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Everchem Updates
VOLUME XXI
September 14, 2023
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October 25, 2023
INVISTA decision to close Orange facility catches many by surprise Published 3:09 pm Thursday, October 5, 2023 By Staff Reports (invista.com) INVISTA’s announcement that it is shutting down production at its Orange facility was unexpected news to many.
Orange County Judge John Gothia said he was informed of the news Thursday. “Anytime we have a shut down or loss of jobs in the community, it’s never a good day,” Gothia said.
Gothia said the county has a number of programs to entice businesses to the area and stay competitive, but there’s not a lot to offer to keep an existing business. Looking toward the positive, Gothia noted there are a lot of growth and job opportunities on the horizon in Orange County coming in the next year, in addition to Lamar State College Orange offering a number of training programs to aid job seekers.
INVISTA operates its facility at 3055 FM 1006 in Orange. Francis Murphy, INVISTA president and CEO, said they appreciate the diligent and innovative work of employees at the Orange site over the years. “Unfortunately, lower than anticipated growth and an increase in global supply led to this difficult decision,” a company statement read. The site will begin the safe shutdown of the adiponitrile production unit right away and expects to cease production of hexamethylene diamine in mid-2024, according to information from INVISTA.
HMDA is the precursor for HDI.
Approximately 240 of the site’s 300 roles will be eliminated by the end of 2024. All impacted employees will be eligible for severance benefits. Throughout this transition, the company is committed to treating every employee with dignity and respect, leaders said. INVISTA’s top priority now and always is the safety of employees, contractors and the surrounding community.
“Ultimately, this decision was made to position our business to more competitively serve the long-term needs of our customers,” Murphy said.
Read more at: https://www.orangeleader.com/2023/10/05/invista-decision-to-close-orange-facility-catches-many-by-surprise/
October 24, 2023
Dow Inc. (DOW) Q3 2023 Earnings Call Transcript
Oct. 24, 2023 11:37 AM ETDow Inc. (DOW)
Dow Inc. (NYSE:DOW) Q3 2023 Earnings Conference Call October 24, 2023 8:00 AM ET
Company Participants
Pankaj Gupta – IR, VP
Jim Fitterling – Chairman and CEO
Howard Ungerleider – President and CFO
Jim Fitterling
Thank you, Pankaj.
Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million.
Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments.
Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI.
Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis.
We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we’ve returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027.
And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings.
Starting with decarbonize and grow. In September, we achieved startup of a new MDI distillation and pre-polymer facility at our manufacturing site in Freeport, Texas. This new facility replaces Dow’s existing capacity in La Porte, Texas, and expand supply by an additional 30% at the site to support high-value demand growth in polyurethane systems while also reducing our greenhouse gas emissions by more than 45% compared to the La Porte asset.
Finally, before we move to Q&A, I would like to speak to the announcement this morning that Howard is elected to retire from the company following 33 years of dedicated service. I want to personally thank Howard for his significant contributions to Dow over the last three decades. He’s been an incredible business and strategic partner, created a financial and leadership team that guided our company through numerous challenges and accomplishments and most importantly, he’s been a tremendous colleague and friend.
In addition to recognizing and thanking Howard, we are pleased to share that the Board has elected Jeff Tate to the role of CFO effective November 1, 2023. As we thank Howard for his years of service and there will be time to honor and recognize him for that. We’re excited to welcome Jeff back to Dow. Many of you will remember, Jeff, who also previously led Dow’s Investor Relations team. He returns to us following a 4-year stint as the CFO of Leggett & Platt.
Prior to that, Jeff had 27 years with Dow in various finance roles, including VP of Finance for Packaging and Specialty Plastics and was our lead auditor. Jeff is joining us here today, and we’ll look forward to him joining our next earnings call in his formal role.
Jeff Zekauskas
Thanks very much. In your $1 billion cost-cutting program, how much of that comes out of SG&A and R&D? And in your slides, you say that your share count in the fourth quarter is 7.10 and in the third quarter, it was7 or 7.5. Are you rounding or is the share count going up?
Jim Fitterling
Yes, Jeff, good morning. On the cost, about half of the costs come out of our structural operating cost model, which would include obviously, making sure that we’re controlling SG&A, during this time period. It also includes things like contract labor and what we’ve been doing, there to reduced headcount.
On our operating cost side, it’s things like purchase raw material and logistics costs, utilities costs being down, our turnaround spend, which is down about $300 million. And while SG&A is down both in cost and as a percent of sales, we’re obviously still continuing to invest in research as we go forward. Howard, do you want to touch on the share count?
Kevin McCarthy
Yes, good morning. Jim, I’d appreciate your outlook for Dow’s construction-facing businesses heading into 2024. Some of the companies that we cover are pointing to meaningful benefits from infrastructure and reshoring-related investments, basically fiscal stimulus. On the other hand, we’ve got rising rates, and that typically has a chilling effect. So, how do you see those countervailing trends netting out for Dow and affecting the way you’re planning for the future?
Jim Fitterling
Yes. Good morning, Kevin. The things we watch on construction, obviously, on commercial construction just the completion rates on existing builds and the permit work that’s going on new builds. I would say this has been a relatively strong year on commercial because there have been a lot of projects that were in flight. We’re starting to see, obviously, some tick up in applications for pyramids on residential for the noncommercial side of things, which is good.
But I think as long as there’s a question out there on rates and will rates continue to rise, that’s going to put a lid on what we’ll see on residential construction. In terms of infrastructure, we are seeing some movement in that space. I would say the biggest rate-limiting step on infrastructure is permitting. So, the speed at which people can get permits, whether that’s for – it could be for pipelines.
It could be for transmission cabling, you name it, but there could be some limitations there, and we keep an eye on that. Overall, I feel good about the fact that we’re moving through the toughest phase of it right now. And if we could see some positive growth come back in the construction markets in China and the U.S., that will be a nice upside for us in ’24.
Steve Byrne
Yes. Thank you. The inventory chart you have on Slide 6 is intriguing. What I’m curious about is, for each of your businesses, do you have a view as to how much your customers have destocked your products relative to their end market demand. And thus, how much of this sequential decline that you’ve seen 12, 15 months is destocking versus just end market underlying demand weakness. You showed some sequential improvement, in each of your businesses in the third quarter. Is that just destocking coming to an end? Or do you think that this is really some firming demand by your customers?
Jim Fitterling
Good morning, Steve, it’s a good question. Obviously, we get industry data that we published on the chart that you see there. When it comes to downstream when we get into the consumer brands and the retailer space, we have to go on reported data that we clean out of their public reports. But just a few things to keep in mind. We know in the auto sector, for example, that with the OEMs.
It’s been pretty much hand to mouth, because there have been other rate-limiting steps like the ability, to get computer chips. We haven’t seen a big restocking with the OEMs. We’ve seen the OEMs continuing to run, because they want to be in a position to ramp up when the strikes get settled. So, I would say, I don’t feel like there’s a lot of restocking going on there.
I would say on the consumer brands and the pharma companies lately seen them, obviously, watching inventory levels. I don’t get any sense of any stocking or big destocking going on there. I think it’s running more to meet demand. And then, the other thing we take a look at is obviously what’s going on with the construction segments, as I just mentioned.
But it’s a little bit harder. It’s a little bit fuzzier when we get into the downstream. We don’t have as much published data to rely on. So, we look more at PMI. We look more at retail sales. We look more at, what they comment on in their public filings.
October 23, 2023
North American chem rail traffic rises
MRC — North American chemical rail traffic rose for a ninth consecutive week, with railcar loadings for the week ended 14 October up 0.3% year on year to 44,668, according Association of American Railroads.
For the first 41 weeks of 2023 ended 14 October, North American chemical rail traffic was down 1.1% year on year to 1,857,880 – with the US down 2.3% to 1,275,816.
In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest. In Canada, chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail.
We remind, for last week, total U.S. weekly rail traffic was 499,217 carloads and intermodal units, up 3.0 percent compared with the same week last year. Total carloads for the week ending October 7 were 233,768 carloads, up 3.6 percent compared with the same week in 2022, while U.S. weekly intermodal volume was 265,449 containers and trailers, up 2.5 percent compared to 2022.
https://www.mrchub.com/news/409834-north-american-chem-rail-traffic-rises
October 19, 2023
Stepan Company (SCL) Q3 2023 Earnings Call Transcript
Company Participants
Luis Rojo – Chief Financial Officer
Scott Behrens – President and Chief Executive Officer
Scott Behrens
Good morning and thank you all for joining us today to discuss our third quarter results. I plan to share highlights from our third quarter performance and will also share updates on our key strategic priorities, while Luis will provide additional details on our financial results.
The company reported third quarter adjusted net income of $14.7 million. Earnings were significantly impacted by a 9% decline in sales volume versus the record prior year third quarter due to continued demand softness across most of our markets and continued inventory destocking in certain market channels.
In the third quarter, Surfactant unit margins were lower versus the prior year, due to less favorable product mix, high cost raw material inventory carryover and pricing pressure in Latin America from imported products. Volumes in Latin America grew by high-single-digits, compared to the second quarter. Specialty Product unit margins were significantly lower due to high-cost inventory and pricing pressure related to increased MCT import activity.
Expenses were slightly lower versus prior year due to proactive headcount and discretionary expense controls implemented earlier in the year and lower incentive-based compensation approvals. We recorded a $4.1 million after-tax restructuring reserve for the transition of employees participating in our voluntary early retirement program. We continue to make significant progress on our cash objectives, reducing our inventory levels by $55 million. Finally, we completed our low 1,4 dioxane capital investments and continued our alkoxylation project in Pasadena, which is expected to be operational in mid-year 2024.
For the quarter, adjusted EBITDA was $48 million versus $85 million in the prior year quarter, primarily driven by the decline in sales volume. Adjusted EBITDA in the third quarter of 2023 was slightly higher than the second quarter of 2023 adjusted EBITDA of $46 million. Surfactant operating income was $15.4 million versus $39 million in the prior year and $15.1 million in the second quarter of 2023. The decline versus prior year was primarily due to a 7% decline in global sales volume and lower unit margins in Latin America, driven by competitive pressure from imports.
Demand within the agricultural end market remained low, due to continued customer and channel inventory destocking. Polymer operating income was $21.8 million versus $31.9 million in the prior year and $16.3 million in the second quarter of 2023. The decrease versus prior year was primarily due to a 12% decline in global sales volume, driven by a 10% decline in Rigid Polyols. Unit margins for global polymers remain in line with previous year.
Luis Rojo
Thank you, Scott. My comments will generally follow the slide presentation.
Let’s start with the slide four to recap the quarter. Adjusted net income was $14.7 million, or $0.64 per diluted share, versus a record $46.3 million, or $2.01 per diluted share, in the prior year. Because adjusted net income is a non-GAAP measure, we provide full reconciliations to the comparable GAAP measures. This can be found in Appendix 2 of the presentation and Table 2 of the press release.
Specifically, the adjusted net income for the third quarter, exclude deferred compensation income of $2.1 million versus $1 million of income in the prior year. It also excludes business restructuring of $4.3 million of after-tax expenses. This business restructuring reserve is driven by the company’s voluntary early retirement program. The deferred compensation figures represent the net income related to the company deferred compensation plan, as well as cash-settled stock appreciation rights for our employees. Because these liabilities change with the movement in the stock price, we exclude this item from operational discussion.
Slide five shows the total company net income breach for the third quarter, compared to last year third quarter, and breaks down the decrease in adjusted net income. Because this is net income, the figure is not here and on an after-tax basis. We will cover each segment in more detail, but to summarize, we experienced lower operating income in all segments versus prior year.
Now turning to polymers on slide seven. Operating income for polymers was $21.8 million. We continue delivering sequential growth quarter-on-quarter, driven by mid-single-digit volume growth. Volume increased 6% versus the second quarter of 2023, driven by high single-digit growth in global Rigid Polyols. This was partially offset by a 25% decline in our commodity PA business. Finally, specialty product operating income was $2.4 million, down versus the second quarter of 2023 at $3.8 million. This reduction was primarily due to order timing differences.
Vincent Anderson
Okay. No, that’s helpful. If I could shift over to Polymers. It was kind of looking to just get your thoughts on where you are with some of the opportunities in Polyols. Maybe a bit longer term, but thinking about spray foam products and then maybe any progress towards converting a former INVISTA asset to run PA. Just curious if you’ve been able to push those a little bit harder in this weaker demand environment or if that’s something that we should return to maybe next year?
Scott Behrens
Yes. Vincent, I would say our activities with our prospective customers in spray foam continue at a very robust pace. I do think that market has been impacted by the overall market conditions, but that has not stopped our pursuit of new customer approvals, and that business and the outlook is still positive from our perspective. With regards to PA, there are no plans or intentions to put PA into the INVISTA assets. Millsdale is our PA production site, and that will remain our only PA production site going forward.
Vincent Anderson
Okay. I was — I apologize if I was unclear. I was referring to using your Millsdale PA as a feedstock into one of the INVISTA plants. Not…
Scott Behrens
We did the integration of the business in ‘21. Vincent, so whatever raw material and operational synergies that we’ve gotten though were taken care of in 2021.
Vincent Anderson
Okay. All right, that is all from me. Thank you. Thank you very much.
David Silver
Yes, hi. Thank you very much. I’ll stipulate here. I did have to step away for a couple of minutes during your remarks, so I apologize if I make — apologize in advance if I make you repeat yourself.
I did want to maybe just start with the Polyols segment. And in particular, I did want to talk about — ask you about the improvement in a couple of areas. So the per unit margins, I guess. So, sequentially — on a sequential basis, you had higher operating income and I think, kind of, flattish or slightly better shipment volumes. And then I did pick up on the comment about improvement from China, and assuming that these products are mainly used in the construction area. You know, I was kind of scratching my head and wondering if you could provide a little color. I mean, I wasn’t aware that the construction segment in China in general was especially robust now. So, just a couple comments there would be helpful. Thank you.
Scott Behrens
Yes. Good morning, David. Regarding unit margins in Polymers, so we have been reporting in the last couple of quarters, you know, we’ve had a significant raw material headwind. And as we continue to work through those raw material headwinds matching our pricing structure. You know, our margins, we believe, are now stabilized. And you can see the sequential volume growth between Q1 to Q2, and now Q3 — Q2 to Q3. We do believe that the stocking has run its course and we’re back on a positive trajectory towards more and more normal market demand in the Polymer space.
As it relates to China, since that asset was fully commissioned three, four years ago, we’ve been on a diversification strategy of unused markets and applications. And I think what you’re seeing is the result of our team’s efforts in bringing a much broader diversification of markets and product technologies to that site.
Luis Rojo
Yes, remember, we use that site, it’s a different end market when you think about [coal] (ph) storage and all of that is not typical insulation that we do here in the U.S. or Europe. And on top of that, the team has done a fantastic job diversifying to other businesses, and using the assets in different end markets. And that is what is driving a very strong double-digit growth in Q3.
David Silver
Very good. Thank you. And I did just want to pick up on Scott’s comment about destocking being largely completed, I guess on the Polymers area. But I think, if I mess that with the comments in the press, I mean, you are still pointing to inventory liquidation and destocking into the fourth quarter, I believe. And I guess that would make maybe at least four, maybe five quarters where destocking has been in effect.
And you know, from a big picture perspective, should the fourth quarter be, I don’t know, the bulk of having the destocking behind us. And I did notice you know, there’s customer destocking and then there’s your own inventory drawdowns. I was just wondering if you might be able to draw a contrast between the two?
Are the customers largely through it, but maybe there’s going to be a big reduction at the company level or how would you just characterize the overall progress in draining, I guess, this overall supply chain of excess product maybe built up during the pandemic and during some concerns over supply chain reliability. Thank you.
Luis Rojo
David, so what Scott was mentioning was destocking is almost done in the Polymers business. There is a pocket in the West Coast, due to rain and other activities where not all the construction activities were able to be executed. So there is a small piece there remaining, but most of the destocking in Polymers is already flushed through. What you see in Q4 in Polymers is the normal seasonality of the business, right. If you go back five, 10, 20 years, Q4 is our lowest quarter in term of demand, because of course, a lot of winter state don’t execute a lot of reroofing activities during the winter. So, that’s only seasonality.
And then when you look at surfactants, we have — what we are seeing is destocking is mostly done in all the cleaning personal care markets. And what is remaining is ag. We believe ag will continue, the destocking in Q4 and we will have more perspective in February, how we see Q1 and Q2.
Scott Behrens
In the ag destocking, lagged the consumer and Polymer’s destocking activities by almost two quarters.
October 18, 2023
VPC Group Inc.VPC Group Inc. 2,340 followers2,340 followers
VPC Group Acquires Prestige Fabricators in Strategic Expansion into US Markets.
VPC Group, a leader in the production of both foam and fiber materials has successfully acquired the assets of Klaussner’s subsidiary, Prestige Fabricators, as part of Klaussner’s asset liquidation.
This acquisition marks a significant milestone in VPC Group’s growth strategy, enabling them to expand their foam pouring and fabrication footprint beyond its historical origins of Canada, into the US market.
With a strong reputation as a customer centric partner in the bedding and furniture industry, VPC Group is known for its commitment to quality and service and has emerged as the market leader in North America.
The acquisition of Prestige Fabricators reinforces their position in the industry, both in Canada and the United States.
VPC Group currently operates 20 state-of-the-art facilities across North America. This includes foam pouring, foam fabrication and fiber processing facilities.
The addition of Prestige Fabricators and their recent acquisition of Fibrix LLC, clearly demonstrates VPC’s commitment to expanding their product offerings and reach in the North American market.
The acquisition of Prestige Fabricators will expand VPC footprint and strengthen and enhance VPC Group’s capabilities to better serve their customers with a broader range of foam products.
https://www.linkedin.com/feed/update/urn:li:activity:7119717013287038976/
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