Ecovyst Inc. (NYSE:ECVT) Q1 2023 Earnings Convention Name Could 4, 2023 11:00 AM ET
Firm Members
Gene Shiels – Director of Investor Relations
Kurt Bitting – Chief Govt Officer & Director
Mike Feehan – Chief Monetary Officer
Convention Name Members
David Huang – Deutsche Financial institution
Hamed Khorsand – BWS Monetary
Operator
Good morning. My identify is Todd, and I will likely be your convention operator right this moment. Welcome to the Ecovyst First Quarter 2023 Earnings Name and Webcast. Please notice right this moment’s name is being recorded and may run roughly one hour. At present, all contributors have been positioned in a listen-only mode to stop any background noise. After the speaker’s remarks, there will likely be a question-and-answer interval. [Operator Instructions]
I’d now like handy the convention over to Gene Shiels, Director of Investor Relations. Please go forward.
Gene Shiels
Thanks, Operator. Good morning, and welcome to the Ecovyst First Quarter 2023 Earnings Name. With me on the decision this morning are Kurt Bitting, Ecovyst’s Chief Govt Officer; and Mike Feehan, Ecovyst Chief Monetary Officer. Following our ready remarks this morning, we’ll take your questions.
Please notice that, a few of the data shared right this moment is forward-looking data, together with details about the corporate’s monetary and working efficiency, methods, our anticipated end-use demand developments and our 2023 monetary outlook. This data is topic to dangers and uncertainties and that would trigger the precise outcomes and the implementation of the corporate’s plans to differ materially. Any forward-looking data shared right this moment speaks solely as of this date. These dangers are mentioned within the firm’s filings with the SEC.
Reconciliations of non-GAAP monetary measures talked about on right this moment’s name with their corresponding GAAP measures will be discovered within the earnings launch and within the presentation supplies posted within the Traders part of our web site at ecovyst.com.
I am going to now flip the decision over to Kurt Bitting. Kurt?
Kurt Bitting
Thanks, Gene, and good morning. Through the first quarter, we continued to execute on our long-term methods, leveraging Ecovyst’s management positions and technical strengths to learn from the world’s increasing want for extra sustainable applied sciences.
On this regard, it was a profitable quarter. Through the quarter, we continued to see constructive demand within the fundamentals throughout the vary of finish makes use of we serve giving us continued confidence in long-term progress alternatives for Ecovyst.
When it comes to monetary outcomes for the quarter, as mentioned in our fourth quarter earnings name in late February, we anticipated our first quarter outcomes to be impacted by quite a lot of elements.
For our Eco Companies enterprise, we indicated that our first quarter outcomes can be adversely impacted by Winter Storm Elliott in addition to by an prolonged turnaround at certainly one of our websites. And in our Catalyst Applied sciences enterprise, we anticipated decrease gross sales of hydrocracking catalysts resulting from buyer order timing.
The primary quarter influence of those elements was consistent with our expectations. The numerous deliberate upkeep turnaround at one of many Eco Companies websites was prolonged, which restricted gross sales of virgin sulfuric acid within the quarter and resulted in some one-time greater upkeep prices.
Because of this, first quarter adjusted EBITDA for Eco Companies was decrease than we anticipated in February, nevertheless, our Catalyst Know-how companies outcomes contributed favorably to our first quarter outcomes, benefiting from constructive pricing momentum and decrease uncooked materials and power prices.
Complete gross sales for the primary quarter, together with our proportionate share of gross sales for the ZI three way partnership, have been $183 million in comparison with $209 million for the primary quarter of 2022. The variance was resulting from decrease gross sales of virgin sulfuric acid in our Eco Companies enterprise related to Winter Storm Elliott and the prolonged upkeep round exercise, decrease gross sales of polyethylene catalyst and the impact of order timing for hydrocracking and specialty catalyst gross sales in our Catalyst Applied sciences enterprise.
Adjusted EBITDA for the primary quarter was $43 million in comparison with $59 million for the primary quarter of 2022, with the lower primarily pushed by greater upkeep and restore prices related to the storm and the prolonged turnaround exercise, the ensuing decrease virgin sulfuric acid gross sales and decrease relative gross sales quantity as a result of order timing in Catalyst Applied sciences.
These elements have been partially offset by greater pricing in Regeneration Companies and Silica Catalysts, and we anticipate that constructive pricing momentum in Eco Companies and Catalyst Applied sciences over the steadiness of the yr will profit our full-year outcomes.
Through the first quarter, we participated in one other profitable secondary providing that marked the ultimate disposition of inventory by CCMP, a former personal fairness proprietor. Along with this transaction, we repurchased 3 million shares at a median worth of $9.95.
Going ahead, we anticipate to take care of a balanced strategy to capital allocation, and we imagine our robust money era functionality will present for important flexibility. Funding for progress initiative stays a better precedence. As this continued discount in internet leverage, we may even have the flexibility to ship additional shareholder worth with $280 million remaining beneath our share repurchase authorization.
We imagine 2023 will likely be one other yr of progress for Ecovyst. And because the elements that adversely impacted our first quarter outcomes have been largely anticipated and factored into our full-year outlook we offered in late February, we’re sustaining our full-year 2023 steerage vary for adjusted EBITDA and for adjusted free money move.
Turning to slip 6 for an replace on our demand outlook. Total, our expectations for drivers of demand for the steadiness of this yr haven’t modified materially from what we shared in our fourth quarter earnings name in late February. For our Ecoservices enterprise, we proceed to anticipate excessive utilization charges for our refining prospects, pushed by progress in each home and export demand for gasoline as projected by the EIA and inventories which are beneath regular ranges.
Alkylate stays a essential part in fuel formulation for our refining prospects, significantly with seasonally greater demand as we head into the summer season driving season which requires decrease vapor stress gasoline. We imagine robust alkylate demand will proceed to help constructive regeneration exercise for Ecoservices over the steadiness of 2023. Though gross sales of virgin sulfuric acid have been down within the first quarter, largely resulting from outages related to the storm and the prolonged turnaround exercise, we proceed to see wholesome demand throughout a spread of end-use purposes.
Demand in all kinds of commercial makes use of for virgin sulfuric together with chloralkali, efficiency supplies, engineered plastics and lead acid batteries remained secure. Given present plans for broader electrification and for additional growth of low-carbon applied sciences and in gentle of the worldwide provide scarcity for metals and minerals to help these aims, we imagine the continuing growth of mining tasks in North America for each copper and borates will proceed to drive demand progress for virgin acid.
Our rising therapy companies enterprise continues to learn from wholesome demand and we anticipate to learn from a constructive demand backlog into the second half of this yr. By way of processing liquid waste streams for our refining and petrochemical prospects within the Gulf Coast, we offer a most well-liked various to different disposal choices reminiscent of long-haul trucking to deep properly injection websites and we profit from the inherent power worth within the waste streams, which is an offset to our pure fuel inputs wanted to gasoline our furnaces.
Lastly, for Chem32, our Catalyst Activation Service enterprise, we’re seeing sturdy demand for off-site pre-activation companies with demand being pushed by excessive refinery utilization turnaround exercise and continued progress in renewable gasoline manufacturing that’s driving greater activation quantity for hydroprocessing catalysts.
Turning to Catalyst Applied sciences. Whereas anticipated order timing was a consider decrease first quarter gross sales for Catalyst Applied sciences, we anticipate strong progress on a full-year foundation. Though we have now seen some near-term destocking in polyethylene, which will be impacted by financial cycles, world polyethylene demand remains to be projected to extend this yr. Home demand stays constructive and with new capability startups, February was a document manufacturing month within the US, the place we’re properly represented with our tailor-made catalyst choices.
Polyethylene demand restoration in China was slower than anticipated within the first quarter. Demand is anticipated to strengthen in later quarters in response to stimulus continued COVID restoration and restocking exercise. In Europe, working charges are down reflecting smooth demand given the financial challenges coupled with the upper power prices. As we have now highlighted earlier than, our polyethylene catalyst gross sales are extra directed to the North American and Center Japanese markets and we have now decrease publicity to the European and Asian markets.
Whereas first quarter hydrocracking catalyst gross sales have been decrease as anticipated resulting from order timing, we proceed to anticipate greater gross sales in 2023. The deferral of turnarounds and catalyst change-outs in 2022 as refineries sought to take care of operations to maximise profitability had the impact of shifting turnaround exercise in gross sales into 2023. As well as, the EIA tasks that world liquid gasoline consumption will improve by 1.5 million barrels a day in 2023. Because of this, refinery utilization is anticipated to stay at excessive ranges for the steadiness of the yr.
With this constructive underlying demand for refined merchandise, we proceed to anticipate robust progress in hydrocracking catalyst gross sales in 2023. We anticipate our gross sales of zeolite-based emission management catalysts may even improve in 2023 supported by a backlog of manufacturing of professional quality diesel automobiles. Trying ahead we anticipate regulatory mandates such because the proposed Euro seven emission requirements will proceed to drive demand for superior emission management programs.
Turning to renewable fuels. The marketplace for renewable diesel continues to increase with progress in each demand and capability over the previous two years in extra of 20%. We imagine we’re within the early phases of the conversion and building cycle with the expansion in manufacturing capability driving demand for our zeolite catalyst used within the dewaxing processes. Because the renewable market continues to develop, we anticipate our gross sales of renewable fuels catalysts will profit from each incremental capability additions and the periodic catalyst change-outs for present capability. We anticipate robust progress in renewable gasoline demand and manufacturing to proceed, significantly with progress in sustainable aviation gasoline that’s projected in 2025 to 2026.
We proceed to imagine, Ecovyst is uniquely positioned to serve the rising want for extra sustainable merchandise and applied sciences. When it comes to product and know-how, right this moment over 80% of our innovation tasks are linked to sustainability. And as we have now mentioned earlier than, our dedication to sustainability extends past analysis and growth of latest applied sciences.
We proceed to push for extra sustainable practices all through our group. We have been just lately awarded a Gold Standing score by EcoVadis in recognition of our efforts to advertise extra sustainable practices. This yr, we’ll proceed to advertise sustainability all through our group, underscoring its significance to our company tradition. Now we have applied our Sustainability Management Award program to foster incremental enhancements in operations and inside processes and product growth and thru our social influence efforts.
As part of this program, our Baton Rouge, Louisiana website certainly one of Ecovyst’s largest websites was just lately acknowledged for its Furnace Optimization Undertaking, which is offering for a major discount in power consumption and discount in associated greenhouse fuel emissions. Our product growth groups have been just lately acknowledged for the event of Silica Catalysts for the manufacturing of bio-butadiene to be used in artificial rubber as a alternative for petroleum-based butadiene.
As well as, our Baytown, Texas website was acknowledged for its dedication and dedication to neighborhood partnerships by way of help of native faculties, mutual assist teams, the native meals financial institution and neighborhood cleanup efforts. I wish to once more congratulate these Ecovyst websites for his or her nice accomplishments and sustainability.
As well as, we have now expanded our inside assets devoted to sustainability to the latest addition of our Director of Sustainability. We sit up for offering you with additional updates on our sustainability applications and our progress in the direction of our long-term targets in our 2022 sustainability report, which we anticipate to publish within the third quarter.
At the moment, I am going to flip the decision over to Mike for a extra detailed dialogue of our first quarter outcomes.
Mike Feehan
Thanks, Kurt. As Kurt famous, our monetary efficiency within the first quarter displays a number of elements, together with the impact of Winter Storm Elliott, the influence of prolonged upkeep turnaround exercise at certainly one of our websites in Eco Companies and our order timing for hydrocracking and specialty catalyst gross sales in our Catalyst Applied sciences enterprise.
Apart from a few of the prolonged upkeep exercise, the anticipated influence of those discrete occasions on first quarter outcomes was mentioned throughout our fourth quarter earnings name in late February. The operational disruption of Winter Storm Elliott together with the prolonged upkeep exercise resulted in constrained availability to provide stock and meet buyer demand for virgin sulfuric acid within the first quarter.
As well as and as mentioned in our fourth quarter name, whereas we nonetheless anticipate share progress to be within the excessive teenagers for hydrocracking catalyst gross sales on a full-year foundation, the timing of buyer orders for hydrocracking catalysts was an element within the first quarter with the vast majority of these gross sales anticipated to happen over the steadiness of the yr.
Complete gross sales for the primary quarter, together with our proportionate 50% share of gross sales from the Zeolyst three way partnership have been $183 million, in comparison with $209 million within the first quarter of 2022. The change in gross sales displays the decrease virgin sulfuric acid quantity in Eco Companies, in addition to order timing for hydrocracking and specialty catalyst gross sales, and decrease gross sales of polyethylene catalysts in our Catalyst Applied sciences enterprise.
Our continued robust pricing in each companies, helped mitigate the quantity shortfall throughout the quarter. As well as, roughly $5 million of the change in gross sales is related to the pass-through of decrease sulfur prices.
Within the fourth quarter earnings name, we shared our expectation that first quarter adjusted EBITDA for Eco Companies can be down roughly 20% in comparison with the primary quarter of 2022 and that adjusted EBITDA for Catalyst Applied sciences can be down roughly 50% in comparison with the primary quarter of 2022. Directionally, this occurred as anticipated, nevertheless, adjusted EBITDA for Eco Companies was decrease than anticipated principally as a result of prolonged upkeep turnaround exercise that contributed to the decreased gross sales quantity.
Whereas adjusted EBITDA for Catalyst Applied sciences was higher than anticipated, principally resulting from decrease uncooked materials and power prices and favorable combine. First quarter adjusted EBITDA was $43 million, in comparison with $59 million within the first quarter of 2022. The change in adjusted EBITDA and the related margin in comparison with the yr in the past quarter was as a result of decrease gross sales quantity together with the antagonistic influence of the storm and the prolonged upkeep turnaround exercise, in addition to the upper unplanned restore and upkeep prices, partially offset by greater pricing in regeneration companies and in Catalyst Applied sciences.
Shifting to the subsequent slide, I am going to spotlight the parts of the change in adjusted EBITDA in comparison with the primary quarter of 2022. As beforehand talked about, the change in adjusted EBITDA was primarily pushed by decrease gross sales quantity. In comparison with the primary quarter of 2022, the combination influence of decrease gross sales quantity for virgin sulfuric acid, decrease gross sales of polyethylene catalysts, and order timing related to hydrocracking and specialty catalyst was $19 million.
Variable prices elevated on greater pure fuel, primarily within the West Coast, in addition to the influence from greater freight charges. Nevertheless, our continued robust pricing in regeneration companies and in Catalyst Applied sciences greater than lined the rising variable prices throughout the quarter, leading to one other quarter of constructive price-to-cost ratio.
Turning to Slide 11. Eco Companies gross sales for the primary quarter of 2023 have been $138 million in comparison with $154 million within the first quarter of 2022. Of this modification, roughly $5 million is related to the pass-through of decrease sulfur prices. The steadiness of the change was resulting from a decrease quantity related to Winter Storm Elliott and the prolonged upkeep turnaround exercise which constrained manufacturing and restricted our means to fulfill buyer demand for virgin sulfuric acid. The influence of decrease gross sales quantity was partially offset by greater pricing in regeneration companies pushed by contractual worth will increase and index price pass-through pricing.
First quarter adjusted EBITDA for Ecoservices was $36.8 million, in comparison with $49.3 million within the first quarter of 2022. The decrease gross sales quantity, greater unplanned restore and upkeep prices and deliberate turnaround prices have been the first elements within the change in adjusted EBITDA and resulted in adjusted EBITDA margin of 26.7%.
Excluding the influence of the Storm and the prolonged upkeep turnaround exercise with decreased quantity and elevated restore and upkeep prices, we’ll proceed to anticipate an adjusted EBITDA margin for Ecoservices to be within the low-to-mid-30% vary.
Turning to the outcomes for Catalyst Applied sciences, on the subsequent slide, for the primary quarter, complete gross sales for Catalyst Applied sciences together with the Zeolyst Joint Enterprise have been $45 million in comparison with $55 million within the first quarter of 2022. For Silica Catalyst, decrease gross sales of polyethylene catalyst, pushed in-part by the financial sanctions related to the developments in Russia and Ukraine, drove the change in comparison with the prior yr first quarter.
The change in gross sales for the Zeolyst Joint Enterprise, mirror decrease gross sales of hydrocracking and specialty catalyst gross sales, primarily a perform of buyer order timing. As we have now beforehand famous, we anticipate hydrocracking gross sales to be up on a high-teens share foundation in 2023 with the vast majority of the gross sales anticipated to happen over the steadiness of the yr. Adjusted EBITDA for Catalyst Applied sciences was $13 million within the first quarter, in comparison with $17 million within the first quarter of 2022. The change was primarily pushed by decrease gross sales quantity, partially offset by continued greater pricing and favorable gross sales combine.
Turning to Slide 13, I am going to present an replace on money leverage and liquidity. As beforehand famous, we had robust money era in 2022 with free money move of $146 million. And whereas we anticipate 2023 to be one other yr of strong money era, throughout the first quarter of 2023, we have been a internet consumer of money largely as a result of influence of decrease gross sales quantity, adjustments in working capital in addition to timing of capital expenditures.
Our money conversion stays robust. And we ended the quarter with a internet debt leverage ratio of three.2 instances. The rise in our internet debt leverage ratio was primarily pushed by the change in first quarter adjusted EBITDA, relative to the yr in the past quarter in addition to a $30 million use of money throughout the first quarter related to share repurchases together with the secondary providing by a former personal fairness proprietor. At quarter finish, we had complete liquidity of $119 million, comprised of money and money equivalents of $62 million and availability beneath our ABL facility of $57 million.
Turning to slip 14, given our expectation for robust money era over the steadiness of the yr we’ll keep a balanced strategy to capital allocation. We’ll prioritize funding in operational enhancements and natural progress. And whereas we proceed to pursue accretive bolt-on acquisitions within the present atmosphere we may even keep a deal with leverage discount with anticipated adjusted EBITDA progress and robust money era, excluding any potential M&A transactions that may enable for a transparent path for leverage discount our internet leverage goal stays within the mid-to-low-times vary.
Our steadiness sheet stays robust with just one tranche of debt being our Time period Mortgage B facility, maturing in 2028. Now we have capped 75% of our curiosity publicity out over the subsequent a number of years and we’ll proceed to guage alternatives to proceed to increase our curiosity safety program.
Turning to the full-year 2023 steerage, on Slide 15, we presently anticipate general demand developments to stay constructive in 2023, however proceed to regulate macroeconomic exercise that would influence our companies. Through the first quarter we skilled important challenges from the Winter Storm and the prolonged upkeep turnaround exercise, leading to decrease virgin sulfuric acid gross sales in Ecoservices. Nevertheless, we’re sustaining our present steerage vary for adjusted EBITDA and adjusted free money move.
For gross sales, we’re adjusting our steerage vary of $760 million to $790 million, to a spread of $730 million to $760 million to mirror decrease projected pass-through of power prices and decrease anticipated virgin sulfuric acid quantity ensuing from the Storm and the prolonged upkeep turnaround exercise that occurred within the first quarter.
I’ll now present some extra particular steerage for the second quarter. We anticipate robust quarterly sequential progress in each companies, leading to mid-single-digit adjusted EBITDA progress for Ecovyst in comparison with the second quarter of 2022. In Ecoservices, we anticipate to see a robust quantity restoration, decrease restore and upkeep price and continued favorable pricing masking our variable prices within the second quarter.
That is anticipated to lead to adjusted EBITDA progress within the mid-single digits, in comparison with the second quarter of 2022. We stay assured in our full-year steerage and anticipate decrease turnarounds and elevated demand in our Remedy Companies and Catalyst Activation Enterprise traces within the later a part of the yr.
For Catalyst Applied sciences, we anticipate important enchancment in gross sales for hydrocracking catalysts in addition to elevated gross sales of catalyst used within the renewable fuels in our Zeolyst three way partnership throughout the second quarter. Our full yr expectation for hydrocracking catalysts stays robust with the share progress within the excessive teenagers, pushed by robust orders for the steadiness of the yr.
As Kurt famous, we have now seen some softness within the polyethylene market and together with decrease anticipated area of interest customized catalyst gross sales resulting from order timing, we anticipate Silica Catalyst gross sales will likely be down within the second quarter in comparison with the prior yr second quarter. Because of this, we anticipate adjusted EBITDA for the Catalyst Applied sciences enterprise to be down within the mid-single digits in comparison with the second quarter of 2022. We anticipate our second quarter outcomes to reveal robust quarterly sequential progress as we proceed to anticipate strong general progress for the total yr in 2023.
I’ll now hand the decision again to Kurt for some closing remarks.
Kurt Bitting
Thanks, Mike. Total, we anticipate the demand atmosphere to stay constructive in 2023. In our favor, we have now diversified end-used publicity with robust illustration in markets that we imagine have favorable progress developments related to the rising demand for low-carbon and extra sustainable applied sciences.
We imagine we’re uniquely positioned with an Eco Companies enterprise that ought to proceed to learn from the demand for cleaner burning greater octane fuels and the increasing want for virgin sulfuric acid to help a variety of commercial processes, together with demand progress related to elevated mining exercise for metals and minerals which are important for electrical car manufacturing, growth of charging networks, and the tie-in of wind and photo voltaic producing capability.
On the similar time, we’re benefiting from mega developments that embody rising manufacturing of renewable fuels, growing regulation related to extra stringent emission necessities, and the continued demand progress for specialty engineered supplies.
Mike and I outlined the elements that performed into our first quarter 2023 outcomes. And as we transfer by way of the second quarter, the storm influence and prices related to the prolonged turnaround exercise are largely behind us.
As well as, and based mostly upon order exercise within the first quarter, we proceed to anticipate stronger leads to our Catalyst Applied sciences enterprise over the rest of the yr. We additionally anticipate to take care of the constructive pricing momentum for Eco Companies and Catalyst Applied sciences that we noticed within the first quarter. Due to this fact, we’re sustaining our steerage vary for 2023 adjusted EBITDA and for adjusted free money move era.
We anticipate that robust money era over the steadiness of the yr will proceed to help a balanced capital allocation technique. We’ll proceed to guage alternatives to reinforce shareholder worth with priorities given to progress initiatives and leverage discount.
With that, we’ll ask the operator to open the road for questions.
Query-and-Reply Session
Operator
Thanks. At the moment, we’ll open the ground for questions. [Operator Instructions] Our first query comes from Aleksey — I am sorry Aleksey Yefremov with KeyBanc Capital Markets.
Unidentified Analyst
Hey guys. Good morning. That is Ryan on for Aleksey. I suppose first query for you simply sort of going based mostly off what you guys guided for 2Q after which taking a look at what it implies to the again half it appears to be like like a reasonably sizable step up. Are you able to perhaps simply speak about a minimum of to get to the midpoint are you able to perhaps simply speak about confidence there and like sort of what leads you to imagine in that step-up? Thanks.
Kurt Bitting
Positive Ryan. Thanks for the query. Nicely, we actually see robust demand throughout all of our market segments transferring into the latter a part of the yr. So, regeneration enterprise is clearly going to learn what’s projected to be rising home gasoline demand rising exports of gasoline and that equating to robust refinery utilization.
Our virgin sulfuric acid demand could be very robust for issues like low carbon applied sciences and sustainable know-how. So, we view that enterprise as actually as a lot as we will produce. We’ll be capable to promote Chem32 and therapy companies’ demand stays sturdy.
After which transferring over to the Catalyst Applied sciences section. Clearly, as we have mentioned earlier than, our hydrocracking catalysts we anticipate to be up on a year-over-year foundation on gross sales within the excessive teenagers. We anticipate progress consistent with marketplace for our polyethylene catalyst after which robust demand coming from each renewables and emission controls. So, we have now good confidence going into the later quarters of this yr which is why we’re sustaining our EBITDA steerage.
Unidentified Analyst
Nice. Thanks for the colour there. After which I suppose identical to are you able to speak about in Catalyst Applied sciences the way you guys are monitoring on worth price? I imagine final quarter you guys talked a bit bit about how one can be on the higher finish of the information if not doubtlessly a bit bit above it. In the event you proceed you sort of see some aid on power prices and stuff like that. So, I do not know if perhaps you guys have something to supply there?
Kurt Bitting
Positive. Sure. So, we did see simply so in our feedback, we noticed some good pricing momentum in significantly in Silica Catalyst, the place we instituted some pricing actions within the latter a part of 2022 in addition to simply the formula-based pricing, that a few of that’s connected to a few of that enterprise making changes in 2023. So, that offered stronger pricing, in addition to we’re experiencing a decrease price for uncooked supplies and power and so forth so, that is been in a position — that is given us the flexibility to increase our margins.
After which actually, our merchandise as we glance over to the ZI three way partnership, we – once more, we provide a really distinctive and coveted hydrocracking catalyst that enables refiners, means to stay versatile and generate the sort of margins on the merchandise that they wish to. So — and we have now good pricing momentum there, which is why we imagine we will have progress within the excessive teenagers in that section as properly.
Q – Unidentified Analyst
Nice. Thanks.
Operator
Our subsequent query comes from David Begleiter with Deutsche Financial institution.
David Huang
Hello. That is David Huang. Possibly first, simply going again to the steerage. Are you able to speak about at this level what’s driving the low finish and excessive finish of your steerage vary? And I suppose, simply given the demand situation you talked about in Catalyst, do you suppose we’re monitoring in the direction of the decrease finish of the steerage fairly than the upper finish?
Kurt Bitting
Sure. Thanks for the questions, David. So once we take a look at the steerage vary and as we gave that on final quarter’s name we clearly, have been taking a look at we have been cautious taking a look at — we have an extended a part of the yr left right here, as we sit right here proper in Could in order that vary is actually there as we watch the final general macro market circumstances.
Nevertheless, I’ll say, we stay assured within the Catalyst Applied sciences section for this yr. We see robust order patterns, particularly for hydrocracking, for the second half of the yr and once more anticipate that enterprise to be up in excessive teenagers share year-over-year, on a gross sales foundation. And we proceed to take care of good gross sales at sort of the market price for our polyethylene catalyst as properly.
David Huang
Okay. And second query, are you able to speak about your expectation for sulfuric acid pricing after which sulfur price for the remainder of the yr?
Kurt Bitting
Positive. Nicely for sulfuric acid, the demand stays actually robust. And once more, it is pushed by the manufacturing of — and the propagation of low-carbon know-how, sustainable applied sciences which have been clearly, requiring minerals and supplies for all of the — for charging and electrical automobiles and so forth. So, there is a super pull for sulfuric acid after which for simply normal industrial makes use of as properly.
From a sulfur foundation. Sulfur, is essentially pushed by — pricing is essentially pushed by the agricultural market. They bought about two-thirds of the world’s sulfur, so we’re anticipating presently this yr sulfur costs in 2023, to be beneath what they have been in 2022. And that is being pushed by one, the excessive refinery utilization. In order refineries run more durable, they’re producing extra sulfur, which consequently advantages our regeneration enterprise clearly, advantages from a better utilization price.
However then on the opposite aspect of the equation, on the demand aspect agricultural demand for sulfur this yr is a bit bit decrease. We do not take part in that market. It is pushed by agricultural economics, however we see the general supply-demand steadiness for sulfur being barely tilting in the direction of decrease pricing in 2023, which clearly impacts our virgin acid pricing as sulfur’s pass-through on a dollar-for-dollar foundation.
David Huang
Okay. Thanks
Operator
Thanks. Our subsequent query comes from Laurence Alexander with Jefferies.
Q – Unidentified Analyst
Hello, guys. Thanks for taking my query. That is Kevin [ph] on for Laurence. So that you guys talked about, that you just anticipate demand to be fairly secure broadly in 2023 and also you guys sound fairly assured about that. I suppose I am simply curious, within the occasion of a recession as an example, in the direction of the perhaps again half of the yr into 2024. I suppose how do you anticipate your small business would fare by way of that? And perhaps what kind of levers, might you pull to enhance working efficiency within the occasion that volumes declined greater than anticipated?
Kurt Bitting
Hello, Kevin. Thanks for the questions. In order you acknowledged, we’re assured in our market section in order you take a look at — Mike and I, have been with this enterprise going again to 2006 and it is seen quite a few down cycles, proper? After we look again at 2008 2009 after which what occurred in 2020 and what I’d say is, our refining section, we challenge to be — proceed to be robust as a result of it is based mostly on demand for merchandise in these areas. While you take a look at the regeneration, clearly, alkylate demand continues to be robust to provide gasoline, demand which is rising and to provide premium gasoline, which continues to develop to assist meet CAFE requirements.
Then you definitely take a look at our hydrocracking enterprise, which is expounded to the refining, which — that is based mostly on a change-out cycle. And people orders are — we’re seeing that order e-book be robust for the again finish of the yr and we anticipate once more these gross sales to be up on a mid-teens foundation year-over-year.
Shifting into the opposite segments we nonetheless really feel assured our silica catalyst, our polyethylene catalyst usually is much less cyclical than different issues. And that is associated to it goes into movie and packaging and issues like blow molding for meals packaging in addition to issues like client items, and such that are usually family staples and fewer cyclical.
So we be ok with the tip market section. They’re clearly we have gone by way of downturns earlier than and we have now levers to drag to cut back our CapEx spending and try that and unfold it out a bit additional or different short-term price reductions. However usually, we be ok with our market segments and really feel assured going into the again half of the yr.
Q –
Okay. Thanks very a lot.
Operator
Thanks. Our subsequent query comes from Hamed Khorsand with BWS Monetary.
Hamed Khorsand
Sure. Hello. So first off right here in sulfuric acid within the shows you are speaking now about building coming again. Is that incremental demand to what you beforehand talked about so far as the customers of sulfuric acid?
Kurt Bitting
Sure. Hello, Hamed. Thanks for the query. So for virgin sulfuric acid, I feel, what we’re seeing in demand from there may be largely mining and building, proper? So that you take a look at issues like wiring and copper and different minerals and supplies getting used for not solely simply in business building, however then for infrastructure building proper? The help charging, inexperienced power merchandise and so forth. So we see that market persevering with to be robust as a result of fairly frankly the worldwide — there’s world initiatives to push in the direction of low-carbon applied sciences and inexperienced power and it is simply going to require numerous these supplies and minerals. In order we discuss with building it is considerably into that house.
Hamed Khorsand
And are you fully achieved with the turnarounds that you have been speaking about?
Kurt Bitting
Sure. So we have now the prolonged turnaround that we had within the first quarter is accomplished and that unit is operating at capability now. We do produce other turnarounds that happen within the latter a part of the yr and that is fairly regular for us. So that they’re deliberate.
Usually once we plan turnarounds we have now a scope of labor that we all know that will likely be executed and we will usually time when they are going to be up or down and we plan round these with constructing stock and such. Now we have a reasonably sturdy preventive and alternative cycle with our vegetation and it is clearly essential to us that we conduct our upkeep at our vegetation as completely as potential as a result of we view the market as very robust. We’ll be capable to promote every little thing we produce. So we wish to ensure that these vegetation are operating accurately.
Hamed Khorsand
And my final query is what is the timeline for upselling the refineries and better high quality catalysts given that they are nonetheless operating at 90% plus?
Kurt Bitting
Sure. Thanks for the query. I feel you are referring to hydrocracking catalyst so our hydrocracking catalyst is — these change-outs usually occur on a on a 3 to four-year cycle foundation. So quite a lot of the shoppers in that portfolio are incumbents proper? So you have obtained some prospects that may improve their catalysts as we develop new catalysts which have greater yields and permit them greater flexibility.
After which on the similar token our new merchandise that provide that greater yield and better flexibility we’re attempting to win new prospects with these catalysts which we have seen can be very profitable with our know-how which actually is sort of surrounded by the purity of our zeolites that we produce.
Kurt Bitting
Okay. Thanks.
Operator
At the moment we have now no additional questions in queue. This does conclude the Ecovyst first quarter 2023 earnings name and webcast. Thanks on your participation and you could disconnect
