Ascent Industries (ACNT) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2020, the company reported a net loss of $10.5 million or $1.16 diluted loss per share, compared to a net loss of $1 million or $0.11 diluted loss per share in Q3 2019 [5] - For the nine-month period, the net loss was $18.7 million or $2.06 diluted loss per share, compared to a net loss of $2.1 million or $0.24 diluted loss per share for the same period in 2019 [6] - Q3 non-GAAP adjusted EBITDA was $1.6 million, down from $2.8 million in Q3 2019, while for the first nine months of 2020, adjusted EBITDA was $6.2 million, down from $10.9 million in the same period of 2019 [7] Business Line Data and Key Metrics Changes - The chemical segment saw operating income increase by 25% and 47% over Q3 and nine-month periods of the previous year, despite a decline in volume [9] - The polished ornamental tubing business remained strong, particularly in consumer-oriented markets like marine and transportation [10] - The welded pipe and tube businesses faced challenging market conditions, with North American consumption of welded stainless steel pipe down approximately 5% from 2019 [11] Market Data and Key Metrics Changes - The company expects to see a recovery in demand for welded stainless steel pipe in North America in the second half of next year, driven by anticipated infrastructure spending [11] - Inventory price change losses totaled $5.5 million in the first nine months of 2020, but nickel surcharges turned positive in late summer, leading to expectations of inventory price change gains in 2021 [11] Company Strategy and Development Direction - The company is focused on reducing net debt, which decreased by $6 million in Q3, with expectations to reduce it by an additional $9 million by year-end [8] - The company is selling off assets related to exited businesses, with expected proceeds of $500,000 in Q4 and upwards of $2 million in the first half of next year from Palmer sales [8] - Management has suspended all fiscal 2020 guidance due to COVID-19 uncertainty and is not providing guidance for 2021 at this time [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning for the next phase of the manufacturing economy, highlighting the resilience of employees during challenging times [12] - There is uncertainty regarding the impact of the new administration on infrastructure spending, but management expects some improvement in demand in the second half of next year [25] Other Important Information - The company plans to file for federal tax refunds totaling $4.5 million, with $1 million expected before year-end [8] - A favorable court ruling regarding industrial gas pricing at the Munhall facility may allow the company to recoup up to $200,000 in overcharges for 2020 [9] Q&A Session Summary Question: Will the company's debt affect the ability to refinance the line of credit expiring in December 2021? - Management indicated preliminary conversations with Truist have been positive, and they expect to renew the line of credit before year-end [19] Question: Was the inventory evaluation able to happen in October? - The inventory revaluation did not occur in October due to COVID-related reasons, but a new valuation is in process with expectations of higher inventory prices [21] Question: How much of the company's revenue is connected to oil and gas? - Management estimated that about 80% of company revenue comes from end markets connected with oil and gas, with varying exposure across different business segments [22] Question: Is there a potential boost for companies supporting manufacturing infrastructure with the new administration? - Management noted that while there are initiatives in the Senate, the outcome is uncertain, but they expect infrastructure spending to improve demand in the second half of next year [25] Question: How is the BioLube ECO-7 product being accepted in the marketplace? - Management stated that the chemical business has historically catered to specific customers, and they would look into the product line's acceptance further [27] Question: Will the Board of Directors be expanded back to eight members? - Management indicated that the Board has not contemplated this at the moment [29]