Q1 2021 Venator Materials PLC Earnings Call
Good morning, everyone and welcome to vector is incorporated 2021 annual meeting of shareholders.
I'd like to introduce you to Lou Giuliano non executive chairman of the board of directors of vectors incorporated.
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Good day and welcome to the banner to a first quarter 2021 earnings call.
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I would like to turn the conference call about two cases Robertson and Investor Relations. Please go ahead.
Thank you and good morning, everyone I'm tape robots, and Investor relations for financial materials, and welcome to Venezuela first quarter 2021 earnings call.
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Joining us on the call today are Simon Turner, President and leasehold the broadcast bold rescue them momentarily.
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Good day and welcome to the very mature first quarter, 'twenty, Tony and long earnings call.
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I would like to turn the conference over to Katie rabbits, and Investor Relations. Please go ahead.
Thank you Francesca and firstly apologies to everyone and appeared and set them.
Technical problems, where and when merged with another call and.
And I'm <unk> Robinson Investor Relations, both anatomic stereo and welcome to Venice, Our first quarter 2021 earnings call.
Joining us on the call today are Feynman, China, President and CEO, and Kurt Ogden Executive Vice President and CFO.
Morning, We released our earnings for the first quarter 2021 by a press release and posted the release and accompanying slides to our website and Bennett Barkoff Dot com.
During this call we may make statements about how and projection or expectation for the future.
All such statements are forward looking and while they reflect our current expectation they involve risks and uncertainties and are not guarantees of future performance.
You should review our filings with the SEC for more information regarding the factors that could cause actual results.
To differ materially from these projections or expectations we.
We do not plan on publicly updating or revising any forward looking statements during the quarter.
We will also refer to non-GAAP financial measures should such as EBITDA adjusted EBITDA adjusted net income free cash flow and net debt you can find reconciliations to the most directly comparable GAAP financial measures and our earnings release, which has been posted to our website at www.
And it's all crop dot com.
And now my pleasure to turn the call over to Simon.
Thanks, Kate and good morning, everyone welcome to our first quarter 2021 earnings call.
The macroeconomic backdrop continues to improve and many countries across the globe coronavirus restrictions are beginning to relax and the vaccine rollout is encouraging.
Although we remain cautious industry fundamentals across our portfolio are positive.
And then also delivered 49 million of adjusted EBITDA, and the first quarter compared to 25 million and the fourth quarter of 2020.
Turning to slide four on our titanium dioxide segment.
And the first quarter, our titanium dioxide segment delivered $40 million of adjusted EBITDA compared to 46 million and the first quarter of 2020, and 25 million and the fourth quarter of 2020.
Demand for functional tier two was strong across all sectors on all regions. We also saw a good recovery and demand for our specialty <unk> products, mainly and textiles and automotive sectors.
We have more ground to cover for a full recovery total tier two volumes were 1% lower compared to the prior year quarter and increased by 14% compared to the fourth quarter, which was slightly ahead of our expectations.
As a result inventories remain tight throughout the quarter, despite increased utilization rates compared to the fourth quarter of 2020.
We experienced some minor disruption and additional cost due to Brexit, which have been resolved.
Turning to price, excluding FX tio to average selling prices declined by 1% compared to the prior year period and increased 3% compared to the prior quarter.
The increasing selling prices due to successful implementation of our first quarter price increase initiative relating to a functional <unk> products and has also resulted in more convergence of price across the regions. Prior to the CIO to average selling prices have been relatively stable for eight quarters.
However, during this time, we have onboard and meaningful raw material inflation.
Price increases are helping us to reclaim lost margin.
Chinese exports was stable compared to the prior quarter with the main export markets being Asia and the emerging markets. We continue to see a pullback and exports to Europe, and North America due to stronger local Chinese demand for tier two coupled with shipping constraints, which is resulting in customers looking to us for reliable supply.
As a result of higher raw material and shipping costs, we continue to see selling price increase announcements from Chinese producers, which in turn continues to narrow the arbitrage window.
Turning to the outlook for tier two we expect to see continued strong demand for our functional <unk> products across all regions and demand for our specialty products to recover more slowly into textiles personal care and automotive.
We expect sales volume and the second quarter to be similar to the first quarter as we restore production and pre pandemic levels. However, inventories at the end of the first quarter was slightly lower than our expectation and Additionally, we continue to manage supply chain challenges both factors could limit our upside.
We expect that the second quarter, we will bring further price capture across all regions from our second quarter selling price initiatives.
And the second half of 2021, we expect to incur some headwinds on feedstocks as a result of continued tightness and the feedstock market. In addition, we expect energy costs will be unfavorable due to rising prices, we expect to manage our margins through further tier two price increase and pass these higher cost funds of our customer.
Yes.
Turning to slide five and performance additives.
Adjusted EBITDA improved by $8 million compared to the prior quarter and $1 million compared to the prior year period.
This is primarily attributable to further recovery of demand and benefits from our 2020 business improvement program and.
And the first quarter, we saw further demand recovery for our functional additives products across automotive electronics and coatings applications.
Our color pigments business continued to display strong demand, especially in European construction and coatings within Europe and Asia Pacific.
Timber treatment demand has been robust as a result of positive home improvement trends in North America.
Average selling prices were flat year on year and declined by 3% compared to the prior quarter the decline in price as compared to the prior quarter is attributable to product mix as it relates to seasonal demand for certain products and.
In the near term, we expect to see favorable business conditions continue with demand remaining strong for all businesses.
Shipping cost and supply chain challenges continue to be managed and monitored. However, we expect to mitigate increased shipping costs with price increases to maintain our margins.
We recently signed an agreement with <unk> group to sell our water treatment business, which is part of our performance additives segment for $6 million cash we expect the transaction to be completed during the second quarter of 2021.
Turning to slide six and our cost programs.
Our cost reduction programs remain on track and restructuring cost continues to be inline with expectations and the first quarter of 2021, we delivered incremental savings of $9 million, which brings total savings to date of $25 million from our 2020 business improvement program.
As we look to the remainder of the year, we expect the timing of savings to be uneven temporary COVID-19 savings realized in 2020 will roll off and we will.
We will be replaced by new 2020 business improvement savings this should be most noticeable and the second and third quarter.
Current will provide commentary of our financials before returning the call back over for some concluding remarks.
Thanks, Simon let's go to slide seven.
And the first quarter total adjusted EBITDA declined $8 million compared to the prior year period the.
The decrease was primarily attributable to an increase and cost of goods sold from higher raw material energy and shipping costs, partially offset by benefits from our 2020 business improvement program.
The improvement in revenue was due to the favorable impact of foreign currency translation, which was offset by a similar foreign currency impact on cost of goods sold.
Compared to the fourth quarter total adjusted EBITDA increased by $24 million, primarily due to an 11% improvement and sales volumes as well as benefits from our 2020 business improvement program.
And this was partially offset by higher raw material energy and shipping costs and the conclusion of our COVID-19 response program.
Turning to slide eight and our cash flow considerations free cash flow was an outflow of $30 million and the first quarter, which represents a $55 million improvement compared to free cash flow for the prior year period the.
And the improvement compared to the prior year was primarily driven by lower capital expenditures and working capital use.
We are running the business today with considerably less inventory and the timing of certain feedstock payments naturally landed and the second quarter.
We exited the quarter with a healthy cash balance of $187 million and $247 million available under our asset based lending facility, resulting in total liquidity of $434 million.
Guidance for our 2021 cash uses remains unchanged, we expect capital expenditures to be and the range of 75% to $85 million as we invest and some modest discretionary projects that support future growth.
We expect cash interest to increase from 2020 as interest is due on our $225 million bond.
And although we remain focused on our cash conversion cycle, and we expect working capital to be a modest use of cash and 2000 22021 consistent with price inflation.
We are engaged in a triangle valuation for our largest pension plan and once complete we will provide a further update we're hopeful that this will lead to lower contributions with that I'll turn the call back to Simon.
Thanks Curt.
We remain encouraged by the improvement and <unk> industry fundamentals over the last quarter demand has been strong inventories are generally low and we continue to see a pull back and Chinese exports and we are capturing selling price increases from our first quarter initiative.
And looking to the second quarter demand continues to be strong for our products and our order book is healthy we are increasing our production levels and managing customer demand, while implementing initiatives to maximize utilization rates of our current CIO to effective capacity.
Our customers are experiencing the continued benefit of our customer tailored approach and our second quarter selling price initiative will bring further price improvement across all regions.
That has been a good recovery and demand for specialty product sales and the first quarter and should continue to gradually improve.
Our performance additives segment continues to perform well delivering strong results I would like to offer. These businesses are very cash generative, we expect to see favorable business conditions continue across all businesses within this segment and both the near and medium term.
We are making good progress and remain on track with our 2020 business improved from program, which we expect to further strengthen our cost structure and deliver $55 million of annual savings by the end of 2022.
And our free cash flow continues to receive maximum focus and attention. Our entire organization is working hard to reduce the cash uses and improved cash generation.
We continue to receive questions and inquiries about environmental social and governance matters.
I am proud of our efforts and this important area and I am delighted to announce and the next few days, we will publish our first sustainability report as a standalone public company entitled expertise and action.
And this report showcases our efforts and performance and key areas to innovative solutions for a more sustainable future and highlights our focus and resource allocation on selected products technologies and markets that will deliver long term success.
As I commented earlier, we recently signed an agreement for Alco group to sell our water treatment business was $6 million cash. This divestiture enables <unk> to unlock value from our non core business.
For Alto, our leading amount of France rewards to treatment and process chemicals on a more natural long term owner of the business, which will benefit its customers and associates. We expect the transaction to be completed during the second quarter of 2021.
With that we thank you for your interest and Venezuela, I would now like to open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star and then one and that does come from.
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The first question is from David Begleiter with Deutsche Bank. Please go ahead.
Thank you and good morning.
Good morning, and Scott, what you're seeing and Oh, two prices and good morning, Keith Scott wasting and North American tier two pricing and contract negotiations as we sit here today.
Yes look I think a couple of comments around price.
And our prepared remarks, we we talked about the success of our first quarter price initiatives, we've clearly got a range of.
And increases out there and the accurate around $200 a ton type increases and all regions and we expect through these negotiations and discussions with our customers to achieve.
A significant step forward within the second quarter on these price negotiations, so I wouldn't sort of pendant into.
Just North America I think this is something that we're seeing across all major regions and <unk> functional market share.
Understood and then just lastly, and performance additives. How are you looking at Q2 cadence of results versus Q1.
Yes, Hello, coming and first half of course, we continue to be very pleased with the performance additives segment. The progress, we're making we had a pretty decent fourth quarter last year as you'll recall.
<unk> seen the numbers here for our first quarter.
Way, we think about this business is we would expect to see another strong quarter within the second quarter.
I would see and I encourage you to look at the sort of like historical cadence of first half results and second half results within this collection of businesses.
Pass and wise, we don't necessarily see any change from that in 2021, and I think that's just sort of help you get to a sort of.
And the landing zone.
And David just to add a little bit further to that I think that we should see.
On a year on year improvement.
And certainly as we begin to lap.
COVID-19 impacted the quarters and so more specifically as we think about second quarter.
It will naturally be a a little bit of a weaker quarter based on our historical pattern that you see but.
Still certainly will carry a lot of this momentum that we've seen and the first quarter with us into the second.
Very good thank you.
Pleasure.
The next question is from Duffy Fischer with Barclays. Please go ahead.
Yes, good morning.
First question is just around.
Louisiana pigment, how did that whether the.
The freeze that we had this quarter and what was it able to produce for you guys and are there any lingering effects.
With that.
Yeah. Thanks, <unk> I'll pick up on the let me say that we did we did have an interruption down in Louisiana for.
Think about it as a week that order of magnitude of sort of six to eight day type of window.
It's true that production was impacted during that time.
We like many others, we faced challenges around <unk>.
Staffing and provision of key raw materials.
Very proud of the efforts of the team down there to get the facility back up and running relatively smoothly.
Theres some nominal losses sustained I think we might say in terms of production.
But if you were to ask me. The question is with the quarter have been Benny Bean and best if it hadn't happened the answer would have been only slightly so I would represent to you that a minimal impact and b no lingering effects.
Okay. Thanks, and then.
You mentioned your feelings from raw material pressure and need to get price, but when you comp your raw materials pressure versus your marginal competitors, let's say and nominal Chinese player do you think youre seeing more or less or about equal raw material pressure to that.
And.
Chinese comp.
Oh, I think we are spending less and the aggregate Duffy because first off with significant ilmenite buyers and <unk>.
Benefit from a range of contract and scale, there, which helps us and Oman, where there has been some pressures.
Certainly and energy, where I think we've seen broad based energy type increases.
Ross the industry, not just ourselves with Chinese producers by the way, but certainly within China tends to be at the higher end of the inflationary pressures.
We also have a chloride.
Unit element of our business as well, which marks us out as different from the typical sort of Chinese producers, so I think and in aggregate it will be low.
Lower level of pressure.
Great. Thank you guys.
Thanks Duffy.
The next question Tom and.
Josh Spector with UBS. Please go ahead.
Yeah, Hey, guys. Thanks for taking my question I guess Simon when you commented on volumes into the second quarter, you said flat sequentially as kind of the basis difference to consider at this point.
And just curious are you at full capacity now or what would be limiting that considering that.
A little bit less optimistic and what we've heard from peers.
Yeah look I think thats, something I would say for us and <unk>.
And I'll leave it to you to sort of compare with peers and so forth.
And I discussed that but from our point of view I mean, there is no doubt about you Sorel pop up in sequential volumes.
We have been a little bit surprised that the pace of the recovery I think we've noted in our remarks that it was ahead of our expectations.
These assets and not the type of asset and see pressed the button and everything goes along.
First off and they tend to suffer little and frankly, it takes a while to get in and backup has been moderation and furloughs and so forth last year as you're well aware through the pandemic. So look the reality is as we get went through the first quarter and faced with the strong demand we did not build any stock. So we cannot rely on.
Stock or inventory to sort of help us through this second quarter and.
There will be increased demand and the second quarter of course, the pace of it won't always be and these are double digit type of levels, but we expect to be able to sort of like fighting our way through the quarter, but depending on how the actual demand comes through on the day, we will be able to meet every ton of upside maybe not quite a challenging.
<unk> position, but it's a pretty good position to be in when you look at.
We are talking to our customers around pricing.
Got a support of customers have supported us through our customer tailored approach.
I'd like to thank the inventories are sort of out real levels, because theres no real incentive under these approaches to build inventory and so forth. So yes, it's true that we might be a little bit constrained and the second quarter, but we still expect to see strong demand and we will do our best to make sure we optimize our outcome from that.
Okay fair points and appreciate that and.
As I kind of look at all of your different comments about pricing up sequentially higher raw material costs and from the moving pieces from cost savings and temporary costs coming back.
Considering again, the flat volume sequentially is EBITDA and <unk> up sequentially and do you think margins expand through the year or just pricing offset costs.
Yeah. So look I think let's deal with the second part first.
We've said prior and we still maintain <unk> prices will be up through the year.
And it does not mean there'll be up and every quarter to that exact same day Rina of course, not but we would expect to see a trajectory of price increase through the ASO.
We are setting up to manage our margin and expand our margin and <unk> expand our margin and <unk> and recover some of the some of the impact we had from rolls over these past couple of years. So I think that really deals with the second part of the question as we see any changes in raw materials through the year, we will respond to that.
Within our pricing programs, we've set ourselves up with our arrangement such that we are sort of not unduly constrained in that period, and we think we will be and are in good position, we would expect to see with volumes and further price capture and the second quarter naturally that the EBITDA level and the titanium dioxide business would be.
Yes.
Okay. Thank you.
The next question from.
Brian Alexander with Jefferies. Please go ahead.
Good morning can you.
And <unk> about how youre thinking about mix effects over say the next one to two years, how much of a lift that can be to margins is to grow specialty volumes.
Yes.
Thanks, Lawrence and let's see.
And a little bit about the specialty business here in the one thing that we.
And trying to get across here is that we've seen the scores like quite dramatic recovery and all.
Functional is outgrowing at the moment not and then you know and she has a product developments and productivity reductions, yes that will help a mix, but won't offset the previous to factor. So in Africa I think the way to think about it is while it won't be a big difference is going to be so.
Lots of negative makes issue over this next period yet.
And then how do you think about the from normalized balance between the specialty and functional volumes compared to where we are now how much of a shift and the vet and your and the ratio should we expect horse and the next three to five years whenever you want to think of as normal.
Yes, I think look you know, we said a number of times that we trying to get as much of a titanium dioxide slate sold and to the specialty and differentiated.
Pops of the market.
And so.
You're sitting with 50% sales into into those so abroad segments. Then if he referenced a five year timeframe I think it would you be doing wells to solve.
Get up by another 5% and that time period, so steady bits flow.
Got it thank you.
Thanks.
And the next question is from <unk>.
And the technical Alaska. Please go ahead.
Great. Thanks for taking my question and good morning, Yes.
They should demonstrate and stuff and.
Just curious and when you look at <unk> could you comment on inventory levels.
Different geography and maybe.
And any reduction and North America and Europe.
And then as well as exports out of China, what can you maybe comment on on that dynamic as well. Thanks.
Yeah, I mean in terms of inventory levels. So touched on a bit early I think if you stand back and look at the Big picture what's been.
Happening and this industry.
And certainly speaking prevented so hey, we've got this program of customer tailored approach, which means that the predictability of pricing supplied felt by the customer.
And that assumes with their customers.
I guess I'm just curious if you're if you're looking to employ a long term contracting strategy.
Going forward or or if you you know are satisfied with a more of a spot based approach.
No I think so.
Spot for US is only something that we do and it's sort of like a very specific situations and it tends to be where we've got a very small presence and tactical markets and all of the markets. We have some range of agreement.
<unk> for each customer, which runs over different time frames for different range of customers and.
Right.
<unk> has different components of the offer and as I've said, a number of times that package is more bespoke to data customers or any other time I've seen and my 30 years, plus citizen and industry. So can there be some areas with terms is a discussion between us and customers yes. They can.
But I would not want you to have the impression that we've got anything other risk significant.
A portion of our products and to some range of.
Tailored contract arrangement.
Okay. Thanks.
Okay.
Our next question is from Hassan Ahmed with Alembic Global Advisors. Please go ahead.
Good morning, Simon and Kurt.
I guess, the other area, where shipping sort of could if you have a model of per.
Reduction.
Hi, a fraction and normal goes on long haul next bill and and and that that that could be others within our industry, but it's not us. So we are frankly, not seeing and <unk> business.
Any really meaningful shipping basic cost inflation.
Yes, we are seeing some energy inflation and a raw materials raw material bill coming to segment to some extent and some locations. It's not rule tool and yes, we are seeing some ilmenite precious Timmy did serve and for the second half, but for the reasons, we gave Harry and the call about a pricing steps. We remain confident you know that we will be able to.
To offset pass through and in fact open up on margin through this coming through through this year and I do believe assigned that.
Over the longer term the fundamental as industry look you know and possibly even stronger than they look walk with.
You had a stimulus packages the demand picture looking good but.
The Chinese producers clearly, even if they bring a bit more capacity and to the market I've got to satisfy their own demand first is limited and.
Pasty growth elsewhere, and I believe the inventories now are quite low and it's hard to see all day with these operating rates People's training to get them up us trying to get them up it's hard to see how we saw build inventory over this next per so I believe the fundamentals and so that I guess, there's some cost inflation, we don't think we're the worst affected but.
To the extent, where effective we plan to bring it back through the market.
Understood and if I could sort of carry on with the cost inflation side of things.
Particularly and China. It seems we've seen dramatic escalation and uhm sort of you know quality lower grade or pricing and just looking at some of the numbers you know I look up coming out reporting sort of you know pretty sort of no.
And production numbers and tons of or is or availability and issue now and how you guys did up in terms of.
You know your contracts vehicle and the volumetric side of things be it on the pricing side of things.
Yeah, they'll come and I think that's the one thing that's very clear prevented so as we've got a wide range of feedstock types that we purchased we've got.
Wonderful diversification of feedstocks and feedstock families and vendors because of all mix of technologies and types of products we pie.
Windows of uplifted and that period.
Okay helpful and then and.
Price was moved to support the bottlenecks and brownfield expansion is there a possibility for <unk> to expand and functional grade capacity.
Yeah look there's always a possibility share, particularly in the area of sort of smaller debottleneck capacity creep.
But more limited in terms of large.
<unk> brownfield throes and of course.
I think I don't think we've ever and I.
I've never seen a greenfield plant bill outside the China.
And since I've been in the industry, which has over 30 years and I don't expect to see one anytime soon either so look I do think we can bring some capacity to bad debt.
With our inventory slow with the time it takes.
With the price benefits and margin benefits, we get from our customer tailored approach will be very careful to match any capacity increments.
And with the market demand, we're not going to get out ahead of our ski tips.
Helpful. Thank you.
The next question Steven Bible with Bank of America.
Please go ahead.
Thank you Sam and you mentioned many of them and go about that.
Increase and Tru to demand in China, where more of that product that's being produced locally and is heading and I'm curious to hear your analysis of global supply and demand.
As you look out a couple of years.
Do you anticipate the demand growth from T. R O two in Asia too to consume incrementally more of that volume that's produced in the region and therefore, maybe a continuation of this trend of less exports.
Out of China, do you have that expectation could they get two and net import center.
Scenario and how do you see all of that impact and.
The other day outlook for pricing in Europe.
Yes, I think this goes back to the point about the fundamentals and the longer term looking very strong because you know not only is China handsets sort of like reconsider its rate of capacity growth as a block. These past five years with some of the changes the environmental standards and so forth and CNS.
Escalating fixed cost escalating energy now escalating ores.
And.
And it's clearly slowed the rate of fill down and we expect the demand rate to continue in China and Asia. So I I expect the fraction of Chinese exports that leave China and Asia should drop over this next period, that's not to say there won't be significant.
Difficult exports.
Proportion to drop I don't see them being a net importer.
So I think that's good news from from the from our standpoint, because that capacity and it does from a the product stays more and the region and be as generally coming off of higher cost curve, which requires high pricing. So both of those bode well for the fundamentals, which remain to your point.
Tact to supply and demand and I think generally speaking I've covered ourselves.
For the industry, but I would suggest that the trend for ourselves you could see elsewhere is that you get this debottleneck and you get this creep you get planned additions to the circuits, but it's not wholesale capacity additions. So I think I think we're well set this next period.
And you have on one of your slides claim and you bought your interest and you and growth and the higher you know higher.
We're value products through.
And then my question for you is how much influence do you have on that and is that innovation coming from your end on on any differentiated.
Product that you can produce oriented innovation all coming from your customer base, where there could be increased.
Product opportunities that require a higher value pigment.
What role do you have and what is my question.
I think from our point of view of course, there are developments and different sectors and segments and the market as I referred to and our sustainability report and our prepared remarks, WAF and things like the green new deal and some of the stimulus and spending and some of these areas and it's.
Tied to the sustainability fundamentally so those mega trends that are driving it no doubt.
And that's driving our customers and our job is to listen carefully to our customers and look at what's driving them.
It sounds from what we can do with our products bring that together. So I think it is a mixture of both per fundamentally that responsibility on products and services rest with us.
We have a role and that and we can identify opportunities, which is which is what we're doing but it wouldnt dispute of course.
The megatrends driving fundamentally the customers here.
Thank you.
The next question.
John Mcnabb.
Please go ahead.
Yeah. Thanks for taking my question and I guess the first one is just on on production levels. Simon you had indicated you're increasing your production levels kind of as we speak I guess, how much incrementally do you think you can get as you push into the back half of the year because it sounds like your <unk> levels will be relatively similar to the <unk> levels.
Yeah look I think there and the way to think about it is our second footprint simply our second half production run rates.
We'll go back to where we were pre pandemic and because.
We clearly moderated last year you know the front end of this year is about sort of being a little bit on the back foot recovering ramping up getting through that phase and back into the clear and water. The second half. So I would urge you to think about the second half being packet off pre pandemic level.
Got it Okay. Now that's helpful. And then when you think about or inflation I guess, how much visibility do you have on the second half cost and and I guess, how does that compare to your ability to put through price to offset it in a timely fashion and I guess, how should we be thinking about about those two those two different dynamics.
Yes, I mean look I think there's no doubt about it as I said earlier, we have a range of contracts and some cases, we have quite short term discussions around price and supply and those are generally sort of like concluded quicker and away because you know this.
Greater range in terms of our largest suppliers.
And this relates more to high grade.
So a period of operation of discussions tends to be <unk>.
Six months, 12 months or beyond and depending which which one is so we have got a good sort of feel for where our vendor base is coming from within the quarter and that all goes into along with clearly supply demand and fundamentals issues.
And how we think about our tactics and.
Later parts of the year and.
I would just remind you it's not necessary all about quarters now and we've got customers.
That phase and at different times at different levels is very bespoke to the customer and individualized, but but I guess, we've got enough.
Within the quarter to be able to formulate our tactics for.
The second part second part of the year.
Got it fair enough and as it is it fair to assume just based on production levels at this point that youre not seeing customers, even able to necessarily game. The pricing trying to buy ahead that type of thing just cause because theres not enough production available or are we thinking about that right or is there a little bit of pre buying.
Some of this price inflation is is getting announced.
Yeah look I think.
And there's two dynamics driving the answer that question. The first is generally isn't the product available to do it even should they want to do it but the second point goes back to the point I think.
And as missed or underestimated a little bit.
For for us to be able to sort of hold on to pricing and these past two years and threes with everything we face is a very different sort of like set of outcomes and any cycle either seeing previously.
And so that speaks very much to customers.
Getting more confidence about planning that business, both from a price and inventory level and us not holding the inventory for them to do it. So I don't think any of the inventories that they wanted to do it and be at the same level of maybe.
Motivations, they have maybe in prior cycles to try and sort of nissin ahead, and buy a bit more either to guard against the uncertainty of supply of successive price increases that would be my take on it.
Got it thanks very much for the color.
Okay.
The next question is from Vincent Andrews from Morgan Stanley and correct.
Okay, Steve Haynes on current events and thanks for taking my question.
Okay. Thanks.
And covered so I guess, maybe can you just help us think about the volume performance and the first quarter and and maybe if you could break out the splits between and functional and.
And the specialty and kind of like and quantitative basis, and just help us understand that.
And that breakout.
Yeah look we won't be breaking out the specialty and functional and I must tell you. We haven't done that we don't plan to do that.
What I can tell you, though within the first quarter demand.
North America continued to be very strong Europe is recovering strongly and of course and Asia.
Mexico, and China growing very strongly and some solid demand in southeast Asia and of course.
Unfortunately, and in countries like India, where we're starting to see a real tragedy unfold.
Clearly you are not going to see the same sort of demand for our products, that's not even and the same universe of importance to people net in a moment so.
Think that we are seeing a bit mixed but in aggregate. It was strong demand across all of the regions and certainly by segments.
And the pleasing thing for US is that we did start to see the recovery and specialties and our textile personal care.
And automotive segment, yes, it's been a bit slower than the sort of recovery rates, we've seen and our functional business, but it is there and so we take great encouragement from that but certainly and the and the more volumetric segments coatings plastics nominate thanks.
And pretty strong and similar types of uptick and all of those.
Parts of the market.
And thank you.
Okay.
And final question is true.
Bank of America. Please go ahead.
Thank you and good afternoon, so looking at that.
Slide six.
What is the 2020, one and 2022 cash cost for each of the business improvement and POI expenses in order to attain.
Chinese.
These benefits on the slide.
Yes, Roger this is Kurt why don't I take that and I.
Thank a good way to think about the cash costs associated with delivering the business improvement benefits is that we've got about $50 million that we will need to spend over 2021 and 2022 now the outflow.
This will be a little bit more heavily weighted towards next year than this year, but hopefully that gives you.
Good feel for the investment necessary to deliver on those savings.
And how about the point part of that or is that including the pori part.
That does not include Corey what we said for Pori is that we expect approximately $15 million or so of cash outflow this year.
Next year.
It looks like it will be in the neighborhood of $20 million ish, unless we are successful with some of these optimization.
Efforts and initiatives that we have underway.
Got it and the second question is can you provide any update on the potential sale of color pigments and have you thought.
Thought about.
Trying to divest your 50% interest and zions and so we're trading business given the ex U.
Ex strong market for us, they're ROFO our Roe for.
Things that make it difficult to realize and true value out of your Petrobras and interest.
Thank you.
Roger I think we're always willing to go to the table and explore.
Discussions and ways to increase value through portfolio optimization.
Right now primarily due to COVID-19, we're not actively running a per.
Process on color pigments.
That said, we are actively pursuing as you can see with the water treatment.
Best richer ways too.
And optimize the portfolio of businesses that we have.
As it relates to the timber treatment I think that.
There is no specific.
Processor and anything going on.
Around that right now, but that certainly.
Certainly something that we would always consider if there were interested parties.
Yes.
Thank you very much.
Youre welcome.
This concludes our question and answer first and I would like to turn the conference back over to Simon Turner for any closing remarks.
Well. Thank you very much for your interest in Venice or apologies once more for the glitch at the start of the call.
We look forward to speaking to many of you throughout the quarter and any upcoming conferences. Please feel free to reach out to Kate with any additional questions question standard and I hope that you and your families continue to stay.
Stay safe during this period, thank you very much.
Yes.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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