Yahoo Finance Ecovyst Inc (ECVT) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
Revenue: $184 million, slightly higher than Q1 2023.
Adjusted EBITDA: $45.5 million, up 6% from Q1 2023.
Adjusted EBITDA Margin: 24.7%, up 130 basis points from previous year.
Net Debt Leverage Ratio: Reduced to 2.9 times from 3.0 times at end of last year.
Cash Generation: Strong, benefiting from deferred dividends from Zeolyst Joint Venture.
Total Liquidity: $173 million at end of Q1 2024.
Free Cash Flow Guidance for 2024: Expected to be between $85 million to $105 million.
GAAP Sales Guidance for 2024: $715 million to $755 million.
Consolidated Adjusted EBITDA Guidance for 2024: $255 million to $275 million.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ecovyst Inc (NYSE:ECVT) reported a strong first quarter with adjusted EBITDA of $45.5 million, up 6% compared to the first quarter of 2023.
Sales within the Zeolyst Joint Venture increased due to higher sales of catalysts used in sustainable fuel production and sales growth in customized catalyst applications.
The company experienced strong cash generation in the first quarter, reflecting the timing of dividends received from the Zeolyst Joint Venture.
Ecovyst Inc (NYSE:ECVT) successfully reduced its net debt leverage ratio to 2.9 times at the end of the first quarter, down from three times at the end of last year.
The company remains optimistic about the long-term outlook for sales of catalysts used in the production of sustainable fuels, with North American capacity for renewable diesel and sustainable aviation fuel expected to grow significantly.
Negative Points
Sales in advanced silicas were lower due to decreased sales of polyethylene catalyst supports, which more than offset stronger sales in finished polyethylene catalysts.
The company noted some price weakness for spot and short-dated contracts as compared to 2023, indicating potential volatility in pricing.
Adjusted EBITDA for Advanced Materials and Catalysts was down from the previous year, primarily due to lower sales in advanced silicas.
The company anticipates a softer demand outlook for 2024 in emission control catalysts due to increased borrowing costs impacting new vehicle purchases.
There are ongoing challenges with the timing of hydrocracking catalyst sales, making it difficult to predict sales with absolute certainty.
Q & A Highlights
Q: So when I look at the outlook you have for the various segments for 2024, it looks like a few things have maybe gotten a little bit more positive PVC PVC outlook in mining recovery utilization rates in refining, you largely maintain the guide. I guess are there are some negative offsets to that that we should be thinking about or is it just look it's early in the year and you want to get too far ahead of yourselves. I guess how should I be thinking about that? A: (Kurt Bitting - Ecovyst Inc - Chief Executive Officer, Director) Thanks for the question, John. Yes, we're it's still I would say we're still early in the year, as we mentioned on the call, were the first really in the first five months of the year, we're going to conduct four of our five maintenance outages, which I think really puts us in a nice position to meet what we see is good demand from the regeneration segment. We're happy with the virgin acid. We do expect to have increased virgin acid volumes year over year with some recovery in the nylon segment. Mining remaining strong polyethylene as expected. We believe that would be stronger in the second half of the year, which is what we had thought it was on our on our last call. So essentially we feel good about where we're at and we're happy with our results so far in the first quarter, but there's still there's still time left in the year. And but we feel good about where we're at.
Q: Can you spoke you through the through the prepared remarks around a push-out in terms of timing around around the polyethylene catalyst side, I guess can you and can you help us to quantify that and think about the timing of when you expect that to roll? And it sounds like it may not necessarily all be 2Q, it may be pushed out into the back half of the year? A: (Kurt Bitting - Ecovyst Inc - Chief Executive Officer, Director) Yes, sure. So for for Q. one, just to recap on For Q1, our finished polyethylene catalyst sales were up year over year. What was fell short was the polyethylene catalyst supports, which are really I'm intermediates that either coal producers and the catalyst industries are actually polyethylene producers themselves five from us, these advanced intermediates and then partner them with their own metals. That's around a quarter to a third of what we call in our polyethylene catalyst sales. So those that there was some timing issues. Some of it was base shipping. And just when the orders actually landed at the expense of customers, there was some limited destocking in that in that space. But overall, when we look at polyethylene, both for the finished catalysts side and supports, we do expect that to be picking up in the second half of the year and for both of them to be year over year.
Q: Thanks, good morning. Just to stay with key catalysts, can you just step back and tell us where you think you are in those E catalysts on a cycle for yourselves in the back half of this year, would you be at a normal run rate or is there still more recovery as you go into next year? Maybe not looking for precise growth next year, but it's some idea of where you are in that cycle. A: (Kurt Bitting - Ecovyst Inc - Chief Executive Officer, Director) Sure. Thanks for the thanks for the question of the last year, I think we generally look at the polyethylene market and what's expected this year is 2% to 3% growth across the globe. Now that's segmented by that there's different regions behaving differently here in North America and the Middle East, where feedstock costs are low on those advantaged producers are at or above that growth rate. Other regions such as China continues to have sluggish growth as well as well as Europe. But we do see overall growth growing 2% to 3% this year, as we've talked about before, historically, we've through capturing market share and getting a disproportionate amount of the new builds and new business, we've been roughly able to been able to double that that market's a growth rate. So we feel good about where polyethylene is going. It's clearly is recovering from where it was last year, but we expect, I guess, the momentum of that recovery to pick up more in the second half of the year base.
Q: And shifting to merchant acid market, I mean you talked about some pricing headwinds in the second quarter. What is the net price headwind that you expect for the entire year, either in dollars or percentage of price or any other metric? A: (Michael Feehan - Ecovyst Inc - Chief Financial Officer, Vice President) Yes, unless we thanks for the question. This is Mike. So I think was for the second quarter, we really don't have any concerns around our overall base pricing. I mean, we did see some headwinds in the virgin sulfuric acid pricing model from some of the spot sales that we talked about before and some of the shorter-dated on contractual pricing. The net pricing impact that we were referring to in the second quarter is really generated on the pass-through nature of some of the contracts and the timing of when those costs are incurred versus when they're passed through, right, there's a quarterly lag. And when you have significant variances that can be intensified by the variable cost, the volatility in the variable costs. So we see that hitting us really in the second quarter, but then really moderating out for the rest of the year, right? That's not it's really partly due to the pass-through contract timing. So we don't expect that to be something that you'll see continuing in Q3 and Q4 for the full year.
Q: Hi, good morning. Maybe just on the Kansas City expansion that you referenced in the release, I guess how how big is that in terms of a percentage basis off your capacity and no long-term commitments you referenced linked to the latest wave of PDH capacity additions? And is there any sort of is there anything baked in for the larger capacity additions we see in 2026 and 27? Are you expecting there or is a time when it gets closer to first production? A: (Kurt Bitting - Ecovyst Inc - Chief Executive Officer, Director) Thanks for the question, Patrick. So in terms of the sizing of the Kansas City expansion, I think we've said it's a 50% expansion of our polyethylene capacity at the Kansas City site. We do have other production locations, so around around the globe, but the Kansas City, it's about a 50% production increase. And of course, as we've talked about, it is linked to contractual equip our contractual obligations with customers that are part of this wave of new builds a cross of across the globe, but obviously not at
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
