Trinseo(US:TSE)2023-08-04 16:10Financial Performance - Trinseo reported a net loss from continuing operations of $349.0 million for the three months ended June 30, 2023, a significant decline compared to a net income of $37.1 million in the same period of 2022[153]. - Net sales decreased by 32% year-over-year to $962.6 million, primarily due to lower sales volumes and a 16% decrease from customer destocking and demand weakness[160]. - The gross profit for the three months ended June 30, 2023, decreased by 61% to $53.6 million, driven by lower sales volumes and weaker market conditions[162]. - For the six months ended June 30, 2023, net sales decreased by 31% to $412.4 million compared to $596.5 million in the same period of 2022[193]. - Adjusted EBITDA for the Engineered Materials segment dropped by 100% to $0.1 million for the six months ended June 30, 2023, down from $68.7 million in 2022[193]. - Adjusted EBITDA decreased by $46.4 million, or 68%, primarily due to weaker demand impacting volumes and margins, particularly in building & construction and appliance applications[217]. - Adjusted EBITDA for the three months ended June 30, 2023, was $(6.9) million, a 149% decrease compared to $14.2 million in the same period of 2022[219]. - The decrease in Adjusted EBITDA for the six months ended June 30, 2023, was $36.0 million, primarily due to a $43.6 million, or 239%, decrease from lower styrene margins[224]. Expenses and Costs - Selling, general and administrative expenses (SG&A) decreased by $31.8 million, or 37%, primarily due to reduced costs associated with strategic initiatives and lower salary expenses[164]. - Interest expense increased by $14.8 million, or 58%, primarily due to the rise in the LIBO rate year-over-year[167]. - The effective tax rate for the three months ended June 30, 2023, was 6.7%, compared to 45.4% in the same period of 2022, reflecting a significant decrease in income from continuing operations[170]. - The effective tax rate for the six months ended June 30, 2023, was 9.5%, a significant decrease from 49.7% in the same period of 2022, primarily due to a $547.3 million decrease in income from continuing operations[184]. Cash Flow and Liquidity - The company achieved positive cash generation from operating activities and maintained strong quarter-end liquidity despite challenging market conditions[154]. - Net cash provided by operating activities from continuing operations for the six months ended June 30, 2023, was $101.9 million, compared to $(88.9) million in the same period of 2022[236][238]. - Free Cash Flow for the six months ended June 30, 2023, was $66.3 million, compared to $(144.3) million for the same period in 2022, indicating a positive cash flow trend[247]. - The company experienced a significant working capital release during the quarter, primarily due to targeted inventory control actions and cash improvement initiatives[238]. - As of June 30, 2023, the company had cash and cash equivalents of $269.5 million, which, along with available borrowings, is expected to meet operating and capital expenditures for at least the next 12 months[261]. Business Operations and Strategy - Trinseo is restarting the divestiture process for its styrenics business due to renewed interest from third parties[155]. - The company sold its PMMA sheet manufacturing facility in Matamoros, Mexico, for approximately $19.0 million, resulting in a pre-tax gain of $14.4 million recognized in Q2 2023[156]. - The company is focusing on liquidity improvement actions to manage the anticipated impact of the challenging macroeconomic environment[188]. - The company has undertaken additional restructuring initiatives expected to result in meaningful cost savings in 2024[187]. - The company is prioritizing the refinancing of the 2024 Term Loan B, which matures in September 2024, amid uncertain market conditions[262]. Market Conditions and Outlook - The company anticipates a constrained demand environment through the remainder of 2023, expecting second half performance to be similar to the second quarter[187]. - Net sales for the Latex Binders segment decreased by 24% year-over-year to $502.1 million for the six months ended June 30, 2023, down from $660.4 million in 2022[199]. - The Polystyrene segment reported a 36% decrease in net sales to $401.9 million for the six months ended June 30, 2023, down from $630.0 million in 2022[213]. - For the six months ended June 30, 2023, net sales decreased by 52% year-over-year, driven by a 26% decrease in sales volume and a 24% decrease due to lower pricing[223]. Debt and Financing - As of June 30, 2023, the company had outstanding indebtedness of $2,349.0 million, slightly down from $2,353.7 million as of December 31, 2022[249]. - The effective interest rate on the 2024 Term Loan B increased to 7.0% as of June 30, 2023, from 3.9% as of December 31, 2022, indicating rising borrowing costs[252]. - The first lien net leverage ratio was reported at 6.07x as of June 30, 2023, exceeding the covenant requirement of not exceeding 3.50x[252]. - The company declared dividends of $0.15 per ordinary share totaling $5.5 million during the six months ended June 30, 2023, which is within the available capacity under the terms of its debt agreements[260]. - Net cash used in financing activities during the six months ended June 30, 2023, totaled $31.7 million, primarily due to $17.1 million of dividends paid and $5.4 million in debt repayments[243].