David Stasse - VP, Treasury and IR Christopher Pappas - President and CEO Barry Niziolek - Executive Vice President and CFO.

Frank Mitsch - Wells Fargo Securities David Begleiter - Deutsche Bank Hassan Ahmed - Alembic Global Bob Koort - Goldman Sachs Nick Cecero - Jefferies Matthew Blair - Tudor, Pickering, Holt Eric Petrie - Citi.

Good morning, ladies and gentlemen, and welcome to the Trinseo Fourth Quarter and Full Year 2017 Financial Results Conference Call. We welcome the Trinseo management team, Chris Pappas, President and CEO; Barry Niziolek, Executive Vice President and CFO; and David Stasse, Vice President of Treasury and Investor Relations.

Today’s conference call will include brief remarks by the management team, followed by a question-and-answer session. The company distributed more detailed remarks on its financial results, along with a press release and presentation slides at close of market yesterday.

These documents are posted on the Company's Investor Relations website and by means of a Form 8-K filing with the Securities and Exchange Commission. [Operator Instructions] I will now hand the call over to David Stasse..

Thank you, Marianna, and good morning, everyone. At this time, all participants are in a listen-only mode. After your brief remarks, instructions will follow to participate in the question-and-answer session. Our disclosure rules and cautionary note on forward-looking statements are noted on Slide 2.

During this presentation, we may make certain forward-looking statements including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described or implied in these statements.

Factors that could cause actual results to differ include, but are not limited to, factors set forth in our Annual Report on Form 10-K under the Item 1A, Risk Factors. Today's presentation includes certain non-GAAP measurements. Reconciliation of these measurements is provided in our earnings release and in the appendix of our investor presentation.

A replay of the conference call and transcript will be archived on the company's Investor Relations website shortly following the conference call. A replay will be available until February 20, 2019. Now I'd like to hand the call over to Chris Pappas..

Thanks, and welcome to Trinseo's fourth quarter and full year 2017 financial results conference call. I'd like to highlight a few key points of our financial results and strategic initiatives. First, we ended 2017 with a very strong fourth quarter as business fundamentals across our portfolio continue to be positive.

Fourth quarter net income was $118 million which included a $22 million pretax gain related to a change made to one of our pension plans. Adjusted EBITDA was $169 million inclusive of $15 million of favorable timing impacts.

These results exceeded the guidance we gave on our third quarter earnings call of $68 million to $77 million of net income, and $130 million to $140 million of adjusted EBITDA. For the full-year we achieved record net income earnings per share and adjusted EBITDA.

Second, in addition to record operating results, we made significant progress towards achieving our goal of increasing EBITDA by $100 million in our Latex Binders, Synthetic Rubber and Performance Plastics segments from 2016 to 2019.

Although the details are explained in the management commentary we published yesterday, I want to review some of those briefly now as well.

In Latex Binders we've made tremendous progress over the last several years in transforming the business from a predominantly North American and European supplier of SB Latex as a paper industry to a globally diverse leading manufacturer of Latex products to a broad spectrum of industries.

We've added capacity to grow our footprint in China and we've invested in developing chemistries beyond traditional SB Latex to serve faster growing markets such as adhesives, construction and paper & board.

All of this has enabled us to offset declines in the North American and European graphical paper markets, and grow adjusted EBITDA from $79 million in 2015 to what we believe will be $120 million 2018.

We've also made a lot of progress in Synthetic Rubber where we significantly improved our mix of products to include more SSBR for the performance tire market. In 2017, about half of the Synthetic Rubber volume we sold was SSBR, and half of that was our most advanced grades that we call enhanced SSBR.

These grades provide performance tires with superior grip, rolling resistance and noise levels. We'll continue this portfolio ship in 2018 and beyond as we qualify the additional capacity created by the SSBR expansion and pilot plant that we completed late last year.

In Performance Plastics we expanded our EPS capacity in China, and are working on selling out this capacity. We also opened a new Plastics Research Center, which modernized and consolidated two existing technical support centers and a research lab under one roof in the Netherlands.

Finally we completed our first acquisition, API Plastics adding soft polymers that complement Trinseo's strength in rigid polymers expanding our offerings to automotive and consumer essential markets. Third, I would like to address the styrene duties that were imposed by China last week.

We continue to monitor this situation closely and we believe the market has been expecting some form of duties and in anticipation of this, there is already been some rebalancing of trade flows.

A further rebalancing could occur as China will continue to import material especially since the Chinese nonintegrated styrene plants perform at the high end of the cost curve. We will see how the market and legal process develops but we do not expect any material impact to Trinseo in 2018.

Fourth, starting in the first quarter of 2018, we're introducing a change to our segment reporting. We will now be reporting financial results for the following six segments; Latex Binders, Synthetic Rubber, Performance Plastics, Polystyrene, Feedstocks and Americas Styrenics.

Our new segmentation groups together similar businesses in order to improve efficiency and portfolio management. It also reduces internal complexity and engages both of our business presidents with our growth agenda.

As a result, we have made the following management changes; Tim Stedman has been named Senior Vice President and Business Presidents for Feedstocks, Plastics and Global Integrated Business Services. He will now have responsibility for all plastics businesses, as well as styrene monomer, Americas Styrenics, and integrated business services.

As part of this, we've added polycarbonate, ABS and SAN to the Performance Plastics segment. This concentrates our more specialized plastics into one integrated business segment under one business leader.

Hayati Yarkadas, has been named Senior Vice President and Business President for Latex Binders, Synthetic Rubber, Global Procurement in Asia-Pacific. He will continue to have responsibility for Latex Binders and Synthetic Rubber and will add responsibility for Procurement in the Asia-Pacific region, an important area for Trinseo's growth.

Now I’d like to discuss first quarter and 2018 guidance. For the first quarter, we expect net income of between $104 million and $113 million, and adjusted EBITDA of between $175 million and $185 million.

This outlook assumes minimal net timing impacts, and includes a favorable impact from known planned and unplanned styrene outages, impacting our Feedstocks and AmSty segments, as well as solid performance across all of our other segments.

Moving to full year 2018, we expect net income of between $369 million and $386 million, adjusted EBITDA of between $640 million and $660 million, and diluted earnings per share of $8.26 to $8.63 per share.

This outlook assumes minimal impact from net timing, no impact from unplanned styrene outages beyond what we currently have visibility into for the first quarter, and it includes about 35% of the $100 million of EBITDA growth that we have targeted in Latex Binders, Synthetic Rubber and Performance Plastics segments.

Finally, as part of our balanced capital allocation approach, we anticipate we will spend about $100 million in 2018 on share repurchases. In closing, I want to reiterate how proud I am of Trinseo's team for delivering record results in 2017.

We look forward to continuing this momentum into 2018, and delivering strong profitability and cash generation. And now Marianna, you may open the line for questions..

[Operator Instructions] Your first question comes from the line of Frank Mitsch with Wells Fargo Securities. Your line is open..

Chris, on the movement of ABS polycarbonate and SAN into the Performance Plastics area, I guess part of that is some of the compounds that you sell-out of it - currently sell out of Performance Plastics are coming from those materials.

Can you give us a sense as to what the percentages are of products that would be sold as is versus compounded after you make this move in Performance Plastics?.

Sure, Frank. First of all on the move as we said on the comments, we really believe this concentrates for the external world a better view of all of our high-value products into really three areas. One, is the newly defined Performance Plastics, and of course Latex Binders and Synthetic Rubber.

But importantly we also now have both of our business Presidents, two very talented executives engaged in part of the growth agenda on the company. And also in Performance Plastics as its reconfigured, we have integrated if you will the polycarbonate and ABS that goes into compounding into that same reporting segment.

The change is subtle but not insignificant in terms of volumes and numbers. We always sold certain amounts of polycarbonate into the open market and we will continue to do that. We’ll just do that under the Performance Plastics segment.

So, our goal there as you know is to sell less polycarbonate as an un-compounded product and more in what we call compounds and blends. Roughly a third of our polycarbonate that we make is consumed internally, that’s a historic number and as I said our goal is to increase that.

The only other real change is that the automotive ABS was - that was not in Performance Plastics is now moving into Performance Plastics and that includes the new China capacity Frank.

So, that’s kind of the structural change rather than give specific numbers I think the thing to concentrate on is, we now have about 65% of our EBITDA on a 2017 basis in what we call the highest value segments and markets of our business and those are represented by the combination of the new Performance Plastics, Synthetic Rubber and Latex Binders..

And I guess on the other side of the equation it certainly allows for greater transparency on a styrene monomer and your Feedstocks business and polystyrene in your Basic Plastics business.

Does this open up the possibilities or how are you thinking about the strategic outlook with those businesses as part of the Trinseo portfolio and might we see some activity on that side on the lower value side or the more commodity side?.

Well this structural change in segment reporting really is not driven by anything other then what I just said, it's not driven by either an easier or harder strategic step for the company. Our strategic outlook for the company remains the same. We have a terrific set of assets that have proven to operate at a high level.

We think they’re going to continue to operate at a high level. We think the supply demand dynamics of styrene, polystyrene, polycarbonate going forward are all very positive. We're committed in our delivering the $100 million of EBITDA growth so that all stays the same.

We have commented and continue to believe that if there were consolidated steps we could take in the styrenics world if you will, then that would be an attractive thing to do strategically for the company. But that hasn't changed as a result of this segmentation, it’s still the primary focus of any strategic step we might take..

Your next question comes from David Begleiter with Deutsche Bank. Your line is open..

Chris just on the Chinese antidumping duties, what did they do to your cost position in terms of importing styrene into China?.

We have this chart David on the deck that showed the - at least last year the flow of styrene around the world. It's chart - Page 14 in the slide deck.

There will be some rebalancing, I think it's important to note that number one, this has been kind of known in the market and the market is been adjusting for some period of time in terms of trade flows. Number two, maybe most important there's nothing about this announcement that adds any capacity to industry.

So, the Chinese are still importing 3 million tons of styrene where they imported as a result of this will probably shift around a little bit. Our expectation is that their imports will shrink from the U.S.

They'll probably grow from the Middle East and as a result of that certain amount of styrene from the Middle East that goes to Europe may not go to Europe. And a certain amount of styrene from the U.S. will probably go to Europe, that's a very rough cut of what we see at a high level that could happen.

We'll have to see how it plays out, but it's really a rebalancing of trade flows in our view. The fundamentals of supply demand have not changed, the fundamentals of relatively high cost integrated Chinese producers with limited ability to run at high rates has not changed.

And as we said on the call, we don't expect any material impact from this in 2018 in our business..

And Chris just on Synthetic Rubber, how is the new expansion ramping up.

I know there qualifications evolved and how do you think about the earnings progression from 2018 to 2019 in this segments?.

The plant is running very well. I will tell you we're also commissioning the pilot plant which is important in the whole equation for rubber. The plant is producing excellent product. We are qualifying as rapidly as possible does take time.

If you look at the guidance we gave for rubber in 2018, and if you compare that to the results in 2017 especially when you’re correct David 2017 for some of the anomalies in rubber, you’ll notice there's some growth in that guidance from 2017 to 2018, but it's also fair to say as we've said that the majority of the new capacity growth of rubber to EBITDA will occur in 2019 from that new capacity.

We could perhaps see a third of it or so placed in the 2018, but the majority of it’s going to go into 2019 as it takes that long to qualify..

Your next question comes from Hassan Ahmed with Alembic Global. Your line is open..

Chris, obviously we've seen some volatility in crude oil prices since the start of - call it year-end last year beginning with this year. Obviously that has had an impact on benzene as well. So historically when we've seen these sort of swings in crude/benzene pricing they’ve had some sort of an impact on the inventory side of things as well.

Obviously, the notion being that you’ll obviously see some destocking as rollers come down and re-stocking as rollers stabilize and go up.

So we’re just broadly love to hear your views on where - sort of across the various products that you produce where you see inventory levels, are you seeing any sort of impact of this raw materially pricing volatility on where inventory levels are right now be it destocking, restocking whatever the case may be?.

Well there’s a lot that goes on that drive customers. Hassan as you know, in relationship to inventory, not just the price of oil there - the timing of year-end for example which we experienced in our rubber business where certain customers were electing to put off purchases.

But on the concept of rising Feedstocks, of course styrene and butadiene and benzene are what affect us.

Now if you look at our gray bars on Page 15 for styrene that we've got February and then the forecast for March, you would expect given that profile which is driven by the plan and the certain unplanned outages right now, that styrene derivatives particularly polystyrene, customers are not buying very heavily in the month of March or in the month of February.

So that would be a very good example. We live this example many times where due to a rise in styrene, and in this case not so much driven by oil, but driven by unplanned and planned outages.

Customers will hold back certain purchases in this case polystyrene to some degree ABS and they will wait for what they think is a better opportunity to buy if and when styrene were to come down later in the year. So that dynamic is clearly happening in the polystyrene business as we speak today.

And I think that's really the one business we have Hassan that has the most effect from these feedstock movements. Otherwise unless butadiene were to rise sharply, that would affect the way the rubber producers think about buying the tire producers think about buying.

But in case of oil in general, I think about polystyrene and styrene being the main actors for us. I want to be clear that styrene rise, the styrene rises that you see right now, the styrene rise and price and the margin really is unrelated to anything do with oil or feedstocks.

In fact benzene recently has been pretty benign recently in the last several months. So the margin you see in styrene is a function. As we've said many times, our planned and unplanned outages and supply demand dynamics driving margin that's been our thesis since we started the company and it continues to be the thesis going forward..

Now obviously you have a chart in there about the whole sort of China antidumping duty side of things but there is obviously the whole China pollution sort of side of things prevalent as well.

Is that impacting you guys in any way, are there any curtailments within the sort of world you live in and if they are, how should we think about the sort of sustainability of those curbs and the magnitude of those curbs?.

You mean you’re talking about styrene I just want to be sure..

Correct..

You're still speaking styrene, okay. No, we haven't seen anything like that. Now of course America Styrenics is an export of styrene. So they would be - they have and will have to adjust further to these trade flows.

So in that sense they would be a company that will adjust from trade flows over time, but no we don't see anything at the moment that has anything to do with - you're on the antidumping that has anything to do with that.

I should make one other comment about antidumping, I believe this is my view because now we have the Chinese exerting these duties I think it's going to exacerbate and continue to make it very difficult for people to make investments in styrene outside of China.

So you can imagine if it were a complicated, uncertain future about making a styrene investment six months ago, I would argue that’s even less likely that somebody would look at that today other than what's already been kind of planned for China..

Your next question comes from Bob Koort with Goldman Sachs. Your line is open..

Chris, I liked Slide 14 there you give an interesting cost curve across the industry.

Could you tell me where we would draw the line that would show the current market price relative to the cost curve?.

Well I guess I would answer the question this way, somewhere about the middle of this chart and left the margins are reasonable today. And to the right of that, so somewhere in between 10 and 20 cumulative kt, the margins are not so good.

And maybe you could bifurcate into three zones obviously, the left the margins are pretty good that zone between 10 and 20 and maybe 22 is okay beyond that the margins are not that great. So that’s why I would answer the question Bob without trying you know exactly pin on price to cost on there.

I think that might be the root of your question hopefully I don’t know but..

And then the concept for China to say that those three regions were dumping product, what is the basis of that genesis of that conclusion from them?.

No, we're not party to that so - actually we have no real data on it, we’re not involved in the process at all.

So it would be hard for us to comment?.

And then on polycarbonate things have gotten quite a bit better certainly dramatically better from a few years ago.

Do you know what the polycarbonate cost curve would look like and similarly where prices are relative to possibly inspiring some reinvestment which I guess would sound crazy from a few years ago, but maybe you're making enough money now that that could happen?.

I can tell you as we’ve said many times we are not building polycarbonate period. We're small player in polycarbonate. Our position is really now in one region of the world it’s in Europe. We're about 13% on the Europe in polycarbonate world and we exited North America as you know and we exited Asia recently by selling our 50% in the JV.

So we’re very small. The two major players in polycarbonate around the world of course are Sabic and [inaudible]. They would be certainly the low cost producers and the capacity expansions in that business that have been announced are minimal. And it takes two to three years to build polycarbonate.

You're right the margins have moved up again as we suggested they would quite well, quite strongly. They’re operating at pretty high margins today. But our plant is a competitive plant but the low-cost plants are certainly in the hands of those two major producers Bob and they have no plans that have announced to build any capacity of substance..

Your next question comes from Laurence Alexander with Jefferies. Your line is open..

Hi. This is Nick Cecero for Laurence.

So just wondering if you might be able to provide some color on demand trends by region, and if there are any areas where you see demand that might be decelerating?.

Nick, we have said kind of continuously that Europe is operating better than people believe. I think the press is caught up with Europe now in other words I think the. What you read about your is about accurate I would have said and I have said as long as a couple years ago, Europe is better than the press. I think the U.S.

again continues to look pretty good. China on a call or two ago we expressed some concern about perhaps there were some slowing in China. I would say today that I'm less concerned about that.

So I'm beginning to be in the mode of believing that we’re in the zone where generally the world economies look pretty good and that's starting to be reflected in our business..

Your next question comes from Matthew Blair with Tudor, Pickering, Holt. Your line is open..

The release mentions that you’re reducing your Asia styrene exposure to 185kt from 300kt but you’re also pretty constructive on styrene going forward. So I was just hoping you could provide a little more background here.

I know it says that it will better align your styrene production with your styrene consumption, but was this your decision to reduce this exposure, and should we expect any additional production going forward?.

It was our decision - the relationship we have that a purchase styrene component. We purchased it under a purchase contract that has some cost based characteristics to it.

We just felt that again aligning to our capacity our production base, we have said all along that Asia is not an attractive place for the world of styrenics with the exception of ABS I'm talking about our portfolio and that's why we invested in ABS, but we have been reducing our polystyrene activities in that region.

It’s the part of the world that's most difficult to make money in styrenics that include styrene by the way. And so we just felt that that was the right thing to do to get a little bit more match to our end production of polymers.

In that part of the world, its lowest profitability of the world in both styrene and polystyrene and we'd rather have less of it..

And then just in terms of the guidance, so the net income guidance is showing interest expense of $60 million. The cash flow guidance has $50 million in cash interest.

Could just remind us on the - I guess discrepancy here and is there still a chance that your net income guidance would reflect the $50 million number?.

The reason for that discrepancy is, we have $500 million of U.S. dollar bonds that we issued in September of last year. We swapped those bonds via across currency swap when we did the transaction into euros. And the reason we did that is two-fold, one is because it gives us synthetic euro debt which is a nice natural hedge for us.

But the second reason is because it lowers our absolute interest rate on that debt, albeit synthetically through a derivative.

The accounting rules have just recently changed as of the first of the year for accounting for those cross currency swaps and in our case putting on that cross currency swap has the effect of reducing our cash interest by about $10 million a year.

Now, we just haven’t gone through the process yet of fully reviewing the applicability of the cross currency swap - the change in accounting policies our swap.

We need to do that over the course of the next month and hopefully we are hopeful that will apply in our case and we’ll be able to change the accounting such that it would match the cash and the accrual on that.

So that on a cash basis we do expect to pay 50 million hopefully after we finish reviewing the new accounting guidance for the swap or the accrual or the P&L impact will be reduced to 50 or so..

Your next question comes from P.J. Juvekar with Citi. Your line is open..

It's Eric Petrie on for P.J. Just a question with the styrene antidumping in China.

Have you seen any of the higher cost production ramp back online or rather than seeing a trade for adjustment you could see actually China produce more of their own styrene?.

Hard to tell, remember they have two issues in interiors styrene plants in China. One is cost, well they have three really, one is cost, one is just capability, but the third and maybe most important is availability of inputs. So they have to be able to get the ethylene and benzene often from a great distance often competing away.

So I think my short answer would be yes, we would expect perhaps the margins some of that but again no fundamental shift in the basic thesis that we have other than trade flows that's why we said no material impact. So, we'll have to see how it plays out but there could be some marginally - higher run rates.

They have to get ethylene and benzene, let's see how it plays out. We don't expect any material impact that's all we can say at this point..

As a follow-up, are you outside of AmSty, styrene neutral so that now you're not selling any styrene into the open market with the reduction in Asia for 300,000 to 185,000 tons?.

Outside of AmSty we have been and are a net purchaser of styrene. We always have been..

Okay..

From day one..

And last I know you didn't provide guidance by segment during last quarter, but at the midpoint it looks like 2018 EBITDA it went from 635 to 650.

Was that just due to the 15 million from unplanned outages in first quarter, did you see any underlying drivers in the rest of the businesses?.

At this point that would be a good summation of the change in guidance. It's February 20, we have very constructive view of the year for 2018 across all of our businesses and we’ll continue to update you guys as we go forward. Obviously, we have a strong view of the first quarter which we gave the midpoint guidance of $180 million of EBITDA..

There are no further questions at this time. I will now turn the call back over to the presenters..

Okay. Thank you, everyone. We’ll talk to you in a few months. Take care. Bye, bye..

This concludes today's conference call. You may now disconnect..