Trinseo Announces Asset Restructuring Actions and Settlement of European Commission Matter

Rhea-AI Summary

Trinseo (NYSE: TSE) has announced significant asset restructuring initiatives aimed at improving annual profitability by approximately $60 million. Key actions include:

• Closure of styrene operations in Boehlen, Germany due to uncompetitive market conditions.
• Closure of a polycarbonate production line in Stade, Germany, while retaining other production for downstream compounding.
• Consolidation of PMMA sheet manufacturing from Matamoros, Mexico to Florence, Kentucky.
• Reduction of SB latex capacity at Hamina, Finland, starting mid-2023.

The company anticipates non-recurring costs of $79 million to $89 million, with most charges incurred through 2024.

Positive

• Expected annual profitability improvement of approximately $60 million.
• Streamlined operations leading to lower overall costs.

Negative

• Expected non-recurring charges of $79 million to $89 million related to facility closures.
• Potential operational disruptions during restructuring process.

WAYNE, Pa.--(BUSINESS WIRE)-- Trinseo (NYSE: TSE), a specialty material solutions provider, today announced updates to its asset restructuring initiatives. In aggregate, these actions are expected to result in approximately $60 million of annual profitability improvement versus the fourth quarter run rate, most of which will be realized in 2023. These actions consist of the following:

• Closure of manufacturing operations at the styrene production facility in Boehlen, Germany. The closure is the result of an uncompetitive position in the global styrene market due to the site’s subscale size, industry capacity additions and elevated natural gas prices in Europe.

• Closure of one polycarbonate production line in Stade, Germany due to an uncompetitive position in the global polycarbonate market. The Company will continue to produce polycarbonate for use in its downstream compounding business with the remaining assets. The line closure is expected to result in lower costs and significantly less exposure to the cyclical merchant polycarbonate market.

• Consolidation of the PMMA sheet manufacturing site in Matamoros, Mexico into the continuous sheet manufacturing operation of Aristech Surfaces in Florence, Kentucky.

• Capacity reduction of SB latex at the Hamina, Finland site starting mid-year 2023 due to over-capacity of SB latex in Europe.

Trinseo expects to incur $79 million to $89 million of pre-tax, non-recurring charges related to the cessation of manufacturing activities at these facilities. Of this, $55 million to $61 million is expected to be incurred in the fourth quarter of 2022, with the remainder expected to be incurred through 2024. The cash amount of these charges is expected to be $67 million to $77 million, including approximately $40 million in 2023, with substantially all expected to be incurred through 2024. The actual timing and costs of these actions may differ from the Company’s current expectations and estimates, and such differences may be material. These charges are subject to ongoing negotiations with the works councils, industrial associations and government authorities.

Additionally, on November 29, 2022, the European Commission issued a final decision imposing a fine to Trinseo in the amount of €32.6 million related to the commission’s 2018 investigation of styrene purchasing practices in Europe. This amount was in line with our previously recorded liability and was paid in full in December 2022.

About Trinseo

Trinseo (NYSE: TSE) a specialty material solutions provider, partners with companies to bring ideas to life in an imaginative, smart, and sustainability-focused manner by combining its premier expertise, forward-looking innovations and best-in-class materials to unlock value for companies and consumers.

From design to manufacturing, Trinseo taps into decades of experience in diverse material solutions to address customers’ unique challenges in a wide range of industries, including consumer goods, mobility, building and construction, and medical.

Trinseo’s approximately 3,400 employees bring endless creativity to reimagining the possibilities with clients all over the world from the company’s locations in North America, Europe, and Asia Pacific. Trinseo reported net sales of approximately $4.8 billion in 2021. Discover more by visiting www.trinseo.com and connecting with Trinseo on LinkedIn, Twitter, Facebook and WeChat.

Use of non-GAAP measures

In addition to using standard measures of performance and liquidity that are recognized in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we use additional measures of income excluding certain GAAP items (“non-GAAP measures”), such as Adjusted Net Income, EBITDA, Adjusted EBITDA and Adjusted EPS and measures of liquidity excluding certain GAAP items, such as Free Cash Flow. We believe these measures are useful for investors and management in evaluating business trends and performance each period. These measures are also used to manage our business and assess current period profitability, as well as to provide an appropriate basis to evaluate the effectiveness of our pricing strategies. Such measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance or liquidity, as applicable. The definitions of each of these measures, further discussion of usefulness, and reconciliations of non-GAAP measures to GAAP measures are provided herein.

Cautionary Note on Forward-Looking Statements

This press release may contain forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, forecasts, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts or guarantees or assurances of future performance. Forward-looking statements may be identified by the use of words like "expect," "anticipate," “believe,” "intend," "forecast," "outlook," "will," "may," "might," "see," "tend," "assume," "potential," "likely," "target," "plan," "contemplate," "seek," "attempt," "should," "could," "would" or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions, 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. Factors that might cause future results to differ from those expressed by the forward-looking statements include, but are not limited to, our ability to reduce operating costs, lower capital expenditures, and successfully implement proposed asset restructuring initiatives including the closure of certain plants and product lines, and the reduction of production capacity; our ability to successfully execute our transformation strategy and business strategy; our ability to integrate acquired businesses; global supply chain volatility and increased costs or disruption in the supply of raw materials; increased energy costs or costs for transportation of our products; the nature of investment opportunities presented to the Company from time to time; the outcome of the European Commission’s request for information; and those discussed in our Annual Report on Form 10-K, under Part I, Item 1A —"Risk Factors" and elsewhere in our other reports, filings and furnishings made with the U.S. Securities and Exchange Commission from time to time. As a result of these or other factors, our actual results, performance or achievements may differ materially from those contemplated by the forward-looking statements. Therefore, we caution you against relying on any of these forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221219005765/en/

Trinseo

Andy Myers

Tel : +1 610-240-3221

Email: aemyers@trinseo.com

Source: Trinseo

FAQ

What restructuring initiatives has Trinseo announced recently?

Trinseo announced several restructuring initiatives aimed at improving profitability, including plant closures and consolidations.

What is the expected annual profitability improvement for Trinseo?

Trinseo expects an annual profitability improvement of approximately $60 million.

What non-recurring charges is Trinseo anticipating due to its restructuring?

Trinseo anticipates non-recurring charges of $79 million to $89 million related to its restructuring initiatives.

When will Trinseo's capacity reduction at the Hamina site begin?

Capacity reduction at the Hamina site is expected to start mid-year 2023.

What are the implications of Trinseo's asset restructuring for investors?

Investors may see improved profitability in the long term, but should be cautious of the immediate non-recurring charges.