Q3 2020 AdvanSix Inc Earnings Call
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Good morning, and welcome to the <unk> third quarter 2020 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please no Olympic specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.
Please note. This event is being recorded I would now like to turn the conference over to Adam Creswell Director of Investor Relations. Please go ahead.
Thank you Danielle good morning, and welcome to Advansix is third quarter 2020 earnings Conference call with me here today are president and CEO earn came and senior Vice President and CFO Michael Preston.
This call and webcast, including any non-GAAP reconciliations are available on our website at investors Doc Advansix dotcom.
Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our business as we see it today those elements can change and the actual results could differ materially from those projected and we ask that you consider them in that light.
We refer you to the forward looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on form 10-K as further updated in subsequent filings with the FCC.
This morning, we will review our financial results for the third quarter of 2020 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end so with that I'll turn the call over to Advansix is president and CEO earn king.
Thanks, Adam and good morning, everyone.
Thank you for joining us and for your continued interest in advance X. I hope that everyone listening today as well as their families and co workers are remaining healthy and staying safe.
As you saw on our press release, our diverse product portfolio and low cost caprolactam competitive advantage continue to serve us well as we navigate through the current environment.
We remain focused on delivering for our customers well executing our business continuity plans with a vigilant focus on health and safety.
In the third quarter, we successfully completed our planned plant turnaround, which was originally scheduled for the second quarter. We continue to be very pleased with the results that our practices and protocols are delivering while also managing the hundreds of contractors that came onto our site to support those turnaround activities.
Mike will detail, our third quarter financials in a moment, where we believe our results reflect the resilience and strength of our business model no.
Notably we've seen nylon sales volume returning to pre koby levels.
Which is an encouraging sign as we monitor the pace of global and regional recovery.
In addition, we generated higher cash flow in the quarter through working capital improvements.
Cost management and reduction of capital expenditures.
We continue to take a disciplined approach to cost management, and expect $20 million to $25 million of cost savings for the full year compared to 2019 and this is an addition to the benefits associated with our natural gas boiler investment.
As we look ahead from a pipeline perspective, we are targeting strong Cadillac and plant utilization at Hopewell, while optimizing our nylon mixed across end uses applications and geographies to position the business for success.
And ammonium sulfate, we expect a stable environment through the 2020 2021 planting season.
And in chemical intermediates, we expect a favorable acetone industry supply and demand balance to continue.
While also benefiting from ongoing investments for differentiated product growth within its portfolio.
We also remain confident in our financial position.
At the end of the third quarter, we had approximately $128 million in available liquidity between cash on hand, and the additional capacity under our revolving credit facility.
We continue to expect robust cash flow generation in the fourth quarter supported by a lower run rate of capital expenditures further.
Further anticipated working capital improvements and receipt of cash tax benefits associated with the cares Act.
Resulting in a reduction of leverage levels and positive free cash flow for the full year.
On October we hit our four year, Mark as a public company and while I'm very proud of all the accomplishments. This organization has made since our spin off I'm, even more excited about the opportunities that lie ahead.
We work to complete our planning for 2021, some aspects of which we'll share. This morning, we are continuing to take a prudent approach planning conservatively from a macro perspective our.
Our priorities will focus on continued operational excellence and improving through cycle profitability.
Enhancing our portfolio resiliency through differentiated product growth and mix optimization and being strong and disciplined stewards of capital with.
With that I'll turn it over to Mike to discuss the details of the quarter, Okay, great. Thanks, Aaron and good morning, everyone.
I'm now on slide four where I'll review, the third quarter financial results.
And overall, we once again executed very well in a dynamic environment highlighted by volume growth and strong cash generation.
Sales totaled 282 million in the quarter, that's down about 9% compared to last year pricing overall was down about 14%, primarily due to lower raw material pass through pricing, which was unfavorable by about 13%.
Market based pricing was unfavorable by about 1%, reflecting challenging end market conditions in our nylon and capital I can product lines and lower sales prices and ammonium sulfate. This was partially offset by improved industry dynamics in chemical intermediates, particularly acetone.
Sales volume in the quarter increased 5% versus the prior year driven by end of season domestic granular ammonium sulfate sales and increases in Iowa you.
EBITDA was $16 million in the quarter down about 9 million versus the prior year, primarily reflecting the impact of our planned plant turnarounds.
Walk through the key year over year variances on the next slide.
Earnings per share decreased 30 cents versus the prior year to a loss of two cents in the quarter.
And lastly, cash flow from operations reached $36 million in the quarter.
It's up about 2 million compared to last year, primarily due to the favorable impact of changes in working capital, partially offset by lower net income yes.
Capex of $16 million was favorable by roughly 19 million year over year. Following the completion of several high return growth and cost savings investments as well as disciplined management of our repair and maintenance spend.
Now, let's turn to slide five.
As we've shared in the last few quarters, we thought it would be helpful. Once again to highlight a few of the key drivers of our EBITDA performance from a year over year perspective pricing.
Pricing overall as was roughly a million dollar tailwind year over year. This reflected in approximately $5 million benefit from lower input costs, namely natural gas and sulfur partially offset by a 4 million dollar market based pricing EBITDA decline try.
Tracking or key variable margin drivers. We saw continued net price over raws pressure across caprolactam, and nylon relative to benzene inputs, reflecting challenging year over year industry conditions, and lower ammonium sulphate prices net of natural gas consultant so for input costs.
This was partially offset by higher acetone spreads over propylene and improvements and other key intermediate products.
Despite an increase in sales volume driving higher revenue in the quarter volume and other items represented roughly an 8 million dollar headwind on an EBITDA basis versus last year.
Generally, reflecting an unfavorable mix in our capital lifetime in nylon business driven by a large increase in exports. As a reminder, nylon is a space where we've seen the most impact from Cove, It which is not surprising given the material ends up primarily in consumer oriented oriented products, such as auto two to textiles to package.
Thing and as the carpet well.
While we're pleased that volume and demand is returning there is a temporal unfavorable mix consideration, which we discussed last quarter as we placed product where demand exists.
The impact of planned plant turnarounds to pre tax income was $20 million in the third quarter of 2020 as expected versus 5 million in the third quarter of 2019, representing an approximately 15 million dollar headwind year over year as we successfully completed our larger hopeful turnaround this quarter, including our Kellogg ammonia plant.
Productivity and cost savings reached 11 million compared to the third quarter of 2019, including plant cost actions lower SG and expense as well in addition to benefits associated with our high return natural gas boiler investment, we're targeting 20 to 25 million of cost reductions for the full year compared to 2019 as.
There are an indicated.
We estimate roughly half of the full year cost savings are more temporary in nature with the remainder being more structural and permanent.
We're keeping our focus on disciplined cost management moving forward, while assessing our dynamic end markets.
Lastly, our realigned cuming supply chain and logistics productivity represented and approximately $2 million favorable impact in the quarter as we continue to drive efficiencies, while ensuring continued continuity of supply following the shutdown acumen supplier Philadelphia Energy solutions now, let me turn to the next slide.
We've included our typical pricing and spreads across our product lines altogether here on slide six.
System with our results global capital like 10 spreads over benzene continued to decline on a year over year basis in the third quarter. However, we have seen stabilization on a sequential basis from the second quarter of 2020.
Although the industry remains in an oversupplied position globally, and we're monitoring inventory levels through the value chain. We are encouraged by the recent improvement in demand the.
The Asia cap Rota, Bensing spreads averaged just above $600 per ton in the third quarter. This spread has been has stabilized for about nine months now and continues to approximate the trough levels. We saw in 2016.
Lastly, the Asia resin Overcapitalized time spreads averaged roughly in the middle of the typical two to $300 per tonne range through the quarter.
Overall nitrogen industry pricing continued to decline on a year over year basis in the third quarter, reflecting the impact of lower lower global energy prices and also declined seasonality from the second quarter as we exited the heart of the domestic planting season.
It's important to normalized pricing as urea contains 46% nitrogen, whereas ammonium sulfate contains 21% nitrogen.
So while urea has an underlying influence on other nitrogen products ammonium sulfate does have its own supply and demand dynamics influencing the premium earned for the sole for nutrient with.
With that we continue to monitor competitive dynamics in light of North America's supply additions, which came online at the end of last year as well as European imports.
And lastly industry relies acetone pricing over refinery grade propylene costs further improved in the third quarter tracking and improved supply demand balance in the U.S. Following final affirmative anti dumping duties local global funeral industry utilization rates and robust downstream demand we've seen that continue.
The expansion of the premium in the small medium by our EPS home prices over the large biomarker on a year over year basis through the third quarter as propylene costs declined from last year.
On a sequential basis pricing in both segments further expanded well propylene increased from trough levels. After a significant drop in the second quarter. As a reminder, the small medium buyer prices reflective of roughly one third of the domestic industry, where pricing is predominantly freely negotiated now let's turn to slide seven.
On the left side of the page we have highlighted the drivers of the robust free cash flow generation in the third quarter.
As anticipated working capital was a source of cash in the quarter contributing 20 million to the overall cash flow generation with inventory, representing a 10 million dollar favorable impact.
Specifically the organization executed well to drive a reduction of finished goods and with inventory, particularly in our Nile and resin product line.
We also remain disciplined around our cost and capital management, including all discretionary spending.
Recognizing this year's challenges from a macro perspective, weve continued to tighten our belts across the business, resulting in noteworthy productivity and cost savings contributions.
As we previewed our Capex run rate has come down quite significantly following the completion of several high return growth and cost savings investments as we closely manage our repair and maintenance capex spend.
We continue to expect positive free cash flow in 2020 supported by further robust cash generation in the fourth quarter, resulting in a reduction of leverage levels, which I'll discuss in a moment.
We expect working capital performance to continue to support cash flow generation as we exit the year with an anticipated continued reduction in overall inventory and the benefits of ammonium sulfate prebuy cash advances.
From a capex perspective, we anticipate roughly $85 million for the full year or similar run rate for the fourth quarter as we saw in the third and lastly, as a result of the cares Act, we do anticipate approximately $12 million of a cash tax refund in the fourth quarter as we've discussed previously.
So overall, a strong quarter from a cash generation perspective, and an improving outlook as we head into 2021 Ellis.
Now, let's turn to slide eight to discuss our debt and leverage.
We wanted to spend a moment to address the confidence we have in our financial position as well as clarify potential investor perceptions regarding our leverage levels on the left side of the page, we've shown our leverage ratios or net debt over trailing 12 months adjusted EBITDA going back to the end of 2018.
Both net debt and adjusted EBITDA are calculated in accordance with the terms of our revolving credit facility.
For example, our adjusted EBITDA adds back noncash stock based compensation and other nonrecurring items, such as a possible restructuring charges recorded in 2019.
Net debt includes our line of credit from the revolving credit facility less cash balances of up to 75 million and other minor items.
However, it does not include operating leases and unfunded pension liabilities by definition. The various external reporting sources include these amounts as debt following the new leasing standard which creates the impression of increased leverage our.
Our operating leases as a percentage of debt tends to be larger than peers and has impacted the perceived leverage levels, despite not being considered as debt by our lending partners.
You'll notice our leverage did increase overall over the last year as we ramped up strategic investments in the business, namely our conversion to natural gas boilers at Hopewell, Caprolactam quality and Debottlenecking project and our R&D lab relocation.
In the third quarter, we do have a timing consideration tied to the impact of two large plan planned plant turnarounds within a trailing 12 month period.
If you recall, we had roughly 25 million plan planned turnaround in the fourth quarter of 2019, and just completed a 20 million dollar planned turnaround in the third quarter of 2020.
We are well within our maximum leverage covenants and expect net debt to be reduced into year end toward our target range of one to two and a half times trailing 12 months adjusted EBITDA.
Now that's supported by the continued robust cash generation I discussed earlier, the normalization of the plan planned turnaround impact in our trailing 12 months EBITDA as well as anticipated debt Paydown now, let me turn the call back to Eric.
Thanks, Mike Im now on slide nine to discuss them industry performance considerations.
The Pie chart shown on this slide represents our sales by key end market.
Turning with the largest end market building and construction, we primarily have exposure here through nylon carpet and female sales into oriented Strand Board members.
Residential trends have improved through this period with housing starts and existing home sales continuing to grow supported by record low interest rates and a migration to the suburbs and low density areas.
Well, we have seen improved carpet demand from residential applications. This sector does represent a smaller portion of overall nylon carpet demand.
Firstly commercial construction trends have been lagging residential and having more unfavorable in the wake of the pandemic, where nylon has a stronger foothold we expect commercial construction to remain soft in the near term until there is more visibility into office and hospitality trends post call that.
Moving around the Pie chart clockwise I can fertilizer is another significant end market for our business.
We've seen and continue to expect steady demand for granular ammonium sulfate and overall software demand remains favorable as the key nutrients for crop supporting yield.
As we move into 2021, we would expect that demand to strengthen seasonally particularly as we move into the heart of the domestic planting season next year.
We continue to monitor our expected planted acres for next year with industry estimates roughly flat for corn around 90 million acres in crop prices, which has moved up a bit to more profitable levels for growers. So these do remain relatively low from a historical perspective.
Our promotion work also continued strong investment in soybean application research marketing and grow our education. The field trials continue to go well and recent testimonials have been favorable so that continues to be an area of potential longer term growth.
Moving to plastics, we've seen acetone demand, which is a precursor into acrylic screens uses protective equipment at retail offices and other locations remain healthy and expect that to continue.
All in demand has also been recovering.
Now while we are further back in the value chain. We are monitoring production in sales trends, where we've seen China and Asia growing faster in recent months compared to the U.S. in Europe, where recovery has lacked.
The remainder of engineered plastics remain steady with consumer and industrial and electric and electronics demand for nylon returning to pre cobot levels.
From a solvency perspective, we expect the favorable acetone industry supply and demand balance to continue.
We also see growth momentum for our NATO cyclohexane and product line, which is a solvent using various high value applications.
Now rounding out the Pie chart food packaging demand for nylon has remained robust.
And we continue to see strong demand for our chemical intermediates into paints and coatings, particularly with do it yourself home improvement projects on the rise during the pandemic.
So, let's turn to slide 10 to wrap up before we move to QNX.
I'd like now to reiterate our core focus areas as we head into 2021.
First continued operational excellence and improving through cycle profitability. This is at the core of who we are as a company.
We're focused on driving improved earnings and cash flow through cost optimization and asset productivity, which creates strong operational leverage.
We have efforts in place targeting improvements in rate cost quality and yield as well as further efficiencies in our planned plant turnaround program.
We expect the impact of planned plant turnarounds to be in the range of 25 to 30 million in 2021 versus approximately $32 million in 2020 and $35 million in 2019.
With operational excellence maturity comes a focused on evolving our sustainability programs and initiatives, even further to where we've come today.
We recently entered into operation clean sweep program campaign is to eliminate plastic waste into waterways pledging our commitment as a leading nylon resin provider in the north American plastics industry.
Our second priority is enhancing portfolio resiliency that 2020 has been a great example of how our diverse portfolio serves us well.
Whether it's our chemical intermediates offerings across various end uses and applications are driving this offer nutrition value proposition for ammonium sulfate product.
Our portfolio diversification has complemented this year's ongoing benefits from our focused cost management and high return capital investments.
Differentiated product growth supports us key priority as well and we've talked about this area of focus in three different buckets.
Hi, purity applications high value intermediates and differentiated nylon.
Individually many of these products are still growing off a small base, but weve seen successes across the portfolio, including our oximeter cyclohexane, Alan and wire and cable offerings.
We'll be well positioned to capitalize on further improvement in the macro environment and continue to expect an improved contribution from these product lines over the long term.
Finally strong capital stewardship.
We expect capex to be $80 million to $90 million in 2021, which does and will include a modest amount of spend towards the continued high return growth and cost savings projects.
We are focused on improving our return on invested capital and we'll remain disciplined in our approach as we look to drive long term shareholder value.
We expect leverage to be reduced to within our target range of one to two and a half time and have approximately $60 million remaining under our share repurchase authorization and we will continue to evaluate options to return cash to shareholders.
We've also continued to build out our inorganic pipeline internal capabilities as we assess potential acquisitions that would have strong portfolio coherent with our product lines and technologies.
During this dynamic time, we are strengthening our ability to deliver long term growth and believe we have the foundational elements in place for sustainable shareholder returns.
With that Adam lets move to QNX.
Great. Thanks, Aaron then LP. Please open the line for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then too.
At this time I will pause momentarily to assemble the roster.
The first question comes from Chris Moore Assi.
J S Securities. Please go ahead.
Hi, Good morning. This is Stefano is calling in for Chris Thanks for taking my questions.
Sure Great to hear is that enough good morning.
Thank you.
Just a little more color and update on the differentiated product growth.
Value intermediate and also the high purity applications.
Yeah, Let me I'm really pleased to recognize this is an area of continued interest and we're going to offer here are some a proof point, perhaps over the last couple of years and how we've continued to progress.
This this strategic area for us so.
So as you pointed out right. We do continue to view this portfolio in its effort in those buckets right high purity applications high value intermediate and places.
Places to drive differentiating island to high value applications as well and just as a quick reminder, right. These are all products that are in product lines that have one and a half to two extra gross margin on.
I mean look at where we were in 2017 about 8% of our total advantek sales fell into this bucket that has increased to 11% this year projected for 2020.
So overall about a 4% CAGR growth for the product lines in this in this bucket.
I would note though that.
It doesn't include our granular ammonium sulfate, which represents about 18% of our total advance excels and again, we view that as high value for the premium is earned as well. So we kind of dive into where we're seeing some real tangible.
Tangible growth nine.
I noted in my comments around made on cyclohexane known.
Since 2017 that product line has grown 10% on a three year CAGR.
Our upstream product line, we talked quite a bit about our launch of our easy about easy blocks on product line, you know again drop in replacement for for our meat goal that's more than doubled in sales this year.
And has a 76% three year CAGR can a growing on that introduction of that product.
Now on our wire and cable offerings as well, they're up 20, sorry, 10% this year and nearly 38% on a three year CAGR.
And also copolymer, which we introduced and again growing off a small base remedies are going into you know oftentimes specific niche applications.
They have to be qualified that has actually seen a 60% growth. This year. So I think even any year, where we've noted that.
Our efforts with customer qualifications have been delayed and perhaps flowed I'm still seeing again, a positive push here and again just in a continued area of emphasis that we think will serve us longer term.
Got it thank you very much.
And then just one more and jump back into queue.
Ill.
So you talked about.
20 to 25 million of the full year 2020 cost reductions.
Some of that just one times for co one time savings for cold it or does all of that flow into 21.
Yeah, So as we indicated on the call.
But by the way that ranges as increased so we initially when we discussed this on the last quarterly earnings call. We said in the range of 15 to 20 million.
We now expect SP 20 to 25 million, but.
But I know, we're estimating that roughly half of that is more temporal and half of that is structural. So you want to think about that is half of the costs will be coming back.
Next year.
What I'll say is year to date, we're pretty close to being in that within that range in the fourth quarter. If you look at our cost. So for example, if you look at SG in a in the fourth quarter of 2019, our spend was relatively low we had low I T costs lower incentive comp cost as well. So we don't expect a signal.
Perfect and year over year cost reduction in the fourth quarter this upcoming fourth quarter from a year over year perspective.
Just so you get a sense of how we're seeing things going forward here and we're going to look to optimize really.
Really as much as we can and continue to be very diligent on our cost structure as we head into 2021 in this challenging environment.
The next question comes from David Silver of CL King. Thank you.
Thank you.
Yeah, Hi.
Good morning.
Oh, Hey, good morning, Hey, I have a couple of questions. So the first would be and on the revenue side. So when I just take the percentages of your revenues that you allocate to the you know your different product lines.
And then.
Related to your total revenues.
It seems like there was a very substantial sequential pickup on your chemical intermediates line you know towards the.
An incremental 30 million of revenue this quarter probably might.
Estimates.
So I I guess some of that is that but I'm. Just wondering if you could how would you characterize you know what was going on on the chemical intermediates line. During the third quarter, maybe just give us some sense of where that substantial pickup in revenues were coming from thanks.
Yes, so as as you well first of all when you're comparing the second quarter to the third quarter you need to consider the fact that.
Utilization and demand was very soft in the second quarter as a result, the economic impact of a.
Co bid overall, so when you look at the third relative to the second generally volume.
Was was stronger really across the board.
And when you look at the intermediates business, specifically, we saw a strong revenue growth from the second to the third quarter.
In in really virtually all of the intermediate products and you point out you know acetone.
We're not only getting improved volume from the third to the.
Second quarter, but also.
Pricing is has moved up you know we shared with you with everyone the trends in pricing, particularly in the small and medium buyer, which improved sequentially, but we also saw improvements in phenol and they don't and HMS as well when you look at these as a top line revenue. So it's really driven both by volume.
Im coming off of a lower quarter in the second quarter, because a coded as well as a as well as pricing, particularly driven by acetone.
Okay.
Very good thanks for that color appreciate it.
I had a question I guess is about.
The cat so sorry so.
Had a question about your comment to both last quarter and this one.
About expecting.
Generate I guess the free cash flow.
For full year 2020.
And I.
I wanted to maybe just harp on the working capital elements. So.
You know per the slides in the third quarter. There was a net working capital benefit of around I don't know $18 million to $20 million 20 million the way you laid it out.
And I was certainly expecting a working capital benefit, but maybe not not in the third quarter.
Could you maybe comment on you know, maybe what incremental working capital benefit you're looking for in the fourth quarter, so not or not so much earnings, but how much more you know maybe inventory order or receivables might be effectively release thing.
I mean, there was a pickup in your accounts payable in the third quarter, and I guess that especially.
Yeah, well yeah.
And what you'll see is sometimes there is some variability on a quarter by quarter basis.
When you look at the working capital overall, but there are a few things and you are correct in indicating that in the second quarter in the third quarter, rather we did get a $20 million benefit from working capital of which $10 million was inventory, but when you break down the inventory.
We saw a $26 million reduction in finished goods and wip.
And about two thirds of that was really the nylon business and so we talked about.
The fact that we expected inventory levels to come down as they were elevated during the first half of the year.
And that was partially offset by raws, which were up $16 million in the quarter and there was some timing considerations.
As we purchase Q mean, we also tend to hold higher balances here to mitigate potential weather impacts is associated with.
Hurricanes potentially down in the Gulf.
What I'll say is as we go into the fourth quarter is still a very.
Big focus on inventory reduction and we anticipate inventories to continue to go down.
We also anticipate the typical seasonal ammonium sulfate prebuy advances.
In the fourth quarter that is also going to help we may have some movement in some other areas. So I wouldn't anticipate working capital in the fourth quarter to be as large of a contribution.
From a free cash flow for perspective, but I would you know I'd call it probably in the low to mid millions contribution in the fourth quarter.
We're going to continue to focus on it and.
And drive cash too to close out the year.
So just to clarify low to mid single digit millions is that what you were referencing right towards the end of your comments, yes, that's correct, okay I'm going to just.
The old one more here fit in one more but.
I was hoping that the air and might be able to comment on just a little bit more color on the global kinda nylon demand outlook. So I guess in the third quarter. We finally saw some some rebounded global auto production and certain regions.
Sure you know their industrial activity levels are picking up and I'm. Just wondering from your perspective are things progressing as you would normally have expected in other words is the uptake of nylon into the typical end markets progressing or as you.
Might have anticipated or is there you know is there something different this time, either regionally or or by end market, where you know that that's maybe causing that's maybe leading to your commentary earlier on about maybe marketing your by law and a little bit differently.
Placing placing your pounds.
I'm, a little bit differently than than you traditionally Mike So maybe just a big picture on where you see nylon demand.
Maybe stronger than you anticipated maybe weaker maybe maybe some new outlets, but you hadn't counted on maybe when the year started thank you no no.
Oh of course, David.
And as a I think at this point, we've been communicating and certainly Ah you well noted and the dial in is a space, where we have seen the most impact you know from a little bit this year and of note really conditions on the front end of Oh, the pandemic weren't necessarily all that great to begin with.
Given the long long market in what child, we're operating.
So yeah as we noted I'm you know volume has been returning to pre cobot levels, but it's returning it you know in Asia at a faster clip than we've seen sort of regionally you know first of there and which is what we expected I believe when we chatted last time, you know from the standpoint that are you know they they had they had.
Pandemic a bit more in control and certainly when you look at you know no like in auto for instance, you know China car.
Our sales only down 7% year to date with a lot of Ah I think momentum being built in the last several months.
No. We did a thing like I mean, the U.S. is still down 18, and 19%, even though certainly again, you're starting to see demand pick up here in Europe is further lagging that at about 29%. So yeah. We are seeing this regional recovery very differently as sort of the global no pandemic progress.
So it's I think on one hand, what that's allowing or sort of necessitating has to do with we've been driving you know the higher utilization rate, it's certainly heading into our turnaround in post the turnaround is I'd be say kind of meeting demand where it exists and that is one consideration.
No wire exports are higher as as the U.S. had been lagging now as we've come through the third quarter and headed into the into the fourth we continued to see a pick up right in in North America, certainly in carpet, even though commercial down again that residential pull is coming through.
We're seeing a the engineering plastics in sort of the non auto spaces and he never returning to pre cobot levels and and although it's kind of on the tails of that.
And so you know I think there's.
Clearly, where we've been operating in stabilize at trough levels, it's hard to say, okay, where where do we see a turn and you know our focus will have to continue to be on driving the asset flexibility and the agility to ensure that we're meeting yeah. The recovery as it exists and I think even as you noted you know this morning and.
Your note, it's it's still going to be uncertain right. If he were here talking a couple of weeks ago, you know Europe looks a little bit different you know we have a resurgence ongoing we're watching that very carefully.
You know the but there are signs right the textile market seems to be perking up certainly for demand and in Asia, you see signs at least that engineered plastics is moving forward packaging will continue to remain robust, but I think we just have to watch that macro view here, which really could impact.
You know the regional recovery, which is what we really need to see you know both in Europe and in the U.S. to really push you know the full global recovery off you know as a joins Asia. So.
[noise] and it's been a you know I think well we're seeing again the the signs of it. There are there are still some puts and takes right. We had talked about for instance.
You know that the U.S. raga mills had come off the bottom right. They falter. It you know or waiver here, a little bit and Ah you know the last month and so we might see some sea salt recovery, you know potentially nylon just with the broader macro.
Okay. Thank you for all that I appreciate it.
<unk>.
As a reminder, if you have a question please press star one.
The next question comes from Vincent Anderson people. Please go ahead.
Thanks, Good morning, guys.
Good morning so.
Hi, I was hoping you could just talk really quick about the turnaround guidance for 2021 or was there some timing differences on maybe the smaller maintenance projects that has it lower year on year or is that just a more results from your execution improvements.
Huh.
I'm happy to address that I think it's a combination Vincent as you may call. It. So we we remind you that you know we alternate sort of our large assets turnarounds every other year. So we did kellogg this year on the sulfuric acid plant will be up next year.
When you when you look at sort of the scope that we voluntarily locked it will be more of a maintenance a scope versus a a a large set of capital expenses go which had an influence on sort of our I would say wrench time consideration, which would have impact on our sort of absorption rates that we could Ryan.
But it also does reflect I think if you look just at our continued execution you know over the years, we've talked about the fact that we look at global strategies integrated scheduling using our lean tools to take out a ways you know the strong partnership with with our turn around partners.
And and I would not we'd actually elevated inside our organization. So we actually have a turnaround leader on.
You know the leadership team of the integrated supply chain group now we've elevated turnaround leaders at every site onto their leadership team I guess with this consistent focus that we have to drive efficiency drive productivity drive 'em as well this safety and start up of these turn around so it definitely is a combination of.
While we're pleased with where you know we continue to like to head.
Excellent Thanks, and then.
Hi, if I missed it I apologize, but specifically volumes of ammonium sulfate into Brazil. This quarter, how how did they do and then.
In the event that you sold through distributors that that exchange basically crop inputs for pledged crop output from farmers, which is common in some parts of Brazil in the event that you distribute through them.
Seem to massive pre selling of next year's crop by Brazilian farmers and I'm wondering if you have seen that in any kind of early conversations I know you mentioned pre buying for I assume the U.S. season, but but any comments there.
I mean, they can we can tackle that so when you look at sort of sequential you know considerations you know overall from a seasonality perspective, we typically talk about you know again that $10 million to $15 million range, because our mix changes in in the quarter we would.
We ended up on the on the higher end of that upside to that more beneficial ended that close to the 10 million and here for a few things one we saw them the season kind of extend into July.
On on the domestic side so that was.
That was a positive for us in the quarter and certainly we did see you know again buying was up on that on the standard side into ex parte sequentially. As we expected you know as well so I would say that the quarter more or less progress as we would have had anticipated and right in our in the remarks coming into into.
Into this call and you know as it pertains to sort of pre buys maybe just a clarification on the pre buys we do our for the domestic you know granular season, so we really aren't not participating that relative to the export.
And size of the a side of the house.
Okay, all right maybe.
Maybe hear more about that early next year.
Right and then so last one.
So the balance sheet is is absolutely moving in the right direction.
So if this big discount between your shares and the replacement value of your assets. So.
If I'm thinking about acetone and what is changed structurally with domestic supply sources, obviously as a positive for you maybe some incremental headwinds on you know from M.B. I, taking share and I know with the over over the long term.
Does this open up any opportunities or any thoughts around monetizing maybe a minority interest in or accumulate oxidation unit or through a long term product.
Product off take agreement that maybe unlocks the assets value based and de risk the portion of your cash flows.
I mean, I think again the way I would best answer that for you here today Vincent right. When we when we think about our forward opportunity you know again as you know thanks for the [laughter] I noticed that we're moving in the right direction. We wanted to make sure that that was most clear and that we have confidence in our.
[noise] ability to drive a free cash flow I'm, whether it's Ah you know in in gross amounts you know from a conversion perspective and also from a yield perspective when.
When we look at sort of our ability and opportunities to optimize the system I think the best way to say is that we will continue to look up and down you know the value chain Oh, we're not opposed to you know the appropriate partnerships that allow us to succeed for the long haul and you know I think in those particular.
Color projects and or you know opportunities on an organic basis farm up and that would be the right time for us to to bring that to life.
Alright, thank you.
This concludes our question and answer session I like to turn the conference back over to Aaron King for closing remarks.
Great. Thank you all again for your time and interest this morning.
Our results this quarter again demonstrated the strength of our business model and the commitment of our roughly 1500 employees to delivering that's possible outcome as we execute for the remainder of 2020 and head into 2021 [noise] maybe.
We have a focused strategy that we're executing against built on a rigorous commitment to operational excellence enhancing our portfolio resiliency and being strong and disciplined stewards of capital all of which are underpinned by our global low cost position. So with that we'll look forward to speaking with you again next quarter stay safe and be well.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.
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