Q4 2019 Earnings Call
Yes.
[music].
[laughter].
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[noise], ladies and gentlemen, thank you for standing by and welcome to the Q4 2019, Calumet specialty products Partners LP earnings Conference call.
At this time all participants' lines are in addition.
Listen only mode. After speaking presentation, there will be a question and answer session.
Question on assessing you'll need to press star one your telephone.
According for dishes. Please.
Yeah.
I would now like to trying to call to Joseph Common T V C with high school.
Thank you Dimitris good morning, everyone and thank you for joining us today fourth quarter earnings result school.
On today's call or Tim groups, you keep drilling seeable, Bruce Fleming, even appears ready and it's got bigger where our new even puberty.
Before we proceed allow me to remind everyone that during the course of this call you may provide varies but we're looking statements within the meaning of section 20, Onee UBS Securities Exchange Act nothing to report.
Such statements are based on the believes the management as old assumptions made by them and in each case based on information currently available to them.
Although management believes that these expectations reflected in such forward looking statements are reasonable.
Either the partnership Fitzgerald partner normally provide any assurances to the expectation would be correct.
Please refer to the Partnership's press released it was issued this morning as well as our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results could cause them to defer forward looking statements made on this call.
As a reminder, you may know download of PD. After the presentation slides that accompany the remarks made on todays conference call as indicated in the press release issued earlier today.
You may access these slides any investor relations section of our website.
Especially dot com.
Also webcast replay of this call will also be available or site within a few hours and you can contact Gilbert our chief.
Investor relation support a three one to 4.2870.
With that I'll pass the call Tim Tim.
Gaming produced another solid quarter or financial performance closing out an important and successful year in our transformation.
This performance was driven by good execution against our strategic initiatives, which included a focused effort over the past several years to expand margins of our core, especially business driving improved operations across all of our sector.
And strengthen our balance sheet.
Turning to slide three let's begin with the highlights of our fourth quarter performance and a year or do you.
During the fourth quarter Calumet delivered $49.9 million of adjusted EBITDA, excluding non cash inventory adjustment.
Our consolidated results is comprised of $42.8 million delivered by our specialty segment.
$28.7 million from the fuel segment offset by $7.5 million net gionee costs in the corporate segment.
Both operating segments performed well, particularly given a planned turnaround work at our Shreveport facility, which we successfully completed during the quarter.
For the full year Calumet delivered $262.8 million of adjusted EBITDA after excluding favorable non cash inventory adjustments.
As a reminder, we present, an adjusted EBITDA, excluding noncash LCM in LIFO adjustments to give them more transparent view business performance.
Our specialty business profitability increased 24% to $207.9 million driven by solid sales line grows.
Across a number of our key product categories.
Our feels business contributed $152.5 billion that adjusted EBITDA in full year 29 to.
Reflecting the impact of improved throughput across our assets.
This was offset by weaker market fundamentals versus the prior year.
The net company result was $192 million in cash flow from operations.
Which represents a 75% increase over last year.
Next we successfully executed a number of key strategic initiatives during the year.
In the fourth quarter, we successfully divested our San Antonio fuels refineries in a credit accretive transaction.
This divestment not only lowered our leverage but also reduced our portfolio volatility by lowering fuels commodity exposure.
For the year, we used cash on hand at the beginning of year and the improved cash flows into the business throughout 2019 to reduce our debt outstanding by $391 million.
We refinanced our 2021 notes in the unsecured mark, which together with the $391 million a total debt reduction that's facilitated a 20 million dollar reduction and our annual interest expense.
These improvements in our credit profile, where acknowledged by each of the major credit agencies as Calumet achieved ratings upgrades from Moody's S&P and Fitch.
The net impact of these efforts it was a reduction in on leverage to 4.0 times debt to trailing 12 month adjusted EBITDA.
December improved 1.6 turns from the end of 2018.
Lastly, our self-help program continues to drive meaningful margin road inner core specialty business.
For the fourth quarter specialty EBITDA margins grew to 14.2% a 50 basis point improvement versus last year's comparable period, which was a very solid results for the seasonally weaker fourth quarter.
This margin growth came as we eliminated 2100 barrels per day of lower margin volumes from our products like.
As we continue to rationalize low margin volumes, we are now backfilling that production capacity with more profitable volumes structurally improving our margin performance on a go forward basis.
In fact, despite the SKU rationalization for the year, especially sales volumes actually increased by 4% compared to 20 team.
Our gross profit per barrel results also much meaningful annual improvement up 7.2% versus last year.
On pace to our near term goal of $40 per barrel.
For the full year, especially EBITDA margins were 15.4% up 320 basis points versus full year 2018 results.
The strategic about is the underpinned the success our detailed further on slide four.
First we spent the last few years stabilizing and turning around the business and I'm excited to say, we started to now focus more intently on driving top and bottom line growth.
The philosophy of continuous improvement has come to define how we operate and is firmly embedded within our corporate culture.
This buildout of our commercial competencies includes the importance of leaders like Skoda Scotto remark, who recently took on the newly created role he VP of commercial.
We'll introduce you to Scott later in the call.
Second further de leveraging remains a top priority.
While we made significant headway and reducing our leverage over the last few years.
Strengthening our balance sheet remains a top priority and a meaningful point of emphasis and our corporate strategy.
We expect continued cash flow from operations to allow further debt reduction edgy and 29.
As a year progressive we expect to address our unsecured notes maturing in 2022, as we right size, our balance sheet to fit our reduced capital requirements and position the partnership for further growth.
Our third strategic priority focus is on our core specialty business.
Our specialty products platform will build on our success in 2019 and drive even stronger margin performance.
We set near term goals to expand our gross profit in excess of $40 per barrel and to maintain an adjusted EBITDA margin above 15% on an annual basis.
This will be achieved through additional de bottlenecking of our operations continued rationalization of lower margin product lines and tactical bolt on acquisitions.
Earlier this week, we announced the acquisition of apparel logic LLC.
Pair logic expands county of its presence in the wax blending and packaging market.
We will walk you through more details on this later in the call.
This is a small acquisition.
But a very complimentary fit to our existing waxed business and we're excited about the pair logics platform and the new capabilities and talent that it has brought to Calumet.
We announced earlier today and we are reviewing strategic options of our Great Falls, Montana refinery.
Great Falls has been and remains a very valuable asset was strong cash flows.
With our leverage coming closer to Rightsized when do we this year is the right time to review our strategic alternatives for Great Falls.
Turning to slide five I want to take a few moments to share some of the results from our commitment to operations excellence that underpins a significant portion of the improved performance across our business.
As a reminder, when we sent over turnaround strategy and road map for growth in motion several years ago. Its foundation was built on operations excellence.
First let me cover safety the safety of our people community and our assets is our number one priority.
I'm very proud to say that in 2019, Calumet set company records for both personal and process safety.
Next utilization.
Our focus on more reliable operation.
Resulted in strong utilization across our portfolio.
And our business at numerous annual records as shown on this line.
Better cost Manish.
Our efforts to structurally improve our costs continue this year.
For example, we were able to drive out $14 million in transportation costs versus last year.
You know in part due our ERP system.
Self-help delivery.
In 2019, we continue to deliver on or somehow program.
For example, our focus to operate them more streamlined fashion by better aligning our production volumes demand.
Allowed us to drive a $16 million reduction in our inventories versus the prior year.
We also delivered out our goals and de bottlenecking, a production at our Shreveport and finished lubricants facilities, allowing us to expand production and support further growth in 2020.
Finally strong cash flows. The net result of all of these efforts combined to contribute towards strong cash flow performance for the year.
In fact 2019 free cash flow results were the strongest for Calumet since 2012.
And cash flow from operations, Mark the strongest performance since 2015.
Even more these cash flow results were delivered from a significantly smaller asset base compared to the Calumet over the past.
Now now I will turn the call over to our CFO keep Jennings.
Who will walk us through our financial results for the fourth quarter and full year 2019 in further detail.
Thank you, Tim and good morning, everyone.
Slide six.
Those are consolidated headline results for the fourth quarter and full year.
All references to adjusted EBITDA in my commentary will be adjusted EBITDA, excluding lower cost of market LCM and LIFO impacts except for slide 13, which uses adjusted EBITDA as reported to align with our covenant calculations.
For the fourth quarter revenue and adjusted EBIT up were 774.8 million at 49.9 billion respectively.
Both of which declined versus prior years record fourth quarter performance.
Full year 2019 results for revenue and adjusted EBIT up were 3.4 billion and 262.8 billion, both declined 1.3% and 12.6% year over year, respectively.
321 million incremental annual revenues from higher volumes were more than offset by 309 million on price decline and $56 million reduce revenues from the San Antonio divestiture.
Yeah on average was 12% lower in 2019 versus 2018, which drove the price compression.
The lower year over year earnings results for both the quarter and the full year were primarily driven by the absence of the light crude differentials that drove the prior years record performance for the fields segment.
This year over year contribution from fuel segment.
Was partially offset by solid growth from more core specialty business.
On slide seven we have provided a detailed bridge, although 2019 consolidated adjusted EBITDA results relative to full year 2018.
Starting with last year was 328 million a full year consolidated adjusted EBITDA. The primary driver and year over year decline annual results was the lower fuels margins seen across the year, which more than offset 35 kind of hedge gains contract and local wrap price improvement if you will segments, resulting.
In a headwind of approximately $80 million.
This meaningful year over year margin headwind in our fuels business was partially offset by the 57 million earnings from consolidated volume improvement 38, many of which was in fuels and 19 million specialty.
Additionally, our specialty business captured 11.7 million of margin improvement across the year, despite the fourth quarter market challenges.
The 17.9 million had been higher operating costs is primarily a function of year over year impact that receiving a 2017 returns in 2018 this more than offset the lower other operating and transportation costs.
Finally, we invested 6.2 million more and as you need to support or specialty strategy.
There's also including some onetime costs related to optimizing our Sep implementation. These onetime investments when the first half of the or not you know current run rate.
Our total 262.8 million adjusted EBITDA for the full year 2019, he's a side or fashion on the quality of their businesses and our people.
Slide eight reviews, they quarter and full year highlights of the result of for specialty segment.
Our fourth quarter adjusted EBITDA result of 42.8 million declined 5.3% compared to last year's fourth quarter, well discuss the shchedrin Shreveport turnaround was executed on time, I really don't cost expectations activities did weigh on volumes.
Additionally, the fourth quarter saw continued margin headwinds and the targeting based on market, which were partially offset by strong performance across our finished lubricants business.
For the full year, especially segment delivered adjusted EBITDA of 207.9 million. These were strong result, which represent approximately 24% growth versus the prior year.
The improved performance was driven by solid growth in sales volumes across several key product categories, specifically specialty volumes, especially solvent nothing base oil and finished.
As Tim mentioned earlier, improving the margin performance of course specialty business as a key focal point in both are transformation and growth strategies that focus with our parents in both the fourth quarter and full year.
Wonderful quarter, we were still able to capture EBITDA margins of 14.2% improvement a 50 basis points versus the prior these were strong results given the seasonal slowdown in demand that is critical for fourth quarter.
This improvement was supported by strong sales mix, which came as a result of rationalizing more than 2000 barrels per day lower margin production from our business.
Well I'm going rationalization low margin products made a significant impact across here as 2019 EBITDA margins were 15.4%.
And improvement of 320 basis points compared to full year 2018.
This improvement reflects the ongoing effort upgrade or sales mix and focus our production towards more profitable part of offerings.
This improved volume performance also drove fixed cost leverage.
Notably we successfully crossover in near term threshold EBITDA margins in excess of 15%, which has been a near term objective for this business.
Our fourth quarter gross profit per barrel results of 30 point.
$30.94 is lower seasonality and also declined 3.2% compared to the prior as gross profit was impacted by tighter crude differentials.
Our full year gross profit per barrels of $34.41 grew by 7.2% compared to full year 2018.
This schools like much of the same drivers or EBITDA margins, namely the improved volume performance and the benefits Oh and improving sales mix.
Turning to slide nine we agreed to full year 2019 specialty products adjusted EBITDA.
Starting allows you to school 168.3 million adjusted EBITDA after we segmentation.
Expanding specialty margins in higher volumes contributed 11.7 million and 19 million nothing improvement respectively.
Our operating costs across the business declined slightly cautiously $2.2 million improved results. Our self help programs contributed significantly to reductions in certain transportation related costs, which contributed 8.1 million across the or.
These year over year gains were partially offset by targeted investments in this ginny expenses, which increased 1.4 million versus the prior year, bringing our full year adjusted EBITDA totaled 207.9.
On Slide 10, we review the highlights of more fuel segment's results for the fourth quarter and full year.
Fourth quarter and full year adjusted EBITDA results were 28.7 million and 152.5 million respectively. As both the quarter end the year decline versus the prior year.
This decline was driven by the significantly tighter crude differentials as to why differentials the benchmark WT <unk> for both our WCS and Midland priced crude sources that benefit 2018 did not repeat sustainably across the fourth quarter, nor the full year 2019.
Fuel production volumes declined 1.9% for the quarter. However, this marginal decline reflects primarily reduced volumes after divesting the San Antonio refinery and the impact of the turnaround activity I don't know Shreveport facility.
Despite this marginal decline in the fourth quarter.
For the full year, we've made meaningful headway and improving our production volumes, which were up 8.8%.
The production volume growth reflected the improvements in throughput and stronger utilization across or assets that Tim mentioned that topical.
Oh gross profit per mile performance, all $3.51 and $3.34 for both the quarter and full year, respectively were down.
Compared to results from the prior year.
Again, this was primarily driven by the significantly tighter and tighter crude differentials that drove 2018 results.
On slide seven.
Slide 11.
We bridge the annual fuels adjusted EBITDA performance versus the prior year.
Starting with 230 million. After you segmentation, we were negatively impacted by the 80 million that decline in fuel was margins as to why crude differentials that persisted through 2018, much larger were largely absent through 2019.
This headwind was partially offset by improved volumes, which contributed 38 million. In addition in additional adjusted EBITDA, reflecting record asset utilization and improved throughput, particularly at grateful.
Higher operating expenses and other miscellaneous costs were headwinds, which which mainly reflect the decline in the value of small refinery exemptions compared to the prior year.
And the absence of the Rins exemptions from the previously divested superior refinery.
Lastly, I don't results benefited from benefited from a 1.7 million dollar improvement in S. DNA, bringing our full year adjusted EBITDA to 152.5 million.
This is a strong result.
Well, if he was business given the challenging market environment seen across most of the year.
On slide 12, we reconciled ore sources and uses of cash across the year.
Most of you would have been flowing all progression since 2015, we have emphasized improved cash flow performance to measure the result of more strategic initiatives.
Brands across our business.
We started 2018 with $155.7 million, we generated 200 at 9.7 million cash flow from operations in 2019, and enhanced focus on driving cash returns and improve working capital management helped deliver results.
We received approximately 55 million net cash proceeds associated with the November divestiture up for San Antonio fuels refineries as well as 14.3 million in additional cash from other investing activities, which was primarily inventory financing.
343 million of cash was used to repay debt. Additionally capital expenditures for the year came in at the lower end up for guidance range at 73 million 40 years.
We closed the year with cash and had about 19.1 million.
Slide 13 provides us an office of world credit metrics, which ones you have to be meaningful improvement as we execute on transformation.
As noted at the start of my comments adjusted EBITDA for these calculation.
As reported this aligns with our covenants and include LCM unlikable.
Our credit metrics improved significantly by the end of 2019 compared to a year ago.
Our leverage declined to four times debt to trailing 12 month adjusted EBITDA of 1.6 turn improvement from the 5.6 times level, we reported at the end of 2018.
In addition, our fixed charge coverage ratio improved to 2.3 times, a 0.6 turns around the 1.7 times. It ended 2018.
I've been told into 2019, our liquidity totaled 379 million between cash and had an undrawn availability on our revolving credit facility down 72 million from year end 2018.
This was largely a result actions to reduce debt outstanding.
It is worth noting that despite this year over year decline, we have ample liquidity to effectively manage our business, particularly after closing the sale of or San Antonio refinery, which by itself disproportionately consumed liquidity.
We expect to continue driving our leverage lower our fixed charge coverage higher as you continue to progress against our strategic transformation with that I will turn the call back over the Tim.
Thanks Pete.
As you turn to slide 14, I'd like to take a moment to introduce sound overly.
Who was recently named executive Vice President of commercial.
Has over 20 years in commercial facing rulings in the specialty chemicals space.
Before joining Calumet Scott served as vice President for a global chemical company managing their organic chemicals business.
Got drilling Calumet in 2017, serving as the Vice President of commercial excellence and most regions recently as a general manager of our Calumets basal business.
Now, let's be VP of commercial Scott will be responsible for managing our lubricating oil solvents and wax businesses.
Additionally, Scott will be responsible for our corporate marketing research and development and customer service.
Scott his appointment is aligned with our strategic pivot towards driving growth in our core specialty business.
Scott's extensive experience in delivering commercial success for specialty chemicals businesses is a significant asset in our ongoing transformation and growth initiatives.
I'm going to ask Scott to say a few words of introduction and I'd also ask him to talk about our recent acquisition apparel objects Scott.
Thanks, Tim.
I'll keep my remarks brief, but I wanted to express store unit holders, how excited I am to be tasked with leading Calumet specialty business.
Well my role as new and supported by a strong team that has already built solid foundations from which we have launched our growth efforts.
We're looking forward to building upon our strong legacy while we further develop our portfolio of our highly valued customized solutions.
I'd like to transition over to slide 15, where I'll briefly discuss our apparel logics acquisition.
The strategic bolt on acquisition was completed in order to enhance and expand our capabilities and presence and the end markets for our niche specialty waxes.
Today, Calumet produces and sells over 100 million pounds, a waxes and our wax business has one of the higher margin profiles in our portfolio.
The acquisition apparel objects and its integration into our existing last value chain, well add 20 million pounds, a blending formulating and packaging capability [noise].
It's a natural and center just that fit with our existing business and adds an additional logistics hub George geographic footprint.
We see this combination is very powerful.
Allowing us to more efficiently access higher margin end markets extend down the value chain into packaging and blending and add additional technical expertise and high margin formulations.
We will now offer customers a fully integrated whack solution.
With that I'll turn the call back over to Tim Tim.
Slide 16, recaps, our multiyear self-help program.
In terms of our performance in 2019, we delivered $30 million, an incremental EBITDA, which was inline with our expectation.
And the program is on track to deliver on that 100 million dollar goal by year end 2021. He was that we outlined at the beginning of last year.
Looking forward to 20, Twond, we expect to deliver on our recently announced goal of adding $40 million in adjusted EBITDA through a number of specialty focused growth initiatives and cost management.
About $20 million of that goal is expected to come from improved profitability to the completion of two debottlenecking projects at our Shreveport and Princeton facilities.
Further rationalization of low margin products from our operations and through the completion of capacity expansion efforts and our high margin finished lubricants business.
The other roughly $20 million will come from cost reduction efforts that include a reduction and outside services and the elimination of certain facility level fixed costs in our system.
For example, last month, we announced plans to close our packaging facility in finding down New Jersey, and consolidate that production within our finished lubricants portfolio.
Additionally, as our focus consolidates around our core specialty assets, we will right size our staffing needs.
There are smaller asset portfolio.
Through today I can report that we have already delivered on three quarters of the $20 million of Gionee reductions on a run rate basis.
I'll close on slide 17, where we've outlined our outlook for the coming here.
In our core specialty business, we expect to continue driving EBITDA margin expansion and improving our gross profit per barrel performance towards our near term goal of $40 in gross profit per barrel annually.
Additionally, we expect to successfully execute several commercial initiatives driving year over year growth.
In our fuels business, our performance will be impacted by the story of industry utilization and the WCS W.G.I. crude differential.
Both the showed favorable signs earlier in the year.
Although recent global events have introduced significant uncertainty in the GDP outlook.
At the core Britain strategic level, we expect just successfully integrate parallon checks into our existing wax capabilities.
Complete our strategic review process for the Great Falls refinery.
Dry $40 million of incremental profitability through our self help the efforts and finally, we expect our annual capital expenditures to fall within the range of $80 million to $90 million.
Finally, before we go into Q today, I haven't announcement regarding myself.
I have notified the board of directors that I'm resigning as CEO on June Onest 20 Twond.
To pursue other interests closer to family.
It has been a privilege to lead Calumet for nearly five years.
I'm proud of our employee.
And what they have achieved and turning this company around.
As we pursue strategic options are great falls.
My vision of returning this company to its core specialty business and restoring its balance sheet is coming to fruition.
We are putting out a press release this morning regarding the CEO transition plan at the board has approved appointing Steve Moore, one of our current board members as new CEO.
Thus I will be focused on driving the great all strategic activity and ensuring in quarterly trends that transition to Steve over the next several months.
With that I would like to turn the call over to the operator open up the line for acuity.
[laughter].
As a reminder, sacrifice any we need to press star one I can tell if that slipped all your question. Please press the pound <unk>.
Please standby, we compared to Q when they buy stuff.
[noise] [noise] cannot first question comes from.
Gregg Brody with Bank of America.
You May proceed.
[noise] Hi, good morning, guys. Thanks for the update.
And.
Tim Good luck with the next steps.
Thanks, Yeah. Thanks right.
You've commented there at the end there was a little bit of if it wasn't especially here that cost maybe it was actually a little bit more about your decision to move on as you said it so to get this right you're going to.
At June 30, if you will resign sounds like you're going to full focus specifically on the great falls.
Strategic options and then Steve Moore was with coming to see.
It's a little bit more about the transition process.
If I, if I got that right and the one and then the transition process.
It's Steve going to be the permanent CEO potentially or how does that process play out.
Yeah, Gray I know I thought you called here at the end so I'm happy to place more yes, Steve Moore is going to be the permanent CEO effective June 1st.
Over the next three months, we will be focused on an orderly transition.
To make sure that the transition as smooth and seamless.
But let me step back you ask you were kind of a asking what's driving this.
And I talked about vision and when I got here for in out years ago.
Hi, reset our vision for Calumet.
On two things, we're going to refocus on our core specialty business.
And we were going to build a foundation for growth on self help and operational excellence.
If you look back on those four half years, we divested the Dakota Prairie refinery the superior refinery the anchor oilfield services and last year, the San Antonio Refiner.
We established our specialty business teams and our general managers.
As a focus on how we were going to grow our specialties business and that's going very well.
Well, we're never done on operations Excellence, our operations excellence is producing the results we want to see we talked about that earlier on the call in terms of some of the results in 2019 that we're very proud of.
Self-help is becoming a way of doing business and as that continues to.
Hi, good ingrained into our culture, I feel better and better about the way. This company is focused on their growth.
We announced the small bolt on acquisition earlier this.
This year on parallel tracks and it's it's a.
Well, it's small it's a sign that this company is ready to grow again, and then specialties business.
Finally, we talked about great falls.
Assets and that we're reviewing strategic options for Great Falls this year.
As as all of that comes to fruition, Greg we're on the cost of closing and old chapter and Calumets history, and opening up a new one and as we're entering into that new chapter I believe it's a good time for me to transition now and that was the discussion that I've had with the board.
And the board reluctantly has accepted my resignation as asked Steve Moore.
The new senior.
Thank you for that and you have to comp is quite a bit so congratulations.
Maybe I'll, just turn to the business, a little bit obviously or going on in the world today.
And you mentioned potential headwinds in the fuel products. We have you talked a little bit on specialty side, what you might be seeing today, that's that's up because of the kind of Iris anything you can help us think through.
If what type of downside, we could expect and just if are you.
Or something more stability.
Then we would thanks.
Yes, Greg there's there's all obviously a lot.
Concern a lot of uncertainty associated with the credit virus.
And some of the impacts that it has around the world markets.
What I can tell you is we think about it in three ways.
There's a macroeconomics impact and just as you see the impacts in the stock market as you see the impacts and overall demand and GDP that will certainly impact Calumet and we're focused on that and watching that carefully it's impossible to predict how long this will last but we're watching that closely alone.
With along with everyone else.
The other two ways that impacts our business is one directly in our supply chain, whether it's through customers or whether it's through a supply.
And procurement disruptions and what I can tell you is our specialty business is primarily a U.S. domestic business and has not been significantly impacted.
On the supply chain and then the third.
Factor that we look at here is if there is an epidemic or even a pandemic here in the U.S., how it impacts our facilities in our employees and I can tell you that none of our facilities at this point throughout the United States have been impacted by the Crown virus and we have implemented are busy.
Discontinuity plans at our precautionary measures around.
Food Pandemics and all of our facilities and believe we are in.
Good shape, a indicates that does make its way here into the United States.
Right and when you say that I've I appreciate continuity plan, it's part of the business when you run through those scenarios.
<unk>.
This is your expectation at the business can continue and normally have it without interruption in the scenarios or do you assume that would be some impact.
Actually produce.
Pivoted the plants just general art.
Yeah, Greg know our plans are to.
To be able to continue business as usual.
Through this.
Through any type of worst case scenario planning and as as we.
Drill on and and and think through.
There will be anything from sending not essential personnel to work from home and continue to keep things moving with limited contact to everything from.
You know, making sure people are our.
Washing their hands practicing good hygiene, having plenty of.
Have a any bacterial you know a hand sanitizer around all those things are part of the.
Preparedness activities that we've already taken and are set up for.
That's very helpful.
I'm sorry, your is it something yeah, let me let me just finish up there Greg on your second question, which is.
More getting around our specialties business and what we are kind of thinking about 420, 20, and let me ask Scott to maybe Steffi Ware.
Great. Thanks, Ben and thanks, Craig for the question.
You touched on a few things here right. The first is is you don't we're pleased to announce as you heard earlier that that as we look at 2019, we did deliver 4% volume growth in our specialties as wells over $209 of EBITDA.
So going forward Murray and continue to be intentional on are targeted products markets and customer segments as we deliver growth on some of those key product set that we've touched on such as waxes solvent Naphthenic base oils and engineered fuels.
And let me just provide a couple of quick examples for a little more color for you Greg on on that.
In addition to our apparel lodges acquisition on the whack side. We've also increased our wax production capacity at a free port plan.
Some process de bottlenecking.
We're going to be unlocking some more capacity in Princeton on the Naphthenic base oils.
And we'll continue to invest and grow our solvents and engineered fuels by enhancing our overall supply chain that working in cotton Valley.
So so we're excited about the the foundation that we've laid out for specialty growth and we're looking forward to do an exciting year in 2020.
Got it I'm going to jump back in queue I'd take with a bunch of time at all.
That's one question for Dan.
Thanks, guys.
[noise] [noise] once again, ladies and gentlemen, if you have any questions or comments. Please press star then one.
Hey, Greg what I would say this is Dan I know there's a.
I know, there's some other competing.
Events going on right now.
In many people have told us that they.
They will follow up with has on questions. So if you have any other questions Greg.
Let us know.
This would be the to.
Can I kinda <unk> I'm trying to start and they won't let me back can you guys can hear me right.
We gave me a lot here, but you can you kind of perfect [laughter] I was wondering what was going on.
I'll keep telling that okay.
So.
The acquisition you announced is there I am assuming you funded that on the revolver and is there a purchase price in any way to think about incremental EBIT from that.
There was a very small acquisition.
And so I don't want us to.
Yes, its focus on the size it was less than no $5 million purchase price. What we are focusing on here as a platform that we've acquired.
Yeah.
So let me back for a second just to alleviate and ask your question although.
It's a small business has positive EBITDA and cash flow. So it will be accretive immediately it's going to be accretive to our income.
By the end of 2020.
Now why do we do it we just because the platform for growth.
We will allow Scott and his team to access on higher margin and markets.
Things are really two things to the party for us it brings up packaging and distribution assets, having brings formulating and lending technical expertise and so we're putting down in the front end up our production of waxes and I think we.
No platform for future growth in this business.
The other thing I would just mentioned Greg is it's this serves as a a great opportunity for this organization to.
Get back into what it means to acquire a business and for example, we have put a full time integration manager in charge of this acquisition trying to make sure that not only we do do we do a good job integrating.
The capabilities that are logic springs to Calumet, but that we also but full time manager in charge of.
Capturing those synergies and driving this platform for growth that Keith mentioned, it's not something that we are done in the past in terms of our our inorganic growth activities, but it's one of the things that we're gonna be doing going forward and this isn't great way to kind of start exercising those muscles.
Trying to get back in debt that mode of best practices around how do we grow inorganically.
Got it.
And then what's what San Antonio can you just remind us how much EBITDA contribution there was this quarter from that and sort of LTM Oh, what was EBITDA I know that.
When we.
During the fourth quarter.
We think about taking out of our normalized numbers.
Hi, Greg This is Bruce the run rate was 10 million air.
And was was fourth quarter, particularly was particularly.
Good or bad or just sort of million dollars or October October was good the financial transition was October 31, So November and December of course, not on our books.
I've ever in December I got it. So that's that's it that's that's helpful and then.
Maybe just moving to Castro side of things.
Sort of the working capital improvement and how should we think about that going forward and this year is there opportunity.
More top two to produce more cash from that.
Also the use of your of your interim Committee Asian facilities.
[laughter] locked down.
Okay. So.
Working capital in 2019 net basis helped us by about $20 million.
You know we.
Reduced our inventory by 16 million trade credit improved by about 15 million and you know we.
We invested in our Aaas, because we had good relatives.
We've been squeezing that working capital for the last few years and as we turn towards growth I would say that our objective in 2020 is to keep it flat.
I wouldn't say that we're expecting to get more out of working capital we are.
Moving towards some rationalizations in.
Inventory as we focus on higher margin things, but I would say that the focus in 2020 is a structural earnings profile business discipline around or working capital management and our Capex.
In terms of our facilities the revolving credit facilities still available and ample liquidity and we still have access to supply and offtake agreements with our.
Our banking partners that front tests, our crude and some of our.
Inventory financing on the finished goods side so.
And then you did you did some work on releasing letters of credit or be put the reason, we get freight and anything more that we see there potentially this year.
I think this year, it's a function of getting the earnings to repeat or be a strong app or stronger that not 2019 that we'll continue to drive our leverage metrics down we are very focused on improving our fixed charge coverage ratio.
That hasn't been different can impacts to our facilities and covenants in the future and we Oh.
Dialogue with our rating agency partners to better understand or business, because we would like to upgrade our a rating and get back to a higher sit in that regard.
And since I'm, the only one off will take two more if you if you don't mind.
Obviously, obviously, the San Antonio I'm, sorry, the divested Montana.
False.
It it sounds like you Tim it sounds like because there's some incentive for you too.
Okay. That's done before you leave.
And you guys mentioned this year that is that how likely do think that is.
[noise], Yeah, Greg I mean, the incentive for mitigate that done is because of the vision that I've said for the company in the desire to you know kind of have that as part of the completion of the chapter, but my part here in and.
In Calumet I mean, it's we will do.
As we review these options what is best for our shareholders Rainfalls. There's you know, we're not going into anything because I'd like to do it from my own benefit we will we will focus on these strategic options as a benefit to the came at shareholders.
As I've mentioned before.
Well look at all options and I as sale included a we have retained and advisor.
And our objectives our assembly.
Well to again do a credit accretive transaction that helps us focus our capital and are on our efforts on or specialties business.
Got it and then you mentioned.
During the prepared remarks about addressing potentially 22020 threes, presumably that's you're talking about using false proceeds to address those.
Is there anything else that you were which consider divesting one is that correct in too is there anything else you're looking at divesting other than great falls to help I'll address that.
Well, let me let me take one part of that question then I'll ask you talk about.
The second part of that you know in terms of our assets. We've said this before Russo said this many times you know we look at the value of these assets in our portfolio and and with all of our strategic growth plans and of all our initiatives to continue to.
Expand our assets, we know a pretty well with the value is those assets to our portfolio.
What we said before is we will always you know look at.
Okay and offers or at a conversation that people want to have for any other assets, whether they're fuels, whether they're specialties way any asset that we have where someone believes that its more valuable in their portfolio that ours. Certainly we will we will look at any of those situations and try to decide.
If it makes sense to to engage in any type of activity around those lines. So we were talking about great falls right now because we know that.
Strategically gives us an opportunity to focus on our core, especially business, but sure. We'll look at well, we'll look at all of our assets. If there is interest.
So Greg let me take the of the refinancing question first.
The 20 twos do not go quite until January 2000, and a 21.
So we have a bit of a window to think through it.
In terms of refinancing.
Well that on the unsecured market that's movie we'd like to state.
As we think about capital structure and what options do you have.
Given what's happening at a macro environment as we review our options for Great Falls.
What were doing is we're looking at.
The landscape ahead of us we're evaluating the capital markets, we're against the transaction options and you know open to generate strong cash flow. So you know, it's nothing more than what we've always done which is assess our capital markets options or risk and I guess all cost of capital going forward. So.
The transaction occurs at the right time, it might be the right.
Just two or three pay from the proceeds or if we get an opportunity to refinance one of those branches will take it and then we'll now will match the proceeds according to the after.
Got it.
<unk>.
Thank you for the took two out of time I think I apologies that later today my questions, we'll obviously be shorter.
[laughter]. Thanks, Thanks for getting sometime.
Great. Thank you Greg.
And our next question kind of Amgen Mcclellan Wasserstein you May proceed.
Hi, guys. Thanks for Hey, Thank you for letting us a ask a few questions and Tim sorry to see leave a good luck with a your next steps.
Thank you Andrew.
As a starting point on specialty we're encouraged to see the recent acquisition and the focus on specialty gross <unk> being the core business.
As a starting point the 208 million for from EBIT da from specialty this year, if we assume there's $5 of gross profit per unit improvement in the near term and 2020 that would imply significant gross and 2020 do you think 250 million people <unk>.
Trouble from the specialty segment in 2020.
Yeah, Andrew let me take a shot at that you know that the $40 per barrel gross profit per barrel target that we had to put out there is a near term target and but I don't want you to necessarily take away that it is a 2020 target. However, we do think there's opportunity to grow.
So I think the the slide on on <unk> on on Slide nine to waterfall chart for the specialties business. I think is a is a great starting point for your question. It shows.
Our specialty business has improved significantly across this year as we've talked about on the on the prepared remarks.
And you're right, we look at our specialty business and we have told you and others that we think we have a 200 million dollar, especially business.
We are ready to say, we have a greater than 200 billion specialty business.
As we look at our plans in our efforts, we would probably say Andrew maybe to 15% to 40 would be would be the the way we would probably characterize it could we get to 250, absolutely, but probably from a.
From a a more conservative basis, we would probably say to 15 to 240 million is what we would now bracken, our especially business that.
And when you say that to 15 to 240 is that a near term target and secondly, what is kind of the ash aspirational target. If we look out a couple of years.
Yeah, I said, Andrew that is a near term target and of course, our aspiration target is to go.
North of 250 like you like you had mentioned.
The other thing of course is apparel logics acquisition is certainly a oh as Steve mentioned earlier a platform for growth and we'll continue to look for bolt on acquisitions. So the numbers. We just talked about of course don't assume any any additional bolt on acquisitions.
That makes sense and as you look at divesting or considering strategic alternatives for great falls, how much Gionee would you ascribe to the specialty segment, if that business if that unit that noncore unit were to be divested.
Well you know last last quarter, I will say something all at Ti.
Say something else to but remember last quarter, when we re segmented.
Into a corporate segment, we told you that our guidance there was about $100 million for.
Gee in a.
That is unallocated given our announcement on our self help program and the $20 million of DNA improvements that we're capturing here in 2020 I can tell you that.
You can probably assume 90 million would be that corporate DNA.
Signal or target that we would be looking for and the other 10 million to get us to the 20 million is directly attributable to either specialties or fuels and so we'll be part of.
Those businesses, which is how it kind of breaks down the other thing I would mention is none of this assumes any type of a strategic options around great falls. So if we decide to take action on Great Falls of course for example, if the great falls asset was removed from.
Our portfolio or we would believe are our DNA costs would go down significantly from that.
Is there anyway to quantify that that the latter point on just the GE and they cost from Great Falls. If we're if you decide to go down that path.
I'll take it from here, Andrew I don't think we're prepared or ready to disclose that stepped out we know there will be a step down but midway through the strategic options, but if you look at.
I would run this business over the past few years, you've got leaner and meaner at the corporate level as we struggled whatever leverage and so there's just a natural cost basis to remain a public company and do things right and so.
As we go through the you know the options that are presented was a great falls and we will then be thinking about what are the truth stranded costs that we have to shed and watch a true cost will have to go with the default acquisition.
Yes for the buyer. So we haven't done that homework in detail yet because we haven't seen all the options and so that's a wait until those around the table and will catch up and we'll be happy to update you in the way that is more thoughtful.
Great and Tim <unk> longer term on specialty what do you think the organic growth rate.
I'm looking at it from a bottom line perspective should should be for the specialty segment.
Yeah, Andrew I'm sitting here for Tim you know the organic growth rate for our specialty business given what we do I think you have to aligned around us GDP I think the thing about from the standpoint, if anything else. We are refinery and so we make goods and services and specialty products that are.
Going into a wave of number of things. So on average we should be stepping GDP. We will step ahead of GDP, where we have growth platforms, where are these businesses are delivering things that others can't but to the extent that we are in the U.S. and doing U.S. business I think your base model should be around us.
And I'll just say this Andrew and I think we're going we're out of time. After this but what I would say is if you look at some of our businesses in 2019, our solvents business, our netcentric business, our true feel business.
In our wax business I think have been growing faster than GDP in 2019, and those are they kind of businesses that are that keeps us just referring to and so we continue to look to to drive that growth and see what we can.
Accomplished but I think Keith is right on when he says you know use GDP is your general growth rate.
[noise], ladies and gentlemen, this concludes that culinary question on today's call, having like his hand call back over to telco for closing remarks.
[noise]. Thank you Dimitris I'd like to close by thanking our board and all of our employees for all of their hard work in 29.
Over the last few years.
Collectively we've transformed this partnership and put it on a path for long term growth.
We have a lot to be proud of but our work is not done and we have aggressive goals to continue our transformation.
We look forward to sharing the results of our success with our unit holders throughout 2023 2020. Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
[music].