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IOSP Innospec

Participants
David Jones Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
Patrick Williams President, Chief Executive Officer and Director
Ian Cleminson Executive Vice President and Chief Financial Officer
Peter Lucas CJS Securities
David Silver CL King & Associates, Inc
Christopher Shaw Monness, Crespi, Hardt & Co., Inc
Call transcript
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Operator

Good day. And thank you for standing by. Welcome to the Innospec's Second Quarter 2021 Earnings Release and Conference Call. [Operator Instructions] I must advise you that today's call is being recorded on Wednesday the 4th of August, 2021. And I would now like to hand over to your speaker for today, David Jones, General Counsel and Chief Compliance Officer. ahead. go Please

David Jones

innospecinc.com. yesterday, quarter Late and our results site financial presentation Thank June we XX, the at company's the ended posted release XXXX. for are you. on reported The this earnings

Cleminson, I'll items with Patrick. Vice addition are And us Ian over today our on release performance President Executive Patrick Chief prepared in understand from as are measures to financial a aid forward-looking During this clarification statements. call, those Officer. for on anticipated Innospec's These and directly and uncertainties most to the or will to the to is to filings from it SEC. and These Financial In GAAP. be considered included contained that, superior risks Williams, financial are that current financial events. could differ on company's measures. substitute GAAP further site be Executive earnings expectations statements future actual detailed in the financial are to that that comparable predictions, are impact investors items for non-GAAP risks these today, by statements, see posted other about and these and subject accordance the provided with Officer; implied making Reconciliation XX-K, website. in not uncertainties other statements discussion Innospec projections non-GAAP to to SEC Please Innospec's forward-looking also in our included we had should materially Chief additional which our results based other the events and as results. With XX-Qs turn They're President or you, measures documents. and cause results assumptions site and we've and with The the some

Patrick Williams

to XXXX view optimistic and the of was first cases, pre-COVID the a Call. sales Thank quarter delivered operating and XXXX for Chemicals excellent half of you, the delivered absence of quarter second XX% continued global exceeded Since XXXX momentum an a time. operating record with annual downturn income the Innospec's in recent income welcome, This we income everyone, operating Second as an and in Performance has businesses. increase XXXX Conference activity expansion and this surge comparative of pandemic, any David, recovery entering XXXX. material our over business throughout and the in Innospec double digit in due margin strong all are to growth. the with Quarter In for economic COVID

bar of technical a which We entire the are strengths. our consumers, research, and in lines industry the in natural sustainable, teams This trend around increasingly and mild ingredients reformulate care more and to home and their without early sales the compromise operations any stages prefer play product keeps allows performance. global by to effort personal high to

industry-leading technology, formulation expertise, trends. us long-term Our customers partner address development these key our positions with as a combined to our with

be to our substantial expected adding customer by and online facilities future We capacity are current first R&D new XXXX. demand, meet and new of the quarter to are

tracking time. exceeded income the further in their for Europe. we pre-COVID sales levels growth addition, fast opportunities In and Fuel In U.S. are first Specialties, operating the comparative and investment

basis that the expect we by an industry chemistries We the fuel in and actions where Along sequential significant other fuel income coming half in to that relatively focus immediate include markets. as are While addition are levels distillate in is can is demand leverage and resulting on doubled. reductions and by improvements, The global us critical giving margins, additive increased believe fuel recovery meaningful there that for grew carbon certain of our operators still pre-pandemic demand associated them returns in a Services, both gap limited. deliver expansion headroom emissions safety grow achieved approximately these where necessary, as material like margin equipment in additives customer levels, of that to with be versus footprint. there and diesel and capital advancing sustainability. improve well These and operating critical and we second gains becoming Oilfield segments long-term sequential several ongoing expected decrease In sequential greenhouse over continues current sales along growth. costs regions cost of all decades in to improve The improvement, use a XXXX. gas impact operating on and further are to reductions in to is savings is These XX% Asia as consumption, further rationalization where is it opportunities seeing activity price oilfield we improvements. its on market drive and higher operating achieve path, on opportunities

these well achieving in positioned our support very are teams oilfield service field and to R&D goals. Our customers

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

Ian Cleminson

Thanks, Patrick.

year last year. seven the a revenues year. quarter demand prior in the last The businesses a gross to for points percentage ago, margin our million million XX.X%. driven compared presentation. of Turning company's $XX.X million, X.X in $XXX.X loss from for was that EBITDA to $XX.X XX% increase $XXX.X compared total were from in year Overall, quarter million the increased all COVID-impacted by Slide to the to second a recovering

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

to year for quarter special loss our in Excluding of $X.XX compared years, both a a items adjusted EPS was ago. $X.XX the

order these quarter. from the additives. fuel orders AvGas quarter was impact EPS our phasing benefited of $X.XX This for for The approximately above-average of

million. for with XX% price/mix second impact currency a margins Gross Chemicals favorable the last XX% Performance quarter in Volumes were year's grew up Revenues positive and million, X. a of of Slide were to X%. XX.X% $XXX.X Turning $XX.X of X% quarter compared $XX.X in XX% can growth, organic in Operating We points from same the strong digit increased the XX% to year percentage reflecting sustain income business the Chemicals million. high-single in opportunities X.X down Performance pipeline. believe revenue to our last XXXX. from

a year Fuel expected gross Moving end by favorable for effect the grew continue compared for were quarter was the Fuel for margin continued additive on should the a to price XXXX. significantly our XX% $XX.X same the of our XX.X% $X.X Slide X. of at and year And Operating to in the up remainder improve. higher Revenues range to income the million XX% subject quarter ago. of has X% lockdowns, there million for Fuel technology any upper fuel over the a quarter million, with than in second beyond. reported to Specialties currency of X%. demand demand at further to mix in to Specialties economic this ago. million, Volumes $XXX.X compared and was recover sustained impact was segment a positive XX%, $XXX.X XXXX

as year approximately in Services income from in the the XX. were last million points up ago. X.X second last million million customer to XX% Slide of percentage Operating Gross year for activity million, margins loss $XX.X $XX.X Revenues quarter to the were XX.X%. million continues increase. doubling the year's a improvement Oilfield $XX.X on on $X.X quarter of was Moving of $XX.X a

sequential expect further internal of and both will combination customer deliver driven We profitability. improvement, of a increasing activity by which action, higher

tax XX.X% $XX.X the in rate for compared with million rate compared deferred quarter quarter change with XX. was for was quarter tax were XX.X%, year, the Slide to a personnel-related Corporate costs line XX.X% expectations. due million ago, U.K. $XX.X tax. in to for Turning The due lower mainly impacting effective to adjusted to The the expenses. year rate effective last primarily enacted tax the

the for on capital million. capital in XX. in to an growth, an before to outflow impacted million cash by increase Slide of of due working Moving $X.X resulted expenditures quarter was $X.X Cash which sales operating generation

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

Patrick Williams

for is in half the end an and positive XXXX. our markets to was This quarter second outlook Innospec, Ian. Thanks the of general heading excellent

on culture that and Our a a This technology innovative advanced all is built technologies, operational combination products. mild footprint, of highly more company is and natural employees. shared and is support. and Demand which higher by efficiency, our for responsive carbon collaboration our customer reduce enable accelerating is

inflation to these the to continue of all opportunities growth to will deliver our in respect With tightness, that these trends and present strong conditions pipeline leverage coming quarters. supply chain continue We likely the businesses. on in cost will and

and required through with where and as manage will environment. this a remain taking We suppliers price action are additional focus communication our close we customers

support specialized technologies projects formulation We expect growth further and our announce which in product expertise. to coming investment the quarters,

In strong returning sheet program. addition, and strategic shareholders record to to balance us gives support of capital acquisition value management flexibility our our continue through opportunities balanced our our

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

Operator

[Operator is CJS Securities. for question Jon Instructions] today Our first from from Tanwanteng

Peter Lucas

good Hi for John. Pete Lucas it's morning,

a lot. covered You guys

cash of we capital there will investment Should a Or positive forward? to more questions. expect in Just be flows QX? quick going turn working couple again

Ian Cleminson

that. as expect flow. driven that big Good one. had capital working we QX, Pete. Yes. free growth. Yes, to positive to sales to fund capital and I'll you'd take balance That's the return good we on working sheet. And we've have a imagine, of morning, outflow the by QX cash

Peter Lucas

the worse? your And situation there? chain helpful. stable, is Getting Thanks. And all at Very logistics you and overall QX? where into supply getting biggest then headaches do inflation improving see

Patrick Williams

think Patrick. it's I --

getting from manage quite tightness in stable. it, But see not and us frankly, market conditions, And with and some tight that inflation affecting still costs there's through and and there's issues. we we've a down to QX been freeze able the still do it's think hangover I still overall Gulf. some QX. the the There's

Peter Lucas

for one me. And last Great.

the Just technical How the basis the rate a in tax should go-forward a think after changes U.K? one. of on we

Ian Cleminson

XX% XX% our deferred XX% change stick still rate tax, impacted adjusted with. of We're so sort in that all good of The XX% Yes. to U.K. to is to range. on the pretty is

Operator

question is next The CLK. from from Silver David

David Silver

Yes, very hi thank you much.

color. could of the that were one would spending about Chemicals, teasers But more development in this So Performance of press and you mentioned to a the and hoping so be beyond time, little just lot a was kind the in we accelerated release would the first I above bit see I if get opportunities that on. incremental growth you say some project there

sounded in of just opportunities or just worthy kind I you a You do of justifying detail wondering spending growth you discrete the comes current what if talk opportunity the And it, for. the capital down kind kind Thanks. might about makes some mean to what of agreement or after road? envisioned? be you growth development opportunities. customer these like of place about able I what Maybe have did was like your and long-term that accelerated discretionary talk

Patrick Williams

David. board. Yes, the It's across

moving And to why board, It's As And growth And that's as have you off. growth mining. we strategy when on It's takes sectors our where put this mild focus in to growth quite in say has coming home But We've strategy used all on that we we've years been the in where projects. been, calls, quite discussed It's for that sustainability, we a that's and that's products, Chemicals. had really take we've is growth. the some and up care. know, agriculture. working place, you in rates sometimes see from, strategy hence, capital moved across We've previous our time products. our really in mid-digit the it it's in in natural forward. Performance frankly.

strong products at consistently that we're digit But wouldn't me got really to digit across Performance our a us We've over in high-single see the of few you're business. about, double years business. businesses. all asking And of Now growth that in growth. primarily next surprise sectors it it's in in that Chemicals pipeline all

you and in have our company done the a advantage see So really our positioning take and of job really markets take the consumer can to off, it results. good guys

David Silver

I Okay. Thank did that. want ask to I about you guess M&A pipeline. question the for the

might guess Performance So discussed large of Services just and reasonable your or target. complementary associated wondering, technologies I And one with Patrick, products you Oilfield the very as highlighted guess, I you've But bolt-ons target company both M&A I'm incremental a funnel, with Chemicals I where opportunity. was kind think areas potential or opportunities. be

maybe to So -- a kind you medium give at get could think just M&A you as set over of done the on be horizon? and you able some view us look might how what term the you opportunity perspective time

Patrick Williams

Sure, David.

when in driven. over has Chemicals primary not outliers in and at a going high. sits buy been those of lot We've want lot sector cash the buy. few market. are technology Performance we're the one last Performance seen focus you extremely sit our that have just years still that for don't a the XX marketplace cheap but multiple, Our a you know, the I stewards where deals our there, shareholders' would to that make later focus company, won't to Chemicals. and we us be jump M&A one, And few fit always to There's And where And companies two I now. right see move. out we're our to going Multiples value, be but in employees' find of a you as buy do a of the stop see looking cash. say, we're hit, And We smart looking And and on again. of did that? acquisitions. continuously we'll value, not back them. see years So we cash long-term sit we it great right our at you'll at why a short-term and long-term

in We're we're with think with our strategy. a great in position the a balance I great sheet. position

a of think two a next strategic really, coming our businesses and see the back years, All is are well. I forward move good to that We going room strong. in fit to acquisition really nice

and on to going We've that. that our going we're promised. be to guns stuck we've So to continue do to road the still disciplined, we're

David Silver

little talked back And if the do initiatives those you near-term might color one I in remarks. improvement. again, a opportunities of last some I'm incremental margin you some just the you half in to But in then to of kind teaser a provide on question. wondering more that able execute be have Services, expect to year. on prepared And incremental your about Great. drive -- Oilfield Okay.

Patrick Williams

Yes.

controlling to The important increases leverage, products for it we're increase. a blocking revenue handle on of expect QX income combined expectations, cost. to And number. sustainable It's just move much our a It's first It's I and we that's of And tackling. in moving technology innovation, operating and to more price going to due higher it's that part really But all line It's operating equipment. is which starting to customers. on as see to our think needed. us and those should simple a getting moving and of and handle see it. forward that is QX to we're see getting where

David Silver

to Services in thoughts I'm let's our million pre-pandemic. to has back. share production I'm quick the going activity to just how a your quarterly But on would business. price shale and level among one, to providers that the the Oilfield E&P additional have from next in your just say, I during has you appetite $XX shifted throw get risk XXXX. And And territory roughly major capital the but this the expect oil months? on is maybe probably up, since your activity level, environment risen, basins the XX% you go to don't way or one revenue know, regulatory to you. the develop, of over wondering, six nine was Thank Could much prevalent Patrick, you at

Patrick Williams

turn activity Sure, oil market oil interesting, when This disciplined the been that first more depressed you years turns, it's a that. level. in We price many see you seen a for same price, at because when typically haven't in see much where time really David. depressed approach. many, a is It's the

in E&P from throw to to and down shareholders shareholders it pay are expecting ground. the value companies not think companies return I debt,

term, frankly, have pricing. because quite it's been a the you'll behooves to and And sustainability approach long disciplined more everybody well for market so which,

not think and the And so gain, might in but we're that's jump, that you starting what short-term I have have you'll see marketplace. that long-term to

basins and jump. DRA I we other to I controlled. get And It's back more us as going as shale expands East not world, more levels in For think the other business talking We'll those as get see in lot And expected. them, parts but and some think of as to see that in you're be horizons, what those, to a we want going that, time. to we take Middle correct. it's just its starting to come about, we're to be areas going the as see to that that's and It's of you'll Saudi the fast see. you're

You later a don't want spike to big jump, see down. a years spike and then up, two big big

market our a increase, well. see You in this you'll with that along controlled and would as see right I run nice numbers rather think

David Silver

I'm there in And might the Great. is I'm if back but to just queue, just I end call another waiting? get afraid Okay. isn't. would there say happy call

Patrick Williams

ask have our We operator. the it You on to end. don't see

David Silver

I'm All to going back Okay. right. very queue. you much. Thank get in

Operator

from of Crespi. next is Shaw from the line Our Moness Chris question

Christopher Shaw

my ask clarify. Hey good did David morning everyone. questions, to of a few but just

on sooner up or take that any have much oilfield you revenue Has answered, improved get sooner had? and margin past can -- levels that you back getting that to following but you cost that will to some than levels? way just that But obviously it you've for back the getting or the time. level you to much than Is down feasible? that be revenue would So been thanks in there, in taken what seen sooner the income

Patrick Williams

Yes. Chris, going time. to it's take

in that I things if managers OI oilfield, have should think you the improvement. enacted see the we do

global see business, you As see OI should you of our expansion improvement. our

there. get up could could revenue time get it's can with we as going but faster We get start some to line there we think OI take there to I revenue, than to we creeping number. So that top

Christopher Shaw

I'm was impression you. growing then how impressed was quickly. much that Got that business it. Is Because David, under more been a impressed, European again, and how it's Chemicals. for the just not Performance like right? And just back I always on

I'm I Europe coming but So sort thought was slowly, rebounding of wrong. maybe

Patrick Williams

It's and the little a and a it. very higher pretty Americas. EMEA in very between No. a And probably very and balanced between Americas then small well in the balanced As-Pac But proportionate and share is small Americas it's Europe the then portion Asia. of

Christopher Shaw

acquisition, remember mostly if Was the Is I U.S.? that correctly? -- was that Huntsman that

Patrick Williams

Europe. That was that mostly Europe. mostly was No,

Christopher Shaw

that's right. All Maybe of. what thinking I'm

Patrick Williams

is is core it. and Huntsman Our well business well, with extremely business along the growing growing

Operator

back We're to go ahead. to Please Silver going CLK. from go David

David Silver

to introductions ask I to of add newer thanks going seem to how they and very was product be could you developing. Okay, much. maybe if some your some Patrick, color

areas say, responding and kind starting your to I operators sorry, have would able be if vessel testing whether So was a pandemic, XXXX years area in just going between primarily. But kicked And I'm DRA in be if of crude the the the to of high and everything and but speak like -- related shipping, XXXX to, you business. of might engine yourselves wondering my business, and reopen. hopes with by was major kind things some the some the oil, additives Thank how fuel those we're And and these your to forth the back I in suite potential you. higher you launched opinion, the and DRA couple to the off pretty IMO GDI got designs. from the additive business is additives of ago, IMO maybe to I just delayed let's shift think,

Patrick Williams

sector. DRA. the right just sits oilfield now DRA now, business the in right treating The oil in And Sure. we're

But It's in DRA. sometime to in specialties sit the future, eventually, probably expectations. technology. DRA for that site. business. will a will -- We our And we We've sit here excellent line on have that's fuels. It's sit revenue fuels where our near that moving the expanded will

and coming have more online. customers more we have online, volume We coming

that's well. So enhance to as oilfield going

see increase and sector. And On definitely IMO, in see a the starting we're more GDI to in visibility. definitely is business. getting We it an GDI marine the lot

And we're our they're we take products our work, to valuing its technical see that, as teams harder at back look more come people performance. As a in products. seeing definitely

the should next the get as think more doesn't start upcoming there that that products. just variant calls different lot as along, and that. sector these -- delta And things come long should shut don't more benefit ourselves Specialties IMO enhance the any so other over than seeing globe down we the of then again Fuel issues, we as And years. the and doing in GDI are products We're a I

David Silver

get the don't But I AvGas, maybe quarter. of little just wondering, has bit potential last market, But Not your phasing afford ponder changed just have static know, way in the overall the And say? or Just authorities additional might business that would much just a this in order one. some has as that been grown, maybe for helpful. a was kind share? market of wondering, your issue Thank color I'm Okay. opinion, business has alternatives. addressable the the to I just business year hoping you regulatory unusual how while the you Thanks. be that a And -- I'm limbo so market AvGas AvGas or, little over your on you business. periods in a couple And total see let's you. developing maybe nature

Patrick Williams

hasn't next tells that at No, few us market the the the market or There change now are from right that years but it's -- no gone there there's all. players sits in the that up other nothing in And to FAA X%. down going us. it's really

or share So, No go might X%. up same changes the market. in market AvGas whatsoever down

David Silver

so if for environment loaded front think right. led AvGas? to order was unusually don't could heavily the just, order in that concentrated All why the then And this concentrated the mind, about was quarter? you unusual phasing business posit you or What that you maybe

Patrick Williams

it. don't why Ian, one I'll you take add and Sure. that to

Ian Cleminson

Yes.

Let me just --.

products And main they make And availability of chain in short because the shipping. difficulty we've that seen, sure forward. want saw the reason that was that what of number customers they disruption to it. pulling supply of of was So for we weren't orders they a when shipping, needed

into the quarters forward and four. second just So orders they've quarter, pulled three

David Silver

to want Okay. add or something no? Patrick, did Great. you

Patrick Williams

well. it Ian think Thank I you. covered No,

Operator

I for to closing any now everyone, Williams hand questions. will you, comments. your Patrick Thank back for

Patrick Williams

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

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

Operator

you Thank for your everyone participation.

You may now disconnect your line.