Kraton Corporation Announces 4rth Quarter and Full Year 2020 Results.

HOUSTON: Kraton Corporation (NYSE: KRA), a leading global sustainable producer of specialty polymers and high-value biobased products derived from pine wood pulping co-products, announces financial results for the quarter and year ended December 31, 2020.

2020 FOURTH QUARTER AND FULL YEAR SUMMARY

Fourth quarter consolidated net loss of $21.0 million compared to consolidated net loss of $22.1 million in the fourth quarter of 2019.

Fourth quarter Adjusted EBITDA(1) of $54.4 million, up 11.0% compared to the fourth quarter of 2019.

Polymer segment operating income of $27.2 million in the fourth quarter of 2020, compared to operating loss of $5.2 million in the fourth quarter of 2019 and Adjusted EBITDA(1) of $30.6 million, up 3.5%, compared to the fourth quarter of 2019.

Chemical segment operating income of $6.9 million in the fourth quarter of 2020, compared to operating loss of $4.8 million in the fourth quarter of 2019, and Adjusted EBITDA(1) of $23.9 million, up 22.3%, compared to the fourth quarter of 2019.

Full year 2020 consolidated net loss(2) of $221.7 million compared to net income of $55.8 million in 2019.

Full year 2020 Adjusted EBITDA(1) of $262.1 million, compared to $320.6 million in 2019.

The net impact from the divestiture of our Cariflex business was $44.3 million.

During the year ended December 31, 2020, consolidated debt was reduced by $440.6 million and consolidated net debt(1) was reduced by $541.4 million, excluding the effect of foreign currency.

During the fourth quarter we refinanced our 7.0% senior unsecured notes with 4.25% senior unsecured notes, resulting in annualized cash interest savings of approximately $11.0 million. We also refinanced our ABL facility, extending maturity to December 2025 and improving pricing.

Three Months Ended December 31,

Years Ended December 31,

2020

2019

2020

2019

(In thousands, except per share amounts)

Revenue

$

406,764

$

408,524

$

1,563,150

$

1,804,436

Polymer segment operating income (loss)

$

27,205

$

(5,155)

$

56,802

$

57,343

Chemical segment operating income (loss) (2)

$

6,906

$

(4,789)

$

(388,390)

$

62,119

Consolidated net income (loss) (2)

$

(21,008)

$

(22,108)

$

(221,686)

$

55,817

Adjusted EBITDA (non-GAAP) (1)

$

54,425

$

49,044

$

262,097

$

320,592

Adjusted EBITDA margin (non-GAAP) (3)

13.4

%

12.0

%

16.8

%

17.8

%

Diluted earnings (loss) per share

$

(0.69)

$

(0.67)

$

(7.08)

$

1.60

Adjusted diluted earnings (loss) per share (non-GAAP) (1)

$

0.23

$

(0.06)

$

1.29

$

2.94

_______________________________________

(1)

See non-GAAP reconciliations included in the accompanying financial tables for the reconciliation of applicable non-GAAP measures to their most directly comparable U.S. GAAP measure.

(2)

For the year ended December 31, 2020, includes the $400.0 million non-cash goodwill impairment charge in the Chemical segment.

(3)

Defined as Adjusted EBITDA as a percentage of revenue.

"We are very pleased with our results for the fourth quarter and full year 2020, especially in light of the unprecedented challenges posed by the global COVID-19 pandemic. The safety of our employees, customers and communities where we operate have remained our top priority, while we maintained operational integrity and implemented enhanced safety protocols throughout our global footprint. Our broad portfolio of product offerings and end market diversification make our business resilient, and 2020 was a good year to prove that, as both our Polymer and our Chemical segments grew sales volume year-over-year," said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. "Moreover, during the year we are equally proud that Kraton polymer and pine chemical technologies contributed to providing key tools in the fight against the spread of COVID-19. For example, one of our Chinese customers utilized a new hydrogenated SBC development grade, manufactured at our Mailao, Taiwan JV, in the production of facemask strips with higher elasticity to significantly improve wear comfort. More recently, as the vaccine roll-out began, our hydrogenated SBCs were used to manufacture gels used to insulate essential refrigerated vaccine transportation and distribution equipment. Similarly, Kraton pine chemicals were utilized in increased demand for many types of packaging adhesives, and as a key ingredient in surfactant manufacturing. Lastly, in 2020 we made meaningful progress in advancing our innovation objectives to drive future growth, by launching several new product offerings such as our REvolution family of low-color rosin esters and our CirKular+ polymer grades; both of which address the ever-increasing market need for biobased and sustainable alternatives, further demonstrating Kraton's commitment to advance our sustainable business model by creating 'value in an otherwise resource constrained world'. Most recently, our Polymer segment announced the first commercial application of IMSS technology in an automotive application. SAIC-GM (a joint venture between General Motors Company and SAIC Motor Corporation Limited) officially released the 2021 Buick GL6 model's newly engineered interior in late November 2020 into the fast growth Chinese auto market," added Fogarty.

Polymer segment Adjusted EBITDA for the fourth quarter of 2020 was $30.6 million, up 3.5% compared to the fourth quarter of 2019. Fourth quarter 2020 sales volume was up 6.0% compared to the fourth quarter of 2019, with higher sales volume in Specialty Polymers associated with demand recovery across multiple regions, and higher volume in Performance Products primarily driven by higher sales into paving and roofing and adhesive applications.

Chemical segment Adjusted EBITDA for the fourth quarter of 2020 was $23.9 million, up 22.3% compared to the fourth quarter of 2019. Chemical segment results for the quarter reflect the benefit of a 20.3% increase in sales volume, compared to the fourth quarter of 2019, partially offset by lower average sales prices and higher costs, including costs of planned maintenance.

"During 2020, we delivered the $20 million of annualized cost savings that we had outlined at the beginning of the year. We also strengthened our capital structure by significantly reducing outstanding debt, while improving liquidity through the refinancing of our ABL facility and senior unsecured notes and meaningfully reducing borrowing cost by delivering approximately $11 million of annual cash interest savings. In 2021, while we expect to continue to reduce debt and maintain a disciplined approach to cost and capital allocation, we will be focused on investing in accretive organic growth projects and our innovation pipeline," added Fogarty. "Looking ahead to 2021, we are encouraged by the demand trends experienced in both our Polymer and Chemical segments in the second half of 2020, and the start of this year. Of course, we must remain mindful of the disruptive potential of COVID-19 as well as constrained availability and increasing costs...