Trinseo (NYSE: TSE), a specialty material solutions provider,
today released preliminary result estimates for third quarter of
2022. Net income from continuing operations is estimated to be
between negative $123 million and negative $118 million and
Adjusted EBITDA* is estimated to be between negative $42 million
and negative $37 million. In addition, cash from operations is
estimated to be between $95 million and $100 million with Free Cash
Flow* estimated to be between $56 million and $61 million.
Third quarter results were negatively impacted by several
factors. Historically high natural gas prices resulted in negative
styrene margins in Europe throughout the quarter. Customer demand,
particularly in consumer durables and building and construction
applications, was very low in Europe and Asia. In addition, steep
declines in raw material prices led to a high level of customer
destocking, largely in polystyrene, ABS and polycarbonate, as well
as an unfavorable net timing impact during the quarter of
approximately $25 million. Third quarter net income and Adjusted
EBITDA also included a one-time pre-tax charge of approximately $23
million related to raw material contract obligations and writedowns
for slow-moving inventory.
“Third quarter results reflect the continuing erosion of
consumer sentiment in Europe as well as the lack of any meaningful
recovery in Asia following the COVID-19 lockdowns in the first half
of the year. Customers de-stocked throughout the quarter in the
face of economic uncertainty, a sharp decline in raw material
prices as well as very elevated natural gas prices,” said Frank
Bozich, Trinseo’s President and Chief Executive Officer. “However,
we believe that fourth quarter results and cash generation should
be sequentially higher based on moderately stronger orders in Asia
and from the potential idling of our styrene assets in Europe.”
In response to the challenging macroeconomic environment,
Trinseo is evaluating its asset footprint to improve its economic
position and operating flexibility. The following initiatives are
under consideration which in aggregate, under current market
conditions, the Company believes would result in an annual
profitability improvement of approximately $60 million:
- Potential closure of the Boehlen, Germany
styrene plant: As previously announced, the Company has
commenced discussions with the Works Council of Trinseo Deutschland
GmbH regarding the potential closure of this facility. If closed,
styrene needs for Trinseo's downstream businesses would be obtained
entirely via production at its Terneuzen, the Netherlands facility
as well as from external purchases. Profitability at the Boehlen
facility was approximately negative $30 million during the 12
months ending June 2022.
- Optimization of Polycarbonate production
and sourcing: The Company is evaluating steps to optimize
its production and supply chain for polycarbonate (PC) and
downstream PC Compounds. As part of this evaluation, the Company
has initiated discussions with the Stade Works Council of Trinseo
Anlagengesellschaft GmbH regarding the potential closure of one PC
production line at the Company's Stade, Germany facility which
would lower costs and greatly reduce exposure to the cyclical
merchant PC market.
- Optimization of the PMMA sheets
business: The Company is evaluating restructuring its PMMA
sheets business in North America.
- SB Latex capacity reduction in Hamina,
Finland: The Company is considering a reduction of its SB
Latex capacity at its Hamina, Finland plant starting in January
2023 due to the current over-capacity in Europe.
_________________________ *For a reconciliation Adjusted EBITDA
and Free Cash Flow, both of which are non-GAAP measures, to net
income from continuing operations and cash from operations, see
Notes 1 and 2 below.
Trinseo continues to maintain a strong balance sheet and has
significant sources of liquidity. The Company ended the third
quarter with approximately $243 million of cash and has over $500
million of availability under two undrawn, committed financing
facilities.
Bozich continued, “Our current liquidity position and history of
strong cash generation gives us high confidence in our ability to
continue to invest in our growth and sustainability objectives,
despite the challenging macroeconomic landscape. Meanwhile, we are
evaluating steps to improve our cost position and optimize our
global asset footprint to emerge in an even stronger position when
market conditions improve.”
Further details will be communicated on Trinseo’s third quarter
2022 earnings conference call on Thursday, Nov. 3 at 10 a.m.
Eastern Time. Commenting on the results will be Frank Bozich,
President and Chief Executive Officer, and David Stasse, Executive
Vice President and Chief Financial Officer. The conference call
will include introductory comments followed by a
question-and-answer session.
For those interested in asking questions during the Q&A
session, please register using the following link:
- Conference Call Registration
For those interested in listening only, please register for the
webcast using the following link:
After registering for the conference call, you will receive a
confirmation email with a meeting invitation and information for
entry. Registration is open through the live call, but it is
advised that you register in advance to ensure you are connected
for the full call.
Trinseo will distribute its third quarter 2022 financial results
via a press release on Business Wire and will post the release and
presentation slides on the Company’s Investor Relations website on
Wednesday, November 2, 2022 after the market close. The Company
will furnish copies of the financial results press release and
presentation slides to investors by means of a Form 8-K filing with
the U.S. Securities and Exchange Commission.
A replay of the conference call and transcript will be archived
on the Company’s Investor Relations website shortly following the
conference call. The replay will be available until November 3,
2023.
Unaudited financial data for the fiscal quarter ended September
30, 2022 presented above are preliminary, based upon our good faith
estimates and subject to completion of our financial closing
procedures. We have provided ranges for our expectations described
above because our fiscal quarter closing procedures are not yet
complete. While we expect that our final financial results for the
quarterly period ended September 30, 2022, following the completion
of our financial closing procedures, will be within the ranges
described above, our actual results may differ materially from
these estimates as a result of the completion of our financial
closing procedures as well as final adjustments and other
developments that may arise between now and the time that our
financial results for this quarterly period are finalized. All of
the data presented above has been prepared by and is the
responsibility of management. This summary is not a comprehensive
statement of our financial results for the quarterly period.
Note 1: Reconciliation of
Non-GAAP Performance Measures to Net Income
We present Adjusted EBITDA as a non-GAAP financial performance
measure, which we define as income from continuing operations
before interest expense, net; income tax provision; depreciation
and amortization expense; loss on extinguishment of long-term debt;
asset impairment charges; gains or losses on the dispositions of
businesses and assets; restructuring charges; acquisition related
costs and benefits, and other items. In doing so, we are providing
management, investors, and credit rating agencies with an indicator
of our ongoing performance and business trends, removing the impact
of transactions and events that we would not consider a part of our
core operations.
We also present Adjusted Net Income (Loss) as additional
performance measures. Adjusted Net Income (Loss) is calculated as
Adjusted EBITDA (defined beginning with net income from continuing
operations, above), less interest expense, less the provision for
income taxes and depreciation and amortization, tax affected for
various discrete items, as appropriate. We believe that Adjusted
Net Income (Loss) provides transparent and useful information to
management, investors, analysts and other stakeholders in
evaluating and assessing our operating results from
period-to-period after removing the impact of certain transactions
and activities that affect comparability and that are not
considered part of our core operations.
There are limitations to using the financial performance
measures noted above. These performance measures are not intended
to represent net income or other measures of financial performance.
As such, they should not be used as alternatives to net income as
indicators of operating performance. Other companies in our
industry may define these performance measures differently than we
do. As a result, it may be difficult to use these or
similarly-named financial measures that other companies may use, to
compare the performance of those companies to our performance. We
compensate for these limitations by providing reconciliations of
these performance measures to our net income, which is determined
in accordance with GAAP.
For the reasons discussed above, we are providing the following
reconciliations of expected net income from continuing operations
to Adjusted EBITDA and Adjusted Net Income (Loss) for the three
months ended September 30, 2022. See “Note on Forward-Looking
Statements” below for a discussion of the limitations of these
estimates. Amounts below may not sum due to rounding.
(Unaudited)
Three Months Ended
September 30,
(In millions, except per share
data)
2022
Adjusted EBITDA
$
(42) – (37)
Interest expense, net
(30)
Benefit from income taxes
~ 12
Depreciation and amortization
(46)
Reconciling items to Adjusted EBITDA
(a)
(17)
Net loss from continuing
operations
(123) – (118)
Reconciling items to Adjusted Net Loss
(a)
16
Adjusted Net Loss
$
(107) – (102)
________________________ (a)
Reconciling items to Adjusted EBITDA and Adjusted Net Loss for
the three months ended September 30, 2022 reflect the Company’s
preliminary estimate of adjustments for the period related
primarily to the Company’s ongoing strategic initiatives. The
income tax benefit related to these items is estimated utilizing
either (1) the estimated annual effective tax rate on our ordinary
income based upon our forecasted ordinary income for the full year
or, (2) for items treated discretely for tax purposes we utilized
the applicable rates in the taxing jurisdictions in which these
adjustments occurred.
Note 2: Reconciliation of
Non-GAAP Liquidity Measures to Cash from
Operations
The Company uses certain measures, such as Free Cash Flow as
non-GAAP measures, to evaluate and discuss its liquidity position
and results. Free Cash Flow is defined as cash from operating
activities, less capital expenditures. We believe that Free Cash
Flow provides an indicator of the Company’s ongoing ability to
generate cash through core operations, as it excludes the cash
impacts of various financing transactions as well as cash flows
from business combinations that are not considered organic in
nature. We also believe that Free Cash Flow provides management and
investors with useful analytical indicators of our ability to
service our indebtedness, pay dividends (when declared), and meet
our ongoing cash obligations.
Free Cash Flow is not intended to represent cash flows from
operations as defined by GAAP, and therefore, should not be used as
alternatives for that measure. Other companies in our industry may
define Free Cash Flow differently than we do. As a result, it may
be difficult to use this or similarly-named financial measures that
other companies may use, to compare the liquidity and cash
generation of those companies to our own. The Company compensates
for these limitations by providing the following detail, which is
determined in accordance with GAAP.
For the reasons discussed above, we are providing the following
reconciliation of expected cash provided by operating activities to
Free Cash Flow for the three months ended September 30, 2022. See
“Note on Forward-Looking Statements” below for a discussion of the
limitations of these estimates. Amounts below may not sum due to
rounding.
Free Cash Flow
(Unaudited)
Three Months Ended
September 30,
(In millions)
2022
Cash provided by operating activities
$
95 - 100
Capital expenditures
(39)
Free Cash Flow
$
56 - 61
About
Trinseo
Trinseo (NYSE: TSE) a specialty material solutions provider,
partners with companies to bring ideas to life in an imaginative,
smart, and sustainability-focused manner by combining its premier
expertise, forward-looking innovations and best-in-class materials
to unlock value for companies and consumers.
From design to manufacturing, Trinseo taps into decades of
experience in diverse material solutions to address customers’
unique challenges in a wide range of industries, including consumer
goods, mobility, building and construction, and medical.
Trinseo’s approximately 3,400 employees bring endless creativity
to reimagining the possibilities with clients all over the world
from the company’s locations in North America, Europe, and Asia
Pacific. Trinseo reported net sales of approximately $4.8 billion
in 2021. Discover more by visiting www.trinseo.com and connecting
with Trinseo on LinkedIn, Twitter, Facebook and WeChat.
Use of non-GAAP
measures
In addition to using standard measures of performance and
liquidity that are recognized in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”), we use additional measures of income excluding certain
GAAP items (“non-GAAP measures”), such as Adjusted Net Income,
EBITDA, Adjusted EBITDA and Adjusted EPS and measures of liquidity
excluding certain GAAP items, such as Free Cash Flow. We believe
these measures are useful for investors and management in
evaluating business trends and performance each period. These
measures are also used to manage our business and assess current
period profitability, as well as to provide an appropriate basis to
evaluate the effectiveness of our pricing strategies. Such measures
are not recognized in accordance with GAAP and should not be viewed
as an alternative to GAAP measures of performance or liquidity, as
applicable. The definitions of each of these measures, further
discussion of usefulness, and reconciliations of non-GAAP measures
to GAAP measures are provided herein.
Cautionary Note on
Forward-Looking Statements
This press release may contain forward-looking statements
including, without limitation, statements concerning plans,
objectives, goals, projections, forecasts, strategies, future
events or performance, and underlying assumptions and other
statements, which are not statements of historical facts or
guarantees or assurances of future performance. Forward-looking
statements may be identified by the use of words like "expect,"
"anticipate," “believe,” "intend," "forecast," "outlook," "will,"
"may," "might," "see," "tend," "assume," "potential," "likely,"
"target," "plan," "contemplate," "seek," "attempt," "should,"
"could," "would" or expressions of similar meaning. Forward-looking
statements reflect management’s evaluation of information currently
available and are based on our current expectations and
assumptions, our business, the economy and other future conditions.
Because forward-looking statements relate to the future, they are
subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Factors that might
cause future results to differ from those expressed by the
forward-looking statements include, but are not limited to, our
ability to successfully execute our transformation strategy and
business strategy; our ability to integrate acquired businesses;
global supply chain volatility and increased costs or disruption in
the supply of raw materials; increased energy costs or costs for
transportation of our products; the nature of investment
opportunities presented to the Company from time to time; the
outcome of the European Commission’s request for information; and
those discussed in our Annual Report on Form 10-K, under Part I,
Item 1A —"Risk Factors" and elsewhere in our other reports, filings
and furnishings made with the U.S. Securities and Exchange
Commission from time to time. As a result of these or other
factors, our actual results, performance or achievements may differ
materially from those contemplated by the forward-looking
statements. Therefore, we caution you against relying on any of
these forward-looking statements. The forward-looking statements
included in this press release are made only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221018006172/en/
Trinseo Andy Myers Tel : +1 610-240-3221 Email:
aemyers@trinseo.com
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