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Everchem Updates
VOLUME XXI
September 14, 2023
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August 1, 2023
Leggett & Platt, Incorporated (LEG) Q2 2023 Earnings Call Transcript
Aug. 01, 2023 11:49 AM ETLeggett & Platt, Incorporated (LEG)
139.04K Followers
Q2: 2023-07-31 Earnings Summary
EPS of $0.38 misses by $0.01 | Revenue of $1.22B (-8.47% Y/Y) misses by $22.00M
Leggett & Platt, Incorporated (NYSE:LEG) Q2 2023 Earnings Conference Call August 1, 2023 8:30 AM ET
Company Participants
Susan McCoy – Senior Vice President-Investor Relations
Mitch Dolloff – President and Chief Executive Officer
Ben Burns – Executive Vice President and Chief Financial Officer
Steve Henderson – Executive Vice President and President–Specialized Products and Furniture, Flooring and Textile Products
Tyson Hagale – Executive Vice President and President–Bedding Products
Mitch Dolloff
Good morning and thank you for participating in our second quarter call. First, I would like to welcome Ben Burns, who stepped into the CFO role effective June 21. Ben has been with the company for 20 years and previously led our internal audit department served as our Treasurer and most recently led our business support services functions, including procurement, logistics and risk. Ben brings a deep knowledge of our business, strong financial capabilities and an ability to drive change that has benefited and will continue to benefit Leggett & Platt.
Now turning to second quarter results. Sales in the quarter were down 8% versus second quarter 2022 from lower volume and raw material-related price decreases. Acquisitions added 3% to sales. The volume decline was driven by continued demand softness in residential end markets, partially offset by growth in automotive, aerospace and hydraulic cylinders.
Second quarter earnings per share were $0.40. This included $4 million or $0.02 per share of gain from the net insurance proceeds from April tornado damage at a shared Home Furniture and Bedding manufacturing facility. Excluding this item, adjusted earnings per share were $0.38. Earnings decreased primarily from lower volume in residential end markets and lower metal margin in our steel rod business.
Cash flow from operations was $111 million, up $21 million versus second quarter of 2022. We are lowering our full year guidance to reflect continued volatility in macroeconomic environment and low visibility in several of our end markets. Our previous guidance anticipated a modest improvement in residential end markets in the second half of the year. We are encouraged by the continued recovery in our industrial businesses, but have yet to see an upward trajectory in the residential markets.
Moving on to our business segment results and outlook. Sales in our Bedding Products segment were down 18% versus second quarter of 2022. We previously expected 2023 market volume to be flat with modest improvement in the back half of the year. Although the market improved sequentially in May and June from seasonal lows in April, the second quarter was weaker than expected. In addition, signals from the broad market and customers are less optimistic than earlier in the year.
We now expect demand to remain at or slightly below current levels. This suggests volume in the back half of the year will be down mid-single digits, and full year mattress consumption will be down high single digits versus 2022. This estimate results in consumption down 25% to 30% from the 2021 peak and at levels comparable to 2016.
In the quarter, our volume generally tracked the overall market, but there is some variability within specific product categories. Trade rod and wire volume declined year-over-year as industrial demand was strong until the third quarter of last year. Steel rod production through the first half of the year was consistent with initial plans. However, full year production is now expected to be approximately 25% below historical levels to align with current demand versus our previous expectations of 20% below historical levels.
Volume in U.S. Spring was down 13% in the second quarter. ComfortCore unit volumes declined versus last year, but tracked near or positive to the overall market. Lower priced open coil innersprings and wire foundations declined more, which we believe is indicative of broader market trends.
Volume in specialty foam was up 8%. Successful efforts to diversify our customer base led to growth in finished mattress units and accessories such as mattress toppers. As expected, metal margin narrowed in the first half of the year, and we still anticipate metal margin to be down mid-teens versus 2022.
Market volume continues to be the greatest headwind and impact to earnings and margin. However, our teams continue to work to improve internal capabilities and bring value to our customers despite the challenging environment. In recent years, we’ve strategically shifted our focus in the Bedding market by expanding product capabilities and growing content at attractive price points.
Our innerspring components business has moved more towards mid to higher end price points and greater content within each unit. Our specialty foam business allows us to produce specialty foam components and finished products for our branded partners. Consumer interest in adjustable beds continues to grow, providing us with an additional opportunity to increase content. This strategic approach enables us to innovate high quality differentiated products for our customers and improve comfort for the end consumer.
We intend to grow our market share and increase profitability by focusing on three key areas. First, we will continue to pursue opportunities to enhance our value proposition by offering product differentiation and reducing total mattress production costs for our OEM customers. For example, our new combination pocket combines perimeter edge innerspring and specialty foam to create a fabric-encased innerspring and foam column that minimizes motion disturbance from a sleeping partner and improves airflow.
Eco-Base is another new product that allows our customers to streamline their manufacturing process, lower cost, and reduce environmental impact by replacing commodity based foam with a lighter polyester non-woven material under a ComfortCore unit.
Our second area of focus is improving specialty foam’s performance and continuing to improve costs. Continued integration of our foam and innerspring operations will drive opportunities for manufacturing savings and product development gains. And our third area of focus is maintaining our production flexibility and ensuring appropriate levels of inventory.
Our competitive position is unique. From our vertical integration of steel rod and wire, specialty polyols and additives and efficient and flexible machine technology to innovative products that service our customers anywhere in the value chain. Our Bedding business is well positioned to bring value to our customers and end consumers.
Susan Maklari
My first question is on the Bedding business. It’s encouraging to hear you talk about some of the new products and some of the innovation that is coming out. As you think about the recovery in that business, can you talk a bit about the role that those new products might play? And how – what stage of their life cycles those are in? And how we should be thinking about the potential ramp there?
Mitch Dolloff
Yes. Very good question. Thanks for asking that. Tyson, I’ll let you take that one.
Tyson Hagale
Sure. Thanks. Good morning, Susan, and thanks for the question. Those are products that Mitch covered in his opening comments that we’ve been working on for a while. I think we’ve talked about this in some of our past conference calls that during the pandemic, there was a heavy, heavy focus on supply. And then as the supply chain started to get more stable, we had more interest from some of our customers on working on new products. And so those are still both early life cycle products. They’ve been in our pipeline for a while, but they are now being commercialized. We are selling them into the market. It will – so they’re still early stage. It will take time for them to grow, but there’s good strong customer interest in those products.
But we’re also very mindful of as we ramp those up that we want to support our customers really well, as we roll them out. So, I’d say a gradual improvement, but they’re good examples of the types of innovation that we’ve worked on for a long time. If you think back historically, it’s a continuation of where we’ve been with the growth of ComfortCore and then perimeter edge, ComfortCore and then now products like combination pocket and eco-based, where we’re adding content, not just to add it, but it adds differentiation or more comfort for end consumers, but also value for our OEM customers, where we can help them either reduce labor cost or additional content to make products more easy to manufacture.
So, I think it’s a continuation of where we’ve been hedging for a long time, and we continue to add those types of products into our pipeline. Another area that Mitch didn’t mention, but I think I’d like to add is innovation from our specialty foam business as well. We have some good products in the pipeline there that both help with the weight of specialty foam products and then also sustainability. So those are also products that we can add into either component form or finished products through specialty foam. And all of these are pretty technical and goes well with our integration all the way back to our machine business because they are pretty complicated in things that we have to apply machine technology all the way through our manufacturing to provide a good product for our customers.
Bobby Griffin
Okay. I appreciate that. And maybe my second question, I think Tyson is probably might stay with you, too because it is on ECS. But is the volume growth actually surprised me was pretty nice this quarter at 8%. Was there – is the operational inefficiencies is really more on cost? Or was there some uniqueness this quarter from a volume standpoint that might not be – valuable for us to kind of read that 8% as a true number?
Tyson Hagale
No. We are seeing volume improvements. As we’ve talked about, the diversification of our customer business is important. As we saw the market softened across bedding, it was even more severe for ECS, just where we’re aligned with our customers, more on the digitally native customers that had an even greater decline overall in the market than the rest. So a lot of our efforts in trying to partner with some new customers, even as the market slow has allowed us to grow our business. And though it’s going to take a while for things to really recover just given the softness, we are seeing volume improvements from where we have been. And we are making some improvements, most specifically on material costs, but we also have some offsets to that. We’re obviously looking at the long run, so we are taking on some onetime costs as we start up some new equipment and programs and go through some facility changes. They’re also impacting us in the short run, but we think will pay off in the long run.
Mitch Dolloff
On the volume side, right, we still have a ways to go to make up that D&B volume that’s declining, but the new programs, as you talked about, that’s an opportunity. It’s both in finished mattresses as well as accessories, right?
Tyson Hagale
That’s right.
Peter Keith
Hi, thank you. Good morning everyone. Just looking at maybe the weakness in the Furniture and Bedding segments that’s resulting in the guide down, it looks like the volume trends came in pretty similar to Q1, but curious what the trends looked like through the quarter? Did it kind of hold at a pretty consistent level? Or was there any improvement as the quarter progressed?
Mitch Dolloff
Tyson, why don’t you take that?
Tyson Hagale
Sure. Thank you. Good morning, Peter, I’ll jump in on the bedding part of that first. I think what we saw is probably what’s been reported more broadly in the market. Actually, even on our last conference call, we talked about April, which was our expectation being seasonally down, and it was. But then we did see sequential improvement as we went through the quarter. So April was down more towards the levels that we saw in October, November of last year. And then May and June improved from that point more to the levels that we’ve seen, both back in the first quarter and probably third quarter of last year. So it didn’t peak out at levels that offset the softness in April, but just back more to the sort of the steady state that we’ve been in for a while.
Mitch Dolloff
And I think the end consumer demand would be very similar in furniture and bedding, but some of the market changes might be a little bit different. Steve, anything you’d like to add there on home furniture?
Steve Henderson
Yes. I would just say when quarter started, the low end to mid-end had been low for months, but the high end was hanging [ph] in there. And probably over the course of the quarter, we saw that start to decline as well through the quarter, I would say. And then just recently starting to feel like, we’re probably at the bottom bouncing around and seeing a little bit of increase in the lower end of the market. So started out a little stronger. I got a little weak and then it to end into the third quarter getting a little stronger in terms of demand. But we think that’s primarily due to the inventory that was in the channel that’s now being depleted.
Mitch Dolloff
Yes. I think, Steve, the other thing I would add too is we had the benefit of backlogs particularly at the higher end for quite a while. And as those – are now I think worn out pretty much. And so what is sales to us, deliveries to our customers that – I think that tailwind evaporated.
Peter Keith
Okay. Yes, I was going to ask about the home furniture decline. So I think you’ve addressed that. So maybe I’ll pivot to the bedding and the spring declines. I guess down the U.S. Spring volume down 13%, pretty similar to Q1 on a volume basis. It does seem like the industry has gotten better in Q2 and maybe even continue to get better here with Q3. Your volumes are kind of holding steady. Is there a customer mix issue within springs? Is there some share loss? Can you just help us frame up why the volume trends aren’t trending towards less negative?
Tyson Hagale
Sure. I’ll jump back in here, Peter. So the way we look at it is things are pretty consistent. Looking across the market overall, I think we would see things pretty similar broadly in the market with kind of where we’ve been trending, talked about the April weakness. The signals that we’ve been getting from our customers is less optimistic for the back half of the year. I think entering the year, there was optimism that we would start seeing some modest improvement from kind of where we were at least the last part of last year and the early part of this year.
But especially with the modest Memorial Day in 4th of July that seemed to dampen the expectations for a lot of improvement in the back half. But within our business, no, I don’t think there’s a customer mix change just within our products. Mitch covered in his opening comments, but open coil and grids from a volume standpoint are more adversely impacted than ComfortCore. I think that’s both some consumer and consumer preference and also just pressure on the lowest end of the market. So I think the mix within our product categories is probably more of an issue than any type of customer mix.
August 1, 2023
BASF, Huntsman, and Chinese partners agree to petrochemical deal in China
MOSCOW (MRC) — BASF and Huntsman together with their Chinese partner companies – Shanghai Hua Yi (Group Company), Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. and Shanghai Chlor-Alkali Chemical Co., Ltd. – announce the planned separation of their joint MDI (diphenylmethane diisocyanate) production at Shanghai Lianheng Isocyanate Co., Ltd. (SLIC), said Hydrocarbonprocessing.
Going forward, the companies will operate the two MDI plants located at the site in Caojing, China independently. Huntsman together with Shanghai Chlor-Alkali Chemical Co., Ltd, and BASF together with Shanghai Hua Yi (Group Company) and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd will each take over one of the MDI plants.
“The SLIC joint venture has been an important partnership to establish MDI production in China as one of the pioneers at the Shanghai Chemical Park,” said Ramkumar Dhruva, President Monomers division at BASF. “The new organizational setup will allow BASF and our partners Shanghai Hua Yi and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. to further develop our MDI operations in Shanghai while serving the demand of our customers in the region even more effectively.”
“Through the production of crude MDI in the SLIC joint venture over almost 20 years, Huntsman together with its partner, Shanghai Chlor-Alkali Chemical Co., Ltd, has been able to successfully build its polyurethanes business in China. As we move to integrate these assets into our downstream operations, we will be even better positioned to meet the future innovation and growth needs of our customers,” said Tony Hankins, President of Huntsman Polyurethanes.
Huntsman, together with Shanghai Chlor-Alkali Chemical Co., Ltd, will own and operate the original MDI plant that started commercial production in 2006, along with a hydrogen chloride recycling unit for the production of chlorine, a precursor for MDI, that was added in 2018. BASF will own and operate the MDI plant that was added in 2018, including the manufacturing facilities for the precursors aniline and nitrobenzene. All employees currently employed in the Joint Venture will be transferred to the respective organizations.
The new operational setup is in preparation and is expected to become effective during the fourth quarter of 2023, and is subject to pending regulatory authority approvals, permits and other customary closing conditions.
In addition to the plant in Caojing, BASF operates MDI production sites in Chongqing, China as well as in Yeosu, South Korea; Antwerp, Belgium; and Geismar, Louisiana. Following the restructuring of the joint venture, BASF’s global production capacity for MDI will total around 1.9 million tons.
Huntsman operates world-scale MDI production and splitting facilities in Rotterdam, the Netherlands, and Geismar, Louisiana, in addition to its Caojing facilities.
MDI is an important precursor in the manufacture of polyurethanes – versatile polymers that are used in the automotive and construction industries, in appliances such as refrigerators, and in footwear.
We remind, BASF and Zhejiang Guanghua Technology Co.,Ltd. (KHUA) have signed a Letter of Intent (LoI) for the supply of Neopentyl Glycol (NPG) from BASF’s Zhanjiang Verbund site to KHUA. This agreement marks a significant milestone in the long-term partnership between both parties. KHUA, a reputed manufacturer of saturated polyester resins for the powder coatings industry in China, is planning to build a 100 kilotons per annum (KT/a) production plant for high-end powder coatings resins in Donghai Island, Zhanjiang Economic & Technological Development Zone, where BASF is building a world-scale NPG plant with an annual production capacity of 80,000 metric tons.
August 1, 2023
Wanhua Chemical Group Co., Ltd. Reports Earnings Results for the Half Year Ended June 30, 2023
July 27, 2023 at 05:47 am
Wanhua Chemical Group Co., Ltd. reported earnings results for the half year ended June 30, 2023. For the half year, the company reported sales was CNY 87,178.76 million compared to CNY 88,856.73 million a year ago. Revenue was CNY 87,626.38 million compared to CNY 89,118.77 million a year ago.
Net income was CNY 8,568.24 million compared to CNY 10,383.02 million a year ago. Basic earnings per share from continuing operations was CNY 2.73 compared to CNY 3.31 a year ago.
August 1, 2023
Univar Solutions Completes Transaction with Apollo Funds
08/01/2023
Shareholders Receive $36.15 Per Share in Cash
DOWNERS GROVE, Ill. and NEW YORK, Aug. 1, 2023 /CNW/ — Univar Solutions Inc. (“Univar Solutions” or the “Company”) and Apollo (NYSE: APO) today announced that Apollo Funds have completed the previously announced acquisition of the Company, which includes a minority investment from a wholly owned subsidiary of the Abu Dhabi Investment Authority. The Company will continue to operate under the Univar Solutions name and brand and maintain its global presence.
Univar Solutions Completes Transaction with Apollo Funds
David Jukes, president and chief executive officer of Univar Solutions, said, “The completion of this transaction begins the next chapter for Univar Solutions as we further enhance our position as a leading global chemical and ingredients solutions provider with enhanced flexibility to explore growth opportunities for the benefit of customers, suppliers, employees, and industry alike. I couldn’t be more pleased to be in such an advantaged position due to our broad product offering and enhanced presence in target growth end markets, award winning customer experience, leading digital tools, and expanded suite of service capabilities.”
Apollo Private Equity Partner Sam Feinstein said, “We are excited to partner with David and the talented Univar Solutions team to build on the Company’s strong foundation and track record of innovation, leveraging our extensive industry experience. We have strong conviction in Univar’s potential and look forward to embarking on a number of exciting initiatives to help accelerate the Company’s growth.”
Transaction Details
Pursuant to the terms of the transaction, an affiliate of the Apollo Funds acquired all of the outstanding shares of Univar Solutions stock. Shareholders are entitled to receive $36.15 in cash for each share of Univar Solutions (UNVR) common stock owned. As a result of the transaction completion, Univar Solutions’ common stock no longer trades on the New York Stock Exchange.
July 31, 2023
Two weeks after explosion, Dow plant still ‘essential personnel only’ as cleanup continues
- BY DAVID J. MITCHELL | Staff writer
- 2 hrs ago
The Dow Chemical complex, in Iberville Parish, along La. 1 on Saturday, July 15, 2023. The plant in Plaquemine, Louisiana, was the scene of a large fire and explosions late Friday.
- STAFF PHOTO BY MICHAEL JOHNSON
More than two weeks since a unit inside Dow’s large complex near Plaquemine exploded in a towering fireball, company officials continued to allow only essential personnel inside the 1,500-acre site but were in talks to more fully reopen the plant to workers.
Company officials ordered the limitations as a precaution for their workers and contractors, Dow officials said, as workers continued on Monday to remove dangerous chemical products from their Glycol II unit that burned in the explosions in mid-July.
Company officials said they were assessing when to lift the restriction but don’t expect the safe removal of the potent chemical ethylene oxide to finish until the end of this week.
“To ensure the safety of our employees, we have restricted access to the site to essential workers only,” company officials said in a statement. “As we near completion of the assessment process, our site leadership team is discussing a return to site plan for all employees.”
In recent reports to state regulators, the company said the fire led to the release of ethylene oxide and ethyl chloride into the air. Ethylene oxide was also found in water initially used to extinguish the fire.
The water overflowed and ended up in the Mississippi River, a state report says.
Dow officials have told the state Department of Environmental Quality that the release of the chemicals into the air was continuing, reports say, but the company has not determined how much was released during the fire or since it has been put out.
Greg Langley, DEQ spokesman, said the “ongoing” air release stems from likely smaller releases expected to occur as the company removes the material from storage tanks, lines and damaged equipment in the Glycol II Unit.
Ethylene oxide is a highly flammable, colorless gas and is a potent human carcinogen with long-term exposure, the U.S. Environmental Protection Agency says.
DEQ and Dow have said continued air monitoring has not detected emissions of ethylene oxide outside the plant perimeter at or above 0.1 parts per million, the lower limit of the handheld monitors being used by Dow and DEQ.
That’s the same concentration as one-tenth of a drop of water in a 10-gallon aquarium, according to one government estimate.
The concentration, which is a federal worker safety standard, also happens to be the “action level” at which state environmental regulators would begin taking protective measures.
Dow officials have not described the level of damage to the unit, one of two that makes glycol at Dow’s Louisiana Operations, nor why the fire occurred, but said other units inside the complex are working.
The fire started around 9:15 p.m. July 14 and took a day and a half to extinguish. It could be seen lighting up the night sky for miles around and appeared on social media pages.
The blast and fire prompted local officials to order about 350 residents to shelter in their homes on the south side of the complex for several hours July 14 and 15.
It will likely be weeks before Dow says why the fire occurred, but an early dispatch from a DEQ field inspector issued sometime after July 16 provided a glimpse at some of what had been happening in the early stages of the fire fight.
Crews were working to isolate five “bullet tanks” that at least had the potential to be fueling the blaze. These pressurized, vertical storage tanks hold ethylene oxide, company officials confirmed.
At the time of the report, about 8:30 p.m. July 15, four of the five tanks had been isolated already. Crews were working on the fifth.
The other chemical released in the fire, ethyl chloride, is another flammable colorless gas. Also known as chloroethane, it can cause dizziness, a drunken feeling and even unconsciousness in high, short-term doses.
Its long-term carcinogenic effects on humans are unknown, but one two-year study found it caused cancer in female mice that inhaled the gas, according to the U.S. Environmental Protection Agency.
Environmental groups have questioned how such a large fire could not result in some emissions of ethylene oxide and other chemicals, but state and company officials have said much of the chemical fuel could have been burned up in the blaze and converted to water and carbon dioxide.
Is there a risk in the air?
Ethylene oxide has drawn new attention and debate in recent years after an EPA research arm found the chemical, which is widely used in medical sterilization and in the production of a variety of chemical products, posed a far higher carcinogenic risk than earlier believed.
Though some advocacy groups and New Jersey’s air regulator suggest there may be no safe level for ethylene oxide, these concerns arise primarily from chronic exposure over a lifetime.
The DEQ action level for ethylene oxide being tested around Dow is 180 times larger than the state’s chronic exposure limit of 0.55 parts per billion, which is for 70 years of continuous exposure.
Air monitors being used around Dow don’t measure a level that small, so it’s not clear if lower levels of ethylene oxide were emitted by the fire.
The higher state action-level standard around which the monitoring at Dow has been based rely on existing federal worker safety recommendations in the absence of an EPA standard for this kind of short-term release, DEQ officials said.
Federal authorities are calling for even smaller chronic exposure standards than DEQ’s standard. Industry groups and some state environmental agencies have argued the chronic standards are based on flawed methods and are overstated, prompting litigation.
In addition to the air impact, DEQ also authorized Dow to send large volumes of water that had been used to extinguish the fire and liquids from damaged coolant and utility lines into the Mississippi River without treatment.
Is there a risk to the water?
In July 18 order, DEQ granted the authority for 14 days after the company told the agency it needed to remove the water that was continuing to fill its containment systems and couldn’t be treated quickly enough to allow progress on the fire recovery to continue.
DEQ required Dow to test the water daily inside the complex and at the river discharge point and report the results to the agency.
Even before the permit was issued, Dow says it has been testing water, including every four hours during the fire.
About 140 samples were taken through last Thursday and hadn’t shown a groundwater risk. The water also appeared to be within preexisting water discharge limits, the company said.
“Water quality remains normal,” Dow officials said.
More than 25 miles downstream of the plant, the city of Donaldsonville draws its drinking water from the Mississippi River. Several other communities farther downriver in St. James and other parishes do also.
State officials say the small concentrations likely being detected would be diluted by the large volumes of water in the river.
Though Dow says it is reporting the testing results to DEQ, those results have not yet been made public in the state’s online database. A report is due in the coming days.
In the first days of the fire, water from fire suppression systems had overwhelmed a containment reservoir, causing water to overflow on July 15 into one of the plant’s drainage canals.
Testing of that overflow water on July 15 gave mixed results, company officials said: one elevated concentration of 39 parts per million and two much smaller results of 0.55 ppm and 2.5 ppm.
The EPA doesn’t have a drinking water standard for ethylene oxide, but the American Chemistry Council says its maximum safe concentration is up to 41 ppm.
Dow officials said the highest sample was taken from a lab in Dow’s Glycol II unit that had been testing other types of ethylene oxide samples previously and wasn’t set up to test water through the EPA-approved method for ethylene oxide.
Dow officials said they used the equipment to get a quick result in the immediate aftermath of the fire.
The lowest sample was found at another Dow lab on equipment calibrated for ethylene oxide and set up to use the EPA method, DOW officials said. The second-highest sample was found by a third-party lab.
All three samples were collected near the Glycol II unit inside Dow, about three-fourths of a mile from the river, company officials said.
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