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Trinseo’s stock tumbled to an all-time low Tuesday after it reported a larger than expected fourth quarter adjusted loss and predicted another loss in the current quarter.

The plastics manufacturer reported a net loss of $265 million, or $7.53 per share in the fourth quarter, compared to a net loss of $364 million, or $10.42 per share, in the previous year’s fourth quarter. Its current fourth quarter adjusted loss jumped to $2.99 per share from $1.72 per share last year. Sales fell 14% year-to-year to $837.5 million. Net sales in 2023 decreased 26% versus the prior year.

For the first quarter of 2024, the company said it expects a net loss from continuing operations of $67 million to $77 million, and forecast an adjusted loss of $1.90 per share to $2.19 per share, which exceeds the analysts’ estimated adjusted loss of $0.72 per share.

“As expected, we had sequentially lower results in the fourth quarter as more pronounced seasonality and continued customer inventory management and destocking led to a challenging end to the year,” said Frank Bozich, president and CEO. “Despite this, we generated positive free cash flow during the year and remain in a solid liquidity position as we enter 2024, and we are seeing the positive impact of our restructuring initiatives taking effect.”

Full-year 2023 results

Trinseo’s net sales in the full year decreased 26% compared to the prior year. Lower prices from the pass through of lower input costs resulted in a 14% decrease and lower sales volumes led to a 13% decrease, the company said. Persistent underlying demand weakness and customer destocking throughout the year, especially in the building and construction and consumer durable segments, led to lower sales volumes across all regions and segments. 

The full-year net loss from continuing operations of $701 million was $273 million below the prior year. The 2023 loss included approximately $160 million of after-tax charges related to increases in valuation allowances on deferred tax assets in certain subsidiaries. This non-cash charge is not expected to affect near-term or long-term cash flow since most of these tax attributes do not expire in the foreseeable future, the company said. Additionally, there was a year-over-year $52 million negative impact due to higher goodwill impairment and restructuring charges. 

Adjusted EBITDA of $154 million was $158 million below the prior year from lower volume across all segments, unfavorable variances of $41 million from net timing, and $38 million from natural gas hedges, as well as $40 million lower equity affiliate income from its Americas Styrenics business unit. These impacts were partially offset by pricing actions in Latex Binders and cost actions, including restructuring initiatives, announced in late 2022.

Fourth quarter results

Net sales in the fourth quarter decreased 14% compared to the prior year. Lower prices from the pass through of lower raw material costs led to a 10% decrease. Lower sales volumes in Polystyrene, Latex Binders, and Plastics Solutions, caused by underlying persistent market demand weakness and more pronounced year-end seasonality, led to a 7% decrease. These impacts were partially offset by a 3% increase from currency. 

A fourth quarter net loss from continuing operations of $265 million was $99 million more than the prior year. The current quarter included approximately $160 million of after-tax charges related to increases in valuation allowances on deferred tax assets in certain subsidiaries. The prior year included a $297 million charge related to goodwill impairment, which was partially offset by higher income taxes of $211 million in the current year. 

Adjusted EBITDA of $20 million was $14 million above the prior year due to a $19 million unfavorable net timing impact in the prior year in comparison to a $1 million favorable impact in the current year. Excluding net timing, lower volume across most segments as well as lower equity affiliate income from Americas Styrenics was mostly offset by cost actions, including restructuring initiatives announced in late 2022. 

2024 outlook

“We are seeing stronger order loads to begin the year following the challenges we faced in the fourth quarter, and, therefore, we expect significantly higher sequential profitability in the first quarter of 2024,” Bozich said. “However, we view first quarter profitability as the low point of the year due to seasonally lower volumes and turnaround activity in the first quarter, as well as the timing of newly awarded business. 

“The unprecedented drop in demand we saw starting in the third quarter of 2022 has persisted, and a great deal of macroeconomic uncertainty remains. Amid this environment we have executed numerous manufacturing footprint and other cost reduction initiatives while extending the majority of our debt maturities out to 2028,” he said. “While we are already seeing the benefits of these initiatives, we will continue to assess additional actions in 2024 to increase our manufacturing network flexibility, which will enable us to take advantage of regional cost differentials while also improving profitability, reducing capital expenditures, and optimizing working capital. This will also allow us to continue investing in higher-value product offerings and sustainable solutions, and will have us well-positioned for when market demand improves.” 

Trinseo has approximately 3,100 employees in North America, Europe, and Asia Pacific. The company’s business units include Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, Feedstocks, and Americas Styrenics.