Q4 2020 Stepan Co Earnings Call
Greetings and welcome to the Q4 and full year 'twenty 'twenty earnings conference call. During the presentation. All participants will be in a listen only mode. Later, we will conduct a question and answer session at that time, if you have a quirk.
Jim Please press the one followed by the for on your telephone.
Any time during the conference you need to reach the operator, Please press star zero.
As a reminder, this conference is being recorded Thursday February 18th 'twenty 'twenty one.
It is now my pleasure to turn the conference over to Luis Rojo, Vice President and Chief Financial Officer. Please go ahead.
Good morning, and thank you for joining Stepan company's fourth quarter 2020 financial review.
Before we begin please note that information on this conference call contains forward looking statements, which are not historical facts.
These statements involve risk and uncertainties that could cause actual results to differ materially, including but not limited to prospects for our for floating operations.
Joel on regional economic conditions on <unk>.
Factors detailed in our Securities Unexplained Commission on filings.
Joining us online or over the phone we encourage you to review the Investor Slide presentation, which we have made available on www dot step on dot com under the Investor Relations section of our website.
We make these slides available on approximately the same time as when the earnings release is issued and.
We hope that you'll find information on perspective helpful.
Now with that I would like to turn the call over to Mr. Quinn Stepan our.
Chairman and Chief Executive Officer.
Thank you Luis good morning, and thank you all for joining US we hope you and your families are safe and healthy.
As the World continues to be challenged by the global pandemic, we had stepan remain committed to doing our part by supporting customers that supply of essential cleaning disinfection and personal wash products to the market.
We are extremely grateful to our employees for their passion and commitment to get the job done for our customers throughout what was a challenging year.
Overall COVID-19 opportunities on the consumer product segment of our business outweighed the negative impacts elsewhere in the company delivered record fourth quarter and full year earnings.
Fourth quarter, adjusted net income was $33 $1 million or $1.42 per diluted share up 29% from $25 $7 million or $1.10 per diluted share last year adjusted.
Adjusted net income for the full year was a record $132 million up 11% from last year.
For the quarter surfactant operating income was up significantly on volume growth, which was mostly attributable to continued strong demand for cleaning disinfection and personal wash products.
Mexican operations delivered strong volume growth versus the prior year quarter.
Our polymer business was up significantly during the quarter due to the mills jail insurance recovery, our rigid polyol volumes are gradually improving we had a good fourth quarter and finished strong with double digit growth driven by increased demand and customer inventory Brexit build in Europe.
Our specialty product business results were up slightly in the fourth quarter.
Board of directors declared a quarterly cash dividend on Stephens common stock of <unk> 35 per share payable on March 15th 2021.
Stepan has paid higher dividends for 53 consecutive years.
As recently announced Stepan acquired investors aromatic polyester polyol business and associated assets.
The acquired business has global sales of approximately $100 million per year.
We are excited to add this is polyester polyol business and believe that investors available spare capacity combined with debottlenecking opportunities in both plants will allow stepan to support future market growth in a capital efficient way.
At this point I'd like Luis to walk through a few more details about our fourth quarter results.
Thank you Queen My comments will generally follow the slide presentation.
Let's just start with a slide five towards GAAP day quarter.
Adjusted net income for the fourth quarter of 2000 on 'twenty was $33 $1 million or $1 42 sales per diluted share.
29% increase.
It was $25 $7 million.
Or $1.10 per diluted share in the fourth quarter of 2019.
Because adjusted net income is a non-GAAP measure we provide full reconciliations to the comparable GAAP measures on <unk>.
These can be found in appendix two other presentation on table two of the press release.
Specifically adjustment to reported net income this quarter consist of adjustment for deferred compensation on cash settled charts on.
Salt mine restart cutting expenses.
Adjusted net income for the quarter exclude deferred compensation expense of $2 $4 million or <unk> 10 cents per diluted share compared to deferred compensation expense of $1 $8 million or seven cents per diluted share in the same period last year.
Deferred compensation on numbers represent the net expenses related to the company's deferred compensation plan as well as cash settled stock appreciation rights for our employees.
Because these liabilities change with the movement in the stock price, we exclude these items from our operational discussion.
Slide six shows the total company earnings for each for the fourth quarter compared to last year's fourth quarter.
Breaks down the increase in adjusted net income.
Because this is net income the figures noted here on after tax basis.
We will call it extend any more detail, but to summarize sort of fact on some volume were up significantly while specialty product was slightly up versus the prior year.
Corporate expenses and all others were higher during the quarter due to higher acquisition related expenses and incentive based compensation the co.
Company's full year effective tax rate was 25% in 2020 compared to 18% in 2019.
This year over year increase was primarily attributable to non recurring tax savings in 2019, and a one time tax calls in queue for 2000 on 20 <unk>.
Due to our cash repatriation project as Battle day in based on acquisition.
Less favorable geographical mix of income in 2000 on 'twenty versus 2019 also impacted the effective tax rate.
We expect the full year 2021 effective tax rate to be in the range of 24% to 27%.
Slide seven focus on sort of fact on segment, we sold for the quarter.
So in fact on net sales were 300 on $58 million, a 16% increase versus the prior year.
Sales volume increased 8%, mostly due to higher demand for products sold into the consumer product end markets.
By increasing miles for cleaning disinfection on personal wash, but also due to COVID-19.
Higher sales volume for our tier two tier three customers also contributed to this increase.
This growth was partially offset by lower demand in the agricultural and oilfield markets.
Selling prices were up 11% on the translation impact of a stronger U S dollar negatively impacted net sales by 3%.
The higher selling prices, primarily reflects improved product on customer mix factor.
In fact on surface.
Surfactants operating income increased $9 $4 million or 28% versus the prior year, primarily due to strong sales volume growth on a $3 million insurance recovery related to the first quarter meso powered outage.
North America results increased primarily due to strong demand in the consumer product and market on a better product and customer mix.
But on a sale had a record quarter driven by strong volume growth.
Lower Mexico resolves were viewed to a high base period with insurance payment in December 2019, Although Mexico volume was up 31%.
Europe results increased slightly due to higher consumer product demand.
Now turning to polymers on slide eight net.
Net sales were $116 $7 million in the quarter in line with the prior year sales volume increased 7%, primarily due to double digit growth in global REIT volumes, lower EBITDA demand, partially offset theyre both growth.
Selling prices declined 8% on foreign currency translation positively impacted net sales by 1%.
Volume net operating earnings increased $11 $4 million or 100% versus the prior year due to the $10 million insurance recovery and the positive impact of volume growth.
All regions did well during the quarter North America Polyol results increased due to higher volumes of margins, reflecting that get out of an improvement in market conditions.
Europe results increased due to double digit volume growth in both rigid and specialty volume, while Asia and Latin America, we sold increased slightly versus prior year.
Specialty product net sales were $19 $6 million for the quarter, a 6% increase versus the prior year sales volume was down 1% between quarters on operating income on improved 2%.
Turning to slide nine despite significant challenge during the year, including the global pandemic on the first quarter 2020 plan powered outage at our meal sales facility. The company delivered record full year results.
Adjusted net income was a record 100 on $32 million.
For a $5.68 per diluted share versus $119 $4 million or $5 on 12 cents per diluted share in the prior year on increase of 11%.
So in fact on segment delivered record operating income of 100 on $69 million.
<unk> 38 for sand versus prior year. This earnings growth was driven by a 6% increase in global volume due to higher demand for cleaning disinfection on personal wash broadly as a result of COVID-19 in a significantly better product and customer mix.
The polymer segment delivered $68 million of operating income almost flat versus prior year. Despite the negative impact of COVID-19.
Global polymer sales volume was down 5% as a result of lower demand within the VA business.
Global rigid polyol volumes were slightly down for the year due to construction project delays and cancellations due to COVID-19.
Specialty product operating angle of $14 million down slightly from the prior year, when we grew significantly versus 2018 actuals.
10 shows the total company earnings bridge for the full year 2020 compared to last year on breaks down the increase in adjusted net income.
The figure is not yet out on an after tax basis. So in fact on was up significantly while polymer and specialty products were down slightly versus the prior year.
Moving on to slide 11, our balance sheet remains strong we had negative net debt at year end, our cash balance of $350 million exceeded total debt of 100 at $99 million.
Company had full year capital expenditure of $126 million and we are REIT darden at $41 million towards shareholders via dividends and share repurchases.
This is still on balance sheet allow us to execute the Invista acquisition in January 2000 on 'twenty one.
Beginning on slide 13.
<unk> will now update you on our 2021 strategic priorities.
Thank you Luis as we wrap up a challenging but rewarding 2020, we continue to believe that Stephens business remains better positioned to perform than most as we demonstrated in the fourth quarter and full year 2020.
We continue to prioritize the safety and health of our employees as we deliver products that contribute to the fight against COVID-19.
Our EPA approved Biocidal formulations kill the specific novel virus that causes COVID-19, and allow our customers to provide the public with additional tools to protect their families and fight the pandemic.
We believe surfactant volume and consumer product end markets should remain strong as a result of changing consumer habits and increased use of disinfection cleaning and personal wash products, we are increasing capacity in certain product lines, including Biocides and app for terex to ensure we can meet our.
<unk> higher requirements.
We are increasing north American capability and capacity to make low one for dioxane surfactants.
Yeah.
As explained in our previous calls recent regulations passed in New York will require reduced levels of one for dioxane in a number of consumer products by January one 2023.
One for docs, saying, there's a minor byproduct generated in the manufacturer of ether sulfate surfactants, which are key ingredients and consumer products.
Through a combination of process optimization and additional manufacturing equipment step and we'll be prepared to supply customers either sulfates that meet the new regulatory requirements.
This project is the driver of our increased Capex forecast for 2021 of $150 million to $170 million.
We are working with our customers to ensure these projects deliver our financial return targets.
Tier two and tier three customers continue to be the center of our strategy, we grew tier two and tier three volume by 28% in the fourth quarter.
And added 405, new customers.
Our diversification strategy into functional products continues to be a priority for stepan during the fourth quarter. Despite a slight volume decrease our agricultural business grew in terms of profitability due to a favorable product mix.
We have introduced many new products to the agricultural market and we will continue to invest in new capacity and capabilities to support growth in the agricultural market.
Oilfield volume was down due to overall challenges in the industry.
We remain optimistic about future opportunities in this business as oil prices have recovered to the $60 per barrel levels.
Polymers had a challenging year, given the availability of labor on construction projects and the need for social distancing.
However, the long term prospects for our polyol business remain attractive as energy conservation efforts and a more stringent building codes should increase demand.
The Illinois Rock River lock closure work was completed on schedule during the quarter, which ended the premium logistics cost associated with the business.
We remain fully committed to delivering productivity gains across stepan.
We delayed our project at mill sales to allow the team to focus on COVID-19 related market opportunities.
Work on the project will continue this year and we expect to see benefits in 2020 and beyond.
M&A represents an important tool as a means to delivering meaningful EBITDA growth and margin improvement. We are excited about the company's recent acquisition of investors aromatic polyester polyol business.
This is our largest acquisition to date and will allow us to continue our journey to create a more specialized higher margin chemical company.
The transaction included two manufacturing sites intellectual property customer relationships inventory on working capital the acquisition was.
Was financed with cash on hand.
We are putting our cash to work.
The acquired business has global sales of approximately $100 million.
Acquisition costs was $165 million plus working capital and is expected to be slightly accretive to Stephens earnings per share and EBITDA margins in 2021.
The company expects the multiple on a post synergy basis to be between six five and seven five times.
We expect to deliver full year run rate synergies within two years.
This acquisition will allow us to support market growth for the next decade in a capital efficient way through available spare capacity as well as debottlenecking opportunities in both plants.
The two additional locations also significantly enhanced business continuity for our customers.
The previously referenced multiples exclude the benefit of extra capacity required.
The company also announced the acquisition of a fermentation plant in late Province, Louisiana.
Fermentation is a new platform technology for Stepan as.
As we look to commercialize the next generation of surfactants.
Low surfactants produced via fermentation are attractive due to their favorable.
<unk> low toxicity and in some cases unique antimicrobial properties.
This goes hand in hand, with our previous net surfactant.
<unk> lipid acquisition in 2020.
This technology provides an important new option as customers across markets.
To achieve greater sustainability advantages within their products.
Wired plant will require additional investment to make our targeted products, but the site will provide world scale capabilities to support incorporation of new bio surfactants and agricultural and consumer products.
Given the strength of our balance sheet, we will continue to identify and pursue acquisition opportunities to fill gaps in our portfolio and to add new platform Chemistries.
Finally, 2020 was a difficult but rewarding year.
Our team responded to challenges and delivered on opportunities, particularly in our surfactants business.
We believe the long term prospects for rigid polyol remains attractive as energy conservation efforts and more stringent building codes should increase demand.
We believe our acquisition of invest investors aromatic polyester polyol business and two manufacturing sites.
Position us better to meet long term demand growth.
We anticipate our specialty product business results will improve slightly year over year.
In conclusion, we remain optimistic that we will continue to deliver value to you our shareholders in the new year.
This concludes our prepared remarks at this time, we'd like to turn the call over for questions. Tina. Please review the instructions for the question portion of today's call.
My pleasure via the phone lines. If you would like to register a question or comment. Please press. The one followed by the for on your telephone.
You will hear us retail prompt to acknowledge your request is for your question has been answered and you would like to withdraw your registration. Please press. The one followed by this three one moment please.
The first question comes from Vincent Anderson of Stifel. Please go ahead.
Yes, good morning, and very impressive enter the year everyone.
Thank you Vincent.
Yes, absolutely.
Given we were in many ways far removed from the panic buying of the second quarter I was hoping you could maybe go into a bit more detail on what the main drivers were of the strong surfactant sales performance in the fourth quarter.
I think generally the.
The increase in <unk>.
Disinfection and hand wash.
Has continued to change consumer habits have changed.
So we have that has sustained.
Our growth in the surfactant market.
And as we look at our customer comments.
We just finished our.
Annual Global meeting, our American chemistry, or cleaning Institute conventions.
And all.
All of the customers remain bullish about their long term prospects.
That sort of sustained increased demand for tool for their their products.
So.
We have so we fundamentally believe that we're going to continue to see increased demand in the consumer product segment.
We've got better availability of our raw materials to support those growth in those end markets.
We as I've said of Debottleneck and are expanding our capacity both in the buyer side and the amphoteric market. So.
So we think overall it's.
The markets will continue to grow and we'll be able to support our customers.
Perfect.
That's helpful. Thank you and.
So with so many tier two tier three accounts added this year, how should we think about the ramp up in dollar sales for those accounts for example, maybe it would be more clear maybe you got in the door selling 10% of their total surfactant needs, but you believe you can service say, 25%.
Any any color you'd be you'd be willing to give around there and how much we could maybe expect to see that contribute over the next one to two years.
So fundamentally we think we can grow our share of their wallet.
We do use metrics in terms about the number of products that we're selling to each of these customers and generally speaking.
The penetration that we have varies around the world depending on the markets that we're in for example in Brazil, we're actually selling on average.
Over.
<unk> 5000 customers today in Brazil in the tier two tier three segment and we are selling on average less than two products per customer and so we do fundamentally believe there is an opportunity to expand the number of products that we're selling to the smaller tier two tier three customers on a global.
Basis.
Now our penetration in the U S tends to be a little bit higher than it is in Brazil, but we still have an opportunity to to expand the number of products, we sell and continue to add more customers on a global basis, yes, being sand. If you remember what we have dog in debt with ICR presentation. We believe that is on <unk>.
Levered yourself around 20000 customers out there today that we're not serving on.
So our screen was mentioning the strategy is to is to France or actually three is acquiring more call summer selling more products to the customers that we already have on improving the mix. So is that is that three legs that we got after with our tier two tier three and as you saw we added.
It almost I mean more than 1000 customers in 2020.
Which is which is that first battle day of the strategy. So we will continue focusing on the three on day three of them.
Perfect.
I can sneak in maybe a little bit of a curve ball.
As you look at the options for adding platforms for new surfactant Chemistries has this surge in call. It traditional oleo chemical feedstock prices kind of related to all this biodiesel demand has that changed your thoughts on potential M&A targets or would you say that youre largely feedstock agnostic.
So so we are still somewhat feedstock agnostic, but.
There is a strong demand for more bio based surfactants.
In the in the consumer product industry in particular.
So you will see a.
Move over a period of time to more bio based products and or vegetable base feedstocks are products derived from virtual <unk> over a period of time.
You also have in the vegetable space. So you also have people that want to make sure that the rain for us are not being destroyed to supply those products. So so it's a complex.
Mix, we do think.
Ram no lipids.
And in other <unk> will be a large part of our portfolio over a period of time.
I fundamentally personally believe that and 10 to 20 years bile surfactants will represent a very large percentage of our portfolio and as we looked at making the acquisition of the plant in Louisiana.
That helps position us to make large scale quantities for our customers and I think.
In our meetings with them over the last couple weeks I think they were enthusiastic about the size and scale that we were bringing to the marketplace.
Eventually.
Alright. Thank you very much good luck with zero, let somebody else on return.
Thank you.
Thank you. The next question comes from Mike Harrison Seaport Global Securities. Please go ahead.
Hi, good morning morning.
Wanted to start off with a couple of questions on the <unk> acquisition I think if I if I do the math here around on the EBITDA contribution.
You started $100 million of revenue six five to seven five times.
EBIT.
Sounds like eventually expect about a $24 million per year type of.
EBITDA contribution.
What can that contribution look like in 2021 I assume there is probably some additional.
On investments and maybe some ramp up costs, especially as you maybe do some debottlenecking.
Thanks, Mike for the question Luke.
We were very clear eyed on providing guidance after full synergies as you can expect for.
You always have that on <unk> gear, but I'm gonna have onetime cost of integration et cetera.
So we don't want to we don't want to provide any specific guidance for the short term.
However, as you'll see in the numbers you saw is a business that is accretive.
222 hour business, we actually a decent stage believe that he is going to be even accretive to EPS us as you know the debt.
On the purchase price allocation work takes several months on opt for a year in some cases, so we will see how that turns out.
But fundamentally you're.
$24 million.
In a few years on a couple of years is a very good number as you can see on now and we're committed to deliver that or more.
Alright, and one also understand the impact of in Vista and this acquisition on your.
It sounds like in hydride business does the amount of merchant commodity phallic that youre selling.
<unk> decline as you start to funnel some of that production other mills day.
Phil.
To be used as a raw material for the Wilmington location that interest I have.
Yes so.
The short answer is.
Yes, a little bit, but but but in Vista is.
It is primarily based on on alternative assets.
Most of their business is based on PTA versus PPA.
So it's a derivatives are part of their portfolio relatively small in the big picture.
But I will make a comment that.
Last year was a difficult year for ourselves and hydride business.
This year, we've been able to recapture some lost market share and we anticipate that that business will perform significantly better in 2021 than 2020.
Alright.
Very helpful.
Wanted to ask also on the Capex front.
Your elevated number for 2021, I think you've mentioned.
The one for dioxin.
Cassidy edition, but maybe talk about what what are some of the other key projects that are involved in your capex number and what would normalized capex look like.
I guess going forward after 2021.
Yes so.
So let me say that there are kind of three different drivers.
For the increased capital expenditure the investments and one for dioxane are kind of on the largest component of it today.
And as we said in the.
The script that we were looking on.
We're working with our customers to make sure that we get an adequate return on those investments and.
So, but there is in 2021 and 2022 there is a spike in terms of our capex associated with the one for docs, saying reduction.
Projects.
Second thing I would say is because of the.
The increased demand that we have on a global basis, particularly for some other specialty surfactants that we manufacture and the amphoteric and the buyer sideline we have additional growth projects that we are looking at implementing in.
In the United States in Mexico, and potentially in France, as well to support.
On our higher margin specialty product lines.
So we're excited about those opportunities.
And then the third category I would say that there is there is an infrastructure spend that we're working on and one of the things I wanted to comment on is that the Chicago area has been.
Labeled as a potential serious non attainment zone for.
For the for.
For the country and so as a result of that we're going to be spending some money to reduce our emissions at our mills sales site and so there's a there's a peak.
Some investments at our mills sales site as.
As we look to reduce emissions.
We can continue to support that site with future growth projects as we go forward.
Alright, and then the last question I had is on the raw material front.
Maybe some of your thoughts on on what kind of inflation you could be seeing in the pricing dynamics as you look at each segment. It seems like the pricing is up pretty nicely in surfactants for at least in Q4.
Still under some pressure in polymers, so how should we think about.
Raw material versus pricing progression.
During early 2021.
So what I'd like to do is answer two questions. One prior to the freeze that we're experiencing down in the Gulf Coast region, and specifically, Texas and Louisiana, what we've seen with the increase in the oil prices are key raw materials.
Ortho xylene Diethylene glycol on our polymer business linear alkyl benzene and.
Ethylene derivatives in our surfactants business, we've seen an increase in those in those prices.
Did announce a price increase in North America.
Try to recapture those in early January mid January.
And I would say that our objective in there is to maintain or increase our margins as we.
As we look at for those raw material movements we.
We do we are experiencing in the country is experiencing.
Number of force matures as a result of the freeze that we currently are in.
We typically build inventories prior to the hurricane season every year, we have a very disciplined process in which we build significant amount of inventories that are produced in the Gulf coast in anticipation of a potential problem and that strategy over the years has benefited our business.
<unk>.
We were not anticipating this freeze in Texas on nor was anybody else. So.
We will be seen as a number of our customer our suppliers have.
Declared force majeure.
Not sure exactly how that's going to impact our business yet in the quarter.
We are also experiencing transportation delays.
On.
Throughout the country as a result of the freeze as well so.
I feel very comfortable in terms of our ability to recover the raw material price increases in our base business not sure currently how the current situation is going to impact our business in February and March.
Alright, I appreciate the color there thanks.
Yeah.
Okay.
Thanks.
Okay.
Okay.
Why.
Okay.
Okay.
Peanuts peanut, we're having a hard time hearing you I don't know if.
If you can hear us clearly.
Okay.
Yes.
Yeah.
Tina you want to call us on that other line. Please that we gave you.
Well no.
Yeah, Hey, Quinn this is Dave.
Go ahead I'm sorry.
Yes, not day weekend, we can hear you. We can hear you fine we can hear you fine yes.
Yeah.
I'm like you I I can make out I can barely make out with the operators, saying.
No I'll just jump in.
Thanks, very much and I'll just preface my remarks by saying I've been dealing with what I would consider tier two or tier three internet service. This morning. So if I make you cover off things that you've already addressed.
I apologize in advance.
First a quick point of clarification.
No.
You did have the $13 million of insurance recoveries reflected in the fourth quarter results.
Did you call out I guess, the EPS benefit from that Thats in the reported results I mean back of the envelope. It seems like it could be for.
<unk> a share for more and then if you could just remind me what were the expectations for insurance recoveries in the fourth quarter.
On that that'd be my first question. Thank you.
Thanks, David So we have two particular, one time errors in the fourth quarter. One was the insurance recovery. The 13 million number that we mentioned on was on a pre tax basis. So you are right that EPS is around 40.
And we also had a.
The impact on negative impact on the tax rate because because of the cash repatriation project that we need.
For the based on acquisition, so that that had a roughly 12% EPS impact so you'll have a.
Debt net of the two co.
Got it Ed.
28 cents on roughly 28 cents EPS help in the quarter.
Okay, great I appreciate that debt that helps a lot.
My next question would be more of a marketing oriented question.
And this has to do with given the time of year I'm pretty sure you have your business plans.
For.
Initial plans in place for 2021, and I guess I was going to ask if you could characterize customer behavior in other words three years surfactants business. I mean, there were periods of shortage I would say.
And maybe some panic buying at times during 2020 and I'm. Just wondering is this the kind of market, where your customers are extending or expanding their purchase commitments to you over the course of 2021.
Or are they looking at or alternatively are they kind of looking at the vaccination deployment and the progress there and they're saying well the situation might change dramatically.
Three to six months on this.
Just wondering from the purchase orders and the customer behavior.
How would you characterize.
The demand for your core.
Array of surfactants in 2021.
I think demand for our core surfactant products. We believe is fundamentally going to be up in terms of purchasing behavior by our customers. It's really it is customer dependent there are many customers that.
Wanted to ensure that they have long term products available and we have worked with those customers and have contracted with customers and in some cases backed that up with raw material contracts.
Contracts that we have made to ensure that those customers will be supplied product not only in 2021, but as we go forward.
There are other customers that.
<unk>.
Choose to buy more on the spot basis so as.
As we look at our business going forward.
We believe that there are.
Debt that we have significant commitments from customers.
Not only in the biocide area, but also for one for docs, saying surfactants that are used in the personal wash categories.
Where the customers have made firm commitments to us as we go forward.
Okay. No that's great. Thank you for that and then I do have one more question maybe for Quinn.
More of the philosophy or the maybe some background on the interest purchase so just briefly but I'd say when you know your company and you in particular.
Under your leadership the company has done.
A wide array of.
Acquisitions, and you know I would credit you with kind of being unusually effective at kind of being both opportunistic and strategic.
And as you kind of build build your company in different areas.
And as you said the investor purchases kind of is in some respects I consider it kind of a step out for your company you mentioned, it's the biggest in your 89 years.
But.
Just.
Are things, but I'm, just kind of scratching my head and I'm, saying. This is this is not in your surfactants business at least principally this is going to be for your polymers business and maybe I am just wondering if you could comment on how important you consider it to have a second strong leg.
As opposed to currently where your revenues are dominated more by one segment.
And then secondly on.
The seller Coke is certainly a very frequent buyer of assets themselves I'm not I don't recall them selling too many things that they had purchased but maybe just.
A comment on how the transaction came about in other words, how does it fit into your strategic priorities.
Were you looking at that business for a while or did they come to you I mean just.
Just some thoughts about how the the transaction on unusual transaction and scale.
From your side and unusual transaction may be a little bit just from being a seller on on the other side just anything you could add color wise on how the transaction came to be would be helpful. Thank you.
Yes, so what I would say is the.
On the acquisition is.
Fits very well with our strategy fundamentally we believe in energy conservation.
We believe in that installation is the lowest cost way to reduce energy.
We believe that <unk>.
Aromatic polyester polyol enables the most effective insulation product on the marketplace. So that's those are the fundamental beliefs that we have and we believe that the market is growing today and then we believe it will continue to grow in the future and this acquisition.
<unk> provides a capital efficient way for us to supply future market growth. If we look at the next required investments at our historic sites. They would have been fairly expensive.
We have an opportunity to buy some some business. They also have some different technology and they got a slightly different market position than we have so we think there are some benefits for us in that regard.
So we have an opportunity to enhance our product portfolio.
Both from a product perspective and from a customer perspective, and then we also have an opportunity to supply and debottleneck their sites as we go forward in a cost effective manner to support our customers and their growth in the marketplace over a period of time relative to the ACA.
Physician process, we identified and initially approach Coke a number of years ago.
And we're able to work with them and come up with a transaction that met their needs and met our needs as well. So we're happy and pleased to work with them. They were they were good entity to work with and they've done a nice job growing the business over the last couple of years.
But again, we're pleased to have it in our portfolio.
Okay, Great. That's it for me I appreciate all the color. Thank you.
And that was our final phone question I will turn the call back over to our speakers.
Okay. Thank you very much and thank you all for joining us on today's call. We appreciate your interest and ownership in Stepan company. Please stay safe and healthy wash your hands frequently and use disinfectants to clean surfaces at home and your Workspaces.
Have a great day. Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a good day.
Okay.
Expenses.
Okay.
Okay.
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