Calumet, Inc

We've seen costs easing, and our margins continue to catch up. Steel costs have rescinded, and feedstock costs have plateaued. That being said, we're cognizant that the current geopolitical environment poses a risk of a new round of cost escalation. On availability of supply, Lubrizol recently notified us that our force majeure is being extended through June of 2022. Now that we have introduced replacements, we expect availability to continually improve but it looks like margins will be somewhat squeezed through the first half of the year. Last, and excitingly, we expect volumes to meaningfully grow, as we believe we can now keep up with demand. On slide 12, you'll see that in Montana, we delivered $9.1 million of adjusted EBITDA in the fourth quarter versus $24.4 million in the third quarter and $6.4 million in 4Q of 2020. We experienced normal seasonality in Great Falls, as gasoline and asphalt demand in the Rocky Mountains is typically low in the winter. Further, we previously reported a hydrogen unit outage during the month of November that led to unplanned downtime for the plant. We brought both the hydrogen unit and the facility back to full operations in December and have been running well ever since. Before I turn the call back over to you, Steve, I just wanted to say that it's been a pleasure being your CFO. I know we are both grateful to so many. our analysts, investors, vendors, customers, and ultimately the great Calumet employees who have made the past couple years at Calumet a true success. And Steve, while I know you're not going anywhere, I think I can speak for everyone when I say thank you for your leadership and commitment to Calumet as our CEO. And with that, I'll turn the call back over to you to talk 2022 out with.

Thank you, Todd, and thank you for the very kind words. I'll briefly touch on the transition announcement we issued yesterday. one that has been well received by major unit holders and key partners, and then I'll conclude with our outlook. The most consequential transition event is Fred's decision to retire from our board as chairman. Fred has been a wonderful leader, mentor, and friend to many of us here at Calumet. He co-founded the company, so naturally we'll miss his perspective, his experience, and his expertise. Heritage has been very supportive of management and of Calumet through the years, So firstly, I wish Fred all the best and thank him from our entire Calumet team. Thoughtful and planned transitions are important to Fred, and we've approached this one in exactly that manner. Secondly, I just want to reiterate that this is the same management team, although roles are changing. I look forward to continuing in an executive capacity as well as chair of the board. We have a great group of directors and a great management team running our business. And third, Todd's going to do just great. It's going to be an easy and smooth transition. He knows as much about Calumet as anybody in the company. He's been here a long time, has deep experience across basically every one of our businesses. He's sharp, he's humble, and he loves this company. He's going to be an excellent CEO, and I have every confidence in him to lead us into the future. I would add that our transition is not just about Todd. It's about a confidence and belief in our whole team. The last two years have been pretty challenging for Calumet. And it takes a strong and close team to circle the wagons, pitching together, and emerge from all the challenges of the pandemic with a transformational vision, one that's created a tremendous amount of unit holder value and should be able to continue to create substantially more. We've got about 1,500 people here at Calumet, and I'm proud to have had the chance to work with each and every one, every one committed to staying the course and rising to the challenge, no matter how daunting it might appear. Okay. In conclusion, on slide 13, I wanted to touch on our outlook for this year and how Calumet is thinking about positioning ourselves for continued growth and success. First, let's touch on our core specialties businesses. As you know, that's comprised of specialty products and solutions and performance brands. In SPS, and you've heard me say it before, through most of the business cycle, we believe we're competitively advantaged by producing our own feedstocks as opposed to purchasing them. And that is definitely very true in this current market. So while Todd mentioned that record specialty margins have eased, product inventories are shockingly low, demand is solid, and we definitely appear to be setting the stage for solid fuels margins contributions that will at least balance, if not outweigh, the easing in specialty margins. In performance brands, demand continues to be strong, and we believe that as supply chains recover, we will generate even more value in this business. I'm not going to say we are out of the woods on supply chain issues yet, but we have had quite a lot of promising signs. I told you about where we are today with MRL. It's a truly superior RD project. We believe the most value to be unlocked for Calumet unit holders is the path for MRL into the public markets, and we will continue to position that business accordingly. We can then use some of that unlocked value to deliver the Calumet parent, giving our special needs business a competitive cost of capital, and the appropriate leverage to return to growth and reinvestment mode for what is an excellent business. And despite geopolitical uncertainty, we think 2022 has the potential to be a good year for Calumet, one that should generate enough earnings and cash flow to give us the option to begin to selectively invest in growth again. We've budgeted about $25 million or so for improvements to modernize, upgrade, optimize, and further integrate our plans. It's a basket of small capital projects that are easy to execute and have high returns. So with that, I'd like to turn the call over to the operator to open up the line for Q&A. Operator?

Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Manav Gupta from Credit Suisse. Your question, please.