Improved demand has boosted earnings and margins for US plastics and rubber company Trinseo (Berwyn, Pennsylvania; www.trinseo.com) in the third quarter of 2020, although weaker feedstock costs have dragged down sales revenue. A strong recovery in demand in automotive, tyre, construction and appliance applications meant that total sales volumes were on par with the previous year, although lower raw material costs pulled down net sales by 18% to USD 752m (EUR 627m). Net income of USD 106m was USD 84m above the same period last year, although the figure included a tax benefit of USD 50m, and adjusted EBITDA was USD 14m higher at USD 102m. Trinseo said the rise in profitability was a result of higher margins in most segments and cost-reduction initiatives.

“During the third quarter we observed significant demand recovery in many of our end markets,” said president and CEO Frank Bozich. “In addition, tighter market conditions led to higher year-over-year margins for styrene, PS, PC and ABS.” He said he is “cautiously optimistic” that the demand momentum will continue through the end of this year.

The performance plastics business saw net sales decline 11% to USD 290m because of weaker raw-material prices. However, cost reduction initiatives and expanded margins for polycarbonate and ABS on tighter market conditions as well as an improved customer mix saw adjusted EBITDA rise USD 15m to USD 51m. Sales volumes for engineered materials applications fell 3%.

For the polystyrene business, adjusted EBITDA was USD 21m, up USD 4m year on year and its highest since 2015. Trinseo attributed the rise to higher volumes and improved margins in Europe and Asia from both high demand and industry utilisation rates. Net sales of PS, however, were 15% lower than last year at USD 167m – again because of lower raw-material costs – although they were partially offset by higher sales into essential end uses such as packaging and appliances. Lower styrene pricing and sales volumes also forced down net feedstock sales by 51% to USD 32m, but higher margins and production pulled adjusted EBITDA up to USD 11m compared with breakeven last year.

The company added that it is no longer looking at options for its styrene plant in Böhlen / Germany, having negotiated a new raw-material agreement that it expects will make the plant economically feasible and provide operational flexibility. Trinseo launched a consultation process in March with the plant facing an uncertain future (see Plasteurope.com of 17.04.2020).

In North America, the Americas styrenics segment posted adjusted EBITDA of USD 18m for Q3, USD 7m down year on year. This was mainly because of lower styrene margins and the impact on sales volumes from coronavirus.

Starting in the fourth quarter of 2020, Trinseo will increase the number of reporting segments from six to seven, by splitting the performance plastics segment into two: engineered materials and base plastics. The other five segments – latex binders, synthetic rubber, feedstocks, polystyrene and Americas styrenics – remain unchanged.

The new engineered materials segment includes compounds and blends sold into applications such as consumer electronics and medical, as well as thermoplastic elastomers sold into various sectors that include footwear and automotive. The base plastics segment includes the remaining product lines, including ABS and PC, as well as compounds and blends for automotive and other applications.

Trinseo explained that the new structure aligns with its strategy to invest efforts and resources into product-serving applications that are less cyclical and offer significantly higher growth and margin potential. In 2019 and so far in 2020, it said engineered materials have delivered margins that were more than twice the average of products serving all applications within the performance plastics segment.