WAYNE, PA — Trinseo (Pink Limited: TSEOF) posted a $120 million second-quarter loss and burned $125 million of free cash flow as debt-restructuring expenses and working-capital demands strained liquidity, even as improved margins and cost cuts lifted adjusted earnings from a year earlier.
The specialty materials company reported a loss of $3.27 a share for the quarter. Results included $89 million of pretax charges, primarily tied to reorganization, debt restructuring and asset restructuring programs.
Trinseo ended the quarter with $198 million of cash, including $17 million that was restricted, and total liquidity of $187 million. The company is continuing a debt restructuring supported by court-approved debtor-in-possession financing while maintaining ordinary-course operations.
Cash used in operating activities totaled $115 million, while capital expenditures were $10 million, producing negative free cash flow of $125 million. Trinseo attributed the cash drain in part to $85 million of debt and other restructuring fees and an $80 million working-capital increase caused by volatile raw-material costs.
The company is seeking to strengthen its balance sheet through the restructuring while continuing to meet obligations to employees, suppliers and customers.
Operating performance improved despite those financial pressures. Adjusted EBITDA rose $39 million from a year earlier to $81 million, driven primarily by margin improvement in Polymer Solutions and Engineered Materials and savings from previously announced restructuring actions.
Net sales increased 8% to $845 million, reflecting higher prices across Trinseo’s businesses, commercial initiatives and favorable currency movements. Lower volumes partially offset those gains.
The volume decline was entirely attributable to the closure of Trinseo’s virgin methyl methacrylate, or MMA, production facilities in Italy and a force majeure at its Tessenderlo polystyrene plant following storm damage, according to the company. Operations at Tessenderlo were fully restored by the end of May.
Engineered Materials sales declined 1% to $292 million, primarily because of lower MMA volumes following the Italian facility closures. Adjusted EBITDA increased $12 million to $43 million as product mix shifted toward higher PMMA resin volumes and the closures reduced fixed costs.
Latex Binders sales climbed 21% to $248 million on higher prices and volumes, particularly in paper and board and textile applications in Asia and North America. Adjusted EBITDA slipped $1 million to $16 million amid continued weakness in those applications in Europe and unfavorable timing effects.
CASE and battery binder applications accounted for 15% of Latex Binders sales, with volumes rising 3% from a year earlier.
Polymer Solutions sales increased 7% to $306 million as higher prices outweighed lower volumes stemming primarily from the Tessenderlo disruption. Adjusted EBITDA jumped $38 million to $43 million on improved margins related to raw-material volatility and commercial initiatives.
Americas Styrenics, Trinseo’s joint venture, generated adjusted EBITDA of $1 million, down $7 million from a year earlier as higher benzene costs and weak end-market demand weighed on results.
Trinseo and its joint-venture partner have also restarted the sale process for Americas Styrenics, adding a potential asset transaction to the company’s broader effort to reshape its finances.
Chief Executive Officer Frank Bozich cited volatile markets, consumer uncertainty and geopolitical tensions as pressures on the business while emphasizing the company’s balance-sheet restructuring.
“We are also encouraged by the progress made in our balance sheet restructuring process, which is supported by our court-approved DIP financing and allows us to continue operating in the ordinary course,” Bozich stated.
The company is seeking to complete the restructuring with lower balance-sheet pressure and greater financial flexibility, while its latest results underscore the immediate challenge posed by restructuring expenses and continued negative cash generation.
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