TSE Q2 2024: $140M Free Cash Flow Deficit, Neutral Q3 & Positive Q4
- Improving free cash flow and liquidity: The company expects free cash flow to move from negative in Q2 with a $140 million gap to neutral in Q3 and positive in Q4, driven by lower styrene prices and a year‐end working capital release.
- Substantial cost savings: The company is on track to fully realize $100 million in cost savings in 2024 from restructuring measures and the elimination of natural gas hedge expenses, which should boost margins.
- Innovative technology in battery applications: Their advanced binder solution for batteries enhances energy density in EV applications, positioning the company to capture growth despite a flat overall EV market.
- Negative free cash flow and liquidity concerns: The company reported a $140 million free cash flow deficit in the first half of the year and expects full-year free cash flow to remain negative, which raises concerns about liquidity and cash management.
- Vulnerability to commodity pricing volatility: Lower styrene prices, compounded by an unplanned outage and unfavorable net timing, create headwinds that could pressure margins and overall profitability.
- Reliance on uncertain restructuring savings: The business is depending on achieving a $100 million restructuring benefit this year; however, the realization of these cost savings remains subject to market conditions and operational execution risk.
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Free Cash Flow
Q: When does free cash flow turn positive?
A: Management expects Q3 free cash flow to be nearly flat and Q4 to turn positive, though the full-year remains negative due to early high styrene prices. -
Restructuring Savings
Q: Is the $100M restructuring benefit still valid?
A: Yes, the combined cost savings from restructuring and natural gas hedge unwind are expected to deliver a $100M benefit in 2024. -
Debt & Interest Costs
Q: What’s behind the updated $15M cash interest?
A: They exercised the pick option on their term loan, reflecting prudent liquidity management and an effective reduction in cash interest outlays to around $15M. -
AmSty Sale Confidence
Q: How attractive is the AmSty sale process?
A: Market signals favor complete control over the joint venture, boosting confidence in a timely and favorable sale. -
MMA Market Tightness
Q: What is the current state of the MMA market?
A: The MMA market remains globally tight with strong demand in architectural coatings and limited Asia feedstock. -
Battery Growth
Q: How is the battery market performing?
A: The battery segment shows significant growth driven by innovative binder technology that increases energy density. -
PMMA Facility Timing
Q: When will the PMMA facility contribute to EBITDA?
A: There is no clear timeline yet as it’s a demonstration project, though it promises cost advantages over virgin production. -
China Polycarbonate
Q: What is the status of China’s polycarbonate market?
A: While previously weak, current conditions remain unchanged with overall MMA tightness and gradual volume recovery in Europe.
Research analysts covering Trinseo.