Q4 2021 Berry Global Group Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Berry Global earnings call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being re.
Accorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Dustin Stilwell. Please go ahead.
Thank you and good morning, everyone.
Welcome to Berry's fourth fiscal quarter 2021 earnings call.
Throughout this call we will refer to the fourth fiscal quarter as of September 2021 quarter.
Before we begin our call I would like to mention that on our website. We have provided a slide presentation to help guide our discussion this morning.
After today's call a replay will also be available on our website and Berry global Dot com under our Investor Relations section.
Joining me from the company there is chief Executive Officer, Tom Salmon.
Financial Officer Mark miles.
Following Tom and Mark's comments today, we'll have a question.
<unk> and answer session in order to allow everyone. The opportunity do you anticipate we do ask that you limit yourself to one question at a time with a brief follow up and then fall back into the queue for any additional questions.
As referenced on slide two during this call we'll be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release and Investor presentation on our website.
And finally, a reminder that certain statements made today maybe forward looking statements.
These statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to those described in our earnings release annual report on Form 10-K, and other filings with the SEC.
Therefore, the actual results of operations or financial condition of the company to differ materially from those expressed or implied in our forward looking statements.
Now, let's turn the call over to Berry's CEO Tom Salmon.
Thank you, Doug and welcome everyone and thank you for being with US today, let's begin this morning on slide four where we've laid out our key takeaways for today.
Our fourth fiscal quarter results were solid as revenues were a record for any September quarter and free cash flow was a record for any period in our company's history in spite of unprecedented inflation and supply chain challenges, we faced across the world.
Fiscal year 2021 was another outstanding year of Barry as we achieved 4% organic volume growth on top of 2% in fiscal 2020 with all four segments delivering strong organic volumes during the year revenues and adjusted earnings per share, which were both annual records grew by 18% and 20% respectfully.
Our teams have worked diligently to offset the challenges created by Covid inflation labor and supply chain challenges, while demonstrating an exceptional ability to remain focused on driving long term sustainable growth and delivering the results you see today.
Various resilience as a continued reminder of the diverse and robust global portfolio, we built through strategic portfolio management.
The second key takeaway was our commitment to improve our strong balance sheet and drive leverage lower I'm proud to say that as a result of our strong and stable earnings and cash flow, we've been able to reduce our leverage by a half a turn since the beginning of fiscal year and a full turn in just two years ending the year at three eight times net debt to adjusted.
EBITDA.
Getting below four times is a top priority for us and as we've stated before we anticipate operating our company in a leverage range of 3% to three nine times.
And lastly, we are focused on capitalizing on our strong base by investing in a number of organic growth initiatives, including innovation and sustainability led projects, which will maintain our growth momentum in fiscal 'twenty two and beyond.
Next let me turn to our number one core value on slide five net safety, keeping all our teammates healthy and safe is a key priority.
As you can see on the slide we have an ongoing commitment to identifying managing and minimizing safety risk.
Over the past few years, the pandemic presented many challenges across our global footprint.
Our global Berry team stepped up took on the challenge implemented and maintained new protocols, while keeping each other safe and in spite of these added challenges of operating during the pandemic. Our safety performance has continued to show improvement and we're very proud of our industry leadership, delivering an osha incident rate below one for the fiscal year.
<unk> 21 significantly better than the industry average of three seven.
Our team's emphasis on working safely and servicing our customers has ensured an uninterrupted supply of the essential products that we produce.
This has made us a stronger and better company, giving us great optimism on the company's future success.
Additionally, as you can see on the slide we have a strong commitment to ensure that we are providing better opportunities in bringing innovation to provide multiple lives and natural resources, while having many initiatives with industry and external partners to improve circularity and our carbon footprint.
Turning now to the financial highlights on slide six.
For the fourth fiscal quarter revenue was up 22% and was a record for any September quarter overall demand for our products remains solid and certain markets, which previously experienced pandemic headwinds continued to improve.
Volumes for the quarter were essentially flat coming off a strong prior year comparison of 4% in September 2020 free cash flow was a poorly record at $512 million.
Throughout fiscal 2021, we experienced significant cost increases in our primary raw material that'd be resident as well as inflation in other raw materials freight and labor on top of supply chain challenges as you can see we experienced a significant increase in the level of inflation and recovered 92% a record cost inflation.
In the September quarter, and 95% of the over $1 5 billion of cost inflation during the fiscal year.
As we've demonstrated historically, we remain committed to passing through cost inflation and believe we are well positioned given our scale to serve our customers with our facilities in close proximity to their locations.
Look if you look at some of our financial year highlights on slide seven fiscal year 'twenty. One was an exceptional year with record revenues and earnings leverage reduction inside our targeted range along with an unwavering commitment to service our customers in a challenging supply chain environment through much of the fiscal year, all while building strong momentum in.
Each of our businesses heading into fiscal year 'twenty two.
For the year revenue was up over 18%, including organic volume growth of 4% with all four segments, showing 3% or more organic volume growth.
From an earnings perspective, our operating EBITDA increased by 3% on a comparable basis to a record $2 billion $224 million.
Adjusted earnings per share. It was also an annual record and increased by an impressive 20% to $5 80 per share.
Additionally, as I mentioned, we have used our consistent and dependable free cash flow to further strengthen our balance sheet and have reduced net debt over $1 billion in the last four quarters and ended the year inside of our leverage range target.
Our employees around the world have shown an unwavering attention on executing against our strategies and as a result, we delivered on our priorities with another year of exceptional results, while building strong momentum going into the future.
Now I'll turn the call over to Mark who will review Berry's financial results in more detail Mark.
Thank you Tom.
Looking at the quarterly and fiscal year performance for each of our four operating segments starting on slide eight.
The quarter, our consumer packaging International Division delivered a 12% improvement in revenue primarily attributed to an 11% increase in selling prices from the pass through of inflation, while volumes were essentially flat.
Regionally, we had modest volume declines in developed markets, which had very tough comparisons and were mostly offset with stronger growth in emerging markets, such as India and eastern Europe.
From a market perspective categories, such as food and beverage and food service soft spot volume growth, while industrial categories experienced some modest headwinds related to supply chain disruptions and our customers.
Operating EBITDA in the quarter was modestly down primarily attributed to the timing lag of recovering inflation.
The year of revenue improved by 12%, including organic volume growth of 3% led by emerging markets and products.
Categories, such as food foodservice and industrials.
Operating EBITDA for the year was up 6%, primarily driven by the organic volume growth foreign currency translation and productivity gains.
Set by a timing lag in recovering cost inflation.
Next revenue in our consumer packaging North American Division was up 31% in the fourth quarter as a result of the pass through of inflation.
Volumes were 2% lower in the quarter from supply chain challenges in certain categories normalizing from Covid.
Volumes were up 4% over the pre pandemic level from the fourth quarter of 2019.
For the fiscal year revenue was up 23% primarily from the pass through of inflation and a 4% increase in organic volumes driven by continued strength in foodservice and beverage products.
Operating EBITDA was down for the quarter in fiscal year due to the timing lag in passing through cost inflation and costs related to managing supply chain challenges.
Let's call. It 21 represents the fourth consecutive year of organic volume growth delivered by our <unk> team.
Continuing the strong momentum, we recently announced a $110 million expansion for a clear sustainable foodservice packaging manufacturer clear drink cups and lids.
Serve restaurants coffee shops and convenience stores.
These investments are customer aligned and the clear designs builds and increasing demand for a cup that showcases some customers premium brand image and beverage appeal and improves restaurant operation efficiencies, while offering a more sustainable option compared to the customer's current cup offerings.
On slide nine our health hygiene and specialties Division delivered a 21% increase in revenue primarily attributed to the pass through of inflation, partially offset by an organic volume decline of 3% on the quarter from the pandemic driven strong volume quarter, a year ago, where we generated 12% volume growth.
The continued recovery in the building and construction markets was partially offset by strong comparison in health care and hygiene markets a year ago.
Organic volumes grew an impressive 9% over the pre pandemic level in the fourth quarter of 2019.
Fiscal year 2021 delivered organic volume growth of 5% building upon the very strong prior year growth of 6% driven by strong demand for our hygiene and health care products, including hard surface disinfecting wipes healthcare protection apparel and premium hygiene.
Operating EBITDA for the fiscal year increased by over $90 million from 19%, primarily driven by the organic volume growth favorable product mix and cost productivity.
For the year, we estimate that the favorable product mix related to COVID-19 was approximately $40 million higher than fiscal 2020.
And lastly revenue for our engineered materials division on a comparable basis adjusted for divestitures was 38% higher than the fourth quarter, primarily attributed to the pass through of inflation, along with organic volume growth of 1%.
<unk> growth in the quarter was primarily driven by partial recovery of our can liner business in the U S. Along with growth in our E Commerce and protective films, which was partially offset by supply chain challenges.
For the full fiscal year, our engineered materials business delivered strong organic volume growth of 4% as we continued to make strategic investments in areas, such as e-commerce, and food and beverage safety packaging.
Operating EBITDA for the quarter and full year was lower as a result of the timing lag of passing through inflation and costs related to managing supply chain challenges.
The fiscal 2021 results are yet. Another example of our proven performance over many different economic cycles. As you can see on slide 10, we have consistently driven top tier results in nearly all key financial metrics, including strong compounded annual growth rates for revenue earnings and free cash flow.
Including growing our adjusted earnings per share every year as a publicly traded company. Our business model is very resilient, including the broadest portfolio of plastic packaging solutions with sizable dependable and stable free cash flows to allow us the flexibility to drive strong returns for our shareholders.
Next our fiscal year 'twenty, two guidance and key assumptions are shown on slide 11.
In order to better align ourselves with our peers, we're now guiding to earnings per share and free cash flow.
We are expecting to deliver between $7 20.
$7 70 of adjusted earnings per share, which includes amortization of intangibles from acquisitions.
For comparison purposes, our fiscal year 'twenty, one adjusted earnings per share was $7 21.
Additionally for fiscal 'twenty, two we expect free cash flow of $900 million to $1 billion, along with 2% organic volume growth.
Given the timing lag of passing through inflation and continued improvement in the supply chain, we expect fiscal 'twenty two earnings to be stronger in the second half.
Our guidance incorporates our commitment of recovering cost inflation and includes recovering the majority of the unfavorable lag experienced in fiscal 'twenty one.
Partially offsetting the inflation recovery, we are conservatively expecting the majority of the favorable product mix, primarily inside our HHS segment to not continue in fiscal 'twenty two.
With organic volume growth expected to be 2%, our comparable EBITDA is expected to be 3% to 7% higher versus the comparable prior year.
In line with our assumptions for earnings per share, we expect volumes in operating EBITDA in the first half to be flat to modestly negative versus the prior year due to our very strong December and March quarters, a year ago, where we delivered volume growth of seven 5% respectfully, while we expect the second half to produce loans.
Mid single digit growth.
On slide 12 for free cash flow, we expect to generate $900 billion to $1 billion.
This includes cash from operations of $1 seven to $1 8 billion less capital expenditures of $800 million as we continue to see a strong pipeline of growth and cost reduction projects with returns well above our cost of capital.
I am extremely proud of our team's execution and delivering on our cash flow guidance every single year. Since we started providing guidance nine years ago.
Our capital allocation plan is clear with a flexible return based focus versus a more rigid fixed strategy.
We intend to use our strong dependable and consistent free cash flow to finance customer supported investments around driving sustainable long term organic growth.
Ported by active portfolio management, and enhances our organic growth potential through strategic strategic acquisitions, and divestitures and opportunistically repurchasing shares while staying within our targeted leverage range with.
This concludes my financial review and I'll turn it back to Tom.
Thank you Mark before we close our prepared remarks today and open the call up for questions I want to reiterate that we will continue to focus on what has been a driving our strong results over the past two years, we continue to invest in each of our businesses to build and maintain our world class low cost manufacturing base with an emphasis on key growing markets and regions.
Continue to see incremental opportunities to invest organically in support of our unwavering commitment to global growth overall, the diversity of our end markets and product offerings as well as the essential nature and demand consistency of our products have been core to the underlying performance of the business.
I am very confident in our team's ability to meet our near term and long term expectations and commitments to provide sustainable profitable growth near term. We are a dependable low single digit growing business that is supported by a robust pipeline of new earned and secured business, which we believe is enhanced as we increase our exposure in faster growth markets.
Such as healthcare and pharmaceutical along with new sustainable technologies.
As I've mentioned, we have several drivers that we've highlighted on previous calls for organic growth shown on slides 13, and 14, including the aforementioned focused on both faster growth end markets with sustainability led packaging.
We believe that by increasing our presence in making gradual moves into faster growing markets, along with continuing to invest into emerging market regions, we will be positioned to provide consistent dependable and sustainable long term growth.
We will continue to focus on global Megatrends as we expect emerging markets to grow faster than advanced economies and we believe there will be a considerable need for our protection products and regions with rapidly increasing populations.
In line with our focus on increasing our presence in health and wellness area, We announced earlier this year approximately $110 million of capital investments in both rigid and flexible healthcare solutions in United States, India and China as.
As part of this investment we are opened another manufacturing facility in global Health Care Center in Bangalore, India.
Additionally, we commercialized our first U S comprehensive commercial scale clean room for our nine layer blown film manufacturing line, which also supports our health care business and rigorous health care and pharmaceutical applications.
Furthermore, on slide 14, we believe the continued focus on sustainable solutions will be a powerful growth driver for us in the years ahead. For example, we believe our polypropylene drink Cup is the most widely recyclable Cup for quick serve restaurants, and convenience stores, having the ability to incorporate recycled content, while not diminishing performance.
For clarity attributes.
Our demand and growth pipeline for these products, including other beverage and spirits products has been strong and we expect further opportunities to continue to grow these products and capture share from alternative substrates.
We are committed to remaining at the forefront of the innovation necessary to meet customer sustainability goals through investments in the latest equipment technologies advantage build development and innovative design for circularity.
In combination with our focus on sustainability and innovation, we recently announced our collaboration with Wendy's and Lyondellbasell to improve Cup recyclability and introduce expansion of our industry, leading cleared drink Cup offering as you can see on slide 15 the.
<unk> will support both the industry's move to create multiple lives for packaging products through advanced recycling, along with Wendy's move from their plastic lined paper cups with limited recyclability to our new single substrate cleared drink cups that more consumers will be able to recycle and important pathway towards circularity.
Based on our mass balanced approach. The cups will also use 20% ISC certified recycled plastic across all North American restaurants.
Quick serve industry restaurant first.
With the potential to increase that amount of recycled plastics used in the future.
Given our natural resources multiple lives requires commitment and collaboration across the value chain partnering with leading brands and actively pursue opportunities to promote innovative packaging solutions is a key to accelerating the circular economy. This is just one example of many similar partnerships Berry has leading companies across the world.
New Cup set will launch in restaurants in both United States and Canada in early 2022 with the initial set of large cups using recycled plastics.
I'll drink cups will use recycled plastics in 2023.
This important first step is estimated to divert 10 million pounds of waste from landfills over the first two years the amount of waste diverted from landfills do this collaboration is projected to only increase as Wendy's works with Barry to expand recycled plastics used throughout its entire cup set.
Turning now to slide 16, as we highlighted on our last call.
And I indicated in our Wendy's collaboration we're very excited about the innovative circular solutions, we are bringing to the market in close partnerships with our customers and suppliers new.
New technologies are becoming available that convert many forms of plastics into feedstock, including many that were previously considered to be unresectable, making more collaborations like the wendy's announcement possible.
You can see the sizable industry investments that are being made in infrastructure to lower the cost of post consumer recycled material increase capacity worldwide and attract future value added investments.
We believe is already a global leader with scale, we will have unparalleled access to recycled content and affording us the opportunity to provide sustainable packaging worldwide to ensure an eight our global CPG customers to meet their commitments around sustainability.
Ultimately plastics are the most advanced versus material and it's hard to imagine any state of the art solution that will help us achieve net zero without the use of plastics.
We believe plastics are a critical part of the transition to net zero by 2050.
But very global capabilities designed for circularity expertise and longstanding partnerships across the value chain. We believe that more brand owners will continue to partner with buried to progress towards their sustainability goals.
As evidenced by our supply chain collaboration we continue to focus on circularity and improving our reclamation capabilities to help our customers meet the growing sustainability of demand trends of today and tomorrow.
Leveraging our unmatched global scale sustainability leadership, and deep innovation expertise, we design and develop products that help advance our circular economy.
Today as you can see on slide 17, we announced our most ambitious sustainable packaging goal to date, 30% circular plastics used across our fast moving consumer goods packaging by 2030. This is an increase from our original target of 10% and includes both recycled and renewable materials.
Our new 30 by 30 <unk> aims to get natural resources multiple lives and introduce alternative renewable resources as the energy industry continues to pivot to recycle and renewable resources.
We will meet this new goal through our leading access to innovative material streams agility in our manufacturing capabilities and our continued close customer partnerships, who count on us to deliver innovations for the future of the world.
We look forward to continuing to lead the way in driving innovation sustainability base growth and announcing many more opportunities over the next several years.
In summary, we have delivered outstanding results across the portfolio in all financial metrics. All in spite of an inflationary environment, coupled with supply chain and labor challenges, we delivered on our strategic goals to drive organic growth, 4% for the fiscal year on top of 2% in fiscal 'twenty and improving our balance sheet lowering leverage by $5.
Two within our stated range to three eight times.
These results are the byproduct of our continued focus on growth improving our strong balance sheet and designing products with sustainability in mind and.
And finally, with our consistent and dependable end markets, our leading cost position along with substantial capacity to invest in long term steady growth. We're confident in our ability to achieve consistent low single digit growth through our customer link capital investments along with active portfolio management that target continued expansion into both.
Faster growing end markets and regions.
Thank you for your continued interest in Berry at this time, Mark and I will be glad to answer any questions you have.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question press, Japan, These stand, though to compile the Q&A roster.
Your first question comes from the line of Anthony Pettinari from Citigroup. Your line is.
Good morning, good morning.
Tom or Mark is it possible to parse out the 2% volume growth guide for 'twenty two across the four segments segment, maybe Directionally directionally.
Yes, we typically wouldn't give volume guidance by.
By segment, but I would say generally.
We're obviously long term expecting all of our businesses to deliver.
Long term.
Low volume excuse me low single digit volume growth.
Next year, there may be some pluses and minuses just those things recover from the pandemic and some of our more industrial businesses, but over the long haul, but all should be.
Low single digit volume growers.
Okay. Okay.
And then.
In terms of a resin assumptions embedded in the guidance for 'twenty two any additional detail you can give there and just.
The general inflation and supply chain headwinds you've seen this year do you expect those two to <unk>.
These continue or get worse, any kind of any general thoughts there.
It's made we've kind of taken for granted probably as an industry have been dealing with these types of challenges at almost 18 months now and it certainly came to a crescendo.
Here in fiscal 2021, but we assumed resin at the close of October.
And so it's a it's a conservative guide in that regard and clearly we continue to see all aspects of the supply chain continue to.
Find ways to improve reliability and supply continuity and.
And we would anticipate that that would continue to improve.
Each quarter throughout the fiscal year going forward.
Okay Thats helpful. Thats helpful. Mark You also asked I think you also asked about resin maybe at the beginning of the question.
We've assumed kind of current pricing, which October is.
Settled november's, yet to settle and October was the first.
Month, where we saw our primary materials start to rollover that being predominantly polyethylene and polypropylene resin. So we'll see how the year unfolds, but our guidance assumes current pricing.
Okay. That's helpful I'll turn it over I'll turn it over.
Your next question is from George Staphos from Bank of America. Your line is open is open.
Everyone. Good morning, Good morning, Andrew there's an echo on the line from the analysts.
Apologies if you can hear me so well.
I wanted to go to slide 10, and 11% 11, Tom and Mark and Mark.
Put up terrific performance.
Certainly versus peers peers over the last.
Really better part of it is part of a decade since you're a public public.
And if I look on slide 11, 11, you are now adding back back the amortization from acquisitions.
Which a number of your company.
Some of your peers do.
Now that peer set set also has very specified fide value return return criteria to investors, both in terms of buyback and dividends dividends.
Can you outline for US now now given the performance in 'twenty, one and over the last decade, which has been very good very good why you don't have specific targets right now.
Dividends on buyback back what are you looking for in terms of leverage leverage.
To get to that point point is there some risk factor that you are.
Justin for in terms of your value return targets target how would you have us think about that asset and at a minimum.
Youre counting.
You're.
Looking for share count around $141 million in your guidance guidance, which is up from from the $1 38.
In the last quarter or can we at least expect that youll try to buy back the dilution Lucian in fiscal 'twenty to 'twenty two.
Thank you.
Thanks, George I'm sure Marc will want to weigh in on this as well, but clearly we do have a long term capital allocation strategy. It is purposely.
Designed to be both flexible and a return based strategy.
First and foremost we were and we're pleased that as an industry leader.
In terms of cash flow from operations in the one seven to $1 $8 billion range. It gives us a lot of flexibility.
And first and foremost, we prioritize our organic growth investments as a priority.
And in our view there is no greater way.
The stand behind the strength and value of our company and by organic growth investment.
Delivering growth in 2021, 2022, and we clearly expect this to be our third consecutive year.
Both.
In 2022, our pipeline is exceptional.
Our opportunity to expand our business in emerging markets in targeted markets aligned with our customers' Similarly, what you saw with our collaboration with Wendy's is unmatched in our view and we're going to continue to bolster that.
I will also state we are just now at the very top end of our range.
We've noted portfolio management, both in form of acquisition and divestiture, we primarily have focused on divestiture.
And granted given the fact of the unpredictable nature of that category. It provides us more opportunity.
To further either reduced or leverage or opportunistically take advantage of buybacks.
Given that we already have an existing repurchase authorization of $400 million and that's clearly how we're thinking about capital allocation. We think its prioritize the right way around a return base focused and we think long term it will deliver the best opportunities for our shareholders, both near term and long term.
Yes on the returns part of that George I mean, we certainly are.
Honestly measure returns across all of our investments you can see the results. We've delivered strong returns return on capital of 14% 15%.
The last couple of years.
While that's objective and certainly obviously they have assumptions on them. When you calculate returns and risk is obviously something that is considered when you evaluate returns in more projects to investment and whether or not they're organic inorganic.
Or returning capital so all of those things are considered when we evaluate our options. We're fortunate as Tom said that we generate a lot of cash and we've got a lot of great options to drive.
Returns for our shareholders with respect to your I think you also asked about share count, yes, we recognize that with a conservative assumption.
And our guidance and we also obviously have the opportunity to drive that down if the company chooses based on.
Share repurchases.
Okay.
Just a quick one and I'll turn it over would it be fair to say that you would put M&A M&A.
Head of value return, given where the shares today today, and how would dividend dividend fit at all it sounds like sounds like buyback would be how you return value to shareholders or holders.
Most over the next 12 months, thanks, guys and good luck in the quarter and the quarter.
Yes, I mean, obviously, where we are.
<unk> committed to staying in that range of three point out at $3 nine were at the top end now.
Three eight were excited that we got the company back in the targeted range.
As we said in the prepared remarks, we've got a flexible return based approach.
Approach.
And we're fortunate that we have a lot of options, but we're not prescribing a fixed amount to any one particular category. Obviously some of those are.
The opportunities are unpredictable, whether or not there's going to be M&A available at the right.
Valuation is hot.
To the term.
I'll turn it over thank you for thank you.
Yeah.
Your next question is from Ghansham Panjabi from Robert W. Baird and company.
Your line is open.
Good morning, everybody.
Just in terms of the supply chain constraints that you touched on in your prepared comments can you just give us some color in terms of what exactly caused you a timeline to recover that for that and then on the price cost mismatch of $66 million from the fourth quarter order. How do you how should we anticipate that evolving through your fiscal year 'twenty to 'twenty two.
We would anticipate being essentially price cost neutral by the third quarter of our fiscal year.
Ghansham.
Great great.
That's probably a flat resin.
Ghansham as we said earlier.
Understood and the supply chain can space constraints.
So like I said, they've continued to get better the resiliency of our team we've enabled the opportunity to source material now from now on a more fluid way from different geographies around the world We've continued to expand.
The number of qualified materials that we have.
We are not relying heavily.
To a large extent, where we can control imported goods, we're serving our local markets with with.
With local supply chain and that frankly is an advantage given the proximity of our locations to our customers.
It really delivers at a surety of supply, which is which is we believe it's the right model for us going forward.
And we're excited about that.
Okay, and then on the circularity component that you outline to 30 by 2030.
How do you see the various buckets kind of playing out between mechanical.
Chemical and recycled resin chemically recycled resin resin versus versus Bioplastics. So how do you sort of envision that that constituency. If you will relative to that 30% you have led light yes, it's no one solutions.
Not going to win the day, it's going to be a combination of really all of them.
Pretty well balanced.
Significant investment in post consumer recycled materials with strong investment position throughout Europe.
The advanced recycling communications that we've made the commercialization that we have made are similarly going to potentially provide very large scale ability to reduce plastic waste to incorporate materials that are otherwise difficult to recycle and ultimately.
Abide Virgin like quality from those from those outputs and the bio based materials.
Our right behind that and we continue to incorporate those.
In solutions and I think they'll continue to evolve I think the biggest takeaway is that we felt early on that our number one role was demand creation.
Closely followed by education to drive that demand.
And you can see it with the type of commercialization, we're able to announce the type of collaboration that this has enabled it's real and the reason for us ultimately expanding to 30 by 30 was based on the pipeline of opportunity that we have as a company.
And I couldnt be more excited about it and it's something I think is going to go a long way towards helping address plastic waste, which is something that we've been passionate about for quite some time.
And not cause the consumer to have to compromise for less effective packaging schemes.
Okay perfect. Thanks, so much thanks, so much.
Your next question, Jason <unk> from RBC capital markets. Your line is open.
Great. Thanks for taking my question.
I guess I just wanted to understand.
The resin price cost impact it looks like this quarter it was a little bit more outsized.
Normal or what what you would've expected.
You called out kind of the $66 million, but when did that really materialized I mean did that materialize and say September timber and now that we've seen October.
Settle lower is there is there an opportunity now to regain that as you go through the year or if prices do come down and the resin side would you have to give back all the prices that you put out.
Thanks.
Yes, sure so yes.
Certainly as RASM has gone up I think polyethylene for like 18.
I don't think it has gone down for 18 months in the U S until the October move if my Memory's right, but yes, certainly we've built up a significant lag with our customers on RASM.
And as that moderates and we would get that back and to the extent. It goes down we would recover some of the negative lag that we experienced on the way up I'd tell you what the acceleration was more than the other purchased items.
Our other inputs.
Things like pallets.
Liners colorants boxes.
That inflation doubled.
From the third quarter so.
Just as there is a lag in recovering RASM theres a lag in recovering those other raw materials and so there was.
Step change in the cost of inflation you saw our total inflation go from $500 million last quarter to over $700 million in Q4.
We're committed to recovering as there is just the timing lag that Tom said I think in the prepared comments, we did a great job of passing it through.
We just got more work to do.
Got you. Thanks for that and then and then if we think about free cash flows flow. Similarly.
You are guiding for that.
Wide range likely you can understand since you're just starting the year to year, but assuming that Raj do do moderate.
Progressing through 'twenty two two.
The main swing factor that would push it at.
The upper end or is there volume price cost considerations that we should also.
Keep in mind keep in mind.
No no I mean, yes, certainly price cost is probably the biggest mover relative to the low end and the high end of the range I would agree with that.
Okay. Thanks, Okay. Thanks.
Your next question is from Adam Samuelson from Goldman Sachs. Your line is open is open.
Yes, thanks, good morning, everyone everyone.
Good morning.
First question.
Clarification on something that's something that came up in the prepared remarks around HHS has seen the mix benefits benefit.
It seems it seems that if I heard correctly $40 million million benefits for the year, which are which sort of implies that that flipped to a pretty notable headwinds in the fiscal fourth quarter and I just wanted to I just want to clarify if that's actually correct in racks and make sure I'm understanding kind of how that how that has evolved involved and what the expectation is for the for fiscal 'twenty two.
Thank you.
Yeah, Chris it's Mark.
Turning to the confusion on that so the mixed benefit started in fiscal 'twenty started in Q3 fiscal.
Fiscal 'twenty.
And so we had about $50 million.
Fiscal 'twenty and that number was about $90 million in 'twenty, one so year over year as a $40 million.
Of the total kind of mix benefit.
Was $90 million in 'twenty $150 million in 'twenty, so the year over year is $40 million.
Sorry for the can right right.
It didn't operate it did moderate somewhat in Q4 relative to what we were pacing in Q3.
Okay, and as you think about that and what that is.
22 guide just what is assuming let's assume there.
We've assumed that that virtually all of that.
Has gone into 'twenty, two obviously, there can be some upside to that.
But we've got a concern we've conservatively guided too.
So very little benefit in 'twenty two.
Okay. Okay, and then again on the guidance just to clarify you talked about price cost and getting getting recovery for inflation lesion.
It would seem that fiscal 'twenty two guide assumes kind of a net neutral price cost balance balance where you are already high.
Coming out of 2021, so is that conservatism on just the pace of peso.
Inflation and price recovery or are we missing something that it's something that.
It's exactly what we just talked about so the inflationary recovery is being offset by the Covid mixed benefit.
And so theyre netting to a very small number.
Got it okay. That's very helpful. Thank you. Thank you.
Your next question is from Chris Parkinson from Mizuho. Your line is open is open.
Great. Thank you very much thank you very much.
So not necessarily on.
Segment level, but there had been a lot of moving parts heading into 2022.
But if you can update us on your thoughts on H N. W. W E Commerce, and food safety outlook and how that flows into your aggregate, 2% growth outlook that would be very helpful very helpful.
In general all businesses, we expect.
With.
To deliver low single digit growth, that's how we built the business over the long haul no doubt, we're going to have headwinds in the HHS business given the amazing comps, we're facing from the prior year.
But based on the capital investments that we've made and we've been continuing to make throughout the pandemic we.
We feel very good that in the back half.
Be able to see a recovery.
Because these are all customer linked investments that we're making.
The capital projects alone are going to generate over $400 million of growth in 2022.
Heard the investments that we're making certainly in the foodservice space.
That is all driven by the amazing demand that we're seeing.
In our cleared drink Cup solution.
And that ultimately being translated potentially to other large <unk> inside that space.
Strong foodservice is also complemented by what we have seen is a trend that continues around more at home food consumption, which is a plus.
Similarly at the end of our fiscal year and beginning in 2023, we have the benefit.
A number of capital investments that we've previously articulated $70 million line in healthcare in China to support our HHS health.
Healthcare business already in place biopharmaceutical investments to support that space of whites line in North America as well as Europe.
And.
Ongoing business had very strong to support engineered materials in E Commerce and building construction.
And HHS as well our CPI business.
We continue to see foodservice and beverage strength in emerging market growth. We did have some weakness in industrials in CPI multi multi most driven by supply chain challenges in our end customers not having access to materials that we believe will continue to mitigate over the course of the over the course of the fiscal year.
That's very helpful.
As a follow up just given the effort polypore polypropylene recycling coalition.
Been hearing a lot about it for what it's worth what else needs to be done to improve overall circularity and then the overall breadth of the opportunity in which you highlight on slide five it seems like Theres a sincere goal amongst U lyondell is a few very large customers customers, but what else really needs to be done to make this financially material.
Ill and improve the opportunity. So if you could just hit on just how this fits into the long term profitability.
Profitability outlook that would be very helpful. Thank you.
I think what you should what you should take advantage of <unk> is that.
Barry increasing its objected to 30% by 2030 is that is correlated to the demand creation that we're enjoying whenever there is demand it helps reduce the risk on capital investment in terms of a return and our job continues to be continue to educate continue to drive demand.
And good things are going to happen in terms of the amount of capacity that is made available to the marketplace and it's no different than electric car. If you listened to the electric car pundits and talk about the expansion. They say electric cars will expand once the infrastructure to support the kidney.
Electric cars, ultimately develops and no different as we continued to develop the infrastructure to support recycling.
And recovery the opportunities use these advanced technologies to promote circular <unk> growth and ultimately allow us to decouple from fossil fuels is in front of us.
Okay.
Thank you. Thank you.
Your next question is from Karl why term Deutsche Bank. Your line is open is open.
Good morning, Thanks for taking the question. The question I wanted to focus on some of the non material inflation.
What are you guys doing in terms of units.
Out against Labor Transportation are you able to go out with any material price increase we saw this on has that resulted in increased churn.
Is there any opportunity for maybe optimization in the business just any thoughts there thoughts there.
We continue to find ways to automate and continuously improve our operations the core competence of what we do and you can see it as part.
Our capital allocation program in terms of labor we've incorporated.
Any any type of anticipated inflation in our outlook.
For 2022 and in our guidance in each geography is unique.
Each geography has a different labor market across the 295 sites that we that we service. So we treat those all individually.
To make certain that we can be an employer of choice in the geographies that we serve relative to other raw materials no doubt about it it's probably been and it will probably the last piece to recover and we yes, we have been able to go out to customers with out of market.
Increases based on our stance, which throughout the pandemic has been make certain that beyond anything else first and foremost focus on service and deliver to our customers and then we'll come back and we can worry about the pricing we've been able to actually go out and recover some of that inflation that we've incurred based on the service that we have been.
Able to provide our customers those supply chain stimuli are beginning to mitigate and to your point seeking out alternatives using our background and know how in material science ultimately reformulate had been some strategies that we've deployed to get that done yes, I would just add look.
While nobody likes inflation and we're doing everything we can.
Mitigate the impact we remain committed to passing it through and I'd say competitively again, while we don't like it probably actually helps us given our scale in proximity that customer locations right. So the extent freight cost or a higher percentage of.
The cost of the products are uniquely closely positioned.
<unk> customer locations puts us at an advantage. So you asked about churn I wouldn't say that.
We have seen any increased level of churn in fact, I would say if anything it's it's decreased over recent years.
I have to add to that throughout the pandemic and now the pipeline of growth opportunities and capital investments, we can make linked with customers to grow our business has never been more robust than it is right now.
And as Mark said, we are 100% committed we will offset the inflation.
And at the same time continue to bring value to our customers but.
I am very bullish on.
The long term outlook for our company relative to growth the way we've operated way we served in a way now that we are collaborating with customers.
Ultimately not only allow them to meet their growth objectives, but also their sustainability objectives at the same time.
Got it and then on alternative resin as you move more and more towards using recycled resin or alternative residential is the pass through mechanism. The same as it is with Virgin resins in resin or do you expect that these restaurants might be a bit more volatile given that the market isn't as established or maybe you're looking to kind of shorten the lag for these specific.
Type of resin type of resin.
It's a fair question the unique thing about the.
<unk>.
PCR base the advance recycling in Biobased materials is that Theyre typically incorporated a lower percentage of the overall volume up for the substrate.
So while in some instances those materials have a higher cost, which similarly are tied to the same types of indices that we have on our on our base materials.
It's a lower percentage of the overall product costs as these technologies become operationalize you will see the percentage of the content grow overtime.
Got it I'll hand, it over to I'll hand, it over.
Your next question is from Andrew Steele from Morgan Stanley. Your line is open.
Alright. Thanks, Thanks for taking my question just wanted to.
I guess on the.
Circularity and then some.
Of the agreements that you've been signing.
I guess I was just could you give us a little bit more color as to the structure of the integral elements currently how they will how you kind of expect them to evolve in terms of.
Becoming a full contract.
As we think about the technology kind of proven itself out.
From from whether its pilot plants kind of full scale.
How should we think about sort of barriers.
Yes.
Two two.
Product product.
At one point, it's actually kind of fully contracted.
Okay.
It's a mixed bag, it's either at a minimum tied to a letter of intent if not a contextual contractual formal agreement.
Our commitment is proven and demonstrated based on the commercial applications that we continue to market.
This isn't just a headline for us in our marketing campaign. This is something that we're delivering with major brands around the world, whether it's mono lays conagra Wendy's.
Just to name a few so we're demonstrating that these are viable technologies in the marketplace and I am wholly anticipate will continue to drive more demand and thats. The objective as a leader in this industry and a thought leader around sustainability. The more we can do to create demand.
Later, the likelihood is that larger scale facilities get built and operationalize, which brings down costs makes it more widely recycled creates the demand for the recycled content, which promote the development of the infrastructure. So we are we believe we're an integral part.
This and driving circularity, and we couldnt be prouder of how the team is ultimately asking around the world. Both in terms of its affiliation with the necessary alliances to drive and promote the circularity the infrastructure development as well as the demand with our commercial organizations.
Understood very helpful and then going back to the raw materials. So I just wanted to clarify something.
In terms of the EBITDA guidance to the higher end.
Range.
I assume some raw material.
I guess, a normalization in terms of prices prices and as as we look at.
Our consultant and data for polyethylene and polypropylene they have that kind of year over year kind of a mid teens to high teens decline in terms of prices prices.
Is that embedded in the higher end.
Also as you think about kind of our sourcing currently are you operating any differently in terms of maybe deferring some purchases or running lower inventories or anything or anything.
As we think about the potential to buy at lower prices.
Hey, Jonathan.
Yes sure he as we said the guidance assumes.
Tober polymer prices so to the extent there is any change going forward that would be.
Modification to our guidance.
With respect to inventory as you know our number one priority is servicing our customers, but we want to make sure we've got adequate materials.
Products to serve our customers.
That's really our focus.
Very helpful. Thank you helpful. Thank you.
Your next question is from Adam Josephson from Keybanc. Your line is open is open.
Tom Mark Dustin Good morning, Thanks, very much for taking my question I guess my question Mark just on volumes given that it's worth more than halfway through the quarter can you provide any update on just volume trends thus far.
What you said about the first half of <unk> being flat to down.
Should we expect to see.
Gradual progression upward through the course of the year in terms of terms of the volume numbers just given.
Given the comps last year last year.
Yes, I think the last part of your question is the right way to think about an item we would expect volumes to improve over the course of a fiscal 'twenty two for the reasons that I think Tom mentioned earlier.
'twenty, one we started off 7% and 5% growth.
December and March respectively supply chain challenges continuing to abate and the new capital that we've got.
Being implemented obviously we spent.
Significantly more capital this past fiscal years.
We've got plans to even grow that more in 'twenty two so as those projects come online.
With custom.
Customer commitments behind them, we would expect the volumes to build over the course of the year.
Yes.
I appreciate that Mark in terms of on previous calls you've occasionally given expected EBITDA weighting first half versus second half and half, but just given that you are calling out this is.
A year or two has can you just frame for us roughly are precisely what you expect that percentage to be versus years past is past.
Yes, I think it's pretty.
'twenty, one I think 'twenty two will look more similar to prior years Q1 is typically in the low twenties.
21, 22% of the total and then the other three quarters are 25%.
Ish, plus 1% or two.
Thank you very much again over the course of 'twenty two it would be higher in the back half.
Thank you. Thank you.
Your next question is from Josh Josh that Jonathan UBS. Your line is open your line is open.
Yeah, Hey, guys. Thanks for taking my question a question just a follow up on the Capex build for 'twenty, two two and you're really thinking over the next few years years does that level of increase further over time as you get as you have more new circularity et cetera, or is 800 kind of the right sustainable level for us to think that that will pick up.
And just related with that with that it looks like the maintenance ticked up about $50 million, maybe from how you've described earlier earlier anything to note around that around that.
And the last part nothing nothing notable.
Maybe there's some rounding in the percentages I think in the past we grounded at the 50 and this time it rounded to <unk> 45, if my Memory's right. So I think it's just rounding no change really in the level of maintenance capital in the first part of your question look I hope So I mean, I hope we continue to have.
Great returning projects with returns again, well above our cost of capital with customer commitments I think we're still in the early <unk>.
Early endings of globalizing, many of our products, where we've got advantages in certain product categories in certain regions, obviously that was a big.
Positive for the RPC acquisition, we made a couple of years ago, we're still in the early innings of that so I look forward.
Continuing to see opportunities from our teams to reinvest globally nayak of that I think is at the <unk>.
Statement to the strength of our relationships with our customers and the premium brands, we're doing around the world.
That integration of our global teams. It just continues to provide significant long term revenue possibilities for the company. So very excited about it be a good problem high quality.
Yeah. Thanks, that's helpful. That's helpful.
Just quickly on inventories stories, where would you say your inventory level is level and customers and just to clarify for working capital expectations. 'twenty. Two what are you assuming flat or is there any build bacon there baked in there.
We've got with respect to working capital a flat guide for 'twenty two.
Embedded in our guidance, that's our typical outlook for for the year. When we provided to the extent we have any updates as the year goes we'll we'll keep you apprised I would say with respect to.
Where we stand inventory, it's going to be.
Vary depending on product and geography in some cases, we're hand to mouth and some product categories and in others, we have been able to build.
A larger inventory position so.
Again, our number one priority is continuing to serve customers.
Okay. Thank you okay. Thank you.
Your next question is from failing young from Jefferies. Your line is open is open.
Good morning, Tom Mark This is John until sale.
Wanted to first start off by commending you on the progress you guys have made.
The advance recycling.
And I think as an industry leader for the plastic industry, but I just wanted to touch a little bit more on the financial implications you've talked about it a little but in terms of the contract.
Your suppliers and how will you match up.
Your customers are they are they pretty well matched in terms of timing on the <unk>.
Pass through mechanism and then.
Thinking about the margin profile for some of these products.
The higher <unk> bio.
Et cetera, as you're increasing percentage within the products that youre, making.
Are they coming in at higher margins than some of your current products.
Figured there would be some kind of Alaska Anthony on the MPC side.
Compelling deal.
Circularity of plastics and seen that on store shelves.
But are you seeing that actually materialize right now or is it still too early too early.
I think it's.
I'll start with the demand across the.
The markets that we serve.
In consumer packaging, North America consumer packaging international.
Sustainability continues to be.
Mainly robust.
Remind you there publicly communicated well we've been working with some of the leading brands that have the ability ultimately to past any type of incorporated inflation.
Tie tie to that content along.
But again, because it's been introduced as a percentage of the overall substrate.
Mutes the impact somewhat.
Yes, we do have <unk>.
Different with different suppliers different.
Agreements in terms of the resin pass through many of them are traditionally built.
And reviewed on a regular basis I'll remind you.
We provide a vehicle to allow these companies to help scale this new and innovative technology.
Building to be an anchor customer as part of that allows them to ultimately increase their capex investment and increase the size and output of those facilities and we think thats an integral role for us.
It is.
Absolutely have complete confidence that you will continue to see increased use and expansion of these materials and they will incrementally grow over the next several years as the capacity gets increased and the scale gets operationalized as its operationalized youll start to begin to see over time more of an equilibrium.
In between of Virgin based material and a recycled stream and it would ultimately over the long term allow more companies to decouple ultimately from fossil fuel.
Excellent and then just to follow up on that.
<unk>.
Now can you made with pure cycle in some of the others Borealis Repsol.
What kind of due diligence are you doing on the <unk>.
Thanks, Kevin.
What goes into it in terms of.
Is it just based on your needs from polyethylene polypropylene that type of revenue or is it.
Actually checking and seeing how well they can scale up their operation is it location.
Brian.
How are you kind of determining.
Good to know.
In the U partnership, but presumably.
Listen I think we've been very vocal that we want to be a leader in that and so we have the ability to have those those investments introduce to us early on and we would do our due diligence as we would any any capital investment or any acquisition. We toured facilities meet with management understand ultimately want.
Their level of technology know, how or what their scale ambitions are to expand the technology and knowhow geographically, where they reside versus other locations that were actually going to produce the product all of those are factored into the analysis.
Excellent I'll turn it over thank you for thank you.
We are at the hour limit. The final question I just have one question question.
Your next question is from Mike <unk> from Barclays. Your line is open.
Great. Thanks, guys.
I just wanted to ask on the shift in guidance on EPS from EBITDA, maybe you could just flush out.
By email.
The right time for the company to do this and Relatedly I think historically annual incentive comp was largely driven by an adjusted EBITDA target. So when we see the crops can come out shortly should we see that shift moving forward.
Sure.
Yes, sure I think the EPS is just simply to align to peers.
And with respect.
EBITDA obviously that's.
That's the starting point for EPS, so certainly.
It's the largest driver of our.
Of our earnings.
So still a very important metric relative.
The company's performance.
Your next question is from Mike <unk> from service since your line is that the line is open.
Thanks, very much guys. Just one quick question, you mentioned that inflation doubled in fiscal <unk>.
Related to material items.
Pontoon liners colors.
The time period in which you can recover those items I believe but I would tell you to try to improve your contracts with your car units you can cover increasing cars sooner sooner so given given the rapid rise in those important.
What's the point.
I will probably want to what are you looking to rework your contracts with your other suppliers relative to a loss of $12 three.
Okay.
Yes on the other raw materials. It really is a mixed bag and to be Frank we've been.
Pursuing price active in Austin.
Relative to recapturing that inflation. During these periods of time when you have instability in supply chain that you've seen over the last 18 months. The primary objective for the customer often is supply first and foremost and everyone's dealing with that and when we talk about supply chain.
Not necessarily just on a variance in some instances certainly like we saw in our CPI organization in Europe. It's the fact that the end users themselves could not get the components to pour the required materials that they are purchasing from us are in the United States a component that would ultimately allow affiliate line to fill a prescribed material they may not need the.
That may or may not need the material. So it's been felt by everyone. This is this is not an area where its just from one company and other we're all in it together we're passing it on we're focused on doing it in a fair and balanced way and we remain 100% committed that we will recover 100% of that inflation would be price cost.
Neutral by the third quarter.
Yes, so our agreements are coming up perpetually for continually coming up we don't have all of our agreements on a specific date.
So they're coming up with customers on a daily weekly basis.
Your next question is from Jeff Zekauskas from Jpmorgan. Your line is open line is open.
Thanks, very much very much if it turned out that polyethylene and polypropylene prices.
<unk> dropped another 15 cents a pound over the next three months three months.
More would you earn your earnings.
Yes, I don't know that.
There's a lot of variables in that depending on when it goes down our customer agreements work differently in terms of.
The trigger point I mean, you can look at our.
Earnings through different cycles, we are pretty efficient pass throughs again, there is a modest timing lag and again, it's going to vary by customer. So there is no. Unfortunately formulae can give you that for every penny.
Equates to blank of earnings.
Because it really depends on the timing and the grade.
The mix of business, it's unfortunately, not a mathematical.
<unk> formula that I can provide but obviously in total we experienced a lot of headwinds last year as it related to.
Timing lag and certainly to the extent that drops that will go the other way that wouldn't be a windfall concept.
How much more volume volume.
Affected by supplier shortly.
2020 'twenty.
Yes, I would say hard to again get an exact number for that I think the best way, we've looked at it as coming into the quarter, we expected low single digit volume growth.
We came in.
Minus one so 2% to 3% is probably our best.
Estimate is the impact that it had on Q4 on a quarter okay great.
Great. Thank you. Thank you.
Your next question Salvador Johanna from <unk>. Your line is open.
Yes, hi, yes so.
It'll be done.
On volume.
Again trying to understand given what's happening with the supply chain I mean as you just mentioned the 2% approximately feedback you have in fiscal Q4 before what gives you confidence.
You will still get 2% next year for the full year on average.
You've probably going to be challenged in the first part.
Here.
And secondly, just want to clarify is that 2%, including any effects from fewer days day oriented.
Apparel number how should we think about basketball that.
Yes, it's opex.
The numbers that we're providing are adjusting for the days just like we did.
In fiscal 'twenty, one when we reported we made the appropriate adjustments for the days.
We will do the same thing.
In future periods.
With respect to supply chain look we are seeing some improvement so I think that's what.
It gives us confidence and in this we spoke about it we've got about.
$400 million.
And in growth in 2002, all tied to capital investments that we've made in.
Factored in when those will become commercialized over the over the course of the fiscal year. So it's really based on those those commitments in those capital investments that we've continued to make.
Throughout the pandemic.
Great. Thank you very much thank you very much.
Your last question is from Gabe <unk> from Wells Fargo. Your line is open is open.
Good morning, guys and I apologize in advance for somewhat of a long winded question.
It's two part one is one is I am a little surprised we're not thinking about kind of the inflation that might hit the consumer next year.
In short what has been sort of your experience in terms of trade down effect on the stack.
About Donald Tin plate steel that can be up 100% next year and what that does for our costs. So the canopies or something like that like that so again, if there is any benefit or thought around that around that and then longer term. What we've seen here recently and kind of the vulnerability of already of our supply chain or the supply chain.
Particularly on that kind of steel aluminum siding side.
But some other countries may or may not choose to do to do as well as the energy intensity of those competing substrates substrates, how are your customers thinking about risk mitigation.
And cost of packaging and again, given the fact that a lot of the inflation that we saw kind of on the resin side at least what is probably more of a more weather related as opposed to what was going on again in other parts of the world just the world trying to understand I understand the cost competitiveness of.
Plastics and energy intensity versus other substrates substrates.
I'll answer it best I can but if you look at our portfolio and the diversity of it and how we're ultimately able to consistently independent blade deliver free cash flow and earnings year in year out it's really the nature of the portfolio and they are amazingly resilient and we've seen.
Previous economic recessions or otherwise or downturns are periods of diversity.
Our product categories hold up very very well. These are these are not discretionary their product that the large extent people have to consume every day and they continue to do so.
I have and we have.
No concerns about the resiliency of this growing raw material.
That that we ultimately convert that being plastics and its competitiveness versus other substrates.
I would argue it continues to be a preferred material and the markets in which we serve.
The advantages that it brings our customers.
Both in terms of some of their sustainability goals and objectives.
Light weighting.
And as I said the cost competitiveness in the future benefits in terms of engineering design.
Our most optimal with plastics as a substrate and that's you've seen us have success and we continue to believe that we will will be a low single digit grower and then some long into the future based on the robustness of the portfolio and the materials that we use.
Thanks. Thanks.
Well listen guys I appreciate all your interest in our company.
About 15 minutes past the hour and we will we just want to extend our thanks and appreciation continue to stay safe and we'll talk to you at the next call take care.
This concludes today's conference conference call.
Thank you for participating you may now disconnect.
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