Earnings Transcript for SIRE - Q4 Fiscal Year 2020

Operator: Welcome to Ciner Resources Fourth Quarter and Full Year 2020 Earnings Conference Call and Webcast. Hosting the call today from Ciner Resources is Mr. Oğuz Erkan, Chief Executive Officer. He is joined by Mr. Ed Freydel, Vice President of Finance. Today’s call is being recorded. It is now my pleasure to turn the floor over to Ed Freydel. You may begin.

Ed Freydel: Thank you, Laurie. Good morning. And thank you for joining us to discuss our fourth quarter and full year 2020 earnings. Before we begin, I would like to remind you that the comments included in today’s conference call constitutes forward-looking statements within the meaning of federal securities laws. These are based on our beliefs, as well as certain assumptions and information currently available to us. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in the Company’s SEC filings. Certain financial measures discussed during this call, included adjusted EBITDA, distributable cash flow and distribution coverage ratio are non-GAAP financial measures. Reconciliations of those non-GAAP financial measures can be found in our earnings press release.

Oguz Erkan: Thank you, Ed. To begin, I am incredibly proud of our team as we navigated a challenging year for Ciner Resources, as it was for the world as a whole in battling the COVID-19 pandemic. As people were forced to quarantine and businesses temporarily closed, global economies suffered from end-to-end. Manufacturing activity, especially in our key end-markets considerably weakened as customer demand waned and workers were required to stay home. Flat glass manufacturing in particular was affected. However, our business weathered the abrupt downturn in demand effectively through successful execution of what we could control. Curtailing production is always our last resort, but we were able to do it in a way that minimized operating costs and allowed us keeping our workforce active around the time. Our employees demonstrated their talent and flexibility in taking on new and different tasks during those irregular operations and I especially want to commend the outstanding job done maintaining our high standards for health and safety in 2020. Our principal value is safety and our workforce committed from the start to applying this standard to our COVID-19 response. I believe avoiding a disruption to our operations due to COVID-19 was a considerable achievement given the circumstances. On top of successfully implementing and adhering to strict COVID protocols, we had zero lost work day incidents in 2020 and as a testament to our safe operations. As economic activity rebounded, our customer demand came back fairly quickly, especially in the domestic market evidenced by net sales growth of 29% from Q2 to Q3. International sales recovered at a slower pace due to high inventory levels and more moderated resumption of downstream manufacturing. As we look back on the year, the second quarter of 2020 represented a true low point in the soda ash market. The fourth quarter of 2020 reflected a continuous strong recovery in domestic market including robust volumes in December as we prepared for new customers coming in 2021. Strong domestic volumes provided a boy for our sales overall amid the relatively slower recovery in international demand. On the international side, the fourth quarter saw continued demand growth in our end-markets. Export volumes in the quarter were up 10% from Q3 and 41% from Q2 lows, a trajectory we expect to continue as world economies stabilize, particularly in Asia. Turning to our operations, I am happy to report that we successfully executed on $18 million of the $20 million cost savings program we implemented in Q2. By optimizing personnel schedules and cross-functionality, we reduced our labor cost, as well as our reliance on outside contractors. We also reduced our spend on maintenance projects, SG&A and other small, yet impactful expenses.

Ed Freydel: Thanks, Oğuz, and thank you everyone for joining our call. With our operations brought back running at full capacity, we produced 686,000 short tons of fourth quarter – in the fourth quarter of 2020, which was in line with Q4 of 2019. Total production volume for 2020 was 2.28 million tons, compared to 2.75 million tons in 2019 primarily due to production curtailments required to manage inventory, as well as a major weather event in Q3 of 2020. Domestic volumes sold in the fourth quarter increased 9% over the third quarter to 265,000 tons, and international volumes sold rose 10% to 327,000 tons, evidencing a significant recovery in soda ash consumption as we ended the volatile year. I will note that the decline in international consumption in Q2 was far more pronounced than experienced domestically in part due to high overseas inventories at the beginning of 2020. Average domestic price in 2020 declined 6.2% from 2019 and average international price declined 14.6% reflecting a challenging pricing environment due to supply demand imbalances, compared against record pricing levels in 2019. Altogether, the 2.2 million tons sold in 2020 decreased 19.5% in year-over-year volume. The resulted – this resulted in net sales of $392 million in 2020 or a decline of 25%, compared to a record 2019 net sales of $523 million. Sequentially, our fourth quarter 2020 net sales rose 5% from the third quarter and 36% from the second quarter lows.

Oguz Erkan: Thanks, Ed. Encouraging performance in the fourth quarter reflected our ability to quickly rebound from a sheer downturn, as well as both our operational flexibility and financial strength to endure market changes. As we’ve put a challenging year behind us, I am excited about the outlook for our business. We are optimistic that COVID-19 vaccinations will provide a tailwind to the macro economy and should spur consumer spending and manufacturing activity in our key end-markets. As a key base material for economic development, we continue to believe soda ash demand is poised to experience long-term sustainable growth, especially in emerging economies where construction, ore production, chemical production, and use of detergents increase. We are also excited about the growth potential in leaching production and the benefits that batteries for energy storage and electric vehicles offered for a sustainable future. Our decision to exit our former export cooperative, which was official as of the end of last year was a key step to capitalize on this growth potential. Combined with our parent company’s production in Turkey, Ciner is a largest exporter of soda ash in the world. We believe that this uniquely positions us to take advantage of logistical synergies and create strong relationships with global customers and distributors.

Operator: Thank you for participating in the Ciner Resources fourth quarter and full year 2020 earnings conference call and webcast. You may now disconnect your lines and have a wonderful day.

End of Q&A: