Q3 2019 Earnings Call

October 24, 2019

Speaking on the call today, or Jim Fitterling gas, Chief Executive Officer, and Howard Ungerleider, President and Chief Financial Officer. Please.

Please read the forward looking statement disclaimer contained in the earnings news release and flights during our call. We will make forward looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties actual performance and results may differ materially from our forward looking statement.

Dow's forms 10-Q, and 10-K include detailed discussions a principal risk and uncertainties, which may cause such differences.

Unless otherwise specified all historical financial measures presented today on a pro forma basis, and all financials, where applicable exclude significant item will also refer to non-GAAP measures reconciliation to the most directly comparable GAAP financial measure in other associated disclosures contained on the down earnings release in the slides.

Implement our comments today and on the Dow website.

On slide two you'll see our agenda for the call Jim will start with an overview of Gals third quarter and operating segment performance. Howard will then move into a financial overview of the quarter and will also provide some comments on modeling guidance and discuss dow's progress against some of our key financial targets.

And finally, Jim will provide a progress update on doubts caulking growth targets and then close with a discussion on our forward looking viewed following that there will be plenty of time for your question with that I'll turn the call over to Jim.

Thanks, Neil and thanks, everyone for joining us this morning, starting on slide three our results in the third quarter demonstrate the Dow teams focused on managing the levers within our control, while also making progress against our operational financial and strategic priorities that we laid out to the new down at our Investor day last year.

Time, we presented a clear set of priorities and targets along with a playbook to drive our execution. Since then we've been diligently and delivering on that plan in the third quarter. We achieved topline performance. It was in line with our guidance and bottom line results that exceeded expectations in doing so we delivered strong improvements from Q2 Q3.

<unk> across the board EBIT margin earnings and free cash flow your or some other notable highlights from our results first we continue to capture demand growth, particularly in sectors closer to the consumer where conditions remained favorable excluding hydrocarbons in energy sales volume rose by 1% in the quarter led by can.

Tumor growth in packaging Polyurethanes and silicones applications.

We grew earnings and margin sequentially led by our plastics franchise, we leveraged our industry, leading feedstock flexibility in the United States and Europe in Europe , we capitalized on the LPG advantage versus NAFTA and on the U.S. Gulf Coast, We made full use a new butane capabilities that we put in place earlier this year and we succeed.

Absolutely achieved zero naphtha cracking this quarter, expanding our flexibility and avoiding an otherwise costly feedstock penalty. Additionally, we focused on recapturing price a key improvement towards the end of the quarter in polyethylene third we continue to drive down our cost structure, we reached a significant milestone in the quarter.

Successfully completing our 1.365 billion dollar cost synergy program. Furthermore, we removed another 40 million of stranded cost in the quarter and fourth our results. This quarter showed the ability of Dallas portfolio to generate strong cash flow, we generated 1.8 billion and cash flow from continuing operations and once.

3 billion in free cash flow, we improved our earnings cash flow conversion as well as working capital improvements provided to source of cash the cash flow story. This quarter is a noteworthy highlights and Howard will unpack. This later in the call.

We accomplished all this while navigating a business environment with limited visibility and while overcoming operational limitations in Argentina, where both of our crackers were down through the third quarter. Following a country wide power outage in late June and finally, we made important progress in our litigation with no the chemicals and in our de leveraging.

Hi, Ortiz in September a judgment was entered in Alberta, Canada ordering Nova chemicals to pay down approximately $1.1 billion on October 10th Dow received the related cash payment of approximately 800 million. Subsequently, we issued a make whole call for the full redemption at 1.25 billion of notes due in 2020.

The one.

Reducing debt. This was another important step forward in strengthening our financial profile altogether, our results demonstrate the strength of the Dow portfolio and our continued focus on executing the operational financial and strategic playbook that we laid out a year ago.

Moving onto our segment results and the business performance in the quarter on slide four packaging and specialty plastics expanded operating EBIT margin nearly 200 basis points year over year, our results reflected demand growth in packaging applications margin expansion cost synergies and contributions from new capacity on the U.S.

Gulf Coast, which more than offset lower equity earnings and notably on a sequential basis EBIT grew 4% and operating EBIT margin expanded 100 basis points.

Further the results are particularly notable considering that the segment overcame a 100 million dollar headwind from a combination of lost ethylene production and repair cost in Argentina are two crackers. There are now back up and running in the third quarter, we saw a continuation of solid demand in packaging applications, the packaging and specialty.

Plastics business grew volume by 4% year over year, we again saw growth in industrial and consumer packaging flexible food and specialty packaging and health and hygiene applications regionally volume growth. This quarter was led by Asia Pacific and EMEA.

In hydrocarbons in energy the business reported both lower volume and local price volume declines were an outcome of our drive for lighter feet slates in Europe , which led to lower Oh product production volumes. In addition, we had slightly lower merchant ethylene sales in the United States as a result of enhanced ethylene integration.

Enabled by our new derivative capacity.

On slide five industrial intermediates and infrastructure operating EBIT declined versus the year ago period, primarily due to margin compression in the polyurethanes component and M. AG as well as lower demand in industrial end markets.

In industrial solutions volume declined modestly as a result of lower demand in energy agriculture, and automotive end market. This was partly offset by growth in catalyst application and demand in pharma end markets. The business reported a significant drop in its equity earnings driven by margin compression for M. EG at all.

Kuwait joint ventures.

Polyurethanes and construction chemicals sales declined on lower local pricing in all regions led by lower components prices.

However, the business achieved volume growth driven by gains in United States in Canada on improved empty I supply year over year as well as continued demand growth in polyurethane systems, our girls and systems reflects the business is focused on driving its downstream agenda and moving the portfolio for merchant components sales the higher value.

Formulated systems. It has been a multiyear journey and the progress was made so far has been impressive this quarter marked the 25th consecutive quarter of year over year volume growth for the systems business.

And finally on slide six performance materials and coatings operating EBIT fell from the year ago period, primarily due to sitelock scenes margin compression and lower demand and coatings and monomers consumer solutions sales declined as volume gains in Asia Pacific and the U.S. in Canada, where more than offset by local price declines in all regions.

Mainly driven by lower sidewalk scenes prices the business reported volume growth in infrastructure end markets and improved demand for sidewalks scenes in Asia Pacific. This was partly offset by soft demand in the automotive and consumer electronics end markets.

Coatings in performance monomers reported a volume decline on the coating side the business saw lower demand in the U.S. in Canada in architectural coating and soft demand in Asia Pacific in industrial coatings end markets.

Ill now turn it over to Howard discuss our financial performance in the quarter modeling guidance and the progress that we made against some of our key financial targets.

Thanks, Jim and good morning, everyone turning to slide seven net sales were 10.8 billion inline with our guide the decline was primarily driven by lower local pricing volume declined 2% year over year. This was largely driven by changes in hydrocarbons and energy related to our cracker features combined with lower ethylene trade sales.

Yes.

Excluding hydrocarbons that energy volume was up 1% versus a year ago period, driven by growth in packaging Polyurethanes and silicones applications sequentially demand was higher in packaging and specialty plastics and in industrial intermediates and infrastructure.

Local price declined 12%, primarily due to decreases and lower global energy prices year over year.

Currency decreased sales by 1% as a result with the strengthening of the U.S. dollar against the Euro.

The earnings impact of currency was offset a year over year tailwinds from lower tax rate and reduced interest expense.

Equity losses were 44 million a year over year headwind of nearly $180 million decrease was primarily due to lower results at the Kuwait joint ventures, driven by margin compression and NBG and polyethylene equity losses, and Cidara also increased primarily due to the impact of a third party industrial gas supplier issue.

Which has since been resolved in the appendix of our earnings deck. We have included our additional disclosure for our three principal joint ventures, which provides further details on their results.

Overall operating EBIT was 1.1 billion gallons in the quarter included savings from cost synergies in spring and cost for mobile as well as contributions from new capacity on the U.S. Gulf Coast.

These gains were more than offset by a year over year margin compression and so a lot changed and isocyanates lower equity earnings and the impact from the Argentina outage on a sequential basis operating EBIT rose, 5% or nearly 60 million representing our first a sequential increase in more than a year or operating EBIT margin.

Also expanded 80 basis points led by margin expansion and packaging and specialty plastics.

We generated $1.8 billion of cash from continuing operations, which reflected reduced headwind from integration and separation spending and a 700 million release of cash from working capital relative to the year ago period, our cash from continuing operations was up 1.6 billion like recall that we need a voluntary pension contribution last year.

1.1 billion after adjusting for this the underlying operations delivered a 500 million dollar increasing cash flow versus the same quarter last year.

And finally, we returned 600 million dollar store owners in the quarter, including 500 million to pay dividends and 100 million of share repurchases.

Spin, we have completed 400 million or share repurchases and we remain on track to achieve our target of 500 million for the year.

Moving to slide eight and our modeling guidance for the fourth quarter as we have for the past couple of quarters, where again, providing or segment guidance on a sequential basis to reflect the most relevant comparison in today's environment.

The total Dow level, we see or even tailwind sequentially as headwinds from normal fourth quarter seasonality in coatings and infrastructure markets and modest impact from turnarounds are offset by nearly 150 million of add backs from one vitamins in the third quarter, including the impact of our outage in Argentina.

Once material in coatings, we expect to lock change pricing to remain at about the same level as we exit in the third quarter.

In coatings and monomers, we expect to see the normal seasonal reduction in profitability and the business will also absorbed one third of the impact from our planned PDH turnaround that is currently underway.

Moving to industrial intermediates and infrastructure. This segment will absorb the remainder of the PDH turnaround impact.

In energy prices on average are projected to be similar to the third quarter.

And finally in the packaging and specialty plastics segment, we see feedstock price trends continuing to drive a lighter cracker feeds late in the U.S. in Europe , which will continue to reduce our topline sales of co products.

We expect a modest sequential headwind as we complete a large turnaround in the Netherlands, and we anticipate reduced catalyst and licensing earnings in the quarter, which by their nature are lumpy on a positive side or Argentina assets are now back online. So they will once again be positively contributing to our results.

Turning to slide nine or two areas, where I'd like to highlight the progress we've made against our financial targets. The first is our capital structure, specifically the de leveraging and liability management, we've done this year.

As you'll recall from our Investor day last year, we outlined our capital structure priorities and our de leveraging targets as you see on this slide we had been delivering on our plan, making significant progress in improving and moving our debt maturity profile and maintaining our liquidity position, we have opportunistically refinance upcoming maturities.

And we secured the option to extend the outstanding $2 billion on our term loan by an additional two years in the second half of 2023.

So far this year, we have completed $2 billion of gross de leveraging and with our recent 1.25 billion debt redemption announcement, which was supported by the cash proceeds received from Nova we will complete more than $3 billion of girls de leveraging by the end of this year.

The result of these actions that we do not have a significant debt maturity due until 2022, and we have maintained our strong liquidity position, which is more than $10 billion.

These accomplishments aligned in the financial priorities, we outlined a year ago, maintaining a strong capital structure, reducing risk lowering interest expense and preserving our financial strength and flexibility.

Moving to slide 10, the second financial highlight is the progress we have made in our cash flow generation and the potential we seem to improve further from here.

Looking at the trailing 12 months, we have delivered $3.2 billion a free cash flow.

Results do not yet fully reflect our underlying potential the reason for this as we highlighted at the start of the or is that we have had short term cash headwinds from two discrete factors.

Spin integration separation activities and interest expense.

On both fronts peak spending is behind us.

Third quarter, we have spent more than a billion dollars on integration and separation spending in 2019, and we expect to full year spend to be in the range of 1.2 billion inline with our target for the year.

Spending is beginning to recede and looking ahead, we expect a 2020 cash spend to be in the range of $2 million to $300 million for a year over year release of cash of about $1 billion.

Non interest expense as I highlighted we have accomplished a substantial amount of de leveraging and liability management. This is put us in a position today, what we see our 2020 run rate interest expense being 100 million lower than where we started in 2019.

These two factors alone represent more than $1 billion of cash flow uplift in 2020 that are completely within our control and independent of market conditions.

We also continue to pursue non operational cash inflows, notably the additional litigation, we have pending with Nova and our teams continue to also focus on operational improvements such as greater working capital efficiency. These improvements will not only boost gross cash flow, which should also lift our earnings to cash conversion.

Our focus on cash is paying off and all other things equal our free cash flow is poised to expand.

This additional flexibility preserves our ability to deliver against our financial priorities, including our strong shareholder returns and further de leveraging now it's like a hand, it back to Jim to discuss our progress and our cost and growth priorities as well as our near term outlook.

Thanks, Howard turning to slide 11, I'll start with our cost out priorities. The progress we made on our cost reductions has been proceeding faster than we planned in the third quarter. We successfully completed our 1.365 billion dollar cost synergy program, which we finished about one to two quarters ahead of schedule on the stranded cost removal side.

We eliminated an additional 40 million and have already exceeded 125 million in cumulative savings.

Just before our spend we laid out a target to the liver 600 million of our remaining 800 million of cost synergy savings and stranded costs removal in 2019 based on the progress we've made through the third quarter. We now expect to deliver approximately 700 millions of savings this year with the remaining 100 million to be realized.

In the first half of 2020.

The Dow team has done an excellent job in putting together a robust cost out plan that identifies delivers and track these saving and they have kept up that focus for more than two years to ensure our steady delivery against our target.

Turning to slide 12, and perhaps what I'm. Most proud of is that the Dow story has not only been about cost, but we've also continued to drive several high return growth projects.

A year ago, we told you that the new Dow has a well defined growth roadmap that includes a robust pipeline up attractive investment projects that are lower risk faster payback lower capital intensity and higher return on invested capital as the macro environment changed we quickly adjusted our capital spending target for the year to $2 billion and we.

Intensified our criteria for approving and advancing projects in the third quarter alone. We advanced several projects, we announced the retrofit of one of our crackers in Louisiana with our proprietary fluidized catalytic dehydrogenation technology to produce on purpose propylene, we see the F. CDH technology as a.

CDH not only drives return on invested capital benefit, but it also advances our sustainability agenda when compared to all conventional PDH technologies.

In our silicones franchise, we continued to greenlight incremental de bottlenecks through the third quarter. We have completed 14 of the 18 downstream capacity expansions that we plan for this year.

Our base case remains at the global economy will continue growing, albeit at a slower pace in that scenario based on historical spreads in our products chains, we see a floor. The further margin deterioration and a good upside to normalized levels when fundamentals Titan in this environment Dow remains well positioned.

We believe the results of our actions will continue to show in our earnings deliver enhanced cash flows and preserve our financial strength.

Since our lower risk higher return growth investments, while staying in line with our 2 billion dollar capital expenditure target. This year and continued driving a best in class reduce cost structure by delivering the remaining stranded cost removal in some steps, we're taking today position us well the leverage increased.

Thank you Jim with that let's move onto your questions I'd like to remind you that are forward looking statements apply to both our prepared remarks and the following QNX operator, please provide the Q in a instruction.

Thank you, Sir if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to an audio signal to return equipment business. You. Please limit yourselves to one question too I was to get as many questions as possible.

Thank you good morning.

Jim good job on the cost side, just looking at Q4, what tweet should we expect for incremental cost savings and stranded costs removals in Q4 versus Q3.

40, David Thanks in Q4, I think you're going to continue to see somewhere in the range of 65 to 75 million come out in additional costs are stranded are our synergy program is done as we communicated we had a 300 million dollar target for stranded costs were at 125.

Million year to date, you'll see another 75 approximately come out and then another hundred the first half of 2020, So I think that'll get us out of the stranded cost removals and then as Howard mentioned, we also see about $100 million lower interest expense next year because of the work that we've done on debt restructuring.

All right and our next question comes in light of just to kind of Skus with JP Morgan.

Hi, Thanks very much.

On Slide 12, you talk about headwinds for the fourth quarter.

Yes, the absence of a lumpy catalyst and licensing activity of 85 million, which was in packaging and specialty plastics.

So I take it what that means is that in the quarter you chest reported.

There was an 85 million benefit from licensing activity that was I guess a little bit unusual.

And your sundry income.

Can you make the adjustments was up 100 million.

What is that and does that flow through to the individual segments and if it does swear to sunoco.

Oh or do you want to touch on the polyethylene part and then maybe we can also talk about what's happening with pricing MP, Yeah, I would say on that so I'm, a sundry income side, Jeff the third quarter.

Was favorable but that was really due to improved forex hedging and that goes to each other segments proportionally. It really wasn't the licensing and cattle are sitting on the licensing in catalyst.

I would just say.

Your your description is not where I would go I would say its delta change from Q3 Q4, we're expecting to be 85 million that was not the absolute number.

And Jeff on the licensing there was a Univision license that was granted and I think that's the comment on the lumpy demand and so it univation still continues to license the technology as people are continuing to build polyethylene.

Pasadena, I would say on P.E.

Into fourth quarter with demand good with inventories down in the third quarter and with that price. You know look I think you should expect to see.

In plastics quarter.

We'll next go to Vincent Andrews with Morgan Stanley .

Thank you and good morning, everyone.

Could you maybe talk a little bit about MD Anderson silicones in sort of what you.

A little bit of turn in the industrial side of the sector or and then the auto side as a sector. We've put a pull there that would start to bring that back up and we haven't seen that yet with PMI really declining for the last four consecutive quarters.

The Big Delta Irrs consumers, then really pulling all the volume growth and industrial hasn't yet, but I I do think with inventories being low I don't see any speculative activity out there and with downstream investments like in our systems business downstream in or silicones business, which are both continuing to hold up.

Well, that's going to create a pool on that supply demand balance and with nothing new on the horizon I think you're going to see some steady improvement we get a deal on trade if we get a phase one trade deal that obviously be a tailwind and I think the industry's poised right now for a little tailwind.

[noise] I'm wanting to.

Jim It's an interesting sort of quartile. Obviously you know we had a this incident happened out in Saudi Arabia, which I would imagine limited feedstock supply a you know through a variety of producers out there and I would imagine siddhartha as well so could you comment on whether or not you guys saw any and he said.

The elements and feedstock supply how does that normalize Dalton Cidara and was there any Q3 negative impact from that and any residual impact we should expect in Q4.

Thanks, that's on a great question, we saw a limited a reduction in feedstock supply we were down about 20% for less than two weeks.

Yeah, Good morning, guys.

And I think we're going to continue to see that see that involve that way.

Great. Thank you.

It's amazing that you went to zero NAFTA.

Good question P.J., Yes, the zero NAFTA was the U.S. Gulf Coast component and what that does is really it widens our feedstock flexibility. So it gives us another range of flexibility that we didnt have and that was important this quarter because ethane was really low and also propane was low in the quarter.

The change of the we have on cracking zero NAFTA in the Gulf Coast is going to have a big impact on NAFTA cost to everyone else.

I would say that in Asia. The naphtha crackers today are at about breakeven margins and they've been there.

Well, that's a follow up I mean do what you are low cost producer. So your volumes should always be strong no matter what I.

So we can tell someday it funding just a magazines and et cetera like the demand in Asia has not thing great lately.

Our volumes have been good the consumer side has been a strong pull for us around the world.

The spreads by feedstock flexibility that we've got.

We're continuing to add products to the line to expand that consumer side and to address some of the challenges on a circular economy. So you saw agility see in there and we've got a host of other recycle ready products and things for the consumer side of the business that we think are going to continue to drive demand.

Good morning. This is Don Campbell on for Bob I'm, when I look at free cash flows is a very impressive quarter, particularly compared to I guess, the last several quarters, where it's about double that rate.

Can you give us comfort the bridge on what drove that strength this quarter relative to last couple of quarters.

The thing that we were talking about but that's going to lead into the billion dollar or at least 2020 versus 2019, two big component.

Thank you do you think your coatings related volumes were down more than the in coatings markets this quarter or in line and you think that was one of the businesses flag for potential strategic review because it was one of the most significant underperformers over the past couple of years.

The other thing is that industrial.

Coatings demand has been down and we had a fair about a fair amount of industrial coatings business in China and that China industrial demand has been down but that's I think in line with the rest of the market.

We're continuing to work on the coatings business in terms of the business model. So you'll see that I talked about on the call. We've got a new Dow Dot com portal out there one of the things we're gonna be doing in coatings is taking advantage of that ecommerce capability to try to broaden out our reach into that market segment and.

In the next couple of weeks our plan right now is to get P.C.D. done before the end than a year and then we'll be looking at negotiating with the lenders on reprofiling a debt, but I wouldn't say for modeling purposes, Steve I would just use another $500 million next year.

And then we'll we'll have more to say as we get that refinancing done.

For the out of our maintenance dollars, we've done a lot on the digital aspect and what we can do with digital technology. There. Those are both gonna be important and we've done $3 billion year to date on our E. Commerce platform, we're looking to that for some growth and productivity as we move forward.

All right next we'll go to Matthew Blair with Tudor Pickering Holt.

Hey, good morning, everyone I'm I thought the results in I and I were pretty good a with the quarter over quarter improvement, despite some pretty tough conditions and how many GE as well as Asia M.D. I did you also called out that industrial gas plant outage too could you just walk through what got better.

And I and I in Q3, 19 versus Q2 19. Thanks.

Hi, Matthew we had a turnaround in Q2 that that really okay. Yeah, Q2 that really brought things down and so we did not have that turnaround expense in Q3, otherwise I would say that the business volumes and the quality of the business has been good <unk> the real drag on I and I.

And third quarter was equity earnings from the Kuwait Joint ventures, and that was because of the margin spreads on M. EG, Kuwait still a low cost producer for I mean, Gi and making good returns, but we haven't seen.

Any demand pull to really bring that that margin spread up on M. E. G. When that comes I think you'll see the real quality by I show through.

All right. Your next question comes in light of Frank Mitsch with Freemium research.

Hi, guys disease on for Crane.

Looking back at the waste your incremental capacity additions you presented back during the pre spend meeting I was curious to get your latest thoughts on those projects with particular interest on the 600 TTP expansion the U.S. Gulf Coast. Thank you.

Those projects are still under under way I think the 600 decade T. solution peak capacity will continue to go ahead Wade mentioned that we're going to take a look at the 450 K T. European expansion I think a with the demand right now in Europe and with them.

Market outlook, we don't see a reason to push step forward for any final investment decision right now everything else on that list that we put forward is underway and on the timeline that we put forward and we're continuing to look at some additional things like the L. Cox lights flexible capacity that we announced.

On the call today.

Next we'll go to Kevin Mccarthy with vertical research partners.

Yes, good morning, Jim I thought you had impressive results and packaging and specialty plastics, notwithstanding some pretty weak industry volumes for polyethylene. So I wanted to ask you about the ladder and going back to your Investor Day, you had assessed.

Polyethylene demand growth rate at 1.4 times GDP.

Year to date, it looks meaningfully negative in North America.

Versus the growing economy. So can you speak to why that's happening do you see it as temporary or or more lasting in nature and will it have an effect on new capital investment in capacity across the industry.

I think a lot of what happened Kevin as a new capacities came up is as you saw some inventories build up and some product move out there the demand obviously with industrial the slowing down on the industrial side, it's been a little bit slower than what we'd anticipated the consumer side.

Andrew coming off of a very very strong 2018, and so I think you're going to continue to see that there's some good balance in the supply demand going forward I don't think Theres any reason to think theres been a fundamental change in the 1.4 times GDP our outlook for GDP next year is still brown.

3% of globally, and so I believe that you're going to continue to see about four 4.5% type of growth rates out of polyethylene.

Next we'll go to Jim Sheehan with Suntrust.

Good morning. Thank you can you comment on a them where I've said this the supply demand balance in silicones.

You see that market is balance right now and.

Yeah, if I can Jim I would just say on Sitelock Sainz I think that's whereas a length in the market is today and this a lock saying upstream materials.

On the silicones Downstreams the supply demand balance is still fairly tight and there's a lot of growth in those downstream applications to continue.

Thank you.

And we'll take our last question from Laurence Alexander with Jefferies.

Good morning, with respect to the investments in the circular economy and the discussions around first types of recycled waste inputs.

Are you.

The gains come conventional petrochemical investments or is it still basically a subsidize research project.

Would indicate theres, probably a change in people's willingness to pay for a more recyclable or sustainable product and so I think that is probably the more important question. Then the cost of this versus burgeoned plastics from Virgin natural gas liquids or another feedstock if it was more competitive that would've.

Already been done.

But the reality is there are pressures out there in their demands to go to a circular economy and there seems to be a growing consumer base. That's a willing to pay for that now we just have to work out what the value chain looks like the second thing on the concern on the consumer side is we have the waste problem, which none of us.

I have our heads in the sand about we have a plastic waste issue that needs to be resolved and in order to drive that circular economy, we've got to come up with a way to value the plastic ways. So they can come back into that feedstock supply and that's probably the bigger challenge. The I think we will.

I'll come up with a way to do it I think everybody in the value chain. That's part of the alliance that we put together is trying to figure that out, but that's going to require some time in and some things for us to work through Meanwhile, the size of these projects that I'm talking about are going to help us learn more about what the cost positions are I've got to help us learn.

Sure about what the customer acceptance is gonna be for these products and what the price points for that will be and I think in another year or so I have a better answer for you on what the relative values are.

And once again that does conclude today's conference we thank everyone for their participation.

Oh.

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