Q2 2024 AdvanSix Inc Earnings Call
Operator: Good day, and welcome to the AdvanSix second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists 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 one on your 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, VP of Investor Relations and Treasurer. Please go ahead.
Operator: Good day and welcome to the Advance 6 second quarter 2020 for earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.
Speaker Change: Good day and welcome to the AdvanSix 2nd 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.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded.
Operator: Please note this event is being recorded.
Adam Kressel: I would now like to turn the conference over to Adam Kressel, VP Investor Relations and Treasurer. Please go ahead.
Speaker Change: I would now like to turn the conference over to Adam Kressel, VP Investor Relations and Treasurer. Please go ahead.
Adam Kressel: Thank you, Chad. Good morning, and welcome to AdvanSix's second 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, Chad. Good morning and welcome to Advance 6 second quarter 2020 for earnings conference call. With me here today are President and CEO Erin Kane and Senior Vice President and CFO Michael Preston. This call on webcast, including any non-GAAP reconciliation, 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. Those elements can change, and the actual results may differ materially from those projected, and we ask that you consider them in that light.
Chad: Thank you, Chad. Good morning and welcome to AdvanSix's second quarter 2024 earnings conference call. With me here today are President and CEO Erin Kane and Senior Vice President and CFO Michael Preston.
Chad: This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com.
Speaker Change: 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.
Speaker Change: Those elements can change, and the actual results could differ materially from those projected, and we ask that you consider them in that light.
Adam Kressel: 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 and subsequent filings of the SEC.
Speaker Change: 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.
Adam Kressel: This morning we will review our financial results for the second quarter 2024 and share our outlook for our key product line and end markets.
Speaker Change: This morning we will review our financial results for the second quarter 2024 and share our outlook for our key product lines and end markets. 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.
Adam Kressel: Finally, we will leave time for your questions at the end.
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 second quarter of 2024 and share our outlook for our key product lines and end markets. 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 Kane: So with that, I'll turn the call over to Advance Six as President and CEO, Erin Kane. Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, we delivered a strong second quarter with year-to-year improvement in sales, earnings, margin rate, and cash flow, and a return to targeted utilization rates across our integrated value chain. This performance reflects our collective organization focused execution to capture commercial benefits and the advantages of our business model and diverse product portfolio. We realize a 6% improvement in sales, reflecting higher domestic nylon volumes.
Erin Kane: Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call. As you saw in our press release, we delivered a strong second quarter with year-over-year improvement in sales, earnings, margin rate, and cash flow and a return to targeted utilization rates across our integrated value chain. This performance reflects our collective organization's focused execution to capture commercial benefits and the advantages of our business model and diverse product portfolio.
Aaron Kane: Thanks, Adam, and good morning, everyone. We appreciate you joining us here today for our quarterly call.
Aaron Kane: As you saw in our press release, we delivered a strong second quarter, with year-over-year improvement in sales, earnings, margin rate, and cash flow, and a return to targeted utilization rates across our integrated value chain.
Aaron Kane: This performance reflects our collective organization's focused execution to capture commercial benefits and the advantages of our business model and diverse product portfolio.
Erin Kane: We realized a 6% improvement in sales, reflecting higher domestic nylon volumes, a robust domestic application season for ammonium sulfate, and continued strength in acetone prices. Our disciplined capital execution continued to support long-term performance and growth, including SUSTAIN, our sustainable U.S. phosphate to accelerate an increased nutrition program. Overall, our team delivered strong operational performance, including year-record production of granular ammonium phosphate. Additionally, we returned $8 million of cash to shareholders through dividends and repurchases.
Aaron Kane: We realized a 6% improvement in sales reflecting higher domestic nylon volumes, a robust domestic application season for ammonium sulfate, and continued strength in acetone pricing.
Erin Kane: A robust domestic application season for ammonium sulfate and continued strength and acetone pricing. Our discipline capital execution continues to support long-term performance and growth, including sustained. Our Sustainable U.S. sulfate to accelerate increased nutrition program. Overall, our team delivered strong operational performance, including year record production of granular ammonium sulfate. Additionally, we return to $8 million of cash to shareholders through dividends and repurchases. Looking ahead into the second half, we continue to have several year-to-year tailwinds supporting a favorable earnings outlook including. It continued tight global acetone supply and demand environment. Modestly improving North American nylon industry spreads, and we started the third quarter with a robust ammonium sulfate still program and higher pricing levels compared to the prior year.
Aaron Kane: Our disciplined capital execution continued to support long-term performance and growth, including SUSTAIN, our sustainable U.S. soft bait to accelerate increased nutrition program.
Aaron Kane: Overall, our team delivered strong operational performance, including year-record production of granular ammonium phosphate.
Aaron Kane: Additionally, we returned $8 million of cash to shareholders through dividends and repurchases.
Erin Kane: Looking ahead into the second half, we continue to have several year-over-year tailwinds supporting a favorable earnings outlook, including a Continued Tight Global Acetone Supply and Demand Environment, and a modestly improving North American Island Industry Spread. Additionally, we started the third quarter with a robust ammonium sulfate fill program at higher pricing levels compared to the prior year. We are highly focused on delivering the right outcomes for our stakeholders by driving superior operational and commercial performance to meet the evolving needs of our customers, building capabilities to strengthen our innovation and portfolio resiliency, and executing against a disciplined capital deployment framework. We continue to positively position the enterprise to fuel future earnings and cash flow performance in support of robust total shareholder returns. Let me now turn the call over to Mike.
Aaron Kane: Looking ahead into the second half, we continue to have several year-over-year tailwinds supporting a favorable earnings outlook, including a continued tight global acetone supply and demand environment,
Aaron Kane: Modestly Improving North American Nylon Industry Spreads. And we started the third quarter with a robust ammonium sulfate fill program at higher pricing levels compared to the prior year.
Erin Kane: We are highly focused on delivering the right outcomes for our stakeholders by driving superior operational and commercial performance to meet the volume needs of our customers, building capabilities to strengthen our innovation and portfolio resiliency, and executing against the disciplined capital deployment framework. We continue to posit a pre-position the enterprise to fuel future earnings and cash flow performance in support of robust total share of our returns.
Aaron Kane: We are highly focused on delivering the right outcomes for our stakeholders by driving superior operational and commercial performance to meet the evolving needs of our customers,
Aaron Kane: Building capabilities to strengthen our innovation and portfolio resiliency, and executing against a disciplined capital deployment framework. We continue to positively position the enterprise to fuel future earnings and cash flow performance in support of robust total shareholder returns.
Michael Preston: Let me now turn the call over to Mike. Okay, thanks Erin, and good morning everyone. I'm now on slide four where I will provide a summary of the second quarter of 2024 financials and year-to-year performance. Higher sales of nylon and ammonium sulfate due to favorable North American supply and demand conditions and continued strength in that stone pricing drove favorable financial results. We saw a 6% increase in sales, 5% from increased volume and 1% from net pricing, which converted to a 19% increase in adjusted EBITDA of 78 million, and a 24% increase in adjusted earnings per share of $1.55.
Michael Preston: Okay, thanks, Erin, and good morning, everyone. I'm now on slide four, where I will provide a summary of the second quarter 2024 financials and year-over-year performance. Higher sales of nylon and ammonium sulfate due to favorable North American supply and demand conditions and continued strength in that stone pricing drove favorable financial results. We saw a 6% increase in sales, 5% from increased volume, and 1% from net pricing, which converted to a 19% increase in adjusted EBITDA of $78 million and a 24% increase in adjusted earnings per share of $1.55.
Aaron Kane: Let me now turn the call over to Mike. Okay, thanks, Erin, and good morning, everyone. I'm now on slide four, where I will provide a summary of the second quarter 2024 financials and year-over-year performance.
Mike: Higher sales of nylon and ammonium sulfate due to favorable North American supply and demand conditions and continued strength in that stone pricing drove favorable financial results.
Mike: We saw a 6% increase in sales, 5% from increased volume, and 1% from net pricing, which converted to a 19% increase in adjusted EBITDA of $78 million and a 24% increase in adjusted earnings per share of $1.55.
Michael Preston: Free cash flow was $17 million in the quarter, up 6%. Cash flow from operations of 50 million increased 15 million, primarily due to higher net income and favorable impact of changes in working capital.
Michael Preston: Free cash flow was $17 million in the quarter, up 6%. Cash flow from operations of $50 million increased $15 million, primarily due to higher net income and the favorable impact of changes in working capital. Capital expenditures of $33 million in the quarter increased $14 million, reflecting our planned increased spend on maintenance and enterprise programs. Now, let's turn to slide five.
Mike: Free cash flow was $17 million in the quarter, up 6%. Cash flow from operations of $50 million increased $15 million, primarily due to higher net income and the favorable impact of changes in working capital.
Michael Preston: Capital expenditures of $33 million in the quarter increased $14 million, reflecting our planned increased spend on maintenance and enterprise programs. Now let's turn to slide five. Here we highlight the key drivers of our second quarter adjusted EBITDA performance sequentially from the first quarter of 2024. Overall, the quarter can be characterized by our team's ability to both capture the benefits of commercial tailings while driving a return to robust operational performance. The absence of the first quarter one-time impact associated with our Frankfurt site resulted in a $27 million benefit sequentially. Titan North American supply and demand conditions across each of our product lines supported a $19 million improvement in pricing of raw materials and a $21 million benefit in volume and sales mix.
Mike: Capital expenditures of $33 million in the quarter increased $14 million, reflecting our planned increased spend on maintenance and enterprise programs.
Michael Preston: Here we highlight the key drivers of our second quarter adjusted EBITDA performance sequentially from the first quarter of 2024. Overall, the quarter can be characterized by our team's ability to both capture the benefits of commercial tailwinds while driving a return to a robust operational performance. The absence of the first quarter one-time impact associated with our Frankfurt site resulted in a $27 million benefit sequentially.
Mike: Now let's turn to slide five.
Mike: Here we highlight the key drivers of our second quarter adjusted EBITDA performance sequentially from the first quarter of 2024.
Mike: Overall, the quarter can be characterized by our team's ability to both capture the benefits of commercial tailwinds while driving a return to a robust operational performance.
Mike: The absence of the first quarter one-time impact associated with our Frankfort site resulted in a 27 million dollar benefit sequentially.
Michael Preston: Tighter North American supply and demand conditions across each of our product lines supported a $19 million improvement in pricing over raw materials and a $21 million benefit in volume and sales mix. As expected, the ammonium sulfate price net of natural gas and sulfur costs was up sequentially as prices and demand seasonally shrank. Plan costs and other items were approximately $10 million favorable, reflecting strong operational performance and lower plant spend, including a $2 million reduction in planned plant turnaround costs. Now, let's turn to slide 6.
Mike: Titan North American supply and demand conditions across each of our product lines supported a 19 million dollar improvement in pricing over raw materials and a 21 million dollar benefit in volume and sales mix.
Michael Preston: As expected, ammonium sulfate price net of natural gas and sulfur costs was up sequentially as prices and demand seasonally strengthened. Plan costs and other items were approximately $10 million favorable, reflecting strong operational performance and lower planned spend, including a $2 million reduction in planned turnaround costs.
Mike: As expected, ammonium sulfate price net of natural gas and sulfur costs was up sequentially as prices and demand seasonally strengthened.
Mike: Plant costs and other items were approximately $10 million favorable, reflecting strong operational performance and lower plant spend, including a $2 million reduction in planned plant turnaround costs.
Michael Preston: Let's turn to slide six. Everyone will dive further into each of our key product lines in a moment, but here on slide six, we've shown our typical industry pricing charts to provide further context on the market dynamic system's quarter. For nylon, global pricing remained relatively stable sequentially, but declines in Asia offset by improved North American spreads on tighter regional supply amid stable and market demand. In the fertilizer space, Cornbelt nitrogen pricing saw a reduction overall in the second quarter relative to the first. In contrast, ammonium sulfate price strengthened in the quarter, with industry cornbelt prices up 25% sequentially, with continued sulfur demand growth and reduced supply in North America.
Michael Preston: Erin will dive further into each of our key product lines in a moment, but here on slide six, we've shown our typical industry pricing charts to provide further context on the market dynamics this past quarter. For Nylon, global pricing remained relatively stable sequentially, with declines in Asia offset by improved North American spreads on tighter regional supply amid stable and market demand. In the fertilizer space, Corn Belt nitrogen pricing saw a reduction overall in the second quarter relative to the first.
Mike: Let's turn to slide 6.
Mike: Erin will dive further into each of our key product lines in a moment, but here on slide 6, we've shown our typical industry pricing charts to provide further context on the market dynamics this past quarter.
Erin: For Nylon, global pricing remained relatively stable sequentially, but declines in Asia offset by improved North American spreads on tighter regional supply meant stable and market demand.
Speaker Change: In the fertilizer space, Corn Belt nitrogen pricing saw a reduction overall in the second quarter relative to the first.
Michael Preston: In contrast, ammonium sulfate pricing strengthened in the quarter with industry corn belt prices up 25% sequentially with continued sulfur demand growth and reduced supply in North America. And in chemical intermediates, industry-realized acetone prices over refinery-grade propylene costs remain healthy.
Erin: In contrast, ammonium sulfate pricing strengthened in the quarter, with industry corn belt prices up 25% sequentially, with continued sulfur demand growth and reduced supply in North America.
Michael Preston: And in chemical intermediates, industry realized acetone prices over refined our great propylene costs remained healthy.
Erin: And in chemical intermediates, industry-realized acetone prices over refinery-grade propylene costs remain healthy. Now let me turn the call back to Erin.
Michael Preston: Now, let me turn the call back to Erin.
Erin Kane: Now, let me turn the poll back to Aaron.
Erin Kane: Thanks, Mike. The following three sides provided a deeper look at each of our product lines, including industry spread trends tied to our key variable margin equations, as well as market dynamics and performance drivers. For our plant nutrients business, spreads have strengthened in recent months. We believe this is reflective of an increasingly recognized sulfur value proposition and observed growth in demand. We have entered the third quarter at higher ammonium sulfate pricing levels compared to the prior year, as the value chain began re-stocking fertilizer, supporting our new season order book. While we navigate typical seasonal pricing considerations, and what many consider more foscious broader ag fundamentals, we know that farmers may be able to support their profitability.
Erin Kane: The following three slides provide a deeper look at each of our product lines, including industry spread trends tied to our key variable margin equations, as well as market dynamics and performance drivers. For our plant nutrients business, spreads have strengthened in recent months. We believe this is reflective of an increasingly recognized software value proposition and observed growth in demand. We have entered the third quarter at higher ammonium sulfate pricing levels compared to the prior year, as the value chain began restocking fertilizer, supporting our new season order box.
Erin: Thanks Mike. The following three slides provide a deeper look at each of our product lines, including industry spread trends tied to our key variable margin equations, as well as market dynamics and performance drivers.
Erin: For our Plant Nutrients business, spreads have strengthened in recent months.
Speaker Change: We believe this is reflective of an increasingly recognized software value proposition and observed growth in demand.
Erin: We have entered the third quarter at higher ammonium sulfate pricing levels compared to the prior year as the value chain began restocking fertilizer supporting our new season order book.
Erin Kane: While we navigate typical seasonal pricing considerations in what many consider more cautious, broader ag fundamentals, we know that farmers may be able to support their profitability. Our performance in Q2, at a time when nitrogen prices were on the decline, albeit with some supply tightness, coupled with the outcome of our fill program, we believe our proof points to the resiliency of software nutrition demand and supports our expectations to deliver improved year-over-year performance.
Erin: While we navigate typical seasonal pricing considerations and what many consider more cautious broader ag fundamentals, we know that farmers may be able to support their profitability.
Erin Kane: Our performance in Q2, at a time when nitrogen prices were on the decline, albeit with some supply tightness, coupled with the outcome of our fill program, we believe our proof points to the resiliency of sulfur nutrition demand and support our expectations to deliver improved year-to-year performance. Longer term, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space.
Erin: Our performance in Q2, at a time when nitrogen prices were on the decline, albeit with some supply tightness.
Erin: Coupled with the outcome of our fill program, we believe are proof points to the resiliency of software nutrition demand and supports our expectations to deliver improved year-over-year performance.
Erin Kane: Longer term, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space. The projects within our SUSTAIN program are progressing well, including passing the Environmental Stage Review of the USDA grant process, and are continuing to track our Targeted Investment Return Profile of 20% plus. Year-to-date, we've achieved approximately 68% granular conversion and continue to anticipate reaching approximately 70% by the end of the year.
Erin: Longer term, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space.
Erin Kane: The projects within our sustain program are progressing well, including passing the environmental stage review of the USDA grant process, and are continuing to track our target investment return profile of 20% plus. Year-to-date, we've achieved approximately 60% granular conversion and continue to anticipate reaching approximately 70% by the end of the year. This program will continue to support growing market demand for sulfur nutrition, with estimated growth of 3-4% per year. In addition, we continue to receive positive feedback around product demand to support essential nutrition, not only for traditional crops, but for soybeans as well.
Erin: The projects within our SUSTAIN program are progressing well, including passing the environmental stage review of the USDA grant process, and are continuing to track our Targeted Investment Return Profile of 20% plus.
Erin: Year-to-date we've achieved approximately 68% granular conversion and continue to anticipate reaching approximately 70% by the end of the year.
Erin Kane: This program will continue to support growing market demand for software nutrition, with estimated growth of 3-4% per year. In addition, we continue to receive positive feedback on product demand to support essential nutrition, not only for traditional crops but for soybeans as well.
Erin: This program will continue to support growing market demand for software nutrition with estimated growth of 3-4% per year. In addition, we continue to receive positive feedback around product demand to support essential nutrition not only for traditional crops, but for soybeans as well.
Erin Kane: Let's turn to slide eight. For chemical intermediates, the chart on the left represents a weighted average industry acetone over a refinery-grade coupling margin. As you can see, acetone spreads have recovered mid-type global supply and demand conditions. This has been supported by persistent lower global phenol operating rates, while reduced demand to value change, serving building construction, and other industrial applications. acetone and phenol represent approximately 60% of our intermediate sales, with acetone making up a far majority of that. As a reminder, approximately 80% of our produced phenol is consumed by our downstream hopeful operations, while all of our acetone is sold externally.
Erin Kane: For chemical intermediates, the chart on the left represents a weighted average industry acetone over a refinery-grade propylene march. As you can see, acetone spreads have recovered from mid-tight global supply and demand conditions. This has been supported by persistent lower global operating rates on reduced demand for value chains serving building construction and other industrial applications. Acetone and phenol represent approximately 60% of our intermediate sales, with acetone making up a far majority of that. As a reminder, approximately 80% of our produced phenol is consumed by our downstream COPA operations, while all of our acetone is sold externally.
Erin: Let's turn to slide 8.
Speaker Change: For chemical intermediates, the chart on the left represents a weighted average industry acetone over a refinery-grade propylene margin.
Erin: As you can see, acetone spreads have recovered mid-tight global supply and demand conditions.
Erin: This has been supported by persistent lower global operating rates on reduced demand to value change serving building construction and other industrial applications.
Erin: Acetone and phenol represent approximately 60% of our intermediate sales, with acetone making up a far majority of that.
Erin: As a reminder, approximately 80% of our produced phenol is consumed by our downstream COPL operations, while all of our acetone is sold externally.
Erin Kane: For us, acetone is a key product line with a perform-and-optimized strategy to meet customer needs while driving favorable sales and profitability next. For the remaining 40% of our chemical intermediates portfolio, our key strategic focus is around placing our various chemistry platforms into select high-value applications. This diversification of the end-market exposure supports our sale of the margin performance through applications, such as our need on cyclohexano and serving electronic space, or easy blocks for our outlet-based paints, and specialty amines for ag, pharma, and industrial applications.
Erin Kane: For us, Acetone is a key product line with a perform and optimize strategy to meet customer needs while driving favorable sales and profitability. For the remaining 40% of our chemical intermediates portfolio, our key strategic focus is around placing our various chemistry platforms into select high-value applications. This diversification of end market exposure supports our sales and margin performance through applications such as our natal and cyclohexanone serving the electronic space, are easy blocks for aqua-based paint, and Specialty and Means for Ag, Pharma, and Industrial Applications. Now, let's turn to Nylon Solutions on slide 9.
Erin: For us, Acetone is a key product line with a perform and optimize strategy to meet customer needs while driving favorable sales and profitability mix.
Erin: For the remaining 40% of our Chemical Intermediates portfolio, our key strategic focus is around placing our various chemistry platforms into select high-value applications.
Erin: This diversification of end market exposure supports our sales and margin performance through applications such as our needle and cyclohexanone serving the electronics space.
Speaker Change: are easy blocks for aqua-based paints, and specialty amines for ag, pharma, and industrial applications.
Erin Kane: Now, let's turn to nylon solutions on slide nine. Here we've shown both a global composite capillac tan and North American reddened over femdened spreads, given the meaningful split of our monomer and polymer sales. Globally, nylon demand remains mixed across most major end uses. Varying regional dynamics, including competitive intensity and trade flows, continues to impact regional pricing. Despite long supply and demand fundamentals, estimated operating rates out of China are sitting at multi-year highs, resulting in continued nylon exports to other regions, namely Southeast Asia. Here in North America, demand has been stable, albeit on a lower base, with continuous offness and building construction, offset by resilience in packaging and engineering plastic applications.
Erin: Now let's turn to Nylon Solutions on slide 9.
Erin Kane: Here we've shown both a global composite caprolactam and North American resin over benzene spreads, given the meaningful split of our monomer and polymer sales. Globally, nylon demand remains mixed across most major end users. Varying regional dynamics, including competitive intensity and trade flows, continue to impact regional prices.
Speaker Change: Here we've shown both the global composite caprolactam and North American resin over benzene spreads, given the meaningful split of our monomer and polymer sales.
Erin: Globally, nylon demand remains mixed across most major end uses.
Erin: Varying regional dynamics, including competitive intensity and trade flows, continue to impact regional pricing.
Erin Kane: Despite long supply and demand fundamentals, estimated operating rates out of China are sitting at multi-year highs, resulting in continued nylon exports to other regions, namely Southeast Asia. Here in North America, demand has been stable, albeit on a lower base, with continuous softness in building construction, offset by resilience in packaging and engineering process applications. Industry supply has been constrained in North America in recent months, supporting regional outperformance as evidenced in the chart.
Speaker Change: Despite long supply and demand fundamentals, estimated operating rates out of China are sitting at multi-year highs, resulting in continued nylon exports to other regions, mainly Southeast Asia.
Erin: Here in North America, demand has been stable, albeit on a lower base, with continuous softness in building construction offset by resilience in packaging and engineering process applications.
Erin Kane: Industry supply has been constrained in North America in recent months, supporting regional outperformance as evidence in the charts. North American spreads have improved off the second half, 2023 12 levels, and we expect further modest improvement through the remainder of 2024, given the tighter regional supply environment. For this business, we remain highly focused on supporting improved through-cycle profitability, given we're operating in the third cycle since then. While our global low cost position and capillac tan supports our ability to operate at disproportionately higher utilization rates, and meets the man wearing gifts through a cycle, our goal of generating higher highs requires us to drive toward intimidating, optimize a regional and product sales mix, and continue to promote the value proposition of our differentiated nylon products.
Erin: Industry supply has been constrained in North America in recent months, supporting regional outperformance as evidenced in the charts.
Erin Kane: North American spreads have improved off the second half 2023 trough levels, and we expect further modest improvement through the remainder of 2024, given the tighter regional supply environment. For this business, we remain highly focused on supporting improved through-cycle profitability, given we're operating in the third cycle since SIPP. Well, our global low-cost position in Capri-Lactam supports our ability to operate at disproportionately higher utilization rates and meet demand where it exists through a cycle.
Speaker Change: North American spreads have improved off the second half 2023-12 levels, and we expect further modest improvement through the remainder of 2024, given the tighter regional supply environment.
Erin: For this business, we remain highly focused on supporting improved through-cycle profitability, given we're operating in the third cycle since spin.
Speaker Change: Well, our global low-cost position in Capri-Lactam supports our ability to operate at disproportionately higher utilization rates and meet demand where it exists through a cycle.
Erin Kane: Our goal of generating higher highs requires us to drive productivity, optimize our regional and product sales mix, and continue to promote the value proposition of our differentiated nylon products. Supporting our current performance is an improved geographical mix, as our export sales have moved back to an average historical level, sitting at approximately 12% of our total nylon sales volume in the second quarter.
Erin: Our goal of generating higher highs requires us to drive productivity, optimize our regional and product sales mix, and continue to promote the value proposition of our differentiated nylon products.
Erin Kane: Supporting our current performance is an improved geographical mix as our export sales have moved back to an average historical level of sitting at approximately 12% of our total and nylon sales volume in the second quarter.
Erin: Supporting our current performance is an improved geographical mix, as our export sales have moved back to an average historical level, sitting at approximately 12% of our total nylon sales volume in the second quarter.
Erin Kane: Now, before moving to Q&A, we would like to take the opportunity on the next two slides to reiterate and illustrate our through-cycle cash generation, how we allocate that cash, and the long-term returns we're generating for our business and shareholders. This is a business best viewed through the lens of long-term performance. The big picture can be missed on a short-term snapshot. Ample cash from operations has been generated to fund critical allocation priorities, and our healthy balance sheet continues to provide flexibility and optionality when needed. Our approach to deploying cash is disciplined with a two-pronged framework of critical funding and discretionary choices to create value.
Erin Kane: Before moving to Q&A, we would like to take the opportunity on the next two slides to reiterate and illustrate our through-cycle cash generation, how we allocate that cash, and the long-term returns we're generating for our business and shareholders. This is a business best view through the lens of long-term performance. The big picture can be missed on a short-term snapshot.
Speaker Change: Before moving to Q&A, we would like to take the opportunity on the next two slides to reiterate and illustrate our through-cycle cash generation, how we allocate that cash, and the long-term returns we're generating for our business and shareholders.
Erin: This is a business-best view through the lens of long-term performance.
Erin Kane: Ample cash from operations has been generated to fund critical allocation priorities, and our healthy balance sheet continues to provide flexibility and optionality when needed. Our approach to deploying cash is disciplined with a two-pronged framework of critical funding and discretionary choices to create value. From a critical funding perspective, we have our ongoing base CAPEX, including our maintenance projects and health, safety, and environmental spend, as well as our enterprise programs to support long-term operational excellence and risk mitigation.
Erin: The big picture can be missed on a short-term snapshot.
Speaker Change: Ample cash from operations has been generated to fund critical allocation priorities and our healthy balance sheet continues to provide flexibility and optionality when needed.
Speaker Change: Our approach to deploying cash is disciplined with a two-pronged framework of critical funding and discretionary choices to create value.
Erin Kane: From a critical funding perspective, we have our ongoing base capex, including our maintenance projects and health, safety, and environmental spend, as well as our enterprise programs to support long-term operational excellence and risk mitigation. And our difficulty, which has grown since its initiation in 2021, serves as a dependable return of cash to our shareholders and sits very well within this framework, well supported by annual operating cash flow. All for the capital allocation is discretionary, where we fund growth and cost savings programs, every bus returns, inorganic opportunities, and sharing purchases. We've generated $1.2 billion of the cash from operations in 2017.
Speaker Change: From a critical funding perspective, we have our ongoing base CAPEX, including our maintenance projects and health, safety, and environmental spend, as well as our enterprise programs to support long-term operational excellence and risk mitigation.
Erin Kane: And our dividend, which has grown since its initiation in 2021, serves as a dependable return of cash to our shareholders and fits very well within this framework, well supported by annual operating cash flow. All further capital allocation is discretionary, where we fund growth and cost savings programs with robust returns, inorganic opportunities, and share repurchases. We've generated $1.2 billion of cash from operations since 2017. Through various conditions and cycles, this framework has allowed us to fund critical deployments, grow our dividend, and invest for long-term performance and growth. Now let's turn the slide a lot.
Speaker Change: And our dividend, which has grown since its initiation in 2021, serves as a dependable return of cash to our shareholders and fits very well within this framework, well supported by annual operating cash flow.
Speaker Change: All further capital allocation is discretionary where we fund growth and cost savings programs at robust returns, inorganic opportunities, and share repurchases.
Speaker Change: We've generated 1.2 billion dollars of cash from operations in 2017. Through various conditions and cycles, this framework has allowed us to fund critical deployment, grow our dividend, and invest for long-term performance and growth.
Erin Kane: Through various conditions and cycles, this framework has allowed us to fund critical deployment, grow our dividend, and invest in our long-term performance and growth.
Erin Kane: Now let's turn it slide along. Pulling it all together, the net outcome of an effective capital allocation framework is robust returns. And leaves a lead for businesses like ours. ROIC is a key valuation metric. We've generated double-digit percentage returns on invested capital through the cycle, outperforming peers, which is a testament to the burning power creative on our investments along with our operational and commercial execution. We remain well positioned to diverse deliver as a diverse by chemistry company, with a playbook and execution to a set of focused priorities and strategies. We have a leading North American position, an advanced asset base, and are aligned to a diverse set of end market applications with an enhanced sales mix across the portfolio.
Erin Kane: Pulling it all together, the net outcome of an effective capital allocation framework is robust return, and we believe for businesses like ours, ROIC is a key valuation metric. We've generated double-digit percentage returns on invested capital through the cycle, outperforming peers, which is a testament to the earnings power created from our investments, along with our operational and commercial execution. We remain well positioned to deliver as a diverse biochemistry company, with a playbook and execution for a set of focused priorities and strategies.
Speaker Change: Now, let's turn the slide around.
Speaker Change: Pulling it all together, the net outcome of an effective capital allocation framework is robust returns.
Speaker Change: And we believe for businesses like ours, ROIC is a key valuation metric.
Speaker Change: We've generated double-digit percentage returns on invested capital through the cycle, outperforming peers, which is a testament to the earnings power created from our investments, along with our operational and commercial execution.
Speaker Change: We remain well positioned to deliver as a diverse biochemistry company, with a playbook and execution to a set of focused priorities and strategies.
Erin Kane: We have a leading North American position, an advantaged asset base, and are aligned to a diverse set of end market applications with an enhanced sales mix across the portfolio. We have increased the earnings power of this business with our focus on per cycle profitability and the goal of generating higher lows and higher highs. And, as I just shared, our Capital Allocation Framework provides upside-in optionality for further value creation. AdvanSix offers a compelling investment thesis. So with that Adam, let's move to Q&A.
Speaker Change: We have a leading North American position, an advantaged asset base, and are aligned to a diverse set of end market applications with an enhanced sales mix across the portfolio.
Erin Kane: We have increased the earnings power of this business, with our focus on critical profitability and the goal of generating higher lows and higher highs. And as I just shared, our capital allocation framework provides an upside to nationality for further value creation.
Speaker Change: We have increased the earnings power of this business with our focus on per cycle profitability and the goal of generating higher lows and higher highs.
Speaker Change: And as I just shared, our Capital Allocation Framework provides upside-in optionality for further value creation.
Erin Kane: AdvanSix offers a compelling investment thesis.
Adam Kressel: So, with that, Adam, let's move to Q&A. Thanks, Erin.
Speaker Change: AdvanSix offers a compelling investment thesis. So with that, Adam, let's move to Q&A.
Adam Kressel: Thanks, Erin. Chad, can you please open the line for questions? Thank you. We will now begin the question and answer session.
Operator: Chad, could you please open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. And at this time, we will pause momentarily to assemble our roster.
Adam Kressel: Thanks, Erin. Chad, can you please open the line for questions?
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.
Operator: And at this time, we will pause momentarily to assemble our roster.
Speaker Change: To withdraw your question, please press star then 2. And at this time, we will pause momentarily to assemble our roster.
David Silver: And the first question today will be from David Silver from CL King. Please go ahead.
Speaker Change: And the first question today will be from David Silver from CL King. Please go ahead.
Unnamed Analyst: Yeah, hi. Thanks very much.
David Silver: Yeah, hi. Thanks very much. So I do have a number.
Unnamed Analyst: So I do have a number. Yeah, good morning. Thank you.
David Silver: Yeah, hi. Thanks very much.
David Silver: Yeah, good morning. Thank you. I do have kind of a number of questions. I think maybe the first one I'd like to start on is your comments about improved operating performance and higher utilization. So I do recognize being able to run your inter-integrated, vertically integrated complex at high rates does help you out quite a bit. I'd also comment there was an issue, I guess, in the first quarter. So maybe if you just, what's the word? I don't know, dart on a dart board. But how close to optimal would you say your operational execution was the score?
David Silver: So I do have a number. Yeah, good morning. Thank you. I do have a kind of a number of questions. I think maybe the first one I'd like to start on is.
Unnamed Analyst: I do have a number of questions. I think maybe the first one I'd like to start on is your comments about, you know, improved operating performance and higher utilization. So, you know, I do recognize that being able to run your interintegrated, you know, vertically integrated complex at high rates does help you out quite a bit. But, you know, I'd also comment on where there was an issue, I guess, in the first quarter. So, you know, maybe if you could just... What's the word? I don't know.
Speaker Change: your comments about, you know, improved operating performance and higher utilization.
Speaker Change: You know, I do recognize, you know, being able to run, you know, your...
Speaker Change: inter-integrated, you know, vertically integrated complex at high rates, you know, does help you out quite a bit. You know, I'd also comment where, you know, there was an issue, I guess, in the first quarter. So, you know, maybe if you could just...
Unnamed Analyst: Dart on a dartboard, but how close to optimal would you say your operational execution was this quarter? Maybe, I don't know, 95% utilization might be, you know, your target. It might be your target. I'm just saying that. And, obviously, without disruptions, but did you really kind of, you know, operate as efficiently as you possibly could? Is that, should we kind of assume that? Or is there incremental room for improvement going forward? And, you know, potentially even an extra increment to your underlying earnings potential?
Speaker Change: What's the word? I don't know. Dart on a dart board. But how close to optimal would you say your operational execution was this quarter? In other words,
David Silver: In other words, maybe I don't know, 95% utilization might be your target. I'm just saying that. And obviously, without disruptions. But did you really kind of operate as efficiently as you possibly could? Should we kind of assume that, or is there incremental room for improvement going forward and potentially even an extra increment to your underlying earnings potential? Yeah.
Speaker Change: you know, maybe, I don't know, 95% utilization might be, you know, your target, might be your target. I'm just saying that and, you know, obviously without disruptions. But
Speaker Change: Did you really kind of, you know, operate as efficiently as you possibly could? Should we kind of assume that or is there incremental room for improvement going forward and, you know, potentially even...
Adam Kressel: an extra increment to your underlying, you know, earnings potential. Yeah.
Erin Kane: Thanks for the question.
Erin Kane: Thanks for the question. You know, I have to maybe sort of start with a quote. I got an email this morning from a friend that had a Franklin D. Roosevelt quote that said, "A smooth sea never made a skilled sailor." And, you know, I know you call out our challenge in Q1, but for us, operational excellence is a lifelong pursuit, right? I think when we talk about returning to operational rates in the second quarter, we did indeed return sort of near the high 90% range at Hopewell, which is, you know, the sweet spot of where we look to operate relative to our target. And certainly, you know, the rest of the chain supports and fills in around that.
Erin Kane: I have to maybe sort of start with a quote. I got an email this morning from a friend that had a Franklin D. Roosevelt that said, a smooth sea never made a skilled sailor. And I know you call out our challenge in Q1, but for us, operational excellence is a forever pursuit. I think when we talk about returning to operational rates in the second quarter, we did indeed return certain years of high 90% range at Hopewell, which is the sweet spot of where we look to operate relative to our target. Certainly, the rest of the chain supports and fills in around that.
Speaker Change: Thanks for the question. You know, I have to maybe sort of start with a quote. I got an email this morning from a friend.
Speaker Change: that had a Franklin D. Roosevelt quote that said a smooth sea never made a skilled sailor. And, you know, I know you call out our challenge in Q1, but for us, operational excellence is a forever pursuit, right? I think when we...
Adam Kressel: Talked about returning to operational rates in the second quarter. We did indeed return.
Speaker Change: So we're near the high 90% range at Hopewell, which is the sweet spot of where we'd like to operate relative to our target. Certainly, the rest of the chain supports and fills in around that.
Erin Kane: But as you say, this is an area of continuous improvement. We know just continuing to create that safe, stable, sustainable operations over longer stretches inherently creates more operational leverage, right? So it supported our results in Q2.
Erin Kane: But, as you say, you know, this is an area of continuous improvement. We know just continuing to create that safe, stable, sustainable operations over longer stretches inherently creates more operational leverage, right? So it supported our results in Q2. We learn from every single challenge that we have. We improve our skill. We improve our capability sets and bring that forward.
Speaker Change: But as you say, you know, this is an area of continuous improvement. We know.
Speaker Change: just continuing to create that safe, stable, sustainable operations.
Speaker Change: over longer stretches inherently creates more operational leverage, right? So it supported our results in Q2. We learn from every single challenge that we have. We improve our skill. We improve our capability set.
Erin Kane: We learn from every single challenge that we have. We improve our skills. We improve our capability sets, and we bring that forward. And that really is the underlying tenets of operational excellence programs.
David Silver: And that really is the underlying, you know, tenant for operational excellence programs. You know, when you started with the FDR quote, I thought you were going to say, "In politics, nothing happens by accident," but I liked your quote better.
Adam Kressel: and bring that forward. And that really is the underlying, you know, tenets for operational excellence programs.
Unnamed Analyst: You know, when you started with the FDR quote, I thought you were going to say, in politics, nothing happens by accident. But I like your quote better. Thank you. Okay, um... I guess I would like to ask a couple of questions on, I guess, the ammonium sulfate side of your business. And maybe you could just characterize the kind of spring selling season. In other words, it looks like you had both high volumes and you were able to achieve, you know, reasonably good pricing, relative to how I guess the benchmark pricing moved during the quarter.
Speaker Change: You know, when you started with the FDR quote, I thought you were going to say, in politics, nothing happens by accident, but I liked your quote better.
David Silver: Thank you very much. Okay. I guess I would like to ask a couple of questions on, I guess the ammonium sulfate side of your business.
Speaker Change: Thank you for that.
Unnamed Analyst: And I'd also say it was kind of in an environment where, you know, the comparable product urea was moving in one direction, and your product was stable or even slightly higher towards the end. So, you know, maybe if you could just talk about that, did you just outperform maybe some of your competition? Or, you know, how would you just characterize your ability to kind of, you know, execute very well in a fast-paced environment?
Speaker Change: I guess I would like to ask a couple of questions on, I guess, the ammonium sulfate side of your business.
David Silver: And maybe you could just characterize kind of the spring-felling season. In other words, it looks like you had both high volumes and you were able to achieve, you know, reasonably good pricing relative to how, I guess, the benchmark pricing moved during the quarter. And I'd also say it was kind of in a environment where, you know, the comparable product, urea was, you know, moving in one direction and your product was stable or even slightly higher towards the end. So, you know, maybe if you could just talk about that, did you just out execute maybe some of your competition or, you know, how would you just characterize your ability to kind of execute very well in the fast paced spring planning season, you know, especially given a number of issues, but one would be attractively priced comparable or close comparable products.
Speaker Change: And maybe you could just characterize kind of the spring selling season. In other words, it looks like you had both high volumes and you were able to achieve.
Speaker Change: You know, reasonably good pricing, you know, relative to how, I guess, the benchmark pricing moved during the quarter.
Speaker Change: And I'd also say it was kind of in an environment where, you know, the comparable product, urea, was, you know, moving in one direction and your product was stable or even slightly higher towards the end.
Speaker Change: So, you know, maybe if you could just talk about that. Did you just out-execute maybe some of your competition or you know, how would you just characterize your ability to kind of, you know, execute very well in the fast pace?
Speaker Change: spring planning season, you know, especially given a number of issues, but one would be attractively priced comparable or close comparable products. Thanks. Sure.
Erin Kane: Thanks. Sure. And I appreciate, you know, certainly the call up and the comparison here. You know, we believe we position ourselves, you know, well through the buildup into the season. That's always important. And certainly it's something that we're focused on, you know, here as we start the next fertilizer. You know, year, you may recall that we, you know, had our own production; we've increased our granular ammonium sulfate output. So is that certainly went a long way to meeting the demand for the higher value, you know, granular product that is growing in demand here in North America.
Erin Kane: And I appreciate, you know, certainly the call out and the comparison here. You know, we believe we position ourselves, you know, well through the build-up into the season. That's always important.
Speaker Change: And I appreciate them, you know, certainly the call out and the comparison here, you know, we we believe we position ourselves, you know, well through the build up into the season. That's always important and certainly it's something that we're focused on, you know, here as we start the next fertilizer.
Erin Kane: And certainly it's something that we're focused on, you know, here as we start the next fertilizer, you know, year. You may recall that we had our own production. We've increased our granular ammonium sulfate output, so that certainly went a long way to meeting the demand for the higher value granular product that is growing in demand here in North America. We also purchased extra volume to make sure that we were ready for our customers' demand to offset our challenges in Q1.
Speaker Change: You may recall that we had our own production, we've increased our granular ammonium sulfate output, so that certainly went a long way to meeting the demand for the higher value granular product that is growing in demand here in North America.
Erin Kane: We also purchased extra volumes to make sure that we were ready for our customers' man to offset our challenges in Q1. But, you know, I think what we're seeing is really the recognition of the essentiality of software nutrition. And, you know, so there is that growing demand. You know, that was taking place. I think the proof points we saw on, you know, in, in the quarter, you know, was really that, you know, not just, you know, the 10 to 50% yield that, you know, folks typically see on corn. You know, but recognize value that folks can also see mid single digit, you know, increases on your own soybeans as well.
Speaker Change: We also purchased...
Speaker Change: extra volume to make sure that we were ready for our customers demand to offset our challenges in Q1. But you know I think what we're seeing is is really the recognition of the essentiality of software nutrition.
Erin Kane: But, you know, I think what we're seeing is really the recognition of the essentiality of sulfur nutrition. And, you know, so there is that growing demand that was taking place. I think the proof points we saw in the quarter were really that, you know, not just the 10 to 50% yields that folks typically see on corn, but a recognized value that folks can also see mid single-digit increases in yields on soybeans as well.
Speaker Change: and you know so there is that growing demand you know that was taking place I think the the proof points we saw
Speaker Change: you know, in the quarter.
Speaker Change: It was really about not just the 10-50% yield that folks typically see on corn, but a recognized value that folks can also see mid-single-digit increases on yields on soybeans as well.
Erin Kane: And, you know, when the fundamentals are pressuring profitability for farmers, yield is a key consideration for them. And, you know, so I think our execution, our positioning with our customers, the growth of the high-protein product, you know, or the higher-demand product that we're committing to. And then, you know, certainly, we are seeing this, you know, demand signal. There was some supply tightness, you know, certainly, that supported it. But I think it's those fundamentals, you know, that are allowing us to provide a lot of support in Q2, but also support, you know, really the fill program that we've seen here at the start of Q3 and really the resilience of demand for fertilizers and particularly sulfur nutrition.
Erin Kane: And, you know, when the fundamentals are pressuring profitability for farmers, yield is a key consideration for them. And, you know, so I think our execution are positioning with our customers, the growth of the high product, you know, the higher demand product that we're, you know, committing to, and then, you know, certainly we are seeing this, you know, demand signal. There was some supply tightness, you know, certainly, you know, that supported it, but I think it's those fundamentals, you know, that are allowing us to perform a lot of forming Q2, but also supported. You know, really the, the fill program that we've seen here at the start of Q3 and really the resilience of demand for furlars, fertilizers, and particularly software nutrition.
Speaker Change: When the fundamentals are pressuring profitability for farmers, yield is a key consideration for them.
Speaker Change: And, you know, so I think our execution, our positioning with our customers, the growth of the high product, you know, or the higher demand product that we're, you know, committing to, and then, you know, certainly,
Speaker Change: We are seeing this, you know, demand signal.
Speaker Change: There was some supply tightness, you know, certainly, you know, that supported it, but I think it's those fundamentals, you know, that are allowing us to perform, or allow us to perform in Q2, but also supported.
Speaker Change: you know really the the fill program that we've seen here at the start of Q3 and really the resilience of demand for fertilizers and particularly software nutrition.
David Silver: All right. Thank you for that.
Unnamed Analyst: All right, thank you for that. And just to follow up again, still on ammonium sulfate, first, I think you touched on this, but I did want to clarify from your prepared remarks that there was some benefit, you know, from the increased percentage of granular product that you were, you know, that you might have had available. That was one thing. And then secondly, I mean, this is more from a, you know, corporate boardroom level than from a down on the ground view in the, you know, Corn Belt.
David Silver: And just to follow up again, still on ammonium sulfate. First, I think you touched on this, but I did want to clarify from your prepared remarks that there was some benefit, you know, from the increased percentage of granular product that you were, you know, that you might have had available. That was one thing.
Speaker Change: All right, thank you for that. And just to follow up again, still on ammonium sulfate, first, I think you touched on this, but I did want to clarify from your prepared remarks that there was.
Speaker Change: some benefit, you know, from the increased percentage of granular product that you were, you know, that you might have had available. That was one thing. And then, secondly, I mean, this is more from a...
David Silver: And then secondly, I mean, this is more from a, you know, corporate boardroom level. And from down on the ground in the, you know, corn belt view. But do you, are you starting to view maybe, I don't know, ammonium sulfate a little bit like acetone. In other words, they're both co-products to a certain extent. And they, you know, the, maybe the pressures on nylon globally led to less product available elsewhere. Where, you know, somewhat like we see with the acetone from time to time. But is there any thinking about that in general, or is that a little bit too arcane?
Speaker Change: you know, corporate boardroom level than from down on the ground in the, you know, Corn Belt view. But do you, are you starting to view maybe, I don't know, ammonium sulfate a little bit like
Unnamed Analyst: But do you, are you starting to view maybe, I don't know, ammonium sulfate a little bit like Acetone? In other words, they're both co-products to a certain extent, and they, you know, maybe the pressures on nylon globally have led to less product available elsewhere, you know, somewhat like we see with acetone from time to time? But is there any thinking about that in general, or is that a little bit too arcane? Okay.
Speaker Change: Acetone. In other words, they're both co-products to a certain extent.
Speaker Change: They, you know, the, maybe the pressures on nylon globally led to less product available.
Speaker Change: elsewhere you know somewhat like we see with the acetone from time to time but is there any thinking about that in general or is that is that a little bit too arcane?
Erin Kane: Okay. I can certainly, you know, tackle both halves of that. So, you know, relative to the vine increase, we would, we would put our estimate about 35% of the grain that sells vine increase, you know, was attributable to our increased production and that mixed benefit. And so that's a, you know, an important trend for us as we continue to invest in our sustained program. Separate of part one, you know, part two, you know, relative to fertilizer and intermediate, you know, we've shared the view in the past, you know, we talk about the split by sales revenue.
Erin Kane: I can certainly tackle both halves of that. Relative to the volume increase, we would put our estimate at about 35% of the grain in our sales volume increase was attributable to our increased production and that mixed benefit. That's an important trend for us as we continue to invest in our sustained program, separate of part one, you know, part two. You know, relative to fertilizer and intermediate, we've shared the view in the past, and we talk about the split by sales revenue.
Speaker Change: Thank you for joining us. Bye-bye.
Speaker Change: I can certainly tackle both halves of that. So, you know, relative to the volume increase, we would put our estimate at about 35% of the greenhouse gas volume increase.
Speaker Change: you know, was attributable to our increased production and that mixed benefit. And so that's a, you know, an important trend for us as we continue to invest in our sustained program.
Speaker Change: Part 3 to Part 1. You know, Part 2, you know, relative to fertilizer and intermediates, you know, we've shared the view in the past, you know, we talk about the split by sales revenue, but when you look at, you know, what we produce
Erin Kane: But when you look at, you know, what we produce. You know, by volume, you know, fertilizer and intermediate, you know, our two thirds, you know, if not three quarters of our production. So there are very important product lines, you know, for us. A bit different in the supply demand global fundamentals, where yes, you know, phenol and acetone are leading to a tighter global acetone market. There definitely is, you know, quite a bit of among am sulfate, you know, still coming out of China. And you know, that is predominantly headed to Brazil and other places. But again, you know, we continue to see sovereign nutrition as a recognized, you know, need globally for its boosting yield.
Erin Kane: But when you look at, you know, what we produce, by volume, you know, fertilizer and intermediates are, [inaudible] But again, you know we continue to see sovereign nutrition as a recognized need globally for its boost in yields.
Speaker Change: you know, by volume, you know, fertilizer and intermediates, you know, are
Speaker Change: two-thirds you know if not three-quarters of our production so they're very important product lines you know for us.
Speaker Change: A bit different in the supply-demand-global fundamentals where, yes, phenol and acetone are leading to a tighter global acetone market.
Speaker Change: There definitely is, you know, quite a bit of ammonium sulfate, you know, still coming out of China and, you know, that is predominantly headed to Brazil and other places.
Speaker Change: But again, you know, we continue to see sovereign nutrition as a recognized, you know, need globally for its boosting yields.
David Silver: Okay, and this is not a question, but maybe just an observation. I do appreciate this slide that was added this time for the first time, charting, you know, the price of ammonium sulfate over the raw materials. I, I track that myself, but it was; I think it was. I appreciate you calling it out this time. I did. I didn't want to ask a question.
Unnamed Analyst: Okay, and this is not a question, it may be just an observation, but I do appreciate this slide that was added this time for the first time, charting, you know, the price of ammonium sulfate over the raw materials. I tracked that myself, but it was, I think it was, I appreciate you calling it out this time.
Speaker Change: Okay, and this is not a question, it may be just an observation, but I do appreciate this slide that was added this time for the first time charting, you know, the price of ammonium sulfate over the raw materials. I tracked that myself, but it was, I think it was, I appreciate you calling it out this time.
Unnamed Analyst: I did want to ask a question. It's agricultural, but this is more the Ag-Chem or the pesticide line of things. But you do have a couple of product lines that service the crop chemicals and the pandemic, and they were, you know, even beyond the normal, you know, buffer stock levels. From your perspective, I mean, US Ammines and I believe parts of your Oxioms portfolio go into that area. Has the environment there improved? Are you able to place more of your product, or have the customers, the Adchem makers, have they kind of cleaned up the surplus that built up over the past couple of years, in your view?
David Silver: It's agricultural, but this is more ag cam or the pesticide line of things. But, you know, you do have a couple of product lines that service, you know, the crop chemicals market. And, you know, I would say that's an area that for more than a year or so, it's been, from the folks I talked to, it's been over supplied. Customer inventories had been built up during the pandemic, and they were even beyond the normal buffer stock levels. From your perspective, I mean, U.S. amines, and I believe parts of your oxyms portfolio go into that area.
Speaker Change: market. And, you know, I would say that's an area that for more than a year or so, it's been, from the folks I talked to, it's been oversupplied. Customer inventories had been built up during the
Speaker Change: pandemic, and they were, you know, even beyond the normal, you know, buffer stock levels.
Speaker Change: From your perspective, I mean, USA means, and I believe parts of your Oxiom's portfolio, you know, go into that area, you know, has the environment there improved? Are you able to place more of your product or have the customers, the
Erin Kane: Has the environment there improved? Are you able to place more of your product, or have the customers that ad chem makers have, they kind of cleaned up the surplus that built up over the past couple of years in your view? Certainly, we continue and have experienced the headwinds, as you point out, in the ad chemical business and certainly continue to see retailers and growers, you know, work through that hiring inventory. You know, the value chain from, you know, NEPA through all the way to herbicides is really being impacted with low-priced Chinese imports of glyphosate salts.
Speaker Change: Ag Chem makers, have they kind of cleaned up the surplus that built up over the past couple of years, in your view?
Erin Kane: Certainly, we continue to experience the headwinds, as you point out, in the ag chemical business and certainly continue to see retailers and growers work through that higher inventory. The value chain from NEPA through all the way to herbicides is really being impacted by low-priced Chinese imports of glyphosate salts. So even though inventories have improved a little, that value chain is still working through the dynamics that we've been tracking and, certainly, you're hearing from others.
Speaker Change: Certainly, we continue and have experienced the headwinds, as you point out, in the ag chemical business.
Speaker Change: and certainly continue to see retailers and growers, you know, work through that higher inventory.
Speaker Change: The value chain from NEPA through all the way to herbicides is really being impacted with low-priced Chinese imports of glyphosate salts.
Erin Kane: So saving my inventory have improved a little. You know, that value chain is still working through, you know, certainly the dynamics that we've been tracking and certainly you're hearing from from others. I say the flip side, you know, the adjuvant server selling some of the spray grade ammonium sulfate that gets mixed into that did improve in the season. You know, indicating that there is some progress being made, you know, deeper in the value chain because that would be added in at the last step. So, you know, some progress, but certainly some ways to go relative to the underlying dynamic.
Speaker Change: Save them all in inventories.
Speaker Change: you know have improved a little you know that that value chain is still working through.
Speaker Change: [inaudible]
Erin Kane: On the flip side, the adjuvants where we're selling some of the spray-grade ammonium sulfate that gets mixed into that did improve this season, indicating that there is some progress being made deeper in the value chain because that would be added in at the last step. So some progress, but certainly some ways to go relative to the underlying dynamics.
Speaker Change: There is some progress being made deeper in the value chain, because that would be added in at the last step. So, some progress, but certainly some ways to go relative to the underlying dynamic.
David Silver: Okay, and then just the last question here.
Unnamed Analyst: Okay, and then just the last question here. I'm kind of...
David Silver: I'm kind of towards the, I don't know, back half of my earning season and, you know, I would just say that your company, you know, based on the remarks, it's virtually the only company that did not call out kind of a weaker demand environment across the general, you know, industrial sector. And I'm just wondering if you could maybe comment on, you know, maybe your relatively buoyant or optimistic outlook for supplying the industrial sector when, you know, again, could just be who I'm talking to, but that has not been a common theme this earning season. Thank you.
Unnamed Analyst: Towards the back half of my earnings season. And, you know, I would just say that your company, based on the remarks, is virtually the only company that did not call out kind of a weaker demand environment across the general, you know, industrial sector. And I'm just wondering if you could maybe comment on, you know, maybe your relatively buoyant or optimistic outlook for supplying the industrial sector when, you know, again, could just be who I'm talking to, but that has not been a common theme in this earnings. Yeah.
Speaker Change: Towards the... I don't know.
Speaker Change: back half of my earnings season and
Speaker Change: You know, I would just say that your company, you know, based on the remarks, it's virtually the only company that did not call out kind of a weaker demand environment across the general, you know, industrial sector.
Speaker Change: And I'm just wondering if you could maybe comment on, you know, maybe your relatively buoyant or optimistic outlook for supplying the industrial sector.
Speaker Change: when, again, could just be who I'm talking to, but that has not been a common theme this earnings season.
Erin Kane: So certainly, you know, appreciate that. And we would also, you know, share the view that there are aspects in the industrial manufacturing, you know, economy that are challenged, right? And that collectively, we're all seeing, you know, a slower recovery than perhaps where many of us would have been, you know, a couple of months ago. But that said, you know, I think there are aspects of our diversification, you know, that ultimately are playing out here relative to our; you know, it is a favorable outlook year over year for the back half. And, you know, certainly the greatest weakness in the slower recovery isn't building in construction.
Erin Kane: So certainly, you know, appreciate that. And we would also, you know, share the view that there are aspects of the industrial manufacturing economy that are, that are a challenge, right? And that collectively, we're all seeing, you know, a slower recovery than perhaps where many of us would have been a couple months ago. But that said, I think there are aspects of our diversification that are ultimately playing out here relative to our, you know, what we would consider a favorable outlook year over year for the back half.
Speaker Change: Thank you
Speaker Change: I certainly appreciate that and we would also share the view that there are aspects in the industrial manufacturing economy that are a challenge, right, and that collectively we're all seeing a slower recovery than perhaps where many of us would have been.
Speaker Change: You know, a couple of months ago, but that said, you know, I think there are aspects of our diversification, you know, that ultimately are are playing out here relative to our
Erin Kane: And, you know, certainly the greatest weakness in the slower recovery is in building and construction, you know, and I think that's an area we continue to, to watch. It impacts, you know, the demand growth or the recovery, you know, certainly in nylon resin but also in, you know, certain aspects of our intermediates. But the flip side is we've seen the automotive industry be relatively stable and strong. We've seen the resiliency of packaging, and our wire and cable product lines, you know, come back as well. You know, so I think that, you know, for us, we've been talking about this diversification as a positive, and that's probably really what's playing out here for us as we look to the second half.
Speaker Change: You know, we live as a favorable outlook year over year for the back half and, you know, certainly the greatest weakness in the solar recovery is in building and construction.
Erin Kane: You know, and I think that's an area we continue to watch the impacts, you know, the demand growth of the recovery, you know, certainly in nylon, resin, but also in, you know, certain aspects of our intermediates. But the flip side, as we've seen, automotive be relatively, you know, stable and strong. We've seen the resiliency of packaging in our wiring cable product lines, you know, come back as well. You know, so I think that, you know, for us, we've been talking about this diversification as a positive. And that's probably really what's playing out here for us as we look to the second half.
Speaker Change: You know, and I think that's an area we continue to watch. It impacts, you know, the
Speaker Change: The demand growth or the recovery, you know, certainly in nylon, resin, but also in certain aspects of our intermediates.
Speaker Change: But the flip side is we've seen automotive be relatively, you know, stable and strong. We've seen the resiliency of packaging and our wire and cable product line, you know, come back as well. You know, so I think that, you know, for us we've been talking about this diversification as a positive.
Speaker Change: And that's probably really what's playing out here for us as we look to the second half.
David Silver: Okay, that's great. Thanks very much. I appreciate all the color.
Unnamed Analyst: Okay, that's great. Thanks very much. I appreciate all the color.
Erin Kane: Thanks, have a great day!
Speaker Change: Okay, that's great. Thanks very much. I appreciate all the color.
Charles Neivert: And our final question comes from Charles Neivert from Piper Sandler. Please go ahead.
Operator: And our final question comes from Charles Neivert, from Piper Sandler. Please go ahead.
Speaker Change: Thanks, have a great day
Speaker Change: And our final question comes from Charles Neivert from Piper Sandler. Please go ahead.
Charles Neivert: Yeah, just a few things. One, when you look at the sustain program and you're talking about an additional 200,000 tons of sulfate, how is that coming about or what's happening there? You sort of walk through the whole program and whatever expansion there might be.
Erin Kane: Yeah, just a few things. One, when you look at the stain program and you're talking about an additional 200,000 tons of sulfate, how is that coming about? Or what's happening there? You sort of walked through the whole program and whatever expansion there might be. Sure, as we have shared in the past year and can just kind of recapture for us, you know, it's a series of programs and projects, you know, of course, of years that really is leading to that opportunity set. And so, you know, it's going to take us, you know, a couple of years to get to the full output.
Charles Neivert: Yeah, just a few things. One, when you look at the sustain program and you're talking about an additional 200,000 tons of sulfate, how is that coming about or what's happening there?
Speaker Change: You sort of walk through the whole program and whatever expansion there might be.
Erin Kane: Sure, as we have shared in the past here and can just kind of recapture for us, you know, it's a series of programs. [inaudible] So there is a nice sustainability aspect to it, but it is a series of projects along that route. So we're targeting 70% by the end of this year, with really full completion by 2027. And so as you think about just various aspects of how we're going to address this, it's not, really just convert really standard up to granular is what's happening here over the course of the next few years. And we can certainly share. There was a full page, I believe, in the last earnings deck that we could send back to you, Charlie.
Speaker Change: Sure, as we, you know, have shared in the past here and can just kind of recapture for us, you know, it's a series of programs.
Speaker Change: projects, you know, over the course of years that really is leading to that opportunity set and so
Erin Kane: But it is, you know, a win-win across many ways because we're increasing the granular conversion here, you know, which is enabling us to do this, you know, without grading increases in, you know, consumption of energy impact to water. There is a nice sustainability aspect, you know, to it, but it is a series of projects along that route, right? So we're targeting 70% by the end of this year, you know, with really the full completion by 2027. And so, you know, as you think about just various aspects of how we're going to, you know, address this, you know, it's not a new line.
Charles Neivert: It's going to take us a couple of years to get to the full output.
Speaker Change: You know a win-win across many ways because we're increasing the granular conversion here, you know, which is enabling us to do this, you know, without great increases in, you know, consumption of energy, impact to water, right? So there is a nice sustainability aspect.
Speaker Change: You know, to it, but it is a series of projects along that route, right? So we're targeting 70% by the end of this year, you know, with really the full completion by 2027.
Speaker Change: And so, you know, as you think about just various aspects of how we're going to, you know, address this, you know, it's not a new line. It's really de-choking, you know, creating the ability for us to,
Erin Kane: It's really detoking, you know, creating the ability for us to really just convert really standard up to granular, what's happening here, of course, the next few years.
Speaker Change: really just convert really standard up to granular is what's happening here over the course of the next few years.
Charles Neivert: And we can, we can certainly share there was a full page, I believe, in the last ironing section that we could send back over to you, Charlie. Yeah, I mean, but in terms of total available AS, just both granular and standard grade, has your capacity haven't actually increased in total because that's just a chemical conversion. So you either leave it as one, one type or the other, but it's up to the amount of product you're converting that we're talking about in that 200,000. That is, that is the primary consideration. I mean, there are some things that certainly we are exploring that could continue to release that we have.
Speaker Change: And we can certainly share. There was a full page, I believe, in the last earnings deck that we could send back over to you, Charlie. Yeah, I mean, but in terms of total...
Charles Neivert: Yeah, I mean, but in terms of total... available AF, just both granular and standard grade. Has your capacity actually increased in total because that's just a chemical conversion, so you either leave it as one type or the other, but it's just the amount of product you're converting that we're talking about, and that's 200,000?
Charlie: available AF, both granular and and standard grade. Your capacity hasn't actually increased in total because that's just a chemical conversion so you either leave it as one
Charlie: one type or the other, but it's just the amount of product you're converting that we're talking about in that 200,000?
Speaker Change: That is that is the primary
Speaker Change: consideration. I mean there are some things that certainly we are exploring that could continue to release that we have.
Charles Neivert: We'll continue to evaluate in our system, but yes. And again, that conversion is valuable, right? And just given the premium that we get from, from standard to. Yeah, I just want to make sure I was understanding it as what it was, as opposed to an actual expansion of capacity by that amount.
Speaker Change: We'll continue to evaluate in our system, but yes, and again, that conversion is...
Speaker Change: It's valuable, right, just given the premium that we get from standard to the greater form.
Erin Kane: Yeah, I just wanted to make sure I was understanding.
Speaker Change: Yeah, I just wanted to make sure I was understanding it as what it was as opposed to an actual expansion of capacity by that amount. It's just a shift, a higher value, higher profitability, but the absolute tonnage available.
Charles Neivert: It's just a shift, a higher value, higher profitability, but the absolute cottage available, relatively small change, just what type of cottage is available.
Erin Kane: On that same note, are you guys looking at all at, and I know that the systems may not be in place even regionally for you to be able to do it, but is there any thought to carbon capture around the ammonia unit and then creating an effective green or blue ammonia there. And then running that, that would be part of your AS molecule and maybe higher value still. Is that something that's at all in their consideration? So, frankly, all of our, or the vast majority of our CO2 has been captured at current, has been captured for years for beneficial reuse.
Speaker Change: Relatively small change, just what type of content is available.
Speaker Change: On that same note...
Speaker Change: Are you guys looking at all, and I know that the systems may not be in place even regionally for you to be able to do it, but is there any thought to carbon capture around the ammonia unit and then creating an effect of green or blue ammonia there?
Speaker Change: And then running that, that would be part of your AS molecules and maybe higher value still. Is that something that's at all in your consideration?
Charles Neivert: Yeah, currently, you know, all of our the vast majority of our CO2 is currently being captured at current has been captured for years for beneficial reuse. So we have partners on the Hopewell site that are taking that CO2 and are using it in a valuable food and beverage industry and cold chain storage. As you may know, the Mid Atlantic is a large poultry and pork industry. And so certainly, the beneficial reuse in the region is pretty high relative to that.
Speaker Change: Currently, the vast majority of our CO2 at current has been captured for years for beneficial reuse. We have partners on the HopeWell site.
Erin Kane: So we have partners on the hope of site that are taking that CO2 and it is being used in a valuable food and beverage industry and colchained storage. As you may know, the Mid-Atlantic is a large, you know, poultry and pork. In the streets and so certainly the beneficial reuse in the region is pretty high relative to that, and like I said, also for beverage. So we do capture it today and have been, you know, certainly any other considerations, but right now it's in good use and we have great partners that are, you know, taking that, taking that off-site today.
Speaker Change: that are taking that CO2 and you know it is being used in a valuable food and beverage industry and cold chain storage. As you may know the Mid-Atlantic is a large you know poultry and pork
Charles Neivert: And like I said, also for beverage. So we do capture it today and have been, you know, certainly other considerations. But right now, it's in good use. And we have great partners that are, you know, taking that, taking that off, taking to that.
Speaker Change: industries and so certainly the
Speaker Change: The beneficial reuse in the region is pretty high relative to that, and like I said, also for beverage. So, we do capture it today and have been. Certainly any other considerations, but right now it's in good use and we have great partners that are...
Speaker Change: Thank you for taking that offtake today.
Charles Neivert: Yeah, I guess the off-site people aren't, because you, in effect, that CO2 doesn't, well that's a better term, disappear. You can't get the green credit, but obviously you've got some credit for whatever sales it's worth. Well, I look at the, again, at AS, as what you say. I mean, the realization that sulfur is, you know, a valuable part of the input. Do you think that's, do you think that's going to contribute to a better spread over urea over time? I mean, you know, historically there's been a, you know, there's clearly that relationship. It's had a certain spread over time.
Charles Neivert: Yeah, I guess the offtake people aren't because, in effect, the CO2 doesn't, for lack of a better term, disappear; you can't get the green credit, but obviously, you've got some credit for whatever sales it's worth. When I look at the, again, at a, uh, Would you say I mean the realization that sulfur is, you know, a valuable part of the input? Do you think that's going to contribute to a better spread over urea over time?
Speaker Change: Yeah, I guess the offtake people aren't, don't, because you, in effect, the CO2 doesn't, for lack of a better term, disappear. You can't get the green credit, but obviously you've got some credit for whatever sales it's worth.
Speaker Change: When I look at the, again, at a,
Speaker Change: would you say I mean the realization that sulfur is you know a valuable part of the input do you think that's do you think that's going to contribute to a better spread over urea over time?
Charles Neivert: I mean, you know, historically, there's been a, you know, there's clearly that relationship has had a certain spread over time. Do you think that's something that's now going to grow because of that realization is more and have you seen sort of more acceptance of AS in the US, or are we just substituting in part for Chinese products that used to come across? I mean, how do you see that market shifting?
Speaker Change: I mean you know historically there's been a you know there's that clearly that relationship it's had a certain spread over time you think that's something that's now
Erin Kane: You think that's something that's now going to grow because of that realization is more, and I've seen sort of more acceptance of AS in the U.S. or we're just substituting in part for Chinese products that used to come across. I mean, how do you see that market shifting? Yeah, I mean, certainly, you know, as we share, there is that consideration on the, you know, baseline nitrogen nutrition price of which we're, you know, working the premium for the sulfur value preposition, but we agree, believe certainly, the willingness to pay and the acceptance of the sulfur proposition is, didn't want that, you know, again, our field research, our agonimists have been out, but we certainly are seeing it strengthen the last 18 to 24 months.
Speaker Change: [inaudible]
Erin Kane: Yeah, I mean, certainly, as we've shared, there is that consideration of the, you know, baseline nitrogen nutrition price of which we're working the premium for the software value proposition. But we do believe, certainly, the willingness to pay and the acceptance of the software proposition has been one that, you know, again, our field research, our agronomists have been out, but we certainly are seeing strength in the last 18 to 24 months. We expect software consumption to continue to increase accordingly, and there's a clear willingness to pay for that boost in yield.
Speaker Change: Yeah, I mean, certainly, you know, as we've shared, there is that consideration on the, you know, baseline nitrogen nutrition price of which we're, you know, working the premium for the software value proposition, but
Erin Kane: We do believe, certainly, the willingness to pay and the acceptance of the software proposition has been one that, you know, again, our field research, our agronomists,
Erin Kane: We expect sulfur consumption to continue to increase accordingly, and there's a clear willingness to pay for that, for that boost to yield. And, you know, depending on how much over the soft nitrogen additions, considering where corn is going, you know, anything you can do to boost yield under these kind of situations that relatively minimal cost, I think it's going to get looked at pretty positively.
Speaker Change: have been out, but we certainly are seeing a strength in the last 18 to 24 months. We expect software consumption to continue to increase accordingly, and there's a clear willingness to pay for that boost to yield.
Charles Neivert: And, you know, depending on how much over the soft nitrogen additions, considering where corn is going, anything you can do to boost yield under these kind of situations at relatively minimal cost, I think is going to get looked at pretty positively. On the nylon side of things, has there been any particular market that's been making things a little bit better, or is it really spread across all the basic nylon markets?
Speaker Change: But I'm you know depending on how much
Speaker Change: over the the soft nitrogen addition.
Speaker Change: considering with where corn is going you know anything you can do to boost yield under these kind of situations at relatively minimal cost I think it's going to get looked at pretty
Charles Neivert: On the nylon side of things, has there been any particular market that's been making things a little bit better, or is it really spread across all the basic nylon markets?
Speaker Change: Positively. On the nylon side of things, has there been any particular market that's been making things a little bit better or is it really spread across all the basic nylon markets?
Erin Kane: Yeah, I mean, here in North America, and certainly, you know, it is the region we want to focus on with the clarity of our ability to support our customers here. You know, the resiliency, again, you've seen more of it in an EP; you're enjoying plastics, really buoyed by automotive. We've seen packaging come back as well, and there certainly were pressures, you know, several months ago, relative to food inflation. You know, we've all seen those numbers come back, so that's supporting, you know, revenue packaging, and others that perhaps were pulled back, you know, along the way.
Erin Kane: Yeah, I mean, here in North America, I mean, certainly, it is the region we want to focus on with the clarity of our ability to support our customers here. You know, the resiliency, again, we've seen more of it in EP, or engineering plastics, really buoyed by automotive. We've seen packaging come back as well. And there certainly were pressures, you know, several months ago, relative to food inflation.
Speaker Change: Yeah, I mean, here in North America, I mean, certainly, you know, it is the region we want to focus on.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Speaker Change: really buoyed by automotive. We've seen packaging come back as well. I mean, there certainly were pressures, you know, several months ago relative to food inflation. You know, we've all seen those numbers come back. So that's supporting, you know, red meat packaging and others that perhaps were pulled back.
Erin Kane: You know, we've all seen those numbers come back. So that's supporting, you know, red meat packaging and others that perhaps were pulled back, you know, along the way. And, you know, again, as I mentioned before, it's really that building construction, you know, area that, you know, is, I think, stable now, but certainly the most challenged given the macro, you know, dynamic that we fit in relative to interest rates, mortgage rates, which just really slow down residential, but more importantly, you know, I think the commercial side, you know, indicators are, you know, not.
Erin Kane: And, you know, again, as I mentioned before, it's really that building construction, you know, area that, you know, is, I think, stable now, but certainly the most challenge given the macro, you know, dynamic, you know, that we sit in relative to interest rates, mortgage rates, which is just really slow down. Residential, but more importantly, you know, I think the commercial side, you know, indicators are... You know, they're growing, but they're not growing at the rate that they want, you know, growing at a path. So they're definitely a recognized slowing there, but that's kind of how it plays out.
Speaker Change: You know along the way and you know again as I mentioned before it's really that building construction, you know area that You know is I think stable now, but certainly the most challenge given the macro, you know dynamic you know that we fit in relative to
Speaker Change: interest rates, mortgage rates, which is just really slow down residential, but more importantly, you know, I think the commercial side, you know, indicators are
Erin Kane: They're growing, but they're not growing at the rate that they have grown in the past. So there definitely is a recognized slowing there. But that's kind of how it plays out. You know, there have been some supply considerations. You know, so I think that has enabled us to, you know, not just capture some of the recovery, but also, you know, a consideration in share as well.
Speaker Change: You know not
Speaker Change: There's...
Speaker Change: They're growing, but they're not growing at the rate that they've grown in the past, so there definitely is a recognized slowing there, but that's...
Erin Kane: You know, there have been some supply considerations, you know, so I think that has enabled us to, you know, not just capture some of the recovery, but also, you know, a consideration in share as well.
Speaker Change: Kind of how it plays out. You know, there have been some supply considerations, you know, so I think that has enabled us to, you know, not just capture some of the recovery, but also, you know, a consideration in share as well.
Charles Neivert: So natural gas, obviously, has been moving downward quite a bit over the last few months in particular. Are you guys heads in any way, or are you able to take pretty much full advantage of the declining gas, particularly obviously on the amount you unit, but just in general? And is that something in terms of the AS spread that's going to make it look better even as the market, you know, moves into a seasonally weaker period in your sales shift, you know, toward South America and maybe a little less granular and a little more of the standard product.
Charles Neivert: Natural gas obviously has been moving downward quite a bit over the last few months, in particular. Are you guys hedged in any way, or are you able to take pretty much full advantage of the decline in gas, particularly on the ammonia unit, but just in general? And is that something in terms of the AS spread that's going to make it look better even as the market moves into a seasonally weaker period and your sales shift, you know, toward South America and maybe a little less granular and a little more of the standard product? But I assume the gas should help a lot.
Speaker Change: Natural gas obviously has been moving downward quite a bit over the last few months in particular. Are you guys hedged in any way, or are you able to take pretty much full advantage of the decline in gas? Particularly obviously on the ammonia unit, but just in general? And is that something in terms of the AS spread?
Speaker Change: That's going to make it look better even as the market, you know, moves into a seasonally weaker period and your sales shift You know toward South America and maybe a little less Granular and a little more of the standard product, but I assume the gas should help a lot
Erin Kane: But I assume the gas should help a lot.
Erin Kane: Yeah, Charlie, we have a natural course, normal course; we don't hedge natural gas. It is a consideration in terms of the, you know, the variable calls for ammonia sulfate and fertilizers and can impact, you know, the pricing, the marketplace, you know; therefore, there is a COVID-alongers term correlation, you know, over time with respect to, you know, and market pricing and that feedstock. So, as a normal course, we don't hedge with respect to the poor look. You know, we did see a bit of a spike in natural gas in July, but it did correct and come back down and settle at a lower level in August, and we'll continue to watch it.
Erin Kane: Yeah, Charlie, we as a natural course normal course, we don't hedge natural gas. It is a consideration in terms of the you know, the variable cost for ammonium sulfate and fertilizers and can impact You know the pricing the marketplace, you know, therefore there is I'll call it a longer term correlation, you know over time with respect to You know and market pricing and that that feedstock. So as a normal course, we don't we don't hedge with respect to the The forward look, you know, we did see a bit of a spike in natural gas in in July, but it did correct and come back down and settle at a lower level In August and we'll continue to watch it but net net overall I'd say for Q3 our expectation is that you know, that's where gas costs will be up a bit And then we'll obviously monitor it closely here as we get into the fourth quarter
Speaker Change: Yeah, Charlie, we as a natural course, normal course, we don't hedge natural gas. It is a consideration in terms of the, you know, the variable cost for ammonium sulfate and fertilizers and can impact
Charlie: you know the pricing the marketplace you know therefore there is
Charlie: I'll call it a longer term correlation, you know, over time with respect to
Speaker Change: and Market Pricing and that feedstock. So as a normal course we don't...
Speaker Change: We did see a bit of a spike in natural gas in July , but it did correct and come back down and settle.
Erin Kane: But maddened overall, I'd say for Q3, our expectation is that, you know, natural gas costs will be up a bit, and then we'll obviously monitor it closely here as we get into the fourth quarter.
Speaker Change: at a lower level in August , and we'll continue to watch it.
Speaker Change: Net overall, I'd say for Q3, our expectation is that natural gas costs will be up a bit And then we'll obviously monitor it closely here as we get into the fourth quarter
Charles Neivert: I think that does it for me today. Thanks very much. Perfect. Thanks, Charlie.
Charles Neivert: I think that does it for me today. Thanks very much.
Speaker Change: I think that does it for me today. Thanks very much.
Operator: Ladies and gentlemen, this concludes today's question-and-answer session.
Erin Kane: And ladies and gentlemen, this concludes today's question and answer session. I will turn the conference back to Erin Kane for any closing remarks.
Speaker Change: Perfect. Thanks, Charlene. And ladies and gentlemen, this concludes today's question and answer session. I will turn the conference back to Erin Kane for any closing remarks.
Erin Kane: I will turn the conference back to Aaron Cain for any closing remarks. Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the continued operational and commercial benefit that our team captured and drove to support our second quarter performance, as well as the key considerations for our favorable earnings outlook. The strength of our business model and our position as a diversified chemistry company will serve us well, and we can continue to expect performance this year to demonstrate our resilience. We feel very good about the strategies we've implemented and our continued investments to support expectations for advancements as long-term sustainable performance.
Erin Kane: Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the continued operational and commercial benefits that our team captured and drove to support our second quarter performance, as well as the key considerations for our favorable earnings outlook. 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.
Erin Kane: Thank you all again for your time and interest this morning. We hope this call and discussion have clarified the continued operational and commercial benefits that our team captured and drove to support our second quarter performance, as well as the key considerations for our favorable earnings outlook.
Erin 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.
Erin Kane: We feel very good about the strategies we've implemented and our continued investments to support expectations for AdvanSix's long-term sustainable performance. With that, we look forward to speaking with you again next quarter. Stay safe, and be well.
Speaker Change: We feel very good about the strategies we've implemented and our continued investments to support expectations for AdvanSix's long-term sustainable performance. With that, we look forward to speaking with you again next quarter. Stay safe and be well.
Erin Kane: With that, we look forward to speaking with you again next quarter.
Operator: Stay safe and be well.
Operator: The conference has concluded. Thank you for joining today's presentation.
Operator: The conference has concluded. Thank you for joining today's presentation. You may now disconnect.
Operator: You may now disconnect.
Speaker Change: The conference has concluded. Thank you for joining today's presentation. You may now disconnect.
Vincent Anderson: Vincent Anderson, Erin Kane, David Silver, Charles Neivert, Adam Kressel, Michael Preston, AdvanSix