Trinseo (TSE) Tops Q1 EPS by 19c, Revenues Miss

Trinseo (NYSE: TSE) reported Q1 EPS of $0.26, $0.19 better than the analyst estimate of $0.07. Revenue for the quarter came in at $854 million versus the consensus estimate of $915.72 million.

First Quarter 2020 and Other Highlights

• Liquidity-focused actions taken in response to COVID-19 to improve the already strong position, including the reduction of capital spending, operating expenses, and working capital, which resulted in quarter-ending cash and cash equivalents of $440 million and Liquidity* of $937 million
• Net loss of $36 million and diluted EPS of ($0.94), inclusive of a one-time pre-tax $38 million charge related to the impairment of certain long-lived assets in Boehlen, Germany and Schkopau, Germany, aligned to management’s ongoing strategy implementation; Adjusted EPS of $0.26
• Adjusted EBITDA of $57 million, including a $15 million unfavorable impact from net timing

“Trinseo has taken proactive steps to minimize the potential impact of the COVID-19 crisis on our employees and other stakeholders, as well as the financial impacts to the Company. Our primary focus has been maintaining a safe and healthy workplace for our approximately 2,700 employees and other stakeholders,” said Frank Bozich, President and Chief Executive Officer of Trinseo. “I’m extremely grateful for our operational personnel and business partners who have enabled the continued, safe operation of all of our facilities that are meeting customer demand, including products that are essential to the recovery from this pandemic.”

COVID-19 Response and Outlook

The Company previously withdrew its full-year 2020 guidance due to market uncertainty from the COVID-19 pandemic. In response to the pandemic, it took various actions to ensure employee safety, meet customer demand, and improve its operating and liquidity position, including:

• Formation of a COVID-19 crisis response team and pandemic response plan
• Implementation of actions that are expected to result in 2020 cost savings of approximately $25 million; this is incremental to the expected savings from the corporate restructuring program announced in late 2019
• Reduction in anticipated 2020 capital spending from $100 million to $80 to $85 million
• Drawdown of $100 million on revolving credit facility, as a precautionary measure
• Continued focus on working capital optimization as a cash source

Commenting on the outlook for 2020, Bozich said, “So far in the second quarter we are seeing sustained demand for polystyrene and latex binders for food packaging, polycarbonate for isolation sheeting, and engineered materials for medical applications. However, there has been a significant decline in demand in other applications, particularly in automotive, tires, and textiles, and we anticipate that this will have a more pronounced impact on second quarter performance.”

Bozich continued, “As we look out into the second half of the year, the duration of these impacts and the rate of recovery are unknown. Regardless, we’ve already taken actions to reduce operating costs and improve our existing strong liquidity position. In addition, we continue to remain focused on investing in the higher growth applications we previously outlined – CASE, Engineered Materials, and SSBR – so that we are better positioned to accelerate growth and profitability when the recovery occurs.”

For earnings history and earnings-related data on Trinseo (TSE) click here.

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