Ecovyst Inc. Q4 FY2024 earnings call

• Financial Results: For the fourth quarter of 2024, adjusted EBITDA was $76 million, up 8.7% compared to the fourth quarter of 2023. For the year, strong cash generation led to a net debt leverage ratio of three times at year-end, down from 3.2 times on a trailing twelve-month basis at September 30, 2024. - Strategic Initiatives: Investments in reliability initiatives in the Eco Services segment improved operational efficiency. Capacity expansions are underway for Chem 32 and the Kansas City polyethylene catalyst facility. Collaboration continues on advanced plastics recycling, biocatalysis, and carbon capture processes. - Demand Outlook: Maintains a cautious near-term demand posture due to macroeconomic uncertainty but has a positive long-term outlook. Eco Services projects positive momentum for regeneration service in 2025. AMAC segment expects stronger hydrocracking catalyst sales in 2025. Advanced Silicas expects sales growth outpacing global polyethylene demand.

Eco Services: Fourth quarter sales were $150 million, up 5% compared to the prior year quarter, driven by higher volume and favorable contract pricing in regeneration services. Adjusted EBITDA was $54 million, up nearly 12%, reflecting higher sales volume and pricing. Advanced Materials and Catalyst: Fourth quarter sales for Advanced Silicas were $33 million, up 5% year-over-year on higher sales of advanced silicas used in polyethylene production and niche custom catalysts. Sales from the Zeolus joint venture were down principally due to the timing of hydrocracking catalyst sales. Adjusted EBITDA for the segment was $28 million, up modestly compared to the fourth quarter of 2023.

• 2025 GAAP sales are expected in the range of $755 to $815 million, including an estimated $35 million of higher anticipated pricing related to sulfur cost pass-through. - Zeolus joint venture sales are projected to be in the $115 to $130 million range. - Adjusted EBITDA is anticipated to be in the range of $238 to $258 million, up 4% at the midpoint compared to 2024. - First-quarter 2025 adjusted EBITDA for Eco Services is between $29 and $34 million, and for Advanced Materials and Catalyst is between $3 and $8 million.

• Macro-economic uncertainty poses challenges to near-term demand. - Geopolitical factors such as tariffs could disrupt global supply chains. - The strategic review of the Advanced Materials and Catalyst business introduces uncertainty.

Q: Good morning. Just maybe first starting off on the 1Q guide, can you help us frame what this means from a volume decline perspective across each business? How much financial impact do you have just from the cost of your own turnarounds? And is there anything to call out in terms of the sort of the timing of price cost on the virgin sulfuric side, which is maybe a further drag here?

A: Good morning. Thanks for the question. From a perspective of size, the turnaround costs that we're incurring are a few million dollars of an impact. The turnaround cost from our customers would be another few million dollars. And then in addition, the rest of the components are made up of the timing of some of our fixed cost absorption related to our inventory timing as well as the timing on virgin sulfuric acid that Kurt had mentioned earlier.

Q: Thanks a lot. And the follow-up, I think you guided to about $35 million of, sorry, $25 million of net sales increase, including the pass-through. Excluding the pass-through, EBITDA is projected to go up $10 million. This just strikes me as somewhat low incremental margins given how high your margins typically are. Could you just give us a call and maybe a walk for that sales versus EBITDA bridge in your guidance?

A: Yeah. I think your first point about the sulfur impact, right? So that is a margin impact, you know, from a negative standpoint, but again, the sulfur pass-through does not impact EBITDA, it just inflates the top line. So that is certainly a component of it. There's also, you know, a mix component, primarily in the AM&C business where you do have, you know, as high, you know, some of our sales for hydrocracking in particular are not as highly profitable as they talked about in the past, but there is a dynamic from a mix standpoint as well. We did talk about higher costs overall for, you know, FMC turnaround cost just as they start to go up. However, you know, we are increasing our sales pricing as well to commiserate for that difference. So it's a little bit of the sulfur impact and then the mix effect as well.