US Trinseo cuts dividend, mulls synthetic-rubber sale

Author: Al Greenwood

2020/12/14

HOUSTON (ICIS)--Trinseo is cutting its quarterly dividend to 8 cents/share, suspending its share repurchase programme, and is considering the sale of its synthetic rubber business, the US-based styrenics producer said on Monday.

The company's previous dividend payment was 40 cents/share, announced on 24 September.

The move is part of Trinseo's plan to prioritise reducing its leverage and preserving its financial flexibility, the company said.

Trinseo revealed the cuts after announcing that it plans to buy Arkema's polymethyl methacrylate (PMMA) business for €1.14bn. The deal should close mid-2021.

Trinseo is funding the acquisition with up to $250m of existing cash. The rest will come from new debt financing.

The company's net leverage ratio should reach into the mid-3x when the deal closes, Trinseo said. It plans to lower the ratio to the mid-2x in 2023.

Meanwhile, Trinseo is exploring the possible divestment of its synthetic-rubber business.

“Our synthetic-rubber business is a very valuable asset and there are significant growth opportunities in the tyre market," Frank A. Bozich, President and CEO, said in a statement. "However, we believe the industry continues to evolve and there are other parties who can better capitalise on these growth opportunities.”

The business makes solution styrene butadiene rubber (SSBR) as well as emulsion styrene butadiene rubber (ESBR). It also makes nickel polybutadiene rubber (Ni-PBR) and neodynium PBR (Nd-PBR).

The synthetic-rubber business had net sales of $441.3m in 2019. Trinseo as a whole reported net sales of $3.78bn in 2019.

The business reported $40.7m in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), versus $351.8m for the company as a whole.

Shares of Trinseo were trading at $42.83 midday on Monday, down 32 cents, or 0.74% from the previous close.