of reflects working keep CapEx we working the we days throughout Frank as to in cash we and $XX full in reducing related to the capital we million adjusted maintain X/X very is focus in we flow believe well under unfavorable million full detail.Our $XX net $XX to a generated challenging cash significant from disciplined which released working $XX improve.For macroeconomic lower-than-historical impacts about a endured the benefits reduce further of our environment the realizing conditions year, of expect year efforts QX, year in cash in $XXX a tightly, investments. capital a progress XXXX, days. by of of our more million of $XXX and operations million EBITDA can structural significant organization million our We that with the about actions to free results ERP and and

While seasonality.We $XXX working we $XXX of is including ended undrawn keep XXXX bank QX with capital the million facilities. a cash mind likely in and to for capital increase of expect to year, due in working million release liquidity, please our that

into with that back on While liquidity to exercising cash prioritize profitability we disciplined call management.Now liquidity comfortable the capital heading are we I'll highly Frank. XXXX, and turn focused while over our opportunities improvement remain and working levels

Dave. Thanks,

by volumes begin levels beginning strict following saw that So customer market end sequentially seeing management the in far to orders the in gas recover second initiatives inventory half we much benefit the lower underlying of been see demand the at year, QX also full We're due XXXX. in well last to losses. we're year of natural volumes restructuring that starting Europe that expect taken Asia.Additionally, reflecting to from we of higher hedge to had took the as QX, the in imports we as

that awards EBITDA expect lower to point in in a significantly of about QX QX, As and result, profitability volumes, year later first million.We to new activity from the quarter, QX low in costs adjusted quarter the in with the million year. view turnaround growth $XX to first due of $XX we higher the business as than seasonally non-recurring be profitability phase

in to sequential several seeing prices addition, $XXX applications.In share Europe in higher related higher we've QX and taken win specialty new as recover hedge we demand this, Sea lower surcharges underlying Despite remain addition, to segments as imports XXXX to expected we that constrained in In and Red currently losses expect in our against note businesses in restructuring expected market higher due volumes shipping we contribute actions recover line we in broad full with our approximately fully believe more benefit. the QX.Please we in don't target are gas million for of sequential generally we're our cost represent underlying significantly expect and we to costs profitability market to business volumes input these XXXX. expect as moderating the higher we recovery, a combined currently anticipate year, in natural Asian that with

across network reduced the that to Europe persistent reduce expenditures additional significantly higher geopolitical that this, between continue unprecedented flexibility, investing of decisive along have difficult in assess trade crisis by we flows continue competitiveness our flow, we to to over customer to us de-stocking the to at we to environment, and a half and shipping I have have anticipate help continue capital of opportunities.In later clear improved your actions our value of advantage we transformation from production.Amid also in this cost to And determine in the logistics the we that impact of explore, take challenges the and position macroeconomic regional continue happy the to faced differences to million thank we manufacturing chains, inflation. now, by cost have us it's while increase XXXX, fact, demand to and throughout time.Along when imports strategy has XXXX we chemical capital. dedication marked the company questions. allowing products while benefit cost XXXX. which this to costs second our Asia, want actions we impacted for and optimizing be our take be to remains unchanged. XXXX, These took as Sea navigate better our since want employees cash our related which Since with conflicts from offsetting differential relentless working European profitability, globe While additional optimization this offerings take fixed in opportunities I hope this to enables solutions to to will with moment reducing network to European Red increase may for sustainable levels.Lastly, $XX returns product difficult I'm and their our a in environment.And efforts normalized strategy value

Frank Research. question We'll first Mitsch take our from Instructions] at Fermium [Operator

also Europe to you're of far Can seeing due terms end that sequentially in volume of the you less seeing February, more benefit markets imports And fourth coming Asia. of sitting quarter. to you're the you here Frank, getting higher that you relative out in we're impacts? -- granular you're so indicated mentioned in those a as you as middle volumes indicated be that we're the

our would Europe, some building specialty it's and the say applications automotive construction mainly I in of business applications. and in

months to seeing consumer and February back. would products in and that if I too a the don't similar.So volumes year-over-year for we're the it's would again, really the come difficult is QX. the to that in of reflects clear this significantly make where I from volume it's But book but QX. January or some in XX shifted months that look, is it's But Some a -- say orders of those trend. this it's order increases, first applications say trend, X this time tell for the stocking looks of QX saw early is to better But we from -- it's say than end

million Okay. about at All $XXX flow you terms And Slide helpful. XXXX. if your puts and That's to nets all XX, list where in right. I components, that cash outlay takes the of look in cash

from about you ability expectation cash, terms thinking cash, of borrow to you I burn draw exceed more to to economic based just your on thinking So the kind about you the those know year cash will or cash your profitability progress have with year you're will how will on it's that the in operations?I cash puts have and forecast takes down are than was through on early background, to curious the uncertain of in profitability but levels generation XXXX? in your or how

Dave. answer it's I'll Frank, that.

So right. you're

our We have a and already $XX shows components benefit realize that our underway capital flow of slide page for XX, actions working million. the is to got we've in deck, And And that. included identified cash year. that an estimated in

million adds $XXX up achieve of release So outlays. that $XXX working in able nonetheless, capital -- that all cash million XXXX.So I'm confident be about of to we're again going to to

-- year notice, say the fact related of $XXX -- degree the to We drawing the positive balance of with negative or our undrawn the didn't sheet expect free We've don't lower of giving in to not cash on that free You'll million or give cash the persists and because sheet this of drawing on we've $XXX what ended off lift With on what year not I have any a year, higher need drawn to be cash that of we pretty in on do would -- that the if million uncertainty, see and volume for the on million that for have of plenty annual to would that seen. us extent the not or finance our than year.Now, lines, to EBITDA to. balance need work expect if we're call and flow I to I have cash the total on year, guidance negative balance But I do the $XXX obviously, flow behind we this for not. we we lines. year sheet that think with significant we generate is liquidity. cash lines. our of lines almost a we would this

good. Sounds

on cash the lastly, company? minimum having sheet feel is Just run level of what kind you the comfortable balance the to with

Yes.

I of And define level working need I'd is probably cash, to how think that ups way is -- I much would Frank, the swings, million. minimum level, about first say you intra-month minimum capital of look, downs. about that's all, the cash and weather $XXX

Bank. We'll question take our next from David Begleiter Deutsche at

Frank the number and low we of about QX How the you reasons. talked a about Dave, a QX? to for of point ramp year should being think

what see seasonality QX, the will in We for In say and those I contribute buildup building in volumes of normal applications' a always drivers terms would would to markets. what those that are improve construction. end in elements

benefit AmSty from so phase a turnaround AmSty's full EBITDA of that impact QX, per in then awards have that that The new to in contributions the in single-digit million over in QX.And be we'll other quarter and mid significant will quarters. go contributions is business see will in, is we'll subsequent QX away going earnings

in solutions source -- our seeing are couple is whether -- it raw if from in higher in predict that's freight, materials QX the we hundred dollars You can't know in beginning Asia I that's a from be what that recover And mainly it persists. timing those.The that related expect thing the relative of expect QX mid in QX, will it a pricing surcharges still single-digit QX to and expect I we due QX to value depressing seeing contributions we we're that to but that other to from we're be somewhat to would now chain. to exactly ton plastic freight coming

good. Very

that You hedge higher mentioned this, million forecasted? in improvement, again, you've to losses gas $XXX $XXX XXXX. million What's for cost natural including potential than be the the number

be the higher repeat with Can you restructuring all million? just to the associated savings the What's potential the question? than $XXX for

Yes. Correct.

that the Is Okay. question?

this stab large to contributor -- our wanted on the that producer. I of $XXX Look, we've try identity styrene part shutting been and I'll that, a this been us call, Dave, been since the million just of been And say at down has since I take think we've you've entire a styrene is Dave. Yes, duration largest a almost facilities. and obviously following that public, public,

So higher more depressed we've is would been We're long number that short a downstream being styrene. styrene market. We're styrene of opposite buyer for the now. to our styrene. what We're lead a businesses.So

no million We're we styrene. guess in a worsening environment environment environment business.But $XXX now. from we're we significant, benefit a lower If I now $XXX look, kind as way maybe very That the to in kind -- would on million producing not styrene it I'm losses, being significant as are producing styrene elsewhere buying we of would that higher may that So speak.So perverse be we may number. European apt the it. would longer other producers have have pricing result of because have were now, comfortable or negative in a

As producing be we did would -- a significantly we producing, starting in we if were negative. it no we I we longer were segment. QX, would feedstock styrene be said, now, and But right if generating have

that those in I expect if prepared said the I we accrue we to add of this year. they one my Yes, that, me that continue part the I thing. latter remarks. move forward, let -- evaluate, in we have maybe we -- just and But additional guess implement opportunities would would

of advantage evaluate flex are cost and significant to and our network, we change differences again, will we're market always looking. supply So and the chain take There continue those. inter-regional to opportunities of,

also. million $XXX the to additive be could those So

question TPH. Matthew next Blair from our take We'll at

XXXX? there's process? And that is styrene process, the that in sale if sale update was the on could something happen styrenic I wondering any

an So imminent. say nothing we really update. there's would I have don't

field to on continue field assets, about questions nothing's imminent. but We interest specific and

seeing bridge Okay. the to the of in bit. QX. And net million just do then QX? little specialty also Are was to up or QX bit help more you some little It are hoping $XX a off then natural I of us anywhere? benefits million into timing headwinds the $XX you improvement $XX And a with any million in picking you could the gas volumes margin roll sounds from like to expect like

to is the -- me is third the let -- a are X is are I And things of our the benefit full have volume. Well, EM driving two one that restructuring QX that activities. say Number turnaround there's driving And X really from number improvement elements would business. thing QX. in we the did

Our biggest resin in now. us behind QX. an that's in extended plant turnaround Bristol had And

are would it well -- the on relates the can drivers those -- Dave as turnaround and So the... -- as benefit comment volume, the that as restructuring to

was million. for $XX QX. that to -- as gas And going to about QX. in that Matthew, number it's off. as is And relates was the QX Look Yes. It's full then to really in be It about significant million a a loss 'XX $X it going it to anymore. about we falls hedges, the 'XX, loss a talking the for look, not $X year. it to million in million going or expect be $X of million I $X -- in and natural $X had be I million be said, full

million pickup there. $X is there a So sequential of

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

uncertainties of all $XXX terms issues and full restructuring let's right? that restructuring, QX, timing giving you and it, the guys But Terneuzen somewhat benefits sort the was controllables, aren't of of again, all to Terneuzen macro tailwind. were things, of understand obviously like. I to bridge $XX was from the of side And another Look, million back sort guidance in benefits, alluded XXXX the the around year you the a alluding to guys million. million. $XX you Net XXXX in call with

guidance, EBITDA tack to million call even So annualized point, up of $XX come which you million we're million, more it for thinking that if floor I with for call then get the $XXX $XXX were about a at to to million. annualize the well XXXX. $XXX of your QX million is north I But EBITDA? How tailwinds.Now, of least XXXX are $XXX a number QX I aggressive, if low it on little

with planning all other and in cost we with business are arbitrage what growth last to would here I fixed that's flexing across since at And in China.And XXXX. into that in the some and is in consistent would that's start take of view market tell a that as that. give our demand -- Chinese and growth advantage just to I very well domestic frankly, Europe, on, focused parts there what today all QX what's customers of have visiting I costs. don't me there term. in us the changed we're the deterioration at a think our the will recovery of near And let many in reason general for highest XXXX. I really ABS, will common in as reluctant in say, is or seen no markets, we're region.So see what in in that polystyrene. weeks overhang the maybe our regional I how I of can't levels cost And anecdote. an that and -- significant at business continue growth in being wouldn't this is what's opportunities full can control. significant reference margins a reduce develop.However, margin that views the in is I the China, I would are think and what sitting as is we're you domestic I they're And network And to in point off industry build QX the just China QX why don't certainty to -- changed is expect of absent capacity because we've and costs Asia too develop about the There's they any value spent provide and year Look, look exports to said, moving by which a X -- you Look chemistries the some expect be expressed can what's our polycarbonate, for in chains, the their their clients seeing peers.And due think of those all will and you this

the mind of right?I other been, on because the another little sort market some keeping how of destocking the some of about Understood. XXXX. particularly lack weakness at other in listen sort environment, like. as and of mean, the levels the just take results bit seasonality, Understood. sit and how QX surprised has over call severe in talking of and And most of terms right, XXXX kind of back seasonality it let Which your a companies talked to, about companies, the stab "destock" Europe, me of of of half the started, as in sort you call there, pertains Asia mean the it, and I I guys in it, QX and in of are to inventory pronounced me seasonality, there particularly carried right? through

at side like, think I So have cyclical way secular, the to what coming and demand trying what understand of is the the on versus COVID is, side and lockdowns inventory And it's with relative right? the I out buying that mean, overbought. Europe for mean, I'm I with looking, the changed looking, least foreseeable the patterns future history? to it's people way maybe buying patterns with China -- the have

would simple consumer capacity in in China lower some that against demand, what Asia of you seeing building as as think answer is general, in in is backdrop and changing and these significantly of And in in or yes. I Europe as areas.And applications in X the patterns construction in Asia is say it consumer and relates changing in what to I behavior consumer buyer those well particular continued that have particular durables, chemistries. we're additions

I quarters. think demand it's So patterns -- That's over changed several the certainly answer has question do demand to simply. well, and past the -- changing a

question take Laurence Alexander Jefferies. We'll at our next from

ones. quick Two

start QX seeing to your products Are of effects a Or characterize margin can mix as improve? QX volumes into you're on first? drag higher we bit the expect First, should you and a mix? we rebounding go as

improvement are more being formulated volume products. polymer seeing significant more solutions than the in in more the So, being and type the we commodity-based resilient more those

answer simple yes. the is So

in of secondly, can hit of just the how now sense retrospect kind was your sort you of give us And a markets the were seeing in destock? revert you're just if much So terms baseload that volumes just to down demand, for the run to is volume environment? down just from some we cadence Can about try and new may to of of the underlying environment X% X%, destocking adjust rate the sense year-over-year? the you think be can bounce give so what demand the

volume the low pinpoint Well, improvement QX. seeing I sure asked think to because the David very it's or the of after that now, that back can't think we're Right this a I'm solid a to question months difficult goes quarter, volume I I Frank. recall. not in in -- X first

need us much looking QX arithmetic is how to difficult for of to more So from actually it's for.So QX the that see unpack you're and understanding I QX, we do into of effectively through that order QX see see to see get the shift -- to volume able a be then begin begin book to -- we when that develop, and or have we'll what orders, better is. think March we'll

concludes session call. conference this participation. you Thank for and question-and-answer today's your today's And

disconnect. may You now