Q1 2020 Earnings Call
Greetings and welcome to the Huntsman Corporation fourth first quarter 2020 earnings call. At this time all participants are in listen only mode. They question answer session will follow the formal presentation.
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This conference is being recorded it is now my pleasure to introduce your host Mr., either more KUSA Vice President of Investor Relations. Thank you Sir you may begin.
Thank you Donna and good morning, everyone. Welcome to Huntsman first quarter 2020 earnings call joining us on the call today or Peter Huntsman, Chairman, President CEO, and Sean Douglas Executive Vice President CFO. This morning before the market open we released our earnings for the first quarter 2020 be a press release, you posted to our website husband Dot Com. We also posted a set of slides on our website.
<unk>, which we will use on this call. This morning, while presenting our results during during that call. We may make statements about our projections or expectations for the future. All such statements are forward looking statements and while they reflect our current expectations. They involve risks and uncertainties and are not guarantees of future performance you should review our filings with the assay.
She for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward looking statements. During the quarter. We're also refer to non-GAAP financial measures measures such as adjusted EBITDA adjusted net income.
Free cash flow you can find reconciliation to the most directly comparable GAAP financial measures in our earnings release, which will be which has been posted on our website. That's been dot com I'll now turn the call over to Peter has been our chairman President CEO.
Thank you very much Ivan good morning, everybody and thank you for taking the time to join US, let's turn to slide three and four.
Adjusted EBITDA for probably your things to pitch and then the first quarter was $84 million versus the $124 million the year ago.
Total Wendy I volumes in the quarter were up 2% as growth in the Americas and European regions for the first two months in the quarter, we're able to offset volume declines in Asia and slowing global demand trends experienced during March our differentiated margins remained relatively stable. However, we continue to.
We experienced pressure on Pall American component margins is softer demand differentiated markets.
Added to the existing margin pressure and upstream Paul American with more than <unk> being diverted into the polymeric markets.
Despite the near term headwinds, we remain committed to our long term strategy of investing in our downstream businesses and further differentiated product innovation.
We are confident that the positive long term trends for Mds urethanes around substitution and sustainable products solutions remain intact.
Looking at Polyurethanes regionally for the first quarter our Americans.
Volumes were up single digits, Oh for the prior year.
Well automobile automotive was lower in the quarter several of our construction related markets saw growth versus the prior year, our acquisition of ice and mean Lapolla, which closed on February 20 added 3% to our growth in the Americas in approximately 1% globally the integration of this.
Business with our existing freight polyurethane foam business, it's hit the ground running, especially given the current environment. We're looking to move as quickly as possible to fully integrate this business and to achieve our synergy targets by the end of 2021.
We expect to achieve approximately $15 million an annualized synergies.
Combined immigrated business is projected to have EBITDA margins well in excess of 20% and will be a leader in the sustainable high growth market.
Within the few years within a few years this will be a business with EBITDA in excess of $100 million, it's a remarkable eco friendly product, especially so when integrated with our Carol Polyols business.
Take equivalent of 1 billion P.T. bottles, otherwise wasted as feedstock and produce a polyester polyol that is blended with M.B. I to produce the best and most versatile insulation in the world.
This is a very compelling sustainable eco friendly alternative to traditional insulation products, we will continue to leverage our global footprint to grow this business in international markets.
In order to appropriately manage our discretionary spending and the current environment, we've decided to push out our splitter project in Geismar, Louisiana by six months now estimated commence operations in mid Twentys 22.
This will reduce our current year capital spend by $40 million.
Project IR, our remains well above our hurdle rate and we see this split or as fundamental to our long term differentiated growth in North America.
Turning to the Asian region of Polyurethanes, our overall volumes were down 8% our installation business was up 11% over the prior year, while nearly all other business categories were down double digit except for our footwear and ace businesses that were down single digits.
Due to the Cobot 19, most Asian markets saw sharp declines due to mandatory shutdowns and other restrictions, which impact production supply chains and end user demand.
Well the region declined overall for the quarter, China saw improving trends starting at the end of February through March.
We're cautiously optimistic that the worst is behind us an eighth in China.
In Europe, we saw overall mid single digit growth in the region. However, with the acceleration of the pandemic, we saw a weakening volumes toward the end of the corridor.
Now looking forward to the second quarter, all but a handful of our polyurethane operations have remained running albeit at a significantly produce right.
Up to this time, we've not lost any customers or orders due to the closure of these facilities.
Our Urethanes business is currently experiencing a significant impact on demand due to the global economic Catholic Reik read by Cobot 90.
Its impact on demand is being felt in just about every one of our core markets to be clear.
We've never seen this sharp of the decline in global demand in such a short period of time.
Differentiated margins remain resilient, however, except for in China, both our differentiated and component product volumes are being significantly impacted.
Seasonal uptick that we typically see the second quarter, there's not happening.
This year as we have essentially lost the entire month of April everywhere, but China.
Our expectation for May and June our four sequentially improving conditions.
Give you some idea of the declines we've seen our automotive related businesses in North America, and Europe solid orders in the month of April versus the prior year decline between 75 and 90%.
Even in China, which is believed to be on the backside pandemic, we saw orders materially lower than a year ago.
And our construction related businesses, which would include installation and composite wood products orders were down around 40% in April and both America in Europe.
No. The current global economic crisis is much different than the 2008 nine financial crisis and ensuing recession. It is our best comparable period, we can point to.
Important to note that we have had learning.
We have learned a great deal from past crisis has significantly improved our business over the past 12 years I'd like to highlight some of the key differences between our polyurethanes business today versus that.
First we no longer have RPL MTV E business that we sold beginning of this year.
Secondly, we've increased our overall capacity by roughly 370000 kilo tons or 38% with expansions in all three of our upstream sites in counseling, China Rotterdam, Netherlands in Geismar, Louisiana.
Also and most importantly, since 2009, we meaningfully reduced our proportional exposure to the more commodity end of the portfolio and have greatly improved our overall product mix through our ongoing investments into differentiated businesses, including stated the arc splitters in Rotterdam and couching struck.
Dziedzic bolt on acquisitions in global scale ups.
This increase in differentiated products amounts to approximately 800 million pounds.
Lastly, in 2008, nine we had meaningfully higher inventory levels, including excess of levels of high cost benzene, which resulted in a significant drag in profitability for in suing quarters. This time around we've entered this crisis with tighter inventory levels and significantly less benzene.
Though our Polyurethanes division today. His continued has continued commodity end exposure. We believe that we have meaningfully lifted the level of recessionary trough EBIT da.
Keep in mind that each recession is very different in terms of cause and effect because of the investments. We've made over the last decade, we believe our current trough EBITDA will be well above the previous trough, which was around $150 million. During the 2008 2009 period pro forma.
For the elimination of the PEO MTV results.
Summary, our visibility into the second quarter remains tough currently we can only see about three or four weeks ahead at best.
With the expectation that our volumes could be down more than 30% versus the prior year, we expect our EBIT da could be around breakeven in the second quarter.
However, this is highly dependent on the speed and timing of recovery in the number of product segments in the coming weeks and months.
Let's turn to slide number five.
Our advanced materials business reported adjusted EBITDA of $48 million down from 53 million in last year's first quarter a decline in adjusted EBITDA was driven by 11% lower volumes in the quarter due primarily to softer demand in our commodity industrial and aerospace markets.
Partially offset by improved demand trends in markets, such as electronics and power or China demand started off week, we saw improved trends throughout the first quarter, which has continued into the second quarter.
Specialty end of our portfolio did perform better than the overall segment average, but still declined 6%.
As one would expect to see from a differentiated business with 85% of its sales revenue coming from a strong core specialty products. Our margins remained very resilient. Despite the volume headwinds we experienced.
We remain on track to close on the recently announced acquisition of CVC thermostat specialties over the coming months, we look forward integrating this highly it's high margin specialty business into our advanced material portfolio.
This business augments.
Our already attractive portfolio in areas, such as structural adhesives coatings in composites. Furthermore, it will significantly strengthen our business in the Americas and provide us commercial opportunities to leverage our global platform by taking this product into our well established Asian and European markets Corning.
We will look to accelerate the integration of this business and to achieve a full run rate of expected synergies as quickly as possible. We expect to achieve a run rate approximately $15 million synergies within the next two years.
Hope at 19 will have a material impact on several of the core markets in our advanced materials business through the remainder of the year. However, it is worth highlighting several key differences between our advanced material business today versus 2000 versus the 2009 recessionary environment.
Da fell by 50%.
First our exposure to commodity basic proxy resin and wind markets is substantially lower today, our portfolio today significantly more diverse and differentiated versus prior years with round, 85% of ourselves now going into specialty markets. Additionally in contract.
To our business in the past recessions, we've taken approximately $40 million of cost out of the business.
Although today, we do experienced significant headwinds in our aerospace business, which are now which is now a bigger portion of our EBIT da today versus 2009, I would like to point out that roughly 30% of our aerospace business today goes in to other markets such as military applications in repair maintenance.
Which will be less impacted that new commercial aircraft build.
Despite the likely volume challenges for the remainder of the year. The advanced material business will remain focused on the integration of CVC managing down costs.
Growth in certain markets to help offset weakness in others and retaining the value, but specialty products in order to keep overall margins steady visibility remains low and segment EBIT da in the second quarter will be down.
More than 45% versus the prior year as volume weakness across most of its core markets will be partially offset by improving trends in Asia and the lower fixed cost.
Let's turn to slide number six.
Performance products segments reported adjusted EBITDA of $58 million compared to $45 million in last year's first quarter volume in the quarter brought down 3% versus previous year remain very solid.
Throughout the quarter higher volumes and performance of meetings were offset by lower volumes and ethylene that means in Malaysia.
Format products performance products margins were favorable favourably impacted by lower raw material costs stable pricing, good cost control and roughly $5 million in lower cost benefits that would not expect to be repeated.
As a reminder, unlike our other three divisions, our raw materials.
Our procured locally our locally to the plants and a drop in raw material prices seen much sooner in this division.
Like all other businesses, we expect performance products to be impacted by the material slowdown in the global economy. However, there are some significant differences between this segment today versus 2008 nine time period, you pointed out most obvious differences that we've sold the intermediate chemicals intermediates and surfactant.
Businesses performance products, today's primarily made up of our means and my way can hydride franchises are means portfolio today is much more diversified and developed across different niche markets.
End use markets and regions with a much improved manufacturing footprint, our higher margin performance remains our a significantly larger portion of the total remains portfolio as well.
Our military business today is larger and the industry is more balance versus 2009, when the North American housing market was crashing and new Mallaig supply was coming into the market at the same time.
Finally performance product today as a larger overall exposure to the construction markets.
In North America, and Europe versus 2009, and much less exposure to the personal care products. However, we expect the more diverse niche industrial markets to serve it serves well helped to offset near term volume weakness in the construction market.
With a reduced portfolio.
Breath of today's business. This division is more focused versus 10 years ago, and we continue to look to control cost and grow in the high margin niche markets over the coming years.
We expect weaker overall market conditions in the second quarter to put pressure across nearly all of our European and North American businesses within that segment, which only be partially offset by strength in certain markets in China, such as wind as a result, we expect second quarter EBITDA could be more than 25% below the prior.
Year.
Let's move on to slide number seven.
Our textile effects division reported adjusted EBITDA of $20 million for the first quarter slightly down from the prior year.
Total volumes in the quarter were fairly flat year over year, but our specialty volumes grew 5% as we continue to benefit from increased demand for our leading technologies that off our customers eco friendly and sustainable solutions.
At the end of March and April we saw a sharp decline in volumes in our core markets due to mandatory government shutdowns impacting textile mills and regions, such as India banquet ash.
He has been compounded by significant order cancellations by retailers, who were experiencing a sharp decline in customer traffic.
Well, we've started to see some positive trends from retailers in China, our volumes in the second quarter are likely to be at levels not seen since 2008.
However, like our other businesses textile effects today is much different than during the recession of 2008 or nine first about $120 million. The fixed costs have been removed in the businesses have been geographically reposition and aligned to today's textile industry also our higher margin specialty businesses.
Have grown significantly over the last 10 years, we've strategically de selected.
From lower margin and less profitable product lastly, the destocking that started in early 2018 has left inventories throughout the supply chain very low levels, which gives us some confidence that once the global economies begin to open back up for business, we should expect to see improving demand trends.
And a quicker rebound than in past recessions in the near term.
The usual seasonal strength, we typically experience in the second quarter is not expected to happen, we expect second quarter results to be significantly lower versus the prior year.
For sharing some concluding thoughts I'd like to turn a few minutes over to Sean Douglas, Our Chief Financial Officer and at that same time wish him a happy birthday. She turns 48 years old today and certainly the best CFO leased on this side to the table so Sean.
Peter Thank you as 29 Im sorry 29.
Turning now to slide eight first quarter, adjusted EBITDA dropped by approximately $39 million or 19% versus the first quarter of 2019.
Our polyurethanes division's adjusted EBITDA declined by approximately $40 million were 32%.
Largely due to margin erosion in Paul American component empty I products.
Our performance products division's adjusted EBITDA increased by approximately $13 million were 29%.
Partially due to higher volumes and margins and performance means.
Our advanced materials Division adjusted EBITDA declined by approximately $5 million or 9% largely due to lower volumes, partially offset by lower fixed cost.
And our textile effects division's adjusted EBITDA was down modestly by $2 million with flat overall volumes.
Turning to slide nine.
Husband enjoys a very strong balance sheet with robust liquidity.
On January Threerd 2020, we completed the sale of our chemical intermediates and surfactants business for approximately $1.9 billion.
And on February Twentyth 2020, Huntsman completed the acquisition of the polyurethane spray foam producer ice being the Paula for approximately $350 million.
As of at March 31, 2019 announcement has a total liquidity balance of approximately $2.9 billion and a net debt leverage ratio of approximately three quarters of a turn.
On March 16, 2020, Huntsman announced it has signed an agreement to acquire the composites adhesives and coatings business CVC Thermoset specialties for $300 million subject to customary closing price adjustments.
No formal for this pending acquisition and the payment of approximately $375 million in cash taxes relating to the gain on the sale from our chemical intermediates and surfactants business all projected to be paid within 2020, our March 31st 2020 pro forma liquidity position is up.
Proximately $2.2 billion with April format, net debt leverage ratio of approximately 1.5 turns.
As of March 30, Onest 2020.
Last 12 months free cash flow conversion was a strong 48% or approximately 42% pro forma for the LTM onetime benefit of approximately $50 million from collecting overdue for and value added tax is as discussed in our prior earnings call.
Reclass cash flow for the first quarter of 2020 was better than we had projected from when we reported our fourth quarter 2020 results a few months ago, largely because of proactive measures taken to reduce inventory levels in response to slowing global conditions, we did not experience as backup inventory.
Where we build as was anticipated in the first quarter.
Additionally, our change in networking capital benefited from improved accounts payable metrics as we look into the second quarter of 2020, we anticipate a meaningful release of working capital largely as a result of softer economic conditions and further actions taken to manage inventory.
During the second quarter, we anticipate an inventory release of between $100 million to $150 million.
The net working capital change for the remainder of 2020 will largely depend upon to what degree the overall economy rebounds.
During the first quarter, we spent $61 million on capital expenditures in response to the rapid change in global economic conditions, we have reduced our current year estimated capital spend by approximately 30% or $90 million and now expect to spend between 225 to 235 million.
Dollars in 2020.
This includes a six month delay in constructing our MD splitter, guys Marlow, many Louisiana, which is now expected to be completed by mid 2022.
Total spend is still expected to be around $175 million of which approximately $15 million was spent last year approximately $40 million, which will be spent this year and the remainder which will be spent in 2021 and 2022.
During the quarter, we spent approximately $96 million to purchase approximately 5.4 million shares huntsman. Since we began our share repurchase is two years ago. In early 2018, we have repurchased approximately 26 million shares for approximately $580 million well above.
10% of our total shares outstanding from when we started.
Given the onset of the global economic crisis, we have suspended further share repurchases proton beam.
Our adjusted effective tax rate for the first quarter was approximately 18%. This is lower than our stated expected range of approximately 20% to 24% due to the global distribution of income in the first quarter.
We still expect that our annual adjusted effective tax rate going forward will be between approximately 22 and 24%.
In summary, our balance sheet and liquidity have never been stronger.
Our efforts over the preceding years to consistently deliver strong free cash flow build a strong liquidity position and a durable balance sheet have prepared huntsman well for the current global conditions.
We are focused on controlling discretionary spend and responsibly managing our net working capital in alignment with developing macroeconomic conditions Lastly, and importantly, we are committed to our balanced approach to capital allocation, creating and returning value to shareholders.
Peter back to you.
Thanks, Sean.
I think back over the past 20 years that I've been involved with the great team and managing this company I reflect upon the economic Fallouts of September 11, 2001 oil and gas bikes manipulation that sent our industry hemorrhaging cash.
2008, nine we entered one of the most profound economic shock the past 80 years.
As I look at the economic chaos, taking place Radnets I can't help but thinking of Shakespeare's where a quote this to shop pass.
So what are we done in light of past experiences by the end of March we emptied our inventories across the board to take advantage of falling raw material prices.
We more carefully tracked our cancellations of orders and the capacities of our manufacturing facilities, we cut our capex by 90% are evaluating every project to re negotiate better prices and better terms.
Carefully tracking the credit of each sale to make sure that customers remain current and low risk we've implemented a hiring freeze suspended merit increases for 2020.
Polyurethanes business, we've accelerated our integration and expansion of our recent spray foam acquisition to create the world's largest and most advanced polyurethane spray foam insulation business. We're also reviewing our structure and cost to allow us to obtain further economic efficiencies and better down.
Downstream growth.
Our vast materials will continue to bring to market its product pipeline of new and innovative products.
We will accelerate our focus to close on our recently announced CVC thermostats business simultaneously expand our products globally, while integrating cutting costs.
Our performance products business will become better integrated into our other divisions as we further consolidate our shared service platforms in target, an additional $15 million and cost savings between ongoing projects and Polyurethanes advanced materials and other corporate shared services, we plan to create over 50.
In dollars of savings by the end of 2021.
In short these are but a few of the projects and changes that we've started over the past two months, perhaps the biggest changed our company in past years, our balance sheet, we've taken decisive steps to focus on cash generation portfolio management to set us where we are today, let me be clear after the safety and wellbeing.
Our associates are number one priority is to maintain the strength of our balance sheet to this and as I mentioned earlier, we're cutting our capex by $90 million suspending our stock buyback and reducing our operating costs.
We will no doubt have the chance to create further shareholder value as opportunities arise, but this will be done within the confines of preserving an investment grade profile and assuring our future.
I can only guess where these markets will go in the coming weeks or even months, but I'm certain that huntsman will emerge a stronger company and when we started 2020 I'm confident that our products and technology will be on the forefront of Lightweighting energy consumption coatings adhesives transportation textiles constructions and thousand.
Tons of other applications that will build our economy and improve our future.
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First question is coming from Bob Court of Goldman Sachs. Please go ahead.
Thanks, guys. This is answering walk on for Bob.
I was just hoping to understand embedded within the polyurethane expectation of breakeven EBITDA are you idling or containing utilization levels at certain facilities and and as such taking on some unabsorbed fixed costs and trying to think through the moving parts of volume price.
We should get you down at those levels and of course, hoping to better understand the moving parts.
No I think that as we look at our Polyurethanes business, we will not be idling.
Any of our end the manufacturing facilities will obviously be matching the rate of production to the demand that we see further downstream at the present time, we see the demand in our Asian facility at around 70 ish.
Plus percent the Americas.
Probably somewhere between 55 and 60 in Europe around 60% and we expect in May and June those will continue.
I would just just say again as we look into visibility right now.
In the order books.
And we talk about a breakeven.
Scenario in Q2.
I would hope that.
That we're trying to be is realistic as possible when we look at.
The economic.
Slowdowns that we've seen over the last 30 days and with the visibility before us of matter of weeks of orders and so forth.
Yeah, I would just put some caution. This is this is.
This is the first time, we've really had a conference call that I remember over the last.
Well since we've been public where we haven't given more granular focus.
Internally.
On the coming quarter in the coming year, and that's just because of of the lack of visibility I mean these markets can change if something were to come out.
It was a vaccination or something forward with a cure I think you'd see a materially.
Better more optimistic future. If you were to see a second wave that were to culminate here by the end of May you might see more calamitous second quarter.
So I think the numbers, we talk about a breakeven I think that we're trying to get.
What we realistically see right now and we're matching that production.
Of our MD I capacities with what we see as the market right now.
Thanks, and then you previously highlighted anticipated free cash flow conversion for the year with the Geismar delay in your efforts around working capital any color you could provide in terms of how fleet free cash flow conversion could play got play out on a pro forma basis with all the changes.
Correct.
Yes, Anthony I think as we look forward to free cash flow.
Obviously some of those elements are fixed we know how much we're going to pay out in terms of.
Interest and taxes and pensions.
I gave some color around the second quarter of inventory, we see a meaningful release of 100 $150 million there, but the lion's share as you know will land on where we end up with earnings towards the end of year and that's something at this stage. We're just not venturing out because we just don't have that clarity to give you that.
So we're going to control we can control capex, we've we've reduced significantly by 90 million.
Give you some more color on some of the components I think you know this.
Cash paid for interest for the year, we'll probably be around 90 million Bucks.
Taxes will probably be around 80, 590 cash paid for restructuring probably around 20 to 30.
Tensions probably around 90.
And and so as you put all those together I mean, we're going to be aiming to do the best we can here to keep that conversion going with this this year is an anomaly and as we get back into normalcy.
We still target that 35% free cash flow conversion target that we have and are confident that we're going to be able to deliver that when things are normal.
Thanks, guys.
Thank you. Our next question is coming from Alex Yefremov of Keybanc. Please go ahead.
Good morning, everyone. Thank you.
Just trying to add up all the segments. So.
By the guide.
The the outlook can you just provided and sort of by higher math I arrived at around 30 million EBITDA in second quarter is this kind of the ballpark you had in mind.
I think that that.
That might be a little bit pessimistic, but you probably have people around this table that whether it would probably that's closer to a ballpark.
Again.
It's incredibly frustrating to me when when we have such such limited visibility as to where we're going to be in the quarter, but I wouldn't be too far off that number but I would hope that it would be on on the upside from that.
Thank you Peter just clarification on slide four you show downstream Polyurethanes EBITDA of 200 million. So that represents about 36% of your 2019 segment EBITDA So how wish.
Should we think about that in relation to this 70 30 differentiated component mix that you also show on that slide.
That 200 million should be looked at as the acquisitions that have been made an added to the business over the course of the last couple of years. So I would see those is being incremental to what we otherwise would have been making had we've been selling that India into a an open in general market now.
Obviously, theres, probably you get a number that that's that.
Broad theres, probably some subjectivity exact what that product could have been placed in the market and what that value was but.
I think its is accurate numbers is can become as we come up with when you start adding all those components together now I'd like to think that that does that as an earnings that we have achieved that otherwise would not have had we not done those acquisitions.
Okay. Thank you Peter.
Thank you. Our next question is coming from Kevin Mccarthy of vertical Research partners. Please go ahead.
Yes, good morning.
Peter a two part question for you on on M.D. I think you reference at autos were down 75% to 90% in April I was wondering it could you comment on what you're seeing in the other end use markets.
In April for Mds, and then secondly.
Benzene is obviously down a lot on the back of crude oil.
Look at this from a unit margin perspective, how do you see that progressing through the second quarter, recognizing your inventory flow through effects and so forth.
I would say that we'll start seeing some of the benefit of of lower benzene by the end of the second quarter, but most of that is going to be a second half.
Even even if our.
And by the end of March we had a record low inventory of benzene.
But just as a reminder.
We buy that benzene globally.
Shipped globally its doors, we make nitrile benzene, we then make aniline some cases, such as our European site, we make that aniline in the UK, we ship it across the channel into Rotterdam, and so there was inventory in some of those areas. So when we look at that benefit of benzene, even if we had benzene.
Literally running on fumes, which I think we're close to that by the end of March.
It'll take it will take two month or so to two plus month to worked out through the system. So I think most of that benefit will be a second half.
Sort of a bottom line impact now as we look at our businesses across the line you asked about the segmentation of our Polyurethanes and again I I would say that these are our.
Our fairly accurate, but I mean, it's really what we're seeing right now.
And these are obviously subject I think the two to probably improvements, but as we look at automobile.
Order patterns in April.
We're seeing kind of down 60% and urethanes across the board.
With.
Yes, that's close to 90 something percent in the Americas and down maybe 20 something.
Twentyish percent and Asia, but globally, something like 60% in May.
Thats around Dan we would say over the previous year about 50% in June we're forecasting looking orders and so forth down around 35% from a year. So.
I think as you look across a CW paid a composite wood and the other construction markets, we'd see April down 35%.
Year over year in by the time, you get out to June.
Looking at that orders and the best visibility, we have in talking to customers, so what that being down somewhere around 20%. So again, you're looking at an April a succession of improvement taking place.
Throughout may and Jim and I would see is similar.
The improvement to that.
And most of the businesses.
From elastomer, certainly going for you now 60% to 45% down a year ago. As you look out over April to June and again those are going to vary region by region. So.
Yes, when the when the automobile companies start manufacturing here in the next week or two are they going to start up at 20, 25% of the startup at 50%.
Oems, we think have very low inventory, we think there's just a very little amount of a product and that overall pipeline.
I think to that can be said for CW p. as we look at our customers. So as we see this improvement in orders throughout April May and June.
You know I've I've been in this industry long that you've just got to be an internal optimum by this point, but I think I think as we as we speak to our customers I think theres very little inventory in the supply chain I think that you're going to see a.
Impact of the improvement on a month to month basis.
But again when I when I talk about.
The visibility that we have again exactly how many units bottom of builds will be who will go forward or GM or BMW be running at the end of May.
That hasn't been told us Oems don't seem to know this point and I think thats a lot of that's going to be tied do what's happening dealer end and consumer sentiment and number of other issues over the next 30 to 60 days here so sorry.
No long rambling answer, but I think when you look at that sort of segmentation that sort of improvement.
On a month by month basis, I can almost go to on a business by business Division by Division basis, Youre going to see fairly similar.
Sort of recovery in improvement from April May and June.
Perfect I appreciate the color and then as the second question.
Can you remind us how much of the advance materials is exposed to aerospace and.
I guess, what the margin and volume outlook is for that market or maybe maybe currently or rearview mirror the profitability there.
Would compare to the non aerospace piece of advanced materials.
Yes, well as we look at the aerospace.
It makes up about 35% to 40% of our EBIT da makes up about 20 to 15% to 20% of our overall volume so our pro rata basis. The profitability is proportionately higher on the aerospace segment as I said in my comments about 30% of that volume.
Is made up of military Mros business, other sort and about 70% of that 35% to 40% of the EBITDA of advanced materials.
Comes from the commercial Oems of Boeing and Airbus and Embraer and other play manufacturers around the world. So as we look at that commercial OEM. It's obviously is been devastated but as we look out just in the last 48 hours in the revision.
Some of the.
The building schedules coming back into line.
Personally I don't think it's going to be quite as Dow where is the manufacture say they're going to be.
But you know I base out more on just what the sentiment what's been said by Boeing and Airbus and so forth.
Over the last of 48 hours, but I think again, we think that there is little inventory and that supply chain and as you start setting.
Those aircraft lines coming back into into manufacturing mode and most most every aircraft.
Manufacturing Assembly line has been down in the month of April and gradually will be coming back up in May and June those Oems will be starting to deep restock and pulling product through.
Thanks, very much can be well.
Thank you Kevin.
Your next question is coming from Matthew Deyoe of Bank of America. Please go ahead.
Good morning.
I Wonder if we could just talk a little bit more about how we dig out of the Twoq U haul.
And kind of what rate of change, we should be expecting to EBITDA as orders come back I think the decremental margins in general were a little surprising to one Q, obviously makes more sense as far as the Twoq guidance is concerned but.
A few were to look out to three Q4 Q.
I know, it's kind of hard to do but assuming a modest recovery.
What should we be expecting for earnings from margins, particularly for for Polyurethanes and.
What should be more differentiated business.
Well I.
Matthew I I'm not trying to be at all evasive on on an answer on this.
Yes, there are just so many variabilities right now as I look in Q3 in Q4.
I think is I look at where we're going I think that you're going to see us by the ended the year.
I think that youre going to see a material improvement as I will go back and look at 2008 nine.
We finished the year stronger not as a company, but as an economy I'm talking macro economy here, we finished stronger than than we had anticipated we would and.
In the negative of any action in reaction are always right in front of us and they're easy to krasner easy to worry about the positive side and what can be the improvement and what are the new markets. It will be developing and so forth I doubt that 30 days ago are well, let me say 60 or 90 days ago that people would see the SAP.
Francisco Bay market as a end use consumer of of a grocery back plastic disposable grocery bags.
There was a law against using those now there's a lot against using.
[music].
Multiuse grocery bags.
So I mean is as you look around the markets I I, just there's just such little visibility at this point I hate to speculate.
But a lot of this I think I think.
Bankers or are going to have their own economic forecasts are on modeling and so forth and as we look internally as we come up with a more solid numbers is a more solid projection, we intend to communicate that but as I said in my prepared remarks, as we look at our our trough economics from the last go around.
Being around $150 million.
We see that is being substantially better.
This go around and seeing it seeing an improvement.
Over on the $150 million to $200 million. This as you look at I mean, if we look at it similar sort of market conditions and if you see a similar sort of recovery here again that was a financial crisis. This is a health crisis. This rapidly turned into financial crisis, I think there's some similarities but they're also some real dissimilarities as well.
Okay and.
I just wanted to clarify you answered to lets his comments and then I would imagine there's going to be some debate around what.
Actually need.
One of the downstream and differentiate business, but.
The 200 million is not your cumulative downstream and differentiated EBITDAC correct, because it's 70% of the volume mix I would assume that.
On EBITDA margin, but try to Bob shows the margin premium that the number would be considerably higher than 200 million correct.
So for all expect.
Yes, let me, let me take that that that 200 million strictly only represents the downstream acquired entities.
And you can see by the footnote we've got a pro forma addition to it for the recent acquisition of isolating the pull those are just downstream acquired entities does not include the systems houses and other things that we've developed that also producing manufactured differentiate products.
Fair enough. Thank you.
Thank you. Our next question is coming from Frank Mitsch Permian Research. Please go ahead.
Good morning, and happy birthday, Sean.
Thank you right there.
So so obviously that begs the the first question Peter what did you get them did you give them a hand sanitizer or high end sneakers, what are what sort of present did you buy Sean no I put I put three shots of Gen and is Red Bull. This morning, he didn't even know until now so thats why you still happy.
Well a paper bright toilet yeah.
A key necessity for sure.
Listen I'm, just I, just obviously want to come back to the to the breakeven on Polyurethanes for the second quarter.
We're where it was April was April negative in terms of EBITDA do you have do you have a sense as to how how the first month a fair there.
Yes April was very close to that sort of scenario and and so.
No.
I don't want get too granular in a month by month basis, but yes. It was it was.
It was it was progressive we were throughout the month.
Okay Fair Fair again, as I, just give color on that.
We expect to see that kind of I would look at second quarter is being very similar to the first quarter, but it inverted sort of ways first quarter fell off very suddenly.
At the end of the quarter, the first quarter second quarter for US will end, we'll start very poorly and I think well, we'll start digging out of that whole how fast that dig down so forth.
Again, I don't want to be the pessimistic as much as I would I don't want to I don't want to tell the market something that a that I can deliver and so as I as I look right now and our team looked about what's going on so forth, that's really where we're coming up but with the the forecast that we shared with you.
Peter I, that's kind of understood I mean, if I look back on one Q as late as March as late as late March you guys were saying 145 to 155 in terms of EBITDA and he came in at 165 and yeah. I mean, I would think that with auto plants starting up on May 18, Yes, we should start to see some recovery there and what have you just the star.
Out of it is obviously, a little bit a little bit eye opening but.
And if I could just follow up on a delay in the MD I split or.
You're not operating in a vacuum here other companies, obviously are pulling back capex, what what are you seeing.
More broadly in terms of.
Or what are you expecting more broadly in terms of anti capacity additions by others in the industry and we're operating rates are et cetera.
Yes, I think that the operating rates is an industry I can only imagine I think they're fairly close to our operating rates that I mentioned earlier in the operating rates I gave you earlier.
I kind of ought to be clear on that that go through those are kind of April ish sort of numbers those aren't Q1 sort of numbers and I would assume that the rest of the industry is operating around the same rate is up.
But I figured I don't have any intelligence that would tell me.
Anything different than that.
And what other companies are doing with operating rates and additions expansions and so forth I only get what I only only rave and know what I read in in the public Pref.
But.
Needless to say if people if people are doing the same thing that we're doing.
Not necessarily canceling projects, but pushing him back.
612, 18 months and so forth is probably a prudent thing to do any sort of markets.
Yes seems reasonable alright, thanks, so much.
Thanks.
Thank you. Our next question is coming from.
Of Citigroup. Please go ahead.
Yes, good morning, Peter and Sean.
Sean Yes, thank you Jay.
And lot of people are expecting China to show a V shaped recovery I know you guys have pretty good intelligence on China and based on your comments it seems likely that it seems that they have started up the plans but.
The demand isn't there. So wondering what are you seeing in China at your plant and that your customers that all that.
Well I look at the business is kind of in two phases for us and depending on on the products and so forth mostly focused on polyurethanes, because that's the lions share of our business in China.
Thank you think of think of something like an 80, 2070 525 sort of split.
Domestic versus export now that's not an exact number because a lot of domestic people well, we'll take part of their product and export and part of its use and internally there, but as we look at the Chinese.
Domestic markets I think we said on our last call that we are seeing those markets recover and we were uncertain as to how much of that was.
Inventory restocking and how much of it was real economic recovery I think as we look now in those markets.
We think that it's mostly economic recovery, it's more than just restocking and so if I look that 75% to 80% of our business in consumption in China.
It's tracking orders in consumption fairly close within a couple percentage points of where we were a year ago as I look at the 20% 25% of our business that is going downstream into export oriented think thing is something like footwear.
If you're if you're producing running shoes youre going to have part of that is going to stay in the Chinese domestic market growing segment, great segment for us as you start looking at the export markets.
Though that's going to be down.
70, 580%, so 20% 25% of your business is just hit the wall and that's that that is exportable.
And your export segment your Chinese domestic business, which is one we've we've tried to focus on the last couple of years and really building a Chinese domestic where we're producing in China were selling in China, where marketing product development billing and customer service everything takes place in China management.
All locals and and as you look at that.
The vast majority that Chinese business, I think that domestic business is actually doing quite well.
So what I would say is over the last quarter. What's changed is I think we've we've changed at least of saying that the Chinese business is gone from restocking to has gone from from real economic seems to be real economic vitality.
Well, we've seen about 4% growth in the Chinese business.
Our year thing versus a year ago, and greater Asia, we're seeing down 10% to 15% depending on the controlling the margin markets and so forth.
And so Asia all in all is about up 1% as we look at the present demand as far as where we are right now again with China being last year that and this is probably two anecdotal the saved Allstate anyway is that kind of look around the three major markets around the world China Europe in the U.S.
Think of think of Europe being.
Four to six weeks behind China, and think of the U.S. has been kind of four to six weeks behind Europe.
I think one the locked down started.
In the auto plants aerospace everything stopped and so as we look at China, We're quite bullish about we see as we look at Europe, I think that we definitely are coming from the bottom or what we would consider to be the trough of this particular cycle and we see a gradual rebuilding as we look at the America.
Yes.
I think that we are at that trough and I think in the coming weeks not months, but weeks, you'll start to see that pickup of automotive aerospace and so forth as those those products gradually come back into the market again as I said earlier, we look at automotive and they come back in the market at 25% build rate 50% 75.
That's yet to be seen and that will be I think the flywheel that will indicate by the ended the quarter.
Just how how strong and how solid of recovery do we have in North America.
Great. Thank you for that detail color. Thanks.
Yeah.
Thank you. Our next question is coming from Matthew Blair of Tudor Pickering Holt. Please go ahead.
Hey, good morning, glad to hear everyone is safe and sound.
It sounds like higher cost benzene is is hurting you in Q2, even though you reduce your inventories.
To low levels is there an opportunity to maybe.
I'll ask store upon benzene wallets cheap now and enjoy some some wider margins down the road.
Well I think that we've looked at that again I want to be absolutely clear we're buying.
As of the beginning of April I think we were buying very low cost benzene.
But again you buy that in April and by the time you move it through your inventory, it's going to be is going to be the end of June middle of June by the time, you start to see the economic benefit of that.
Now we're benzene goes from here.
You know.
What I saw crude oil this past month, it $10 a barrel.
For the first time in 20 years I learned a lesson 20 years ago never do invest in commodities I thought how much lower can crude oil gold and $10 a barrel and I thought about going long on on crude oil in the next day I think it went down negative $50 a barrel.
I think that.
Yeah, we might look at some of those.
Some some pre purchasing on benzene, but in today's world, we're refining demand.
Okay consumption driving patterns, the byproduct of aromatic production on the refining in on the chemical level. The number of people that are shifting from a light slate to a heavy slate in an ethylene cracker.
The benzene toluene xylene production economics, improving to the side of the heavy consumers. The light I mean, if I'd just add all that up. It tells me that we're probably going to be well satisfied on the benzene side for probably the better part of this year.
If not very well satisfied so I'm not sure that's a place that we necessarily want type lot of capital, but again, it's something that we look at on a fairly regular basis.
I would just remind you too that as we look at our European as we look at our North American Polyurethanes pricing to our customers.
Of our of our commodity side of the business.
We have about 30% of that this locked in.
On on.
On raw material pull through for that moves with benzene with natural gas so.
So some of some of that we.
I'm not sure the.
Hedging some of that is that now we're not getting into running the business, we're really getting into financial instruments that I know absolutely nothing about.
I do.
Yes.
I'll leave it there thanks to the color.
Thank you. Our next question is coming from Laurence Alexander of Jefferies. Please go ahead.
Hi, I guess, what sort of things I want to cost went up and covered so just very quickly.
Slide deck and in your comments youve harmonies at various businesses, where margins are expected to be fairly stable.
If you roll all curves up.
Roughly how much of your business is in the stable margin, but driven by a volatile and volumes as opposed to having sort of the spread swinging around.
Sean what would what would you sent looking at that well large good question look I think that 95 go through the portfolio, you've got 95% of advanced materials, which is pretty much as stable margin business, we talk about our urethanes business, you're looking at 65% to 70% so.
Stable.
You got to textiles margins are pretty stable there. It's a volume drill there and then you get into performance products and I would say you got a high percentage of stability. There average that altogether I am just total while number out there, but I will say, you're looking at probably somewhere around 75% of the portfolio, 80% the portfolio, that's that's pretty stable margin.
But but volume is the is the issue we face in today's market is just volume yes.
Well in preparation for this call I wanted to give color. If we're seeing an erosion of margins and I'm really quite pleased with the Brazilian say something I didnt see in the last recession.
I think our portfolio was was far more tilted the commodity than even we suspected at the time and we got crushed with volume and with margins.
For US. This is this is 90% of battle here a 9%. The battle here is as of March as a volume drill and as you start to see aerospace and automotive and CW piece of what coming back into the Mart market.
So I don't we're not going to be out, they're having to necessarily push through.
A lot of pricing and so forth.
And then has the current environment changed.
Kind of what the pipeline looks like in terms of smaller bolt on or you're seeing acquisitions.
Oh I think that.
Right now I think Theres still is a separation of I mean, we've looked at a number of transactions and continue to look at transactions I think that theres still a gulf between what people think assets are worth.
From the selling side and from the buying side.
That I think to be expected on something like this the buyers always want to.
Look I look forward.
As to what I'm, what I'm buying what I'm getting into an a seller is always going to say yeah look right. Then look what I have accomplished look what I've done and I think that over the course of the next quarter, you'll probably see dose to start to come together a little bit.
Again have having said that right now until we get a little more visibility as to the profile of the pandemic that we're in and we start to see things like the macro economy, and where job autos construction. Some of these these big.
Numbers are going to be I think capital preservation is going to continue to be our number one priority.
Thank you.
Your next question is coming from Mike Sison of Wells Fargo. Please go ahead.
Okay.
Hi, Good morning, guys happy birthday, Sean.
Quick question.
Peter when you think about polyurethane.
Longer term if demand comes back hopefully over time, where do you think profitability, our absolute EBITDA margins and should get to it and at what when volume does come back.
Well I think that volume comes back again, I, what we want and our Urethanes business there Nirvana for us.
As consistency.
And reliability reliability of operations and and making sure that we can have a financial.
Result, there that is that it's consistent so if I look at our downstream and use MD I today and I looked at our margin of last year at 27% our margin. This year Q1, 2020 at 29% in Q4 22.
Many 19 was at 29%. So I mean, we've got I think those downstream margins that consistent I think first and foremost we need to make sure that we feel that and the volume will come back to volumes can do with the volume is going to do a we're not losing customers not losing.
Applications, we continue to make headway and we continue to get into new applications and so forth, but as you can consistently get a downstream business. It has.
A high 20% EBITDA margin and you continue to build that business.
It's that's going to be our priority and that's that's going to a and I think you know quarter by quarter.
I hope that we can continue to see that.
Thank you.
Thank you. Our next question is coming from.
Good.
Global Please go ahead.
Wanting Peter and happy but that you Sean.
Thanks Lasan.
Yeah, just a cool [laughter] just a quick one.
In the interest of time.
You guys put out a really good sort of slide eight kind of showing us where we like today in terms of the portfolio relative to sort of follow up downtrend in that like.
You know I think one of the things I guess it was dead in the early part of the last decade, but now seems to be a bit more acute is this sort of extreme volatility in.
Bullets sort of crude oil and put away derivative prices as well as Nat gas and Nat gas derivative prices.
You know how are you guys feelings about the portfolio positioning relative to yesterday. He says in dealing with this sort of energy price volatility, particularly in on the polyurethane side and particularly as you guys have gone further downstream on deploying you attend side. Thanks.
Well Thats an excellent question I think that as we look at the overall portfolio and we look at our consumption may here we were.
Just.
Couple of months ago, where we were tracking ethane pricing.
I have a lot more.
The commodity chemicals in ethylene pricing and purchasers of propylene and so forth.
Today, our single largest raw material is benzene, which we by about 200 million gallons per year, and then you drop way down and I think it's probably butane or maybe utility cost or something our raw material, especially started looking to advanced materials and into.
Some of our other business our other division.
That volatility of raw materials, yes, it's there and it's something we tried very carefully but but volumetrically. We're just not saying, we're just not being whipsawed like we would have been.
A couple of quarters ago, and as we look at the benzene market.
And our position in benzene in Mds high.
All of our competitors essentially by benzene I don't know many of our competitors I suppose yantai has a coal to benzene and there are producing benzene internally.
I don't know how much in what the economics that would be but.
It's not like all of our competitors are producing their own benzene were the ones that are not everybody kind of starts at the same benzene price everyone kind of has I won't say they all have the same technology.
That 70%, 80% of of the MD industry I would imagine has.
A cost that is within 5% between the leader in the lag or third for the top 70, 580% of the producers and so I again, I don't want to brush often say from materials aren't important.
But it's it's a.
I'm not sure that it's going to impede us anymore than with somebody else in that so the real question. Then is how are you managing the physical volumes the working capital in the impacted that has rather than than the pricing side to that.
Very helpful. Peter Thanks, so much thank you.
Your next question is coming from Jim Sheehan of Suntrust. Please go ahead.
Thanks, Good morning.
Could you talk about the spray foam business and how demand for energy efficiency is likely to hold up with lower oil price environment and also regarding your proportion of the portfolio that.
Yes.
Consist of differentiated polyurethanes.
It's still around 70% when do you expect it to move higher is that after you integrate I mean that youre that that number moves up.
Well, obviously, we look at our spray foam business are you kind of look good on that 2019 sort of economic performance.
Around $80 million as we kind of look of the synergies and so forth going forward I think that we're on track a couple of things I am on just lay the groundwork here as we look at that I think the we're well on track, perhaps even a little ahead of track of seeing that business get to $100 million.
Sort of an EBITDA now as we look at the near term on the spray foam no doubt that we've seen about a 40, 45% drop in our orders on the near term, but longer term people don't the half of this business is new residential construction and a growing segment of this business more and more our states.
Her mandating insulation.
And energy conservation and building codes.
Here's a unique.
Situation, where a chemical company is out lobbying for tougher building standards and tougher building codes, which is what exactly what we're doing.
So as we look longer term I think that you're going to continue to see a focus around energy conservation as you look at utility costs by and large and the taxation that are on those utility costs and so forth.
There's just not a lot of especially in North America, Europe, where a lot of people are heating or cooling a building based on a raw material. This dependent on crude oil most of its all natural gas natural gas price hasn't really moved a great deal in the last decade.
I think you're still going to see that push for energy conservation I think you're going to continue to see longer term.
Growth in that in that industry.
I think that as you see longer term, what we're doing and being able to consume a billion PT bottles and that will be increasing this year is the second plant comes on Taiwan upwards of the equivalency of one and a half billion PD bottles to making insulation, that's conserving CL twos and it's a great story to be told in it.
Is one that we want to market very aggressively as we go through.
2020, because we see a lot of growth it will be taking place there.
Thanks, a lot Peter.
Your next question is coming from Mike Harrison of Seaport Global Securities. Please go ahead.
Hi, good morning.
Within the performance products business can you give a little bit more color on what's driving the strength performance and means business and maybe any view on when we could see some improvement in the competitive environment in ethylene amins.
Well I think that lot of that is going to be the improvement that we've seen and wind in gas treating.
In the first sitting there at the beginning yeah, we saw that throughout the first quarter I would say that will probably continue to see a fairly strong demand.
For when I say that relatively speaking, but for wind is going to be fairly decent particularly in China.
Gas treating thats. Another story I think it was a falloff in crude prices were going to see a real falloff in demand in Q2.
On the gas treating side of that business and performance products is going to be seeing.
Some of those same headwinds.
Because of that but I think that.
By and large it's a it's a it's a competitive platform that we have we have global reach global marketing and it's going to continue to be I think a very strong into the business and I think that.
Your first quarter.
As a great demonstrations to how strong that division as.
Thanks very much.
Thank you. Our next question is coming from John Roberts.
Please go ahead.
Thank you and happy birthday as Nelson.
I think that I think the textile chemical business has been characterized as non core in the past and often in a downturn. This consolidation do you think we might end up with merging your business as a path to exit eventually out of the textile area.
You know John it's a good question. If we were in the midst of of such discussions of a merger I would say no comment the fact that I'm not saying no comment probably tells you that nothing's taking place.
But again I think that there is room for consolidation in the.
In the industry.
If that if that comes about we'll see a but I think that that business is poised I think that as we look out over the next 12 months here, we're going to see a real opportunity and the pp area, where I think that we will excel amongst our competitors than the product the pipeline that we have the opportunities we have to grow.
That into the business I think that we're also going to see some real growth in the synthetic fibers and to that business as you see a lower crude and lower raw material on that side now put pressure on cotton and it will put I think it'll probably give.
Rise to opportunities and product product innovation silver going into the synthetic fiber into the business. So look any division that generates cash generates positive EBITDA for me as a core business and textile effects, we look at their because that business today in comparison to where they were in the last recession.
It's going very well I continue to say that it's a it's a core business of ours and yes. It the last recession that that business was losing as much EBIT da as it is making now that's a phenomenal turnaround and tremendous credit to that.
Because the wonderful team that we have there so right now it's a great business Scott is a great amount of upside and I would just saying the first quarter I think when I think back on our quarterly call a quarter ago.
We were talking about a recovery in that business I think we were seeing for the first time in a year or so a quarter on quarter year on year sort of growth and that business. I mean, literally was was which was coming out of the ashes of of a textile industry that had been they've been pretty badly beaten up in 2019 and.
So anyways, what will I think that business will continue to improve.
Okay.
Why don't operator, I know that we've got some competition right now with some of.
The other chemical companies that are that are also reporting and I really appreciate those people that have stayed on why don't we take one more question here, we usually try to in a top the hour and I want to make sure we try to addresses many questions as possible.
Our last question today will be coming from the formation of RBC capital markets. Please go ahead.
Great. Thanks, Good morning, Thanks for sticking around and thanks for everything you're doing on Covance.
So.
I guess I just wanted to ask real quickly on the on the differentiated side.
You guys had made a push to grow a downstream the last couple of years.
I guess when you look at the margins going forward or are you getting any indication from your customers that theres any substitution away from.
Yes, maybe more value added materials would you expect out I guess in the future and if so would that be how would that impact your business. Thanks, No I think a room. Good great question I think to the contrary, we're seeing just the opposite if I look at the industry in tilt in the industry.
Yes, we're no doubt facing headwinds in the aerospace in the light weighting of aerospace, but longer term playing to going to be lighter, they're getting to be flying longer.
And they're going to be more efficient automobiles and the lightweighting, that's taking place in automobiles and so forth, what's taking place with adhesives in coatings and installation building materials.
To the contrary I think that we have an excellent opportunity about half of our growth takes place in our downstream businesses from GDP growth and about half that takes place us going out and replacing someone else's product in someone else's technology and product that goes into those downstream applications and I have.
Anything I would hope that that would accelerate and as we look at this opportunity downstream I'm not hearing anything from our customers.
I think that from a corporate point of view.
Look we're in an excellent position to continue to feed that downstream growth. We have a strong balance sheet got cash on that balance sheet and while we're slowing some of our capex projects, we're not going to start of this business.
We're going to continue to feed that we have the balance sheet, we have the cash to be able to do so and perhaps at a time when others are going to be pulling in their horns, we're going to be out aggressively pushing into those new markets in those new applications.
So if anything in the coming month, or so I hope that we're growing our business our downstream business in particular disproportionate to overall GDP growth.
And accelerating beyond that no reason why we shouldnt, we certainly have all the balance sheet the product people technology to be able to do that.
Great. Thanks.
Thank you.
Operator, thank you very much and thank all of you for taking the time to join US and if you have any questions or would wish to send any salutary actions to Sean Douglas Please.
Please feel free to do that throughout the day. So thank you very much.
Thanks.
For your participation. This concludes today's event you may disconnect your lines.
Yes at this time I'd have a wonderful day.
Wow.
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