Kraton Corporation

Good morning and welcome to the Craydon Corporation first quarter 21 earnings conference call. My name is Dale and I will be your conference facilitator. At this time, all participants are in listen-only mode. Following the company's prepared remarks, there will be a question and answer period. If you'd like to ask a question, please press star 1 on your touch-tone phone. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'll now turn the call over to Mr. Gene Shields, Director of Investor Relations. Sir, you may now begin.

Thank you, Dale. Good morning and welcome to the Craton Corporation first quarter 2021 earnings call. With me on the call this morning are Kevin Fogarty, Craton's President and Chief Executive Officer, and Athanasia Tanisov, Craton's Executive Vice President and Chief Financial Officer. A copy of the first quarter news release and the related presentation material that we'll review this morning is available in the investor relations section of our website. Before we review results for the first quarter, I'd like to draw your attention to the disclaimers on forward-looking information and the use of non-GAAP measures, which is included in the presentation this morning as well as in yesterday's earnings release. During the call, we may make certain comments that are not statements of historical fact and thus constitute forward-looking statements. Investors are cautioned there are risks, uncertainties, and other factors that may cause Craton's actual performance to be significantly different from the expectations stated or implied in any forward-looking statements we make today. Our forward-looking statements speak only as of the date they're made, and we have no obligation to update such statements in the future. Our business outlook is subject to a number of risk factors, as the format of this morning's presentation does not permit a full discussion of these risk factors. Please refer to our Forms 10-K, 10-Q, and other regulatory filings that are available in the investor relations section of our website. Finally, with regard to the use of non-GAAP financial measures, a reconciliation of each non-GAAP financial measure we use to its most comparable GAAP financial measure was provided in yesterday's earnings release and also in the appendix of the presentation material this morning. Following our prepared comments, we'll open the line for your questions. I'll now turn the call over to Kevin Fogarty. Kevin?

Thanks, Gene, and good morning, everyone. Over the course of the first quarter, we saw continued improvement in global demand trends, and this contributed to solid results we posted for the first quarter of 2021. These favorable demand trends translated into strong volume growth for our polymer segment. Specialty polymers volume was up 24.5% compared to the first quarter of 2020, driven by demand recovery in China and broader Asia, and we also saw demand improvement in North America and Europe. In addition, sales volume for performance products was up 6.5% compared to the first quarter of 2020, on higher sales into paving and roofing applications in Europe in anticipation of an upcoming strong paving season. The favorable demand fundamentals in the first quarter also contributed to improved results in our chemical segment. with overall sales volume for the chemical segment up 1.3%. Now, versus the first quarter of 2020, core sales volume was up almost 3% on higher demand for rosin esters, TOFA, and TOFA derivatives. As a result, we had a more favorable sales mix with lower sales of raw materials than the year-ago quarter. Strong demand for rosin esters, TOFA, and TOFA upgrades drove higher operating rates in our refineries during the first quarter, which, in conjunction with favorable price trends, led to improved profitability for the segment, despite pressures associated with rising energy and raw material costs. Overall, we are very pleased with the financial results we delivered in the first quarter, given costs associated with our turnaround at Bayer, and particularly in light of some specific and challenging structural market conditions during the quarter. As you are no doubt aware, thus far in 2020, we have seen significant increases in raw material and energy costs, and this impacts both our polymer and chemical segments. In response, we have implemented price increases in both segments to address these inflationary pressures. However, as we've experienced in the past, the magnitude and trend of raw material price increases, particularly in our polymer segment, resulted in some timing-related margin pressure during the first quarter, which we expect will be recovered over the course of the second and third quarters. In other words, we remain confident in our ability to manage these raw material cost trends and preserve target margins through our price-right strategies. Of course, the significant constraints in global transportation and logistics channels was also a factor in the first quarter, both in terms of cost inflation and because of the limited availability of ocean vessels, and coupled with the imbalance in shipping containers and ice retainers, put further pressure on supply chains to further complicate our customer fulfillment processes. While we were able to mitigate the impact of transportation and logistics constraints to a large extent, it was not without significant effort on the part of our teams. We expect demand for our products to continue the positive trend. We also recognize that logistics are likely to remain tight in the near term. In this reality, we require more focus on advanced lead times and the need for further creativity as we move forward. In addition, as you all well know, during the first quarter winter storm URI, impacted the petrochemical and refining infrastructure in the Gulf Coast region and disrupted activity at a number of mills from which we sourced CTO and CST and plants from which we sourced raw materials such as styrene and isoprene. As a result, there were limitations on availability of key raw materials with many suppliers declaring force majeure. And this limited sales in the quarter, particularly for CST products in our chemical segment and for SIS product grades in our polymer segment. On a more positive front, during the quarter, we continue to work through the approval process for BIAXIM. And as you have hopefully seen by now, on April 21st, the Environmental Protection Agency approved an emergency exemption for the states of Utah, Minnesota, and Georgia to allow Delta Airlines to utilize BIAXIM for specific applications in those states. We believe this is an important step in validation of BIAXIM's efficacy, safety, and durability, and we intend to pursue broader regulatory approvals that may provide for further deployment of this unique technology. Lastly, during the quarter, we remain focused on sustainability and our numerous ESG-related objectives. We continue to see positive demand and market response for the Revolution and Circular Plus platforms we have discussed in previous quarters. We also continue to position Craton for further opportunities in the growing biofuel space. I'll talk more about these later in the call. But for now, I'll turn the call over to our Executive Vice President and Chief Financial Officer, Athanas Atanasoff, who will provide more specifics on our financial financial results for the second quarter of 2021. Athanas.