PQ Group Holdings Inc.

02/21/2019 | Press release | Distributed by Public on 02/21/2019 05:27

PQ Group Holdings Reports Fourth Quarter and Full Year 2018 Results; 9% Sales Growth, 50% Operating Cash Flow Improvement and ~$135 Million of Debt Repayment for the Year

  • Sales increased 6% to $380.1 million for the fourth quarter and 9% to $1,608.2 million for the year;
  • Net income of $28.2 million for the fourth quarter and $58.3 million for the year;
  • Adjusted EBITDA of $109.1 million for the fourth quarter and $464.0 million for the year;
  • Operating cash flow higher by 50% to $248.6 million for the year; Adjusted free cash flow up $109.4 million for the year leading to approximately $135 million debt reduction for the year;
  • 2019 Guidance: Sales of $1,640 million to $1,670 million; Adjusted EBITDA of $470 million to $485 million; Adjusted free cash flow of $125 million to $145 million; and
  • Announcing realignment into four distinct business units including Catalysts, Performance Chemicals, Performance Materials, and Refining Services

MALVERN, Pa.--(BUSINESS WIRE)-- PQ Group Holdings Inc. (NYSE:PQG) ('PQ' or the 'Company') reported results for the fourth quarter and year ended December 31, 2018. For the fourth quarter, sales of $380.1 million were up 6% from the fourth quarter of 2017. Net income was $28.2 million or $0.21 diluted EPS and Adjusted net income was $23.2 million or $0.17 Adjusted diluted EPS. Adjusted EBITDA was $109.1 million. For the year, sales were $1,608.2 million, an increase of 9% over 2017. Net income was $58.3 million or $0.43 diluted EPS. Adjusted net income was $116.6 million or $0.87 Adjusted diluted EPS. Adjusted EBITDA was $464.0 million.

'In the fourth quarter, we delivered on both pricing and volume growth plans that drove a solid finish to the year. We generated strong operating and adjusted free cash flow for 2018 that was all allocated to debt reduction, achieving meaningful progress towards our deleveraging target,' commented Belgacem Chariag, PQ President and Chief Executive Officer. 'Despite more modest macroeconomic trends in 2019, we expect growth in all our product groups driven by continued underlying secular demand.'

Chariag also added, 'Since our last quarter earnings call, we advanced our strategic review to make our business portfolio simpler and stronger. As a first step in this process, we are delayering our business structure effective March 1 to empower our four strong business units, creating an environment of focus and accountability to drive additional efficiencies.'

The financial results and outlook include non-GAAP financial measures.These non-GAAP measures are more fully described and are reconciled from the respective measures determined under GAAP in 'Presentation of Non-GAAP Financial Measures' and the attached appendix tables.

Environmental Catalysts & Services ('EC&S') Segment Results

For the fourth quarter ended December 31, 2018, sales of $141.3 million rose 15.0% versus the same period in 2017, driven by higher demand for regeneration services and virgin sulfuric acid in Refining Services as well as polyolefin catalysts in Silica Catalysts. Net sales from the Zeolyst Joint Venture decreased by 14.7% to $36.5 million, largely on expected lower hydrocracking catalyst volumes due to timing of customer demand. Adjusted EBITDA of $69.0 million was up 13.1%, benefiting from the higher Refining Services operating results coupled with a gain related to a Hurricane Harvey insurance recovery.

For the year ended December 31, 2018, sales of $527.7 million grew 11.4% from 2017 largely driven by higher sales demand in Refining Services and polyolefin catalysts offsetting lower chemical catalyst volumes in Silica Catalysts. Net sales from the Zeolyst Joint Venture increased 9.0% to $156.7 million due to higher demand for hydrocracking and emission control catalysts. Adjusted EBITDA of $257.6 million was up 5.7% from 2017, largely driven by the operating performance in Refining Services.

Performance Materials & Chemicals ('PM&C') Segment Results

For the quarter ended December 31, 2018, sales of $239.5 million improved 1.5% versus the same period in 2017. This was largely driven by higher sales in the Performance Materials North America highway safety product line, offsetting lower demand in Performance Chemicals and unfavorable currency. Adjusted EBITDA of $49.8 million decreased 10.2% from the same period in 2017 largely as a result of higher costs in Performance Materials.

For the year ended December 31, 2018, sales of $1,083.8 million rose 8.2% and Adjusted EBITDA of $243.4 million was up 1.3% from 2017 driven by demand growth in the Performance Materials North America highway safety product line, including ThermoDrop®, and higher Performance Chemicals sodium silicates and specialty silicas sales.

Cash Flows and Balance Sheet

For the year ended December 31, 2018, the Company had cash flows from operating activities of $248.6 million, compared to $165.2 million for the year ended December 31, 2017. This increase was primarily driven by lower cash interest of $65.1 million and improved operating performance.

At December 31, 2018, the Company had cash and cash equivalents of $57.9 million and total debt outstanding of $2,148.4 million. During the year ended December 31, 2018, the Company repaid approximately $135 million in debt, including $109.5 million of its term loan facility.

2019 Financial Outlook

The Company provides 2019 guidance as below:

  • Sales of $1,640 million to $1,670 million
  • Adjusted EBITDA of $470 million to $485 million
  • Adjusted diluted EPS of $0.75 to $0.93
  • Adjusted free cash flow of $125 million to $145 million

Conference Call and Webcast Details

On Thursday, February 21, 2019, PQ management will release its fourth quarter and full year 2018 results during a conference call and audio-only webcast scheduled for 11:00 a.m. Eastern Time.

Conference Call: Investors may listen to the conference call live via telephone by dialing 1 (877) 883-0383 (domestic) or 1 (412) 902-6506 (international) and use the participant code 4583942.

Webcast: An audio-only live webcast of the conference call and presentation materials can be accessed at http://investor.pqcorp.com.

A replay of the conference call/webcast will be made available at http://investor.pqcorp.com/events-presentations.

Investor Contact:
Nahla A. Azmy
(610) 651-4561
[email protected]

About PQ Group Holdings Inc.

PQ Group Holdings Inc. is an integrated, global provider of specialty catalysts, materials and chemicals, and services. Our Environmental Catalysts and Services business is a leading global innovator and producer of catalysts for the refinery, emissions control, and petrochemical industries and is also a leading provider of catalyst recycling services to the North American refining industry. Our Performance Materials and Chemicals business is a silicates and specialty materials producer with leading supply positions for the majority of our products sold in North America, Europe, South America, Australia and Asia (excluding China) serving diverse and growing end uses such as personal and industrial cleaning products, fuel efficient tires, surface coatings, and food and beverage products.

Presentation of Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles ('GAAP') throughout this press release, the Company has provided non-GAAP financial measures-Adjusted EBITDA, Adjusted EBITDA margin, Adjusted free cash flow, Adjusted net income, Adjusted EPS and Adjusted diluted EPS-which present results on a basis adjusted for certain items. The Company uses these non-GAAP financial measures for business planning purposes and in measuring its performance relative to that of its competitors. The Company believes that these non-GAAP financial measures are useful financial metrics to assess its operating performance from period-to-period by excluding certain items that the Company believes are not representative of its core business. These non-GAAP financial measures are not intended to replace, and should not be considered superior to, the presentation of the Company's financial results in accordance with GAAP. The use of the terms Adjusted EBITDA, Adjusted EBITDA margin, Adjusted free cash flow, Adjusted net income, Adjusted EPS and Adjusted diluted EPS may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures. Adjusted EBITDA, Adjusted free cash flow, Adjusted net income, Adjusted EPS and Adjusted diluted EPS are reconciled from the respective measures under GAAP in the appendix below.

The Company is not able to provide a reconciliation of the Company's non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation such as certain non-cash, nonrecurring or other items that are included in net income and EBITDA as well as the related tax impacts of these items and asset dispositions/acquisitions and changes in foreign currency exchange rates that are included in cash flow, due to the uncertainty and variability of the nature and amount of these future charges and costs.

Zeolyst Joint Venture

The Company's zeolite catalysts product group operates through its Zeolyst Joint Venture, which is accounted for as an equity method investment in accordance with GAAP. The presentation of the Zeolyst Joint Venture's total net sales represents 50% of the total net sales of the Zeolyst Joint Venture. The Company does not record sales by the Zeolyst Joint Venture as revenue and such sales are not consolidated within the Company's results of operations. However, the Company's Adjusted EBITDA reflects the share of earnings of the Zeolyst Joint Venture that have been recorded as equity in net income from affiliated companies in the Company's consolidated statements of operations for such periods and includes Zeolyst Joint Venture adjustments on a proportionate basis based on the Company's 50% ownership interest. Accordingly, the Company's Adjusted EBITDA margins are calculated including 50% of the total net sales of the Zeolyst Joint Venture for the relevant periods in the denominator.

Note on Forward-Looking Statements

Some of the information contained in this press release constitutes 'forward-looking statements.' Forward-looking statements can be identified by words such as 'anticipates,' 'intends,' 'plans,' 'seeks,' 'believes,' 'estimates,' 'expects,' 'projects' and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Examples of forward-looking statements include, but are not limited to, statements regarding our results of operations, financial condition, liquidity, prospects, growth, strategies, product and service offerings and 2019 outlook. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market and regulatory conditions, currency exchange rates and other factors, including those described in the sections titled 'Risk Factors' and 'Management Discussion & Analysis of Financial Condition and Results of Operations' in our filings with the SEC, which are available on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190221005236/en/

Investor Contact:
Nahla A. Azmy
(610) 651-4561
[email protected]

Source: PQ Group Holdings Inc.