Q3 2020 Calumet Specialty Products Partners LP Earnings Call
[music].
And welcome to the Q3, Twentytwenty Calumet specialty products Partners LP earnings Conference call. At this time, all participants' lines are in a listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.
One on your telephone if you require any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, Joe Camel Daddy Investor Relations. Thank you. Please go ahead Sir.
Thank you Carlos good morning, everyone and thank you for joining us today for our third quarter earnings results call with us on today's call, Steve Moore CEO Todd.
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Before we proceed allow me to remind everyone that during the course of this call. We may provide various forward looking statements within the meaning of section 21 E secure.
The Securities Exchange Act of 1934.
Such statements are based on the police department and trends as well as assumptions made by them and in each.
Case based on information currently available to them, although our management team believes that the expectations reflected in such forward looking statements are reasonable.
Partnership, it's John partner, nor our management can provide any assurances that the expectations will prove to be correct.
Please refer to the partnerships press release that 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 and could cause them to differ from our forward looking statements made on this call.
As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks me I've seen conference call as indicated in the press release, we issued earlier today you.
You may access these slides in the Investor Relations section of our web site.
Have you done Calumet specialty dotcom.
Also a webcast replay of this call will also be available on our site within a few hours you can contact Delphi our group for Investor Relations support at 312445 to 870 with that I'll pass the call Steve Steve.
Thanks, Joe Good morning, everybody and thank you for joining us first.
First of all I'd like to recognize the efforts of our employees in the third quarter.
For all of US the pandemic has progressed from what was an adrenaline fueled leap into the unknown during the second quarter. So the reality of an ongoing extended campaign I've.
It seems transitions well lending to adapt to this new way of working well keeping ourselves and our colleagues sake.
The most crucial measures in this business, our environmental and safety performance and I'm pleased to say that we're tracking materially ahead of 2019. This.
This shows that we're keeping our eyes on what really matters and is a testament to the commitment and focus of my colleagues at Calumet. So thank you team. Thank you very much.
I will start the presentation on slide three.
Overall, the message of the third quarter is one of recovery led by the resilience of the U.S. consumer together with a rebound in the industrial sector.
This resilience I love Calumet delivered great results in our core specialty business, which was topped off with a record year to date performance from up finished lubes and chemicals unit.
[noise] overall July was the bottom for Calumet on the month. Since then have shown steady improvement. We are very pleased with our specialty results with the segment's adjusted EBITDA. So far are trending ahead of the pre pandemic 2019.
As we've discussed before this year over year outperformance has been led by strength across all of our consumer facing products and brands separately on more industrial facing specialty products and brands showed a modest recovery in demand across the third quarter.
[noise] well, some end markets and products still show the impacts of lower demand.
Total specialty sales volumes.
Alright, 90% of last years levels and encouragingly the September months or industrial volumes return to where they were in September 2019.
The recovery in volumes this allowed us to resume our lean supply chain and apply a philosophy of running the business with less inventory, which is conducive to improving margin performance.
On an industry level, we believe that the tightness were seeing across several specialty markets comes from a combination of strengthening demand restocking post locked down and disruptions from an exceptionally active hurricane season. These factors explain why as of today, we haven't yet observed the typical signs of the historical seasonal.
The slowdown that we tend to see enough specialties businesses, they could still come but there are indications that the overall uniqueness of this year has somewhat also to typical seasonal patterns.
[noise] Appeals market is of course grinding along at the bottom of its business cycle I'd like everyone else in the refining business with focused on what we can control in the case of Calumet. This focus has been led by deliberate actions, specifically maximizing value from our local niche markets, bringing 2020 one turn around.
The board into 2020 metre spreading our system wide workload and leveling multi year spending.
Also we continue to aggressively re optimize our run rates and yields as the markets evolve.
Furthermore, in Twentytwenty. We also ran a hedge book, which was proportionately larger than many in our industry.
Given the tough yield environment many of common sense that if one is to be in refining right. Now then the two best places to be right in the northern Rockies well to have a focus on specialties and chemicals and we are fortunate enough to be two to 2.2 with our assets in Montana Northwest, Louisiana and will take a little deeper in.
Well in northwest, Louisiana complex later in the presentation.
Taking you back to late in the first quarter on the start of the Lockdown Calumet stepped into the unknown as a pandemic on a global economic collapse carrying a debt load that is relatively high for our industry.
As such it was immediately clear that our financial objective, what's going to be to get through.
This time to make without earning excessive amounts of cash.
Extreme disruption in down cycles tend to take out the most leveraged competitor and we would now determined that it would not be Calumet.
Decisive actions were taken in order to see that challenge through to reality, we've reduced our capital budget for the year by 35% immediately accelerated our planned sta reduction strategy, reducing those costs by approximately 20% versus last year, and we removed $30 million of fixed operating costs.
We reset yielded inventories for the new operating environment and finally in very short order, we significantly added to our hedge book.
Throughout this period of decisive action on throughout this year, we've operated with a foundational thinking that we would not compromise on safe and reliable operations.
The net consequence of these decisive actions by the team that we end the third quarter up from burning cash, but rather cash positive. So far this year, which is a good place to be and an extremely credible achievement by our team so with that I'll now turn the call them. Its a Todd who will give you a more detailed look at our financial.
The results for the quarter Todd Thank.
Thank you Steve.
Let's turn to slide four where we provide third quarter highlights.
Calumet generated 25.4 million of adjusted EBITDA in the third quarter.
Our core specialty segment produced 56 million and our fuel business generated negative $13.5 million.
Year to date, our specialty segment has generated nearly 177 million of adjusted EBITDA and as Steve mentioned. This business is trending ahead of 2019 level through the first three quarters of the year.
We finished the quarter with a cash of 109 million and total available liquidity of 269 million both figures improving from the prior quarter.
Since early in the pandemic, we've been focused on ensuring cash flow neutrality and in the third quarter Calumet generated $15 million of cash flow from operations and $8 million of free cash flow.
We're also encouraged by recent trends, we've seen in the credit markets, which indicate investors recognize the value of our specialty business and its ability to to succeed even under most challenging environments.
As you know improving margins in our specialty business has been a strategic priority over the last two years special.
Specialty gross profit was $38.32 a barrel in Q3, while specialty adjusted EBITDA margin was 19.9%.
These results are due largely to our diverse product offering management of the volume margin dynamic and brand recognition in both consumer facing in industrial markets as quarter over quarter specialty gross profit grew despite crude prices increasing 47% from the second to third quarter.
On slide five we provide a bridge to our consolidated adjusted EBITDA totaled versus this years second quarter.
An important development in the quarter was the return of industrial volumes as this occurs margins on a per barrel basis shrink due to the mix effect, but we are encouraged by the volume increase as total profit will benefit.
Slide six compares our year to date adjusted EBITDA to the same timeframe last year.
In total we added $62 million bridge, which a $116.7 million is the negative impact of fuels margins appeals volumes in rents.
On the contrary the combination of specialty margins volumes and transportation net to a 4.2 million dollar improvement versus the same time period last year.
Less controllable operating costs it as generic reductions represent 45.6 million dollar improvement compared to 2019 three.
To reiterate on an annualized basis, our SG that expense is $36 million less than 2019.
We don't take that lightly and we're extremely proud of our employees for their bold and proactive response during this pandemic.
Let's turn to slide seven.
Third quarter specialty EBITDA of $56 million was a $4.4 million or 8.5% improvement to last years third quarter.
The business continued to demonstrate margin expansion.
140 basis points compared to the same period last year.
This was feels like and consistent growth in our consumer facing brands and good recovery in our industrial brands. The finished lubricants and chemical segment, including Trufuel Royal Purple and Bel Ray continued its record pace.
The retail business is also from performed well as food grade and pharmaceutical demand has been robust.
And the pair logics wax business is integrating well and outperforming expectations are.
Our sales teams been effective managing volumes and margins throughout the pandemic and a laser focus on product placement in the industry diversification will continue as industrial demand returns to normal.
Slide eight details the quarterly results in our fuel segment.
Third quarter adjusted EBITDA of negative 13.5 million was down compared to both the prior year and sequential quarter, driven largely by the compression and crack spreads.
We continue to benefit from our geographic advantages in this business with a focus on what we can to Ken can control for.
For example, this quarter the fuel business achieved record volumes of rack sales into our local markets, which is an advantage. We continue we intend to continue benefiting from when markets recover.
Turning to slide nine we bridge the sources and uses of cash year to date.
You can see that our cash position has improved from the 19.1 million, where we began the year.
Most importantly, we produced $53.5 billion of cash flow from operations year to date.
Working capital management and Capex discipline also contributed to the generation of $30.1 million of year to date free cash flow, which led to finishing the quarter with $109.4 million of cash on hand.
On slide 10, we provide a snapshot of our credit metrics.
The $109 million of cash I, just mentioned, we finished the quarter with over $269 million of total liquidity.
$20 million versus this years second quarter.
We continue to operate in the day to day business with a focus on cash flows while leverage reduction and balance sheet improvement remain as key components to our overall strategy with that I'll turn the call back to Steve.
Thank you Todd.
Let's go to slide 11.
In last quarters call, we review to focus items, one covering our true fuel business and another covering hello specialties margin versus volume envelope had been performing through the pandemic.
The deep dive received a lot of appreciated investor feedback and so our intent is to continue sharing in order to further help you understand what we what we are up to and our story.
So the today's call given the recovery in industrials, we thought it might be good to spend a couple of minutes on our integrated complex of facilities in northwest Louisiana.
Calumet interconnected specialty product sites at Shreveport, Princeton and Cotton Valley are collectively the largest high yield specialty petroleum product complex in the U.S.
In valleys focus is the production of solvents marketed under our console and Maggie sold brands Princeton is on Naphthenic base oil production facility and that includes such industry known brands as Caltrans electrical oils and hydro Cal process oils.
Sri for our largest Louisiana facility serves three distinct roles for us.
First Shreveport is focused on power refining base oils, particularly off how pop brand, which is sold into a variety of industrial specialty applications together with oil checks, which is our branded agricultural spray oil.
Shreveport is also at the heart of our rapidly growing lacks business.
Most well known throughout Titan brand, which is sold into the candle industry.
The second Roche repo plays is it's the flywheel around which these other sites exchange intermediates for optimization value.
And third Shreveport is a feedstock platform for other Calumet businesses further downstream, which includes our businesses in white oils blended and formulated waxes, petroleums and specialty gels or manufactured that other calumet locations.
The strength of our interconnected Louisiana sites, coupled with freeport's extended reach further downstream into other Calumet businesses provides the operating flexibility to deliver stable performance and growing specialty segment results even in Twentytwenty.
What brings these facilities together other than that geographical proximity is that collectively we have an extremely flexible asset base focused on custom distillation.
Hydrotreating across the entire pressure envelope together with catalytic and solvent extraction, most particularly in D. waxing.
Within the specialty petroleum product business. This gives us a real scale and flexibility and we continuously work on how to optimize this unique set of flexible assets.
So now onto our outlook on slide 12.
US consumer data remains remarkably good and as long as that holds up it is our expectation that our positive trajectory on consumer facing specialty should hold.
Our industrial brands appeared to be well into recovery mode.
Inventories and supply chains are in a good position and the seasonal slowdown that we often see is not yet upon us.
Deals is currently near the bottom of its business cycle, and we will continue to focus on controllable actions.
Our decisive actions on costs marketing strategies and hedging have got us this far through the pandemic without cash burn and has helped for Calumet in a good position to emerge strongly once the business cycle times.
And with that I'd like to turn the call over to the operator to open up the line for Q1 eight operator.
Thank you at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad that will star then the number one well pause for just a moment to compile the Q and a roster.
Your first question comes from the line of Neil Mehta with Goldman Sachs.
Good morning, guys and we do appreciate that incremental color that you provided around around Freeport here looking at the first question that that that I have is around the lubricants business.
Of course.
Okay.
Into the world of speculation here, but there were press reports about the potential to monetize.
Yeah. It sounds like your assets for a certain amount of money I just your thoughts on on on those on that lubricants business, how core is that and the potential for further monetization to try to unlock value.
That might not be.
Being reflected in the unit price right now.
Great Neil Steve how you doing so good to have you on our call.
As you know I mean, the finished goods and chemicals business has really taken cobot and its stride.
Our through it so year to date record.
And we believe that the future growth potential of all the brands inside this business is substantial.
As responsible stewards of the business management the board continuously review what the value of any product Calumet is to us and I think as it would be for any company Neal that valuation as a synthesis of cash flows growth potential and strategic importance.
It's clear from mock aggression commentary the people understand.
This hypothetical situation would potentially change of leverage and debt quantum significantly.
I think right now given its highly speculative as you hit on I really can't comment further on speculation beyond that.
Yeah, no very clear I'm sure there'll be other questions around this today.
A follow up I have is is around is around great falls and that.
It is a good asset in the sense that it runs a lot of WCS, which is a differentiated crude grade right now.
Results came in a little softer than I think what most investors were expecting out of that asset can you just talk about anything that could have been unusual or onetime or just a function of the product and crude environment and then how do you think about mint.
Minimizing losses from the fuels business as you get to 2021 at the forward curve what levers do you have.
For WCS prices start to widen back out.
Overtime.
Neil This is Bruce good morning.
Of course were reported in Great falls and transport fuels together, so I would.
Not want you to lead to a conclusion about either facility, but in aggregate.
Over.
This summer.
We have had softer fuels environment for everybody.
Then last year.
Great Falls is incrementally affected by that as you noted in the WCS is actually.
A key contributor to the gross margin environment out there and of course, it's been narrower which is adverse so with all the obvious points being made.
That is a good part of the country to be a refiner and I think the proof of that is that the facility has run fall on a volume basis throughout this throughout this pandemic.
In that steps that you guys are taking in order to as you go into 2021, what levers do you have to pull in order to drive.
To minimize losses.
Losses, as we work through the pandemic.
Well I think the the operational levers are the same for US is everybody we're pretty nimble.
Given our two positions on re optimizing and tracking closely.
Matching output from the facilities to the local market demands and customer demands.
It's been very volatile for everybody, but I think we've hung in there pretty well I'll tell you most of what you're seeing is the 64 and a half million dollar Hickey from RIN prices skyrocket in this year as opposed to a fundamental change in our operational competencies.
Okay.
Thanks, guys appreciate it.
Thank you.
Your next question comes from the line.
Roger read with Wells Fargo.
Yes. Thank you good morning.
Good morning, Roger Okay, [laughter] here, Mike you only get a little nervous.
I guess, what I'd like to kind of get I mean, it sounds like things are definitely improving in specialty.
I mean I'm sure a lot of this is volume driven I was just curious as we look through thinking about what year, we're able to do in terms of pricing right. We had a tremendous amount of crude volatility early in the year.
Little more stable.
Since mid year.
So how has that affected your pricing and then with the recovery in what we heard a lot of places across the business Oh.
All across everywhere that there have been no.
Run down of inventories and then everybody always said demand popped up have you been able to or do you expect to capture any sort of extra margin on.
Fixing the just in time issues that have crept up out there. We just maybe that's a mix question, but I was just curious if any of that was kind of curious.
Yes, good morning, Roger Scott here, but let me let.
Let me take the first crack at it and takeaway in and as needed, but when we look at the product mix Roger first on the on the profit per barrel type.
Type of view and it was mentioned during the presentation, but results were still over $38 a barrel. So I think what we saw during the quarter as the volumes started ramping back up really led by those industrials. The the margin per barrel came back a little bit more tests closer to normalization, but.
Just for perspective, Roger if you just go back even two years ago, it's still up basically $10 a barrel above where we were just a few years ago. So $38 plus a barrel is still solid margin and I think as we're in Q4.
The inventories remain relatively low out there there are some some lower refining rates the hurricane impact et cetera.
I think overall the supply demand in the overall supply chain and the market is pretty firm out there overall.
Yeah, I appreciate that I guess you.
You did a lot of things cut back on a lot of low margin or low priced type or product offerings to improve that margin. So I'm not really sure when I look at it I can compare the.
The high Thirtys to previously to high Twentys and recognize whether that was changes you've already made or we were actually seeing changes in the market. So thats, what I was really trying to get at with the question there.
Yeah, I guess, Roger this is Todd I can chime in a little bit too.
Like you said you know crude prices are very substantially and you know when you look at Q2 versus Q3, and we see a 47% increase in crude prices.
Yet margins hold all wall industrial demand returns I think tells you something about kind of the market and the resilience of the consumer side.
And that we don't think that this is just some sort of crude anomalies. This is you know the.
The specialty markets are strong right now and.
Yeah. This is I will just Steve if I could add to Todd I mean, just a couple of observations maybe to give you some more anecdotal feel as to how we think about it I mean first of all you know clearly we had a a period a few days back where we had a material sell off on the crude complex and.
And we Didnt see price cuts and his specialties from any one so I think that that just shows you generally there's a feeling that supply chain to tight and then I think one of the best to me one of the best indicators that supply chains tied and sustaining that way.
As you know we're facing the good news bad news problem that it's very difficult to get trucks and truckers.
And.
So that tells US just how tight situation is right now.
Okay, good that kind of dovetails, what we've been hearing.
And then I guess my comply.
Completely unrelated follow up question for you Todd I'm, obviously, the companies come through what's been a brutal year for most.
Companies, we cover on the cash flow side, you all come through.
I'll just say strong.
What.
What if anything that we need to look at into the.
I'll say the end of this year or the beginning of next in terms of expectations on cash flow or cash management, and then is there any potential as an MLP for Calumet to participate on the cares act in terms of any tax recoveries I mean, I know, it's generally speaking on a tax business I just didnt know if there was any.
Anything.
Are we going to tax laws or something like that that could benefit the company.
Sure enough. Thanks the.
You know as far as the as far as what to expect in 2020.
For the rest of 2028, you know, it's quite an uncertain world out there. So I'd hesitate to look forward to far you know our goal does remain to be cash flow neutral in 2020.
No no change on that we're committed to that.
Yes, what I can tell you is what we've seen so far and into the fourth quarter is more of the same on specialties. So so you know industrial the industrial return continued concern.
Consumer facing strength.
Continued to be strong we don't see any reason for that relative strength to change.
As you know you know it's difficult because we do see seasonality in the fourth quarter typically in the particularly in the industrial brands.
But like I said earlier, we have not seen knows yet so so far so good we may see something different.
Yes, and yes, so far so good.
Probably is going to forecast as anyone can make these days gentlemen, thank you for the time.
Thank you again.
Our next question comes from the line of Gregg Brody with Bank of America.
Good morning, Greg.
I'm just following up on the question about the finished lubricants business.
You know I know this is market speculation, but just a sense. If we think about it is.
Isn't it.
Is it easy to separate these businesses from your other businesses are there any limitations to doing it.
So.
I guess the way the way, we would kind of frame. It up is that currently the businesses are integrated but they're not strategically integrated.
So so simplist, maybe that that's a key point geographically.
We don't have any kind of shared facilities prime.
Primarily between the finished lubes business and our other asset base. So we talked a little bit about the integrated complex in Shreveport, just now Greg I mean.
Yes.
Because the slide real estate, we didnt put on that but obviously, we have a major packaging and distribution facility as well. So the finished goods business and that's where we have the trufuel production line. That's in Shreveport, but it's like 15 miles away. So there is no pipes or anything like that integrated from an asset base.
So it is strategically aligned so.
Our integrated.
Or so.
How do you what would be the steps to I guess separate it is just.
Is there anything that's that's arduous or is it fairly simple to do.
Hey, Greg This is Bruce I might give a little more context around this so first of all.
The.
General structure of the company.
Isolates each of our assets legally we isolate them for PML purposes internally.
We roll that up obviously to a high level when we report but.
We have the ability to have a very cool.
Clear look.
And how the business is performing part of that is we have got absolute arms like separation, if there are molecules moving back and forth.
The speculative interest in finished lubes is probably getting a little overheated here.
But if you want to if you want to keep thinking about it as a.
Separable component everything we've got is separable in that way I think of it as virtual integration not physical and I think you'll be on the right track.
Got it.
Just in terms of I appreciate all the color on the comes because especially because business is.
Is there.
One of the challenges of forecasting this year has been just.
Yes, knowing exactly how how covance and patent it sounds like you said for this year for this quarter as of October you back to last year as volumes is that is that did I hear that correctly.
I think we were we said September specifically.
We've had an upward trajectory we've had an upward trajectory sorry, I struggled pronounce that what I'm hearing.
During the third quarter and the lines, Matt in September than the 1920 lines.
So is it is it fair to say that based on what you're telling us you're not.
See the normal seasonality that you historically have seen in the fourth quarter and you were at last year September numbers that theoretically volumes and specialty could be higher this quarter than last year.
Yes, Greg Scott I would say theoretically you asked and I think the wildcard becomes if seasonality comes into play or not we haven't seen it yet total debt at a minimum it appears that may be delayed.
And we just don't know if it's going to come come or not on the seasonality, but yes, and if I could just add a technical accounting comment that the numbers the volume like on like we're giving you is pro forma because in 19, we had a processing deal. So so if you want to forensically attacked the Q you need to bear that in mind.
Got it.
And then just last question for me.
Actually maybe I'd say more ive first what I'll say is.
Didn't headwinds.
How should we think about that steady state impacting your refining business, if we stay around here.
Five and for this quarter and thereafter.
Well, we we.
We accrue against a shortfall the system operation blends as much ethanol as we can we like blending ethanol, we wish we could do more.
But it leaves a short.
I would not want you to think that we have any insights on where that market is headed rins prices and markets are just absolute chaos strongly reactive to political or policy developments. So.
Well I can tell you is that.
We're waiting for the RFS reform like the rest of the world.
Got it.
I appreciate that and just last one for you. So you talked about the substantial SGN they savings you've had this year.
Is it your sense that that's that's sustainable at those levels does it need to go up the stairs. If there is a recovery because it's going to go down further.
Yeah, no great it's Todd.
We've been mostly it's sustainable you know there has been some kind of structural changes made in the business as far as outside contract services head count those types of things that are sustainable you know naturally as travel comes back in as we hit the road more and things.
Things like that we'll see a little bit of regression.
But but I'd say for the most part.
Made a step change in SGN, a and we expect to keep the majority of it.
Got it that's it.
For me guys. Thank you.
Thanks, Chris.
[music].
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Jason gave woman with Cowen.
Morning.
Good morning, John I'm wondering.
I wanted to first ask just about how you're thinking about that longer term you have I think the next notes due or 150 million.
And a couple of years, so maybe thoughts around how you plan on attacking that and then.
Just a long term view on where are you on that.
EBITDA levels to be and if you think you can get there organically or if you do think there needs to be some something.
Something on the inorganic side.
And kind of tangential to that thinking about there's there's obviously been a lot of questions about this finished lubes part part of the business but.
You previously referred to Great falls as non core and it seems like that's something that you're going to be holding onto at least for now just given the difficulty in transacting refining deals is there anything.
On the specialty side that you consider less core relative to the other parts of the business.
Thanks.
Thanks, Jason This is Tom let me, let me take the first part of your question. If that's all right on the kind of the upcoming debt and then I'll turn it over to Steve to talk a little bit more about some of the long longer term questions.
You mentioned, so so as far as the 2020 twos.
Yeah remember we did exchange in Q2. So we're just left with a 150 million maturing in 2022, we think thats, a very manageable amount and we have some flexibility so.
We just talked about we got $269 million of liquidity.
The cheapest that we have at the moment.
Been generating cash so you know.
We're willing and comfortable to go current as we kind of give ourselves some time to optimize our options. So I guess that would that would be hopefully part one of your question then Steve you want to sneak a little bit to sort of longer term on that.
Deleveraging.
So give me if I make an onto that might sound a little facetious I mean, I'm going to let me use a golfing analogy right I can sit here and tell you that I like to be a scratch golfer, where I'd like to be at that a golfer.
And let's kind of talk about leveraging from I want to be a better gulf of rather than I want to be a scratch golfer.
So so I'm not going to have given inspirational target from that perspective, but clearly you know monitoring the board look at what our cost of capital is and say that some combination of of deleveraging and clarifying Hot mix business model is the path forward.
If you go back to January February I think there was a very clear organic pollutants on right now I'd say that will kind of comfortable with as much less so we're hopefully continuing to look about how we can reduce our cost of capital through a combination of addressing those two issues.
So I hope that kind of comes the second one and then and then on the third one.
We'll have to refresh me.
Just on I mean, yeah, I was kind of tied to the lab.
Last question, which if it was just around you kind of referred to great fall those non core historically is there something within the spot in the specialties business that you consider not necessarily noncore, but not as core I guess, there's other parts of the business just along the lines of the.
Todd conversation about that finished lubes.
Second yeah.
Yes. This this may not be a very satisfying answer I mean, we like.
I think pretty much everything.
Everything we're doing in specialties, we like everything we look at it it's got some difference in growth opportunity, but we see growth opportunities across all of it. So so just kind of maybe pick.
Pivot back to what I said earlier, and then hand over to Bruce to get his take.
You know, which is whenever we look at valuation, it's obviously going to be some synthesis of cash flows growth potential and strategic importance and that strategic importance is that kind of task globally, but but I think all of it is particularly you know has a relative degrees strategic importance Bruce you want that.
Sure Steve Thank you.
I appreciate the kind of longer term strategic journey and the nature of your interest and if we maybe give a little bit of a foundation. If you. If you go back to December 30, Onest 2016, we had $2.0 billion that Miss you know this quarter the report that.
Hi, it's putting out has added 1.2. So we made an 800 million dollar inroads against our long term debt structure over that period of time and it was a good balance.
Between ops, improving as the site level at the individual business level.
And M&A activity, though.
And those two things took care of the debt that I just mentioned and also funded a great deal of.
Inward investment the organic part so we're actually pretty reasonably pleased with the balance it as Steve indicated that was going really well.
Until we sales into the Covance storm, so we'll see.
But.
We do like to think about balancing so when when people want to take a list of our assets and draw lines or I'd say core versus non core that's probably a little in flexible compared to how we think about it. So the diversification that we've got is a strength pieces of the business have been rotational this the.
Cycles don't sink up and if you think about it that way. We're just looking at the mix, we're looking at the portfolio.
If something was to bolt on or bolt off it would be against that backdrop that context.
Got it great I appreciate the color.
Thanks.
And at this time there are no further questions I would like to turn the call back over.
Mr Kamineni.
Joe you want me to wrap.
[laughter].
Go ahead, Steve to your call.
Thanks, Okay, well again I appreciate everybody being on the call.
I would I would point out I was talking about Gulf earlier, and I can assure you know want to Calumet has concluded Gulf. These days, we're working hard on getting through the pandemic.
I want to thank you all again for your interest in Calumet.
The team has executed at a high level throughout 2020 in the face of significant challenges and uncertainty.
We've taken proactive actions to both protect the business and to position us for long term success I'm.
Im extremely proud of everybody at Calumet and look forward to seeing what we can do in 2021. Appreciate the time have a great and good weekend. Thank you.
Ladies and gentlemen that does conclude today's conference call. You may now disconnect. Thank you for your participating.
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Ladies and gentlemen, thank you for standing by and welcome to the Q3 Twentytwenty Calumet specialty products Partners LP earnings Conference call. At this time, all participants lines are in a listen only mode. After the speakers presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Joe Camel Daddy Investor Relations. Thank you. Please go ahead Sir.
Thank you.
Good morning, everyone. Thank you for joining us today for our third quarter earnings results call with us on today's call for Steve Moore CEO Todd.
<unk> interim CFO responding strategy and grow its got over bar.
Before we proceed allow me to remind everyone that during the course of this call. We may provide various forward looking statements within the meaning of section 21 secure.
Securities Exchange Act of 1934.
Such statements are based on the beliefs or trends as well.
No.
Based on information currently available to them, although our management team believes the expectations reflected in such forward looking statements are reasonable.
Partnership, it's John partner, nor management can provide any assurances that the expectations will prove to be correct.
Please refer to the partnerships press release 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 and could cause a difference reportable statements made on this call.
As a reminder, you may now download a p. after the presentation slides that will accompany the remarks made on todays conference call as indicated in the press release, we issued earlier today.
Access these slides in the Investor Relations section of our website at Www Dot Calumet specialty dotcom.
Also a webcast replay of this call will also be available on our site within a few hours you can contact Delphi our group for Investor Relations support at 312, or four or five to 870 with that I'll pass the call to Steve Steve.
Thanks, Joe Good morning, everybody and thank you for joining us.
Well I like to recognize the efforts of our employees in the third quarter.
For all of US the pandemic has progressed from what was an adrenaline fueled leap into the unknown during the second quarter. So the reality of an ongoing extended campaign our.
It seems transitions, while lending to adapt to this new way of working well keeping ourselves and our colleagues. Thanks.
The most crucial measures in this business, our environmental and safety performance and I'm pleased to say that we're tracking materially ahead of 2019.
This shows that we're keeping our eyes on what really matters and is a testament to the commitment and focus of my colleagues at Calumet. So thank you team. Thank you very much.
Just on the presentation on slide three.
Overall, the message of the third quarter is one of recovery led by the resilience of the U.S. consumer together with the rebound in the industrial sector.
This is resilience allow calumet delivered great results in our core specialty business, which was topped off with a record year to date performance from our finished loops and chemicals unit.
[laughter] overall July was the bottom for Calumet on the month. Since then have shown steady improvement. We are very pleased with our specialty results with the segment's adjusted EBITDA. So five trending ahead of the pre pandemic 2019.
As we've discussed before this year over year outperformance has been led by strength across all of our consumer facing products and brands separately on more industrial facing specialty products from brands showed a modest recovery in demand across the third quarter.
Well, some end markets and products still show the impacts of lower demand.
Total specialty sales volumes are.
90% of last years levels and encouragingly the September sorry, industrial volumes return to where they were in September 2019.
The recovery in volumes this allowed us to resume our lean supply chain and apply a philosophy of running the business with less inventory, which is conducive to improving margin performance.
An industry level, we believe that the tightness were seeing across several specialty markets comes from a combination of strengthening demand restocking post locked down and disruptions from an exceptionally active hurricane season. These factors explain why as of today, we haven't yet about the typical signs of the historical seasonal.
Slowdown that we tend to see enough specialties businesses, they could still come but there are indications that the overall uniqueness of this year has somewhat altered a typical seasonal patterns.
So the ILS market is of course grinding along at the bottom of this business cycle I'd like everyone else in the refining business, we focused on what we can control and the case of Calumet. This focus has been led by deliberate actions, specifically maximizing value from our local niche markets, bringing 2020 one turn around.
Before into Twentytwenty, better spreading our system wide workload and leveling multi year spending.
Also we continue to aggressively re optimize our run rates and yields as the markets evolve.
Furthermore, in Twentytwenty, we also run a hedge book, which was proportionately larger than many in our industry.
Given the tough yield environment many of common sense that if one is to be in refining right now than the two best places to be right in the northern Rockies well to have a focus on specialties in chemicals, and we are fortunate enough to be two to two for two with our assets in Montana, and northwest, Louisiana and will take a little deeper into.
So our northwest Louisiana complex later in the presentation.
Taking you back to late in the first quarter on the start of the Lockdown Calumet step into the unknown or the pandemic on a global economic collapse carrying a debt load that is relatively high for our industry.
As such it was immediately clear that our financial objective, what's going to be to get through.
This time to make without earning excessive amounts of cash.
Extreme disruption in down cycles tend to take out the most leveraged competitor and we were unaudited comments that it would not be Calumet.
Decisive actions were taken in order to see that challenge through to reality, we've reduced our capital budget for the year by 35% immediately accelerated our plans sta reduction strategy, reducing those costs by approximately 20% versus last year.
And we removed $30 million of fixed operating costs, we reset yields at inventories for the new operating environment and finally in very short order, we significantly added to our hedge book.
Throughout this period of decisive action on throughout this year, we've operated with a foundational thinking that we will not compromise on safe and reliable operations.
The net consequence of these decisive actions by the team as we end the third quarter far from burning cash, but rather cash positive. So far this year, which is a good place to be on an extremely credible achievement by our team so with that ill now turn the call them. Its a Todd who will give you a more detailed look at our financial.
The results for the quarter Todd Thanks.
Thank you Dave.
Let's turn to slide four where we provide third quarter highlights.
Calumet generated 25.4 million of adjusted EBITDA in the third quarter.
Our specialty segment produced $56 million in our fuel business generated negative 13.5 million.
Year to date, our specialty segment has generated nearly 177 million of adjusted EBITDA and as Steve mentioned. This business is trending ahead of 2019 levels through the first three quarters of the year.
We finished the quarter with a cash of 109 million and total available liquidity of 269 million both figures improving from the prior quarter.
Since early in the pandemic, we've been focused on ensuring cash flow neutrality and in the third quarter Calumet generated $15 million of cash flow from operations and $8 million of free cash flow.
We're also encouraged by recent trends, we've seen in the credit markets, which indicate investors recognize the value of our specialty business and its ability to succeed even in the most challenging environments.
As you know improving margins in our specialty business has been a strategic priority over the last two years.
Specialty gross profit was $38.32 a barrel in Q3, while specialty adjusted EBITDA margin was 19.9%.
These results are due largely to our diverse product offering management of the volume margin dynamic and brand recognition in both consumer facing and industrial markets as quarter over quarter specialty gross profit grew despite crude prices increasing 47% from the second to third quarter.
On slide five we provide a bridge to our consolidated adjusted EBITDA totaled versus this years second quarter.
An important development in the quarter was the return of industrial volumes as this occurs margins per barrel basis shrink due to the mix effect, but we are encouraged by the volume increase as total profit will benefit.
Slide six compares our year to date adjusted EBITDA to the same timeframe last year.
In total we added $62 million bridge, which a $116.7 million as the negative impact of fuels margins appeals volumes in rent.
On the contrary the combination of specialty margins volumes and transportation net to a $4.2 million improvement versus the same time period last year.
Last controllable operating cost at SG their reductions represent $45.6 million improvement compared to 2019.
To reiterate on an annualized basis, our SG that expense is $36 million less than 2019.
I won't say that slightly and we're extremely proud of our employees for their golden proactive response during this pandemic.
Let's turn to slide seven.
Third quarter specialty EBITDA of $56 million was a 4.4 million dollar or a 25% improvement to last years third quarter.
The business continued to demonstrate margin expansion of 540 basis points compared to the same period last year.
This was fueled by strong consistent growth in our consumer facing brands and good recovery in our industrial brands. The finished lubricants and chemical segment, including Trufuel Royal Purple and Bel Ray continued its record pace.
Enrico business is also from performed well as food grade and pharmaceutical demand has been robust.
And apparel logics wax business, integrating well and outperforming expectations.
Our sales teams been effective managing volumes and margins throughout the pandemic and a laser focus on product placement and the industry diversification will continue industrial demand returns to normal.
Slide eight details of the quarterly results and our fuel segment.
Third quarter adjusted EBITDA of negative 13.5 million was down compared to both the prior year and sequential quarter, driven largely by the compression and crack spreads.
We continue to benefit from our geographic advantages in this business with a focus on what we can do can can control.
For example, this quarter the fuel business achieved record volumes of rack sales into our local markets, which is an advantage. We continue we intend to continue benefiting from when markets recover.
Turning to slide nine we bridge the sources and uses of cash year to date.
You can see that our cash position has improved from the $19.1 million, where we began the year.
Most importantly, we produced 53.5 million of cash flow from operations year to date.
Working capital management and Capex discipline also contributed to the generation of $30.1 million of year to date free cash flow, which led to finishing the quarter with $109.4 million of cash on hand.
On slide 10, we provide a snapshot of our credit metrics.
The $109 million of cash I, just mentioned, we finished the quarter with over $269 million of total liquidity.
$20 million versus this year second quarter.
We continue to operate the day to day business with a focus on cash flows while leverage reduction and balance sheet improvement remain as key components to our overall strategy with that I'll turn the call back to Steve.
Thank you Todd.
Let's go to slide 11.
In last quarters call, we reviewed to focus items, one covering our trufuel business and another covering how our specialties margin versus volume envelope had been performing through the pandemic.
The deep dive received a lot of appreciated investor feedback and so our intent is to continue sharing in order to further help you understand what we what we are up to and our story.
So for todays call given the recovery in industrials, we thought it might be good to spend a couple of minutes on our integrated complex of facilities in northwest Louisiana.
How are you, Matt interconnected specialty product sites at Shreveport, Princeton and Cotton Valley are collectively the largest high yield specialty petroleum product complex in the us.
Cotton Valley focus is the production of solvents marketed under our Consol Maggie So brands Princeton is on that finished base oil production facility and that includes such industry known brands as Caltrans electrical oils and hydro Cal process oils.
Sri for our largest Louisiana facility.
Three distinct roles for us.
First Shreveport is focused on power funding base oils, particularly our power brand, which is sold into a variety of industrial specialty applications together with our checks, which is our branded agricultural spray oil.
Shreveport is also at the heart of our rapidly growing lacks business.
Most well known throughout Tyson brand, which is sold into the candle industry.
The second Roche repo place is it's the flywheel around which these other sites exchange intermediates for optimization value.
And third Shreveport, as a feedstock platform for other Calumet businesses further downstream, which includes our businesses in white oils blended and formulated waxes.
A lot of cost and specialty gels or manufactured that other calumet locations.
The strength of our interconnected Louisiana sites, coupled with freeport's extended reach further downstream into other Calumet businesses provides the operating flexibility to deliver stable performance and growing specialty segment results even in Twentytwenty.
What brings these facilities to get up other than that geographical proximity is that collectively we have an extremely flexible asset base focused on custom distillation.
Hydrotreating across the entire pressure envelope together with tax Olympic and solvent extraction, most particularly in D. waxing.
Within the specialty petroleum product business. This gives us a real scale and flexibility and we continuously work on how to optimize this unique set of flexible assets.
So now onto our outlook on slide 12.
US consumer data remains remarkably good and as long as that holds up it is our expectation that our positive trajectory on consumer facing specialty should hold.
Our industrial brands appeared to be well into recovery mode.
Inventories on supply chains are in a good position and the seasonal slowdown that we often see is not yet upon us.
Deals is currently near the bottom of its business cycle, and we will continue to focus on controllable actions.
Our decisive actions on costs marketing strategies and hedging have got us this far through the pandemic without cash burn and has helped for Calumet in a good position to a much strongly once the business cycle times.
And with that I'd like to turn the call over to the operator to open up the line for Q1 operator.
Thank you at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad that will star then the number one well pause for just a moment to compile the Q and a roster.
Your first question comes from the line of Neil Mehta with Goldman Sachs.
Good morning, guys and we do appreciate that incremental color that you provided around around Freeport here looking at the first question that that that I have is around the lubricants business.
Of course.
We don't want to enter the world of speculation here, but there were press reports about the potential to monetize.
Yes.
Your assets for a certain amount of money yet just your thoughts on.
On those on that lubricants business, how core is that and the potential for further monetization to try to unlock value.
That might not be being.
Being reflected in the unit price right now.
Great Neil Steve how you doing it's good to have you on Onco.
As you know I mean, the finished goods and chemicals business has really taken coded and its stride.
Our through it so year to date record.
And we believe that the future growth potential of all the brands inside this business is substantial.
As responsible stewards of the business management the board continuously review what the value of any product Calumet is to us and I think as it would be for any company Neal that valuation as a synthesis of.
Cash flows growth potential and strategic importance.
It's clear from OCC aggression commentary that people understand.
This hypothetical situation, where potentially change our leverage and debt quantum significantly.
I think right now given its highly speculative as you hit on I really can't comment on speculation beyond that.
Yeah, no very clear I'm sure there'll be other questions around this today.
A follow up I have is around that.
Is around great falls and that.
It is a good asset in the sense that it runs a lot of WCS, which is a differentiated crude grade right now.
Results came in a little softer than I think what most investors were expecting out of that asset can you just talk about anything that could have been unusual or one time or if it's just a function of the product and crude environment and then how do you think about.
Minimizing losses from the fuels business as you get to 2021 at the forward curve what levers do you have.
Before WCS prices start to widen back out overtime.
Neovasc Bruce good morning.
Of course were reported in Great falls and Shreveport fuels together so.
I would.
Now I want to you to leap to a conclusion about either facility, but it.
Aggregate.
Over.
This summer.
We have had softer fuels environment for everybody.
Then last year.
Great Falls is incrementally affected by that as you noted in the WCS dip is actually.
A key contributor to the gross margin environment up there and of course, it's been narrower which is adverse so with all the obvious points being made.
That is a good part of the country to be a refiner.
And I think the proof of that is the facility is running fall on a volume basis throughout this throughout this pandemic.
In that steps that you guys are taking in order to as you go into 2021, what levers do you have to pull in order to drive.
To minimize.
Losses, as we work through the pandemic.
Well I think the the operational levers are the same for us as everybody we're pretty nimble.
Given our two positions on re optimizing and tracking closely.
Matching output from the facilities to the local market demands and customer demands.
It's been very volatile for everybody, but I think we've hung in there pretty well I'll tell you most of what you're seeing is the 64 and a half million dollar Hickey from RIN prices skyrocket in this year as opposed to a fundamental change in our operational competencies.
Okay.
Thanks, guys appreciate it.
Thank you.
Your next question comes from the line.
Roger read with Wells Fargo.
Yes. Thank you good morning.
Good morning, Roger Okay, Yes, [laughter], yeah, you might get a little nervous.
I guess, what I'd like I get I mean, it sounds like things are definitely improving and specialty.
I'm sure a lot of this is volume driven I was just curious as we look through thinking about what your we're able to do in terms of pricing right. We had a tremendous amount of crude volatility early in the year kind of a little.
A little more stable sales.
It's mid year.
So how has that affected your pricing and then.
With the recovery and what we've heard a lot of places across the business.
All across everywhere that there have been no.
Run down of inventories and then everybody always said demand popped up have you been able to or do you expect to capture any sort of extra margin on fig fixing. The just in time issues that have crept up out there. We just maybe thats a mix question, but I was just curious if any of that was kind of curious.
Hey, good morning, Roger Scott here, but let me.
Let me take the first crack at it and takeaway on an as needed, but when we look at the product mix Roger first on the on the profit per barrel.
Type of view and it was mentioned during the presentation, but results were still over $38 a barrel. So I think what we saw during the quarter as the volume started ramping back up really led by those industrials. The the margin per barrel came back a little bit more test closer to normalization.
Just for perspective, Roger if you just go back even two years ago, So basically $10 a barrel above where we were just a few years ago, so $38 off the barrel it's still.
All in margin and I think if were in Q4, you know the inventories remain relatively low out there there are some some lower refining rates the hurricane impact et cetera.
I think overall the supply demand in the overall supply chain and the market is pretty firm out there.
Overall.
Yes, I appreciate that I guess.
You did a lot of things cut back on a lot of low margin.
Or low priced tight.
Product offerings to improve that margin, so I'm not really sure when I looked at it I can compare the.
The high Thirtys to previously the high Twentys and recognize whether that was changes you've already made or we were actually seeing changes in the market. So thats, what I was really trying to get at with the question there.
Yes, I guess.
To start I can chime in a little bit too.
Like you said.
Prices are very substantially and when you look at Q2 versus Q3, and we see a 47% increase in crude prices.
Margins hold all wall industrial demand returns I think tells you something about kind of the market and the resilience of the consumer side.
And that we don't think that this is just some sort of accrued anomalies. This is this.
The specialty margins are strong right now and.
Yes. This is Rob just Steve if I could add to Todd I mean, just a couple of observations maybe to give you some more anecdotal feel as to how we think about it I mean first of all you know clearly we had a a period few days back where we had a material sell off on the crude complex and.
And we Didnt see price cuts and his specialties from anyone so I think that just shows you generally there's a feeling that supply chain to tight and then I think one of the best to me one of the best indicators that supply chains at Titan sustaining that way.
Is.
We are facing the good news bad news problem that it's very difficult to get trucks and truck us.
And.
So that tells US just how tight situation is right now.
Okay, good that kind of dovetails, what we've been hearing.
And then I guess my coming.
Completely unrelated follow up question for you Todd.
Obviously, the companies come through what's been a brutal year for most.
Companies, we cover on the cash flow side, you all come through.
I'll just say strong.
What.
What if anything that we need to look at into the.
I'll say the end of this year or the beginning of next in terms of expectations on cash flow or cash management, and then is there any potential as an MLP for calumet to participate under the care Zack in terms of any tax recoveries and I know, it's generally speaking not a tax business just didnt.
If there was anything.
Winkle, when the tax laws or something like that that could benefit the company.
Sure enough. Thanks.
You know as far as the as far as what to expect in 2020 are the rest of 2028.
It's quite an uncertain world out there so I hesitate to look forward too far.
Our goal does remain to be cash flow neutral in 2020.
No no change on that we're committed to that.
Yes, well I can tell you is what we've seen so far and.
For the fourth quarter is more of the same on specialty so so industrial the industrial return continued concern.
Consumer facing strength.
Continues to be strong we don't see any reason for that relative strength to change.
As you know it's difficult because we do see seasonality in the fourth quarter typically in the particularly in the industrial brand.
But like I said earlier, we have not seen those yet so so far so good we may see something different.
Yes, and yes, so far so good.
Probably is going to forecast as anyone can make these days gentlemen, thank you for the time.
Thank you.
Our next question comes from the line of Gregg Brody with Bank of America.
Good morning, Greg.
Just following up on the question about the finished lubricants business.
I know this is market speculation so should we think about it.
It is.
Is it easy to separate these businesses from your other businesses are there any limitations to doing that.
So.
I guess the way the way, we would kind of frame. It up is that currently the businesses are integrated but they're not strategically integrated.
So so simplest maybe.
The key point geographically.
We don't have any kind of shared facilities.
Generally between the finished lubes business and our other asset base. So we talked a little bit about the integrated complex in Shreveport, just now Greg I mean.
Because of slide real estate, we didnt put on there, but obviously, we have a major packaging and distribution facility as well the finished goods business and Thats why we have the Trufuel production line, that's in Shreveport, but it's like 15 miles away. So theres no pipe. So it seemed like that integrated from an asset base.
Got it so.
It is strategically aligned so.
Integrated.
So.
How do you what would be the steps to I guess separate it is just.
Is there anything thats thats arduous or is it fairly simple to do.
Hey, Greg this Bruce I might give a little more context around this so first of all.
The.
General structure of the company isolates each of our assets legally we isolate them for BNL purposes internally.
We roll that up obviously to a high level when we report but.
We have the ability to have a very.
Clear look.
And how the businesses perform and part of that is Weve got absolute arm's length separation, if there are molecules moving back and forth.
Speculative interest in finished lubes is probably getting a little overheated here.
But if you want to if you want to be thinking about it as a.
Separable component everything we've got is separable in that way I think of it as virtual integration not physical and I think it will be on the right track.
Got it.
Just in terms of I appreciate all the color on the comes because on the specialty comms business.
Is there.
One of the challenges of forecasting this year has been just.
Yes.
Hey, how how covance and package it sounds like you said for this year for this quarter as of October you're back to last year's volumes is that is that did I hear that correctly.
I think we were we.
September specifically.
We've had an upward trajectory, we've had an obvious trajectory, sorry stroke or not but what.
During the third quarter and the lines, Matt in September the 1920 lines.
So is it is it fair to say that based on what Youre, telling us you're not seeing the normal seasonality that you historically have seen in the fourth quarter and you were at last year September numbers that theoretically volumes and specialty it could be higher this quarter than last year.
Yes, Greg Scott I would say theoretically, yes, and I think the wildcard becomes if seasonality comes into play or not we haven't seen it yet so that at a minimum it appears that may be delayed.
And we just don't know if it's going to come or not on the seasonality, but yes, and if I.
I could just add a technical accounting comment that the numbers evolve.
The volume like on like we're giving you is pro forma because in 19, we had a.
Processing deal. So so if you want to forensically attack a few you need to bear that in mind.
Got it.
And then just last question from me.
Actually maybe I'd say more.
First what I'll say is.
Rins headwinds.
How should we think about that steady state impacting your refining business.
We stay around here.
And for this quarter and thereafter.
Well we.
We accrue against the shortfall the system operation blends as much ethanol as we can we like blending ethanol, we wish we could do more.
But it leaves a short.
I would not want you to think that we have any insights on where that market is headed rins prices end markets or just absolute chaos strongly reactive to political or policy developments. So.
All I can tell you is that.
We're waiting for the RFS reform like the rest of the world.
Got it no I appreciate that and just last one for you. So you talked about the substantial SJ savings you've had this year.
Is it your sense that that's that's sustainable at those levels does it.
To go up the stairs theres a recovery because it's going to go down further.
Yes, no yes Todd.
We've been mostly it's sustainable.
In some kind of structural changes made in the business as far as outside contract services head count those types of things that are sustainable.
Naturally as travel comes back and as we hit the road more and things.
Things like that we'll see a little bit of regression.
But I'd say for the most part.
Made a step change in SGN, a and we expect to keep the majority of it.
Got it Thats it from me guys. Thank you.
Thanks, Rick.
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Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your next question comes from the line of Jason gave women with Cowen.
Morning.
Morning, John.
I wanted to first ask just about how you're thinking about that longer term you have I think the next notes due or 150 million.
And a couple of years, so maybe thoughts around how you plan on attacking that and then.
Yes, the long term view.
On where are you on that.
EBITDA levels to be and if you think you can get there organically or if.
You do think there needs to be some.
Something on the inorganic side.
And kind of tangential to that thinking about theres, obviously been a lot of questions about this finished lubes part part of the business but.
You previously referred to Great falls as non core and it seems like Thats something that you are going to be holding onto at least for now just given the difficulty in transacting refining deals is there anything.
On the specialty side that you consider less core relative to the other parts of the business.
Thanks.
Thanks, Jason This is Tom let me, let me take the first part of your question. If that's all right on the.
The upcoming debt and then I'll turn it over to Steve to talk a little bit more about some of the long longer term questions.
You mentioned, so so as far as the 2022.
Remember, we did exchange in Q2 so.
We're just left with 150 million maturing in 2022, we think thats, a very manageable amount and we have some flexibility so we.
Just on drug at $269 million of liquidity.
Steve is that we have at the moment.
And generating cash so yes.
We're willing and comfortable to go current as we kind of give ourselves some time to optimize our options.
I guess that would now be hopefully part one of your question then Steve you on Nick a little bit over the longer term deleveraging.
So give me if I may going onto that might sound, a little facetious I mean, I'm going to let me use a golfing analogy right I could sit here and tell you that I'd like to be a scratch golfer, but I'd like to be a better golfer.
And let's kind of talk about leveraging from I want to be a better Gulf of rather than I want to be a scratch golfer. So so I'm not going to give an aspiration on target from that perspective, but clearly monitoring the board look at what our cost of capital is and say that some combination of of deleveraging and clarifying our mixed business.
Mobile is the path forward if.
If you go back to January February I think it was a very clear organic path forward and right now I'd say that what kind of Taco is much less so we're hopefully continuing to look about how we can reduce our cost of capital through a combination of addressing those two issues.
So all that kind of comes the second one and then and then on the third one.
You'll have to refresh me.
Just on I mean, yeah, I was kind of tied to the last.
Last question, which it was just around you kind of referred to great fall those non core historically is there something within the spot in the specialties business that you consider not necessarily noncore, but not as core I guess as other parts of the business just along the lines of the.
Conversation about the finish leaves.
Second yes.
Yes.
It may not be a very satisfying answer I mean, we like.
I think pretty much.
Everything we're doing in specialties, we like everything we look at its got some difference in growth opportunity, but we see growth opportunities across all of it. So so just kind of maybe.
Pivot back to what I said earlier, and then hand over to Bruce to get his take.
Which is whenever we look at valuation, it's obviously going to be some synthesis of cash flows growth potential on strategic importance and that strategic importance is that kind of task globally, but but I think all of it is particularly as a relative degrees strategic importance Bruce you want that.
Sure Steve Thank you.
Okay. Appreciate the kind of longer term strategic journey nature of your interest and if we maybe give a little bit of a foundation. If you go back to December 30, Onest 2016, we have $2.0 billion that this this quarter the report that.
Hi, it's putting out has added 1.2, so we made an $800 million inroad against our long term debt structure over that period of time and it was a good balance.
One offs, improving as the site level at the individual business level.
And M&A activity.
Those two buildings took care of the debt that I just mentioned and also funded a great deal of.
Inward investment the organic part so we're actually pretty reasonably pleased with the balance it as Steve indicated that was going really well.
Until we sales into the Covance storm, so we'll see.
But.
We do like to think about balancing so when when people want to take a list of our assets and draw lines or as a core versus non core that's probably a little in flexible compared to how we think about it. So the diversification that we've got is a strength.
Pieces of the business have been rotational this the cycles don't sake.
And if you think about it that way, we're just looking at the mix, we're looking at the portfolio.
I think it was to bolt on or bolt off it would be against that backdrop that context.
Got it great I appreciate the color.
Thanks.
And at this time there are no further questions I would like to turn the call back over.
Mr. Kennedy.
Joe you want to wrap.
Okay.
Go ahead, Steve to your call.
Thanks, Okay, well again I appreciate everybody being on the call.
I would I would point out I was talking about Gulf earlier, and I can assure you know want to Calumet has concluded Gulf. These days, we're working hard on getting through the pandemic.
I want to thank you all again for your interest in Calumet.
Has executed at a high level throughout 2020 in the face of significant challenges and uncertainty.
We've taken proactive actions to both protect the business into physician at the long term success I.
Im extremely proud of everybody at Calumet I look forward to seeing what we can do in 2021 I. Appreciate your time have a great and good weekend. Thank you.
Ladies and.
Gentlemen that does conclude today's conference call. You may now disconnect. Thank you for your participating.