Q1 2025 AdvanSix Inc Earnings Call
Operator: Good day and welcome to the 2025. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by the star key.
Good day and welcome to the advance Inc's first quarter 2025 earnings conference call.
Participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star keys, 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 telephone keypad to withdraw your question. Please press Star then.
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Two.
Speaker Change: Please note. This event is being recorded I would now like to turn the conference over to Adam Crustal VP Investor Relations and Treasurer. Please go ahead.
Adam Kressel: I would now like to turn the conference over to Adam. Thank you, Megan.
Speaker Change: Thank you Meghan good morning, and welcome to advanced <unk> first quarter 2025 earnings Conference call with me here today are president and CEO, Erin Kane and senior Vice President and CFO Sid managers for this call and webcast, including any non-GAAP reconciliations are available on our web.
Erin Kane: Good morning and welcome to AdvanSix's first quarter 2025 earnings conference call. With me here today are President and CEO Erin Kane and Senior Vice President and CFO Sidd Manjeshwar. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com.
Speaker Change: Site at investors <unk> advanced <unk> Dot com.
Erin Kane: 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 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.
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.
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.
Erin Kane: This morning, we will review our financial results for the first quarter of 2025 and share our outlook for our key product lines and end market.
Speaker Change: This morning, we will review our financial results for the first quarter 2025 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 advanced six as president and CEO Erin Kane.
Erin Kane: Finally, we'll leave time for your questions at the end.
Erin Kane: So with that, I'll turn the call over to AdvanSix's 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, AdvanSix delivered significantly improved year-over-year performance. The first quarter results reflect improved operational performance, continued strength in plant nutrients, and the previously announced insurance settlement proceeds. First, we know that operational excellence is a key enabler to our overall performance. Our planned plant turnarounds, as well as prioritized maintenance capital investments, are critical to supporting high equalization rates and capturing the operational leverage of our competitive cost advantage.
Erin Kane: Thanks, Adam and good morning, everyone. We appreciate you joining us here today for our quarterly call.
Erin Kane: You saw in our press release advantages delivered significantly improved year over year performance.
Erin Kane: The first quarter results reflect improved operational performance continued strength in plant nutrients and the previously announced insurance settlement proceeds.
Erin Kane: First we know that operational excellence is a key enabler to our overall performance.
Erin Kane: Our planned plant turnaround as well as prioritize maintenance capital investments are critical to supporting high utilization rates and capturing the operational leverage of our competitive cost advantage.
Erin Kane: 2024 highlighted the meaningful annual opportunity of sustainably running at our targeted production rate. Across our integrated value chain, asset utilization was up nearly 20% to meet customer demand and I'm pleased to report that our first half turnaround work at Frankfurt and Hopewell is successfully behind us. Secondly, despite a slow start to the year, our competitive position enabled our team to drive higher volume to meet our customers' needs and achieve a 4% increase in market pricing. This was led by strength in plant nutrients, with continued robust ammonium sulfate premiums over urea, while we navigated margin impact driven by higher raw material prices, namely natural gas and sulfur.
Erin Kane: 'twenty 'twenty four highlighted the meaningful annual opportunity of sustainably running at our targeted production rates.
Erin Kane: Our integrated value chain, I think utilization was up nearly 20% to meet.
Erin Kane: Customer demand and I am pleased to report that our first half turnaround work at Frankfurt and Hopewell is successfully behind us.
Erin Kane: Secondly, despite a slow start to the year, our competitive position enabled our team to drive higher volume to meet our customers' needs and achieve a 4% increase in market pricing.
Erin Kane: This was led by strength in plant nutrients with continued robust ammonium sulfate premiums over urea, while we navigated margin impact driven by higher raw material prices, namely natural gas and sulfur.
Erin Kane: We remain well-positioned to serve our customers across our diversified portfolio, including fertilizer as the domestic planting season progresses in acetone amid a balanced global supply and demand environment. and across the modestly recovering nylon industry. Lastly, as we previously announced, we drove a successful conclusion of our multi-year efforts to recover losses associated with the 2019 PES Cumulus Supplier Shutdown. This included a final Omnibus settlement in the first quarter of 2025 of approximately $26 million. In total, we received approximately $39 million of aggregated insurance proceeds since the 2019 event. We have supplemented our commercial success with continued investment in growth and enterprise initiatives in support of sustainably improving through-cycle profitability.
Erin Kane: We remain well positioned to serve our customers across our diversified portfolio, including fertilizer as the domestic planting season progresses in acetone amid a balanced global supply and demand environment.
Erin Kane: And across it modestly recovering nylon industry.
Erin Kane: Lastly, as we previously announced we drove a successful conclusion of a multiyear effort to recover losses associated with the 2019 P. S. Cumulus supplier shut down.
Erin Kane: This included a final omnibus settlement in the first quarter of 2025 on approximately $26 million.
Erin Kane: In total we received approximately $39 million of aggregated insurance proceeds since the 2019 event.
Erin Kane: We have supplemented our commercial success with continued investment in growth in enterprise initiatives in support of sustainably improving through cycle profitability.
Erin Kane: We continue to focus on making the necessary investments at the right time to support our long-term performance.
Erin Kane: We continue to focus on making the necessary investments at the right time to support our long term performance.
Erin Kane: As we move through the remainder of 2025 and navigate a dynamic environment, we are well-positioned to support our strategic growth priorities as a U.S.-based manufacturer aligned to domestic supply chains and energy markets, as well as a diverse set of end-market applications.
Erin Kane: As we move through the remainder of 2025 and navigate a dynamic environment, we are well positioned to support our strategic growth priorities in the U S based manufacturer aligned to domestic supply chains and energy markets as well as a diverse set of end market applications.
Siddharth Manjeshwar: Now let me turn the call over to Sidd to walk through the financials. Thanks, Erin, and good morning. I'm now on slide four, where I'll highlight key items of the first quarter 2025 financials. Sales of $378 million in the quarter increased approximately 12% versus the prior year. Sales volume increased approximately 7%, primarily driven by improved operational performance and higher granular ammonium sulfate sales. Supported by our flagship Sustained Growth Program. Market-based pricing was up 4%, driven by continued strength in plant nutrients, reflecting favorable North American ammonium sulfate supply and demand conditions. Raw material pass-through pricing was up 1%.
Erin Kane: Let me turn the call over to Sam to walk through the financials.
Sam: Thanks, Aaron and good morning.
Sam: Now on slide four where I'll highlight the key items of the first quarter 2025 financials.
Sam: Sales of $378 million in the quarter increased approximately 12% versus the prior year.
Sam: Sales volume increased approximately 7%, primarily driven by improved operational performance and higher granular ammonium sulfate sales.
Sam: Supported by our flagship sustained growth program.
Sam: Market based pricing was up 4% driven by continued strength in plant nutrients, reflecting favorable north American ammonium sulfate supply and demand conditions.
Sam: The raw material pass through pricing was up 1%.
Siddharth Manjeshwar: Adjusted EBITDA was $52 million and adjusted EBITDA margin was 13.7%. I'll walk through the year-over-year variances on the next slide. Adjusted earnings per share of $0.93 increased by $1.49 versus the prior year. The effective tax rate was 19.3% compared to 25.7% in the first quarter of 2024, primarily driven by an additional $1.8 million in 45Q tax credits claimed for the 2019 period. Free cash flow was negative $23 million in the quarter, up $49 million versus the prior year. Cash flow from operations of $11 million increased $48 million versus the prior year, primarily due to higher net income.
Sam: Adjusted EBITDA was 52 million and adjusted EBITDA margin was 13, 7%.
Sam: I'll walk through the yard or where your variances on the next slide.
Sam: Adjusted earnings per share of <unk> 93, and.
Sam: <unk> increased by $1 49 versus the prior year.
Sam: The effective tax rate was 19, 3% compared to 25, 7% in the first quarter of 'twenty 'twenty four primarily driven by an additional 1.8 million and 45 Q tax credits claim for the 2019 period.
Sam: Free cash flow was negative 23 million in the quarter.
Sam: 49 million versus the prior year.
Cash flow from operations of 11 million increased $48 million versus the prior year, primarily due to higher net income.
Siddharth Manjeshwar: Capital expenditures of $34 million in the quarter decreased $1 million.
Sam: Capital expenditures of $34 million in the quarter decreased 1 million.
Siddharth Manjeshwar: I'd like to thank our dedicated and talented employees for supporting our operational excellence while driving commercial success across our diversified product portfolio and a job well done on the turnaround.
Sam: I'd like to thank our dedicated and talented employees for supporting our operational excellence, while driving commercial success across our diversified product portfolio and a job well done on the turnarounds.
Siddharth Manjeshwar: Now let's turn to slide five. Here we highlight the key drivers of our first quarter 2025 adjusted EBITDA performance compared to the prior year period. Pricing over raw materials was unfavorable by $5 million. Tracking our key variable margin drivers, we saw a contraction in acetone margins over rising propylene costs in the first quarter. In plant nutrients, ammonium sulfate prices increased year over year but were largely offset by significantly higher natural gas and sulfur input costs. Lastly, we saw a modest increase in our Nylon and Caprolactam portfolio over Benzene. The absence of the prior disruption supported higher volume and improved operational performance.
Sam: Now, let's turn to slide five.
Sam: Yeah.
Sam: Here, we highlight the key drivers of our.
Sam: First quarter 2025, adjusted EBITDA performance compared to the prior year period.
Sam: Pricing over raw materials was unfavorable by 5 million track.
Sam: Tracking key variable margin drivers, we saw a contraction in acetone margins over rising propylene costs in the first quarter.
Sam: In plant nutrients ammonium sulfate prices increased your where you are but were largely offset by significantly higher natural gas and sulfur input costs.
Sam: Lastly, we saw a modest increase in our nylon and caprolactam portfolio or benzene.
Sam: The absence of the prior year disruption supported higher volume and improved operational performance.
Siddharth Manjeshwar: Volume represented a $10 million improvement year-over-year, including favorable mix of higher granular ammonium sulfate sales, supported by our investments in the Sustained Growth Program. Operational performance and other items were a 20 million tailwind with improved plant output and a focus on cost discipline and productivity. As Erin mentioned, we received the previously announced $26 million of final PES insurance settlement proceeds in the first quarter.
Sam: Volume represented a $10 million improvement year over year, including favorable mix of higher granular ammonium sulfate sales supported by our investments and the sustained growth program.
Sam: Operational performance and other items of about 20 million tailwind with improved plant output and <unk>.
Sam: Our focus on cost discipline and productivity.
Sam: As Aaron mentioned, we received the previously announced 26 million of final P. S insurance settlement proceeds in the first quarter.
Siddharth Manjeshwar: Now let's turn to slide six. Our healthy balance sheet, ample liquidity, and prudent leverage ratios have continued to support reinvestment, growth, and return of cash. Our CAPEX framework is a key pillar of our balanced and value-creative capital allocation strategy. We remain focused on our base maintenance. and Health, Safety and Environmental Spend, which has averaged $75-90 million per year. to support safe, stable and sustainable operations and our enterprise programs to support long-term operational excellence and risk mitigation. Above and beyond that, we've invested in a pipeline of high growth. and cost savings projects with our flagship sustained growth program representing our largest near-term organic investment supporting compelling IRRs of over 30%.
Sam: Now, let's turn to slide six.
Sam: Our healthy balance sheet ample liquidity and prudent leverage ratios have continued to support reinvestment growth and return of cash.
Sam: Our Capex framework is a key pillar of our balanced and value creating capital allocation strategy.
Sam: We remain focused on our base maintenance.
Sam: And health safety, and environmental spend which has averaged $75 million to $90 million per year.
Sam: To support safe stable and sustainable operations.
Sam: And our enterprise programs to support long term operational excellence and risk mitigation.
Sam: Above and beyond that we've invested in a pipeline of high growth.
Sam: And cost savings projects with our flagship sustained growth program, representing our largest near term.
Sam: Organic investment supporting compelling IRR of over 30%.
Siddharth Manjeshwar: We've tightened our overall CAPEX forecast for the full year 2025 to a range of $145 to $155 million. We recognize that in the current macro dynamics, managing cash flow is critical. We're focused on generating positive free cash flow for the year while making smart and disciplined investments to support our through-cycle performance. Beyond 2025, we do expect Base CapEx to moderate next year, as the Frankfurt Dock and Boiler projects are completed, with further declines anticipated in 2027 as our Hopewell Water Program investment is moderated over its remaining years. Our growth pipeline is evaluated and replenished on an ongoing basis and we expect to see the heaviest of our spend for the sustain program in 2025 and 2026.
Sam: We've tightened our overall capex forecast for the full year 'twenty 'twenty five to a range of 145 to 155 million.
Sam: We recognize that in the current macro dynamics managing cash flow is critical we're focused on generating positive free cash flow for the year, while making smart and disciplined investments to support our through cycle performance.
Sam: Beyond 'twenty to 'twenty five we do expect base Capex to moderate next year as the Frankfurt dock and boiler projects are completed with further declines anticipated in 2020 seven as a whole well water program investment is moderated always remaining years.
Sam: Our growth pipeline is evaluated and replenished on an ongoing basis and we expect to see the heaviest of our spend for the sustain program in 2020 five 'twenty 'twenty six.
Siddharth Manjeshwar: Overall, we continue to seek the best risk-adjusted return opportunities.
Sam: Overall, we continue to seek the best risk adjusted return opportunities now.
Erin Kane: Now, let me turn the call back to Erin. Thanks, Sid. I'm now on slide seven to discuss each of our product lines, starting with our plant nutrients business. In the lead up to the North American Springs, we saw nitrogen fertilizer pricing increase in the quarter amid higher energy costs and tighter supply and demand. Industry Corn Belt ammonium sulfate prices were up 34% year-over-year and 25% sequentially from the fourth quarter, outpacing broader nitrogen and supporting continued healthy realized sulfur premium. We are continuing to monitor higher raw material prices on a year-over-year basis, particularly natural gas and sulfur, which are expected to impact fertilizer margins overall.
Aaron: Now, let me turn the call back to Aaron.
Aaron: Thanks said I am now on slide seven to discuss each of our product lines, starting with our plant nutrient business.
Aaron: And the lead up to the North American spring, we saw nitrogen fertilizer pricing increase in the quarter amid higher energy costs and tighter supply and demand.
Aaron: Industry corn belt ammonium sulfate prices were up 34% year over year, and 25% sequentially from the fourth quarter outpacing broader nitrogen and supporting continued healthy realized software premiums.
Aaron: We are continuing to monitor higher raw material prices on a year over year basis, particularly natural gas and sulfur which are expected to impact fertilizer margins overall.
Erin Kane: We remain confident that the underlying industry fundamentals will continue to support nutrient demand. Expectations for 95 million acres of corn in the U.S. represents one of the largest plantings, while stock-to-use ratios remain below 10% supporting crop prices. Given the positive weather outlook, we're anticipating having an earlier season than we've recently seen, which could modestly impact the back half of June in-season sales. As always, we're working closely to serve our plant nutrients customers as the season progresses. Our volume growth has been strong in this fertilizer year compared to last and supplemented with favorable mix supported by the progression of our Sustained Growth Program.
Aaron: We remain confident that the underlying industry fundamentals will continue to support nutrient demand.
Aaron: Expectations for 95 million acres of corn in the U S represents one of the largest plantings well stock to use ratios remain below 10% supporting crop prices.
Aaron: Given the positive weather outlook.
Aaron: We're anticipating having an earlier season than we've recently seen which could modestly impact the back half of June in season sales.
Aaron: Ali we're working closely to starve our plant nutrients customers as the season progresses.
Aaron: Our volume growth a strong this fertilizer year compared to last and supplemented with favorable mix supported by the progression of our sustained growth program.
Erin Kane: We continue to anticipate production capability by the end of 2025 to reach a milestone of 72% granular conversion. up from roughly 70% at the end of 2024.
Aaron: We continue to anticipate production capability by the end of 2025 to reach a milestone of 72% granular conversion.
Aaron: Up from roughly 70% at the end of 2024.
Erin Kane: Overall, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space. We continue to see strong demand for ammonium sulfate as growers understand the value and seek ways to maximize crop yields.
Aaron: Overall, we remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space.
Aaron: We continue to see strong demand for ammonium sulfate as growers I understand the value and seek ways to maximize crop yields.
Erin Kane: Let's turn to slide 8. For Nylon, it was a slow start to the year, but we saw orders and pricing pick up through the quarter amid lower benzene costs supporting a modest price rose expansion in the U.S. Domestic nylon demand remains stable amid highly dynamic macro factors. Customer indicators downstream have pointed to a modest uptick in commercial construction applications supported by return-to-office and hospitality sectors.
Aaron: Let's turn to slide eight.
Aaron: Yeah.
Aaron: For that one it was a slow start to the year, but we saw orders and pricing pick up through the quarter, I mean, lower benzene costs supporting and modest price, where all the expansion in the U S.
Aaron: Domestic nylon demand remains stable and then highly dynamic macro factors.
Aaron: Customer indicators downstream have pointed to a modest uptick in commercial construction applications supported by return to office and hospitality sectors.
Erin Kane: The path uncertainty to a lower interest rate environment, which would favorably impact building and construction and markets, and translate to improved demand in fiber and filament applications, continues to be difficult to predict. Our order book across the packaging space has been studied, and we continue to monitor potential inflationary impacts on consumer buying behavior. Tariff and trade policy uncertainty has impacted engineering plastics, most particularly into the auto value chain, which represents significant demands for that end use. Outside of the U.S., persistent global oversupply conditions continue to pressure pricing and spread. Operating rates in China remain robust despite soft demand in the region.
Aaron: The path uncertainty to a lower interest rate environment, which would favorably impact building and construction end markets and translate to improved demand in fiber and filament applications continues to be difficult to predict.
Aaron: Our order book across the packaging has been steady and we continue to manage our potential inflationary impacts on consumer buying behavior.
Aaron: Tariff and trade policy uncertainty has impacted engineering plastics, most particularly into the auto value chain, which represent a significant demand for that and yes.
Outside of the U S persistent global oversupply conditions continued to pressure pricing and spreads.
Aaron: Operating rates in China remained robust despite soft demand in the region.
Erin Kane: As a result, trade flows out of China, primarily to Southeast Asia and Europe, have also continued to limit pricing improvement globally. Third-party reporting has cited a moderation in China operating rates in April, which is encouraging, but far from a trend.
Aaron: The result trade flows out of China, primarily to South East Asia, and Europe have also continued to limit pricing improvement globally.
Aaron: Third party reporting had cited a moderation in China operating rates in April which is encouraging but far from a trends.
Erin Kane: While we continue to navigate a protracted downturn in the cycle, I would characterize our nylon business overall as performing a bit better than what we had seen just a few months ago. Our focus remains on supporting improved through cycle profitability by driving productivity, optimizing our regional product-sales mix, and continuing to promote the value proposition of our differentiated nylon office.
Aaron: Well, we continue to navigate a protracted downturn in the cycle I would characterize our nylon business overall is performing a bit better than what we had seen just a few months ago.
Aaron: Our focus remains on supporting improved through cycle profitability by driving productivity optimizing our regional and product sales mix and continuing to promote the value proposition of our differentiated and island offerings.
Erin Kane: while benefiting from running at higher operating rates relative to our Let's turn to slide nine. Moving to chemical intermediates, industry realized acetone prices over refinery-grade propylene costs declined sequentially and year-over-year in the first quarter, in part due to higher input costs. but it remains above cycle average. Propylene prices settled significantly higher on the back of refinery turnarounds and lower trading volumes in the industry. From an acetone supply and demand perspective, while phenol operating rates continue to remain low, we did see a slow start to the year, particularly into the large buyer space.
Aaron: While benefiting from running at higher operating rates relative to our peers.
Aaron: Let's turn to slide nine.
Aaron: Moving to chemical intermediates industry realized acetone prices over refinery grade propylene costs declined sequentially and year over year in the first quarter in part due to higher input costs.
Aaron: But it remains above cycle averages.
Aaron: Propylene prices are significantly higher on the back of refinery turnarounds and lower trading volumes in the industry.
Aaron: From an acetone supply and demand perspective, while phenol operating rates continued to remain low we did see a slow start to the year, particularly into the large fire space.
Erin Kane: A reminder, this sector primarily serves the MMA market. And as we shared previously, there were several industry turnarounds occurring in the first quarter. Into the second quarter, acetone demand is expected to modestly improve following the completion of those downstream turnarounds and seasonal improvements in paints and coatings. Supply and demand conditions overall, as well as stabilization of propylene costs, are expected to continue to positively support acetone spreads at or above cycle averages, however this does represent a year-over-year headwind. Demand across the rest of chemical intermediates continues to remain mixed into ag chemicals, electronics, and European paints and coatings, though many of these chemistries serve high value applications in support of longer term growth and profitability.
Aaron: As a reminder, the sector primarily serves the M&A markets now as we shared previously there were several industry turnarounds occurring in the first quarter.
Aaron: Into the second quarter acetone demand is expected to modestly improve but many of the completion of those downstream turnarounds and seasonal improvements in paints and coatings.
Aaron: Supply and demand conditions overall as well as stabilization of propylene costs are expected to continue and should continue to positively support acetone spreads at or about cycle averages. However, this does represent a year over year headwind.
Aaron: Demand across the rest of chemical intermediates contingents remain mixed and to add chemicals electronics and European paints and coatings. So many of these chemistries are high value applications in support of longer term profitability.
Erin Kane: Let's wrap up on slide 10 before moving to Q&A.
Aaron: Let's wrap up on slide 10, before moving to Q&A.
Erin Kane: We thought it would be worthwhile to spend a moment on our position as a diversified chemistry company. Our business is aligned to domestic, agricultural, and manufacturing supply chains and energy markets, as well as a diverse set of end market applications. While we know that 2025 will again be another dynamic year, we are well positioned as an American manufacturer of essential chemistries and will continue to pivot where needed. As a reminder, all five of our manufacturing sites are located in the U.S., primarily along the East Coast. We are largely insulated from first-order impacts of reciprocal tariffs with nearly 90 percent of our sales in the U.S.
Aaron: We thought it'd be worthwhile to spend a moment on our position as a diversified chemistry company.
Aaron: Our business is aligned to domestic agricultural and manufacturing supply chain and energy markets as well as a diverse set of end market applications.
Aaron: While we know that 2025 will again be another dynamic here, we are well positioned as an American manufacturer of essential chemistry is and will continue to pivot where needed.
Aaron: As a reminder, all five of our manufacturing sites are located in the U S. Primarily along the east coast. We are largely insulated from first order impacts are reciprocal tariffs with nearly 90% of our sales in the U S and most of our key product lines being in a net import industry position.
Erin Kane: and most of our key product lines being in a net import industry position. We have been operating with structural tariffs in place globally across our value chains for quite some time, so we feel we are adept at navigating an environment like this. AdvanSix is also advantaged to the domestic energy market with nearly all direct raw materials procured from the U.S. And in fact, we have a limited reliance on foreign vendors with approximately 98% of all supplier spend procured domestically. We are continuing to monitor the potential second and third order impacts on demand across end markets, particularly since we operate far back in the value chain.
Aaron: We have been operating with structural tariffs in place globally across our value chains for quite some time.
Aaron: So we feel very adept at navigating an environment like this.
Aaron: Advanced makes its also advantage to the domestic energy market with nearly all direct raw material secured from the U S and.
Aaron: And in fact, we have eliminated reliance on foreign vendors with approximately 98% of all suppliers that procure domestically.
Aaron: We are continuing to monitor the potential second and third order impacts on demand across end markets, particularly since we operate far back into by Daiichi.
Erin Kane: In times of uncertainty, we're keenly focused on delivering on what we can control. This includes taking a measured and a disciplined approach to cost and cash management while maintaining smart investments for sustainable long-term performance. We also continue to protect our healthy balance sheet, enabling our strategic capital allocation framework to provide optionality for further value creation and remain confident in the potential of AdvanSix.
Aaron: In times of uncertainty, we're keenly focused on delivering on what we can control.
Aaron: This includes taking a measured and disciplined approach to cost and cash management, while maintaining smart investments for sustainable long term performance.
Aaron: We also continue to protect our healthy balance sheet, enabling our strategic capital allocation framework to provide optionality for further value creation and remain confident that attached to the ethics.
Erin Kane: With that, Adam, let's move to Q&A. Thanks, Erin.
Adam Crustal: With that Adam let's move to Q&A.
Operator: Megan, can you please open the line for questions? We will now begin the call. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the button. At any time your question has been addressed and you would like to withdraw your question, please press star.
Maggie: Thanks, Darren Maggie can you. Please open the lines for questions.
Maggie: We will now begin the question and answer session.
Maggie: To ask a question you May press Star then one on your telephone keypad.
Maggie: You are using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and he would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our...
Maggie: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from David Silver with C. L. King. Please go ahead.
David Silver: David Silver with C.L. King.
David Silver: Please go ahead. Yeah, hi. Good morning. Morning. Yeah, so and I'm sorry, I have a I can't read my own handwriting here. Sorry.
David Silver: Yeah, Hi, good morning.
Speaker Change: Good morning.
Speaker Change: Yeah. So then I'm, sorry, I can't read my own handwriting here sorry.
David Silver: I would like to maybe just pick up on I guess Sidd's comments or both of your comments regarding you know, Tactical Moves are Preparing for Uncertainty and you know in particular You know, I guess your company had a playbook of some sort, you know, as of a few years ago, tied to pandemic pressures. And while it's not a perfect guide, I'm assuming there is, you know, a few pages that you could have pulled from that earlier playbook for use here. But just in particular, you know, Erin, you talked about things you can control. And, you know, is this a period where, as a company, you want to maybe increase or selectively build up inventories and strategic inputs?
Speaker Change: I would like to maybe just pick up on I guess sids comments or both of your comments regarding you know.
Speaker Change: Technical moves or preparing for uncertainty.
Speaker Change: And you know in particular.
Speaker Change:
Speaker Change: I guess your company had a playbook of some sort you know as of a few years ago tied to pad.
Speaker Change: Pandemic pressures and while it's not a perfect guide I'm, assuming there is a few pages that you could've pulled from.
Speaker Change: That earlier book playbook for us here, but just in particular.
Speaker Change: Aaron Aaron you talked about things you can control and.
Speaker Change: Has this is this a period where.
Speaker Change: Has the company you want to maybe increase or selectively build up inventories in strategic inputs.
David Silver: or maybe any other concrete steps that you're thinking of.
Speaker Change: Or maybe any other.
Speaker Change: Concrete steps that you're you're thinking of and then for Sid you know you did mention cash flow and managing cash.
Erin Kane: And then for Sidd, you did mention cashflow and managing cash. Is this kind of an opportunity to increase borrowing capability or gaining more financial flexibility that way? I'll stop there, thank you. Sure. And David, as you mentioned, certainly, you know, the playbook from, you know, prior trials and recessionary, you know, considerations, you know, will serve us well, right? We've been through this, you know, as we've said, we've navigated various cycles, you know, through our time, you know, as a company here. Relative to, you know, operating the value chain, you know, again, given that, you know, we're a U.S.-based manufacturing chain, our raw materials are here, we're producing, and then predominantly selling here, allows us to really ensure that we're running the business to our business rules.
Speaker Change: Is this a kind of an opportunity to increase.
Speaker Change: Borrowing capability or you know gaining more financial flexibility that way.
Speaker Change: I'll stop there thank you.
Speaker Change: Sure Andy.
Andy: As you mentioned certainly you know the playbook from prior troughs and recessionary considerations.
Andy: You know well will serve us well right we've been through this he knows he said we've navigated various.
Andy: Various cycles through our time on.
Andy: As a company here relative.
Andy: Relative to operating the value chain, you know again, given that you know where we're a U S based manufacturing chain. Our raw materials are here, we're producing and then predominantly selling here allows us to really ensure that we're running the business to our business rolls. So I don't think that's at the time at currently.
Erin Kane: So, I don't think this is a time, you know, at current, we're very focused on delivering for our customers, having the right service levels accordingly, and continuing to right size, you know, the inventory buffers, really against the operational performance of our plant. So, you know, I don't think at this time, you know, I know in the past, we may have, you know, used inventories in the balance sheet to navigate through. We are not there, and I don't see that as part of how we're operating at current.
Andy: Are you focused on delivering for our customers, having the right service levels Accordingly, and are continuing to right size.
Andy: I know the inventory buffers I'm really against the operational performance of our of our plants. So yeah. I don't think at this time you know I know in the past we may have them.
Andy: Used.
Andy: Inventories in the balance sheet to navigate through them, we are not there and I don't I don't see that as part of how we are operating at Cod.
Siddharth Manjeshwar: Yeah, and I think just building on Erin's comment, and hope you're doing well, Dave on a good question. Look, I think, you know, from a finance perspective, and just from a strategy perspective, right, what I'd say is, look, Today, our leverage is roughly one times. We've got ample liquidity, right, in this period of uncertainty. We continue to believe cash is king and have a laser focus on driving cash flow, like you heard in our prepared remarks. And as we think about that, we continue to focus on tightening up our supply chains, right, improving our working capital terms and efficiency.
Andy: Yeah, and I think just building on Aaron's comments and hope you're doing well.
David Silver: Well, Dave on good question look I think you know from a finance perspective, and just from a strategy perspective, right. What I'd say is look to.
David Silver: Today, our leverage is roughly one times, we've got ample liquidity right. In this period of uncertainty. We continue to believe cash is king and have a laser focus on driving cash flow like you heard in our prepared remarks.
And as we think about that we continue to focus on tightening up our supply chains right improving our working capital to ons inefficiency and then you know as we look at costs across our fixed asset base, we look to drive drive those costs down and amortize those costs over a larger molecule base right, while meeting our customers' needs.
Siddharth Manjeshwar: And then, you know, as we look at costs across our fixed asset base, we look to drive those costs down and amortize those costs over a larger molecule base, right, while meeting our customers' needs. So I think, you know, those are the tangible things. And then the other piece which I'd highlight is the intangibles, right. I think continuously we have a mindset of countermeasures to stay very agile as a company as we sort of jab and tack, you know, seeing what the trade winds present us. And I think we've got that focus constantly in everything that we do across the organization.
David Silver: I think those are the tangible things and then the other piece, which I would highlight is the intangibles right I think continuously we have a mindset of countermeasures to stay very agile as a company as as we sort of job and Jack you know seeing what the the trade winds are present us and I think we've got that focus constantly in everything that we do across.
David Silver: The organization.
David Silver: Okay, thank you for that.
Speaker Change: Okay. Thank you for that.
David Silver: I wouldn't want to follow up, I guess, on one input, and that would be sulfur. You know, my, just my history with it is that I'm always worried at times like this when You know, the supply might be constrained by an economic slowdown while, you know, agricultural demand remains steady or even better. How concerned are you, or what steps can you take to ensure, not necessarily, I'm not interested in the particular price that will find its own level, but can you take steps to increase your assurance of supply in a pinch? Could you substitute purchases?
Speaker Change: I wouldn't want to follow up I guess on one input and that would be sold for.
Speaker Change: You know my just my history with it is that I'm always worried at times like this when.
Speaker Change: The supply might be constrained by an economic slowdown while agricultural demand remains steady or even better.
Speaker Change: How concerned are you or what steps can you take to ensure not necessarily I'm not interested in a particular price that will find its own level, but you know can you take steps to increase you know you're assure in sub supply in a pinch could you substitute purchased salt.
Erin Kane: Sulfuric Acid for Purchases of Elemental Sulfur. Just, you know, what's the flexibility in your system just to ensure that, you know, the sulfur side of your input requirements are covered? Yeah. So certainly we we buy molten sulfur, you know, bringing that into our sulfuric acid and oleum plant, you know, we have a, you know, broad based supply, a mix of of vendors across the board. I would say, though, that, you know, our discussions with external analysts indicate that the supply demand is actually more balanced than probably the current price indicates. You know, so we certainly do, you know, we have this short-term, you know, pressure relative to the settlement, but we would anticipate software to come down and, and again, right now, you know, believe that supply is ample, you know, for our needs.
Speaker Change: Uric acid for purchases of elemental sulfur just you know what's the flexibility in your system just to ensure that our you know.
Speaker Change: The sulfur side of your input requirements are covered.
Speaker Change: Yeah.
Speaker Change: So it certainly means we buy molten sulfur you know, bringing that into our sulfuric acid and oleum plants. You know we have a broad based supply mix of.
Speaker Change: Our vendors across the board I would say, though that you know our discussions with external analysts indicate that the supply demand is actually more balanced than probably the current price indicates.
Speaker Change: So we certainly do you know we have this short term pressure relative to the settlement, but we would anticipate software to come down and and again right now I believe that supply is ample borrowing needs.
David Silver: Okay, great. Thank you for that.
Speaker Change: Okay, great. Thank you for that.
David Silver: I did have a question about ammonium sulfate and the outlook there. I mean, I do think the fundamentals have been very healthy for a little while here domestically.
Speaker Change: Did have a question about ammonium sulfate and the outlook. There I mean I do think the fundamentals have been very healthy for a little while here domestically.
Erin Kane: I am thinking a little bit about that, you know, post-spring demand outlook. Have you kind of been getting inquiries, you know, just given the relatively firm fundamentals there, have you been getting inquiries from overseas or are you adjusting your strategies, you know, as a result of the profit opportunities? Just how are you thinking about the post-spring demand and deployment of your, demand for and deployment of your ammonium sulfate product? Certainly, you know, right now, we're in the heart of the season and, you know, focused here on maximizing, you know, our granular sales into the heart of the season, you know, as we do progress towards the end, right, just as you say, we pause, we reflect, we look at the fundamentals, you know, obviously, there's a lot here relative to yields and acres and farmer profitability and things of that nature.
Speaker Change: I'm thinking a little bit about the you know post the spring <unk>.
Speaker Change: Manned outlook.
Speaker Change: Have you kind of been getting inquiries just given the relatively firm fundamentals. There have you been getting inquiries from overseas or do you.
Speaker Change: Are you adjusting your strategies you know as a result of the profit opportunities just how are you thinking about the post spring.
Speaker Change: Demand in deployment of your demand for in deployment of your.
Speaker Change: Ammonium sulfate products.
Yeah.
Speaker Change: Certainly right now we're at we're in the heart of the season and are you know focused here on maximizing.
Speaker Change: Our granular sales into the heart of the season, you know as we do progressed towards the end trade I'm just as you say, we pause very flat we'd look at the fundamentals.
Speaker Change: Obviously, there's a lot here relative to yields in acres and farmer profitability and things of that nature. You know and then we will move into the domestic you know fall sell you know program as they go relative to.
Erin Kane: You know, and then we will move into the domestic, you know, fall, fill, you know, program as we go relative to, you know, inquiries, you know, we definitely do get regular inquiries, but, again, given our investments and the growth in the domestic demand, that is ultimately where we are focused and, you know, certainly with sustain, it's an increasing focus, right, on our domestic demand growth with our key customers here and our exports are reduced.
Speaker Change: Inquiries, we definitely do get regular inquiries, but again, given our investments in the growth in domestic.
Speaker Change: Demand that is that is ultimately where we are focused and you know certainly with sustain it's an increasing focus right on our domestic demand growth with our key customers here and our exports are reducing overtime.
David Silver: Thank you. Okay, very good.
Speaker Change: Okay.
Speaker Change: Okay very good.
David Silver: I did have a question on the nylon side here, and I'm making reference to your comments in the press release regarding, you know, kind of positioning yourself for a more protracted period of, I guess, you know, softer demand. Um, could you just qualitatively kind of discuss, you know, how you, uh, you know, plan to maybe shift your marketing emphasis, you know, to, uh, adapt to, uh, the, the more protracted period of demand weakness that you're citing. Sure. And maybe as a point of clarification, it's probably not more protracted from last release and last call, but just that the protraction continues, if that is helpful, right?
Speaker Change: I did have a question on the nylon.
Nylon side here and I'm, making reference to your comments in the press release regarding you know kind of positioning yourself for a more approach protracted period of I guess.
Speaker Change: Softer demand.
Speaker Change: Could you just qualitatively kind of discuss you know how you.
Speaker Change: Plan to maybe shift your marketing emphasis.
Speaker Change: To adapt to the the more protracted period of demand weakness that you are citing.
Speaker Change: Yeah.
Speaker Change: Sure and maybe as a point of clarification, it's probably not more protracted from from last our last release in last call, but just that the Protraction continues and saw it that is helpful. Right now that we necessarily see that it has gotten.
Erin Kane: Not that we necessarily see that it has gotten more challenging. Just that this value chain, like others, is living through just a persistent global oversupply environment. And so as we navigate through that, we certainly are focused on serving the domestic silent demand. Again, I would reiterate that here in North America, demand remains stable. Obviously, there's quite a bit that we have to continue to watch in this highly dynamic set of macro factors. Of course, we focus on our mix as well. Certainly, as we look and continue to focus on packaging, on our wire and cable accounts, these are areas where more of the differentiated nylon offerings come to play.
Speaker Change: More challenging just that are you know this value chain like others is living through just the persistent global oversupply environment and so you know as we navigate through that we certainly are focused on serving the.
Speaker Change: The domestic violence demand again.
Speaker Change: Again, I would reiterate that you know here in North America.
Speaker Change: Demand remains stable. Obviously, there is you know quite a bit you know that we have to continue to watch it in this highly dynamic set of macro factors.
Speaker Change: We focus on our mix as well certainly as we look and continue to focus on packaging on our wire and cable account. You know these are areas where more of the differentiated nylon offerings, you know come to play and a and then of course, we just need to manage the productivity.
Erin Kane: And then, of course, we just need to manage the productivity and the cost side and some of the more challenging application sets. So again, we focus on our customers, being customer-centric, understanding what offerings they need as they continue to drive forward into their value chains. And so it's really just much more of what we've already been doing and continuing forward, recognizing that those self-help measures and the focus on the domestic opportunity set is going to be key to the success.
Speaker Change: <unk> and and the cost side and you know some of the more challenging application sets.
Speaker Change: So again, that's a if we were focused on our customers being customer centric understanding what offerings they need as they continue to.
Speaker Change: Jai for it into their value chain and so it's really just much more of what we've already been doing and continuing forward recognizing that those self help measures and our focus on the domestic opportunity.
Speaker Change: Opportunities that's going to be key to this success.
Speaker Change: Yeah.
David Silver: Okay, and then last one from me, but I did notice in your discussion, in the slide covering your chemical intermediates unit, you did cite patent infringement proceedings. and regarding your EasyBlock additives.
Speaker Change: Okay, and then last one for me, but.
Speaker Change: I did notice in your talk in your discussion in the slide covering your chemical intermediates our unit.
Speaker Change: You did cite a patent infringement proceedings.
Speaker Change: And regarding your easy block additives and.
Erin Kane: Just wondering if you could discuss that a little bit, I mean, I guess, just sticking to what's publicly available. But, you know, just maybe if you could kind of characterize this is, well, first of all, congratulations for having a product that people want to poach your technology from. But separately, you know, it says Europe here, but I'm kind of scratching my head and wondering where the source of the infringement originated. But anyway, maybe if you could just share, you know, a brief overview of that and then your expectations for how the infringement proceedings might progress.
Speaker Change: Just wondering if you could.
Speaker Change: Discuss that a little bit I mean, I guess just.
Speaker Change: Looking to what's publicly available but.
Speaker Change: Just maybe if you could kind of characterize this as this well first of all congratulations for having a product that people want to poach your technology for them.
Speaker Change: But separately.
Speaker Change: It says Europe here, but I'm kind of scratching my head wondering where the source of the infringement are originated but.
Speaker Change: Anyway, maybe if you could just share you know in over a brief overview of that and then your expectations for how the.
Speaker Change: Our infringement proceedings might might progress. Thank you.
Erin Kane: Thank you. Yeah, sure. You know, maybe by, you know, way of background and reminder, sorry, Easy Blocks 2-Pentanonoxine, you know, really since March of 22 has been the only an ideal replacement for for Meco. Again, this was a drop-in replacement for Meco, which was severely restricted by the EU Chemical Regulatory Agency for toxicity concerns. So it was a great, great the European Patent Office formally granted, you know, the patent covering those claims as an anti-skinning agent and not blood paints and coatings. So, you know, we're in a position really to protect the market exclusivity in 23 countries, you know, in the patent convention in Europe until April of 2036, right?
Speaker Change: Yeah sure you know maybe by.
Speaker Change: The way of background I'm, a reminder, sorry easy blocks to pension or vaccine you know really since March 22 has been the only an ideal replacement for me go Oh, My goodness, what that drop in replacements for Mako, which was severely restricted by the E chemical regulatory agency for toxicity can.
Speaker Change: So it was a great a great drop in great product.
Speaker Change: And then in 2020 for the European Patent office formally granted the patent covering those claims.
Speaker Change: Anti skinning agent Nahcolite paints and coatings. So you know we're in a position related to protect the market exclusivity in 23 countries. You know in the patent Convention Europe until April of 'twenty 36, right and so obviously, that's as important to US as you point out and we continue to.
Erin Kane: And so obviously this is important to us, as you point out, and we continue to, you know, work with our key partners to ensure that, A, there's, you know, clear end-user awareness of the patent protection.
Speaker Change: You know work with our key partners to ensure that Hey, there is you know clear end user awareness.
Erin Kane: You know, I'll leave it to you. You can probably connect dots, you know, on where most likely sources come for folks who don't necessarily abide by patent rules, right, in the world. And so, you know, relative to, you know, the legal matters, right, they are proceeding. You know, we can't necessarily comment, you know, further on on those. We would seek damages for past unauthorized sales of 2PO and then certainly ask for permanent injunction so that the infringing product does not interfere, right, with our opportunity set and development of the product. Okay, that's great. Thank you very much.
Speaker Change: The patent protection.
Speaker Change: You know I'll leave it to you you can probably connect dots on where most likely sources coming for folks who don't.
Speaker Change: Necessarily.
Speaker Change: Bye Bye [laughter] patent rolls right in the World and so you know relative to you know the legal matters right. They are proceeding.
Speaker Change: You know we can't necessarily comments you know further on on those.
Speaker Change: We would seek damages for past unauthorized sales of two P. M.
Speaker Change: And then certainly asked for permanent injunction.
Speaker Change: The infringing product does not interfere right with our opportunity set and development of the product.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay. That's great. Thank you very much I appreciate all the color.
David Silver: I appreciate all the color. You got it.
Speaker Change: Got it.
Operator: Again, if you have a question, please press star then. Your next question...
Speaker Change: Again, if you have a question. Please press Star then one.
Charles <unk>: Our next question comes from Charles <unk> with Piper Sandler. Please go ahead.
Charles Neivert: Charles Neivert with Pipeline. Please go ahead. Morning, everybody. Just a few questions. One on the nylon side, China obviously has some position here in the US and assuming some level of tariff exists. Do you guys anticipate a being able to pick up some market share from the fact that their product is going to become a lot more expensive? And, you know, from what they do bring in How does that, might that affect your share, I mean, your, excuse me, your product mix? I mean, if they're bringing in carpet, you're going to get carpet business, if they're bringing in other resin, you're going to get the other resin business, or is there something you guys are going to be doing to sort of adjust product mix based on, you know, changes due to the, due to the, the potential for some tariffs on that, on that front?
Charles: Good morning, everybody.
Charles <unk>: Just a few questions one on the nylon side.
Charles <unk>: China, obviously has some position here in the U S and assuming some level of tariff exist do you guys anticipate a being able to pick up some market share from the fact that their product is going to become a lot more expensive.
Charles <unk>: And from what they do bring in.
Charles <unk>: How does that might that affect your share.
Charles <unk>: In your excuse me your product mix I mean, if they're bringing carpet you don't always get carpet business.
Charles <unk>: We're bringing in the other resin youre going to get the other resin business or is there something you guys are going to be doing to sort of adjust carp.
Charles <unk>: Product mix based on changes due to the <unk>.
Charles <unk>: Due to the the.
Charles <unk>: The potential for some tariffs on that on that front and then by the same token you guys have talked as well about your own export too.
Charles Neivert: And then by the same token, you guys have talked as well about your own export to domestic mix, and at times has affected earnings. Where are we today? And do you anticipate that changing over the next, let's say, six months or a year if the, you know, significant tariffs come into place? Yeah, okay. A lot there.
Charles <unk>: Domestic mix and at times has affected earnings where are we today and do you do you anticipate that changing over the next let's say six months or a year.
Charles <unk>: Significant tariffs come into place.
Charles <unk>: Yeah.
Charles <unk>: Yeah, Okay, a lot there, let's see if we can unpack that for you. Charlie. Thanks, you know I think when we look at them nylon overall it probably is an area that you know if terrorists lead to higher costs and sort of consumer.
Erin Kane: Let's see if we can unpack that for you, Charlie. Thanks. You know, I think when we look at nylon overall, it probably is an area that, you know, if terrorists lead to, you know, higher costs and sort of consumer, you know, lead recessionary environment, we know that this is a space that will be most challenged. But, you know, relative to what we're, you know, seeing right now, you know, right now the focus is watching on the engineering plastic demand. You know, and this is certainly, you know, has an interplay with with Mexico and automakers, you know, there's a, you know, the dependency on parts that are made in Mexico and certainly the demand in inside the U.
Charles <unk>: Lagged recessionary environment.
Charles <unk>: We know that this is the space that will be most challenged but you know what.
Charles <unk>: Relative to what we're seeing.
Charles <unk>: Seeing right now are the you know right now the focus is watching on the engineering plastic demand.
Charles <unk>: It certainly has an interplay with with Mexico and automakers there.
Charles <unk>: Or is that you know the dependency on parts that are made in Mexico, and certainly the demand in our inside the U S. So that's the area that we're watching closely obviously theres a lot of moving parts associated with pauses.
Erin Kane: S. So that's the area that we're watching closely. Obviously, there's a lot of moving parts, you know, associated with pauses, bilateral agreements here as we go. But that's probably the area to watch the closest, you know, obviously, as you say, for downstream product. You know, increased costs for imported yarns or carpets would help the fiber and filament, you know, folks and our customers in there and their pricing opportunities, but then relative to direct tariff on. on PA6. You know, currently, you know, it's unfortunate, but Nylon 6 is excluded from the retaliatory tariff list. You know, this could change.
Charles <unk>: Bilateral agreements here as we go but that's probably the area to watch the closest honestly did you say for our downstream products.
Charles <unk>: Increased costs for imported yarns are carpets would help the fiber and filament you know folks and our customers in there and there are pricing opportunities, but then relative to <unk>.
Charles <unk>: Direct tariffs on.
Charles <unk>: One P a six.
Charles <unk>: It's currently.
Yeah, it's unfortunate, but nylon six is excluded from the retaliatory tariff list.
Erin Kane: We're obviously, like many, reviewing Annex 2, but, you know, something we'll have to watch. But again, you know, it's not as if, we see more parts and compounds and things down the chain coming in than perhaps direct Nylon at current. So, you know, relative to our mix, as you say, you know, we are, you know, at times in sort of a balance to net export position. That's predominantly net export inside the North American region, you know, versus going to other places in the world. You know, again, if we remain focused on, you know, the same measures I shared with David earlier, that's kind of how we seek the opportunities to navigate through here.
Charles <unk>: Could change we're obviously like many reviewing annex two but you know something will have to watch but again.
Charles <unk>: You know, it's not as if we.
Charles <unk>: We see more parts and compounds and things down the chain coming and then that perhaps direct dialogues at current so.
Charles <unk>: Relative to our mix as you say you know we are you know at times inside of a balance to 10 net export position, that's predominantly net export inside that North American region versus.
Charles <unk>: <unk> is going to other places in the world.
Charles <unk>: You know again, if we remain focused on.
Speaker Change: At the same measure as I shared with David earlier, that's kind of how we see the opportunity set to navigate through here and then you know the caprolactam side that at times, we export relative to meet demand.
Erin Kane: And then, you know, the Capri-Lactam side that at times we export relative to meet demand, you know, some of that is into more or less South America. So right now it's, you know, continuing on, I would say our exports in this space in Q1 were sort of consistent with, you know, the historical averages. So kind of steady as she goes here, if you will, and just focus on the execution for the remainder of the year.
Speaker Change: You know some of that isn't it more or less South America itself right now is.
Speaker Change: Continuing on I would say are our exports.
Speaker Change: Their space and in Q1 were sort of consistent with.
Speaker Change: Historical averages so a kind.
Speaker Change: Kind of steady as she goes here if you will and are just focused on the execution for the remainder of the year.
Charles Neivert: And on the ammonium sulfate side, obviously you talked about the higher acreages that are going in. You've got a little bit of an early start to the year, I guess, which is good, which means potentially it ends a little earlier. I think you mentioned that as sort of late June might be some tail off. But I mean, given the acreages. Given the pricing for corn, are you guys seeing like, and volumes are up, but it's sort of hard to measure whether it's just, you know, a timing thing, but does it look like volume over the course of the season is going to be substantially higher given the acreage?
Speaker Change: Yeah Okay.
Speaker Change: The ammonium sulfate side, obviously, you talked about the higher acreage deals that are going in you've got a little bit of an early start to the year I guess, which is good which means potentially ends a little earlier I think you'd mentioned that in sort of late June might be some tail off but I mean, given the acreage is.
Speaker Change: Given the pricing for corn are you guys seeing like.
Speaker Change: Volumes are up but it's sort of hard to measure whether it's just.
Speaker Change: A timing thing, but does it look like volume.
Speaker Change: Over the course of the season is going to be substantially higher give it given the acreage and are you seeing any more.
Charles Neivert: And are you seeing any more, like a higher application rate on the acres that you're, you know, you're selling into?
Speaker Change: Like a higher application rate on the acreage at year.
Speaker Change: You are selling into.
Erin Kane: Yeah, great, great clarifying question. Certainly, you know, our order book was was robust headed into into this season. We we should have a record volume really for the fertilizer year and very close in Q2, as you say, if this is a robust planting, robust use of of sulfur nutrition. You know, the the point around June, you know, as you can say, like, you know, by this time in the year, right, we've our. sort of modus operandi is to position everything into the market, into the value chain, so that it can go, you know, to the field.
Speaker Change: Yeah, no great Great clarifying question certainly in our order book was was robust headed into into the season. We we should have a record volume really for the fertilizer year and very close in Q2 as you say it is this is a robust planting.
Speaker Change: Robust use of of Salford nutrition.
Speaker Change: You know the the point around June you know as you can say like.
Speaker Change: This time in the year right.
Speaker Change: Our.
Speaker Change: Sort of modus operandi is to position everything into the market into the value chain. So that it can go.
Speaker Change: No two to the field, obviously, when there's a little bit of a longer season. If you will you get an extended top dress type application and so you know when we are low on inventories. If you will out of the play out we get that extension of every extra day of production a week of production on that extended season.
Erin Kane: Obviously, when there's a little bit of a longer season, if you will, you get an extended top dress, you know, type application. And so, you know, when we are low on inventories, if you will, out of the plant, we get that extension of every extra day of production or week of production on that extended season, then goes out in, you know, what is a supply, tight supply demand environment, so you get that extra, extra tail. That's the part that is difficult to call every year. And so that's just the part that's difficult to call now.
Speaker Change: And goes out.
Speaker Change: In you know what is the supply tight supply demand environment. So you get that extra extra tail. That's the part that is difficult to call every year and so that's the part that's difficult to call now but.
Charles Neivert: But all things said, you know, a robust, a robust year for us and a robust season.
Speaker Change: Being said a robust.
Speaker Change: Robust year for us and a robust season.
Charles Neivert: Okay, then the last question is... On the CapEx side, you said after 25 you sort of hit peak and you start winding down a little bit, 26, 27, or some of these projects complete. But if you're looking at a total spend between CapEx plus the opportunity stuff that you also talk about, does that mean we have, for lack of a better term, assuming we don't have any real serious earnings issues, that we've got actually more to spend on those opportunistic type of acquisitions? And does the pipeline, given the current situation, does the pipeline for acquisition look a little better right now?
Speaker Change: Yes.
Speaker Change: Last question is.
Speaker Change: On the Capex side, you said after 25 years, what do you see things you start we'll start winding down a little bit 'twenty six 'twenty seven or some of these projects complete.
Speaker Change: If youre looking at a total spend between Capex plus the opportunities stuff that you will also pause about does that mean, we have for lack of a better term assuming that we don't have any real serious earnings issues that we've got actually more to spend on those.
Speaker Change: Those opportunistic type of acquisitions and how does the pipeline given the current situation does the pipeline for acquisitions look a little better right now I mean, just in terms of what might be out there.
Charles Neivert: I mean, just in terms of what might be out there. And obviously, again, if you're spending less, you may have more to get there. those things become available.
Speaker Change: Obviously again, if you're spending less you may have more to get there.
The thing that become available.
Siddharth Manjeshwar: Yeah, no, certainly. Yeah, no, certainly that's as you, as you think about that, obviously, we would look to continue to, you know, bring that base CapEx, you know, back in line as we lap some of these larger enterprise considerations, we continue to, you know, refresh and look at organic opportunities. I mean, these things are also, you know, in our in our wheelhouse, right, and typically have some of the best risk adjusted, you know, return profiles. But certainly there are, they just say, I think the, the, the time and energy heating up relative to, you know, inorganic opportunities, you know, I think that's an area that we will continue to to look at and evaluate as well.
Speaker Change: Yeah, No certainly no more.
Speaker Change: Yeah, no. It's certainly that such as you as you think about that obviously we would.
Speaker Change: Look to continue to.
Speaker Change: Bring that base Capex, you know back in line as we lap some of these larger enterprise.
Speaker Change: Considerations.
Speaker Change: We continue to you know.
Speaker Change: Refresh and look at organic opportunities I mean these things are also you know in our in our wheelhouse right and typically have.
Speaker Change: Some of the best risk adjusted return profile is.
Speaker Change: But certainly there are they just say I think the the.
Speaker Change: The time in LNG heating up relative to inorganic opportunities.
Speaker Change: You know I think that's an area that we will continue to.
Speaker Change: To look at and evaluate as well I'm itself.
Siddharth Manjeshwar: Right? So.
Charles Neivert: Well, that's it from my end. Thanks. Thanks, Charlie.
Speaker Change: Okay.
Speaker Change: That's it from my end thanks.
Speaker Change: Thanks, Sean.
Operator: This concludes our question and answer session.
Speaker Change: This concludes our question and answer session.
Erin Kane: I would like to turn the conference back over to Erin Kane for any closing comments. Thank you all again for your time and interest this morning. We are confident in our demonstrated ability to perform through a multitude of environments. We feel very good about the strategies we've implemented and our continued investments to support expectations for AdvanSix's long-term sustainable performance. Importantly, we are well positioned as a U.S.-based diversified chemistry company with a resilient business model to navigate the current macro dynamics.
Speaker Change: I'd like to turn the conference back over to Erin Kane for any closing remarks.
Speaker Change: Thank you all again for your time and interest. This morning, we are confident in our demonstrated ability to perform through a multitude of environments. We feel very good about the strategies, we've implemented and our continued investments to support expectations for advance it says long term sustainable performance in.
Speaker Change: Accordingly, we are well positioned as a U S based diversified chemistry company with a resilient business model to navigate the current macro dynamics.
Erin Kane: With that, we look forward to speaking with you again next quarter.
Speaker Change: With that we look forward to speaking with you again next quarter and stay safe and be well.
Operator: Stay safe and be well.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.