Q4 2020 Tenneco Inc Earnings Call
Good morning, and welcome to the Tenneco, Inc. Fourth quarter and full year 2020 earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask.
A question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Rich <unk>, Vice President Investor Relations.
Thank you and good morning earlier today, we released our fourth quarter 2020 earnings results and related financial information.
A presentation corresponding to our prepared remarks is available on the investors section of our website.
Please be aware that our discussion today will include information on non-GAAP financial measures all of which are reconciled with GAAP measures and our press release attachments and other earnings materials, when we say EBITDA it means adjusted EBITDA.
And unless specifically described otherwise margin refers to value add adjusted EBITDA margin.
The earnings release and other earnings materials are available on our website. Additionally, some of our comments will include forward looking statements.
Please keep in mind that our actual results could differ materially from those projected and any of our forward looking statements.
And the near term, we will be participating and two virtual conferences, including the Wolfe Research Auto's conference on February 25th and the J P. Morgan Global high yield and leveraged Finance conference on March <unk>, we look forward to speaking with many of you.
Our agenda for today starts with CEO, Brian Kesseler, summarizing our accomplishments and business performance and 2020.
CFO and <unk> will provide an overview of our fourth quarter and enterprise performance and COO, Kevin Byrd, who will discuss our segment results.
Matti will then review our balance sheet and 2021 outlook, Brian will provide concluding remarks before we take your questions and we will.
Turn it over to Brian.
Brian.
Thank you rich good morning, everyone and welcome starting on page four.
We ended the year on a strong note.
Largely driven by a number of actions we took during the year aimed at accelerating shareholder value creation and to further the development of a performance driven culture.
Let me quickly provide you with an overview of some of these actions.
First.
We revitalized our leadership team with a single CEO appointed to oversee the total enterprise and the addition of a new Chief operating officer, Kevin Baird and appointment of a new Chief Financial Officer, Matt and <unk>.
We also refreshed our board with four new independent directors with both industry and financial expertise.
This refresh also included the appointment of a new independent Board Chair and New Committee chairs.
These are meaningful enhancements for both the leadership and governance standpoint.
Under this refresh team we are unifying the organization with a clear mission to drive enhanced customer and shareholder value both in the near and long term.
Second.
Our accelerated cost program initiated in 2020 continues to prove successful yielding structural cost savings and margin expansion and cash generation and benefits with all projects on or ahead of schedule.
We continue to target $265 million and run rate savings by the end of 2021 and the team generated significant cash flow and improved our net debt position by nearly $500 million and 2020.
This was accomplished and and operating environment, where our year over year EMEA revenue.
Declined 17% as a result of the pandemic.
Spreading across the regions we serve.
Third I am proud of the resilience of our global team, which allowed us to successfully manage COVID-19 related impacts to our business operations.
Since the onset of the pandemic.
We have remained focused on ensuring the health and safety of our workforce, both in and outside of our facilities.
We rapidly implemented a range of actions aimed at reducing operational costs, coupled with the implementation of temporary SG&A cost measures.
And by these actions the Tenneco team delivered solid 2020 results and a challenging and volatile operating environment.
Turning to page five let me walk through and overview of our full year 2020 performance.
Our 2020 total revenue was $15 4 billion.
With $12 billion of value add revenue.
As you can see we have broken down our annual value add revenue by operating segments and markets and regions.
Our scale and diversification and product lines and markets and regions continued to be an advantage for us and.
Allowing tenneco to effectively whether the pandemic and spread across geographies and impacted our end markets and different cycles through the year.
North America was our largest value add revenue contributor at 42% followed closely by Europe at 36%, China contributed 14% and the other regional markets, making up approximately 8%.
You can see the breakdown and value add revenue by product applications on the bottom left chart.
Light vehicle emissions and engine made up 41% of value add revenue.
Aftermarket and OE DFS made up 32% CTO H and industrial made up 14% and OE light vehicle suspension and chassis made up 13%.
It is important to highlight that approximately 60% of our 2020 value add revenue was unrelated to OE light vehicle internal combustion engine product lines.
Supported by strong operational performance and the fourth quarter, we generated significant cash flow and year over year debt reduction for the year.
As well as meaningful improvements to the company's liquidity position and leverage ratio.
Year over year margin performance for the second half of 2020 was up 190 basis points over the prior year period and.
And yearend net debt was $4 5 billion.
A reduction of nearly $500 million.
Compared with 2019 year and.
Total liquidity was $2 3 billion.
Up from $1 8 billion at the end of the 2023rd quarter.
At year and the team delivered a run rate savings of $165 million from the accelerate plus program with the cost to achieve at about $150 million. Additionally.
Additionally, our working capital efficiency target improvement of $250 million has been fully realized at year end and a full year ahead of schedule.
I will now turn it over to Matt to walk through our fourth quarter financial performance.
Thank you Brian.
Turning to page seven and for a brief overview of our fourth quarter performance, we benefited from our diversified portfolio and delivered margin expansion generating strong cash flow and reduce net debt.
Revenue was up 10% year over year, excluding a currency impact of $99 million.
And this is inclusive of substrate revenue of approximately $1 1 billion.
Our value added revenue was $3 6 billion and the quarter up 4% year over year excluding currency.
This compares to light vehicle industry production up 2% and the fourth quarter.
Adjusted EBITDA was $410 million and the quarter up $123 million from the fourth quarter of 2019, we.
We delivered an 11, 5% adjusted EBITDA margin on value added revenue and increase of 300 basis points year over year and $521 million of free cash flow available for debt service.
This strong free cash flow and margin performance drove a reduction and leverage to four three times.
And a reduction and net debt to $4 5 billion.
Two charts, breaking down our Q4 value added revenue by product application and region highlights the strength and the diversification of our portfolio.
Now, let's turn to page eight for a look at our fourth quarter Enterprise performance as I mentioned previously we saw value added revenue of $3 6 billion and in the quarter up 4% from the fourth quarter of 2019.
Global light vehicle value added revenue grew 7% and commercial truck off highway and industrial and the aftermarket were essentially flat volume and mix positively impacted our value added revenue in the quarter.
Again, we saw strong improvement and adjusted EBITDA year over year, driven by solid operating leverage on higher volumes and the benefit of accelerate plus savings are operating performance also includes nonrecurring benefits of approximately net $30 million and the fourth quarter, primarily asset sales tooling recoveries and lower aftermarket rebates.
Our adjusted EBITDA figure includes $41 million and corporate costs.
Now I'll turn it over to our Chief operating officer, Kevin Barry for more details regarding our segment performance Kevin.
Thanks, Mehdi I'll start with our motor parts business on page nine.
Fourth quarter aftermarket revenue was $730 million on a year over year basis sales volumes were about flat at constant currency, excluding the strategic decision to exit certain product lines and certain regions.
On a sequential basis revenue was also flat representing stronger than normal seasonality for the fourth quarter.
During 2020, the motor parts team maintained a strong focus on serving customers securing incremental annual revenue of about $100 million.
Adjusted EBITDA was $110 million and adjusted EBITDA margin was 15, 1% up 480 basis points year over year, driven by operating performance of $49 million and the quarter, including restructuring savings and manufacturing distribution, and SGA, A&D and and nonrecurring benefit from the prior year.
Lori adjustment.
We also manage through late Q4 supply chain challenges the motor parts business was able to drive down inventory days on hand, and Q4 and was a significant contributor to meeting our company's working capital reduction target a year ahead of plan.
Please turn to page 10 and for details on ride performance.
Fourth quarter revenue of $683 million was up 4% year over year and constant currency driven by growth and light vehicle sales as well as aftermarket and Oes volume and.
Adjusted EBITDA was $29 million with and adjusted EBITDA margin of four 2% and the quarter conversion on the higher volume was strong driven by higher volumes and the noise vibration and harshness business and the advanced suspension technology business lower year over year operating performance, primarily came from the North American ride control business.
While the second of two plants was closed at the end of the second quarter stabilization of the North American ride control and network as a challenging journey and Covid has made it even more difficult we expect operations to improve and 'twenty 'twenty, one and to begin to realize restructuring savings.
During 2020, we continued to invest and and secure business wins and our core growth platforms. We launched 16 advanced suspension technology programs, and one incremental and VH business with three global battery electric vehicle manufacturers.
Turning to page 11, clean air value add revenues were $105 billion.
And grew 5% year over year on a constant currency basis.
Light vehicle value add revenues increased 2% and OEM sales were up 17% commercial truck and off highway value add revenue expanded 19% year over year fueled by content gains related to new emissions regulations in China, and India and.
In 2020, we launched 37 programs and support of China, six regulations, and 33 programs related to <unk> six regulations.
And our revenues will continue to benefit from the regulatory content gains in both China and India during 2021.
Adjusted EBITDA was $160 million, which represented a 13% increase from the prior year period Valley.
<unk> adjusted EBITDA margin increased 70 basis points year over year.
Operating leverage on increased volume and strong cost control and restructuring savings were the primary drivers of the performance.
Please turn to page 12 for details on powertrain.
Powertrain posted strong Q4 results at constant currency revenues increased 7% versus the prior year led by strength in light vehicle sales the ongoing ramp up of steel piston volumes for gas applications launches of new technology, advancements and bearings and continuing light vehicle inventory replenishment benefited growth.
Commercial truck off highway and industrial sales declined 11% year over year, while OE service revenues fell 6%.
Adjusted EBITDA measured $152 million and increase of 85% versus the prior year period with a 550 basis point improvement.
Profit performance was boosted by strong volume leverage and savings from restructuring projects initiated earlier in 2020, and a couple of onetime items.
<unk> and closed two facilities and 2020 and continues to pursue opportunities to lean out its asset base.
I'll now turn the call back to Matti to discuss our liquidity and debt position.
Thanks, Kevin at year end liquidity increased to $2 3 billion compared to $1 8 billion at September 32020, and.
And consisted of total cash balances of $800 million and available.
Revolving credit facilities of $1 5 billion.
And the fourth quarter, we fully paid down our revolver with the cash generated from operations driven by working capital improvements disciplined capital spending and expanded margin performance.
As of December 31, net debt was $4 5 billion a.
And a reduction of almost $500 million compared to the prior year.
Our relentless focus on improving capital efficiency.
Allowed us to achieve the one time $250 million working capital reduction as part of project accelerate and enabled us to significantly reduce net debt this year.
As part of our goal to optimize cash performance, we made progress reducing capital intensity this year.
Working capital as a percentage of sales improved 200 basis points to eight 8% as compared to the prior year and driven by inventory reduction across the segments with our motor parts business, leading the way.
We made capital investments of $394 million and 2020.
A reduction of almost 50% compared to 2019, we will continue to invest and our core growth platforms, while tightly managing our overall level of capital expenditures and.
And the fourth quarter, we improved our debt maturity profile by issuing new $500 million senior secured notes due in January 2029, and use the proceeds to redeem our 2022 notes.
We will continue to be opportunistic and actively monitor credit conditions to further extend our maturity schedule.
Turning to page 15, we have resumed providing formal financial guidance. We expect good revenue growth and margin expansion in 2021, our value added revenue guidance is 13, two to $13 8 billion at the midpoint. This represents growth of 12% year over year our.
Our revenue range employs a global light vehicle production assumption of approximately 80 million units. We are using the February IHS global light vehicle production forecast for the first half of the year. However, we have embedded and we're conservative assumptions and IHS for the second half, particularly in Europe.
We expect our OE centric businesses to modestly outgrow our motor parts business are.
2021, adjusted EBIT range is $1 three to $1 4 billion.
At the midpoint the forecast reflects a 10% value added EBITDA margin.
130 basis point increase year over year.
As you think about modeling the year, our quarterly incremental margin is anticipated to be the strongest in Q1 recall, our China sales declined significantly and the first quarter of 2020, and our North America and Europe OE businesses saw reductions in the back half of March 2020, all related to the start of the pandemic spread.
Further our cost base comparison was relatively normal and the first quarter of 2020, there were no special cost savings measures that were effective.
And Q1 2020, please keep in mind that there were $150 million of temporary savings.
That benefited our margin performance in Q2, and Q3 of 2020 that will normalize and 2021, we expect continued year over year savings from the accelerate plus program on our way to achieving the $265 million run rate by year end.
We forecast our net debt to fall to $4 2 billion by year end 2021, we estimate our capital expenditures will be and the range of $450 million to $500 million.
We expect cash taxes to fall between $140 and $160 million and 2021.
As a reminder, our cash flow is seasonal with a typical outflow and the first half followed by significant inflow and the second half.
And the middle of the page Youll see our Q1 outlook.
At the midpoint, we estimate $3 5 billion and value added revenues up almost 12% year over year.
We expect our OE centric businesses to post strong year over year revenue growth and Q1 motor parts is expected to be relatively flat primarily due to the recent adverse U S weather patterns and its related supply chain challenges.
Last year's revenue was not significantly impacted by the pandemic until the second quarter.
Our adjusted EBIT, our range is $325 million to $355 million.
The midpoint of the range translates to nine 7% value added EBITDA margin, reflecting more than a 200 basis point increase year over year as we carry our positive performance momentum from 2020 into 2021.
I'll now turn the call back to Brian for concluding remarks.
Thanks, Mike Please turn to page 16.
In closing I once again want to thank the global Tenneco team for all they did in the face of so many challenges to help deliver strong fourth quarter and full year 2020 results.
Since the onset of the pandemic, the health and safety of our workforce, both inside and outside of our facilities has been and will continue to be our major focus.
Looking ahead, we continue to build positive performance momentum.
And our disciplined performance focus proved successful and 2020 with our accelerated plus program, yielding structural cost savings margin expansion and cash generation benefits.
We have strengthened our balance sheet by reducing and optimizing capital intensity and improving our liquidity position and leverage ratio.
And enhancing our debt maturity profile.
We have resumed providing formal financial guidance and in 2021, we anticipate a gradual recovery from the pandemic and consistent with industry forecasts. We expect by 2023 that light vehicle production will return to 2019 levels.
Our diversified and balanced portfolio and leading global market positions and each operating segment and enable us to drive shareholder value creation, which is a top priority for our organization.
We are well positioned to capitalize on our positive momentum as we further invest and our long term core growth opportunities.
And our motor parts and ride performance segments.
We are continuing our focus on business mine optimization with clean air and powertrain and generating significant cash to fund our core growth investments and debt reduction.
At the same time, we see significant near term potential as we continue to focus on margin expansion cash generation and debt reduction.
And I am confident we have the team the core assets and strategic advantages to deliver long term customer and shareholder value.
We appreciate.
Are you taking the time to join US today and operator, we will now answer any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
And you were using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
The first question will be from James Picariello of Keybanc capital markets. Please go ahead.
Hey, good morning, guys.
Good morning.
And just starting with your market assumptions do you feel as though you had the global chip shortage appropriately accounted for.
And if it's February forecast and I'm thinking about just in the first half I know you have embedded conservatism for the second half.
And then can you remind us what the regional breakout is within your commercial vehicle and off highway sales mix and how are you thinking about those markets for this year. Thanks.
So.
And the chip shortage and IHS I think is still a little bit hard to tell obviously, we're sitting here near the end of February so for the first quarter. We've got at least a pretty good window. So we think for the first quarter, it's going to be close I know that the industry and many of our customers have been believing.
Net this semiconductor issue will be behind us maybe by the end of the first quarter, but we see that spilling into the second so there might be a little bit.
You have downside on IHS, and we're a little more conservative than and the IHS and the second quarter and that substantially.
But then as we noted in our second half, we're probably most conservative on Europe recovering at the pace and IHS shows as.
And as far as the commercial vehicle space Europe is heavier force and commercial trucks commercial trucks.
Not that big of a.
Makeup for Us and North America, and China is becoming larger and larger with the China six and as we mentioned the <unk> coming in for both.
Our training and cleaner.
Got it.
That's helpful and then yes.
How should we be thinking about the motor parts business.
And the aftermarket demand for this year and and then we also have to consider.
Yeah that business is recaptured.
And your share gains and so yes.
Backdrops for some motor parts, yes.
And as Ken.
Kevin highlighted in his commentary.
Our fourth quarter revenue.
It was about flat with Q3, which is with.
And with Cigna signals a bit higher demand generally from a cyclicality standpoint, usually Q4 is a little bit lower demand and.
And the one we're watching real carefully as miles driven.
Miles driven and was down quite a bit and 2020, primarily because of.
And the miles and to work being so greatly reduced.
But Q1.
About flat, we didn't really see.
A lot of the Covid impact and our motor parts business until Q2.
But we did have the team and North America, specifically booked some good business globally.
As Kevin highlighted we added about $100 million of revenue incremental too.
To the book last year, and we continue to.
Kind of drive that.
Drive that momentum as we go so we're still.
And very bullish on our motor parts business.
And that was.
Comment on the first quarter flat was that demand or.
And for your revenue and was that year over year or sequentially that was yes that was year over year about flat, which last year's Q1 wasn't so far comparatively and it was really the very very very end of March where we started to see the impacts.
Primarily in Europe, and the beginning and then it moved over to North America with all all of our major impact was in Q2 for.
For the motor parts group and so we would expect to get back up to normal and Q2 is generally our strongest quarter.
And the motor parts from a cyclical standpoint.
Thanks.
The next question will be from Joseph Spak of RBC capital markets.
Hey, good morning, everyone.
Maybe just the first of all and sort of point of clarification and I think you said in the quarter. There was about 30 million and that health performance that was nonrecurring including asset sales. So I was wondering if you could just.
And maybe tell us how that sort of broke down between the segments and.
And so I'm curious about the asset sales because when I saw the reconciliations and the filing I noticed there were some adjustments that were taken out so what why were some lift and the number.
Well it depends on what we're selling we're selling so if it's a routine asset sale.
PP&E it stays in but if it's a facility sale and gets it gets removed and so.
So essentially that's where it came from one of the segments and benefited with powertrain.
And the second and.
And the period.
And obviously, we mentioned the one of the other nonrecurring items.
Those rebates aftermarket rebase.
And motor parts benefited as well okay. Thanks for that clarification, and then you talked about some of the headwinds and ride performance.
I guess I, just wanted to sort of zoom out bigger picture on that segment since it's still.
Lagging some of the other margin some of those segments dilutive to margin. So whats the bigger picture and planned with that segment and get them higher and and what's a real.
Acceptable acceptable target margin level that you are looking for.
So.
Two challenges inside the <unk> and the size of the ride performance segment, and then two really solid growth opportunities that we see I'll start with the growth opportunities and and.
And that are really positioned very well for the Megatrends are <unk> performance materials business sure Kevin and highlight.
A lot of business wins, they're very relevant specifically relevant and our growth story on battery electric vehicles and advanced suspension technology growth.
Growth is very positive.
For ride control business, which is more of a conventional shock business. It's really it's really a north American footprint story.
We've taken and four plants down to two so essentially cut our capacity and have rationalized a lot of business out of there over the last year and a half.
And we shut down the first facility at the very very beginning of the year and 2020 and the second facility at the end of the second quarter and.
And as you can imagine anytime we're moving two plants worth of production into the remaining plants, It's a challenge and normal operating times when we couple that with what the team had to deal with during the Covid.
Periods, especially in Q2 Q3.
And very and carry beginning of Q4 and Thats really what drove the margins, we expect to see meaningful improvement and our rate control North America business.
Starting this year.
And when we move up and our braking business again, Theres, a couple of hotspots and they're from a regional perspective that that will get addressed from a overall position, we would expect kind of the.
Lower technology type businesses ride control and and.
And breaking two and kind of beyond that normal.
Seven ish percent EBIT range, and then be higher on the two technology driven businesses and so usually makes those out and as more and more of our ASD and NPH business growth.
When I get above that 7% number and the longer term.
Thanks, Rod if I could ask.
And one more and interest on sort of all the bigger picture strategy right.
The sign optimization and debt reduction and I guess I, just wanted to better understand and how you and maybe the board sort of.
Holistically think about this because you're effectively using clean air and powertrain powertrain to fund some of that growth investment, but also the debt reduction and.
And you are radically and I agree with this and create equity value, but it does rely on the market.
And not contracting and a multiple on some of those on those businesses and it looks like we're in a world where the peso of electrification is increasing and I know a good portion of your business as you highlighted in your prepared remarks is not tied to light vehicle is etc, but but.
How do you weigh the risk of I guess and holding on those businesses to fund that potential migration versus.
And the potential for continued.
Multiple contraction, which which may actually to value destruction.
Yes, as you can imagine that's a topic pretty much every day of as we're looking at our portfolio makeup.
And every part of our portfolio today.
It has strategic value to us.
For what it have but it's doing and the portfolio today as you mentioned.
Our powertrain and our clean air business is really our cash engines and the business and with where we're at today and the focus we have on net debt reduction.
Bring a lot of value to us to drive that net debt reduction down significantly year and the near to mid term.
Also we've got great core growth platforms that we highlighted and NBA itch.
And our motor parts business and so they are helping to also fund that growth and really pick up that from a higher growth percentage of our business.
Inside both of those clean air and powertrain businesses. The commercial truck off highway is really growing significantly again, thats going to be a lot slower pace.
Technology evolution that might vehicle, but we do not have our head stuck in the sand on light vehicle.
Pes and the electrification of the fleet average of good force, but we've got a very clear view of what we see and what we hear in the marketplace for what the adoption rates and the penetration rates are going to be for <unk>. In 2000 32035 going forward. We've got we believe we've got the right portfolio mix.
What we need to accomplish now and the near term, which we see significant potential and.
Shareholder value creation through that debt reduction one, but also we've got the wherewithal and and our plans and our portfolio to make sure. We have a durable long term growth business with motor parts and ride performance and its nucleus and its core as we move forward as the.
The value.
Different parts of our portfolio evolves.
We are prepared to and we will make the decisions to.
Change the mix and our portfolio over time.
Thank you very much for that.
The next question will be from Ryan Brinkman of Jpmorgan.
Hi, congrats on the quarter and thanks for taking my questions.
Looks like Youre guiding to net debt rounding to $4 2 billion at the end of 'twenty, one versus rounding to $4 5 billion at the end of 'twenty, suggesting our net leverage at the midpoint of guidance I think Brian three one down from four three today and realize these are blue.
Look net leverage figures and the cash.
And for your secured leverage ratio was different but just how do you think about or how to think about moving from close.
Four three in the context of Optionality around the separation of the businesses that has been discussed on earlier calls can you remind us again of the <unk>.
Leverage that Youre looking for.
Prior to separation and via a spin and then just given the stronger at CF and <unk> and and the guidance here for 'twenty. One does that maybe take pressure off of evaluating the sale of certain businesses to accelerate deleverage or is that something that is still being seriously considered at this point.
Well a lot there so let me pick up maybe from the end and move forward and if I Miss a part. Please. Please just remind me. So we have very clearly established some noncore businesses and our portfolio.
And just because we're getting a little bit better and our and are a bit better and our leverage ratio doesn't mean that it should sit and the portfolio long term we will put.
And non core asset sales to work for debt reduction when the markets get a little bit more amenable to the deal structures and we see more strategics coming in but in the meantime, we will keep using those.
And those businesses to reduce debt that's one two.
As we kind of looked at the original intent of the strategic direction.
Related to and I'm going to address the spin question.
We were hovering in and are targeting somewhere and the two five to three leverage ratio, but I will tell you coming out of last year and the Covid related.
Downtime downturn and the severity of the downturn.
And we actually were advantaged by having the businesses together and its current state.
And.
That ratio for US now if we were going to consider as one of the options.
Spin or separation of the business.
I believe it's more prudent.
To get the debt down below two.
And before that option.
<unk>.
More realistic.
But we will always be looking for different avenues to and enhance shareholder value.
And to make sure that.
Different parts and asset sales create more shareholder value and the near term and that's what we will do it all goes through the lens of that near term and long term shareholder value creation capability of the enterprise, we're and this for the long haul and so we want to make sure we're making the right decisions for the shareholders.
Both now and for the future.
Did I Miss any part of that question Brian.
Great and comprehensive response, Thank you and then just next question.
Wanted to ask around the performance of your internal combustion related business relative to the.
And the change and global light vehicle production and I think.
Onset of the call you might have mentioned that.
Something like 60% of your business is not directly related to <unk>.
Internal combustion and just adding up Europe, powertrain, and <unk> and ride performance and clean Air segments would result in about 80% of your revenue in those three division. So clearly there are some aspects of those that are not.
Related to internal combustion, maybe you can just remind us of the non internal combustion engine related.
And non ride performance businesses, but even if I just did look at that 80% of the business.
It seems like that 80% of the business from a volume mix perspective increased its revenue kind of like four 5% year over year and the fourth quarter versus.
And the change and global light vehicle production of noting was three 2%. So just trying to figure out where the.
And where the melting ice cube.
What the melt rate is what youre expecting for 2021 for Europe internal combustion related businesses relative to that change and production and then going forward I don't know if you.
We intend to communicate about longer term targets anytime soon but anything you wanted to share on the call today relative to your ability to track even.
In line or modestly below et cetera, the change and enlightened and I can see it seems like you werent, especially pressured in the fourth quarter be curious your thoughts on that yes.
Yes, So let me maybe separate internal combustion engine discussion.
And kind of carbon and two one is light vehicle internal combustion engine and the powertrain technology shift to full battery electric vehicle that is.
The 40% of our revenue and those light vehicle OE internal combustion engine product lines or commercial truck off highway businesses that are in both clean air and powertrain are continued to have great.
Growth strength margins.
And booked business through the middle and into the back half of the decade.
And so the commercial truck off highway space when you look for the outpace of content.
As Kevin highlighted.
30, plus launches in both India, and and China each.
For commercial truck off highway China, six and brought six.
Programs that came and that content is better for us and and better margins cash flow for us. So.
That's where a lot of that content is growing obviously ride performance is agnostic to powertrain technology, and and our core growth platforms and advanced suspension technology and NPH.
Sure.
Meaningful part of where we are driving our investment up for those core growth platforms. So that's the that's the makeup.
As we grow commercial truck off highway more as we grow the ride performance side more and motor parts more we would expect that 40% to continue to shrink over time and then as we get our leverage ratio, where we're more comfortable we've talked about a range of one five to two is where we'd like to see this portfolio.
As we get there then our options really get much broader four different strategic alternatives.
Okay, Great. Thanks, and then just lastly for me of course, you've taken a number of steps on the balance sheet side that have been popularly received and including the push out of those 22 maturities.
Just looking at the net distribution profile and then on Slide 20, maybe just first update us on.
What sort of normalized interest expense, maybe you did say that during the call, but if you could remind we can assume going forward might be and then youre looking at that debt stack on slide 20, maybe just update in terms of what might be next I don't know.
And if it's.
The term loan a.
Or if there's anything else that.
Might need or could be done here and given the.
Really much more conducive environment relative to.
Nine months ago et cetera.
Yeah, Hey, Brian it's Matti.
Our interest expenses and in around the 235 million to $250 million a year. So that's what we would expect and 21.
As far as what I can say is we will be opportunistic with the high yield market. The way it is and so and as we look at our debt maturities.
We did taken out the 'twenty twos, moving and 29, we will continue to be opportunistic and look at.
As we've as we've always done if the markets are open.
And we'll try to try to.
Get some of these maturities further addressed and so I think that will I think only benefit benefit us and our shareholders as well so that's as far as I can go at this point, Okay very helpful. Thank you.
And.
Again, if you have a question. Please press Star then one the next question is from Bob Amenta of Jpmorgan.
Yeah, Hi, Thanks, and just couple.
Couple of quick ones.
When you were going through and slide 15, I'm, sorry, and I heard you say 140 to $1 60 per cash taxes.
Thank you Might've said right before that I missed maybe capex pension cash reward could you just repeat those cash uses this year.
Yes, I think I said it was capex of $450 to 500 to 500 million profit two to 500 and that.
The only other guidance, we gave on cash flow.
Okay, and then just so I'm, making sure I'm talking about the same thing and why.
Back and I can't remember if it was pre COVID-19 or not when you guys mentioned the cash restructuring $2 50 over two years is the 150 <unk> site on costs to achieve is that apples to Apple does that mean that Theres 100 left to go in 2021 or is that not the same.
And we've got about $125 million more of restructuring.
Investment to make to get to our 265 exit run rate at the end of 'twenty, one from an EBITDA perspective, so from a restructuring cash perspective, I think of the question Youre, asking and we'd be around a $125 million marker in 'twenty, one and so that's.
A little bit higher as well.
As we prioritize and 2020 the quicker payback periods. So as we're now jumping into it a little bit a little bit higher but not much and so the $1 50 would correlate to the original <unk>.
<unk> hundred 50, which is now probably closer to $2 70 to 75.
Okay, and then just lastly, the pensions with the cares Act I had like that for last year. You only spent 40 and I had more like 100. This year is that and the right.
Brian ballpark or is this year going to be bigger than that due to the deferral.
We did not take advantage of the cares act deferral into 2021. So we made that are normal pension payments in 2020. So.
So our normal run rate on pensions is approximately 100 million of cash half of that being born up and EBITDA and the other half coming via the balance sheet.
Okay, So starting with EBITDA and really just be at a $50 or for $1 million reduction. Okay. Alright, that's all I had thank you.
Okay.
Seeing no further questions. This concludes our question and answer session and also concludes our conference call for today, we want to thank you for attending today's presentation. You may now disconnect have a great day.
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