Trinseo PLC

Good morning, ladies and gentlemen, and welcome to the Trinzio First Quarter 2023 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 Thursday, May 4th. 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'll now hand the call over to Andy Myers.

Thank you, David, 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 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 May 5, 2024. Now, I'd like to turn the call over to Frank Bozich.

Thanks, Andy, and welcome to our first quarter 2023 earnings call. I'd like to start by addressing the spill at our Bristol, Pennsylvania PMMA operations that occurred in late March. Let me begin by saying that our organization is deeply disappointed in this event and the disruption to our neighbors and the concerns of our stakeholders. We are working very hard to regain everyone's confidence. Due to an equipment failure and the accidental release estimated 8,100 gallons of acrylic latex emulsion occurred and some portion of this material was not contained at our facility and ultimately flowed into a local waterway. We immediately reported the events and cooperated closely with local, state, and federal authorities on the response activities, while at the same time collecting material and preventing further flow into the waterway. This material is used in various downstream industrial, consumer, and medical applications, including dialysis filters, and is approved by the FDA for use in medical devices. Importantly, our acrylic polymer latex emulsion has a non-hazardous OSHA classification. Within our material, there are certain precursor chemicals that are potentially present. Our estimates of these chemicals dispersed within the 8,100 gallons of material and reported to the Pennsylvania Emergency Management Agency was 0.32 pounds of butylacrylate, 1.62 pounds of ethylacrylate, 27.22 pounds of methylmethacrylate, and 0.26 pounds of styrene. None of the water sampling conducted by authorities detected these chemicals. Due to the onsite containment and cleanup activities as part of the initial response to the release, we believe that portions of the material never reached the waterway. Additionally, I'd like to take this opportunity to address the record about the historical environmental performance of our facility at the multi-tenant Bristol site that includes other companies' operations. Our facility has a history of compliance with environmental regulations, as indicated by the EPA's enforcement and compliance history online database. Not including this event, our facility has had no significant violations, no quarters of noncompliance, and no formal enforcement actions. As you all know, we are committed to strong environmental health and safety performance, and as a company, we've had an overall outstanding EHS record. I'm proud of the response of our employees, and the emergency responders to handle this in a cooperative and transparent way. Now, I'd like to turn to the first quarter results. As we entered Q1 2023, a continued low-demand environment, we established three near-term priorities for Trinzio. First, to focus on working capital management to increase cash, Second, to recover volumes that may have been lost to low-cost imports in Europe in the second half of last year. And lastly, to continue driving organic growth programs targeting material substitution and sustainability. I'm happy to say that our efforts around working capital management were very successful in Q1, as we reduced working capital by $52 million in the quarter. Dave will elaborate on our cash management actions in more detail. But based on the actions we are taking, we are confident we will be free cash flow positive in 2023, even at these reduced demand levels. From a market and volume standpoint, we saw 4% increase in volume over the levels of Q4. This volume increase reflected normal seasonal improvements rather than a broad recovery in our end markets. Business conditions in the first quarter were broadly the same as what we experienced in the fourth quarter. with continued destocking and building and construction, weak demand in consumer electronics, but healthy automotive demand. While our total sales volume for the company was down 20% year over year, volume for specialty and modified resins, as well as for case applications and latex binders, declined at about half that rate, which shows that these offerings have more resiliency during periods of destocking and lower structural demand. The volumes of margin for our technologies that enable our growth programs in general outperform the broader portfolio and at the Q1 run rate should deliver year-over-year margin growth. The volume of products containing recycled materials, which are very high demand by our customers, grew at 1% year-over-year during Q1. So far in the second quarter, April volumes are consistent with Q1. Structural demand remains low, and the recovery in China has been softer than expected. While we've seen an increase in orders for some high-value specialties in China for May and June, it's too early to tell if this represents sustainable demand. Therefore, we have implemented a series of cash improvement initiatives. We've already seen the benefit of these with our strong first quarter cash generation, and we'll continue to take action. While the timing and trajectory of the market recovery is unknown, we are addressing what we can to optimize near-term performance while preparing for the market recovery. I'd like to comment on the results of our engineered materials segment in Q1. While volume and unit margins were largely as expected in almost all of our EM product lines, our MMA margins were significantly lower due to ongoing ammonia force majeure of our supplier and the impacts of the natural gas hedges against declining gas prices. These costs cannot be recovered through sales of MMA into the merchant market or through our sales of ammonium sulfate byproduct into the fertilizer market. However, our input costs have decreased significantly in the second quarter as our ammonia supplier has restarted local production and we expect to see a significantly lower natural gas hedging impact in Q2. For these reasons, we expect to see significant sequential improvement in EM results. One last comment I would like to make is related to our process to sell our Styrenix assets. We continue to have ongoing dialogue with parties interested in specific assets and regional business activities related to our Styrenix business. As we have previously stated, separating these assets is part of our long-term strategy, and monetizing them is an important part of deleveraging the balance sheet. Given the continued interest in specific assets, as well as improvements we have made to them through our restructuring actions last year, we are restarting the sales process of our Steverenix business, which will include the marketing of individual assets and regional businesses. Now I'd like to turn the call over to Dave.