Kraton Corporation decreased EBITDA margin to 14.3% in 1Q2017

Kraton Corporation, a leading global producer of styrenic block copolymers, specialty polymers and high-value performance products derived from pine wood pulping co-products, reported 29.6% decrease of Adjusted EBITDA amid 9.1% revenue growth in 1Q2017 y-o-y. According to the announcement, the company’s revenues accounted for USD 458.1 million, generating Adjusted EBITDA of USD 65.6 million in the period (14.3% margin).

Kevin M. Fogarty, Kraton’s President and CEO, commented:

“On a consolidated basis, first quarter 2017 Adjusted EBITDA was USD 65.6 million. As expected, during the quarter we saw unprecedented increases in raw material costs for our Polymer segment and, as a result, our Adjusted EBITDA was negatively impacted by the lag in realization of price increases. While we expect the full realization of price increases implemented to address the increase in raw material costs to be completed in the second quarter 2017, the raw material cost trend itself has also reversed as we move into the second quarter of the year. As we have pointed out previously, we continue to see competitive conditions for SIS polymer grades in our Performance Products business.

For our Chemical segment, we are encouraged by the 15% increase in sales volume compared to the first quarter 2016. However, segment margins continue to be adversely impacted by availability of low-cost C5 hydrocarbon alternatives, and pricing pressure for TOFA and TOR products in general. Regarding TOFA markets specifically, we implemented a global price increase of USD 120 per metric ton effective March 15th, reflecting an improving demand outlook for TOFA and, to a lesser extent, cost increases for CTO raw materials.

Strategically, we continue to make progress on our cost reduction and transaction synergy value realization initiatives. In the first quarter we delivered an incremental USD 13 million on top of the cumulative USD 68 million realized through year-end 2016. We expect that for the balance of 2017 we will deliver an additional USD 27 million in cost reductions towards our 2018 target of USD 135 million. In addition, during the first quarter we took steps to further refine our capital structure. In early January we repriced our Term Loan Facility, reducing the interest cost for amounts outstanding under the facility by 100 basis points, and in late March, we issued USD 400 million of 7.0% Senior Notes, using the proceeds to reduce borrowings under the Term Loan Facility. This issuance resulted in a more appropriate balance between secured and unsecured components of our outstanding debt, and effectively eliminated all scheduled amortization payments under the Term Loan Facility, enhancing financial flexibility.”

In 4Q2016 Kraton decreased EBITDA margin to 18.6% in 4Q2016. Check other wood business-related companies 1Q2017 schedules for financial and operating results.

Earlier Kraton Corporation introduced a new biobased tackifier for premium packaging hot melt adhesives.

About Kraton Corporation:

The company is a leading global producer of styrenic block copolymers, specialty polymers and high-value performance products derived from pine wood pulping co-products. The company’s polymers are used in a wide range of applications, including adhesives, coatings, consumer and personal care products, sealants and lubricants, and medical, packaging, automotive, paving, roofing and footwear products. As the largest global provider in the pine chemicals industry, the company’s pine -based specialty products are sold into adhesive, road and construction and tire markets, and it produces and sells a broad range of chemical intermediates into markets that include fuel additives, oilfield chemicals, coatings, metalworking fluids and lubricants, inks, flavors and fragrances and mining.

Source: Woodbizforum