Q2 2021 Intertape Polymer Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to Inter polymer group Q2, 2021 conference call.
During the call all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
And in order to maximize the efficiency of this event. The question period will be open to financial professionals on the.
And at that time does what the question should press star followed by the number one on the telephone keypad and.
And if at any time during the conference you need to reach and operator, Please press star followed by zero.
Joining me from the company and I have entertain polymer group Chief Executive Officer of Greg Young and Chief Financial Officer, Jeff Crystal.
I'd like to caution all participants that and response to your questions and our prepared remarks today, we will be making forward looking statements, which reflect management's beliefs and assumptions regarding future events based on information available today.
You are cautioned to not place undue reliance on these forward looking statements and they are not a guarantee of future performance and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expected.
Please see slide two titled Safe Harbor statement for a further discussion.
During this call. We may also be referring to certain non-GAAP financial measures as defined under the SEC rules.
The reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available on our website at www Dot I take the dotcom.
Please also note that all dollar amounts are in the U S dollars unless otherwise noted.
I'd like to remind everyone that this conference is being recorded today August 11, 2021 at 10 o'clock a M eastern time.
And now I'll turn the call over to Greg Yao Mr. Yao. Please go ahead.
Thank you and good morning, everyone and welcome to IPG <unk> 2021 second quarter Conference call. Joining me is Jeff Crystal our CFO.
During the call we will make reference to our earnings presentation that you can download from the investors Investor Relations section of our website.
It was an outstanding quarter with strong demand across all our major product categories revenue was 337 million $377 million up 41% from the depths of the pandemic last year.
Adjusted EBITDA was $65.7 million up 60%.
Based on our confidence and the business and its strong and sustainable cash flow profile of this morning, we announced and increase toward dividend of 8% on an annualized basis, bringing it to the 17 cents per share or <unk> 68 on an annualized basis per common share.
The demand trend and the third quarter remained strong at this stage of August we typically have approximately three to five weeks of forward visibility and our.
For or current order book is as strong as it's ever been.
Today, we are focused on three key elements to drive near term performance number one and protecting the dollar contribution spread between selling price and cost of raw materials, and freight and and inflationary environment number two securing sufficient supply to ensure we can meet customer demand across our product.
<unk> in this market, we are not just having the pay more for raw materials, but we need to ensure we can source them number three efficiently operating our manufacturing assets to ensure optimal capacity is maintained which.
This includes the health and safety of our team and assets.
We are executing across each of these three parameters the team across sales and customer support the supply chain management and operations has performed exceptionally well to deliver these results day.
Man was strong during the quarter across all of our key product verticals.
We also saw growth all across all of our key product categories. The growth was led by films woven carton sealing tapes water activated tape to.
Dispensing machines protective packaging and industrial tapes.
And see the influence of some of the hardest hit categories and Q2 of 2020, which were up significantly on a year over year basis in Q2.2021.
However, even our e-commerce vertical which was up approximately 40% and fiscal 2020, continuing to show double digit growth and Q2. Despite a much tougher comparison to the strength we saw through the initial lockdowns and Q2 of 2020.
We continue the experienced strong demand and in the third quarter of cost across key categories, where we have made investments and capex and acquisitions like water activated tape protective packaging woven and carton sealing tape.
We expect e-commerce to remain a growth driver for us.
We sell into a broad range of players and the e-commerce market, while growth through the pandemic reached 40% or more for the largest E retailers that lever leaped level is obviously not sustainable however, many small and large retailers of invested hard dollars and their E Commerce channel over the course of the past 18 months.
And they expect a return on those investments. So we don't expect them to turn off the channel. In addition, e-commerce retailers of accelerated their penetration into a broader range of demographic groups, which should act as a tailwind to the ongoing share gains of the e-commerce versus brick and mortar retail for the years ahead.
We continue to expect growth and our e-commerce vertical well above GDP in the low to mid teens based on third party forecasts that the.
Cover of the coming years ahead.
We have strengthened our product bundle with the acquisition of new wave of pack and manufacturer the designs and develops a range of machines to provide void fill and cushioning protection packaging solutions. The wave of pack was already of strategic supplier. So this acquisition extends our footprint up the value chain and capturing the value of its expense.
The <unk> machine and the paper void fill of conversion as well as securing supply for these important inputs. We believe the new wave of Pac acquisition positions us to sell to a broad range of e-commerce customers and strengthens the sustainability profile of our product bundle.
While its contribution of the current fiscal year will be relatively modest we believe that our scale and customer relationships set us up to deliver accretive growth with this new addition to our product candidates we.
We believe sustainability will be of long term driver and the packaging and protective market. We are investing in both new products that offer of sustainability benefits for customers like curbside recyclable products as well of certifying our existing products with the cradle to cradle certification during.
During the second quarter, we published our annual sustainability report and the report expands on our prior work with.
And highlights our progress and includes the increase reporting as we embrace sustainability across the organization as one of our core strategic pillars and long term growth opportunities.
To meet customer demand, we are expanding production capacity across multiple products. These are high value strategic products, including a new water activated tape line and additional capacity for films woven and protective categories.
As a result, as an update we've invested approximately 25 million to date of the $100 million and growth and maintenance Capex budgeted for fiscal 2021 we fully intend to commit the entire 70 million budgeted for capacity expansion, but there is a possibility that some of these expenditures may slip into the early 2022.
This should not affect the timing of the realization of the $100 million and the incremental revenue on a run rate basis that we expect and placed by the end of 2022 and with additional revenue upside beyond 2022.
Moving on to the supply landscape prices remain volatile and sourcing supply remains challenging.
And the time of the Q1 call of commented that we thought raw material prices had peaked and the third party forecast and form that outlook.
Since may we've continued to see upward pressure on raw materials third party forecast now expect the current elevated pricing to persist persist through the end of calendar 2021.
And to manage these pressures we've implemented more than 30 individual price increases across the various product lines since the beginning of 2021.
And the normal environment. These price increases would take approximately 60 days to hit our income statement consisting of a 30 day notification period for price increase and then another 30 days to realize the revenue.
Given the high demand environment, and the rapid price changing and raw materials. The market is accelerating this process and certain cases.
Such that we are seeing shorter and notification periods for price increases and we're also seeing the market would be more aggressive and limiting the amount of pre buying during the notice period to normal levels to prevent stockpiling lower cost products.
Given the high demand levels and the production capacity restraints across the competitive landscape the dynamics of the market have been and continue to be disciplined.
As a result, and as past periods of volatile raw material prices, we effectively managed to cover the dollar contribution spread between the selling prices and the combined raw material and freight cost increases.
As we expected and this inflationary period, the simple math of this pricing strategy dictates as the raw material prices rise and we protect the dollar contribution our margins narrow slightly despite this impact we maintained our adjusted EBITDA margin at 17, 4% and Q2, which is the 200.
10 basis point improvement from the same period last year.
For the remainder of fiscal 2021 we expect the math of higher pricing and protecting the dollar contribution to impact margins by approximately 150 basis points compared to what they would've been had prices remained steady with what we saw at the end of 2020 the.
This impact has already been included in our updated guidance, which I will dress and a moment.
Paying for inputs is one thing, but securing sufficient supply has also been of challenge our supply chain chain team has been managing this very effectively the kept us and product and we built raw material inventory during Q2 to both ensure we have sufficient supply and mitigate higher pricing. This strategy has the impact.
<unk> our free cash flows as we are now using more working capital however, when pricing and supplier constraints ease. We expect these working capital levels to unwind and generate higher free cash flows and future periods.
And we view this as the timing issue and a responsible strategy to ensure we meet the demand and the near term. It is not a permanent level of working capital required to run the business of permanent new level of based on the performance of the business to date, our order book and the current outlook for demand as well as the persistence of <unk>.
Higher selling and raw material prices, we are updating our outlook for the remainder of 2021.
We expect revenue for the full year of 2021 of between one for two 5 billion to $1.5 billion, which represents 21% growth over 2020 at the midpoint of the range.
And adjusted EBITDA for the full year 2021, we expect between $245 million and $255 million, which represents growth of more than 18% over fiscal 2020 at the midpoint of the range as we continue to protect the dollar spread.
We expect free cash flows of between 70 to 80 million and fiscal 2021 which is the reduction from what we communicated and may due to the impact that increased demand supply chain constraints and higher selling price prices and raw material prices have on working capital. However, as I mentioned, we expect two and.
While working capital as pricing and supply constraints ease and capture that free cash flow and future periods.
The business isn't a great position to perform and the second half of 2020, one and beyond we are effectively managing the raw material challenges, we've covered on price and maintain supply and the face of ongoing strong demand, we are allocating capital and key product categories, where we're experiencing our highest growth, we're bringing new production capacity.
And the online and both the second half of 2021 and two of greater extent, and 2022, which will fuel our continued organic growth and the future.
The capabilities of our team to manage these dynamics is extremely impressive.
And as the individual responsible for tracking their progress I could not be more proud of how they performed since March of 2020.
With that I'll turn it over to Jeff to review the financials, Jeff. Thank you Gregg on page nine of the presentation. We presented an analysis of our revenue for the second quarter of 2021.
Revenue was $376.7 million and increase of 41% compared to the same period and 2020.
Volume mix accounted for 27% of the increase compared to last year as Greg mentioned every major product category was up and the quarter with the primary drivers coming from films woven carton sealing tape water activated tape dispensing machines and protect the packaging.
Price positively impacted revenue by 12% and the quarter with the remainder of coming from foreign exchange impact the price impact was due to the multitude of price increases implemented to ensure we maintained our dollars threat.
Turning to page 10, gross margin was 23, 7% and the second quarter and improvement of approximately 240 basis points compared to the same period and 2020.
The primary drivers of the margin improvement were favorable product mix driven by continued growth of our e-commerce related products and the recovery of many other margin accretive industrial products compared to last year and effective management of the spread between selling prices and raw material and freight costs.
Adjusted EBITDA improved 60% to $65.7 million from $41 million and the same period last year. The improvement was primarily driven by the margin drivers I mentioned earlier product mix and spread management.
Cash flow from operating activities were $22.2 million and the second quarter compared to $40.5 million and the same period and 2020. The change is primarily due to working capital changes, including higher inventory at higher prices to ensure supply and this high demand and supply constrained environment, and an increase and federal income tax.
The paid partially offset by the increase in gross profit.
This compares to the COVID-19 related declines in demand and conservative working capital management strategies implemented in 2020, and our response to that uncertainty.
Free cash flows were $6.4 million and the quarter of compared to $35.3 million and the same period and 2020. The change was primarily due to the working capital changes I, just mentioned as well as higher capital expenditures.
We finished the first quarter with $487.1 million and cash and loan availability. Our total leverage ratio at the end of the second quarter, which includes the unsecured debt was two two times.
In June we issued $400 million of new senior unsecured notes that bear interest at $4.37, and 5% and used the proceeds to redeem the $250 million to 2018 senior unsecured notes, which carried a 7% interest cost.
We also entered into a new $600 million credit facility of that replaces the prior one and doing so we have extended the term to June 2026, and gained greater flexibility with a more favorable covenant structure and slightly better pricing and a $300 million accordion feature if needed.
The investments, we have made and capex and acquisitions of structurally change the business, resulting in improved margins and a strong cash flow profile.
We believe that both of these attributes are sustainable moving forward now I'll turn it back over to Greg for his closing thoughts Greg. Thanks, Jeff. It was an outstanding quarter. We continued to experience strong demand for the second quarter and now into the third quarter. Our order book remains strong as it's ever been we're seeing growth across all.
All major product categories, we manage the price increases and supplier restraints on our raw materials front and effectively cover the spread on a dollar contribution basis.
We are executing on our capex projects to expand production capacity in key categories.
We strengthened our product bundle with the acquisition of new able to pack, which supports our e-commerce business and IPG sustainability profile.
And we improved our capital structure with the refinancing of the credit facility, New note issuance and early redemption of the existing notes the structure provides us with greater flexibility and the dry powder to execute on growth or growth strategy.
The diversity of both of our end markets and our product offering as well as the essential nature of our products have been core to the underlying performance of the business. The business is structurally different today than it was five years ago. We were focused on executing our strategy to deliver for all of our stakeholders building global leader and packaging and protective solutions.
With that I'll turn the call back to the operator to open up for question and answer period. Thank you.
Ladies and gentlemen, if you'd like to ask a question. Please press star and the number one on your telephone keypad.
For just the amendment to compile the roster.
Okay.
Your first question comes from the line of Michael <unk> with Scotiabank.
Hey, good morning, guys good morning, Michael.
Another good morning, another great quarter.
My first question is on the implied second half expectations and if I use.
The mid cycle, sorry of the midpoint of your EBITDA guidance.
You're essentially implying the second half EBITDA will be in line with that of the first half and that's not typically the seasonality and so could you explain maybe the dynamics that you're guiding to and.
And whether or not we should be interpreting the guide is there you know of beating some element of conservatism still baked in.
Yeah. So I think those points of all valid and I think for US. It's certainly what we're seeing today and the business has strength and all that Greg mentioned in the prepared remarks, you know the the demand profile that we're seeing so far is strong we're covering our spread and we feel good about the second half of the same.
And time of course, as we all know there's uncertainties around COVID-19 impacts of supply.
Supply chain constraints, there's just the multitude of factors and a lot of moving parts going on.
And so what I would tell you is that we are certainly cushioning ourselves for some of those potential impacts so could it turn out better yes, it could turn out better and certainly I think if things work out the way they've been working out well, we could end up at the high end of our range.
Got you that's helpful. Thanks.
And then I guess on the margin profile again second half of the implication there again using your guidance is that it would be lower than Q2, and again I knowledge. The fact that you've indicated.
Indicated there is some conservatism, but just wanted to clarify that sort of the peak pressure in terms of.
Price cost spread and margin.
Is that is that in Q2 or does that peak in Q3, and just in terms of pressure.
So where we sit right now Michael we believe that's going to peak in Q3.
And with where we are with raws.
And certainly as I've mentioned and my remarks.
And you know from from our May perspective, we expected at that point to be at peak and that ended up not to be factual. So we continue to see a run up so we're continuing to experience I would say peak from a buy perspective is kind of July August and many of the categories. So that will flow through our P&L in the third quarter.
Perfect.
And then maybe one last one on capital allocation that you've raised your dividend.
And that you've re initiated the and CIB.
Your share of straight at seven five times.
And on my numbers for next year, obviously, but it's presumably cheaper than a lot of deals that you're looking at so just wondering you know what the commitment level as to the and CIB and and maybe how youre thinking about surfacing of value.
So as we sit here today, you know certainly the the highest return for the company continues to be investing organically in the and growth capex and areas like that certainly on the <unk>.
It's a discussion that we continue to have at the board level and our position really hasnt changed as it relates to being opportunistic there we've been quiet as you know for the past couple of years and that area and certainly on a go forward basis, we'll have to see where the stock price settles out and and reevaluate on a go forward basis, but I don't really have a change of we don't have a change of our position.
And we sit here today.
Relative to where we were last quarter.
Perfect. Thanks, Greg.
And welcome.
Your next question comes from the line of Stephen Macleod with BMO capital.
Oh, great. Thank you and good morning, guys. Good morning.
Good morning, I just had a question about just sort of the the growth trends you saw on a category basis.
Understanding that a lot of the dynamics has to do with how.
How different categories performed last year, but I just noticed that protective packaging was sort of low on the list and I'm just curious.
And that related to potentially some some shift youre seeing and demand.
Or is it really just related to kind of year over year growth gyrations.
I would I would and Jeff can add on here, so and that protected the.
Products category Theres kind of two different main categories of <unk>.
Protective packaging there there's the system based protective packaging, which is R.
Pillow machines aerospace things of that nature, and then there is the more traditional.
Bubble foam and things of that nature, and if you split that category of part where the lower the lower growth ended up in that category is on the more legacy products.
For the bubble and the full myriad and on the system side, we saw.
Good growth because thats tied to some higher growth areas and thats something that doesn't surprise us as we sit here today like that didnt come off as.
And as something that was the big Miss for us from that perspective, because the the key part of that business for US is in that systems approach of.
And the machine and the consumable and tying back into that and the new wave of Pac acquisition, that's the future of the business for the future of the business is not the legacy.
Bubble and full Miriam.
Okay. That's helpful and that makes total sense.
Turning to and the label pack, which which is an interesting acquisition.
No there's no wafer pack and give you a broader customer range or is it really about broadening the product opportunities.
So I think it's a little of both so certainly it gives us broader product offerings. When we think of our position in North America, and our ability to take that product into our existing customers of whether that's distribution or of end users. So certainly that's a key part and certainly here ties us in very nicely with sustained.
Ability and then when we look at we look at opportunities within Europe.
And they have a position in Europe, it's not it's not.
Material, but certainly there is opportunity there from a customer perspective to broaden our customer penetration with that product and other products within the protective space and packaging space.
And so it does open up some customers within Europe, there's a little bit in the Asia as well, but I would say that Europe would be for.
First and foremost and as we all know when you think of.
Sustainability and <unk>.
Where we are country by country or continent by continent, certainly Europe is further ahead.
And then.
The U S specifically around the needs for sustainable packaging and <unk>.
Certainly, making a significant move to paper as opposed to plastic and that area.
Right. Okay. Okay. That's that's great and then maybe just finally following up on the capital allocation question.
I'm just curious you did you re sort of.
Refinance some of the high cost debt.
The increase the dividend you're active on the buyback.
Can you just talk a little bit about.
If you were the.
Two tier of your priorities for excess free cash flow could you just run through sort of top to bottom of of what your priorities look like.
So you know my comments around that are very similar to what they were and May I think when you look at the capital allocation and the Capex programs of this year.
And with North of 20% IRR I still think if there are opportunities like that that's the best return for shareholders.
On a go forward basis.
And then and then working my way down the list at this point and I still think theres opportunity to deploy capital around the M&A.
Such as opportunities like new wave of pack that gives us a differentiated product with a accretive margin profile and a lot of runway.
As it relates to opportunities on the top line.
And then working our way down to dividends certainly supporting the dividend with an 8% increase this year and.
And share buybacks and as I said earlier to the earlier question the position on the share buybacks continues to be evaluated and.
And we will continue to be evaluated, but we really don't have a change and position on that as we sit here today.
Okay. That's great. Thanks, guys.
Thank you.
Your next question comes from the line of and Neil Lindsay <unk> with <unk> capital.
Hey, good morning, guys, yes, definitely congratulations on the quarter. Thanks.
Thanks.
Just touching on the newest Nuevo pack again, you talked about the clients and the potential there is there anything about the footprint or ability to.
Would you be co locating any other types of operations there to be able to take advantage of.
The.
Of that acquisition.
Okay.
Specifically in Europe.
Well I was thinking Europe, and China, but sure.
And so.
And I don't see any complications and that as it relates to the sourcing customers or customer conflict distribution conflict.
Is that I'm thinking about it.
And I am thinking about opportunities is there any way to really expand on those operations or locations that you're that you are getting.
Yes.
Okay.
I think right now there's no plan for that and I think.
Certainly when we think about the Chinese operation I mean, it's not when you talk about machine assembly facilities that are not typically that large you know we do have capacity to grow there.
And then potentially and Europe, certainly if there's if there's opportunities not so much on the machine side, but maybe more on the paper converting or the things like that more of the finishing side and maybe theres some opportunity to expand a little more locally there but.
But that's the extent of it there is no major is no major plan there.
Okay, and just wanted to check and then all of them.
Stay and ability I mean, we'd been talking about this for years and I remember the last two Investor Day plant tour, you actually had some of your clients coming in to look at what you were doing as far as improving their packaging as youre continuing to develop that or you find your either ahead of or behind your customers or is this the push pull.
The aspect.
I would say I would say our customers you know when I look back on it and I think about where customers were five years ago, and I think thats, probably the appropriate timeframe.
Their desire for.
Sustainable packaging and their mind whatever their definition of sustainable packaging is.
And their willingness to pay a premium for it because in some cases of the cost of premium is definitely much different today than it was five years ago and five years ago. They were not willing to pay for that attribute if you will and so certainly from a customer behavior perspective that has changed.
And over the past of as I said five years.
And certainly you know our strategy around that is to take that of the opportunity for us.
And that's where a lot of our work is from a product development perspective, and frankly and you saw it with new wave of pack of acquisition strategy as well and I think it's really a bit of both you know when you talk about the push pull and I think we've tried really hard to become a solutions provider to our customers and working really closely for when we think of especially our larger and use.
And distribution customers, we work very closely with them to understand the problems and they are facing and trends and theyre seeing and try to work more in sync with them.
Understand kind of what the next product need is over the next solution need is so I'd say, it's kind of a bit of both and not necessarily one of the other.
Okay would you say you're more trying to sell your new solutions or are you having more demand from the clients still.
It varies by product line and.
And of tough a tough too tough to articulate further than that.
Okay.
And then just one more from the Big picture you know years ago, you talked about you were you're doing a lot of bundling on your products. Obviously, you've expanded your product line and since then and you really wanted to on the packing table.
Do you think you've achieved everything you.
You could there or is there more to do with the distributors the passion table of more products and services are so low hanging fruit already kind of.
Taken care of.
No I think cow, specifically when I look at the packing table or think of the like the pack out station if you will.
I think that's going to continue to evolve and I think products or group continue to evolve and.
And the need for equipment and automation and the line solutions.
Is going to continue to evolve so I think theres a lot more work to be done there. There is a lot more innovation to be had there and we are positioning the company the to be able to benefit from that change as we move forward in the automation and sustainable packaging and things of that nature, because I think again I think if you fast.
For the five years from now.
And several cases.
Gonna be relying much more on automation and the line solutions and much more on sustainable packaging from the end of life solutions perspective as well.
Okay, Great best of luck. Thanks. Thank.
Thank you.
Our next question comes from the line of Walter <unk> with RBC capital markets.
Alright.
Thanks, and good morning, everyone.
Good morning.
And the discretionary and as.
And then from the sequential performance of the equal and the standard bonds during Q2.
I was wondering if you could give us some more color and how the Q over Q right Sandy.
Sandy during the quarter and if you've seen anything.
And the retail reopening on demand and the deep end markets.
Yeah, So I mean.
Certainly when we think of the growth quarter over quarter, and I guess the way I'd look at it.
The Q1 was somewhat of an easier comp versus Q2, we continue to see the good double digit growth and Q2.
And it continued to see strength quarter over quarter.
And in terms of the reopening I mean.
And as we've as we've mentioned in the past certainly there is more volume going into brick and mortar as as things reopen and we are seeing some evidence of that some evidence of tapering of growth, but growth is still strong and I guess, that's the point is we're still seeing good growth and the E Commerce channel E Commerce products.
But also seeing of course, good growth and the rest of our business as you know 70% of our business is non ecommerce.
And certainly the the reopening is helping on that and so you know.
And so we are seeing some tempering and the e-commerce side, certainly the lap of the tougher comps versus last year that that will be you won't see that St and 40% growth, let's say we saw in 2020 over 2019, but we expect to see good growth and certainly the other one is expect to see some outsized growth and the near term.
Got it.
And then the next question just with Mickey.
And the longer term growth potential.
And the kind of explain us finish the year.
And you can sustain current for Dan Greenfield the sneaky.
And maybe around the capex might be required.
And tough tough to say I mean, and I think obviously of lots going to depend on.
And sort of aware of things.
Gold post COVID-19 or is there going to be of post COVID-19 and and what are the trend is going to look like there certainly we expect that the longer term trends to continue with growth and e-commerce outside outsized growth and e-commerce over GDP.
So certainly that will be what accelerates our growth. We're also continuing to see good growth and our woven side.
With the the low cost profile, we've had we were expanding there as well and we expect that to go add some growth and so we'll see how that goes as well, but it's tough to say as you move further out what we've always said is that we're going to be a GDP plus grower from a longer term perspective, and so we would still stick by that and say that.
We certainly expect still some plus from the e-commerce potentially from the woven as well and then in the medium term.
And then some.
Seeing that long term debt GDP plus growth and certainly from the perspective of what we're investing this year.
As I said, and we said and the Q1 call as well as we expect additional run rate revenue of plus 100 million and Q4 of next year, and then 2023 of that even increasing more yeah.
Okay.
And that's it for me.
Alright, thank you.
Your next question comes from the line of Zachary <unk> with National Bank Finance.
Good morning, everyone and congrats on a great quarter. Thanks, Matt.
So when raw material and freight inflation and starts to taper off and where would you expect your gross margins to settle on a percentage basis.
So.
I'm going to answer that without giving you numbers. So when we see when we see things start tempering off from a selling price, Illinois down we're going to protect that dollar spread right. So youll see youll see a increase in margin you should see an increase in gross margin increase and EBITDA margin hard.
Hard to give you a figure of what that would be.
And we're calling out right now on second half approximately 150 basis points of pressure there.
On the on the margin side.
And at the end of Q4.
We kind of Directionally, you got to a point, where we talked about 17, five to 18 and a half kind of on the EBITDA margin I mean that was kind of the.
The more normalized range if you would.
And so hard to say, but again on a falling raw material environment.
We would manage that the same.
And even in some cases try and increase that dollar spread between selling price and raw material costs.
That's helpful. Thanks, and then on that falling raw material environment, given the working capital Bill do you have any concerns of getting stuck with high priced inventory.
Certainly it's a conversation that we've had actively.
Around the company.
And when we when we look of the dynamics of these markets from a demand supply perspective.
And the resin area and the paper area and hydrocarbon area, which are our biggest areas. We don't see a scenario at this point, we're going to see dramatic drops.
And that are very material the right. So we see this we see the stabilizing at a much higher rate than we were in 2020.
So we don't see those kind of massive drops in the future certainly if we start seeing that we will start depleting our inventory.
And minimize the impact on the way down, but thats not of concern as we sit here right now.
Thanks, that's great and then one last one a bit more open ended and looking forward you mentioned greater automation and an increased focus on and applying the solutions.
Take that trend in combination with increased shipping container applications does that give you pause on your total addressable market.
Okay.
Not sure we understand the what do you mean by the what.
And what do you mean by the I'm not sure I understand the question do you mean by the container.
Shipping and own containers, so all of the shipping at Atlanta.
Yes.
Oh.
Look I think I think that chip and home container is only going to effect of certain portion of.
And specifically in the E Commerce channel.
And I think from from our perspective, that's still an opportunity for us within those shifts and your old containers too.
And you'll provide packaging solutions to that vendor.
I don't see that as being a dramatic shift.
On a go forward basis to our profile right now.
Thank you very much and I'll turn it over alright. Thanks.
Your next question comes from the line of.
And Jack Inc, with Pi financial.
Hey, good morning, great quarter guys.
You have.
Two questions in there.
Maybe just a different way of asking some questions that have already been asked.
But in terms of stronger strength, so I'm, assuming the strongest performers here films woven carton sealing tapes, that's just on the.
Percentage basis, given the weakness from last year in these products right.
Yeah, a lot of that would be that.
Okay.
And you know.
We're all talking about ecommerce and and growth and E. Commerce, There's all of these other sort of.
The sectors that you're exposed to is there any like what would be the second and sort of.
Most pronounced trend and in some of the other some of the.
The other.
The sectors.
Obviously, you're benefiting from.
I would go back I would go back to our woven business.
And take a look at our woven business going into from a vertical perspective and to add.
AG into.
And building construction into areas like that that business is performing exceptionally well both from a growth perspective topline perspective, and a margin perspective. So that is a that is a growth engine the.
I look at and.
For <unk>, a fair amount of runway as Jeff said and you were doing an expansion there right now.
And we're doing another expansion there next year and that's all accounted for within our guidance on our Capex. So that business is performing tremendously well, both topline and bottomline.
Right.
And then just a quick question is when you say the e-commerce.
Low to mid single digits in terms of growth is that over the next three to five years or like what would be the.
Sort of time horizon, there I don't think we said yeah and I think we said most research reports that you read are kind of and the double digit maybe low double digit the mid mid <unk>.
Mid teens something like that.
And so thats more of the long term growth a growth trajectory that we're certainly reading about and certainly we've seen that over the last number of years.
Uh huh.
Yeah. So that's the way we're referring to.
Okay perfect. Thank you.
Thank you.
And there are no further questions at this time and I would like to turn the call back over to Greg Hill for any closing comments.
Thank you for participating in today's call. We look forward to speaking with you again following the release of our third quarter results in November in the meantime, I Hope you and your families stay safe and healthy. Thank you.
Yes.
Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.
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