Trinseo PLC

Good morning, ladies and gentlemen, and welcome to the Trinzio second quarter 2022 financial results conference call. We welcome the Trinzio management team, Frank Bozich, president and CEO, David Stacey, executive vice president and CFO, and Andy Myers, director of investor relations. Today's conference call will include brief remarks by management team, followed by a question and answer session. If you would like to ask a question at that time, press star followed by the number one on your telephone keypad. The company distributed its press release along with its presentation slides at close of market Monday, August 8th. These documents are posted on the company's investor relations website and furnished on a form 8K filed with the Securities and Exchange Commission. If anyone should require operator assistance during the call, please press star then zero on your telephone. I will now hand the call over to Andy Myers.

Thank you, Brent, and good morning, everyone. At this time, all participants are in a listen-only mode. After our brief remarks, instructions will follow to participate in the question and answer sessions. Our disclosure rules and cautionary note on forward-looking statements are noted on slide two. During this presentation, we may make certain forward-looking statements, including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described, or implied in these statements. Factors that could cause actual results to differ include, but are not limited to, risk factors set forth in item 1A of our annual report on Form 10-K, or in our other filings made with the Securities and Exchange Commission, The company undertakes no obligation to update or revise its forward-looking statements. Today's presentation includes certain non-GAAP measurements. A reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release and in the appendix of our investor presentation. A replay of the conference call and transcript will be archived on the company's investor relations website shortly following the conference call. The replay will be available until August 9, 2023. Now, I would like to turn the call over to Frank Bozich.

Thanks, Andy, and good morning, everyone. During the second quarter, we delivered healthy earnings and closed out the quarter with the third highest first-half adjusted EBITDA in the company's history, all while navigating an increasingly challenging economic environment. As the second quarter progressed, we began to observe slowing demand and destocking broadly across Europe, but particularly in building and construction and consumer durables like appliances and furniture. These conditions have accelerated early in the third quarter. This is most pronounced in engineered materials, polystyrene, and base plastics, where we're seeing lower levels of demand compounded with customers delaying orders awaiting lower prices from rapidly falling feedstock costs. In polycarbonate, which is quite energy intensive, market prices have not increased to reflect the rise in energy costs. In North America, we're seeing relatively stable demand with double-digit year-over-year improvement expected in automotive. In Asia, we're encouraged by easing COVID restrictions in China, and are hopeful that it leads to increased production in the region, although regional economic data from July has not reflected that yet. The uncertainty in the global macroeconomic landscape only underscores the importance of our strategy to transform Trinzio to a less cyclical specialty material and sustainable solution provider. A key part of that transformation remains the divestiture of our styrenics business. We began a formal sales process during the first quarter of this year and saw strong interest from strategic and financial parties. Since that time, there have been broad changes to the economic conditions, including geopolitical uncertainty in Europe and rapid rises in interest rates to combat high inflation. This conspired to shut down the acquisition financing market, which ultimately led us being unable to conclude a transaction at a fair valuation. While we're focused on our transformation strategy, we are also committed to obtaining a fair value for this highly cash-generative business. So on July 26th, we announced the pause to the sales process. I want to be very clear that the separation of Styrenix Business is still a key component of our transformation journey, and based on the significant interest we saw during the process, We anticipate a successful separation of these assets in the future. For now, we will continue to utilize the cash they provide to fund organic growth projects, including expanding our sustainable product portfolio, decreasing our CO2 footprint and energy intensity while returning cash to shareholders. The Stagronix divestiture was just one component of the transformation, and our work is ongoing on the other facets of that strategy shift. The integration of the acquired PMMA business and AERIS tech services is going as planned, and we're on track to capture at least $60 million of run rate synergies by mid-2024. We also recently completed the first wave of the ERP implementation for the PMMA business in North America, with the European go-live expected later this year. When complete, we expect these migrations will result in transition service savings of approximately $6 million per year. In addition, we still expect annual savings of at least $25 million related to the upgrade of our legacy Trinzio ERP system, which we expect to complete next year. Another important part of our transformation is growing the recycled material containing products. This is accomplished not only by growing sale of existing product offerings, but also by introducing new offerings like the recent launch of our AltaGlass R-Life acrylics, which are comprised of chemically recycled PMMA and are used in a variety of applications, including transportation, building and construction, and lighting. Sales of our recycled products not only have a positive environmental impact, but also align with our strategy of targeting higher growth higher margin, and less cyclical markets. Including sales from the recently acquired plastics collector and recycler, Heathland, first half sales volume and variable margin for products containing recycled content grew 62% and 86% respectively versus prior year. Our first half revenue for these products was $39 million. Further growth in recycled content sales will be supported by focused R&D and capital projects. More information on our sustainability strategy and metrics can be found in our 12th Annual Sustainability Report, which we released in July. New additions to this year's report include the TCFD framework, in addition to SASB and GRI, as well as the inaugural Supplemental Core Impact Report, which provides a holistic view of how we define, create, and disperse value. The report also includes our highlights from 2021 and updated progress toward our 2030 sustainability goals, including emissions reductions, employee safety, and D&I targets. I want to thank our sustainability team for another stellar report and our employees who've been integrating sustainability into our daily operations and company culture. Before I turn the call over to Dave, I want to make a few comments regarding natural gas in Europe. There are two key questions our stakeholders are interested in understanding. The first is, what if there's a limited natural gas availability in Europe? And the second, what is the impact of higher and more volatile prices? We have 14 production sites in Europe, including four in Germany. With the exception of Stada Polycarbonate and Bohlen Styrene Monitor, we have robust contingency plans for continuing operations in the event of a natural gas curtailment. Bohlen is currently down for planned maintenance, but looking forward, if energy supply is curtailed, we have the option to idle Bohlen and procure styrene from the market or to run chernus and site more intensely. In Stata, there are multiple lines and we consume 50%, about 50% of the site's production for our higher margin compounded products. So we have the ability to reduce rates by 50% without impacting our downstream specialty business. Our network of site provides us with the unique ability to utilize alternative energy sources Russian gases curtail or to ship from other regions at lower cost to meet market demand. Overall, a significant curtailment could become an upside in some of our chemistries due to their plant locations and the options to use non-Russian energy. For example, approximately 30% of European styrene monomer comes from plants in Germany and Eastern Europe, and in certain curtailment scenarios, we could see supply-driven fly-up margins. Regarding higher natural gas prices, during the first half of the year, the average gas price in Europe was approximately $100 per megawatt hour, and our spending on natural gas was more than $100 million higher than last year. We've taken numerous commercial actions to pass through this cost increase, including increasing the frequency of our pricing updates. In fact, I'm happy to say that we have maintained our unit margins in almost all of our products except styrene and polycarbonate. However, we estimate that our earnings were impacted by about $25 million from higher gas prices in the first half of the year, primarily in styrene polycarbonate and polycarbonate-containing compounds. If natural gas prices stay at their current levels through the second half of the year, The year-over-year impact would be $170 million higher cost than the second half of 2021. In the event of continued high prices and no curtailment or rationalization of supply, we can supply from other regions at significantly lower costs. In short, we have contingency plans that allow for our continued ability to supply and optimize costs in either scenario, with some potential upside if there are supply disruptions related to curtailments. Now I'll turn the call over to Dave, who will talk more about our financial performance.