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Aug 3, 2024, 2:28:14 PM8/3/24

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Polymer segment Adjusted EBITDA for the fourth quarter of 2020 was $30.6 million, up 3.5% compared to the fourth quarter of 2019. Fourth quarter 2020 sales volume was up 6.0% compared to the fourth quarter of 2019, with higher sales volume in Specialty Polymers associated with demand recovery across multiple regions, and higher volume in Performance Products primarily driven by higher sales into paving and roofing and adhesive applications.

Chemical segment Adjusted EBITDA for the fourth quarter of 2020 was $23.9 million, up 22.3% compared to the fourth quarter of 2019. Chemical segment results for the quarter reflect the benefit of a 20.3% increase in sales volume, compared to the fourth quarter of 2019, partially offset by lower average sales prices and higher costs, including costs of planned maintenance.

"During 2020, we delivered the $20 million of annualized cost savings that we had outlined at the beginning of the year. We also strengthened our capital structure by significantly reducing outstanding debt, while improving liquidity through the refinancing of our ABL facility and senior unsecured notes and meaningfully reducing borrowing cost by delivering approximately $11 million of annual cash interest savings. In 2021, while we expect to continue to reduce debt and maintain a disciplined approach to cost and capital allocation, we will be focused on investing in accretive organic growth projects and our innovation pipeline," added Fogarty. "Looking ahead to 2021, we are encouraged by the demand trends experienced in both our Polymer and Chemical segments in the second half of 2020, and the start of this year. Of course, we must remain mindful of the disruptive potential of COVID-19 as well as constrained availability and increasing costs of global logistics associated with improving demand and trade flows. Nevertheless, in our Polymer segment, China continues to present an excellent economic backdrop after two plus years of geopolitical and trade challenges. As is always the case this time of the year, we have high expectations for a robust North American and European paving and roofing summer season, and our consumer durable markets continue to indicate attractive growth. In our pine chemical segment, we are seeing evidence of positivity across all three major product categories, including TOFA, TOR and CST, indicative, we believe, of both improved fundamentals, and increasing preference for our sustainable, 'from the trees,' pine chemical offerings. We therefore currently are planning to grow our core business by 5%-7% in 2021 and expect 2021 Adjusted EBITDA to be at least on par with 2020, after adjusting for the Cariflex stub period that contributed approximately $10 million in 2020, or approximately $252 million. It is important to note that this outlook for 2021 is burdened with approximately $15 million of expenses associated with the significant statutory turnaround in our Berre, France, plant, which occurs approximately every six years," said Fogarty.

Q4 2020 VERSUS Q4 2019 RESULTSRevenue for the Polymer segment was $214.8 million for the three months ended December 31, 2020 compared to $232.5 million for the three months ended December 31, 2019. The decrease was due to the divestiture of our Cariflex business in March 2020 and lower average sales prices resulting from lower raw material costs across all product lines, partially offset by the increase in sales volumes discussed below. The positive effect from changes in currency exchange rates between the periods was $6.6 million.

Sales volume of 70.2 kilotons for the three months ended December 31, 2020 increased 6.0% compared to the three months ended December 31, 2019. The increase in sales volumes is largely attributable to increases in Specialty Polymers volumes of 15.6%, primarily driven by the demand recovery across all regions particularly into durables and automotive applications, a 7.4% increase in Performance Products sales volumes, driven by higher sales into paving and roofing and adhesives applications, and sales attributable to the Isoprene Rubber Supply Agreement ("IRSA") entered into in connection with the sale of our Cariflex business. These increases were partially offset by the divestiture of our Cariflex business.

Sales volumes were 291.8 kilotons for the year ended December 31, 2020, a decrease of 4.2 kilotons, or 1.4%. The decrease is largely attributable to the divestiture of our Cariflex business, partially offset by the commencement of the IRSA during the first quarter of 2020. While we experienced the impacts of COVID-19 during the first half 2020, the demand recovered during the second half of the year. Specialty Polymers volumes increased 5.2% primarily driven by demand recovery in Asia. The 2.2% increase in Performance Products sales volumes was driven by higher sales into adhesives applications, as well as improved paving and roofing demand within North America.

Q4 2020 VERSUS Q4 2019 RESULTSRevenue for the Chemical segment was $192.0 million for the three months ended December 31, 2020 compared to $176.1 million for the three months ended December 31, 2019. The Chemical segment experienced higher sales volumes across all product lines, including opportunistic raw material sales. These volume increases were partially offset by lower average sales prices, including the impact of raw material sales. The positive effect from changes in currency exchange rates between the periods was $7.8 million.

Sales volume was 117.9 kilotons for the three months ended December 31, 2020 compared to 98.0 kilotons for the three months ended December 31, 2019. Performance Chemicals volumes increased 25.6% driven by opportunistic raw material sales, Adhesives volumes increased 9.0% due to improved market conditions globally for rosin esters, and Tires volumes increased 27.2% with the growth of innovation applications.

For the three months ended December 31, 2020, the Chemical segment generated Adjusted EBITDA (non-GAAP) of $23.9 million compared to $19.5 million for the three months ended December 31, 2019. This increase is largely due to the increased volumes, in addition to the factors described above. These benefits were partially offset by the timing of higher costs, including costs associated with planned maintenance and turnaround activity. The positive effect from changes in currency exchange rates between the periods was $0.3 million. See a reconciliation of U.S. GAAP operating income to non-GAAP Adjusted EBITDA below.

FY 2020 VERSUS FY 2019 RESULTSRevenue for the Chemical segment was $705.6 million for the year ended December 31, 2020 compared to $751.5 million for the year ended December 31, 2019. The decrease was primarily attributable to lower average sales prices in the crude sulfate turpentine ("CST") chain driven by a decrease in gum turpentine price and lower average sales prices for rosin esters associated with excess hydrocarbon tackifier supply. The decline was also due to lower average sales prices in tall oil fatty acids ("TOFA") upgrades associated with the adverse impact of COVID-19. These impacts were partially offset by higher sales volumes of rosin ester adhesives and opportunistic raw material sales. The positive effect from changes in currency exchange rates between the periods was $8.5 million.

Sales volumes were 425.7 kilotons for the year ended December 31, 2020, an increase of 27.1 kilotons, or 6.8%, with higher opportunistic raw material sales within Performance Chemicals and increased rosin ester sales volumes, partially offset by lower sales volumes for TOFA and TOFA derivatives related to COVID-19 demand pressures.

For the year ended December 31, 2020, the Chemical segment generated $94.6 million of Adjusted EBITDA (non-GAAP) compared to $132.4 million for the year ended December 31, 2019. The 28.6% decrease in Adjusted EBITDA (non-GAAP) was primarily driven by lower margins as a result of a decline in average sales prices impacting the CST refinery and rosin ester products. The decrease was also driven by the decline in TOFA and TOFA derivative sales volumes impacted by market fundamentals, primarily due to COVID-19 and higher fixed costs, partially offset by higher opportunistic raw material sales. The positive effect from changes in currency exchange rates between the periods was $1.0 million. See a reconciliation of U.S. GAAP operating income to non-GAAP Adjusted EBITDA below.

OUTLOOKFollowing a significant demand contraction in the first half of 2020 associated with the adverse impact of COVID-19, we experienced demand recovery in the second half of the year. In 2020, we delivered approximately $20.0 million of run rate cost savings which will largely offset 2021 cost inflation, and we expect to deliver additional cost savings in 2021.

Based upon our current market view, we expect growth in our core business of 5% to 7%. However, we expect to incur approximately $15.0 million of costs in 2021 largely associated with a significant statutory turnaround at our Berre, France, plant, which occurs approximately every six years. We expect to incur the majority of the costs for the Berre turnaround in the first half of 2021.

USE OF NON-GAAP FINANCIAL MEASURESThis press release includes the use of both GAAP and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted Earnings per Share, Consolidated Net Debt (including as adjusted to exclude the effect of foreign currency), Adjusted Gross Profit, and Adjusted Gross Profit Per Ton. Tables included in this earnings release reconcile each of these non-GAAP financial measures with the most directly comparable U.S. GAAP financial measure. For additional information on the impact of the spread between the first-in, first-out ("FIFO") basis of accounting and estimated current replacement cost ("ECRC"), see Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, when filed.