Q2 2021 Icahn Enterprises LP Earnings Call

August 6, 2021

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Good morning, and welcome to the Icahn Enterprises L. P Q2, 2021 earnings call with Jesse Lynn General Counsel Ms Cajun.

And CEO and David Willetts, Chief Financial Officer, 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 a safe harbor for forward looking statements. We make in this presentation, including statements regarding our future performance on plans for our businesses on potential acquisitions forward looking statements may be identified by words, such as expects anticipates intends plans believes seeks estimates.

Estimates will or words of similar meaning and include but are not limited to statements about the expected future business and financial performance of Icahn Enterprises L T and its subsidiaries Act.

Actual events results and outcomes may differ materially from our expectations due to a variety of known and unknown 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 magnitude and duration of the COVID-19 pandemic. Accordingly, there is no issue.

Parents 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 measures can be found in the back of this presentation on.

Now I'll turn it over to <unk>, our Chief Executive Officer.

Thanks, Jessie good morning, and welcome to the second quarter 2021, Icahn Enterprises earnings Conference call.

Joining me on today's call is David Willetts, our Chief Financial Officer.

I'll begin by providing some brief highlights David will then provide an in depth review of our financial results and the performance of our business segments. We will then be available to address your questions.

For Q2, 2021, we had net loss attributable to Icahn enterprises of $136 million or <unk> 53 per LP unit compared to net income of $299 million or $1.36 per LP unit in the prior year period.

The quarterly net loss was primarily driven by interest expense on our senior unsecured notes and income taxes offset in part by gains on our investments segment.

Adjusted EBITDA attributable to Icahn enterprises for Q2, 2021 was 192 million compared to 696 million for Q2 of 2020.

Our investment funds had a positive return of 1.4 per cent for Q2 of 2021 compared to 11, 7% for Q2 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 decreased by 10 million to 49 million for Q2 of 2021 compared to 59 million in the prior year period, our petroleum business was positively impacted by higher throughput volumes and increased product cracks offset by exorbitant rins pricing.

Our fertilizer business continues to benefit from strong pricing for both ammonia and you add.

Net sales and service revenues for our automotive segment was 637 million for Q2 of 2021.

We continue to see our automotive service business revenues return to pre pandemic levels.

As a reminder, icahn automotive group continues to push forward with a multiyear transformational plan to restructure operations and improve profitability, which is illustrated by the reduction in losses in Q2 versus the prior year quarter.

We have substantially completed the legal separation of our automotive service business from our aftermarket parts business, which will position the service business for new growth and value enhancing opportunities.

In April of 'twenty, 'twenty, 1 Icahn enterprises issued $455 million a 5 on a quarter senior unsecured notes due in 2027.

The proceeds were used to repay the remaining 455 million principal amount of 6 on a quarter senior unsecured notes due in 2022.

For the 6 months ended June 32021, indicative net asset value increased by 956 million to $4.5 billion compared to 355 billion as of December 31.2020.

We closed the quarter with cash and investments in the funds of over $6.9 billion.

Finally, the board declared a $2 quarterly distribution payable in either cash or additional units.

With that let me turn it over to David.

Thank you Erez I'll 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 Q2 'twenty 1 for the 3 months ended June 30th we had a net loss attributable to Icahn enterprises on $136 million.

Compared to net income of $2.99 in the comparable prior year period.

For Q2, 'twenty, 1 adjusted EBITDA attributable to Icahn enterprises was $192 million compared to $696 million in the prior year period.

I'll now provide more detail regarding the performance of our individual segments on the next pages.

And our investments segment, we had net income attributable to Icahn enterprises of 68 million for Q2 'twenty 1 the.

The investment funds had a positive return of 1.4% for Q2, 'twenty, 1 compared to a positive return of 11, 7% in the comparable prior year period.

Long positions had a positive performance attribution of 6.6% in Q2, 'twenty, 1 while short positions and other had a negative performance attribution of 5.2%.

Since except inception in November 2004 through the end of Q2 'twenty 1 the investment funds gross return is approximately 91.3 per cent or 3.9% annualized.

The investment funds had a net long notional exposure of 5% at the end of Q2, 'twenty, 1 compared to a net short exposure of 19% at the end of Q1 'twenty 1.

Our investment in the funds was approximately $4.7 billion as of June 30th 21.

And now onto our energy segment.

In Q2, 'twenty, 1 our energy segment reported net sales of $1.8 billion compared to 675 million in the prior year period.

Consolidated adjusted EBITDA was 102 million for Q2, 'twenty, 1 compared to $109 million in Q2 'twenty.

The total throughput was approximately 217000 barrels in Q2, 'twenty, 1 compared to 156000 barrels in Q2 'twenty.

The Q2, 'twenty, 1 refining margin per throughput barrel was $6.72 compared to $10.43 in the prior year.

While increased crack spreads and volumes contributed to the improvement in refining margins higher rins expenses offset much of the benefit <unk>.

<unk> previously announced renewable diesel project is under review pending improved feedstock market pricing, while process design engineering for a pretreatment unit continues.

CVR partners reported Q2, 'twenty, 1 adjusted EBITDA of $51 million compared to 39 million for Q2 'twenty.

Corn planting and prices are attractive and are driving increases in fertilizer prices and demand.

Now turning to our automotive segment.

Q2, 'twenty, 1 net sales and service revenues for Icahn automotive group were $637 million, an increase of 50 million from the prior year period.

Q2, 'twenty, 1 adjusted EBITDA, which excludes the losses associated with closed and closing parts stores was $25 million compared to a loss of 6 million in the prior year period.

Icahn automotive continues to push forward with a multiyear transformational plan to restructure the operations and improve profitability.

Service revenues increased due to the reduced impact of COVID-19 pandemic.

This was offset in part by store closures related to the transformation plan, which decline for Q2, 'twenty, 1 when compared to the prior year period.

Now turning to our food packaging segment.

Q2, 'twenty, 1 net sales increased by $2 million or 2% and adjusted EBITDA attributable to Icahn Enterprises was 14 million for Q2, 'twenty, 1 compared to 13 million for Q2 'twenty net.

Net sales increased due to price and product mix and the favorable effects of foreign exchange and now onto our metals segment.

Q2, 'twenty, 1 net sales increased by $119 million and adjusted EBITDA increased by 15 million compared to the prior year period Volte.

Volumes and prices continue to be strong driven by high demand from steel mills.

And now onto our real estate segment.

Q2, 'twenty 1 net operating revenues increased by 2 main compared to prior year.

Adjusted EBITDA for the quarter was a loss of 2 million compared to earnings of $10 million in the prior year period.

Revenue from our real estate operations for both Q2, 2021, and Q2.2020 were substantially derived from sales of residential units in rental operations now.

Now turning to our home fashion segment.

Q2, 'twenty, 1 net sales increased by $14 million compared to the comparable prior year period sales to hospitality customers recovered due to the reduced impact of COVID-19 pandemic.

West Point's adjusted EBITDA was $1 million for both Q2, 'twenty, 1 and Q2 'twenty.

Now turning to our pharma segment.

We started to consolidate the results of EBITDA, beginning December 2020, within our new pharma segment.

Q2, 'twenty, 1 net operating revenues were $19 million and adjusted EBITDA was $5 million.

Now I'll discuss our liquidity position.

Yeah.

We maintain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities.

We ended Q2, 'twenty, 1 cash cash equivalents, our investment in the investment funds and revolver availability totaling approximately $7.5 billion.

Our subsidiaries have approximately 645 million of cash 579 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 our existing operating segments.

Thank you.

Operator can you. Please open up the call for any questions.

Thank you.

Ladies and gentlemen, as a reminder to ask the question you will need to press Star then 1 on your telephone.

To withdraw your question press the pound key.

Again, Thats star 1 to ask a question.

Please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of Dan Fannon with Jefferies.

Line is open.

Thank you good morning.

First question is just on the fund and the positioning and how you guys are thinking about the current investment backdrop I believe your investment in the fund is $4.7 billion as you stated but.

Think if I heard correctly $6.9 billion is the total in terms of.

Available or cash I, just want to make sure the liquidity or.

Or.

Kind of how the it seems like there's more.

I guess less investments and Thats on more more conservatism based on I think some of the numbers I heard.

Thanks for the question Dan.

On the actual $6.9 billion number includes cash at the holding company level. So the amount of.

Cash investment in the funds has not changed that $4.7 as we as you highlighted.

You asked about positioning of the fund.

In this current backdrop, we obviously are taking a look at the kind of.

Valuations.

Net.

Parsing through clearly we are trying to pick our spots.

The fund is positioned at a net short I'm, sorry, net long of 5%.

That's consisting of a 24% net long on the equity book.

I had an 18% net short in the credit book.

That answers your question.

Okay that is helpful.

On the just the returns for the second quarter, the short positions driving the I think 5.2% of the traction on performance fees.

You also mentioned other.

I guess as we think about just the positioning of their is their illiquid or other things that outside of just normal securities because I don't think I recall, you're using the term other outside of just the short positioning if there is something else that we should think about when that you guys are doing in the portfolio.

The other is actually quite de Minimis as just expenses.

Im wondering I wouldn't drive attribution to that.

Got it got it Okay and then just lastly, you think across your businesses and the environment, where you you highlighted certain like the auto where youre seeing things improve.

Is there are portions of your business or as you look across that are still lagging pre pandemic that you are still waiting for kind of the.

A more return to normalcy or are taking longer than others. If you could just kind of dissect a bit the various segments that are maybe kind of returning faster versus others that might still be lagging behind.

Yeah, well look I think for the most part we're seeing pretty good rebound in on our portfolio companies in terms of.

Pre pandemic level performance in fact in the auto services business, we're seeing.

Business perform on a pre pandemic level, but 1 other things we do see across the portfolio still the supply chain lines.

Either.

That combined with some degree of inflation and pressure that we see across the portfolio I think those are all pandemic still pandemic related.

In fact from some of them on more international related businesses, we're seeing some issues around shipping containers getting access to other things like that so the supply chain is still.

Clogged up quite a bit.

And that's a common theme that we're seeing so hopefully that clears up with even better performance, but for the most part I think what we're seeing in our portfolio is a pretty good rebound.

To pre pandemic levels.

Great. Thanks for answering my questions.

Thank you.

Our next question comes from the line of Monro.

Ed with northeast investors.

Line is open.

Hi, and thanks for hosting the call I'd love to pick up on that actually with regard on the cost question with.

With regard to this case and you mentioned price mix FX, all favorable and that's great. So there must be on a cost issue. Because you are the overall, 100% EBITDA was a little bit lower so you know it seems like it's a little bit of a rerun of 2018 and I guess my question is on pricing.

Are you or are you or your customers.

Benefiting from price protection or what's the outlook for for catching up on the cost side, even if I'm diagnosing it right. Please.

Well I think you have 2 things going on on this case..1 is this case actually performed even better during the pandemic.

For whatever reason the.

Shutdown in place environment created significantly better demand so.

On performance last year was quite good compared to most of the portfolio, but the other thing that youre seeing in this case, there's definitely some price pressure.

In terms of raw material costs and supply chain cost the business is in the process.

Applying price increases and surcharges to offset that those are all in place and underway as we speak.

Just sometimes I think in the past it has been an annual issue with customers are you, saying I'm pleased that it is that current is that what you're saying in places that for now and 3 Q4, Q type things or is it wait until the new year. Thank you.

This is David.

I think the short version is we're just seeing a typical lag between supplier price increases at our ability to to share.

Share of those price increases with our customers customers have generally been pretty open on aware that there are significant price increases out there on the market. So we are taking a look on a quarter by quarter basis at raising prices, where it makes sense respecting our customers, but there will be a time lag is as our prices catch up to what the market inflation has.

Ben on our cost base.

Okay. Thank you. Thank you Youre welcome.

Thank you.

Our next question comes from the line of Chris morale with retail Investor Youre line is open.

Yeah, Hi, Thanks, good morning.

So that's a cool guy.

2 questions on in and around the dividend. So can you just tell us how the dividend is funded through time and then.

How do you want us to think about dividend sustainability.

It is the other economic as economic sensitivity investing but some sense because if you just give us a sense of kind of how you want us to think about that.

Well, we've got plenty of cash.

On the books as you can imagine so we're funding.

The dividend is not necessarily an issue.

For us whatsoever, we do like our current.

Our capital allocation policy as you know, we just approved a $2 dividend for the quarter, which has been consistent with relatively fast past practices and I think we intend on continuing that at least at this point in time unless things change.

Okay. Thank you.

Thank you.

Okay.

Our next question comes from the line of Robert spoke goodwill.

Your line is open.

Yes concerning that dividend.

Carl Icahn has most of the stock of the company.

Uh huh.

You've given the option of taking stock instead of cash. So I don't think you you would be paying out as much as $2. If every share that you have out as Carl Icahn.

In the past and as far as you know for the taking.

Taking stock instead of cash.

On the dividend.

Well, Carl Icahn has been consistently taking stock and Luke.

Cash with the exception.

A particular quarter last year.

So.

At this point in time.

Indicated.

Day, that's been his practice.

And we intend as we intend to believe that that will be the practice going forward on.

Things change.

Got it so is the ownership of the company is being increased greatly.

Every time there is 1 of these dividends paid out in the company is not paying out.

This is tremendous dividend in cash.

Fair statement.

Hi, Thank you Steve on your question is whether or not he is taking dividends increases is ownership in the company I think thats an accurate statement.

Alright, and further he made a statement on May 27, he's been pretty bearish on the dollar.

He made the statement about crypto currency and I was taken aback by that because.

At that time, the crypto currency was about $53000 for the for the Bitcoin and.

He said some bad things about the American dollar and.

Yeah.

I Hope you and Brian EBIT season to put a $1 billion do you have any information about whether he has invested in.

And these.

Though currencies since May 27.

Well before that.

I think I think what Karl indicated on that call was that he is a much like we looked at all kinds of different investment opportunities cryptocurrency as a topical subject and 1 that we're evaluating among others.

At this point in time I don't have any other comments other than that we don't actually comment on any particular investment thesis.

He has been pretty negative on the market.

Last year and beginning of this year and he's got a lot of good investments.

Buying companies.

Basically as the net.

You basically runs the company anyway.

Is he still basically negative.

What percentage of your guys' short in the market.

I think what we indicated is we're net long 5%.

As consistent of a <unk>.

24% net long position on on equities and a 18% net short position on our credit books. So I think you could maybe overall call our position relatively neutral.

At this point in time.

Okay. I mean, the market is running like tremendously below market and he has always been a great investing and he's always found great investments.

But.

He's moved to every day.

And it's a big turnover in the company now you have new people running the company and some people don't like to say that.

Mike on us.

Is getting on.

And look at that dividend I mean.

What do you have to say about that dividend when the stock is trading at $58 and paying an 8 dollar dividend there aren't too many companies doing something like that.

Okay.

Well, we definitely have a high dividend yield and net that's 1 other factors that makes the stock attractive. So I think you're highlighting that fact.

Okay, what does that book value right now.

Last question I'll ask thank you for taking my questions I appreciate it.

But what is what is the book value of our.

Company now, it's so hard to figure out I mean, Carl Icahn.

5 of our stockholders and we have stocking and several hundred companies and we have a lot of trouble trying to figure out what's going on in this company.

So what is the book value of the company.

The book value and Youll see this today on the 10-Q is $3.7 billion.

Divided by the share how much does that comment on 2 per share.

Yeah.

Okay.

Yeah, and I think you can do the math.

Okay, Alright, I appreciate it thank you very much.

Thank you.

As a reminder, ladies and gentlemen that star 1 to ask a question.

Our next question comes from the line of Andrew Berg with Covid.

Post Advisory group your line is open.

Thank you Hey, guys just a couple of housekeeping questions with respect to automotive the.

EBITDA that you guys report nice increase from 6 million loss to $25 million gain.

But I think you said that excluded closed store.

Can you quantify what the closed store loss was and was that all non cash loss or was any of that.

Cash to closing.

So the in terms of 2 questions..1 is what do we think the actual loss for the closed store is and then how much of that was cash income.

When you take a look at our adjustments.

This is a heavy transformation program.

Affectively, the total cost to close the stores pay the severance and continue the transformation is approximately $67 million this year.

We view those as 1 time cost that.

That obviously don't repeat once we finish the transformation in.

In terms of the cash the cash is a little misleading simply because you have.

You have to record the.

Expenses well in advance on when you actually pay the cash balance and right inventory down so we'd expect the cash to continue over the course of the next 2 to 3 quarters, but to approximate 67 day.

As we wrap things up.

Does that help.

Yes. The 67 was year to date do you happen to have the comparable numbers Q21 versus <unk> 20, I believe you said that the the amounts are coming down.

Yes.

Comparable numbers for 2020 were approximately 44 million.

That's year to date on quarter.

It'll be 6 months ended 2020.

Do you have enough the <unk> numbers or follow up on that offline.

Oh I'm sorry.

2020.

<unk> was $20.4 million.

And the same figure for this year.

Thank you.

It would be 43.

Okay.

These figures are in the adjusted EBITDA and adjusted.

Adjusted EBITDA reconciliation package, if you need any more.

I'll go back and look at either from realizes I missed I apologize on that.

Then the loss.

In real estate.

For EBITDA given.

Given the relatively.

Flat revenue numbers, what's driving that.

I think what you have in the real estate per portfolio. In particular is we have a triple net lease property in Atlanta that was a single tenant lease fully leased up until last year we.

We're in the process of turning that into a multi tenant property this year.

Yes, there were some delays as a result of COVID-19, but we're back on track in terms of getting core tenants in place. So there is some timing lag associated with that process, but we are in the process of repositioning our portfolio.

Okay, Great and then lastly, with respect to investments there was a question earlier on crypto.

To the extent Karl does start getting involved in it 1 way or the other.

When you guys report will that end up being.

<unk> factored into the net.

Net equity or the net credit.

A portion of how youre going to be reporting things. If you were to be start getting along that.

Or would it end up being a separate line altogether.

I think I think if we actually get into crypto to your point and to have it as a significant investment will actually.

Consider <unk>.

Identifying that as other I imagine at this point in time.

Okay.

Fantastic. Thank you guys.

Yeah.

Thank you.

I'm showing no further questions in the queue.

I would now like to turn the call back over to management for closing remarks.

Thank you operator, and thanks, everyone for your questions.

We are looking forward to.

Following up with you on our third quarter update coming up up until.

Until that time, we wish you happy.

Happy happy.

Good morning.

And on a.

And a good rest of the day, thanks a lot.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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Good morning, and welcome to the Icahn Enterprises L. P Q2, 2021 earnings call with Jesse Lynn General Counsel, Heska Kagan, President and CEO and David Willetts, Chief Financial Officer, I would now like to hand, the call other to Jesse Lynn who will read the opening statement.

Thank you operator.

The private Securities Litigation Reform Act of 1995 provides a 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 seeks estimates.

<unk> will or words of similar meaning and include but are not limited to statements about the expected future business and financial performance of Icahn Enterprises L T and its subsidiaries.

Actual events results on outcomes may differ materially from our expectations due to a variety of known and unknown 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 magnitude and duration of the COVID-19 pandemic. Accordingly, there was no 1.

<unk> 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 on such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the back of this presentation on.

Now I'll turn it over to <unk>, our Chief Executive Officer.

Thanks, Jessie good morning, and welcome to the second quarter 2021, Icahn Enterprises earnings conference call joining.

Joining me on today's call is David Willetts, our Chief Financial Officer.

Begin by providing some brief highlights David will then provide an in depth review of our financial results and the performance of our business segments. We will then be available to address your questions.

For Q2, 2021 we had net loss attributable to Icahn enterprises of $136 million or <unk> 53 per LP unit compared to net income of $299 million or $1.36 per LP unit in the prior year period.

Quarterly net loss was primarily driven by interest expense on our senior unsecured notes and income taxes offset in part by gains on our investments segment.

Adjusted EBITDA attributable to Icahn enterprises for Q2, 2021 was 192 million compared to 696 million for Q2 of 2020.

Our investment funds had a positive return of 1.4 per cent for Q2 of 2021 compared to 11, 7% for Q2 of 2020.

Adjusted EBITDA attributable to Icahn enterprises that are energy segment decreased by 10 million to 49 million for Q2 of 2021 compared to $59 million in the prior year period, our petroleum business was positively impacted by higher throughput volumes and increased product cracks offset by exorbitant rins pricing.

Our fertilizer business continues to benefit from strong pricing for both ammonia and you add.

Net sales and service revenues for our automotive segment was 637 million for Q2 of 2021.

We continue to see our automotive service business revenues return to pre pandemic levels.

In April of 'twenty, 'twenty, 1 Icahn enterprises issued 455 million a 5 on a quarter senior unsecured notes due in 2027.

The proceeds were used to repay the remaining 455 million principal amount of 6 on a quarter senior unsecured notes due in 2022.

For the 6 months ended June 30th 2021, indicative net asset value increased by 956 million to $4.5 billion compared to $3.55 billion as of December 31, 2020.

We closed the quarter with cash and investments in the funds of over $6.9 billion.

Finally, the board declared a $2 quarterly distribution payable in either cash or additional units.

With that let me turn it over to David.

Thank you Erez I'll 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 Q2 'twenty 1 for the 3 months ended June 30, we had a net loss attributable to Icahn enterprises on $136 million.

Compared to net income of $2.99 in the comparable prior year period.

For Q2, 'twenty, 1 adjusted EBITDA attributable to Icahn enterprises was $192 million compared to $696 million in the prior year period.

I'll now provide more detail regarding the performance of our individual segments on the next pages.

And our investment segment, we had net income attributable to Icahn enterprises of 68 million for Q2 'twenty 1 the.

The investment funds had a positive return of 1.4% for Q2, 'twenty, 1 compared to a positive return of 11, 7% in the comparable prior year period.

Long positions had a positive performance attribution of 6.6% in Q2, 'twenty, 1 while short positions and other had a negative performance attribution of 5.2%.

Since except inception in November 2004 through the end of Q2 'twenty 1 the investment funds gross return is approximately 91.3 per cent or 3.9% annualized.

The investment funds had a net long notional exposure of 5% at the end of Q2, 'twenty, 1 compared to a net short exposure of 19% at the end of Q1 'twenty 1.

Our investment in the funds was approximately $4.7 billion as of June 30 of 'twenty 1.