Q2 2021 Orion Engineered Carbons SA Earnings Call
Greetings and welcome to the Orion engineered carbons second quarter 2021 earnings Conference call.
This time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce Wendy Wilson head of Investor Relations. Thank you you may begin.
Thank you operator.
Good morning, everyone and welcome to Orion engineered Carbons conference call to discuss our second quarter 2021 financial results I'm.
I'm, Wendy Wilson head of Investor Relations.
With us today are Corning painter, Chief Executive Officer, and Lorin Crenshaw, Chief Financial Officer.
We issued our press release after the market closed yesterday, and we posted a slide presentation to the Investor Relations portion of our website, we will be referencing this presentation during the call.
Before we begin I'd like to remind you that some of the comments made on today's call are forward looking statements.
These statements are subject to the risks and uncertainties as described in the company's filings with the SEC.
Actual results may differ materially from those described during the call.
In addition, all forward looking statements are made as of today August 6th.
The company does not undertake to update any forward looking statements based on new circumstances or revised expectations.
All non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release.
I'll now turn the call over to Corning painter.
Thank you Wendy good morning, everyone and welcome to our second quarter earnings Conference call I'm pleased to report that we produced near record results for the second quarter capping an excellent first half of the year.
At $78.8 million second quarter, adjusted EBITDA was the second highest in our history for times higher than year ago levels, and 10% higher than the second quarter of 2019 with both divisions contributing to the strong performance.
Given the volumes year ago were running at exceptionally low pandemic levels I believe it's useful to compare our second quarter volume levels for 2019 on.
On that basis total company adjusted EBITDA was up again 10, 2% on volumes that were approximately 93% of second quarter 2019 levels and favorable specialty product mix compared with the first half of 2019 total company adjusted <unk>.
EBITDA was up 10% on volumes that were approximately 95% of first half 2019 levels.
Overall against the backdrop of the COVID-19 induced economic downturn, a year ago, both businesses demonstrated substantial operating leverage.
In addition to delivering strong financial performance. This quarter. We also settled our longstanding dispute with a vanik for approximately $79 million.
We now consider this matter totally settled.
As I've said many times, we've been managing our company's capital plan without counting on a recovery from a volume therefore investors and creditors should view the $79 million in proceeds for what it is a cash injection that is not earmarked for any specific matter.
The immediate effect of receiving the cash is that it will substantially strengthen our balance sheet and accelerated our achievement of net leverage within our targeted range of 2 to 2 and a half times.
We expect the associated debt reduction to result in an annualized interest expense savings of about $1.1 million.
Turning to recent developments related to sustainability, our strategy is to develop new products across 3 core pillars, enabling carbon blacks circular carbon blacks and renewable carbon blacks year to date several developments aligned with these pillars have taken shape.
Including launching a new renewable product offering <unk> nature.
Collaborating with the European Commission's IQ Carb battery consortium to design and scale up innovative battery materials, including our high purity conductive acetylene black.
And partnering with the research institutes of Sweden to produce carbon black from force based products.
Each of these efforts and our broader strategy are summarized on slides 5 and 6 I want to salute the efforts of our team year to day, not only to deliver impressive financial results, which are important from a short term perspective, but also to advance our sustainability efforts, which are critical to positioning Orion to thrive.
Ive longer term and a lower carbon world.
Using slide 6 I would like to elaborate a bit further on how the 3 recent developments fit into the broader strategy.
First regarding enabling carbon black strategic pillar, we developed <unk> a family of rubber carbon black for tires that have unique properties. It.
It is aimed at extending tire life, lowering rolling resistance, and reducing hysteresis, which collectively it reduces fuel consumption material use in the <unk> footprint on.
All of these attributes are aligned with our customers' goals to improve the environmental impact of transportation.
Regarding the circular carbon black strategic pillar, our focus is to drive the development of the circular economy for tires here, we are working to make carbon black from oil derived from used tires to that end, we are well into a year of working as a partner with the black cycle.
That is an EU funded group led by Michelin working to drive a circular economy and sustainable solutions by recycling end of life tires.
Our partnership is off to a good start and we will provide additional updates over time.
Finally, with respect to the third pillar renewable carbon blacks are focus is reducing consumption of fossil fuels by producing carbon black from renewable feedstocks. We actually started this journey a decade ago with the development of print text nature of carbon black derived from plants aimed at the printing market.
More recently, we launched <unk> nature, the first highly reinforcing carbon black grade made from renewable feedstocks, which can be used in tire tread construction.
The product is currently being tested by customers given the development cycle for tires, we expect it to be in testing for 2022 as well.
We also announced recently our partnership with the research institutes for Sweden to develop a carbon black from sustainably harvest force based products as we gained traction in conjunction with these and related initiatives. We will keep you abreast. The main idea is that we expect renewable.
Carbon black to play a role in a lower carbon world and look forward to partnering with key players to bring these types of products to fruition.
Finally, we recently announced that we have become a part of the European Union funded IQ Carb project that was formed to design and scale up innovative battery materials, leveraging Orion high purity conductive settling black we're excited about this development and that the project Organised.
<unk> chose Orion acetylene black to develop a lithium ion batteries in Europe.
Overall, we've made significant progress with our sustainability efforts and with these and many other initiatives that you can read about in our recently published 2020 sustainability report that is now available on our website.
Turning to our second quarter results in greater detail as you can see on slide 7 adjusted EBITDA rose to $78.8 million year over year, primarily driven by the sharp broad based demand recovery across most rubber and specialty applications and geographies as well as the.
Both specialty and rubber mix.
That concludes my opening remarks for the remainder of today's call Lauren and I will cover second quarter results in greater detail in our second half outlook. After our prepared remarks, we'll be happy to take your questions.
Lauren.
Thanks Corning.
Revenue nearly doubled year over year up 97, 9%, reflecting a strong demand recovery for our products across all end markets from the year ago pandemic trough and the favorable impact on revenue of passing through higher feedstock costs.
Contribution margin more than doubled up 106, 7% year over year, mainly due to strong volume driven operating leverage adjusted EBITDA rose over 400% year over year to $78.8 million, reflecting strong operating leverage partially offset by higher fixed cost.
Driven by higher maintenance labor and incentive costs, reflecting a more normalized operating environment at our plants.
Finally, we reported adjusted net income for the quarter of $37.2 million on higher adjusted EBITDA.
On slide 9 you will find several useful bridges that provide greater financial details in support of the comment I just shared on our quarterly results.
Slide 10 details our year to day cash generation, which as a result of the Eugonic proceeds has been positive. Despite a surge in working capital as a reminder, when oil prices rise or working capital increases by roughly $30 million for every $10 change per barrel of oil in our feedstock costs.
On the year to date increase in working capital roughly half is driven by higher oil prices and half is driven by higher receivables and finished good levels in line with the current robust demand dynamics, we are experiencing and building inventory during the quarter ahead of numerous upcoming turnarounds.
On a full year basis at the midpoint of our adjusted EBITDA guidance, if oil prices average where they are today.
We would expect net debt to be roughly flat year over year with the cash associated with strong operating results and the EPA settlement payment.
Largely offset by Capex and higher working capital.
Slide 11 summarizes our leverage and liquidity profile after the end of the second quarter.
As Corning mentioned earlier with the receipt of the Vaneck proceeds and our trailing 12 month EBITDA normalizing. We are now comfortably within our targeted steady state net leverage range at 2 to 2.5 times. In addition, our liquidity available at any adjusted EBITDA level has risen to 300 <unk>.
$64 million.
Overall, our strong financial standing positions us well to fund and execute the EPA investments as rapidly and safely as possible. While also advancing growth initiatives that bolster our adjusted EBITDA and free cash flow capacity with the Ravenna expansion ramping up next year and the Huawei expansion.
<unk> to ramp in the 2023 to 2024 timeframe, while EPA investments ramped down.
We expect these 2 investments to contribute roughly 30% to $40 million on adjusted EBITDA at steady state levels.
Moving to slide 12 specialty volumes increased 37, 6% year over year, showing strength across all end markets and geographies with strong operating leverage and favorable mix driving adjusted EBITDA to rise by 138, 9% year over year.
As shown in the trailing 12 month gross profit per ton chart. We are pleased to see that specialty profitability is a protein levels last experienced in 2018, reflecting near record profitability levels strong operating rates and favorable mix.
The next slide breaks out the major year over year drivers of adjusted EBITDA for the specialty business in greater detail. The most significant of which was higher volume and improved mix.
We have increased prices significantly year to date, but these increases have simply allowed us to hold even with rising costs as opposed to expanding our margins.
In market wise polymers, and coatings were particularly strong.
Geography wise, the European and Asia Pacific regions showed the greatest relative strength.
Turning to slide 14 rubber volumes were up 69, 6% year over year with strength across all regions.
With both tire and <unk> up significantly, but tire stronger than <unk> on a relative basis.
Higher volumes translated into higher adjusted EBITDA, which rose to $39.5 million, a substantial improvement from essentially breakeven during the year ago period.
Slide 15 breaks out the major year over year drivers of adjusted EBITDA for the rubber business in greater detail. The most significant of which was higher volume with that I will turn the call back over to Corning.
Thank you Lorne.
Turning to our outlook for the balance of the year, we are raising our full year 2021, adjusted EBITDA guidance to the range of $265 million to $285 million from our prior guidance of $250 million to $280 million.
While there are many bullish signals for the global economy, we continue to expect that the second half for financial results. Those strong will not match the robust level of our first half due to lower volumes due to planned outages at several specialty and rubber plants, including our Ivanhoe, Louisiana site, where we're completing our.
Air emissions upgrades there.
And typical rubber carbon black end of year seasonality.
Finally, I'd like to provide an update on our capex guidance.
We expect 2021 capex to be in the range of $190 million to $200 million up $25 million at the midpoint from our prior guidance. This increase reflects higher costs as we approach the finish at Ivanhoe accelerating some spending for the remaining 2 air emissions.
<unk>.
And accelerating a number of debottlenecking projects in light of the ongoing market demand.
Regarding our overall EPA spending estimate we recently obtained stage 3 front end loading estimates our F. L..3 for our Borger and Belle pre sites. These sites are the last to EPA related installations and this is the most robust cost estimate we have had to date.
As a reminder, front end loading activities fall into 3 stages, 1.2 and 3 FBL too is developed up to a pre defined level of detail not yet sufficient for construction and operation, but enough to develop a cost estimate schedule and to make critical decisions.
That will influence the final.
Designed for the project.
At the F. A L..3 phase the engineering team has more fully designed the project, including defining how it will be constructed commissioned started up and operated.
As a result of the higher costs at Ivanhoe that I referenced earlier.
And incorporating the Belle pre and border F. A L..3 estimates our current estimate for the cost for the EPA work is in the range of $270 million to $290 million up roughly $30 million for 12% at the midpoint from our prior guidance of $230 million to $270 million.
Beyond getting to <unk> III, we recently entered into lump sum turnkey EPC contracts with engineering firms for both of the remaining sites significantly derisking those projects.
Finally, as a reminder, for these sustainability related projects, we seek to recover.
Both for higher operating costs associated with them and to achieve an adequate return on invested capital by driving higher base prices and surcharges.
In closing the key messages I would like to reiterate is that our business continues to do very well, we have deleveraged our balance sheet, we're investing in key growth and sustainability initiatives launching new differentiated products Derisked, our EPA efforts going forward and are on track to generate substantial.
Free cash flow in 2023.
We look forward to the ongoing support of our investors as we continue to profitably and responsibly grow Orion in the coming years.
With that operator, please open the line for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star 1 on your telephone keypad.
For confirmation tone will indicate your line is in the question queue. You May Press Star 2 if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary pick up your handset before pressing the star keys, 1 moment. Please while we poll for your questions.
Okay.
Our first question is coming from the line of Laurence Alexander with Jefferies. Please proceed with your questions.
Good morning, it's Dan Rizzo on for Laurence how are you good.
Good morning, Dan Good morning, So, let's see if on a settlement.
The influx of cash on the balance sheet in better shape. I mean is the first use of this cash can be to kind of look at more brownfield or just expansions of organic growth for specialty black or are there other alternatives you're looking at.
Also when we look at this is we have our internal discussions as we talk to investors as we talk amongst the board of directors.
We hear a number of voices and considerations, 1 of which would be around returning cash to shareholders in the form of dividends or buybacks.
But also growth.
Specific to growth I mean, I think the.
Most interesting opportunities for us are in some of the exciting specialty areas and sustainability.
Those can be greenfield, especially for what we're doing right now in a bar bay or could be something like what we've done at Ravenna I'd say those those options are open to us Theres, obviously commercial sensitivity on all of this so we don't really have an announcement until we have 1 but I would just stress that we.
We see this as really a classical capital allocation and we're looking to strike the appropriate balance between those interest as I mentioned earlier.
Thank you that's helpful and then what's the sustainability and it looks like you have a few pretty promising projects. I was just wondering is there 1 in particular that should be kind of first the commercialization and if you've kind of quantified what the Tam in score for these products.
Well so we're in commercialization effectively with the circular carbon black so we've actually had the print text nature for a number of years, the echerer axes out sampling, but as I said earlier I don't really expect that to be on.
A meaningful contributor until 2022 for sure there is strong demand for sustainable carbon Black's no question about it. It's also true for sure they are going to cost more than what the other materials are and our look is too.
Maintain a return on capital.
For these areas on a gross profit per ton in let's say the range that we're in but I wouldn't expect that for example to really be contributing until more like 2023.
Thank you very much.
Yes.
Thank you. Our next question is come from the line of Josh Spector with UBS. Please proceed with your questions.
Yeah, Hey, guys. Thanks for taking my question congrats on a solid quarter.
Thank you, Jeff I guess relative.
Relative to our estimates you know margins came in stronger, but a little bit surprised with some of the sequential volume progression, particularly in rubber with things kind of flattish sequentially, where you had some constraints in the prior quarter. So I'm curious if you could give some color on what held back some sequential volume growth be it supply constraints continuing.
In or demand and any context by region would be helpful as well.
So in general I'd say, we have strong demand and most of our rubber carbon black plants are running hard we are in a situation, where we're building inventory in certain situations. For example, the turnaround that we have going on right now to upgrade the air emissions in Ivanhoe and so that.
On the constraint for us I'd say the market right now in many places there are robust spot opportunities and we are really curtailing our participation in that we're focused on taking care of our our contract customers. The people who are more for lets say a partnership relationship with them because that's really where we've made the commit.
But that's a that's a constraint to the volume that we can take as well.
Thank you. Our next question is come from the line of Kevin Hocevar with Northcoast Research. Please proceed with your questions.
Hey, good morning, everybody.
Hey, good morning, guys.
Curious on the rubber side.
The EBITDA per ton was $2.17, which I believe was a quarterly record or at least close to it. So just curious how you're able to.
To do that because because obviously volumes were at record type levels.
You know I wouldn't imagine pricing changed much quarter over quarter, just kind of how the contracts work, but I guess, the 1 thing as oil prices did move up quite a bit sequentially. So I don't know if that was a big variable in there, but kind of curious your take on what drove the sequential improvement in our.
Kind of profit per ton there in the rubber side and how sustainable you think that it is obviously it sounds like there might be some factors here.
Some.
Maintenance and stuff that might make it go backwards.
That sounds almost kind of temporary so maybe I'm curious your take on what drove that higher and how sustainable that is.
Well, Kevin you know this business well, so yes oil prices going up that was certainly a factor I would say mix a little bit favorable for us and as well, but also some onetime effects. For example, when the oil price goes up I would expect that to moderate a little bit in the second half.
And Kevin I would add that we build inventory and that was beneficial during the quarter. When you look at the GP per ton.
You can see us average in that $2.70 to 80 range for the year and so this was a strong quarter it's will.
Will moderate in the second half and on average will probably be a net $2.70 to 80, mark for GP per ton.
Okay got you and then.
Correct.
I think somebody had mentioned that the 2 new facilities that youre ramping should add.
<unk> $30 million to $40 million of EBITDA once that's at a steady state.
And I think there regarding 1 is next year.
The China, 1 might be the year after in terms of when those are ramping but but I'm curious if your cash.
Did I hear that right and then how do you expect that to ramp in terms of the you know.
Wow.
How does that ramp to $30 million to $40 million over the next couple of years in terms of contributions from those new facilities.
Right. So first of all your timing is right and the let's say the overall magnitude is in the right order as well I would say.
In terms of how it would ramp I would just draw your attention to the relative size of the 2 projects. If we're in an environment like what we have today, obviously loading is going to be favorable for 2022 and I fully expect that in terms of how we could do that but keep in mind Ravenna is the smaller of the 2 projects.
Okay Gotcha.
Okay, I think that day.
Maybe just 1 other 1 on on slide 9 you showed on <unk>.
$13.8 million on other benefits to contribution margin, which was.
Obviously, a fairly large number so curious what that is exactly.
That's a combination of cogan the oil price movement that we noted earlier as well as the inventory build at the same things you are referencing on the rubber side. Most of those are in that bucket. Okay. Okay got it alright. Thank you very much.
Youre welcome.
Thank you our next questions come from the line of Josh Spector with UBS. Please proceed with your questions.
Yeah, Hi, again, thanks for taking the follow up apologize went on to do after the last question on.
I was just curious on the specialty side, where would you say you are on from a price cost perspective, and your visibility over the next couple of quarters I know, there's some probably some moving parts with auto OEM demand, perhaps being constrained from a mix perspective, but I'm curious if you think you're pretty much caught up on the pricing side.
Against what I expect you to see is rising raws into the second half.
Yes, so we work very very hard on specialty pricing and we move those prices significantly. However, I would say that was really catching up with what the cost inflation was versus margin expansion for us.
We've largely got that in place at this time.
Say a thing to keep in mind as right now we are constrained on a lot of our volumes just in terms of what demand is and we have these outages in the second half.
So that's a challenge for us in the second half but.
All in all I'd say the underlying demand in the prospects for that business are really tremendous.
Okay. Thanks, and just a follow up from the prior question about the rubber black profitability. So understand the sequential but I guess, if we look at the gross margin per ton for for this quarter and try to bridge to next year, we're expecting to have volume growth on top of this year and potential for pricing with some of those contracts.
Jack settlements, perhaps later this year.
Should we expect that being a level that you can grow off of or is there anything temporary from you mentioned inventory I think in your prepared remarks here slides that we should remove from that for a totally look year over year in rubber specifically, yes.
So let's be clear, we absolutely positively expect to grow off that number.
The conditions are excellent for 2022 pricing.
On the economy is strong I think its just going to Covid will continue to make progress against it we still see onshoring of materials. For example, our tire manufacturing in North America shipping in terms of importing materials. That's a nightmare today, even the chip shortage, we say see today is going to be an upside for 2020.
2 so I think the raw pricing market is going to be tremendous we just need to keep in mind.
But theres going to be a lot of cost drivers as well. So I mean pricing is going to move but it's got to move because we're all going to have higher costs associated with operating on our air emissions controls as well as just simply getting a return on capital for them, but 100%, we expect to build off of where we are right now.
Okay. Thank you.
That's on an oil price neutral basis.
Yeah.
Thank you. Our next question is coming from the line of John So on 1 tank with C. J S. C. J S. Securities. Please proceed with your questions.
Good morning. This is Brendan Pops on on for John.
Wanted to ask real quick on or are you any closer to our longer term return on capital based pricing model for our C. D and then as the supply and demand dynamic changing heading into next year.
Yeah. Good question first of all are welcome Brendan nice to have you on with us today.
We continue to be in discussions with customers, if you're speaking specifically to the longer term discussions we have those underway with actually a couple right now I think the underlying industrial logic remains very strong for that but we don't we don't have until we have done.
Overall, though.
I think the structural movement of this industry is very positive in that direction and in let's say just higher returns on capital because as I said before there is there is much more localization. So think about Europe think about North America.
And there just isn't a lot of local investment in carbon black there and pricing has got to get to the point, where it's going to support incremental investment and so I think that's just a fundamental fact on the ground. That's a positive for this industry. A second thing I'd say is there was once a time, where I think people felt they could buy.
On price and not worry about reliability, so much but you see now that's really not the case right and when it gets tight.
Really goes to those who have made commitments to their suppliers. Those are the people who get product spot market I think it's very difficult right now and I I really think that's a positive.
Evolution for this industry as well.
Okay, great. Thank you I appreciate it.
Thank you. Our next question is come from the line of Michael <unk> with Barclays. Please proceed with your questions.
Great. Thanks, Good morning, guys.
Good morning, Mike.
Just on the demand side, 1 I was I was hoping you could peel back the onion, a little bit I know you cited broad based demand recovery from the pandemic, but just what end markets, you're seeing trend better or worse versus your expectations, maybe 3 months ago and second on the EV lithium ion from if you could just remind us how orion is approaching that market.
And the long term potential for growth there okay.
Okay excellent.
We saw broad based improvement across nearly all markets in that time frame.
Specific changes in unique niches here and there so I think some people, let's say in the <unk> space.
When automotive Oems first started slowing down we are eager to build inventory to be ready for the rebound I think some of those people are now sort of slowed down on lets say theyre rebuild for that but in many other areas.
We're maxed out and people are quite eager for product.
Strong and I stayed strong really across all 3 geographies.
Geographies in terms of that.
Now if we are going to go to conduct is right now our conductors business I'd say, there's about $15 million to $20 million of EBITDA per year on a small portion of that being lithium ion batteries today, but if we were gonna look out let's say 5 years, you could see that roughly double for us and of course at that point lithium ion batteries.
It would be a much larger part of it today in that space with the way we plays with acetylene Black there's other materials. There's other conductive materials that go into lithium ion batteries into the electrodes, specifically things like carbon nanotubes. When you think about it those materials are really 1 dimensional materials.
And like wrapping 2 well we put in a 3 dimensional additive and that's got a certain synergistic effect with these other materials and.
The space, where we play now and 1 is obviously very much tied to working with other people who were doing some of those other materials and developing the battery technology itself.
Got it that's helpful. And then maybe for my second question just on the EPA project.
Gratz first on reaching the of on X settlement, but can you just maybe flesh out why cost estimates are moving higher again and Relatedly now with the turnkey EPC contract does that essentially lock in this new figure or is there still risks around further cost moving any color there would be helpful. Sure. So the majority of the cost.
We've had has been effectively getting right getting the final things addressed at the Ivanhoe site. That's been the majority of the cost movement. We saw we did see some movement going from <unk> to <unk> at the other sites if the higher let's say just general cost.
<unk> today than when we had done FBL too by moving those to EPC I think we have very significantly derisk them, but you know I would never say, it's zero risk and particularly for Bell for you. The 1 that's further out there is some exposure on that but that's how we see it so going forward I would expect to spend about 80 million.
This year.
On air emission controls in the U S. Roughly the same amount next year, but then in 2023, only about $20 million and part of what we're doing right now is creating the ability to accelerate particularly the last project moving forward. So that's going to mean in 2023, we're going to have tremendously.
Better free cash flow as we get that work behind us.
Great. Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star 1 on your telephone keypad.
Our next questions come from the line of Chris Capps with loop capital markets. Please proceed with your questions.
Yeah, Hi, good morning, Corning, you mentioned chip shortage and implying as that gets resolved there should be.
Some upsides.
Year end market demand trends and indeed, as we've learned new you have.
Although I guess rubber black is.
Leverage to replacement tires, you have considerable exposure to the automotive end market as well either direct or indirectly so.
From what I've seen it looks like IHS is pointing to possibly 11% higher passenger car auto builds next year globally.
Just wondering if.
If that were to materialize would you see that outsized demand in that end market and what would the implications be for your for your product mix.
Well so.
For the first of all Chris Good to hear from you and thanks for the question.
We would see that kind of movement I mean, thats a significant change in the market and that would be an upside for us that would in general will be a positive for us in terms of mix. The 1 challenge in that though is that a lot of our premium lines are under allocation right. Now that's why we shared a little while ago we were.
Doing a <unk>.
On expansion of our capability around surface treated gas blacks, so materials like that that go into some of let's say automotive coatings things like that.
Our working to be able to take more full advantage of that but depending upon when the wave comes in where we are on capacity.
That would be just the potential limitation to what we can get out of that and Chris as you think about modeling 2022, I would point you to for rubber incremental margins in the low thirties and for specialty in the mid Forty's and I think that as a rule of thumb would be.
A good proxy to use as you start thinking about next year.
Okay.
Appreciate that and then if I could just follow up on the comments you had on capital allocation that you've had some pretty deliberate messaging around the possibility of reestablishing a dividend.
And even if it were at a more modest and sustainable level, but just given the restored healthier balance sheet bolstered by the on X settlement.
And given especially considering the capex that will be.
Curtailed starting in 2023.
Should investors be thinking about the reestablishment of the dividend.
It was pretty much a given its just not its more a matter of when not if or for.
And we jumped on and gotten a little bit there.
So I personally feel strongly that it's a good discipline for our company to have a structured way that you're returning cash to shareholders.
In structured can meet it really means in a dividend I think you can supplement that as well and potentially in a buyback program. So I feel strongly that we will get there that's ultimately a full board decision.
For us.
Several attractive opportunities here right. There is growth there is very strong demand there as a sighting opportunities in specialty and conductivity than some of our core already markets that were strong and in terms of specialty as well as sustainability and then there is the dividend and the buybacks and I think theres going to be the opportunity to satisfy all of those needs.
And it's just a matter of striking the right balance and what the right timing is.
But I expect to be able to do all of that.
Fair enough. Thank you and then just 1 final 1 if you look at sort of the bridges you have by segment on pages 13, and 15 on your presentation, well I'm, just curious where the the benefit from that.
The co Gen. The higher oil price it shows up does that show up in <unk>.
And mixer or overhead absorption or I mean, I'm, assuming on a year over year basis, you are seeing some benefits from that thanks.
And that would be in volume on the rubber side of the business on the chart that shows contribution margin.
You would see it in that contribution margin there, but you can see it in volume on that Scott.
Thank you.
Thank you there are no further questions at this time I would like to turn the call back over to Mr. Corning painter for any closing comments.
Thank you all for your time and attention for joining US today. We appreciate your interest in Orion engineered carbons and working hard to create a profitable and sustainable future for all of us. Thank you.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Have a great day.