AdvanSix Inc. (NYSE:ASIX) Q2 2018 Earnings Conference Call - Final Transcript

Aug 03, 2018 • 09:00 am ET

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AdvanSix Inc. (NYSE:ASIX) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the AdvanSix Second Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Adam Kressel, Director of IR. Please go ahead.

Executive
Adam Kressel

Thank you, Steven. Good morning and welcome to AdvanSix's second quarter 2018 earnings conference call. With me here today are President and CEO, Erin Kane and SVP and CFO, Michael Preston. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com.

(Forward-Looking Cautionary Statements)

This morning we'll review our financial results for the second quarter of 2018 and share with you our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end.

So with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Executive
Erin Kane

Thanks Adam and good morning everyone. Thank you for joining us once again, and for your continued interest in AdvanSix. As you saw in our press release, AdvanSix delivered another strong quarter, capping off a dynamic first half of 2018. Our results demonstrated the strength of our business model, and our ability to perform in what has been a rising input and energy environment. We saw strong results across a number of metrics, including sales volume, income and operating cash flow. Mike will detail the full results in a moment, but I'd like to highlight the following.

Sales were $400 million, an increase of 11% with higher volume and raw material pass-through pricing contributing to the improvement year-over-year. Earnings per share was $0.91 in the quarter, up 10%, and our cash generation continued to improve with cash flow from operations increasing 12%. In addition, we've initiated share repurchases in June, reflecting our maturing capital allocation strategy and confidence in continued cash flow generation. Through July, we've purchased nearly 195,000 shares for approximately $7.5 million.

Our end markets remained dynamic, and this quarter we did continue to see favorable supply and demand environments. Global caprolactam and nylon pricing is favorably supported by generally balanced or tight supply demand dynamics in North America and Europe as well, with continued supply side constraints in China. We expect the current favorable nylon industry conditions to continue as we move into the second half of the year. In ammonium sulfate, we executed on the strong domestic demand we saw in the quarter, following a late start to the planting season.

The fertilizer market environment, in general, has improved and new season fill pricing is expected to be up about 10% year-over-year. However, we do expect the typical seasonality to drive a normal sequential pricing decline in the third quarter. As for chemical intermediates, global phenol and market demand and operating rates have remained strong, resulting in the production of additional products -- co-product of the acetone. As a result, we continue to see elevated North America acetone imports pressure pricing in the industry. We will share a more detailed framework for the second half of