First Quarter 2024 and Other
Highlights
- Net loss of $76 million and EPS of negative $2.14
- Adjusted EBITDA* of $45 million, including a $13 million
favorable impact from net timing; Adjusted Net Loss* of $69
million
- Cash used in operations of $66 million and capital expenditures
of $16 million resulted in Free Cash Flow* of negative $82 million.
First quarter Free Cash Flow* included a $61 million increase in
trade working capital driven by seasonal factors and a more than
50% increase in styrene monomer prices
- First quarter ending cash of $171 million, of which $5 million
was restricted, with approximately $252 million of additional
available liquidity under two undrawn, committed financing
facilities with continued focus on cash management and
liquidity
- Extended the maturity date of the Accounts Receivable
Securitization Facility by one year to November 2025, and expanded
available borrowing capacity by $36 million
quarter-over-quarter
- Announced commencement of the sale process for the Company’s
interest in Americas Styrenics, via the initiation of an ownership
exit provision in the joint venture agreement, which is expected to
lead to a definitive agreement in early 2025
- Announced the potential closure of the virgin polycarbonate
production site in Stade, Germany which, if approved, is expected
to increase annual profitability by $15 million to $20 million
compared to 2023
Trinseo (NYSE: TSE):
Three Months Ended
March 31,
$millions, except per share
data
2024
2023
Net Sales
$
904
$
996
Net Loss
(76
)
(49
)
Diluted EPS ($)
(2.14
)
(1.40
)
Adjusted Net Loss*
(69
)
(35
)
Adjusted EPS ($)*
(1.94
)
(1.01
)
EBITDA*
38
29
Adjusted EBITDA*
45
36
*For a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted
Net Loss, all of which are non-GAAP measures, to Net Loss, as well
as a reconciliation of Free Cash Flow and Adjusted EPS, see Notes 2
and 3 to the financial statements included below.
Trinseo (NYSE: TSE), a specialty material solutions provider,
today reported its first quarter 2024 financial results. Sales
volumes excluding styrene-related sales were the highest since the
third quarter of 2022 and the first year-over-year increase since
the first quarter of 2022. Net sales in the first quarter decreased
9% versus prior year. Lower price, from the pass-through of lower
raw material costs and pressure from weak polystyrene and ABS
market conditions, led to a 7% decrease, while lower sales volumes,
primarily from lower styrene-related sales following the closure of
the Terneuzen, the Netherlands styrene facility, led to a 3%
decrease.
First quarter net loss of $76 million was $27 million below
prior year, reflecting higher interest and income tax expenses.
Adjusted EBITDA of $45 million was $9 million above prior year.
Higher margins in the current year and fixed cost under absorption
in the prior year, both primarily in Engineered Materials, were
partially offset by lower equity affiliate income due to the
planned turnaround at Americas Styrenics. First quarter results
included a favorable impact of $13 million from net timing.
Commenting on the Company’s first quarter performance, Frank
Bozich, President and Chief Executive Officer of Trinseo, said, “We
were encouraged with how the first quarter progressed, as results
improved steadily throughout the quarter. We believe destocking in
some of our value chains has ended, as market tightness resulted in
significant margin expansion in Engineered Materials and Americas
Styrenics in March, and we see this continuing into the second
quarter. While the first quarter working capital increase was
expected, it was higher than what we’d attribute to seasonality due
to significantly higher styrene costs. We believe this will reverse
itself and release working capital in the third quarter.”
First Quarter Results and Commentary by
Business Segment
Effective January 1, 2024, following the closure of the
Terneuzen, the Netherlands styrene production facility, the Company
will no longer report results under a Feedstocks reporting segment.
Therefore, prior year results have been adjusted to show the
historical results of the Feedstocks segment within the segments
that consume styrene monomer in their end products; Latex Binders,
Plastics Solutions and Polystyrene. This included styrene-related
sales as well as styrene production profitability.
- Engineered Materials net sales of $189 million for the
quarter decreased 8% versus prior year including a 12% impact from
lower price due to raw material pass-through, partially offset by a
3% impact from higher sales volume of PMMA resins and MMA. Adjusted
EBITDA of $4 million, including an unfavorable net timing impact of
$7 million, was $16 million above prior year primarily due to
higher MMA-related margins, lower natural gas hedge losses, and
fixed cost under absorption in the prior year.
- Latex Binders net sales of $241 million for the quarter
decreased 3% versus prior year including a 7% impact from lower
price from the pass-through of lower raw material costs, partially
offset by a 3% impact from higher volumes in paper and board
applications. Adjusted EBITDA of $26 million was $2 million above
prior year due to slightly higher volume and margin.
- Plastics Solutions net sales of $266 million for the
quarter were 12% below prior year including an 8% decrease from
lower price due to weaker market conditions in ABS. Additionally,
lower polycarbonate volumes resulted in a 4% decrease, which was
partially offset by higher volume in PC compounds. Adjusted EBITDA
of $23 million was $1 million below prior year as lower ABS margin
was mostly offset by a favorable net timing variance from
increasing styrene cost during the quarter.
- Polystyrene net sales of $208 million for the quarter
were 14% below prior year including a 3% impact from lower price
and an 11% impact from lower sales volume. Weak market conditions
in Europe led to lower polystyrene prices and sales volume, and the
closure of the styrene production facility in Terneuzen, the
Netherlands led to lower styrene-related sales volume. Adjusted
EBITDA of $13 million was $4 million above prior year as
polystyrene price and margin pressure was more than offset by a
favorable net timing variance as well as lower fixed costs
following the closure of the Terneuzen styrene plant.
- Americas Styrenics Adjusted EBITDA of $6 million for the
quarter was $12 million below prior year due to a planned
turnaround at its largest styrene production facility in the
current year.
2024 Outlook
- Second quarter 2024 net loss of $53 million to $38 million
- Second quarter 2024 Adjusted EBITDA of $60 million to $75
million
Commenting on the second quarter outlook, Bozich said, “We are
seeing the positive earnings momentum from the end of the first
quarter continue into the second quarter, including similar sales
and margin levels to start the quarter. I am confident in a
significant sequential profitability improvement as the turnaround
at Americas Styrenics is behind us, and as we enter the seasonally
stronger period for many of our building and construction
applications. Additionally, there has been continued tightness in
the styrene and MMA markets that is supportive of continued higher
margins. We also expect a sequential free cash flow improvement
from higher profitability and moderating styrene prices.”
Bozich continued, “As expected, we are seeing the financial
benefits of our asset and cost optimization actions that we
implemented over the past 18 months, and we continue to evaluate
additional actions including the potential closure of the Stade,
Germany virgin polycarbonate plant. Finally, while we had more than
adequate access to liquidity to end the quarter and we are seeing
positive earnings momentum, liquidity preservation remains our top
priority.”
Conference Call and Webcast
Information
Trinseo will host a conference call to discuss its first quarter
2024 financial results on Thursday, May 9, 2024 at 10 a.m. Eastern
Time.
Commenting on results will be Frank Bozich, President and Chief
Executive Officer, David Stasse, Executive Vice President and Chief
Financial Officer, and Andy Myers, Director of Investor
Relations.
For those interested in asking questions during the Q&A
session, please register using the following link:
- Conference Call Registration
For those interested in listening only, please register for the
webcast using the following link:
After registering for the conference call, you will receive a
confirmation email with a meeting invitation and information for
entry. Registration is open through the live call, but it is
advised that you register in advance to ensure you are connected
for the full call.
Trinseo has posted its first quarter 2024 financial results on
the Company’s Investor Relations website. The presentation slides
will also be made available in the webcast player prior to the
conference call. The Company will also furnish copies of the
financial results press release and presentation slides to
investors by means of a Form 8-K filing with the U.S. Securities
and Exchange Commission.
A replay of the conference call and transcript will be archived
on the Company’s Investor Relations website shortly following the
conference call. The replay will be available until May 9,
2025.
About Trinseo
Trinseo (NYSE: TSE), a specialty material solutions provider,
partners with companies to bring ideas to life in an imaginative,
smart and sustainably focused manner by combining its premier
expertise, forward-looking innovations and best-in-class materials
to unlock value for companies and consumers.
From design to manufacturing, Trinseo taps into decades of
experience in diverse material solutions to address customers’
unique challenges in a wide range of industries, including building
and construction, consumer goods, medical and mobility.
Trinseo’s approximately 3,100 employees bring endless creativity
to reimagining the possibilities with clients all over the world
from the company’s locations in North America, Europe and Asia
Pacific. Trinseo reported net sales of approximately $3.7 billion
in 2023. Discover more by visiting www.trinseo.com and connecting
with Trinseo on LinkedIn, Twitter, Facebook and WeChat.
Use of non-GAAP measures
In addition to using standard measures of performance and
liquidity that are recognized in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”), we use additional measures of income excluding certain
GAAP items (“non-GAAP measures”), such as Adjusted Net Income,
EBITDA, Adjusted EBITDA and Adjusted EPS and measures of liquidity
excluding certain GAAP items, such as Free Cash Flow. We believe
these measures are useful for investors and management in
evaluating business trends and performance each period. These
measures are also used to manage our business and assess current
period profitability, as well as to provide an appropriate basis to
evaluate the effectiveness of our pricing strategies. Such measures
are not recognized in accordance with GAAP and should not be viewed
as an alternative to GAAP measures of performance or liquidity, as
applicable. The definitions of each of these measures, further
discussion of usefulness, and reconciliations of non-GAAP measures
to GAAP measures are provided in the Notes to Condensed
Consolidated Financial Information presented herein.
Cautionary Note on Forward-Looking
Statements
This press release may contain forward-looking statements
including, without limitation, statements concerning plans,
objectives, goals, projections, forecasts, 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,” “believe,” “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, our current indebtedness, 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 implement proposed restructuring
initiatives and to successfully generate cost savings through
restructuring and cost reduction initiatives; our ability to
successfully execute our business and transformation strategy;
increased costs or disruption in the supply of raw materials;
deterioration of our credit profile limiting our access to
commercial credit;increased energy costs; compliance with laws and
regulations impacting our business; any disruptions in production
at our chemical manufacturing facilities, including those resulting
from accidental spills or discharges; conditions in the global
economy and capital markets; our current and future levels of
indebtedness and ability to service our debt; our ability to meet
the covenants under our existing indebtedness; our ability to
generate cash flows from operations; 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 achievements 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 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.
TRINSEO PLC
Condensed Consolidated
Statements of Operations
(In millions, except per share
data)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Net sales
$
904.0
$
996.3
Cost of sales
843.4
959.1
Gross profit
60.6
37.2
Selling, general and administrative
expenses
70.1
84.7
Equity in earnings of unconsolidated
affiliate
6.2
17.6
Impairment and other charges
—
0.3
Operating income (loss)
(3.3
)
(30.2
)
Interest expense, net
63.0
38.3
Other expense (income), net
3.8
(2.9
)
Loss before income taxes
(70.1
)
(65.6
)
Provision for (benefit from) income
taxes
5.4
(16.7
)
Net loss
$
(75.5
)
$
(48.9
)
Weighted average shares- basic
35.3
35.0
Net loss per share- basic
$
(2.14
)
$
(1.40
)
Weighted average shares- diluted
35.3
35.0
Net loss per share- diluted
$
(2.14
)
$
(1.40
)
TRINSEO PLC
Condensed Consolidated Balance
Sheets
(In millions)
(Unaudited)
March 31,
December 31,
2024
2023
Assets
Cash and cash equivalents
$
166.4
$
259.1
Accounts receivable, net of allowance
556.5
490.8
Inventories
431.2
404.7
Other current assets
42.6
39.5
Investments in unconsolidated
affiliate
258.4
252.2
Property, plant, equipment, goodwill, and
other intangible assets, net
1,354.8
1,401.4
Right-of-use assets - operating, net
60.7
65.3
Other long-term assets
118.8
116.2
Total assets
$
2,989.4
$
3,029.2
Liabilities and shareholders’
equity
Current liabilities
732.0
672.6
Long-term debt, net of unamortized
deferred financing fees
2,276.7
2,277.6
Noncurrent lease liabilities -
operating
47.5
51.7
Other noncurrent obligations
281.2
295.3
Shareholders’ equity
(348.0
)
(268.0
)
Total liabilities and shareholders’
equity
$
2,989.4
$
3,029.2
TRINSEO PLC
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Cash flows from operating
activities
Cash provided by (used in) operating
activities
$
(66.2
)
$
45.4
Cash flows from investing
activities
Capital expenditures
(15.7
)
(21.8
)
Proceeds from the sale of businesses and
other assets
4.7
—
Cash used in investing activities
(11.0
)
(21.8
)
Cash flows from financing
activities
Deferred financing fees
0.4
—
Short-term borrowings, net
(3.7
)
(2.7
)
Dividends paid
(0.6
)
(11.8
)
Proceeds from exercise of option
awards
—
0.1
Withholding taxes paid on restricted share
units
—
(1.3
)
Acquisition-related contingent
consideration payment
(0.7
)
(1.2
)
Repurchases and repayments of long-term
debt
(4.6
)
(3.6
)
Proceeds from Accounts Receivable
Securitization Facility
30.0
—
Repayments of Accounts Receivable
Securitization Facility
(30.0
)
—
Cash used in by financing activities
(9.2
)
(20.5
)
Effect of exchange rates on cash
(3.2
)
2.3
Net change in cash, cash equivalents, and
restricted cash
(89.6
)
5.4
Cash, cash equivalents, and restricted
cash—beginning of period
261.1
211.7
Cash, cash equivalents, and restricted
cash—end of period
$
171.5
$
217.1
Less: Restricted cash
5.1
—
Cash and cash equivalents—end of
period
$
166.4
$
217.1
TRINSEO PLC
Notes to Condensed
Consolidated Financial Information
(Unaudited)
Note 1: Net Sales
by Segment
Three Months Ended
March 31,
(In millions)
2024
2023
Engineered Materials
$
189.2
$
206.2
Latex Binders
241.5
249.0
Plastics Solutions
265.7
300.3
Polystyrene
207.6
240.8
Americas Styrenics*
—
—
Total Net Sales
$
904.0
$
996.3
* The results of this segment are comprised entirely of earnings
from Americas Styrenics, our 50%-owned equity method investment. As
such, we do not separately report net sales of Americas Styrenics
within our condensed consolidated statements of operations.
Note 2: Reconciliation of Non-GAAP
Performance Measures to Net Income
EBITDA is a non-GAAP financial performance measure, which is
defined as income from continuing operations before interest
expense, net; income tax provision; depreciation and amortization
expense. We refer to EBITDA in making operating decisions because
we believe it provides our management as well as our investors with
meaningful information regarding the Company’s operational
performance. We believe the use of EBITDA as a metric assists our
board of directors, management and investors in comparing our
operating performance on a consistent basis.
We also present Adjusted EBITDA as a non-GAAP financial
performance measure, which we define as income from continuing
operations before interest expense, net; income tax provision;
depreciation and amortization expense; loss on extinguishment of
long-term debt; asset impairment charges; gains or losses on the
dispositions of businesses and assets; restructuring charges;
acquisition related costs and benefits, and other items. In doing
so, we are providing management, investors, and credit rating
agencies with an indicator of our ongoing performance and business
trends, removing the impact of transactions and events that we
would not consider a part of our core operations.
Lastly, we present Adjusted Net Income (Loss) and Adjusted EPS
as additional performance measures. Adjusted Net Income (Loss) is
calculated as Adjusted EBITDA (defined beginning with net income
from continuing operations, above), less interest expense, less the
provision for income taxes and depreciation and amortization, tax
affected for various discrete items, as appropriate. Adjusted EPS
is calculated as Adjusted Net Income (Loss) per weighted average
diluted shares outstanding for a given period. We believe that
Adjusted Net Income (Loss) and Adjusted EPS provide transparent and
useful information to management, investors, analysts and other
stakeholders in evaluating and assessing our operating results from
period-to-period after removing the impact of certain transactions
and activities that affect comparability and that are not
considered part of our core operations.
There are limitations to using the financial performance
measures noted above. These performance measures are not intended
to represent net income or other measures of financial performance.
As such, they should not be used as alternatives to net income as
indicators of operating performance. Other companies in our
industry may define these performance measures differently than we
do. As a result, it may be difficult to use these or
similarly-named financial measures that other companies may use, to
compare the performance of those companies to our performance. We
compensate for these limitations by providing reconciliations of
these performance measures to our net income, which is determined
in accordance with GAAP.
Three Months Ended
March 31,
(In millions, except per share
data)
2024
2023
Net loss
$
(75.5
)
$
(48.9
)
Interest expense, net
63.0
38.3
Provision for (benefit from) income
taxes
5.4
(16.7
)
Depreciation and amortization
45.0
56.0
EBITDA
$
37.9
$
28.7
Net gain on disposition of businesses and
assets
(3.6
)
—
Selling, general, and administrative
expenses
Restructuring and other charges (a)
9.4
3.7
Selling, general, and administrative
expenses
Asset impairment charges or write-offs
—
0.3
Impairment and other charges
Other items (b)
1.3
3.6
Selling, general, and administrative
expenses; Other expense (income), net
Adjusted EBITDA
$
45.0
$
36.3
Adjusted EBITDA to
Adjusted Net Loss:
Adjusted EBITDA
45.0
36.3
Interest expense, net
63.0
38.3
Provision for (benefit from) income taxes
- Adjusted (c)
4.2
(20.0
)
Depreciation and amortization - Adjusted
(d)
46.3
53.3
Adjusted Net Loss
$
(68.5
)
$
(35.3
)
Weighted average shares- diluted
35.3
35.0
Adjusted EPS
$
(1.94
)
$
(1.01
)
Adjusted EBITDA by
Segment:
Engineered Materials
$
4.3
$
(11.7
)
Latex Binders
25.7
24.0
Plastics Solutions
22.7
23.6
Polystyrene
12.6
8.9
Americas Styrenics
6.1
17.6
Corporate Unallocated
(26.4
)
(26.1
)
Adjusted EBITDA
$
45.0
$
36.3
(a)
Restructuring and other charges for the
2024 period primarily relates to contract termination costs as well
as decommissioning and other charges incurred in connection with
the Company’s asset optimization and corporate restructuring plan.
Restructuring and other charges for the 2023 period primarily
relates to contract termination costs as well as decommissioning
and other charges incurred in connection with the Company’s asset
restructuring plan.
(b)
Other items for the 2024 and 2023 periods
primarily relate to fees incurred in conjunction with certain of
the Company’s strategic initiatives, as well as costs related to
our transition to a new enterprise resource planning system.
(c)
Adjusted to remove the tax impact of the
items noted within the table above. The income tax expense
(benefit) related to these items was determined utilizing either
(1) the estimated annual effective tax rate on our ordinary income
based upon our forecasted ordinary income for the full year or, (2)
for items treated discretely for tax purposes we utilized the
applicable rates in the taxing jurisdictions in which these
adjustments occurred.
(d)
Amounts for the three months ended March
31, 2024 and 2023 excludes accelerated depreciation of $1.3 million
and $2.7 million, respectively. The 2024 period charges are
primarily related to the shortening of the useful life of certain
assets related to the asset optimization and corporate
restructuring plan. The 2023 period charges are primarily related
to the shortening of the useful life of certain assets related to
the asset restructuring plan as well as charges related to the
shortening of the useful life of certain IT assets related to the
Company’s transition to a new enterprise resource planning
system.
For the same reasons discussed above, we are providing the
following reconciliation of forecasted net loss to forecasted
Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS for the three
months ended June 30, 2024. See “Note on Forward-Looking
Statements” above for a discussion of the limitations of these
forecasts. Totals may not sum due to rounding.
Three Months Ended
June 30,
(In millions, except per share
data)
2024
Adjusted EBITDA
$
60 – 75
Interest expense, net
63
Provision for income taxes
4
Depreciation and amortization
46
Reconciling items to Adjusted EBITDA
(e)
-
Net Loss from continuing
operations
(53) – (38)
Reconciling items to Adjusted Net Loss
(e)
-
Adjusted Net Loss
$
(53) – (38)
Weighted average shares - diluted (f)
35.3
EPS from continuing operations - diluted
($)
$
(1.50) – (1.08)
Adjusted EPS ($)
$
(1.50) – (1.08)
(e) 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. As such, for
the forecasted second quarter ended June 30, 2024, we have not
included estimates for these items.
(f) Weighted average shares presented for the purpose of
forecasting EPS and Adjusted EPS assume that the Company will be in
a net loss position for second quarter 2024, and therefore excludes
the impact of potentially dilutive shares, as the inclusion of said
shares would have an anti-dilutive effect. Further, the weighted
average shares presented do not forecast significant future share
transactions or events, such as repurchases, significant
share-based compensation award grants, and changes in the Company’s
share price. These are all factors which could have a significant
impact on the calculation of EPS and Adjusted EPS during actual
future periods.
Note 3: Reconciliation of Non-GAAP
Liquidity Measures to Cash from Operations
The Company uses certain measures, such as Free Cash Flow as
non-GAAP measures, to evaluate and discuss its liquidity position
and results. Free Cash Flow is defined as cash from operating
activities, less capital expenditures. We believe that Free Cash
Flow provides an indicator of the Company’s ongoing ability to
generate cash through core operations, as it excludes the cash
impacts of various financing transactions as well as cash flows
from business combinations that are not considered organic in
nature. We also believe that Free Cash Flow provides management and
investors with useful analytical indicators of our ability to
service our indebtedness, pay dividends (when declared), and meet
our ongoing cash obligations.
Free Cash Flow is not intended to represent cash flows from
operations as defined by GAAP, and therefore, should not be used as
alternatives for that measure. Other companies in our industry may
define Free Cash Flow differently than we do. As a result, it may
be difficult to use this or similarly-named financial measures that
other companies may use, to compare the liquidity and cash
generation of those companies to our own. The Company compensates
for these limitations by providing the following detail, which is
determined in accordance with GAAP.
Free Cash Flow
Three Months Ended
March 31,
(In millions)
2024
2023
Cash provided by (used in) operating
activities
$
(66.2
)
$
45.4
Capital expenditures
(15.7
)
(21.8
)
Free Cash Flow
$
(81.9
)
$
23.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508169444/en/
Andy Myers Tel : +1 610-240-3221 Email: aemyers@trinseo.com
Trinseo (NYSE:TSE)
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