AdvanSix Inc at Stifel Cross Sector Insight Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Yeah. Well, let's start with how you described yourself because your name is AdvanSix, right? So that's because you are used to be a nylon 6 company. Nothing's changed; you still make nylon. But you now describe yourself as a diversified chemical company, and I think that's appropriate. But let's walk through what that really means. We will save the chemistry lessons, but keeping it in the context of the end of your value chain will always terminate with nylon. But along that path, a lot of other things happen that you create value from. So let's lay that groundwork because we're going to form a lot of this.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Beautiful. So let's focus on the super near term. It's the kind of volatile market out there, nylon, mostly commercial real estate, consumer durables, but then let's talk about how some of the other businesses are performing, especially relative to your most cyclical business in nylon. So a lot of these people are familiar with fertilizers, but maybe go through what you're seeing in acetone particularly right now.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Yeah. And so if we back up to the investments that you've made in these co-products, the ones that, for the first few years, nobody was really thinking about, I mean, if I remember correctly, acetone and fertilizers were how you actually grew earnings year over year in 2020. So rare for a commodity company in that year in particular. What were specifically -- and you touched on granulation capacity -- but maybe talking about where U.S. Amines actually fits in from a vertical integration play because it is the first asset really that you've ever owned that isn't directly tied into your existing asset base.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Sure. So let's talk about that. Because when you came out of Honeywell, I think I found an article in CNDN magazine from 2002 where they were already calling you a non-core asset. So that must've been wonderful. So you came out with a lot of low-hanging fruit, $200 million CapEx project pipeline. You've done $100 million, 18, 24-month payback periods. You have the granulation project. What else is in that $100 million and how does this stack up against maybe your M&A pipeline or something that wasn't originally in that and is really more of a truly organic investment rather than a productivity investment?

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : That's perfect. And it gives us a lot more to dig into. I want to start -- I'm going to put you on the spot. U.S. Amines, you've had it a year. How does brownfield look for that relative to the remaining $40 million in the pipeline, if you had a ballpark prioritization?

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : We'll come back to capital allocation. But I wanted to go through nylon in a bit more detail right now because -- so it's a tough market. I mean, China's back down bouncing off of cash costs, basically, as they love to do. But we have very low base of growth from your perspective in automotive, and we also have very easy comps in automotive if and when builds ever come back. We also have wire and cable, which you -- you're not in fiber optic, but it is a meaningful business for you and one that we're seeing quite a bit of excitement from other participants in that value chain. I get that the commodity side of the business, China's going to do what it's going to do. But can you talk about what you're seeing in those particular end markets, particularly given the margin profiles? Well, you don't tell us exactly, but let's say 1.5, 2x consolidated.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : So I won't ask it directly, but I will point out that you have been, especially for a company of your size, remarkably successful with anti-dumping cases and you're seeing outsized nylon imports in what's already a poor market. Do you feel like these origin countries are selling their nylon here at fair value?

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : All right. I'm going open it up to questions and we can close the capital allocation. Should anybody have anything? No pressure. How do I model your business? No.

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Yeah, he hasn't sent me his copy yet. So let's go to capital allocation. You're a small cap, ostensibly commodity chemical company that instituted a dividend. That's not common. And then you raised at 16% in, I guess, the first year of it, and that's nice. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 07, 2023 / 5:50PM, ASIX.N - AdvanSix Inc at Stifel Cross Sector Insight Conference Where can that -- how do you think about that going forward? Not looking for guidance per se, but what's left maybe in terms of putting it in line with some targeted baseline of earnings growth on that remaining project pipeline? How do you think about setting expectations around dividend growth?

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : Excellent. And then I guess we'll do the last one. I think I ask you this every six months or so just for fun. You don't control the valuation on your shares. They make for a very attractive return vehicle for your cash. However, there is, in theory, an argument to be made that if you are one hell of an operator and there's a lot of assets out there in the US that are maybe in the wrong hands from that perspective, how do you measure the risk reward of going after an asset that would need some love, but would greatly expand the absolute size of your business and help you reach a larger investor base?

Question: Vincent Anderson - Stifel Financial Corp. - Analyst : All right. Well, that's time. And thanks so much.