Q2 2022 Icahn Enterprises LP Earnings Call

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Okay.

Good morning, and welcome to the Icahn Enterprises L. P Q2, 2022 earnings call with Jesse Lynn General Counsel, David Willetts, President and CEO and Ted pop a bus.

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 and plans for our businesses and potential acquisitions.

We're looking statements may be identified by words, such as expects anticipates intends plans believes seeks 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 P and its subsidiaries.

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. According.

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 measures can be found in the back of this presentation.

I'll now turn it over to David Willetts, our Chief Executive Officer.

Thank you Jessie good morning, and welcome to the second quarter 2022, Icahn Enterprises earnings Conference call. Joining me on today's call as chip <unk>, Our Chief Financial Officer, together will provide an overview of Q2 results and then will be available for questions.

For the sake of brevity, all net income and EBITDA amounts that we'll discuss here today are attributable to icahn enterprises, unless otherwise specified.

Before we get into the results I wanted to reemphasize that we believe activism is the best paradigm for investing.

We are putting our activist principles into effect in both our majority controlled and our minority positions held in our investment segment and currently have representatives on 14 public company boards.

Additionally, we strongly believe in hedging our positions to mitigate risk.

Actually in the volatile markets in which we are living in today.

Now onto the numbers.

For the six months ended June 32022, our net income was 195.

65, $64 <unk> per depository unit, and our adjusted EBITDA was $742 million per.

For reference last year's first half figures were $26 million and net income 10 per depository unit and adjusted EBITDA of $627 million.

Our second quarter discrete results were a net loss of $128 million adjusted EBITDA of $126 million.

This represents an improvement of $8 million of net income and a decrease of 66 million of adjusted EBITDA compared to quarter two of 2021.

Our indicative net asset value as of June 32021 was $6 6 billion up $1 5 million from the ending figures of December 2021.

The change in net asset value includes among other things changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings reported above.

Regarding our segments for the first half of 2022, our investment funds had a positive return of four 3% driven primarily by our energy investments.

Second quarter had a negative return of four 8% driven by movements principally in our health care investments, partially offset by broad market hedges.

CBI ended the quarter in the half with very strong performance largely due to improved crack spreads in UAE and pricing.

In light of the strong 2022 performance today in both the refining and fertilizer segment, CVR announced a dividend of $3 per share.

Which includes a special dividend of $2 16.

<unk> announced a dividend of <unk>.

$10 five and its distributions to unitholders.

Our automotive segment continues to execute the transformation plan and are seeing improvements in the services shop margins and is seeing a reduction in overall losses within the parts business.

We closed the quarter overall with cash and investments in the funds of approximately $5 9 billion.

The board declared a $2 per quart per unit quarterly distribution payable in cash for additional units.

And with that let me turn it over to Ted for a detailed discussion of all of our segments.

Yes.

Thanks, David I'll begin by 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, two we had net loss of $128 million compared to net loss of $136 million in the prior year period.

Our results for the quarter include headwinds from RIN expense totaling $153 million.

A one time settlement charge of $79 million within our energy segment.

For Q2, 'twenty, two adjusted EBITDA was $126 million compared to $192 million in the prior year quarter.

I will now provide more detail regarding the performance of our individual segments.

Yes.

The investment funds had a negative return of four 8% for Q2 dollars 22 compared to a positive return of one 4% in the prior year quarter.

Negative returns for the quarter were primarily driven by health care investments offset in part by broad market hedges in Q2, 'twenty two long positions had a negative performance as infusion of 28%.

While short positions and other had a positive performance attribution of 16%.

The investment funds had a net short notional exposure of 28% at the end of the quarter compared to a net short notional exposure of 21% at the end of Q1.

Our investment in the funds was approximately $4 4 billion as of quarter end.

And now to our energy segment.

In Q2, 'twenty two our energy segment reported net sales of $3 1 billion compared to $1 8 billion in the prior year quarter.

Adjusted EBITDA was 273 million for Q2 dollars 22 compared to $49 million in Q2 'twenty one.

CVR declared a $3 per share cash distribution, which includes a special dividend of $2 60 per share.

Q2, 'twenty two refining margin per throughput barrel was $26 10 compared to $6 72 and.

In the prior year quarter. This increase was primarily due to widening crack spreads the cost of rents continue to have a negative impact on our refining business with $153 million of expense for the quarter.

CVR partners reported Q2, 'twenty to EBITDA of $147 million compared to 51 million for Q2 'twenty one.

Q2, 'twenty two average realized gate prices for UAS improved by 134% to $555 per ton and ammonia improved by 193% to $1182 per ton when compared to the prior year quarter.

CVR partners declared a second quarter cash distribution of $10 five per unit.

And now on to our automotive segment.

Q2, 22, net sales and service revenues for the automotive segment was $621 million a decrease of 16 from the prior year quarter.

Q2, 'twenty two automotive service revenue increased by $34 million in part due to the growth in its fleet business.

Aftermarket parts sales decreased by $63 million, mainly due to store closures as part of the transformation plan.

Q2, 'twenty two adjusted EBITDA was $13 million compared to $25 million in Q2 'twenty one.

Now onto our real estate segment.

Q2, 22, net sales and other revenues increased by $3 million compared to the prior year quarter. Adjusted EBITDA was $4 million for Q2 dollars 22 compared to a loss of $2 million for Q2 'twenty one the.

Segment continued its strong performance and the management team is focused on increasing occupancy across the portfolio.

And now turning to our other segment.

Q2, 22, net sales and other revenues for all other operating segments increased by $22 million compared to prior year quarter. Adjusted EBITDA was $19 million for Q2 dollars 22, compared to 21 million for Q2 'twenty one.

This case benefited from pricing initiatives, which were offset by raw material price inflation increased distribution costs and manufacturing inefficiencies.

AUM fashion continues to experience high demand in the hospitality business.

And the pharma segment experienced strong script growth for pancreas, and qsymia as compared to the prior year quarter.

And now to our liquidity.

We.

Pain ample liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. We ended the quarter with cash cash equivalents, our investment in the investment funds and revolver availability totaling approximately $7 2 billion, our subsidiaries have approximately $1 billion of cash and $200.

$95 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.

Operators can you. Please open up the call for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press star one one on your telephone.

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

And our first question comes from the line of David Fannon with Jefferies.

Hey, good morning, it's Dan Fannon.

Wanted to follow up on the 14 company boards I think you highlighted that that I'm not sure we've gotten before curious as to how that compares to.

Other periods and also just generally how receptive companies or.

To your involvement in and if that's changed over time as well.

Yes, I think Jesse you can probably comment.

The number over a longer period of time, and then I think we can address the receptivity.

Jesse.

Mike might take Dan would be that at.

At least from my duration here I don't want to speak beyond that we've always been in the plus or minus I would say, 10% to 16 range. Certainly we go up we go down, but I would say Karl and the company has historically had a number of investments where we are pursuing and agenda over a multiyear period. So I don't think the <unk>.

<unk> is fundamentally different we included that comment just to provide some context, because sometimes it can seem as though.

It's a series of passive investments and Thats, probably the wrong context mess, that's not how you drive activism.

In terms of receptivity.

What I'd say is that over the long term generally speaking our relationships are fairly collaborative and productive with management.

Certainly an initial approach you might have more of a.

A less collaborative approach when you're when you're initially getting into your investment and youre, considering either a proxy or a tender situations, but I think on the whole if you would ask a number of our investments.

I would say, it's a fairly collaborative relationship over the long term.

At least that's my perspective after the last year and changed.

Got it that's helpful and then.

We heard the updated positioning around the fund and but given the backdrop and the volatility we are seeing.

Obviously rates moving a lot more macro factors are.

Is your strategy changing at all as turnover picking up are you thinking about more single position short positions, our hedges as opposed to kind of a more broader macro stuff that you guys have historically done or any kind of change in terms of the.

The way that you guys are investing.

I think there are two different answers to that question.

Generally speaking our overall strategy Hasnt changed we use a combination of broad market hedges and single position hedges, depending on the particular circumstance and we will adjust those based on company condition company performance. How it is executing on its plan.

Broader macro hedges are.

Our both for companies as well as underlying commodities that the companies might be exposed to so I'd say in general we haven't changed our overall strategy. We've adjusted it overtime certainly as you look through 2020 into 'twenty, one and 'twenty two we've gotten with <unk>.

Dialed up or dial down our.

Our views on the macro markets.

We're not ignorant to the fact that there are opportunities in volatile situations, where we can take money off the table and we have looked at doing that in Q1 and Q2 in select areas.

As things continue we're going to continue to monitor the volatility and where things are vis vis what we think are at historic lows and highs.

So short answer is macro strategy hasnt changed, but we do look to optimize it from time to time.

Understood. Thanks for taking my questions.

Youre welcome Sir.

Thank you as a reminder to ask a question you will need to press star one one on your telephone.

And our next question comes from the line of Tappin Meacham with northeast Investors Trust.

Oh, Hi, good morning, guys.

I just have a few questions about this keith.

As usual.

I see that you are no longer breaking the numbers out on its own slide, but if I look at the any V down $20 million quarter over quarter is that.

Pretty much all from EBITDA, so like a $2 million number or as part of that cash our working capital can you.

The address that at all.

Sure Ted.

Can you get through the specifics of the elements that are move just as we look at this quarter. Yes. The majority of that movement is due to the EBITDA decline year over year. So the LTM.

<unk> decreased by $2 million.

And for context.

This case.

Maybe we can characterize this case says.

A company that frankly had not fully appreciated the inflationary headwinds that were coming its way and we were playing a game of catch up.

On price so when you take a look at the EBITDA you certainly have the impact of slow to action price in the market. That's weighed on an LTM basis. If you didn't have as much inflation last year and playing catch up.

<unk> just that coupled with the fact that we had to take a significant lined down and one was in October November last year, maybe even September it was Q4, yes.

Yes.

And that only now has just come back up online.

So call it.

Three weeks in June maybe two weeks in June so you have that the game of catch up on price and inflation, coupled with you had a line down.

What I'd say is we have been collectively addressing the price issue.

Im relatively happy even though the jobs isn't done.

The team has fully offset the inflation that they faced on a year to date basis year over year and Medisoft and once the line is fully back up and running.

In the results I think youre going to see a bit more of a pop so that's a little bit of context to your question.

That's great. Thank you I was going to ask a couple of things about that so I guess, what you'd say so the costs are not abating, but you are I know you've had some price increases already but you are saying you continue to be able to put in more but there mark.

I mean, we are respectful of our customers, but yes, yes cost of energy in Europe is staggering.

Yes.

Werent hedged in select areas candidly the cost of electricity would've doubled.

That those hedges expire and we're having those discussions now not soon but we're having those discussions with our customers and we're being very respectful not doing.

A jam, but they understand the environment, we live in energy prices are.

We use a lot of energy in our process as our raw material prices and shortages in wood pulp.

So they understand it they don't like it we don't like it but we are passing it through when it comes down to.

Just simply driving for your economics, while being respectful to your customer and understand your competitive position.

Absolutely understand that.

But so the volumes are I mean demand strong, but it's really just about figuring all of that.

Is there any FX impact, it's really just about a cost issue.

Well if you take a look at the adjusted EBITDA that is principally my comments talked about the adjusted EBITDA.

Do have <unk>.

Translation issues.

Just based on some large movements in the U S dollar versus the euro and some of them.

European currencies.

What I would say, though is I would say many of those are balance sheet balance sheet translation issues that said, we are looking at an area of opportunity to address our transactional FX costs, but that's just.

Our back office Treasury.

Efficiencies, we just havent had in place before so primarily translation there is some opportunity, particularly.

And translation with I think it's in Mexico, and the U S dollar as well as some of the intra European currencies.

But that's a small piece of it.

Great. That's all I've got thank you so much as always for additional insight.

Of course.

Thank you.

I'm showing no further questions at this time, so with that I'll hand, the call back over to President and CEO , David Willetts for any closing remarks.

Okay. Good well, thank you all for joining us.

We always enjoy these opportunities to interface with our shareholder base. If you do have any questions that werent able to be addressed through this process.

Refer you to our website so that you can raise those.

Through the IR portal and we'll be happy to get back to you shortly.

Otherwise, we look forward to talking to you in about three months, everyone have a great day.

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

Okay.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Yes.

Okay.

Okay.

Yes.

Sure.

Okay.

[music].