Trinseo PLC

Good morning, ladies and gentlemen, and welcome to the Trinzio third 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 the management team, followed by a question and answer session. The company distributed its press release along with its presentation slides, at close of market Wednesday, November 2nd. 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, Regina, and good morning, everyone. At this time, all participants are in the listen-only mode. After our brief remarks, instructions will follow to participate in the question and answer session. 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 November 3rd, 2023. Now, I'd like to turn the call over to Frank Bozich.

Thanks, Andy, and good morning, everyone. As we highlighted in our last quarterly call, The combination of economic uncertainty, high energy prices, and falling raw material prices triggered significant customer destocking throughout the third quarter. In addition, record energy prices in Europe resulted in reduced demand and lower margins due to the inability to fully recover input costs. We estimate that the sequential impact of higher gas costs on margins in Q3 was about $50 million. Asian demand remained consistent with Q2 levels, and there was no significant demand improvement as COVID restrictions continued. North American demand was steady and auto, but demand for building and construction applications and consumer discretionary items fell during the quarter as a result of rising interest rates and inflation. Against this economic backdrop, our volumes and margins in Europe showed considerable weakness during the quarter. Additionally, elevated energy costs placed the entire industry's more energy-intensive products on the high end of the global cost curve, and as a result, created opportunities for regional arbitrage. For more globally traded products like styrene and polycarbonate, the adverse impact on margins was significant, with the oversupply leading to negative margins. In response to these market conditions, we've announced several potential actions which we are considering to optimize our assets and improve our cost position with the largest area of focus on the more energy-intensive products in our portfolio, namely styrene and polycarbonate. We've begun the dialogue with the Works Council of Trinzio Deutschland regarding the potential closure of our styrene plant in Bolland, Germany. The plant has been offline since August, first for planned maintenance and then idled in response to poor economic conditions. The Boland facility contributed approximately negative $30 million to EBITDA during the 12 months ending June 2022. We have also temporarily idled our styrene production in Tjernuizen in the Netherlands. The starting needs for our downstream businesses beyond our production are expected to be met via external purchases. In polycarbonate, we're evaluating steps to optimize our production and supply chain for our downstream polycarbonate compounds. As a reminder, we consume about half of our polycarbonate production in our higher margin downstream compounding business, but the remaining 50% is sold into the more cyclical merchant polycarbonate markets. Part of our evaluation relates to potentially closing one of the production lines at our Stata plant, and we have initiated discussions with the Works Council there. This potential production line closure would lower costs and greatly reduce our exposure to the merchant polycarbonate market. In addition to these potential steps regarding our styrene and polycarbonate assets, We were reviewing ways to optimize our asset footprint in other segments, such as restructuring our PMMA sheet business in North America, as well as reducing styrene butadiene latex capacity at our Hamana Finland plant. Together, all of these initiatives, if approved, would lead to an improvement in annual profitability of about $60 million under current market conditions. I'm confident that in the medium to long term, we have a very competitive asset footprint. We are working on some very exciting energy efficiency initiatives that will both reduce our carbon intensity and decrease our utility costs. For example, heat recovery through mechanical vapor recompression. The financial benefits of these can be significant, and we estimate the annual savings of approximately $60 million for the initial set of projects assuming a natural gas price of $100 per megawatt hour. However, like the rest of the industry, in the short term, we are faced with a combination of historically high energy costs and low demand, particularly in Europe. Therefore, we're actively evaluating steps to improve our operating cost position and operating flexibility. And we've also enacted cost controls, such as limiting discretionary spending, and reducing capital spending. The current challenges we face as an industry reinforce the importance of continuing to transform our portfolio into a specialty solutions provider that, as a consequence, has lower carbon intensity. We remain focused on the overarching priority of our transformation and want to be clear that we will continue to prioritize the investments and initiatives that support this strategy. It's understandable that a significant amount of our current focus is on the headwinds we're facing from a macro environment, but I'm encouraged by the progress we're making on our transformation. Volumes of sustainable products, meaning products that contain recycled materials, grew 70% in the third quarter versus prior year, with a Q3 year-to-date increase of 65%. Margins for these products have been some of the most resilient in our portfolio, which is evidence of how highly valued they are by our customers. To expand our sustainable product offerings, we're creating and cultivating beneficial relationships to widen our range of sustainable products, including our recent announcement of a collaboration with Japan Steel Works to further develop recycled MMA, which will feed into circular PMMA solutions. We are also growing in material substitution applications that help our customers achieve their sustainability and cost reduction goals, such as replacing fiberglass with the co-lamination of PMMA and ABS for mobility and wellness applications. Co-laminated product volumes have grown 20% this year through Q3. And this is one of several material substitution offerings with significant and additional growth potential. There are additional growth opportunities through expanding our existing products into adjacent applications. For example, our PMMA CampStack technology has been adopted for PVC decking and railings as it provides high durability and weatherability, as well as the environmental benefit of lower EOC emissions by eliminating the painting for the end consumers. We recently began supplying this technology into siting applications. And with the expansion of CampSec into siting, which has a total addressable market of approximately $200 million, we can deliver these benefits to a wider range of customers. We remain committed to developing our product portfolio as part of our transformation with organic and inorganic growth. This will place us in an advantage position when the market conditions inevitably improve. A recently appointed CTO, Han Hendricks, will lead this effort to expand our technology offering into higher value applications. Now I'll turn the call over to Dave to walk through some of the additional financial points.