Q1 2024 Trinseo PLC Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Trinseo first quarter 2024 financial results conference call. We welcome the management team, Frank Bozich, President and CEO, David Stasse, Executive Vice President and CFO, and Andy Myers, Director of Investor Relations. Today's conference call will include brief remarks by the management team, followed by a question and answer session. The company will distribute its press release along with its presentation slides at the close of business on Wednesday, May 8.
Good morning, ladies and gentlemen, and welcome to the trends Youll first quarter 2024 financial results Conference call. We welcome.
Operator: <unk> management team, Frank Bozich, President and CEO, David <unk>.
Operator: Executive Vice President and CFO and Andy Myers Director of Investor Relations. Today's conference call will include brief remarks by the Finnish.
Operator: Followed by a question and answer session company to distribute its press release, along with its position slides at close of market Wednesday may eight.
Operator: These documents are posted on the company's Investor Relations website and furnished on a Form 8K filed with the Securities and Exchange Commission. If anyone should require operator assistance during the call, please press star then zero on your telephone. I will now hand the call over to Andy Myers.
Operator: These documents are posted on the company's Investor Relations website and furnished on a form 8-K filed with the Securities and Exchange Commission.
Operator: Anyone should require operator assistance during the call. Please press Star then zero on your telephone I will now hand, the call over to Andy Myers.
Andrew Myers: Thank you, Rob, and good morning everyone. At this time, all participants are in a listen-only mode. After our brief remarks, instructions will follow to participate in the question and answer session. Our disclosure rules and cautionary note on forward-looking statements are noted on slide two. During this presentation, we may make certain forward-looking statements, including issuing guidance and describing our future expectations. However, we must caution you that actual results could differ materially from what is discussed, described, or implied in these statements.
Andrew Myers: Thank you Rob and good morning, everyone. At this time all participants are in a listen only mode. After a brief remarks instructions will follow to participate in the question and answer session or.
Andrew Myers: Our disclosure rules and cautionary note on forward looking statements are noted on slide two.
Andrew Myers: During this presentation, we may make certain forward looking statements, including issuing guidance and describing our future expectations.
Andrew Myers: We must caution you that actual results could differ materially from what is discussed described or implied in these statements.
Andrew Myers: Factors that could cause actual results to differ include, but are not limited to, risk factors set forth in Item 1A of our annual report on Form 10-K or in our other filings made with the Securities and Exchange Commission. The company undertakes no obligation to update or revise its forward-looking statement. Today's presentation includes certain non-GAAP measurements. For reconciliation of these measurements, the corresponding GAAP measures are provided in our earnings release and in the appendix of our investor presentation.
Andrew Myers: Factors that could cause actual results to differ include but are not limited to risk factors set forth in item <unk> of our annual report on Form 10-K.
Andrew Myers: And our other filings made with the Securities and Exchange Commission.
Andrew Myers: The company undertakes no obligation to update or revise its forward looking statements.
Andrew Myers: Today's presentation includes certain non-GAAP measurements.
Andrew Myers: Conciliation of these measurements to corresponding GAAP measures is provided in our earnings release and in the appendix of our Investor presentation.
Andrew Myers: A replay of the conference call and transcript will be archived on the company's investor relations website shortly following the conference call, and the replay will be available until May 8th, 2025. Now, I'd like to turn the call over to Frank Bozich.
Andrew Myers: A replay of the conference call and transcript will be archived on the company's Investor Relations website. Shortly following the conference call. The replay will be available until May eight 2025, now I'd like to turn the call over to Frank <unk>.
Frank A. Bozich: Thanks, Andy, and welcome to our first quarter 2024 earnings call. Let me begin by saying how encouraged I am with how the first quarter progressed and how the second quarter has begun as profitability improved steadily over that period. The initial strength in volumes that we saw in January and February continued through March, resulting in our first year-over-year volume increase in two years and our highest volume quarter since Q3 2022. Additionally, we believe destocking in some of our value chains has ended, market tightness resulted in significant margin expansion in engineering materials, and America's dynamics as the quarter progressed, resulting in over half of our quarterly adjusted EBITDA coming in the month We see this higher profitability continuing into Q2. The higher profitability that we saw in March was due to several factors.
Frank A. Bozich: Thanks, Andy and welcome to our first quarter 2024 earnings call let.
Frank A. Bozich: Let me begin by saying how encouraged I am with how the first quarter progressed and how the second quarter has begun its profitability improve steadily over that period.
Frank A. Bozich: The initial strengthened volumes that we saw in January and February continued through March resulting in our first year over year volume increase in two years.
Frank A. Bozich: And our highest volume quarters since Q3 2022.
Frank A. Bozich: Additionally, we believe destocking in some of our value chain is ended.
Frank A. Bozich: Market tightness, resulting in significant margin expansion in engineered materials and Americas <unk> as the quarter progressed.
Frank A. Bozich: <unk> and over half of our quarterly adjusted EBITDA coming in the month of March we see this higher profitability continuing into Q2.
Frank A. Bozich: The higher profitability that we saw in March was from several factors.
Frank A. Bozich: We saw margin expansion in MMA as a result of supply tightness that drove March MMA prices significantly higher in Europe while costs moderated. Weakness in epoxy, nylon, and polycarbonate value chains in Asia led to reduced by-product feedstock availability for MMA producers in that region. This dynamic, along with ongoing geopolitical tensions in the Red Sea, resulted in lower quantities of MMA shipped into Europe from Asia during the quarter, and we're seeing this continue into the second.
Frank A. Bozich: We saw margin expansion in MMA as a result of supply tightness that drove March MMA prices prices significantly higher in Europe, while costs have moderated.
Frank A. Bozich: Weakness in epoxy nylon and polycarbonate value chains in Asia led to reduced byproduct feedstock availability for MMA producers in that region.
Frank A. Bozich: This dynamic along with ongoing geopolitical tensions in the Red Sea resulted in lower quantities of MMA shipped into Europe from Asia during the quarter.
Frank A. Bozich: And we're seeing this continue into the second quarter.
Frank A. Bozich: We are also seeing demand for architectural coatings and various polymer additives beginning to pick up following a period of prolonged de-stocking, which is further tightening the MMA market in Europe and is supportive of continued higher margins in the segment. In North America, low acetone availability led to MMA and downstream PMMA supply tightness, resulting in higher integrated margins in the region. Additionally, America's Styrenix had a major turnaround at its large styrene facility in January and February and returned to production in March. Staggering supply tightness due to several industry outages combined with low inventory levels led to significantly higher wholesale prices and margin expansion at the Amstead. And we're seeing this continue into the second quarter.
Frank A. Bozich: We're also seeing demand for architectural coatings and various polymer additives beginning to pick up following a period of prolonged destocking, which is further tightening the MMA market in Europe and is supportive of continued higher margins in this segment.
Frank A. Bozich: In North America, low acetone availability led to MMA and downstream PMMA supply tightness, resulting in higher integrated margins in the region.
Frank A. Bozich: Additionally, America's diabetics had a major turnaround at its large styrene facility in January and February and returned to production in March styrene supply tightness due to several industry outages combined with low inventory levels, but to significantly higher styrene prices and margin expansion.
Frank A. Bozich: The Ami study and we're seeing this continue into the second quarter.
Frank A. Bozich: While we're happy to see the improved earnings profile, increasing styrene and MMA prices exacerbated the typical first quarter seasonal working capital build, and rising spot styrene prices negatively impacted polystyrene, ABS, and latex binders margins by way of higher input costs. I'd like to shift gears for a few minutes to discuss several actions that we took during the quarter to continue advancing our In March, we announced the commencement of a sale process for our interest in America's Steyr Enix via the initiation of an ownership exit provision in the joint venture agreement.
Frank A. Bozich: While we are happy to see the improved earnings profile, increasing styrene and MMA prices exacerbated the typical first quarter seasonal working capital build and rising spot styrene prices negatively impacted polystyrene, ABS and latex binders margins by way of higher input costs.
Frank A. Bozich: I'd like to shift gears for a few minutes to discuss several actions that we took during the quarter to continue advancing our transformation strategy and optimizing our business in.
Frank A. Bozich: In March we announced the commencement of a sale process for interest in American <unk> via the initiation of an ownership exit provision in the joint venture agreement.
Frank A. Bozich: This process provides us with a clear pathway to divest our interest in AmSti, and we expect it to lead to a definitive agreement no later than early 2025. The proceeds will be used to pay down our highest-cost debt, helping to lower our annual interest burden, which will be beneficial to future cash flows.
Frank A. Bozich: This process provides us with a clear pathway to divest our interest in <unk> and we expect it to lead to a dependent if agreement no later than early 2025.
Frank A. Bozich: The proceeds will be used to pay down our highest cost debt, helping to lower our annual interest burden, which will be beneficial to future cash flows.
Frank A. Bozich: Also in March.
Frank A. Bozich: We announced that we engaged the Local Works Council in Germany regarding the potential closure of the remaining virgin polycarbonate production line at our Stade facility in Germany. While decisions like these are never easy, continued soft demand and price declines due to oversupply, along with significant fixed operating costs in Stata, have strained the financial viability of the site. We do not expect these challenging conditions to abate any time soon, as capacity and additions in Asia continue to drive down prices and make operating this chemistry in Europe more difficult.
Frank A. Bozich: In the homes that we engaged local works council in Germany regarding the potential closure of the remaining Virgin Poly carbonate production line at our started Germany facility.
Frank A. Bozich: While decisions like these are never easy continued soft demand and price declines due to oversupply along with significant fixed cost operating fixed operating cost and startup have strained the financial viability of the site. We do not expect these challenging conditions to abate anytime soon.
Frank A. Bozich: Pasty and additions continue in Asia continued to drive down price.
Frank A. Bozich: And make operating this chemistry in Europe more difficult.
Frank A. Bozich: If approved, we will no longer produce virgin polycarbonate and will obtain all of our polycarbonate needs for our downstream businesses via external purchases and recycling. While difficult, this decision is in line with our continued focus on continuous network evaluation and optimization, and we expect it will increase annual profitability by $15 to $20 million compared to our 2023 results. I also want to be clear that any decision to close the Virgin polycarbonate production site in Stata will not impact our commitment to advancing our polycarbonate dissolution technology that we discussed at length in our third quarter 2023 earnings call.
Frank A. Bozich: If approved we will no longer produce Virgin polycarbonate and will obtain all of our polycarbonate needs for our downstream businesses via external purchases and recycling.
Frank A. Bozich: While difficult. This decision is in line with our continued focus.
Frank A. Bozich: Continuous network evaluation and optimization and we expect it will increase annual profitability by $15 million to $20 million compared towards 2023 results.
Frank A. Bozich: I also want to be clear that any decision to close the Virgin poly carbonate production site and start it will not impact our commitment to advancing our polycarbonate disc solution technology that we discussed at length in our third quarter 2023 earnings call.
Frank A. Bozich: While Stade was previously mentioned as a potential location for this technology, up to commercial scale, we are now exploring numerous alternative locations that could host our recycling assets. We remain committed to the integration and application of modern recycling technologies to help customers develop more sustainable product offerings, and this potential closure does not change that commitment. We continue to see excellent demand for our products that contain recycled material, with a record amount sold in the first quarter, which represents a 65% increase over the prior year.
Frank A. Bozich: While starter was previously mentioned as a potential location for this technology up to commercial scale. We are now exploring numerous alternative locations that could host our recycling assets, we remain committed to the integration and application of modern recycling technologies to help customers develop.
Frank A. Bozich: More sustainable product offerings and this potential closure does not change that commitment.
Frank A. Bozich: We continue to see excellent demand for our products that contain recycled material with a record amount sold in the first quarter, which represents a 65% increase over the prior year.
Frank A. Bozich: In addition to our focus on products containing recycled material, we continue to work on other sustainably-advantaged product offerings. We recently introduced flame-retardant polycarbonate and PC-ABS compounds that are manufactured without the use of PFAS and will primarily be used in consumer electronics applications. PFAS chemicals, which have faced growing regulatory and consumer pressure to be reduced, are commonly used for their claim-retardant properties as well as their resistance to heat, oil, grease, and water. These new products maintain those critical performance attributes and use post-consumer recycled substrates, but replace PFAS with other flame-retardant chemicals. Now, we'd like to turn the call over to Dave to discuss our first quarter results.
Frank A. Bozich: In addition to our focus on products containing recycled material. We continue to work on other sustainably advantaged product offerings. We recently introduced flame retardant polycarbonate and PC ABS compounds that are manufactured without the use of PFS and will primarily be used in.
Dave: <unk> electronics applications.
Dave: <unk> chemicals.
Dave: Chip base growing regulatory and consumer pressure to be reduced are commonly used for the flame retardant properties as well as their resistance to heat oil grease and water.
Dave: These new products maintain those critical performance attributes and used post consumer recycled substrates, but replace Pete bus with the other flame retardant chemicals.
Frank A. Bozich: Now I'd like to turn the call over to Dave to discuss our first quarter results.
David P. Stasse: Thank you, Frank. Before I get into the first quarter results, I'd like to call your attention to a change in our segment reporting structure that became effective at the beginning of this year. As we've previously discussed, following the closure of our polystyrene production facility in Chernouzin, we no longer produce styrene and, therefore, no longer have a feedstocks reporting segment. As a result, we have recast the 2022 and 2023 net sales and adjusted EBITDA of the feedstock segment into the downstream segments that consume styrene, which are latex binders, plastic solutions, and polystyrene.
Dave: Thank you Frank.
David P. Stasse: Where I get into the first quarter results I'd like to call your attention to a change in our segment reporting structure that became effective at the at the beginning of this year as we've previously discussed following the closure of our polystyrene production facility into news and we no longer produce styrene and therefore no longer <unk>.
David P. Stasse: A feedstocks reporting segment.
David P. Stasse: As a result, we have recast the 2022 and 2023 net sales and adjusted EBITDA of the feedstocks segment into the downstream segments that consume styrene.
David P. Stasse: Which our latex binders plastic solutions in polystyrene.
David P. Stasse: We have included segment results with and without this recast in the earnings presentation appendix. Turning back to the results, the first quarter adjusted even to $45 million was in line with our previous guidance, but it included $13 million of favorable net timing from rising styrene prices. The European spot styrene price increased by about 60% in the first quarter due to planned and unplanned industry outages.
David P. Stasse: We have included segment results with and without this recast in the earnings presentation appendix.
David P. Stasse: Turning back to the results first quarter adjusted EBITDA of $45 million was in line with our previous guidance.
David P. Stasse: So that included $13 million of favorable net timing from rising styrene prices.
David P. Stasse: The European start spot styrene price increased by about 60% in the first quarter due to planned and unplanned industry outages in this environment, we generally will have favorable on that timing.
David P. Stasse: In this environment, we generally will have favorable net timing and a working capital build. Conversely, when styrene declines, as we expect in late Q2 into Q3, we generally will have unfavorable net timing and a working capital release. Throughout this period, however, our underlying EBITDA x-timing is generally unchanged, as America's styrenics benefit from periods of styrene tightness, and our polystyrene plastic solutions and latex binder segments have a roughly equal and opposite effect as they are net buyers of styrene.
David P. Stasse: And a working capital build Conversely, when styrene declines as we expect in late Q2 into Q3, we generally will have unfavorable net timing and a working capital release.
David P. Stasse: Throughout this period, however, our underlying EBITDA ex timing is generally unchanged as Americas <unk> benefits in periods of styrene tightness.
David P. Stasse: And our polystyrene plastic solutions in latex binders segment.
David P. Stasse: A roughly equal and opposite effect as they are net buyers of styrene.
David P. Stasse: Cash used in operations during the quarter was $66 million, which resulted in a free cash flow of negative $82 million. This resulted in a 61, which included a $61 million increase in trade working capital. Historically, the first quarter of the year includes a working capital build due to seasonal factors. However, this year's build was amplified because of the significant increase in selling prices that I just spoke about.
David P. Stasse: Cash used in operations during the quarter was $66 million, which resulted in free cash flow of negative $82 million. This resulted in a 61. This included a $61 million increase in trade working capital.
David P. Stasse: Historically, the first quarter of the year includes a working capital build due to seasonal factors. However, this year's build was amplified because of the significant increase in styrene prices I just spoke about.
Frank A. Bozich: We expect Q1 to be the lowest free cash flow quarter of the year as our earnings improve and as our working capital normalizes from lower feedstock prices. We ended the quarter with $171 million of cash and $423 million of liquidity, including our undrawn bank facilities. We enhanced our overall liquidity by extending the maturity on our accounts receivable securitization facility by one year to November 2025 and by including new subsidiaries in the facility that helped increase the available borrowing capacity by $36 million quarter over quarter.
David P. Stasse: We expect Q1 to be the lowest free cash flow quarter of the year as our earnings improve and as our working capital normalizes from lower feedstock prices.
Frank A. Bozich: We ended the quarter with $171 million of cash and $423 million of liquidity, including our Undrawn bank facilities.
Frank A. Bozich: We enhanced our overall liquidity by extending the maturity of our on our accounts receivable securitization facility by one year to November 2025.
Frank A. Bozich: And by including New subsidiaries in the facility that helped increase the bar available borrowing capacity by $36 million quarter over quarter.
Frank A. Bozich: Additionally, we are taking other actions such as proactively moderating lower-margin sales to conserve working capital with only a nominal impact on earnings. Liquidity preservation is and will continue to be our top priority as we navigate this cycle downturn. Now, I'll hand the call back over to Frank.
Frank A. Bozich: Additionally, we are taking other actions such as proactively moderating lower margin sales to conserve working capital with only a nominal impact on earnings liquidity preservation is and will continue to be our top priority as we navigate this cycle downturn.
Frank A. Bozich: Now I'll hand, the call back over to Frank.
Frank A. Bozich: Thanks Dave. I'm happy to report that we're seeing the positive earnings momentum from the end of the first quarter continue into the second quarter. Tightness in the styrene and MMA markets supports a continuation of the higher margins that we experienced in the latter part of Q1. This, combined with AmSty's return to normal styrene operations and seasonal increases in height, margin, building and construction, and consumer electronics sales, gives us confidence in a meaningful sequential profitability improvement in the second quarter.
Frank: Thanks, Dave.
Frank A. Bozich: I'm happy to report that we're seeing the positive earnings momentum from the end of the first quarter continue in the second quarter.
Frank A. Bozich: And the styrene and MMA markets supported continuation of the higher margins that we experienced in the latter part of Q1.
Frank A. Bozich: This combined with an <unk> return to norm styrene operation and seasonal increases in height March and building and construction and consumer electronic sales give us confidence in a meaningful sequential profitability improvement in the second quarter. As a result, we expect Q2 adjusted EBITDA of 60 to 75 million.
Frank A. Bozich: As a result, we expect Q2 adjusted EBITDA of $60 to $75 million, including approximately $5 to $10 million of negative timing. Consistent with the outlook we provided last quarter, we still expect Q1 profitability to be the low point of the year. Our base assumption is that demand remains constrained throughout 2024, but EBITDA will be stronger due to tighter markets from destocked supply chains and the restructuring actions that we've taken. While our first quarter results and our second quarter outlook are certainly promising, we remain in one of the most challenging times for the chemical industry in several decades.
Frank A. Bozich: Including.
Frank A. Bozich: Approximately $5 million to $10 million of negative timing.
Frank A. Bozich: Consistent with the outlook, we provided last quarter, we still expect Q1 profitability to be the low point of the year. Our base assumption is that demand remains constrained throughout 2024, but EBITDA will be stronger due to target tighter market markets from destock supply chains and the restriction.
Frank A. Bozich: The actions that we've taken.
Frank A. Bozich: While our first quarter results and our second quarter outlook are certainly promising we remain in one of the most challenging times for the chemical industry in several decades.
Frank A. Bozich: I'm confident that the cost actions we have taken combined with our focus on prioritizing liquidity while improving our sustainable and differentiated materials capabilities will have us well positioned to rise out of this cycle when demand returns to more normal levels. And now, we're happy to take your questions.
Frank A. Bozich: Confident that the cost actions, we have taken combined with our focus on prioritizing liquidity, while improving our sustainable and differentiated materials capabilities will have us well positioned to rise out of this cycle when demand returns to more normal levels and.
Frank A. Bozich: And now we're happy to take your questions.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of David Begleiter from Deutsche Bank. Your line is open.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please.
David L. Begleiter: One on your telephone keypad to raise your hand enjoy Q. If you would like to withdraw your question simply press Star one again.
Operator: Our first question comes from the line of David Begleiter from Deutsche Bank. Your line is open.
David L. Begleiter: Thank you, good morning. Frank, nice comeback or recovery in injury materials. You looked at Q2 with the strength continuing. How are you thinking about Ibada, Ernest's potential in engine materials in Q2?
David L. Begleiter: Thank you good morning.
David L. Begleiter: Nice come back or return.
David L. Begleiter: Andrew materials.
David L. Begleiter: Q2, with this trend continuing how are you thinking about EBITDA earnings potential and engine materials in Q2 here.
Frank A. Bozich: Yeah, so we would expect EM engineered materials to be in the above 20 million EBITDA in Q2. You know, it was at that run rate in March and April, and we don't see the dynamic continuing or changing in any way we've seen it. These are the things that we're really acutely watching from a market standpoint. We're watching what's happening in the polycarbonate, epoxy, and nylon value chains in Asia because those value chains being depressed really constrain the byproduct feedstock that goes into MMA in that region, and then we're also watching the Red Sea.
Frank: Yes, so we would expect.
Frank A. Bozich: Engineered materials to be in.
Frank A. Bozich: Above $20 million EBITDA in Q2.
Frank A. Bozich:
Frank A. Bozich: Is that that run rates in March and April and we don't see that dynamic continuing or changing in any way.
Frank A. Bozich: So.
Frank A. Bozich: And these are the things that were really acutely watching.
Frank A. Bozich: From a market standpoint, we're watching what's happening in the polycarbonate epoxy and nylon value chains in Asia, because as Asia those.
Frank A. Bozich: Those value chains being depressed really constrains the.
Frank A. Bozich: Byproduct feedstock that go into MMA in that region and then we're also watching the Red Sea. So there are certain dynamics that IRA.
Frank A. Bozich: So there are certain dynamics that are out of our control that are influencing the current shortening tightness in North America and Europe, but we don't see any signs right now that would change that dynamic. But the other thing I'm happy to say is that the volume improvement we're seeing in MMA really cuts across all of the segments. MMA volumes are certainly up, but we're also seeing good volume improvement and a good order book in both the resins business, and our surfaces business, as well as rigid compounds that go into consumer electronics as we enter Q2.
Frank A. Bozich: Now Rob of our control that are influencing the curtain current shorten that tightness in North America and Europe, but.
Frank A. Bozich: We don't see any signs right now that would change that dynamic.
Frank A. Bozich: But the other thing I'm happy to say is that the volume improvement we're seeing in MMA.
Frank A. Bozich: Is really cuts across all of.
Frank A. Bozich: The segment's MMA volumes are certainly up but we're also seeing good volume improvement.
Frank A. Bozich: And our good order book in.
Frank A. Bozich: In both the resin our surfaces business as well as.
Frank A. Bozich: Richard compounds that go into consumer electronics as we enter Q2.
Frank A. Bozich: Very good. And given that strong level of earnings in Q2, can you actually grow earnings from that level in the back half of the year, i.e., $20 million per quarter or higher?
Speaker Change: Very good and given that the strong level of earnings in Q2 can you actually grow earnings from that level in the back half of the year I E $20 million per quarter or higher.
Frank A. Bozich: Okay.
Frank A. Bozich: Well, it all really depends on the underlying market demand. Right now, we don't anticipate a significant change in market demand. We're winning; we're winning some new awards.
Speaker Change: Well it all really depends on the underlying market demand right now we don't anticipate a significant change in market demand, we're winning we're winning some new awards, but in our outlook in the back half of the year really depends on how the markets develop so difficult to.
Frank A. Bozich: But, you know, our outlook for the back half of the year really depends on how the markets develop. So difficult to say at this point. And that's why, you know, we've neglected to give full-year guidance, because it's just difficult to say how the markets will develop.
David L. Begleiter: I understand. Thank you very much.
David L. Begleiter: Say at this point and that's why we've neglected to give full year guidance, because it's just difficult to say how the markets will develop.
Speaker Change: Understood. Thank you very much.
Speaker Change: Thank you David.
Matthew Robert Lovseth Blair: Your next question is from the line of Matthew Blair from TPH. Your line is open.
David L. Begleiter: Your next question James from the line of Matthew Blair from Tpa. Your line is open.
Matthew Robert Lovseth Blair: Thank you, and good morning. I had a few questions about AmSty. First, are you able to quantify the impact of the turnaround in Q1? You know, what would that $6 million have looked like if you were not in the turnaround? Two, what kind of interest are you seeing in marketing the AmSty JV? And then could you explain a little bit more about this ownership exit provision? What exactly would happen in early 2025? Would the other half? Let's go back to the other counterparty, CP-CHEM.
Matthew Robert Lovseth Blair: Thank you and good morning.
Matthew Robert Lovseth Blair: Two questions on <unk> first are you able to quantify the impact of the turnaround in Q1.
Matthew Robert Lovseth Blair: What would that 6 million have looked like if you were not in turnaround.
Matthew Robert Lovseth Blair: Two what kind of interest are you seeing in in marketing the <unk> JV and then three could you explain a little bit more about the.
Matthew Robert Lovseth Blair: This ownership exit provision.
Matthew Robert Lovseth Blair: What exactly will happen in early 2025 with the other with the other half.
Matthew Robert Lovseth Blair: Go back to the other counterparty CP Chem.
Frank A. Bozich: So let me take the back half of that question and then I'll let Dave take the first part of it. So we've seen indications of interest from a number of strategic and financial parties in the Amstey asset when we signaled that we would be using this prescriptive JV exit provision. But, you know, we haven't begun actively marketing the asset jointly with our joint venture partner at this point. But, you know, I can say that it's a great asset. It's recognized as one of the best Styrenex assets in the world.
Speaker Change: So let me take the back half of that question and then I'll, let Dave take that.
Dave: The first part of it.
Frank A. Bozich: So we are.
Frank A. Bozich: We've seen indications of interest from a number of strategic and financial parties in Amsterdam.
Frank A. Bozich: Asset when we signaled that we would be using this prescriptive JV exit provision.
Frank A. Bozich: But we havent begun actively marketing the asset jointly with our joint venture partner at this point, but.
Frank A. Bozich: Can say that.
Dave: It's a great asset its recognized as one of the best.
Frank A. Bozich: Stay rennix assets in the world So.
Dave: Im confident we will see interest and a good process when when that begins.
Frank A. Bozich: So I'm confident we will see interest in a good process when that begins. So, you know, The JV exit provisions that are defined under the JV agreement have a number of steps, and we're working through those steps. Ultimately, those steps result in a joint marketing of the asset. You know, there's certain prescriptive elements we need to complete before we get to that point. And we're in the process of doing that. But again, even if those take their own, they are fully exhausted.
Frank A. Bozich: Okay.
Frank A. Bozich: <unk>.
Frank A. Bozich: The JV exit provisions that are defined under the JV agreement have a number of number.
Frank A. Bozich: A number of steps, we're working through those steps ultimately those steps result in.
Frank A. Bozich: A joint Mark a joint marketing of the asset.
Frank A. Bozich: So.
Frank A. Bozich: Okay.
Frank A. Bozich: There is certain prescriptive elements, we need to.
Frank A. Bozich: To complete before we get to that point and we're in the process of doing that but again.
Frank A. Bozich: Even if those take there.
Frank A. Bozich: Those preliminary steps, we're very confident that this will result in the signing of a transaction by early 2025.
Frank A. Bozich: R.
Frank A. Bozich: Our fully exhausted those preliminary steps, we're very confident that this will result in.
Frank A. Bozich: Our signing of the transaction by early 2025.
David P. Stasse: Matthew, related to the first part of your question, the impact on us of the outage, they were out for substantially all of January and February for a planned outage. They have two styrene units, and each one turns around every three to four years, so they often have these turnarounds in the first quarter. The impact to our earnings in the first quarter of this year was probably high, single digits, eight million or so, I'd say, from the turnaround. The reason it's that low is because of styrene.
Frank A. Bozich: Matthew related to the first part of your question.
David P. Stasse: The impact to us of amps of the outage. So they were out for substantially all of January and February for a planned outage. They have to styrene units in each one turns around every three to four years. So there is they often have these turnarounds in the first quarter.
David P. Stasse: <unk> to our earnings in the first quarter of this year was probably high single digits.
David P. Stasse: $8 million or so I'd say from the turnaround. The reason is that low is because styrene.
David P. Stasse: Steyring prices really didn't accelerate, and margins until March. So they were up in March. As you can see, I think we had $6 million in EBITDA in the quarter, and all of that was in March. Um, you know, as we look forward to Q4, we obviously have considerably, considerably better results.
David P. Stasse: Styrene prices really didn't accelerate.
David P. Stasse: And margins.
David P. Stasse: Until March so they they were up in March.
David P. Stasse: As you can see I think we had $6 million in EBITDA in the quarter.
David P. Stasse: And sustained and all of that was in March.
David P. Stasse: As we look forward to Q4, we obviously considerably.
David P. Stasse: I mean, you know, I think our equity income from AmSci will probably be $20 million or higher in the second quarter because of the, you know, high margins that we continue to see. But related to Styrene, kind of a, you know, a tangential point I'll just say is in my prepared remarks earlier, I did say we do expect Styrene prices to go up, you know, these averages are starting to end as unions are coming back online as we speak that are out.
David P. Stasse: Considerably better results I mean.
David P. Stasse: I think I think our equity income from <unk> side will probably be $20 million or higher.
David P. Stasse: In the second quarter because of the.
David P. Stasse: High margins that we continue to see.
David P. Stasse: But related to styrene kind of tangential point I'd, just say is in may.
David P. Stasse: Prepared remarks earlier I did say, we do expect styrene prices you know these these averages are starting to and as units are coming back online as we speak that are out.
David P. Stasse: And we do expect a.
David P. Stasse: And we do expect a fairly significant decline in styrene prices late in Q2 and into Q3. The working capital benefit for us associated with that will probably be a Q3 item for us. And we obviously, you know, for liquidity purposes, look forward to that.
David P. Stasse: Fairly significant decline in styrene prices late in Q2 and into Q3, the working capital benefit for us associated that will probably be a Q3 item.
David P. Stasse: For us.
David P. Stasse: For liquidity purposes look forward to that.
David P. Stasse: Any net timing assumptions in your Q2 guidance? We did see European dining contracts in May come down, although the Q2 average is still well above Q1, so could you help us think about the potential net timing impact in Q2?
David P. Stasse: Good and then.
David P. Stasse: Net timing assumption in your Q2 guidance, we did see European signing contracts in May come down although the Q2 average is still well above.
David P. Stasse: Q1.
David P. Stasse: If you could help us think about the.
David P. Stasse: Any impact in Q2 that would be great.
David P. Stasse: Yeah, so embedded in the guidance range that we gave Matthew and Frank mentioned on the call of 60 to 75 million, embedded in that we believe net timing will be negative 5 to negative 10 in the quarter. So that's embedded in the guidance. The reason, you know, working capital as that works its way through your balance sheet is, you know, there's a month or two lag, really, between the P&L impact and the recognition on your balance sheet of the lower working capital. So that's why I said it was probably the working capital benefit would be in Q3, but the P&L impact would be in Q2.
David P. Stasse: Yeah, I think it's so embedded in the guy.
David P. Stasse: Yeah.
David P. Stasse: Embedded in the guidance range that we gave Matthew that Frank mentioned on the call of 60 to 75 million embedded in that we believe that timing will be negative five to negative 10 in the quarter. So that's embedded in the guidance. The reason the working capital as that works its way through your balance sheet.
David P. Stasse: A month or two lag really.
David P. Stasse: Between that.
David P. Stasse: Between the P&L impact and the recognition in your balance sheet at the lower working capital. So that's why I said, it's probably the working capital benefit would be in Q3, but the P&L impact.
David P. Stasse: In Q2.
Speaker Change: Great. Thank you.
David P. Stasse: Okay.
Hassan Ijaz Ahmed: Your next question comes from the line of Hassan Ahmed from Alembic Global Advisors. Your line is open. Good morning, Frank and Dave.
David P. Stasse: Your next question comes from the line of Hassan Ahmed from Alembic Global Advisors. Your line is open.
Hassan Ijaz Ahmed: Morning, Frank and Dave. You know, I know it's early days, and you know, some positive sort of demand signs are emerging. And I understand the sort of sensitivities around, you know, maybe not really sort of divulging 2024 guidance. But I mean, look, you guys did around 154 million in EBITDA in 2023. Right. And from the sounds of it, the restructuring benefits certainly seem to be running at levels above 100 million.
Hassan Ijaz Ahmed: Good morning, Frank and Dave.
Hassan Ijaz Ahmed: I know it's early days.
Hassan Ijaz Ahmed: Does it get sort of demand signs emerging.
Hassan Ijaz Ahmed: I understand sort of sensitivities around.
Speaker Change: Maybe not really.
Hassan Ijaz Ahmed: Sort of divulging, a 2024 guidance, but.
Hassan Ijaz Ahmed: I mean look you guys did around $154 million in EBITDA in 2023 right.
Hassan Ijaz Ahmed: And from the sounds of fate, the restructuring benefits certainly seem to be run rating at levels above $100 million right. So I mean straight up that's north of $250 million for 2024, EBITDA without even sort of factoring in some of these demand improvements that you guys are talking about.
Hassan Ijaz Ahmed: Right. So, straight up, that's north of 250 million for 2024 EBITDA without even sort of factoring in some of these demand improvements that you guys are talking about and seeing. Am I sort of thinking about things the right way, as it pertains to 2024?
Hassan Ijaz Ahmed: And seeing.
Hassan Ijaz Ahmed: Am I sort of thinking about things the right way.
Hassan Ijaz Ahmed: As it pertains to 'twenty four.
Hassan Ijaz Ahmed: Okay.
Frank A. Bozich: Yeah, so thanks, Hassan. The Look, I think what we've assumed is that year-over-year volume growth is going to be in the low single-digit range for the remainder of the year. And our volume will, you know, will be similar. The volume dynamic will be similar to 2023. But we are confident that we'll deliver the $100 million in year-over-year improvement that we anticipated. But will we get it exactly in the same buckets that we thought we would?
Speaker Change: Yes, so thanks Hassan.
Frank A. Bozich: Yeah.
Frank A. Bozich: Look I think what we've assumed is that.
Frank A. Bozich: Year over year volume growth.
Frank A. Bozich: It's going to be in the low single digit range for the remainder of the year in our volume will.
Frank A. Bozich: We will be similar the volume dynamic will be similar to 2023, but we are confident we will deliver the $100 million.
Frank A. Bozich: Year over year improvement.
Speaker Change: We anticipate it will.
Frank A. Bozich: We get it exactly in the same buckets that we thought we would probably not but I think.
Frank A. Bozich: Probably not. But I think... We're confident in the $100 million, and we're encouraged by the start of the year, but it's very difficult to anticipate how the second half of the year and market demand will develop during the second half of the year. So, I would just leave it at that.
Frank A. Bozich: We're confident in the $100 million and.
Frank A. Bozich: We're encouraged by the start to the year, but very difficult.
Frank A. Bozich: To anticipate how the second half of the year or in the market the market demand will develop during the second half of the year or so I would just leave it at that.
David P. Stasse: Hassan, let me add a couple of things to that, if you will please. You know, in Q1, we clearly had to step up in volume. Our volumes were up sequentially by about 12% in the first quarter versus the fourth quarter. And that was very broad-based and in all segments.
Frank A. Bozich: Hassan Let me, let me add a couple of things that if you will please so.
David P. Stasse: In Q1, we clearly had a step up in volume our volumes were up sequentially about 12% in the first quarter versus the fourth quarter and that was very broad based and in all segments, but on a year over year basis, it's up about 1%. So I would attribute most of the Q4 to Q1 transition that seasonality.
David P. Stasse: But on a year-over-year basis, you know, it's up about 1%. So I attribute most of the Q4 to Q1 transition to seasonality. So, as Frank said, I think we're very comfortable with, you know, delivering the $100 million. You know, even in a low-growth environment like we've assumed, we're managing the business based on the assumption that we continue to have, you know, constrained growth and low single-digit year-over-year growth.
David P. Stasse: So as Frank said I think we're very comfortable with it.
David P. Stasse: With that.
David P. Stasse: Delivering the $100 million.
David P. Stasse: Even in a low growth environment lately the assumed.
David P. Stasse: We're managing the business.
David P. Stasse: Based on the assumption that we continue to have.
David P. Stasse: Constrained growth in low single digit year over year growth.
David P. Stasse: And, you know, we're clearly not going to build any inventory for growth unless we see clear signs in the order book that that growth is there. So I just wanted to give you that color, you know.
David P. Stasse: And.
David P. Stasse: We're clearly not going to build any inventory for growth unless we see clear signs in the order book.
David P. Stasse: But that growth is there so.
David P. Stasse: So I just wanted to give you that color.
David P. Stasse: The kind of recovery we're talking about here for Q2 numbers is not really a demand recovery we're seeing yet; it's more of a margin recovery.
David P. Stasse: The everything kind of we're talking about here for Q2.
David P. Stasse: Numbers is.
David P. Stasse: Continues.
David P. Stasse: That it's not really a demand recovery, we're seeing yet it's more of a margin recovery.
Hassan Ijaz Ahmed: Very helpful. And as a follow-up, on the MMA side of things, can you talk a bit about what you guys are seeing in terms of trade patterns over there? Because I know, you know, a couple of quarters ago, we were all sort of seeing that arbitrage opportunity between sort of MMA out in Asia and Europe, and you guys were sort of talking about more and more Asian products sort of going into Europe. So, you know, if you could just talk a bit about whether sort of those trade patterns have normalized, and that arbitrage opportunity is closed.
Speaker Change: Very helpful.
David P. Stasse: And as a follow up on the M&A side of things can you talk a bit about what youre seeing in terms of trade back until the debt because I know a couple of quarters ago.
Hassan Ijaz Ahmed: We were all sort of seeing that arbitrage opportunity between sort of M&A out in Asia, and Europe, and you guys were sort of talking about more and more Asian product sort of going into into Europe. So if you could just talk a bit about.
Hassan Ijaz Ahmed: Whether that sort of those trade patterns have normalized and arbitrage opportunities.
Frank A. Bozich: So it's. It's certainly been reduced. And the Red Sea and the crisis, as well as the extended lead times from Asia into Europe have reduced the ability to ship this reactive monomer from Asia. But more importantly, the weakness in epoxy, polycarbonate, and Nylon Demand in China really constrains phenol production, whose byproduct is acetone, which is a key building block for MMA via the C3 route, and it also affects hydrogen cyanide, HCN is the byproduct, So that availability is reduced.
Hassan Ijaz Ahmed: So.
Hassan Ijaz Ahmed: It's.
Frank A. Bozich: It's certainly reduced and the Red sea in the <unk>.
Frank A. Bozich: Crisis as well as the extended.
Frank A. Bozich: Lead times from Asia into Europe have reduced the ability to ship this reactive monomer from.
Frank A. Bozich: From Asia, but more importantly, the weakness in the <unk> polycarbonate.
Frank A. Bozich: Nylon demand.
Frank A. Bozich: In China.
Frank A. Bozich: Really constrains phenol production, which the byproduct of phenol production as acetone, which is a key building block.
Frank A. Bozich: For MMA.
Frank A. Bozich: Be it the C III route and it also affects H.
Frank A. Bozich: Hydrogen cyanide HCN is the byproduct for.
Frank A. Bozich: One of the byproducts in the nylon chain. So that availability is reduced we also are seeing.
Frank A. Bozich: We also are seeing Butadiene C4 production significantly reduced in Asia because of the slowness in that market. So these factors are constraining the ability of Chinese MMA producers, and so they're actually running at greatly reduced rates.
Frank A. Bozich: Our.
Frank A. Bozich: Butadiene.
Frank A. Bozich: C four production significantly reduced in Asia because of the slowness in that market. So these factors are constraining the ability of the Chinese MMA production and so they are actually running a greatly reduced rates.
Frank A. Bozich: So the combination of those two things is creating the current dynamic. Now, while things are better, and we see slight improvements or signals of improvement in China broadly, those specific value chains we see as currently are still challenged. And so, you know, we don't anticipate a significant change in that. If you look at Europe and North America, those markets for MMA are currently net short. You see a recovery in architectural coatings that have tightened the market. So those factors combined have made it a much more [inaudible] you know, a higher-margin MMA market, and we've obviously benefited from that. So I am very good.
Frank A. Bozich: The combination of those two things are creating the current dynamic now.
Frank A. Bozich: Well things are better and we see slight improvements are signals of improvement in China broadly those specific value change. We see is currently still challenged.
Frank A. Bozich: And so.
Frank A. Bozich: We don't anticipate a significant change in that.
Frank A. Bozich: You look at Europe, and North America those markets for MMA are net short currently.
Frank A. Bozich: You see a recovery in architectural coatings that tightened the market up so those factors combined have made it a much more.
Frank A. Bozich: Yeah.
Frank A. Bozich: Higher margin MMA market and it's obviously.
Frank A. Bozich: Obviously benefited from that.
Frank A. Bozich: So I hope that's helpful. Very much so. Thank you so much, Frank, and thanks again, David.
Speaker Change: That's helpful very much so thank you so much Frank and thanks again, Dave.
Speaker Change: Thanks Hassan.
Kevin Estock: Your next question comes from a line of Kevin Estock from Jeffreys. Your line is open.
Frank A. Bozich: Your next question comes from the line of Kevin <unk> from Jefferies. Your line is open.
Kevin Estock: Hey, thank you for taking my questions. I guess my first question just had to do with mixing. I guess curious how you'd characterize that, you know, as volumes sort of rise, would your mix improve, and would you benefit from basically higher-margin product sales, or would you expect there to be a drag on mix? Just, you know, wanted to get some sense of how it would evolve in Q2 and Q3. Thank you.
Kevin Estock: Hey, Thank you for taking my questions.
Kevin Estock: I guess my first question just has to do with mix I guess curious how you'd characterize that as volumes kind of rise would your mixed group.
Kevin Estock: Would you benefit can basically higher margin product sales.
Kevin Estock: Or would you expect there to be a drag on mix.
Kevin Estock: Wanted to get some sense of how it evolved in Q2 and Q3. Thank you.
Frank A. Bozich: Sure. So yeah, great question. And so while we anticipate a low single-digit volume improvement year over year in 2024, we do see a much more favorable mix, and so EM growth will be better than the broader portfolio. And so, you know, EM resins are rigid compounds in the engineered materials that go into consumer electronics, as well as our surfaces business, which is our highest margin application in the company will grow faster than low single digits.
Speaker Change: Sure. So yes, great question.
Frank A. Bozich: So while we anticipate low single digit volume improvement year over year end 2024, we do see a much more favorable mix and so.
Frank A. Bozich: Yes.
Frank A. Bozich: Growth will be.
Frank A. Bozich: Better.
Frank A. Bozich: And then the broader portfolio.
Frank A. Bozich: And so that.
Frank A. Bozich: M resins are Richard compounds in engineered materials that go into consumer electronics.
Frank A. Bozich: As well as our surfaces business, which are higher margin applications and the company will grow faster than low single digits and.
Frank A. Bozich: And, you know, our lowest growth area, actually, we're seeing negative growth in polystyrene, which would be our, you know, one of the lower margin applications. So we will enjoy a favorable mix during the course of the year if based on the current assumptions that we have. The other thing I did want to point out that, you know, in Q1, as Dave said, we had a 12% sequential improvement in volume compared to Q4, but we also did see a lot of volume growth, 15% volume growth in the Asia Pacific region, but all of that was concentrated in paper. We don't see that as that was really driven by some unique industry events that we don't see continuing. So those are the things that we're But yes, a favorable mix through the full year with EM applications growing better than the rest of the portfolio. Okay, I got it. Thank you.
Frank A. Bozich: Our lowest growth area actually we are seeing negative growth in polystyrene, which would be our.
Frank A. Bozich: One of the lower margin applications. So we will enjoy a favorable mix.
Frank A. Bozich: During the course of the year if based on the current assumptions that we have the other thing I did want to point out that.
Frank A. Bozich: In Q1, as Dave said, we had a 12%.
Frank A. Bozich: Sequential improvement in volume compared to Q4, but also we did see a lot of volume growth of 15% volume growth in the Asia Pacific, but all of that was concentrated in paper and board for latex in Asia, which.
Frank A. Bozich: We don't see that as that was really driven by some.
Frank A. Bozich: Unique industry events that we don't see continuing.
Frank A. Bozich: So those are the things that we're balancing but yes favorable mix through the full year with apt.
Frank A. Bozich: Applications.
Frank A. Bozich: <unk> better than the rest of the portfolio.
Kevin Estock: Okay, got it. Thank you. And apologies if this question has been asked before, but my service has been a little spotty on this call. I'm just wondering, I guess, where you're still seeing these dockings and guessing which value chain specifically? Thank you.
Speaker Change: Okay got it thank you.
Speaker Change: And apologies. If this question has been asked but like managed services has been a little spotty on this call just wondering.
Speaker Change: I guess.
Speaker Change: We're still seeing destocking in guessing which value chain specifically thank you.
Kevin Estock: Okay.
Kevin Estock: Yes.
Frank A. Bozich: The only place where we're seeing some, you know, where we would see some signs of destocking is in the downstream building and construction related to polystyrene, you know, EPS, and XPS applications. So those are the only areas where we currently believe in Q1, and that's specific to Europe and North America.
Speaker Change: The only place where we're seeing some.
Frank A. Bozich: Okay.
Frank A. Bozich: Where we would see some signs of Destocking is in downstream building a construction related to polystyrene.
Frank A. Bozich: EPS xps applications. So those are the only areas where we currently believe in Q1 or is this specific to Europe and North America.
Kevin Estock: OK, great. Thank you very much.
Speaker Change: Okay, great. Thank you very much.
Ed Brucker: Your next question comes from the line of Ed Brucker from Berkeley. Your line is open.
Kevin Estock: Your next question comes from the line of Ed Brucker from Barclays. Your line is open.
Ed Brucker: Hey, thanks for the call this morning. My question is, my first question is on just demand.
Ed Brucker: Hey, Thanks for the call this morning.
Ed Brucker: My question is my first question is on just <unk>.
Ed Brucker: You mentioned that you saw.
Ed Brucker: Bill.
Ed Brucker: Not near normal levels, I guess, how far below.
Ed Brucker: Normal levels are you still.
Ed Brucker: You could do.
Ed Brucker: <unk> business and for example, like engineered materials business.
Ed Brucker: You said, a $20 million if you run rate that is that kind of normal demand now or is there upside if we get a.
Ed Brucker: Hi.
Ed Brucker: Demand to return.
Ed Brucker: Yes.
Ed Brucker: In the earnings presentation, there is a pretty good breakdown of the trade volumes by segment and what I would tell you is we're about 20% below.
Frank A. Bozich: You mentioned that you're still not near normal levels. I guess how far below normal levels are you still? Do it, you know, broadly or by business. And for example, like, you know, engineering materials business. You said 20 million. If you run at that rate, is that kind of normal demand now? Or is there upside if we get, you know, demand to return?
Frank A. Bozich: The historical run rate volumes for the whole portfolio.
Frank A. Bozich: So, you know, in the earnings presentation, there's a pretty good breakdown of the trade volumes by segment. And what I would tell you is, you know, we're about 20% below the historical run rate volumes for the whole portfolio as it exists today compared to sort of normal demand over the previous cycle, you know, even the previous decade. And so, and what I would tell you too, with the current mix in the portfolio, that for every 10% improvement, That's approximately a $25 million per quarter EBITDA impact, so, you know, or $100 million per year for every 10% recovery. So if we get halfway back to normal volumes, you know, we would expect that to deliver, you know, an additional $25 million a quarter in EBITDA, in aggregate.
Frank A. Bozich: As it exists today compared to sort of normal demand over the.
Frank A. Bozich: The previous cycle, even the previous decade.
Frank A. Bozich: And so what and what I would tell you too is with the current mix in the portfolio that for every 10% improvement.
Frank A. Bozich: Approximately $25 million per quarter.
Frank A. Bozich: It impacts so our $100 million per year for every 10% recovery. So if we get halfway back to normal volumes.
Frank A. Bozich: We would expect that to deliver an additional $25 million a quarter in EBITDA.
Frank A. Bozich: In aggregate.
Ed Brucker: Got it. That's helpful. Thank you. My second question, the $150 million stub of the 2025 outstanding, I guess. What was the reasoning behind leaving that outstanding? And then what do you, or what are the plans to address that maturity, you know, over the next, or I guess before it goes current?
Speaker Change: Got it that's helpful. Thank you.
Ed Brucker: My second question.
Ed Brucker: The $150 million stab of the 2020 Five's outstanding I guess.
Ed Brucker: What was the reasoning behind leaving that outstanding and then what do you or what are the plans to address that maturity.
Ed Brucker: Over the next or I guess before it goes correct.
David P. Stasse: The reason behind leaving was really covenant. It was covenant, for covenant reasons; we left that.
Ed Brucker: The reason the reason behind leaving it was really covenant was covenant for covenant reasons, we left that.
David P. Stasse: We did a transaction in September of last year, as you know, and the sizing of that transaction was constrained by covenant. So look, we clearly had the cash and liquidity to address that, kind of less concerned about it. I don't view it going current as necessarily a constraining factor as to when we need to address that. I mean, it also happens to be our lowest cost of debt right now.
David P. Stasse: We did a transaction in September of last year as Youre aware.
David P. Stasse: And the sizing of that transaction was constrained by covenants so look.
David P. Stasse: We clearly have the cash and liquidity to address that.
David P. Stasse: Im.
David P. Stasse: Kind of less concerned if I don't view it billing current as a.
David P. Stasse: Necessarily as a constraining factor as to when we need to address that I mean, it also happens to be our lowest cost of debt right. Now so look our plans are.
David P. Stasse: So, look, our plans are, you know, to either pay it off or refinance it in a transaction. We do have a number of divested, you know, sale processes underway. I mean, that could bring in incremental proceeds. I think, as Frank mentioned in his prepared remarks, the Amstead sale, the net proceeds from that would already be earmarked for the most recently issued debt, but other asset sales could be used for others. So, again, I think we're comfortable with our liquidity and our ability to handle that maturity but don't feel compelled to do that before it goes current.
David P. Stasse: To either pay it off or.
David P. Stasse: Or refinance it in a transaction.
David P. Stasse: We do have a number of divested.
David P. Stasse: Sale.
David P. Stasse: Processes underway that could bring in incremental proceeds.
David P. Stasse: As Frank mentioned in his prepared remarks, the <unk> sale.
David P. Stasse: The net proceeds from that already would be earmarked to the most recently issued debt, but other asset sales could be used for other so again I think we were comfortable with our liquidity and our ability to.
David P. Stasse: To handle that maturity.
David P. Stasse: But don't feel compelled to do that before it goes current.
Frank A. Bozich: Got it. Just one last one. I noticed the $8K retention bonus that you put out at the end of February. What was the reasoning behind those retention bonuses?
Speaker Change: Got it and just one last one I noticed the 8-K, a retention bonus that you put out at the end of February what was the reasoning behind the strategic alliances.
Roger Spitz: Yeah, so, um... We had several members of the team that did exceptional work navigating through the deepest part of the cycle. And, and at the same time, you know, we wanted to create a strong incentive and recognition retention for those efforts. And that's what it reflects.
Speaker Change: Yes so.
Roger Spitz: Yeah.
Roger Spitz: We had several members of the team did exceptional work navigating through the.
Roger Spitz: Deepest part of the cycle and.
Speaker Change: And at the same time.
Roger Spitz: We wanted to create.
Roger Spitz: A strong incentive and recognition retention for those efforts and that's what it reflects.
Frank A. Bozich: Your next question comes from the line of Roger Spitz from Bank of America. Your line is open.
Roger Spitz: Your next question comes from the line of Roger Spitz from Bank of America Your.
Roger Spitz: Thanks very much. Good morning. Regarding Amstey, just to see if I understood correctly, you're saying the preliminary steps you're having to take before you start marketing this will likely result in both you and CP Chemical working together to sell all of Amstey. Did I hear that correctly, or did I misinterpret it?
Roger Spitz: Your line is open.
Roger Spitz: Thanks, very much good morning.
Roger Spitz: Regarding am side just to.
Roger Spitz: If I understood correctly, you are saying that preliminary steps, you're having to take before you start marketing this.
Roger Spitz: We will likely result in both you and CP chemical working together to sell all of <unk> did I hear that correctly or did I misinterpret that.
Frank A. Bozich: No, these steps are prescriptive in their precursory to a joint marketing effort, but it will certainly result in a joint marketing of the asset. It's just that we have to go through these prescriptive steps.
Roger Spitz: These steps are prescriptive in there.
Frank A. Bozich: Cursory to a joint marketing effort, but it will.
Frank A. Bozich: Certainly results in a joint marketing of the asset.
Frank A. Bozich: Okay. So we have to go through these prescriptive steps.
Speaker Change: Got it.
Roger Spitz: The thinking is that AmSty will be sold, both parties will sell their 50% stakes in AmSy, and someone is going to be buying all of AmSy.
Frank A. Bozich: The thing is <unk> will be sold both parties will sell their 50% Stakes in Ham sie someone is going to be buying all of <unk>.
Roger Spitz: Correct.
Frank A. Bozich: Yeah, I'm sorry. Can you repeat the question? I missed it? You are going to be marking all of Amstey. Somebody, a potential buyer, will be looking to buy all of Amstey, not just yours...
Speaker Change: Yes, I am sorry can you repeat the question I missed.
Frank A. Bozich: You were going to be marketing all of Amstar somebody a potential buyer, we will be looking to buy all of Ams tied not just Europe at 2%.
Frank A. Bozich: That is correct okay.
Operator: Alright, that's it. Thank you very much. And we have now concluded our question and answer session. This concludes today's conference call. We thank you for your participation. You may now disconnect.
Speaker Change: That's all thank you very much.
Operator: And we have now concluded our question and answer session. This concludes today's conference call. We thank you for your participation you may now disconnect.
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Speaker Change: Please wait the conference will begin shortly.
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