AdvanSix Inc. (NASDAQ:ASIX) is a diversified chemistry company playing a critical role in global supply chains, innovating and delivering essential products for its customers in a wide variety of end markets and applications that touch people's lives, such as building and construction, fertilizers, agrochemicals, plastics, solvents, packaging, paints, coatings, adhesives and electronics. AdvanSix's reliable and sustainable supply of quality products emerges from the integrated value chain of its five U.S.-based manufacturing facilities.

Financials

In fiscal year 2023, AdvanSix reported annual revenue of $1,533,599,000 and net income of $54,623,000. AdvanSix generated annual operating cash flow of $117,550,000 and annual free cash flow of $10,173,000.

For the first quarter of 2024, AdvanSix reported sales of $336,829,000, down 15.9% compared to the prior year period. The decrease was primarily attributable to a 9% decline in market-based pricing, reflecting reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions. Sales volume also decreased by approximately 7%, primarily driven by lost sales resulting from a first quarter operational disruption.

Adjusted EBITDA for the first quarter of 2024 was $595,000, down from $65,354,000 in the prior year period. The primary drivers of the earnings decline were the impact of the first quarter operational disruption and unfavorable market-based pricing, net of raw material costs. Adjusted earnings per share was a loss of $0.56 for the quarter.

Free cash flow was negative $72 million in the first quarter of 2024, compared to negative $23 million in the prior year period. The decline was primarily due to lower net income and the impact of changes in working capital. Capital expenditures increased to $35 million in the quarter, up $11 million versus the prior year, reflecting increased spend on enterprise programs and other maintenance projects.

On a geographic basis, AdvanSix generated approximately 84% of its first quarter 2024 revenue from the United States, with the remaining 16% coming from international markets. By product line, AdvanSix's sales were diversified, with Nylon accounting for 25%, Caprolactam 18%, Ammonium Sulfate 25%, and Chemical Intermediates 32% of total revenue.

Outlook

Looking ahead, AdvanSix is encouraged by its improved outlook heading into the second quarter, with both operational and commercial benefits anticipated. Operationally, AdvanSix has returned to its expected robust plant utilization rates, ensuring it is well positioned to serve customers across each line of business. AdvanSix continues to expect capital expenditures in the range of $140 million to $150 million in 2024, reflecting increased spend year-over-year to address critical enterprise risk mitigation and growth projects.

Commercially, AdvanSix sees positive trends for ammonium sulfate and acetone continuing, and is cautiously optimistic on nylon modestly improving as the year progresses. AdvanSix expects the pretax income impact of its planned plant turnarounds to be $38 million to $43 million in 2024, with the timing of its larger turnaround now shifted from the third quarter to the fourth quarter.

Recent Developments

AdvanSix has also recently achieved several external recognitions for its corporate social responsibility and sustainability performance, including its third consecutive Platinum rating by EcoVadis, strong ratings by CDP for water security and climate change, and ISCC PLUS certification across its manufacturing sites. These achievements demonstrate AdvanSix's commitment to responsible and sustainable business practices.

Conclusion

AdvanSix's diversified product portfolio, integrated manufacturing capabilities, and focus on operational excellence and sustainability position it well to navigate various industry cycles and market dynamics. AdvanSix's resilience and ability to maintain robust investment for growth, sustain good cash conversion, and structurally improve its underlying earnings power make it an intriguing investment opportunity in the diversified chemicals space.