Trinseo (TSE) 9 May 242024 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Trinseo First Quarter 2024 Financial Results Conference Call. We welcome [ Trinseo's ] 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, Wednesday, May 8. 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 will now hand the call over to Andy Myers.

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

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

call. our and welcome to earnings Andy, XXXX Thanks, quarter first

continued how profitability The that QX highest March, volume strengthen steadily volume resulting X XXXX. our the how increase year-over-year with saying over that has since in February in begun volumes in and through by as am begin improved how me quarter years quarter first in saw and and our quarter progressed second I first January the we period. initial Let encouraged

in along our quarter as over of of resulted expansion resulting Market in value Styrenics tightness chains margin has March saw EBITDA destocking supply dynamic, MMA Engineered region. this in our believe of the resulted QX.The during some Europe geopolitical in led in in nylon prices a that significant epoxy, the several progressed, chains significantly while see month higher in that in Americas factors. the we have was value and byproduct Asia MMA the saw into higher drove of Additionally, March profitability in producers ongoing expansion into into from that higher and adjusted and second ended. result profitability to Sea in Europe, quarter. Asia tensions continue This We costs quarterly seeing Weakness moderated. half with Red in in MMA polycarbonate MMA we we're We quantities quarter, coming for this continuing Materials the margin from availability of as the March. lower reduced shipped tightness feedstock in

tightening are to led pick low tightness integrated PMMA of architectural the destocking, which MMA in and region. supportive of America, in MMA margins acetone polymer margins following continued up also demand the this coatings various downstream further seeing in a segment.In North and is period to higher is supply additives, We at availability and prolonged market in Europe for higher beginning resulting

continue returned higher large into quarter. to prices Americas outages, facility inventory combined significantly in second styrene several seeing February Additionally, January production due to major March. led the Styrene had a and its with to levels, margin expansion we're styrene supply the and and in Styrenics and at industry low tightness AmSty, turnaround at this

future and styrene us no earnings for early a gears expect This improved used Latex in to prices venture The commencement provision pathway pay agreement. it Styrenics seasonal actions proceeds Binders XXXX. and and a we advancing will the and Council interest in working in engaged of of our to cash our polystyrene, to process by to debt, capital be the which we for joint prices to agreement Germany flows.Also first our Stade, quarter divest our typical to see increasing a burden, that via in spot clear build of shift facility. annual we ABS our sale will to Germany higher of exit MMA happy lead input to polycarbonate minutes like styrene the transformation costs.I'd ownership the continue margins we're rising cost While that AmSty, profile, later provides production negatively way the the the March, potential exacerbated process virgin than strategy with line regarding interest March, remaining interest lower quarter during in our beneficial to took be business. announced down we highest at helping our the to Works several Americas a Local an announced In discuss closure initiation we few definitive and optimizing impacted

not our close also third discussed want earnings our make easy, clear with for costs our that to like be our to and Stade dissolution production technology continued obtain continuous have If produce strained operating results. I virgin commitment decision needs to in longer profitability more conditions by we these Asia continue site additions fixed declines down demand due polycarbonate we at and polycarbonate financial advancing length continue the significant of expect increase in will annual chemistry expect to XXXX businesses not these to approved, price impact any compared our that will via XXXX challenging on difficult. all the -- polycarbonate are to in our Stade site. never it we and abate quarter $XX this in and $XX external of million purchases million downstream no do to this will to is in our optimization, operating and Europe call. recycling.While capacity focus as continued price evaluation While and We polycarbonate network viability soft decisions with anytime oversupply, soon virgin difficult, drive decision line in the along will

While Stade product a are technologies closure technology remain host previously for exploring alternative to assets.We help we customers that integration potential not now that and more to change to this our was numerous recycling the this location as of could recycling committed does potential commitment. scale, commercial sustainable locations mentioned modern application and develop offerings up

XX% demand year. that for We continue in over the with record to material first a excellent amount the products contain recycled represents a our quarter, increase prior which sold see

as for Dave substrates, be call use to the be work to material, attributes with offerings. We use product and as compounds well to introduced sustainably to manufactured in their chemicals, electronics but we replace focus and advantaged new other those properties will results. the These critical water. pressure flame-retardant resistance discuss first PFAS are to and flame-retardant have without addition flame-retardant our on In other oil, post-consumer containing performance on PFAS commonly products heat, which reduced the over to applications. and turn consumer used recently chemicals.Now, PC/ABS polycarbonate grease recycled faced consumer are used like primarily recycled PFOS growing quarter and of our continue to products maintain that I'd regulatory

you, Thank Frank.

change get at this that segment the became to quarter to in into reporting our the year. effective first I results, like beginning of I'd call Before structure a your attention

following of facility and discussed, polystyrene a we we've therefore, segment. reporting production As closure longer no no have previously the produce Terneuzen, our in longer styrene Feedstocks

Solutions segment sales Feedstocks adjusted into the As XXXX that and EBITDA Polystyrene. of and segments we have the Binders, which net result, Plastic a and recast consume styrene, the Latex XXXX downstream are

We the the appendix.Turning and segment with earnings have without this recast results. results included back in presentation to

capital line and generally quarter tightness and styrene.Cash the of of Latex a underlying in and used segment Polystyrene EBITDA adjusted quarter Solutions quarter the million. to have rising million which first and $XX previous includes favorable but XX% $XX opposite of million EBITDA this the capital. this during buyers seasonal styrene unchanged net is timing styrene will are outages. into Throughout In generally quarter benefits planned The resulted roughly million, was in will in QX about working Plastic Americas in spot price cash million Binders with negative guidance, a increased Styrenics Conversely, free year however, $XX release. $XX our as This build of periods environment, a in was we have equal the included build. timing capital in generally industry expect First of a first favorable prices. we late factors. a timing Historically, working European due QX, effect due unplanned capital and net as net they our working period, trade to by and net flow styrene included unfavorable of ex-timing operations declines, increase our $XX have styrene in working when from we as

amplified increase build I prices of just year's about. this because was significant However, in the spoke styrene

expect our year the free subsidiaries capital including our to normalizes million from of X available that by XXXX, increase overall and $XX lower capacity our the to million in and liquidity enhanced the our improved by flow facility undrawn $XXX our cash our by quarter year $XXX with including -- quarter accounts prices.We extending the the QX bank of the working maturity liquidity, feedstock of as We new lowest be by and facility receivable cash as million facilities. and earnings ended securitization We quarter-over-quarter. November helped on borrowing of

margin are the our taking top Liquidity only hand to downturn.Now, a back we working proactively continue such to capital on this I'll other nominal priority lower as sales as impact actions moderating and earnings. over with Additionally, navigate be cycle Frank. preservation will is conserve call we to

momentum in of we're market higher in of Thanks, quarter. support the a styrene end a with improvement confidence positive the second the quarter margins high-margin of in the QX. seeing the that continue report and us electronics in from part latter continuation sales, recurring the in This, operation building to I'm second we happy Tightness styrene normal earnings combined Dave. construction meaningful the the give and first AmSty's profitability quarter. sequential that increases consumer and in and seasonal experienced MMA

year. result, a provided approximately we negative the expect the last adjusted to point with EBITDA we $XX outlook QX quarter, the million, to still including million $XX As QX timing.Consistent low expect million be we million of to $XX of profitability of $X

but Our constrained XXXX, that supply that the base throughout actions chains stronger from markets is to demand due taken. will be we've tighter restructuring assumption destocked and EBITDA remains

industry are taken, now, quarter while one rise actions several when your While and we're have we happy us well outlook this chemical have that liquidity, quarter promising, our will our in materials prioritizing remain results most the on to demand challenging we cost decades. in the combined our first the focus second levels.And for our times certainly cycle more improving confident I'm returns positioned to capabilities of and take differentiated to with normal questions. sustainable out of

the now will Instructions] begin question from Begleiter the Bank. We first Deutsche [Operator question-and-answer line from David of Your session. comes

nice comeback recovery Frank, Engineered or in Materials.

you earnings here? with Engineered are If how you QX look strength the continuing, Materials potential thinking in about QX EBITDA in at

Yes.

in then in we're in or We watching Asia changing really in Red Materials $XX MMA those polycarbonate epoxy run nylon acutely Engineered constrains chains don't happening see expect rate We're that also the the feedstock and March standpoint. things the region we watching is and depressed from -- really the would in value It being million we any to April chains way. So, value that so byproduct Sea. in that a QX. be go and the and watching what's market continuing are -- the EBITDA as that into these we're because and above in dynamic

go are the is seeing but good certainly now in are MMA in as would across cuts MMA that surfaces as improvement influencing certain America North that consumer are in our really dynamic. tightness improvement into the but of volume that dynamics order thing the we're other out is both our see well resin, to of as enter happy that QX. the we're are that change that volume we So, volumes signs our right don't the say and I'm there Europe, But any compounds we current electronics book and segments. business rigid also up, all good seeing control

of $XX per year, of level you can strong earnings grow higher? that i.e., half or And QX, level in back that actually in from the million the given quarter earnings

We're in really on the outlook change all we But the Right demand. market anticipate the don't half depends year how demand. a markets it really new now, back underlying awards. depends significant Well, some on market develop. of in winning the our

it's just neglected we've say full year guidance So, markets why to say that's at develop. point. the difficult And difficult will to to this because give how

TPH. of is from question next line Your from Blair the Matthew

few I AmSty. on had questions a

could JV? happen $X would in bit What AmSty the What then more you quantify of looked to counterparty, what would Two, you you the in of back you ownership XXXX? this impact And like interest about the Would in exactly other First, were half explain three, are kind have in Chem? go able that if turnaround? little QX? the provision? exit CP not to a the turnaround are marketing early seeing other million

So, let part me of question the that take Dave the I'll back of then take and first it. half let

one But it's point. asset. interest world. assets we as a signaled this financial marketing would -- can begun the the using with and best a be number haven't the AmSty our parties exit there from But prescriptive say I great in asset So, strategic the that we jointly that recognized we we've venture is seen of of asset indications Styrenics It's in actively JV this provision. partner at joint of when

steps. So, a working joint in a Ultimately, process steps JV asset. number I'm have see marketing JV exit are of we in will of through a We're agreement the confident good under steps. when those begins.So, the interest result defined provisions those that that the

of certain by their XXXX. prescriptive even result we're to So, a -- -- point this transaction signing the that and those preliminary of complete exhausted, a in confident it we there's doing are to if before will steps, we process very just take early elements in again, those we're But that fully that. need get

each Matthew around the every were X have of the years. outage. to for and part to they the your question, first related outage, out X January-February planned for us impact substantially one to of all of X a styrene turns They units

high turnaround. in The this there's until The didn't in earnings of these year because reason $X have I'd first is say, our low quarter that so, So, impact probably million really margins quarter. the prices styrene -- they the single-digits, or first to and turnarounds often is the was accelerate March. from

in were March. they up So,

benefit are outages my prepared remarks starting obviously earlier, as be late I probably did say look we in we a us. in do us item The expect is see, significant working results. QX our forward better can as had we purposes, associated for to I liquidity I in to continue kind are considerably into that you the will for $XX styrene higher see. from because styrene prices. I'll of AmSty we units fairly the are But expect a all to and that the we we and we of decline in These March.As just capital a point online And to or As do that of of second QX. And that will -- back coming think QX mean, income quarter that. to was QX, EBITDA think probably obviously be quarter in for million margins related prices we equity high $X styrene million forward tangential we look speak end out. I in say

And in QX although we signing did then Difficulty] see your outage above QX. any still come contracts European well timing in [Technical QX guidance, down, is May the net

if you be So, in potential about us help the pending QX, think could that'd impact great.

Yes.

to that, the the timing we in that in range Matthew Embedded million the to embedded believe that quarter. XX% X% we Frank on $XX million. negative negative guidance $XX will of mentioned call in be So, gave net

the really of embedded on there's or balance balance capital as reason sheet, working the between X So guidance. capital. the and way a impact month lower that the sheet The that's its through works your the lag recognition in -- P&L working your

the but in said working probably QX, it's I the be QX. impact So would P&L benefit capital in that's why

Your Ahmed next from of the question comes Hassan Alembic line from Global Advisors.

I I I in right? you from sounds positive in around guys the of XXXX days sort And sort look, And divulging million, seem the maybe without sensitivities as right improvements it in and demand EBITDA Am it's did early some it, mean, I you of straight seeing. million not pertains guys of XXXX, of So know of $XXX emerging. rating off, way and to benefits restructuring that But million XXXX talking of are about about guidance. thinking certainly sort sort north mean, that's of really some at factoring right? I demand signs $XXX $XXX the things understand EBITDA sort run around even levels for be to 'XX? above these of a the

Yes.

assumed -- will we volume will think second of remainder And in in similar same what exactly is but develop start the volume during by the improvement I range similar demand encouraged Look, the the probably we growth confident market and be anticipated. it think half to not. to we Hassan. the of deliver -- year. the for year-over-year is we get difficult buckets very anticipate XXXX, to confident the $XXX but would, dynamic second year-over-year thanks, we'll the the thought year, low our the we the that we've I in the going in half year that the that the will Will But be be $XXX how year. to we're of we're the market, million million, single-digit are So volume in

I at would just that. it leave So,

you will, Hassan, couple let please. things that, of me add a to if

So we volume. a in QX, had step-up clearly in

the XX% up on Our segments. it's volumes the were year-over-year was fourth in and up quarter basis, all broad-based in first very But quarter X%. that about sequentially versus about and a

would to attribute QX QX I So, seasonality. to most of transition the

business any we based clear we very to is clearly Frank We're signs think $XXX a single-digit on we're that and we've environment growth in the book, even order comfortable not the going year-over-year as low with growth. but for to continue I in that growth delivering there. assumption million said, managing So growth assumed. low And see inventory the unless build we're constrained have growth like

Everything to about margin So, for of really give I recovery. continues color. a a demand we're that of -- more talking here recovery as yet. wanted numbers a just seeing It's we're -- it's kind you QX not

talking guys trade ago, Very of Europe. into of Asia Asian a opportunity and terms as helpful. that talk you guys seeing seeing in MMA there the And because a a going and sort you side can on know sort are sort over of arbitrage MMA what couple you products we of bit of in were more about Europe, all of follow-up, quarters things, I of sort and between were out more about patterns

So, bit if talk opportunity you trade those sort is about could whether a arbitrage of have closed? just normalized and patterns that

byproduct the reduced Sea crisis So, to times and importantly, the more have the this for which it's Asia in byproducts one from production, block and is it phenol of ship Asia. monomer the chain. and constrains the byproduct of But also Red CX which the is certainly hydrogen phenol via in for MMA production affects HCN is into cyanide, demand really as a as China reactive extended in Europe the well lead epoxy, nylon building the the key reduced, and the acetone, from nylon polycarbonate route weakness ability

is availability that reduced. So

seeing slowness are of reduced in also We production in that butadiene Asia because market. significantly CX the

they're running of MMA at are factors constraining greatly these Chinese So, the the actually and reduced rates. production ability so

we or in improvement So, better specific challenged. broadly, and the combination value current of still those improvements are while is see currently slight are signals X dynamic.Now, see China the we of things chains, things creating those

so we a don't change in And that. anticipate significant

America, If for Europe short net North are markets and you MMA currently. look at those

the market that recovery architectural a tightened up. have see You coatings in

a that. higher-margin So, from we've market. those more made it factors And benefited much MMA obviously have combined

So, hope that's helpful. I

Kevin comes Estok next Jefferies. the from Your from of question line

in Just mix. characterize from basically evolve rise, of expect just just some I guess improve? with be sense would to margin do sales? you get to could should you would you QX volumes first I'm question that would curious wanted as your to mix it how And drag a my product and how have higher on Or QX? mix? would there benefit

Sure.

question. So yes, great

do And a volume a year-over-year much in -- see more XXXX, we a we anticipate favorable so mix. while single-digit improvement low

will be growth than broader the portfolio. EM so better And

that into low that the the applications seeing And which and our business, lower well in which company highest as growth grow applications. of resins, rigid will lowest in electronics faster margin would our EM materials single-digits. engineered than our we're so margin polystyrene, area And compounds be go consumer our negative actually, one as growth surfaces

So, other we we of but as the mix want course on did assumptions volume XX% enjoy compared said, QX, in also during that and we in Dave really as thing out of which growth, had XX% that will sequential did see if improvement a based the I current to QX, point we a the Pacific, that to a in have.The favorable Latex Asia year we that in lot continuing. that see all some concentrated in of paper but don't driven growth events Asia, industry volume -- was by unique see for we volume board don't was that

of So, things But the rest the than mix yes, favorable growing balancing. with that those EM the applications are portfolio. full through the year better we're

apologies has asked, And spotty a my question call. has this on service but little if this been been

wondering, specifically? I you're destocking, still value seeing chain where guess, guess which I in Just

The applications. downstream related Yes. -- where to EPS/XPS construction polystyrene, where destocking of would is see some we building in place some and seeing we're signs only

QX the are America. North in believe we that's those where currently and only So, to and areas Europe specific

Ed Barclays. Your line comes Brucker of next the question from from

is question my -- first question on just demand. is My

we you still rate you a it that do levels that a is get $XX run -- if normal I return? kind normal could that, mentioned you by said or near below materials not is You business, demand you are upside there levels. industry example, of now? and demand normal like still business, far you're if broadly for Or million, guess how

Yes.

the I compared you the good sort by pretty volumes for would demand would with XX% $XX portfolio historical I below is tell we're to normal per the volumes a decade. run there's million a the improvement, over cycle, every segment. for breakdown rate that's exists current presentation, So, what every approximately And mix today EBITDA is recovered. trade previous it $XXX of the what you in million the even the of XX% quarter the about so, earnings that for XX% tell impact, portfolio whole per in in or And too, as previous year

an back we $XX to normal volumes, if EBITDA we So, aggregate. million expect in additional in deliver quarter get a would halfway to that

My the [ what second reasoning of guess, or XXXX's question, $XXX then plans million are to what you or the ] the that leaving behind goes was do outstanding? the address current? what stub -- I next I that And guess, it outstanding, maturity over the before

behind really reason was it leaving covenant. The

did For in covenant of was constrained reasons, aware a that. the year, that by last we transaction of left covenants. transaction We you're September sizing and as

clearly debt address to going now. mean liquidity look, of So as of concerned about. our necessarily address I kind when we need that. it we current and it cost to cash to constraining a happens right as the don't less I'm also view lowest be as had factor that. to I

in are transaction. our off do pay processes to a I it it proceeds. underway. that divested number So a sale bring plans could have refinance look, We in either incremental or mean of

I AmSty already for would his Frank proceeds the issued asset the from used I as earmarked to sales be remarks, most could in debt, be mentioned think, the others. but other that sale, net prepared recently mean

current. our handle with I compelled we're liquidity feel it ability goes to to our but that don't again, maturity comfortable do that and think before So

I February. reasoning the retention out the of X-K the one. you noticed bonus was What last end one at behind that those for put the retention just And bonuses?

cycle. to the recognition retention the through of members team what that's reflects. strong several that at had those the incentive the for exceptional we create a and and work same it did efforts time, And of deepest part So, we wanted navigating

from question comes Roger America. the Your of line Bank of from next Spitz

understood having Regarding marketing before take sell I all I did to that? CP Will see, misinterpret I likely preliminary to hear steps Chemical Or the if both you AmSty, correctly, result and saying together working AmSty? start you're you correctly? Did that in of this. you're

It's their have a steps precursory through joint the These certainly prescriptive to but joint to in result effort, No. steps. prescriptive marketing we go marketing asset. in will are these of it a just

parties will But AmSty. sold, stakes the will XX% both thinking AmSty their in be is sell

all going to be Someone buying is correct? that AmSty. of Is

I'm the missed... can I repeat sorry, you question?

to marking all AmSty. You're going be of

buyer all potential will buy of not your a to looking AmSty, -- XX%. Somebody be just

is correct. That

have now call. This participation. for conference question-and-answer our concluded we And thank session. today's We you your concludes

disconnect. now may You