Q2 2023 Ecovyst Inc Earnings Call
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Good morning, My name is Travis and I will be your conference operator today welcome to the second quarter 2023 earnings call and webcast. Please note today's call is being recorded and should run approximately one hour. Currently all participants had been placed in a listen only mode to prevent any backroom.
Noise after the Speakers' remarks, there will be a question and answer session.
I would like to ask a question. Please press star one I would now like to hand, the conference over to gene Shiels Director of Investor Relations. Please go ahead Sir.
Thank you operator, good morning, and welcome to the <unk> second quarter 2023 earnings call.
With me on the call. This morning are Kurt bidding <unk>, Chief Executive Officer, and Mike <unk>, Chief Financial Officer.
As is our usual practice following our prepared remarks, we'll take your questions.
Please note that some of the information shared today is forward looking information, including information about the company's financial and operating performance strategies are anticipated end use demand trends and our 2023 financial outlook.
This information is subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially.
Any forward looking information shared today speaks only as of this date. These risks are discussed in the company's filings with the SEC.
Reconciliations of non-GAAP financial measures mentioned in today's call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted in the investors section of our website at <unk> Dot com.
Now I'd like to turn the call over to Curt bidding Kurt.
Dean and good morning.
We are pleased with our financial results for the second quarter of 2023, with adjusted EBITDA up 9% when compared to the second quarter of 2022.
There were a number of positive factors contributing to our second quarter results.
Refinery utilization continued to drive activity for our regeneration services business and we benefited from higher net pricing for regeneration services in the quarter.
As we expect refinery utilization to remain at high levels for the balance of the year. We continue to have a positive outlook for our regeneration services business.
During the second quarter, we also benefited from higher pricing and our catalyst technologies business.
While sales of silica catalysts were lower compared to the year ago quarter due to the lack of event driven niche custom catalyst sales in the quarter and lower sales of polyethylene catalyst associated with optics polyethylene demand.
Pricing momentum and if you look at catalyst business in conjunction with higher sales of renewable fuels hydrocracking in emission control catalysts from the deal is joint venture translated into favorable year over year growth sales and 19% growth in adjusted EBITDA for our catalysts technologies segment.
However, the quarter was not without its challenges in.
In the closing weeks of the second quarter, our Domingos, California site suffered an unexpected and premature equipment failure, which resulted in an outage in production restriction limiting our sales volume in the quarter.
The plant then required another outage at the end of July to replace the equipment and make the last thing repair.
This production constraints also resulted in higher costs in the quarter as we work to minimize the overall impact of the production on the patient.
Second quarter sales, including our proportionate share of sales in the <unk> joint venture where $229 million. While this was down from the $261 million in the second quarter of 2022. This was principally due to the associated pass through of lower sulfur costs on the Virgin sulfuric acid selling prices.
Despite the lower Virgin sulfuric acid sales volume adjusted EBITDA for the second quarter was $79 million up 9% compared to the second quarter of 2022, driven by increased pricing and both eco services and catalyst technologies and higher sales of renewable fuels hydrocracking.
In emission control catalysts.
Factors serve to offset the impact of the unforeseen production constrained lower silica catalyst sales and higher variable and fixed costs.
Fortunately the aforementioned production restriction at our Domingos site was not resolved until the end of July due to the required repair of a key component for us.
The third quarter, we expect the restriction to impact Virgin sulfuric asset sale and we also anticipate increased repair and maintenance costs related to the restriction and other sites in our production network.
In addition, late in the second quarter, we began to see deteriorating demand fundamentals and select end users that are more directly tied to macroeconomic activity, including lower demand expectations and destocking from specific customers associated with softening consumer demand.
As a result for the second half of the year, we are revising our expectations for demand in two primary end use markets.
For Virgin sulfuric acid, our OEM and high purity sulfuric acid grades are used in nylon production for applications, such as vehicle light weighting construction materials coding and packaging.
We expect that Destocking and weaker global demand for these end users will have an impact on nylon production and therefore, our virgin sulfuric acid sales for the second half of this year.
Additionally, while we believe polyethylene demand will remain positive over the long term, we now expect that down cycle conditions in the second half of this year, we will continue to put pressure on our sales of polyethylene catalyst.
As a result of the production constraint in eco services and higher related costs as well as the softer demand outlook. We are revising our full year 2023 guidance for adjusted EBITDA to a range of $260 million to $275 million we.
We still expect cash generation to be positive over the balance of the year and leverage reduction remains a key priority for use of it.
Even with $73 million worth of share repurchases in the first half of the year, we expect to end the year with a net debt leverage ratio below three times.
Roughly in line with year end 2022.
Turning to slide six for an update on our demand outlook.
Looking at the balance of 2023, we still see refinery utilization remaining at high levels supported by favorable demand for refined products low inventory levels and historically attractive refining margins.
From a longer term perspective, we still see growth in Apple at demand with plans for alkylation capacity expansion underway with some customers.
Based upon our expectations for growth in <unk> demand and with a continuation of favorable pricing for our regeneration services. We expect our regeneration services business will continue to be a solid contributor of overall growth for eco services.
Likewise, we have seen continued growth in our waste treatment business as a preferred alternative to other disposal methods such as deep well injection.
With favorable demand from our Gulf coast petrochemical and refining customers. We expect the business to continue to grow as we invest in expansion of infrastructure to handle higher volumes.
For our Virgin sulfuric acid business, we expect the resolution of the production issues at our Domingo site to allow us to return to normalized production levels.
Typically with regard to the revised market outlook for nylon as we have discussed previously our sales into the nylon production tend to be more correlated to global macro economic trends and therefore are more susceptible to contraction in consumer demand and destocking.
Historically, we have seen customers, who purchase our sulphuric acid for nylon production build their finished product inventory in the third quarters ahead of potential weather disruption and fourth quarter planned maintenance activity. The current down cycle conditions for nylon have resulted in lower operating rates, particularly in the third quarter in conjunction with customer.
Stocking.
From a demand perspective, we believe we are seeing trough of the cycle conditions for nylon production for.
For the balance of our Virgin sulfuric acid sales, we serve a diverse range of industrial applications, which we believe contributes to volumetric stability Mauro.
Moreover, we still expect large multiyear expansion projects for our mining customers to continue supporting overall market demand for sulphuric acid.
Rounding out eco services, our catalyst activation business continues to see a high level of demand supported by the ongoing growth in renewable fuel production as well as the ongoing replacement cycle for conventional hydrofracking and hydro processing catalyst.
Turning to our catalyst technologies business earlier in the year, we anticipated softer market demand for polyethylene and therefore sales of polyethylene catalysts and our silica catalyst business.
However, slower than anticipated recovery in China, as well as lower consumer spending in North America and throughout Europe as resulted in weaker global demand and lower operating rate.
In light of historic annual rates of growth for global polyethylene demand of approximately 4%. We expect polyethylene demand will recover with newer low cost capacity additions, where we are well represented is benefiting from a return to historic operating levels.
While we are seeing some pressure in the second half of the year, primarily in to select end users. We believe our portfolio remains well positioned for longer term growth, particularly as we continue to serve the expanding need for sustainable and low carbon technologies.
Given our leverage to ongoing demand growth for sustainable products and processes. During the second quarter, we maintained our focus on the development of more sustainable product and solution.
During the quarter, we saw continued sales growth in renewable fuel catalyst in emission control catalysts that are helping to decarbonize and reduce emissions and heavy duty transport.
Today over 80% of our innovation products are directly linked to sustainability.
And as evidence of our ongoing commitment to a more sustainable future, we recently announced that needless to international and Valor region, a leading innovator of recycling technologies have formalized a strategic development program that will focus specifically on advanced plastic recycling processes and technology that we expect will play a key role in the <unk>.
Dan Smith of the circular economy.
In addition, we recently published our 2022 sustainability report I.
I encourage you to read the report as it highlights our commitment to sustainability and the progress we are making in delivering our near term and longer term sustainability initiatives.
At this time I will turn the call over to Mike for a more detailed discussion of our second quarter financial results.
Thank you card starting on slide nine I will provide a review of our second quarter 2023 financial performance.
It'll sales, including our proportionate, 50% share of sales from the <unk> joint venture for $229 million compared to $261 million in the second quarter of last year.
Of the period over period change approximately $32 million is directly associated with the pass through of lower sulfur costs compared to the second quarter of 2022.
In addition volume was lower during the quarter compared to the prior year.
Sales volume for Virgin sulfuric acid was lower largely due to the production limitations during the quarter that Kirk referenced.
Silica catalyst sales decreased due to weaker global demand for polyethylene as well as timing for event driven Mitch custom catalyst used for the production of methyl methacrylate.
The lower volume was offset by higher pricing and regeneration services.
And in silica catalyst.
Within our <unk> joint venture sales were up 25%.
On higher sales of catalyst used in the production of renewable fuels and mission control and hydrocracking catalyst compared to the second quarter of the prior year.
Adjusted EBITDA for the second quarter was.
It was $79 million up 9% compared to the second quarter of 2022, driven by higher pricing and regeneration services as well as favorable sales mix and higher pricing in catalyst technologies.
This more than offset lower sales volume and higher unplanned repair and maintenance costs and eco services during the quarter.
The adjusted EBITDA margin for the second quarter of 2023 was nearly 35%.
Close to 700 basis points compared to 28% in the second quarter of last year.
Illustrating the impact that changes in sulfur costs and the associated pass through has on the margin calculation.
Proximately 440 basis points of the increase is related to the pass through of lower sulfur costs.
The balance of the margin improvement was largely a function of higher pricing across both businesses and higher volume and the Zelus joint venture, partially offset by higher costs in the quarter associated with the production downtime and eco services.
The next slide illustrates the drivers of the change in adjusted EBITDA compared to the prior year.
During the second quarter of 2023 average sulfur prices were significantly lower than in the second quarter of the prior year.
As we have previously discussed.
In terms of the selling price for purchase sulfuric acid, the sulfur costs as a direct pass through.
As reflected on the bridge compared to the second quarter of last year, the impact impact of the pass through of sulfur cost was approximately $32 million, which is neutral to the change in adjusted EBITDA.
The increase in adjusted EBITDA for the second quarter was therefore, driven by price increases.
<unk>, the sulfur pass through impact covering higher variable costs.
<unk> and yet another quarter of positive price to cost ratio.
The higher price to cost benefit during the quarter more than offset the impact of lower sales volume.
Turning to the second quarter results for Eco services on slide 11.
Because services sales for the second quarter, 2023 were $158 million compared to $193 million in the second quarter of 2022.
The change in Eco services sales was primarily driven by the $32 million pass through impact associated with lower average sulfur costs.
The lower sales volume for Virgin sulfuric acid with nearly offset by higher pricing and regeneration services.
Eco services adjusted EBITDA for the second quarter of 2023 was $60 million.
Compared to the year ago quarter as the benefit of higher pricing for regeneration services offset the lower sales volume for <unk>, and sulphuric acid and higher costs largely associated with the production outages during the quarter.
For the second quarter, the Eco services adjusted EBITDA margin was 38% up nearly 700 basis points compared to the year ago quarter.
Margin increase was primarily driven by the impact from the pass through of lower sulfur costs.
The higher pricing offset by higher variable and fixed costs compared to the second quarter of 2022.
Catalyst technologies second quarter, 2023, total sales, including the Zelus joint venture were $71 million.
Up 4% compared to the second quarter of last year.
Silica catalyst sales for the second quarter were $26 million compared to $32 million in the second quarter of 2022.
The decrease in silica catalyst sales was driven by lower sales of polyethylene catalyst and the timing of event driven niche custom catalyst orders used in the production of metal in the faculty.
Second quarter sales for the <unk> joint venture were $45 million up $9 million or 25% compared to the second quarter of 2022 on the higher sales of renewable fuels mission control and hydrocracking catalyst.
Second quarter adjusted EBIT for catalyst technologies was $25 million up 19% compared to the year ago quarter.
The increase was driven by the higher pricing favorable mix and higher sales volume within the <unk> joint venture, partially offset by the lower sales volume for silica catalyst.
The adjusted EBITDA margin for catalyst technologies was 36% up 450 basis points compared to the second quarter of last year.
Higher pricing and increased sales of higher margin products within the zealots joint venture.
Turning to our discussion on cash leverage and liquidity.
As we have previously discussed our business has historically demonstrated a strong cash generation capability.
With a cash conversion ratio of nearly 80% in 2022, our adjusted free cash flow of $146 million provided for significant capital allocation flexibility, including the repurchase of $137 million of stock in conjunction with secondary offerings.
We expect cash conversion for this year to remain above 75%.
While we were a net user of cash in the first quarter of the year, we generated significant operational cash flow in the second quarter.
Cash from operations in the first half of the year was $41 million compared to $53 million in the first half of 2022.
But the lower cash from operations was driven by the timing of dividends received from <unk> joint venture.
On leverage during the first six months, we spent $73 million for share repurchases in conjunction with secondary offerings.
Given the use of cash for share repurchases during the first half of the year, our net debt leverage ratio at the end of the second quarter held at three two times as compared to the end of the first quarter.
We expect to generate cash over the balance of the year that will provide for a reduction in our net debt leverage ratio.
Based upon our current outlook and assuming no further share repurchases. We expect to end this year with a net debt leverage ratio below three times in line with the two eight times leverage ratio at the end of 2022.
I would also like to highlight that leverage reduction will remain a key priority as we continue to target a net debt leverage ratio of two to two five times.
At quarter end, we had total liquidity of $99 million comprised.
Comprised of cash and cash equivalents of $29 million and availability under our ABL facility of $70 million.
Curt has previously stated late in the second quarter, we saw evidence of weaker demand fundamentals and end uses which we believe are more influenced by cyclical global demand trends.
For the second half of 2023, we believe these weaker demand fundamentals will adversely impact sales on purchased sulphuric acid into nylon production as well as sales of polyethylene catalyst driven by declining global polyethylene demand and lower plant operating rates.
With this updated view on the market as.
As well as the unplanned operational downtime at our Eco services Domingos facility late in the second quarter and carrying into the third quarter.
We are adjusting our guidance to reflect our updated outlook.
We now expect sales for the full year 2023 to be in the range of $685 million to $715 million.
Primarily due to our expected lower sales volume into nylon and polyethylene and uses <unk>.
Relative to 2022, we still expect a sales decrease of approximately $90 million associated.
With the pass through effect of lower average sulfur costs.
At the segment level <unk> sales are expected to be down on a mid double digit percentage basis, while silica catalyst sales are expected to be down year over year on a low double digit percentage basis.
Excluding the estimated $90 million impact of sulfur cost pass through.
<unk> services sales are forecasted to be down approximately 3%.
At the midpoint of our guidance.
But the Zelus joint venture, we now expect full year 2023 sales to fall in the range of $155 million to $165 million up $10 million from our prior guidance range, reflecting our continued expectations for stronger hydro cracking in the renewable fuel catalyst sales this year.
Taking into account these revised sales assumptions, we now expect full year adjusted EBITDA to be in the range of $260 million to $275 million.
At the segment level compared to the prior year, we expect eco services adjusted EBITDA to be lower on a high single digit to low double digit percentage basis coming off 2022, where eco services adjusted EBITDA expanded by 28%.
We anticipate catalyst technologies adjusted EBITDA to be up on a high single digit to low double digit percentage basis.
Corporate costs are expected to average for the full year, what was reported in the second quarter.
In light of our revised expectations for full year adjusted EBITDA, We now expect adjusted free cash flow to be in the range of $100 million to $115 million.
In addition, our capital spending guidance range has been reduced reflecting $50 million to $60 million largely due to revised timing assumptions for capital projects.
Lastly, with the interest rate caps, we have in place, we still expect interest expense to be $45 million to $50 million for the year.
For the second half of the year.
Given the lower expected sales of Virgin sulfuric acid sold into the nylon market.
We expect that ethos services' adjusted EBITDA will be relatively similar in the third and fourth quarters with Q3 earnings down 15% to 20% compared to the third quarter of 2022.
Our catalyst technologies.
We anticipate that their third quarter earnings will be generally in line with the prior year's third quarter with higher earnings expected in the fourth quarter, driven by product mix and the timing of hydrocracking catalyst orders.
Overall for the third quarter, we expect our adjusted EBITDA to be down low double digits compared to the prior year third quarter. However, our fourth quarter will be stronger with expected adjusted EBITDA up on a low double digit percentage basis compared to the prior year fourth quarter.
I will now hand, the call back to Kurt for some closing remarks.
Thank you, Mike we believe our second quarter results demonstrate the underlying strength and profitable growth potential of each of its portfolio.
Although we were challenged by an unexpected production restriction in our eco services business during the quarter higher pricing and regeneration services, along with higher pricing and higher sales volume and catalyst technology drove a 9% year over year increase in adjusted EBITDA.
Our outlook for the second half of the year has been tempered by a weaker demand outlook in two specific end uses which we believe represents temporary down cycle conditions for the balance of our businesses. We believe demand fundamentals will remain positive.
We expect refinery utilization will remain at high levels for the balance of the year, providing continued support of our regeneration business. In addition, with the production challenges at our Domingo site now resolved a resumption of more normal production volumes for Virgin sulfuric acid should support demand in other end uses for virgin acid over the balance of the.
A year.
For catalyst technologies, we still anticipate a stronger second half of the year for hydrocracking sales and we also expect continued growth in renewable fuel catalyst sales overall, we expect catalyst technologies will continue to benefit from higher pricing in 2023 with solid year over year growth in adjusted EBITDA.
Despite a revised look for the second half of the year associated with production challenges that are now resolved and lower expected sales in the two select end uses we expect pricing and margins to remain favorable.
On a full year basis, we expect cash generation to remain favorable with cash conversion above 75% for the year.
Given our expectations for strong cash generation over the balance of the year, we expect to end the year with a net debt leverage ratio below three times from a capital allocation standpoint continued reduction in leverage is a key objective as we move towards our longer term leverage target of two five times or lower.
Looking forward, we believe our portfolio remains well positioned for attractive rates of growth as we serve the growing demand for low carbon and more sustainable technologies for our sales of Virgin sulfuric acid, we expect the ongoing energy transition and growth in low carbon technologies will continue to support the expansion of mining.
Projects in the U S for copper <unk> and lithium and these projects will drive increased demand for sulphuric acid in.
In addition, we continue to participate in the expanding production of renewable fuels through catalyst sales in our <unk> joint venture and through increasing activation of renewable fuels catalyst in our <unk> business.
We are pleased to have recently announced our strategic initiatives with Valor region, a leading innovator of recycling technologies for joint collaboration on advanced solutions for plastics recycling Vallo region has a unique hybrid advanced recycling solution that combines mechanical and advanced recycling.
<unk> the amount of plastic waste recycled while delivering an exceptional quality paralysis oil that can be processed into high value end products.
We believe our Opal Infinity zeolite technologies can contribute significantly to the achievement of higher yields improved economics, and higher quality and products for plastics recycling.
In summary, near term demand weakness and isolate and end use markets does not alter our strategy or long term value proposition. We continue to believe that our technologies, our supply share positions and our end use exposures provides significant opportunities for profitable long term growth and strong shareholder.
<unk>.
With that we will ask the operator to open the line for questions.
Yes, Sir at this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.
Remove yourself from the queue at any time by pressing star to once again that is star one to ask a question, we will pause for a moment to allow questions to queue.
Our first question comes from Alexia <unk> from Keybanc capital markets.
Hey, guys. Good morning. Thank you for taking my question. This is Ryan on for Alexia.
So the first thing I wanted to do is just kind of dig into the new EBITDA guidance for the year right you called out a number of different factors.
The unplanned outage and then you also have lower sales volumes through vaults Virgin sulfuric NPA catalysts can you just help us try and break out what the impacts of each of those are kind of better understand the new guide. Thanks.
Sure. Thanks for the question Ryan So they are really the primary factors that resulting in our moderated adjusted EBIT outlook are really follows the unplanned equipment outage at our Domingos, California site that really happened in late June and carried on into July and that resulted in lower operating rates loss.
<unk> higher repair and maintenance costs, some unfavorable fixed cost absorption and higher networking and networking cost across that period. Additionally, in the second quarter, our nylon and polyethylene customer end markets.
<unk> headwinds due to the really solid recovery in China and global consumer pressure.
That revised outlook really resulted in us seeing lower customer nominations for product as well as some did some destocking so in.
In terms of magnitude of the adjustment we'd like to think its about probably one third of it is attributable to the dominion as an operating issues and higher maintenance costs associated with that and then the balance of the two thirds really split evenly between the downturn in the nylon and polyethylene segments.
Great. That's that's incredibly helpful. There and then.
Next question I, just wanted to try and understand a little bit of the timing of what you guys are calling out.
Louis you're flagging, Destocking and lower operating rates, which I feel like it's kind of been a phenomenon that's been going on since the beginning of the year.
Got it.
Large producers who are probably running at their lowest so can you just maybe trying to sift through that for us. Thanks, a lot guys.
Yes, no problem Ryan.
At the beginning of the year. We had also stated that we had a cautious view on polyethylene and we are realizing that at that time, there was uncertainty surrounding the recovery in China and there was some other consumer headwinds again as we approach the end to end of the quarter, we started seeing more customer activity pulling back.
Citing macroeconomic headwinds, which led them to destock and lower operating rates beyond what we had thought would happen at the beginning of the year and as you said I'm sure you've read those comments from those from those polyethylene producers themselves. So I do want to point out that we are happy that we've been successful in increasing pricing and.
That segment and we believe that really long term. These global leaders that were partnered with that are in this space will benefit from their scale and geographic locations.
Locations and their cost advantage. So we're confident in that market long term at accurate moves through this down cycle patch.
Our next question comes from John Mcnulty, BMO BMO capital markets.
Yes. Good morning, Thanks for taking my question just one on on the Virgin acid side. So it sounds like kind of a mixed bag, where you've got some weakness around around the nylon market, but you've got strengths in some of the other markets around the metal and mining opportunities.
I guess can you help us to think about what that might mean for virgin acid pricing as we as we push forward through the rest of this year and into early next year.
Yes, well I think we will.
We're not really as you know John .
John and thanks for the question, we're not going to guide for anything in 2024 at this point, but in terms of maybe I'll start with nylon.
As I mentioned on the scripted we typically experienced really strong virgin acid demand for this segment in Q3 and typically what happens is those producers are building inventory in Q3 in anticipation of Q4 planned maintenance as well as any potential weather events that could impact the <unk>.
Alf Kos. So this year really was the lack of recovery that youre seeing in China, and the weaker kind of consumer dynamics that influence that market the segments really reducing rates and destocking long term. We believe that segment will still continue to grow because it's highly linked to things like light weighting and packaging and.
Our Gulf Coast presence and those customers are well positioned with their scale and cost advantages in the long run to your point.
We flagged nylon and polyethylene as being segments that are being impacted by the consumer demand in kind of a global macro economic outlook right now other sections of our business are largely performing very well with strong regeneration pricing.
Strong pricing across the catalyst technologies segment in total.
<unk> volumes that are outperforming so.
Really if you balance these two down segments versus the up segments that we have in those those would've really washed each other out so our guide really is base.
View it is we're almost down about $25 million due to these operational issues going back to the winter storm that hit Us in January and then dovetailed with our Houston outage that we had also in the first quarter and now these dominion's issues. So outside of those operational issues. The tube down markets would have largely been balanced out by the.
The positivity, we're seeing elsewhere.
Sure.
Got it thanks very much for the color.
Our next question comes from David Begleiter Deutsche.
Deutsche Bank.
Hi, This is David long year, I know you've talked about liner in polyethylene being at the bottom.
The cycle do you expecting sequential improvement in our U.
<unk> sequential improvement in your guidance.
Yes.
Again, we don't we're not.
We're not we're really kind of as we gave our guidance. We're looking at our customer orders as we see their outlook and their nominations really through the end of the year. We see again, we feel this is a really down cycle period that were going on right now.
As mentioned earlier in the call that it started earlier, we started the year thinking it was going to be a soft this year for polyethylene and it's kind of gotten a little a little softer than we had expected. So that's leading us to adjust our partially adjust our guidance partial.
Our guidance adjustment so.
The other side of our adjustment obviously is on the nylon side, which is probably the other half of really the market segment really we're seeing a downturn again related to consumer.
Like slower recovery in China, So looking forward and again, we feel that both nylon and the polyethylene markets will recover nicely. We have very good customer partnerships, where were linked to the largest global scale producers that will benefit long term both of them where they're located.
Graphically and their scale and those markets will grow over time, because they are linked to obviously things like again light weighting and packaging and so forth.
Okay. Thanks, and then secondly, I guess on capital allocation are you comfortable with your leverage levels right now and if you think about capital allocation in the second half and Q24, do you expect any share buybacks in the near future.
Yes, David I think for.
Current capital allocation strategy, we've talked before of having a balanced approach and we certainly have share repurchases as a component of our capital allocation strategy and you've seen us participate.
And share repurchases during some of the recent secondary offerings and we'll continue to do so as we see that the price makes sense for me.
Low value standpoint, we still believe that our stock price is undervalued. However, we also recognize that leveraging deleveraging is a very important component and we are very focused on that we do and.
And have said that we are targeting to have a leverage ratio in the low twos somewhere between two and two five times. So our focus is certainly going to be on that as we finish this year and go into next year.
Okay. Thank you.
Our next question comes from Ahmad horizontal.
BW is financial.
Hi, Good morning. So first question I had was in regards to your catalyst business.
How do you describe your outlook as far as your order book is concerned given the.
Your customers usually order six to 12 months at this time.
Thanks, Amit.
When you look.