Q4 2021 Rayonier Advanced Materials Inc Earnings Call
Good morning, and welcome to the Iranian advanced materials fourth quarter and full year 2021 earnings conference call.
During todays presentation, all parties will be in a listen only mode.
Following the presentation the conference would be open for questions, but instructions to follow at that time.
As a reminder, this conference is being recorded.
I would now like to turn the call over to your host Mr. Mickey Walsh, Treasurer, and Vice President of Investor Relations.
Virginia advance materials.
Thank you.
Mr. Walsh you may begin.
Yeah.
Thank you operator, and good morning, everyone and welcome again to Rayonier advanced materials fourth quarter and full year 2021 earnings conference call and webcast. Joining me on today's call our Vito Consiglio, our president and Chief Executive Officer, Paul Boynton, Our Vice chair and Marcus Molnar, our chief financial.
<unk> and senior Vice President of Finance.
Our earnings release and presentation materials were issued last evening and are available on our website at rayonier a M dot com I'd like to remind you that in today's presentation. We will include forward looking statements made pursuant to the safe Harbor provisions of Federal Securities laws, our earnings release as well as our filings with the SEC.
Some of the factors, which may cause actual results to differ materially from the forward looking statements. We may make they are also referenced on slides two and three of our presentation material. Today's presentation will also reference certain non-GAAP financial measures as noted on slide four of our presentation, we believe non-GAAP .
Measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on slides 18 through 23 of our presentation.
I'd now like to turn the call over to Paul for some introductory remarks, hey, Thanks, Mickey and good morning, everyone.
As you know I stepped down as president and CEO of the company January one and assumed the role of Vice chair of the board.
The completion of our portfolio optimization in 2021, which included the sale of our lumber and newsprint assets.
The company was able to reposition itself with a stronger balance sheet and for bio refinery assets well aligned towards the accelerating demand for sustainable bio based product solutions. This alignment coupled with strong demand for our industry, leading cellulose specialties products.
<unk> is an ideal time for a leadership transition.
As I shared my retirement plans with Orion Board of directors sometime ago. The board was able to undertake a deliberate and thoughtful search for the company's next leader.
Fortunate as defined Vito Configurable.
As an industry executive with extensive global industrial experience and a proven track record of achieving commercial and operational excellence over a 30 year career.
For specialty materials companies, such as Rohm and Haas Danaher in Ashland.
Prior to joining Ryan leaders. Most recently most recently served as an advisor to private equity on deals within the chemicals industry.
And prior to that he was chief commercial officer, Ashley a valued customer of Rainier advanced materials.
And even though I'll step down from the board in May I'll remain advisor to veto for the balance of the calendar year to ensure a smooth transition.
And of course I would also remain a large shareholder with continued interest in the value growth of Ryan.
I'm excited for our future veto.
We do have a strong vision for the company and I'm confident he's the right person to lead us into our bio future.
And so with that I mean.
Excited to introduce to you, our president and CEO Vito Consiglio.
Thank you Paul and good morning, everyone.
I am delighted to be joining you today on my first investor call as President and CEO of Rayonier advanced materials.
I wanted to begin with an overview of what attracted me to Ryan and.
And how it aligns well with the strength of the company.
Turning to slide five.
As a former customer while the chief commercial officer at Ashland IX.
I experienced firsthand the superior products and technical acumen that Rainier advanced materials provides to the industry.
As CEO for the past two months my appreciation for this is only increase through my time meeting with customers employees and visiting our R&D and manufacturing facilities.
We also have an unparalleled security of supply.
Anchored by four strategic manufacturing facilities there.
To provide the broadest product portfolio to a wide diversity of end markets.
In North America and Europe .
We have the capability to make cellulose specialities and five separate and unique operating lines, creating a significant competitive advantage.
Rainer advanced materials backbone is.
Is built upon its deep knowledge of cellulose chemistry.
Including bio based solutions, which we call our bio future.
The interest in these types of natural non petroleum based products has never been higher.
This coming year, we will launch a nano cellulose product to replace micro beads, and silica and the personal care industry through our investment in Ana Meera.
We are meeting customer demand for natural based sustainable solutions that do not harm the environment.
As we recently announced we will be making a significant investment into a second generation bioethanol plant in <unk>, France to meet the growing demand for non food based bio ethanol to support cleaner vehicle emissions in line with the European Union's mandate.
Okay.
These investments.
Add to our existing sustainable products, including <unk>, which is used to make lifestyle textiles, and kolyma paperboard, which meets the demand for greener consumer packaging applications.
We have other strategic initiatives, we are working on.
And we will work and share the details with you at the appropriate time.
Leveraging our bio refinery model is the future of Rainier advanced materials.
Throughout our 95 year history.
The company has consistently developed world class cellulose specialty products.
We also produce and sell approximately $100 million of nine cellulose products, including bioenergy.
And like no softening.
We plan to accelerate investment in our assets to further maximize the capabilities of these unique biorefineries.
And we have a great ESG story.
Our products are made from renewable forest manufactured responsibly in our bio refineries and used in sustainable industries, often as a substitute for petroleum based products.
Finally.
The company is in an improved financial situation with ample liquidity.
Strategic sale completed last year of our forest products and newsprint assets enabled us to focus investment on our remaining core businesses.
<unk> advanced materials is well positioned to capitalize on the growing consumer demand for sustainable and renewable products and as we say renewable to remarkable is reality.
Now I'll ask Marcus to take us through the financial and strategic highlights for the year Marcus.
Thank you Vito and good morning, everyone.
Today, I would like to start by reviewing some of the financial and strategic highlights for the year.
Starting on slide six.
Revenue grew 5% to just over $1 4 billion, while EBITDA for continuing operations improved by $28 million from prior year to $128 million.
The EBITDA gains were.
<unk> by strong momentum for commodity prices, including fluff viscose and high yield pulp as.
As well as solid demand for cellulose specialties in paperboard.
With the sale of the lumber and newsprint assets completed earlier in 2021.
We further improved our credit profile and provided capital to reinvest back into our assets.
We reduced debt by over $155 million in the year.
Drew our cash balances by nearly $160 million.
This cash provides the company with flexibility to further repay debt and invest in our core business.
Another key strategic accomplishment was securing double digit CS price increases.
Along with volume improvements for 2022.
Which will help offset cost inflation and drove the high purity cellulose segment.
Turning to slide seven.
High purity cellulose sales increased $40 million or 4% to $1 1 billion driven by a 13% increase in sales prices offset by a 9% decline in sales volumes.
As expected CS prices were down slightly as per annual negotiated contracts.
While we captured significantly higher prices for commodity products.
Volume declines were primarily impacted by lower productivity.
Along with the buildup of finished goods inventory ahead of the upcoming planned maintenance outages.
Volumes also declined as we drove toward a more favorable mix shift with strong demand for CFS.
In addition continued supply chain constraints impacted volumes.
Overall EBITDA for this segment improved 18 million to $139 million driven.
By the stronger sales, partially offset by higher costs.
Costs were impacted by inflation for key input materials higher supply chain expense as well as higher maintenance costs.
Turning to slide eight paper.
Paperboard segment sales improved 18 million to $208 million driven by an 8% increase in sales price, resulting from strong demand for our three-ply Kolyma paperboard.
Product for commercial print and packaging applications.
EBITDA for this segment declined 5 million to $28 million as.
As the sales price increases were more than offset by higher raw material pulp and cost inflation in our operation.
Turning to our high yield pulp segment on slide nine.
Sales increased $11 million from prior year to $136 million.
While EBITDA for the segment grew 7 million to $10 million driven by a 16% improvement in sales price, partially offset by a 9% decline in sales volumes largely driven by supply chain challenges.
Turning to slide 10 on a consolidated basis operating income from continuing operations improved $20 million from prior year.
The company effectively drove price increases across all segments with volume and mix improvements driven by the higher <unk> sales.
Input costs were significantly impacted by higher inflation, particularly with respect to chemicals wood fiber and energy. Additionally.
Additionally, reliability issues and elevated maintenance costs negatively impacted the high purity segment.
Higher raw material costs, and paperboard and overall supply chain costs also impacted results.
Corporate SG&A and other costs improved 8 million, primarily driven by favorable currency adjustments.
Looking forward to the first quarter and turning to slide 11.
We expect the strong demand for <unk> to continue.
The double digit price increases that have been negotiated for 2022 will start to flow through later in the first quarter.
Commodity prices have remained strong, particularly for fluff products.
We expect slightly higher pricing for this product in the coming quarter.
Overall in high purity cellulose, our focus is mitigating substantial inflationary and supply chain pressures.
And improving EBITDA for the full year.
However, we expect a slower start to the year as we execute extensive planned maintenance outages at three of our four facilities beginning with jesup in the first quarter, followed by Fernandina and domestically.
These outages are larger in scale and more than 50% longer in duration than our average maintenance outage.
We will be focused on investments on major pieces of equipment.
Including the jesup recovery boiler to improve overall reliability.
Turning to paperboard, we continued to see strong demand for both packaging and commercial print uses.
As such prices are expected to continue to climb higher.
Costs for this segment have also been under pressure specifically for the hardwood and softwood Kraft pulp purchased to make the outer layers of the three-ply Kolyma brand.
North American craft pumps have recently seen a sharp increase driven by supply disruptions.
In high yield pulp, we expect to recognize lower prices in the first quarter due to a lag in realized pricing.
We also continue to experience significant supply chain constraints in this business as well as cost inflation for key cost inputs.
Our corporate costs for the year are expected to remain stable subject to noncash currency and pension fluctuations, which could create volatility in the quarters.
It is also worth noting that the first quarter of 2022 is 13 days shorter than the fourth quarter of 2021 due to the timing of our fiscal calendar.
Capex for the full year is expected to be in the range of $140 million to $150 million, including $40 million for strategic capital.
The strategic capital will be focused on a few discrete projects.
Including the previously announced <unk> bioethanol plant entire test, which accounts for more than half of the strategic spend.
This bioethanol plant.
Is expected to be largely financed with low cost green loans.
The maintenance capital will also be elevated for 2022, as we focus investments on improving reliability, especially during our planned maintenance outages help.
Helping offset the capital investments are $21 million of cash tax refunds.
Expected in the year and the potential to monetize $28 7 million shares of Green first forest products valued at $39 million as of the end of 2021.
As we have previously stated our goal is to reduce net debt.
Two five times EBITDA.
Turning to slide 12, our net debt stands at $684 million as of the end of the quarter, including $253 million of cash.
Our near term goal is to drive this towards $625 million.
With cash tax refunds and the proceeds from the eventual monetization of the Green first shares.
We have enacted plans to improve our EBITDA to help us achieve our leverage targets with that I would like to turn the call back to Vito. Thank you Marcus.
Turning to slide 13.
Our EBITDA margins are unacceptable and we cannot continue to operate at this level.
The higher costs that we're incurring must be recovered and the initiatives that we undertake must drive profitable growth.
We expect to generate EBITDA margins at a much higher level than the current conditions have allowed.
Given our specialized asset base unique.
Unique product offering security of supply and technical leadership the.
The company aims to improve its cost position and generate meaningful Li higher EBITDA margins.
To achieve this we have developed a plan focused on five key areas, which I've outlined on slide 14.
We're over 95 years, Ryan has been a sustainable company yet opportunity remains for us to make this a competitive advantage.
Last week alone, we published our 2021 ESG report.
Detailing the benefits of our company and established a 40% reduction target to greenhouse gases by the end of the decade.
This combined with our recent announcements, including the ongoing investment into buy often LG to plant at our <unk> facility demonstrate the importance of.
Of this key priority.
Additionally, I also wanted to make sure that we have a workforce that represents the communities that we operate in and as open and inclusive of all ideas and people.
We need to ensure that we are getting fair value for our products and services.
As a prior customer of Ryan I know the value that we bring to the market.
We need to ensure that our customers recognize this.
As you saw on the prior slide we are increasing prices Ics products to help mitigate inflationary cost pressures and improve margins.
Additionally, since joining in January I've had the opportunity to meet with some of our key customers and I will continue to engage in an ongoing dialogue in an effort to ensure they recognize the value we provide to the marketplace.
Related.
We will continue to increase our investment in R&D and innovation driven projects.
Our investment in Ana Mirror, a producer of carboxylate nano cellulose with performance enhancing attributes for personal care and coatings is ramping up production and its newly constructed to mescaline plant.
We are looking to capture near term sales in the personal care segments.
A distribution agreement with Croda, who is a global specialty ingredient supplier to the beauty and personal care industry.
As global demand for more environmentally friendly products continues to evolve.
We are working to offer solutions from both our existing natural products and developing new offerings to meet growing needs.
We will further enhance our self help initiatives to mitigate the extraordinary inflationary raw material and supply chain pressures.
We are actively managing through significant challenges in Q1, and as such it will be a rebuilding quarter.
We are investing to improve reliability and drive down costs are for bio refineries.
Have any reliable assets lower its cost increases throughput and drive efficiencies.
Importantly, these investments also reinforce that safety is our key priority.
Operating complex industrial workplace, we're ensuring safe and reliable operations is critical.
I believe they workplace focused on safety is also a workplace focused on quality reliability and execution, which are important factors to generating value.
We have a talented and diligent team with a strong mix of skills backgrounds and experiences.
Our most recent higher Joshua Hix is our new senior Vice President of high purity cellulose. He brings nearly 20 years of business leadership experience in the chemical and advance materials industries and most recently as vice President of global Industrial solutions for Univar.
Previously he held leadership positions at <unk> solutions.
And Dow chemical.
Together, we bring a fresh new perspective to the business to complement the existing management team.
Lastly, we expect these actions to drive higher EBITDA margins to sustain the capital needs of the business.
<unk> debt and provide positive returns for investors.
We are well positioned to capitalize on the opportunities in front of us.
We have tremendous demand for our products.
We are addressing the challenges with reliability and managing an extraordinary inflation and supply chain issues.
It is incumbent upon us to execute against our objectives and grow shareholder value with that operator, please open the call to questions.
Thank you.
This time, we'll be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You may start to if you would like to remove your question from the queue.
For participants using speaker equipment it.
It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Yes.
First question is from John Babcock.
Gulf of Mexico. Please go ahead.
Good morning, and thanks for taking my questions actually I just wanted to ask just kind of following up from some of the.
<unk> comments that you guys made I was wondering if you could provide a little bit more color on what opportunities you see from an operational standpoint to improve the way that Ryan.
Perform it and then on top of that also.
The extent to which you see opportunities to further improve <unk> positioning in the market and grow from here. Thanks.
Hey, good morning, John It's Marcus.
We mentioned during our last call that our real focus is on <unk>.
Proving the reliability of our assets.
And we've got a strong commitment.
To allocate a higher level of custodial capital too.
<unk> to our operations.
And certainly running reliability is really our best lever to improve the cost structure of our assets.
To your second question.
Obviously in this inflationary environment.
<unk>.
Pursuing other self help avenues to to help mitigate inflation is important.
As Vito has mentioned we've got Joshua on the team Vito brings a new perspective.
We're actually looking at our commercial agreements and making sure we're getting fair value for our products. So so just ensuring the value proposition that we bring to our customers as being.
Barely viewed by our customers so that dialogue is important.
Yes.
Okay. Thanks for that and then.
Did one one point of clarity.
What are your customers looks like it's starting to shift some of it.
Tow production into more of a growth area, which looks like it's going to head into athleisure and I was just wondering the extent to which you can comment whether or not that new product will entail the use of acetate or not.
And also if.
So you know what whether or not you know ryan's acetate fits into that opportunity.
Okay.
Yes, certainly John there is there is there is a couple of avenues people are pursuing to get into garments.
You had mentioned <unk> before but you are right the acetate material is making into textiles to too.
Support a sustainable product in that area. So certainly we've heard of those inroads.
And certainly given our operating footprint would be well positioned to.
To pursue that kind of growth and we've also as you know have opportunities in plastics for acetate as well.
Okay. Thanks for that.
And then next just on the cellulose specialties market in the double digit increases.
But you guys announced for the year.
Might you be able to provide some color on the magnitude of what you mean by double digits and also how much was pricing up for the volumes that are that weren't contracted.
Because I understand at least a portion of our contracts had pricing negotiations for multiple multiyear period and I guess I was curious for the volumes that didn't have that.
A multiyear kind of extension.
Yes so.
Step back to our original press release in October right.
Needed a range of <unk>.
15% to 30% on open contracts and then during our last conference call, we guided that on the majority.
At that time, we had indicated for your modeling kind of take.
Take a composite of those reference points. So certainly that's where we're ending up with the outcome, where we're seeing double digit increase.
Alright, great. Thanks, and then just last question before I turn it over I was wondering if you might be able to talk about the price cost relationship for your different segments over the balance of the year.
Just given given kind of the dynamics and pricing, including the lagged effect on pulp and also.
She is pricing.
Falling and not towards the not until the kind of the end of the first quarter wanted to get a sense overall in terms of how youre thinking about price cost.
In the first quarter and to the extent that you can comment over the balance of the year.
And John you are looking for that by segment is that what you indicated if possible I mean, obviously, an overview would be would be useful, but if you could do by segment that would be great.
Yes.
Again, we are seeing continued inflation on our key material inputs, so think of wood chemicals.
In energy and energy is the one that in my view and through my lens is accelerating given what we're seeing on gas pricing.
It's been a colder winter gas pricing has come up we're obviously, partially hedged, but there's still that exposure.
And energy in Europe , given what's happening with the destabilization of the energy markets.
In Europe , and then the last area, where we're seeing inflationary pressures is in the supply chain.
So we're seeing that think of that across our segments.
If I, if I break it down a bit by by the other segments in high yield certainly there's the logistics challenge and as we mentioned pricing was down this quarter right, but youre seeing announced increases in the marketplace.
As the there's been capacity that's been deferred.
So South America, so thats, helping these price increases come across paperboard really strong demand.
So price increases in the future has been announced by by a lot of the major competition and there youre going to see the.
The impact of pulp as well right.
And lastly.
There is that inflation in our core business, but.
We picked this up from our comments the the demand and the market outlook for our CFS products is very positive, but again, it's the supply chain.
Getting it through the supply chain and any spillover volume that we had from last year would mitigate Q1 to some degree as well.
Okay. Thank you I'll get back on the chip.
Thank you. Our next question is from Paul Quinn with RBC capital markets. Please go ahead.
Yeah. Thanks, good morning, guys.
Maybe to start with the C is double digit price increase.
I take the midpoint of that.
The prior range of 15 at 30, and say Thats 22, and a half and say have happier or majority of them.
Our open and.
And you got the midpoint.
Are we looking kind of like a 12, 13% price move.
Yes, Paul it's Marcus.
That math that you just laid out resonates.
Okay, and then in terms of the sale.
Sales volumes being up what.
Time what.
What's the metric on that.
Okay.
So.
We're seeing.
Look at volume absolute tons sold.
Given the strong.
Market dynamics across all our end use markets.
That's what we're speaking to the C S volumes.
Okay. So is that do you expect that to be up 5% do you expect that to be up 10% with what's what's the quantity.
Okay.
Again, we prefer to be.
Given the challenges in the supply chain, but that's really the wildcard here, but we're seeing strong strong pull through from that from the customer side. Yes. Paul. This is we probably aren't going to get that granular on this call, but I'll tell you.
I want to compliment the team for the progress they've made its been a very difficult year, there's great upside here. So we're working we're continuing to work through the cycle of contracts and that's a primary focus for us but.
From the from the commodity side the pricing is quite dynamic there limitation pulse some of the transactions on spot or in nature. They are contracts that are in place that they're going to lag a little bit. We've got some work to do there, but I applaud the team for the efforts that theyre, making and in this environment. We've had great success in passing through the inflationary.
Cost.
That's a big plus for us moving forward.
Okay, and then maybe we can talk about.
How that sales volume is going to come in in terms of the.
Maintenance capital.
Our maintenance projects in especially heavy heavy maintenance in first half. So it is it is it going to be like a 40% volume in the first half 60% in the back half or how can you help us sort of bottom about it.
Yeah, Paul definitely given the outage in the first quarter expect lower volumes.
Which is going to drawdown that that overall average right.
For the for the first half.
Yes.
Okay.
We're going to need accordingly.
Right.
But but but certainly Q1 is a challenge for everybody on the logistics side.
And we're going to need a couple of quarters to see this through.
Okay, and then just over on Paperboard I mean, typically the way this.
This segment moves with with a high yield pulp as one goes up one goes down and in this quarter both went down.
Just trying to understand that paperboard.
Youre selling some of the high yield into paperboard.
What else how much how much crop or N b S carry easing in that.
To make that product in or another way.
Another.
Why do it.
That would be how much high yield is going into that paperboard.
So all we purchased around 80000 tonnes of craft, both hardwood and softwood.
And as you know regionally north American pricing for craft.
<unk> was ahead of China, given given the flooding issues in D C and some other curtailments in waiting of shutdowns.
So that's why you see that that disparity between the cost of pulp going to paperboard and high yield being down because mainly China where sales are.
Okay. So you're purchasing 80000 tons of craft and then you can see them in about 100000 tonnes. So the high yield from.
The paperboard.
In the range of $65 to 70000 tons of high yield.
Okay, that's really helpful.
Then just lastly on Capex.
If I take a look at your sort of base capex over the last five years is somewhere around $70 million Youre guiding to 100 to 110, what are the extra projects are you doing.
Yeah, so as we called out the recovery boiler in Jesup.
So thats a retooling of the boiler.
And as you know those are done every 20 odd years, so that's a big item.
And in <unk>, we're focused on.
Addressing the larger pieces of equipment in that mill to drive reliability.
As you know with a focus in the past and turn back days was was the number 10 boiler.
So we're deploying capital in the other areas to drive reliability.
Okay, and Chesapeake Q1 for NIM, the beach and commencing later in Q2 those payments.
Permanent Fernandina beach kind of straddles the two quarters starts in March into April right, and then <unk> as me.
It's hard for us.
October event.
Yeah, Paul as we noted earlier these are the most extensive shutdowns.
And reparations work that we've done in quite some time and we look forward to coming out of this in a good position, but these are pretty extensive and it's the work that needed to be done and we will drive us to I think step change in the future here.
Yeah, no I agree with that and anything to help the reliability, which has been pretty shaky.
G to economics, you've got a $20 million investment what are the returns on that.
Yeah, we haven't shared those yet.
Obviously, where we're early in that project, but it's an exciting one.
Paul and <unk>.
We'll share those details when we get closer to launch, but it is a high return capital project meeting our strategic deployment hurdle rates. It puts us in an extraordinary position moving forward and then we're doing the right thing for the environment.
Uh huh.
Okay.
The one I had was just in a mirror you've got a I think he's got a 44% ownership do you have an option to buy a majority position or what's the what's your expectation of the teacher for that.
No youre right on the ownership level.
That's a good level right now as we move forward and build.
Build that business playing out.
<unk>.
Right.
<unk> manufacturing facility is on the site and they're making great advances there.
That's tremendous opportunities on the work that they're doing as we mentioned in the personal care industry and we're looking forward to.
Coming product launches here with the items that they are working on there is a tremendous need right now from consumers demanding these.
Naturally based products.
And we're in a really good position there.
And Paul.
Your question on Ana merits, the 44 as the voting interest and then actually the.
Economic interest is around 48.
Yeah.
Alright, that's all I had thanks.
Thank you.
Thank you <unk>.
Question is from.
Michelle please.
Please go ahead.
Thank you and good morning, guys. So first of all on inflation I'm just.
Wondering if you could provide some more color as to how much total inflation across all your segments you saw last year.
And if you're maybe best guess how are your expectation for 2022.
Good morning Paradoxes Marcus.
For 'twenty one as.
As we guided during our last conference call. It's been confirmed we are in the high single digit range for inflation in.
And it's across our key manufacturing inputs being wood chemicals energy and freight.
And through our lens and our business planning.
We're seeing.
The same outcome based on our planning right now for the upcoming year.
Thanks for that Marcus and then regarding.
Regarding the bioethanol.
Our production plants in France now, what's the next step for it.
Is there any capex that you're spending on that.
That project.
Project as well as this year.
Yeah. So a paradox, we had said we reallocated around $40 million in total strategic and close to half would be allocated to that strategic project.
So we're working on the engineering and all of that.
Got it got it and then I think it's on the CES business you had a chip.
$12 million favorable impact related to sales of emission allowances. In Q4 can you talk about that is that something that could recur next year or this year as well or it's more like a one time.
Yeah.
We have access to those in France through our production.
Production footprint.
So yes that is a reoccurring matter.
Again, the important item to note there is the <unk>.
Pricing of those carbon credits.
Our tied to what's going on in energy pricing in Europe , as well so think of it as an offset right.
Got it got it.
And.
Got it. Thank you and then maybe just the last one besides capex, maybe if you could just walk through the other potential uses of cash for 2022.
Well.
Certainly the focus is.
The custodial capital and then the strategic capital in covering our other fixed charges being interest.
And I think for your modeling it's important to note that we've got some further tax coming in just over $20 million and we mentioned the green first shares.
And then obviously we.
We had built inventories to support these outages, we're very focused on our cash conversion cycle and improving our working capital.
Okay, Thanks, and Paul all the best for the next phase.
Career and life and Vito again, congratulations to you on your need well. Thank you guys.
Thanks, Josh.
And it's it's Marcus here just the end game.
A lot of questions on the inflationary environment.
I just wanted to emphasize that the inflation.
That we're seeing in Q1 and Q2 is is is at a higher rate, but we're very far.
Fortunate to see a stronger year based on the outlook on volumes, but.
Energy is certainly a common theme and the front end loaded our maintenance outages.
And I guess, what I would add to that Marcus is when we talk about our timing and the fundamental challenges that we will see its going to be unlike prior years in terms of seasonality.
So it is important here that we're improving and investing to improve our reliability, which we're doing that in the first quarter and the second fourth quarter, which is going to cost us in terms of the Q1 and Q2, but we're going to see huge dividends pay off on that work as we get into Q3 and Q4 and we're extremely excited about the future, where we're going and the work that's part of that process. So we look forward to talking to.
About that.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Yes.
Okay I would like to thank you again for your time today, while there are challenges the opportunities to drive sustainable value creates an excitement in me and throughout the entire Rainer advanced materials team I look forward to keeping you updated on our results.
Thanks, so much.
Thank you. This concludes today's conference you may now disconnect. Your lines. Thank you for your participation.