Q1 2021 Icahn Enterprises LP Earnings Call
Good morning, and welcome to the Icahn Enterprises L. P Q1, 2021 earnings call with Jesse Lynn General Counsel, Keith Cozza, President and CEO and sung hwan Cho Chief financial <unk>.
Sure.
I would now like to hand, the call over to Jesse Lynn, who will read the opening statement.
Thank you operator.
The private Securities Litigation Reform Act of 1995 provides the safe Harbor for forward looking statements. We make in this presentation, including statements regarding our future performance on plans for our businesses and potential acquisitions forward looking statements maybe identified by words, such as expects anticipates intends plans believes.
<unk> seeks estimates will or words of similar meaning and include but are not limited to statements about the expected future business and financial performance performance of Icahn Enterprises L. P and its subsidiaries actual events results on outcomes may differ materially from our expectations due to a variety of known and on.
Known risks uncertainties and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic competitive legal and other factors, including the severity of magnitude and duration of the COVID-19 pandemic.
Accordingly, there is no assurance that our expectations will be realized we assume no obligation to update or revise any forward looking statements should circumstances change except as otherwise required by law. This presentation also includes certain non-GAAP financial measures a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measure.
As can be found in the back of this presentation I'll now turn it over to Keith Cozza, Our Chief Executive Officer.
Thanks Jesse.
Good morning, and welcome to the first quarter 2021, Icahn Enterprises earnings Conference call.
Joining me on today's call is sung hwan Cho, our chief Financial Officer.
I will begin by providing some brief highlights.
<unk> will then provide an in depth review of our financial results from the performance of our business segments.
We will then be available to address your questions.
For Q1 2021, we had net income attributable to Icahn enterprises of 162 million or <unk> 65 per LP unit.
<unk> two of net loss of $1 4 billion.
We're $6 34 per LP unit in the prior year period.
The quarterly net income was primarily driven by gains on our investments segment.
Adjusted EBITDA attributable to Icahn enterprises for Q1, 2021 was $435 million.
Compared to a loss of $1 3 billion in Q1 of 2020.
Our investment funds earned the positive return of nine 2% in Q1 of 2021 compared to a negative return of 17, 6% Q1 of 2020.
The positive performance was driven by net gains in certain long equity positions, primarily in the energy industry offset in part by net losses in our short index and short single name equity positions.
Adjusted EBITDA attributable to Icahn enterprises at our energy segment.
<unk> by 30 million to negative $2 million for Q1 of 2021 compared to negative $32 million in the prior year period.
Our petroleum business was positively impacted by increased volumes of the U S market per prime refined products improved as demand continued to recover and negatively impacted by exorbitant rins pricing and winter storm Yuri.
Net sales and service revenues for our automotive segment were 598 million for Q1 of 2021.
We are beginning to see our automotive service business revenues return to pre pandemic levels.
As a reminder, icahn automotive group continues to push forward with the multiyear transformational plan to restructure of the operations and improve profitability, which is illustrated by the significant reduction in losses in Q1 versus the prior year quarter.
We have substantially completed the legal separation of our motive service business from our aftermarket parts business, which will provide the service business for new growth and value enhancing opportunities.
In January of 2021, we issued $750 million of four and three eighths senior unsecured notes due in 2029 and in April of 'twenty, One we issued $455 million of five on a quarter percent senior unsecured notes due in 2027.
The proceeds were used to repay all of the $1 2 billion principal amount of six on the quarter per cent senior unsecured notes due in 2022.
We closed the quarter with cash and investments in the funds of over $6 6 billion.
Last month in connection with the continuing consolidation of all of our operations into our Florida Office, we announced the hiring of Arris Kgan, the former Chief investment Officer of General Electric company, as our new President and CEO.
<unk> is with us on today's call and will be available to answer any questions.
With that let me turn it over to Sean.
Thanks Keith.
I will begin by briefly reviewing our consolidated results and then highlight the performance of our operating segments and comment on the strength of our balance sheet.
For Q1, 2021, net income attributable to Icahn enterprises was $162 million as compared to a net loss of $1 $4 billion in the prior year period.
As you can see on slide five in Q1 2021, the performance of the investment funds was the significant driver of our net income for the quarter.
Adjusted EBITDA attributable to Icahn enterprises for Q1, 2021 was $435 million compared to a loss of $1 3 billion from the prior year period.
I will now provide more detail regarding the performance of our individual segments.
Our investment segment had net income attributable to Icahn enterprises of $391 million for Q1 2021.
The investment funds had a positive return of nine 2% in Q1 2021 compared to a negative return of 17, 6% for Q1 2020.
Long positions had a positive performance attribution of 18, 5% for the current quarter of <unk>.
Short positions and the other positions had a negative performance attribution of nine 3%.
Since inception in November 2004 through the end of Q1 'twenty one the investment funds gross return of 89% or three 9% annualized.
The investment funds out of net short notional exposure of 19% compared to a net short of 52% at the end of Q4 of 2020.
Our investment in the funds was $4 $7 billion as of March 31, 2021.
And now to our energy segment.
For Q1 2021, our energy segment reported net sales of one $5 billion and breakeven consolidated adjusted EBITDA compared to net sales of $1 1 billion and consolidated adjusted EBITDA of a loss of $38 million per the prior year period.
The Q1 2021 adjusted EBITDA include the gain of $62 million related to <unk> investment in Delek.
Q1, 2021, combined total throughput was approximately 186000 barrels per day compared to approximately 157000 barrels per day for Q1 2020.
Refinery operations were severely impacted in February by winter storms, but have resumed full operations.
Refining margin per throughput barrel was $3.05 in the first quarter of 'twenty, one compared to $1 52 during the same period in 2020.
While increased crack spreads and volumes contributed to the improvement in refining margins higher rens expense offset much of that benefit.
<unk> previously announced the renewable diesel project is expected to be completed in the third quarter and is expected to help mitigate future exposure to returns.
CVR partners reported Q1, 'twenty, one EBITDA of $5 million compared to $11 million on Q1 2020.
Corn plantings on prices are attractive and are driving increases in fertilizer prices and demand.
Now turning to our automotive segment.
Q1, 2021, net sales and service revenues for Icahn automotive group were $598 million down $37 million from the prior year period.
Q1, 2021, adjusted EBITDA, which excludes the losses associated with closed or closing part stores was a loss of $9 million compared to a loss of $42 million in the prior year period.
Icahn auto continues to push forward with the multiyear transformational plan to restructure of the operations and improve profitability.
Store closures related to the transformation plan accounted for most of the sales decline for Q1 2021, when compared to the prior year period.
Now turning to our food packaging segment.
Q1, 'twenty, one net sales increased by $3 million or 3% and consolidated adjusted EBITDA was $15 million compared to $14 million on the prior year period.
Net sales increased due to an increase in volumes and favorable effects on foreign exchange.
And now to our metals segment.
Q1, 'twenty, one net sales increased by $34 million and adjusted EBITDA increased by $6 million compared to the prior year period.
Volume set of prices continue to be strong driven by high demand from steel mills.
And now to our real estate segment.
Q1, 2021, net operating revenues decreased by $5 million compared to the prior year adjusted.
Adjusted EBITDA for the quarter decreased by $3 million compared to the prior year period.
Revenue from our real estate operations for both Q1 'twenty. One in Q1 2020 were substantially derived from sales of residential units and rental operations.
Now turning to home fashion.
Q1, 2021, net sales decreased by $9 million compared to the comparable prior year period.
Sales to hospitality customers were down significantly due to weak global travel.
West points of adjusted EBITDA was the loss of $2 million in Q1, 2021 compared to breakeven in the prior year period.
Now turning to pharma.
We started to consolidate the results of Veeva is beginning in December of 2020 within our new pharma segment.
Q1, 2021, net operating revenues were $30 million, including $13 million from of onetime transaction and adjusted EBITDA was $3 million.
Now I will discuss our liquidity position.
We maintain ample liquidity at the holding company and at each of our operating subs to take advantage of attractive opportunities.
We ended Q1, 2021 cash cash equivalents and our investment in the funds and revolver availability totaling approximately $7 2 billion.
Our subsidiaries have approximately $808 million of cash.
$586 million of Undrawn credit facilities to enable them to take advantage of attractive opportunities.
In summary, we continue to focus on building asset value and maintaining ample liquidity to enable us to capitalize on opportunities within and outside of our existing operating segments.
You're.
Operator can you please open the call for questions.
As a reminder to ask the question we wanted the press star one on your telephone.
John Your question press the pound Cole please standby, while we compile the Q&A roster.
Our first question comes from the line of Blayne.
Your line from Jefferies. Your line is now open.
Thanks, Good morning.
First I just wanted to say thanks, I'm not sure of this in the last call for you guys before the transition, but it's certainly wanted to thanks. It was great working with you and wishing you the best of luck in future endeavors.
My question is always kind of keep the start is just kind of the current backdrop and how.
You guys are thinking about new investments.
In terms of the the risk of the fund.
The net short positions that maybe some context around kind of the current backdrop and the thinking of.
A little bit forward thinker of the outlook based on where we sit today.
Yeah sure. Thanks, Thanks for the question, Dan and thanks for the kind words, yes. This is my last earnings conference call.
So just pivoting to the fund, yes, I think.
And Youll see in the 10-Q, when it's released related later today and sung referenced some of the exposure changes, but we.
We did we ended the year at negative 52%.
Net short when you aggregate, both equities and credits.
And at March 31 that number is negative 19%. So obviously reduced some hedges and added some long, but I think when you break down that detail further youll see we found some equity spots. If you look at our net equity short position at year end.
It was around negative, 30% and that pivoted.
Pivoted to positive 20 percentage of March 31, and so and a lot of those names are public we found interesting activist positions.
On that we built in the beginning of this year in Q1, such as Bausch health companies, and Firstenergy and and even in non activist position.
That we're public on in the Dana automotive holdings.
We're finding spots about pockets of value and then the two actavis cases positions where we.
We were able to obtain board representation, where we think we can.
Help unlock value and help the the catalyst too.
Two.
Yeah.
Improve help improve those two situations, so but that being said the overall backdrop.
We're still moving hedges around and you have to be very cautious with market multiples where they're at.
Makes sense I appreciate that color and then just on the book.
<unk> segment, just curious about how the pandemic is potentially shifted that transition or change some of the factors in terms of the how youre thinking about that business is going to look at the end of that multiyear transition.
Yes.
Sure I don't know like from the pandemic point of view.
It probably helped I would say we it.
We accelerated the time line of closing.
Unprofitable parts stores on the on the parts side of the business.
But from I think the although sure it had had enough of the pandemic had an effect on the service side of the business.
The service side of the business as we're at the end of this restructuring as ware.
Where we think there's the most opportunity.
We have great secular tailwind there.
We've restructured that side of the business and you should see dramatic improvement in profitability.
On the service side, we have it separated.
We're managing it internally totally separate from the parts of business.
What I would add and I referenced in some of my opening commentary, we're seeing a lot of pent up demand.
That we're capturing our share of.
On top line growth where were for Q1, we were back to Q1 of 19 levels not Q1 of two on obviously great growth from 2020, but.
That's nothing to brag about given the low bar from the pandemic and so we're excited about the growth profile I mean, we've talked about this in songs talked about this over the over the last year of the size of the car Park. The age of the vehicle fleet in the U S.
And the secular tailwind that should make the service business very valuable on a go forward basis.
Great. Thank you and then.
I think you mentioned the arris who's on the call. So I guess, we'd like to hear a bit about maybe how he's thinking about the.
The combined entity and the enterprise going forward and maybe how he thinks he can put his footprint kind of handprints around.
This business or what we should think about potentially changes or lack thereof kind of going forward.
Yes sure Eric.
<unk> is on so I think it would be best for Eric why don't you give.
Give dan and the listeners of little bit of color on your background and and.
Flavor experience well look high.
Hi, everybody, it's nice to be on the call I spent a better part of three decades of GE. Most recently as the Chief investment Officer of the company I think my background is more of an M&A background, which I think bodes well for some of the activity that we look to do in the can the company I don't see any any significant change.
In terms of strategy or direction of the company or the.
The.
The institution here in any way.
I think it's more continuous.
Progress in terms of the plans that Keith has laid out up to this point.
But I'm looking forward to being part of <unk>.
The institution.
I think.
It's got a great track record.
History.
Source of permanent capital.
And one that's well positioned.
<unk> for the future.
Great. Thank you that's all my questions.
Thanks, Dan I appreciate it.
Thank you as a reminder to ask the question you need the press star one on your telephone to withdraw your question press the pound key.
Our next question comes from the line of Anthony Calderon from ICANN Enterprises. Your line is now from.
Hi, how are you guys. Thank you so much for taking my question.
I actually have.
One question, maybe a suggestion.
I'm sure you guys are familiar with it.
I believe right.
I would like to suggest.
That maybe the company take a very small position.
And possibly a military contractor.
Only because only because.
I'm sure you guys are familiar with the military contact the such as general dynamics.
They make our tanks for the U S.
States Army they make our nuclear submarines from the United States Navy.
In my opinion that is not going anywhere.
They pay a two 5% dividend as well.
So that's just the thought that's just the suggestion of the mine.
The other thing was I love, how diversified the whole portfolio is on the.
The whole portfolio on energy and real estate and everything.
On the energy sector.
I would like to make another suggestion maybe to possibly diversify the energy assets.
On Green energy assets, just to diversify a little bit.
Oil is not going anywhere that has absolutely we know oil is not going anywhere but.
Just a suggestion of possibly diversifying those all right well. Thank you for the suggestions operator can you move on to the next question.
Thank you at this time line is showing no further questions I would like to turn the call back over to Keith <unk> for closing remarks, Okay. Thank you operator, and thank you everybody for your continued interest in Icahn enterprises and the we'll be looking forward to speaking with you in the August to discuss the second quarter results of a good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Yes.
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