Q1 2021 Trecora Resources Earnings Call
Good day and welcome to the check where I resources first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Today's conference is being recorded and at this time I would like to turn the call over to Jason Finkelstein from the P. S N to current lease.
Go ahead Jason.
Thank you operator, and good morning, everyone.
Welcome to the true core resources first quarter 2021 earnings Conference call. The earnings release was distributed over the wire services. After the close of the financial markets yesterday afternoon.
Any on our call today will be pack World, President and Chief Executive Officer, and Sami Ahmad Chief Financial Officer, Christopher Groves, Our corporate controller will also be available for the question question and answer session, which follows management's prepared remarks.
Before we get started I would like to review the Safe Harbor statement statements on.
On this call that are not historical facts are forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements are based upon management's beliefs and expectations only as of the date of this teleconference make that 2021.
Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected.
These risks as well as others are discussed in greater detail intra chorus filings with the SEC, including the company's most recent annual report on form 10-K, and subsequent quarterly reports on form 10-Q.
During today's call management will also discuss certain non-GAAP financial measures for comparison purposes, only for a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued after the close of the financial markets yesterday afternoon.
The webcast is accompanied by a slide presentation is available on the investors section of the company's website Www Dot true Cora Dot com at this time I'd like to turn the call over to true <unk>, President and CEO Pat Quarles.
Thank you Jason Good morning, everyone and thank you for joining us today over the last year, we've been focused on strengthening our balance sheet and managing through the uncertainties and disruptions created by the COVID-19 pandemic, ensuring that your core emerged in a position of strength. We have also been very clear that prudent capital allocation, including return.
Turning value to our shareholders was among our highest priorities.
While we entered Q1 and well positioned to both benefit from the recovery and leverage our evolving growth portfolio.
Already sub freezing temperatures in Texas, and the Gulf Coast resulted in significant disruptions to our customers and supply chain as well as higher utility repair and maintenance costs at both facilities.
South at South Hampton, we're fortunate not to experience loss of electricity or natural gas we were out of operations for one week during that time, we were able to repair most of the damage to our equipment, which is largely related to water handling equipment.
And we avoided any supply disruptions to our customers.
At <unk> chemical we lost both electricity and natural gas operations at TC were down from roughly two weeks during which time, we completed most of their payers to damage equipment.
From a financial performance perspective in Q1, we had a net loss from continuing operations of $4 $4 million compared to net income from continuing operations of $5 $9 million last year.
Q1, adjusted EBITDA from continuing operations was a negative <unk>.
Compared to positive $5 million last year.
We estimate the total freeze event impact Q1, EBITDA to be between four $5 million to $5 million. This includes higher utility and maintenance costs as well as well as loss of sales from our outage and outages at our customers and suppliers.
While the impact of the freeze was largely confined to Q1 certain customers and suppliers continued to experience residual effects into Q2.
Following the freeze event in February the board authorized a $20 million share repurchase program, which reflects the resilience of our business, our strong balance sheet and ample liquidity.
Our debt at the end of Q1, the lowest level since Q3 of 2014 continues to keep us at our target leverage ratio.
By the end of the first quarter, our growth funnel had 12 projects focused on delivering new products are entering new markets 11 projects focused on driving asset utilization with revenues that don't require significant capital and five projects focused on improving productivity and reducing costs.
The assay utilization projects, we have converted two of our successful commercial trials to new custom processing business beginning in Q2.
These projects will allow us to significantly load the new distillation column at T C.
On productivity, we executed a significant cost reduction project at the beginning of April at T. C.
In addition to focusing on increased utilization of Tcs assets, we have recognized the important importance and improving its overall cost structure to benefit its financial performance.
Restructuring is expected to lower costs at Tc by about one and a half million dollars a year beginning in April.
In addition to the new business in Q2, we are seeing several positive market developments with <unk>.
The U S economy is driving solid demand across all of our key end users. It's also supporting price increase initiatives and the market.
For our solvents business you will recall, we increased non formula prices last November 10 cents per gallon and in February we increased them a further 15 cents per gallon.
We have a further 10 cent per gallon increase currently in the market, it's not known yet it's not known yet whether this one will be fully successful.
Byproduct values are also changing rapidly.
Byproduct prices move according to a formula linked to benzene toluene and our feedstock.
While feedstock and <unk> prices had been relatively stable in the second quarter benzene has become very tight and pricing is responding.
Contract price for benzene was $3 from one cents a gallon.
Benzene said last week at $4 60, a gallon.
That translates to about 44 cents per gallon improvement and byproducts spread from April to May.
I will note, we expect benzene pricing to remain volatile and it is currently backward dated so while we expect the byproduct spreads to remain strong they're unlikely to stay at these levels for long.
For our waxes, we implemented increases up to six cents per pound in April and have announced a 12 cent per pound increase in met in mid may.
So all of its price increase the magnitude of the realized increase is not yet known.
We're also seeing a step up in our custom processing activities due both to demand from our pre existing customers as well as the new business from a growth program I mentioned.
However, there do remain some headwinds in Q2 some of our solvents customers continue to have production constraints due to the February freeze event and supply chain disruptions and generally are a challenge, particularly in the trucking and international markets.
Lastly, I also wanted to note that we executed a scheduled turnaround some of our units in silsbee during the first quarter.
Without a planned turnaround in the second quarter. This was sequentially benefit the quarter by about $1 million.
We remain committed to our goal of creating long term value for our shareholders and returning capital. If we don't believe we have higher value opportunities to grow our company.
As far as our share repurchase program. During the last few days of March we purchased approximately 88000 shares at an average price of $7.86. A program continues into the second quarter.
Now, let me turn it over to sandy to discuss the specifics of our Q1 results.
Thanks, Pat and good morning to everyone.
Let me start with a discussion of liquidity debt and cash flow and then I'll discuss our first quarter performance in more detail.
Our first quarter leverage ratio under our bank credit agreement was basically unchanged from year end.
With unanimous support from our Bank group, we amended our credit agreement EBITDA for covenant purposes to allow for a one time $5 million add back to the first quarter and this was in connection with the financial impact of the freeze event.
With this amendment our leverage ratio for the first quarter was 1.62 times and this compares to 165 times at the end of 2020.
Additionally, this amendment allowed us to maintain availability under our revolver, which is undrawn.
$53 million at the end of the first quarter.
Cash on the balance sheet as of March 31 was $53 million.
In addition on April one we received our final tax refund under under the Cares Act tax law changes that were implemented last year of $2 $4 million.
Thus, our total liquidity, including the tax refund stands at $108 million.
Total bank debt is about $45 million at the end of March.
As you know in addition to our bank debt, we have $6 $1 million of outstanding PPP loans.
We expect to complete the forgiveness application process for these loans by the end of the second quarter and we believe we will qualify for full forgiveness based on the SBA criteria.
All of our PPP loan funds were segregated from our operating funds and we specifically used them solely for payroll and benefits thus preserving employment at our sites.
Despite the impact of the freeze operating cash flow from continuing operations for the first quarter was $3 $8 million.
Capex for the first quarter was $4 8 million, which included approximately $1 $7 million of plant and equipment restoration related to the freeze event.
Our expected capital spending for 2021 remains at approximately 13% to $14 million.
We will do our best to absorb the extra freeze related capital expenditures in the 2021 planned, but we wont have clarity on this until later in the year.
As you know 2021 capex spending is primarily driven by continued continued feedstock pipeline work as well as a higher level of plant maintenance and turnaround spending at South Hampton.
As we progressed with this plant maintenance work there may be additional spending related to discoverable that we may not be able to fully absorb our offset.
Free cash flow for the quarter, which as you know is a key metric for the company.
And defined as cash flow from operations, less capex and less required debt amortization.
It was approximately negative $2 million.
Now, let's take a.
A closer look at our first quarter performance.
We reported net loss from continuing operations in the first quarter of $4 4 million or negative <unk> 18 per diluted share compared to net income from continuing operations of $5 $9 million or 24 cents per diluted share in the first quarter of 2020.
Adjusted EBITDA from continuing operations was negative <unk> 5 million fourth first quarter compared with adjusted EBITDA from continuing operations of $4 8 million in the fourth quarter and $5 5 million in first quarter of 2020.
General and administrative expenses for the first quarter were $7 $6 million compared to $6 $9 million in the first quarter of 2020.
G&A includes plant level general and administrative expenses as well as corporate expenses. The increase from last year is primarily due to higher insurance costs.
Interest expense for the first quarter was approximately zero point $3 million compared with 0.9 million in first quarter of last year.
The reduction in interest expense is due to debt reduction combined with lower interest rates bank debt has been reduced from $102 million at the end of the first quarter of last year to $45 million at the end of the first quarter of 2021.
And our effective interest rate has dropped from 383%.
For Q1 2020 are.
From Q1 2022, 188% for first quarter 2021.
Now, let me walk you through our business segments, starting with specialty petrochemicals segment.
Adjusted EBITDA for specialty petrochemicals in the first quarter was $2 6 million compared to $6 4 million in the fourth quarter and $6 4 million in first quarter of 2020.
Adjusted EBITDA margin for the first quarter was five 6% for the specialty petrochemical segment compared to 13, 1% in the fourth quarter and 12, 5% the first quarter a year ago.
As mentioned previously the freeze had a significant negative impact, especially petrochemicals revenue and costs, which are reflected in the Q1 numbers.
Specialty petrochemicals total sales volume in the first quarter of 2021 was $17 2 million gallons compared to $22 1 million gallons in the fourth quarter and $19 7 million gallons in Q1 of 2020 price.
Prime product sales volume in the first quarter was $14 7 million gallons and declined approximately a million and a half gallons or not 5% from Q1 of 2020.
This decline was mainly due to the freeze events, which resulted in widespread utility failures rolling blackouts across the state and region, causing significant disruptions for our customers suppliers as well as our own facilities.
In addition sales were also generally weaker compared to the same period last year due to the continued impact of the COVID-19 pandemic.
Moving on to specialty petrochemicals feedstock.
Benchmark natural gasoline feedstock prices have followed a trend of continued increases in spotting bottoming out in the second quarter of 2020 at 42 per gallon.
The increased to 86% per gallon at the end of the third quarter and to a dollar per gallon at the end of last year.
At the end of first quarter 2021, natural gasoline was priced at $1 43 per gallon and it stayed roughly flat through the month of April.
This trend in market pricing of natural gasoline is shown on slide eight of the Q1 2021 earnings deck that is posted on our website.
As you can see in the slide feedstock pricing has rebounded back to nearly 2018 levels and are actually higher than 2019 levels.
Now moving onto byproducts byproduct sales volumes declined to $2 5 million gallons in the first quarter from $4 5 million gallons in the fourth quarter of 2020.
This was in conjunction with the decrease in prime product sales byproducts.
Byproducts are are produced as a result of pump product production and their margins are significantly lower than margins for our prime products.
Byproduct spread improved to nearly 30 per gallon in the first quarter from a negative four cents per gallon in the fourth quarter of 2020 and eight cents per gallon in Q1 last year.
The upward turn in byproduct spread that's Pat explained was driven by higher byproduct prices as a result of sharply higher prices for the aromatic components, specifically benzene and a byproduct stream.
Moving on to the specialty waxes segment, especially.
Specialty waxes segment had adjusted EBITDA of negative <unk> 5 million in Q1 compared to negative <unk> 2 million in the fourth quarter and a positive $1 1 million in Q1 of last year.
Especially waxes segment generated revenues of approximately $8 $7 million in the first quarter compared to $9 million in the fourth quarter and $10 4 million in Q1 2020.
Revenue in Q1 revenue in Q1 included $6 $9 million of wax product sales, an increase of one 6% compared to Q1 2020.
Texas freeze event curtailed feedstock supply during the quarter. This loss of supply was significantly offset by sales from our wax inventories.
We continue to be sold out in wax and we have increased product pricing in the last quarter with further increases announced for may.
Processing fees.
Which were approximately $1 8 million in Q1 decreased 51, 5% or approximately $1 9 million from first quarter of last year and this of course was driven by lower custom processing demand, resulting from the Texas freeze event.
And the absence of custom processing business related to the pandemic.
That concludes the financial summary, and I would like to turn the call back over to Pat and then we will open the line for your questions.
Thank you Sammy before we take questions I'd like to take this opportunity to note that <expletive> Townsend true core as executive Vice President and Chief Manufacturing Officer will be retiring effective may 14th with his involvement as a director on the company's board beginning in 2011 and his subsequent move to the role of Chief Manufacturing Officer true core has undergone a historic train.
Formation as he helped implement significant beneficial change in our manufacturing work processes.
Today, I am manufacturing, a safer stronger and more innovative than ever before and that is due in large part to <expletive> and his team.
Ralph ponds previously the site leader at South Hampton is transitioning to the position of Chief manufacturing Officer.
Ralph joined the company a year ago to lead our South Hampton facility as part of our succession planning process.
During the past year, it became abundantly clear to me and the board that Ralph was the ideal candidate to succeed <expletive> Rouse.
Ralph has been instrumental in driving strategic and structural change amidst significant market disruption his proven leadership and track record of success in manufacturing, specifically and increasing reliability and reducing maintenance costs will be invaluable to achieving the company's overall to go overall goals.
Now, we'd like to open up the phone line to questions.
Sure.
Thank you.
To ask a question you will need to press star one on your telephone to withdraw.
The other question press, the pound or hash key.
Please standby, while we compile the Q&A roster.
Okay.
Yes.
Okay.
Again that is star one to get in the queue and ask a question.
First question is from Rosemary more belly with G Research. Please go ahead.
Thank you and good morning, everyone.
Good morning, good morning, Pat.
Pat I was wondering if you could give us a little more details on the two new customers.
And their size and size and where they are coming from is it for existing product lines is it from new ones.
Any details would be appreciated.
Sure. Thanks for the question.
As we continue to outline our growth program kind of clarity as to how we're.
Segmenting the projects that we're driving with a real emphasis on.
Really driving utilization of our assets and these are projects that fall into that category.
These particular projects are against.
The new distillation column that was installed some years ago they relate.
I appreciate with custom processing I can't talk specifically about the customer of the product because that's confidential for them, but it does significantly drive utilization of the distillation column that business starts up in <unk>. We're in the midst of that work today and we anticipate it running.
On a going forward basis, so it should be reliable and ratable business.
In terms of kind of the magnitude of the step up.
We hedge it a little bit it's not going to be.
As we've said our portfolio, particularly on these type projects are more doubles and singles, they're not really homeruns and I would put this in kind of the double category. So in excess of a million dollars, but and we'd expect it to grow from there. So it's meaningful but it's not just to be clear it's not not.
Not a game changer. This is part of the part of the.
The path we're on.
Sure. Thank you and and so we see what is the new distillation column capacity utilization I am assuming that you have a lot of room for growth in there.
We have more room for growth.
Have more room for growth.
We don't talk about specific Utilizations and as you. Appreciate it depends also on the product that we're running the service and the value that we're getting so.
We tend to target.
Our margin on the projects that we do.
If theyre slow runners.
Higher margin, who need to get a return on that that asset and that's how we kind of think about value capture.
Okay, Thanks and.
And then could you touch on the Canadian soil.
Soy oil.
I mean, the demand was weak I am assuming it was Canada.
Can you give us some details on that whether it is a question of demand with that.
It is supply or maybe competition sure. So I'm often kind of asked.
Is kind of 2019, the baseline performance for this company.
Thank you I can answer your question in that context, I would generally agree that it is so if I talk about oil sands.
And I'll use 19 is kind of a pre COVID-19 baseline.
During 19, we were seeing some reduction from historical levels of demand in the oil sands. However, we were pursuing an opportunity to land a new customer during that year, we actually had a significant trial, which benefited end use demand in the oil sands for 19, ultimately that's not we didn't retain.
That business and subsequently as we as we can consistently talk about here are existing customer has been driving efficiency programs to reduce their overall requirements for solvents. So if you fast forward from 19 to 21, our general expectation and certain current reality.
Is it oil sands demand for us is down structurally now that said.
And this is what can also often can be very frustrating quarter to quarter. There remains a tremendous amount of volatility. So if you think back to fourth quarter last year, we talked about very strong demand there.
First quarter. This year it was very weak and it's going to step up again in the second quarter as far as we can see it so sequentially, we're going to have more oil sands demand in <unk>, but I don't think the trend is really different than what it's been for some time is that this will continue to be as we've said before roughly five.
<unk> of our portfolio in a volume basis.
Okay, and then if that helps yes. It does and lastly, if I may if we look at the impact from the Texas sleeves. So its I am not mistaken. It was one $4 4 million loss in the first quarter. There is still some lazy.
In the second can you.
Quantify how much you're anticipating to be hit by that particular event.
Sure.
No.
Notionally $5 million impact during the first quarter as we said Thats comprised of our estimate of lost sales opportunity right either because customer assets were down our assets were down our suppliers were down a combination of all of those things. It also includes.
Significant premiums that we ended up incurring for utility costs during the event.
And our repair costs as.
As we look into <unk> and the comment I made about residual effects, maybe a few comments about the end users as well.
I'll know last year, we had.
Really really good solid demand on the polyethylene end use which is our largest end use and that was certainly continuing into the first quarter of this year and as we've all read the ethylene infrastructure was significantly impacted by the storm and there were several world scale crackers.
Really return to normal operations well into April so so what we see.
While general market demand is very good as we get into two Q.
We are seeing sequentially polyethylene could probably be actually be down a little bit first quarter to second quarter.
Actual basis now that's more than offset by <unk>.
Strong return of our poly ISO in use which is both storm recovery as well as just the normal seasonal pattern.
Also note that.
Post storm event with the change in energy values or in fuel values. We saw the return of demand into our refining in use which was the first time, we've seen that really since COVID-19. So that's a nice step up that actually began at the end of <unk> and continues into <unk>.
And.
<unk>.
Yes, those and those are really the principal drivers with improvements, we'll see next year and as I said oil sands is going to step up sequentially, just because of kind of the normal volatility.
Seeing that into that market.
Rosemary just a couple of points on the impact of the freeze event.
The Pat outlined so we believe that the total impact was just about to EBITDA was about $5 million and then.
There was the Capex additional capex of $1 $7 million that I mentioned in my remarks, so that $5 million was really the basis for our <unk>.
Add back that we got on covenant.
On the amendment covenant, which by the way was a no cost no fee amendment.
We are.
<unk> implemented from March 31.
Okay. Thank you very much.
Yeah.
Thank you and as a reminder to ask a question press star one to get in the queue. Our next question is from Bill that's in line with the tides on capital. Please go ahead.
And I'm going to ask you to repeat some.
Some information that you shared in your opening remarks.
It's significant and you went awfully fast with the price increases would you walked through.
Again, each of the price increases that are there.
You discussed.
And.
Do you have a historical perspective, when the last time was that.
That the business had enough strength that you were able to have.
This many in this magnitude of price increase.
Sure and thanks for the question Bill and I apologize for going to quickly now.
Now you're asking me to dig back into my script, So I got to make sure I find the right section, but let me just let me just speak to it.
So in the first question the first element.
What was the last time, we were actually the successful so the pre.
And 2020, the company had not successfully implemented a solvent price increase and two <unk>.
Since 2019 I dying from.
Middle of excuse me I think middle of 2018.
So.
And there's lots of things that contribute to that of course I mean.
Our sophisticated customers understand our cost structure. So they watch things like natural gasoline, but of course, we keep an eye on supply demand and the value that we bring to market and that really underscored the moves that we started making at the end of last year. So as I mentioned is a 10 cent per gallon solvent increase.
<unk>.
November 15% in.
February and we've announced a further 10 cents.
In the market today, and I will say that.
We'll see how that one unfolds.
We are in a competitive market and we need to see what responses are out there for us to be successful there one thing I didn't mention but I should is that we also look at the various channels to market that we have the drum business, although relatively small it is extraordinarily high mark.
<unk> business for us the dynamics have changed in the drum business as well.
Implemented differential price increases for our drumming customers.
In April as well or in May excuse me.
On the wax side.
Yeah, we've been talking for years about our drive to enhance the value of our wax offering.
It's been kind of a multi step process, we developed and commercialized in 2019.
Some new products that have higher performance versus ft waxes.
The hot melt adhesive market it.
It was important to get established in that market early so we had very competitive pricing.
Then COVID-19 hit and so the world kind of went upside down, but what we've seen now in the backend as market demand recovers.
Offering an attractive value proposition to those customers and we've begun driving price increases for waxes.
Particularly for hot melt adhesive and uses.
The last thing I would comment on for wax as you'll recall, we talked last year that while we were able to maintain sales levels. Despite impacts from COVID-19 that was largely due to going after alternative channels to market, which included.
Lower value kind of exports and as we get into late late this past year and you see the results in the first quarter, we are repatriating that demand.
That volume into higher value in use so you do see in our first quarter results and improvement on our wax margin and we'd expect between that and the price increases to benefit us in the second quarter as well.
Effectively sold out and of course, we're sold out which always helps the story right now.
No to answer your question Bill It does thank you and then.
This next question is is either remedial or really insightful.
It's all over insightful, although France, I, well I'm I'm guessing remedial. So we all see the data with economic activity rebounding.
But would you discuss kind of what what economic drivers that are really leading to the demand that you referenced it's across all end users.
Is there a way that you can pinpoint and and really help clarify what aspect of the economic rebound is is helping you or is it. It's so broad based that again the question is to remedial.
Well I mean, certainly we just benefit generally with GDP growth of consumable goods I mean, we participate broadly in the industrial markets right. So.
All of the big trends that we've seen with people spending their stimulus on goods rather than services.
That just drives general consumption I think the change of channels to at home delivery, you think about hot melt adhesives and some of those and uses our benefit. So I think that's generally helpful. I think specifically in some of our more key end uses.
In some ways.
Despite the pandemic our despite the resurgence in the economy longer term trend for US is the investment in U S. Gulf Coast polyethylene assets and as you appreciate they consume our product.
As long as they're running high rates they have a certain consumption profile and we have benefited from those plants and we will continue to benefit from the.
Those plants coming on stream, we are we are effectively contracted.
Now against all of the new capacity coming on in the next two and a half years. So so we'll be the beneficiary of that and that should start to some extent the next increment.
Soon as the second half of this year, we will see some new assets coming online that will be supplying so that's that's kind of a structural benefit of our business. The other one and poly ISO which again are.
It's a it's a component of the composite flat roofing technology Thats, having a lot of success because of its improved energy energy efficiency versus alternative technologies.
Kind of a good I'd say, a good sort of a bad story, but in today's market.
What we see is our customers are effectively sold out with the capacity. They have so what we will see the step up because of the storm impacts and so forth into the second quarter, but we do see them somewhat constrained. This year now they are announcing new plants and we've seen.
Some of those are public some of those are just with us as a supplier and again in most instances where contract either were already contracted with that growth anticipated to come or we're in the midst of having the discussions about contracts. So so those are some of the more kind of longer term trends that are driving.
Our growth.
And then we do just have frankly the volte.
The volatile kind of frustrating stuff that comes in and out that really hinges on the market. So the value of byproducts, we appreciate highly volatile but still leveraging.
What we see going on in oil sands.
That's kind of been structural decline and then refining was disappointing last year because as they are.
De rated refineries and re re optimized they took out to consumption of our solvents, we have seen that reverse and so we're optimistic that that should continue now given the value of refining and fuel products generally.
Okay.
Transportation for our tastes like go ahead.
I'd say transportation products to be clear this downstream refining.
Right. Okay. Thank you for for making that question not look as remedial is Uh huh.
It could have it really it was insightful. Thank you.
And so I do want to take one more question before I turn the line over.
You had referenced that you have.
Ah you're contracted with all of the new polyethylene capacity coming on in the next two years.
And there's definitely a difference between being contracted as a is a small component versus the the lead supplier what.
What insights can you share about your position.
In general across the board for all of this capacity that's coming on in the next two years.
Sure you appreciate I won't be too specific but.
I would say is we continue to be recognized for the differentiation of the purity of our product and their liabilities reliability of our supply chain into those accounts. So we have a high market share.
And we've been successful in preserving our position.
Thank you very much Pat.
Thank you. Our next question is from Mitchell sacks, with Grand Slam. Please go ahead.
Yeah, Hi, guys. So I.
I missed a couple of things in terms of understanding.
How they were flowing when you talked about the turnarounds that you did in Q1 and that you wouldn't have them I guess recurring in this quarter. I think you said that was going to pick up a million dollars in EBITDA is that correct correct.
And the $1 million then again the turnaround that you were doing in Q1 as we look forward going through the rest of this year and then next year do you expect that those turnarounds that you did in Q1 is it an annual thing is it more of a every few years or do we expect that million dollars in benefit to kind of flow through over.
Longer period of time.
So I guess the way I think about Mitch is we do plan. These advanced in advance we don't.
Publish our talk publicly.
About.
Too far in advance of the turnarounds that we have but it's a multiyear plan for us and this is really preventative maintenance right either because it's just time to get into the assets and validate their mechanical integrity or if you think about in case of our <unk> units.
Time to change catalyst so they come with some frequency.
We do have.
Further turnarounds this year.
There is nothing in the second quarter and then maybe maybe the next quarter, we'll talk about what's happened in the rest of the year, we have something planned for the second half.
The year, Mitch will provide more details later okay.
Okay.
Turnarounds last year or two and the year before that so this is not this is not something new it's just impacts that quarter to quarter changes. Okay. And then you had mentioned that the margin on byproduct I kind of missed that as you went through it but you could also just talk a little bit about as as the.
Economic rebound continues on and as you start to have your.
Polyethylene customers, you'll come online over the next two and half years, where there were there new plants can you just talk a little bit about.
Your reformer and and how you sort of think that drives.
Profitability into the future.
You don't like the air Max Advancer advanced reformat.
Yes so.
Yes listen the premise there if you if you rewind time on the contribution of the reformer.
It remains the same which is we get better conversion of those byproduct to the higher value aromatics through the new technology than we had in the past.
Different I guess is.
The scale of that unit really isn't necessary given the scale of our business today. So it's not as utilized as we would like but its performing according to design we're getting.
Grade that we expected.
We're always optimizing.
One of the things that we're always trying to do is to minimize byproduct production because it is much lower margin towards prime products.
We don't break all of that stuff out for you guys I appreciate but we have had success in driving.
Better yield to prime products, which is which has helped us.
Certainly helped us last year even.
Poor as it was with COVID-19 and.
And we think that will give us some benefits going forward as well.
Okay and your margin in the quarter on the byproduct.
During the first quarter was.
Yes, 30 cents yeah.
First quarter.
Okay, and then on the projects you've got the 12, new ones the asset utilization.
The productivity I think on the productivity when you talked about a million and a half.
Here annual savings starting April can you give a.
A little color around that.
Sure. So so listen I think.
TC we know has been a challenge for us for some time.
The cost structure at that site changed materially negatively.
When the hydrogenation and distillation units were added.
We've been really focused on efficiently.
Efficiently.
Trying to bring those costs down over time, we've been doing it incrementally for really two years now.
But we believe we've reached a point at the end of <unk>.
Last quarter that we.
We had an opportunity to make a more aggressive change it's hard.
These impact people, which we take seriously.
But we felt as though is the right thing to do.
To kind of carve out.
Certain set of resources that can improve the underlying cost structure there.
Okay, great. Thanks.
Thank you and I'm not showing any further questions from the queue I will like to turn the call back to Pat Quarles for his final remarks.
Thank you.
Operator.
Thank you all for your questions and interest in true Cora I always want to end our call with a thank you to our broader organization COVID-19 fatigue, there's something we can relate to these days and our folks are no different and on top of that organization faced a herculean task of repairing our facilities from and freeze event. They accomplish those repairs.
And efficiently and most importantly without any injuries.
Thank them for their attention to detail and keeping everyone safe during those crazy weeks.
We look forward to capitalizing on our growth program and getting back to normal as we move further away from COVID-19, pandemic and the Texas freeze event.
Again, probably.
For your participation.
Yeah.
And thank you. This concludes today's conference. Thank you for your participation you may now disconnect good day.
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Yes.
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