Q1 2024 AdvanSix Inc Earnings Call
Operator: Good day, and welcome to the AdvanSix First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Adam Kressel, Vice President of Investor Relations and Treasurer. Please go ahead.
Good day and welcome to advance six first quarter 'twenty 'twenty four earnings conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I'd now like to turn the conference over to Adam Crustal, Vice President of Investor Relations and Treasurer. Please go ahead.
Adam Kressel: Thank you, Cindy. Good morning, and welcome to AdvanSix's first quarter 2024 earnings conference call. With me here today are President and CEO, Erin Kane, and Senior Vice President and CFO, Michael Preston. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today.
Adam Kressel: Thank you Cindy good morning, and welcome to <unk> first quarter 2024 earnings Conference call with me here today are president and CEO, Erin Kane, and senior Vice President and CFO Michael Larsen.
Adam Kressel: This call and webcast, including any non-GAAP reconciliations are available on our website at investors <unk>.
Adam Kressel: <unk> Dot com.
Adam Kressel: Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our business as we see it today.
Adam Kressel: Those elements can change and the actual results could differ materially from those projected and we ask that you consider them in that way.
Adam Kressel: We refer you to the forward looking statements included in our press release and earnings presentation.
Adam Kressel: We identify the principal risks and uncertainties.
Adam Kressel: Our performance in our SEC filings, including our annual report on Form 10-K as further updated in subsequent filings with the SEC.
Adam Kressel: This morning, we will review our financial results for the first quarter of 2024 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions. So with that I'll turn the call over to advanced six as president and CEO Aaron.
Adam Kressel: Those elements can change, and the actual results could differ materially from those projected, and we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K, as further updated in subsequent filings with the SEC. This morning, we will review our financial results for the first quarter of 2024 and share our outlook for our key product lines and end market. Finally, we'll leave time for your questions at the end. So with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.
Erin N. Kane: Thanks Adam, and good morning everyone. Thank you for joining us and for your continued interest in AdvanSix. As you saw in our press release, our first quarter performance was impacted by the previously announced process-based operational disruption at our Frankfurt, Pennsylvania site, along with a delayed ramp to targeted utilization rates across our integrated value chain. The total unfavorable impact to pre-tax income in the first quarter was approximately $27 million, comprised of the impact of lost sales and other additional costs, including purchases of replacement products and incremental plant spend.
Aaron: Thanks, Adam and good morning, everyone. Thank you for joining us and for your continued interest in advance X.
Aaron: As you saw in our press release, our first quarter performance was impacted by the previously announced process based operational disruption at our Frankford, Pennsylvania site, along with a delayed ramp to targeted utilization rates across our integrated value chain.
Aaron: The total unfavorable impact to pretax income in the first quarter was approximately $27 million comprised of the impact of lost sales and other additional costs, including purchases replacement products and incremental plants there.
Erin N. Kane: This disruption was fully resolved in the first quarter, and I would like to once again thank our customers, partners, and teammates for the collaboration to mitigate the impact on the value chain. Looking ahead to the second quarter and remainder of 2024, there are a number of operational and commercial tailwinds at our backs. We return to targeted plant utilization rates and are well-positioned to serve our key customers, particularly in plant nutrients as the domestic planting season progresses and in our acetone portfolio amid a tight global supply and demand environment.
Aaron: This disruption was fully resolved in the first quarter and I would like to once again, thank our customers partners and teammates for the collaboration to mitigate impact on the value chain.
Aaron: Looking ahead to the second quarter and remainder of 'twenty 'twenty four there are a number of operational and commercial tailwind at our back.
Aaron: We have returned to targeted plant utilization rates and are well positioned to serve our key customers, particularly in plant nutrients as a domestic planting season progresses and in our acetone portfolio amid tight global supply and demand environment.
Erin N. Kane: We also expect nylon industry spreads to modestly improve through 2024 from the 2023 trough level. Critical to our stakeholders, importantly our customers, I'm proud to share that in recent weeks we've achieved a number of external recognitions for our corporate social responsibility and sustainability performance. We earned our third consecutive platinum rating by Echovotis and received strong ratings by CDP for water security and climate change. And we're certified by ISCC Plus across our manufacturing sites in Frankfurt, Colwell, and Chesterfield.
Aaron: We also expect an island industry spreads to modestly improve through 2024 of 2023 trough levels.
Aaron: Critical to our stakeholders importantly, our customers and I'm proud to share that in recent weeks, we've achieved a number of external recognitions for our corporate social responsibility and sustainability performance.
Aaron: Earned her a third consecutive platinum rating by Echo about it.
Retained strong ratings by CDP for water security and climate change.
Aaron: We were certified by I S C class.
Aaron: Factoring flights at Frankfurt, Hopewell and Chesterfield.
Erin N. Kane: We have a proven ability and demonstrated playbook with our diverse product portfolio to navigate and manage through various cycles and macrodynamics, evolving as we go to meet the needs of our end market. As a diversified chemistry company, we take pride in our long legacy of success and track record of serving as a trusted partner for our customers. We'll continue to position our business for long-term sustainable performance through our smart and disciplined investments and remain focused on accelerating growth in the most profitable areas of our portfolio. And let me turn the call over to Erin.
Aaron: We have a proven ability and demonstrated playbook with our diverse product portfolio to navigate and manage through various cycles and macro dynamics evolving as we go to meet the needs of our end markets.
Aaron: Diversified chemistry company, we take pride in our long legacy of success and track record of serving as a trusted partner for our customers.
Aaron: We'll continue to position our business for long term sustainable performance through our smart and disciplined investments and remain focused on accelerating growth in the most profitable areas of our portfolio.
Aaron: Let me turn the call over to Mike. Thanks, Erin and good morning, everyone. I'm now on slide four where I will provide a summary of the first quarter of 2020 for financials.
Michael Preston: Thanks, Erin, and good morning, everyone. I'm now on slide four, where I will provide a summary of the first quarter 2024 financials. Sales of $337 million decreased approximately 16% versus the prior year, and market-based pricing was unfavorable by 9%. This primarily reflects reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions. Sales volume decreased approximately 7%, primarily driven by lost sales resulting from the first quarter operational disruption. Raw material pass-through pricing was approximately flat.
Mike: Sales of 337 billion decreased approximately 16% versus the prior year.
Mike: Market based pricing was unfavorable by 9%.
Mike: Primarily reflects reduced ammonium sulfate pricing amid lower raw material input costs, and a more stable global nitrogen supply environment as well as lower nylon pricing due to unfavorable supply and demand conditions.
Mike: Sales volume decreased approximately 7%, primarily driven by lost sales, resulting from the first quarter operational disruption.
Mike: Raw material pass through pricing was approximately flat.
Michael Preston: Adjusted EBITDA was approximately $1 million, down from $65 million in the prior year period. The impact of the first quarter operational disruption and unfavorable market-based pricing net overall material costs were the primary drivers of the earnings decline. Volume mix and other items were unfavorable year-over-year, primarily reflecting lower production in the quarter. Adjusted earnings per share was a loss of $0.56. The effective tax rate was 25.7% in the quarter versus 21% in the prior year, primarily due to a larger tax benefit last year related to the vesting of equity compensation. We continue to anticipate our full year 2024 effective tax rate to be approximately 24%.
Mike: Adjusted EBITDA was approximately $1 million down from $65 million in the prior year period.
Mike: The impact of the first quarter operational disruption and unfavorable market base pricing net of raw material costs were the primary drivers of the earnings decline Vale.
Mike: Volume mix and other items were unfavorable year over year, primarily reflecting lower production in the quarter.
Mike: Adjusted earnings per share was a loss of 56 cents. The effective tax rate was 25, 7% in the quarter versus 21% in the prior year, primarily due to a larger tax benefit last year related to the vesting of equity compensation.
Mike: To anticipate our full year 2024 effective tax rate to be approximately 24%.
Michael Preston: Pre-cash flow was negative $72 million in the quarter compared to negative $23 million in the first quarter of 2023. Cash flow from operations declined $38 million year-over-year, primarily as a result of lower net income and the impact of changes in working capital. Capital expenditures of $35 million in the quarter increased to $11 million versus the prior year, primarily reflecting increased spend on enterprise programs and other maintenance projects. On a trailing 12-month basis through the first quarter, our debt leverage was approximately two times when normalizing for the impact of the operational disruption. We anticipate debt leverage to remain within our target range of 1 to 2.5 times in 2024.
Mike: Free cash flow was negative $72 million in the quarter can patch compared to negative $23 million in the first quarter of 2023 cash.
Mike: Cash flow from operations declined $38 million year over year, primarily as a result of the lower net income and the impact of changes in working capital.
Mike: Capital expenditures of $35 million in the quarter increased $11 million versus the prior year, primarily reflecting increased spend on enterprise program and other maintenance projects.
Mike: On a trailing 12 month basis through the first quarter, our debt leverage was approximately two times when normalizing for the impact of the operational disruption.
Mike: We anticipate that leverage to remain within our target range of one to two five times in 2024.
Michael Preston: We also anticipate free cash flow to improve in the second quarter sequentially on higher earnings. As a reminder, we incur an unfavorable impact on our cash flow in the first half from the unwinding of money from self-paid pre-buy cash advances as we do each year. Now, let's turn to slide five.
Mike: We also anticipate free cash flow to improve in the second quarter sequentially on higher earnings as a reminder, we incur an unfavorable impact on our cash flow in the first half from the unwinding of ammonium sulfate pre buy cash advances as we do each year.
Mike: Now, let's turn to slide five.
Michael Preston: Here we highlight the key drivers of our first quarter adjusted EBITDA performance sequentially from the fourth quarter of 2023. In the quarter, we began to see tailwinds from a commercial perspective, with pricing for raw materials improving by $11 million. Tracking our key variable margin drivers, ammonium sulfate on a net price over natural gas and sulfur basis was up sequentially as prices strengthened through the quarter coupled with lower input costs. Chemical intermediates price over raw spread increased as well, driven by an expansion in acetyl margins over propylene.
Mike: Here, we highlight the key drivers of our first quarter adjusted EBITDA performance sequentially from the fourth quarter of 2023.
Mike: In the quarter, we began to see tailwind from a commercial perspective with pricing over raw materials, improving by $11 million.
Mike: Tracking our key variable margin drivers ammonium sulfate on a net price of our natural gas and sulfur basis was up sequentially as prices strengthened through the quarter, coupled with lower input costs chemicals.
Chemical intermediates price over raws spread increased as well driven by an expansion in acetyl margins over propylene.
Michael Preston: Performance across our nylon portfolio over our key raws was a modest headwind sequentially, while copper lag 10 was relatively flat. Volume, sales mix, and other items provided improved performance of $7 million, largely reflecting lower nylon export sales in the first quarter compared to the fourth quarter. SG&A costs were approximately $1 million favorable on lower functional specifications. Finally, as discussed, the operational disruption was $27 million unfavorable, and we had an additional $5 million of planned turnaround impact in the quarter. Now, let me turn the call back to Erin.
Mike: Performance across our nylon portfolio over our key raws was a modest headwind sequentially, one caprolactam was relatively flat.
Mike: Volume sales mix and other items provided improved performance of $7 million, largely reflecting lower nylon export sales in the first quarter compared to the fourth quarter.
Mike: SG&A costs were approximately $1 million favorable on lower functional spend.
Mike: Finally as discussed the operational disruption was $27 million unfavorable and we had an additional $5 million of planned plant turnaround and impact in the quarter.
Mike: Now, let me turn the call back to Eric.
Erin N. Kane: Thanks, Mike. I'm now on slide six to further discuss each of our key product lines. Starting with Nylon, we've seen the global industry spread stabilize in the first quarter, while the Asia benchmark cell declines following the sequential improvement in the fourth quarter. So, as we expected, we are trending favorably, albeit slowly, off the 3Q23 trough. Demand globally remains soft, while varying regional dynamics, including competitive intensity and trade flows, continue to impact regional prices despite long-term supply-demand fundamentals. Estimated operating rates out of China remain elevated, resulting in continued nylon exports to the rest of the world.
Eric: Thanks, Mike I'm now on slide six to further discuss each of our key product lines.
Eric: Starting with nylon he's.
Eric: He's seen global industry spreads stabilize in the first quarter, while the Asia benchmark satisfying installing a sequential improvement in the fourth quarter.
Eric: Well as we expected we are trending favorably, albeit slowly after three two twenty-three trough.
Eric: Demand globally remains soft, while varying regional dynamics, including competitive intensity and trade flows continued to impact regional pricing.
Eric: Despite long supply demand fundamentals.
Eric: Estimated operating rates out of China remained elevated resulting in continued nylon exports to the rest of the world.
Erin N. Kane: Here in North America, demand has been stable, albeit on a lower base, with continued weakness in building and construction markets as a result of the higher interest rate environment. However, supply has been tighter in the region with production downtime across the industry, which has led to modest pricing increases into the second quarter. For our business, we continue to focus on driving productivity to improve unit profitability, optimizing our sales mix through target customer selling, while leveraging our competitive position to meet demand where it exists. In the fertilizer space, global nitrogen pricing began the quarter relatively steady and began to decline mid-March.
Eric: Here in North America demand has been stable, albeit on a lower base with continued weakness in building and construction markets as a result of the higher interest rate environment.
Eric: Supply has been tighter in the region, but production downtime across the industry, which has led to modest pricing increases trending into the second quarter.
Eric: For our business, we continue to focus on driving productivity chunk trade Union profitability optimizing ourselves next target customer selling while leveraging our competitive position to meet demand where it exists.
Eric: In the fertilizer space global nitrogen pricing began the quarter relatively steady and began to decline mid March in contrast, we have seen ammonium sulfate pricing strengthened through the first quarter and into the second quarter amid continued software demand growth and reduced supply in North America.
Erin N. Kane: In contrast, we have seen ammonium sulfate pricing strengthen through the first quarter and into the second quarter amid continued sulfur demand growth and reduced supply in North America. While we did see cautious buying behavior at the start of the year, we've now entered the heart of the season with a strong order book, and we are seeing a strong pull out of terminals for products going to the fields to support nutrient demand for traditional corn applications along with growth on soybeans.
Eric: While we did see cautious buying behavior at the start of the year. We've now entered the heart of the season with a strong order book and we are seeing strong pull out a terminal for product going into the field to support nutrient demand for traditional corn application along with growth on soybeans.
Erin N. Kane: The actions we took to position ourselves to capitalize on the expected strength of the season are paying off. Lastly, in chemical intermediates, industry realized acetone prices over refinery-grade propylene costs continued to improve in the first quarter, with the spread sitting at multi-year highs. While acetone demand has seen softness, particularly into the large fire end applications, with some downstream M&A producers taking turnarounds in the first quarter, we see supply as tight gold. This has been supported by persistent lower global female operating rates on reduced demand into value chains serving building construction and other industrial applications. Let's turn the slides up.
Eric: The actions, we drove to position ourselves to capitalize on the expected strength of the season in paint.
Eric: Lastly, in chemical intermediates industry realized acetone prices refinery grade propylene costs continued to improve in the first quarter with spreads sitting at multi year highs well.
Eric: Well I have to phone demand has seen softness, particularly instead of large fire ends application without a doubt.
Eric: Onstream M&A what are you interested in turnarounds in the first quarter, we see supply is tight.
Eric: This has been supported by persistent lower global operating rates on reduced demand, it's a value chain, starting building and construction and other industrial applications.
Speaker Change: Let's turn to slide seven.
Erin N. Kane: We're encouraged by the improved outlook heading into the second quarter, with both operational and commercial benefits anticipated. Operationally, we've returned to our expected robust plant utilization rates, ensuring we are well positioned to serve our customers across each line of business. We continue to expect capital expenditures in the range of $140 to $150 million in 2024, reflecting increased spend year-over-year to address critical enterprise risk mitigation and growth projects.
Speaker Change: We're encouraged by the improved outlook heading into the second quarter with both the operational and commercial benefits anticipated.
Speaker Change: Operationally, we've returned to our expected robust plant utilization rates, ensuring we are well positioned to serve our customers across each line of business.
Speaker Change: We continue to expect capital expenditures in the range of $140 million to $150 million in 2024, reflecting increased spend year over year to address critical enterprise risk mitigation and growth projects.
Erin N. Kane: The projects within our SUSTAIN program are progressing well. We now anticipate reaching approximately 70% ammonium sulfate grain in the conversion by the end of 2024. As a reminder, SUSTAIN stands for Sustainable U.S. Sulfate to Accelerate Increased Nutrition. And we continue to track this growth program to a robust investment return profile at our 20 plus percent target rate.
Speaker Change: The projects within our sustained program are progressing well, we now anticipate reaching approximately 70% ammonium sulfate, bringing the conversion by the end of 2024.
Speaker Change: As a reminder, sustain stand for sustainable U S phosphate to accelerate increase nutrition.
Speaker Change: And we continue to attract this boat program to robust investment return profile at our 20%.
Target a hurdle rate.
Erin N. Kane: We also continue to expect the pre-tax income impact of our planned plant turnarounds to be $38 to $43 million in 2024. Of note, the timing of our larger turnaround has now shifted from the third quarter to the fourth quarter as we have firmed up our planning for the year. As I shared, we see and anticipate positive trends commercially for ammonium sulfate and acetone to continue, and we are cautiously optimistic on nylon to modestly improve as the year progresses.
Speaker Change: We also continue to expect the pretax income impact of our planned plant turnarounds to be $38 million to $43 million in 'twenty 'twenty four.
Speaker Change: The timing of our larger turnaround has now shifted from the third quarter to the fourth quarter as we've firmed up our planning for the year.
Speaker Change: As I shared we see and anticipate positive trends commercially for ammonium sulfate and asked them to continue and are cautiously optimistic on nylon to modestly improve as the year progresses.
Erin N. Kane: The strength of our business model and our position as a diversified chemistry company will serve us well, and we continue to expect performance this year to demonstrate our resilience. We've consistently come through cycles at stronger companies that can maintain robust investment for growth, sustain good cash conversion over the long term, and structurally improve the underlying earnings power of our business. Now, let's turn to Spidey.
Speaker Change: The strength of our business model and our position as a diversified chemistry company will serve us well and we continue to expect performance this year to demonstrate our resilience.
We've consistently come through cycle as a stronger company that can maintain robust investment for growth. The thing good cash conversion over the long term and structurally improve the underlying earnings power of our business, let's turn to slide eight.
Erin N. Kane: To wrap up, before moving to Q&A, I'd like to further discuss the recent highlights related to our sustainability initiatives and performance. As I mentioned earlier, we were awarded our third consecutive Platinum Rating by ECHOvatis, an independent corporate social responsibility assessment agency. The Platinum Rating puts the company in the top 1% of all companies.
To wrap up before moving to Q&A I'd like to further discuss the recent highlights related to our sustainability initiatives and performance.
Speaker Change: As I mentioned earlier, we are we were awarded our third consecutive platinum rating by Echovirus and independent corporate social responsibility assessment agency.
Speaker Change: The platinum rating puts the company in the top 1% of all companies assessed.
Erin N. Kane: This is a compelling recognition of the hard work and achievements of our AdvanSix teammates who embed responsible and sustainable business practices into delivering for our customers, communities, and our stakeholders every day. In addition, we were once again rated on our water security and climate practices by CDP, a global non-profit that operates the leading environmental disclosure platform. Our submission was recognized in the top leadership category with an improved A- rating for water security, and we maintained our strong B rating for climate change.
Speaker Change: This is a compelling recognition of the hard work and achievements of our advanced six teammates.
Speaker Change: That responsible and sustainable business practices and to delivering for our customers communities and our stakeholders every day.
Speaker Change: In addition, we were once again rated on our water security and cleaning practices by C. D. P. A global nonprofit that operates a leading environmental disclosure platform.
Speaker Change: Our submission was recognized in the top leadership category with an improved a minus rating for water security and we maintained our strong b rating for climate change.
Erin N. Kane: Both of these ratings compare very favorably with peers across the globe and within the chemicals industry. Finally, we recently were certified to the ISCC Plus standard for three of our manufacturing sites, Frankfurt, Hopewell, and Chesterfield. ISCC Plus is a globally recognized voluntary certification system for developing sustainable supply chains. The certification validates the adoption of transparent and traceable practices, particularly for organizations applying the mass balance approach to track feedstocks and their sustainability characteristics.
Speaker Change: Both of these ratings compare very favorably with peers across the globe and within the chemicals industry.
Speaker Change: Finally, we recently were certified to the I S. C C plus standard for three of our manufacturing sites Frankfurt Hopewell and Chesterfield.
Speaker Change: I S E E plus is a globally recognized voluntary certification system for developing sustainable supply chain.
Speaker Change: This certification validates the adoption of transparent and traceable practices, particularly for organizations applying a mass balance approach to attract feedstocks and their sustainability characteristics.
Erin N. Kane: This also complements our existing post-industrial recycled and post-consumer recycled nylon product lines. By enabling solutions that reflect our sustainability focus, while also helping our customers transform and meet their own environmental goals, together, we are building a more socially responsible future.
Speaker Change: It's also complements our existing postindustrial recycled and post consumer recycled nylon product lines.
Speaker Change: Enabling solutions that reflect our sustainability focus while also helping our customers transform their own environment mental goals together, we are building a more socially responsible future with.
Speaker Change: With that Adam let's move to Q&A.
Adam Kressel: Thanks, Erin. Cindy, can you please open the line for questions? We will now begin the question and answer session. To ask a question, you may press star, then 1.
Adam: Thanks, Erin Cindy can you. Please open the line for questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Charles Neivert of Piper Sandler.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Charles <unk> of Piper Sandler go ahead. Please.
Charles Nathan Neivert: Morning, guys. Just a couple questions. On the nylon side, you said, you know, some of the export of nylon has been reduced. How far away are you from, I'd say, sort of that pre-run normal, and how long do you think it'll take you to get back there? And the other question is, you know, from the downtime, to the degree to which you think it may have constrained your ability to move product into the agricultural space. I mean, you know, how much product is lost?
Speaker Change: Good morning, guys.
Charles: A couple of good morning Juan.
Charles: And then on the nylon side, you said some of the export of nylon has been reduced how far away are you from.
Charles: Sort of that pre run normal and how long do you think it'll take you to get back there and the other question is from the downtime.
Charles: To the degree to what degree do you think it may have constrain your ability to move product into the agricultural space I mean, how much product is law.
Charles Nathan Neivert: in that respect, or will you be able to catch up? And lastly, as you move to more granular, I know that you guys have talked in the past about granular and standard and that South American markets, which take your product in the non-US agricultural season, tended to be more toward the standard side. Are they taking more granular now? So I'll stop. I'll leave it there.
Charles: In that respect or will you be able to catch up and lastly, as you move to more granular I know that you guys have talked in the past about.
Charles: Granular and standard.
Charles: South American markets, which take your product in the non U S. Agricultural season tends to be more towards the standards are they taking more granular now.
Speaker Change: Yeah, I'll start, but I'll leave it there.
Speaker Change: Hi.
Erin N. Kane: Okay, great. So let's unpack that a bit here, Charlie.
Speaker Change: Great. So, let's unpack that a bit here Charlie thanks for the questions.
Speaker Change: First on the nylon exports as we had.
Erin N. Kane: Thanks for the questions. First, on the nylon exports, as we had spoken last quarter, we had anticipated a higher rate of exports, probably more consistent with our exit run rate of 2023, which was in the high 20s. When we finished 2024, certainly with the operational disruption and our targeted focus on optimizing mix and in sales, and certainly with our contract and domestic customers, that rate dropped to about 15%, which is a lot closer to what we've shared in the past as historical sort of norms.
Speaker Change: Well again last quarter, we had anticipated a higher rate of exports on consistent probably more with our exit run rate.
Speaker Change: 2023, which was in the high 20.
Speaker Change: When we finish 2024, certainly with the operational disruption and our targeted focus on optimizing mix and in sales and certainly with our contract and domestic customers.
Speaker Change: That rate dropped to about 15%, which is a lot closer to what we've shared in the past as a historical sort of norm.
Erin N. Kane: We think that it will probably ebb and flow a bit here as we move through the year. Obviously, as production across the industry is constrained and has been for the past couple of months, so getting our value chain realigned here in North America, and then, perhaps, as we progress and see how the markets improve in the second half, whether we can maintain those rates or if, you know, certainly export will increase, but certainly our cost position and capital act time allows us to meet demand where we really need to, and then we're highly focused on the In Part A, V asked about AS. I would say there's practically no impact on AS.
Speaker Change: We think that will probably ebb and flow a bit here as we move through the year you know obviously as the production across the industry is constrained.
Speaker Change: It has been in the past couple of months, so getting our value chain realigned here in North America, and then certainly perhaps that you know as they progress and see how the market improve in the second half whether we can maintain those rates are if you know certainly export well will increase but certainly our cost position in copper.
Speaker Change: A lot of time allows us to meet demand, where we really need to and then we're highly focused on the targeted selling mix optimization on a unit profitability in nylon.
Erin N. Kane: We did go out and purchase in the first quarter, so that was, So let me reframe. Sorry, I was thinking more about the season here, because I think that's what you're asking the questions about, but I'll reframe, just to be clear, certainly sales in the first quarter for AS were down, but we did purchase to protect the heart of the season and our customer demand in Q2. So we are in good shape as we are here now in the season, going to market, and allowing our customers and farmers to be successful in their planning season. Just wanted to clarify that.
Speaker Change: That's part a.
Speaker Change: You know be asked about a S. I would say, there's practically no impact to a S.
Speaker Change: We did go out and and.
And purchased in the first quarter.
Speaker Change: You know so that was.
Speaker Change: So let me I'm pretty sure I'm, sorry, I was thinking more in the season here because I think that's what you're pointing the question Bob to frame.
Speaker Change: To be clear certainly sales in the first quarter for <unk> were down but.
Speaker Change: But we did purchase to protect the heart of the season in our customer demand in Q2. So we are in good shape as we are here now and in the season going to going to market and allowing our customers and farmers to be successful in their planning sees himself.
Speaker Change:
Erin N. Kane: And then your third piece, relative to granular and standard, at the highest level, right, we're expanding our granular sales and, well, production to meet sales growth here in North America. And so, you know, certainly we have, and always have had, limited export granular in the first half. And as we continue to upgrade that conversion level, those products are focused here for domestic use, so we'll still maintain, you know, some sales on the export side. We've got some great customers in various regions that will continue to meet the standard. Did I capture the essence of where you were, or is there any further clarification?
Speaker Change: Just wanted to clarify that and then.
Speaker Change: Here are a third piece relative to granular and standard.
Speaker Change: At the highest level right, we're expanding our granular on sales.
Speaker Change: And while production to meet sales growth here in North America.
Speaker Change: So you know certainly we have and always have had limited export granular in the first half and as we continue to upgrade them.
Speaker Change: Or is that a level that was.
Speaker Change: Those products are our focus here for domestic so.
Speaker Change: We'll still maintain you know some sales in the export side, we've got some great customers.
Speaker Change: Various regions that will continue to take the standards.
Speaker Change: [laughter].
Speaker Change: Thanks, Ryan did I catch that captured the essence of where you are or is there any further clarification.
Charlie: This is Charlie.
Operator: Can you hear us, John? Sorry. Sorry, what we've done... Don't worry. Come on. Sorry.
Charlie: Oh, sorry.
Charlie: Sure.
Charlie: Alright.
Charlie: Sure.
Charlie: Yeah.
Charlie: Yeah.
Charlie: Okay.
Charlie: Okay.
Charlie: Okay.
Operator: Excuse me, Charlie. Would you like to respond?
Charlie: Excuse me Charlie would you like to respond.
Charles Nathan Neivert: I'm sorry, I missed the response. Sorry. What was the question? Back.
Charlie: I'm, sorry, I missed the response alright.
Charlie: What was the question.
Operator: We'll come back to you, Charlie.
Charlie: Back when we will come back to you Charlie.
Charlie: Okay. Thanks.
Charlie: Yeah.
David Cyrus Silver: Okay, the next question comes from David Silver of CL King. Go ahead, please.
Charlie: Okay. The next question comes from David Silver of C. L. King go ahead. Please.
Charlie: Okay.
David Cyrus Silver: Yeah, hi. Good morning.
David Cyrus Silver: Yes, hi, good morning.
David Cyrus Silver: Hi, good morning.
David Cyrus Silver: So.
David Cyrus Silver: I kind of have a scatter of questions here.
So I apologize in advance if it helps around a bit.
Erin N. Kane: Thank you. So, I kind of have a scattershot of questions here. So, I apologize in advance if it hops around a bit. You know, I listened with interest to your comments about how AS pricing has progressed during the run-up to the planning season, and timing looks very favorable. You know, there is another issue that I was hoping you could maybe lend some perspective on, and that is the relationship between AS Pricing and Urea Pricing.
David Cyrus Silver: You know.
David Cyrus Silver: I listened with interest with your comments about how.
David Cyrus Silver: Pricing has progressed during the run up to the planting season and timing looks looks very favorable.
David Cyrus Silver: There is another issue.
David Cyrus Silver: That I was hoping you could maybe lends some perspective on and that is the relationship between.
Erin N. Kane: So there's always some variation, you know, and certainly different, different, you know, pricing points or delivery points have different relationships. But that said, I mean, by the information I've been tracking. I mean, it looks like AS pricing is unusually favorable for you relative to, you know, urea. And I'm just wondering if you could point to something that might have driven that relationship more in AS's favor. Is it, you know, your outage, for example? But more to the point, I mean, how sustainable would that, you know, unusually favorable or historically unusually favorable relationship be? I'll stop there. Thanks.
Speaker Change: Yes pricing and urea pricing so there's always some variation.
Speaker Change: Certainly different different pricing points or delivery points have different relationships, but.
Speaker Change: That said I mean.
Speaker Change: By the information Ive been tracking I mean, it looks like.
Yes pricing is unusually favorable for you relative to <unk>.
Speaker Change: <unk>.
Speaker Change: And I'm just wondering if you could point to something that that might have driven that relationship more in <unk>.
Speaker Change: Favre is it your outage for example, but more to the point I mean, how sustainable would that unusually favorable or historically unusually favorable relationship persist Tom I'll stop there. Thanks.
David Cyrus Silver: So, maybe just to re-ground everyone and ourselves. We have nitrogen and sulfur in our ammonium sulfate product lines, and we talk about the relationship of nitrogen to urea because that is the largest nitrogen fertilizer and sets a nutrient value for the nitrogen in AF. We really are marketing and providing ammonium sulfate for this sulfur nutrition, and certainly AF has proven to deliver, pound for pound, the most readily available sulfur and nitrogen to a wide variety of crops.
Speaker Change: So maybe just to ground, everyone and and ourselves.
Then we have nitrogen and software in our ammonium sulfate product lines and we talk about the relationship blind nitrogen to urea because that is the largest nitrogen fertilizer and such that nutrient value.
Speaker Change: For the nitrogen and after we really our marketing and providing ammonium sulfate for that software.
Speaker Change: Tradition.
Speaker Change: And certainly as it is proven to deliver pounds on kind of the most readily available sulphur and nitrogen to a wide variety of crops. So when we price we have that base consideration, which is why you know I guess that you track, where where nitrogen is headed but we really have always been focused on pricing to earn the premium for software as well.
David Cyrus Silver: When we price, we have that base consideration, which is why, like you said, you track where nitrogen is headed, but we really have always been focused on pricing to earn the premium for sulfur as well. Effectively, what we are seeing right now is the value that ag customers and the value chain are placing on sulfur due to the yield benefit in what has become a tight market for AF as well, so it really is those fundamentals.
Speaker Change: And effectively what we are seeing right. Now is is the value that add customers in the value chain is placed on software.
Speaker Change: Due to the yield benefit in what has become a tight market for a ask as well. So it really is those fundamentals there is a linkage to the base nutrient value, but again that focus on the premium that's earned and that premium.
David Cyrus Silver: There is a linkage to the base nutrient value, but again, that focus is on the premium that's earned and that premium is earned in a supply-demand environment. As we alluded to, certainly we see that in demand growth, the work we've been doing on soybeans, and certainly several customers down the chain this season have reported a big uptake in sulfate use this season on soybeans, and so I think it's that combination of factors, Dave, that are leading to the opportunity and the pricing situation that we're in today.
Speaker Change: Is that is earned in a supply demand environment.
Speaker Change: Sulfur nutrition.
Speaker Change: So broadly as we alluded to.
Speaker Change: Certainly we see that demand growth there is.
The work, we've been doing on soybeans and certainly several customers down the chain. The season have reported a big uptake on sulfate youth the season on soybean and so I think it's those combination of factors David that are leading to the opportunity and the pricing situation that we're in today.
David Cyrus Silver: Okay, thank you for that. And, you know, I was getting a little feedback when Charlie was asking one or two of his questions, so I apologize if I'm making you repeat yourself.
Erin N. Kane: But this goes back to your comment about increasing the percentage of your AS in the granular form to up to 70%. And I'm just, you know, kind of wondering, I mean, your sales strategies vary, you know, in different seasons of the year and other factors. But in thinking about having the flexibility, right, to increase the percentage of granular product, the premium price product, to, you know, maybe 10 percentage points.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks, Thank you for that.
Speaker Change: And I was getting a little feedback when Charlie was and asking one or two of his questions. So I apologize if I'm, making you repeat yourself, but.
David Cyrus Silver: This goes back to your comment about <unk>.
David Cyrus Silver: Increasing the percentage of your.
David Cyrus Silver: In the granular form to up to 70%.
David Cyrus Silver: And I'm, just kind of wondering I mean.
David Cyrus Silver: Your sales strategies.
David Cyrus Silver: Very different seasons of the year and other factors.
David Cyrus Silver: But.
David Cyrus Silver: And thinking about having the flexibility right to increase the percentage of granular product.
David Cyrus Silver: Premium priced product to maybe 10 percentage points.
Erin N. Kane: As you look back, has there been a period in the past, I don't know, 5 to 10 years, where AdvanSix wouldn't benefit from selling their maximum output in the form of granular? In other words, is this really adding flexibility, or is this just increasing the amount year after year that you intend to sell in the granular form?
David Cyrus Silver: As you look back is there has there been a period.
David Cyrus Silver: In the past I don't know five to 10 years, where advanced six wouldn't benefit from selling their maximum output in the form of granular in other words.
David Cyrus Silver: Is this really adding flexibility or is this just.
David Cyrus Silver: Increasingly amount year after year that you intend to sell in the granular form.
David Cyrus Silver: Yeah, so we've been steadily increasing granular conversion within our operations for quite a period of time. And certainly, you know, the program here for sustain is targeting a total direction to get to 75. We are tracking ahead of our original plan and, you know, reaching 70% here this year. And, you know, but at the heart of it, the simple answer is no: there's not a time in history where granular wouldn't always be more profitable than standard.
David Cyrus Silver: Yeah. So we've been steadily increasing granular conversion within our within our operation for for quite a period of time and certainly.
David Cyrus Silver: Graham here first sustain is targeting a total direction to get to 75. We are we're tracking ahead of our original plan.
David Cyrus Silver: You know, reaching 70% here this year.
David Cyrus Silver: But the heart of it the simple answer is no. There is not a time in history, where granular or wouldn't always be more profitable than standard I'm. Andy is that growing form right. As we think about mechanized agriculture or the development the need that our customers, particularly in north of.
David Cyrus Silver: I mean, it is a growing form, right? As we think about mechanized agriculture, the development, and the needs of our customers, particularly in North America. And that's just, you know, really the fundamentals that move forward. So, very consistent with sort of a long-term strategy, and the investment here allows us to take this really next significant step forward.
David Cyrus Silver: America and that's just a.
David Cyrus Silver: You know really the fundamentals more forward so.
David Cyrus Silver: Very consistent with our long term strategy and any investment here allows us to take those really next significant step forward.
David Cyrus Silver: Good. Thank you. That makes my modeling that much simpler.
Speaker Change: Oh, good thank you that.
Speaker Change: It makes my modeling that much simpler thank you.
Speaker Change:
Erin N. Kane: Thank you. I would like to switch over to your comments about nylon and how you anticipate some moderate improvement this year after what's been a very difficult stretch overall in that particular product line, nylon and Capro. And, you know, I have to confess, I'm, I'm, I'm a little bit, you know, I don't know what to, I wouldn't say confused, but I'm questioning the kind of thought process behind, you know, anticipating an improvement.
Speaker Change: I would like to switch over to your comments about nylon.
Speaker Change: And how.
Speaker Change: You anticipate some moderate improvement this year after what's been a very difficult.
Speaker Change: Stretch.
Speaker Change: Overall.
Speaker Change: In that particular product line nylon and cap.
Speaker Change: And I have to confess I'm I'm I'm, a little bit you know.
Speaker Change: I don't know what the I wouldn't say confused but I'm questioning kind.
Speaker Change: The thought process behind.
Erin N. Kane: In other words, and I apologize, but you mentioned that nylon production rates in China continue to be, you know, frustratingly high, and I'm not really aware of, you know, a dramatic pickup in auto builds or, I don't know, capacity closures or regulatory actions, whatever. But, you know, maybe just a little bit of background or perspective on why you're anticipating, after, you know, a very difficult stretch, why there should be some, you know, moderate easing in the supply and in the fundamentals such that, you know, there might be some improvement, or you anticipate some improvement in your financial results there.
Speaker Change: Anticipating an improvement in other words I apologize, but.
Speaker Change: You mentioned the nylon production rates in China continue to be frustratingly high.
Speaker Change: And I'm not really aware of a dramatic pickup in auto builds or I don't know capacity closures or.
Speaker Change: Regulatory actions whatever.
Speaker Change: But you know, maybe just a little bit of background or perspective on on why youre anticipating after.
Speaker Change: Very difficult stretch why there should be some moderate easing in the.
Speaker Change: And the fundamentals such that.
Speaker Change: There might be some improvement or you anticipate some improvement in your financial results. There. Thank you.
Speaker Change: Okay.
Erin N. Kane: Yeah, it certainly is one where, you know, I think the tone and the view is that we are cautiously optimistic here. I can agree that when we think about sort of the macros, there are signs and considerations relative to continued sort of robust, you know, strength in auto and packaging. Those are the strongest, you know, segments in North America, and building construction is the larger end market, and that is the one that has lagged.
Speaker Change: Yeah. It certainly is one where.
Speaker Change: Yeah, I think in that and then telling me. The view is they are cautiously optimistic here.
Speaker Change: I can agree that when you think about sort of the the macros.
Speaker Change:
There are signs and considerations relative to.
Speaker Change: <unk> is sort of robots strengthen and auto and packaging those are the strongest segments in North America.
Speaker Change: And.
Speaker Change: Sort of building construction is the larger and end market and that is the one that has lagged and so certainly as we look to residential and commercial construction and the opportunity set there we like many others are watching the space associated with.
Erin N. Kane: And so, you know, certainly as we look to residential and commercial construction and the opportunities that there are, we, like many others, are watching the space associated with interest rates and, you know, other considerations that will allow more typical demand to come back in those spaces. And so that... That sort of the North America piece, you know, when we think about, you know, really the broader sort of Asian consideration.
Speaker Change: Interest rates and other considerations that will allow the market to come back in those spaces.
Speaker Change: Ed.
Speaker Change: And so that.
Speaker Change: That started the North America piece, you know well.
Speaker Change: When we think about you know really the broader sort of Asia consideration.
Speaker Change:
Erin N. Kane: You know, there there are logistics constraints, you know, certainly, you know, challenges in the Panama Canal and just sort of the Middle East are constraining. [inaudible] You know operating rates in in europe and the rest of asia um, you know, we've had You know, sumitomo shut down in um in japan and um, you know, so I do think that there are Um, you know slow signs here This is not going to be a fast recovery we don't believe but we should continue to see um, or at least that would be our expectation of, are starting to check up off the trot, which we have seen over the last two quarters and albeit it's slow.
Speaker Change: And there there are logistics constraints you know certainly you know challenges in the Panama Canal.
Speaker Change: And I'm.
Speaker Change: It just started at the middle East are constraining them.
Speaker Change: Logistics them into Europe, and and coming sort of east. So there is there are some things that play out as.
Speaker Change: V go and and.
Speaker Change: And then third would you say is not all cycles, perhaps repeat at fifth Street guys. But we are we are seeing going into this downturn now relative to.
Speaker Change: The history and when.
Speaker Change: You know southern structure, usually comes back into the marketplace and you see that already in constrained operating rates and Europe and the rest of Asia.
Speaker Change: You know we've had.
Speaker Change: Yeah, the Sumitomo shut down and in Japan, and you know so I do think that there are you know.
Speaker Change: We'll assign theory it does.
Speaker Change: Not going to be a fast recover we don't believe that we should continue to see.
Speaker Change: That would be our expectation of a.
Speaker Change: Starting to check up off the trough.
But we have seen over the last two quarters and albeit it's it's well.
Speaker Change: Yes.
David Cyrus Silver: Got it. Thank you. I appreciate that. Maybe just one last question.
Speaker Change: Got it. Thank you I appreciate that maybe just one last question.
David Cyrus Silver: You know, this would be with your chemical intermediates segment or product line. And you did talk about the strength of acetone, but I was wondering maybe if you had some comments about the progress or whatnot on the U.S. amines side of the business. In other words, you know, the various intermediates there. And in particular, I believe, you know, agriculture is a pretty significant end market for the output there. And I'm just wondering if what you're seeing on the U.S. amines intermediates side is jibing with your comments on ammonium sulfate and, you know, as well. Thanks.
Speaker Change: This would be with your chemical intermediates.
Speaker Change: Segment or product line and you did talk about the strength in acetone, but I was wondering maybe if you had some comments about the progress or whatnot on the USA I means side of the business in other words.
Speaker Change: The.
Speaker Change: Various intermediates, there and in particular I believe.
Speaker Change: Agriculture is a pretty significant end market for the output there and I'm just wondering if what youre seeing from the USA I means intermediates side as jiving with with your comments on.
Speaker Change: Ammonium sulfate.
Speaker Change: As well yeah.
Erin N. Kane: Certainly, you know, when we kind of think about broader agriculture, there really is a segmentation between fertilizer and then, you know, crop protection and ag chemicals. And you know, the U.S. Amines products fit into that ag chemical space given that you're really flowing into the herbicide value chain.
Speaker Change: No it's certainly.
We kind of think about broader I mean, they're really the segmentation between fertilizer and.
Speaker Change: Crop protection and AG chemical and do you know the U S I mean product.
Speaker Change: So that AG chemical.
Given that you are really falling into the herbicide.
Speaker Change: Value chain and we like we see others continuing to still report that there is.
Erin N. Kane: And we, like the others, are continuing to report that there is de-stocking and sort of generally slow demand, which is... Again, I think consistent with what we've seen, you know, others in the states report and certainly is what we're continuing to work through. So, you know, I think the sense is this is a season that sort of corrects the project pipeline that was part of the core investment pieces here relative to being able to grow the business given the asset base that we acquired.
Destocking inside a generally slow demand which is.
Again, I think consistent with what we've seen others in this space report and certainly is what we're continuing to work through so.
Speaker Change: You know what I think sense is this is the season that sort of correct.
Speaker Change: No the the prior year, but that is a headwind for us in the U S. The main space.
Speaker Change: However, we continued to progress you know certainly the project pipeline that.
Speaker Change: That was <unk>.
Speaker Change: Part of.
Speaker Change: The core investment thesis here relative to being able to grow that business given the asset base that.
Erin N. Kane: And that continues to progress, so that is a positive here that we continue to, you know, watch forward to here and stay focused on. And the market dynamics certainly should, you know, sort themselves out as we come through into the next ag season on the base.
Speaker Change: That we acquired and that continues to progress.
So that is a positive here that we continue to watch for here and that and stay focused on and the market dynamics certainly should.
Speaker Change: That's obviously come through into the next AG season on the base.
Speaker Change: Yeah.
David Cyrus Silver: Okay, you hit right on the aspect I was wondering about. Thanks very much. I'll get back in queue. All right, thanks.
Speaker Change: Okay.
Speaker Change: You hit right on the D aspect I was wondering about.
Speaker Change: Thanks, very much I'll get back in queue.
Erin N. Kane: Thanks, David.
Speaker Change: Okay. Thanks, David Thanks, David.
Speaker Change: Yeah.
Vincent Alwardt Anderson: Our next question comes from Vincent Anderson of Spiefel. Go ahead, please.
Speaker Change: Our next question comes from Vincent Anderson of Stifel Go ahead. Please.
Vincent Alwardt Anderson: Thanks. Good morning, everyone. Good morning. I think I'll just segue off of David real quick. Beyond agriculture and U.S. Amines, could you maybe just level set how your mix has been trending, say, the last two, three quarters? So including things like your higher-value nylon products, your film business, your Oxeams, kind of stacking up, all of those little buckets and how that's looked, and if we start seeing a broader demand recovery, you know, is there a bit more pent-up margin with those coming back in relative terms, or has it been pretty stable?
Vincent Alwardt Anderson: Yes, thanks, good morning, everyone.
Vincent Alwardt Anderson: Thanks.
Vincent Alwardt Anderson: I think I'll, just segue off David real quick beyond.
Agriculture, and U S. I mean could you maybe just level set how your mix has been trending say the last two three quarters, so including things like your higher value nylon products are film business rock seems kind of stacking up.
Vincent Alwardt Anderson: All of those little buckets, and how that's worked and if we start seeing a broader demand recovery is there a bit more pent up margin with those coming back in relative terms or has it been pretty stable.
Erin N. Kane: Yeah, it's, um, it's certainly, you know, we think about those Those product lines that have, you know, stickier and more differentiated margins, as we've shared, have been impacted by the downturn. Most notably, probably, is our Natome product line, which is a high-purity application to solvents and electronics. And, you know, that is still quite weak.
Speaker Change: Yeah, It's it's certainly.
Speaker Change: When we think about those.
Speaker Change: Those product lines that have that you know stickier and more differentiated margin dilutive share that have been impacted by the downturn.
Speaker Change: Most notably probably is our NATO and product line.
Speaker Change: It is a high purity application into solvents, and electronics and you know that is still quite weak.
Vincent Alwardt Anderson: And so, I think as we see that recovery, and certainly there are a lot of, you know, broader macro trends that should support that going forward, you know, as you indicate, that will be positive as we see that come through. And likewise, you know, coatings in Europe have been a bit of a headwind as well here on the oxygen side, you know, for 2PO or EZ-BLOX. And so, you know, differentiated products haven't been immune to the broader, you know, macro considerations. And certainly, as we see more broad-based recovery, that will come back in as a tailwind as well in the future.
Speaker Change: And so I think as we see that recovery and certainly there's a lot of broader macro trends that should support that going forward.
Speaker Change: As you indicate that will be a battle.
Speaker Change: That will be a positive as we see that.
Speaker Change: Come through and like wise coding.
Speaker Change: Coatings in Europe has been a it didn't have a headwind as well here on the oxy side, you know for two P O our easy blocks and so he does it differentiate their products havent been immune to the broader.
Speaker Change: In a macro considerations and certainly as we see more broad based recovery that.
Speaker Change: That will come back in as a as a tailwind as well in the future.
Erin N. Kane: Okay, that's helpful. And then, kind of a quick one on what the U.S. means.
Speaker Change: Okay. That's helpful. And then kind of a quick one on U S. Amines I think when you. When you first bought it you mentioned it had a favorable acetone contract at least for the time being but something like a swap agreement.
Vincent Alwardt Anderson: I think when you first bought it, you mentioned it had a favorable acetone contract, at least for the time being, but something like a swap agreement could be a possibility in the future to get that asset more closely integrated into your acetone cost structure. I'm just curious where we stand with, you know, how long that contract will last and if it still makes sense to be looking at getting it closer to your acetone.
Speaker Change: Could be a possibility in the future to get that asset more closely integrated into your acetone cost structure I'm, just curious where we stand with the how long that contract glass and if it still makes sense to be looking at getting it closer to your acetone.
Erin N. Kane: Yeah, I think that the easiest way to think about this, Vincent, here is just like in all of our, you know, supply agreements and considerations that, you know, all options are open, we have a good relationship and partnership with the current supplier, the flexibility, you know, works, you know, there is, as you could imagine, you know, in this space, co-producer, you know, relationships given is Shutdowns, operations, whatever it may be, swaps come into play, and so, you know, I think it's simple to say we keep all of our options open relative to being able to, you know, drive the best decisions, profitability, and growth for the company.
Speaker Change: Yeah, I think that.
Speaker Change: The easiest way to think about this Vincent here is just like in all of our supply agreements and considerations that all options are open we have a good.
Speaker Change: Relationship and partnership with the current supplier the flexibility works you know there is as you could imagine.
Speaker Change: In this space co producer.
Speaker Change: Our relationship has given us.
Speaker Change: Downs operations wherever it maybe thoughts come into play and so.
Speaker Change: I think it's it's simple to say, we keep all of our options open relative to being able to drive the best decisions profitability and growth for the company.
Speaker Change: Okay fair enough.
Vincent Alwardt Anderson: Okay, fair enough. And then, coming back to the move in the turnaround schedule for this year, I'm just curious if any of that was driven by like a need to have more time to rebuild inventory ahead of it, and kind of given where it sits in the year, should we anticipate maybe a little bit less participation in the export markets in the third quarter for ammonium sulfate compared to a typical year?
Speaker Change: And then coming back to the move in the turnaround schedule for this year I'm. Just curious if any of that was driven by like a need to have more time to rebuild inventory ahead of it and kind of given where it sits in the year should we anticipate maybe a little bit less participation in the export market.
Speaker Change: In the third quarter for ammonium sulfate compared to a typical year.
Erin N. Kane: And so, you know, when we moved it, it's subtle, and it's about two weeks, you know, so when we think about, September into October, there were some customer accommodations that were, that we managed because we do impact folks like our CO2 customers and others. So AS-MIX shouldn't really change significantly, but it's just a matter of just, you know, lining this thing up, and it's a modest move.
Yeah, So you know what.
Speaker Change: We when we moved it it's subtle Vincent is about two weeks so when we think about.
Speaker Change: September into October.
Speaker Change: There were some customer accommodations that were yeah, we manage because they do impact folks like our C O two customers and other so.
Speaker Change: As mixed shouldn't really change significantly, but it's just a matter of just lining this thing up and it's a it's a modest mode.
Vincent Alwardt Anderson: Gotcha. Okay, that makes sense. And then just last one, since you brought up your recycled nylon again, I wanted to maybe just touch base on how you're thinking about the commercial strategy there. If it's something you think you can basically place into a nice, you know, long-term supply agreement at attractive margins, or is this going to have to be a bit more nimble just based on, you know, how much demand there is for recycled nylon today?
Speaker Change: Gotcha, Okay that makes sense.
Speaker Change: And then just last one.
Speaker Change: And since you brought up your recycled nylon again I wanted to maybe just touch base on how youre thinking about the commercial strategy. There. If it's something that you think you can basically place into a nice long term supply agreement at attractive.
Speaker Change: Margins or is this going to have to be a bit more nimble Ah just based on how much demand there is for recycled by one today.
Erin N. Kane: So, you know, I think it's probably going to be a bit of a mix as we move forward. Certainly, we have customers that have been, you know, quicker adopters and have kind of layered those into their, you know, contracts, but certainly, this is a lot of targeted selling with our customers that have, you know, strong interests in consumer-facing requests and commitments. And certainly, the ISCC Plus was a significant, I would think, step forward because there were customers in the packaging industry and, to some extent, those in engineering projects as well that have been requesting, you know, this verification and certification as a substantiation of PCR and PIR, which will, you know, allow them to, you know, now really invest in these types of materials into their chain. So, you know, I think it's
Speaker Change: So I think it's probably going to be a bit of a mix as we move forward certainly we have.
Speaker Change: Customers that have been quicker adopters might have kind of layer those into their.
Speaker Change: No contracts, but certainly that there's a lot of targeted selling with our customers.
Speaker Change: Is that have you know strong in insurance with consumer facing.
Speaker Change: Quest and commitments and certainly the IFC box was a significant I would think steps forward because there were.
Speaker Change: Customers in the packaging industry.
Speaker Change: And to some extent those in engineering plastics as well that had been requesting verification and certification as a substantiation of PCR MPI or Wil that will allow them to now really is is that this into their their changed out yes, I think it's the right step for in a lot of interest in these types of <unk>.
Speaker Change: But are you know a lot of work that has to go through the value chain to earn D.
Premium.
Vincent Alwardt Anderson: Gotcha. And can we actually take like one step back and explain from an AdvanSix point of view how PIR versus PCR works? Because I only think of you as, you know, a virgin nylon producer. And so PIR makes sense, but I'm not entirely sure how PCR fits in.
Speaker Change: Got you and can you can we actually take one step back and explain.
Speaker Change: From an advanced six point of view, how P IR versus PCR.
Speaker Change: Works, just because I only think of you as.
Speaker Change: A virgin nylon producer and so it makes sense, but I'm not entirely sure how PCR fits in.
Erin N. Kane: Yep. So, you know, certainly the post industrial, you know, plays in through our asset base, right? And our capturing and recirculation, you know, loops. The PCR, by the certification, takes into consideration the materials we bring back from our partners.
Speaker Change: Yeah. So you know certainly the postindustrial you know plays and through our.
Speaker Change: Our asset base rate and are are capturing in recirculation loops.
Speaker Change: P C. R by the certification takes into consideration the the materials, we bring back from our partners.
Erin N. Kane: So basically waste from their own manufacturing lines? Yeah.
Speaker Change: So basically waste from their own manufacturing lines.
Erin N. Kane: Anything that a lot of this is a little more recapture, and you know we reincorporate that back into our system from our downstream customers.
Speaker Change: Anything that a lot of that says look like them or recapture and we reincorporated that back into our system and from our downstream customers.
Vincent Alwardt Anderson: That's very interesting. Okay, I'll chew on that, and maybe we'll circle back on it next quarter. You got it. Thank you.
Speaker Change: That's very interesting, okay, I'll chew on that.
Speaker Change: Circle back on the next quarter.
Vincent Alwardt Anderson: You got it. Thank you. Thank you.
Speaker Change: You got it thank you.
Speaker Change: Thank you.
Yeah.
Charles Nathan Neivert: Our last question comes from Charles Neivert of Piper Sandler. Go ahead, please.
Speaker Change: Our last question comes from Charles <unk> of Piper Sandler go ahead. Please.
Charles Nathan Neivert: that I deal with have had issues with their inventories, not necessarily their own, but within the chain and a lot of destocking. And, largely, it seems that most of them have commented that the destocking was over with and they could sort of resume a more normal pace of sales. Did you guys run into any major destocking issues over the last, you know, a few quarters, and if so, have they basically dissipated at this point? Are we done with them? And then, you know, going forward, we should see more regular cadence of sales going forward.
Charles: So I deal with have had issues and the inventory is not their own necessarily but within the chain and a lot of destocking.
Charles: And largely it seems that most of them commented that that destocking was overlays and they couldn't sort of resume a more normal pace of sales did you guys run into any major destocking issues over the last.
Charles: A few quarters and if so are they basically dissipated at this point.
Charles: Are we done with them and then.
Charles: Going forward, we should see more regular cadence of sales going forward.
Erin N. Kane: Yeah, our sense is, you know, again, we probably saw a variety of things here, depending on which line of business you're in. I think certainly, in nylon, we saw that predominantly through last year. And I think we would say that most of that value chain is sorted. And what we're seeing now is, you know, I think more typical demand signals that we would expect, you know, in intermediates where we play, I think, likewise there as well with the outstanding consideration of ag chemicals because, you know, where our materials get pulled through is in combination with other materials and until.
Charles: Yeah. Our sense is you know again I mean, we probably saw a variety of things here, depending on which line of business.
Charles: I think certainly in nylon you know we saw that predominantly through last year and I think hum.
Charles: View that most of that value chain.
Charles: Is it sorted and what we're seeing now is.
Charles: More typical demand signals that we would expect.
You know and in.
Charles: In intermediates, where we play I think likewise, there as well would be where the outstanding consideration of AG chemicals because.
Charles: Where where our materials get pulled through in combination with other materials then until now.
Erin N. Kane: And those downstream materials are pulled through, but I would say we're, we believe we're really kind of mostly done. And then ag, you know. The goal there, as you well know, is to make sure that we have the inventories as low as possible at the end of the season, and that allows us for a strong reset into the fall, which would be our intent and expectation for this year as well.
Charles: The downstream materials are.
Charles: Pull through but I would say, where they believe are really kind of mostly done.
Charles: And then I you know that.
Charles: Either they go there as you well know is a two to make sure that we have the the inventories as low as possible at the end of the season and that allows us for a strong reset in the fall which would be our.
Charles: In terms of an expectation for this year as well.
Charles Nathan Neivert: And that really clears it up. And then whatever I missed on the left, go around the perils of
Speaker Change: Okay, that's great.
Speaker Change: And then whatever I missed on all that.
Speaker Change: So around <unk>.
Speaker Change: Parallels are working at home sometimes.
Erin N. Kane: Okay, if there's anything we need to follow up on, yeah. Yeah, if there's anything that we need to follow up on, you know, I tried my best to ensure that I tackled all three parts of your question, but I think we might have had some connectivity issues. But if there's anything we can help to clarify, you know, certainly reach out.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah, Theres anything that we need to follow up one.
Speaker Change: I tried my best to ensure that I talked about all three parts of your question, but I think we might have had some connectivity issues, but if there's anything.
Speaker Change: That we can help to clarify certainly reach out.
Speaker Change: Okay great.
Charles Nathan Neivert: Very good. Yeah, we've got a good call later, so I'll clear up anything that I've missed. Thank you. Perfect. You bet.
Speaker Change: We at least have the call later, so I'll clear up anything I've missed.
Erin N. Kane: Thank you. Perfect. I'll be back.
Speaker Change: Thank you perfect.
Erin N. Kane: This concludes our question and answer session. I would like to turn the conference back over to Erin Kane for any closing remarks. Thank you all again for your time and interest.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Erin Kane for any closing remarks.
Erin N. Kane: Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the operational and commercial tailwinds that are constructive and supportive of our anticipated rebound in earnings and cash flow performance as we head into the second quarter. We feel very good about the strategies we've implemented and our continued investments to support expectations for AdvanSix's long-term sustainable performance. I am confident that this year presents a great opportunity to further maximize our value to shareholders. With that, we look forward to speaking with you again next quarter. Stay safe and be well.
Erin N. Kane: Thank you all again for your time and interest. This morning, we hope this call and discussion that clarify the operational and commercial tailwind that are constructive and supportive to our anticipated rebound in earnings and cash flow performance as we head into the second quarter.
Erin N. Kane: We feel very good about the strategies, we have implemented and our continued investments to support expectations for Atlantica is long term sustainable performance.
Erin N. Kane: I'm confident this year presents a great opportunity to further maximize our value to shareholders with that we look forward to speaking with you again next quarter stay safe and be well.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.