Q4 2019 Earnings Call

We will also refer to non-gaap financial measures such as a trusted even adjusted net income free cash flow and net debt. You can find reconciliations to the most directly comparable gaap Financial message in our earnings released, which has been posted to our website. It is now my pleasure to turn the call over to Simon.

Thanks, Jeff and good morning. Everyone. Let's begin on slide 3 2019 was a challenging year this macro economic uncertainty led to limited visibility notwithstanding Edwin's venator delivered a hundred ninety four million dollars of adjusted ebitda and $0.24 of adjusted diluted earnings per share. We made significant progress on our strategic prior in 2019 and delivered on those items within our control including improving our cost base strengthening our position and Specialty and differentiated CO2 and advancing our customer that approach to reduce our tio2 price and margin volatility.

To slide for not to tanium dioxide stick in the fourth quarter or titanium dioxide segment generated Thirty million of adjusted ebitda compared to $52 billion dollars in the 4th 2018 the average tio2 selling price declined 4% in local currency compared to the prior-year but remained stable on a sequential basis for the third consecutive corset this reflects our ongoing approach of matching our supply network to customer commitments to reduce price and margin volatility.

Prices for functional c o two products were most impacted in Europe on a year-over-year basis. We exit the fourth quarter of 2019 with average prices in Europe and Asia below lots of the more stable North American region on the US dollar basis sequentially prices in local currency were relatively stable in our three main regions wage, despite the historically softest quarter of a demand to turn him the oxide volumes increased 5% compared to the prior-year. The increase which was in Europe and North America was merrily results of increased sales of new differentiated products improved availability of certain products and high demand compared to the same period last year which was impacted by customer inventory reductions on a sequential basis c o two volumes declined in line with normal seasonality.

before I highlight

The regional Trends impacting the tio2 industry. I'd like to update you on recent Trends and Specialty t o two in the fourth quarter. We experienced soft demand in certain specialty applications only for textiles. This was primary results of these talking with in the textile supply chain in China and elsewhere in Asia and was precipitated in part by the US China trade Thursday. We estimate more than three-quarters of global industry demand for these products in Asia, including China.

Notwithstanding soft demand in textiles prices for our Specialty to2 Products remained relatively stable adjusting for the impact of makes prices and demand for our Specialty Products tend to be more resilient across the cycle due to the applications into which we sell these Dynamics underscore the investment in our specialty and differentiated CO2 portfolio wage strengthen our position of these higher value applications. We expect demand for our specialty and differentiated products to progressively improved throughout 2020 that said continue to monitor the impact the Koran coronaviruses having on demand and the supply chain it remains too early for us to provide an assessment of the ultimate impact that the situation is still available.

looking at our business regionally in

North America demand increased in the fourth quarter compared to a weaker prior-year quarter and was flat sequentially our average tio2 selling price in North America was stable both on a year-over-year and sequential basis reflecting are more stable customer mix and our customer tailored approach demand and pricing and Asia stabilized in the fourth quarter. However, as I previously mentioned it is too early to a point on the impact of the coronavirus on growth in Asia.

Europe is a largest market 4002 compared to the fourth quarter of 2018 volumes in Europe increased modestly benefiting from higher sales of new differentiated products and not demand compared to the fourth quarter of 2018 when customers reduced their inventory levels are average tio2 price in Europe declined modestly and local-currency wage compared to the prior-year quarter and was stable on a sequential basis.

In the fourth quarter raw material cost moved higher primarily from high grade ores these headwinds which were in line with our expectations were partially offset by a $3,000 benefit from our business Improvement program.

Turning to the tio2 outlook for 2020 macroeconomic challenges are expected to remain in 2020 in the near-term. We expect volumes to improve sequentially and follow normal seasonal passes specialty volumes are expected to progressively improve throughout the year subject to my comments earlier on China. We expect more modest raw material cost involved in twenty-twenty and are actively engaged with customers to implement price increases all regions to the inflationary pressures on our business.

Longer-term tio2 industry fundamentals remain favorable. We remain focused on our customer tailored approach enhancing our specialty and differentiated CO2 portfolio home and improving our cost competitiveness throughout the tio2 cycle.

Turning to slide five and performance additives.

Revenues declined 7% compared to the prior-year. Driven by a 5% decline in volumes and a 2% unfavorable impact from foreign currency translation. Our Average stock price was flat compared with the fourth quarter of 2018. I will provide some additional comments on the three main businesses within performance additives compared to the fourth quarter of 2018 color pigments volumes were primarily impacted by lower demand for products into construction related applications in North America and portfolio optimization as we exit need some low-margin business. The impact from lower volumes was partially offset by lower raw material costs and the benefits of our cost and operational Improvement initiatives.

temperature treatment volume

Declined compared to the prior. Primarily due to lower construction activity the average selling price and margins were impacted by an adverse mix of sales. However, it was offset wage lower raw material and other costs.

Functionality volumes were impacted by weaker-than-expected demand for automotive Coatings and Plastics. We are taking meaningful steps as part of our business Improvement program to offset these mods challenges and improve the profitability of this business.

A performance additive segment generated four million dollars of adjusted ebitdar on the quarter up 1 million dollars compared to the prior-year quarter in 2019 performance of the segments need a significant Market forces, especially in the automotive Coatings Plastics and construction applications in 2020. We expect to capture additional benefits from our self-help initiatives.

We continue to explore a potential sale of the color pigments business. This process is ongoing and we have set an aggressive timeline the color pigments business generated $17 of a judge and 20 ninety and we expect to benefit from our targeted cost initiatives in 2020. But because we are actively involved in a process to explore the potential cell of our color pigments busy. We will not be providing additional commentary or taking questions on the matter turning to slide 6, we continue to be intensely focused on a strengthening our business and improving our cash flow. We accelerated our 2019 business Improvement program and delivered twenty million dollars of benefits in 2019, including five million dollars in the fourth quarter double our original four-year Target. We expect a complete all the actions necessary to deliver on our full forty million Target by the end of 2020.

Exiting the year at the full run-rate.

level

on an absolute basis. This program is expected to live at 12 million dollars of benefits in 2020. This does not include the benefits which I highlight that is part of the color pigments review page. We are pleased to the executions a date and are confident in our ability to deliver the target benefits as promised.

I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments Kurt. Thank Simon. Let's turn to slide 7 in the fourth quarter total adjusted ebitda declined $22 compared to the prior-year. The decline is primarily attributable to the adverse price mix in RTO to business office and partially offset by higher volumes and the benefit of our business Improvement program compared to the third quarter of 2019 total adjusted ebitda declined by $57 million.

Seasonally lower sales volumes and Teo to and performance additives. We're the largest contributor to the sequential decline price mix was also a headwind due to a lower contribution of specialty TL to we benefited in the quarter from improved fixed cost absorption in performance additives and our tio2 business as we built inventories in certain specialty and differentiated products to assist in the transfer of the business from pori.

Turning to slide.

8 and our capital resources at the end of the fourth quarter net debt totaled $695 million and our net leverage ratio was approximately 3.6 times are worth 12 months adjusted ebitda. Total liquidity was approximately $307 million at the end of the year consisting of $55 billion in cash and $252 million of undrawn availability under our asset-based revolving lending facility. We do not have any significant debt maturities until 2024. We continue to enjoy relatively Low Cash taxes. This is primarily a function of the countries where income is generated and the net operating losses from which we benefit in the quarter song. We recorded $157 million tax expense in connection with recognizing a full valuation allowance against certain net deferred tax assets important log.

This does not.

Fantastic from being able to utilize the associated nols in future. And enjoying a low cash tax rate which we expect to be ten to fifteen percent.

Our outlook for Capital expenditures and 20/20 is eighty to ninety million dollars including business transfer capex from pori. We will remain Vigilant with our capital budget and could reduce this outflow further should market conditions warrant. We expect cash interest in 2020 to be between 40 to 45 million in two thousand. We expect our adjusted effective tax rate to be approximately 35% consistent with 2019 as we apply a normal eyes adjusted rate to better reflect the correct weighted average tax rate applicable under the various jurisdictions in which we operate we continue to expect a long-term adjusted effective tax rate to be 15 to 20%

cash restriction

Payments in 2020 are expected to Total fifteen to twenty million dollars this primarily includes our ongoing business Improvement program and the cost-saving related to our color pigments business other cash uses in 2020 are expected to be approximately 75 million primarily consisting of pension obligations, a joint venture capital expenditures and legal fees. We preliminary really expect the net change in working capital capital to be a modest source of cash in 2025. This is subject to market conditions and other factors finally are poori related expenses are expected to Total fifteen to twenty million in 2020 down from an outflow of 64 million in 2,019. We recognize the importance of returning to positive free cash flow and remain intensely focused on reducing our cash uses include wage.

FX to transfer business from

Corey we continue to make considerable progress on the transfer of many of our specialty and differentiated products into the existing Network as a result of the current economic environment and our financial resources. We are exploring ways to optimize the remaining transfer of business from pori. We believe this will include a slower total expected capital outlay and a lower Associated ebitda benefit than originally estimated with a similar if not higher economic return. We expect to update all material elements of our 20 20 cash uses as necessary on our quarterly earnings calls with that. I'll turn it back over to Simon.

Thank you kid 2019 was a challenging year, but we remain focused on executing on those items within our control in the near-term. We expect volumes to follow a normal seasonal pattern in both tio2 and performance additives. We expect an improvement in CO2 pricing for the benefits of our cost and operational Improvement initiatives to pack partially offset inflationary pressures. Additionally, we expect to continue to manage our manufacturing Network aligning production with customer commitments. We are. Maximizing value to shareholders through following we're committed to our customer tailored approach by which we actively manage our production Network and inventories along with the implementation of a thousand range of customer agreements the net effect reduces. Our price volatility evidence can be seen in our more stable 2019 pricing profile.

We all Focus.

Some strengthening our leadership position and Specialty and differentiated t o two made possible by our unique mix of assets our specialty and differentiated tio2 portfolio provides. Then it's all the ability to partner with customers in higher growth and higher value applications. We continue to invest in strengthening and diversifying our products late and it is these applications which contributed most of our 7% volume growth in 2019. We remain focused on enhancing our competitive position in all our businesses. We accelerated the delivery of odd business Improvement program and delivered twenty million dollars of improvements in 2019 versus the original Target of ten million dollars, we expect to deliver the remaining cost and operational. It's Jesus Promised including the incremental benefits related to our color pigments business. Additionally. We are actively evaluating opportunities to optimize our manufacturing capabilities wage.

cost base to further

Improve our profitability. We remain intensely focused on reducing our cash uses and improving our free cash flow and are taking meaningful steps in 2028 Kurt mentioned we expect to reduce our capex spending by approximately Thirty million dollars and our spend related to the story closure expected that increase by approximately 45 million dollars compared to 2019. We are fully committed to maximizing shareholder value through active portfolio optimization in the near-term. This includes exploring the potential sale of our color pigment business, which is ongoing

Longer-term tio2 industry fundamentals remain favorable We Believe CO2 industry inventory levels improved in 2090 and are lower than they were this time. Last month capacity additions are well understood and in line with normalized industry growth rates We Believe executing on our strategic priorities will enhance our competitiveness and create long-term hold with that. We thank you for your continued interest in venator over now like to open the call for questions. Yes. Thank you. We will now begin the question-and-answer session month to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to try your question, please press * then two months this time. We will pause momentarily to assemble the roster.

And the first question comes from David Fisher with Barclays.

Yes, good morning guys. First question is you're talking about the changes that you're thinking about for the poor recap X. Maybe I missed a bit. Can you quantify how much different do you think the new plan will be from the old plan as far as you know end game and then, you know the capex that we would need to spend for that.

Yes, I will. Let me help you out. Not the assignment here. Look, you know, I think September 2018 was when we announced program for Paris that was about eighteen months back. I think we can all see those six months have been pretty challenging. We had a pretty significant D stock in the second half of 2018, you know, very modest growth in 29 at the industry level. And now of course as we enter the year, you know, Thursday further uncertainty with coronavirus and so forth. So, you know, if the circumstances are change, I would like to point out here that you know by Far and Away the largest part of the cash spent here at Paris is in the club and wind down costs and we have got most of that spend behind us of the 280 million. We announced we spent the 180 that would leave us a hundred million dollars to run in. We'd expect that to you know, be around twenty million dollars as a curse. And so, you know, that's sort of like the Lion's Share of the cash on the capex side of the Ledger which is to your question here, you know, we've been exploring wage.

To optimize the remaining trance.

Through the business again and we expect that to come in at a higher economic return. So look we are looking at a lower capex for the remaining portion that would until a law, you know, but of course as I said, hopefully with a similar or higher economic return, we're still working through that deathly we don't have a number yet that we prepared to share in that regard. We still got a long ways to run but I would point out that, you know meant for many of our products. The transfer is complete and behind us. We spent fifty million in nineteen with some more suspended 2012.

Okay, thank you. And then if you could maybe just walk through your large end markets and how fast do you think public consumption growth was for those in markets of tio2 in 2019? And then what would you anticipate for 2020?

Okay, so look, you know as I said early 2018, you know was a a terrible second half from Adam and point of view. I think you know our view is that 2018 year of the industry contracted by about 6% There was some more positive year-on-year growth in 2019 at the industry level nominal positive growth for us. Thanks mainly to our you know new products. We sort of outpaced that overall but if I think about it from a you know, 2019 watt sort of like Advanced faster or slower. I think you know, in fact is probably to to tears in that answer at the applications level, you know, rather than the geographic level. So let's think about the applications first, you know, I don't think that what we saw in 2019 between Coatings and Plastics at the aggregate level was dissimilar around the world. But of course we would pick out wage.

You know Automotive coatings.

And parts of Interest which definitely were in that second tier of lower growth. And and you know, from what we can see why we're not big on that and CO2 exposed to it in our absence business, you know, that is still persisting. So, you know, that would be an example of the second-tier predominantly. I think we saw a demand for our inks and other Specialties coming through in 2019 in the way we expected to which was apps or even slightly above larger functional markets. We would call out as a second here as of the textiles application. We had a very soft end to the year. We called it on our previous school. I think we called it again on this call so that again would be you know, a sort of like lower rate. So if the question is by application, where do we notice the difference? I think we'd have to Center in on Automotive Coatings and you know, uh textiles in the CO2 world and similar age.

And additives would have seen that in.

You know autos and electronics to some extent and Plastics and coating depending which Market you're in so that explains it by a by a applications point of view, Of course, I think that obviously the geography lens if we put the geography lens on that. Of course, it was the Chinese softness in the second half that stood out for us on a geographic basis. I hope that's responsive to the question of what we saw in 2019 2020. Look, you know, we absence coronavirus as we close last year and coming off the back of the net, you know contracted industry these past two years of let's call it 5% and we would ordinarily expect the GDP GDP plus Rebound in 2012-13. The question is so what degree does Corona virus affect that or delay that and you know, we don't have the answer to that. I'm not going to represent you that we do but that would be our thinking hitherto dead.

We don't really we can't read.

You say too much on coronavirus other than the year started off the first six seven weeks of the year has started off our sales in the aggregate in line with our expectations down the first in a staff the year, the only notes of all, I could make was that you know, I do think in the broader Asia region, there is some heightened, you know concerns around Supply ability out of China for two as a result of the coronavirus and that that we have felt that a bit and heard that and received that a little more in this first start to the home that helps great. Thank you guys.

Thank you, and the next question comes from David begleiter with Deutsche Bank.

Thank you. Sammy. That was my folks as well the supply issue in China and how that might impact your your operations in Europe. Are you are you seeing yet? Any strength Chinese Imports into Europe and get that support. Do you think some of these pricing issues that have been out have been announced? Yes. Hello. This is there's a number of themes in that question. I'm going to break it out a little bit there. But let's focus in a little bit about the Chinese Point reminder, of course to everyone. I think people are well aware that you know, we are not seeking to be, you know, the largest importer of products to China we take technical specialty and differentiated products into China One of the smaller importers. So we don't see the kind of direct head-to-head competition within China although off what we have noted in the second half. The last year is softness within China. We've noticed the Gap in price and kind of develop wider between local Chinese prices and

And more Western producer prices. We've noted that the majority of Chinese producers have announced price increases.

In fact, and I would you know point out that the smaller producers in China were already under pressure and this latest development with coronavirus will put them under even more precious. So while we might be hearing sort of like concerns around, you know, the ability of China's export we certainly here in that from our customers as I said, we sort of yet to put any tangible evidence there. That's why we've been very cautious on calling it regarding the broader exports Point. What I would say to you is you know, what we saw in 2019 was this sort of a Repeat Performance of a a million tons of export out of China we continue to see that the Lion's Share of those exports went to emerging economies and that one second half loaded notably because of the trade disputes and so forth importantly though exports from China into the combined Market of North America birth.

Declined on aggregate by around 15% So, you know, hopefully those calibration points can help answer your question now very helpful and just left the and feedstock or cause what were the upper 2019 Simon and what's your expectation for 2020?

Sorry.

Thanks for calling you know if we took over all Roars and and and feedstock. We said pretty early on in 2019 where we had some clarity there that we'd expect to walk around forty million dollars of of inflationary pressures in 2019 3/4 of which would be in the feedstock area. And that's basically how it played out in 2019. You may recall on our previous call. We said that we didn't see the same kind of justification in case for similar type inflation a precious in 2020 course not solve you. I think it's fair to say that we expect we still expect more modest inflationary pressures in 2020 off without giving a number. I think we can say that the pattern remains from feedstock and within that predominantly high-grade feedstock for the patterns are quite clear. It's fair to say also wage.

continue to negotiate

hard with our suppliers around the eventual inflation costs

Thank you.

Thank you. And the next question comes from Bob court with Goldman Sachs.

Good morning. This is Dylan Campbell on for Bob to provide some background on your recent price increase announcement. I guess on the back of raw material inflation. What does that price increase cover that raw material inflation? And then I guess the second is you know, if lower inventory levels now and if we get into a situation where demand starts to improve again, what kind of tear to sensitivity to tightening conditions concerning the value stabilization efforts and done by some of your peers?

Yeah, like we we let's be clear about stabilization. We continue to be through our customer tailored approach, you know Advocates and proponents of stabilization, you know, we have stabilized are perhaps the last three quarters unfortunate that we have unboarded some raw material cost. So as we go out to customers, you know, we are looking at what has happened to date and what is yet to happen in 2012 as reasons why we would be adjusting prices upwards to you know restore margins, of course as we saw in the stabilization process, you know, the the the rates of adjustment a movement quarter-on-quarter would prices was relatively small so, you know, we're not prepared to going to what degree we cover Rose because of course, you know, we still you know, negotiate with our uh consumer and if you could do and remind me of the last part of question, I would be grateful. Yeah, I guess the price increase and whether that's camera covering the raw material inflation wage.

They're expected to see.

Hello Kim mean as I said earlier to my earlier answer we would ordinarily expect to see growth in this CO2 industry above GDP and a year after we'd you know had two years after we had traction and where we progressively lowered year-end inventories. So, you know, I think we well set that we've taken the decision to go out because you know, we want to tackle these Mark precious of course and as part of the stabilization initiative it remains to be seen, you know, what will happen with, you know, tightness on the go for Faith or the rest of 2020 because we've got this near-term lack of clarity around the coronavirus, but ordinarily we would expect it to help Pace GDP and that of course would provide birth the conditions for price increase in 2020. Got it. That's helpful. And I guess in sales Max looks like that was down 2% on a year-over-year basis. Can you provide some color there and whether we can expect wage?

similar Trends in to

2448 specifically I think that relates for the moment predominantly Dylan to the specialty segment and I think as you're aware we closed last year with a soft specialty segment predominantly in Asia censored and shown assented textiles application.

Got it. Thank you.

No problem.

Thank you. And the next question comes from PJ juvekar. What city?

Morning Simon. It's Eric Pizzeria on for PJ. Hey, do you think we're at a trough with fourth quarter ebitda margins or do you think there's still risks in first class at least attributed it to coronavirus in a like

well, certainly if they're risk. Yes. I think you know, there's risk, but of course, you know that could play out in unexpected ways. And and that's quite hard to predict here. You know, I've heard various people Advantage various reasons why it could be sort of like a a net-positive but from our point of view what we would say is of course, you know, it was a seasonal soft quarter and fourth quarter. So, of course you have absorbed some issues typically them. We got some softness in specialty but you know, we expect you know to see some stability of pricing as we cross the year from 2019 to 2020 and of course you've heard earlier comments about price increases

Thanks and second.

Oh, yeah competitor announced that they could close Eve sulfate capacity at the end of this year and next. Could you do the same or talk about the competitive dynamics of voice Bergin erdogan?

Yeah, I mean look, of course. Could you could you go down the path of closing I said, yes, you could and I think you know over this past many years. We have faced up to those difficult decisions when she wants have become older and sub economically. Yes, you could of course our view though is you have to look at both the competitiveness of the plan and the net revenue stream that's is included in each of those plants. And I think as we alluded to in our uh, you know call earlier in our prepared remarks in CO2. We will continue to further look for optimization and efficiency opportunities within our broader circuit reflecting the fact that you know, 2019 will see the end of our you know, currently running the Agape we found ten million dollars of color based Improvement. And you know, it's a way of life in this business. We expect to go back look for further opportunities and as we I dead

For those we will share those with you.

Thank you.

Thank you, and the next question comes from John McNulty with BMO Capital markets.

Yeah, thanks for taking my question. Can you give us a little bit of color at least as to what insights you have is to the customer inventory levels and kind of where they stand relative to kind of the normal seasonal page him for for this.

I don't think we'd if I go through it by region, I don't think we'd see anything out of the ordinary in the United States. I'd characterize those inventories at this time of year as normal similarly off Europe, you know, we did not see any evidence. And as I said to you earlier, you know, we had seen lower Chinese exports on a net basis into European States combined in in you know, 2019, but you know, I think that it's fair to say at the industry level that our calculations and estimates in venator would suggest that you know, the closing year-end inventories at the industry level, you know were at least 10% lower than where they stood at the back end of 2018. So I think that's a that's a good as a metric we can give you.

Great.

Helpful, and then just with regard to the color pigments business. I know you can't comment on the assets held can you give us some color as to how the cost-cutting program is working there and then kind of where you know what you've what you've pulled out this point in and and how that's progressing as you kind of looking through 2020.

Yeah, I mean, yeah, we identify ten. You know, it's not a front-end loaded program similar to the CO2 area. It's a mixture of projects a smaller running projects, which don't require Carfax around a multiple in the instance of sight. So it's not dissimilar attempt by we're facing and fragmentation to its larger kind of tio2 cousin if you want to think about it that way.

Great. Thanks very much for the color.

Thank you. And the next question comes from Josh Specter with UBS.

Yeah. Hey guys, just in terms of thinking about potential China impacts and one Q. Can you help us understand how much of your sales go directly into China and how much of Europe and kind of rest of your life goes into products that you think ultimately end up in demand in China. I mean that second one is is pretty tough because you know, if you think about ourselves and say Europe North America into the bigger the larger established sort of like applications like Coatings and and Plastics. Well, hey, you know Coatings decorative Coast particularly generally don't travel very well in lots of liquid associate with the final product. So the answers there's minimal. I guess there's probably some special part of Coatings that does make it did tell plastic in the sense that you know, you tend to see a more, you know, special plastic decide you tend to see the more commoditized plastic flowing out of China into the rest of the world. I think that the second part of the question is is really from our point of view is not that much we sell into wage.

West San Marcos ends up being sold to consumers in China will be some but not much in terms of the first.

The question, you know the way I think about it is that you know, we are one of the smaller exporters into China and I will be surprised if our sales are of the junction of the Imports is greater than 10% of All Imports. So again, they they go to specialized and differentiated applications predominantly.

Okay, thanks and just in terms of your volume growth year-over-year you talking about that being led by new products. So I assume volume loss last year. You're not filling those same volumes. I guess. I'm trying to think about that Dynamic of maybe where you're selling those new products into and what are the kind of end markets where you getting some additional traction? Well, I'm certainly happy to you know, talk a little bit about 7% you know, a year-on-year increase the bulk of that came from product new products and the way to think about it I think is in three buckets. It's about you know, new laws like functional products and grades that we've launched which have been extremely well taken up in Plastics and Industrial Coatings types of segments. And another way to think about that is from vacation play point of view, you know, you you will recall that we took on, you know, the laminates business which is a diversification play for us. But again, you know, it was absent from pre-birth.

Yeah sale so you know that.

That's the way we think about those new product sales.

Okay. Thanks.

Thank you. And the next question comes from Steve Brian with Bank of America.

Porsche over Steve thanks for taking my question. I wanted to talk about the Middle East the bottleneck projects. Do you see any product coming from the Middle East and hitting Europe from these projects off?

We not in a position to comment on that but you know, we haven't seen anything of that type.

Okay, sure and just a little more high-level. Are you seeing any further reductions of tio2 content by global paint manufacturers and conversely are there any new developments in our office regarding new applications or products that you think could benefit from increased tio2?

I think fundamentally the first the answer your first part of your question is no we're not seeing any of these quite stable, you know prices have been stable and we had you know some turbulence in thank God, you know some ten years back almost now, but no we don't see that as a fundamental driver. That's the second part of your question and there's nothing near-term that we see that would lead wage any sort of even you know, material radical, you know improvements in you know, overall consumption, you know, that's you know, I wouldn't want to when it never say never of course, there can be some embryonic applications that could lead to that in our ears, but you know, that's really not a near-term issue.

Sure. Thank you.

Thank you. And the next question comes from Lawrence Alexander with Jeffries. Could you Benchmark what the current sales run rate is for the assets under potential wage sure. And as you've seen sort of you know, the mix of your business change has there been any significant change in seasonality home first half vs. Back half compared to what was the run-rate before the most recent downturn?

Lawrence this time they can I just clarify the point you of course, both of those parts of the question relates to the performance additives business knows of the second one is just across the entire portfolio home. Okay, my friend earlier to serve normal seasonality. Just just want to be clear that that has not changed in any way as you've shifted your portfolio mix. Yes. So to be clear then the second off your question is seasonality, you know, we do not see any fundamental shift in seasonality across to2 or the performance additives business. That's not to say necessary though. Of course the sales of minutes that it all cases because you know as we've seen over these past couple of years, we've had soft spots Automotive off earlier and our textiles a segment at the back end of 2019. So, of course the can be reasons that it doesn't apparently look like seasonality, but we don't think the bass season alibaug.

That's the second part of the question. Sorry. Could you repeat the first part about color or passengers on the sales run rate that you're looking to divest you gave that you mentioned the other. Just want to double-check if you know how what the sales rep is looking like.

Lawrence this is Kurt will follow up with you on the on the sales number. We did want to provide greater transparency tours around the the Eva. So you had a sense for what the contribution was from that from that color pigments business, but because we haven't broken out the sales, I don't I don't have that with me right now. Happy to follow up with you later. Thank you.

Thank you, and the next question comes from our room because Juan with the RBC Capital markets.

All right. Thanks. Good morning. I just wanted to go back to the the China issue. Is there a way you could kind of share what you generated in sales and needed done in China and 2019 Chef broadly? No, I don't think we'd be prepared to share that information.

Okay, then and then also you commented on the export situation, uh out of China and into Europe as being potentially more benign. Could you share more details on Thursday? Thanks. Yeah, I didn't actually say it's potentially more benign. Well, I may have may have inferred that. Let me back up and be as clear as I can be about this. What I said is dead. We look back over these past. At last year for instance or even prior to that. You know, what we have been saying about China is you know, the trajectory of supply and build rate in China has been slowing. Of course, we saw inspection environmental issues has been a number of setbacks faced predominantly by but not exclusively by a smaller Chinese producers and the net effect of that coupled with the fact that Western customers are extremely concerned to get dead.

Supply reliability and quality consistency

Has meant that Chinese exports to Western markets of North America and Europe while they have grown in last year specifically were actually lower than the price. Yeah. So, you know that had been this notion that you know, Chinese products would you know go onwards and upwards into Europe and North America that has not happened. I believe that's fundamentally relates to you know, the two factors I mentioned in a supply reliability for whatever reason and their quality consistency.

And then just lastly if I may just send that on the price increase announcements, I guess what would you characterize as your as your life, you know chances of success for these increase announcements and what would drive kind of success there? Maybe just contextualize that with your raw material Outlook as well Banks.

Yeah, so look, you know high level basis. We convicted to these price increases, you know, we have done we have worked very closely to listen to our customers around, you know, managing their pricing and they have that ability for us. Our margins got compressed. It looks like there's going to be a bit more of it. So we're going to move our prices and you know, we aiming to offset our raw material inflationary pressures, you know, I you know, we it remains to be seen as to how that plays out. But you know, I think that we are certainly convicted to support those in all major regions.

Thanks.

Thank you. And the next question comes from Vincent Andrews is Morgan Stanley.

Hi, this is Steve on for Vincent. Just wanted to come back to the segment margin discussion and tio2. So if if you guys did about 12% this year and if if that's kind of what we're going to call trough and then in 2017 and 2018. You were more in the mid twenty percent, you know, clearly probably not getting back to that level, but can you kind of help us frame, you know kind of what the reputation of this year, you know kind of you know, what that being the bottom and the and the top kind of ends of the range.

Yeah, this is Kurt. I'm happy to take to take that. I think that our success in 2020 will largely be predicated on how successful we are with the the sales price initiatives that we have. We think that it was The Prudent thing to do to pass along the raw material inflation that we've seen in 2019. And as you have heard us outline, we are aggressively tackling our costs which would also serve to improve our jobs. But but difficult to to put a number or even a range out there for you. We're we're still early in those price negotiations. And so I think we'll just we'll wait and see how those how how those come in.

Okay. Thanks guys.

Thank you and the next question customer with Olympic Global morning time in the morning, you know, just wanted to go back to the pricing, you know, tio2 pricing also some of the Dynamics going on on the other side of things, you know, this you guys talked about wanting to offset higher or costs. You know, from what I've been hearing. It seems high grade or the availability of high-grade or seems to be questionable mean, you know high grade or seems to be very tight supply-demand wise. So my question really is good. We sort of enter twenty-twenty with a situation where a high grade ore is tighter than titanium dioxide and the industry actually struggles to pass through those higher or costs and maybe you guys

You know being far more sort.

most leveraged women might benefit from those Dynamics

Well, I think you know, thanks for the question. I sent I mean I think that this point about how how I agreed lower grade. You know, yours is a continuation of a theme that has developed over multiple years. And and of course, you're right back to point out the high-grade markets are you know more so the less sort of like a vendor choices in those markets and it's true that we have seen in the higher grade buckets particularly in route off and to some extent some of the sort of operational ups and downs in in chloride flags that that has become tighter. You know, I think we can see our sort of way through this office near Park 20/20 typically as we've said before we would go to like try to bolt down requirements and prices in the front half and then come back with second-half typically six months type negotiations. I'm not sure we're at the stage yet, which you imply I would also say on the on the lower grade that you know, despite the fact that there there are still inflationary pressures at the lower grade level. It's just they have ma'am.

You know eventuated in a pattern that we've seen on the hybrid.

Can you appreciate the fact that you know coronavirus ongoing tough to sort of figure out what demand impact it may have but you know, obviously the supply side tends to be a bit more visible. What are you guys seeing in terms of Supply curtailments 42 in China on the back of you know, the Coronavirus?

I think you know as I said, I take our comments here, you know appropriately how sign in the sense that we not the big window on the world for China in the world of CO2 because of the limited amount problem taking you know, so we have seen and heard of the type of Dynamics over the Lunar New Year where you know holidays are extended and whether that's home, you know affected the workforce Logistics infrastructure can park and geography. Of course, you know, there were broader impacts that meant that supplied got interrupted. The question is, you know, it does that rumble on and continue and that's the part. We do not know the part we've seen is cattell massive disruption over so like off limits the time Window app and somewhat beyond the Lunar New Year. We've yet to see anything, you know more fundamentally different from that.

Understood understood helpful and as a follow-up, you know.

Very helpful Simon. Thanks so much.

Thank you. And the next question comes from Jim Sheehan with SunTrust morning Simon. What are your plans for the poor eyesight? Is there any opportunity to monetize the remaining assets their life and how would your exploring of options for cat backs and so forth affect that decision making

Well, look, you know, I think an important Point here. It's a notice, you know as we've already transferred some of those Specialty Products. We're still committed to further transfer of specialty business. Let's be very clear about that long, you know that is a strategic, you know imperative for us with in Venice or so, of course, what we're doing here is you know, we have to be prudent with cash for well understood reasons that forces us to examine each and every part of our cash usage including all parts of the, you know, current and anticipated capex Bill and that's what we doing. It's about pregnancy with cash not it's no reflection our commitment to Specialty. I want to be very very very clear about that. That's something we still deeply believe in, you know, are there opportunities to potentially sell the sites or part the site does yes, there are are we exploring? Yes, we are. So we will leave no stone unturned there to see if there's you know alternative usage for that site dead.

we have been successful on several occasions in our past as we've closed various sites and you know turn

Those into opportunities for others. So I think that's a path will continue to be a lot of focus on that in 2020. And of course we're going to work through their our best option for being prudent with the cash optimizing our return from other specialty business transfers and you know, we'll update you when we get to that point. We don't have that number here today.

Okay, thank you. And on your tio2 business what level of volume growth is realistic in 2020 given the improvements you've made in your specialty production Network and and also new products. Do you expect to outgrow the market again in 2020?

I think it goes back to him to my earlier comment about coronavirus. You know, I think that you know, there are times when this industry on the demand profile where things are more or less clear and fortune on one of those lots of periods where the demand is less clear near-term. So I really does heavily depend on how that evolved and it is evolving David a week-by-week all that we can point need to is, you know, we would expect industry rebound GDP Plus in 2020 ordinarily and we'd like to think that still happens. And of course you have to factor in the fact that we are broadening diversifying and strengthening our products late. And of course that will also plays into our ability to to manage our volumes.

Thank you.

Thank you. Thank you and the next question customer base with Bank of America.

Thank you. Good morning. Your price was down 7% for the full year 2019 verses eighteen. But can you comment on what the 2019 price it was bifurcated between chloride process. Do you have a 2in sulfate process? For instance? Another large tio2 producer who has only chloride processed reported its price was only down 1% off the full year of nineteen.

Yeah, I think this is not this is not a chloride sulfate situation per se at all. This is first and foremost a regional footprint discussion because in 2018 with us having a 50% of our revenues in Europe and the European dollar selling price being some $300 plus greater than North America wage. That is what plays into a year on your price decline. That is the driver not the application. What I would say is that generally speaking our specialty theaters, which just happened to be a clue Civ Lee sulfate, of course those prices are more stable. So they did not drop in that. In any material sense. What I would say about the remainder of our business hour wage sales here. We've got a mixture of chloride and Sulphur into those businesses and and the way pricing evolved was more a function of customer size than it was of Technology.

I see.

I believe you said that Global to demand declined for the industry by 6% early in the call. If I heard that correctly your volumes were up 7% in 2019. Would that imply that you took market share?

So what I'm saying is that you know, it's going to be back track again. I said the in 2019 we estimate that the industry struck by 6% over two thousand and three eighteen over 70 by 6% A nineteen group. I am modest amount. Let's call it 1% so over that. That's 6% related to the prior but coming back to your 7% number. It's a very strong forward assessment here. If you Pro format out the you know, extra Diversified laminate acquisition and the introductions of specific new products walk through in line with the market.

Thank you very much.

Thanks.

And this concludes our question-and-answer session. I would like to turn the conference to assignment Turner for any closing comments.

Thank you. Thank you. If you're interested in van, it's all we look forward to speaking to a meeting with many of you throughout the quarter in the interim. If you do have any issues, please reach out to Jeff with additional questions. Thanks again for joining the call and have a great weekend. Thank you. See conferences concluded. Thank you for attending today's presentation disconnect your lines.