Q1 2021 Stepan Co Earnings Call
Okay.
Greetings and welcome to the Stepan Company Q1, 2021 earnings conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.
If at any time during the conference you need to reach and operator, Please press star zero.
As a reminder, this conference is being recorded.
Tuesday April 27th 2021.
I would now like 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 first quarter 2021 financial review.
Before we begin please note that information on this conference call contains forward looking statements, which are not historical facts.
Such statements involve risk and uncertainties that could cause actual results to differ materially.
Loading, but not limited to prospects for our floating and operations global and regional economic conditions and factors detailed in our Securities and Exchange Commission filings.
Whether you're joining us online or over the phone we encourage you to radio and Investor Slide presentation, which we have made available at www dot step on dot com under the investors section of our website.
We make these slides available at approximately the same time of when the earnings release is issued.
And we hope that you'll find information on 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.
And as vaccines are rolled out across the country. We hope you and your families have had a chance to be vaccinated.
And that you will continue to stay safe and healthy.
We had step and remain committed to doing our part by supporting customers that supply essential cleaning disinfection and personal wash products to the market.
Before we discuss our results I would like to introduce Scott Behrens, our new President and Chief operating officer, who will be joining us today.
Scott has been a key leader at step and for the past 28 years. We are pleased to recognize Scott contributions to our success with his promotion and are excited about the talent. He brings to this role and the impact he will have on the value of our company for you and for all shareholders Welcome Scott.
The company had a good start to the year and delivered record quarterly income the best financial quarter. Our company has ever had adjusted net income was $42 $4 million or one dollar and 82 cents per diluted share up 75 per cent from 40 or 24.
$4 $2 million or one dollar and four cents per diluted share last year. When we had the power outage at our mills sale facility.
For the quarter surfactant operating income was up 47%, primarily due to improved customer and product mix. Our polymer business was up 140 per cent on the strength of 32% global sales volume growth.
Polymer volume growth was driven by the and Vista acquisition.
Organic market growth and a rebound in our business.
Our specialty product business results were down due to lower margins within our MCT product line.
Our board of directors declared a quarterly cash dividend on Stephens common stock of 30, and a half cents per share payable on June 15th 2021.
And has increased its dividends for 53 consecutive years.
Luis will walk you through a few more details about our first quarter results.
Thank you Quinn my comments will generally follow the slide presentation and such.
Starting with slide four to recap the quarter.
Adjusted net income for the first quarter of 2000 on 'twenty, one we'll start a record $42 $4 million or $1 on 82 cents per diluted share.
Our 75 per cent increase versus $24 2 million or $1 <unk> per diluted share in the first quarter of 2020.
Because adjusted net income is on non-GAAP measure, we provide full reconciliations to the comparable GAAP measures and these can be found in our appendix Stuart and the presentation and table two of the press release.
And specifically adjustment to reported net income this quarter consist of adjustment for deferred compensation and some minor restructuring expenses.
Adjusted net income for the quarter excludes deferred compensation expense of $1 $7 million or eight cents per diluted share.
Compared to deferred compensation income of $3 6 million or 15 cents per diluted share in the same period last year.
And deferred compensation numbers represent the net expense related to the company's deferred compensation plan as well as Scott said on the stock appreciation rights for our employees.
Because these liabilities change we've been moving and the stock price we exclude this item from our operational discussion.
Slide five shows the total company earnings bridge for the first quarter.
Compared to last year first quarter and breaks down and Ganesh in adjusted net income.
Because this is net income and figure it is not a he and I don't on after tax basis.
We will cover each and many more detail, but to summarize sort of fact on some 40 months were up significantly while our specialty per hour was slightly down versus the prior year.
Corporate expenses on all orders were higher during the quarter due to the higher acquisition related expenses and incentive based compensation.
The company's first quarter effective tax rate was 23 six per cent compared to 22, 5% in the prior year quarter.
This year over year increase was primarily attributable to a less favorable geographical mix of income.
We expect the full year 2021, and effective tax rate to be and the range of 23% to 26%.
And slide six focus on US with fact on segment results for the quarter for.
So in fact on net sales were 300 on $71 million a.
13% increase versus the prior year.
Selling prices were up 13%, primarily due to an improved product and customer mix and the pass through of higher raw material cost.
Volume was flat versus the prior year high.
Higher demand for products sold in our functional product end markets, principally agriculture, and oilfield was offset by lower and North America sales volume and volume consumer product and market.
That reduction in North America consumer product volumes was due to supplier force my you're following the severe weather in Texas.
Consumer products volume outside North America grew low single digits.
So in fact on operating income for the quarter increased $17 million or 47% versus the prior year and good.
<unk> was primarily due to an improved product and customer mix and lower supply chain expenses within non recurrence of the meal <unk> plant power outage in the prior year.
North America results increased primarily due to and improve product and customer mix.
Brazil results were up driven by higher volumes and improved customer and product mix.
Mexico volume was also up high single digits.
Europe results increased slightly due to an improved product and cost from are mixed.
Now turning to polymers on slide seven.
Net sales were $150 million and the quarter.
Up 41% from the prior year quarter.
Total sales volume increased 32% in the quarter, primarily due to 32% growth and read volume.
Global rigid polyol volumes, excluding the Invista acquisition was up 8% versus the prior year.
Volume for <unk> increased significantly given the weak base due to the meals El power outage and the prior year.
Selling prices increased 7% and day translation impact of a weaker U S dollar positively impacted net sales by 2%.
Volume net operating income increased $10 million on 140% from.
And I'll, let you just put on sales volume growth and lower supply chain expenses due to the non recurrence of the Q1 2020, new wholesale plan that went outage.
North America Polyol results increased due to higher volumes and lower supply chain expenses in the current year quarter.
Europe results increased due to double digit volume growth in <unk> volume, primarily due to the and Vista acquisition.
Asia, and Latin America volume actually sold decreased slightly versus prior year due to a one time extra cost in Q1, 2000 and I'm 21.
Volume and Asia grew a strong double digit.
Specialty products net sales were $16 million for the quarter.
In line with the prior year.
Sales volume was up 4% between quarters and operating income declined $1 $4 million.
The operating income decrease was primarily attributable to lower margins within our MCT product line, giving higher roadmap and the prices.
Moving on to slide eight.
Our balance sheet remains strong and we have ample liquidity to invest in the business.
Our leverage and interest coverage ratios on deals at very solid levels.
And total cash reduction from 300 on $50 million from 100 on $51 million was driven by the Invista acquisition and the first quarter of 2021.
We had a strong cash from operations in the first quarter of 2021.
Which was used for capex investments dividends and incentive based compensation payment payment.
Payments.
The company also experienced higher working capital requirements, which is typical for the first quarter.
Beginning on slide 10, and Scott will now update you on our 2021 and strategic priorities.
Thank you Louise I am pleased to be joining our earnings call and look forward to continuing to contribute to the success. Our team has had generating for our shareholders.
As we wrap up the first quarter of 2021, we believe our business will remain strong we continue to prioritize the safety and health of our employees as we deliver products that contribute to the fight against COVID-19.
And our EPA approved biocide 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 demand and the consumer product and markets should remain strong as a result of changing consumer habits and sustained higher use of disinfection cleaning and personal wash products.
Core cleaning and disinfecting product lines drove volume growth and Europe, and Latin America, offset by lower volume and the U S. Due to raw material disruptions related to the Texas weather incident.
We are increasing capacity and certain product lines, including bio sides and amphoteric to ensure we can meet anticipated higher requirements from our customers.
We are also increasing north American capability and capacity to produce low one four doxxing sulfates.
As previously explained a recent regulations passed and New York will require reduced levels of one four doxxing and on shelf consumer products by January one 2023.
One for docs, saying Theres, a minor byproduct generated and the manufacture of either Sulfates surfactants, which are key cleaning and folding 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 primary driver of our increased 2021 capital expenditure forecast 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 continued to be a focus of our strategy. We grew to tier two and tier three volume by 9% and the first quarter and increased customer penetration, adding 362, new customers during the quarter.
Our diversification strategy into functional markets continues to be a key priority for Stepan.
During the first quarter global agricultural volumes increased with strong growth obtained and the post patent pesticides segment and.
Eight new products launched throughout the world.
Oilfield volume was up double digits due to higher oil prices, we remain optimistic about future opportunities and this business as oil prices have recovered to the $60 per barrel level.
We remain fully committed to delivering productivity gains across the company.
We delayed productivity project implementation at mills Dale to allow the team to focus on COVID-19 related market opportunities.
Work on the project has now begun and we expect to see the benefits in 2022 and beyond.
<unk> had a good quarter as the business is gradually coming back after a challenging year due to COVID-19 restrictions the long term prospects for our polyol business remain attractive as energy conservation efforts and more stringent building codes should increase demand.
The integration of Invista is going well and we expect to deliver on our internal commitments.
During 2021.
The acquisition is expected to be accretive to both EPS and EBITDA margins in 2021.
The company expects the multiple on a post synergy basis to be between six five and seven five.
We expect to deliver full run rate synergies within two years.
The company also acquired a fermentation plant located in Lake provenance, Louisiana and February 2021.
This acquisition is part of Stephens further development of bio surfactant technology. Following the acquisition of Napster fact in 2020.
Stepan has strong knowledge of surfactant chemistry, and we are excited about fermentation as a new platform technology for our next generation of surfactants as customers look to achieve sustainability goals, while maintaining key performance attributes.
We continue to optimize our fermentation process technology, including downstream processing.
The Louisiana plant will require additional investment to manufacture our target product portfolio, but will provide world scale capabilities to support customers and both functional product and consumer product applications.
And 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.
I will now turn the call back to <unk> for closing comments Quinn.
Thank you Scott.
The company just completed its best quarter ever.
Looking forward, we believe our surfactant volumes and the consumer product and markets should remain strong as a result of continued heightened demand for disinfection cleaning and personal wash products.
We anticipate that demand for surfactants within the agricultural and oilfield markets will improve versus 2020.
Global demand for rigid polyol continues to recover from pandemic related delays and cancellation of re roofing and new construction projects.
This gradual recovery combined with our first quarter 2021 acquisition of investors aromatic polyester polyol business should position, our polymer business to deliver strong growth versus prior year.
We anticipate our specialty product business results will improve slightly year over year.
After a record first quarter and despite experiencing significant raw material price increases we are cautiously optimistic about the remainder of the year.
This concludes our prepared remarks at this time, we would like to turn the call over for questions. Daisy. Please review the instructions for the question portion of today's call.
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One moment please for our first question.
Our first question comes from the line on Vincent Anderson with Stifel. Please proceed with your question.
Good morning, gentlemen, and nice job on the good morning Vincent.
So normally we see some seasonality and your polymer margins, but just between the good start two years and supplier outages and Vista.
You know being early in the synergy.
Window.
Should we think about the margin cadence during the peak construction months of this year.
If we take a look at our polymer margins with the significant raw material price increases that we've experienced.
In the market, particularly in North America, I would say that our margins are down so far and 2021 versus <unk>.
Prior year and we are.
We're trying to.
Two we have announced price increases to recapture some of the.
The increase in raw material prices and we'll be looking to do.
And do more of that as the year continues.
Alright, Thank you and.
And and surfactant margins can you remind us what the year ago impact was from mills deal just to help frame a little bit more precisely what the price mix impact was on margins. This quarter and then just following on that with regard to raw materials have you already been able to put through.
Rice initiatives for the.
The products impacted by raw material availability or is there going to be a little bit of a lag where once you have that supply back then you start price discussions again.
Hi, Vincent let me take the first one is called will come and a little bit more about pricing, but let me give you some perspective about the comparison between Q1, 2020 because I know he's.
And he has a lot of selling to be how do we have anything that that happened last year.
And you look at the 75% good old that we had on net on net income and on EPS EPS.
Glued the meals L E band from Debase.
More around that 20% growth.
So as you know, we produce both surfactants and polymers and our meals zelle facility. So both a.
Both businesses were impacted in Q1, 2020 with higher cost that.
The force my yard that we had saw.
So my point is we manage on last year that the cost in Q1 was roughly $10 million you can call it a little bit more than $10 million after tax and that's why I'm, saying the true comparison will be a growth of 20%.
Vincent in terms of surfactant margins and pricing and I think quarter over quarter. Our mix is better was better and Q1 versus 2020, because we've had three months on.
Higher demand related to the COVID-19 product portfolio versus one month and 2020 in terms of in terms of price increases we started to see raw material inflation mid Q1, So we've already taken actions in our surfactant business to try and recover the inflation.
We are seeing and will continue to see and Q2.
And from a product mix and customer mix perspective, we continue to make progress on our tier two tier three customer initiative and are benefiting from higher sales and the agricultural and oilfield space.
Alright, great. Thanks for thanks for all the color there and if I could sneak in a quick one on the fermentation business first how is that ramp up going in terms of staffing some on the more specialized roles and then second out of curiosity, how many independent production lines does.
Net asset you purchased have in terms of being able to easily segregate them. If you were to acquire additional fermentation product portfolios.
So let's start with.
Where we are and the development process.
We are in the R&D phase at this point working on and optimization of the fermentation process itself we.
And do have staff that is.
Schooled and educated in fermentation so that is being done inside from a technology development perspective with outside help for pilot scale.
Experimental runs.
In terms of the manufacturing site and Lake Providence, Louisiana.
There are up to four independent trains that could be commissions for individual product production.
But we are.
And we're looking at what our future portfolio will entail and thats to be determined.
Alright, great. Thanks, and thanks, everyone.
Our next question comes from the line of Mike Harrison with Seaport Global Securities. Please proceed with your question.
Hi, good morning, and and let me add my congratulations on a strong start to the year.
Thank you Mike good.
Good morning.
I wanted to kind of come back to this question about the better COVID-19 demand that you saw in Q1 are you seeing the benefits from enhanced cleaning and disinfection demand.
And this quarter.
I think what we're trying to figure out is how do we think about the comps as we head into the second quarter, we did see some elevated.
Demand for those products, but maybe talk a little bit about how your capacity has changed in the past 12 months.
And maybe what the mix looks like today versus 12 months ago, maybe any any way that you can help.
Help us understand and how much a sustainably higher or different businesses.
Businesses today than.
And then it was pre pandemic.
So our face surfactant business.
Last year.
We saw an 8% growth for the year.
And our kind of our core cleaning products and more quite frankly, and our disinfectant products.
But as we look at you.
You asked some questions relative or to our capacities.
So for our amphoteric product line, we talk about efficiency gains and.
And in our manufacturing plants, so we've been able to.
<unk>.
Lean and efficiency tools to significantly increase the capacity that we have from existing assets for our amphoteric product lines, which are a big part of our growth that we're that we have and will continue to experience from a bias sidel <unk>.
<unk>, we've added some new reactor capabilities and Mexico. So we think we have sufficient capacity to support the market growth at this point and time.
Yeah, Mike the only thing that I will add is.
We also in our prepared remarks, we talked about the impact of day of the way that he and sit in index us so.
So we are just coming out of the whole industry shows coming out of out of that event and we need to see how how how these evolve in the following weeks or months, but that had also an impact on on on genome.
On raw materials on everything and so and then the other part of your question is will we see sustained demand from.
COVID-19 related market opportunities and what our customers are saying is that they believe that.
Individuals' cleaning standards have changed and that it is sustainable as the market goes forward.
We believe that there may be some decline in consumer washing habits. As we go forward, but those are going to be offset by enhanced cleaning in the industrial and institutional markets, because and maybe Scott you want to comment on one of our customers have recently been.
Talking about telling you yes.
And as economies reopen and around the world.
A lot of the hospitality industry.
<unk> is going to I believe try and and store public confidence that their themselves and their families can be safe and these public places so visible cleaning should be a big part of the economies reopening around the world so rather than cleaning crews.
Doing the cleaning and disinfection at four am when nobody's and the lobby, we expect to see more visible cleaning habits in the public forum and that could provide a boost for our for our business. Yes, I think we have talked on it in the past all the cleaning protocols in all of these into cities right.
When do you think on schools when you think about ranch on a whole speed on airplanes.
All of that all those cleaning protocols have change and.
And that's a piece of that that we all I mean, our customers believe that is going to be more demand in the future on as they come and ask the economies reopen and.
And on.
And we'll we'll see how that all impact offset on not the consumer piece.
On.
Understood that makes sense, maybe just to help frame up the impact of the supply disruptions.
You mentioned that outside the U S consumer business was up.
Low single digits, and it sounds like him and the U S.
And in North America, your business day about down a little bit.
Is that the way we should think about it is that supply disruptions, where maybe like a three or 4% impact on <unk>.
North American demand and and how does that flow.
Go through.
Is that does that demand just get lost or does it get made up as we get into Q2 or maybe Q3.
Okay. So.
Mike Let me help you out a little bit.
I think the impact for our North American and is primarily commodity surfactants is probably $1 million to $2 million.
Operating income impact for our North American surfactant business.
And you've got all your other points totally right Mike.
And so.
Low single digit growth.
Side, North America, and our consumer business on North America was down because of the weather.
Alright, and then the last question is on the AG business, which which sounded like it was really strong but it seems like this is.
New products that you're introducing as well as your positioning.
And particularly in Asia, you called out there.
And maybe more and more stuff and driven as much as a better market.
And last year when there was some destocking going on and North America can you maybe give a little bit more color on how you're feeling about the AG business.
Yeah, Mike.
Starting off commodity prices corn and soybeans are have almost doubled over the last 12 months, so theres a strong anticipation that.
And the planting on a global basis will be significantly up so customers are preparing for that increased demand for for pesticides.
So we have seen.
Good volume growth and.
And all of our regions.
And.
We expect that to continue.
We got to get through the planting seasons here and the northern hemisphere.
But so far so good.
And I think it's nice to see AG and even our oilfield business.
<unk> showing good strong growth and recovery after the impacts of both of those businesses and within 2020.
Alright, thanks very much.
Thanks, Mike.
Our next question comes from the line of Marco Rodriguez with Stonegate capital markets. Please proceed with your question.
Good morning, everybody. Thank you for taking my questions.
Good morning.
I was wondering if maybe you could talk a little bit more about the integration efforts with and this maybe if you can kind of frame, where you sort of sit there.
And I'm lines as far as any specifics that you might be able to provide us and then if you could also and maybe discuss a little bit about the debottlenecking opportunity that you mentioned at the at the acquisition date.
So.
What I would tell you.
That.
Many people from step and have been actively working on the integration.
Just to remind everybody we purchased.
The about $100 million aromatic.
Polyester polyol business.
And two locations on a global basis.
We.
Ended up.
Wiring a relatively <unk>.
Small commercial staff and <unk>.
A relatively small R&D facilities are R&D.
People with that as well.
So from a people perspective, the integration has been relatively easy.
And we're very excited to have those new skills and new capabilities, joining our company.
And then we've got the two plant sites.
On the plant site and in North America is relatively.
Underutilized or significantly underutilized and we think we have sufficient capacity.
To support market growth for the next decade or so.
And those assets and what we're working on today at that site is to provide backup capabilities for our step and his legacy technologies at that site as well. So we can provide business continuity for our customers.
The initial phase of that.
Activity will be done in Q3.
And then what we've already seen is that.
Due to some raw material availability issues, we've seen some.
Switching back and forth between the two sites already and North America and in Europe.
Where we have <unk>.
Supplied.
And.
Sure.
And have had some customers move from legacy.
And Vista products to step and products and we anticipate that that will occur over a period of time and technology will switch and we will utilize both plants effectively and efficiently.
No we're pretty pleased with the progress so far as we said in the script that the profitability. So far is up we're encouraged that the market for polyester polyol is growing.
And as rebounded nicely, excluding the acquisition our base business was up 8%. So that's indicative of market growth. So.
And so far so good.
And.
And we'll report more on the next quarter.
Understood. Thank you very helpful. And then on the surfactant side the strategy to push more into the tier two tier three and <unk>.
We see journeys and very nice growth from you guys last year and it looks like it was pretty strong here this quarter as well.
Kind of based on what you've learned over the past 12 months or so.
If you can talk to you how perhaps.
You might be looking at any sort of approaches or changes and approaches to yourselves and market opportunities to this group.
Marco.
I think we've we put together I think a pretty good sales and marketing strategy to go after the <unk>.
And the tier two tier three space Thats been working and partners, it's been working very well and.
We've got a broad range of distribution partners around the world that are really committed to our strategy and.
And and work very well with us and implementing our marketing plans across the world. So I don't see any any real change now if you ask your questions related to the COVID-19 environment and customer engagement, we are enhancing our digital customer engagement strategy, bringing more of our tools.
Online around our product technologies and formulation offerings. So we are doing some obvious modifications to bring more digital content to customers, while we're kind of grounded from travel at this point and time.
Got it and then last quick question from me just kind of following up on a on a prior question on the passing through of the higher prices from raw materials I'm not sure if I caught it.
But.
Did you were you able to push through most or the majority of those higher costs or is there a confidence level that you have that might be able to share in terms of your ability to push that three two and customer. Thank you.
Marco I think we're a little bit behind in the polymer space and that's why you've seen some compression and our polymer margins and I think we're in pretty good shape on surfactants, we've announced one.
Mid quarter price increase and I think there'll be a little bit more but I think were better suited in surfactants and polymers today.
And we need to continue monitoring these medical on how raw material goes and <unk> while weeks on month at the and this is a very dynamic.
Piece right pricing and we will always try to maximize margins and share to deliver the best value and the.
Hi is value creation for a step and so we will I think the company has to prove.
And that we can manage margins pretty well in both environments, when raw material goes down and when raw material disposal and.
And I guess I would also make the comment is due to the Texas freeze and North America.
Our inventories and I think many inventories across the supply chain are low today. So we've got.
As we think about.
The.
Akane season, coming and not too distant future, we need to start building inventories to prepare for the U S Gulf Coast Hurricane season, as well so so.
We've got some work to do relative to.
And getting getting our inventories back up to a level, where we're comfortable.
Got it and I understand and I really appreciate and congrats thank you.
Thank you.
Our next question comes from the line of David Silver with C. L. King. Please proceed with your question.
Yeah, Hi, good morning, Thank you.
Good morning, David Hey.
Yeah, I'm going to apologize in advance I did unfortunately joined the call a few minutes late so I may be making you repeat yourself here.
And so.
And there's a number of kind of.
Striking kind of sequential sorry year over year improvements I just wanted to hone in on a couple of them.
I guess Quinn.
And you were Luis were you able to call out the accretion or the benefits.
Of the.
Polyol acquisition this quarter and other words I'm guessing.
Revenues were kind of a little.
A little bit above that $100 million run rate, but.
Is there any did you call out.
What the.
Incremental effect was on.
On earnings per share this quarter as a result of having the coke business.
As part of all day.
And I'll, David and we didn't we need and specifically called out day.
And based on non squamous mentioned, we're pleased.
With the first two months, we had ahead of our internal goals and as we mentioned when we did the acquisition.
The acquisition and he is going to be EPS accretive, even the first year and he's going to be accretive to our EBITDA margins and we expect.
So you kind of have to set and have multiple after two years of senior and junior.
And that we paid $165 million. So you can do some math there.
And what we would say is as I mentioned that the market is growing and is rebounding nicely and the <unk>.
Volume is is ahead of our head of our internal target at this point and time.
Okay great.
And.
The next question is more related to just some comments about incremental margins and so.
If I look at maybe page two of your earnings release and I just compare.
For the surfactant and polymers.
Segments, if I compare the delta on the revenue line to the Delta.
On the operating income line.
You know it seems like the Incrementals are unusually or very very high very robust this quarter year over year and I'm certain that mills still factors into that but you know.
Could you make some comments about I guess, the incremental margins that you're seeing as you're you know as your volumes tick up here and in other words I guess the comments on how well fixed costs are being absorbed and.
Raw material price increases are being matched with offsetting price increases just from some qualitative commentary to kind of wrap around the.
The simple math as far as the incremental.
Sure.
Incremental profit on the extra dollar so sorry go right ahead.
So David I'll make some comments.
Qualitative comments and I'll, let Luis.
Jump in with some of the numbers, if you will but.
Certainly the quarter benefited as you pointed out.
From the.
From that.
The lower expenses at our mills sale facility. So that so that's the first point I want to make the second point is mix.
If you take a look at Q1 versus 2021 versus Q1 2020, we have significantly more buyer side sales in the in the month and we also have improving oilfield and agricultural business.
And then you see also improved tier two tier three business year over year, so the customer mix and the product mix.
I have more of an impact.
And to our margin improvement and absolute margin on raw material costs for our commodity product lines.
Yeah, I think as I mentioned before David of course, the comparison with Q1 2020 is off is.
He is not apples to apples, we had a big event last year as we all know saw so good all that youll see if you exclude that as more of like a 20% growth and that type of growth did even buy.
Product and customer mix and so the fact and <unk>.
And Ah Ah being V Starr acquisition and the growth of volume.
And in our polymers business, if you think on what EBITDA margins for the quarter that we're just reporting if you look at our pending five on.
Of the presentation.
You will see sort of fact and close to 18% EBITDA EBITDA margin.
And we feel good about those margins and EBITDA.
And again, its product and customer mix.
And Youll see polymers in the in the 17% because of course Q1 is.
Seasonally low.
Because not all day volume is there so.
What you've heard from us over the last couple of years is a consistent focus on.
And on.
Our strategy, which.
Is tier one customers commodity surfactants provide any economies of scale that business as has improved over the last year and a half two years.
So that's good that business is growing.
But also that gives us strength to leverage those assets against some more specialized customer mix and also.
That position allows us to sell more specialty chemicals more specialty products to a broad based customer mix and so so that strategy and our surfactant business continues to.
To provide an opportunity to pay dividends from 53 consecutive years.
But that but that strategy, there is ups and downs, but we.
We feel pretty good about the mix and the capabilities and the services that we're bringing to the market bringing to the customers.
Okay great.
And this next question I think is kind of more and more or less a supply chain related question.
Question.
But.
And with demand high and was margins favorable.
I think.
Internally there has to be a priority on just maintaining reliable operations and and hitting your production and delivery targets.
And I mean, I scratch my head and I just think over the last 12 months I mean, there's been you know.
Very severe pandemic.
<unk> a number of your production and distribution sites, the Texas freeze that he talked about there was the Illinois River locks work that.
It was uncertain, but it was something a little bit different but kind of.
Posed a threat to your supply chain, I guess and a few other things, but I guess as you look at as you plan for the whole year and you'd want to kind of hit your internal targets up and down in terms of production and deliveries and and things like that.
And what additional steps do you take here or how do you kind of view.
The challenge of kind of a building and maybe redundancy or co.
Additional capabilities to ensure that you optimize what you were able to accomplish and the current robust environment. Thanks.
So the first comment I would make you made a statement about.
Having some difficulty keeping our plants up and running as a result of COVID-19. What I would tell you is that we have had virtually no disruption and our supply chain over the last year and a half as a result of COVID-19, primarily because we take it very very seriously and and Vista.
<unk> precautions.
Across our supply chain network on a global basis, and our employees are being very diligent and trying to keep themselves safe. So we have had COVID-19 and our and.
And our across our population that reflects.
And the communities in which we live and work, but we have not had any supply disruptions.
Relative to reliability of assets and capacity utilization of our assets.
So we.
Our capacity utilization has increased.
And so there is less flex that we have within our.
Our supply chain network today.
And then we have had over the last couple of years.
We continually try to squeeze more productivity out of our existing assets and I will tell you.
And we're using lean tools as I mentioned earlier, and we always seem to find a little bit of.
Little bit more capacity and those assets and our supply chain team is doing good job.
The investments and reliability that we're making continue to increase a little bit.
And so.
We.
We need to spend money on.
On our plant sites and we need to.
Reinvest so we can.
Have the reliability that the market needs us to.
And so.
So your point is well taken and it is a priority for the company given the extent that the customers depend on us to continue to make those products for them. So they can have material on the store shelves.
Sponsored ability, we take very seriously and and.
And it costs money to maintain our plans to do that.
Okay. Thanks for that day, I apologize if I implied that the pandemic has caused meaningful disruptions to your to your specific.
Facilities or operations.
Solely meant it in terms of a challenge to be to be addressed.
Maybe on a continuing basis, but not not that it had.
Pad disrupt major disruptive effects to date.
Okay, that's fine I'm gone and that's it for me and I appreciate all the color. Thank you.
Thank you David.
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