February 9, 2023

Tempur Sealy Investors Call Highlights

Tempur Sealy International, Inc. (TPX) Q4 2022 Earnings Call Transcript

Feb. 09, 2023 10:17 AM ETTempur Sealy International, Inc. (TPX)

Tempur Sealy International, Inc. (NYSE:TPX) Q4 2022 Earnings Conference Call February 9, 2023 8:00 AM ET

Company Participants

Lauren Avritt – Investor Relations Manager

Scott Thompson – Chairman, President, and Chief Executive Officer

Bhaskar Rao – Executive Vice President, and Chief Financial Officer

Scott Thompson

Thank you, Lauren. Good morning, everyone, and thank you for joining us on our 2022 fourth quarter and full earnings call. I’ll begin with some highlights from our fourth quarter, and then I will turn to discuss how we delivered on our long-term initiatives. Then Bhaskar will review our fourth quarter financial performance in more detail and discuss our 2022 guidance. Finally, I’ll close with a few comments on how we view the current market environment, then we will open the call up for Q&A.

In the fourth quarter of 2022, net sales were approximately 1.2 billion and adjusted EPS was $0.54. This represents a 36% growth in sales and a 59% growth in adjusted EPS as compared to the fourth quarter of 2019, a pre-COVID period. Compared to the same period last year, this represents a 13% decline in sales and a 39% decline in adjusted EPS as we navigated a weak overall market and experienced robust inflation.

However, we continue to outperform the broader industry by a good bit and enhanced our competitive position. Consistent with our previous quarter, we observed a slight increase in resilience of our premium customers with sales of value focused customers a bit more subdued.

I’d like to begin by highlighting some of the key wins for the quarter. First, as we discussed last quarter, we successfully kicked-off the North America launch of our new collection of Stearns & Foster products, which is designed to further distinguish our high-end traditional Innerspring brand from the numerous mid-market Innerspring brands in marketplace.

Our third-party retail partners have demonstrated their enthusiasm for both the new Stearns & Foster product portfolio and our commitment to supporting the line-up through compelling national brand marketing. This excitement for the new product is reflected in robust year-over-year order trends.

In order to ensure the new product meets our stringent quality requirements, we have extended the launch window in response to a slight component delay. We expect to complete the rollout by Memorial Day holiday selling period. Overall, we remain on track to expand Stearns retail slot by more than 20%.

Turning to our second highlight, our U.S. e-commerce channel performance performed well in the quarter delivering approximately double-digit growth. Our new Stearns & Foster and Sealy e-commerce sites have exceeded our expectation, the greater mix into the more premium SKU assortments resulting in unexpectedly high ASP across both brands.

Our Tempur e-commerce business also delivered solid growth in the quarter, which is especially notable considering a difficult prior year compare. With the recent launch of our new Sealy website, we now have operation to direct-to-consumer websites to the U.S. at each of our leading brands. Our expanded e-commerce presence is a powerful tool that enables us to be closer to the customer, drive [share of voice] [ph] and build on our omnichannel strategy.

For the last five years, we’ve developed a direct relationship with millions of customers, gaining valuable consumer insights and furthering our direct marketing capability. This helps build our long-term customer relationships and drives marketing efficiencies. Moving to ESG, we further our commitment to protect and improve our communities and the environment.

We recently published our 2023 corporate social value report, which is available on our IR website. We are proud of the progress we’ve made in our ESG goals. In the fourth quarter, we achieved our goal of 100% landfill diversion from our U.S. and European manufacturing operations. We also made progress towards our goal of carbon neutrality for our global operations reporting a decrease in emissions per unit.

Before turning the call over to Bhaskar, I want to take a moment to step back and review the progress we’ve made on our long-term initiatives during 2022. Though the year was fluid from a macroeconomic standpoint, we remained focused on positioning the business for long-term success.

Starting with our first key initiative, which is to develop the highest quality products in all the markets we serve. When it comes to product development, our Number 1 objective is to anticipate and react to consumers evolving suite preferences. In early 2022, we made continued progress against this objective through various product launches.

As part of the refresh of our U.S. Sealy Posturepedic portfolio, we launched a new line of premium and hybrid Sealy mattresses featuring improved comfort, superior support, innovative cooling technology. This lineup has truly resonated with our Sealy targeted consumer base.

We leveraged our Sealy brand to tap into new market segments as well. We launched our new Sealy Natural Collection in the second half of the year, constructive or ecofriendly sustainable source material. This collection appeals to environmentally conscious consumers and continues to broaden our customer base. We also launched our Sealy FlexGrid mattress line, which features pressure relieving grid, gel grid, it represents the evolution of the technology in the market today.

With a unique scalable manufacturing approach, we’re able to offer these products at a mid-market retail price. In addition to supporting our 2022 launches, we set the innovation pipeline for 2023 and beyond. Later this quarter in the U.S. we’ll launch an upgraded line of TEMPUR-breeze products and smart adjustable basis.

Then later in the year, we expect to expand the distribution of our TEMPUR ACTIVEbreeze cooling system into select wholesale doors. We expect these launches to further strengthen Tempur’s appeal to the premium wellness minded consumer and drive improved attach rates and strong ASP.

Turning to our International group. Beginning this quarter, we’ll undertake the largest international product roll-out in the company’s history, reaching more than 90 markets worldwide. This new lineup of mattresses, pillows, and bed basis has been strategically designed to drive addressable market expansion of Tempur products. The launch is phased over multiple quarters to allow for the customization by region.

Finally, I would point out that our investment in Silicon Valley sleep tech started bright, our partnership with Sleep Data Company, full power technology, and our industry leading R&D team will ensure Tempur Sealy remains at the forefront of sleep innovation. As evidence of our commitment to product quality innovation, our leading brands received a number of recognitions throughout the year.

Notably, Tempur-Pedic ranked Number 1 in customer satisfaction among mattress brands in the J.D. Power 2022 Report for the fourth year in a row for retail mattress category. And for the second year in a row, ranked Number 1 in the online mattress category. A true testament to the customers’ trust of our brand and products.

Turning to our second initiative, which is to promote our brands with compelling marketing worldwide. We supported our brand and products with a record marketing investment of approximately $450 million this year. In addition to generating strong near-term returns and driving outperformance relative to the broader bedding market, these investments also serve to seed the market for our 2023 product launches.

Sealy and Tempur continue to be the Number 1 and Number 2 best-selling mattress brands in America and among the most highly recommended, recognized, and desirable brands in the industry with 95% of shoppers aware of at least one of the TSI brands. In 2022, we leaned into the untapped potential of our Stearns & Foster brand by doubling our presence on national television.

In addition to contributing to growth and awareness and consideration for Stearns, these marketing investments grew our retail support, which combined with the new product lineup is reflected in a significant increase in placements. Our investments in product, brand, and channel successfully drove Stearns & Foster’s website traffic and sales growth in 2022, making clear progress to our goals to make Stearns & Foster our third billion dollar brand.

Last year, we also ceded the market for upcoming international launch with strategic marketing investments in store sales programs and e-commerce initiatives worldwide. Our third initiative is to optimize our powerful omni distribution platform. Evolved, our global omnichannel present in-step with consumer preferences to be wherever they wanted to shop.

The largest pillar in our omnichannel distribution strategy is our more than 26,000 third-party retail doors. This broad footprint ensures that consumers can easily find and experience our products in person. Now, we’re well represented in third-party retailers in the U.S. today. There are opportunities both to increase our balance this year with existing retail partners and to sell to certain retailers who do not currently retail Tempur Sealy products.

Turning to our OEM operations. While we entered the space only a few years ago in 2020, we made significant progress in growing our operations, both within our Sherwood private label Innerspring business and our foam-pouring business. In 2022, we delivered significant growth in our OEM operations as we continued, to charge towards our target of 600 million in OEM sales.

Note that OEM sales growth will decrease the cost per unit for all of our branded products as we spread our fixed cost and drive more advantageous supply agreements on the enhanced volume. In addition to growing our wholesale and OEM business, we are now running in excess of [$1 billion] [ph] in annual sales in our global direct-to-consumer business with a robust five-year compound annual growth rate of over 40%.

Regarding our direct retail store operations, we opened 50 retail stores in 2022 and currently operate over 700 brick-and-mortar storefronts around the world. Our retail network is comprised of both wholly-owned and joint venture locations led by over 200 Tempur retail and multi-branded fleet outfitter stores in the U.S., and are more than 200 Dreams locations in the UK.

In total, including the e-commerce sales they facilitate, our company-owned stores generate an average sale of $2 million per location with the U.S.-based Tempur retail stores averaging a robust $4 million for sales per location. Finally, I should note that in aggregate our U.S. web has grown at a compounded annual growth rate of over 25% since 2017. Our fourth and final key initiative is to drive increased EPS through operational execution and prudent capital deployment.

In 2022, we generated full-year adjusted EPS of $2.66. This represents a five-year compound annual growth rate of 26%. We executed on our balanced capital allocation strategy to return value to shareholders. We allocated approximately $1 billion in capital. First, we reinvested over 300 million in operations. This includes a one-time investment to stand-up our new foam-pouring plant in Crawfordsville, Indiana which is expected to commence operation in 2023, enhancing our ability to service our customers by ensuring product availability to meet increase demand in the premium sector, creating shorter lead times, and reduced per unit logistics cost in the Northeast market.

Second, we invested 10 million in Bright, a technology based mattress company with differentiated new product offering targeted at a different premium customer than we currently serve today. Third, we invested over 665 million in share repurchase to buy back approximately 10% of our shares outstanding at an average price of $33 a share. And finally, we paid $70 million in cash dividend. I should note we announced today a 10% increase in our quarterly dividend bringing it to $0.11 per share.

I’d be remiss if I didn’t mention our ERP transition, which will play a critical part in our ability to deliver on all of our long-term objectives. In 2022, we completed the multi-year journey of transitioning more than 50 of our global subsidiaries from using five different ERP systems into one common system. This investment in consolidating our operations 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.

Bhaskar Rao

Thank you, Scott. In the fourth quarter of 2022, consolidated sales were approximately $1.2 billion and adjusted earnings per share was $0.54. We had $10 million of pro forma adjustments this quarter, all of which are consistent with the terms of our senior credit facility. Turning to North American results. Net sales decreased 12% in the fourth quarter. On a reported basis, the wholesale channel decreased 13% and the direct channel decreased 5%.

Early indications are that we outperformed the market. When looking at our sales growth, please note our fourth quarter of 2021 was significantly benefited by a Tempur-Pedic backlog reduction of $100 million. North American adjusted gross profit margin declined to 37.9%, primarily driven by operational headwinds and mix related to the prior year Tempur-Pedic backlog reduction, partially offset by pricing actions.

The backlog reduction in the prior year accounted for approximately half of the margin decline. North American adjusted operating margin declined to 15.1%, driven by the decline in gross margin and operating expense deleverage.

Curtis Nagle

Good morning. Thanks very much. Kind of my last question in terms of just breaking out the sales guidance. I think we’re a little better than expected, so that’s good. Maybe just dig a little more into the U.S., Scott over the past, I don’t know, 3 months or 4 months, we’ve been talking about stabilization, right, in the U.S. which sort of started in 4Q. Through where we are right now has that continued? Could we talk a little bit in terms of just how the U.S. is trending at the moment and how you’re feeling about that?

Scott Thompson

Well, I mean, as of 8:00 A.M., I can tell you how we’re doing. Look, it’s very stable. I mean, it feels like from a trend standpoint we’re getting off, we’ll call the COVID trend of people shopping more during the week than they used to and less on the weekend. It’s moved back to more traditional shopping with more shopping on the weekend than during the week. One of the other trends that we saw during COVID was that the holiday periods were not quite as robust and the business was steadier through the calendar.

And now we’re going back to what I think is more of the historical pattern where the trough is a real trough and the peaks are real peaks, i.e. the holiday periods become critical for the industry. But all that would be, what I would call normal, getting back stable. And look, I think our volumes – we haven’t seen anything since year-end that would make us think the industry is anything, but at least stable. And I’ll add that I haven’t seen anything that makes me think that we won’t continue to take a reasonable amount of share in 2023.

Jonathan Matuszewski

Great. Thanks so much for taking my question. I had a question on the competitive landscape. Your largest competitor recently filed for bankruptcy a couple of weeks ago. Just curious if you could give us a sense of how conversations with your retail partners have looked since this news broke and how are conversations progressing regarding potential slot gains for the TSI brand? Thanks so much.

Scott Thompson

Yes. Thanks for the question. Look, I don’t think that particular news was shocking to the industry, I think it was well telegraphed and expected. So, I don’t think it’s fundamentally changed the discussions with our retailers. What the retailers care about is quality products, support with advertising and those kind of items.

I think our chief competitor has strong brands and is a hard, tough competitor. But we continue to work aggressively with our retailers. So, I don’t think the actual filing changed very much in most retailers mines, as long as they provide quality products and service in the marketplace.

https://seekingalpha.com/article/4576800-tempur-sealy-international-inc-tpx-q4-2022-earnings-call-transcript?mailingid=30503207&messageid=2800&serial=30503207.29

February 6, 2023

Highlights from LyondellBasell’s Earnings Call

LyondellBasell Industries N.V. (LYB) Q4 2022 Earnings Call Transcript

Feb. 03, 2023 2:22 PM ETLyondellBasell Industries N.V. (LYB)

Q4: 2023-02-03 Earnings Summary

EPS of $1.29 beats by $0.02 | Revenue of $10.21B (-20.45% Y/Y) misses by $487.87M

LyondellBasell Industries N.V. (NYSE:LYB) Q4 2022 Results Conference Call February 3, 2023 11:00 AM ET

Company Participants

David Kinney – Head, IR

Peter Vanacker – CEO

Michael McMurray – CFO

Kenneth Lane – EVP, Global Olefins and Polyolefins

Kimberly Foley – EVP, Intermediates & Derivatives & Refining

Torkel Rhenman – EVP, Advanced Polymer Solutions

Michael McMurray

This represents our 12th consecutive year of annual dividend growth. We continue to invest in maintenance and growth projects with $1.9 billion in capital expenditures. A significant portion of this capital funded the final stages of construction of our world-scale PO/TBA plant.

Startup activities remain on track for the end of this quarter. Our transformation of is working across our company to rigorously manage and track the progress of our value enhancement program. We look forward to sharing the progress of this program at our Capital Markets Day in March.

As a reminder, volatility in natural gas prices impacts our cost for not only gas, but also steam and electricity. We estimate that a $1 per million BTU change in the price of natural gas impacts the energy cost of our directly operated assets by approximately $175 million per year across the company with 80% of this impact in North America and 20% in Europe.

These estimates do not include the impact of gas price on feedstock cost. Before I turn the call over to Ken and then to each of our business leaders, who will describe our segment results in more detail, let me address some of your annual modeling questions for 2023 on Slide 11.

As our new world-scale PO/TBA plant ramps up, we expect to produce and sell about half of the asset’s nameplate capacity in 2023. We remain confident that our value enhancement program can achieve recurring annual EBITDA of $150 million by the end of 2023 through the execution of about 1,000 projects.

In order to achieve this benefit, we expect to incur a similar amount of onetime capital and operational cost of about $150 million, with the majority of these costs allocated to capital. Major planned maintenance for 2023 included a turnaround at one of our Midwest ethylene crackers in the O&P Americas segment, turnarounds at our acetyls assets and 3 propylene oxide plant turnarounds within our I&D segment.

Kimberly Foley

Thank you, Ken. Please turn to Slide 14 as we take a look at our intermediates and Derivatives segment. Fourth quarter EBITDA was $291 million. Styrene margins improved due to lower feedstock costs. Oxyfuel margins remained well above historical fourth quarter averages.

Oxyfuel volumes declined as the timing of the vessel sailings resulted in unusually high third quarter volumes. We operated our assets at rates of approximately 75%. Our propylene oxide and styrene joint venture in the Netherlands is expected to restart this month after 3 months of downtime in response to volatile European energy costs and lower demand.

We look forward to initial volumes from the new PO/TBA asset in Houston by the end of the quarter. We plan to operate our assets across the IND segment at approximately 80% in the first quarter. In January, we are encouraged by unseasonably strong oxyfuel margins with low butane feedstock costs and strong oxyfuel blend premiums.

We expect relatively stable margins for the segment for the first quarter. We developed multiyear maintenance schedules to ensure that our plants can safely and reliably serve our customers. As it works out, 2023 will be a heavy year for maintenance across several of our PO/TBA assets.

Maintenance is scheduled for 2 of our 3 PO/TBA plants at our Bayport, Texas facility in the second and fourth quarters. Our [indiscernible] PO/TBA facility in the Netherlands will also undergo maintenance from September through November. We expect the ramp-up in volumes of our new plant will be partially offset by loss production from this planned maintenance.

Nonetheless, the incremental 2023 PO and TBA volumes should be sufficient to capture typical market growth. In 2024, we expect less scheduled maintenance and the full year of production from our new assets will provide additional volumes to serve market growth.

Duffy Fischer

Two quick questions. One, in the increase in your operating rates across segments, does that contemplate some inventory build for the summer season? Or does that also — or do you see that as kind of sell-through as well for Q1? And then on the polymers for Americas, what — or what’s your plan, I guess, for the split between U.S. sold and export this year versus next year? Do you have to improve your export percent meaningfully with the new capacity in North America?

Peter Vanacker

Thank you, Duffy. I mean, let me split it up in 2 parts on your working capital question on the inventory question. First of all, Kim will give a bit of overview on the PO side. And then Kim can also talk about the olefins, polyolefins.

Kimberly Foley

Thank you, Peter. So as it relates to the propylene oxide side, yes, we’re building a a slight bit of working capital as a contingency for the startup. But once the startup is successful, which we have tremendous confidence in that inventory level will come down. And we expect throughout the year to operate at about 85% capacity based on the modest demand we see in propylene oxide right now.

https://seekingalpha.com/article/4575185-lyondellbasell-industries-n-v-lyb-q4-2022-earnings-call-transcript

February 4, 2023

Wisdom About Big Company Downsizing

Headlines about layoffs don’t mean you’re going to lose your job

Rebecca Knight

Feb 4, 2023, 02:23 IST

What does the future hold?Hidesy/Shutterstock

• The US labor market looks strong, and yet news about mass layoffs dominates the headlines.
• Nearly 40% of US workers said they “are nervous about being laid off,” per a LinkedIn survey.

The US labor market looks stunningly strong, and yet it’s hard to scan the headlines without feeling a tinge of worry about your job security.

Big Tech companies including Amazon, Google, Microsoft, and Meta have collectively shed tens of thousands of workers amid a slowing economy. And the cuts keep coming — even in industries outside of tech. The chemical company Dow, for instance, laid off 2,000 employees; 3M, the maker of Post-it notes and Scotch tape, slashed 2,500 jobs; and Impossible Foods, which produces plant-based meat, trimmed 700.

To be clear: Labor Department data shows that layoffs overall remain historically low and the latest jobs report shows growth is rock solid.

But if the fear of losing your job hovers over you like a dark cloud, you’re not alone. Nearly 40% of US workers said they “are nervous about being laid off,” a LinkedIn survey of more than 2,000 US employees conducted in December found.

What are the real chances of that happening? To find out, Insider spoke with three experts: Nick Bunker, the head of economic research at Indeed Hiring Lab; Wayne Cascio, an industrial-organizational psychologist at the University of Colorado; and Andrew Flowers, a labor economist at Appcast, the recruitment-advertising technology company. Highlights of what they had to say might help you sleep a little more soundly.

How worried should we be about layoff contagion?

Flowers: Recessions are psychological phenomena. They’re about a loss of confidence in the future.

In the tech sector, there was a collective awareness that companies were operating with a different outlook than they had been previously. Before, growth was the priority and there was lots of optimism — let’s take advantage of low interest rates and hire a bunch of people. That sentiment flipped as the unit economics came under more pressure, along with higher interest rates and more consumer spending on services.

As for whether these layoffs spread into other sectors, the risk is not that business leaders will see what’s happening in tech, get spooked, and say, “We need to batten down the hatches and lay off our people, too!” That’s not the channel through which layoff contagion happens.

The risk is if consumers get spooked.

You’re scaring me a little. What happens when consumers get jittery?

Flowers: Over the last year, we’ve seen a disconnect between hard and soft data. The hard data, including GDP, has been relatively strong. But the soft data, including consumer sentiment, which is based on surveys, has been weaker. The fundamentals are good, but the vibes feel off.

That’s why some talk about a “vibe-session?”

Flowers: There’s potential for a recession to become a self-fulfilling prophecy. That could happen if consumers get nervous about the layoffs news. They’ll think, “Maybe I won’t go out to eat. Maybe I won’t buy a new refrigerator.” If their spending falls, the effect on the economy could cause contagion.

Why is there such a disconnect between what the data says about the economy and how we feel about it?

Bunker: I get why people are voicing discontent — inflation is a lot higher than it’s been in the recent past.

But there’s what people say and what they do. They say it’s not great and they complain about it. But they’re still quitting their jobs and going out to dinner. What people are doing is indicative of a strong economy.

And by “people,” do you mean CEOs, too? Are they operating in a way that’s indicative of a strong economy?

Bunker: Unfortunately, I can’t read the mind of the CEOs. Economic growth is slowing down, but there’s still growth.

We could see a rise in layoffs if that takes a hit moving forward. But that would be based on economic growth, not based on what other CEOs are doing.

That’s encouraging. As long as fundamentals stay solid, we’re not all in danger of getting pink slips, right?

Cascio: You don’t need to hit the panic button. In this tight labor market, the demand for talent is high and supply is limited. The last thing enlightened CEOs want to do is cut people when things look like they’re turning south.

So I guess we all should hope we work for an enlightened CEO then?

Cascio: One of the things you want to look at is what your employer did in past downturns. Did they turn to layoffs during the financial crisis? What about in the tech wreck of 2001? Research shows that’s the best predictor of future behavior. If they’ve done it once, they’re going to do it again.

I’ve been doing research on downsizing since the ’90s and one thing is clear: Companies that move quickly to lay off their workers never outperform their competitors in the same field. If companies are doing layoffs to cut costs, there are better ways than cutting people.

https://www.businessinsider.in/careers/news/headlines-about-layoffs-dont-mean-youre-going-to-lose-your-job/articleshow/97588787.cms

February 3, 2023

Patten Jr. Joins Everchem Specialty Chemicals

Everchem Specialty Chemicals today announced that Dave Patten Jr. has joined the company as Director of Marketing

Patten Jr. comes from the film and commercial production background, having run his production company South9 since 2009. He has produced and sold films to Netflix and series to Comcast, directed/produced music videos for record labels including Atlantic Records, RocNation and Warner Brothers, as well as commercials for brands like Under Armour, NFL, Lincoln, and Jack Daniel’s.

“I’m excited to spice up the current paradigm of Chemical Industry marketing where I can. The team at Everchem are a lot of fun and open to atypical ideas I throw their way. Most of the time, anyway.” Patten Jr said. “More than anything though, I love that I get to work with my dad.”

Media PA, February 3, 2023

February 1, 2023

Bustynowicz Named President of Everchem Specialty Chemicals

Everchem Specialty Chemicals, a sales and marketing distributor of Urethane, Epoxy, Industrial Chemicals and Energy Curing products, today announced that Walt Bustynowicz has been named President.

Bustynowicz has more than 25 years of experience in the Urethane and Epoxy industries, working in various Technical and Commercial roles at companies which include ICI, Huntsman, CVC Thermoset Specialties, Emerald Performance Materials Company, and Cardolite Corporation. Bustynowicz transitions from his most recent role as Vice President and General Manager at Everchem.

“I am very honored to take on this new position at Everchem,” said Bustynowicz. “Our employees are what differentiate us from all other suppliers. We have dedicated people that go the extra mile to serve our customers. Everchem is uniquely positioned to bring cost effective solutions to urethane and epoxy formulators in North America. We have a wide range of raw materials that support our customers in growing their businesses.”

Dave Patten will continue as CEO and CFO of Everchem.

Media PA, February 2, 2023

About Everchem Specialty Chemicals:

Everchem Specialty Chemicals is a sales, marketing and technology driven company that operates in the North American marketplace, promoting urethane commodity, and specialty industrial chemicals. Our sourcing abilities and technical and market expertise result in real savings of both time and money for customers. Our market expertise helps our suppliers reach additional customers and markets in an easy and efficient way.