Q3 2020 Ciner Resources LP Earnings Call

Hosting the call today from General resources is Mr. or Cohen, Chief Executive Officer. He is joined by Mr. at Friedel, Vice President of Finance.

This call is being recorded it is now my pleasure to turn the floor over to Ed freight all you may begin.

Thank you Laurie.

Good morning, and thank you for joining us to discuss our third quarter 2020 earnings before.

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 laws.

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 SEC 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.

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Thanks, Ed and good morning, everyone.

Welcome to junior resources third quarter 2020 earnings call.

To begin I'm happy to report that we continue to successfully operate our business through the ongoing cold with crisis.

Our safety protocols have worked effectively since implementing them in March.

Waiting any emergency contingency actions.

We have reduced exposure to outside contractors restructured ship schedules increase.

Increased sanitation.

And implement that individual requirements, such as masks and temperature checks.

As always.

Safety is our first priority.

And I applaud our entire workforce for its dedication to the additional procedures needed to better ensure our 24 seven operation.

Isn't disrupted.

Our production levels began to normalize into third quarter running near full capacity, although we did experience a major storm in Green River, which college area wide power outages and shut down our plant for almost two decades.

Due to the abrupt stopper drove our production process. It took several additional days to resume full utilization.

The unplanned downtime reduce our production volume, which totaled 460000 tons for the quarter.

Thanks to inventories on hand, and some strategic use of our railcar fleet, we were able to meet although our customer orders in the quarter.

Turning to sales the third quarter, Mark and encouraging rebound.

Improving market conditions led to strong sequential revenue growth for the second quarter.

We have seen a considerable recovery in domestic customer demands from Q our quarter two levels.

And I don't or curtail production has largely come back online.

However, pricing levels, particularly in international markets remain depressed compared to historical levels as customers continue to work through elevated inventory and the global economy continues to endure the impact of COVID-19 pandemic.

Our domestic business show some resiliency in the third quarter due to a strong rebound in the downstream markets and contracted pricing structures.

Automotive manufacturing.

Rich so production come through in your stance show in the second quarter has recovered to 2019 levels, providing key demands for our auto glass customers.

Likewise construction spending is on the rise and approaching highs seen in the first quarter.

With strong residential housing starts underpinning demand for architectural glass.

Container glass demand has remained steady in the U.S. its personal consumption of food and beverages has remained high throughout the years.

Internationally subdued demand in key export markets continues to result in Beacon sales.

By quarter over quarter improvement, well <unk> Asia remain below historical levels levels due to lower demand high customer inventories and competition from exports out of China China.

Chinese exports were up 8% over 2019 through the first eight months I will be your and total production was up 1.5%.

However in September industry, cutbacks and plant shutdowns due to flooding have since starting Chinese supply.

Reducing its export potential as it seeks to feel domestic orders at favorable pricing and lowering producer inventories to normalized levels.

Latin American imports were also down year over year with glass produces operating in the range of 80% to 90% or pre cobot levels.

We see him carbonate production in Chile, and Argentina has been largely stable.

Old or new projects have generally been delayed autos 2020 2021.

All said, we sold 540000 tons in the quarter.

Presenting a 26% increase over the second quarter, but well below the record. So 109000 200000 tons sold in the third quarter of two talking a 19.

Declining global inventories and recovering demand are positive signals for our export volumes and we are encouraged by the overall relative stability in the domestic market.

We should be proactive we chose to increase our exposure entering the year.

As we navigate a lower pricing environment and I'm certain pace a recovery of course global economies, we continue to focus on liquidity and prudent cash management.

While we maintain a cautiously optimistic outlook for earnings improvement.

And greater flexibility with our cash we must be acute to weather downside risks such as a researcher researches Oh carbonite team at new containment measures.

Our efforts drove a proved successful in the third quarter ending the period with 130 million in liquidity.

And Carl.

Comfortably within our leverage covenant by repaying $28 million of that.

Joe our leverage ratio rose to 1.7 times at quarter end.

Evidencing the impact, though on a weighted bleed lower trailing 12 month EBITDA figures.

The distributions, especially was a key piece to bolstering liquidity this quarter.

As we prioritized the day to day financial strength of the business.

We will also continue to carefully manage our costs and capital expenditures through the remainder of the year.

We expect to realize cost savings in the range of $20 million in 2020.

And it's human.

I am quite proud of considering we did not layoff or furlough any of our employees.

With that I am now turning the call over to Ed who will discuss our financial results for the quarter in more detail.

Thanks Erez.

And thank you everyone for joining our call and for your continued interest in general resources today I'll provide some detail around our third quarter performance the major financial drivers from the quarter and some key metrics, we used to evaluate our business.

[laughter] production volume for the third quarter of 2020 was 460000 short tons a decrease of 35% from the record 711000 tons produced in the third quarter of 2019.

Due to several days of unplanned downtime, resulting from an unusual weather about.

Sequentially, our production grew 1.5% over the second quarter.

Domestic volumes sold in the quarter increased 25% over the second quarter to 244000 tons as domestic customers returned to near normal production levels. Following shutdowns in curtailments in Q2.

Year over year domestic volumes rose, 2% as a result of shifting volume from the international market in favor of more stable domestic contracts.

Total international volume sold in the third quarter 2020 was 297000 short tons, a 37% decrease from Q3 2019, but at 28% sequential increase over the second quarter.

Demand in our export markets has improved from the trough levels seen in Q2.

But the market remains well supplied and subdued economic activity has kept soda ash consumption below pre co bid levels.

Our average domestic price and the third quarter 2020 declined 7.7% from the prior year quarter and.

And our average international price fell 12.1%.

Evidencing the pricing effect from the abrupt halt and overall demand compared against record pricing levels experienced in 2019.

However, compared to the second quarter average international price rose, 8.3% debt.

Demonstrating the impact cobot had on export markets during the peak of the pandemic last quarter.

Altogether, our volume sold decreased 169000 tons from Q3 2019.

Resulting in third quarter net sales of 98.2 million it.

A decline of 28.4% year over year.

Sequentially net sales rose, 29% from the second quarter.

Cost of products sold including freight in the third quarter 2020 fell 16% to 78.8 million compared to the same period in 2019 Prime.

Primarily due to lower sales volumes and in parts of fixed cost savings.

<unk> expenses decreased by 8% from <unk> from Q3, 2019 to 4.7 million in the quarter as a result of lower employee benefit and travel expenses.

Sequentially as DNA expenses were down 22% from the second quarter.

Cash provided by operations of 21.2 million in the third quarter 2020 decreased 48% from Q3 of 2019 as a result of a 24.5 million decrease in net income from the prior year quarter.

The decrease in net income was partially offset by a release of 7.7 million in working capital in the quarter as we focused on cash management and accounts receivable collections.

Net income of 5.4 million in the third quarter was a 10.8 million increase over the second quarter.

This leads into the discussion of our distribution strategy in the context of key non-GAAP financial metrics.

We monitor as an MLP adjusted EBITDA and distributable cash flow.

In the third quarter 2020, we recorded a 14.6 million of adjusted EBITDA.

An increase of 11.8 million from 2.8 million in the second quarter.

Distributable cash flow attributable to general resources was 3.8 million for the third quarter of 2020 compared to a negative 1.4 million in the second quarter.

As I touched on the current operating environment increases more than ever the importance of a conservative balance sheet.

At the historical 34 cents per unit distribution, our distribution coverage ratio would have been 0.55 times for the third quarter of 2020.

Meaning we would've had to borrow on our revolver to pay the distribution.

Given our focus on liquidity and access to capital the board of directors of our general partner unanimously decided to maintain the distribution suspension for the third quarter.

This decision allowed us to pay down 28 million of debt in the quarter, bringing our revolver balance below $100 million for the first time since 2018.

Nevertheless, our leverage ratio increased quarter over quarter from 1.58 times to 1.7 times as our trailing 12 month EBITDA fell a strong quarter from the prior year are replaced by lower figures this year.

Management and the board of directors will continue to evaluate each quarter, whether it is appropriate to resume the distribution, which will dependent or liquidity and leverage as well as anticipated capital expenditures.

Now I'll turn the call back over to oppose to provide more commentary on our near and long term growth objectives.

Thanks, Ed I'm pleased with our financial performance this quarter, considering the current climate in which we are operating.

While the COVID-19 outbreak was a setback to our industry and global economies as a whole.

Our operating flexibility financial strength and commitment to safety continues to be a bright spot during these challenging times.

Minimal disruption to our operations over the past six months is a testament to our high safety standards and COVID-19 mitigation procedures.

I mean actually we have long maintained a conservative capital structure.

Which has positioned us to better withstand the current downturn and recover quickly from what we believe to be a market bottom.

Moreover, we want to avoid overburdening, our balance sheet as he prepared to embark on major capital plans, while also resuming quarterly distributions to our acuity holders as soon as reasonably possible.

Turning to our Green River expansion project, we were forced to revisit the timing of our construction this year as the preserve cash amid new beacon market.

We believe the long term soda ash market continues to support our expansion initiative.

We are refining our preliminary studies in the interim leading up to a more detailed engineering.

With some built in room in Georgia on schedule. We think we will have construction complete an operations commission within a similar timeframe as originally provided give or take a quarter or two.

If you do experience a delayed a one to two quarters, we do not anticipate any impact to our production levels, resulting from depletion or why because that kind of supply because we have preserved it during the downturn to provide flexibility between completion and commissioning of the Green River expansion project.

We're also designing the production unit to provide additional synergies to maximize utilization of our entire asset base.

We will ask since our project capital needs in tandem with a refinancing of our current credit facility.

Which matures in August 2022.

As such and the first half of next year, we anticipate moving forward EBITDA strategy to secure the most economical funding in advance of our major cost structure.

While still generating strong distributable cash flow hedging.

At Gener.

As the quick we approach the end of the year and are all for show exits from as I said, we are excited to take control of our export business.

Otherwise, our parent companys existing distribution network and gain better insight into key end markets and geographies.

Preparing for this transition is pretty easy proceeding as planned and we have begun building relationships with international customers.

As part of our exit agreement to help ensure a smooth transition for both sides. We will continue to sell specific Williams directly transact for a limited time.

As we steadily ramp up our own export volumes, we will build out our international supply chain, but holistically.

Holistic effect and margin optimization in mind.

While it is tough it is tough to project pricing past the near term we are confident that the global demand for soda ash will return to pre corporate levels as evidenced by historically stable consumption growth and rapid recoveries from downturns in the past.

We're especially be confident in our business position within the industry as a low cost leader, our capital strength and appetite and capacity for growth and innovation.

In closing I'm proud of our team's tireless efforts to keep our operations running smoothly and the commitment as always sort of safety.

And high standards that makes us successful during these extraordinary times.

Thank you for your continued interest in Gener resources.

This concludes our prepared remarks.

Thank you for participating and the general resources third quarter 2020 earnings Conference call and webcast. You may now disconnect your lines and have a wonderful day.

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