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IOSP Innospec

Participants
David Jones General Counsel, Chief Compliance Officer and Corporate Secretary
Patrick Williams President and CEO
Ian Cleminson EVP and CFO
Jon Tanwanteng CJS Securities.
David Silver C.L. King
Call transcript
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David Jones

Thank you. This is David Jones. The Quarter One earnings release and this presentation will be available on the company's site for at least six months.

During this call, we will make forward-looking statements, which are predictions, projections and other statements about future events. These statements involve a number of risks, uncertainties and assumptions, including the effects of the pandemic, such as its duration, long-term economic impact, measures taken by government authorities to address it in a manner which the pandemic may impact other risks and uncertainties, that could cause actual results to differ materially from the anticipated results applied by forward-looking statements. are the Innospec's SEC. uncertainties other XX-Qs and with filings risks detailed XX-K, in and These Please, site other for the these see SEC and documents. site or Innospec's non-GAAP In measures. included we've today's some presentation, also financial most directly earnings our A reconciliation to comparable financial contained release. measures GAAP in is the from Patrick us and and Officer; Williams, Chief Officer. today With Cleminson, Chief Executive Financial President Executive Ian Vice Innospec are President and turn I'll that, it with you, over And Patrick. to

Patrick Williams

and David, Call. everyone, to Quarter First Conference welcome, Innospec's XXXX Thank you,

oil investments, are as are Further we in for investments. XXXX to technology had positive To prior XXXX with our delivered over original businesses for We Specialties promising, quarter expectation and record outlook continues first are strong end of the ongoing XX% this start pleased is incremental meet in customer and our we end to income medium of trends the to to to sales and Chemicals our have we active markets, projects European product sequential long-term quarter reporting industry-leading Performance value Services effects demand, and the which on improve of excellent XX% business continuing consumer despite reached The a and The this demand in year cash on on growth that our record our the of to be strategy across shareholders. returning markets. the an Board and pipeline all Performance million review our growth Oilfield balance to R&D $XX growth is semi-annual to Operating to organic the our increase approved on our under to Chemicals outlook, with accelerate businesses first demand. our the with very capitalize increased a through results dividend, Based align refined Fuel continue sheet. shifts continue technologies. in our and we with quarter. The all year. plans. debt-free has all rest the approved flow expect excellent continued into long-term pandemic XXXX. for our

During technology quarter, in which was levels, for is global issues In transportation more quarter are and XXXX. Fuel with Carolina, fuels. of other global we sustainable to that pre-COVID-XX ground to research completion we activity fuels, on the also demand In leverage center through behind in our Customer opportunity North unique lagging expected by state-of-the-art, the below seeing scheduled is technology are to operational continue still new year-end. to renewable broke address industry-leading additive these to aviation recover our Specialties, balance well the alternatives.

in technologies and in to been are of storm and growth efficiency winter global event that negative safety the our more finding coatings we we sequential offset We in in also improve widespread production developed delivered and completions, the modified mid-February. In DRA which were impact have businesses, than manufacturing fuels, plastic U.S. and operations. our for interest Services, originally process Oilfield

QX in of the and activity for the further expect We levels year. improvements in rest

performance. raw Specifically in sustainability the chemistries To demand. have allow developed our customer Oilfield petroleum-based are our we to expansion use, DRA water-based process customers material meet increased without capacity we in our completing business, third address decrease now to our business, to of which compromising

coming have our of of the over years. our trends, end sustainability carbon consumer technology with the benefit front collaboration key driven to substantially at of our objectives to customers being on many and footprint and their by next-generation products a to well-documented As regulatory partner customers the reduce

new to invest technologies in formulations group, customers bio-based any chemistries, targets. reach and that will enable versions continuing without molecules are With leading our additives, resources These compromise we identify to help industry the and new our of include formation to develop performance. technologies these disruptive of important our the

collaboration, for within strong success on and innovation the and long-term built efforts opportunities Innospec. growth been our has will disruptive always Our customer deliver technologies tremendous group

will will over detail, Ian? who review After to turn results take Cleminson, with your in we concluding more call financial the I the return some that, will Ian then Now, comments. questions. I'll

Ian Cleminson

Thanks, Patrick.

Turning decrease to lower X $XXX.X to customer pandemic reduced the in company's in quarter the Oilfield of year Fuel Slide from a million were a driven million, the by ago, for Services demand and first presentation, due the total revenues activity Specialties. $XXX.X X%

margin million million less for $XX.X the X than year. point EBITDA to year XX.X%. gross by overall decreased Our $XX.X last compared to was quarter percentage from last

per The share. GAAP A items items. share, included reported per earnings Our which year share quarter $X.XX negative of effect our earnings special GAAP impact earnings we per net which $X.XX special by of of were decreased ago, a $X.XX from $X.XX. first including

worth for years, adjusted over in $X.XX year Excluding our It's both was EPS for compared in quarter, charge noting reduced higher adjusted our uplift XX% to due a share EPS share-based special compensation. that a by items the ago. the our to $X.XX price $X.XX the quarter a was

further of for few Specialties to of our this Operating Moving there X% quarter same $XXX.X ago. XX% segment lockdowns, Fuel for was down over price recover to positive X% in were were continue X% by a Slide than additives and mix demand million, XX.X%, remainder end million, sustained has of a a quarter gross first revenues on down effect X, Fuel the XXXX a income and should year beyond. X%, lower to impact. our the to to was the economic at expected the for range Volumes from for the ago. continued of XX.X% margin $XXX offsetting XXXX. reported $XX.X and year in the low Fuel subject was Specialties any currency million demand compared quarter improve negative

increase were year We in to revenues price adverse to business last to positive quarter of X%. million, increased mix same volumes sustain an offset the for up as first up of of the a XX.X% reflecting Chemicals of impact Turning X%, Gross XX% were million. X% $XXX.X XX% Slide XX, of growth, believe single-digit year's and XX.X% to last an compared Chemicals in strong million, we from margins points, quarter from Performance currency opportunities X.X have. our in organic can Performance $XX.X mid pipeline high XXXX. percentage income the growth revenue $XXX.X Operating

XX% Moving Services customer levels by margins Slide the was Oilfield Gross driven activity same $XX.X million quarter revenues on on of fourth in XXXX, million, quarter over income a Operating up last XX.X%. XXXX. U.S. to in last $X.X down in the million but low were was XX, on for improvement of quarter first $X.X year, first million completions. XX.X% of quarter of X.X the points in of was the dramatic year's from percentage down $X.X the

Moving services. quarter, our second for expect products demand into we to currently see the and and improvements levels further activity in

million for Slide of year. same effective $XX.X XX% up from year, to quarter the costs compared XX, million corporate acquisition Turning last cost. to by tax compensation driven The were last quarter primarily XX.X% $X.X the was rate share-based and higher in

cash, another of expenditures Moving generated $XX.X on capital excellent this million, from $XX.X with quarter cash net of Slide before to operations million. for XX, was

$XXX finance some turn final it million, now, Patrick of million had cash lease March of over for a net cash $XXX.X million. in $X.X back to equivalents resulting I'll in comments. debts of position XX, As and Innospec cash and And

Patrick Williams

with good has Ian. started momentum. Thanks, Innospec XXXX

our businesses, Performance overall sustainability Chemicals, targeting have on improvement that the are chain further Services, we environment. not will margin with Improving develop to and through driving recovery teams consumption prospects customers, growth supply on incremental of economic remain Specialties, our coupled strong. businesses, we of Fuel support chain, focus cost growth will In In until excellent will revenue, the year, will from for Continued our XXXX. tightening Oilfield job with long-term In we although activity all leverage levels And the operational much improvements. execute be manufacturing through coordination throughout and balance commercialize in demand sales all benefit continue increase, recovers an these our global and XXXX. drive XXXX fuel of customers' organic to investments this we In this projects our done as continue in is drive our close realized as will objectives. rest our inflation. technologies driving supply managing

been our In complementary addition communicated Performance that increases both and are supplied, respect price imbalances. chain acquisition supply products objective our aligns deal that substantially to current compelling keeping We the our by we footprint. of prioritize have a with and would fit, implementing strategic would believe our our With expanded was proposed portfolio, to caused consistent counteract customers to this geographic our with cost to inflation, have Elementis, previously this Chemicals. M&A

our with to cease leverage. is this valuation consideration disciplined use to of consistent active of and Our approach also acquisition decision

our cash to our balance to sheet, allowing strengthening continue flow, XX%. We excellent generate dividend us increase by further semi-annual

our disciplined opportunities investment acquisition in Chemicals of that businesses. within seeking will multitude on We Performance approach we expand to the will parallel exist will of efforts, the business. organic with remain continue acquisition all In our our opportunities and execute that

turn the operator, will take call Ian I and your the Now, over and to questions. I will

Operator

CJS comes Thank of line Tanwanteng from ask first your Your the [Operator Securities. you, Instructions] from question. question sir. Please,

Jon Tanwanteng

you Hey, quarter. questions. taking good guys. for my excellent Thank morning, And

Patrick Williams

morning. Good Jon. Thanks,

Ian Cleminson

Good morning, Jon.

Jon Tanwanteng

can look know heading seen level My is Just it pass hitting margins the quarter, board expanding? Or now. power, lot through. second pricing of just staying as I given companies Or you you it's price Patrick. contracting? to know gross increases do across of a the I inflation, on the same? first see at here. you you even the we've right But things question have

Patrick Williams

typical which Yes, typically month three and customers contract Jon. the won't so you get It very in lag, of chemical see are -- six you is to some that depends on customers, industry. the --

So, contract, where always are levels that company, kept increasing range customers technologies are it but levels. with at up should that keep would will part, I most for the on with those benefit on and say within we is same increases, least discuss. us sustain will market, the price we that margin put margin the that within new the that we profile There margins hope in the the forth the that we

Jon Tanwanteng

it. expect or kind at next to the so? of got of for Okay, the should quarter But be we end your ranges lower

Patrick Williams

put mid-range, I won't to on lower the it in It the end. high would be Jon. probably

Jon Tanwanteng

Got you.

year-over-year. extent? close portion you questions. that some were to the One, that sense. of and And on makes year. pushed Avgas was I you you how two, X% a big actually believe you levels fuels Okay, just avgas, two business, out that cold at are mentioned then probably pre-pandemic I did Number fuels one, to wondering from you is consumption? what happen, last that. down And see number of

Patrick Williams

Aviation well. consumption in saw as we back. quite come see is we that to and levels crawl back starting in quarter, considerably Yes, fourth the first the quarter

I QX. think normalized that in quarter see a avgas you'll

you see brought will into up go So, consumption and QX.

the it If you we've rest think I come of across the look board. back seen general, the industry, at in

see the continuous of we this is that get throughout So, growth the we XXXX, pandemic. expectation as will through remainder

Jon Tanwanteng

growth Got it. Sequential you growth, Or year-over-year? mean?

Patrick Williams

Yes.

Jon Tanwanteng

Which one?

Patrick Williams

Both, Jon.

Jon Tanwanteng

Got you.

OpEx Thank just you. then think and just, of demand And the seeing returned? should we how Ian, you're Okay, this given growth great. year, the have SAR

Ian Cleminson

Yes.

and have bit Jon, ramp be will to activity business. see we'll control little we'll think in slightly I expectation able probably be maintain we'll cost. levels more that, in that expect we'll than Oilfield is of there our see is don't SAR that leverage the to be Chemicals. Performance you further as to in able levels to we higher what previous a SAR years. up, the levels Specialties see, growth much in done We different, some But Fuel

can't should see that you of coming think expansion, leverage some you'll but corporate same of range see be that time, operating level, in the you, business. to So, price higher I We a movements which any compensation of previously we movements, to And sort various Jon. the share at we out quoted and level that at will subject predict.

Jon Tanwanteng

just Okay, Chemicals. one mid-single to clarify, in growth great. And more digits Performance then you said

by meant mean above for that just quarter. year mid-single? you well did whole just or that clarify forward, what Did going the the you You this

Ian Cleminson

growth. Mid to high single-digits

Jon Tanwanteng

Yes.

Ian Cleminson

the mean of We year, rest the Jon.

Jon Tanwanteng

Thank it. you. Got

Ian Cleminson

goes forward. It

Operator

line from Silver King. comes David the your ask of C.L. question Please question. next Your from

David Silver

Thank Good hi. Yes, morning. you.

Patrick Williams

morning, Good David.

David Silver

to parse to we're operating secular I maybe I wondering maybe driven tier was other guess, if know, or the you more segment, Yeah. one it's more our the was growth million by buckets, And bit could that words, other of directed and two volume your there? you bucket contrast the Performance newer higher may hands color if would I In bit just but driver. for be that at into growth and double-digit or on the in that's maybe more. washing company-specific then maybe little record elements. incrementally, Chemicals hoping dig say possible more Thank and where of little growth formulations is what performance So, current than additives, the the growth more, line. seeing I you'd to which with least the In or incremental just $XX volume but you're driving what XX it's a performance that just investment shampooing like on words, great? technology, the don’t income be in and revenue the might be you. things that natural a

Patrick Williams

sustainable, years. after a of put for see industry, the don't Yeah, David. you And to was more place. natural, organic this right five this Typically the type consumer in that on that in strategy alley for area. And three you strategy we have job growth us, years two going this we've in really focusing past worked trends good the and we done are on fortunately in for a

whether great is seen improvement homecare, sourcing So, that care. additionally pushed in that margin parts continuous We're really our natural, ag., and really we're we've business, industrial whether our of it's every little albeit growth expansion. sustainable markets, it personal in And products markets, its growth a tinier. the that great seeing forward. And in that this have

that the So, a really global team strategy sticking in technical in our put to it's the across as our business job it. but that great and really in will Performance have been second team that business say a and plan putting Chemical the opinion all our is this And done forth individuals business we board, place I work to none. in

in initiatives that continued are And to year products fact are are that sustainable, these plants moving and we that that to our due natural our we're along right five that they're the growth full to this fact forward that We're have they're we pulling forward. growth on patented. going have believe the plan, other we're launch because products have the that so long-term, And new we pipeline. going sustainability market

like we good a really feel position forward. we're So, sitting moving in

David Silver

Okay. if build on that. Thank that. for just I maybe could you And

how it's are Carolina. your unpack to research three? that And How think efforts? expect over you put to global technology of kind maybe I be of directed that discussed sorry. generated? of Is part mean what But vision? to I use, for there, a is see see maybe kind collaborative? first you years just one couple your You share groundbreaking you. best vision, you unit things it the running? Patrick, And do up just your you more North Thank your In asset research equally that inward other or and this supporting utilized? two going that guess kind being and and the more so center lot a in if basic there's as words, Or is be couple will be on to of just primarily of or of internally is So, pursuing this to of segments? customer-initiated vectors, I elements, do could it Or all

Patrick Williams

Yeah, David.

technology the R&D UK. have in We center

disrupt five are bit center that at market, R&D that And have a out being a years, call specific customer We care. U.S. that's facility lot the that group technologies separate agriculture, of road the Carolina. support the a built we to throughout to looks The new XX-years we North have from base. what little technology in labs be personal world our in will that's the disruptive down the then will based homecare, R&D and

we we're right new in the to So, we current envision pure structures, that as envision this now. businesses support as molecule this

like consumer it's three a something than do else. to great customers. to ability chemist and lot projects to have customer of continue does, North great we we're the a the of how to trends envision technicians, going because to we that's base. going everybody we on all down be our forefront and us And have now. gives there, in support Carolina moving very to our we PHD growth is believe gives moving and and the lab really to It's the we're looking technology-based the not We of of giving market have put me-too a footprint why brought now, that It us that's that our really with And forward very, different collaboration is three are do think We what company, five this I that's got because years it it's from product, what the we've research center a in years us. technology. from businesses. what important forward And that's technology

David Silver

that U.S. this speculative be in may is volume the Okay, for maybe the traditional the or DRA on if I just And geographically And moving where through going pipes will demand expansion more that on would a are used petroleum, expansion, be clarify placed? ultimately I product ask But the moving want maybe more, order business. was you book. other maybe to or crude could in whether pipelines being one differently, the volumes just the if means fluids committed it then capacity already completed. ground is that oil if other prior through characterize than other either or great. you And product you if oil? in just Thanks. that be third be is indicate words, did the the full focused Like nature? to In that had to breaking could

Patrick Williams

and question. expansion put any unless our committed have plants don't expansion we Yeah, we Typically, into it's of good manufacturing volume.

been to we've that due expansion technology, this and to in had U.S. very We've already we have responsible DRA we've volume expansion put the fact volume. fully therefore We think just got the exceptional and contracted volume. to It's not this market. the in committed an So, is bringing

could We have where think beyond we outside today. DRA U.S. be we even the are our in XXXX substantially volume and volume

the moving doing we're toward the So, we technology, growing avenues it will market and XXXX. end market. it this to many more XXXX responsibly. have We're We're very of moving with a doing great the and expand

David Silver

you. in queue. Okay, great. get Thank I'll back

Patrick Williams

David. Thanks,

Operator

question we ask the Tanwanteng. your [Operator line from Instructions] of a And question. follow-up comes have Please,

Jon Tanwanteng

Thanks yes. the follow-up. Hi, for

it's what before finished? will a follow-up expansion, dollar your DRA what the after it on in terms capacity, expansion? maybe be Just the third was And

Patrick Williams

dollar take Ian, do want the you to term?

Ian Cleminson

Yeah, Jon. dollar. break out We the don't actually

when way. do together, you put modular we it As we this in bump know,

now about probably in XXX,XXX dollar we'll we XX,XXX the a capacity XX,XXX don't us, So, probably probably terms of But capacity. got to we And Jon. to that's region on another number that. over XXX,XXX break because sensitive obviously, put the gallon gallon about out top for

Patrick Williams

Yeah, Ian a said, what modular plant you Jon, is is, as this type that, add to plant. to just it's saying was

world we very fairly plant in of parts So and and expensive technology. could move up quick, running the That's to get the neatness about it's and do. this other this not

So, responsible us. I think for one the us, market being to was in controlled and number

smaller with and we've done. what plant bring the as and us, on market that's volumes expand the on Let's grows

Jon Tanwanteng

great. Okay,

of ultimate long have market Just -- you for trying the share size to think of the over and to you the expect medium-term. guys kind

Patrick Williams

double fairly year. Yeah, this it's over year, I you'll think small, probably see but still it last

Jon Tanwanteng

Okay, great.

more to at is looking looking else dividend Elementis that's staying to M&A add and to market. that out front disciplined. back increasing and guys buybacks size number up are opportunities to the M&A an there a even the disappointing, there of I'm maybe point? cash, could that was the at interesting be same be time, share On or It I seems you're think as that wondering, or anything now even go investing of you at is overheating it appreciate or may people Or it? use organic but at this seeing close

Patrick Williams

Yeah.

You know point. you made good a

it think M&A is I overheated an market.

petrochemical got industry. people different You've a from back you've money big got the low of parked on into A run and interest chemical lot industries of rates, the lot jumping sidelines. have

script. ball of as had the had us with a that being didn't cautious due and in those is this Jon, that forth. lot in the passed was the organic most synergies that But that markets growth growth profitable in play five we're we we think cheapest us, could have looked the growth. I We've really for put that our M&A. We've very Elementis mentioned It push lot. year We're going that a in we your plan always that So, we forward, to we growth fact have. on to bottle we because at the unfortunate

on multiple You're not a it. paying

an So, continue overpay. moving off year five not we're and easy But and the very forward, But time, at to now. we're it's footprint But the and about we're in look market. deal to announcement. all a whether going rushing. We're looking, we're whether some it's at find we'll environment. our not It's sustainability, M&A right rush excited on to it's to we'll the plan based or the in not point need we're mid-sized, going small overheated, right hopefully have

Jon Tanwanteng

back Any own that shares thoughts buying to relative great. just the your are your peers Okay, on valuations getting?

Patrick Williams

just increased a have buyback in place. We we the XX%. dividend Yeah,

projects We see that look to have to good the increases shareholders. continue I it's Chemicals, M&A. parts that's we've et not got the powder forward. at like And think other organic buybacks. in we we're in to powder our obviously expect We for for business. cetera some And And dividend. dry We'd further Performance have on just to that of like dry DRA growth like pushing to we'd value other projects think

continues to it. as And monitor continue to we you Board let if And do. it, as the buying look we'll start so, know at we we soon

Jon Tanwanteng

Got you, job. Good it. guys. Thank

Patrick Williams

you. Thank

Ian Cleminson

Thanks, Jon.

Operator

We question. coming Silver. of ask have Please, question the David a line your follow-up from

David Silver

sorry. Okay. I you wondering I Thank you. guess, was if might,

early that quarter, would has on quarter-to-date? been great. just if touch to the that read April? segments an of the in the has it briefly, businesses Let extended kind to me on start wouldn't you during that mind, we've month made be over. other In your early get progress And into words, first each Is in three of too the progress of the your

you. So, April. Thank

Patrick Williams

seeing you're businesses. consumption in Specialties Fuel strong E&P portfolio, to Yeah. just three due growth Oilfield also Services seeing due Sure. more is only a still back, not but diversifying is In levels back. back to coming coming all back. activity coming we're trend coming the general,

we're seeing our job, in guys these Services been strategy growth fact that our In we've there to has Chemicals done to just have still definitely see. the put great side. continuing we're to So, a and due expected see Performance Oilfield that the forth, the that

So, we're of pretty about the excited remainder year. this

stays As wild the that think long continuing nothing as bay, the pandemic as in as at happens long the and in next I market you'll see the strength quarters. three

Ian Cleminson

add we seeing Yes, order We're We're strong certainly On bit, the seeing activity completions. David. little continuing Chemicals May to Oilfield going QX. sequential the And looks and much Performance that. as for more momentum customer our over to We're just to a business, in April. growth in well. expect deliver beyond, book pretty

Our business is going business is going our well. DRA well, production

the aviation. So, growth. so winter again sequential quarter out quarter quieter going you'll in of see for quarter-over-quarter not a actual is probably growth We to there. X season, of the us. market outside underlying improving the But Fuel you're traditionally Specialties, come again see demand a is

businesses they better will confident of in the than We shape So, to improve. the it continue all year throughout our remain rest that are were.

David Silver

progress additives the just all you. progress the color. just And the there. update the but in products meet us mandates? for designed you last to on an Just XXXX IMO Thank give for the the Thanks marine fuel update an could one, on then

Patrick Williams

that the lot as it. quarters with it about as see we last We're quite to significantly, our IMO, with slowed talked we've and alluded three Due XXXX GDI. down a the starting activity pandemic, more well products IMO Yeah. to

expected, to start back you and out pandemic companies So, products the reviewing coming we there's getting activity a lot technical the resources start start we more as as of in again. as

So, necessarily not product we see but demand, to back in are both starting lines. activity those coming

David Silver

all great. you. Okay, Thank from me. That's

Patrick Williams

you. Thank

Ian Cleminson

Thanks, David.

Operator

are further Please, you. Thank sir. now. ahead go no questions, Patrick. There Instructions] [Operator

Patrick Williams

thanks for and you our to Thank for and your employees Innospec all all support. today, joining shareholders, and customers us interest

discussed XXXX us to results with call. to Have in Innospec today, a matters up If quarter further you second give We day. about great questions forward August. or discuss have look please our you a any in meeting again