Trinseo sees low carbon business as growth driver

Trinseo's chief executive said a focus on low-carbon chemicals and plastics businesses will be key to the company's profitable growth
.

"Over the past few years, we've had a debate about whether sustainability can grow the company's business,
" Trinseo CEO Frank Bozich said at a conference of the Chemical Marketing and Economics Group (CME) in New York
.

Comparing the adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of different types of chemical businesses with Scope 1 and 2 emissions, the less carbon-intensive businesses tend to have higher profit margins, he noted
.

He noted that the megatrend of decarbonisation will further benefit low carbon businesses such as engineered materials and plastics
.

"Companies with high profitability and low carbon intensity will have a significant advantage in the future, as they will be able to allocate a larger percentage of their free cash flow to growing the company and solving customers' problems
," Bozich said
.

"Their growth potential will be limited because they will be locked into this cycle of constant decarbonization," he added
.

In its transition, Trinseo aims to continue its migration to a low-carbon-intensity and high-margin business
.

“The deals we’ve done have been driving Trinseo in this direction
.
If we were to run the engineered materials company independently, it would be one of the best in our industry in terms of profitability and carbon intensity
.
” Bozich say
.

"We think it's very important for us and the company's future, and frankly, reducing carbon intensity will inevitably be an important factor for the chemical industry,
" he added
.

Trinseo's Engineered Materials segment includes specialty PMMA, PC and ABS used in consumer electronics, medical, footwear, automotive and construction and building materials
.

The segment's 2021 sales of $755 million include the acquisition of Arkema's PMMA business, which ended in May 2021, and the Aristech surface business, which ended in September 2021
.

In the first quarter of 2022, Trinseo's Engineered Materials segment had sales of $295 million, adjusted EBITDA of $35 million, and an EBITDA margin of 11.
9%
.
Adjusted EBITDA in the first quarter lost $6 million due to fluctuations in raw material costs and supply chain constraints
.
Adding this figure would bring an EBITDA margin of 13.
9%
.

The CEO emphasized that while engineered materials is the most beneficial business from a carbon intensity and profit margin perspective, Trinseo's goal is not to be a pure engineered materials company
.

"Obviously, we're acquiring other companies and technologies to complement the four markets we're focusing on,
" Bozich said
.

Trinseo's four main end markets are transportation, building materials, consumer products and medical devices
.

The CEO believes that despite strong organic growth opportunities, a larger portion of the company's growth over the next five years will come from mergers and acquisitions
.

The company has put its styrene business up for sale, with the transaction expected to close by mid-year
.