Trinseo Q4 2024 Earnings Report

Trinseo EPS Results

• Actual EPS: -$2.67
• Consensus EPS: -$2.30
• Beat/Miss: Missed by -$0.37
• One Year Ago EPS: N/A

Trinseo Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $803.09 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Trinseo Announcement Details

• Quarter: Q4 2024
• Date: 2/12/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 13, 2025
• Conference Call Time: 10:00AM ET

Trinseo (NYSE:TSE) operates as a specialty material solutions provider in the United States, Europe, the Asia-Pacific, and internationally. It operates through five segments: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, and Americas Styrenics. The Engineered Materials segment offers rigid thermoplastic compounds and blends, soft thermoplastic, continuous cast, cell cast, activated methyl methacrylates (MMA), PMMA resins, and extruded PMMA sheets and resins for consumer electronics, medical, footwear, automotive, and building and construction applications under the EMERGE, CALIBRE, PLEXIGLAS, ALTUGLAS, ACRYSPA, AVONITE, STUDIO, MEGOL, APILON, APIGO, and APINAT brands. The Latex Binders segment provides styrene-butadiene latex, and other latex polymers and binders primarily for coated paper and packaging board, carpet, and artificial turf backings, as well as the adhesive, building and construction, and technical textile paper market. The Plastics Solutions segment offers acrylonitrile-butadiene-styrene, styrene-acrylonitrile, polycarbonate, and compounds and blends for automotive and other applications under the MAGNUM brand. The Polystyrene segment provides general purpose polystyrenes and high impact polystyrene for use in appliances, food packaging and food service disposables, consumer electronics, and building and construction materials under the STYRON brand. The Americas Styrenics segment provides styrene and polystyrene for appliances, food packaging, food service disposables, consumer electronics, and building and construction materials applications. Trinseo PLC was incorporated in 2015 and is headquartered in Wayne, Pennsylvania.

Trinseo Q4 2024 Earnings Call Transcript

Presentation

[Operator]

morning, ladies and gentlemen, and welcome to the Trinseo Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call. We welcome the Trinseo management team, Frank Bozic, President and CEO David Stacy, Executive Vice President and CFO and B. Van Kessel, Senior Vice President, Corporate Finance and Investor Relations. Today's conference call will include brief remarks by the management team followed by a question and answer session. The company distributed its press release along with its presentation slides at close of market Wednesday, February 12.

[Operator]

These documents are posted on the company's Investor Relations website and furnished on a Form eight K filed with the Securities and Exchange Commission. I'll now hand the call over to Beavan Kessel.

[Bregje Roseboom-Van Kessel, SVP Corporate Development, Investor Relations at Trinseo]

Thank you, Jael, and good morning, everyone. At this time, all participants are in listen only mode. After our brief remarks, instructions will follow to participate in the question and answer session. Our disclosure rules and cautionary notes on forward looking statements are noted on Slide two. During this presentation, we may make certain forward looking statements, including issuing guidance and describing our future expectations.

[Bregje Roseboom-Van Kessel, SVP Corporate Development, Investor Relations at Trinseo]

We must caution you that actual results could differ materially from what is discussed, described or implied in these statements. Factors that could cause actual results to differ include, but are not limited to, the risk factors set forth in item 1A of our annual report on Form 10 ks or in our other filings made with the Securities and Exchange Commission. The company undertakes no obligation to update or revise its forward looking statements. Today's presentation includes certain non GAAP financial measurements. A reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release and in the appendix of our investor presentation.

[Bregje Roseboom-Van Kessel, SVP Corporate Development, Investor Relations at Trinseo]

The replay of today's conference call and transcript will be archived on the company's Investor Relations website shortly following the conference call. The replay will be available until 02/13/2026. Now I would like to turn the call over to Frank Vodich.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Thanks, Bea, and welcome to our year end twenty twenty four earnings call. Before we get into our financial results, I'd like to highlight some of our outstanding safety achievements as we've had one of the safest summers in the history of the company this past year. I'm proud to announce that 19 production and recycling facilities, all of our global R and D teams and two site service teams received a zero award, which represents zero recordable injuries, zero spills and zero process safety events for the entire year. With an injury rate of just zero point three, we continue to operate in the top quartile of companies in the American Chemistry Council and outperform many of our peers. These results are a testament to the priority that we place on safety in everything that we do and our reflection on the dedication that our people have to creating a safe work environment.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Moving on to our operational results. This past year saw a continuation and in some cases a worsening of many of the market challenges that the chemical industry faced in 2023. Geopolitical uncertainty, elevated inflation and relatively high interest rates eroded consumer confidence across the globe, which adversely affected our largest end markets of auto, building and construction and most significantly Europe most significantly in Europe and China. Despite these macroeconomic challenges, we were able to improve our full year adjusted EBITDA by $50,000,000 because of the self help actions that we've taken over the past couple of years. Amid these challenging times, our focus has been on executing actions within our control and aligned toward transformation strategy as we wait for the macroeconomic environment to inevitably recover.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

These included exiting our unprofitable and energy intensive styrene inversion of polycarbonate production operations, consolidating several of our PMMA sheet operations and rightsizing the company and its support functions based on the new operating footprint. We also implemented new supply chain systems and processes that enabled a greater than 20% reduction in days of inventory to a level that can be sustained through the cycle. Finally, we took actions to extend our near term debt maturity to 2028 and greatly improved our liquidity. All of these actions have resulted in more efficient and focused company. Compared to the first half of twenty twenty two when we began these actions, our energy intensity has decreased by approximately 45%, Our maintenance CapEx has decreased by more than 35%.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And due to work process improvements and footprint reductions, we have reduced our total headcount by approximately 20%. These actions have allowed us to continue to make progress in our strategic initiatives and circular technologies. We continue to grow our recycled content containing product offerings with sales increasing 47% versus prior year and representing now 4% of the total company variable margin in 2024. Sales volumes were higher to higher margin case applications continued to make up an increasing percentage of volumes in our Latex Binder segment, accounting for 11% of our total segment sales volumes and 18% of our total segment variable margin in 2024. And in our Engineered Materials segment, PMMA resin sales and margins continue to show resilience as volumes increased 3% year over year despite a very weak end market demand environment.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

We have also made significant advancements in our Circular Technologies. These include commissioning our polycarbonate dissolution pilot facility and opening our ABS dissolution pilot plant and our PMMA depolymerization demo facility in 2024. We anticipate scaling up the PC and PMMA technologies at a Rohe, Italy site and the PC dissolution technology at our Zhang Zhigang, China site to support the growing demand from our auto clients. Next, I want to spend a few moments discussing our recently announced agreement with Deepak Nitrite Limited. In November, we agreed to supply a polycarbonate license as well as all proprietary virgin polycarbonate production equipment from our Stad, Germany facility to DPAC for a combined total of $52,000,000 While the economics of producing virgin polycarbonate at our Stade facility have become unprofitable and led to our decision to exit that site, our polycarbonate technology remains highly valued and the assets can still be utilized.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

We view this agreement as mutually beneficial to both companies and see this as the initial steps of a strategic and collaborative partnership with Deepak. We also see India as a significant growth market where Trinseo currently has minimal exposure. We believe in a base case scenario of at least seven percent compound annual demand growth through the end of the decade in our target end markets. Before I hand the call over to Dave, I'd like to make a few comments regarding our fourth quarter results. Core business results were in line with our expectations as seasonally lower volumes and extended year end shutdowns led to sequentially lower profitability.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Falling raw material prices resulted in significant negative timing impacts in our Polymer Solutions segment and at Americas Styrenics. While this led to lower adjusted EBITDA than originally anticipated, the lower raw material prices led to lower working capital balances, which contributed to the highest quarter of free cash flow generation in over two years. Now, I'd like to turn the call over to Dave.

[David Stasse, EVP & CFO at Trinseo]

Thanks, Frank. Before I get into fourth quarter results, I'd like to spend a few minutes discussing our new reporting segments. At the end of the third quarter, we announced restructuring measures that included combining the management of our Engineered Materials, Plastic Solutions and Polystyrene businesses. As a result, we made two substantive changes to our reportable segments to be more representative of this new structure and how we intend to operate the businesses going forward. First, the automotive compounding business that was previously part of Plastic Solutions has been moved into Engineered Materials.

[David Stasse, EVP & CFO at Trinseo]

This was a natural move since we already have a smaller compounding business and significant automotive exposure within Engineered Materials. The second change is that we are combining polystyrene with the two remaining businesses in plastic solutions, ABS and SAN, and are renaming the segment Polymer Solutions. I also want to highlight that in January, we closed on a transaction that increased our available liquidity by approximately $150,000,000 and extended the maturity date of the January of debt that was due in 2025 to 2028. Pro form a for this transaction, we ended 2024 with almost $500,000,000 of available liquidity and no maturities until 2028. Moving on to financial results.

[David Stasse, EVP & CFO at Trinseo]

Fourth quarter adjusted EBITDA of $26,000,000 was $6,000,000 higher than prior year and included a $9,000,000 unfavorable net timing impact, primarily in plastic solutions as styrene prices fell throughout the quarter. Fourth quarter results were also negatively impacted by an additional $15,000,000 of unfavorable net timing at Americas Styrenics due to falling raw material costs. Absent these headwinds, core business results were in line with expectation and improved versus prior year for each of our operating segments. Engineered Materials saw the highest year over year improvement due to moderating input costs, improved PMMA pricing and a 61% increase in volume sold into consumer electronics applications. Cash provided by operations during the quarter was $85,000,000 which resulted in free cash flow of $64,000,000 Now, I'll turn the call back over to Frank.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Thanks, Steve. Looking ahead to 2025, we do not currently anticipate meaningful demand recovery in our major end markets. Geopolitics have negatively impacted our business over the past three years and we look forward to the resolution of some of the worldwide conflicts that have disrupted global trade flows and decreased European competitiveness. With this in mind, I'd like to give a brief update on the sale process of our joint venture, Americas Stirenix. We, along with our partner, remain committed to selling iAMstack with a focus on maximizing value.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

To this end, we expect an improved valuation environment later this year, which would result in assigning later than originally anticipated. We remain very confident that the sale process will be successful and will update the market once we have more clarity on timing. We expect the first quarter of twenty twenty five to be sequentially better than Q4, following the pronounced seasonality and negative timing impacts that we experienced at year end. We are seeing seasonally higher volumes to begin Q1, but still expect first quarter volumes to be lower year over year due to continued weakness in automotive and building and construction end markets and in paper applications in Asia. As a result, we expect Q1 adjusted EBITDA of $60,000,000 to $80,000,000 which includes a one time $26,000,000 contribution from the polycarbonate technology license agreement to Deepak.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

I believe the actions we've taken over the past two years have positioned us well for an eventual market end recovery and the refinancing transaction, which we recently closed in January, give us ample runway to continue pursuing our strategy. And now we're happy to take your questions.

[Operator]

Thank you. The floor is now open for questions.

[Operator]

You.

[Operator]

Your first question comes from the line of Frank Mitsch of Fermium Research. Your line is open.

[Frank Mitsch, President at Fermium Research]

Hey, good morning folks. I want to follow-up on Slide 14 in terms of the cash spend that you're expecting for 2025 standing at $390,000,000 Frank, I believe or perhaps it was David last quarter was mentioning a

[Frank Mitsch, President at Fermium Research]

number in the low 300s.

[Frank Mitsch, President at Fermium Research]

In terms of the spending, I'm just curious as to where you're seeing the net cash expenditures pick up from what it was a few months ago?

[David Stasse, EVP & CFO at Trinseo]

Good morning, Frank. The only changes based on the last time we talked about this figure, which is admittedly higher than it was last year, is in working capital. I mean, predicting working capital, the $40,000,000 outflow of working capital is a function of really two things. Volume over the course of the year, which as Frank said, we're not baking into our forecast any thing of significance there, but also raw material prices. So our working capital balances is at the end is the working capital inflow or outflow is really a function of our forecast of raw material prices at the end of the year, which look admittedly, Frank, standing here February 13 is not making that a little hard to predict.

[David Stasse, EVP & CFO at Trinseo]

So, that line item particularly is quite likely to change going forward. Cash taxes, a little bit higher than what they were last year. Also, Frank, last year, I think was more like $20,000,000 and that's just a function of higher profitability. So that's real those are the only changes.

[Frank Mitsch, President at Fermium Research]

Okay. All right. That's I totally understand. And David, when you were talking about the negative timing impacts in 4Q restraining profitability or restraining the EBITDA that was reported due to lower styrene monomer, of course, that cuts two ways because you guys are now merchant styrene monomer purchasers. So I'm curious as to how we should think about the benefits that I guess you're seeing in 1Q from the lower styrene pricing.

[Frank Mitsch, President at Fermium Research]

How would you factor that in to the overall profitability?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. Frank, a lot of you can imagine that a lot of our pricing on our styrene containing products are indexed on the styrene index pricing. So it's generally a pass through.

[Frank Mitsch, President at Fermium Research]

Okay. Got you. Got you. Okay. So it's all right.

[Frank Mitsch, President at Fermium Research]

Understood. And then I assume in terms of the delay on the AmSty sale from the first half of this year to the second half of this year, obviously, you guys are operating hand in glove with CPChem, correct?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. We're in close obviously, we're in close cooperation with our joint venture partner. And again, as I said, we anticipate an improved result from AmSty in a better valuation environment later this year.

[Frank Mitsch, President at Fermium Research]

Got you. Thanks so much.

[Operator]

Your next question comes from the line of Matthew Blair of Tudor, Pickering and Holt and Company. Your line is open.

[Matthew Blair, Managing Director at TPH&Co]

Thank you and good morning. Hopefully you can hear me okay. I had two questions on the Q1 guidance. First, how much of an impact, if any, is embedded from rising European natural gas prices in the Q1 guide? And could you provide an update on any sort of hedges you might have for 2025?

[Matthew Blair, Managing Director at TPH&Co]

And then two, is there any assumption on net timing benefits in that Q1 guide? Thank you.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So, yes, that's a great question. So, there will be in Q1 a timing, a pricing lag due to natural gas price increases and those inputs into mainly EM that are based on natural gas prices. So we would expect that or the current expectation is that the quarterly pricing that we provided at the end of last year for Q1 to our customers, we wouldn't fully recover the input in cost increase from the natural gas prices. And that's mainly an EM related issue.

[David Stasse, EVP & CFO at Trinseo]

Matthew, as it relates to hedging, look, we've obviously been monitoring this very closely. We have been putting in hedges generally for the short term and the first quarter. Obviously, I'm sure you've seen the news, or there's a lot of positive kind of speculation coming out of some resolution to the Ukraine situation. And a follow on to that would be a potential reopening of supply from Russia to Europe with natural gas, which obviously I think would have a very deflationary effect on natural gas prices in Europe. So we're, so we do have some hedges in place for the first quarter of this year.

[David Stasse, EVP & CFO at Trinseo]

It's low. It's less than 50%. And obviously, the near term prices are really impacted more by the weather than anything else. But also looking longer term, we're watching the Ukraine situation closely. And a little bit reticent probably right now given that to put on any kind of long term hedges in natural gas for Europe.

[David Stasse, EVP & CFO at Trinseo]

I do also just Matthew, just want to point out,

[David Stasse, EVP & CFO at Trinseo]

I mean,

[David Stasse, EVP & CFO at Trinseo]

due to we've exited our energy intensive businesses in Europe to suit the two siren plants as well as polycarbonate. So the only real energy intensive operation that we still have is MMA production in Italy. So our energy intensity has gone down considerably since the last time we went through it's about half of what it used to be. So the last time we went through this or the last time we had an energy crisis in Europe, our exposure was 2x of what it is today.

[Matthew Blair, Managing Director at TPH&Co]

That's helpful. Thank you. And my follow-up, it seems like one of the bright spots in the quarter was in Engineered Materials. You mentioned the 61% increase in volumes into consumer electronics. Do you have any more details here?

[Matthew Blair, Managing Director at TPH&Co]

Was this the result of like a new product launch and maybe a one time benefit? Or do you think this is something more sustainable? Thank you.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. So, maybe just I think one of the big things year over year was that you had a very low base in 2023 by comparison. So 2023 was a low year in consumer electronics for many reasons in end consumer demand. So one, you're starting at a low point. But I'm really excited about the work that the team has done during the course of late twenty twenty three and into 2024 to diversify our customer base.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So I would generally say that our while this has been a really strong growth part of our business and one of the biggest areas for recycled containing products, where we're selling into the consumer electronics area. It was a fairly concentrated customer base. And these would be the larger brand names in consumer electronics. And we've done a very good job diversifying our sales into new customers last year. And these are really bespoke products.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

It's not we're custom formulating a product with up to 60% to 70% recycled content for specific applications. And so for that reason, we think these are really resilient sales. And again, the big driver the two big drivers are the year over year comparison as well as diversification of our customer base.

[Matthew Blair, Managing Director at TPH&Co]

Great. Thank you.

[Operator]

Your next question comes from the line of Hassan Ahmad, Valimba Global Advisors. Your line is open.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Good morning, Frank. Question around guidance. You guys are guiding to, call it midpoint of guidance, $70,000,000 for Q1. And I understand there are some moving parts associated with that. But if I annualize that, that's, call it, $280,000,000 I mean, I know there are all these sort of macro uncertainties and the like, but how should we be thinking about 2025?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. Look, I mean, we great question. And for the reasons that you stated, we're not we're reluctant to try and predict the full year guide at this point. But look, we're very confident in continued positive earnings development in 2025. And the drivers are give you the buckets.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So what we announced with Deepak, so twenty six million dollars of EBITDA contribution from the licensing agreement. The SG and A reductions that we announced last year in restructuring will give a full year benefit of $25,000,000 the PC asset closure and then the subsequent sourcing agreements with that as well as the new business awards that we've received in qualifying new customers are similar in magnitude to those previous two areas. And then lastly, I would point out that we would expect a much more normalized earnings contribution or EBITDA contribution from AmSty this year. And you could do the math, but over the past four years, EBITDA contribution for Trinseo from our participation in AmSty was $68,000,000 and we would expect a contribution closer to that than the result we had last year. So those are the big buckets of contribution excluding market, the market whatever happens in the market.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And so, I would that's how I would think about it once you land your market assumptions on the underlying demand.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Very helpful, Frank. And as a follow-up, we've seen a nice sort of rebound in the Engineered Materials sort of segment EBITDA margin wise. I mean, last quarter it was 12% EBITDA margins. Now it's 10%, which obviously year on year is a healthy sort of expansion. I mean, how are you now with all the moving parts and the changes we've seen in the macro thinking about normalized earnings and normalized EBITDA margins in that segment?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. I mean, Hassan, we've been it's impossible for

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

It's a new world, isn't it?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

I couldn't tell you what normal is. So what I can tell you is we're confident in our ability to show positive earnings momentum in EM. I think we have a great portfolio. I mean, just as we talked about, look at in last year's environment where we saw, I would say, generally in many of our end markets, some weakening in demand, we were able to grow PMMA resin 3% in volume. Fantastic story in the growth that we've seen in our engineered compounds that go into consumer electronics.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

It's over 60% growth. And then the other thing that I would point to is, these same customers are demanding. There's significant

[Frank Bozich, President & Chief Executive Officer at Trinseo]

pull

[Frank Bozich, President & Chief Executive Officer at Trinseo]

from the market for recycled and circular solutions. And we believe we have a unique and leadership position in recycling technology for ABS, PC and PMMA that go into those end segments. And so those investments that we will continue to drive will give us continued momentum there. So I feel good about the work the team has done in EM and I think there's more to come.

[Hassan Ahmed, Co-Founder at Alembic Global Advisors]

Very helpful. Thanks so much, Frank.

[Operator]

Your next question comes from the line of Laurence Alexander of Jefferies. Your line is open.

[Laurence Alexander, Analyst at Jefferies Financial Group]

So good morning. Three questions. Just one is on the circularity and recycling. Can you just give a sense for what your total sort of size of your platform is in those products and how the margins compare with the balance of your business? And then can you touch on what you think the CapEx needs might be down the road, say over four or five years, if the recycling platforms are going to start to scale up?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So the volume of the recycled containing products for all of 2024, and I'm looking at B and Dave to keep me, I think it was 4% for the full year, but it was growing as the year progressed. So I think that in Q4, it actually got to 5% of our total volume. The sales of recycled containing products grew, as I said, over 40% last year. So we're seeing relative to our ability to supply and source the material, we see relatively unlimited demand from our end customers. So, the going to the CapEx, this it's a really interesting and dynamic question on this.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

But these investments are not significant. They're either high single digit or low double digit million modules. So these are modular investments that we would make where we could install those at our various downstream plants and the investments depending again, we're it's early days, but it's high single digit to low double digit million per module. Okay. And then you asked about margin premium.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

We're seeing in each of the areas that a sustainable offering or a circular offering

[Frank Bozich, President & Chief Executive Officer at Trinseo]

in

[Frank Bozich, President & Chief Executive Officer at Trinseo]

PC, ABS and PMMA as well as polystyrene in the multiple $100 range are significant premiums over virgin the virgin premiums or virgin margins.

[Laurence Alexander, Analyst at Jefferies Financial Group]

And so is it fair to say that the payback on any of the modular investments will probably be like one point five, two years?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. It's premature for it's premature for us to for me to lean into that one and give you a real view on that. But we're seeing very positive preliminarily, we see that these would be very positive IRRs on these types of investments. And but again, it's early stages and we're in the process of preliminary engineering and we'll know more in the by the second half of the year.

[Laurence Alexander, Analyst at Jefferies Financial Group]

And then just lastly, could you just calibrate what you're hearing from your customers about further destocking or working capital efficiency initiatives? And how much of that is baked into your outlook in terms of being sort of a fairly steady demand environment?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. So,

[Frank Bozich, President & Chief Executive Officer at Trinseo]

I would generally say that we think that our value chains have gotten pretty tight. We think that we've done a great job along in partnership with our customers to take any slack out of the supply chains. And we haven't heard of any significant additional initiatives where people would be looking to take inventory levels down. We haven't seen that. And I guess maybe this is the one data point that we are looking at from a longer term or mid term demand standpoint is what is let's talk about building and construction and automotive.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Since 02/2008, there's been a deficit in North America and Europe in terms of new construction versus household formation. And so there's massive pent up demand there. We think the value chains have largely they've become balanced. And then in automotive, while demand is weaker, it's a consumer confidence issue. It's not a inventory.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

We don't see it as an inventory issue. And in the medium term, we see the age of that we watch the age of the car park. And the data that I we just looked at this morning would tell us that in Europe, the car park, the auto fleet is over 12 years old, which is historically highest level of age of the car park. And in North America, it's over twelve years, which is one of the oldest fleets that I remember in my career. So, yes, I'm not we don't see a big drive to Destock.

[Laurence Alexander, Analyst at Jefferies Financial Group]

Yes. Thank you.

[Operator]

Your next question comes from the line of Roger Spitz of Bank of America. Your line is open.

[Roger Spitz, Analyst at Bank of America]

Thank you very much. First, can you speak about the impact of tariffs? For instance, how much do you sell to Canada, Mexico and or China from directly from The USA?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. So on tariffs, we're thinking about tariffs in three dimensions, okay? So dimension number one is, okay, what are we importing? What are our purchases from countries that could be subject to import tariffs? And we believe that impact will be negligible to us because the purchases are relatively small and the commodities that we're buying from those countries are in oversupply.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And so we have the ability to switch to avoid the tariff, switch our suppliers. The second dimension is where do we sell our products from The U. S. Production into countries where there could be retaliatory tariffs. And I would just say in general, most of the by far most of The U.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

S. Production is consumed in The U. S. Our exports from The U. S.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

To Canada and Mexico represent low single digit percentages of our overall sales and 80% of those are in the auto value chain and were highly specified into the tiers. So we don't necessarily believe that we will see an impact in terms of demand sitting here today if tariffs were imposed on those sales. And then the third bucket or the third dimension, which is unknowable at this point is what would be that end market demand impact on imposition of significant tariffs. And it's that's there's a lot of uncertainty and we just don't know, at this juncture.

[Roger Spitz, Analyst at Bank of America]

Thank you for that. My other question, I'm looking at Slide 12 of the deck. For instance, the AR securitization, you have $50,000,000 left over of availability, excuse me. Does that mean that I guess it will come out with the Q, but are you doing $100,000,000 under the AR securitization? Or is or is there borrowing base limitations here?

[David Stasse, EVP & CFO at Trinseo]

Yes. Hi, Roger. Good morning, it's Steve. So there's a borrowing base. So the amount we have to borrow against obviously the function of the receivables balance in the legal entities that participate in the program.

[David Stasse, EVP & CFO at Trinseo]

The receivables balance participate in the program. The receivables balance was quite low, understandably, at the end of Q4, just because of the season the kind of seasonality of sales in the quarter. So our borrowing, we were able to so it's $150,000,000 facility. Almost always going back in time, we've had full availability based on the borrowing base. It happened to be particularly low at the end of the year because of lower seasonal volumes, but also lower prices I talked about earlier, that big drop in styrene prices.

[David Stasse, EVP & CFO at Trinseo]

So, we had $125,000,000 at the end of the quarter able to be borrowed, And there was a $75,000,000 drawn. I would expect that borrowing base will be higher in Q1.

[Roger Spitz, Analyst at Bank of America]

Got it. Perfect. Thank you very much.

[Operator]

And your last question comes from the line of Alex Kelsey of Wells Fargo. Your line is open.

[Alex Kelsey, Vice President at Wells Fargo]

Hey, guys. Thanks for taking the question. A couple of follow ups from I think what's been asked already. With regard to the EM segment, just now that there's automotive some automotive components in there as well, the $27,000,000 reported in Q4, like how much of that was pure EM versus auto of the $27,000,000

[David Stasse, EVP & CFO at Trinseo]

Alex, there was always a pretty significant automotive exposure in Engineered Materials. In fact, auto and building and construction are the largest end markets for what I would call legacy engineered materials. So PMMA, a lot of PMMA resin applications. I don't have a number for it. We'll have to get it up the percentage.

[David Stasse, EVP & CFO at Trinseo]

The automotive compounding business that moved into engineering. We'll have to get that and give it to you offline. I just wanted to

[David Stasse, EVP & CFO at Trinseo]

clear that.

[Alex Kelsey, Vice President at Wells Fargo]

And that

[Alex Kelsey, Vice President at Wells Fargo]

was the automotive compounding segment, not automotive in general. But okay, that's fine. We can follow-up. Another one on the license sale with your Indian partner. Could you just remind us the duration of that agreement?

[Alex Kelsey, Vice President at Wells Fargo]

And then I guess the bigger question is, if there is a expiration on that agreement, the extent of the license and technology is still valuable, can you enter into a similar agreement again? And then on the other question on that partnership is, Frank, I think you mentioned the start of a strategic relationship with that partner. Can you just talk about what that means or anything else we should expect with them?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. So, no, thanks. It's a great question. Maybe let me give you a little color or a little more background on who Deepak Nitride is. Deepak is one of the largest Indian public companies in the chemical industry.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

They are the largest phenol acetone producer in India. And this is an attempt this is a move on their part to move downstream to forward integrate in these value chains because India is a net importer of polycarbonate. There is no domestic production as well. And so this that's sort of their strategy. Their sales are over they're a multibillion dollar revenue company, market cap of $4,500,000,000 So they are a substantial company and have a great presence and cost position in the value chains we participate.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So it's India's in my career, I've had a lot of operations in India. It's hard to get critical mass in India, so partnerships are important. And so having a substantial company that you're partnered with that gives you access to the market is important. And like we said earlier, in our downstream formulated products, we would see a high single digit compounded annual growth rate in our end markets for our solutions. And it's a big opportunity for us going forward.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

So on the license, it's a perpetual license. We believe our as I said in the script, we believe our polycarbonate technology is unique and one of the best technologies in the industry. It just didn't in Germany, it was disadvantaged, but for a number of reasons. But elsewhere, it is a significant value. And then we have the option to expand the capacity with Deepak as well as provide other licenses in other geographies.

[Alex Kelsey, Vice President at Wells Fargo]

Okay. Okay. That's very helpful. Two more from me if I may. On 2025, I understand lots of moving pieces and you're ready to offer a true guide out there.

[Alex Kelsey, Vice President at Wells Fargo]

But if I just take the cleansing docs in the last transaction, $25 estimate of $300 to $350 of EBITDA. As we sit here today knowing what we know and don't know about the market, do you think that those are still reasonable goalposts for the year?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. I'm not we're not going to give guidance for the full year or even bracket it. But what I would tell you, because there's so much market uncertainty, there's positives and negatives that are in development, you can know for last night, development. So it's I don't want to bracket where we would end up, but I go back to the comments that I would make that I made, I think, for Hassan. We're very confident in positive earnings momentum.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And because a lot of the actions we've taken are well within our control and those buckets are what we talked about with Deepak, the SG and A restructuring, the make versus buy decision in polycarbonate and the closure in STAD as well as business wins. And then again, a much more normal based earning contribution from AmSty. Right. I get that mixed up. So those are that's a pretty positive benefits to this year.

[Alex Kelsey, Vice President at Wells Fargo]

Right. And last one, if I may. Just the status of cost cuts, Frank or David. I think you mentioned $25,000,000 to be realized in $2,025,000,000 dollars Again, just looking at the old deck that was posted with the last transaction, it was noted there was $80,000,000 dollars of cost outs to be realized in $2,025,000,000 dollars Can you just help me sort of bridge those numbers? Or more simply just kind of remind us like where you guys stand in terms of total cost outs from the various closures and the corporate restructuring?

[Alex Kelsey, Vice President at Wells Fargo]

How much has been realized to date? And what we should expect in 'twenty five and maybe into 'twenty six? Thank

[Frank Bozich, President & Chief Executive Officer at Trinseo]

you. Yes. We'll have to go back to and try and I don't I'm not sure I could give you an answer to that question. What I'm very certain of is the incremental SG and A benefit from the actions that we announced late last year are $25,000,000 The impact of polycarbonate is there we realize some of that, there's an incremental benefit from some of that. And again, it's I'd have to we'll have to follow-up with you to give you a complete analysis of that.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

But what I would tell you is we've taken fixed costs down by well over $100,000,000 over the past two years and we're on track to deliver everything that we have announced. So I don't know, I'm looking at Dave to answer that better than I did.

[David Stasse, EVP & CFO at Trinseo]

So Alex, look, the actions that we've taken, we will get the full year realization of savings in 2025 substantially. I mean, for the headcount reductions, the SG and A restructuring, that's $30,000,000 We got $5,000,000 last year. We'll get an incremental $25,000,000 So we'll get the full run rate of that this year. We'll also get the full realization of the polycarbonate savings. Obviously, the styrene stuff was done years earlier.

[David Stasse, EVP & CFO at Trinseo]

So we're already seeing the full effect of that in 2025.

[Operator]

Thank you. We have time for one more question. It comes from the line of David Begleiter of Deutsche Bank. Your line is open.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you. Just a couple of questions. Back to guidance and I'm sorry, but one more try. In Q1 ex the polycarbonate agreement, if you look at that mid-40s EBITDA, the last two years you've seen a progression of roughly $20,000,000 sequentially higher in Q2, gets you to about mid-60s for Q2. Is that a good run rate or is that a good proxy at least directionally speaking for Q2 versus Q1, perhaps mid-60s versus where we are right now?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

Yes. David, thanks for the question. The actually, Q1 is somewhat more depressed than normal because it's been a slower start to the year than typical. And then I would also say that we have pricing lag in Q1 that's not immaterial mainly in EM because we've been providing quarterly pricing. We price the product, our products to our end customers at the end of Q4.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And again, it's very volatile. But input cost a lot of the input costs in the EM in Europe are based on natural gas price and the TTF has gone up and those related products that are based on TTF have gone up with them. So that we see today, we see some pricing lag that would not be recurring after Q1. So I would say, yes, I would agree with you. Q2s and three Q2 and three will be an improvement over Q1, but it would not I wouldn't compare it to prior year simply because we're seeing more pronounced a more pronounced slow start to the year and then we hit the pricing lag.

[David Begleiter, Managing Director at Deutsche Bank]

Understood. And just on polystyrene, are these assets core now to Trinseo?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

No. We our polystyrene assets are great assets. They're actually we've done a great job managing those in the past couple of years to optimize the free cash flow generation of the assets. But we believe that other people could would be investors would invest in the growth of those assets. And we continue to field inbounds and work with potential buyers for those assets, but on an individual basis around the world.

[Frank Bozich, President & Chief Executive Officer at Trinseo]

And there's nothing to report, but again, there's activity and interest. So we would continue to explore the possibility of selling those individual assets and are doing that.

[David Begleiter, Managing Director at Deutsche Bank]

And just one last thing. On AmSty, is it fair to say the process sales process has been halted? And if it has been halted, when was it halted?

[Frank Bozich, President & Chief Executive Officer at Trinseo]

It's not halted. We're as I said, we're working in conjunction with our partner. We and our goal is to monetize our interest in AmSty and we will continue to progress that, but we want to time our process to optimize value. And so that just means a later marketing than we had originally anticipated.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you.

[Operator]

With no further questions, that concludes our Q and A session.

Participants

Executives

• Bregje Roseboom-Van Kessel, SVP Corporate Development, Investor Relations
• Frank Bozich, President & Chief Executive Officer
• David Stasse, EVP & CFO

Analysts

• Frank Mitsch, President at Fermium Research
• Matthew Blair, Managing Director at TPH&Co
• Hassan Ahmed, Co-Founder at Alembic Global Advisors
• Laurence Alexander, Analyst at Jefferies Financial Group
• Roger Spitz, Analyst at Bank of America
• Alex Kelsey, Vice President at Wells Fargo
• David Begleiter, Managing Director at Deutsche Bank