™Trademark of Trinseo PLC or its affiliates Third Quarter 2022 Financial Results & Full-Year 2022 OutlookNovember 2, 2022 |
2 Introductions & Disclosure RulesDisclosure RulesCautionary Note on Forward-Looking Statements.This presentation may contain forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, forecasts, strategies, future events or performance, and underlying assumptions and otherstatements, 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 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 future results to differ from those expressed by the forward-looking statements include, but are not limited to, our ability to successfully execute our transformation strategy and business strategy; our ability to integrate acquired businesses; global supply chain volatility and increased costs or disruption in the supply of raw materials; increased energy costs or costsfor transportation of our products; the nature of investment opportunities presented to the Company from time to time; the outcome of the European Commission’s request for information, and those discussed in our Annual Report on Form 10-K, under Part I, Item 1A —"Risk Factors" and elsewhere in our other reports, filings and furnishings made with the U.S. Securities and Exchange Commission from time to time. As a result of these or other factors, our actual results, performance or achievementsmay 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 press release 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 theUS(“GAAP”) including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow. 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 beviewed 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 and in the accompanying press release.Introductions•Frank Bozich, President & CEO•David Stasse, Executive Vice President & CFO•Andy Myers, Director of Investor Relations |
Summary 2022 Outlook Q3 2022 Results•Q3 cash provided by operations of $98 million led to Free Cash Flow* of $59 million•Working capital release of $166 million attributed mostly to a sharp decline in raw material costs•Q3 ending cash of $243 million with over $500 million of additional available liquidity under two undrawn, committed financing facilitiesCash Generation & Liquidity•Net loss from continuing operations of $126 million to $91 million and Adjusted EBITDA* of $325 million to $375 million•Cash from operations of approximately $150 million and Free Cash Flow* approximately breakeven •Evaluating potential closure of styrene production site in Boehlen, Germany•Optimizing polycarbonate production and supply chain for downstream compounding including potential closure of one PC production line in Stade, Germany –expect lower costs and greatly reduced exposure to the merchant PC market•Evaluating restructuring of PMMA sheet business in North America•Considering capacity reduction of SB latex in Hamina, Finland plant –mid-2023•Styrenicsbusiness sales process remains paused; still integral part of transformationKey Initiatives•Net loss from continuing operations of $118 million; Adjusted EBITDA* of negative $37 million•Economic uncertainty and falling raw material prices caused customer destocking and weak demand, particularly in Europe and in global construction and consumer durable applications•Significant margin pressure in Europe from higher energy costs, reduced demand and ample supply3* See Appendix for a reconciliation of non-GAAP measures |
Europe$613 U.S.$313 Asia-Pacific$219 Rest of World$34 Q3 Sales and Volume Summary Europe Weaker demand environment from geopolitical uncertainty and inflationary pressure led to destocking especially in building & construction and consumer durable applicationsNorth America Resilient demand in automotive and paper & board with lower demand in building & construction and consumer durable applicationsAsia Sequentially similar demand with no significant improvement as COVID-19 lockdowns persistedSales VolumeYoY: (16%)Sales VolumeYoY: 0%Sales VolumeYoY: (22%)Net SalesGlobal $1,178Sales VolumeYoY: (16%)Net sales in $millionsVolume variances exclude Feedstocks segment4 |
Sustainability Highlights PMMA Chemical Recycling Collaboration Announced with Japan Steel Works Europe•Japan Steel Works will supply a depolymerization extruder and technology while Trinseo will source PIR/PCR PMMA waste as feedstock to produce recycled MMA•Recycled MMA will be used in the development of circular PMMA solutions for various applications including automotive, building & construction, lighting, appliances and sanitary wareMemorandum of Understanding signed with Ferroglobeto jointly develop high-silicon anode solutions for electric vehicle batteries•Goal of improving battery performance by optimizing battery charge cycles•Combines Trinseo’s expertise in latex binders solutions with Ferroglobe’stechnology of highly purified silicon powder in micrometer and sub-micrometer sizes Aristech Surfaces named Small Employer of the Year by Disabled American Veterans for its support of military veterans through recruiting, hiring and training practices 5 |
6Trinseo Q3 2022 Financial Results**From continuing operations; ** See Appendix for a reconciliation of non-GAAP measures •Lower year-over-year volume caused by a combination of geopolitical uncertainty in Europe, continued COVID-19 shutdowns in China, pullback in residential construction in the U.S. and customer destocking amid a weaker economic landscape and steep declines in raw material prices•Higher energy costs and low demand led to significant margin contraction•Q3 results included $24 million unfavorable negative net timing and one-time charges of $23 million related to raw material contract obligations and write-downs for slow-moving inventory ($3.35)($2.91)$2.01 $2.01 Diluted EPSAdj EPS**EPS ($) Q3'22 Q3'21 $1,178 ($118)$1,269 $79 Net SalesNet Income Net Sales & Net Income ($MM) Q3'22 Q3'21 Net Sales ($37)$173 Q3'22Q3'21Adjusted EBITDA** ($MM) VolPriceFXPortfolioTotal(18%)11%(2%)2%(7%) |
7Engineered Materials •Adjusted EBITDA impacted by reduced demand, particularly in Europe and in building & construction applications, seasonally lower ammonium sulfate sales, as well as lower margin, including the inability to pass through historically high utility costs•Sales volume of PMMA/ABS co-lamination up 20% year-to-date: a differentiated offering that helps customers achieve their sustainability goals $243$231Q3'22Q3'21Net Sales ($MM) $8$33Q3'22Q3'21Adjusted EBITDA ($MM) 5053Q3'22Q3'21Volume (kt) VolPriceFXPortfolioTotal(13%)8%(1%)11%5% Excluding portfolio change (Aristech Surfaces), volume declined 11% |
8Latex Binders •Higher pricing from passthrough of raw material costs and commercial excellence actions•Lower year-over-year volume from demand downturn in residential construction impacted carpet and construction applications•Stable demand for paper & board applications•Volume to CASE applications down 6% year-to-date as growth in Asia was more than offset by reduced demand in Europe $341$316 Q3'22 Q3'21 Net Sales ($MM) $31$37 Q3'22 Q3'21 Adjusted EBITDA ($MM) 132141Q3'22Q3'21Volume (kt) VolPriceFXTotal(6%)19%(4%)8% |
9Base Plastics •Lower year-over-year volume from reduced demand, particularly in building & construction and consumer durable applications, and improved supply for ABS and polycarbonate products•Europe margins pressured by low demand and available supply; polycarbonate unable to fully pass through higher energy costs $293$393Q3'22Q3'21Net Sales ($MM) ($15)$88 Q3'22 Q3'21 Adjusted EBITDA ($MM) 100135 Q3'22 Q3'21 Volume (kt) VolPriceFXTotal(27%)5%(4%)(25%) |
10Polystyrene •Lower year-over-year volume and margin due to customer destocking and reduced demand for appliances and building & construction applications as well as improved supply, including new capacity in China•Price increase from the pass through of higher styrene cost•Continued, robust growth in recycled-material-containing offerings with margin premium $248$275Q3'22Q3'21Net Sales ($MM) $19$51Q3'22Q3'21Adjusted EBITDA ($MM) 124154Q3'22Q3'21Volume (kt) VolPriceFXTotal(20%)10%0%(10%) |
11Feedstocks & Americas Styrenics •Significantly lower margins from weak demand and historically high energy costs in Europe•$23 million unfavorable net timing impact in Q3 2022 ($78)($28)Q3'22Q3'21Adjusted EBITDA ($MM) FEEDSTOCKS AMERICAS STYRENICS $23$17Q3'22Q3'21Adjusted EBITDA ($MM) •Higher year-over-year margins partially offset by lower volume; prior year results included an $8 million impact from Hurricane Ida |
$665 $500 $738 $447 202220232024 TermLoan2025SeniorNotes202620272028 TermLoan2029SeniorNotes Debt and Liquidity Overview (as of Sep 30, 2022)12 $243 $150 $369 Cash and Borrowing Facilities ($millions)* Cash On HandAR SecuritizationRevolvingCreditFacility*2026 Revolving Facility with $375.0 million borrowing capacity and available funds of $369.2 million (net of $5.8 million outstanding letters of credit) as well as the Accounts Receivable Securitization Facility with borrowing capacity of $150.0 million. Debt Maturity Schedule ($millions) SeptemberSeptemberMayApril$762MM Combined Cash and Borrowing Facilities |
13Q4 & FY 2022 Earnings Guidance Update•Full-year 2022 net loss from continuing operations of $126 million to $91 million and Adjusted EBITDA of $325 million to $375 millionFourth Quarter 2022 vs. Prior Quarter •Similar market conditions are expected to continue in Q4, but significant sequential improvement expected due to:•Styrene asset idling with expected sequential benefit of ~$35 million•Non-repeating Q3 charges of $23 million for minimum raw material purchase agreement and inventory write-downs•Minimal net timing expected following negative $24 million impact in Q3*For the definition of Adjusted EBITDA, refer to the accompanying press release furnished as Exhibit 99.1 to our Form 8-K dated November 2, 2022. |
14FY 2022 Cash Flow GuidanceCash from Operations of approximately $150 millionFree Cash Flow* approximately breakeven•Capital Expenditures: $150 million –includes $70 million for ERP implementation and upgrade of plant control rooms•Cash Interest: $110 million•Cash Taxes: $100 million (includes $25 million paid for gain on Synthetic Rubber sale)•Project & One-Time Costs: $60 million •Working capital expected to be positive for full year following large release in the second half of the year from steep raw material price declines, lower sales and inventory control |
Appendix |
16Selected Segment Information (in $millions, unless noted)Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20Q1'21Q2'21Q3'21Q4'21Q1'22Q2'22Q3'22 2019202020212022 YTD Engineered Materials1213141512101316164353586060505351170170Latex Binders126128133129135115133131137139141135132138132516514553403Base Plastics152145136141131101139140143142135128134120100575511548355Polystyrene174149151144152171163160163150154145165141124619645612430Feedstocks886686897250596665544955465437329247223137Trade Volume (kt)5525025195185024475075135255285325215395144442,0911,9682,1061,496Engineered Materials495153564838506066181231277295301243210195755839Latex Binders2242302302192191651832002513113163063073543419037671,1831,001Base Plastics3202962722682571512402693293973933793963622931,1569181,4981,052Polystyrene2282071981761831561671932673132752643183122488096991,119878 Feedstocks786575785624394773715573709753296166272220 Net Sales9008498277987635346797689861,2741,2691,2981,3871,4261,1783,3742,7454,8273,990Engineered Materials579108591282833263534831359576Latex Binders162020212116192117323720302931777710691Base Plastics3026261727(12)4050658288796946(15)99106314100Polystyrene17161661115203347515133452319547918387Feedstocks17(1)(0)(10)(17)(4)10144640(28)(25)414(78)6334(60)Americas Styrenics324026211014182523301722223923119679384Corporate(26)(21)(19)(20)(22)(17)(16)(26)(22)(24)(25)(24)(27)(21)(24)(85)(82)(96)(72)Adjusted EBITDA*918778453817101130184239173133178164(37)301285729305Adj EBITDA Variance AnalysisNet Timing** Impacts - Fav/(Unfav) Engineered Materials(0)(0)(0)(0)(0)(1)0111(0)0(0)0(1)(1)02(1)Latex Binders(0)(1)11(3)(2)(1)0(16)32(2)3(3)71(5)(13)7Base Plastics(0)00(0)(1)(15)235(1)(1)81110(1)0(11)1119Polystyrene2(0)2(3)(4)(3)16510157(6)0(1)65Feedstocks314(5)(7)(8)215140(2)11319(23)31139Net Timing** Impacts - Fav/(Unfav)408(8)(15)(28)32585(1)73233(24)4(16)1940*See this Appendix for a reconciliation of non-GAAP measures**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. |
17US 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 November 2, 2022. Totals may not sum due to rounding. (in $millions, unless noted)Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20Q1'21Q2'21Q3'21Q4'21Q1'22Q2'22Q3'22 2019202020212022 YTD Net Income (Loss)35.828.022.55.7(36.3)(128.4)105.866.771.5151.693.1123.816.737.4(119.8)92.07.9440.0(65.6)Net Income (Loss) from discontinued operations0.53.7(0.6)1.333.1(154.2)65.60.55.718.613.7122.4(0.4)0.3(1.9)4.9(54.8)160.4(1.9)Net Income (Loss) from continuing operations35.324.323.14.4(69.4)25.840.266.265.8133.079.41.417.137.1(117.9)87.162.7279.6(63.7)Interest expense, net10.29.99.310.010.311.710.011.612.021.623.022.821.925.430.439.343.679.477.7Provision for (benefit from) income taxes11.214.99.8(23.2)42.3(53.0)26.926.520.123.35.522.022.630.8(12.1)12.742.770.941.4Depreciation and amortization22.723.821.923.124.224.321.222.823.138.149.856.453.048.145.991.592.6167.5147.1EBITDA79.472.964.114.37.48.898.3127.1121.0216.0157.7102.6114.6141.4(53.7)230.6241.6597.4202.5Other items11.014.113.316.918.73.02.61.22.14.80.712.023.422.114.855.425.519.560.1Restructuring and other charges0.4(0.3)0.216.51.85.4(0.1)(1.5)0.36.30.22.20.4(1.5)- 16.85.69.0(1.0)Net gain on disposition of businesses and assets(0.2)--(0.5)(0.4)---(0.2)--(0.4)(0.3)(1.5)- (0.7)(0.4)(0.6)(1.8)Acquisition transaction and integration net costs-0.70.6(2.2)0.1(0.4)-9.46.043.213.612.53.22.70.4(0.9)9.175.36.2Acquisition purchase price hedge loss (gain)-------(7.3)55.0(33.0)---- - -(7.3)22.0-European Commission request for information------------35.6- - 35.6Asset impairment charges or write-offs----10.3--0.7-1.81.23.80.71.31.9-11.06.83.9Adjusted EBITDA90.687.478.245.037.916.8100.8129.6184.2239.1173.4132.7177.6164.5(36.6)301.2285.1729.4305.5Adjusted EBITDA to Adjusted Net Income Adjusted EBITDA90.687.478.245.037.916.8100.8129.6184.2239.1173.4132.7177.6164.5(36.6)301.2285.1729.4305.5Interest expense, net10.29.99.310.010.311.710.011.612.021.623.022.821.925.430.439.343.679.477.7Provision for (benefit from) income taxes - Adjusted13.118.220.21.247.6(54.7)26.825.326.133.524.724.425.625.7(9.6)52.744.9108.741.7Depreciation and amortization - Adjusted22.222.320.822.723.023.021.222.823.037.446.152.950.947.245.188.090.1159.3143.2Adjusted Net Income45.137.027.911.1(43.0)36.842.869.9123.1146.679.632.679.266.2(102.5)121.2106.5382.043.0Wtd Avg Shares - Diluted (000)41,76241,10440,41039,43438,63238,28938,42138,95439,47939,64739,51739,48338,13936,99635,17640,71038,58139,57336,927Adjusted EPS - Diluted ($) 1.080.900.690.28(1.11)0.961.111.793.123.702.010.832.081.79(2.91)2.982.769.651.16Adjustments by Statement of Operations Caption Cost of sales---0.4-----10.13.53.5--- 0.40.017.1-SG&A and Other Charges11.414.514.133.330.98.41.510.48.441.514.727.063.324.217.973.451.291.6105.2Acquisition purchase price hedge (gain) loss-------(7.3)55.0(33.0)---0.00.0-(7.3)22.0-Other expense (income), net(0.2)--(3.0)(0.4)(0.4)1.0(0.6)(0.2)4.5(2.5)(0.4)(0.3)(1.1)(0.8)(3.2)(0.4)1.4(2.2)Total EBITDA Adjustments11.214.514.130.730.58.02.52.563.223.115.730.163.023.117.170.643.5132.1103.0Free Cash Flow Reconciliation Cash provided by (used in) operating activities153.280.840.947.6(5.8)81.651.9127.651.0(21.0)208.2214.4(5.1)(83.0)97.6322.5255.4452.79.4Capital expenditures(25.0)(22.6)(23.6)(38.9)(24.3)(23.8)(12.7)(21.4)(12.6)(19.7)(35.7)(55.4)(24.8)(31.5)(38.5)(110.1)(82.3)(123.5)(94.8)Free Cash Flow128.258.217.38.7(30.1)57.839.2106.238.4(40.7)172.5159.0(29.9)(114.5)59.1212.4173.1329.2(85.4) |
18US GAAP to Non-GAAP Reconciliation(1)Reconciling items to Adjusted EBITDA and Adjusted Net Income (Loss) are not typically forecasted by the Company based on their nature as being primarily driven by transactions that are not part of the core operations of the business and, as a result, cannot be estimated without unreasonable cost or uncertainty. For potential reconciling items to Adjusted EBITDA and Adjusted Net Income (Loss) during 2022 are not reflected.ProfitabilityOutlookCashOutlookNOTE: For definitions of non-GAAP measures as well as descriptions of current period reconciling items from Net Income (Loss) toAdjusted EBITDA and to Adjusted Net Income (Loss), refer to the accompanying press release furnished as Exhibit 99.1 to our Form 8-K dated November 2, 2022. Totals may not sum due to rounding. Year Ended(In $millions, unless noted) Dec 31, 2022 Adjusted EBITDA325 - 375Interest expense, net(113)Provision for income taxes(35) - (50)Depreciation and amortization(200) Reconciling items to Adjusted EBITDA(1)(103) Net Income (loss) from continuing operations(126) - (91) Reconciling items to Adjusted Net Income (Loss) (1)107 Adjusted Net Income (Loss)(19) - 16Weighted avg shares - diluted (MM)36.3EPS - diluted ($)(3.47) - (2.51)Adjusted EPS ($)(0.52) - 0.44 Year EndedDec 31, 2022 Cash From Operations~150Capex ~(150)Free Cash Flow~0 |