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AdvanSix Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

AdvanSix Inc.

Filing date:

02/21/2025

TLDR:

AdvanSix Inc.’s 10-K filing for FY 2024 reveals a slight revenue decrease and a decrease in net income. Operational disruptions and cyclical industry conditions pose challenges.

ELI5:

AdvanSix, a chemical company, had a slightly worse year in 2024 compared to 2023. They made a bit less money and faced some problems with their factories.

Accession #:

0001673985-25-000011

Published on

Analyst Summary

  • Total revenue decreased slightly by 1.0% from $1,533.6 million in 2023 to $1,517.6 million in 2024.
  • Net income decreased from $54.6 million in 2023 to $44.1 million in 2024.
  • Gross margin decreased from 10.8% in 2023 to 10.1% in 2024.
  • Management attributes the revenue decrease to operational disruptions at the Frankford and Hopewell manufacturing sites.
  • Gross Profit Margin: 10.1% (down 6.5% from 2023)
  • Operating Profit Margin: 3.8% (down 15.6% from 2023)
  • Net Profit Margin: 2.9% (down 19.4% from 2023)
  • Return on Assets (ROA): 2.8% (down 24.3% from 2023)
  • Return on Equity (ROE): 5.7%
  • Earnings Per Share (EPS) – Basic: $1.65 (down 17.5% from 2023)
  • Current Ratio: 1.08 (down 7.7% from 2023)
  • Quick Ratio: 0.49 (down 15.5% from 2023)
  • Cash Ratio: 0.05 (down 37.5% from 2023)
  • Debt-to-Equity Ratio: 1.06 (up 3.9% from 2023)
  • Interest Coverage Ratio: 5.0 (down 51.0% from 2023)
  • Inventory Turnover: 6.4
  • Days Sales Outstanding (DSO): 35.0 days
  • Days Payable Outstanding (DPO): 61.2 days
  • Asset Turnover: 0.95
  • Price-to-Earnings Ratio (P/E): 18.0
  • Price-to-Book Ratio (P/B): 1.0
  • Price-to-Sales Ratio (P/S): 0.52
  • Enterprise Value to EBITDA (EV/EBITDA): 6.0
  • Revenue Growth: -1.0%
  • Net Income Growth: -19.2%
  • EPS Growth: -17.5%
  • Adjusted EBITDA: $142,116,000 (down 7.5% from 2023)

Opportunities and Risks

  • Cyclicality: The industries in which AdvanSix operates are cyclical, which can cause significant fluctuations in cash flows.
  • Economic Conditions: Difficult and volatile economic conditions could adversely affect the business.
  • Unplanned Downtime: Any significant unplanned downtime or material disruption impacting production facilities, logistics operations or information technology infrastructure may adversely affect the business.
  • Raw Material Price Fluctuations: Raw material price fluctuations and the ability of key suppliers to meet delivery requirements can increase the cost of products and services.
  • Loss of Significant Customers: The loss of one or more of the company’s significant customers could adversely affect the business.
  • Cybersecurity Threats: Cybersecurity threats and incidents continue to increase in frequency and sophistication.
  • Environmental Regulations: Extensive environmental, health and safety laws and regulations applicable to operations may result in substantial costs and unanticipated loss or liability.
  • Operational Excellence: Improving production efficiency and reducing costs can enhance profitability.
  • Product Diversification: Expanding the portfolio of differentiated products can attract price premiums and greater demand.
  • Capital Stewardship: Disciplined capital allocation can improve return on invested capital and deliver strong shareholder returns.
  • Growing Demand for Sulfur Nutrition: Expect sulfur nutrition demand to grow 3%-4% per year with potential upside driven by increased adoption of ammonium sulfate on soybeans.

Potential Implications

Company Performance

  • AdvanSix faces challenges in maintaining profitability and liquidity, requiring careful management of costs and debt.
  • Operational disruptions at its Frankford and Hopewell manufacturing sites, impacting sales and profitability.
  • Decreased Net Income: Net income decreased significantly in 2024 compared to 2023, indicating potential challenges in maintaining profitability.

AdvanSix Inc. (ASIX) 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes AdvanSix Inc.’s 10-K filing for the fiscal year ended December 31, 2024. The analysis covers the company’s business, financial performance, risks, and opportunities. Key findings include a slight revenue decrease, a decrease in net income, and ongoing operational challenges. The report also highlights the company’s strengths, including its integrated manufacturing footprint and diverse revenue streams. Overall, a cautious approach is warranted, with a “Hold” recommendation.

Company Overview

AdvanSix Inc. is a diversified chemistry company producing nylon solutions, plant nutrients, and chemical intermediates. The company operates five U.S.-based manufacturing facilities. Key products include Nylon 6 resin, caprolactam, ammonium sulfate fertilizer, and acetone. The company serves a wide range of industries, including building and construction, agriculture, and automotive.

Detailed Analysis

Revenue Analysis

  • Total revenue decreased slightly by 1.0% from $1,533.6 million in 2023 to $1,517.6 million in 2024.
  • The decrease was primarily due to a 1.9% decrease in volume, partially offset by a 0.9% increase in price.
  • Sales mix by product line: Nylon (23%), Caprolactam (18%), Plant Nutrients (30%), Chemical Intermediates (29%).
  • Geographic revenue concentration: The United States accounts for 86% of total sales.

Profitability Analysis

  • Net income decreased from $54.6 million in 2023 to $44.1 million in 2024.
  • Gross margin decreased from 10.8% in 2023 to 10.1% in 2024.
  • The decrease in profitability was attributed to increased raw material prices, increased plant costs due to operational disruptions, and the impact of market-based pricing.

Key Ratios

Key ratios could not be calculated due to the limited data provided in the text. A full financial statement would be needed to calculate ratios such as:

  • Gross Profit Margin
  • Operating Margin
  • Net Profit Margin
  • Return on Equity (ROE)
  • Return on Assets (ROA)
  • Debt-to-Equity Ratio
  • Current Ratio
  • Quick Ratio

Management’s Discussion and Analysis (MD&A) Insights

  • Management attributes the revenue decrease to operational disruptions at the Frankford and Hopewell manufacturing sites.
  • Management emphasizes operational excellence and improving through-cycle profitability.
  • Management highlights a disciplined framework for capital deployment, balancing long-term investment with shareholder returns.

Risk Factors

  • Cyclicality: The industries in which AdvanSix operates are cyclical, which can cause significant fluctuations in cash flows.
  • Economic Conditions: Difficult and volatile economic conditions could adversely affect the business.
  • Unplanned Downtime: Any significant unplanned downtime or material disruption impacting production facilities, logistics operations or information technology infrastructure may adversely affect the business.
  • Raw Material Price Fluctuations: Raw material price fluctuations and the ability of key suppliers to meet delivery requirements can increase the cost of products and services.
  • Loss of Significant Customers: The loss of one or more of the company’s significant customers could adversely affect the business.
  • Cybersecurity Threats: Cybersecurity threats and incidents continue to increase in frequency and sophistication.
  • Environmental Regulations: Extensive environmental, health and safety laws and regulations applicable to operations may result in substantial costs and unanticipated loss or liability.

Opportunities

  • Operational Excellence: Improving production efficiency and reducing costs can enhance profitability.
  • Product Diversification: Expanding the portfolio of differentiated products can attract price premiums and greater demand.
  • Capital Stewardship: Disciplined capital allocation can improve return on invested capital and deliver strong shareholder returns.
  • Growing Demand for Sulfur Nutrition: Expect sulfur nutrition demand to grow 3%-4% per year with potential upside driven by increased adoption of ammonium sulfate on soybeans.

Red Flags

  • Operational Disruptions: The company experienced operational disruptions at its Frankford and Hopewell manufacturing sites, impacting sales and profitability.
  • Decreased Net Income: Net income decreased significantly in 2024 compared to 2023, indicating potential challenges in maintaining profitability.

Uncommon Metrics

The provided text does not contain sufficient information to calculate uncommon metrics. Examples of uncommon metrics that would be useful to analyze include:

  • Customer Acquisition Cost (CAC)
  • Customer Lifetime Value (CLTV)
  • Employee Turnover Rate
  • Inventory Turnover

Conclusion & Actionable Insights

AdvanSix faces challenges related to operational disruptions and cyclicality in its industries. While the company has strengths in its integrated manufacturing footprint and diverse revenue streams, the decrease in net income and ongoing operational issues warrant a cautious approach.

Recommendation: Hold. Monitor the company’s progress in improving operational efficiency and mitigating risks. Further analysis of financial statements and industry trends is needed to make a more informed investment decision.

AdvanSix Inc. Financial Analysis – 2024

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Calculation: (Revenue – Cost of Goods Sold) / Revenue = ($1,517,557 – $1,364,621) / $1,517,557 = 10.1%
    • Trend: 2023: 10.8%. Change: (10.1% – 10.8%) / 10.8% = -6.5%
    • Industry: The chemical industry typically has gross profit margins ranging from 20% to 40%. AdvanSix’s margin is significantly lower, suggesting potential issues with cost control or pricing power.
  • Operating Profit Margin

    • Calculation: (Revenue – Cost of Goods Sold – Selling, General & Administrative Expenses) / Revenue = ($1,517,557 – $1,364,621 – $94,023) / $1,517,557 = 3.8%
    • Trend: 2023: (1,533,599 – 1,368,511 – 95,538) / 1,533,599 = 4.5%. Change: (3.8% – 4.5%) / 4.5% = -15.6%
    • Industry: Typical operating margins for chemical companies range from 10% to 20%. AdvanSix’s operating margin is below average, indicating challenges in managing operating expenses.
  • Net Profit Margin

    • Calculation: Net Income / Revenue = $44,149 / $1,517,557 = 2.9%
    • Trend: 2023: $54,623 / $1,533,599 = 3.6%. Change: (2.9% – 3.6%) / 3.6% = -19.4%
    • Industry: Average net profit margins in the chemical sector are typically between 5% and 10%. AdvanSix’s net profit margin is below the industry average, suggesting potential issues with profitability.
  • Return on Assets (ROA)

    • Calculation: Net Income / Total Assets = $44,149 / $1,594,920 = 2.8%
    • Trend: 2023: $54,623 / $1,496,020 = 3.7%. Change: (2.8% – 3.7%) / 3.7% = -24.3%
    • Industry: The chemical industry generally sees ROA values between 5% and 10%. AdvanSix’s ROA is low, indicating it is not generating significant profit from its assets.
  • Return on Equity (ROE)

    • Calculation: Net Income / Total Stockholders’ Equity = $44,149 / $774,650 = 5.7%
    • Industry: Typical ROE values for chemical companies range from 10% to 20%. AdvanSix’s ROE is below average, suggesting it is not generating substantial returns for its shareholders.
  • Earnings Per Share (EPS) – Basic

    • Calculation: Net Income / Weighted-Average Shares Outstanding (Basic) = $44,149 / 26,828,338 = $1.65
    • Trend: 2023: $2.00. Change: ($1.65 – $2.00) / $2.00 = -17.5%
    • Industry: EPS varies widely.
  • Earnings Per Share (EPS) – Diluted

    • Calculation: Net Income / Weighted-Average Shares Outstanding (Diluted) = $44,149 / 27,255,213 = $1.62
    • Trend: 2023: $1.95. Change: ($1.62 – $1.95) / $1.95 = -16.9%
    • Industry: EPS varies widely.

Liquidity

  • Current Ratio

    • Calculation: Current Assets / Current Liabilities = $387,116 / $357,103 = 1.08
    • Trend: 2023: $419,804 / $358,918 = 1.17. Change: (1.08 – 1.17) / 1.17 = -7.7%
    • Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. AdvanSix’s current ratio is below this range, indicating potential liquidity concerns.
  • Quick Ratio (Acid-Test Ratio)

    • Calculation: (Current Assets – Inventories) / Current Liabilities = ($387,116 – $212,386) / $357,103 = 0.49
    • Trend: 2023: ($419,804 – $211,831) / $358,918 = 0.58. Change: (0.49 – 0.58) / 0.58 = -15.5%
    • Industry: A quick ratio of 1.0 or higher is generally preferred. AdvanSix’s quick ratio is low, suggesting it may have difficulty meeting its short-term obligations without selling inventory.
  • Cash Ratio

    • Calculation: Cash and Cash Equivalents / Current Liabilities = $19,564 / $357,103 = 0.05
    • Trend: 2023: $29,768 / $358,918 = 0.08. Change: (0.05 – 0.08) / 0.08 = -37.5%
    • Industry: A cash ratio of 0.2 or higher is often considered adequate. AdvanSix’s cash ratio is very low, indicating a heavy reliance on other current assets to meet its immediate liabilities.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Calculation: Total Liabilities / Total Stockholders’ Equity = $820,270 / $774,650 = 1.06
    • Trend: 2023: $756,783 / $739,237 = 1.02. Change: (1.06 – 1.02) / 1.02 = 3.9%
    • Industry: A debt-to-equity ratio between 0.5 and 1.5 is generally considered acceptable. AdvanSix’s ratio is within this range, suggesting a moderate level of leverage.
  • Debt-to-Assets Ratio

    • Calculation: Total Liabilities / Total Assets = $820,270 / $1,594,920 = 0.51
    • Trend: 2023: $756,783 / $1,496,020 = 0.51. Change: (0.51 – 0.51) / 0.51 = 0.0%
    • Industry: A debt-to-assets ratio below 0.6 is generally considered healthy. AdvanSix’s ratio is within this range, indicating a reasonable level of solvency.
  • Interest Coverage Ratio (Times Interest Earned)

    • Calculation: Earnings Before Interest and Taxes (EBIT) / Interest Expense = $45,575 + $11,311 / $11,311 = 5.0
    • Trend: 2023: ($69,223 + $7,485) / $7,485 = 10.2. Change: (5.0 – 10.2) / 10.2 = -51.0%
    • Industry: An interest coverage ratio above 3.0 is generally considered safe. AdvanSix’s ratio is above this threshold, but the decrease is concerning.

Activity/Efficiency

  • Inventory Turnover

    • Calculation: Cost of Goods Sold / Average Inventory = $1,364,621 / (($212,386 + $211,831) / 2) = 6.4
    • Trend: 2023: $1,368,511 / (($211,831 + $306,998 – $95,167) / 2) = 6.5. Change: (6.4 – 6.5) / 6.5 = -1.5%
    • Industry: Inventory turnover ratios vary widely.
  • Days Sales Outstanding (DSO)

    • Calculation: (Accounts Receivable / Revenue) * 365 = ($145,673 / $1,517,557) * 365 = 35.0 days
    • Trend: 2023: ($165,393 / $1,533,599) * 365 = 39.3 days. Change: (35.0 – 39.3) / 39.3 = -10.9%
    • Industry: DSO varies widely.
  • Days Payable Outstanding (DPO)

    • Calculation: (Accounts Payable / Cost of Goods Sold) * 365 = ($228,761 / $1,364,621) * 365 = 61.2 days
    • Trend: 2023: ($259,068 / $1,368,511) * 365 = 69.0 days. Change: (61.2 – 69.0) / 69.0 = -11.3%
    • Industry: DPO varies widely.
  • Asset Turnover

    • Calculation: Revenue / Total Assets = $1,517,557 / $1,594,920 = 0.95
    • Trend: 2023: $1,533,599 / $1,496,020 = 1.03. Change: (0.95 – 1.03) / 1.03 = -7.8%
    • Industry: Asset turnover ratios vary widely.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Calculation: Stock Price / EPS (Basic) = $29.77 / $1.65 = 18.0
    • Industry: P/E ratios vary widely.
  • Price-to-Book Ratio (P/B)

    • Calculation: Market Cap / Total Stockholders’ Equity = (26,737,036 * $29.77) / $774,650,000 = 1.0
    • Industry: P/B ratios vary widely.
  • Price-to-Sales Ratio (P/S)

    • Calculation: Market Cap / Revenue = (26,737,036 * $29.77) / $1,517,557,000 = 0.52
    • Industry: P/S ratios vary widely.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Calculation: (Market Cap + Total Debt – Cash) / EBITDA = ((26,737,036 * $29.77) + $195,000,000 – $19,564,000) / $142,116,000 = 6.0
    • Industry: EV/EBITDA ratios vary widely.

Growth Rates

  • Revenue Growth

    • Calculation: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,517,557 – $1,533,599) / $1,533,599 = -1.0%
  • Net Income Growth

    • Calculation: (Current Net Income – Previous Net Income) / Previous Net Income = ($44,149 – $54,623) / $54,623 = -19.2%
  • EPS Growth

    • Calculation: (Current EPS – Previous EPS) / Previous EPS = ($1.65 – $2.00) / $2.00 = -17.5%

Other Relevant Metrics

  • Adjusted EBITDA

    • Calculation: Adjusted EBITDA is a non-GAAP metric provided by the company. In 2024, it was $142,116,000.
    • Trend: 2023: $153,559,000. Change: ($142,116,000 – $153,559,000) / $153,559,000 = -7.5%
    • Significance: Adjusted EBITDA is used by the company to show underlying operating performance by excluding certain non-cash and non-recurring items. However, investors should be cautious as it excludes real expenses.

2. Commentary

AdvanSix’s financial performance in 2024 shows a decline compared to 2023. Revenue decreased slightly, and profitability metrics such as gross profit margin, operating profit margin, and net profit margin all experienced declines. The company’s liquidity position, as indicated by the current ratio, quick ratio, and cash ratio, also weakened. While the debt-to-equity and debt-to-assets ratios remain within acceptable ranges, the significant decrease in the interest coverage ratio is a concern. Overall, AdvanSix faces challenges in maintaining profitability and liquidity, requiring careful management of costs and debt.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️