Q1 2020 Earnings Call

Sure, Yes joined to find Mr. At freight <unk>, Vice President Finance.

Today's call is being recorded it is now my pleasure to turn the floor over to add freight <unk> you may begin.

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Before we begin I would like to remind you that the comments included in todays conference call constitute forward looking statements within the meaning of federal Securities law.

Including forward looking statements relating to the recent cobot 19 pandemic.

These are based on our beliefs as well certain assumptions and information currently available to us.

Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in the company's FCC filings.

Certain financial measures discussed during this call, including adjusted EBITDA distributable cash flow and distribution coverage ratio or non-GAAP financial measures reconciliations of those non-GAAP financial measures can be found in our earnings press release.

I'll now turn the call overdose.

Thanks, Ed and good morning, everyone.

Welcome to dinner resources first quarter 2020 earnings call.

Our results for the first quarter over 2020, Mark at solid start to the year.

Despite numerous evolving challenges associated with the global Corona wider thoughtfully.

The health and safety award workforce their families.

And everyone involved directly or indirectly.

Our business remains our foremost concern at this time.

Companywide prevention efforts have helped ensure a safe working environment and continuity of our operations.

As we take corrective measures to minimize disruption to our production.

I'm happy to report that our plan has not experienced any shutdown event and operations are running smoothly.

Our team remain steadfast and their commitment to operational stability and performed admirably in implementing their comprehensive covert 19 mitigation plan developed in the early stage of the outbreak.

New procedures include frequent extensive sanitation and measures to reduce person to person interaction such as staggering shift changes to and tighter control Oh outside contractor movement.

The plan also appliance vertical for self reporting.

Contact racing in the event of positive cases, and contingency plans for maintaining operations green very simply absent scenarios.

As we continue to refine these wins.

We are using data rather than from dates to guide and measured return to normalcy.

As demand expectations develop we will Taylor our production profile to match expected consumption.

We are confident in the flexibility of all of our operations to optimize onstream time and production cost.

Oh, managing rapidly evolving customer needs.

Moreover, we are optimizing product storage on side and across our supply chain.

Including yourself terminal storage and wrote.

Our end customers to ensure consistent delivery and balance inventories in demand with demand.

We're also managing our production schedule in line with maintenance activities in order to efficiently address maintenance projects during plant outages.

The goal is to optimize our maintenance program.

And the associated outage time with any perceived production demand imbalance and do more work in house as he may have flexibility to extend said downtime.

In terms of first quarter results, we have achieved another strong production corridor with 680000 short tons produced eclipsing the previous first quarter record set last year.

However, supply surplus and lower demand led to a beacon pricing environment and lower volumes sold.

Results hold for the quarter included hundred 40 million in net sales net income of 14 million and adjusted EBITDA of 22.4 million marks we consider favorably in light of current well tire market conditions.

Highlighting our steady results over a more normalized period, we have average probably about 20 million of net income and 30 million a quarterly adjusted EBITDA over the last eight quarters on a consolidated basis.

Turning to sale.

We're working proactively with customers to manage expectations for consumption and demand.

Demand in several several of our domestic end markets has been affected by this sudden should slow down <unk> economies activity.

Flat glass production has been especially screen due to stalled automated manufacturing and declining architectural glass demand and we have seen some plants temporarily idled their operations.

Container glass on the other hen has remained quite stable thus far.

And in some cases is exceeding historical demand due to a lack of call it availability.

On the international side, we're facing declining demand in many geographies and Mark end markets.

Most notably flat glass is architectural in automotive and automotive activity in Asia has been vastly curtailed.

Container glass demand has been more resilient, although the impact of cuts the brewery I put in Mexico have yet to be defined.

So then detergents have largely been considered essential business, which we hope to bolster demand for those end users.

We view carbonate production has has taken ahead due to Argentina suspending production. However, two way has not mandated shutdown for lithium producers, who maintain its stable production outlook due to a backlog of orders.

Battery manufacturers.

I will note that much of the cobot India's demanded ration.

It did not take or pay called until the late in the quarter. So we did not experience and materially impact to our results in Q1.

However, we do expect to see considerable pressure on demand in the overall international market persist for the timing.

Especially since the pace of economy recovery is highly uncertain at this point.

This shows in our April 2020 production results as we experienced any approximately 20% greater than normal decline in the production.

Overall, as we look at our customer base or more long term basis.

We anticipate geographical diversification stability in our plastic products like detergents, and container glass and long term growth potential in markets like lithium and flat glass support a favorable revenue mix and outlook.

From a financial planning standpoint, we've taken steps to bolster our liquidity and cash position in the interest of near term financial flexibility.

Despite graded market turmoil in March we successfully closed at 30 million term loan at a favorable fixed rate.

Our capital position remains strong and we believe we have ample liquidity as these basic covidien viewed period of economy contraction and uncertain timeline to recovery.

I'll now turn the call over to Ed who will discuss our financial results for the quarter in more detail.

Thanks of.

Thank you everyone for joining our call and for your continued interest engine or resources.

Today I'll provide some detail around our first quarter performance the major financial drivers from the quarter and some key metrics, we used to evaluate our business.

Well It goes mentioned production volume for the first quarter 2020 was a record 680000 short tons.

As we continue to execute on or operational reliability initiatives and prioritize production stability.

Total volume sold during the first quarter of 2020 was 664000 short tons, which is a 2% decrease from the first quarter of 2019.

The 16000 ton Delta between production and sales volume reflects reduced demand in the first quarter due primarily to an oversupply and the international market.

Domestic volumes sold in the quarter increased by 6% year over year to 237000 short tons.

Total international volumes sold in the first quarter of 2020 was 426000 short tons, a 6% decrease over the 453000 short tons sold in Q1 2019.

After shifting considerable volume in 2019 to the export market to take advantage of favorable international pricing, we increased sales volumes domestically in 2020, as we continually evaluate and optimize our sales mix.

Average domestic price in the first quarter 2020 declined 1.4% from the prior year quarter versus a drop of 18.9% and international prices.

Everything evidencing the near term benefit of proactively increasing domestic volume and what we believed to be the relative stability of domestic sales.

Overall pricing was down 10.5% in the quarter, driven primarily by higher global inventory levels, and the resulting supply demand imbalance.

Lower net pricing combined with a decrease of 13000 tons sold from Q1 2019 resulted in first quarter net sales of 114 million or a decline of 12.3%.

Cost of products sold including freight in the first quarter 2020 fell 4% to 87 million compared to the same period in 2019.

Primarily due to decreased variable costs because of lower net sales.

SDN expenses decreased by 22% from Q1 2019 to 5.8 million in the first quarter of 2020.

As a result of lower employee benefit expenses professional fees and contracted services.

Cash provided by operations up 16.7 million in the first quarter 2020 increased 198%.

From Q1 of 2019.

Primarily due to an 8.8 million decrease in affiliate receivables principally due to timing of collections and lower export sales.

These cash receipts resulted in a total increase to working capital of 4.4 million in Q1 2020.

As compared to the 26.2 million increase in the first quarter of last year.

From a balance sheet perspective, we continue to maintain a conservative capital structure ending the first quarter with a net debt to adjusted EBITDA ratio of 1.0 times.

Next let's turn to discuss how these results translate into two of the key non-GAAP metrics. We continue to monitor as an MLP adjusted EBITDA and distributed cat distributable cash flow.

In the first quarter 2020, we recorded 22.4 million of adjusted EBITDA compared to 33.2 million in the first quarter of 2019.

Distributable cash flow attributable to general resources was 9.0 million for the first quarter of 2020 compared to 15.6 million in the first quarter 2019.

At a 34 cents per unit distribution, our distribution coverage ratio was 1.32 times for the first quarter 2020.

We remain committed to maintaining a conservative and flexible balance sheet as we continue to embark on our growth plans.

With that in mind, we maintained our first quarter 2020 distribution, given our financial performance in the quarter.

Going forward, we will continue to closely monitor our cash flows as we determine the most prudent distribution strategy and these uncertain times.

Now I'll turn the call back over to oppose to provide more commentary on our recent performance and growth strategy.

Thank you Ed.

First I would like to thank our entire junior team for their resilience and overall job well done in the first quarter.

It was an easy acclimating to down per se unprecedented measures implemented as part of the Corona buyers and dynamic.

But our team face the challenge proactively and responsibly.

We have learned a lot during this period.

And much of what we have put in practice will provide a guide for safety protocol going forward.

The management team has earnestly developed and continues to refine comprehensive business strategies for navigating near term market uncertainty.

Our first quarter financial performance was encouraging.

And starting the year on a good footing was an important milestone in the current economy climate.

As it stands we believe our businesses, while acute to endure the many variables outside of our control.

And for those we do control we remain focused on successful execution.

One of the primary focal points for our businesses, our greenery expansion project.

Which we expect will increase our plant capacity through approximately 3.5 million short tons per year.

We believe this project still represents an attractive investment opportunities.

As it significantly increases our production rate capabilities, while also improving our operating margins.

We continue with preliminary design and engineering, which is largely a desktop study at this time.

As of now we're proceeding as planned but we are continue evaluating our timing in the context of our current economy climate.

We're confident in the underlying economy and need for new supply in the soda ash market over the long term.

Our strong capital structure cash generation capability, and low operating cost position us to fund the Capex economy weekly and maximize long term return to our unit holders.

In tandem with our expansion project plan. We also continued to develop our strategy and structure for our exit from Antech.

Post Anzac, we believe their marketing our product jointly with our parent Companys Turkish production will offer the most advantages source of supply to our customers in growing markets abroad.

We expect that geographic diversification, along with Gener groups existing distribution network will allow us to realize logistics savings through supply chain optimization.

In closing as we navigate a challenge economic landscape and honestly descended social distancing measures, we expect our financial strength and resources will allow us to weather macro economy and soda ash specific challenges that may lie ahead.

But have all it is our talented people working for dinner that will drive our success through the near term, we'll have we'll talenti, our major growth stage and beyond.

Thank you for your continued interest in general resources. This concludes our prepared remarks.

Thank you for participating and the general resources first quarter 2020, <unk> earnings conference call and webcast.

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