The Chemours Company Q1 2023 Earnings Call
Speaker 1: Pr.
Speaker 2: Good morning and welcome to the Chemours Company first quarter 2023 earnings call.
Speaker 2: All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session.
Speaker 2: To ask a question, you'll need to press star followed by the number one on your telephone keypad.
Speaker 2: As a reminder, this conference call is being recorded.
Speaker 2: I would now like to turn the call over to Jonathan Locke, SCP and Chief Development Officer. Thank you, please go ahead.
Speaker 3: Hi, thanks Julianne and good morning everybody. Welcome to the Comorbid Companies first quarter 2023 earnings Q&A conference call. I'm joined today by Mark Newman, President and Chief Executive Officer and Samir Rauhan, Senior Vice President and Chief Financial Officer.
Speaker 3: Before we start, I'd like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website, contain forward looking statements that involve risks and uncertainties as described in our SEC filings. These forward looking statements are not guarantees of future performance and are based on certain assumptions and are not guaranteed to be appropriate for future performance.
Speaker 3: non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript, plus our earnings deck have been posted to our website alongside our earnings release.
Speaker 3: This morning's call will focus purely on Q&A.
Speaker 3: With that, I'll turn the call over to our CEO , Mark Newman. Thank you, Jonathan, and thank you all for joining us this morning.
Speaker 4: Our strong performance in the first quarter is a testament to our secular growth thesis.
Speaker 4: at work and the strength of our overall portfolio.
Speaker 4: TSS and APM continue to deliver products the world needs and which underpin many strategic as well as emerging technologies.
Speaker 4: Despite the challenges faced by our TT segment, we remain confident in a gradual recovery throughout the year with improvements in margins, moderating raw material costs, and cost optimization measures implemented across the portfolio.
Speaker 4: With a strong first quarter, we are reaffirming our full-year guidance, but we acknowledge the uncertainty of the macro environment and its potential impact on the second half of the year. We're closely monitoring the situation and we're prepared to adapt as necessary.
Speaker 4: With that, Julian, let's move to questions.
Speaker 2: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. In the interest of time, we ask that you please limit yourselves to one question and one follow-up question. Thank you. Our first question comes from Duffy Fisher from Goldman Sachs. Please go ahead. Your line is open. Yes. Good morning. Yes. wg43sh radio.com,
Speaker 5: First question just on TSS with the step down or the pending step down can you go through how much the price benefit you've seen over the last year has come from the HFO side kind of the mixed shift and how much has come from HFC.
Speaker 5: just kind of you know getting squeezed on volume and what's your expectation this year in the US kind of what the market share between HSC and HFO will be for the market.
Speaker 4: Yes, so Duffy, as you recall, great question. The step down of 10% last year continues at that level through the end of this year, where there's a 30% step down. So, our view would be, there will be folks buying ahead.
Speaker 4: in the second half of the year potentially of that step down. And obviously in a market with constrained supply, that will continue to support prices. We did not expect significant year over year price increases like we saw last year.
Speaker 4: but we do expect the market to remain dynamic. And then on your question on HFO volumes, clearly volume growth in our portfolio which you saw in the first quarter is tied to both HFO adoption.
Speaker 4: as well as a strong auto OEM market, which really benefited us. So I'm going to ask Simir to make a couple more comments, but I think those are the big headlines. Thanks, Mark. And definitely the only other comment I would add is as you're going to think about the pricing, you should really think about the realization as the Kura.
Speaker 4: steps down, we think about pricing. Not just from pure just one product point of view. Think about the optimization across the portfolio. Just to make sure we can meet all the needs of the customers and really maximize on the pricing side as well. So think about an optimization problem across the product portfolio rather than just focusing on product by product.
Speaker 5: Fair enough, thanks. And then on TIO2, again, another quarter where your sell-in to customers is significantly lower than what their sell-out has been. You know, again, you go back a year ago, there didn't seem to be any TIO2 inventory in the system anywhere.
Speaker 5: So can you just kind of triangulate the math of how did we build as much inventory maybe over last summers it seems like we've destocked from the fall through today and what gives you confidence that you know or when do you think we'll get back to where you're selling and they're out is somewhat even on the t.
Speaker 4: Yeah, so, you know, the year started off relatively slowly. You know, we predicted...
Speaker 4: What we expect to be a gradual recovery, sequentially our volumes are up 1%.
Speaker 4: but down year over year. As we look at the market, what we're seeing is signs that the de-stocking is over in Europe and to some extent China.
Speaker 4: And then, you know, we're seeing a little bit more cautious behavior here in North America.
Speaker 4: with some of the recent news flow. As we look to the whole year, we are expecting a gradual recovery. Our expectation sequentially going into Q2 would be for double-digit sequential growth. But we're not sort of basing our year.
Speaker 4: on sort of a rapid volume recovery, given some of the sentiment here in North America. I'll ask Samir to comment further, but I'd say those are the main stories for now.
Speaker 4: Yeah, I think Mark, you covered all the key points. So definitely, I think as you're going to think about from the demand perspective, really, if you look into the guide, as we're going to think about the guide information, you know, TI2 is going to be a little weaker than what we thought at the beginning of the year. But from a sequential perspective, we should expect a double digit volume improvement as we get into the second quarter.
Speaker 3: as well. I mean, look, as I take a look at sequential volumes, they were just up 1%. And, you know, as I take a look at the landscape, you know, one of your large competitors had sort of, you know, significantly higher volume gain sequentially. So I'm just trying to understand, in terms of market share,
Speaker 6: globally are you guys seeing any losses? How should we think about that?
Speaker 7: Yeah, so listen, when we look at, I think you're probably referring to Tronox, so when I look at the year of a year comparison, you know, we're down 30% or 35% from last year, they're down 30%, so on a relative basis, there is some delta, I would admit that.
Speaker 7: And I would attribute that mainly to where people are strong regionally. I would also tell you that we are very focused on adjusting our circuit against market demand and being more focused on running the business for cash over the full year.
Speaker 7: And so, you know, I think we are playing our cards well. And again, as I said in my earlier comment, you know, we'll be looking for, you know, double digit volume growth starting, you know, in the next quarter. But we're very, very thoughtful about how we approach market. And then the last one I would make is...
Speaker 7: A lot of our businesses on long-term contracts, which in many cases are tied to share of requirements. So I'm quite confident that this doesn't represent a significant share shift by any means. It's really more of a regional mix.
Speaker 7: between us and some of our other MNC competitors.
Speaker 6: Very helpful Mark and just a quick question on the guidance, the full year guidance. You guys obviously handily beat the Q1 estimates and you're already sort of run rating annualized at 1.2 billion EBITDA. And I'd like to think through the course of this year, you know, demand improve.
Speaker 7: So Hassan, I think we are kind of a team that under promises and over delivers. And I think as we sat here with a good one-cue in hand.
Speaker 7: Our view was given all of the global macro uncertainties.
Speaker 7: And particularly some of the banking uncertainties here in the US.
Speaker 7: It made sense at this point in the year to be careful. I think it's with that view that we have reaffirmed our full year guide. Clearly there are some aspects in the second half which could go either way. And so I think our perspective is...
Speaker 4: There's a lot of moving pieces as Mark said from a macroeconomic perspective that we cannot reflect it into this. But overall, if you look at from the business to business perspective, as I said earlier, TI2 is probably a little weaker than what we thought at the beginning of the year. And TSS, of course, given the performance that he's drawing Q1, is going to be the better place than what we had when we gave the guys the beginning of the year.
Speaker 4: and APM generally in line from where we were at the beginning of this year. So that's all you should think about, you know, the three businesses where they were at the beginning of the year and became the guy and now when we are real creating the guy.
Speaker 4: line from where we were at the beginning of this year. So that's all you should think about you know the three businesses where they were at the beginning of the year and became the guy and now when we are really creating the guy. Very helpful thank you so much guys.
Speaker 2: Our next question comes from John McNulty from BMO Capital Markets. Please go ahead and the line is open.
Speaker 3: Yeah, thanks for taking my question. So Mark, maybe the first one was so on TSS. You know, you kind of mentioned in passing that, you know, you kind of expected some really strong men on the second half of the year going into that 2024 stepdown in HFCs.
Speaker 3: Your volumes are pretty darn strong actually in the first quarter. I guess are you seeing any earlier pull of an expected or option in some of your HFOs ahead of that step down or is this something else?
Yeah, John , I think what's driving volume, what's helping to drive volume in Q1 was the strong automotive star that we saw. Auto volumes were strong in both, you know, Europe and the US.
And so I think as we think of the full year, one question for us would be, where do auto volumes go? Clearly, the automotive companies are building cars with the supply chain more normalized.
The question is with higher interest rates, does that continue throughout the year? So I'd say, are record Q1 performance in TSS is in part driven by strong auto, but it's also being driven by continued adoption of option in the stationary side.
And then as we said earlier, strong HFCs, based on an effective AM&F gas framework working as well. So listen, as Samir said, TSS is really out of the starting blocks very strong. And we expect TSS to have a great year.
TT, I think, is starting a little weaker than expected, but with the focus on cost reduction in that business and a gradual volume recovery, our expectation would be that we could get this business back to...
20% EBITDA margins as we exit the year. So the team's really working on both the growth side of the business in TSS and APM, as well as the cost side of the business in TT.
Got it. Okay. And then maybe just as the follow up on the TSS business. So the margin snapback really nicely from from the 4Q kind of a dip that we saw. I guess when I think about this business.
Normally, one queue isn't the strongest margin quarter, just because you've got a little bit more auto, a little bit less stationary. Is that the right way to think about it? Should we be expecting the margins to push higher here, just given the strength and autos, which is a kind of a constant price degradation story, and the lack of big...
or a number of factors that made Q4 more of an aberration than pointing for anything to come. As I look at the full year in TSS, I would expect it to be somewhat comparable to our last year. Clearly, as you saw in the Cordo, our margins are down slightly year of a year based on higher input costs.
But no, I think this is a business that has top line growth.
You know in low double digits with EBITDA margins You know very attractive EBITDA margins which we expect all your similar. Yeah, thanks Mark John , I think as Mark said you should form a full your perspective look at the margin almost on comparable basis for last year
I just want to point out that in Q4, last year we had someone else, but overall if you are going to think about the Q4, we always have the seasonality impact with impact on margins. As you know, in that part of the time we have more sales in the Southern Hemisphere and some of the automotive slowdowns happen as well, which impacts at Q4 margins. But overall if you look at the first three quarters of the year, you could expect the margins to come out of it and why it can
and just also on the volume side, it seems like you came in even ahead of where auto builds were in the year and wondering, like is that a channel bill impact or anything else that made one queue particularly strong?
and how we should think about kind of the sequentials as we move through the year there. Yeah, I'd say auto is a component of the growth, but clearly as I said earlier, James, you know, there's continued adoption on the stationary side. Recall that we had told in a previous call.
as well as some of our other specialty HFO chemistry on the foam site. So the growth is pretty broad based, but clearly in terms of versus expectations, the strong auto build certainly was quite helpful in Q1. Yeah, games only on the Colorado Dagger Summary is as you can think about oxygen solutions, we are the key of unsupporting.
adoption into the first quarter. Does that offset maybe what I would think of as a normal seasonal uplift in the second quarter?
So clearly in our full year guide we're being very thoughtful here.
Not to project out Q1, you know, overage as a full-year concept. You know, we tend to, you know, stick closer to the IHS.
forecast in terms of our auto outlook. So clearly, the rate of auto bills beyond Q1 could either be a positive or a negative factor in a relative to what we would expect in normal seasonality.
Okay.
Thank you.
Our next question comes from Arun Viswanathan from RBC Capital Markets. Please go ahead, your line is open.
Great, thanks for taking my question. Yes, I have a similar question to some of those others. So first off, if you just think about C-1 in North to 400 million, obviously you can't analyze that, but Q2 and Q3, these only should be higher.
What are some of the differences this year that you're seeing that would kind of affect the normal seasonality and could you just remind us What were what was the total of save the one-time items in Q4 that led to that lower number. Thanks
Yeah, I think we've gone through the Q4 Delta's and obviously if you want to talk to the IR team they'll be happy to give you more color. I think we went through it in some detail on the last call. But clearly I think the main Delta.
that we're seeing as we start the year is, you know, Strongo auto veils in Q1. We'll see if those persist in Q2. Europe is clearly better. You know, Europe is feeling stronger as we start the year.
In the US, I think the outlook is more cautious if I could use that word. And we will see how that translates into a normal cooling season with the hotter weather in the summer. So I think as we think of the year, we'll look at...
you know, how the summer season plays out in terms of temperature that could affect our seasonality along with auto bills. And then in the second half of the year, while we would be looking for our people buying ahead of the step down on HFCs to use up their quotas.
And so that could be a positive versus normal seasonality. I just want to reaffirm what Samir said earlier that, you know, this is a very seasonal business. Q4 tends to be our weakest quarter. But as we said, Q4 last year had a number of items, including some life items that really impacted the quarter.
and which we have taken you guys through before.
Great. Thanks. And then just on APM.
You also seem to be, I guess, a little bit different from what we're seeing on the electronic side. So, even just kind of walk through some of the end markets in APM and highlight some of the areas of strength that you're seeing and maybe weakness if there are any. Thanks.
Yeah, APM is kind of a mix, well, APM is two distinct portfolios, performance solutions and advanced materials. And advanced materials tends to be, quote, unquote, more economically sensitive. You know, these are broad industrial applications. You know, where we saw some volume fade. They're also markets.
We are de-emphasizing as we free up inputs to drive the growth on performance solutions. In terms of areas of strength, our Tesla and PFA is integral to any new semi-con fab. While there is some softness in electronics, we are speaking.
There's still a lot of focus on building new fabs for high-quality load and node size chips, where our high-purity PFA is key.
And actually the limiting factor for us on both
things like PFA and Nafeon membranes for hydrogen, where again we're sold out, is how quickly we can relieve capacity and in some cases get permits to expand capacity at some of our plants. So, you know, there's kind of a push and a pull within the APM segment this year.
where the advanced materials is more subject.
to sort of macro, global macro.
which you saw in our results in Q1. And performance solutions is really tied mainly to our ability to unlock capacity, which the team is really focused on.
Yeah, and there will need a couple of other points I would add on the APM side is as we set at the beginning of the year for APM, this is a year of transition, right? You saw that in performance solution is about 20% advanced material is down 8 and advanced material is more economically sensitive business, so that's kind of reflected as you're going to think about.
overall seasonality into the year. Have that overlay of the APM transition as well, as you're gonna think about the overall guide for the full year. Okay.
Our next question comes from John Roberts from Credit Suisse. Please go ahead and your line is open.
Thank you. On your earlier comment about the regional mixed difference with Tronox and Tio 2, does that imply that the US went through a bigger supply chain correction? And would that be because the US does tinting at the stores while XUS is factory tinted? So maybe there's just structurally more channel inventory of paint that contains pigment in the US.
at this time in the year. But yes, we're...
You know, we're more represented in terms of US, the US market, for example, than the European market, which, you know, as I said earlier, went through a significant destocking in Q4 and which is rebounded nicely. So for example,
Europe has been strong for us in TSS given the strength of that economy, but we're less represented in Europe on TI-O-2 versus some of our other MNC competitors. So I think it actually has to do more with how strong Europe has come back.
And to some degree, a little bit of caution in the US. There may also be a little bit of market exposure, coatings versus plastics, for example. Yeah, John , I would just ask you to zoom up a little bit here. I think it's a lot simpler in our judgment, because if you think about it.
It's a timing issue, right? Europe went into recession much earlier and started coming back, as we said, and even in Q4 last year. So Europe has been coming out, whereas US now, where we are more exposed, is becoming more cautious as we can think about the impact of the financing markets on the construction site. So I would think of it more from a broader timing perspective rather than individual product or channel.
many times we have no major customer exit any of our major contracts.
All right, thank you. Our next question comes from Vincent Andrews from Morgan Stanley . Please go ahead, your line is open. Thank you.
Hey, guys, this is Will, staying on for business. Thanks for taking my question. I guess, kind of going back to the earlier question, you guys mentioned that the de-stoppicking you saw that took place in the media and was now largely over. Does that mean that if we get into a situation where...
the map row, kind of a weekend from here, you might still expect TI2 volume, your TI2 volume releases to increase it gradually, just to kind of get back to the equal, you know, to sell in, and sell out rate. I'm not sure I fully understand the question, but you know, I think our expectation.
incentive to build inventory as we're going to talk about in the past is lower as we either present volume commitment so I think the volume that you can see pull through from them is going to be more representative of their demand.
God, okay, that's helpful. And then going to TSS, I guess, as you look at auto builds and maybe, you know, expectations for ED reductions to be lower this year than what we have thought maybe a few months ago. Are there any differences with respect to the TSS content between ED and ICE? And would that be an incremental headwind just on the mixed sides?
Actually, so again, I think our automobile forecast for the year is tied to IHS. Clearly, we've seen really good strong automobiles out of the starting blocks.
some sense that even as we go into April , automobiles remain relatively strong. So I think actually sitting here today, that could be a nice tailwind. Candidly, as you look at the EV to ICE comparison,
EV charge size is actually larger than an internal combustion engine.
And so, you know, the increased penetration of EVs is actually a positive for our business. And that's probably something we'll share in more detail. You know, as we look at overall EV mix as it grows over time.
But, you know, car for car, the charge size in an EV is somewhat larger than an internal combustion engine where you're using a heat pump essentially to heat the cabin in the winter
Thank you. Our next question comes from Matthew Deio from Bank of America. Please go ahead and line it open. Yes, thank you. This is a letter to you. I'm looking for Matt. So, firstly, I want to ask a little bit about your margins in TL2 where...
I think they came up 11% and they're so quite lower than some of your peers. I'm just trying to understand at this point is it more a difference of vertical integration or are there any other structural changes that are leading to lower margins for for gamers and you mentioned before also that you are focused on
on close-in the titanium technology segment. So can you provide a little bit more color on what some of the initiatives you're taking here?
Yes, so, you know, clearly we're not happy with our current margins.
of the year at 20% even the margins based on both a gradual volume recovery and the work we're doing on the cost side.
Denise Dignum, who has come into the role of TI2 President.
our TT president is, you know, has a really good track record of being focused on the costs out of the business, which she did in APM. And so, you know, I think Denise and the team are really focused on how we drive that business forward.
The other thing I would tell you is we're clearly adjusting our capacity to be more in line with the volume in the market, with the focus on running the business on a full year for cash flow. So I tell you, I don't know if margins are always comparable.
margins were not happy at the 11% level.
and the team under Denise's leadership is focused on improving the margin as we move through the year with a target to exit the year of the 20% EBITDA margin.
Perfect. And as I follow up, I want to ask a little bit about your agreement with DC Energy on a couple of green hydrogen plants. If you can provide a little bit more detail regarding the investment size, the size, I guess, of electrolyzers, the hydrogen capacity and...
Just trying to understand the will all of this hydrogen be used by chemors to kind of decarbonize your own products or do you see yourself participating in selling green hydrogen to others as well.
So first of all we're very excited about our role in renewable hydrogen. We think...
that has a huge role in decarbonizing economies around the world. And we want to lead by example. So we're working with TC Energy as another member of the Arch2 Hub application. This is a demonstration hydrogen project.
in West Virginia, where TC energy is a partner. And what we've agreed with TC energy is, we'll be a partner, both in the supply of naphion membranes for the electrolyzes to be used at those facilities. But we'll also be using at least some portion of the hydrogen generated at these facilities that are the products from around 3 stms, so it's okay Yann Romance.
a path to achieve a 60% greenhouse gas reduction, absolute greenhouse reduction by 60% by 2030 through a number of initiatives including this one at all of our plants. So we're very excited about this project and the MOU we've just signed with TC Energy who is a partner. For more information visit www.cctexas.com
in the Arch 2 Hub submission to the DOE.
to have submission to the DOE. Thank you very much.
Our last question comes from Lawrence Alexander from Jefferies. Please go ahead. Your line is open. Good morning. You mentioned the potential pull forward in refrigerants ahead of a stepdown. How much of an impact do you think that would have on your volumes after the regulation change?
So, you know, we'll have to wait and see Lawrence to see, you know, what kind of summer we have. I think my sense is, and we've indicated this on prior calls, is that the step down...
is likely to generate some level of buying activity as people so to look how much of my quota have I used up in the year again based on how much demand there is this summer, how much do I have remaining?
and using that up towards the end of the year. Clearly in a market that's restricted on volume based on a quota, that could drive more robust price in the second half. It may also have some impact.
on seasonal demand patterns.
throughout the year in terms of HFC demand as people look at their use of quota versus actual demand in the marketplace. So we will have to wait and see, but obviously net-net it is a favorable impact on the business ahead of the step down next year.
Great. And then can you give a thanks for how much, you know, between where option is now, in both the mobility and stationary applications and what you see is like pole market penetration, where it's just a growing in line with GDP. How much of a step up in the EBITDAG effect?
before you get to like this trend growth. Yeah, Lawrence, I wouldn't step away from our sort of long-term guide that we gave in our investor day. This is a, you know.
high single digit top line K-Gur.
with even greater than 30%. Clearly, as we said in this call, we're expecting overall margins to be close to where they were last year on a full year basis. But our long-term guide would be with that in mind.
Yeah, you know, Lawrence, it's a great question. We obviously believe that floral polymers are essential for modern living.
but are also key to the new economy. Whether we're talking about high speed data.
We are also expanding our Teflon PFA line in our Washington Works plant in West Virginia, which by the way, we are the only PFA supplier in the US, so if there is a US on-shoring of chips, we are key to that whole activity. So listen, the investments that we have announced today are both in Teflon PFA as well as the hydrogen facility, which we would like to site in Villiers-Saint-Paul in France.
And we continue to be focused on those near-term opportunities. But the teams also very focused on debotl-necking a number of our plants. Again, whether it's demand for materials on the EV side, we're really focused on the growth in our performance solutions business, which as you saw in the quarter was up 20%.
And really subject to more of our ability to bring capacity online more quickly. Interestingly, performance solutions was 31% of the portfolio last year. In this recent quarter is 39%. So that higher cager is making the APM segment a lot more specialized as we move forward in time. And candidly, when I look at our TSS and APM business,
I really would agree with the sentiment that our multiple doesn't reflect the power of the earnings of those businesses over time. So we are very excited about where we go from here and the team is very focused on delivering.
And I guess if I may just, would you be looking to expand into novel formulation, chemistry and market? Or is it more just, you know, because you have such significant growth opportunities in the market that you're already in, is it more just the matter of trying to keep up with that demand curve?
Yeah, you know the team is really focused on where we can add more value.
in sort of adjacent applications or provide more value in some of our downstream applications.
Obviously, we're very thoughtful about, you know, potential channel conflicts, but, you know, we think there's real value in understanding how the chemistry works.
from all the way back from the monomer right through to the end application. And some of these are, for example, manifesting themselves in joint ventures. So we did a joint venture with Fumatec.
in Germany on fuel cell membranes where we have all the supply chain, we have all the chemistry from the monomer forward, but they have a lot of expertise in membrane capacity, so we are working with them on that.
Yeah, Lawrence, this is me. The only one thing I would add is as you kind of think about the growth in that business is, you know, we had a big change in strategy and the Denise when she had laid out the APM business. Effectively, it's going to be market-led innovation. We have some very unique properties that are material supply.
and as you're going to think about the market needs, it's going to be market-led innovation that's going to drive the growth of business. Okay, great. Thank you. And we have a follow-up question from Matthew De Yo from Bank of America. Please go ahead. Your line is open. Thank you very much. A couple of last questions since we have some time. The first one was in the TI02 segment. You had previously mentioned that you see Bdavu, BC, who kind of has a worst-case scenario of 500 million.
And just given the current outlook to what performance I'm wondering is still the case that you're targeting at the mean 500 million for 2023? Yeah, this will be it. I'll take this one. Yes, we stand by the number that we had in the past. We have given all the changes and the market dynamics that we had in the business.
You know, the trough should be 500 issues. How are we going to talk about? Okay, perfect. And the second one is in your ATM, what you're talking about, higher production and raw material cost. Can you provide a little bit more color on the inflation you're seeing there, both in terms of what level of inflation also?
what categories, what raw materials are still going up? Yeah, this is me, I'll start in market and add color. You know, overall, as you're going to think about the inflation side, it really depends business to business, right? Because they all consume very different raw materials. So it's, I won't generalize over the top. But...
The comment I would do like to make is, as we laid out in the script as well, is as we progress through the year, we expect the inflation headwinds to moderate and that should really help drive the margin as well and that's reflected in how we can think about the TT margin recovery as we go through the year. So overall, the headwinds are moderating quite a bit as the supply chains have eased.
make is as we laid out in the script as well is as we progress through the year we expect the inflation headwinds to moderate and that should really help drive the margin as well and that's reflected in how we're going to think about the TT margin recovery as we go through the year. So overall the headwinds are moderating quite a bit as the supply chains have eased. Yeah.
Now clearly I'd say, you know, energy and, you know, to some degree, or we're seeing, you know, prices have already rolled over significantly. And as we look to the rest of the year, you know, our procurement team is really taking advantage of a low inflation environment to drive cost improvement across the portfolio.
Yeah, and as you're going to look at the last comment, I would make us look at the earnings slides as well, right? Again in this quarter, the pricing has stayed ahead of the cost line item as well. So we are staying super focused on the commercial side as well to make sure we stay ahead of any inflation. So thank you all very much for watching, and have a great weekend!
Thank you very much. We have no further questions. I would like to turn the call back over to Mark Newman for closing remarks.
So thank you all for your interest in Commores today. The team's remaining very focused on, you know, delivering another great year and it's great to reaffirm our guide for the full year and we look forward to seeing you on the road and to taking your, you know, follow-up questions throughout the day today. Thank you.
To conclude today's conference call, thank you for your participation. You may now disconnect.