Trinseo(TSE)2024-05-09 19:45Financial Data and Key Metrics Changes - The first quarter adjusted EBITDA was $45 million, in line with previous guidance, including $13 million of favorable net timing from rising styrene prices [35][36] - Cash used in operations during the quarter was $66 million, resulting in free cash flow of negative $82 million, attributed to a $61 million increase in trade working capital [53] - The company ended the quarter with $171 million of cash and $423 million of liquidity, including undrawn bank facilities [54] Business Line Data and Key Metrics Changes - Engineering materials are expected to generate above $20 million in EBITDA for Q2, reflecting a recovery in demand [59] - The MMA market saw margin expansion due to supply tightness, with March prices significantly higher in Europe [46] - The company anticipates a favorable mix in 2024, with engineering materials growing faster than the broader portfolio [71] Market Data and Key Metrics Changes - European spot styrene prices increased by about 60% in Q1 due to industry outages, leading to margin expansion at America’s Styrenics [35] - The MMA market in Europe is currently net short, with demand for architectural coatings tightening the market [48] - The company is about 20% below historical run rate volumes compared to normal demand, indicating potential for recovery [97] Company Strategy and Development Direction - The company is committed to integrating modern recycling technologies and has seen a record amount of products containing recycled material sold in Q1, a 65% increase over the prior year [33] - A sale process for the company’s interest in America’s Styrenics has commenced, with expectations for a definitive agreement by early 2025 [32] - The company plans to close its virgin polycarbonate production line in Germany due to soft demand and price declines, while continuing to focus on sustainable product offerings [32][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive earnings momentum continuing into Q2, supported by tightness in styrene and MMA markets [55] - The company remains cautious about the overall demand environment, indicating that Q1 profitability is expected to be the low point of the year [36] - Management noted that while there are signs of improvement, the overall market remains challenging, and they are prioritizing liquidity [56] Other Important Information - The company has engaged local works council in Germany regarding the potential closure of its polycarbonate production line, reflecting ongoing challenges in the market [32] - The company is taking actions to moderate lower margin sales to conserve working capital, with minimal impact on earnings [54] Q&A Session All Questions and Answers Question: Can you quantify the impact of the turnaround in Q1? - The impact of the turnaround was approximately $8 million in earnings, with styrene prices not accelerating until March [62] Question: What kind of interest are you seeing in marketing the AmSty JV? - There has been interest from several strategic and financial parties, but active marketing has not yet begun [81] Question: How do you characterize the mix as volumes rise? - The company expects a favorable mix with higher margin product sales as volumes rise, particularly in engineering materials [59][71] Question: How far below normal levels is demand currently? - The company is about 20% below historical run rate volumes, with a potential $25 million per quarter EBITDA impact for every 10% recovery [97]