Q2 2021 Univar Solutions Inc Earnings Call
And then David will close and progress on our business strategy. Following that we will take your questions with that I'll now turn the call over to David for his opening remarks.
Thank you Heather and good morning, good afternoon, and good evening for everyone and thanks for joining the call.
I'm pleased to report such a strong financial performance against the backdrop of good customer demand with constrained supply and disrupted supply chains.
We believe the performance is a testament to our operating the digital infrastructure as well as our outstanding team of dedicated colleagues there.
The ability to identify trends and grow our supplier and customer relationships as well as build on investments and both technology and our growing global specialty and market verticals has positioned us well to deliver for our customers and supplier partners and achieve another strong quarter of results.
As we continue to execute our strategy and focus on growing together, we're building momentum and believe our singular focus on strong operational execution is paying off as we advance our strategic priorities and complete our integration activities.
Key highlights from the quarter.
We delivered strong Q2, adjusted EBITDA of $197.5 million with liquidity of $882 million at quarter and inclusive of $279 million of debt pay down in the quarter.
Our headline sales were up versus prior year as we continue to look for growth in our core business, even with the effects of our divestiture program and exit from our Canadian and distribution business.
We improved our sales performance with positive win loss ratios and all regions and many of the court with much improved retention levels for new customers.
Our SAP migration work has just been completed and Canada with now only Mexico outstanding.
We remain on track to deliver on our commitments of $120 million of net synergies from the Nexium integration.
Our digital investments and delivering real benefit with approximately 40% of on U S customers now registered on our e-commerce channels enable to utilize 24, 7 and self service capabilities.
Additionally, approximately 21% of U S customers are utilizing our digital tracking capabilities on the amount of orders placed all of our shop channel increased by more than 50% quarter over quarter.
And we strengthened our position and on global specialty and market verticals with more new supplier authorizations in the quarter.
We saw increasing business activity globally with sales of improving throughout the quarter.
Once again, we were able to provide existing customers with the security of supply and demand outpaced the supply of product containers and transport as well as support the needs of new customers who've been let down elsewhere.
The second quarter of 2021 experienced the strongest year over year of growth and overall financial metrics and the recent history of Univar solutions.
Prior year comparisons were aided by the strong economic recovery and pricing, reflecting demand and ongoing supply disruptions for the winter storms in Texas.
We believe our global network and strong supply of partnerships provided us with the distinct strategic advantage of of much of our competition as we were able to leverage the capabilities of our single ERP and the USA to ensure we optimize available supply throughout the network.
Our industrial solutions business saw strength and construction and automotive related chemistries with strong demand and many of the critical products for these markets.
Food and personal cash both experienced double digit growth with consumer demand accelerating as vaccination programs of proving effective and much of the world.
Unforeseen shortages in certain key ingredients have strengthened the value proposition within both the industry, because we believe our ability to deliver bespoke formulations and strong supplier partnerships and positions us to provide a differentiated value to customers.
Our general industrial business has seen strong demand across the various markets, but in particular chemical manufacturing machinery and paper.
Our water treatment portfolio has been especially of essential for the drought stricken western United States.
Our extensive organic chemistry portfolio has supported growth in the segments, while the ability to leverage our scale enabled us to provide our customers with secure supply.
Although now a much smaller part of our business oil and gas related demand returns the double digit growth compared to the prior year with oil prices currently of pre COVID-19 levels and weekly oil and gas rig counts and steadily increasing.
Production Chemistries in particular, so of strong demand.
Our services business was strong in the quarter, largely due to automotive and airline sectors, we manage chemical waste streams and related recycling programs.
For 2021, we still expect delivered gross profit growth at a rate better than the industrial production indices and with the third quarter started strongly and we're expecting the adjusted EBITDA guidance of $175 million to $185 million for the third quarter on our raising our adjusted EBITDA.
Guidance range for the full year to $705 million to $725 million.
And with net free cash flow conversion above, 40%, which Nick will expand upon shortly.
Beyond 2021, we believe the completion of the integration activities the SAP migration and the actions, we're taking the streamline our business.
The positions us for sustainable success.
Of the right people products and tools and strategy. The we expect will deliver the innovative solutions, our customers and suppliers value and position us to deliver shareholder value.
Now, let me turn the call over to Nick who will walk you through our second quarter results and our outlook then I will share some brief closing thoughts.
Thank you David Good morning, and Hello to all I am pleased to share Univar solutions Q2 financial results.
Update you on our business activities and provide our outlook for the rest of the year.
Sales were up 19, 2% on a reported basis and 15, 4% on a constant currency basis, excluding the results of the exited the Canadian agricultural businesses and disappear from the prior year financials, we estimate net sales to be up 35% and up 26.
4% on a constant currency basis.
This growth is primarily due to the impact of chemical price inflation and higher industrial demand.
Gross profit exclusive of depreciation was higher by 23, 2% for $602.5 million and a 19, 3% growth on a constant currency basis.
Our gross margin increased by 90 basis points to 25, 2% driven primarily by the Canadian agricultural distribution exit.
Excluding the <unk> businesses, and disappoint and margins were down 60 basis points as the positive impact of this year's chemical price inflation was offset by the absence of prior year's favorable product mix benefiting from certain essential end markets of $20 million.
Second quarter, adjusted EBITDA of $197.5 million was up by 21% and 16, 2% on a constant currency basis compared to the prior year.
Adjusting for the exited businesses growth was 22, 2% on a constant currency basis.
The increase was primarily driven by chemical price inflation higher industrial demand and the realization of net net synergies, partially offset by higher W. SMA.
The W estimate increase was due to higher variable compensation driven by the outperformance of the businesses and Reinvestments and operating cost versus the temporary reductions implemented last year.
Despite the higher Ws and 8 EBITDA margins did improve by 10 basis points.
Moving on to slide 7 Q2, GAAP net income was $153.2 million or <unk> 90 per share compared to $1.8 million and the prior year.
The increase was primarily due to higher gross profit of gain on the sale of our digital business and the effect of the exploration of the warrant related to the February 2019 next year solutions acquisition.
These were partially offset by the higher Ws and 8 which included the variable compensation and pension related expenses.
For our detailed schedules in the appendix adjusted earnings per diluted share.
The 57.
And the quarter and increased from 33.
And the prior year second quarter.
Operating cash flow at a higher use of cash versus the prior year period, primarily due to net working capital use driven by the strong acceleration in Q2 sales this year sequentially quarter over quarter of about 11% versus the sequential decline in the prior year, which.
As we all know was impacted by the effects of the COVID-19 pandemic.
This was partially offset by higher net income during the quarter.
We're able to maintain ample liquidity of 882 million inclusive of $207 million and cash and the availability under our asset based credit lines.
We expect levels of working capital and cash flow through the rest of the year to follow our traditional seasonal trends.
During the quarter, we refinanced $1.3 billion of term loans with the new $1 billion term loans net of debt paydown of $279 million.
As part of this refinancing we extended the maturity of the term loan for 2028 and reduced the interest rate by 25 basis points, which will save approximately $2.5 billion, a year and interest expense.
There is also an opportunity to further reduce the rate by 25 basis points, if our leverage falls below $2.5 times saving an additional $2.5 million per annum.
Capital expenditures for the quarter were $23 million and Nexium and integration related expenses were on plan at $19 million.
Our ROIC was 11, 4% for the quarter and leverage now stands at 3.2 times.
On slide 8 we of aggregate of the key metrics across our 4 reporting segments and we provide details in the appendix.
Sales across all geographies and benefited from chemical price inflation and higher industrial and market demand.
Sales were higher year over year, and all of the regions, except for Canada, which saw a reported decline due to the exit from our agricultural businesses.
And the as reported sales were also negatively impacted by the district for divestiture.
Gross margins were lower and USA EMEA and Latam.
USA saw strong demand and our LCD business, resulting in the change in margin for the quarter.
And now and Latam were impacted by the lower benefit from certain essential end markets and the prior year.
And Canada gross margins benefited from the agricultural distribution business exit as well as favorable mix.
Adjusted EBITDA margins expanded in USA, and Canada and declined in EMEA and Latam.
And USA lower gross margins were mitigated by better cost management, and resulting operating leverage positively impacted EBITDA margins.
EBITDA margins for other segments were driven by the relative gross margins.
Overall, the increase in sales was higher and the increase of WGNA, except for Canada due to the AG business exits.
Okay.
Moving to slide 9 we remain confident and our ability to execute on our strategies and 2021 and.
As we've highlighted before our 2020 adjusted EBITDA of 636 million included approximately $20 million of earnings for the Canadian Agriculture services business, which we exited in Q4 and disproportion, which closed on April 1 this year.
We also had the benefit of $35 million from essential and market demand in 2020, which we didn't expect to recur at that level and 2021.
For our 2021 and the outlook, we continue to expect increased market share growth in the year and we anticipate our business to grow at a higher rate than our previous expectations and above the general economic consensus of 6 plus percent.
The industrial production growth rate, which we are using as a benchmark.
For the rest of the year, we expect to see a trend towards a normalization of chemical prices and a continuing broadly opening of north American and European economies.
These dynamics, along with our solid execution and the continuation of better product mix through robust customer demand and our focus industries will drive good results.
Accounting for all of these factors as well as Q2 performance, we are increasing our expected adjusted EBITDA guidance to $705 million for 725 million for fiscal year 2021, $25 million higher at the midpoint from our prior full year guidance and almost 12% higher.
From the midpoint of our initial guidance for the fiscal year 2021.
Guidance for our Q3.2021, adjusted EBITDA is and the range of $1.75 million to $185 million.
As you would expect we're closely tracking the market dynamics and we recognize that some of the current pricing levels may not be sustainable beyond the next few quarters. However, we believe a solid base for adjusted EBITDA of 6.9% of 700 million is our benchmark for growth into 2000.
And 'twenty 2.
On Slide 10, let's review some of the cash flow of highlights of our 2021 outlook.
Net working capital liquidation from exiting of the Canadian Agriculture distribution business has resulted in net proceeds of $4 million as of Q2.
With an additional $21 million expected to come through by early Q3 of 2021.
These amounts are net of related payables and are in addition to the $52 million received in Q4 of 2020.
Yes.
Our plan is to continue the target net working capital and align with our guidance of 13% to 14% of annualized quarterly sales.
Land sales and our current guidance are expected to result in only a slight use of cash from working capital for the full year, implying good cash flow and the second half.
Cash use of other expenses and timing of year on accruals is expected to be up to $35 million.
Final Nexium integration expenses, which are not included in our adjusted EBITDA forecast are expected to be up to $70 million for the year.
We are planning for $125 million worth of capital expenditures for the year and line with our initiatives to invest and high ROI projects and the increased competitiveness.
We recognize that with Covid there have been some delays and the year to day spend but during the second half, we hope to catch up and thus avoid a significant carryover into 2022.
Consequently, we are targeting net free cash flow of $280 million to $300 million for 2021, resulting in a net free cash flow conversion above 40%.
Net leverage excluding further divestment proceeds is now expected to be 2.7 times or lower by year end 2021 versus the prior guidance of $2.8 and clearly ahead of our F. 'twenty 2 target of 3 point al.
We expect to have ample cash and line of credit liquidity throughout the year, even after some additional permanent debt reductions.
During the 3 months ended June 32021, a portion of the expiring warrants relating to the Nexium acquisition were exercised and a price of $27.80.
Resulting and the issuance of approximately $1 million of newly issued shares of common stock.
Given this we expect shares outstanding for 'twenty, and 'twenty, 1 to be and the range of $171.5 million for $172 million.
In conclusion, we are very pleased with our results for the second quarter and remain optimistic about our outlook for the full year and beyond.
Our teams every day execute very well and challenging environments and I'm excited to see the continued progress we are making against our F 'twenty 2 and growth objectives.
We are continuing to implement our plans to achieve a run rate adjusted EBITDA margin of 9% by the end of 2022, and we intend to provide more details on the 2021 through 2023 margin bridge and our upcoming analyst Day day.
David.
Thank you Nick.
As you can see we're making solid progress on our business strategy and the strength and capability of our Salesforce remains the key driver of business improvements as we leverage our advantage network of tactical and regional sellers and combination with our digital platforms. The <unk>.
As evidenced by our positive win loss ratio and all 4 regions and new customer retention.
The expansion of our consistent technically differentiated approach to customers through the globalization of our specialty end markets and the consumer and industrial solutions verticals the delivering growth.
Our expertise and commit to the investments in these vertical for us being rewarded with new or expanded supply partnerships and with roughly half of those announced in the quarter being wins from existing distribution channels.
This past weekend, we successfully migrated our Canadian business onto our SAP platform and the move in Mexico, the schedule for November and.
This will complete the nexium integration activities from which we delivered $8 million of net synergies during the quarter and expect to achieve on net synergy goal of $20 million to $25 million of this year and $120 million and total by Q1 of 2022.
Moving onto the last 22.
As mentioned last quarter, we sold the disproportion plastics business and EMEA on April the for US and later in the quarter, we divested of additional assets and the region.
To date, we have realized of approximately $196 million and gross proceeds from disposals.
And Q3, we expect to deliver $6 million from further asset sales in Europe and expect to realize most of our targeted total net pre tax proceeds.
As Nick detailed our expected strong cash flow and divestiture proceeds and enable us to meet and beat the first of our F. 'twenty 2 objectives and reduce on net leverage to below 3 times by year and actually to 2.7 times and lower.
Our commitment to being of digitally to continues as we accelerate our omnichannel approach.
We now have a single integrated digital commerce platform at Univar solutions Dot com, enabling customers to search select source and self serve and whatever the time of day on 9 day choose this.
The investments is delivering results and we continued to enhance its capabilities based on customer feedback on the now providing users with real time pricing without the Logan.
Quarter over quarter sequentially, we've seen of 42% increase and document download of 58% increase and order through shop on a 12% increase and orders by true Ken Central on no Frills channel, which also launched in France, and Brazil and in the quarter.
Our digital vision is clear and we are beginning to realize the benefits of our capabilities as a source of continued and sustainable competitive advantage.
Putting the customer the sensible we do we've established a global voice of customer process, leveraging the on net promoter score or NPS.
As of June our overall score is good despite challenging tight supply chain conditions impacting our results.
Regular reviews have been instituted to ensure we are listening to the customers feedback and adjusted or developing our processes based on what day truly value.
Involves reviews for me right down through the organization as we work to build out of the effortless experience, we believe our customers deserve.
To help with this and using advanced analytics capabilities. We have progressed the development of our customer 360 model that provides us with a single view of customer performance, including NPS and customer centric metrics all along the customer journey.
This model is designed to provide predictive insights the we believe will aid and prioritizing improvements towards and effortless experience for customers.
Altogether of digital investments and customer centric approach the designed to maximize the effectiveness and scale of our operations turning data into the strategic assets and making it easier for customers and suppliers to do business with us.
We released our latest annual sustainability report in June which is up 12 of addition.
The 2020 sustainability report reflects the company's commitment to grow today tomorrow together to both of our commercial strategic priorities and the sustainability approach.
While showing we are on track to meet or exceed our 2021 on sustainability goals, which was set back in 2017.
We provide a comprehensive view into our ambitious sustainability goals for 2025 and beyond with the net zero of ambition by 2050.
A few of us ESG highlights for the first half of the year include.
We announced new supplier authorizations for a number of more environmentally friendly solutions.
We continue to invest and projects to reduce our carbon footprint in line with on net zero commitment.
We continue to give back to our communities as well of support stem programs globally laptop sponsorship and active involvement and the you'd be the Kennedys program organized by the chemical Education Foundation and the U S.
We continue to put safety first which is evidenced by our world class safety record.
And we introduced on new supplier code of conduct to support sustainability throughout the value chain.
ESG is a priority for us at the.
Such as each of our core values and aligns with our vision to redefine distribution and be the most valued chemical and ingredient distributor on the planet as well as being the best of Steward. The post resources understanding is our home our responsibility.
So before we come to your questions and to summarize.
We delivered strong Q2, adjusted EBITDA, while realizing on purpose to help keep our communities healthy the fed clean on site, even during challenging times.
We have again raised our full year adjusted EBITDA guidance this time to 705.
Thank you at this time.
You would like to ask a question simply press Star then the number 1 on your telephone keypad. If you would like to withdraw your question press the pound key.
Please limit yourself to 1 question and 1 follow up please hold while we compile the Q&A roster.
Your first question comes from the line of Kevin Mccarthy from vertical Research partners. Kevin Your line is open.
Good morning. This is Corey on for Kevin how are you.
Good morning.
Good morning, So you had mentioned and taking market share can you provide a little bit more detail.
Maybe by geography, or by end market and and how you're accomplishing the market share gain.
Sure I think debt.
Really we're looking at right across all of them all of our markets.
We have really good capability and those specialty consumer.
Solutions, and industrial solutions verticals and the authorizations.
Helping us drive share the as well as the continued to invest and on.
Our technical capability is not technical and sales organization and the chemical distribution business, we're seeing and good growth and the U S and and and.
And in EMEA.
And we have products we have containers.
Transport and so we are a more reliable and <unk>.
<unk> of product when and why.
On the others cant deliver.
And I think we're finding it some.
The good environment for us to win with customers and that's why we're so focused on so then on our MTS to make sure that we are where the supporting customers and our win loss ratio is improving and all areas and all regions and.
So I think really what we're saying is on our business executing well.
And our strategy playing out.
Thank you for that and Thats helpful and if I may your free cash flow guidance suggests maybe 200 million of $200 million tailwind and the back half of the year can.
Can you walk through some of the assumptions underpinning that maybe what are your price assumptions.
Sure, let me ask Nick to to walk through that for you, Yes, Hey, Corey it's Nick.
Morning, because we mentioned in the script, we do expect some level of pricing to come down in the second half of the year and we are going into our seasonally lower quarters. So those factors do drive the breakdown of the working capital just driven off of.
Of the sales and.
And we also expect to improve some of our efficiencies on working capital like many people collecting and processes.
During the Covid environment and some challenges we still ended up relatively close to our 13% to 14% target we are above that and the first half of what we expect to be below that getting to the second half. So the combination of the lower top line and the improved efficiencies and collections and drive the working capital cash flow.
And the second half.
Thank you very much.
Your next question comes from the line of Laurent Favre with Eczema Laurent <unk>.
Line is open.
Yes, good morning and.
And David when you.
And talk about the actually maybe for the big enough for the weekend.
We're talking about normalization and into the second half. So I'm wondering are you referring to the pricing and margin.
For returning to.
Some of the volumes that you gain as you ended the.
And we keep discipline anyway, youll catch the meso.
And as I guess may go back to them for reaching those sorts of that's the time.
Hey, there on.
Good question. Thank you know I mean, I think what we're saying and with very very confident about our sales approach and very confident about the service that we're providing customers right now.
It is really thinking about pricing thinking about pricing normalizing a little bit so.
So we expect some of the some of the tailwind we've had on margin for 70 from the first half to taper off into the second half, although we still expect pricing to be strong, but we expect the amount of a strong and we're very confident and our ability to support customers.
Thank you and.
And you and then you mentioned and nuts.
A lot of ahead of target on Internet of thing we've seen the most of your is the black Kid on M&A since the beginning of the care I'm wondering as of.
And now that you on a lot closer to the.
Turning to the the <unk>.
The bill and keep them and in or should we be expecting some simple that returns.
Although.
Yes, the capital allocation strategy I think.
We've highlighted before our priority was to get our leverage down and we're well on track to do that and we see the opportunity for <unk>.
For some good bolt on acquisitions and of both.
And in the Americas, as well as and in other markets as well. So we are we have turned our attention to the already and we have a program and the process to do that I have to say nothing.
And that's been sold recently.
And we'd lamented on that sort of thing we've looked at many things and and turned away for many things we're going to continue to be very disciplined around the businesses that we add to our portfolio, but on capital allocation strategy is to invest in and of high ROI Capex to drive growth.
Some bolt on acquisitions, and then look at how we return capital to shareholders and we'll share a lot more about this at the Investor Day later this year.
Got it thank you.
Your next question comes from the line of David Begleiter with Deutsche Bank, David Your line is open.
Hi, This is David Huang here for David I guess, you talked about you're expecting normal seasonal trends.
Year on some of your suppliers and customers are expecting more muted seasonality this year and escape.
Talk about how you think about seasonality.
And then on your guidance for Q3 and Q2, it looks like the drop from Q3 into Q2 as the little bit bigger you the answer.
Assuming normal seasonality is that just the function of the normalizing pricing.
Okay.
Thanks, David look I think Q3 to Q2.
Is seasonal and you've got a seasonal adjustments and that we expect sales to be generally.
Lower because of that seasonality trend.
And we see that and what kind of normalization of margins coming back, but we do think as I said earlier on and we see continued strong demand across all markets and we're very confident and our ability to deliver and capture that demand.
Okay, and then just the crusher and markets can you talk about where and Youre seeing the strongest growth and are there any end markets that are below pre pandemic levels.
I think you have to look at micro markets, rather the market for the below pre pandemic levels. So personal cash personal beauty care is as strong of.
Though things like makeup cosmetics is still.
Pandemic led both non until people really start going back to work and.
And getting out more and will we see that pick up but we're seeing good strength across all markets as I think we highlighted in the prepared remarks.
Okay.
Your next question comes from the line of Michael Mcginn with Wells Fargo. Michael Your line is open.
Hey, good morning, everybody.
Hey, Mike and Michael.
I may have missed the comment you said earlier on the call you were benchmark you raised the guidance, but your benchmarking.
The 690 of the 700 is that correct and what do you mean by that statement.
Yes, I think that what we're is what we're saying is if you if we look at the puts and takes the.
The delivering this year.
If we looked at the exceptional on pricing on the exceptional margin from 70, particularly from from Q1 into Q2 and that will normalize out and so I think of normalized run rates for this year would be of 690.700 and for us to base of growth on for next year.
And I would add Dave and.
And Michael on that is the <unk>.
Higher variable compensation, which were also calling out which has been a benefit obviously to all our colleagues.
And at a higher level than normal, which would be and offset going into next year versus the chemical price inflation benefit that we expect the taper down so those 2 kind of net against each other I mean, there are other puts and takes obviously, we had a little bit of a disproportion pick up and the beginning of the year, that's not going to recur next year. So we're just calling out.
On a base level that we think is the good growth platform going into next year.
Okay. So the back of the envelope math with you guys. If I take the midpoint of that 695, and then maybe of blended EBITDA full year rate of 8.5% that gets me the sales of $8.1 billion and which is down maybe about 7% and this year given the.
Pricing momentum we've talked about is that the ballpark estimate you guys are looking at.
That is back of the envelope math, Mike I'm not going to comment on the back of envelope math and I'm not giving guidance for next year, we're looking at and I think of giving we've given as much and as.
And as much guidance as we possibly can do a much into insight into our thinking as we possibly can to.
And to allow you took the model and Wally.
Okay, and I think understood.
And to grow better than industrial production.
And sanction and Thats, what we will do next year.
Got it.
And switching gears to the.
I guess the.
The guidance a lot of your you're already running essentially this quarter at a 9% EBITDA margin run rate and all in all of your segments ex U S. And you just you just got the ERP information implementation done there. So can you just walk us through what you see as the progression of the EBITDA margin. The the next couple.
Full of quarters for that.
And that 1 segment for you guys.
Yes, I mean, as we called out last quarter, we're expecting our margins this year to be higher than last year and the low eights, probably when you end up after the full year.
Clearly, we had very strong margins and the first 2 quarters.
But they taper down in Q4, typically but we've got as we will get through later on the year of line of sight into better margins going into next year, given some of the adjustments that we've called out and.
And then a path towards the 9% of beyond that.
And at other elements affecting our margins as well, which is just the mix between our strong sales and our LCD business versus our specialty area.
That normalizes, you'll also see the improvement and our margins driven by that improved mix towards the fye segments.
Okay I appreciate the time thank you.
Thanks, Michael and.
And once again, ladies and gentlemen, if you would like to ask the question. During this time simply press star followed by the number 1 from your telephone keypad to withdraw your question press the pound or has.
Your next question comes from the line of Steve Byrne with Bank of America. Stephen Your line is open.
Yes. Thank you.
With respect for the 9% EBITDA margin targets that you have the your ex U S regions, seeing who already be well above that it's your U S region. The.
Is there something structural about the sort of enables the the ex U S rings and the harmony of the higher EBITDA margin and perhaps.
And how you get there in the U S Mercury.
And can happen.
Sure I'm on it.
And I think the big thing the difference between the U S and any other business day. We have is its large inorganic bolt business and that tends to just drive the margin down a little bit and so we have that largely inorganic business, which is free and a very cash generative very profitable, but there's tens of of lower margin and the and the business and it's a bigger portion of.
The U S business compared to anywhere else on the on the planet.
So.
I think we're very confident about our actions to streamline our processes to streamline our business continue to enrich the mix continue to drive.
Specialty focused industry still feel pretty confident about our ability to hit that 9% EBITDA margin run rate by the by the end of next year.
And 1 of the drill into the the comment you made David on on the win loss ratio.
And I recall in years past.
You argue debt.
And we're losing.
Some of the new supply opportunities.
Those were pushing price and.
And I think you transform the sales force seems that what have you learned now for them from these cases when you lose a.
And our new supplier of opportunity.
We do attribute it to.
And it isn't so much on supplier of the changes that will lose inc. We windows pretty consistently and I think our specialty on.
<unk> installation and dose escalation study and are very good at capturing those and we have a number of those that we've spoken about for the win loss ratio speaks much mall to 2 customers and answer.
The customers, winning and losing so and now we're winning more customers and we're losing some business will naturally churn at the end of life its.
And customers might go out of business.
And in the old days, we may have just lost them because they've got set up and when somewhere else on now we're seeing more of them come back more of the mistake with us were seeing on digital tools, helping us to have a better customer experience and better buying experience, we talked about the <unk> experience, we want and we think customers of that deserve. So we're very focused on delivering that so we can.
And retaining the base and add more business on top to really affect the win loss ratio on a positive way and grow share.
Thank you.
Your next question is the follow up question from the line of Michael Mcginn with Wells Fargo. Michael Your line is open.
Hey, Thanks, guys for taking the follow up here.
So I just wanted to go.
Go back to the debt Paydown and can you just walk through some of the upside factors that would lead you to the beat that target and then maybe on the capital allocation side and what kind of synergistic opportunities here is there to add on.
Bolt on and the new geographies kind of role and some of the existing supplier relationships you've had and other regions.
Yeah, So Michael it's Nick let me speak to the deleveraging as you know our original target was 3 times by the end of the year.
We now have reduced debt twice looking at the being less and 2.7 times.
Some of Thats driven by the cash flow of the business, but also driven by the higher EBITDA. So generally we're performing better than we thought starting out of the year.
In terms of upside opportunities, we continue to see good cash flow there might be some additional divestiture realizations.
And also some of the timing of the Capex might impact that but generally we're on track to continue to delever, putting aside any future capital allocations I'll, let David speak to some of the synergistic M&A opportunities that were looking into and and pursuing and considering yes, thanks, Michael and I think that the.
And what we've built.
Is a really good plan.
That formed for growth, we built and have a good operating with and we are of good sales structure and we have a great now technology on <unk>.
Stack and digital platform, which gives us a really good.
Infrastructure to plug and the new things into.
And as well as globalizing, our industrial solutions consumer solutions businesses. So we have of consistent execution around the world, which has led to new supplier authorizations, not new new not new new supplies, the univar, but existing suppliers of univar solutions, extending the reach and toward the market.
Because we can offer this consistency of approach now and the digital infrastructure and it is very attractive to them to our suppliers to move.
And move with us so we see really good opportunities and that we think are of very good host.
And for companies coming and so as we think we can really.
Plug them into the into the infrastructure into the network and into the people network as well to.
<unk> been able to make it and enjoyable experience now for any company the.
And we happen to acquire and and really terrific drive accretive growth.
Great.
And then just going back for the last question you mentioned the win loss ratio I'm just looking at the initiatives you have in place ESG new facilities digital capabilities, when you say win loss.
Are you benchmarking yourself to the 2 big competitors are out there or is this just.
Maybe.
Supplier decided the keep something internally.
And.
For those solution based sales.
Where you're adding and then there is of.
The value add component of what's the lead time for winning business like that.
Okay. So theres a number of questions and that money on but let's just go back of the win loss ratio on first of all of you don't benchmark that against anything other than ourselves. The question is are we.
And winning more business, winning more business at a customer SKU combination level.
And then the we're losing so this is are we growing our customer SKU combinations and and.
Is that.
How does that stack up year on year. So therefore, we are winning or losing the game and we are winning the game we are winning.
Winning more than we're losing in terms of customer of ours.
Business of that customer skewed combination level. So we don't bounce them up against anybody else just ourselves and that's the measure for us of are we winning or losing the battle OE winning share on on winning share in terms of the dwell time of the lead time on some of the specialty sales.
I mean that can that can vary but that can vary and some of the what I term more fashion businesses like food ingredients for Q2 and personal cash.
And new season will bring day new skincare.
And source food whatever it may be that can be 6 months 9 months.
On some of the other businesses if I look at the pharma ingredients business book at the.
The some of the industrial solutions business, the coatings business tends to be less fashion and less change that can be more like 12 to 18 months, but we track all of those we track everything throughout the development centers are solutions fences and.
So we know what the kind of average lead time is through our pipeline process. So that helps us to give us a view of.
Our forward opportunities.
Great I appreciate it.
Ladies and gentlemen that concludes our Q&A portion of the call today and I'll turn the call over to have the right at.
And this time.
Thank you, ladies and gentlemen, and for your interest and manufacturer relations. Please be on the look out for a save the date on our analyst day. The next week and then.
Any follow up questions. Please reach out to the Investor Relations team. This does conclude today's call.
Ladies and gentlemen that concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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