Q2 2020 Olin Corp Earnings Call
Good morning, welcome to the Olin Corporation second quarter 2020 earnings Conference call. All participants will be in listen only mode. So you need assistance. Please signal a conference specialist Starkey followed by zero.
Today's presentation, there will be an opportunity to ask questions to ask your question.
More than one or you're testing.
The chart. Your question. Please press Star then too. Please note. This event is being recorded I would now like to turn the conference over to Steve Kean Olin's director of Investor Relations. Please go ahead.
Good morning, everyone and thank you for joining us today.
Well again, let me remind you that this presentation.
The associated slides in the question answer session.
Ed remarks, well include statements regarding estimates of future performance.
Please note that these are forward looking statements.
Actual results could differ materially from those projected.
Some of the factors that could cause results to differ from our projections are described without limitation in the risk factor section of our most recent form 10-K.
The second quarter 2020 form 10-Q, and then yesterday its second quarter earnings press release.
A copy of today's transcript insights will be available on our website in the Investor section.
[music] press release, and other financial data and information.
Under press releases.
With me this morning as John Fischer.
Lunch, Chairman, President and Chief Executive Officer.
Oh, Dawson executive Vice President and President.
And international.
Yep.
Executive Vice President and Chief operating Officer.
Todd Slater, Vice President and Chief Financial Officer.
We will begin with brief prepared remarks, and thereafter, we'll be happy to take your questions.
I'll turn the call over to John Fischer John.
Thank you Stephen Good morning, everyone Hope you in your families are keeping safe and healthy during these challenging times Oh I'm sure second quarter results last night, we'll keep our remarks this morning toward minimum in favor of addressing your specific question.
I'll start on slide three.
19 related demand losses were seen ever chemical portfolio at March demand impact continue through early two before showing signs of recovery during the second quarter of 22020, all experienced significantly lower customer demand, partially driven by inventory reductions. Consequently.
Second quarter sales for the combined Chlor alkali products in vinyls hoxsey businesses declined by approximately 27% year over year weakness in demand was compounded by two large planned maintenance turnarounds that took place growing in the quarter.
Including one in every three or Bino chloride monomer turned around I don't want and every five year Freeport I'd be carbohydrate turned around.
As a result April and May work Olin's weakest volume Matsons core alkali products and vinyls business overall always chemical businesses.
Sales increased each month during the quarter from the April low point Olin's July sales levels have continued improvement trend by exceeding June levels as a further point of reference the majority of our second quarter. Adjusted EBITDA was generated in June as market maintenance turnarounds were completed in volumes are approved.
[noise] Olin has addressed the lower customer demand by extending maintenance outages, where practical temporarily idling chlor alkali oxy assets today, we have one chlor alkali plant undergoing an extended maintenance turnaround we plan to continue to temporarily idle plants to minimize operating costs.
Third quarter, 2020 will benefit from improved volumes, lower maintenance turnaround costs and higher product prices compared to the second quarter.
We are forecasting third quarter 2020, adjusted EBITDA that is more than doubled second quarter 2020 levels.
Let's now turn to slide four.
The most significantly impacted and uses for our products include automotive aerospace construction and oil and gas chlorine demand from urethane Isocyanates customers represented our largest volume declined during the second quarter and that demand outlook still remains challenged chlorine sold into titanium.
They oxide, which held strong through the first quarter began to weaken during April and is now below historic trends hydrochloric acid demand and pricing is well below typical levels also reflecting the weakness in the oil and gas sector.
Weakness in global Vinyls demand contributed to all in second quarter ethylene dichloride pricing decline of approximately 50% from first quarter levels.
We have seen olin's corot ethylene chloride dichloride pricing.
Prove during the third quarter.
Our second quarter of privacy resin volumes decreased by approximately 30%.
Sequentially and year over year across both Europe, and North America impacted by we customer demand from automotive industrial coatings and oil and gas.
We're now one month into the third quarter and I've seen any increase in vials that isocyanate demand at a slower paced recovery in resins in your things on the cost side inorganic and uses our recovery while several grades of pulp and paper demand are still showing signs of weakness.
Now, let's take a closer look at caustic soda pricing, which is on slide five.
That's great operating rates slowed in the second quarter caustic soda availability tightened and domestic caustic soda price indices rose $70 per tonne.
Second quarter, 2020, caustic soda pricing and olin's system increased approximately 8% when compared to the second quarter of 2020.
This trend is expected to continue in the third quarter as always July caustic soda price was the highest as the year.
The current environment across our chemical businesses is still more by uncertainty and volatility.
Future demand visibility on both sides of the easy remains uncertain, our customer order pattern, so Dan and remain erotic heavily influenced by their customers.
Supply chain inventories as a result, we consider it equally like equally likely that olin's yearend 2020, caustic soda price will be higher than or lower than our July 2020 pricing.
Now, let's talk about Winchester, which is on slide six for the fourth consecutive quarter Winchester business experienced year over year segment earnings growth.
Second quarter 2020, Winchester experienced a 17% increase in sales compared to the same quarter last year, resulting in a 61% year over year, increasing adjusted EBITDA.
Year over year your increases were due to higher commercial ammunition sales volume and improved pricing.
The second quarter 2020, representing the strongest quarter in commercial demand since 2016, and we expect this will have elevated level of commercial I mean, it vision demand to continue at least through the balance of the year.
Winchester has significantly reduced inventory levels responding to this surge.
The lower level of inventory in the business will limit our ability to meaningfully inc. crease, our commercial ammunition sales volume during the third quarter.
Following the April 1st price increase Winchester announced an additional 2020 commercial ammunition price increase effective August 1st.
Moving to slide seven I'll provide an update on Winchesters Lake City project.
Winchester will assume operational control at the U.S. armies Lake City Army ammunition manufacturing facility on October Onest. This multiyear contract is expected to increase Winchesters annual revenue by $450 million to $550 million, an increased annual adjusted EBITDA per Winchester by 40 to 50.
Million dollars.
Based on the transition work performed to date, we are confident that we can meet or exceed these incremental sales and adjusted EBITDA targets. During 2020, all in expects to incur approximately $15 million to $20 million of transition costs and invest approximately $80 million working capital as part of the Lake City contract.
The acquisition.
In late 2020 annually beginning in 2021, we expect to begin to realize incremental cash generation from a number of initiatives.
On January 1st until 2021, our vinyl flooring monomer contract will transition from its all manufacturing arrangement by a third party to a direct customer sale agreement. The new contract is expected to improve annual adjusted EBITDA by $50 million to $75 million.
In 2021, we will realize the full benefit of our new Lake City Us Army ammunition contract.
And expected 35 million dollar reduction in annual operating costs from the permanent shutdown of a core alkali plant capacity of 230000 tons and the associated Phenylephrine dichloride production facility. Both in print Freeport, Texas. These closures are expected to be completed around year end.
I will enable all into Optimizes, Freeport, Texas core alkali operations and cost structure.
The winding down of the multiyear information technology project integrate the acquired Dow chlorine products businesses, which is forecast to reduce spending by approximately $110 billion annually split between capital on expense. This wind down begins in the fourth quarter. This year.
After tax cash flow enhancements of approximately $200 million per year are generally independent of industry conditions. The associated adjusted EBITDA benefit is approximately $140 million annually.
I would like to turn the call over to Todd Slater all in Seattle.
Thanks.
During the second quarter, we completed several refinancing actions that enhanced our liquidity as highlighted on slide.
These actions included the following we reactivated our 250 million dollar accounts receivable securitization facility of which 240.7 million was drawn at June Thirtyth.
In May we amended our $1.3 billion senior secured credit facility.
Now includes a senior delayed draw term loan facility, a $500 million and as senior revolving credit facility of $800 million both facilities are undrawn.
New bank structure provides additional financial flexibility.
Also in May we issued $500 million of 9.5% senior notes due in 2025.
These refinancing actions provide the company with the financial flexibility to navigate the current economic conditions and should support the company over the next several years.
All of the expects to refinance a portion of the high cost bonds, which were assumed during the 2015 Dow acquisition during the fourth quarter of 2020, when they first become callable.
By refinancing a portion of the high cost pause, we expect to reduce annual interest expense.
Additionally, $30 million.
We ended the quarter with cash and cash equivalents of 200, a third $238 million. We continued to focus on other liquidity enhancements such as our 2020 target to reduce working capital by $150 million year to date, we've reduced working capital by 31 million.
Dollars, which represented approximately $130 million of incremental cash flow from March 2020 levels, we are forecasting capital spending to be $250 million to $275 million in 2020, which is approximately $135 million lower.
And the prior year levels.
Let me of capital spending was front half loaded and we expect lower capital spending in the second half of the year.
We also expect the capital spending will be lower in 2021 2020.
Finally on Thursday July Thirtyth Olin's Board of directors declared a dividend of 20 cents on each share of wallet common stock. This dividend is payable on September 10th 2020 to shareholders of record as of the close of business.
August 10 2020.
This is a 375th consecutive quarterly dividend to be paid by the company.
Operator, we're now ready to take questions.
And we will now begin the question answer session. You ask your question you May proceed stars and one on your question.
If you using speakerphone. Please pick up your heads that we're progressing lucky.
I would draw your question. Please press Star then too.
And our first question today will come from Kevin Mccarthy with vertical research partners.
Good.
Good morning I.
I think you mentioned in the prepared remarks that youre idling some core alkali plants.
Can you expand on that in terms of locations and what you think the operating rates are likely to be and then.
I guess unrelated note I think you announced in late 2019 your intention to.
Shutter some capacity in Texas.
Is that still on track for late 2020 or has that timeline changed.
This is John Kevin I'll answer the second question first the.
Texas capacity shutdown is off is on pace to be done by the end of 2020.
And that was also done in contacts with another downstream plan.
I would rather not address specifically what plants are down at any point in time I can tell you. We've had one plant where we've been running it between two and three weeks a month and taking seven to 10 days off every month since March I can tell you. There is a plant that's down now that.
In order to save costs, we took a turnaround that was typically done with contractors and tried to be done in two weeks and we're spreading it out over five to six weeks using just internal people and doing it only our first shift to avoid overtime costs. So those are the kind of things. We we are doing and I would.
Say that we have had probably of the seven different sites that have chlor alkali plants. We've had some kind of shutdown at least five of them over the last four months.
I see that's helpful. And then second question on the Apoc see business.
NZ and propylene I suppose have been quite volatile in recent months. So if you take into account the inventory flow through effects of those important raw materials.
How do you think your margins might trend moving forward into the third quarter versus the second quarter.
Hi, Kevin This is Pat.
You're right they have been very volatile we saw the big.
Fall off here in the second quarter.
And I would say that benefiting us here late annotated thats, a little bit late in the second quarter and that will benefit us in that first half of the third quarter. However.
Seen hydrocarbons now start to kick up Oh, benzene and propylene and that's that's the reason why they've got price increases out there right now.
Third quarter so.
It's kind of where we see it lot of volatility.
Okay, well stay tuned thank you so much.
And our next question will come from Steve Byrne with Bank of America. Please go ahead.
Yes. Thank you wanted to ask a little bit about that GCM contract.
Why is there now this 25 dollar or $25 million range in there and what will be the mechanism for VCM pricing in their contract.
The reason for there's a range and there is when you look at the demand uncertainty that we're facing today.
There is the prospect of just facing lower demand as we move into 2021 than we originally wouldn't forecast demand in that space had been a lot of solider and the contract I'm not going to give you any specifics, but it does have some movements around different.
Raw material inputs.
And just also wanted to follow up on your your outlook for caustic pricing you highlighted.
You thought to be higher in the third quarter I don't know if that was just like sequentially and improvement in the average price and second quarter. So third.
As you also mentioned by yearend.
I'll could be roughly the same as the price in July. So what is your what is your thinking on the on the cadence of pricing in the second half.
Our comment on the third quarters was simply the price in all in system that was all we were referencing.
And then our outlook for the ended the year, where we said an equally likely I think just goes to the volatility around supply and demand or demand on both sides of the easy you, especially when you give consideration to the fact that PV see and chlorine demand typically weakens pretty significant.
When we moved from late third quarter into fourth quarter, just on a seasonal basis.
Thank you and if I could just squeeze one more in there have you.
Have you looked at the.
The production of hydrogen out of your core offline electrolyzers and whether there's an alternative use for that hydrogen other than.
As a combustion fuel and your cogens.
Well, we use this significant amount of it to make hydrochloric acid, which we that sell so.
And we do have other contracts with third parties, who take the hydrogen.
For other than combustion purposes.
Okay very good thank you.
Yes.
And our next question will come from Frank Mitsch Permian Research. Please go ahead.
Hi, good morning, folks and John I assume this is your last conference call.
Certainly wanted to Watson my congratulations and best wishes on your and retirement.
Thank you Frank.
And if I could follow up on the on the caustic soda pricing because it is a little bit of a surprise that you're anticipating.
HM that prices are moving higher obviously your system includes certain contract terms and so forth. So I can understand why the third quarter.
Caustic prices may be higher in your system, but as you look at the industry. Overall I mean, there is that there was a thought that oh, PBC demand and chlorine demand is doing a bit better.
And then perhaps caustic demand as you think about the industry itself wouldn't you would have thought that maybe from the high July levels, we might start to attend off or or trend offer or that's not necessarily the Casey said.
I think Frank that there are lot of views at a lot of uncertainty around demand on both sides of molecule.
And we have seen.
[music].
PVC operating rates improve.
But theres still 10% to 15% below where they were a year ago. So theyre not what I would term wildly robust.
And if we do get a seasonal slowdown in that you could see a situation where it caustic if demand does it seasonally slow down which is typically does it tossing could go tight again.
We're just not convinced that some of it things you read.
Hey, caustic is going to roll over in the second half, yes, that's true.
Got you got your understood and.
You did mentioned that volumes in July were better than June.
What is your Crystal ball say in terms of when we might be a year over year parity in terms of volumes.
For.
For for Roland.
I'm not sure I could answer that question I personally don't think thats going to happen in 2012.
Okay all right.
Alright fair enough. Thanks, Thanks, so much and again congrats thank you.
And our next question will come from that's on the Med with Olympic Global. Please go ahead.
Morning, guys, you guys talked about a in your prepared remarks.
A couple of turnarounds in the quota I'm, just trying to get a sense or what sort of negative EBITDA impact in the quarter those turnarounds may that.
This is Todd I know, we have a slide back 22 in the in the deck the talks about specifically the maintenance cost.
As a little bit of ahead when from Q2 versus Q1, but the most significant penalty to us is really.
The volume impact, especially for alkali operation in April in the first part in May.
Fair enough fair enough and now moving to the raw material side of things you know obviously.
There's been some choppiness on the natural gas pricing side of things the ethylene pricing side of things as you guys. It provided your Q3 guidance or you know more than doubling EBITDA up.
I'm, just trying to get a sense or what sort of raw material pricing environment do you are backing into that a into that guidance.
Hassan This is Todd again, we as you know we are.
Heavily hedged at least a quarter out so I think we have a high degree of confidence in our cost associated with ethane frac ethylene and natural gas add I think from Q2 to Q3.
I think it's a small good guy.
Very helpful. Thanks, so much guys.
And our next question broke up for Microsites on with Wells Fargo. Please go ahead.
Hey, good morning, guys and congrats to you as well John.
Okay.
Can you give us a little bit of color where are your operating rates that were for the chlor alkali footprint in June and heading into July and what do you think you need to sustain two to start to get that outlook for the third quarter in terms of EBITDA versus the second quarter.
Yes, as you know the industry operating rates the second quarter were around 71% I mean, they they were higher in June band.
April.
It would be our expectation that you're not going to see that 71% is down 14% year over year.
We are expecting continued year over year success in operating rates, but not as significant improvement in operating range from Q late Q to Q3, but I would add to that the scale of the turnarounds that we discussed.
Made our operating rates in the second quarter lower than those of the industry and we've got a built in.
Larger step up as we move to Q3, I would say that based on what we saw in July.
July's operating rates are sufficient.
For us to achieve what Weve said about the third quarter.
Understood and then when do you any changes to your long term view for the industry.
You had slide in the past out or you know several several years.
Mid parts this decade in terms of.
Operating rate our capacity expansions be mostly de bottlenecking any sort of is that de think.
We're still on that same path in terms of the long term potential for the industry. I think we're still on that long term path and I think the likelihood of any near term capacity expansions within the industry globally has probably gone way down given what we've experienced in the last three or four months and what the.
And the uncertainty of the near to intermediate term outlook is.
Great. Thank you.
And the next question will come from John Roberts with you'd be a please go ahead.
Good luck, John when you move to the executive Chairman role and I'm sure Scott is listening in so welcome.
Okay.
On slide four for chlorine demand in the third quarter, you have a green bar for organic or inorganic I think you've said T. O. Two was softening into the third quarter. So is tio to a minority of that inorganic box or is it large and the weakening in tier twos just very modest.
I'll answer the first part of that we what we said was to go to weaken significantly in the second quarter and is improving which would okay. All the green boxing, Jim maybe you want to just talked about that category.
It's a broad based category, there's a lot of if rates.
A different elements to it in.
Some other releases this morning, where bromine actually was a was a good guy was a strong and so forth. So we see that is coming as increasing again, it's coming off of what was a slow first and second quarter and improving automobiles are back up so.
By definition nursing improvement, there and as I mentioned bromine and John just talk to T. O. Two so it's a broad category that's a that's improving.
And then also on slide four all of the boxes improved from Twoq to Threeq, you, except for pulp and paper for caustic soda.
By flat is it still at an elevated level like versus pre kobin or has it come down from the initial surge boxes in tissue and towel demand that we had earlier this year.
Yes, theres failures.
In the second quarter, you had the big surge, especially on the tissue side of things and so that is waning to a certain extent. So it's just a pullback in some of the markets that were really is search.
In search.
Surge elements and so forth and also there was it the fine papers and so footwear expected you know with returned to work you would expect those to be coming up and actually thats being stretched out a little bit more with less people.
Fewer people coming back into offices and so forth. So.
Not a dramatic drop off it's just a settling back of where we were in the second quarter, which was a very much to the upside.
Thank you.
The next question will come from Eric featuring with Citi. Please go ahead.
Hi, good morning, John.
Good morning.
Could you talk a little bit about how would be cost curve you see you it's changed with lower gasoline prices year over year as well as gas prices and how does that impact you know your export economics and do you see that holdings still into 2021.
As it relates to.
See you, obviously ethylene doesn't really affect that I would say, where we are on the on the cost curve is the biggest variable on the cost per right. Now is just operating rate and obviously it how you spreads are fixed costs I think natural gas for US is in a very similar place to where it was last year on average.
Thank you.
What matters in terms of BDC and I'll, let Jim elaborate on this isn't so much what the absolute price BDC is based on ethane, but how that relates to the price of PVC globally.
Maybe you want to.
Yes, the I'll just specifically on NBC.
It's a it's a very dynamic.
Marketplace as I think everybody is seeing.
The dynamics that are taking place right now and PTC.
Our that after the complete pull back in April where there was plummeting of our BDC prices that took place.
70% type of drops in terms of pricing. It's now come back off the floor. There is if there is a there is a market the markets come back and so there's demand in Asia and around the world, It's starting to pick up.
Importantly, you speaking the economics with with oil moving up and therefore naphtha based ethylene theres a good there's a significant amount of cost push on the ethylene components for PTC and in addition to that you've got PBC pricing thats been moving up from the fortunate that were hit in.
The second quarter all of those dynamics are playing to the increase in LTC pricing that thats, taking place from the low levels in the second quarter.
Helpful color and then to help us thinking about your volume recovery sequentially can you.
Give us where all and underweight overweight you see a molecule compared to the industry.
I would say if you look at the industry were underway on the vital side and we're probably overweight on the Urethanes slash isocyanate side.
Great. Thank you.
The next question will come from Alex Yefremov with Keybanc. Please go ahead.
Thank you good morning, everyone in the current congrats children as well just.
Just a follow up on the easy price.
What do you expect that price to be higher in the third quarter versus second quarter for for in terms of your realizations.
Yes, hi, or in the third quarter.
Thank you and then on on the balance sheet or do you have full access to to your entire revolver capacity currently and what are the covenants that that are related to this revolver.
Okay.
This is Todd the we do have full access to the revolver and the delayed draw term loan.
The covenants now because we in May went to a secured structure.
The covenant is always based on secured debt and at the end of June we had $153 million of secured debt.
So and the Covenant now is three and a half times basically adjusted EBITDA, so well within any of those kind of metrics. So as soon as we said a significant improvement financial flexibility associated with our new pack agreement.
Thank you Pat.
And the next question will come from Matthew Blair with Tudor Pickering Holt. Please go ahead.
Hey, good morning, everyone.
Question on Winchester margins, it looks like revenues back too.
2016 levels.
But back then your EBITDA margin was closer to 20% now it's still at 11%. So could you just talk about the this ramp in revenue and volume you seem this year why isn't it flowing through to a margins and what do you expect going forward.
If you look at the way the Winchester business operates over the course of.
Demand cycle, you started out in the first phase of the search you get volume.
Surge matures because there's shortage is uncertain.
Products, you get more pricing power and your margins typically to expand over the course of the surge. So we are coming into this and really the first quarter of the surge was the second quarter.
Where we had been on the other ended that for almost three and a half years. So we were coming in with what I would call cyclical low margins and we are now on the path to is cyclical higher margins and as we said there was an April onest price increase and now there is an August 1st price increase.
Not none of which was reflect really reflected much in the second quarter.
Sounds good and then and could you talk about your bleach activities to do you have elevated demand in Q2, and if so it looks like bleach pricing was flat quarter over quarter.
You know why didn't prices move up there.
I would say.
Demanded bleach in the second quarter was a record for a second quarter remembering that a lot of it is seasonal.
I don't know what you're looking at to say that pricing was down or flat.
So I can't comment on the other that it is.
Some of that was 16, okay and some of that just goes to the mix.
Okay. Thank you.
And our next question will come from likely that with Barclays. Please go ahead.
Great. Thanks, Good morning, and John Mike Congrats as well I wanted to first returns on the topic of the heavy turnarounds in the quarter and its impact on results you talked about if I go to slide 22 in your deck, where it looks at maintenance turnarounds. If I just add up floor offline I'll talk to you.
We look lower year over year in quarter over quarter. So are there other cost.
There that I don't see on the slide or do you just help triangulate that for me.
Yeah.
Mike. This is Todd you to the component that is missing and as I mentioned earlier really relates to the loss volume, especially in Chlor alkali coming because of the turnarounds this year.
The DCM turned around.
On the part C. B turn around affected our chlor alkali operating rates significantly in April in the first part may so that is on top of the numbers that you see on this slide.
Okay. That's helpful. And then John just a bigger picture question around capital allocation I think obviously the near term focus is on cash flow and de leveraging and hopefully the next mile marker in that the refinancing of the callable bonds. Later this year I guess, how does the board view the dividend.
Because I presume the dividend in some ways impair your borrowing costs and your stock is probably not getting full credit for that dividend today.
I would say if you look at all in over a long period of time recognize we recognized an award recognizes that it's a cyclical company and there are points in time, where the dividend is a very key component of shareholder value and the board is looking at this company and the dividend.
Over the long haul as it has gone.
I'll speak for myself for at least the last 35 years. So.
And that's the view I don't.
Have any sense that it is creating an issue as it relates to our borrowing capacity or anything like that.
Got it thank you.
And our next question will come from Irene This is where nothing with RBC capital. Please go ahead.
Great. Thanks, Good morning, and congrats on your retirement spending as well John I appreciate working with you over the last several years.
Yeah, I guess first maybe even just asking about near term caustic soda you know looks like we saw the first decline here in July.
I guess do you expect I guess, a you know that to continue the declines or.
Yeah, maybe we just see one month, one month of declines would be unusual.
Finally, we keep going so I mean, just copier perspective is to.
Yeah, the trajectory here and you know if pricing remained stable from here.
I think the point, we were trying to make was that.
The visibility that we have and I think that the industry has over demand on both sides of the molecule is very.
Limited and it is entirely possible to create a scenario where costing does go down. We said we gave at a 50% probability, but we also think theres a probability that caustic.
By the ended the year could be higher than it was in July keeping in mind, but there is typically a very meaningful step down in operating rates in the industry driven by PVC in the fourth quarter. I mean, you typically see a five to seven point drop in operating rates.
Caustic demand is not that seasonal and we typically see price increases in caustic for caustic announced late in the third quarter into the fourth quarter recognizing that seasonality.
We were not making a forecast we were just trying to point out broadly there's a lot of uncertainty and you could end up on either side business.
Okay.
And.
Appreciate the detail added on slide eight.
It looks like you're now expecting a $140 million uplift in EBITDA in 21 versus 20.
What's your confidence level on that I guess, it sounds mostly company specific not necessarily related to price or supply and demand I guess is that correct and you know could you maybe offer some thoughts on sensitivity to pricing.
And volume in the 140 million. Thanks.
What I would say is that hundred 40 million, we say is.
Relatively independent of market conditions. So we feel very good about that flowing through the income statement I think theres an entirely different question about where our base volumes and based pricing going to be and I would suggest I come back to what we said at the moment Theres a lot of uncertainty about those.
Because of demand uncertainty around demand.
Right now.
But I would you say all the other thing all other things being equal and that's a lot of things to be equal. We would expect 2021, adjusted EBITDA to be $140 million higher than it was will be in 2020.
Okay, great. Thanks, Congrats again, thank you.
And the next question will come from Travis Edwards with Goldman Sachs. Please go ahead.
Hi, Good morning, I just wanted to ask a follow up question on the balance sheet could appreciate there's a lot of uncertainty coastal appreciate the recent deal that you completed to improve the covenant structure Electromobility business, but just wondering what your team is thinking as far as you know the potential a willingness to come to market again either to preserve liquidity.
He took I'm one of those Blue Cube notes and then as you know if so if you're if there is willingness can you just remind us looking what your capacity it looks like to issue debt at the secured level just between that's a clearer secured leverage ratio you mentioned danger.
Your CNTV limitations.
Let me address the first part of that is.
From loan that we have in place is there to be used to call without bonds and as Todd said in his remarks, we intend to do that.
And we do have.
Essentially a billion to callable bonds, starting October 15, so that 500 million can be used or more.
Okay.
You can answer the secured borrowing questions I don't.
I don't think we would come at this point about whether into your specific question about whether we would consider additional debt or incremental borrowings beyond what John mentioned to refinance the remainder of that 1.2 billion.
Clearly you know you your leverage ratio.
If you borrow the 500 million as much closer to one to what are the secured basis when that would occur and our limitation is three and a half.
Got it. Thanks I can appreciate those there was some granularity there. So thank you for walking through I guess, maybe as a follow up just as we're looking to the slides I think the messages has changed a little bit as far as interest cost savings I think it's down to 30 million now from the 50 to 70 and then I think later in the slide deck you talk about.
12 million of call premium. So just wondering you know between those two numbers.
Can we extrapolate sort of what the implied you know portion of those you know the 1.2 billion of notes is coming out is that a safe way too or just sort of triangulate.
But you're taking out or are there.
Considerations that we need to take into account.
As part of the restructuring.
Our debt, we reduced the amount of the delayed draw term loan from a billion $2 million to $500 million.
We originally had expectations in a different environment.
We could Houston delayed draw term loan to take out all of the callable bonds. Now we are saying, we're essentially going to call 500 million. That's what I've said in his remarks and all of that is what's now reflected in the slides and I know we had something different reflected.
Last year early this year.
Got it. Thanks, So nothing's changed so appreciate the just clarifying on your end and best of luck to John <unk>. Thanks.
And our next question will come from Roger Smith with Bank of America. Please go ahead.
Thank you good morning on this isn't contacts to compare it gets a recent event, but there are 2008 nine recession in Chlor alkali I mean do you now export more you see venue or shall I say Dow chemical did back in a way down nine.
This is Jim.
The honest with you I wasn't in the business, though eight or nine.
So I can't make a comment about you know, whether we're exporting more or less without period of time. So.
I don't have that information for you.
Okay.
Hi.
And that VCM contract.
You are suggesting that the team the range in EBITDA benefit.
Now or.
Different range.
You got to caucus from my take lower volumes.
Yes, it's that were to occur when did you make that up by exporting bcm, if you have that capability or perhaps more 80 see two to consume that.
Borrowing capacity Oh production.
Yeah, we have flexibility in our assets so that.
The AIDC capability that we have.
Would provide an outlet for that should we fall short on the IBCM contract.
Got it thank you very much.
And there are no further questions. This concludes the question answer session I'd like to turn the conference back over to John Fischer for any closing remarks, yes, I, thank everybody for joining us today and.
All I look forward to talking to again in about 90 day. So thank you very much.
In the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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