Exhibit 99.2
1 ™ Trademark of Trinseo S.A. or its affiliates ™ Trademark of Trinseo S.A. or its affiliates July 29, 2020 Second Quarter 2020 Financial Results |
2 Disclosure Rules Cautionary Note on Forward-Looking Statements. This presentation contains forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts or guarantees or assurances of future performance. Forward-looking statements may be identified by the use of words like “expect,” “anticipate,” “intend,” “forecast,” “outlook,” “will,” “may,” “might,” “see,” “tend,” “assume,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would” or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions regarding the impact from the Covid-19 pandemic, our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Factors that might cause such a difference include, but are not limited to, those discussed in our Annual Report on Form 10-K, under Part I, Item 1A — “Risk Factors” and elsewhere in our other reports filed with the U.S. Securities and Exchange Commission. As a result of these or other factors, our actual results may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you against relying on any of these forward-looking statements. The forward-looking statements included in this presentation are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. This presentation contains financial measures that are not in accordance with generally accepted accounting principles in the US (“GAAP”) including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow and Liquidity. We believe these measures provide relevant and meaningful information to investors and lenders about the ongoing operating results and liquidity position of the Company. Such measures when referenced herein should not be viewed as an alternative to GAAP measures of performance or liquidity, as applicable. We have provided a reconciliation of these measures to the most comparable GAAP metric alongside of the respective measure or otherwise in the Appendix section of this presentation. Introductions • Frank Bozich, President & CEO • David Stasse, Executive Vice President & CFO • Andy Myers, Director of Investor Relations Introductions & Disclosure Rules |
3 NOTE: Working Capital represents accounts receivable, inventory and accounts payable. *See Appendix for a reconciliation of non-GAAP measures. **For the definition of Liquidity and other non-GAAP measures, refer to the accompanying press release furnished as Exhibit 99.1 to our Form 8-K dated July 29, 2020. ***$371 million of availability under committed facilities includes $261 million of available borrowings under the revolver facility as of June 30, 2020, and $110 million of available borrowings under the accounts receivable securitization facility as of June 30, 2020. Summary • $60 to $65 million COVID-19 impact (pre-tax): steep demand decline particularly in automotive, tire, textile, and graphical paper with April as the trough followed by sequential improvement each month • Strong Polystyrene volume in packaging and appliances • Abundance of naphtha from low fuel demand and lower POSM operating rates continue to aid styrene margins in Europe 2nd Half 2020 Outlook Q2 2020 Results • Q2 cash from operations of $82 million and Free Cash Flow* of $58 million, including a working capital release of $131 million from lower raw materials and inventory management • Q2 ending cash of $582 million and availability of $371 million under committed lines***, resulting in Liquidity** of $953 million • $100 million revolver borrowing repaid in July Cash and Liquidity • Increasing volume from Q2 lows from improved demand in applications such as automotive and tires • Lower project spend expected in 2nd half as larger turnarounds and major projects, such as the transition from Dow Services, were completed in the first half • Released 2020 Sustainability Report on July 17th including Sustainability Goals for 2030 • Continued COVID-19 safety actions for employees including increased cleanings and social distancing practices • Investments in CASE, SSBR, and Engineered Materials Key Initiatives |
4 Our 2019 Sustainability Results at a Glance Sustainability Journey • Developed strategic, ambitious and achievable Sustainability Goals to develop a sustainable product portfolio, increase supplier responsibility, elevate responsible operations, develop a sustainable workforce, and directly address climate change Business & Operations • Took steps to transition IT and other services from Dow Chemical (achieved systems independence in 2020) – hired 440 new employees, bringing global count to approximately 2,700 • Continued implementation of the Corporate Procurement Policy by developing evaluation tools, including an updated Supplier Relationships Management scorecard Products & Innovations Plastics • Unveiled plans to offer an average of 30% recycled content to customers for polystyrene packaging in Europe by 2025 Latex Binders • Introduced low-VOC containing latexes with reduced levels of unreacted monomers and impurities, reducing hydrocarbon releases into the atmosphere Synthetic Rubber • Introduced SPRINTANTM 918S SSBR, enabling up to 15% improvement in rolling resistance, 8% better wet grip, and 20% less wear in comparison to standard, non- functional high-grip SSBR* Corporate Citizenship • Trinseo employees spent 3,545 hours supporting local organizations at 24 locations across the globe as part of the 2019 Trinseo Volunteer Days Safety • Achieved an injury rate of 0.11, which places Trinseo in the upper echelons of the chemical industry for safety • For the fifth year in a row, recorded no Process Safety Incidents Environmental Protection Since 2011, Trinseo has reduced: • Electricity usage by 15% • Water consumption by 34% • Scope 1 Green House Gas (GH) emissions by 37% • Nitrogen Oxide (NOx) by 40% • Total chemical emissions by 29% * In lab indicators |
5 Our 2030 Sustainability Goals Climate Change • By 2035, reduce, by 35%, Scope 1 & 2 GHG emissions intensity (2017 base year) • By 2030, increase the share of electricity from non-fossil sources from 5% to 30% (2017 base year) • By 2025, establish a management system and begin reporting and tracking Scope 3 emissions Sustainable Product Portfolio • By 2025, 30% of Trinseo’s technology and innovation/R&D efforts will be aimed at circular economy solutions • By 2030, 40% of Trinseo’s products will be sustainably advantaged • By 2030, 50% of Trinseo’s products will be used in applications that align with the United Nations Sustainable Development Goals (UNSDG) Supplier Responsibility • By 2025, implement a Sustainability/CSR Due Diligence program for new key suppliers as an addition to the existing supplier on-boarding process • By 2030, 80% of our existing suppliers with recurring spend of >$100K are assessed and demonstrated to be compliant with our sustainability requirements Responsible Operations • By 2030, reduce fresh water intake by 20% • By 2030, reduce overall waste generation by 15% • By 2030, reduce waste disposal to landfill to zero • By 2030, all pellet-handling sites achieve zero pellet loss to the environment through Operation Clean Sweep Sustainable Workforce • By 2030, achieve gender balance in the organization through filling 50% of company open positions with women; and double the percentage of women in senior management and executive positions to 40% • By 2023, all employees will have a personal employee development plan which will enable the creation of holistic learning and development strategy, which is to be implemented by 2025 • By 2030, achieve one or more years of zero recordable injuries for employees and contractors globally |
6 • Q2 results include an unfavorable net timing impact of $43 million and an unfavorable COVID-19 impact of approximately $60 million to $65 million • Lower profitability versus prior year due to net timing and significantly lower volumes attributed to COVID-19, particularly in the applications of automotive, tires, graphical paper and textiles • Resiliency in demand in packaging and appliance applications Trinseo Q2 2020 Financial Results ($3.36) ($2.95) $0.68 $0.99 Diluted EPS Adj EPS* EPS ($) Q2'20 Q2'19 $570 ($128) $952 $28 Net Sales Net Income (Loss) Net Sales & Net Income (Loss) ($MM) Q2'20 Q2'19 ($8) $103 Q2'20 Q2'19 Adjusted EBITDA* ($MM) * See Appendix for a reconciliation of non-GAAP measures. Net Sales Vol Price FX Total (18%) (21%) (1%) (40%) |
7 • Lower demand versus prior year in graphical paper and textile applications due to COVID-19, with resiliency in board • Q2 year-to-date CASE sales volume up 3% • Lower price from the pass through of lower raw material cost Latex Binders $165 $230 Q2'20 Q2'19 Net Sales ($MM) $17 $21 Q2'20 Q2'19 Adjusted EBITDA ($MM) 115 128 Q2'20 Q2'19 Volume (kt) Vol Price FX Total (7%) (20%) (1%) (28%) |
8 • Adjusted EBITDA includes a negative net timing impact of $15 million • Roughly 35% decline in global tire demand led to historically low volumes, particularly early in the quarter • Lower price from the pass through of lower raw material cost Synthetic Rubber $36 $112 Q2'20 Q2'19 Net Sales ($MM) ($28) $13 Q2'20 Q2'19 Adjusted EBITDA ($MM) 26 58 Q2'20 Q2'19 Volume (kt) Vol Price FX Total (56%) (11%) (1%) (68%) |
9 • Adjusted EBITDA includes a negative net timing impact of $15 million • Automotive volume down 65% as manufacturers in Europe and North America shut down in the first half of the quarter • Improvement in polycarbonate margin from increased demand in protective applications and lower raw material cost Performance Plastics $189 $347 Q2'20 Q2'19 Net Sales ($MM) ($6) $34 Q2'20 Q2'19 Adjusted EBITDA ($MM) 110 158 Q2'20 Q2'19 Volume (kt) Vol Price FX Total (33%) (12%) (0%) (46%) |
10 • Adjusted EBITDA slightly lower than prior year as negative net timing variance of $3 million and lower fixed cost absorption offset gains in volume and fixed costs • Higher volumes due to increased demand for packaging in Europe and strong demand for appliances as well as prior year destocking • Lower price from the pass through of lower raw material cost Polystyrene $156 $207 Q2'20 Q2'19 Net Sales ($MM) $15 $16 Q2'20 Q2'19 Adjusted EBITDA ($MM) 171 149 Q2'20 Q2'19 Volume (kt) Vol Price FX Total 15% (39%) (1%) (25%) |
11 • Below prior year as $9 million of negative net timing variance and lower styrene margins in Europe were partially offset by increased production Feedstocks & Americas Styrenics ($4) ($1) Q2'20 Q2'19 Adjusted EBITDA ($MM) FEEDSTOCKS • Below prior year primarily from lower styrene margins in North America • Negative impacts from COVID-19 via lower demand in Latin America and appliance production shutdowns in North America • No Q2 dividend AMERICAS STYRENICS $14 $40 Q2'20 Q2'19 Adjusted EBITDA ($MM) |
12 Significant Impacts on 2020 First Half Profitability Earnings faced significant headwinds in the first half of the year in the form of: • Net Timing – as raw material prices sharply declined • COVID-19 – from significant volume impacts mainly in automotive, tire, textile and graphical paper applications Fav/(Unfav) $MM Net Timing (58) COVID-19 (65)-(70) |
13 Q3 2020 Expectations • Improving sequential demand in applications such as automotive and tires, although still below prior year levels – Performance Plastics: automotive volume 20% lower than prior year – Synthetic Rubber: volume 20% lower than prior year – Latex Binders: volume 10% lower than prior year • Similar sequential styrene margins – Europe margins at higher level as low fuel demand and reduced POSM operating rates persist • Continued solid demand for polystyrene, particularly in appliances, but below strong Q2 • Polycarbonate margins sequentially lower following relatively stronger Q2 • Favorable net timing of approximately $10 million |
14 Q4 Expectations and Full Year Cash Assumptions • Unknown duration and recovery rate from COVID-19 pandemic • Q4 expectations – Seasonally weaker demand – Lower styrene margins due to less demand and lower level of planned styrene turnarounds • Free Cash Flow* assumptions: *For the definition of Free Cash Flow and other non-GAAP measures, refer to the accompanying press release furnished as Exhibit 99.1 to our Form 8-K dated July 29, 2020. $Millions 1st Half 2nd Half 2020 Taxes 8 12-17 20-25 Interest 21 19 40 Dow Transition / Mfg Upgrades 19 14-16 33-35 Other CapEx 29 18-21 47-50 Capital Expenditures 48 32-37 80-85 Turnarounds 22 8 30 Corporate Restructuring 9 11 20 Dow Transition Expense 11 6 17 • 2nd half outlays $25 million to $30 million lower than 1st half • Expect book tax expense to be similar to cash taxes |
15 15 Appendix |
16 US GAAP to Non-GAAP Reconciliation NOTE: For definitions of non-GAAP measures as well as descriptions of current period reconciling items from Net Income to Adjusted EBITDA and to Adjusted Net Income, refer to the accompanying press release furnished as Exhibit 99.1 to our Form 8-K dated July 29, 2020. Totals may not sum due to rounding. (in $millions, unless noted) Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 2017 2018 2019 Net Income (Loss) 117.3 60.2 33.2 117.7 120.3 98.3 74.7 (0.9) 35.8 28.0 22.5 5.7 (36.3) (128.4) 328.3 292.5 92.0 Interest expense, net 18.2 18.7 18.4 14.8 14.9 10.8 10.1 10.6 10.2 9.9 9.2 10.0 10.3 11.7 70.1 46.4 39.3 Provision for income taxes 29.3 18.8 8.3 26.4 24.9 20.4 19.2 7.3 10.8 15.7 9.3 (23.2) (11.9) 64.7 82.8 71.8 12.6 Depreciation and amortization 24.7 26.3 29.2 30.3 31.9 32.3 31.8 34.2 33.9 34.7 33.0 34.3 36.4 34.8 110.6 130.2 136.0 EBITDA 189.5 124.0 89.1 189.2 192.0 161.8 135.8 51.2 90.7 88.3 74.0 26.8 (1.5) (17.2) 591.8 540.9 279.9 Loss on extinguishment of long-term debt - - 65.3 - - 0.2 - - - - - - - - 65.3 0.2 - Other items - - 1.6 (21.6) 2.7 6.8 6.1 7.4 11.1 14.1 13.3 16.9 18.7 3.0 (19.9) 22.8 55.4 Restructuring and other charges 2.1 1.1 1.5 1.2 0.5 1.2 0.9 5.6 0.4 (0.3) 0.2 17.9 1.8 6.3 6.0 8.2 18.1 Net (gains) / losses on dispositions of businesses and assets (9.9) - 0.2 - (0.5) - - (0.5) (0.2) - - (0.5) (0.4) - (9.7) (1.0) (0.7) Acquisition transaction and integration costs - 1.1 3.8 (0.1) 0.3 0.2 0.1 - - 0.7 0.6 (2.2) 0.1 (0.4) 4.7 0.6 (0.9) Asset impairment charges or write-offs - - 4.3 - - - - 1.5 - - - - 38.3 - 4.3 1.5 - Adjusted EBITDA 181.7 126.2 165.8 168.7 195.0 170.2 142.9 65.2 102.0 102.8 88.1 58.9 57.0 (8.3) 642.5 573.2 351.8 - Adjusted EBITDA to Adjusted Net Income Adjusted EBITDA 181.7 126.2 165.8 168.7 195.0 170.2 142.9 65.2 102.0 102.8 88.1 58.9 57.0 (8.3) 642.5 573.2 351.8 Interest expense, net 18.2 18.7 18.4 14.8 14.9 10.8 10.1 10.6 10.2 9.9 9.2 10.0 10.3 11.7 70.1 46.4 39.3 Provision for income taxes - Adjusted 29.5 19.2 21.0 28.4 26.0 22.3 21.9 10.8 12.7 19.1 19.7 1.3 1.7 59.3 98.2 81.0 52.8 Depreciation and amortization - Adjusted 24.2 25.8 28.6 30.0 31.7 32.1 31.5 34.0 33.4 33.1 32.0 33.9 35.0 33.6 108.6 129.1 132.4 Adjusted Net Income (Loss) 109.8 62.5 97.8 95.5 122.4 105.0 79.4 9.8 45.7 40.7 27.2 13.7 10.0 (112.9) 365.6 316.7 127.3 Wtd Avg Shares - Diluted (000) 45,313 44,995 44,782 44,734 44,430 43,810 43,347 43,269 41,762 41,104 40,410 39,434 38,632 38,243 44,973 43,666 40,710 Adjusted EPS - Diluted ($) 2.42 1.39 2.18 2.14 2.76 2.40 1.83 0.23 1.09 0.99 0.67 0.35 0.26 (2.95) 8.13 7.25 3.13 Adjustments by Statement of Operations Caption Loss on extinguishment of long-term debt - - 65.3 - - 0.2 - - - - - - - - 65.3 0.2 - Cost of sales - - 2.4 (18.4) - 1.2 - 0.6 - - - 0.4 - - (16.0) 1.8 0.4 SG&A and Impairment Charges 2.1 2.2 7.6 (2.1) 3.5 6.5 7.1 13.8 11.5 14.5 14.1 34.6 58.9 9.3 9.9 30.8 74.7 Other expense (income), net (9.9) - 1.4 - (0.5) 0.5 - (0.5) (0.2) - - (3.0) (0.4) (0.4) (8.5) (0.5) (3.2) Total EBITDA Adjustments (7.8) 2.2 76.7 (20.5) 3.0 8.4 7.1 14.0 11.3 14.5 14.1 32.1 58.5 8.9 50.7 32.3 71.9 Free Cash Flow Reconciliation Cash provided by (used in) operating activities (25.7) 62.3 158.3 196.5 40.8 141.6 56.1 128.0 153.2 80.8 40.9 47.6 (5.8) 81.6 391.3 366.5 322.5 Capital expenditures (36.0) (38.2) (34.6) (38.5) (30.6) (28.9) (31.5) (30.5) (25.0) (22.6) (23.6) (38.9) (24.3) (23.8) (147.4) (121.4) (110.1) Free Cash Flow (61.7) 24.1 123.7 158.0 10.2 112.7 24.6 97.5 128.2 58.2 17.3 97.5 (30.1) 57.8 243.9 245.1 212.4 |
17 Selected Segment Information * See this Appendix for a reconciliation of non-GAAP measures. NOTE: Totals may not sum due to rounding. (in $millions, unless noted) Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 2017 2018 2019 Latex Binders 136 130 135 125 124 131 129 125 126 128 133 129 135 115 527 510 516 Synthetic Rubber 81 72 62 65 74 73 64 62 65 58 57 57 60 26 280 273 238 Performance Plastics 156 147 153 154 159 160 165 151 164 158 150 156 143 110 610 636 628 Polystyrene 141 156 159 155 140 173 154 161 174 149 151 144 152 171 612 627 619 Feedstocks 76 108 94 102 65 85 107 80 77 57 77 78 59 49 379 336 289 Trade Volume (kt) 591 613 603 601 563 621 619 579 606 551 567 565 549 471 2,408 2,382 2,288 Latex Binders 289 292 266 250 255 281 278 255 224 230 230 219 219 165 1,097 1,069 903 Synthetic Rubber 163 174 119 127 149 155 138 130 125 112 104 100 102 36 583 573 441 Performance Plastics 337 339 362 381 403 413 401 361 369 347 325 325 305 189 1,419 1,578 1,366 Polystyrene 228 233 238 241 240 286 252 240 228 207 198 176 183 156 941 1,017 809 Feedstocks 87 107 111 103 75 102 131 79 67 55 66 69 45 24 408 387 256 Net Sales 1,104 1,145 1,097 1,102 1,122 1,237 1,200 1,065 1,013 952 922 889 854 570 4,448 4,623 3,776 Latex Binders 37 36 32 33 27 36 25 22 18 21 21 22 22 17 139 110 81 Synthetic Rubber 46 28 (6) 15 26 31 15 5 9 13 7 12 15 (28) 83 77 41 Performance Plastics 52 48 62 68 66 49 44 31 36 34 36 29 37 (6) 231 189 135 Polystyrene 14 7 9 19 10 14 5 6 17 16 16 5 12 15 48 34 55 Feedstocks 42 (1) 46 24 42 32 40 (7) 17 (1) 0 (10) (16) (4) 111 107 7 Americas Styrenics 18 30 44 31 46 33 35 31 32 40 26 21 10 14 123 144 119 Corporate (27) (22) (22) (21) (20) (25) (21) (22) (26) (21) (19) (20) (22) (18) (92) (88) (85) Adjusted EBITDA* 182 126 166 169 195 170 143 65 102 103 88 59 57 (8) 642 573 352 Adj EBITDA Variance Analysis Net Timing** Impacts - Fav/(Unfav) Latex Binders (8) 1 (5) 4 (4) 4 (3) 4 (0) (1) 1 1 (3) (2) (8) 1 1 Synthetic Rubber 16 (4) (25) 0 2 7 3 (3) (5) 1 (2) (0) 1 (15) (13) 9 (6) Performance Plastics (2) (3) 1 2 (0) (3) (1) (5) (1) 0 0 (0) (1) (15) (2) (9) (0) Polystyrene 4 (5) 1 3 (2) 1 (2) (7) 2 (0) 2 (3) (4) (3) 3 (9) 0 Feedstocks 11 (11) 4 7 (3) 0 (2) (17) 3 1 4 (5) (7) (8) 11 (21) 3 Net Timing** Impacts - Fav/(Unfav) 22 (23) (24) 15 (7) 10 (4) (28) (1) 1 6 (8) (15) (43) (9) (30) (2) **Net Timing is the difference between Raw Material Timing and Price Lag. Raw Material Timing represents the timing of raw material cost changes flowing through cost of goods sold versus current pricing. Price Lag represents the difference in revenue between the current contractual price and the current period price. |