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BERWYN, Pa.--(BUSINESS WIRE)--Mar 10, 2014--Styron, the global materials company and manufacturer of plastics, latex and rubber, today reported fourth quarter 2013 results with revenue of $1,245 million and Adjusted EBITDA of $104 million.
“Full year 2013 Adjusted EBITDA, excluding inventory revaluation, of $344 million is the highest fiscal year in Trinseo’s history, looking back to 2011,” said Chris Pappas, Trinseo President and Chief Executive Officer. ”I am proud of our full year results and other achievements that have improved the Company’s growth prospects for the future. Our team remains focused on executing our business strategies and I am cautiously optimistic for a better 2014.”
Commenting on the Company’s future growth strategy, Pappas said, “We made two significant announcements in February of 2014 that are low cost and effective parts to our growth strategy for 2014 and beyond. First, we acquired additional Solution Styrene Butadiene Rubber (“SSBR”) production capacity from JSR at our site in Schkopau, Germany. Doubling production capacity on one train will allow us to further grow the rubber business in a very economical and timely manner. Second, we announced plans to expand our latex capacity at our production facility in Zhangjiagang, China. This expansion will mainly support the growing demand for latex in China’s paper and paperboard industry.”
Fourth quarter revenue decreased 6% versus prior year driven by a 2% reduction in volume and a 6% reduction in price, which was primarily driven by the pass through of lower butadiene costs in the Synthetic Rubber and Latex segments. These impacts were partially offset by favorable foreign exchange rates as the US dollar weakened compared to the euro. Sequentially, revenue decreased 5%. Volume had a 5% unfavorable impact due mostly to seasonality, particularly in the Styrenics and Latex segments. Price, net of foreign currency impact, was roughly flat as a favorable currency impact was offset by passing through the lower cost of styrene to our customers.
Adjusted EBITDA for the quarter increased 113% versus prior year including $10 million of additional joint venture dividends from Americas Styrenics in 2013. The remaining increase was driven by margin improvement due to higher styrene production margins as well as favorable inventory revaluation. Sequentially, Adjusted EBITDA increased 20% including an additional $7.5 million of joint venture dividends. Favorable inventory revaluation was partially offset by lower styrene production margins and seasonally lower volumes.
Full year revenue decreased 3% versus prior year, driven by 3% lower price and 1% lower volume. The overall decrease in sales volume was primarily due to the Styrenics segment, with increases in the selling price of our polystyrene products due to the pass through of price increases of our key raw material (styrene monomer), and the Latex segment, driven by lower demand in the Europe and Asia paper markets. These were partially offset by higher sales volume in the Synthetic Rubber segment due to our previously announced SSBR capacity expansion. The overall decrease in selling price was driven by the contractual pass through of lower butadiene cost in the Latex and Synthetic Rubber segments. These impacts were partially offset by the pass through of higher styrene cost as well as a favorable foreign exchange impact as the U.S. dollar weakened compared to the euro.
Adjusted EBITDA for the year increased 4%, driven primarily by higher margin, with volumes remaining relatively flat. Higher volume in the Synthetic Rubber segment was driven by the SSBR capacity expansion, partially offset by lower demand in the Styrenics segment, with the pass through of the higher cost of styrene monomer, and the Latex segment, due to weaker paper markets in Europe and Asia. Higher margin was driven by improved styrene production economics and styrenic polymer margin optimization efforts, which were partially offset by unfavorable inventory revaluation. Fixed costs were higher due to the SSBR capacity expansion, higher incentive compensation, and a lower rate of fixed cost absorption as we worked to optimize inventory levels.
Fourth Quarter Results by Business Segment
Latex revenue of $308 million for the quarter was down 12% versus prior year. Lower prices had a 10% unfavorable impact, driven mostly by the pass through of lower butadiene cost. Adjusted EBITDA of $24 million was $3 million below prior year mostly due to lower volume. Sequentially, revenue was down 7% primarily due to lower volume on seasonality. Adjusted EBITDA decreased $2 million as higher margin, due to favorable inventory revaluation, was more than offset by lower volume. Synthetic Rubber revenue of $148 million decreased 18% from prior year. Lower prices, driven by decreased Butadiene cost, unfavorably impacted revenue by 18%. Higher SSBR volume, with the new train coming on line, and a favorable currency impact were offset by lower revenue from our capacity rights customer as well as lower spot exports to Asia. Adjusted EBITDA of $42 million for the quarter was $18 million higher than prior year. This increase was driven by higher SSBR volume as well as higher margin with more favorable inventory revaluation. Sequentially, revenue increased 4% driven by higher SSBR volume. Adjusted EBITDA increased $29 million due mostly to inventory revaluation as well as higher SSBR volume. Styrenics revenue of $530 million for the quarter was 2% below prior year including a 1% reduction due to the divestiture of the Expandable Polystyrene business. The remaining 1% reduction was driven by lower polystyrene sales in Europe and Asia, with the higher price of styrene, as well as lower price, on unfavorable mix in our Styrene Monomer related sales. Adjusted EBITDA of $55 million was $39 million higher than prior year driven by $10 million of additional dividends from Americas Styrenics, better styrene monomer production margins, as well as higher Styrenic Polymer margins due to improved market conditions and margin optimization initiatives. Sequentially, Styrenics revenue decreased 8% including a 2% reduction due to the divestiture of the Expandable Polystyrene business. The remaining 6% reduction is driven by volume due primarily to seasonality as well as higher styrene monomer sales in the prior quarter when the styrene margins were more favorable. Price was also lower due to the pass through of lower styrene cost. Adjusted EBITDA decreased $4 million as significantly lower styrene production margins were partially offset by higher styrenic polymer margins, due to pricing initiatives and an additional $7.5 million of dividends from our joint venture, Americas Styrenics. Engineered Polymers revenue of $260 million was 4% higher than prior year. Higher volume increased revenue by 4%, with more sales to the Automotive and Building & Construction markets. Lower price decreased revenue by 2% due to the pass through of lower raw material costs as well as continued competition and excess supply in the Polycarbonate markets, and this impact was offset by a favorable currency impact. Adjusted EBITDA of $2 million for the quarter increased slightly from $1 million in the prior year as higher margin was mostly offset by higher fixed costs. Sequentially, revenue was roughly flat. Lower volume, including seasonality and mix impacts, was offset by a favorable currency impact. Adjusted EBITDA was flat as higher margin was offset by volume seasonality and mix impacts as well as higher fixed costs. Free Cash Flow and Liquidity
Free cash flow was positive $109 million for the quarter, which included $9 million of capital spending, net of a $12 million subsidy related to the SSBR expansion. Free cash flow was positively impacted by a $36 million decrease in receivables. Free cash flow for the full year was a record $170 million. We ended the year with record-high liquidity of $633 million.
Outlook
Commenting on the outlook for 2014, Chris Pappas said, “We are cautiously optimistic that we can deliver higher Adjusted EBITDA in 2014 as compared to 2013. While we believe we will not see a repeat of the record styrene margin levels of the second half of 2013, we look to more than make up for that with improved performance particularly in Synthetic Rubber, with a stronger tire market and as we work to sell out the SSBR train, and in Engineered Polymers, with an improving polycarbonate market and continued wins with our differentiated offerings in the automotive, medical, and other markets. In addition, we will continue to closely manage fixed costs and capital spending.”
Conference Call and Webcast Information
Trinseo will host a conference call to discuss its Fourth Quarter and Full Year 2013 financial results tomorrow, Tuesday, March 11, 2014 at 10 AM Eastern Time.
Commenting on Trinseo’s 2013 year-end results will be Chris Pappas, President and Chief Executive Officer, and John Feenan, Executive Vice President and Chief Financial Officer. The conference call will be available by phone at:
Participant Toll-Free Dial-In Number: 877-372-0878
Participant International Dial-In Number: +1 253-237-1169
Conference ID / passcode: 4091514
The Company will also offer a live, listen-only Webcast of the conference call on the Trinseo / Styron Investor Relations website.
Trinseo / Styron will distribute and post the Fourth Quarter and Full Year financial results press release and presentation slides on the Company’s Investor Relations website on Monday, March 10 th at 5 PM Eastern Time. The presentation slides will also be made available in the webcast player prior to the conference call. The Company will also furnish copies of the financial results press release and presentation slides to investors by means of a Form 8-K filing with the U.S. Securities and Exchange Commission (SEC).
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 April 11, 2014.
Styron previously announced plans to change the name of all Styron affiliated companies to Trinseo. Some, but not all, of the Styron companies are currently known as Trinseo; Styron companies that have not yet changed their names will continue to do business as Styron until their respective name changes are complete. Styron's operating companies also continue to do business as Styron at this time.
About Styron
Styron is a leading global materials company and manufacturer of plastics, latex and rubber, dedicated to collaborating with customers to deliver innovative and sustainable solutions. Styron’s technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Styron had approximately $5.3 billion in revenue in 2013, with 19 manufacturing sites around the world, and approximately 2,100 employees. More information can be found at www.styron.com.
Use of non-GAAP measures
Trinseo management believes that measures of income excluding certain items (“non-GAAP” measures) provide relevant and meaningful information to investors about the ongoing operating results of the Company. Such measurements are not recognized in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should not be viewed as an alternative to GAAP measures of performance. Reconciliations of non-GAAP measures to GAAP measures are provided in the Notes to Condensed Consolidated Financial Information.
Note on Forward-Looking Statements
This press release may contain “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements in this press release may include, without limitation, forecasts of growth, revenues, business activity, acquisitions, financings and other matters that involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others: conditions in the global economy and capital markets, volatility in costs or disruption in the supply of the raw materials utilized for our products; loss of market share to other producers of styrene-based chemical products; compliance with environmental, health and safety laws; changes in laws and regulations applicable to our business; our inability to continue technological innovation and successful introduction of new products; system security risk issues that could disrupt our internal operations or information technology services; and the loss of customers. Additional risks and uncertainties are set forth in the Company’s reports filed with the United States Securities and Exchange Commission, which are available at as well as the Company’s web site at . As a result of the foregoing considerations, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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