Trinseo (TSE) Q2 2024 earnings summary

Executive summary

• Q2 2024 net loss was $68M with EPS of $(1.92), including a $13M non-cash tax charge in China, but Adjusted EBITDA reached $67M, the highest since Q2 2022, with sequential improvement for the second quarter.

• Engineered Materials segment achieved highest sales volumes and Adjusted EBITDA since Q2 2022, driven by moderating input costs, normalized MMA market dynamics, and steady downstream demand.

• Sustainability initiatives advanced, including record sales of recycled-content products, opening of a PMMA depolymerization facility in Italy, and release of the 14th annual Sustainability and Corporate Social Responsibility Report.

• Free cash flow remained negative in Q2 at -$56M but is expected to turn positive in the second half of the year.

• Joint sales process for Americas Styrenics JV with Chevron Phillips Chemical to begin in Q3, targeting a definitive agreement in H1 2025.

Financial highlights

• Q2 2024 net sales were $920M, down 4% year-over-year, with net loss improving from $(349)M in Q2 2023.

• Adjusted EBITDA was $67M, up from $57M in Q2 2023, despite a $10M unfavorable net timing impact.

• Cash used in operations was $42M; free cash flow was -$56M for the quarter; capital expenditures were $14M.

• Ended Q2 with $108M in cash and $244M in additional available liquidity.

• Q2 2024 operating income was $13.9M, compared to a loss of $336.8M in Q2 2023.

Outlook and guidance

• Q3 2024 Adjusted EBITDA expected between $65M-$75M, with market conditions similar to Q2.

• Q4 profitability expected to be sequentially lower due to normal year-end seasonality, but free cash flow anticipated to increase from Q3 to Q4 due to working capital release.

• Full-year 2024 free cash flow will be negative due to first-half performance; positive free cash flow expected in H2 2024.

• $100M in cost savings from restructuring and natural gas hedges expected to be fully realized in 2024.

• Management will continue to evaluate further profitability improvement actions and focus on cash management and liquidity.