Q4 2020 Trinseo SA Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the trends of yellow fourth quarter 2020 financial results conference call. We welcomed the trends he'll market management team Frank of Bowl, which president and CEO, David Stacy <unk> Executive Vice President and CFO and.
Andy Myers director of Investor Relations.
Today's conference call will include brief remarks by the management team followed by a question and answer session. The company distributed its press release, along with its presentation slides at the close of market yesterday.
These documents are posted on the company's Investor Relations website and furnished on the form 8-K filed with Securities and Exchange Commission.
If anyone should need.
The operator assistance during the call. Please press Star then zero on your telephone I will now turn all of the call over to Andy Myers.
Thank you Crystal and good morning, everyone. At this time all participants are in a listen only mode.
After our brief remarks instructions will follow and to participate in the question and answer session.
Our disclosure rules and cautionary note on forward looking statements are noted on slide two during the presentation. We may make certain forward looking statements, including issuing guidance and describing our future expectations.
We must caution you that actual results could differ materially from what is discussed described or implied in these statements factor.
Factors that could cause actual results to differ include but are not limited to risk factors set forth in item one a day of our annual report on form 10-K or in our other filings made with the Securities and Exchange Commission and the company undertakes no obligation to update or revise its forward looking statements.
Today's presentation includes certain non-GAAP measurements, a reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release.
And in the appendix of our Investor presentation.
A replay of the conference call and transcript will be archived on the company's Investor Relations website. Shortly following the conference call. The replay will be available until February four 2022, now I would like to turn the call over to Frank <unk>.
Thanks, Andy and welcome to <unk> fourth quarter earnings call.
First and foremost I'd like to start by thanking our employees.
All of their continued hard work, especially given the unprecedented economic and social issues during 2020, which made for the most challenging environment I've experienced in my 35 years from the industry.
I was very impressed with how agile our team was and how they adapt to rapidly changing working conditions. We were never overwhelmed by the crisis as everyone remains very collaborative focused and engaged throughout the year.
No doubt that their passion.
Enabled us to successfully weather the storm and emerge in an even stronger financial position compared to the beginning of 2020.
I am very proud of what we accomplished and I'm looking forward to a very bright future for <unk>.
Yes.
Moving to our financial performance I'm overall, very pleased with our 2020 results as we noted in our December of issue guidance, we continued to see improved demand and profitability across the company in the fourth quarter.
With strong pre tax income and adjusted EBITDA at its highest level in more than three years.
Excluding feedstocks are total sales volume in the fourth quarter was 6% higher than prior year.
As we observed strengthened demand in many of our end markets, including appliances tires, and especially automotive where fourth quarter volume was 7% higher than the prior year after declines of 65% in the second quarter and 13% in the third quarter.
Stronger automotive demand led to tighter ABS market, which along with our commercial excellence actions resulted in the highest quarterly adjusted EBITDA for our base plastics segments since the beginning of 2018.
In addition, our polystyrene segment enjoyed its highest full year adjusted EBITDA ever.
Of the polystyrene team has done an excellent job of implemented value based pricing and it's more differentiated products like high impact polystyrene.
For appliances.
For the full year, our engineered materials segment achieved its highest adjusted EBITDA ever despite of challenging macroeconomic environment.
The fourth quarter, which was our highest earnings quarter ever for the segment experienced volume improvement from prior quarters due to the demand strength, mainly in consumer electronics and footwear applications.
And the latex binders sales volume for the full year was essentially flat versus prior year as increases to the higher margin case and board of applications were offset by a decrease in graphical paper.
The case volumes grew by 5% over the course of the year, including a 13% growth in the fourth quarter.
This mix improvement in latex binders is in line with our strategy for the segment and.
And we expect continued growth in case applications as the Brian Monster acquisition from the fourth quarter of 2019 has enabled us to expand into alternative chemistries in more attractive applications.
Looking back at 2020, when we celebrated our 10 year anniversary as a company I'm very proud of what we were able to accomplish the.
The safety of our employees remains of the utmost important to <unk> and I am happy to announce that in 2000 2016 of our 25 plants earned the Triple Zero award, meaning that there were no injuries spills and or processes safety incidents.
At those facilities during the year.
The Ed impressive statistic reflects the commitment to safety that our employees and site leaders of tier two daily.
And our goal is to achieve one or more years of zero recordable injuries.
For all of our global employees and contractors by 2030.
This is the example of one of the 2030 sustainability goals that we set for ourselves this year the.
These goals, which include initiatives like increasing our offering of sustainably advantaged products further reducing our carbon emissions and the increasing the percentage of women in senior management and executive positions were released in July along with our annual sustainability report.
Setting these goals as part of our vision to become a leader in providing sustainable solutions and to position ourselves.
As of workplace, which attracts top talent, while we successfully compete in the sustainable economy.
I was pleased with the sustainability progress that we made in 2020, especially.
Especially the ways in which we increased the sustainability of our product portfolio.
There were there were several milestones that were truly market leading.
Including the launch of our pulse Eco series.
Recycled containing resins for the automotive market.
In polystyrene, we partnered with the German food packaging customer from the holes to use form fill seal formulations with 40% recycle polystyrene.
In engineered materials sales with recycle based research.
Recycled based.
Polycarbonate compounds, which are used mainly in consumer electronics electronics applications grew 50% in 2020 and sales volume doubled and bio based footwear applications.
Three of our sites achieved mass balanced certification in 2020, which will allow for a more transparent tracking of sustainably advantaged materials at a large scale.
Most importantly, we can expand our offering of circular materials toward key customers.
Lastly, we've made further progress on our joint plan with Ineos for.
For a polystyrene recycling plants in Europe.
This plant will represent a significant step forward for polystyrene circularity as its goal is the breakdown polystyrene back to styrene monomer.
For use of numerous applications.
We will still have more to accomplish in sustainability I am proud of this year's achievements and we continued to be recognized as a leader in this area.
As evidenced by Newsweek naming us as one of the top 100, most responsible companies for 2021.
Which made us number three in the materials industry.
I look forward the sharing more sustainability updates and accomplish accomplishments over the course of 2021.
2020 was an excellent year for cash generation, our full year cash from operations was $255 million, which led to free cash flow of $173 million.
Throughout the year, we were able to effectively manage costs from structural programs put in place prior to the pandemic as well as short term cost actions in response to the pandemic, which were successful thanks to the quick and thorough implementation by our employees.
For the full year, we captured cost savings of $30 million, which were split roughly equally between structural and short term savings.
Going forward, we expect structural savings of $25 million per year.
And we will keep short term cost actions in place as long as we feel this is prudent.
We ended the year with $589 million in cash and entered 2021 with a strong balance sheet and liquidity position.
Perhaps the biggest development of the past year was our agreement to acquire <unk> PMMA business, which represents the first steps in the transformation of <unk> into an advanced materials specialty solutions provider.
We're very excited to add this business to our portfolio.
As we believe it will significantly increase our scale in the engineered materials and provide higher margins high free cash flow conversion and lower volatility throughout the cycle.
In addition to being a strong strategic fit and we anticipate that the transaction will allow us to harmonize the it systems within <unk>.
Which will create significant efficiency and the legacy trends of the organization.
And the time since we announced the acquisition, we have established and fully staffed and integration management office.
Comprised of members of both the Arkoma intrinsic.
Integrating this business is one of our highest priorities and we're still targeting closing the acquisition by the middle of the year.
2020 ended the year with the favorable market conditions for many of our segments.
That positive momentum has continued into the first quarter. As we are now we are observing similar and in some instances improved market conditions.
Demand strength in applications, such as automotive and appliances are not only providing volume benefits to many of our segments, but the increased demand is contributing to higher margins in ABS and polycarbonate and polystyrene.
However, despite this improvement in underlying market performance.
We expect first quarter adjusted EBITDA to be sequentially lower as we don't expect to enjoy the favorable net timing benefit of $29 million.
That we did in Q4 to repeat itself in Q1.
Given the strong start to the year.
We estimate full year earnings in 2021 to be significantly higher than each of the prior two years with an estimated net income of $167 million to $200 million.
And adjusted EBITDA.
Of 400 million to $450 million.
This range assumes a full year contribution from synthetic rubber and no contribution from the announced PMMA acquisition.
With this expected performance and resulting cash generation. We are now targeting net liberate our net leverage ratio of approximately three times at the end of 2021 pro forma for the PMA acquisition with further deleveraging thereafter.
Let me conclude by saying how excited I am about the company's future.
And our transformation into a specialty materials and sustainable solution provider, where our success will be determined more by how we differentiate our products.
And the value, we create by working with our customers to solve problems.
Looking forward the closing the acquisition and integrating the PMA business implementing best practices welcoming our new employees and upgrading and harmonizing our business systems.
In addition, we will continue to pursue additional growth in business of.
Optimization activities.
I'm equally enthusiastic about the pursuit to achieve our long term sustainability goals, including working with our customers to provide value based and sustainable products.
As always we remain extremely focused on maximizing shareholder value and now Crystal you can open the phone line for questions.
At this time, if you would like to ask an audio question. Please press star one on your Touchtone phone once again that is star one to ask an audio question one moment for your first question.
Your first question comes from the line of Frank Mitsch with <unk>.
Fermium research.
Excellent job on the pronunciation. Thank you.
Hey.
Frank wanted to.
The nice end of the year, but listen I wanted to talk about 'twenty. One your guidance of 400 to 450 million of EBITDA the basis as the company exists today.
Actually it looks like a nice increase relative to where the street is given there's some confusion as the who is PMMA and who doesn't et cetera, but it does look like.
Cereal increase year over year, where do you see.
The segment Wise, where do you see the most upside.
Among your among your various segments as we think about 'twenty one versus 'twenty.
So year over year, we would see that in our basic plastics and we're seeing really excellent traction with that group.
And hold their value based pricing and then there's the second component that.
Currently there is some supply chain tightness that we're benefiting from that when we look at that range. We don't anticipate will continue for the full year. It will normalize after the outage season in Q1, but we're benefiting from those.
Those comex initiatives, obviously rubber returning to normal will be a big improvement year over year as we get back to pre COVID-19 level of demands so.
Those two segments are really where we see the biggest year over year improvement.
Got you and Thats, obviously, the second quarter was the does that.
Very negatively impacted in synthetic rubber and speaking of that of that business. It seems like the environment for M&A.
Picking up here.
Can you can you discuss what your thoughts are in terms of.
The ability to monetize that business how are you feeling today relative to where you felt.
A few months ago, when you first announced that.
Initiatives.
So were we.
We've seen significant interest in the business and we're really confident that we will conclude our process too.
To evaluate our options by the middle of the year.
Got you.
Thank you so much.
Thanks Frank.
Your next question comes from the line of David The leader with Deutsche Bank.
Hey, good morning, Thanks for taking the question is the Katherine Griffin on for David.
Just first question on guidance the it seems like excluding the timing impact EBITDA.
It should be up in Q1 versus the Q4. So then if we kind of assume that Q1 is up from let's say $120 million ex timing then relative to the full year 2021 guidance is the rate.
And EBITDA cadence for Q2 to Q4 of somewhere like in the $100 million range.
Thinking about that right.
Yes, I think you've got Q1.
Your assessment of Q1 is accurate so we ex timing, we would expect Q1 to be better than Q4.
But not the.
Enough to offset the $29 million in timing.
Timing benefit that we got in Q4, but and then we would but again, we need to remember Theres two factors.
Well, we're currently experiencing some supply chain are enjoying some supply chain tightness in Q1 day.
Due to it being a normal outage season, and then some of.
Market disruptions that are occurring and we expect those to normalize.
After Q1, and then we would expect also the <unk>.
Normal Q4 seasonality that we typically have in the business. So that's how we get to the range.
Great. Thank you.
And then just thinking about.
Kind of the cadence.
The temporary cost savings coming back.
The next year could you just talk about kind of how you expect those to flow through.
Hi.
Hi.
Inventory at the end demand kind of get better.
I think if I understand the question.
I think.
I'm going to answer our address of the question of when we think will relax the short term cost savings measures that.
We've continued to keep in place.
And if thats, what youre asking so yes, that's perfect. Thank you. Okay. So we had in total last year, we had $30 million contribution from a combination of both structural and short term cost savings initiatives.
We will keep those short term cost savings initiatives in place until we get more certainty that the recovery is here to stay and the market outlook progresses.
So.
Again, I don't have an exact timetable for when we would relax that in.
But.
Yes, Catherine this is Dave maybe I'll add a couple of things I mean the.
<unk> of.
We're really as Frank said, we took $30 million of cost actions in 20 of that.
Half of that was structural and half of that was what I would call it temporary the.
Full year impact of the half that was structural will be at $25 million. So the $25 million structural cost savings out of the company in 'twenty one the part that is.
The part of it's temporary.
The big part of that is <unk> for example.
Of an entertainment and the Nobody's traveling in the company right now.
So what we've budgeted and this is all baked into our guidance, what we've kind of assumed is.
Those elements Tradeshows TNT, you may think of late that well.
The return to kind of pre COVID-19 levels in the second half of the year, but we'll have to see if that plays out or not but that's kind of.
Gives you the.
Prospective I think of how we think about that.
Yeah, great. Thanks, so much.
Your next question comes from the line of Hassan Ahmed with on the deck global.
Good morning, Frank and David.
Good morning Hassan.
I was taking a look at your of volumes, obviously sequentially really good performance in engineered materials and synthetic rubber.
And obviously I understand sort.
Non market autos in particular.
Picking up quite nicely.
As you guys sort of came up with your guidance.
Could you talk a bit about the sustainability of some of these volume levels that you're seeing particularly in these two segments.
So.
I would say that we feel very confident in both engineered materials and synthetic rubber volumes continuing at the current levels assuming.
The recovery sustains itself. So there's a couple of things that are driving the depth beyond just market recovery and a lot of it is based on the new products that we're introducing.
You mentioned in the commentary and engineered materials were really getting good traction with our <unk>.
Post consumer waste containing our recycled containing.
The materials that go into consumer electronics, we're also getting good traction on bio based materials that go into the footwear so irrespective of.
Sure.
Market dynamics, we're winning new business with those innovations and we're winning those at better margins.
Then non recycled or sustainable materials in.
Synthetic rubber U of a similar dynamic playing itself out.
It's an innovation driven business and performance tires, and we've been we've introduced new grades.
That are being specified in.
Those.
Platform wins are going to result in growth going forward. So.
Again.
We think that.
The volumes that we're enjoying today or sort of pre COVID-19 level volumes, but the mix has improved because of those commercial activities we've taken.
Understood understood very helpful and.
Dan on the 2021 guidance.
A lot of your sort of raw material supply contracts.
Larry expiring last year.
So obviously this would be the first year of 2021 win b of benzene and ethylene BD styling in the BPA of variety of these sort of.
The raw materials will of will sort of the under the umbrella of new contracts. So could you talk a bit about how we should think about the puts and takes off the 2021 guidance in light of <unk>.
Some of these new raw material contracts you guys may have structured.
Yes.
What I would say is that we have more market based contracts in across the board and in particular in polystyrene and styrene monomer for benzene and ethylene we had.
New contracts that were operating under but again.
We believe that those reflect the current market conditions.
Yes.
There are some benefits that we're seeing from that that are.
Passing passing through into our 2021 outlook, but it's not significant really the big driver.
For 2021 improvement are the market conditions in the commercial actions that we're taking.
Got it so overall the kind of net neutral in terms of year over year.
I would say overall slightly positive slightly positive perfect. Thank you so much Frank.
Your next question comes from the line of Matthew Blair with T. P H coal.
Good morning.
I was hoping you could just elaborate a little bit more on your expectations for polystyrene in 2021 and just in particular, how sustainable are the strong 2020 results.
So.
At.
At this point, we believe the produce.
The benefits, we're seeing in 2020 are pretty sticky.
A lot of that is driven by commercial actions and the.
Demand for packaged foods and increase demand for appliances and from changing conditions.
That were driven by Covid, So again, we're pretty confident that.
What we've been doing in polystyrene or will.
We'll see that benefit throughout 2000.
Okay.
About 2021, and the other thing I want to point out is we are also seeing a significant benefit.
From the introduction of the circular polystyrene products that we've introduced and so.
As we accelerate and shift our mix to more sustainable products.
We're going to actually I would expect that we would see a further improvement in our margins and our growth.
Simply because those products are in very high demand and most of our end consumers in the end.
The consumer products companies are really want to introduce products that are more sustainable and we're a leader now in that so.
As we continue to make progress I would expect.
Not only sustainability for our performance but improvement.
Matthew This is the this is Dave I would like to add one thing.
About a quarter of our.
Of our of polystyrene revenue is high impact polystyrene.
Accuse me of our polystyrene volume of high impact polystyrene, the told of appliance manufacturers in Asia.
And that's the that's clearly.
It's a good market and we've got a differentiated product there and that's that's one of the areas where we.
Really capitalized on what Frank mentioned earlier on the value based pricing. So I just want you to keep in mind the quarter of our polystyrene business as.
It is differentiated product.
And just.
Just to kind of buttress, what Frank said about the.
The stickiness of sustainability of that I mean, I just wanted to keep that part of mine that we do have a differentiated elements of the portfolio of there.
Sounds good and then how would you characterize the spring 2021 turnaround season Perspiring the.
Likely to be above average.
No we think it will be normal.
Great. Thank you.
Your next question comes from the line of Laurence Alexander with Jefferies and company.
Good morning, two questions.
First of all on the value based pricing initiatives.
Where do you think <unk> is in terms of capturing the potential of that and how far in terms of.
Do you have room to go in terms of the structural improvement in your margins.
And then secondly, as you think as you think about the characterization of.
<unk> wants to be as a more of solutions focused specialty chemical company.
Can you characterize what skill sets you have internally that really drive that.
And how much needs to be brought in through hiring just shifting the hiring practices or M&A just in terms of acquiring skill sets and technology platforms.
So.
Im going to start with the second.
Part of that question.
It's a great question and.
We believe that.
Really a lot of the skills and the expertise.
That will enable us to be successful is the solution provider comes from the acquired company.
And.
So preserving and bringing the successfully integrating those new employees, who understand the markets that they serve and their customer needs are really critical and that's the key to success in the specialty businesses as the market understanding customer needs and understanding.
How to fulfill customer needs.
You make the key point is being mindful of <unk>.
Wiring assets are bringing assets in and successfully retaining that skill set to solve problems and being.
Our solution provider is critical that's something that we have to acquire with.
We won't be able to grow that.
<unk> successfully in these new applications of Chemistries.
If I if you think about.
Going to the first part of the question how much runway do we have to continue to improve.
In.
And our <unk> initiatives, I think there's quite a bit and but again I would put it more in terms of our of shifting our portfolio to the more sustainable solutions type.
Mix.
As you can see we're really focused on introducing to the customer base recycled containing materials contain.
Containing circular polystyrene.
<unk> bio based materials, and we're seeing high demand for that.
As we secure.
I'd say there is as they qualify those materials I believe the rate limiting factor will really be our ability to secure feed the appropriate feedstocks for those materials, but I think there's a long runway for improvement as we continue to introduce and broaden that offering to our customer base.
<unk>.
And then just lastly, the bio based materials and the recycled materials are either of those or both of them.
The deliver.
Delivering higher margins in terms of cents per pound and rather than percentage margin just in terms of actual.
Cash margins.
So the simple answer is yes.
Both in percentage margin terms and in absolute.
Dollar terms per unit there are improving.
Thank you.
Your next question comes from the line of Eric Petrie with Citi.
Hey, good morning, Frank.
Good morning, Eric.
Yes, I would the annualized second half of 'twenty EBITDA, excluding the inventory re Val you get the 440 and that compares to a range of 400. The 450. So can you talk about the 10 million of upside where they come from and then 40 million downside.
Yes.
When we look at the second half.
I'm not sure.
There is a pretty.
Difficult exercise to go through when you look at the second half to strip out how much pent up demand from Q2 slipped into the Q3 and Q4 so.
<unk>.
I'd, rather look at our financial forecast from our customer base and the forward outlook, we're getting from our customers.
And really build that based on a bottoms up basis with how the product lines. So that's how we got to the range that we've got is really that detailed.
Forward forecast that we're getting from our customer base, because again as you point out second half.
2020.
Had a lot of moving parts that.
The estimate how.
How much inventory rebuild how much pent up demand there was.
So again, we did more of a bottoms up build.
Okay, secondly, rubber volumes in the quarter I think were stronger than expected.
Do you see demand this year for ESPN rns SCR grades in the U C any.
Story of restocking.
So.
What we're seeing right now is strong we're seeing.
Strong demand, but little ability from the retailers of the tire producers to build inventory in fact inventory levels of staying relatively strong.
Of our staying relatively stable.
And the other thing I would point out with our volumes in synthetic rubber as we've been successful in 2020 to win new business with new customers in particular in Asia.
And with some new grades and so that stronger demand.
We're seeing of demand recovery, but also we're seeing of mix.
<unk> from our historical business, where we're seeing more growth and more volume coming from new customers in Asia.
Great. Thank you.
Your next question comes from the line of Angela Castillo with Morgan Stanley.
Hi, Good morning, and thank you for taking my question I was hoping you could walk us through how you're thinking about working capital in 2021.
And the magnitude of potential use of cash.
It will recover.
Yes.
Angel highest Dave we gave.
In our slide decks of some kind of the pieces I guess.
You can work your way towards the free cash flow estimate for 'twenty.
And if you take the midpoint of our guidance range of $4 25, EBIT to the and walk through those pieces.
You'll get two of free cash flow number of $240 million.
And that's work that's out of working capital neutral.
I think the biggest driver of our working capital.
Is obviously feedstock prices now.
Now we don't currently foresee a lot of volatility in the feedstock prices through the year I mean as far as it out as we can see so we are not forecasting anything for the year.
The in either direction related the feedstock prices.
What I would say operationally as we took our inventories down considerably.
In 2020, we dropped our inventory volumes about 20% as a company and we're going to keep it there. So we're not going to be building inventory as a company.
I think we do have opportunity in other working capital the areas.
That week.
We have implemented some initiatives within the company.
To further reduced our working capital numbers.
So what I guess, the the net of the answer to your question is.
And our feet at a flat feedstock price level I would.
I would estimate that will reduce working capital of the year.
Yes.
I would put a number of 40% to $50 million probably on it.
Just the.
Our own operational initiatives.
Understood that's very helpful.
And then separately Frank I was hoping you could talk a little bit more about your sustainability initiatives.
The only having a lot of success with winning new business with the product launches whether it's process.
So the recycled.
And bio based that can be used that you mentioned so maybe if you could just kind of expand on that and give some of them are color what is the EBITDA contribution.
Total of sustainability portfolio have some margins are clearly better than kind of the fossil fuel based products, but how has that progressed over the year as you.
Ramped up sales.
And then at what point of view of capacity become kind of a good problem in the sense of needing to expand.
Yes, there's a lot there and honestly I Couldnt give you an answer for the.
The uplift in margin across the portfolio of the sustainable products versus non what I would tell you is.
Because theres, so many different products and so much going on but I would just say in general.
Some of the prices are multiples of Virgin material in in certain categories and the others.
Doubled you should be thinking double digit unit margin improvements.
<unk>.
But.
Again this is a broad based effort that we're making across every one of our business units actually didn't even mentioned this on the call of what I would also say as we.
We've got our first order for bio based synthetic rubber.
In the end of last year or so.
We've received mass balanced certification for our scope, how Germany site.
And we're seeing.
The tire companies really looking to change their environmental.
And sustainability footprint and so there's a lot of interest in this now again it will take the.
As of quality, there is a bit of a long runway in certain industries like the tire industry to quantify those materials, but the good news where we're using.
Chemically recycled or.
Or bio based feed that is that those end products basically have the same performance characteristics. When we use that feed as Virgin material. So I know I didn't give you specifically the answer youre looking for but I would just say, there's a long runway and you should be thinking.
As we're successful in that.
The <unk>.
Relatively significant improvement in unit margins.
Very helpful. Thank you.
Your next question comes from the line of Bob Corp, with Goldman Sachs.
Hi, everyone. This is Tom Glinski on for Bob. So first question it sounds like you're expecting to be maybe a year ahead of schedule on the Delevering target post.
The <unk> acquisition.
Could you just speak to what we should expect to see on your capital allocation priorities, maybe in the back half of this year and in the 2022 between M&A repurchase.
Re upping the dividend.
Yeah.
Yes, Hi, this is Dave Stacy I'll answer that question you are right. We are ahead of schedule and the reason we're ahead of schedule off of two things one is because of the cash generation and also because of it.
Our EBITDA forecast has risen.
Since we last forecast the numbers. So we do think we'll be in the neighborhood of three times net levered by the end of 2021.
As we announced in the when we announced the PMA acquisition.
We did reduce our dividend and suspend the share repurchase program I mean, those two things will be something we'll have to assess as we move forward.
In the context of other cash needs.
For the company and for the New company of those cash needs.
Yes.
Could be organic growth projects.
For the acquired business.
Other acquisition. So it's just something we'll have to.
Look at as we go forward.
Post the post closing.
I guess, maybe just I want to build on the one point that Dave is making.
We will continue as we said when in December when we made this announcement, we will continue to explore opportunities to broaden the offering that we have the case in engineered materials customers through through M&A and other.
Bringing in new product lines now obviously, our first priority is to integrate the PMA business and to get of our.
Our system's harmonize, but the other thing is to with the appropriate time. We would also we will be looking to separate more of the commodity products to help fund that growth. So.
We're balancing all of those factors when we think about the future and our capital allocation.
Got it that's helpful. And then on case applications performance was quite strong in 2020 could you just go through the moving parts of maybe what outperforms, what underperformed within that business.
So well.
The case the applications.
With the acquisition of the Rhine Monster plant in Germany, we have more flexibility in terms of customizing smaller lot production.
And more tailored solutions for our customers, but what I think you could read into that is that we saw really strong traction in introducing new products in <unk>.
The applications in particular, I would point out DIY.
So the DIY market.
Adhesives and sealants.
Did quite well that last year.
<unk>.
We also introduced other.
The new grades of materials based on the technology that we have now in Rhine months during those got good traction, but I think if I were the point.
Point to some end market that really was robust it was DIY and I think.
Sure.
And construction applications those those were quite strong.
Got it thanks for the help.
Your last question is a follow up from the lines Alexander with Jefferies.
I just wanted to revisit the discussion around the bio based and recycled products.
Are those.
By implication are those being included or will they be excluded from any divestitures as the decision to exit the commodity positions.
<unk> portfolio.
Every day so the simple answer is no. So in every one of our our product areas and our business segments. We are trying we believe in the increasing the ratio of sustainable products is to our advantage in.
We're seeing big demand from our customers. So across every one of our product segments, we're introducing those products in.
As we make evaluate.
What businesses to sell.
If that were to happen in the future of those products that are intrinsic to that product line would go with it.
Okay perfect. Thanks.
Ladies and gentlemen that does conclude today's conference call you may now disconnect.
[music].
Okay.