Q2 2020 Kraton Corp Earnings Call
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[noise] good morning, and welcome to create on Corporation second quarter 2020, and conference call. My name is cap and I'll be your conference that's what Peter.
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Today's conference is being recorded if you have any objections to me disconnect. At this time I'll now turn the call over to Mr. gene Shiels director of Investor Relations you may begin.
Thank you cap good morning, and welcome to the Grey Tom Corporation second quarter 2020 earnings call.
With me on the call. This morning are Kevin Fogarty, Cray towns, President and Chief Executive Officer, and Atlanta, Santana soft, great taunts Executive Vice President and Chief Financial Officer.
A copy of our second quarter news release and the related presentation material. We will review. This morning is available in the Investor Relations section of our website.
Before we review our results for the second quarter of 2020, I'd like to draw your attention to the disclaimer on forward looking information and the use of non-GAAP measures included in our presentation. This morning and in yesterday's earnings press release.
During the call we may make certain comments that are not statements of historical fact, and thus constitute forward looking statements.
Investors are cautioned there are risks uncertainties and other factors that may cause great times actual formats to be significantly different from the expectations stated or implied by any forward looking statements we make today.
Our forward looking statements speak only as of the date. There. Maybe then we have no obligation to update such date that's in the future.
Our business outlook is subject to a number of risk factors as the format of this mornings presentation does not permit a full discussion of these risk factors. Please refer to our forms 10-K, 10-Q, and other regulatory filings available in the Investor Relations section of our website.
Regarding the use of non-GAAP financial measures a reconciliation of each non-GAAP financial measure we use to its most comparable GAAP financial measure was provided in yesterdays earnings release and in the appendix interpret presentation will review this morning.
Following our prepared remarks, well open the line for your questions I'll now turn the call over to Kevin Sorry, Kevin.
Thanks, Jane and good morning, everyone.
In light of the overall market conditions in particular, a greater impact on global market demand associated with Covance 19, we're pleased with our results for the second quarter of 2020.
Hi, John delivered strong financial results in the second quarter with adjusted EBITDA of $69.5 million.
As always in certainly in the current environment. The safety of our employees has continued to be our highest priority.
We've been fortunate thus far that the steps we've taken and the responsible actions of our employees have resulted in no significant coal that 19 concerns or any material impairment and our ability to operate efficiently effectively and of course safely.
Great Don's broad portfolio in geographic diversification continues to be a strength.
Our diversification in the resilience of our business model contributed to our second quarter 2020 results, particularly in our polymer segment, where we continue to see stable demand and many in markets such as medical personal care adhesives, and infrastructure and were favorable raw material sourcing, particularly for me to Guy and contributed to this strong profitability in the quarter.
However, current current market conditions did present more challenging environment for our chemical segment, where sales volume was down compared to the second quarter of 2019 due to overall market fundamentals, especially in the Americas, including the adverse impact of Golden 19 on end market demand and the significant default decline in oilfield activity in North America.
In terms of management actions.
During the second quarter, we made solid progress on cost control and operating efficiency, particularly with the ongoing focus on our manufacturing locations to drive improvement in fixed costs.
[noise], turning turning now to slide five.
While cold, but had a broader impact on the global environment as mentioned, we did not experience disruption in our global safety chain supply chain or operational capability. Our plans continue to operate at plan rates raw materials were readily available and in our polymer segment, specifically at historically attractive prices and as a result, we targeted an inventory.
Build in the second quarter to leverage these know these these low raw material costs.
With the health of our employees customers stakeholders and local communities remaining our top priority our manufacturing locate locations continue to operate at normal planning rates under the enhance social distancing protocols and safety measures, we implemented earlier in the year.
Side of our manufacturing locations in innovation centers. The majority of our employees continue to work remotely.
Because of our safety precautions once again and the ongoing diligence of our employees. We have not had a significant number of reported cases of cobot 19 within our company.
Although covert 19 did not have a material impact on our first quarter 2020 results. We did see a broader demand impact associated with Golden 19 in the second quarter, particularly in North America.
However, our geographic end market diversity wasn't advantage in the salt in the quarter as solid demand trends in medical personal care adhesives and infrastructure served to mitigate weakness in other end markets.
Given the overall resilience of our business our balance sheet remains healthy since year end 2019, we have reduced consolidated net debt by $474 million.
We have no scheduled maturities until 2025, and a very strong liquidity position with cash of $137 million at quarter end and significant availability under our 250 million dollar ABL facility.
Due to a number of factors, including the annual seasonal inventory build in advance of the paving and roofing season, Weve historically generate the majority of our cash in the second quarter excuse me the second half of the year. We expect this to be the case this year as we liquidating inventory in the second half releasing working capital and generating cash and the process.
As such we anticipate further debt reduction through free cash generation over the balance of the year.
Given the health of our balance sheet, and our financial flexibility, our current operating and strategic priorities remain unchanged debt reduction remains a primary focus we continue to position the company for the long term and we therefore continue invest and our innovation pipeline.
So our innovation commitment we have recently introduced our revolution family of locally relevant Esther formulations, which are providing a compelling bio based alternative to hydrocarbon based tackifiers and our circular polymer grades which are enabling expansion of the circular economy through their ability to compatible eyes version plastic bio plastics and post consumer and industrial plastic recycled.
Extremes.
Overarching theme in many of our recent innovations successes as well as our ongoing innovation programs is staying ability.
Over the past year, we've made great progress in advancing our sustainability objectives, not only on the product development front, but also in terms of tangible progress in establishing key metrics.
Consistent with the overall theme of sustainability, we remain on track track to deliver an estimated $20 million a run rate cost savings by yearend.
With these opening comments I'm going to turn now the call over to our Chief financial officer at than as Thomas off will provide more details on our financial financial results for the second quarter agonists Thanksgiving and good morning, everyone turning to slide six I will provide more detail on our consolidated financial results for the second quarter.
As Kevin indicated in the context of overall market conditions, we posted strong results in the second quarter 2020, with adjusted EBITDA of $69.5 million and an associate as adjusted EBITDA margin of 19.6%.
While adjusted EBITDA was down 32, and a half million dollars compared to the second quarter 2019, a significant portion of the decrease is explained by the sale of our former Cariflex business.
Excluding cariflex operating results in the second quarter of 2019 consolidated adjusted EBITDA would have been down 18.1 million with a decrease largely attributable to current market conditions, including the impact of code at night team.
The second quarter 2020, consolidated revenue of $355.7 million was down 139.6 million compared to the second.
Compared to the year go quarter.
51 million of this decrease was associated with the sale of the Cariflex business well the balance of the decrease was driven by lower sales prices in both polymer and chemical segments, resulting from lower raw material costs in the lower sales volume in our chemicals segment.
In terms of segment results, our polymer segment delivered strong results in the second quarter with adjusted EBITDA of $53.8 million. This was down 6.3 million compared to the second quarter as 2019 due to the sale of the Cariflex business.
The polymer segment margins remained relatively stable in the second quarter and in light of the effect of lower average raw material costs on selling prices and revenue we posted an adjusted EBITDA margin of 26.4% for the quarter.
Market conditions for the chemicals segment were more challenging.
In the second quarter, principally due to the impact of called at 19 on market demand.
Chemicals segment, adjusted EBITDA was $15.7 million in the second quarter down 26.2 million compared to the second quarter of 2019. The decrease was driven by lower sales volumes associated with these market conditions lower average prices in our CST chain compared to the historical high in the second quarter.
Team and to a lesser extent with tour upgrades and the timing of sales to a significant customer which shifted to the third quarter of this year.
Debt reduction remains a key priority for create Don.
Although consolidated net debt.
Adjusted for FX increased by modest stemming the half million dollars in the second quarter.
This was largely due to timing and the impact of the targeted inventory built in the second quarter of 2020.
On a year to date basis compared to year at 2019, we have reduced consolidated net debt by $474 million adjusted for the effects of foreign currency.
Historically would generate the majority of our cash in the second half of the year and this relates to the seasonal inventory build into first half associated with our paving business, our use of cash and inventory liquidation and release of working capital in the second half of the year.
As such we expect further reduction in debt in the second half of 2020.
Our liquidity position remains strong we ended the second quarter with a 137 million of cash.
And $208 million of borrowing base availability under our 250 million dollar ABL facility.
With only $15 million outstanding at the end of the second quarter.
Turning to slide seven the second quarter revenue for the polymer segment was down.
To discuss the polymer segment results the second quarter revenue for the polymer segment was down $94 million compared to the second quarter of 2019.
And as previously noted $51 million of the decrease relates to the sale of the Cariflex business.
Excluding cariflex the polymer segment revenue was down $42.9 million.
Merely due to lower average selling prices associated with lower raw material costs.
Fair to the second quarter of 2019 sales volume was down 5.9%. However, excluding volume associated with Cariflex Inc. second quarter of 19 overall polymer segment sales would have been up 205% compared to the second quarter 2019.
Sales volume for the specialty polymer business was down 14.7%, which reflects lower sales into lubricant additives. The impact of go that 19 on sales into consumer durables, principally in North America as well as lower sales into global automotive applications sales volume for performance products was up 6.7.
Compared to the second quarter 2019 on higher sales into European roofing applications, and strong demand and as he sits and personal care and hygiene applications.
Second quarter 2020, adjusted EBITDA for the polymer segment was $53.8 million.
And the associated margin of 26.4% and.
And this was down 6.3 million compared to the second quarter of 19.
Excluding cariflex from second quarter 19, the polymer segment adjusted EBITDA would have been up $8 million or 17.7% compared to the second quarter of 2019.
Also note that despite the sale of our Cariflex business in the second quarter. This year second quarter 2020, adjusted gross profit per tonne was a strong a thousand $40 compared to $1075 per ton in the second quarter 2019, which included the Cariflex business.
On a year to date basis polymer segment revenue was down $114.7 million affecting the sale of Cariflex and lower average selling prices associated with lower raw material costs. Excluding cariflex revenue would have been down approximately $60 million or approximately 13% largely due to the effect of lower.
Our average selling prices, resulting from lower raw material costs.
Excluding cariflex sales volume was unchanged versus the first half of 2019.
Specialty polymer sales volume was down 6.5%, reflecting the impact of cobot 19, resulting from weaker demand in North America, and lower sales into lubricant additives in.
In Asia demand weakness associated with gold at 19 was largely offset by higher demand and medical applications sales volume for performance products was unchanged compared to the first half of 2019.
The polymer segment adjusted EBITDA for the first six for the first six months of 20 to 20 was a $105 million compared to 108.3 million for the first half of 2019.
Excluding cariflex first half 2020, adjusted EBITDA would have been up 13.4% compared to the first half of 2019.
In addition on a year to date basis adjusted gross profit per tonne for the first half of 2020 continues to be strong.
Sales and $56 per tonne slightly ahead of the $1049 per ton for the first half of 29 team.
Turning to the chemicals segment results on slide eight.
Chemicals segment revenue for the second quarter of 2020 was down $45.8 million compared to the second quarter 2000 2019.
The decrease reflects lower average selling prices in the CSD chain and to some degree for rosin esters, which is related to the significant decrease in gum turban team and continued pressure on resin prices and by lower sales volume in total products into our upgrades, resulting from market conditions, including lower oilfield demands and the impact.
Back to school that night team.
In terms of the pricing decline in the CST chain. The second quarter 2019 was essentially the peak pricing for gum turbine team and therefore for CST based products.
Relative to year end 2019, we have seen a stabilization and gum turpentine in Rosen prices and this has translated into civilization of margins in our CST refinery products and for us investors.
Second quarter sales volume for the chemicals segment was down 16.1%, primarily a reflection of decline in the oilfield markets and related systemic impact of comp cobot 19 on market demand, mostly in North America.
Performance product performance chemicals sales volume was down 23.4% compared to the second quarter 2019, reflecting lower sales into oilfield and fuel additive applications and the timing of sales to a significant customer which shifted into the third quarter.
Well sales volume in that he lives was down 8.1%, primarily due to lower sales into road marketing applications.
Sales volume for tires was down, 39.4%, reflecting weaker automotive demand and disruption into production.
Associated with Covance 19, however from absolute volume metric standpoint sales of sales volumes in our target business accounts for less than 5% of chemicals segment sales volumes.
Chemicals segment adjusted EBITDA for the second quarter, 2020 was $15.7 million, a decrease of $26.2 million compared to the second quarter 2019.
The decrease reflects lower sales volume due to overall market conditions and the impact of gold at 19, and lower pricing in the CST chain compared to the.
Second quarter 2019 peak pricing.
And to a lesser extent lower pricing foot tore upgrades compared to the second quarter 2019.
I will turn into year to date results for the chemicals segment.
Chemicals segment revenue for us for the six months ended June 32020 was down $54.1 million compared to the first six months of 2019.
Drivers for the decrease is similar to the second quarter, the largest was which was lower pricing in the CSD chain and for us investors and lower sales volume into tofa upgrades related to oilfield market conditions and for upgrades and recovered 19, a significant factor in the volume decrease primarily in North American.
Chemicals segment volumes for the first half of 2020 was down 4.9% compared to the first half of 2019 due to current market conditions and the impact of coal that 19 overall demand.
Performance chemicals sales volume was down 5.5%, reflecting lower sales into oilfield and fuel additive applications, while volume for adhesives was down 2.1% principally due to lower sales into road marketing applications.
Thank you for our Tars business was down 18.3%, reflecting overall trends in the automotive market and production disruption associated with coated 19.
Chemicals segment adjusted EBITDA for the first six months of 2020 was 42.4 million down 40.8 million compared to the first half 2019.
The decrease was driven by lower sales volume, resulting from market factors, including the adverse impact of coal that 19, and lower pricing in the CST chain and tore upgrades.
Slide nine presents consolidated results for the second quarter.
Year to date basis, having largely covered the drivers of consolidated results in the segment review I'll note that here that adjusted EBITDA for the first half of 20 to 20 for the whole company was 147.4 million and this compares to 191.5 million for the first half of 29.
Team.
The adjusted EBITDA margin for the first half of 2020 was 18.8%.
For the second quarter of 2020, we reported adjusted diluted earnings of 30 cents per share and this compares to $1.58 a share for the second quarter 2019.
For the first six months of 2020, we reported adjusted diluted earnings of.
57 cents per share and this compares to $2.48 per share for the first half of 19.
Now turning to slide 10.
Debt reduction remains a high priority for create Don since year end 2019, we have reduced consolidated net debt, excluding the effect of foreign currency by $474 million largely through the sale proceeds from our Cariflex business. As previously mentioned, we expect cash generation and therefore further <unk>.
One in the second half of 2020.
I want to again highlight our strong liquidity position, which at quarter end totaled $345 million, consisting of 137.4 million of cash and an available borrowing base of approximately $208 million under our ABL facility.
As previously mentioned earlier this year the maturity of our ABL facility was extended to January 2023.
Now turning to slide 11.
Few comments on our expectations for the second half of the year.
While we're not providing any formal guidance at this time, we do expect that weaker overall demand associated with gold at 19, and other factors will have an adverse impact on financial results for the second half of Twentytwenty compared to the first half of Twentytwenty specifically.
Number one.
Lower plant operating lower plant operating rates in our plans associated with first half 2020 inventory build would result in less favorable fixed cost absorption.
With an expected impact of $20 million to $25 million.
Number two the second half of 2000 Twentys expected to include cost associated with turnarounds and maintenance.
That will be $5 million to $7 million higher than in the first half of 2020.
Thirdly, the second half of 2020 is expected to include two quarters of cobot nitin impact versus one quarter impact in the first half of 2020.
Number four we expect continued market weakness in our chemicals segment in the second half of the year, primarily due to adverse impact of coated 19.
And lastly, our financial results in the first half of the year included approximately $10 million of adjusted EBITDA associated with the Cariflex business, which was sold in March of this year.
I'll now turn back to Kevin for his closing comments. Thank you and has now let's turn to slide 12 for an update on our need to near term market outlet.
Outlook as previously noted during the second quarter in our chemical segment, we did see a more pronounced demand impact for coal that 19, particularly in North America, where we experienced lower sales into oilfield fuel additives and road marketing applications sales volumes for tires globally were down reflecting weaker automotive demand.
Disruption in the tire production associated with Covance 19, our polymer segment. Similarly in North America, primarily the impact of coal. The 19 result in the lower sales volume into consumer durable applications.
We continue to expect that relative stability in certain end markets will mitigate weaknesses and others and as a result, the outlook for North America is mixed in contrast in Europe. We currently see relative stability in overall market conditions and in China and broader Asia, we see evidence that demand is improving.
In terms of specific end markets nothing significant has changed compared to our view at the end of April as expected, we have seen weaker demand in oilfield applications in automotive AFA, Kelly applications and in our tire business, where automotive demand and coal that 19.
Disruption and tire production had been a factor however, while we saw particularly robust demand in many adhesive markets in the first quarter, particularly in packaging applications, such as tapes and labels and in construction and he says from medical applications such as masks during the second quarter. We noted some moderation in demand in adhesive markets and our view overall.
Adhesive market demand remained stable, but concerns about supply availability, which may have contributed to strong first quarter demand have lessened and we believe many customers now have a more conservative approach in managing inventory levels relative to actual demand.
In summary, we expect that our market diversification will continue to contribute to relative stability in our financial results nearly half our polymer segment revenues associated with end markets in which we continue to see positive demand trends and approximately 40% of our polymer segment revenues associated with end markets, where demand trends are relatively stable.
But for which we are maintaining a cautious outlook.
In our chemical segment less than 15% of revenues associated with end markets, where we have seen significant weakness weakness in overall demand.
However, we have seen a moderation and adhesive demand compared to the first quarter 2020 and for the segment. Overall, we expect KOVA 19 will continue to be a factor for the balance of the year.
While we expect that the impact of covert 19 will continue to drive near term uncertainty. We continue to believe longer term the outlook for our business remains favorable because of our market position and the nature of our portfolio offerings, which we intend to leverage through our ongoing focus on innovation and sustainability.
Now sustainability.
On slide 13 is a broad term and is often.
Opened for interpretation first and foremost we believe that a focus on sustainability is premised on embracing actions to create long term value in a resource constrained world.
For Clayton specifically the role we play in a world that is increasingly defined for us for by a growing need for sustainable products in a desire for sustainable actions and business practices.
Which is best summed up it creates onto our tagline of sustainable solutions through endless innovation.
Simply stated our portfolio positions us well to deliver an a resource constrained world and this reality drives our focus on innovation.
Our chemical segment is 100% bio based with a broad portfolio that provides effective and compelling alternatives to hydrocarbon based products. While innovation was not a key focus of the business. When we acquired the chemical segment, we have applied our R&D capabilities to the business and are now introducing differentiated products to the market a significant example, as our.
Revolution family of low color Rosin, Esther formulations, which have significantly enhanced functional performance color and stability positioning them well relative to cfive hydrocarbon based alternatives. This advancement is specific to create John we had our first commercial sales in the third quarter of last year and customer feedback continues to be quite positive.
Other examples include two recently introduced bio based products for our tires business Silver tracks 8000 Silva tracks to 097 that are providing differential performance for tread enhancement agents and as a reminder, trend enhancement technologies are used by the auto industry to drive fuel efficiency without sacrificing performance.
And our polymer business through the years, we have continued to provide innovations to enhance recyclability improve safety or manufacturing efficiency and products such as wiring cable automotive applications and medical packaging.
More recently, we have introduced our circular polymer formulations that we believe will facilitate growth in the circular economy as compatible lasers for bio plastics and industrial plastic recycling streams.
We believe our current product offering and the innovation projects. We have underway will continue to drive create on growth into the future.
However, our focus on sustainability extends well beyond our products and innovation programs, our focus on sustainability as a more holistic as we consider our business in terms of economic impact environmental impact and our impact on society overall, a guides our practices.
Around governance compliance and stakeholder engagement in this regard over the past year, we have made significant and tangible progress and our sustainability objectives.
We have aligned with the United Nations Global comp compact on sustainable development goals, our STG piece, which is a global framework for sustainable development intended to address world's most challenging issued by 2030.
We have introduced a responsible procurement program and we recently were awarded a goal rating by Ecovadis and acknowledgment of our progress and sustainability and management of those systems. This recognition places Creighton in the 98% olive oil companies in our industry assessed by Ecovadis.
In alignment with the American Chemical Chemistry Council, we adopt the principles of responsible care implementing ISO 14001.
We've also recently joined together for sustainability joint initiative of chemical companies focused on sustainable supply chains.
Lastly, we have committed to conduct 12 lifecycle assessments by the end of this year to measure and evaluate the environmental impact for specific products.
We look forward to sharing more with you on our progress and sustainability. We encourage you to learn more in our recently published 2019 sustainability report that is available on our website.
But those comments were happy now to open up this call for your questions.
Thank you we'll now begin the question and answer your question. If you would like to ask your question. Please press star follow but number one a year Foley and make your phone and record your name and company.
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Cancel your request Crestar Feldman Q1 will be three income question.
Our first question is from Matthews call Wronski.
Your line is now open.
Thank you and good morning.
How should we think about sequential volumes and unit margin Palmer's given this is a bit of it odd year in terms of seasonality and then secondly.
I mean, I might've missed it but is your full year Capex guide Brlninety million.
I would ask and has to go ahead with the Capex and then ill take the polymer question.
Yes.
Well, we're not we're not providing guidance for the full year as you as you know what we had indicated earlier. This year is that we were looking at around $90 million and what we have indicated now is that we don't.
I believe that we're going to be spending anything more than 90 million, so we'll be $90 million or less for this year and were looking.
We're looking at various opportunities and we retain flexibility with respect to cash capex as the rest of the year unfolds.
And so when I think about the polymer question.
I mean, this is an interesting year to say the lease but.
For the for the most part I mean sequentially the volumes going from Q1 to Q2, particularly for our performance products business that is driven by the paving and roofing.
Demand is been.
You know inconsistent with our expectations in terms of the market evolution and heading into the summer paving season.
Our especially business, while the volumes going from Q1 to Q2 look the same there I think there's a couple of different drivers in Q1, we obviously had a return to China that we were.
Thinking through when that would occur and talked about that openly in the call in the first quarter results. But then you had the China recovery starting to pick up and then Khaled impacting a lot of the.
The the volume scenarios and market demand in other create on market. So you kind of have kind of two different demand drivers equating to approximately the same type of volume trend in our specialty business.
Now we also have on top of that of course, what's happened to raw materials and yes, we did see a decline in raw material costs going into the second quarter from the first quarter.
Fairly dramatic as you.
Probably noted.
That being said, obviously consistent with our price right strategy I mean.
We we use that as an opportunity obviously to two out to manage our margins very effectively through that time period and I think the the impact if you will on the results in the second quarter.
For that raw material. If you if you kind of looking at relative to the overall margin expansion that we were able to achieve is somewhere between five and $7 million.
Thank you.
Thank you. Our next question is from Vincent Anderson of Stifel. Your line is now open.
Yes. Thank you.
I know you typically don't disclose this level of detail, but I was curious if you'd be willing to talk about volume versus price in your adhesives demand this quarter and going into two July.
Particularly in pine chemicals, because im looking at.
The two Q pressure and I'm wondering and your comments that you made and I'm wondering if.
How much of it was maybe an inventory correction in the first quarter versus an actual.
Structural reset in demand lower than maybe what you had anticipated.
Now as I said in my comments, we didn't see.
What we would characterize is a demand shift in terms of consumption.
We.
We as we now look back on some of the first quarter.
Positive volume trends, it's pretty evident to us that that our customers not knowing fully how the supply change would be available to them.
Wanted to make sure that for the very critical adhesive formulations that go into a lot of the demand surge in downstream packaging associated with over 19 at the had ample supply. So they probably built some inventory and then in the second quarter, they release that inventory, but from an overall consumption standpoint, we're not seeing any changes.
Okay. Thanks, I appreciate that clarification.
I wanted to go back to turnarounds.
Have you with your second half demand outlook have you been able to move any turnarounds and this year and then kind of coupled with that if you'd be willing to kind of quantify 2019, 2020, and then going into next year total turnaround costs and maybe how they've they've moved.
Yes.
I think your.
And your senses is accurate when you look at the when you look at turnarounds, we have had some turnaround activity that basically slipped from the second quarter into third quarter that was largely attributable.
To covert.
And we indicated in our prepared remarks as you recall that we're looking at five to seven.
Million of incremental.
Impact that's expense on our PML for the second half of the year, so that that reflects that.
When it comes to turnarounds you have to realize that we have.
Doesn't plants and they have revolving shall we say.
Turnaround schedule on some of our plants we have.
Regulatory.
Required maintenance that occurs five every five to six years, while on others. It's every year every other year. So at any point in time, you may have turnaround activity, depending on what part of the world you're looking at but specifically to this year as you look at it it's nothing out of the ordinary or unexpected it's simply a shift.
From the first half to the second half of the year, which is five to 7 million.
And the only thing I would note is for our paving and roofing business, specifically as part of our performance products.
Depending on that turn around cadence, we have to manage our inventories carefully relative to the summer season, because we don't we can't produce what the market demands over the course of just the summer season. So we have to look at our inventories across the calendar year, and then lining up with the turnaround schedule that at that has just mentioned.
Okay. Thank you that's helpful.
One more.
You spoke about your compatible advisers that that's very interesting I was also curious to hear if youre looking at opportunity in incorporated with cycled styling content. We've just been seeing quite a few large styrene monomer suppliers starts to partner with some interesting technologies on the pyrolysis side and wondered if you had.
Looking at that the potential source of increasing the sustainable portfolio.
No I wouldn't say that.
The styrene and polystyrene.
Plastic.
You know.
Chain is a driver in our circular technology I think our circular technology, though works very well for a number of other plastics of course, polyolefins being the largest driver but also.
Now some of the.
Ali mines as well as even the polyester so.
Okay, if I could clarify something that you have given some thought to that is my understanding that the.
The output in the emerging styrene monomer from these pyrolysis plants would not meet the specifications needed for Styrenic block Copolymers city expected to go back into the polystyrene Biogen.
Again, I'm not quite sure what youre driving at for this question, but.
As we look at the the main opportunity for our circular technology. It certainly focused on the polyolefin chain as well as the polyester Jane we see those is very large sources of recycle streams that needed solution and circular we'll provide that solution.
Okay fair enough. Thank you.
Thank you. Our next question is from James Sheehan of Suntrust. Your line is now.
Good morning, Thank you.
You could parse out the co bid 19 impacts by segment in the first half.
You said you had no more.
You can add two quarters of that in the second half.
Versus just one in the first half and also just clarify what do you see as continued chemical market weakness.
Is are you expecting similar EBITDA levels from the second half to what you realized in the second quarter.
Yes. Thank thank you for your question. This is atanas. So when we when we look at gold with 19 impact.
It's not precise science, but I will give you our view of our specific impact on our company.
When we look at the first half.
If we look at the second quarter.
And again I'll give you some ranges on the chemicals segments.
Thats, probably anywhere between 12 12 to 13 million in our results and on the polymer segments around four to 5 million primarily on the HSBC on the specialty side of the portfolio.
So youre looking at the around 16, maybe $17 million of impact.
In the second quarter of this year.
On a year to date basis, obviously, that's going to be a little more.
But the majority of impact occurred in this in the second quarter. So for polymers I think it's around 6 million and again thats, primarily on the HSBC side of the portfolio.
And on chemical we're looking at maybe 15 to 17. So in total Youre looking at go at 20 plus million of coal that impact.
On a year to date basis for create dawn.
When you look at the chemicals segment and the continued weakness.
The weakness is primarily in volumes because if you look at versus year end margins have largely stabilized, particularly on the CST chain and to a large degree on on the toward chain you may have a little bit of movement, but not much. So thats why when we talk about coal that impact for the second half of the year its demand.
Driven impact primarily in North America on the chemicals side. So it's a volume sales volume impact I hope that answers your question.
Yes, thank you very much.
And you referenced your gross profit per turn.
This year and last year in polymer.
Could you state what was your gross profit per turn in the second quarter of 2019.
Excluding cariflex.
Yes.
Not have been.
Excluding cariflex it opened would have been still right around $1000.
$950 between 50 and 1000, so still very robust.
Thank you and.
With the election coming up there are some political proposals to raise the us corporate tax rate to 20%.
If that were implemented what would that mean for your effective tax rate.
Well as you know we operate across various tax jurisdictions.
Although I would say is that our effective tax rate is likely to be.
I would say well below 28%, although overall basis simply because of our overall.
Favorable tax position as the the availability of credits and such but just to the high level I would say that will not have an immediate impact on us.
For the immediate or foreseeable future at 28.
And again Thats just high level estimates.
Thank you very much.
You're welcome.
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For your name and company and clearly you win from.
So your request presents our folded in Q.
Yes.
Further questions at this time ill hand, the call back to Mr. Ji shields for closing comments.
Alright, Thank you cap, what we'd like to thank all of our participants this morning for their interest in great time and their thoughtful questions. A replay of this call will be available shortly after the termination of the call.
Through a link on our website you can also access the replay by dialing 88856 to 6891.
That concludes our prepared remarks, thank you very much.
Please please grading corporation second quarter 2020 earnings Conference call you may now disconnect.
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