Calumet Specialty Products accelerates CEO transition
Calumet Specialty Products Partners, L.P. announced that it has accelerated its chief executive officer transition and that Steve Mawer, current board member, will assume the role of CEO immediately. Tim Go, the partnership’s former CEO who has recently been named executive vice president and chief operating officer of HollyFrontier Corporation effective July 2020, will assist with the successful transition of the new CEO.
“We continue to closely monitor the impacts of the COVID-19 pandemic, and our foremost concern is the safety of our employees and the communities we serve,” said Mawer. “Our specialty and fuels production facilities have continued to operate with limited disruption across our supply chain. The federal guidelines and state orders put in place to protect the public have deemed our businesses as essential. Our products and formulations are vital to a diverse set of markets, from healthcare and personal care products, to food processing and water treatment. While the demand landscape remains uncertain, to date our businesses have not experienced a significant step down in customer demand.”
Mawer continued, “In early March, we implemented our business continuity plans, and our essential staff at the plants have remained on-site and are continuing production. The rest of our employees are supporting our production operations remotely. We continue to operate in accordance with the guidelines of federal, state and local government agencies, as well as public health organizations, to maintain a safe and healthy work environment for our employees. I want to thank all of our employees for their commitment and exemplary effort through this uncertain time as we work to meet the needs of our customers and our communities.
“While this is a challenging economic environment, the strategic actions that Calumet has taken over the past several years to reposition our portfolio with a core focus on specialty products and to improve business operations through self-help, have made our business more resilient, less volatile, and better positioned to succeed,” Mawer said.
Calumet Specialty Products’ portfolio is primarily focused on high-value specialty lubricants and chemicals business, which generate results that exhibit lower volatility with greater predictability to earnings.
“Over the last few years, we have substantially reduced our exposure to commodity price volatility by selling an oilfield services business and three fuels refineries, while simultaneously upgrading performance of our core specialties assets. Our portfolio is now more concentrated in specialty products with greater long-term demand defensibility, particularly in niche applications for higher-value end markets. Additionally, we have reconfigured our remaining fuels assets such that gasoline output is only about 20% of systemwide crude runs, while the higher margin distillates (ultra-low sulfur diesel, jet fuel and solvents) are 40% of crude runs during normal market conditions,” said Bruce Fleming, EVP Strategy.
“Given today’s unusual market conditions, we have the capability to continue to step gasoline down further while retaining diesel output. For example, our Great Falls refinery can sequentially reduce gasoline output to zero without cutting crude run or diesel production at all. Moving forward we will use our above-average optimization flexibility during the current demand environment and price dynamics.”
Balance Sheet and Liquidity Update
Calumet Specialty says it has approximately USD320 million of available liquidity as of 31 March, including approximately USD100 million of cash on hand and more than USD220 million of undrawn capacity on the partnership’s revolving credit facility.
The company revised its capital budget guidance to USD50-60 million in 2020, down from the original guidance of USD80-90 million. Net working capital is expected to contribute additional cash in the near-term, due to the favorable direction of raw materials prices in relation to accounts receivable and inventories. Further, Calumet said it has identified USD20-30 million of additional plant operating cost reductions, which include:
- Closure of the Farmingdale, NJ manufacturing facility, which Calumet acquired from Bel-Ray Company, LLC in 2013. The facility produces synthetic, industrial and commercial lubricating oils
- 60-day furlough of the manufacturing employees at the Louisiana, Missouri facility
“Calumet exited the first quarter with sufficient liquidity to appropriately fund its business operations in this fast-changing business environment,” said H. Keith Jennings, chief financial officer of Calumet. “Over the past four years, we have taken significant steps to strengthen our balance sheet and solidify our sources of liquidity, improved inventory management, reduced capital expenditures, and entered into our third-party supply and offtake agreement which increased our working capital flexibility. Our Self-Help initiatives and culture have eliminated costs across our system, further improving our financial resiliency, and in 2020 we have already achieved the full USD20 million goal for adjusted EBITDA improvement through General and Administrative (G&A) cost reductions.”
Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) is a master limited partnership and a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents and waxes used in consumer, industrial and automotive products; produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana, and operates 10 manufacturing facilities located in northwest Louisiana, northern Montana, western Pennsylvania, Texas, New Jersey and eastern Missouri.