Fourth Quarter and Full Year 2014 Financial Results March 5, 2015 TREC

Transcription

1 Your Click Specialty to edit Master Chemical title Partner style Fourth Quarter and Full Year 2014 Financial Results March 5, 2015 TREC

2 Safe Harbor Statements in this presentation that are not historical facts are forward looking statements as defined in the Private Securities Litigation Reform Act of Forward looking statements are based upon Management's belief, as well as, assumptions made by and information currently available to Management. Because such statements are based upon expectations as to future economic performance and are not statements of fact, actual results may differ from those projected. These risks, as well as others, are discussed in greater detail in Trecora Resources' filings with the Securities and Exchange Commission, including Trecora Resources' Annual Report on Form 10-K for the year ended December 31, 2013, and the Company s subsequent Quarterly Reports on Form 10-Q. 2

3 Agenda Financial & Operational Highlights Simon Upfill-Brown, Executive Vice President Financial Statement Review Connie Cook, CFO SHR Update Simon Upfill-Brown Trecora Chemical Update Peter Loggenberg, President, Trecora Chemical AMAK Mine Update Simon Upfill-Brown Closing Remarks Simon Upfill-Brown 3

4 Financial Highlights 4th Quarter 2014 Fourth quarter revenues of $74.1 million, the highest revenue fourth quarter in our history, an 11.2% increase from the $66.6 million in the fourth quarter of Total petrochemical sales volume increased 9.9% to a quarterly record of 21.6 million gallons, up from 19.7 million gallons in the year-ago period. The growth in revenues and volumes during the fourth quarter were the result of: Increasing demand for high purity petrochemical products Ongoing growth in demand from international customers Incremental revenue from Trecora Chemical 4

5 Revenue Gallons Petrochemical Revenue & Volume Summary Petrochemical Sales Revenue and Volume (in millions) $80 25 $70 $60 20 $50 15 $40 $30 10 $20 5 $10 $- 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 - Sales Volume 5

6 Petrochemical Feed Cost Summary Processed Feedstock Cost per Gallon Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 6

7 TREC Income Statement (in thousands) December 31, December 31, (unaudited) Revenue $ 74,072 $ 66,637 Revenue $ 289,643 $ 236,227 COGS 61,788 56,818 COGS 243, ,064 COGS% 83% 85% COGS% 84% 85% Gross Profit 12,284 9,819 Gross Profit 45,743 35,163 GM% 17% 15% GM% 16% 15% G&A 7,271 4,304 G&A 19,701 14,672 Depreciation and Amortization Depreciation and Amortization Total Operating Expenses 7,425 4,436 Total Operating Expenses 20,261 15,193 Operating Income 4,859 5,383 Operating Income 25,482 19,970 Op Inc% 7% 8% Op Inc% 9% 8% Interest Expense (1,061) (211) Interest Expense (1,420) (821) Equity in earnings/gain AMAK (385) (298) Equity in earnings/gain AMAK (1,072) 8,700 Misc Income (expense) (251) (64) Misc Income (expense) (272) (204) Income before Income Taxes 3,162 4,810 Income before Income Taxes 22,718 27,645 Income tax expense 964 1,628 Income tax expense 7,147 8,147 Net Income $ 2,198 $ 3,182 Net Income $ 15,571 $ 19,498 7

8 TREC Adjusted EBITDA Calculation (in thousands)(unaudited) THREE MONTHS ENDED TWELVE MONTHS ENDED December 31, December 31, Net Income 2,198 3,182 Net Income 15,571 19,498 Add: Depreciation Add: Depreciation Depreciation in COGS 2,030 1,021 Depreciation in COGS 4,645 3,518 Interest expense 1, Interest expense 1, Taxes 964 1,628 Taxes 7,147 8,147 EBITDA 6,408 6,174 EBITDA 29,343 32,505 Equity in (earnings) losses in AMAK Equity in (earnings) losses in AMAK 1,072 (8,700) Adjusted EBITDA $ 6,793 $ 6,472 Adjusted EBITDA $ 30,415 $ 23,805 8

9 TREC Balance Sheet as of December 31, 2014 (in thousands) Assets Liabilities Cash & Equivalents $ 8,506 A/P $ 9,535 A/R 28,271 Derivative Instruments 362 Inventories 12,815 Accrued Liabilities 5,801 Deferred Income Taxes 1,652 CP-LTD 7,000 Other 3,691 Other 2,183 Current Assets $ 54,935 Current Liabilities $ 24,881 PPE, net 73,811 LTD 73,450 Investment in AMAK 53,023 Deferred Income Taxes 10,471 Goodwill 21,750 Other 1,884 Intangible Assets $ 26,235 Owners' Equity 121,388 Other long-term assets 2,320 Total Assets $ 232,074 Total Liabilities and OE $ 232,074 Cap table at 12/31/14 Shares outstanding 24,188 Exercisable Options (WAEP $4.97) 573 Total 24,761 9

10 South Hampton Resources Petrochemical Update Fourth Quarter average monthly sales volume (million gallons): All Prime December Products Products Deferred Increased international volume driven by Canadian oil sands and new Asia-Pacific customers 30.0% International % of volume sold 20.0% 10.0% 0.0%

11 SHR Highway 92 Expansion - 3 Year Project Constructed five new finished-product pipelines between the Highway 418 production facility and the Highway 92 terminal Installed seven new pressure tanks at the Silsbee rail and truck terminal Installed new five-bay truck and isocontainer loading facility (2x previous capacity) Installed second 10-railcar loading rack; doubles loading capacity Customer investment of three storage tanks with total capacity of 1.2 million gallons, with truck and railcar blending capabilities 11

12 SHR D-Train Expansion Update Higher throughput feed filters and ancillary equipment installed All major equipment for D-Train Hydro De-Sulfurization (HDS) unit set The tower pedestals curing seal slab pour and tower settings the week of 3/16 Even though significant weather delays, already proven we can run at least 8000 bpd with D-train Phase 1 Still expect D-Train to be fully in place (additional 3000 bpd) by yearend 12

13 SHR D-Train Expansion Update 13

14 Trecora Chemical Progress Focus on raising finished product quality and consistency Enables higher price points with more attractive margins Successful run crystalline poly alpha olefin (LCrysta) Increasing wax production capacity (by 50%) ahead of schedule Improving direct sales effort Expanding custom processing capability Hydrogenation and distillation initiative underway Controlling CapEx with purchase of used equipment 14

15 2525/ / / / / / / / / / /24 45/46 121/ / / / / / / / / / / / / /238 Temperature C Trecora Chemical Quality Improvement PE Wax 1 Softening Point Softening Point, Deg C LCL UCL Average Lower Spec Batch #'s 15

16 Klett Trecora Chemical Quality Improvement Weighted Avg Color PE Wax values ucl lcl 16

17 New PE Wax vs. Fischer Tropsch waxes Launch of higher quality PE hard wax T105 (PE WAX) SX 105 TM (FT) H1 TM (FT) 17

18 New Crystalline PAO on-purpose wax Launch PE Wax 1 LCrysta TM of higher quality PE hard wax 18

19 AMAK Mine Improvements Installed new management team Developed cost control measures and operational efficiencies that increased outputs while reducing waste and dilution Commissioned a Precious Metals Circuit Fully activated, expected to recover significant amounts of gold and silver that was previously lost as part of tailings Designed to recover approximately 50% of contained metals Improved metal recoveries approx. 5% for zinc and 1% for copper compared with the first half of Successfully renegotiated contract with labor supplier Reduced costs due to operational efficiencies Aligned contractor's and AMAK's interests and success 19

20 AMAK Precious Metals Circuit 20

21 AMAK Production Update Projected 2015 concentrate tonnage Zinc 54,500 WMT Copper 34,000 WMT Gold 113 Kg Silver 4,854 Kg Average cash cost of production (underground to port warehouse) is ~$60 /DMT of ore 2015 Price forecast- Zinc $2,100 - $2,700/WMT Copper $5,500 - $6,200/WMT 21

22 Closing Remarks Achieved record revenue and petrochemical volumes in 2014 South-Hampton Resources Positioned to address the rapidly growing demand for hexanes and pentanes D-Train expansion adds 60% to capacity in 2015 HWY 92 sales rack expansion supports D-Train, toll customers and 2015 growth projects Trecora Chemical Expect to begin to generate revenue growth through increased wax volumes in 2015 Increase margins through improved quality and consistency Distillation/hydrogenation expansion underway AMAK New management and cost control initiatives demonstrating operational efficiencies Precious metals circuit enhancing mining capabilities 22

23 Q&A Thank you Please visit our websites:

24 Appendix RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1) 12/31/14 (in thousands except ratio) Current assets $ 54,935 Current liabilities 24,881 Working capital $ 30,054 (current assets less current liabilities) Current ratio 2.2 (current assets divided by current liabilities) TWELVE MONTHS ENDED 31-Dec (thousands of dollars) NET INCOME $ 15,571 $ 19,498 Add back: Interest 1, Taxes 7,147 8,147 Depreciation Depreciation in Cost of sales 4,645 3,518 EBITDA $ 29,343 $ 32,505 Less: Equity in (earnings) loss of AMAK 1,072 (8,700) Adjusted EBITDA $ 30,415 $ 23,805 (1) This presentation includes non-gaap measures. Our non-gaap measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. 24