Q4 2020 Canfor Corp and Canfor Pulp Products Inc Earnings Call
[music].
Good morning, ladies and gentlemen, welcome true they can't force and Canfor pulp fourth quarter analyst call and recording and transcript of the call will be available on can't force website. During this call Canfor and Canfor pulp Chief financial officer will be referring to a slide presentation that is available and the investor relations sex.
And of the company's website also the companies would like to point out that this call will include forward looking statements. So please refer to the press releases for the associated risks of such statements.
I would now like to turn the meeting over to Mr. Donkey Canfor and Canfor pulp Chief Executive Officer. Please go ahead Mr. King.
Alright, Thanks, operator, and good morning, everyone.
Thanks for joining the Canfor and Canfor pulp Q4, 2020 results conference call I will make a few comments before I turn things over to Alan Nicholl, Our executive Vice President of Canfor pulp operations, and Chief Financial Officer of Canfor Corporation, as well as kind of a pulp.
Alan will provide a more detailed overview of our performance in Q4 in.
In addition to Alan and I, we are joined by Kevin Pankratz, Our senior Vice President of sales and marketing.
Before I talk about our 2020 and Q4 results I'd like to start by recognizing the exceptional efforts of our employees this past year.
'twenty was a very volatile and unpredictable year with extreme highs and extreme lows largely due to the uncertainty caused by the COVID-19 pandemic.
Our employees have demonstrated an unwavering commitment to health and safety and have implemented our COVID-19 protocols policies and procedures and I can't thank them enough for their resilience determination and commitment to Canfor and Canfor pulp.
2020 also marked a shift for us as we started the process of developing a comprehensive sustainability strategy and significantly increasing our focus on ESG and associated priorities around the world countries are embracing low carbon strategies to aggressively reduce greenhouse gas emissions and as a producer of renewable green and <unk>.
<unk> products, we are excited about the role we can and are playing and reducing societies environmental footprint.
The green attributes of our products are increasingly being recognized whether it's and mass timber hybrid construction applications or bio innovation opportunities. In addition, with increasing opportunities and the bio economy and bio innovation space. There are exciting opportunities to produce both advanced biofuels and bio products were.
We're also pleased that we've been able to generate significant economic activity throughout most of the pandemic and believe the forest industry will continue to play a significant role and the post pandemic economic recovery.
Turning to our financial results beginning with our pulp business Canfor pulp reported an operating loss of $56 million and 2020, reflecting the significant impacts of COVID-19.
Global pulp market fundamentals were very challenging throughout most of the year and response to a weak markets and extensive sawmill curtailments at the onset of the pandemic Canfor pulp took significant operational downtime during the year, which weighed heavily on our financial results.
During the fourth quarter. We also made the decision to replace the lower furnace of our main recovery boiler at Northwood, which was completed on time and under budget and early 2021.
Despite the many challenges faced during the year Canfor pulp maintained a solid balance sheet and with significant capital projects now behind US we are well positioned to capitalize on the recent increases and the price of pulp and the improved market fundamentals, we are seeing and early 2021.
Turning to lumber despite extreme volatility experienced during the year, our lumber business generated record high operating income of $816 million and 2020, reflecting unprecedented strength and lumber markets worldwide, particularly in the second half of the year.
At the onset of COVID-19 significant market uncertainty resulted in widespread production curtailments across the lumber industry reduced supply was not able to meet the unexpected increase in demand as a result of strong R&R activity or change in consumer spending habits due to a large percentage of people working from home.
<unk> and a sharp increase in North America, and new home construction activity. These favorable demand conditions far exceeded available supply, resulting in unprecedented price increases and record high earnings for our lumber operations in North America, our European lumber business achieved record high earnings and the fourth quarter of 2020.
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Supported by strong market fundamentals and Europe and increased production levels.
European pricing has lagged North America due to the nature of overseas contract pricing models.
Our operations performed well and the year generating annual EBITDA of approximately $180 million in 2020 <unk>.
Despite the unprecedented challenges due to the pandemic, we continued to make significant progress on our strategy during the year with our recent acquisitions in Europe, and growing footprint and the U S. So and significantly improving our geographic diversification.
Following major growth in recent years, we significantly strengthened our balance sheet and 2020 supported by strong lumber markets solid operational performance and a disciplined approach to cash management.
Looking ahead to 2021, we anticipate increased capital spending supported by our strong balance sheet favorable favorable lumber market fundamentals and improving global pulp market conditions, Canfor and Canfor pulp will continue to deploy capital internally that target's strong rate of return projects that align with our strategy.
And <unk> and consider M&A opportunities that will grow our business on a global basis I will now turn it over to Alan to provide an overview of our financial results.
Thanks, Don and good morning, everyone that cash.
<unk> and Canfor pulp quarterly results were released yesterday afternoon, and come together with our overview slide presentation, and the Investor Relations section of the respective company's websites.
And my comments. This morning, I'll briefly speak to quarterly financial highlights a brief summary of which is included in our overview slide presentation.
Our lumber segment reported operating income of $461 million for the fourth quarter compared to $337 million and Q3.
Results included a net duty recovery of $95 million following the Finalization of CVD and 80 day rates applicable to the department of Commerce's first period up with you after.
After adjusting for this the lumber segment generated operating income of $366 million.
Compared to similarly, adjusted operating income of $387 million and the previous quarter.
Segment results continued to reflect strong global market fundamentals, while north American benchmark lumber prices saw extreme volatility through the fourth quarter increased demand over the traditionally slower season further reduced inventory levels and supported material price increases towards the end of the fourth quarter and into early 2021.
Unit sales realizations and Western Canada increased modestly in the fourth quarter, reflecting a favorable timing lag and shipments versus orders as well as improved offshore sales realizations and to a lesser extent, a reduction and the Judy deposit rate to 462% and December.
And the U S sites, and notwithstanding the impact of seasonally lower pricing and wider width southern yellow pine lumber products, our operations performed well and continued to generate strong financial results and the fourth quarter supported by historically high number of prices and unstable log cost.
North American lumber demand has continued to increase and early 2021 and strong market fundamentals and order files are supported record high western SPF and southern yellow pine pricing in recent weeks.
Our European business reported record high earnings and the fourth quarter supported by improved unit sales realizations and higher production. Following the September 1st acquisition of Berg's timber and southern Sweden, with most business and Europe conducted based on pricing negotiated quarterly and the.
European prices are also seeing solid increases and the first quarter of 2021.
In contrast to a number of business our pulp business reported an operating loss of $28 million and the fourth quarter, which was in line with that of the previous quarter.
Results for Q4 reflected continued soft market conditions and weak prices on pulp shipments as well as the capital related time time at Northwood.
And while global pulp markets improved towards the end of the fourth quarter unit sales realizations were in line with those of the previous quarter due in part to the timing of shipments versus orders.
Global pulp prices have surged in recent weeks with improved market fundamentals supporting significant price increases.
And the fourth quarter and as previously reported Northwood completed the scheduled maintenance outage in October and took an extended outage on one production line to enable the replacement of the lower furnace and the mill recovery boiler number five the lower furnace replacement was completed as scheduled and mid January at a total capital cost of approximately $27 million.
Pulp production was up 3% from the previous quarter, while unit manufacturing costs were slightly lower as we are just fiber costs outweighed seasonally higher energy cost and usage.
At the end of the year Council, excluding canfor pulp and net debt of $227 million and available liquidity of approximately $1 3 billion.
Liquidity improved by approximately $255 million during the quarter, reflecting the significant cash earnings associated with the strong lumber markets.
Canfor pulp ended the year with net debt of $43 million and available liquidity of approximately $105 million.
Excluding capitalized major maintenance, we currently anticipate significantly higher capital spending in 2021 was approximately $300 million and the lumber segment and $70 million per canfor pulp.
From a broader capital allocation perspective, we continue to assess various options related to M&A and growth and diversification and preferred regions of the U S and Europe and.
In addition, we will consider the potential for restarting our share buyback program on an opportunistic basis.
Having said that we are comfortable with retaining and enhancing our existing liquidity until a reasonably a reasonable opportunity presents itself and with that Don I'll turn the call back to you.
Yeah. Thanks, Thanks, very much Alan as operator, I'll turn it over to you and were ready to take questions from analysts.
We will now take questions from financial analysts. If you have a question. Please press star one on your telephone keypad, if you're using a speaker phone. Please lift your receiver and then price chart. One if at any time you wish you cancel your question. Please price chart you. Please.
Please press star one now if you have questions there will be a brief pause while participants to reduce some questions. Thank you for your patience.
Your first question comes from EMEA and <unk> with CIBC EMEA. Please go ahead hi.
Good morning.
And it.
And Aif talks about a decision on the potential Washington, and Georgia Greenfield project coming later in 2021 any update on timing or how youre thinking about that project given the strength development market.
And for sure. Thanks, Sameer I think we're looking at washing and Washington Greenfield into context of several different choices.
And we're hoping and we'll have here as the year progresses, and and also looking at it and the context of some of the other opportunities on the organic capital growth and M&A and so forth, but yeah. So for right now we're not we're not completely to make a decision in terms of whether we will go ahead, there or not.
And I can't say is we're looking at from different alternatives, there as well too. So that's maybe how I would answer that right now.
And Don if you do decide to go forward with a greenfield.
I mean, we've been hearing it from sort of equipment lead times stretching out to 18 months.
What are you seeing out there.
Yes, I think I think thats accurate or longer and I. My view is it wasn't 2018, when we were when we seem to be getting a new Greenfield mill announced every and every other day.
Where a lot of them didn't end up actually materializing I think we're looking at here.
And at least 18 months, probably more like two years from my view.
Great. Thanks, Tom that's helpful and Alan and I was wondering if you could.
Just give us an update on the Canfor pulp chips supply agreements with Canfor I think they're coming up for renewal at <unk>.
Some point this year.
How should we expect the impact of <unk>.
That given the moves and the commodity prices.
Yes, I think that's.
Fair question.
And we will just continue our productive discussions between both companies.
Clearly the.
And the residual sawmill residual chip supply reflects very much it's a function of pulp prices as well and that's built into the mechanism there.
Amir.
Area that we are wrestling with is clearly on the whole log chips side, where clearly there are challenges in terms of procuring that fiber on a cost efficient basis. So that scenario certainly account for pulp. We're looking very closely at and looking to see what we can do to mitigate those costs.
Fair enough and Alan and any update you can give us on the.
And how negotiations going for Canfor pulp collective agreements I think they are set to expire and okay in April.
Yes, and it was fairly quiet on that front at this point, so nothing much to update.
Okay great.
Thats all I had thanks alright.
Alright, Thanks Robert.
Thank you we have a following question from Sean <unk> with TD Securities shot Youre. Your line is now open.
Thanks, Good morning, guys.
Couple of questions.
Drilling into the capital allocation.
So Dan you touched on.
Lumber M&A opportunities and Europe, and North America can.
Can you comment on where the the opportunity set and either more.
Opportunities are more attractive valuations between those two regions is there any bias one way or the other right now.
Yeah.
As to your second part of that question first and I don't think there's any bias I mean, clearly we mentioned.
I mentioned in the past that Europe as well as the U S. So through our two primary areas, where we think theres opportunity going forward.
And both of those areas and I'm not sure it's equal, but pretty darn close evaluations have definitely accelerated here over the last number of months here.
So I would say there.
Wouldn't be able to differentiate much between Europe, and the south but clearly there are opportunities for sure and both areas.
We're interested in and I think that will continue.
Whether or not there'll become.
That will become available at a valuation of level that's acceptable to us.
Thanks for that and.
And Don a question for you or Kevin.
And Youre looking at lumber markets right now.
Prices don't feel sustainable, but I would have said the same thing three months ago and been wrong, but when youre thinking about downside risk.
It is and greater concern is it demand slowing.
Or.
Apply catching up and whether thats.
Organic growth and North America European imports.
What are you more concerned about over the midterm with respect to lumber.
That's a good question and one that we spend a lot of timeline because like you. We one thing for sure is we're often not correct, but I'll, maybe Kevin why don't we let you comment on the share sharing with.
Morning, Sean Yes, so I think for from a demand perspective, we are feeling fairly confident on new home construction, particularly single family home construction for the year. So that's going to help support some good <unk>.
<unk> I think the one risk area potentially would be on the R&R side, where consumer behavior.
He came out and post COVID-19 environments, and where people will spend their money and prioritize events could be a potential risk we're not seeing it today, but it could be at risk and maybe on the back half of the year and of course as is.
As we go throughout the year, we do expect to see some modest increase and supply we've given.
Southern yellow pine and also from from Europe. So there are a couple of headwinds on the other side and of course affordability is another risk down the road and the back half that gives us a little bit of caution, but overall feel very.
And this Nick a positive on the market fundamentals.
Maybe just maybe staying on just from the supply side, though and I think Kevin you're absolutely right and I think.
Our view would be I think that if you're not running at full capacity right now it would be surprising are really around the world and I think we're still we're still not sure how it's going to end up yet, but the impacts we've talked a lot of bode for a couple of years now, but the impacts of the forest fires.
We had two serious <unk>.
<unk> is still out there and we're not sure about the magnitude of that and British Columbia and that add to that what's occurred down and the us and the U S. Clearly, they're still trying to figure out what the impacts are.
And that are going to be the beetle and Europe is that.
It's still much more serious than what was expected I think initially and we've all seen and numbers in terms of log exports and Alberta lumber exports, so and in terms of upside on the supply side, yes, there'll probably be some there always is and but I think it's a ways away for sure and I'm not sure that the <unk>.
And magnitude of that is going to be.
Super significant for sure and.
Totally agree Kevin I'll, let Rachel.
Anyway, hopefully that gives you a better color.
Yes, thats useful context, thanks, just one last one Alan.
And your Capex budget for 2021, you mentioned, the 300 million for lumber and from <unk> 70 per pulp did you say that was before maintenance and if so what's the increment. We can expect to go above and beyond those figures.
Yes, so what I was referring to there Sean and was.
The major maintenance turnarounds that we have accounts for pulp and.
And so they vary obviously, depending on each year.
Guiding something like.
Close to 15, and 20 million for the balance of the year looking forward.
Got it.
Okay. That's all I had thanks very much guys.
Sure.
Thank you. Your next question comes from Mark with BMO. Please.
Please go ahead.
Hello, and good morning dog running Alan Kevin and Mark.
I guess first one might be either for Don or for Kevin and I am just would like to get your perspective.
And what you see and European and Chinese markets, right, now and what that might imply for an increase and European exports into North America. This year.
Okay. Good question and you go ahead and sure Kevin.
So so yeah. Good question, so with China, I'll, maybe I'll start there and.
And it's quite interesting China. The inventories are extremely lean over there on the lumber side and even a bit on the log and.
And as they're coming out of their Chinese new year, and a growth of their economy, we do see demand actually picking up quite strong and you are seeing quite a bit of strength and log and lumber imports from essentially Europe. So that's going to be I think a factor that might limit north American shipments on certain great.
Because we are seeing some pretty material price increases that we didn't normally see in that market, where it would be five to $10 per cubic meter received material shifts and those markets I think are going to.
Lagging are going to start to.
<unk> improved pricing over and over time.
And the other market Force is Japan, Japan is also starting to recover and Europe is a big exporter into that market as well, especially in the post and beam market and that's going to start to improve and add another demand component to the European supply.
Equation and then just in Europe itself I think Don you mentioned that earlier.
The fundamentals there are quite good and we feel quite optimistic about there and that's going to limit.
To the degree of how much longer can actually come to the U S and part of it.
<unk> capabilities in Europe that they can't fully split everything into North America, they've got commitments quarterly type commitments and with key customers and we do for sure and so thats been a limit how much it's going to come into North America. So don't if I missed anything else that you'd like to add or I think maybe just one thing Kevin maybe talk.
With us to a little bit because mark and you are I know you're up to speed and those two but if you think if you kind of separate central Europe from Scandinavia, or northern Europe, particularly.
You might see some additional product coming from central Europe, just because of the.
The opportunity to get the high value products there isn't as is.
As and as great as it is up and Scandinavia rate, so up and Scandinavia.
And we really don't focus on the commodity business at all and Thats why our percentage of volume into the North American market is quite small and hasn't really increased any significant not materialized couple years market and start going to.
And we're really well.
And just basically because of the focus more and high value products, but central Europe for sure that will continue to be logs and lumber probably more likely to move and in North America to some degree right.
Okay.
Question I have.
I guess more for you Don and thank you.
And it's just.
How do you think about sort of the.
New normal kind of price range going forward and lumber just given.
Less supply and higher cost and BC looks like the Pacific northwest of the U S is pretty well maxed out in terms of kind of fiber supply and so when you put all of that together.
What does that tell you about sort of.
A lumber price band going forward relative to where we've been in the past.
Yes.
And Kevin is the expert on this but I'll just give you my two cents worth first.
First of all I think there is a bit of a new normal and I hate using that word because it's overused, but compared to what we've been dealing with before and I think and I do think there is a new base rate and so whether that number is 700 or 600 or 800 or whatever.
And it's somewhere and that kind of band.
But there are some fundamental changes I think and the market and how lumber is viewed worldwide thats, having a big impact here you got supply of course, and I mentioned some of them already earlier.
And it's hard to tell yet how much impact that's going to have long term, but it's going to wait and whether that's from Russia, where the fires and the Beatles, whether its central Europe, whether it's North America doesn't matter, but in terms of demand though.
And some of the fundamental shifts that we're seeing and the market from a consumer level with the suburbanization for lack of a better word versus what we've seen in the past.
That's definitely have and a bigger impact than we thought the whole home.
<unk> is viewed in the world from a green aspect and how we can be big contributors to the de carbonization of the planet and those sorts of things Thats gained a lot of ground around the world much quicker much bigger than we think and markets that we probably wouldn't have thought before.
I think that's catching hold and then you've got the whole mass timber piece and the mass timber piece.
And again, we are we.
The reason, we got a lot of shows all our promise and our view is is that in Europe.
It went from demonstration to commercial fairly quickly and of course, it's the largest and the world. We see that same opportunity here, that's going to take some time clearly, but it is progressing and so if you're.
And all that up I mean, I think that more than supports sort of some of those bands that we're talking about.
And Kevin in terms of offshore and that's the one area.
Is there anything you want to add to that just that just that comment around green building zero carbon you've got governments like in China that are taking that seriously and got some treatment material objectives to 2000, 32016, and when they put their minds to it.
Execute so aligning lumber forest products pulp and that screen and that's going to be a very positive outlook for demand that's going to be incremental to what we have today. So we are pretty positive on that and Europe's cost and pretty aggressive policies do on de carbonization and zero net zero and so we see that as a pretty positive impact.
Yes, Okay next question.
If we think about.
<unk> 'twenty as you said you know you had a lot of supply come out and a late first quarter early second quarter, so that kind of.
Supply and the market and then.
The second element seems to be just.
And there is some production losses are less efficiency, because sort of the ongoing drag from kind of COVID-19 workers' out as we move through the year any way to get a sense of how big.
Do you think that drag might have been an overall kind of production volumes.
North America last year.
Yes, I still less than we would have thought I know I speak and from our own experience and talking to to Stephen and our operating guys. I mean definitely and so I think they put in some really and I don't know if were that much different than anybody else. I mean, everybody I think got on it quickly put and protocols and procedures et cetera.
And bearing in mind, the health and safety of their employees first and foremost I think everybody did a superb job at that frankly, and so I think that maybe mitigated pretty significantly the amount of downtime and we lost a lot of it without a lot of hours and a few shifts here and therefore share.
No no question about that but that was largely in Q later about the back half of Q3 into Q4.
At where we saw some of that but overall materially I don't think it was not material at all I mean, it was much better than we would've expected.
And would you want to hazard.
Part number like it was a percent.
And the App, 2%, 1% less and less.
Less than one per server.
Yes.
Turning turning to capital allocation and I'm just curious you.
You've talked about Europe, you've talked about the U S sales.
And there was a package on the market that gave you a <unk>.
This bump and U S sales capacity, but it kind of it came with some capacity in the Pacific Northwest of the U S would you would you take that.
I guess it would just depend on.
Some degree on the valuations although.
I would say this we are and we've been pretty consistent I think between us all but and I still feel as strong as we did a year two three and five years ago as the Europe and the U S. South are our primary focus as a company right and so.
Really the only we would be more interested and any opportunities for some vertical integration around that and we would to try and get into potentially into another region.
I would say that yes.
It helps but yes that would be.
And be more likely to be our focus.
Okay, and then last one from me.
All and can you give us some help and just thinking about <unk>.
Roll through all of these price hike announcements, because theyre coming fast and furious and some of them are quite large and I'm just trying to get a sense.
And how that's likely to kind of roll index Canfor pulp realizations.
No. It's a very good question Mark so for us certainly.
It's great to see all these price increases for sure, but I think to your point, we're likely to see the spillover effects of those as we get into the end of this quarter and into Q2 and that.
It's largely a reflection of our order from and our cash cutting up a little bit and RV five and also just the way the.
The difference if you will between the timing of shipments and orders as well. So certainly we're expecting a very very positive Q2 at this point and more moderated outlook for Q1.
Okay. That's helpful I'll turn it over.
Alright, Thanks Mark.
Thank you.
I have a following question from Paul with RBC capital markets. Please go ahead.
Yeah, Thanks, very much good morning, guys.
Morning, Bob.
And just.
And obviously 2020 was very strong and North America per lumber prices, just sound like volume and shifting from overseas back into the.
The domestic market and then looking forward into 'twenty, one and said.
Given your outlook on idle cash.
And prices coming back do you is there a little bit of a shift back.
Florida that jurisdiction and going forward here.
So yes, good morning, Paul.
So yes, I mean, we do have a core group of customers long term strategic customers and those markets and Japan, and China and southeast Asia that that we just don't abandon and so but there is a percentage of volume of flex I would like I can say that where we could optimize it and position that and those products. There. So we're going to continue to modify that and Chris.
Sure given the strength in North America, you would expect to see a little bit of that happening in for sure in Q1 and Q2, but.
Core volume there were pretty committed into those markets and to those customers.
Okay, and while I got you Kevin just so what's your assessment of lumber inventories in North America right now as opposed to the beginning of the year and do you see any slowdown and hold pricing there.
Yes, no I think.
Pulp Inc.
Demand and the consumption has still been quite resilient and.
Zinc inventories might be modestly improving but there's still I think below target level for most and and anticipation of strong.
Order files.
Whether it's with homebuilders and and committed levels on the R&R side I still think that there is quite a room to go so I would still classify it at.
Okay, and then maybe a higher level question for you Don just on the softwood lumber file.
And we've seen I guess increased lobbying efforts from U S homebuilders.
Obviously, even change and that ran in the U S side and any movement on that file.
You are seeing going forward.
No not at all.
I think like you say the NIH B has been increasingly vocal about about it.
And domestically and the down and the states and they're looking for U S producers to produce more volume and that's probably not going to have a too much and theyre looking novo freeing up some freeing up logs and the national forest unlikely to happen.
And the only one that's on there that maybe it makes some sense and hopefully it does that down the road here is to reduce tariffs right. So, but that's a ways away. We still have an appointment that I know of IRA accounts I don't recall any way of Commerce Secretary, yet and so once that happens they are going to happen and we'll have to.
Educate that area and so forth, but I don't see us talking to the coalition guys and so forth I think we're a good two years away myself at least and it's going to be a complicated and much more complex negotiation and I think than it was in the past.
Okay and.
And then maybe just lastly, just.
Just on your capital allocation.
Opportunities and looking at that Greenfield.
And what have you noticed since you.
At first announced the Washington, and plant, what kind of cost escalation and we've seen it.
I mean that pointing all current.
Yes.
That's a good question Alan do you have a sense on that I mean, I think clearly there has been right and just like Theres been a lumber there has been escalation in steel prices and labor costs and all of that.
And actually quantify how much I think it would be probably in the neighborhood of five 5%, maybe 10% at the most but probably closer to five that's kind of what I've heard Alan is that would you agree with that yes, I think it is.
And that in that ballpark based and our knowledge.
Alright, that's all I had best of luck guys.
Thanks, Paul Yes, it Garcia.
Thank you we have a following question from March with BMO, Mike. Please go ahead.
Thanks.
A couple for you.
One can you give us a sense of what cash taxes should look like.
For you.
And in terms of both businesses.
Yes, Laurence in terms of both businesses.
Sorry, I'm just just in terms of just in terms of our regular cash taxes.
Yes, exactly yes, so yes I mean.
It typically will follow.
And what you would expect based on the taxes and jurisdiction and so it's typically run about 25% level for cash for.
If you look at it and aggregate and then in terms of Canfor pulp obviously, that's a different situation, where we're looking at a cash tax refund reflected and the losses that we incurred in 2020.
Okay and then the other one I wanted to ask about was just.
And a share repurchase activity because of this.
This tends to be kind of a devilishly hard for people and companies and and cyclical businesses. So can you just you talked about doing this I think and I'd like a disciplined fashion, if youre going to bring back or and opportunistic pension can you just talk a little bit about kind of how you might think about strategy there for.
Share repurchase activity.
Yes.
Good question, Mark and clearly a lot of struggled with this and for sure I think as I mentioned and my comments. We certainly are open to entertaining. This as we go through the year and somewhat on a more opportunistic basis. The challenge of course is to to buy at at.
And at levels that we feel makes sense and of course with such volatility around it's hard to it's hard to make a call there, but we do have a process that we follow and Todd works with me on that and we typically look at IRR and what we think is a reasonable value appears to points of time and we have other factors that guide us.
And our decision as well Mark so from a just not giving you a very precise answer there, but more guiding to general principles. If you will book is something we are keen to look at as we go through the year, particularly as the market continues to be as favorable as we see it today.
And and kind of along those lines Allen can you give us like some sense of just.
And how much cash you guys might be willing and build on the balance sheet again, remembering that youre in a cyclical business and your stock moves around cyclically asset values move around cyclically. So.
No.
It looks to me like Youre going to be debt free at the end of the first quarter.
And how far might you be willing to go in terms of building dry powder.
And then Josh.
And I'm not sure if that's a rhetorical comment there mark but.
But what I would say is listen we're not going to apologize for building cash.
And for all the reasons and Tom sidelined and.
To your point, we arent generating significant significantly positive cash flow at this point in time and guide to precisely when will be debt free, but certainly it's coming sooner than we all thought even a month or two ago. So it is very positive, but clearly we are charged with making sure that we make not cash kind of and the appropriate context and at the right time, we'll certainly.
And make very measured and.
And hopefully good decisions with it.
Okay Fair enough good luck, guys and the and the first quarter and through the year.
Sure. Thanks, a lot mark Thanks, Mark.
Thank you and there are no further questions I'll now turn it over to Don Keane for closing comments go ahead, Mr. Alright.
Alright, thanks, operator, and thanks to everyone that joined the call. This morning, and we look forward to.
I'm talking to you again at the end of the first.
First quarter and have a great day sales.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.