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 9.4% increase of Adjusted EBITDA amid 15.5% revenue growth in 1Q2017 y-o-y. According to the announcement, the company’s revenues accounted for USD 525.3 million, generating Adjusted EBITDA of USD 101.5 million in the period (19.3% margin).
Kevin M. Fogarty, Kraton’s President and CEO, commented:
“We delivered USD 101.5 million of Adjusted EBITDA in the second quarter 2017, which represents a margin of 19.3%. Both our Polymer and Chemical segments experienced solid end market demand fundamentals and sequential margin expansion. In addition, we delivered an incremental USD 13 million of cost improvement and synergy capture initiatives in the quarter, making the total for the first six months USD 26 million, well ahead of the plan we outlined at the beginning of the year. With a USD 37 million reduction in Kraton net debt in the last two months of the quarter, we remain on track to reduce Kraton net debt by USD 100 million to USD 150 million in 2017.
Our Polymer segment posted strong results in the quarter, delivering Adjusted EBITDA of USD 62.8 million with an associated margin of 18.7%. This represents nearly $24 million of growth and over 400 basis points of improvement in margin, demonstrating the effective pass through of raw material cost inflation. Following the sharp increase in raw material prices in the first quarter 2017, raw material costs declined significantly in the second quarter and into July, returning to levels we believe are more indicative of structural market balances, and underlying energy costs. We expect relative stability in raw material costs and segment margins for the balance of the year.
Our Chemical segment second quarter Adjusted EBITDA was USD 38.7 million, or 20.3% of revenue, which showed sequential improvement compared to the first quarter of 2017. Second quarter results for our adhesives business reflect stabilization of the market dynamics associated with the availability of low-cost C5 hydrocarbon alternatives. In addition we saw improved margins for tall oil fatty acid products, driven by previously announced price increases. In the quarter we saw continued success in delivering transaction synergies. Based upon our success to date, we now expect to deliver the full $65 million of transaction synergies associated with the Arizona Chemical acquisition by year-end 2017, one year earlier than originally planned.
We remain on track to deliver our planned USD 70 million of cost reductions for the Polymer segment by year-end 2018. Our conversion to the ‘direct connect’ process for our Cariflex business has gone extremely well, and we currently expect to complete our USBC expansion in France, by year-end 2017. The qualification process at our new HSBC plant in Taiwan continued during the second quarter and we saw the first shipment of commercial product grades from the plant. We look forward to the incremental contribution of the plant to our cost optimization efforts as commercial volumes expand in late 2017 and into 2018.”
Earlier Kraton Corporation increased prices for Rosin Ester, Terpene and AMS/AMS Phenolic Product lines from July 1, 2017.
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.