Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ecovyst Inc (ECVT, Financial) delivered financial results above their forecast for the second quarter of 2024, with adjusted EBITDA of $57 million.
- The company saw strong demand for regeneration services, supported by high refinery utilization and favorable economics for alkylate.
- Ecovyst Inc (ECVT) completed four turnarounds planned for eco services in the first half of the year, indicating successful operational execution.
- The company made a strategic equity investment in Pajarito Powders, aligning with their growth strategy in emerging markets like green hydrogen and fuel cells.
- Ecovyst Inc (ECVT) strengthened its balance sheet by amending and extending its term loan facility, reducing the interest rate spread and extending maturity until June 2031.
Negative Points
- Sales for the second quarter of 2024 were down $17 million compared to the same period in 2023, primarily due to lower sales of catalyst materials used in sustainable fuels and emission control applications.
- The company revised its sales expectations for the Zeolyst Joint Venture due to weaker demand for catalyst materials used in sustainable fuel production and emission control applications.
- Ecovyst Inc (ECVT) experienced unfavorable net pricing impacts due to the timing and contractual pass-through effect of lower variable costs.
- The renewable diesel market is expected to face headwinds over the next 12 to 18 months due to a decline in RIN credits and increased feedstock costs.
- The company revised its full-year 2024 guidance downward, reflecting expected softer demand for catalyst materials and a more cautious view on industrial demand for virgin sulfuric acid.
Q & A Highlights
Q: How much of the lower guidance is tied to the impact from Hurricane Beryl, lower industrial demand, and the renewable fuels outlook?
A: The impact from Hurricane Beryl is a few million dollars. About half of the guidance reduction is from the Ecoservice side, primarily due to softness in the industrial sector, and the other half is from the Advanced Materials and Catalysts (AM&C) side, related to changes in the outlook for sustainable fuels and emission control.
Q: How long do you expect the headwinds on renewable fuels to last?
A: The renewable diesel market is expected to face headwinds for the next 12 to 18 months due to a sustained decline in RIN credits, leading to deferred investment decisions and slowed utilization rates. However, we anticipate growth in sustainable aviation fuel demand between 2025 and 2030.
Q: Can you provide some reference on how low your renewable diesel business is now relative to pre-downturn levels?
A: Previously, sustainable fuel business represented over 10% of total sales for the AM&C segment. Now, it is below 10%, in the mid-to-high single-digit percentage range. This is expected to be a short-term situation, with potential for growth in the longer term.
Q: What is the impact of regulatory uncertainty on renewable fuels and emission control catalysts, and are you taking any cost optimization actions?
A: The regulatory environment, including the RFS and renewable volume obligations, remains uncertain and is expected to be addressed post-election. We have already taken steps to reduce costs, such as removing shifts from underutilized units, particularly in the Zeolyst Joint Venture, without impacting ongoing expansions in other areas.
Q: What is your view on the back half of the year for virgin sulfuric acid demand?
A: We expect volumes to be up year-over-year and Ecoservices EBITDA to increase in the second half. However, we are cautious about capturing additional spot sales due to a potentially weaker industrial climate, which may affect the availability of marginal spot sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
