AdvanSix Inc. Q3 FY2020 Earnings Call

Good morning and welcome to the AdvanSix Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Adam Kressel, Director of Investor Relations. Please go ahead.

Thank you, Danielle. Good morning and welcome to AdvanSix's Third Quarter 2020 Earnings Conference Call. With me here today are our president and CEO Erin Kane; and Senior Vice President and CFO Michael Preston. This call and webcast including any non-GAAP reconciliations are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today. Those elements can change and the actual results could differ materially from those projected, and we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on form 10-K as further updated in subsequent filings with the SEC. This morning, we'll review our financial results for the third quarter of 2020 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end. So with that, I'll turn the call over to AdvanSix president and CEO Erin Kane.

Thanks, Adam, and good morning, everyone. Thank you for joining us and for your continued interest in AdvanSix. I hope that everyone listening today, as well as their families and coworkers, are remaining healthy and staying safe. As you saw on our press release, our diverse product portfolio and low-cost caprolactam competitive advantage continue to serve us well as we navigate through the current environment. We remain focused on delivering for our customers while executing our business continuity plans with a vigilant focus on health and safety. In the third quarter, we successfully completed our planned plant turnaround, which was originally scheduled for the second quarter. We continue to be very pleased with the results that our practices and protocols are delivering, while also managing the hundreds of contractors that came onto our site to support those turnaround activities. Mike will detail our third quarter financials in a moment, where we believe our results reflect the resilience and strength of our business model. Notably, we've seen nylon sales volume returning to pre-COVID levels, which is an encouraging sign as we monitor the pace of global and regional recovery. In addition, we generated higher cash flow in the quarter through working capital improvement, cost management, and reduction of capital expenditures. We continue to take a disciplined approach to cost management and expect $20 million to $25 million of cost savings for the full year compared to 2019. This is in addition to the benefits associated with our natural gas boiler investments. As we look ahead from a product line perspective, we are targeting strong caprolactam plant utilization at Hopewell while optimizing our nylon mix across end uses, applications, and geographies to position the business for success. In ammonium sulfate, we expect a stable environment through the 2020-2021 planting season. In chemical intermediates, we expect the favorable acetone industry supply and demand balance to continue while also benefiting from ongoing investments for differentiated product growth within this portfolio. We also remain confident in our financial position. At the end of the third quarter, we had approximately $128 million in available liquidity between cash on hand and the additional capacity under a revolving credit facility. We continue to expect robust cash flow generation in the fourth quarter supported by a lower run rate of capital expenditures, further anticipated working capital improvements, and receipt of cash tax benefits associated with the CARES Act, resulting in a reduction of leverage levels and positive free cash flow for the full year. In October, we hit our four-year mark as a public company, and while I'm very proud of all the accomplishments this organization has made since our spin-off, I'm even more excited about the opportunities that lie ahead. As we work to complete our planning for 2021, some aspects of which we'll share this morning, we are continuing to take a prudent approach of planning conservatively from a macro perspective. Our priorities will focus on continued operational excellence and improving through-cycle profitability, enhancing our portfolio resiliency through differentiated product growth and mix optimization, and being strong and disciplined stewards of capital. With that, I'll turn it over to Mike to discuss the details of the quarter.

Okay, great. Thanks, Erin, and good morning, everyone. I'm now on Slide 4, where I'll review the third quarter financial results. Overall, we once again executed very well in a dynamic environment highlighted by volume growth and strong cash generation. Sales totaled $282 million in the quarter, down about 9% compared to last year. Pricing overall was down about 14%, primarily due to lower raw material pricing, which was unfavorable by about 13%. Market-based pricing was unfavorable by about 1%, reflecting challenging market conditions in our nylon and caprolactam product lines, and lower sales prices in ammonium sulfate. This was partially offset by improved industry dynamics in chemical intermediates, particularly acetone. Sales volume in the quarter increased 5% versus the prior year, driven by end-of-season domestic granular ammonium sulfate sales and increases in nylon. EBITDA was $16 million in the quarter, down about $9 million versus the prior year, primarily reflecting the impact of our planned plant turnarounds. I'll walk through the key year-over-year variances on the next slide. Earnings per share decreased $0.30 versus the prior year to a loss of two cents in the quarter. Lastly, cash flow from operations reached $36 million in the quarter, which was up about $2 million compared to last year, primarily due to the favorable impact of changes in working capital, partially offset by lower net income. Capital expenditures were $60 million, which was favorable by roughly $90 million year-over-year, following the completion of several high return growth and cost savings investments as well as disciplined management over our repair and maintenance spending. Now let's turn to Slide 5. As we've shared in the last few quarters, we thought it would be helpful to once again highlight a few of the key drivers of our EBITDA performance from a year-over-year perspective. Pricing overall was roughly a $1 million tailwind year-over-year. This reflected an approximate $5 million benefit from lower input costs, namely natural gas and sulfur, partially offset by a $4 million market-based pricing decline. Tracking our key variable margin drivers, we saw continued net price over raw pressure across caprolactam and nylon relative to benzene inputs, reflecting challenging year-over-year industry conditions and lower ammonium sulfate prices, net of natural gas and sulfur input costs. This was partially offset by higher acetone spreads over propylene, and improvements in other key intermediate products. Despite an increase in sales volume driving higher revenue in the quarter, volume and other items represented roughly an $8 million headwind on an EBITDA basis versus last year, primarily reflecting an unfavorable mix in our caprolactam and nylon business driven by a large increase in exports. As a reminder, nylon is a space where we've seen the most impact from COVID, which is not surprising given that the material ends up primarily in consumer-oriented products, such as automotive, textiles, packaging, and carpets. While we're pleased that volume and demand are returning, there is an unfavorable mix consideration that we discussed last quarter as we place products where demand exists. The impact of planned plant turnarounds to pretax income was $20 million in the third quarter of 2020 as expected, versus $5 million in the third quarter of 2019, representing an approximately $15 million headwind year-over-year, as we successfully completed our larger turnaround this quarter, including our Kellogg ammonia plant. Productivity and cost savings reached $11 million compared to the third quarter of 2019, including plant cost actions and lower SG&A expenses. In addition to benefits associated with higher return natural gas boiler investments, we are targeting $20 million to $25 million of cost reductions for the full year compared to 2019, as Erin indicated. We estimate roughly half of the full year cost savings are more temporary in nature, while the remainder is more structural and permanent. We're keeping our focus on disciplined cost management moving forward while assessing our dynamic markets. Lastly, our realigned cumene supply chain and logistics productivity represented an approximately $2 million favorable impact in the quarter as we continue to drive efficiencies while ensuring continuity of supply following the shutdown of our cumene supplier, Philadelphia Energy Solutions. Now let me turn to the next slide. We've included our typical pricing and spreads across our product lines altogether here on Slide 6. Consistent with our results, global caprolactam spreads over benzene continued to decline on a year-over-year basis in the third quarter. However, we have seen stabilization on a sequential basis from the second quarter of 2020. Although the industry remains in an oversupplied position globally and we're monitoring inventory levels through the value chain, we are encouraged by the recent improvement in demand. The Asia caprolactam to benzene spreads averaged just above $600 per ton in the third quarter. This spread has stabilized for about nine months now and continues to approximate the trough levels we saw in 2016. Lastly, the Asia resin over caprolactam spreads averaged roughly in the middle of the typical $200 to $300 per ton range through the quarter. Overall, nitrogen industry pricing continued to decline on a year-over-year basis in the third quarter, reflecting the impact of lower global energy prices, and also declined seasonally from the second quarter as we exited the heart of the domestic planting season. It's important to normalize pricing: urea contains 46% nitrogen, whereas ammonium sulfate contains 21% nitrogen. While urea has an underlying influence on other nitrogen products, ammonium sulfate does have its own supply and demand dynamics influencing the premium earned for the sulfur nutrient. With that, we continue to monitor competitive dynamics in light of North America supply additions, which came online at the end of last year, as well as European imports. Lastly, the industry's reliance on acetone pricing over refinery-grade propylene costs further improved in the third quarter, tracking and improving supply and demand balance in the U.S. following final affirmative anti-dumping duties, including global phenol industry utilization rates and robust downstream demand. We've seen the continued expansion of the premium in the small/medium buyer pricing over the large biomarker on a year-over-year basis through the third quarter, as propylene costs declined from last year. On a sequential basis, pricing in both segments further expanded while propylene increased from trough levels after a significant drop in the second quarter. As a reminder, the small/medium buyer price is reflective of roughly one-third of the domestic industry where pricing is predominantly freely negotiated. Now let's turn to Slide 7. On the left side of the page, we've highlighted the drivers of the robust free cash flow generation in the third quarter. As anticipated, working capital was a source of cash in the quarter, contributing $20 million to the overall cash flow generation with inventory representing a $10 million favorable impact. Specifically, the organization executed well to drive a reduction of finished goods with inventory, particularly in our nylon resin product line. We also remain disciplined around our cost and capital management, including all discretionary spending. Recognizing this year's challenges from a macro perspective, we've continued to tighten our belts across the business, resulting in noteworthy productivity and cost savings contributions. As we previewed, our CapEx run rate has come down significantly following the completion of several high-return growth and cost-saving investments as we closely manage our repair and maintenance CapEx spend. We continue to expect positive free cash flow in 2020, supported by further robust cash generation in the fourth quarter, resulting in a reduction of leverage levels. We expect working capital performance to continue to support cash flow generation as we exit the year with an anticipated continued reduction in overall inventory, and the benefits of ammonium sulfate pre-buy cash advances. From a CapEx perspective, we anticipate roughly $85 million for the full year, or similar run rate for the fourth quarter as we saw in the third. As a result of the CARES Act, we do anticipate approximately $12 million of cash tax refund in the fourth quarter, as we've discussed previously. Overall, a strong quarter from a cash generation perspective and an improving outlook as we head into 2021. Now let's turn to Slide 8 to discuss our debt and leverage. We wanted to spend a moment to address the confidence we have in our financial position as well as clarify potential investor perceptions regarding our leverage levels. On the left side of the page, we showed our leverage ratios, our net debt over trailing 12 months adjusted EBITDA, going back to the end of 2018. Both net debt and adjusted EBITDA are calculated in accordance with the terms of our revolving credit facility. For example, our adjusted EBITDA adds back non-cash stock-based compensation and other nonrecurring items such as the possible restructuring charges recorded in 2019. Net debt includes our line of credit from the revolving credit facility less cash balances of up to $75 million and other minor items. However, it does not include operating leases and unfunded pension liabilities by definition. Various external reporting sources include these amounts of debt following the new leasing standard, which creates the impression of increased leverage. Our operating leases as a percentage of debt tend to be larger than peers and have impacted the perceived leverage levels despite not being considered debt by our lending partner. You'll notice our leverage did increase over the last year as we've ramped up strategic investments in the business, namely our conversion to natural gas boilers at Hopewell, caprolactam quality and debottlenecking project, and our R&D lab relocation. In the third quarter, we do have a timing consideration tied to the impact of two large planned plant turnarounds within a trailing 12-month period. Recall we had roughly $25 million planned plant turnaround in the fourth quarter of 2019 and just completed a $20 million plant turnaround in the third quarter of 2020. We are well within our maximum leverage covenants and expect net debt to be reduced into year-end toward our target range of 1x to 2.5x trailing 12 months adjusted EBITDA. This is supported by continued robust cash generation I discussed earlier, the normalization of the planned plant turnaround impact and our trailing 12 months EBITDA, as well as anticipated debt pay down. Now, let me turn the call back to Erin.

Thanks, Mike. I'm now on Slide 9 to discuss some industry performance considerations. The pie chart shown on the slide represents our sales by key end market. Starting with the largest end market, building and construction, we primarily have exposure here through nylon carpet and phenol sales into oriented strand board. Our residential trends have improved through this period, with housing starts and existing home sales continuing to grow, supported by record-low interest rates and a migration to the suburbs and low-density areas. While we have seen improved carpet demand from residential applications, this sector does represent a smaller portion of overall nylon carpet demand. Conversely, commercial construction trends have lagged residential and been more unfavorable in the wake of the pandemic where nylon has a stronger foothold. We expect commercial construction to remain soft in the near term, until there's more visibility into office and hospitality trends post-COVID. Moving around the pie chart clockwise. Fertilizer is another significant end market for our business. We continue to expect steady demand for granular ammonium sulfate as overall sulfur demand remains favorable as a key nutrient for crops supporting yields. As we move into 2021, we expect that demand to strengthen seasonally, particularly as we move into the heart of the domestic planting season next year. We continue to monitor expected planted acres for next year, with industry estimates roughly flat for corn around 90 million acres and crop prices which have moved up a bit to more profitable levels for growers, though these remain relatively low from a historical perspective. Our promotion work also continues through investments in soybean application research, marketing, and grower education. The field trials continue to go well and recent testimonials have been favorable. So that continues to be an area of potential longer-term growth. Moving to plastics. We've seen acetone demand, which is a precursor into acrylic screens, used in protective equipment at retail offices, and other locations remain healthy, and expect that to continue, although demand has also been recovering. Now while we are further back in the value chain, we are monitoring production and sales trends, where we've seen China and Asia growing faster in recent months compared to the U.S. and Europe, where recovery has lagged. The remainder of engineered plastics remains steady with consumer industrial and electronics demand for nylon returning to pre-COVID levels. From a solvents perspective, we expect the favorable acetone industry supply and demand balance to continue. We also see growth momentum for our Nadon cyclohexanone product line, which is a solvent used in various high-value applications. Rounding out the pie chart, food packaging demand for nylon has remained robust and we continue to see strong demand for our intermediates into paints and coatings, particularly with do-it-yourself home improvement projects on the rise during the pandemic. So let's turn to Slide 10 to wrap up before we move to Q&A. I'd like to reiterate our core focus areas as we head into 2021. First, continued operational excellence and improving through-cycle profitability. This is at the core of who we are as a company. We're focused on driving improved earnings and cash flow through cost optimization and asset productivity, which creates strong operational leverage. We have efforts in place targeting improvements in rate, cost, quality, and yield as well as further efficiencies in our planned plant turnaround programs. We expect the impact of planned plant turnarounds to be in the range of $25 million to $30 million in 2021 versus approximately $32 million in 2020 and $35 million in 2019. With operational excellence, maturity comes our focus on evolving our sustainability programs and initiatives even further to where we've come today. We've recently entered into Operation Clean Sweep, whose program campaign is to eliminate plastic waste entering waterways, pledging our commitment as a leading nylon resin provider in the North American plastics industry. Our second priority is enhancing portfolio resiliency. 2020 has been a great example of how our diverse portfolio serves us well. Whether it's our chemical intermediates offerings across various end uses and applications or driving the sulfur nutrition value proposition through ammonium sulfate product, our portfolio diversification has complemented this year's ongoing benefits from our focus on cost management and high-return capital investments. Differentiated product growth supports this key priority as well. We've talked about this area of focus in three different buckets: high purity applications, high-value intermediates, and differentiated nylons to high-value applications. Individually, many of these products are still growing off a small base, but we've seen successes across the portfolio, including our oximes, cyclohexanone, and wiring cable offerings. We'll be well-positioned to capitalize on further improvement in the macro environment and continue to expect improving contributions from these product lines over the long term. Finally, strong capital stewardship. We expect CapEx to be $80 million to $90 million in 2021, which will include a modest amount of spend toward continued high-return growth and cost savings projects. We are focused on improving our return on invested capital and will remain disciplined in our approach as we look to drive long-term shareholder value. We expect leverage to be reduced within our target range of 1x to 2.5x and have approximately $60 million remaining under our share repurchase authorizations, and we'll continue to evaluate options to return cash to shareholders. We've also continued to build out our inorganic pipeline and internal capabilities as we assess potential acquisitions that would have strong portfolio coherence with our product lines and technologies. During this dynamic time, we are strengthening our ability to deliver long-term growth and believe we have the foundational elements in place for sustainable shareholder return. With that, Adam, let's move to Q&A. Great, thanks, Erin. Danielle, if you please open the line for questions.

We will now begin the question-and-answer session. The first question comes from Chris Moore of CJS Securities. Please go ahead.

Good morning. This is Stefanos calling in for Chris, thank you for taking my questions.

Sure. Great to hear you, Stefanos, good morning.

Good morning. First, could you provide us a little more color and update on the differentiated product growth and high-value intermediate and also the high-purity applications?

Yes, I'd be pleased to. I recognize this as an area of continued interest, and I'm going to offer here some proof points, perhaps over the last couple of years and how we've continued to progress this strategic area for us. As you pointed out, we do continue to view this portfolio and its effort in those buckets - high purity applications, high-value intermediates, and places to drive differentiated nylons to high-value applications as well. Just as a quick reminder, these are all product lines that have 1.5% to 2% extra growth margins. So we look at where we were in 2017, and about 8% of our total AdvanSix sales fell into this bucket. That has increased to 11% this year, projected for 2020. So overall about a 4% CAGR growth for the product lines in this bucket. I would note, though, that that doesn't include our granular ammonium sulfate, which represents about 18% of our total AdvanSix sales - and again, we view that as high value for the premium earned as well. Diving into where we're seeing some real tangible growth: I noted in my comments around meto and cyclohexanone. Since 2017, that product line has grown 10% on a three-year CAGR. Our oximes product line, we've talked quite a bit about our lines of EZ-Blox product line. Again, a drop-in replacement for other products. That's more than doubled in sales this year, with a 76% three-year CAGR. Growing on that introduction of that product. On nylon, our wire and cable offerings are up 10% this year and nearly 38% on a three-year CAGR and also copolymer, which we introduced - again, growing off a small base, remember these are going into oftentimes specific niche applications. They have to be qualified. That has actually seen a 60% growth this year. Even in a year where we've noted that our efforts with customer qualifications have been delayed and perhaps slowed, still seeing again a positive push here and just a continued area of emphasis that we think will serve us longer term.

Got it? Thank you very much. And just one more and I could come back in the queue. So you talked about $20 million to $25 million of the full year 2020 cost reductions. Is some of that just one-time savings for COVID? Or does all of that flow into 2021?

Yes, as we indicated on the call - by the way that range has increased. Initially, when we discussed this on the last quarterly earnings call, we said it would be in the range of $15 million to 20 million, and we now expect that to be $20 million to $25 million. We estimate that roughly half of that is more temporal and half of that is structural. So you want to think about that as half so the costs will be coming back next year. What I'll say is year-to-date, we're pretty close to being within that range. In the fourth quarter, if you look at our cost, our spend was relatively low. We had low IT cost, lower incentive comp cost as well. So we don't expect a significant year-over-year cost reduction in the upcoming fourth quarter from a year-over-year perspective, just to give you a sense of how we're seeing things going forward here. We'll look to optimize as much as we can and continue to be very diligent on our cost structure as we head into 2021 in this challenging environment.

Yes, hi. Good morning.

Good morning.

Good morning.

Hey, I had a couple of questions. So the first would be on the revenue side. When I take the percentages of your revenues that you allocate to your different product lines and relate it to your total revenues, it seems like there was a very substantial sequential pickup on your chemical intermediates line towards an incremental $30 million of revenue this quarter by my estimates. I guess some of that is acetone, but I'm just wondering how you would characterize what was going on in the chemical intermediates line during the third quarter? Maybe just give us some sense of where that substantial pickup in revenues was coming from. Thank you.

Yes. Well, first of all, when you compare the second quarter to the third quarter, you need to consider the fact that utilization and demand was very soft in the second quarter due to the economic impact of COVID overall. So when you look at the third relative to the second, generally volume was stronger really across the board. When you look at the intermediates business specifically, we saw strong revenue growth from the second to the third quarter in virtually all of the intermediate products. You pointed out acetone, which not only saw improved volume but also pricing moving up. We shared with everyone the trends in pricing, particularly in the small and medium buyer, which improved sequentially. We also saw improvements in phenol, Nadon, and AMS as well when you look at top-line revenue. It's really driven by volume coming off of a lower quarter in the second quarter due to COVID, as well as pricing particularly driven by acetone.

Okay, very good. Thanks for that color, I appreciate it. I had a question about your comments last quarter and this one about expecting to generate free cash flow for full year 2020. I wanted to maybe just harp on the working capital element. In the third quarter, there was a net working capital benefit of around $18 million to $20 million. I think $20 million the way you laid it out. I was expecting a working capital benefit, but maybe not in the third quarter. Could you comment on what incremental working capital benefit you're looking for in the fourth quarter? How much more inventory or receivables might be effectively released? There was a pickup in your accounts payable in the third quarter, and I guess that has to be run down as well.

Yes. There is some variability on a quarter-by-quarter basis when you look at the working capital overall. But there are a few things, and you are correct in indicating that in the third quarter, we did get a $20 million benefit from working capital, of which $10 million was inventory. However, when you break down the inventory, we saw a $26 million reduction in finished goods and work in progress. About two-thirds of that was really from the nylon business. We talked about the fact to have the expected inventory levels to come down as they were elevated during the first half of the year, which was partially offset by raw materials, which were up $16 million during the quarter and there are timing considerations as we purchased cumene. We also tend to hold higher balances this year to mitigate potential weather impacts associated with hurricanes in the Gulf. As we go into the fourth quarter, there's still a very big focus on inventory reduction, and we anticipate inventory to continue to go down. We're also anticipating the typical seasonal ammonium sulfate pre-buy advances in the fourth quarter, which will also help. We may have some movement in other areas, so I wouldn't anticipate working capital in the fourth quarter to be as large of a contribution from a free cash flow perspective, but I'd call it probably in the low to mid millions contribution in the fourth quarter. We're going to continue to focus on it and drive cash to close out the year.

Just to clarify, low to mid-single-digit millions? Is that what you were referencing right towards the end of your comment?

Yes, that's correct.

Okay, I'm going to just fit in one more. I was hoping that Erin might be able to comment on just a little bit more color on the global nylon demand outlook. In the third quarter, we finally saw some rebound in global auto production, and certain regions, their industrial activity levels are picking up. I'm just wondering from your perspective, are things progressing as you would normally have expected? In other words, is the uptake of nylon into the typical end markets progressing as you might have anticipated? Or is there something different this time, either regionally or by end market, that's leading to your commentary about marketing your nylon a little bit differently or placing your pounds a little bit differently than you traditionally might? Maybe just the big picture on where you see nylon demand? Maybe stronger than you anticipated, maybe weaker, some new outlook that you hadn't counted on when the year started? Thank you.

Yes. Of course, David. I think at this point, we've been communicating this, and certainly you well-noted that nylon is a space where we have seen the most impact from COVID this year. The initial conditions on the front ends of the pandemic weren't necessarily all that great to begin with, given the long market in which we're operating. As we noted, volume has been returning to pre-COVID levels but at a faster clip in Asia than we've seen regionally first there. This is what we expected when we chatted last time, from the standpoint that they had the pandemic more under control. Certainly, when you look at auto sales in China, they're only down about 7% year-to-date, with a lot of momentum being built in the last several months, which is lagged here in the U.S., still down about 18% to 19%, and Europe is further lagging at approximately 29%. We are seeing this regional recovery occurring very differently as the global pandemic progresses. On one hand, this allows, or necessitates us to drive higher utilization rates, as we approach and execute our turnaround and post-turnaround, and also meeting demand where it exists. This is one reason why our exports are higher, given that the U.S. has lagged. We continue to see a pickup in demand within North America, especially in carpet, even though commercial is down, again that residential pool is coming through. We're seeing engineering plastics returning to pre-COVID levels. The auto sector is still building up. So while we've operated and stabilized at trough levels, the question of when we see a turn still remains. As you noted, the progress is uncertain. A few weeks ago, Europe looked different, and we have a resurgence ongoing that we're monitoring carefully. Signs indicate that the textile market is perking up in Asia, while engineering plastics and packaging remain robust. Our focus will need to be on driving the asset flexibility to meet varying recoveries. The situation continually evolves, and while we are observing positive trends, we must remain vigilant about potential shifts with the broader macroeconomic environment that could affect nylon demand.

Thanks. Good morning, guys.

Good morning.

I was hoping you could just talk really quick about the turnaround guidance for 2021. Was there some timing differences on maybe smaller maintenance projects that have it lower year-on-year? Or is that just more results from your execution improvements?

I'm happy to address that. It's a combination, Vincent, as you may know. We'll remind you that we alternate large asset turnarounds every other year. We did Kellogg this year, while the sulfuric acid plant will be up next year. The scope that we've nearly locked will be more of a maintenance scope versus a large capital expense scope, which influences our wrench time considerations as well as absorption rates that we can run. It reflects, as you look, our continued execution. Over the years, we've talked about how we leverage global strategies, integrated scheduling, and use lean tools effectively to drive out waste. Our strong partnership with our turnaround partners has been crucial, and I would note that we've elevated turnaround leaders within our organization. We now have a turnaround leader on the leadership team of the integrated supply chain group, and we've elevated turnaround leaders at every site onto their leadership team with this consistent focus that we have to drive efficiency, productivity, safety, and successful startups during these turnarounds. It’s indeed a combination of factors, and we're pleased with where we continue to head.

Excellent, thanks. Specifially, could you provide the volumes of ammonium sulfate into Brazil this quarter? How did they do? In the event that you sell through distributors that exchange crop inputs for pledged crop output from farmers, which is common in some parts of Brazil, have you seen this massive pre-selling of next year's crop by Brazilian farmers? And I'm wondering if you have seen that in any early conversations. I know you mentioned pre-buying for I assume the U.S. season, but any comments there?

We can tackle that. Sequentially, from a seasonality perspective, we typically talk about a $10 million to $15 million range because our mix changes in the quarter. We would have ended up on the higher end of that, which was beneficial, close to $10 million due to a few reasons: one, we saw the season kind of extending into July on the domestic side. That was a positive for us in the quarter. Certainly, we did see buying increase on the standard side into export sequentially as we anticipated. The quarter progressed as we expected coming into this call. The pre-buys we conduct, mainly pertain to the domestic granular season. We aren’t really participating in that relative to the export side of the business.

Okay. So we'll perhaps hear more about that early next year. The balance sheet is moving in the right direction. There's still a significant discount between your shares and the replacement value of your assets. If I'm considering acetone and the structural changes in domestic supply sources, could this open up any opportunities or thoughts around monetizing a minority interest in your cumene oxidation unit, or via long-term product off-take agreements that may unlock asset value and derisk a portion of your cash flows?

The way I'd best answer that for you today, Vincent, when we think about our forward opportunities, we appreciate the recognition that we are moving in the right direction. We want to ensure that it’s clear that we have confidence in our ability to drive free cash flow, whether it's through growth amounts from a conversion perspective and yield perspective. When we look at our ability and opportunities to optimize the system, the best way to say it is that we will continue to look up and down the value chain. We're not opposed to partnerships that will allow us to succeed in the long haul. As specific projects and/or opportunities on inorganic basis firm up, that will be the right time for us to bring those to life.

This concludes our question and answer session. I would like to turn the conference back over to Erin Kane for closing remarks.

Great. Thank you all again for your time and interest this morning. Our results this quarter again demonstrated the strength of our business model and the commitment of our roughly 1,500 employees to delivering the best possible outcomes as we execute for the remainder of 2020 and head into 2021. We have a focused strategy that we're executing against, built on rigorous commitments to operational excellence, enhancing our portfolio resiliency, and being strong and disciplined stewards of capital - all of which are underpinned by our global low-cost position. With that, we'll look forward to speaking with you again next quarter. Stay safe and be well.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.