Q3 2021 Avient Corp Earnings Call
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Good morning, ladies and gentlemen, and welcome to AVX Corporation's webcast to discuss the company's third quarter 2021 results. My name is Gigi and I'll be your operator for today at this time all participants are in listen only mode. We will have a question and answer session. Following the company's prepared remarks.
As a reminder, this conference is being recorded for replay purposes, I would now like to turn the call over to Jodi Salvo, Vice President Treasurer and Investor Relations. Please proceed.
Thank you Gigi good morning, and welcome to our third quarter 2021 earnings call before beginning we'd like to remind you that statements made during this webcast may be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements will give current expectations or forecasts of future events and are not guarantees of future performance.
They are based on management's expectation and involve a number of business risks and uncertainties any of which could cause actual results to differ materially from those expressed in or implied by the forward looking statement.
Also during the discussion today the company will use both GAAP and non-GAAP financial measures. Please.
Please refer to the presentation posted on the avian website, where the company describes the non-GAAP measures and provides a reconciliation for historical non-GAAP financial measures to their most directly comparable GAAP financial measures.
Joining me today in our call is our chairman President and Chief Executive Officer, Bob Patterson.
And senior Vice President and Chief Financial Officer, Jamie bags.
Now I will turn the call over to Bob for some opening comments. Thank.
Thanks, Joe and good morning, everyone.
Today, we are reporting record third quarter results continue to reflect the transformation of our portfolio as avion demonstrate the impact of our key growth platforms.
As you know, we've made deliberate and strategic moves over the past decade to evolve into the specialty formulate or that we are today.
The acquisition of Clarient color business and the subsequent rebranding to avian over a year ago was a pivotal point in this journey.
Our current performance reflects these bold moves and the ones we have taken to transform the company toward a portfolio of high growth specialty technologies.
This year, we have achieved significant growth in sustainable solutions health care and composites.
Nearly $50 million in run rate synergies from the Clarient integration.
Having a record year.
In addition to that we have reduced our net debt or will by end of this year net debt to EBITDA leverage to two one times in just 18 months, which is about half. The time. We had originally planned from the date, we announced the Clariant deal.
The Clarient color business has been a tremendous success, which not only shows up in the numbers, we're reporting and that youre seeing today, but also on the engagement that we see in our associates around the World every day.
This engagement and commitment have served us well as we've been as we have seen unprecedented demand for our materials solutions from all our segments against the backdrop of very challenging conditions.
Our team has come together to deliver world class service for our customers, our global footprint flexibility in our operations dedicated manufacturing workforce.
Difference makers.
Helping us manage through a myriad of supply chain disruptions.
Material availability issues, which I know you know all about.
We have turn these challenges into opportunities improved our unique value proposition to customers around the world.
Our third quarter results reflect tremendous growth with sales up 32% and adjusted EPS of <unk>, 52%.
I'm very pleased with our performance and the discipline, we had this quarter with respect to handling inflation as well as the incremental cost associated with supply chain disruptions, which are impacting everyone in our space.
The magnitude of these items have been substantial but so are our efforts to overcome them both of which we will cover in more detail in future slides. This morning.
All three segments have performed exceptionally well in all three contributed to our record results.
Color additives and inks grew operating income, 31% due to robust demand for our sustainable solutions.
More and more of our customers are committing to using recycled materials.
And our unique value proposition accelerates their sustainability goals.
In addition, as I mentioned before our cost synergies achieved from the ongoing integration of the Clariant deal have contributed to these results.
CMS growth was underpinned by our unique composites portfolio, serving telecommunications, namely the high demand for our fiber optic cable materials as well as growth in health care.
Distribution delivered record third quarter operating income and.
An increase of 33% over the prior year.
Driven by growth in healthcare and industrial applications, which were up 46% and 75% respectively.
Over the years, our portfolio has undergone a tremendous and deliberate transformation.
With an increased focus on specialty applications that require more sustainable solutions and advanced performance characteristics.
Not only has this been an important contributor to our recent sales growth, but the benefits of improved mix are clearly improving margins despite inflationary pressures.
And we continue to make great progress on improving the margins of legacy Clarient color as well.
In the first five quarters of ownership, we have expanded the margins of the acquired business nearly 400 basis points.
One driver of this improved performance is the acceleration of synergy capture between the two organizations.
Each contributed $12 million in the quarter, and we expect to achieve $50 million in synergies this year.
I'm very pleased with our early integration progress, but I'm most excited about our combined innovative portfolio and long term revenue synergies.
An example is how well our portfolio is positioned to enable the use of more recycled materials.
Virtually all of our largest consumer packaged goods companies have made long term commitments.
To increase the use of recycled content in their products.
This slide shows the significant gap between the percentage of recycled plastic being used shaded in gray.
And the amount needed to reach their 2025 targets.
There is a tremendous opportunity to help these brand owners reach these commitments based on their current usage as you can see in the chart.
Using post consumer recycled material has significant challenges and our customers have leveraged our formulation expertise.
And solutions to bridge, the gap and reaching their goals.
You cannot just replace Virgin material with recycled material.
<unk> knowledge and experience to achieve the precise color <unk>.
Address contamination.
Maintain physical properties.
And manage recycled material quality.
100% of our innovation portfolio and the color segment is dedicated to sustainable solutions, we are a leading expert in this space.
Take this recent example from one of our customers.
On the left side of the slide you see a vibrant yellow colored bottle achieving achieved from using prime resins.
Full breadth of the color spectrum as possible when the base resins as clear white.
While on the right side, you see the resulting dalia, although the results starting with recycled resin, which is grayish and color.
So how do you overcome this.
You need more colorants and additives to achieve the same vibrant color in some cases significantly more.
And that's the plus factor for the demand of our products and solutions as we enable the use of more recycled content.
There are additional case studies in news releases on our website.
I encourage you to check these out.
Our most recent success story was posted last week as.
As we collaborated with Vic to formulate a razor was 62% recycled content.
The high performance GPU solution enabled big to create a product that lives up to their sustainability promises.
These are just a few examples of why sales for sustainable solutions are expected to grow 18% this year over last year accounting.
Accounting for $930 million of total company sales.
These solutions are solving our customers' challenges to enable the circular economy.
Reduce carbon emissions and advance health and human safety.
Slide 12 illustrates our third quarter performance by key growth drivers all of which were up significantly reflecting strong demand and pricing in all regions and end markets.
Although we experienced some seasonality in the third quarter, primarily in Europe Middle East demand conditions were robust and continue to be.
From an end market perspective over half our revenue is tied to strategic end markets, such as consumer health care and packaging.
In particular health care demand over the prior year.
Grew 40% driven by new business and recovery and are likely to procedures.
And consumers up considerably as well with a growing strength in household goods and outdoor high performance products.
Overall, I'm very pleased with our results for the quarter.
Our specialty strategy has enabled us to achieve record levels of revenue and operating income against a backdrop of increasing inflation and supply chain disruptions that are candidly gotten more challenging since the second quarter.
Jamie will now cover the next couple of slides that illustrate how our pricing initiatives exceeded these increasing costs.
Thank you as Bob mentioned, we want to highlight the significance of inflation and costs associated with supply chain disruption and how they impacted the third quarter. All three segments were proactive in raising prices throughout the period as you can see in the break schedule, we have more than covered inflation.
Beyond raw material inflation, we incurred an additional $19 million of costs related to supply chain disruption exacerbated by a shortage of labor in many regions.
These cost manifest themselves in the form of increased overtime and less than normal production efficiency as we work to qualify new or alternative sources of raw material supply for our customers unique formulation.
These are costs that can be difficult to predict or quantify on a contemporaneous basis.
We are operating nimbly and in real time, as we seek to meet customer demand without sacrificing quality.
The following slide illustrates how inflation and the impact of supply chain disruptions continued into the third quarter here, we walk our Q2 to Q3 sequential performance to highlight how we navigated the current market dynamics.
To date, we have covered more than $300 million of costs associated with inflation and supply chain disruptions.
Related to demand the sequential decline from the second quarter is consistent with what we've experienced historically and it's primarily due to seasonality in Europe and the middle East.
We also experienced weaker demand in southeast Asia due to an increased number of Covid cases, which prompted localized lockdown.
Heading into the fourth quarter demand continues to be strong for our formulations and services reflected in the orders we have received thus far in October we.
We expect supply chain issues to persist for the foreseeable feature and we'll likely see higher inflation.
An area of uncertainty that has yet to play out fully is the energy crisis in China, while our plants have not been forced to shut down some of our suppliers and customers have been subject to those restrictions feeling fresh raw material shortages and higher energy costs.
With that said we are maintaining our previously communicated full year adjusted EPS guidance of approximately $3 per share.
We are on pace to deliver at 40% increase in adjusted operating income and a 55% increase in adjusted EPS.
Record performance in a year full of challenging conditions.
And we realize many companies are reporting significant growth rates compared to 2020 as it's an easy comp from US which is why we also compare our full year projections to pre pandemic 2019 performance I want to remind our shareholders. How avs performance is differentiated recall that in 2020, our EBITDA did not decline.
2019, it grew and our EBITDA projections for 2021 or 31% higher than 2019.
This is a direct reflection of the investments made to position the company to benefit from long term secular growth trends the quality of the clarient color business and our team's ability to execute in a challenging environment that concludes my prepared remarks, I will now hand, the call back over to Bob.
Thanks, Jamie and Thats, Great perspective, we have spent quite a bit of time. This morning, highlighting how we are managing the near term.
But we need to also step away and put in all perspective to ensure that we're executing for long term value creation.
Record earnings strong free cash flow and the outlook for our business has enabled us to recently raise our dividend by 12%.
This is the 11th consecutive year, we have increased the dividend since it was initiated in 2011.
We are committed to returning value to our shareholders and now that our net debt to EBITDA is closing in on two times. We can also resume opportunistic share repurchases.
Of course, we will continue to prioritize and actively seek acquisitions to leverage our proven operating model and reinvest back into our sustainable solutions portfolio.
As we continue to de lever, we have the balance sheet to support both bolt on acquisitions as well as more transformational targets.
There's a lot behind what we have been able to deliver this year, thus far and we can only go into so much detail on these quarterly calls with our investors.
Which is why we are excited to host our Investor day in New York on the summer night.
We will be taking a deeper dive into our sustainable solutions portfolio provide more insight into our innovative technologies and our margin expectations.
You'll hear from several members of our management team.
Who will provide further insights into our long term growth drivers.
Like how we help to advance the circular economy, our depth of applications with composites fiber optic cable and the important role that we're playing for health care customers and ultimately those receiving care.
It's something we're really looking forward to and hope to see many of you. There in person there will be a virtual option, but for those comfortable and traveling and gathering together I think the experience will be all the more impactful.
So with that that concludes our prepared remarks today, we'd be happy to take any questions you have at this time.
As a reminder, task a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Bob <unk> from Goldman Sachs. Your line is now open.
Thank you good morning, Bob I was wondering if I could talk a little bit about obviously your pricing.
Offsetting raws is a novelty in the industry you keep doing it I'm wondering is there any overlap or information advantage from distribution that enables that or can you talk maybe a little bit more about the synergistic benefits of the distribution business.
I don't think that I would point to distribution is.
Necessarily help.
Helping out with respect to pricing for color and engineered materials as they really are priced and very distinctly different ways.
I would say that having a distribution business probably gives us more insight into it.
Inflation with respect to the cost part of the equation. So that's helpful. And then of course, there is just a tremendous amount of connectivity between our customers and there are so many of them who.
Bye from all three of our segments and I believe that's always been an advantage.
And then on.
Your end markets, obviously consumer and health care are very big packaging.
You know there is some expectation that you had some some surge activity in those end markets can you talk a little bit about how you see the path forward. There in terms of rate of change relative to what you might have seen in the last year.
Thanks.
Yeah, I mean, we did have really strong growth in healthcare and industrial applications in the third quarter.
Obviously to some extent, we're still comparing to.
Some pandemic lows of last year, obviously as we get into the fourth quarter of this year, the comparable start to get more challenging piece of the.
2020, but.
Man conditions continued to be strong and we see good growth and really those three key areas for us health care.
Consumer and packaging and look all along this year packaging has actually been one of the slower growers for us, but that's because it was so strong in 2020 so it.
It hasn't pulled back it hasnt gotten weaker and I think packaging is still going to be very important for us because of the demand versus stainless solutions.
Thank you. Our next question comes from the line of Frank Mitsch from Fermium Research. Your line is now open.
Hey, good morning, folks just curious who selected the <unk>.
The picture for the Decommit decontamination on slide nine.
That was.
Kind of unique I guess it gets the point across.
If I look at.
Look at your inflation statistics.
Statistics.
Really helpful and looking at the sequential move about $80 million <unk> dropped down to $50 million <unk> can.
Can you help frame us what ballpark are we looking at.
<unk> <unk> and then any thoughts on an initial read on 2022.
Yes, so I mean everything that we have seen so far Frank is that.
We're going to see more inflation supply chain disruptions haven't abated.
And so we are really planning on more of the same here in the fourth quarter we've got.
More in additional price increases planned and being announced.
<unk>, which I think will.
Help us to handle that in the same way that we've done so all year. So I don't really see things getting any better.
From an inflation or a cost perspective, but believe we have it covered.
One other aspect I'd say is I've always just been kind of cautious on the fourth quarter forecast historically because December is always been a little bit of a wildcard with respect to.
How customers' buying patterns might change between December and January.
And that could happen this year or two so hopefully were.
Being conservative in that respect and we will see how things play out and then look for next year.
Look we're excited to share some insights into these long term growth drivers in the areas of sustainable solutions healthcare composites and so on and I think we lay that out in December there is really strong mega trend poll for our solutions, that's going to allow us to be able to do.
Liver at those growth rates.
And next year and beyond so no specific guidance on 'twenty two at this time, but we'll be able to lay out a lot around the growth drivers and margin expectations.
Very helpful.
As you look at that wildcard of December what are your order books, saying and I guess just in general.
You've highlighted the supply chain disruptions from time to time is that constrained you I mean.
Would we have been able to see even greater shelf, obviously, you posted very strong sales in the quarter as is but.
Do you feel like you were constrained in some of your business activities and some of that is pent up demand any help there would be would be helpful.
So I guess two things one maybe I'll take the latter part first.
Look historically, we've got about 45 days worth of visibility from an order standpoint and.
That's actually looks good for October the actual growth rate that we have for October is higher than what we have projected for the fourth quarter. In total so that kind of brings me back to a conservative assumption around what is going to happen in December which we just really.
Really don't know at this point.
Look with respect to the supply chain challenges.
This is the first year, where I would ever say, we've had orders that.
We struggled to deliver on a contemporaneous basis, usually we can get.
A order in that 45 day time period and get it out in that same time period, and we've had some overhang this year.
Simply because we are waiting on something from someone so.
Order of magnitude $15 million to $20 million in a month, so not a huge number but one that's.
Not a number that we're accustomed to so there is an opportunity to.
Well catch up on that at some point in time, when the supply chain improves.
Thanks, so much Bob.
Yep.
Thank you. Our next question comes from the line of Mike Sison from Wells Fargo. Your line is now open.
Hey, good morning, nice nice quarter guys.
In terms of acquisitions, you noted in the prepared remarks that there could be other transformational targets out there.
Are there ones in color or is it more focused on M or the recycling sustainability actions, just curious where the scope of another transformational deal would be given how all clarient Gwen.
Yes, I mean first of all I mean, there is nothing eminent but we do have the balance sheet flexibility to pursue not only bolt on acquisitions, but something bigger if the opportunity arises.
Our two areas of focus for us.
Posits being at the top of the list.
Which falls inside of our engineered materials segment and then.
Sustainable solutions much of which are.
Rather than a lot of the opportunities that we're looking at do fall within color.
But there are some this also fall within engineered materials. So that's the best way to kind of think about that.
Mike.
Okay, and then in terms of.
On a sequential basis Q4 versus Q3, it looks like Youre looking for maybe a normal seasonality sequentially. Just just curious what's sort of baked in there I know you talked about more inflation likely.
Let me get my price and and you know.
It sounds like there could be some issues in China and getting some raw materials just.
Any thoughts there given I do continue to hear that inventory levels from customers and probably yourself are really low. So is it possible that maybe not have as much of a down.
Sequential quarter.
So two things to start with yes, I mean from a modeling standpoint seasonality for us really isn't above.
Whether it's about just having a stronger first half of the year in Europe and the middle East.
And that's playing out this year as we expected.
And you could be right. The inventory levels are low we routinely hear that from our customers.
And so demand could remain strong through December and see something better than what we have.
<unk> here I do think it's very real that inflation is actually.
Going up nothing has abated, thus far and I think we'll see more supply chain disruption costs. So that's just a balancing factor in the whole equation, but.
I do Echo what you heard or said about.
Inventory levels, because I do think they are still so low.
Great. Thank you.
Yes.
Thank you. Our next question comes from the line of Mike Harrison from Seaport Research. Your line is now open.
Hi, good morning.
I was wondering I was wondering if you could give some more detail I would like the slides.
Recycled plastic packaging opportunity.
But maybe a little more detail on how much more revenue you can get.
Her package basis.
Using using recycled materials versus one made from rising from Virgin rather.
How much more volume of those colors and additives are needed how much higher value are those products that you're selling for recycled applications.
And I guess I'm, just maybe asking a different way any sense of what the total addressable market for colors, and additives and recycled plastic packaging could look like.
That's a teaser slide for our Investor day coming up in December Mike.
So every one of the questions that you just asked we will have good information around.
The answer is not so simple in terms of.
We sell product X today, and believe we're going to be selling.
Something X plus y.
Because it does vary by color and it does vary by customer size, what I would tell you is that the brand owners have.
The firm has commitments I believe to use more recycled content and we can build a really good model with that.
While we don't have great visibility to is what smaller players will do they may not have the same sustainability type goals, our mission, but we're going to lay a lot of that out.
The Investor day, and we just need some more time to put that together. So hopefully we'll see you there and we can do with that.
And then.
Presumably it's a substantial opportunity.
My next question is on the distribution business, that's always been a very strong cash generator for you I know it provides an outlet for products.
Some insights on what's going on in the broader market as you addressed earlier, but at the same time you've been on this journey of focusing the portfolio around specialty additives of materials.
<unk> made this transition to becoming a formulated in a solution provider I'm. Just wondering is it time to reevaluate the fit of the distribution business with the Navy and whether it makes sense to monetize that business and deploy the proceeds back into higher value product lines.
Were you expecting secular growth over time.
I mean look as you know we have.
We've evolved our portfolio significantly over.
The last 12 or 13 years.
We haven't been afraid to make divestitures the most recent being.
The sale of PPS in 2019.
<unk> 19 ahead of a new head of announcing the acquisition of Clarient. So I do think that we take the right view and a right angle with respect to thinking about our portfolio.
Look one thing I would say is that distribution has been a cash generating machine but.
There are two really important I would say commercial aspects of it that we.
Fine to be strengths, one is the connection to health care, it's about 30% of their sales.
And then <unk>.
Second is just the overlap that we have with our other businesses and I think it's been a real asset for us.
To Bob's earlier question, which I'm not sure I answered so great this morning, but.
And a real asset for us during this inflationary time periods and then maybe lastly, I mean look it's 12% of total company EBITDA right. So.
It's not as big as it once was on a proportionate basis. So I don't think Theres anything.
Urgent pressing that we need to do and Theres more pluses and minuses at this point.
Alright, thanks very much.
Thank you. Our next question comes from the line of Angel Castillo from Morgan Stanley. Your line is now open.
Hi, This is Lisa Steinberg on for Andrew I was just wondering in terms of pricing increases.
Chris.
Is there been any pushback from customers on that or receptivity changing there.
Many customers are never happy with price increases it's no different than it is for us when we've been getting price increases from our suppliers.
I do think generally there is a great deal of appreciation for the supply chain issues and the shortage of supply.
All of which I think is driving inflation. So I'd say, there's been a fair.
Fair amount of let's say understanding about the need for these increases and many customers are doing the same things themselves but.
No one has ever excited about a price increase in the same neither are we right. So.
In terms of what we get from our suppliers. So.
But we've been able to do it.
Maybe we don't always get everything we ask for but I think we've been able to make good progress this year.
Thanks, and then you noted inefficiencies.
Yeah with respect and supplier.
Headwind do you feel good about where you are now or more.
More investments in capacity.
Expected and when could that potentially online. Thanks.
Yes, I mean look I think it's like a real there's kind of some hidden cost of inflation in the supply chain disruptions.
You know and there are pretty significant for us I'm sure. They are for other people.
It's really a result of running over time.
Maybe doing three different orders to fill a customer need versus just one historically.
Or pre qualifying another material or other things like that that have led to these.
Cost and obviously freight and so on and logistics are are all higher but we don't have a capacity issue.
We have <unk>.
Plenty of capacity.
With the exception of labor right really it's only our capacity constraint is that like many companies, we haven't been able to get enough manufacturing associates.
And if we can solve that then some of these cost issues would go away.
But more broadly than that I think it's going to take a long time for the supply chain to get caught up to where demand is.
The silver lining in this whole thing right is that demand continues to be really strong. So that's good.
Thanks.
Thank you. Our next question comes from the line of P. J <unk> from Citi. Your line is now open.
Hi, Eric Petrie on for P. J.
Eric.
You.
Noted on slide eight all those <unk>.
<unk> owners that have targets for recycling capacities.
See any risks to them meeting this growth by 2025, either from our recycling capacity or collection of raw materials.
Oh, Yeah, I mean, I think that there is a challenge to getting there because at present, there isn't enough recycled content to meet those goals.
But I think the brand owners know that I think that.
It's pretty widely understood, but there is a fair amount of recycling infrastructure being created today and being invested.
But I think there's a real chance that they can't get there by 2025, but they want to make substantial progress towards those goals.
So, yes, I think thats pretty real secondly, I think that with respect to the recycling infrastructure, that's being put in place.
Not necessarily all go to these brand owners I mean, there's lots of people who would like recycled materials. So my sense is there will be.
A lot of demand for that material and that's just another challenge with respect to hitting those goals.
Okay, and then as a follow up to that question do you have enough capacity and Colorants and additives to meet black step change in the recycling capacity investments.
Just I know you mentioned, the bic razor and the 62% recycled content there how long did it take for you to spec in your solutions for that product.
So the first question is yes, we do we don't have any supply capacity constraints and color again with the exception of hourly.
Factoring associates right now which are in short supply in many locations, but as a general rule with respect to machine and equipment footprint and so on.
Well positioned to handle.
The growth in sustainable solutions, there will be some things that we add along the way in terms of specific machines, but not <unk>.
Significant.
Not significant costs and then we.
Do a lot of work in the consumer space with companies like a big for example, and off the top of my Dad I don't know how long the specification had been for that particular product I can tell you as a general rule.
Once we're an incumbent and they are typically we're working on new products.
Most every year.
For razors and toothbrushes and so on.
But I just don't know off the top of my head what the.
But the lead time was on that specific project.
Okay. Thank you Bob.
Yep.
Thank you. Our next question comes from the line of Christian Owen from Oppenheimer. Your line is now open.
Great. Thanks. Good morning, Thank you for taking my question.
So a lot of your customers doing hand to hand combat over the last 18 months.
Sorry, just under the sustainable solutions.
Great all the additional color on that today.
But I'm wondering if you can talk about the innovation.
<unk> pipeline Youre seeing with your customers and then and you mentioned it in the context that clear.
Clariant synergies, but can you speak to the state of their own vitality index at this stage.
Yes, so look from an innovation perspective.
It was interesting in the second quarter of last year third quarter, maybe it's kind of like innovation and sustainability just get kind of put on pause right. Because everyone was just so focused on this new thing called Covid and the pandemic and the Lockdowns and so on but as we've come out of that.
The request from customers have just been increasing exponentially and almost entirely.
Related to sustainable solutions and examples like what we use today.
To use more recycled content, so a 100% of our color segment our innovation.
Our innovation pipeline is focused on sustainable solutions.
And on a combined basis, our vitality index is a little over 35% if I put color.
Are we.
Exclude distribution from that equation as you know.
Great.
This is another teaser for the analyst day, but you called out earlier in the quarter, the <unk> opportunity and something you're 50% CAGR for the industry.
Four digit sales growth for <unk>.
You mentioned some of the strong fiber contribution this quarter I'm wondering if you can break that down for us a little bit and how we should think about the cadence of that opportunity.
Market share opportunity in that context. Thank you yeah, Yeah, I mean, maybe there was a little bit of a teaser slide too but.
Look as I as I sort of reflect on and prepare for the Investor day, and I just think about.
My years with the company.
There's been a lot of transformation with respect to.
Focusing on becoming a specialty organization.
Now focusing on being a formula later, we've had to add a lot of commercial resources in the past.
And when I just look at where we are today one of the really important differences.
There are these really important mega trends that are creating demand and pull for our products like we've never seen before.
Telecom is a great example, five <unk> infrastructure build out at the Investor day, and we're going to show some maps with respect to how that rolls out how that impacts our sales and that's what gets us to the double digit growth rates in areas like that the same is true for sustainable solutions.
And health care. These are the three areas that we're going to spend a ton of time on in December.
But there is really really very good very good pull for all of that.
With respect to the third quarter that actually was one of our best performing businesses in engineered materials.
Specifically for those applications and <unk> that has kind of slowed down last year because of the plant closures in the second and third quarter and it just started to ramp up in the four so I think we're starting to see that pick up again this year, which is really good.
Yes.
Thank you. Our next question comes from the line of Laurence Alexander from Jefferies. Your line is now open.
Good morning, two questions. One can you give a sense for how much of your business you have seen in the past in similar periods of strong demand total ordering develops.
And secondly, with respect to the supply chain what are your suppliers, telling you as to when they think they will even have a line of sight towards normalization.
Well with respect to orders doubling up I don't think Thats, taking place anymore. I mean, I think that may have been in the.
Earlier part of this year, particularly when you know that.
When we had the very cold weather in Texas and supply chain systems worked threatened throughout as a result of those plant closures I think.
I think that led to probably you know some customers putting in orders for more than they needed at a specific time, but I don't really think.
But we're seeing that.
Now.
And then.
Remind me Laurence the second question.
With respect to you mentioned that there was like a so far no easing of the logistics issues.
Can you talk to your suppliers what are they.
But even sticking your neck out on promising that they see a line of sight to normalization.
I mean, there is no no not at all.
<unk>.
You know what I mean candidly demand is still very strong and I think as it remains at these levels.
It's.
Got it would be really hard to catch up.
I had conversations with a couple of customers last week in the consumer space.
Who said that.
Are there kind of a niche year type companies, but they said they are sold out.
Through 2022.
They already know they said they have sold out their plan and got all the orders they can take.
There is still behind you know what I mean, so as long as that demand dynamic exists I think it's just really difficult for suppliers and everyone else to catch up.
Okay, great. Okay. Thank you.
Yeah.
Thank you. Our next question comes from the line of Vincent Anderson from Stifel. Your line is now open.
Yeah. Thanks if.
If I may just kind of nibble around M&A, a little bit ahead of the Investor day.
If I'm remembering correctly, you've tended to have a fairly long courtship period with many of the companies you've ultimately acquired and I'm just wondering if with the drama with inflation and supply chain disruptions. This year has that maybe brought some of these targets closer to the table.
Given the procurement advantages your scale can provide.
I don't think we've seen a change in those relationship dynamics as a result of supply chain issues.
There are probably companies out there that are.
Finding a way to have a really strong year because of demand.
And that might be changing how they think about selling.
With respect to.
Their performance this year versus last year, but I don't think I can really make a connection to the supply chain issues or the cost side of equation.
As a reason why those discussions or.
Any more fruitful now than they've done in the past.
Okay fair enough.
With some of these attractive new end market weightings that have shifted with the Clarient acquisition has.
Is that maybe helped inform additional investments in the engineered materials segment, where youre seeing more opportunities either just from the new market intelligence that clarity on fraud or outright cross selling opportunities.
Yeah, I think there's been all of the above.
Look just in.
In healthcare alone first of all I would tell you that.
And one of the reasons why we love that.
Clariant deal and had a lot of respect for our client as a competitor back before we were one company was there really strong customer relationships.
Many of which had been entrenched for years and there have been some really good introductions for our engineered materials segment.
And multiple industries. So we are seeing.
Right now cross selling opportunities.
Across all of our businesses, but there's been some really good examples of specifically clariant to engineered materials, which I think you were asking about.
Yes, no absolutely. Thank you very much.
Okay.
I think that's fair last last question. So we appreciate everyone's.
Time today to listen to our results, but look forward to updating all of you in more detail at our Investor Day again on December 9th I think we've got a release coming out shortly to ask about registration. So hopefully we'll see you all in person between now and then take care.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
Okay.
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