President and CEO: Nick Carter
About: Trecora Resources principal business activities include developing mineral properties in Saudi Arabia and the United States and manufacturing various petrochemical products.
WSA: Good day from Wall Street. This is Juan Costello, Senior Analyst with The Wall Street Analyzer. Joining us today is Nick Carter, the President and CEO of Trecora Resources, the company trades in the New York Stock Exchange and the ticker symbol is TREC. Thanks for joining us today there Nick.
Nick Carter: Sure, happy to be here.
WSA: Okay right now, starting off, please give us a history and overview of the company for some of our listeners here that are new to your story.
Nick Carter: Trecora was actually formed as Arabian American Development Company back in 1967 but in 1987, they bought a little petrochemical company, and since 1987, the petrochemical company has kind of grown to be the big dog and Trecora which was the name we picked up last June, has morphed into a petrochemical company rather than the mining company that was originally established. We still have an investment in Saudi Arabia, a Zinc and Copper mine but really, petrochemicals at this time, is the focus of the company. Right now, we’re in a niche business. We make high purity C5 and C6 hydrocarbons and there’s only one competitor in our industry. And so we’re in a very good marketing position. We’ve got about 70% of the market in the United States for these products that we manage and so it’s an interesting business. We’ve got a good future ahead of us.
WSA: Great and what were some of the key drivers there behind the Q4 and the four-year results, which were particularly strong?
Nick Carter: Well the main thing is that our customers, which is a lot of polyethylene manufacturers, are riding on resurgence in the petrochemical industry in the US and of course when of our customers are doing well and we’re doing well. And so the volume has picked up over the last three to four years and particularly margins are good. Demand remains strong and outlook for demand over the next four or five years is very good. So we were pretty happy with the operating results in the fourth quarter. Unfortunately, we had some noise. We did an acquisition in early during October of last year and we still had quite a few one-time charge offs that we had to do because of the acquisition. So, the earnings per share weren’t very good. But, if you look up in the income statement, well the operating results were excellent.
WSA: And what are some of the trends that you’re focused on right now in the sector particularly chemicals and how is the company positioned to capitalize?
Nick Carter: Well the biggest thing is that the natural gas and NGLs in the United States right now and are very low-priced and very plentiful. A lot of the polyethylene people are in the midst of expansions and some new plants being built. And these plants that are being built are the extensions of our current customers. And so what we’re doing is expanding our own capacity by about 60%. We’ve got part of it finished now. We’ll have the rest of it finished by the end of the year. And so over the next three to four years, we’ll see at least a 60% growth in our revenues and volumes that we produce. And the good part is we’re not trying to get more market share. What we’re trying to do is keep up with our current customers. And so the path forward is very clear to us at this point in time.
WSA: And as far as what makes you unique, what do you think are some of the key factors that differentiates you from some of the other players in the sector?
Nick Carter: Well actually, kind of like I mentioned, this is a real niche market, these products that we make are real key ingredients in the larger manufacturing process for expandable polystyrene, polyethylene, and we are also sending a lot up into the Canadian oil sands market. But what makes us unique is that the purity of the material that we make is 99.5% pure. And there’s only one other company in the United States that makes that same purity product. And so consequently there’s very limited competition between the two of us and anywhere in the rest of the world, you won’t find that kind of purity. It’s strictly between the two of us and I think that’s probably the unique factor in the operation of the company.
WSA: And what are some of the key goals or milestones that you’re hoping to accomplish here over the course of the next year.
Nick Carter: Well like I said, we’re doing this 60% expansion with our own facility here, which is at South Hampton Resources. But we also did an acquisition in October 1st and we bought a plant over in Pasadena, Texas, which is in the outskirts of Houston, and it’s right in the middle of the big petrochemical complex along the Houston Ship Channel. And we’ve got plans underway to expand that operation also the revenues over last year. Last year we were only about $25 million but with the capital improvements that we’re making, and also in revamping their marketing effort, we think that we’ll probably double the revenues in that company by the end of 2016.
WSA: And perhaps you can walk us through your background and experience there Nick and talk a little bit about the management team.
Nick Carter: I’ve actually been with the petrochemical company almost 38 years. I came along with the acquisition when it was acquired by Trecora in 1987. And so most of my experiences with the petrochemicals. I took over as CEO and President of Trecora in 2009 and I’ve been working on the corporate side since that time. We have a CFO that has been with the company 20 years. She’s very good at what she does. We got a Vice president of Manufacturing that has about 20 years experience in the industry. And we’ve got a COO, Executive Vice President, COO, that’s probably got 30 years experience in the industry. And a lot of these experiences with custom manufacturing and so we’re also starting to emphasize that in our strategy in trying to do more custom manufacturing for people. So we’ve got a good management team. They’ve been, most of them have been with us for quite a bit, and there is a lot of experience in there. And we’re all on the same page as far as the strategy going forward in the company. It’s a real pleasure to work with these people.
WSA: Excellent. And as far as investors in the financial community, do you believe that the Trecora story and your message and upside–as you were recently speaking with investors at the ROTH Conference–do you believe that your story is completely understood by the investment community, and if not what do you wish they better understood about you guys?
Nick Carter: Well yeah, I think we dropped the ball a bit following our fourth quarter earnings announcement because I don’t believe we explained the one-time charges very well. They factored into the results at the end of the year which is unfortunate because like I said, if you look at the operating side, we had an excellent quarter from an operation standpoint and I think that during the last few days, that’s probably hurt our stock price a little bit. But our [10K], has been issued on the 13th, I believe. And whenever that gets reviewed, well I think that there’ll be enough information that probably you’ll see the stock price rebound. And I hope that we’re getting the message out about the next four or five years being pretty well defined about where we’re going and what the volumes will do. And so, we’ll see.
WSA: Well great. And so once again, joining us today is Nick Carter, the President and CEO of Trecora Resources. The company trades on the New York Stock Exchange, ticker symbol, TREC. They’re only trading at $12 a share, market cap is about 290 million. And before we conclude here Nick, to recap some of your key points. Why do you believe investors should consider the company as a good investment opportunity there today?
Nick Carter: Well, the biggest thing is, this expansion that we’re doing is a 60% capacity expansion. Like I mentioned the reason they were expanded is very clear and that is our customers are all expanding. And so we’ve got opportunities. So more volume on the same products and the same people, we’ll expect we’ll maintain our market share. We think that this capacity that we’re building will sell-out over about three or four years as our customer’s projects come all on. You know, I think it’s a little bit rare when you can do an expansion like that. And your market going forward is so well defined that you can have that kind of confidence in where the volumes are going and where you’re going to be placing the products. So, we think it’s a real good time to invest in the company. You can see growth, solid, steady growth over the next few years. And it’s pretty clear where it’s coming from. So it’s, I think it’s good time to get into it.
WSA: Well, we certainly look forward to continue to track the company’s growth and report on your upcoming progress. And we like to thank you for taking the time to join us today Nick and update our audience on Trecora Resources, it was great having you on.
Nick Carter: Thank you very much. I’m always ready to talk about the company. I’m excited about where we’re going and I always like to get an opportunity to tell the story. Thank you for having me.