AdvanSix (ASIX) 2 Aug 242024 Q2 Earnings call transcript

Good day. And welcome to AdvanSix Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Adam Kressel, VP, Investor Relations and Treasurer. Please go ahead.

Thank you, Chad. to Quarter welcome Call. Earnings and morning, AdvanSix's XXXX Second Conference Good and non-GAAP me and website and Vice call President today at CFO, including Erin Preston. This With are: Senior investors.advansix.com. CEO, here on are reconciliations, available Kane; and Michael webcast, our any President on of Note elements our we it today. based business presentation view of statements that contain as that best forward-looking the this are of our world and see ask from change, can results the you those that projected, in and we materially elements Those could way. and actual that them consider differ We our refer presentation. included you to the forward-looking press statements in earnings release and

In the principal filings, share and affect including markets. we key morning, our review SEC. This in XX-K for and SEC our report our product annual lines uncertainties updated on Form we second and will addition, that XXXX identify results quarter the of our as our financial our with performance the end for filings in outlook further risks subsequent

the Finally, we'll leave end. time for your questions at

turn to that, with Kane. AdvanSix's call Erin CEO, I'll So and President the over

everyone. good here call. us for Thanks, today Adam, joining you quarterly We appreciate our and morning,

higher diverse execution in for to reflecting strength capture volumes, domestic portfolio. nylon We product in targeted saw our our value and sulfate a second commercial advantages realized and improvement acetone in ammonium organization's collective chain. flow; delivered performance rate, model the a return earnings, press continued with across application benefits sales, domestic year-over-year you As improvement release, quarter sales, a and and a our reflects cash business utilization and X% in pricing. margin our rates of to season we robust strong This integrated focused

production program. SUSTAIN Sulfate Increased growth, long-term to performance capital record delivered performance, of disciplined to Nutrition execution team Sustainable granular ammonium U.S. Our our operational phosphate. near including strong our including Accelerate and continued Overall, support

Additionally, and returned cash dividends to through repurchases. million shareholders $X of we

and tight higher a earnings into we tailwinds the global continue with half, at favorable have including quarter prior several pricing North a third and sulfate American ammonium the modestly started demand robust compared ahead to levels outlook, environment, acetone industry supporting the continued improving year-over-year we spreads Looking year. program a Fill supply second to Nylon

focused superior our and the outcomes commercial the for are and performance operational against our right highly portfolio building the deployment strengthen driving resiliency of evolving executing our by to stakeholders delivering framework. on meet innovation We capabilities to disciplined capital and customers, needs

fuel flow We to of future robust continue in position cash performance to positively the total support enterprise and returns. earnings shareholder

to, over Let me call turn now Mike. the

$XX in the earnings Free share million up and million, enterprise in increased changes expenditures in income of Capital favorable of primarily and now nylon I due to planned and capital. Erin, Thanks, Higher ammonium summary conditions, sales, on X% everyone. I'm quarter $XX saw the from on X% where maintenance a performance. sales good the due spend net quarter and increase working impact a increased continued Slide million reflecting volume and demand higher programs. XX% million, Cash our operations will in and second flow EBITDA net and and XX% quarter, from X results. $XX adjusted of million $XX pricing in morning, favorable increased favorable a increase to sulfate financials in per strength was drove financial Okay. $XX and provide from a the of We of in which supply American million acetone increase pricing, of X%. X% year-over-year to flow $X.XX. cash XXXX increased North converted adjusted $XX of

X. let's to Now turn Slide

of lines to to our XXXX. of robust Overall, team's driving be the a absence tailwinds key from by commercial benefits the $XX first Here of associated quarter million we supply highlight EBITDA American a each capture volume $XX the resulted while can raw materials sales benefit characterized The and the our our in with conditions pricing our demand second the site and product both and mix. first ability return quarter improvement over quarter a across a sequentially impact million of drivers sequentially. adjusted performance $XX operational quarter performance. of onetime North Tighter supported in Frankford million benefit in

including Plant million net expected, strong costs. were seasonally in as other gas As favorable, planned reduction reflecting and $XX plant plant ammonium was price, prices sulfate items operational and and of sulfur lower demand approximately costs, natural up million sequentially a and spend, $X turnaround strengthened. performance costs

But shown lines Slide to provide product on the turn typical will of context past we've a further Slide pricing Erin moment. here X, this X. to on industry further market in our dive our quarter. key Let's dynamics into each charts

remained pricing Asia belt tighter corn industry-realized remain nitrogen sulfate continued sequentially. industry pricing prices ammonium offset over market refinery in For up saw sequentially, in to North healthy. quarter on American demand by amid in corn stable supply declines prices the Intermediates, improved strengthened the stable relatively end acetone reduction In propylene sulfur reduced global Nylon, second in contrast, supply regional belt and The Fertilizer quarter demand. the relative In grade overall in spreads America. And space, growth Chemical first. the pricing with with North XX% costs a

back call Now let me Eric. turn to the

as key following of industry as Mike. variable deeper each spread our product Thanks, dynamics equations performance trends look The including tied to our at a well drivers. market margin and provide lines, X slides

observed believe is software Nutrients our an strengthened recent recognized of We this increasingly spreads and business, reflective proposition For Plant in demand. have value months. growth in

as chain order season the have higher fertilizers new prior restocking value compared quarter our levels supporting We pricing book. third entered ammonium at began year sulfate the to the

many navigate While profitability. that know their fundamentals, pricing need to more yield what support typical cautious we farmers consider considerations and broader seasonal we ag

expertise tightness, our prices the XX% X% Our of proof performance the are resiliency continuing passing the at demand continuing with reaching believe in this remain QX to we program, growth we've about decline, stage we the This when as the projects nutrition to including USDA our within year-over-year well, leader end outcome review of investment market albeit XX% and of for The with sulfur are and progressing program points are target return term, the anticipate achieved sulfur of nutrition a space. to to by the in this nitrogen approximately of for growing environmental Year-to-date, our coupled time expectations plus. year. a process year. program conversion will our per approximately sustained supply estimated were XX% to track excited continue growth performance. Longer prospects to granular grant X% Fill of with demand and leveraging some and supports the on improved deliver business support profile our

continue product for nutrition, to for we traditional around feedback receive addition, support to positive well. but In essential crops demand as not soybeans only

turn Slide Let's X. to

the on weighted refinery-grade margin. a acetone For left Chemical represents propylene average Intermediates, over the industry chart

you has conditions. that. to see, acetone with reduced been other of majority up operating phenol have As and phenol recovered XX% can value by Acetone serving a far demand tight and and This of persistent global lower rates represent spreads approximately and making chains acetone amid industrial supply applications. supported demand global on sales our construction building intermediate

acetone XX% propyl is is ] As of [ reminder, consumed our while downstream our approximately of all sold operations, phenol by externally. produced our a

optimized to a product perform For customer favorable with and needs us, meet is Acetone line strategy a profitability driving sales while key mix. and

Intermediate Chemical our of XX% remaining portfolio. the For

ag, of into for high select alkyd-based focus market various our chemistry cyclohexanone through value and our diversification specialty our pharma performance exposure strategic industrial applications. platforms margin as sales paints around for is key amines end the electronic This applications our Our applications. space, placing such Nadone supports and serving EZ-Blox and

Now Nylon Solutions let's X. turn to on Slide

Composite continued Caprolactam uses. Global at meaningful exports Varying sales. major continue benzene demand competitive are North regional multiyear shown regional spreads, supply including Here intensity estimated our and resin pricing. and mixed in nylon rates of Asia. fundamentals, across Despite remains over flows to to and regions, long polymer operating dynamics the highs, end resulting Southeast China out we've split and demand other given trade of impact both the most namely American nylon sitting monomer Globally,

charts, building America demand in offset continued in has evidenced supply further recent of XXXX XXXX, Here modest trough the given expect and regional remainder Packaging has the supply construction stable, North lower tighter the North the through outperformance in we been improved applications. Industry improvement second have levels Engineering spreads resilience with half as by off and base in environment. North a America, softness American Plastics on albeit months supporting constrained in in regional been

highly we given For the this remain cycle profitability, in through-cycle operating third focused on then. since business, supporting improved we're

nylon and position at differentiated XX% have Caprolactam it requires our higher operate our cost an is optimize goal our our to higher our quarter. us utilization and in sales supports improved product back through-cycle, global moved demand our mix geographical the mix where to to volume performance and approximately proposition our highs ability of productivity, promote sales value as continue historical average generating Supporting current regional second to of meet our sitting low rates in nylon sales the at drive exists level, total products. to export of While disproportionately an

and been snapshot. like long-term we Now, be viewed picture our fund opportunity The short-term needed. when illustrate the business business a to generating of the allocation operations is from sheet slides next and Q&A, cash returns optionality priorities, best to generation, to big allocate provide cash our to long-term take our healthy and generated continues flexibility This a balance before the that moving has we can critical performance. X the on lens to how through missed cash Ample and would for and on through-cycle reiterate shareholders. we're

long We've All allocation very to from savings and and including as approach we share of to fund support by Through XXXX. ongoing in flow. repurchases. create dividend, shareholders And critical its inorganic generated enterprise base fits operational growth cash and safety and well value. From us Our as our is with invest cash since of dependable growth. to robust capital which maintenance and and well further cost of projects and our we spend, critical return our operating mitigation. our various framework cycles, fund X-pronged XXXX, grow since critical has discretionary conditions within environmental our cash has grown performance funding and term supported annual serves where operations risk framework allowed funding $X.X returns, disciplined opportunities dividend, CapEx, as to deploying at programs health, our discretionary, a this have initiation and deployment, cash excellence this well and our long-term billion programs choices framework, is perspective, a a to

framework our valuation with a returns We percentage cycle, through Now focused on metric. all which to deliver is execution ours, net with the We've and returns, is it a ROIC like allocation let's a positioned of capital outcome chemistry turn and businesses XX. to effective as to capital robust testament for is a digit key we outperforming along double well created and to power believe invested Slide an from Pulling generated together set the commercial diversified and earnings operational execution. investments, strategies. of playbook peers, our company priorities a remain the

to We aligned North applications of advantaged across asset have leading sales a an portfolio. American an are diverse base, enhanced mix set a the and position, with end-market

We generating value have of for goal the creation. and provides with compelling increased through-cycle offers And further of the thesis. highs. our business investment this optionality focus a framework power I and our capital higher earnings higher just on allocation shared, lows as AdvanSix profitability upside and

Adam, Q&A. that, with move let's to So

Chad, Erin. for line the questions? open can please Thanks, you

CL first the And question King. from Instructions] Silver from will [Operator be David today

Yes.

I So I of a a do number number -- a have do questions. have of kind

I to on performance start one improved and is utilization. I'd your comments operating maybe the about think like first higher

quite comment at also bit. rates recognize complex vertically-integrated to So issue, a quarter. I help your I run where in being out does you the high there first an was I'd inter-integrated do able guess,

to that as But going target. But what's been optimal you don't don't maybe, kind to you earnings have And just So efficiently know, Or your could? you incremental operational that. operate Is execution underlying your -- I forward would really obviously increment ] [ XX% utilization maybe dartboard. for assume on -- how a was this is I'm without of possibly say your quarter? In just that? if should word? you know, could potential? of the we even an -- be kind disruptions. words might room and saying did dart other close potentially there as I extra might improvement

in an you QX, Yes. I email have I operational know but sailor." to a pursuit, a quote right. challenge from start our a a maybe got sea Franklin "A quote. a of sort is Well, D. that thanks out call for morning question. Roosevelt for said, that And had never I the forever excellence with made this smooth skilled friend us,

excellence longer we operations improvement. really leverage. the We know And improve more we that of in mid- high-XX% chain operational that we the range in just this create programs. indeed bring learn results around area returning creates of of safe, stretches our it that. to sort about the which target. Certainly for we supports of in have. So spot continuing and and operational over at Right? rates an is capability sets improve But when look operational return We quarter, second Hopewell, continuous think to did relative operate is rest stable, to the our supported where challenge sustainable every that talk we single from as is our skill, I underlying to that sweet inherently QX. say, We our you to the forward. fills tenant

When in quote nothing happens But I quote, were accident. you FDR I the to politics, with your like thought you started by say, going better.

for Thank you that.

kind urea good reasonably product like higher where benchmark pricing selling the other was guess, even quarter. And season. on, the In had end. a of it could I'd guess, high direction I and one the say looks stable I volumes how, and to it pricing of you characterize moving achieve just during the of relative slightly your your was maybe was words, ammonium I to side I product were you the also Okay. both guess, towards comparable would environment couple you like spring ask to business. And an able or of in kind sulfate in the questions moved

be about your the planning but you a given ability could issues, comparable especially out-execute would execute in maybe your So spring kind comparable that. one of just or very Or just fast-paced just to if talk priced you of you products? attractively some well would Did number how of maybe close characterize season, competition?

that out we on Sure. And through season. comparison start the the year. something the I next we appreciate important, believe and focused certainly here. we're We the buildup and well call as ourselves into certainly fertilizer always the That's it's positioned here

recall increased You sulfate output. our we granular production. had ammonium our may own We've that

higher long to value that way the America. product demand that in a So went in certainly granular the here is meeting North demand for growing

offset of really ready what we're sulfur challenges for We we our in also purchased volume essentiality I extra the to customers' demand that to nutrition. of QX. But make sure recognition think were is the our seeing

And that place. so that there growing demand is taking was

yield was XX% fundamentals as typically I points to think that the are for them. proof we XX% value saw see in increases the but not when farmers, that folks key on also the on folks can well. single-digit see corn, mid quarter really recognized yields a soybeans pressuring that yields the on profitability for is consideration just a And

are fundamentals that product of QX, it. to. supported certainly was supported positioning us some the we resilience nutrition. and certainly, but But this seeing fertilizers, perform the those And particularly it's start lot Fill we're supply seen so then, of demand high our the with sulfur and of for here really also the support signal. There the to we've tightness, think are I really demand QX, at I committing allowing of that in a program think the -- that our higher that product growth execution, And customers, or our demand

led level product view. other Boardroom Nylon corn you from belt -- like certain in you had thing. And of But from that just on little I ammonium remarks touched clarify increased That pressures you might bit a was did this I to a the coproducts a still globally there you then they're elsewhere. And I starting I on to Corporate do both view to down-on-the-ground prepared more right. secondly, they extent. In on All maybe, are a the mean, sulfate from from the was sulfate, want don't granular -- less ammonium available. one follow than but words, to benefit your the maybe again, have product acetone? is And some available first, up percentage to that think this, know,

time-to-time. that arcane? see general? like bit acetone But that thinking little a any there too Somewhat with in we is Or is about from

volume Okay. increased of that. at would to the was about Relative I can to granular increase certainly put production, tackle the and both our increase, estimate sales volume of XX% halves attributable our that benefit. mixed we

that's so we And an program. in continue our important for as us to trend invest SUSTAIN

We are not and we've produce by in view the by production. that's at the about if intermediates, So split volume, X/X, past. what talk Part intermediates sort our fertilizer to you sales X/X but X, the X. Part fertilizer revenue, we and relative when of look of shared

coming So they're is global different lines are of to in But again to places. that yes, quite where, ammonium product headed us. There A sulfur And yields. bit a for of recognized sulfate China. definitely market. other a out a bit we boosting to need leading still tighter the acetone for acetone see fundamentals is predominantly and important globally as nutrition global very supply/demand phenol continue Brazil and

-- agricultural, that's service been do perspective, your normal but beyond out up oversupplied, during buffer it of and the it's it's of the want that calling inventories And this question, had X ag-chem, talked market. pandemic, been from were I product would I but say was things. stock of levels. From and to the or observation, more your product customers, the -- year But do think customer an parts time U.S. to, more built of the materials. the chemicals couple your amines, charting over so, they have And but ask sulfate of appreciate I this pesticide believe question. improved? an time, past crop myself, ag-chem even for couple that into your Okay. than been environment a this I over view? you I appreciate the did tracked Has or was you that it a oximes surplus is cleaned place portfolio is time. I go in added or that a that I ammonium the have the they up Are the years, slide you the for but have built raw to It's that line not just there price first kind area. area the more of maybe of this I up folks able this lines the makers,

still there did chain continue business, where into out, we've and you through the season, dynamics gets work to say the working to the because some all and value is imports saving from growers step. deeper continue MIPA with chain mixed Certainly that sulfate ag-chemical in from salt, certainly experienced herbicides the that the retailers on progress been higher being selling tracking way point chain adjuvants through. that in we're of we that a some side, flip little. you're low-priced certainly so added the inventories headwinds, that others. I'd have have the in spray-grade value ammonium And the of through as improved last really Certainly, and the is would value the being see glyphosate That the at and in improve inventories. indicating made be is Chinese impacted that hearing

progress, some go dynamics. certainly the So ways relative some to but to underlying

your half on when of a season. earnings not know, the I just outlook And I'm that of maybe just who company optimistic here. then remarks, did relatively just kind industrial company sector. say virtually the weaker out earnings based you towards Okay. back don't kind only I'm the, last of it's theme across I call be season. on could comment general the a question that demand And has talking just maybe supplying the wondering my been environment -- I'm that And again, But not this your common for the to. could sector, if or buoyant industrial would

us view we collectively we're perhaps economy greatest said, building ultimately outlook to manufacturing would diversification our have many that certainly playing the that. that's a here there of that slower aspects slower half. And that are I out year-over-year couple appreciate right? there recovery in would And where industrial think months recovery a been share all also in of ago. is back are I aspects the the that and in the Certainly. But challenged, are of seeing are construction. And weakness for our favorable relative the than

But continue Packaging impacts aspects the I watch. think our is, certainly product an side but or be resiliency also Wire Intermediates. demand certain recovery seen to we've as We've in Cable relatively in seen the the area flip in strong. and well. lines that's and the back stable we Nylon come growth Automotive It resin, of of our

talking we that here think the about that's look us I positive, a as and to we've really for out what's been So this us, diversification probably second half. as playing for

great. That's color. I appreciate Okay. the all

question final Charles Piper from our And from Neivert Sandler. comes

Yes.

and about Just there? few additional an happening talking about? might and sulfate, a look be? walk the the you're whatever coming at you program how when Or whole there program what's Can One, things. you SUSTAIN through expansion of that is sort tons of XXX,XXX

Sure.

have past over leading recapture set. a As course can and just to of of programs really of opportunity years the projects here we that us, kind that is and in for the series it's shared

it completion end impact projects sustainability is this to full is year increasing a in us win-win the across conversion the us a many it's consumption to but really series route, It without XX% of by a here, so, to years of we're is to couple is nice right? which to targeting the great output. do granular energy, XXXX. full of get because aspect water it, increases that to rates. So the going There along a we're with enabling of by And this take ways

about full to dechoking, ability as ] really to this. It's we back years. the line, us just last can going few to you, in is up new we're was the Charlie. that to earnings send what's a happening page, convert a deck of could we the address creating various of share, over it's [ aspects you not so, here how really over And standard there And just believe, think next granular for course I certainly really the

mean, your total of Yes. because terms hasn't increased a just in capacity chemical total both but and standard that's granular I conversion. grades, available in actually AS

either you just about in of other, as the product that leave converting the XXX,XXX? but that type or So amount talking it it's you're one we're

consideration. is are That premium exploring standard there we that we is, that's mean, But our continue evaluate to the that in we'll some right? things that I to primary that and conversion certainly greater release, yes, are -- valuable, form. continue from we have the is that again, to could system. the Just given get

Yes. -- understanding I as by an that I make just it just sure of absolute relatively but value, amount. what wanted shift change. small opposed capacity to was the profitability, It's it as expansion higher tonnage was higher actual a available, to

looking and But the type able do maybe systems blue to part of for is consideration? around you that be be at all ammonia same in in AS effect and you as running and ammonia there regionally note, know of then that something even and -- tonnage at all molecules place be to then that's would to I value what guys still? that creating capture your carbon thought may that higher Is it. Just or under unit there green a is available. On at are that the any not

Yes.

for years of majority all -- current beneficial captured reuse. has the vast or of our has been captured currently COX for -- So our been at

valuable Hopewell storage. and a it have cold and in beverage the food used COX on So is taking being that site chain are we industry that partners and

As the for is and you the large poultry high beneficial the relative to so industry, and said may that, mid-Atlantic beverage. like and a region reuse I know certainly pork also is in pretty

have considerations, been. partners other now right in So taking we and to [ ] good today but any offtake great have are that. we do use it's capture and it Certainly that that

lack aren't guess, -- that better for COX you a taking term, disappear. people [ ] the I of Yes. effect offtake in doesn't, because

again sort look the AS get credit sulfur I would When whatever the there's there's credit, can't going over you input? to say, got the, realization I that worth. part better Do a at that see now seen a realization of is over used of come of more U.S.? substituting shifting? in clearly contribute urea across? going And to do grow certain you've the I sales because it's product have we that's a at -- I had AS that you but over think is time? mean time. for the more? in you that obviously a for market mean it's historically You spread spread you mean, valuable something think to Are some acceptance relationship, been just that's Do that's Chinese green of that that part to you how

Yes. field there seeing for on out, it our certainly is acceptance as premium we're certainly the which I price agronomists value has one nutrition again been that but research, the consideration are we've our the XX last been mean, to of the proposition strengthen have proposition. that the shared willingness do sulfur working nitrogen and the baseline months. pay sulfur of to the XX But we believe certainly we

pay to yield. increase We that and boost expect sulfur to willingness consumption clear a there's to accordingly for continue to

on under yield positively. going, depending with relatively these looked considering the over at of stock nitrogen going kind to cost, pretty minimal to boost where you anything much do And corn is I situations get additions at think how is can

that's particular there a Nylon market On it making better? things the been markets? side any Has all Or things. basic been the spread across is bit really Nylon of little

Plastics, were I in relative back all Engineering seen as more to we come our we've here. support without inflation. EP on our those our certainly I seen well. automotive. food numbers it Packaging mean, -- the of pressures back. seen Again America, mean, of it here I clarity want customers region come to again, buoyed there in is ago several really by ability in to Yes. focus months We've certainly We've North the resiliency mean,

the supporting stable pulled in the that's I dynamic macro that others back really that is not before, is, area we given mentioned now, think rates, most But were sit growing, but So mortgage way. And Packaging, they're indicators that the down construction commercial the perhaps certainly revenue the more really but and side challenged slowed in past. building along as think it's which to grown the that I residential. are rates relative rates, I importantly, at interest they're they've growing not in just again, --

definitely there some think as just of there, how been to a share but of not supply slowing also So enabled it kind a have considerations us that's plays the I consideration has There recovery, is out. capture in that so some but well. recognized

terms lot. in less bit your help Got few shift I quite guys pretty much Are on gas, just are to it unit, it. spread in should sales gas general? Natural a more even to toward hedged you but months is that's Or and make particularly in over going of able you month, gas assume as moves AS But the that look the the last obviously and full granular advantage better And a obviously South any market has take in been ammonia the of decline little America into maybe little a product? moving standard and that particular. seasonally period the in downward a the something way? weaker of a

end a term and don't Yes. time hedge consideration sulfate is, course, Charlie and we pricing, over we, can the variable respect call ammonium of in the it normal is that market a there cost It natural and longer pricing I'll to correlation marketplace. feedstock. with natural for as terms the Therefore a course gas. fertilizers impact

and look, lower come So spike see hedge. With did to a respect did But bit it up I'd we say then a and at it. back we monitor don't forward in get normal of in be course, we'll expectation July, natural fourth down we but the natural watch for continue here and settle in we'll the as a level QX, correct gas as is quarter. overall, that gas a And closely will costs it a bit, to net-net obviously our into August.

for it does that me think today. I

turn And Kane will this closing session. the question-and-answer any and conference Erin ladies concludes gentlemen, I for to remarks. today's back

the well. expectations favorable safe and a our and captured commercial We position continue feel again diversified year well. second the good model and to our drove this investments well our time long-term us strength demonstrate key our outlook. that and to business for have be about quarter And quarter. of performance and We we look Stay sustainable hope this continued Thank that, serve to you clarified will speaking with we've for our very all your operational again next our expect considerations continued call and support strategies we forward morning. as the resilience. performance. With chemistry to as our team AdvanSix's support implemented earnings The benefits interest performance, to as you company this discussion and for

presentation. The concluded. for Thank conference you today's has joining

may now disconnect. You