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Everchem Updates

VOLUME XXI

September 14, 2023

Everchem’s Closers Only Club

Everchem’s exclusive Closers Only Club is reserved for only the highest caliber brass-baller salesmen in the chemical industry. Watch the hype video and be introduced to the top of the league: read more

July 28, 2022

Tempur Sealy Comments

Tempur Sealy International Inc.’s (TPX) CEO Scott Thompson on Q2 2022 Results – Earnings Call Transcript

Jul. 27, 2022 10:37 AM ET

Company Participants

Aubrey Moore – Investor Relations

Scott Thompson – Chairman, President and Chief Executive Officer

Bhaskar Rao – Executive Vice President and Chief Financial Officer

Scott Thompson

Thank you, Aubrey. Good morning everyone and thank you for joining us on our 2022 second quarter earnings call. I’ll begin with some commentary on the second quarter, then spend some time discussing how we’re continuing to drive our long-term growth initiatives in the current very fluid operating environment. Then Bhaskar will review our second quarter financial performance in more detail and discuss our updated 2022 guidance, which has been revised to reflect the changes in the market. Finally, I’ll share a few closing remarks regarding how our business model would operate in a recessionary environment, and then we’ll open it up for Q&A.

In the second quarter of 2022, net sales were 1.2 billion and adjusted EPS was $0.58, both slightly below our expectations, primarily due to the U.S. market and a 30 million sales backlog on U.S. Sealy as we brought our new ERP system online. We made significant progress in this backlog and expect to return to normalized lead times by the end of the third quarter.

The second quarter was also impacted by three additional factors: first, whereas flare ups of COVID variances internationally, particularly in our Southeast Asia markets; second, commodity inflation impacting our cost ahead of the timing of our price increases, which went into effect at the end of June and will benefit future quarters; and third, operational investments to secure our supply chain, to retain flavor in order to maintain product quality and customer service.

Our international operation performed in-line with our expectations even as we faced challenges. In North America, the overall operating environment deteriorated during the quarter as the forward outlook for the economy and our sector diminished for all the reasons that have been well reported.

We believe that the overall U.S. mattress industry, our largest market, had its toughest volume decline in 15 years with units down 20% to 25% this quarter compared to last year. This environment again gave us a chance to demonstrate the resilience of our business model as we generated profit, invested in our business, returned capital to our shareholders, and outperformed the market.

The team continues to focus on execution. First, we continue to work on expanding our leading position in domestic U.S. bedding industry. The last few years, our growth initiatives and industry leading products have driven a meaningful outperformance relative to the market. We continue to drive market outperformance with our focused delivery best-in-class product quality and customer service.

Second, we completed our multi-year journey of transitioning more than 50 of our global subsidiaries and using five different ERP systems to using one common system. This investment in consolidating our operations is expected to drive long-term efficiencies across our global operations, enhance cyber security, facilitate customer communications regarding order status and improve our direct-to-consumer capabilities.

We now are truly one company as this completes the merger of Sealy and Tempur. I personally want to thank all of the employees who worked on this critical project. Great job. Third, Stearns & Foster performed very well relative to the market in the second quarter and is currently our fastest growing brand in the domestic market. Additionally, we launched the Stearns & Foster e-commerce website this quarter, although still very small, and is performing ahead of our expectations and ahead of where we were at this time when we launched our successful online [cocooned] [ph] by Sealy.

Consumer research has identified that there is an unmet market need or high-end traditional industry leading products and our Stearns & Foster e-commerce channel is designed to provide additional opportunities to serve this demand. Our approach is similar to our direct Tempur strategy and that we drive meaningful brand awareness to the benefit Stearns & Foster sales across all distribution channels, growing ASP, driving advertising dollars, and profits for all of our partners.

We’ll launch our all new collection of Stearns & Foster mattresses in the fourth quarter. The new Stearns & Foster lines designed to further distinguish our high-end traditional innerspring brand with superior technology, clear product step-up stories, and new contemporary look.

Fourth, in addition to Stearns & Foster launch, the other new product launches in our pipeline continue to be on-track and on-plan, furthering our objective to bring industry leading innovation to market. In the second quarter, we completed the rollout of our new premium Sealy products, which offer improved comfort and support technology. We also launched our new Sealy Natural Collection, which was thoughtfully designed with our commitment to sustainability environmental preservation [mark] [ph].

In the fourth quarter, we expect to launch a Sealy mattress with a best-in-class pressure-relieving gel grid layer at a consumer appealing mid-market price point. This product is designed to target a relatively small category of consumers looking for a non-traditional mattress feel.

In 2023, we expect to begin to roll-out our lineup of all new Tempur mattresses, pillows, and bed bases across both Europe and Asia. This new product line that features exciting customer centered innovation, allows better channel, and customer differentiation and at a wider price point. Retailer’s reaction to this new product and price points today has given us confidence that this updated product strategy will enable us to significantly increase our total international addressable market.

In addition to Asia and Europe rollouts, in the first quarter of 2023, we plan to introduce our new line of TEMPUR-breeze products in the U.S. along with a new line of adjustable basis with incremental consumer focused features and benefits. We had made substantial investments in 2021 and 2022 to prepare for these launches, and we’re looking forward to bringing these new consumer solutions to market.

Turning to the final highlight. In the first half of 2022, the incremental 10 plants, [diluted] [ph] 100% of manufacturing byproducts from landfills. We continue to be on-track to achieve our goal of zero landfill waste at our wholly-owned Tempur and Sealy manufacturing operators worldwide by the end of the year.

Our focus remains on delivering shareholder value through the execution of our long-term strategies by investing in our brands, products, people, and capacity. We also continue to allocate capital to share repurchase as part of our commitment to returning capital to shareholders. We’ve repurchased over 8% of our shares outstanding year to date. We plan to repurchase at least 10% in 2022.

Our key initiatives, which have driven growth from a $500 million company at the time of our IPO, to a $5 billion company today are the underpinning of our confidence and our ability to continue to extend our leading position in the global bedding market. These key initiatives include: first, develop the highest quality bedding product in all the markets we serve; second, promote worldwide brands with compelling marketing; third, optimize our powerful omnichannel distribution platform; and fourth, drive increased EPS through operation execution and by prudently deploying capital.

These initiatives have shaped the building blocks to our next stage of growth, which we’re laying the [groundwork] [ph] today. In the U.S. we’re investing in new products, compelling brand advertising, expanding channel diversification. In our international operations, we’re investing in the 2023 launch of our all new Tempur products in Europe and Asia to increase our international total addressable market.

Our operations are also in investment focus this year as we execute on four key priorities: complete the transition to our new ERP system; two, stand-up third U.S. foam flooring plant; three, strengthen our supply chain worldwide; and four, increase safety stock of imported products, key components and inputs with long lead times.

With that, I’ll turn the call over to Bhaskar.

Bhaskar Rao

Thank you, Scott. I would like to highlight a few items. Consolidated sales increased 4% to $1.2 billion. Adjusted earnings per share was $0.58 and we repurchased over 4 million shares in the quarter. At the end of the second quarter, we successfully implemented a new round of pricing [actions] [ph]. This follows previous rounds of pricing, all of which were designed to fully offset the headwinds from rising input costs.

Our pricing actions are dilutive to gross margins as sales increased with no meaningful change in gross profit. Since 2019, this dynamic has accounted for 400 basis points of headwind to consolidated gross margin. We believe that designing price increases to cover the dollar impact of inflation is both beneficial for near and long-term retailer advocacy and end consumer demand.

We expect certain input costs may ease beginning in the back half of the year. If this release were to come to pass, we anticipate the unfavorable margin dynamic that we have experienced over the past couple of years will reverse providing a tailwind in 2023. As Scott mentioned, we are leveraging our industry leading balance sheet and cash flow attributes to invest in the business, laying the groundwork for future growth.

We have made investments to diversify our supplier base to fully support our customers while managing through a fragile global supply chain and a tight labor market. We invested an incremental $10 million in our operations in the second quarter to maintain our high standard of product quality and customer service.

We anticipate these incremental investments to continue to a lesser degree in the second half of the year. For 2023, we are set up to drive efficiencies as the global supply chain infrastructure stabilizes, and our new ERP system drive synergies. We have adjusted [$17 million] [ph] of charges during the quarter, all of which are permissible adjustments under the terms of our senior credit facility. $9 million of those adjustments were related to the transition of our new ERP system, which as Scott had noted was completed in the second quarter.

In addition, we had $4 million of organizational restructuring costs and $3 million of operational startup costs relating to expanding our capacity. We expect there may be a similar amount of adjustments related to these items later this year, primarily from further investments in our new foam-pouring facility in Crawfordsville, Indiana.

Now, turning to North American results. Net sales decreased 5% in the second quarter. On a reported basis, both wholesale and direct channels decreased 5%. North American adjusted gross profit margin declined to 38.7%. This decline was driven by operational investments to service our customers and pricing benefit to sales with no gross profit. These factors were partially offset by favorable mix as Stearns & Foster performed well in the quarter.

North American second quarter adjusted operating margin declined to 16.5%. This was driven by the decline in gross margin and advertising investments in Stearns & Foster ahead of the planned fourth quarter launch.

Now, turning to international. Net sales increased 59% on a reported basis, primarily driven by the acquisition of Dreams. On a constant currency basis, international sales increased 68% as we experienced $10 million of headwind this quarter from unfavorable foreign exchange rates.

Read more here:

https://seekingalpha.com/article/4526298-tempur-sealy-international-inc-s-tpx-ceo-scott-thompson-on-q2-2022-results-earnings-call

July 28, 2022

BASF Results

German chemicals giant BASF reports profits based on price hikes

DPA – Yesterday 4:09 AM

German chemical company BASF said on Wednesday that it managed to boost net income by 26.3% in the second quarter thanks to “significant price increases.”

A logo of the chemical company BASF is seen on a large storage container at the main plant. BASF said on Wednesday that it managed to boost net income by 26.3% in the second quarter thanks to

Net income came in at €2.1 billion ($2.13 billion). The comparison was with the second quarter of 2021.

“Despite the continued high raw materials and energy prices, we again achieved strong earnings in the second quarter,” said board chairperson Martin Brudermüller.

Like many industries, BASF is nervously watching rising gas prices spurred by Russia’s decision to limit shipments to Europe, a ruse that the West says is payback for Western sanctions. Those sanctions were laid down because of Russia’s invasion of Ukraine.

Gas is critical not only to power BASF factories, but is also a key ingredient in some processes. But the company reported strong sales to all of its key clients, except for the car sector, which has been hit hard by pandemic-related supply problems.

BASF also reported a 16.3% increase in sales to €23 billion. Earnings before interest and taxes (EBIT) came in at €2.3 billion, which matched levels in the the second quarter of 2021.

Sales in the chemicals segment grew 27.2%, while sales in the materials segment rose 29.9%. Sales in the industrial solutions segment rose by 12.1% and sales in the surface technologies segment increased by 7.6%. Nutrition and care segment sales rose by 30.9%.

Looking ahead to fiscal 2022, BASF now expects sales in the range of €86 billion-€89 billion, compared to prior outlook of €74 billion-€77 billion. EBIT before special items is expected between €6.8 billion and €7.2 billion.

https://www.msn.com/en-xl/news/other/german-chemicals-giant-basf-reports-profits-based-on-price-hikes/ar-AA100w8b

July 28, 2022

BASF Results

German chemicals giant BASF reports profits based on price hikes

DPA – Yesterday 4:09 AM

German chemical company BASF said on Wednesday that it managed to boost net income by 26.3% in the second quarter thanks to “significant price increases.”

A logo of the chemical company BASF is seen on a large storage container at the main plant. BASF said on Wednesday that it managed to boost net income by 26.3% in the second quarter thanks to

Net income came in at €2.1 billion ($2.13 billion). The comparison was with the second quarter of 2021.

“Despite the continued high raw materials and energy prices, we again achieved strong earnings in the second quarter,” said board chairperson Martin Brudermüller.

Like many industries, BASF is nervously watching rising gas prices spurred by Russia’s decision to limit shipments to Europe, a ruse that the West says is payback for Western sanctions. Those sanctions were laid down because of Russia’s invasion of Ukraine.

Gas is critical not only to power BASF factories, but is also a key ingredient in some processes. But the company reported strong sales to all of its key clients, except for the car sector, which has been hit hard by pandemic-related supply problems.

BASF also reported a 16.3% increase in sales to €23 billion. Earnings before interest and taxes (EBIT) came in at €2.3 billion, which matched levels in the the second quarter of 2021.

Sales in the chemicals segment grew 27.2%, while sales in the materials segment rose 29.9%. Sales in the industrial solutions segment rose by 12.1% and sales in the surface technologies segment increased by 7.6%. Nutrition and care segment sales rose by 30.9%.

Looking ahead to fiscal 2022, BASF now expects sales in the range of €86 billion-€89 billion, compared to prior outlook of €74 billion-€77 billion. EBIT before special items is expected between €6.8 billion and €7.2 billion.

https://www.msn.com/en-xl/news/other/german-chemicals-giant-basf-reports-profits-based-on-price-hikes/ar-AA100w8b

July 27, 2022

BASF Production Update

BASF Prepares To Slash Ammonia Production In Germany Amid Worsening NatGas Crunch

by Tyler DurdenWednesday, Jul 27, 2022 – 08:30 AM

German chemicals company BASF SE paid an extra 800 million euros ($809.5 million) to keep its plants operating in the second quarter compared with a year earlier amid skyrocketing natural gas prices. The impact of high energy prices has forced the company to make a difficult decision: slash the production of ammonia, which could have potential consequences for farming to the food industry. 

“We are reducing production at facilities that require large volumes of natural gas, such as ammonia plants,” BASF Chief Executive Martin Brudermuller said in a conference call after an earnings report. 

Brudermuller said BASF would tap external suppliers to fill the deficit as German plants reduced output. He warned about potential supply disruptions that could boost fertilizer costs for farmers.

Reuters details how ammonia plays a critical role in manufacturing nitrogen-based fertilizers, plastic-making, and diesel exhaust fluid. A byproduct of ammonia production is high-purity carbon dioxide (CO2) which is heavily used in the food industry. 

The news of BASF reducing ammonia production because of soaring NatGas prices comes as Russian state-owned energy producer Gazprom PJSC is expected to halve supplies via Nord Stream 1 to Europe to about 20% today. EU member states agreed Tuesday to reduce NatGas demand by 15% over the next eight months, though countries like Germany, without any liquefied natural gas (LNG) port terminals to replace Russian pipeline NatGas, might have to make more considerable sacrifices. 

Benchmark NatGas prices in Europe at the Dutch TTF hub hit their highest level since March. Prices have shot up 35% in a week, over 200 euros per megawatt-hour (MWh), as Putin turns the screws on Europe by reducing pipeline capacity to Europe. 

“Chemical companies are the biggest industrial natural-gas users in Germany, and ammonia is the single most gas-intensive product within that industry,” Reuters said. 

Arne Rautenberg, a fund manager at Union Investment, said ammonia is a prime candidate by chemical companies to cut production first over the NatGas supply squeeze. 

“In the northern hemisphere, nitrogen fertilizer is applied primarily during the spring. It can also be produced in the United States and shipped to Europe,” Rautenberg said, adding that the CO2 supply for the food industry could experience disruptions. 

The chemical industry lobby VCI indicates German ammonia production has been curbed (some of which began last October) considerably because of soaring energy prices. This could soon impact industries that rely heavily on ammonia and ripple through the economy already facing recession. 

https://www.zerohedge.com/commodities/basf-prepares-slash-ammonia-production-germany-amid-worsening-natgas-crunch

July 27, 2022

BASF Production Update

BASF Prepares To Slash Ammonia Production In Germany Amid Worsening NatGas Crunch

by Tyler DurdenWednesday, Jul 27, 2022 – 08:30 AM

German chemicals company BASF SE paid an extra 800 million euros ($809.5 million) to keep its plants operating in the second quarter compared with a year earlier amid skyrocketing natural gas prices. The impact of high energy prices has forced the company to make a difficult decision: slash the production of ammonia, which could have potential consequences for farming to the food industry. 

“We are reducing production at facilities that require large volumes of natural gas, such as ammonia plants,” BASF Chief Executive Martin Brudermuller said in a conference call after an earnings report. 

Brudermuller said BASF would tap external suppliers to fill the deficit as German plants reduced output. He warned about potential supply disruptions that could boost fertilizer costs for farmers.

Reuters details how ammonia plays a critical role in manufacturing nitrogen-based fertilizers, plastic-making, and diesel exhaust fluid. A byproduct of ammonia production is high-purity carbon dioxide (CO2) which is heavily used in the food industry. 

The news of BASF reducing ammonia production because of soaring NatGas prices comes as Russian state-owned energy producer Gazprom PJSC is expected to halve supplies via Nord Stream 1 to Europe to about 20% today. EU member states agreed Tuesday to reduce NatGas demand by 15% over the next eight months, though countries like Germany, without any liquefied natural gas (LNG) port terminals to replace Russian pipeline NatGas, might have to make more considerable sacrifices. 

Benchmark NatGas prices in Europe at the Dutch TTF hub hit their highest level since March. Prices have shot up 35% in a week, over 200 euros per megawatt-hour (MWh), as Putin turns the screws on Europe by reducing pipeline capacity to Europe. 

“Chemical companies are the biggest industrial natural-gas users in Germany, and ammonia is the single most gas-intensive product within that industry,” Reuters said. 

Arne Rautenberg, a fund manager at Union Investment, said ammonia is a prime candidate by chemical companies to cut production first over the NatGas supply squeeze. 

“In the northern hemisphere, nitrogen fertilizer is applied primarily during the spring. It can also be produced in the United States and shipped to Europe,” Rautenberg said, adding that the CO2 supply for the food industry could experience disruptions. 

The chemical industry lobby VCI indicates German ammonia production has been curbed (some of which began last October) considerably because of soaring energy prices. This could soon impact industries that rely heavily on ammonia and ripple through the economy already facing recession. 

https://www.zerohedge.com/commodities/basf-prepares-slash-ammonia-production-germany-amid-worsening-natgas-crunch