Q4 2020 Ciner Resources LP Earnings Call

Welcome to general resources fourth quarter and full year.

'twenty 'twenty earnings conference call and webcast.

During the call today from General resources is Mr. OS Archon Chief Executive Officer. He is joined by Mr. Ed for Edelweiss.

As President of Finance today's call is being recorded it is now my.

Pleasure to turn the floor over to Ed Friedl, you may begin.

Thank you Laurie.

Good morning, and thank you for joining us to discuss our fourth quarter and full year 2020 earnings.

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

These are based on our beliefs as well as 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 included adjusted EBITDA distributable cash flow and distribution coverage ratio are 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.

Thank you Ed.

To begin I'm incredibly proud of our team as we navigated a challenging year for general resources.

As it was for the world as a whole and battling the COVID-19 pandemic.

As people were forced to acquiring team and business has temporarily closed global economy suffers from end to end.

Manufacturing activity, especially in our key end markets considerably weakened as customer demand vein and workers were required to stay home.

Flat glass manufacturing and party killer was affected.

However, our business, whether the abrupt downturn in demand effectively.

Through successful execution of what we could control.

Curtailing production is always our last resort, but we were able to do it in a way that minimize operating costs and a lot of keeping our workforce active around the planet.

Our employees demonstrated their talent and flexibility in taking on and a new and different tasks during those irregular operations and I, especially want to comment the outstanding job done maintaining our high standards for health and safety in 2020.

Our principal value safety and our work force committed from the start to apply in the standard to our COVID-19 response.

I believe you're avoiding a disruption to our operations due to COVID-19 was a considerable achievement given the circumstances.

On top of successfully implementing and adhering to strict COVID-19 protocols, we had zero loss work day incidents in 2020, and another testament to our safe operations.

As the economy activity rebounded our customer demand came back fairly quickly, especially in the domestic market evidenced by net sales growth of 29% from Q2 for Q3 here.

International sales recovered at a slower pace due to high inventory levels and more moderated resumption of downstream manufacturing as.

As we look back on the year the second quarter of 2020 represented a true low point in the soda ash market.

The fourth quarter of 2020 reflected a continued strong recovery in domestic market, including robust volumes in December as we prepared for new customers coming in 2020 one.

Strong domestic volumes provided a boy for our sales overall amateur relatively slower recovery in international demand.

On the international side, the fourth quarter saw continued demand growth in our end markets export volumes in the quarter were up 10% from Q3 and 41% from Q2 lows a trajectory we expect to continue as world economies stabilize particularly in Asia.

Turning to our operations I'm happy to report that we successfully executed on 18 million of the 20 million cost savings program, we implemented in Q2 book.

By optimizing personal schedule personnel schedules and cross functionality, we've reduced our labor cost as well as our reliance on outside contractors.

We also reduce our spend on maintenance projects, SG&A and others small yet impactful expenses.

I believe the all hands approach, we took to minimizing our fixed cost will benefit our operations going forward as this experienced brought to light a number of operational efficiencies, we will continue to employ.

Furthermore, in order to ensure we maintain adequate liquidity liquidity throughout the year, we delayed certain discretionary maintenance capital projects and also postponed some of the detailed engineering work for our Green River expansion project.

The board of directors of our general partner also made the difficult decision to suspend our distribution, while the pace of market recovery remains uncertain.

Redirecting that cash to debt repayment was an important step in managing our leverage ratio, which was two one times total debt to EBITDA at the year end.

All in all the team at the end of 2020 was strong recovery.

Evidenced by our fourth quarter adjusted EBITDA of 22 million, which was nearly equal to Q1 before COVID-19 took hold within our end markets. There's no question that the pandemic tested our resolve as a company, but we believe we have emerged stronger more efficient and better at.

To better downside risks going forward.

Ed.

Thanks, guys and thank you everyone for joining our call.

With their operations right back running at full capacity, we produced 686000 short tons of fourth quarter and the fourth quarter of 2020.

Which was in line with Q4 of 2019.

Total production volume for 2020 was 2.28 million tons compared to $2 75 million tons in 2019.

Primarily due to production curtailments required to manage inventory as well as a major weather event in Q3 of 2020.

Domestic volume sold in the fourth quarter increased 9% over the third quarter to 265000 tons and international volume sold rose, 10% for 327000 tonnes evidenced a significant recovery in soda ash consumption as we ended the volatile year.

I will note that the decline in international consumption in Q2 was far more pronounced than experienced domestically in part due to high overseas inventories at the beginning of 'twenty 'twenty.

Average domestic price in 'twenty 'twenty declined six 2% from 2019 and average international price declined 14, 6%.

Collecting a challenging pricing environment due to supply demand imbalances compared against record pricing levels in 2019.

Altogether, the $2 2 million tons sold in 2020 decreased 19, 5% and year over year volume.

The result, the resulted this resulted in net sales of $392 million in 2020, or a decline of 25 per cent compared to our record 2019 net sales of $523 million.

Sequentially, our fourth quarter 2020, net sales rose, 5% from the third quarter and 36% from the second quarter lows.

Cost of products sold including freight in the fourth quarter of 2020 fell 13% for $84 2 million compared to Q4 2019.

<unk> costs for the full year declined 14% to 338 million compared to 2019, primarily due to lower sales volumes.

SG&A expenses in 2020 decreased 9% from the prior year to $21 7 million as a result of lower sales and marketing expenses for.

<unk> fees and contracted services and deferral of non essential costs in order to mitigate the negative impact of lower sales levels.

Cash provided by operations of $54 7 million in 2020 decreased 47% from 2019 as a result of a $74 7 million decrease in net income from the prior year.

The decrease in net income was partially offset by a release of $24 2 million in working capital in the year.

Net income of $12 7 million in the fourth quarter of 2020 increased $7 3 million from the third quarter and totaled $26 9 million for the year.

This leads into the discussion of our distribution strategy in the context of the key non-GAAP metrics, we monitor as an MLP adjusted EBITDA and distributable cash flow.

In the fourth quarter of 2020, we recorded $21 8 million of adjusted EBITDA, an increase of $7 2 million from the third quarter and an increase of $19 million from the second quarter trough.

As those touched on we generated within $1 million of our first quarter adjusted EBITDA in the fourth quarter of 2020, which really evidences our recovery considering our adjusted EBITDA fell nearly nearly 90% just two quarters prior.

Distributable cash flow attributable to general resources was $5 7 million for the fourth quarter of 2020 compared to $3 8 million in the third quarter and distributable cash flow for the full year was $17 1 million.

Based on fourth quarter distributable cash flow of $5 7 million our coverage ratio would have been less than 1.0 times. If our board of directors had elected to resume our previous 30 for cent per unit distribution.

As we continue in the new year, maintaining a conservative capital structure continues to be our primary focus.

With the intention of resuming distributions once our board of directors feels comfortable with demand in our pricing environment as well as our leverage.

While we were comfortable with the resulting year end debt to EBITDA ratio of two one times. It still remains above what we were accustomed to particularly as we consider expansion plans.

Although our Q2 'twenty 'twenty adjusted EBITDA of $2 8 million as anticipated to burden our leverage ratio through Q2 of 2021 we.

We will be forward looking and expect to continue to evaluate quarterly with our board of directors when its appropriate to resume a distribution.

Lastly, I would like to touch on the March 5th amendments to our credit facilities that were disclosed last week.

The recent event of default.

At our parent company facility is not a result of our business operations in Wyoming.

We proactively entered into amendments within our bank group to ensure we would not be in a default scenario within our credit agreements.

The agreements were revised to eliminate a change of control default event at the general Wyoming level that could be triggered due to an event of default at our parent facility.

Effectively decoupling the parent facility from our facilities.

In addition, as part of the decoupling effort, we terminated the $10 million line of credit at the C. I N, our partnership level, which simplifies our overall capital structure.

And credit structure.

Our bank group was supportive throughout the process we work together.

To ensure a favorable solution was quickly reached our lenders are comfortable with our financial performance and outlook and we value the strong relationships like these.

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

Thanks, Ed.

Encouraging performance in the fourth quarter reflected our ability to quickly rebound from US we are downturn as well as both our operational flexibility and financial strength to endure market changes.

As we put a challenging year behind us I'm excited about the outlook for our business.

We are optimistic that COVID-19, vaccinations will provide a tailwind to the macro economy and should spur consumer spending and manufacturing activity in our key end markets.

As a key based materials for economy development. We continue to believe soda ash demand is poised to experience long term sustainable growth, especially in emerging economies, where construction auto production chemical production and use of detergents increase.

We are also excited about the growth potential in lithium production and the benefits that batteries for energy storage and electric vehicles offer for a sustainable future.

Our decision to exit our former export cooperative, which was official as after end of last year was a key step to capitalize on this growth potential.

Combined with our parent company's production in Turkey generic is a largest exporter of soda ash in the world.

We believe that this uniquely positions us to take advantage of logistical synergies and create strong relationships with global customers and distributors.

As we transition to our new export model, we expect to sell a specified volume directly to end back in 2021 for our direct export sales, we will leverage the benefits of our parent company's existing distribution channels, while continuing to optimize our own value chain to serve our customers.

Turning to our Green River expansion project, we continue to assess the timing of the project in the context of the capital outlay construction schedule and market recovery our plan to expand our operations has not changed as we are confident in the long term fundamentals that support new capacity in the market.

Furthermore, we believe that the project presents the opportunity to modernize and upgrade our assets for sustainable long term production, reducing our overall cost per ton and maximizing the efficiency of our production process.

We expect that as the market outlook becomes clearer during this year largely influenced by the pace of recovery in the ongoing COVID-19 pandemic, we will refine our timeline to proceed and next steps on the project.

In tandem with our capital planning for the expansion project, we are developing a holistic financing strategy that we anticipate will include the refinancing our existing credit facility in 2021, we intend to optimize our access to capital and financing structure to fund capital expenditures efficiently.

Without overburdening, our distributed distributable cash flow or leverage metrics in the future.

While COVID-19 pandemic delayed some of our growth plans, we anticipate that it is merely a speed bump to our long term objectives of leading our industry and providing sustainable natural soda ash grove to growing economies worldwide as well as our domestic customers.

We hope we have turned a corner on a macro economy basis and strength in our end markets will closely follow <unk>.

While it is difficult to protect the timeline for prices to see meaningful improvement. We expect the strong fundamentals of the soda ash industry should support upside earnings potential for our business.

In closing I want to thank our employees for their tremendous efforts the value or people cannot be overstated and I am proud to see us once again achieve a successful year. Despite the global COVID-19 pandemic.

The health and safety of our team and their loved ones will always be our priority number one thank.

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

Thank you for participating and then general resources fourth quarter and full year 2020 earnings conference call and webcast. You may now disconnect your lines and have a wonderful day.

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