Q2 2023 Trinseo PLC Earnings Call
Please standby we're about to begin.
Good morning, ladies and gentlemen, and welcome to the <unk> second quarter 2023 financial results Conference call.
Welcome to <unk> management team, Frank Bozich, President and CEO , David Stacey Executive Vice President and CFO and Andy Myers Director of Investor Relations. Today's conference call will include brief remarks by the management team followed by a question and answer session. The company distributed its press release, along with its presentation.
Slides at close of markets Thursday August 3rd these documents are posted on the company's Investor Relations website and furnished on our form 8-K filed with the Securities and Exchange Commission.
If anyone should require operator assistance during the call. Please press Star then zero on your telephone I will now hand, the call over to Mr. Andy Byers. Please go ahead Andy.
Okay.
Thank you Bo and good morning, everyone. At this time all participants are in a listen only mode. After a brief remarks instructions will follow to participate in the question and answer session.
Our disclosure rules and cautionary note on forward looking statements are noted on slide two during this presentation, we may make certain forward looking statements, including issuing guidance and describing our future expectations.
I caution you that actual results could differ materially from what is discussed described or implied in these statements factors.
Factors that could cause actual results to differ include but are not limited to risk factors set forth in item one a of our annual report on Form 10-K.
<unk> and our other filings made with the Securities and Exchange Commission and the company undertakes no obligation to update or revise its forward looking statements.
Today's presentation includes certain non-GAAP measurements, a reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release and in the appendix of our Investor presentation.
A replay of the conference call and transcript will be archived on the company's Investor Relations website. Shortly following the call a replay will be available until August four 2024, now I'd like to turn the call over to Frank <unk>.
Thanks Sandy.
Welcome to our second quarter 2023 earnings call.
Before I comment on our second quarter results and what we're seeing in the market I would like to start by giving a brief update on our sustainability journey.
In July we issued our annual sustainability and corporate social responsibility report.
Which details how we continued to implement our sustainability initiatives and shape the future of the company.
We've made fantastic progress last year towards 2030, sustainability goals, which waste and energy improvements at our facilities around the world the acquisition of PS one to supplier businesses with a reliable source of recycled feedstock.
And the development of de Carbonization strategy.
Our employees have set the stage for continued sustainable progress and the advancements made to date are a testament to their dedication.
I wanted to extend a heartfelt thanks to those played a role in our efforts.
Set us on the path to success.
Now, we'd like to turn to the second quarter results.
As expected our Q2 sales volume was similar to both Q1 and the average over the last three quarters as volume has stabilized at about 20% below mid cycle levels.
Continue to see lower demand across many applications, particularly in building construction consumer durables as end consumer demand remained soft and its customers.
Customers continue to destock.
In Q2, the total sales volume for the company was down 17% from prior year.
However volumes for products containing recycled materials products for case applications and our technologies that enable our growth programs outperformed the broader portfolio, while experiencing improved unit margins.
This relative performance shows that these offerings have more resiliency during periods of destocking and lower structural demand.
Despite overall demand temporarily stabilizing at this low level, we were able to deliver our third consecutive quarter of sequentially higher adjusted EBITDA, while generating positive free cash flow.
In the first quarter, we announced more than $100 million of cash improvement initiatives and we are well on our way to achieving that.
In the second quarter, we continued to make progress on these initiatives.
And this resulted in $43 million of free cash flow.
Based on our progress to date, we have increased our outlook on free cash flow in 2023, despite lower profitability.
So far in the third quarter, we continued to see demand at similar levels to the first half of the year while.
While the timing and trajectory of the market recovery is unknown, we were addressing what we can to optimize near term performance, while preparing for the market recovery.
Late last year, we announced several asset restructuring initiatives and we've seen the expected benefit of those in the first half of the year.
As we continue to assess the structural challenges facing our value chains since the natural gas supply from Russia was disrupted.
We're taking additional actions to optimize our business.
We recently began works council discussions regarding the potential closure of our styrene facility ensure news in the Netherlands.
If closed we will no longer produce staggering.
And we will purchase all of our styrene needs from third parties.
We have always purchased all of our styrene needs in North America, and Asia as well as the significant percentage of our European requirements. This model is not new to us and at times, we have in fact sourced all of our styrene needs for Europe from the market.
With the elevated energy costs in Europe styrene production in the region as some of the highest cost in the world plus.
Given recent and planned global styrene capacity additions. We believe this feedstock will remain structurally long through the end of the decade.
Therefore, we believe we will be able to purchase styrene at a lower price than our production cost.
This action would also reduce production risk ongoing capex and turnaround cost as well as lower our carbon footprint.
I would like to point out however that styrene production will remain an important profit contributor to our joint venture Americas <unk> as they enjoy world class economics for energy and raw materials.
We already source styrene from Ams Die in North America, and we anticipate <unk> supplying a greater share of our future needs.
We are also evaluating our PMMA cast in extruded sheet network in Europe , including the possibility of consolidating operations.
And finally, we are taking measures to lower operating costs, including head count and other reductions. This includes our recent executive leadership changes to create a more streamlined organizational structure.
In the aggregate we anticipate these actions will improve annual EBITDA by approximately $70 million to $90 million in 2024.
Before I hand, the call over to Dave I'd like to follow up on a topic that came up on our Q1 earnings call regarding mid cycle EBITDA.
During the call we indicated that following the sale of our <unk> businesses are mid cycle EBITDA would be about a $350 million.
This amount is lower than our previous estimate and like to discuss some of the drivers for that.
The primary drivers are higher energy costs from the warm Ukraine and reduced growth rates for chemical demand in China.
The change in energy and feedstock costs relative to the rest of the world has reduced the competitiveness of many segments of the chemical industry in Europe , including some of our own.
Coupled with lower demand in China. This has resulted in lower margin expectations for Europe for many globally traded products.
Let me remind you that over half of our revenue is generated in Europe .
We see and the engineered within engineered materials, we've seen significant margin degradation in our MMA production as a result of higher natural gas and ammonia costs, which cannot be offset through ammonium sulfate sales.
We believe this could be permanent is the price of ammonium sulfate in Europe is currently being capped at the landed cost of Chinese production.
I'd like to go a bit deeper on engineered materials.
<unk> six of our earnings presentation divides the products, we offer into three categories ranging from less differentiated to more specialized.
On the far left in the less differentiated categories, MMA, which is where we believe we are permanently lost profitability given our current configuration and the changing regional economics of key inputs.
We purchased MMA in North America cost via capacity rights agreement and this is one of the lowest variable cost assets in the world. However, we produce our own MMA in Europe .
The elevated energy and ammonia costs, our MMA plant has become less competitive compared to Asian, and North American planes, and therefore, we are structurally disadvantaged.
Assuming energy costs in Europe remain among the highest in the world. We believe our MMA related profitability, which is currently negative in Europe may not return to historic mid cycle profitability levels.
However, we have made investments in our European assets over the past 12 months to flex our network to take advantage of richer regional cost differences.
We have also identified specific investments that we can make to reduce the energy and carbon intensity of our assets to make them more competitive.
The middle section of the slide includes the cast in extruded PMA sheets.
These products are more specialized and therefore margins are more dependent on end applications and the service levels required by our end customers.
While we saw a negative impact from imports coming into Europe from Asia, when energy input cost differences were highest we're watching to see if the elevated energy costs will have a permanent impact on trade flows.
While currently both volumes and margins are below mid cycle conditions. We believe profitability of these products will return to near historic levels. In addition, our potential consolidation of operations will make our network more competitive going forward.
The far right section contains the most specialized products within the E M. Richard compounds, mainly for consumer electronics applications, PMMA resins continuous PMMA sheets and TPS. These.
These products are highly formulated specialty solution based differentiated offerings that are value priced.
While demand is currently below normal levels margins have been very resilient and we believe overall profitability of these products will also return to historical levels. In addition, these are technologies, where we have significant growth opportunities that are enabled by new innovations recycling and through substitution.
For higher cost materials these growth opportunities create future upside to our historical performance. These technologies.
In summary, higher energy costs and overcapacity in China have had a major impact on European chemical industry.
The ultimate impacts are not yet known but we've already seen this greatly influenced the region, including a reduction in our MMA and polycarbonate profitability.
Please understand that while we've already taken some actions to address this we will continue to look at ways to optimize their business given this new operating environment.
He's also understand that this does not change our strategy of focusing on the higher value related and sustainable products.
Anything that accelerates our need to do this.
Ultimately the actions, we've announced our ability to flex our network the growth investments, we're making will allow us to increase our mid cycle earnings potential in the near term.
Now I'd like to turn the call over to Dave. Thank you Frank.
Our second quarter adjusted EBITDA was below our expectation due mainly to $16 million of negative net timing from decreasing raw materials.
$9 million of this was in engineered materials from declining natural gas and ammonia prices.
Results also included $4 million for fixed cost under absorption from inventory reductions and $3 million higher than forecasted natural gas hedge losses.
As it relates to fixed cost absorption preserving liquidity in this environment is a top priority for us and we continue to work to reduce working capital.
In the second quarter, we had free cash flow of $43 million, including a working capital reduction of $52 million, which was driven by inventory reductions.
While the decision to run at lower operating rates resulted in lower profitability.
The cash benefit was significant.
Free cash flow for the first half of the year was $66 million and we are increasing our free cash flow guidance for the year to $100 million, despite reducing our EBITDA outlook.
As we anticipated large larger working capital decrease for the year.
We ended the second quarter with $270 million of cash and more than $500 million of liquidity, including our Undrawn bank facilities.
The last item I'd like to discuss is our capital structure and refinancing plans.
Slide 13 in our deck shows we have $660 million of debt maturity due in September of 2024 and $500 million due in September 2025.
Addressing these maturities remains our highest priority and very confident that we will be able to accomplish that in the third quarter.
Now I'll turn the call back over to Frank who will talk about our expectations for the third quarter and the remainder of 2023.
Thanks, Dave.
Looking ahead to the rest of the year, we are guiding to a net loss of $460 million and an adjusted EBITDA of $215 million.
This updated full year outlook is $60 million below the low end of our prior guidance primarily from weaker market conditions in the second half of the year, leading to lower expected margins in feedstocks engineered materials in polystyrene.
With the remainder due to the second quarter impacts $23 million, mostly from unfavorable net timing.
Sequentially, our guidance implies an average of about $60 million of adjusted EBITDA in Q2 through Q4.
While we don't anticipate the unfavorable net timing of the second quarter to repeat in the back half of the year, we expect similar sales volume, but lower margins and feedstocks, including impacts from our <unk> facility being down.
As well as engineered materials from lower expectation for ammonium sulfate prices.
As we continue to navigate a sustained low demand environment, we've been proactive to take significant actions to enhance profitability and cash generation, including new numerous initiatives regarding asset optimization cost reductions and liquidity improvements as we look ahead into 2024.
The year over year benefit of these actions combined with lower losses from natural gas hedges are expected to result in over $100 million.
Of EBITDA improvement.
I'm happy to take your questions.
Thank you Mr <unk>, ladies and gentlemen at this time if you do you have any questions simply press star one and could you find your question has already been addressed you can remove yourself from the queue by pressing star one again.
Our first question this morning from Frank Mitsch at Fermium Research.
Hey, good morning, gentlemen.
David <unk> you indicated that.
Top priority to refi.
The coming maturities.
But I noted.
On the.
On the guidance on the cash flow guidance. The interest cost was 155 can you talk about.
If you are successful and it sounds like you expect to be successful in a refi here in <unk>.
How might that change.
Yes, good morning, Frank Yes look I'll make a couple of added comments on our refinancing and this is kind.
Kind of given where we are in the process. This is really all we can say at this point.
So we've obviously been in deep discussions with with a variety of lender groups, both public and private.
And.
Have run, but I think is a very healthy process and had a lot of interest in.
So they are refinancing and that's what gives me confidence.
In me in being able to get something done in the third quarter.
The the.
The guidance that we've given the slides of the 155.
Million of interest this year is not reflective of our current capital structure, it's not.
It's not reflective of what we may get in refinancing.
Look clearly what we get in a refinancing is going to be higher I mean, the debt refinancing was put in place.
Six years ago in a much different interest environment and operating environment. So.
The interest is clear that the interest expense will be going up I just cant say at this time, Frank since we are still going through the process what that will be but.
When we have something to disclose again I'm very confident about it being in the third quarter and.
Yes, we will disclose that when we have everything wrapped up.
Understood understood. Thank you and.
Frank.
Can you talk about <unk> and the decision to shut it down I thought I saw a press report that it was currently Dan for production.
Issues.
I know you have discussions with the work counsels.
Any thoughts on <unk>.
On timing of when.
That might occur what the overall embedded costs might be.
In terms of in terms of shutting it down and.
And then I believe you said that you will be getting like 70 to 90 million on some of these actions.
Right.
For 2020 for any any additional color on <unk> that would be very helpful.
Yes, so maybe let me start.
Yes so.
Yes. It is.
As events would have it we had a technical issue that caused us to have an unplanned outage ensure news and the week before last so the plant currently is not running.
And that's some of the debt.
Unplanned outage as part of the reason, we've seen anticipate a reduction in.
Feedstock contribution through the end of the year now.
We've begun the consultation process with the works Council.
Again, there is.
That's a very structured process and I can't really comment more than to say, we're going to work constructively with our employee groups and to find a good solution for everybody.
But typically in.
In the Netherlands. This is.
Our six months approximately six months or less process.
As it relates to the estimate of the costs were still evaluating that and we are still negotiating the social plan, which is a component of that so it's hard to say.
What the exact cost will be but.
We have some estimates for.
Yes, Frank look I think for I think for a placeholder as Frank said, we are still in the mid in the middle of a we will have to go through divorce Council process.
As an estimate right now and what I would use is.
Total total cost, including decommissioning dismantling severance is about $50 million.
Spread $30 million in 'twenty, four 2020 five.
Got you got you. Thank you so much.
Thank you we'll go next now to Mike Lakehead at Barclays.
Great. Thanks, Good morning, guys.
First question in engineered materials, Frank you talked about MMA production in Europe .
Being permanently uncompetitive or just not returning to historical levels and I think you also talked about being able to store some favorable in EMEA I believe from Dow So similar to truck news and would you look to ultimately shut our European capacity and source war in the open market there.
Yes, sorry, you sort of broke up in the middle of the question can you could you repeat the question.
Just on your MMA in Europe .
You talked about it being mostly uncompetitive.
Or unprofitable.
So similar to turn news and would you look to shutter a European MMA capacity and buy more from third parties.
So we.
<unk>.
We have not we don't have any plans to make a structural change in the way we operate in ROE at this time, we do have we have made investments that give us the flexibility to buy from the market for our PMA downstream PMMA production and those will be effective.
By the end of this year, but I think the important point to recognize and that we're trying to bring out.
Bring forward is that our expectation for.
Mid cycle earnings from MMA contribution in Europe is lower than it has been historically.
We don't anticipate it returning to normal now the other thing that's important to realize is that we are making investments to recycle MMA PMMA to recover the MMA in our facility in Europe and that investment is very.
Financial outlook for that is very very favorable so.
Which will require the assets that we have in row.
In our facility to.
To continue operating to help us with the recycling so.
Hopefully that gives you some color, but no no plans to close the plants.
Great. That's super helpful. And then maybe just quickly.
For Dave I, just wanted to clarify when you talked about the refinancing is the current plan to address both the 2024 and 2020 fives and whatever actions you may take.
Mike It's a good question and I understand the question, but it just unfortunately I just can't talk about it since we're in the middle of.
In the middle of discussions with.
With lenders right now Mike So it's.
It's it's just premature we'll have an announcement I think hopefully in the third quarter. We're obviously.
Looking at looking at 'twenty, four and 'twenty five solution as well as a 24, only but I can't comment right now Mike.
Fair enough I appreciate it thank you guys.
We'll take our next question now from David Begleiter at Deutsche Bank.
Thank you.
Frank what does the closure to Doosan.
For your European polystyrene assets.
Yes, David.
Actually.
It doesn't I think that our polystyrene the assets are going to remain very profitable we have a great franchise in polystyrene pulse in Europe and in North America.
Because of the segments that we focus on and the mix of our product line being mainly focused on hips and some higher end applications. So again.
We anticipate that our polystyrene assets are.
I wanted to go back to the.
So the first question you raised about a polystyrene franchise because.
It's important to understand.
We've operated a very profitable polystyrene franchise that wasn't backward integrated.
Ian.
In North America to the extent, where we make ABS and in Asia.
We don't think that that's it.
We don't think Thats, a model thats required given our product mix and so again, we feel very comfortable about our competitive position and the strength of earnings potential for that business going forward.
Thank you.
We'll go next to Matthew Blair at PVH.
Good morning, Frank and Dave.
<unk> seemed a little weaker than expected in Q2 do you have any more color there.
And U S styrene spot prices have risen about 20%. So far in July do you think that'll be a tailwind for your Q3 <unk> results.
Hi.
Matt Good morning, the answer is yes, it will be a tailwind for <unk> Q3 results.
In fact styrene margin.
They're kind of.
The two parts of the questionnaire linked style.
Styrene margins were weak globally for the duration of the second quarter.
And as you know North America is an export market and north of there was note. There was no draw from Europe , where a lot of those exports and up.
So nothing is on the water and a lot of lot of North American styrene units were running at low levels of utilization and some are even shut for economic reasons in the second quarter and Si wasn't but some others work. So nothing is on the water.
Or is it maybe.
Recently, but nothing was exported and those depressed level of styrene margins is what you're referring to and what youre seeing in the Q2 results brand side. Now you are right spot prices have risen pretty sharply recently theres been couple of unplanned outages in Europe , including our own inter news in.
And we and others are out buying in the spot market to replace that production.
As I said there is nothing on the water and there's some outages. So it's so it's lifting global styrene spot prices.
Our feedstocks business will be a that'll be a headwind for that business in the third quarter.
But I would expect that to be largely offset by.
By a tailwind for AMC in Q3 and look at it.
These kind of that.
These kinds of issues tend to resolve themselves pretty quickly.
Yes, I would expect.
A month or two proudly and then we would revert back to where we were before this started but.
That's the that's the answer to your question Matthew.
Great. Thank you and then.
Could you talk about how your construction end market is fairing. So far in Q3 has there been any improvement or has it gotten worse in Q2.
No we see it steady with the levels that we saw in Q2.
No significant improvement.
That I could speak of by region, probably with.
North America, slightly weakening Europe being slightly better than we are.
We thought in China.
Got it thank you very much.
And well go next now to Hassan Ahmed at Alembic Global Advisors.
Good morning, Frank.
Yes.
Back in <unk>.
During our Q4 earnings call.
You guys talked about.
This arbitrage opportunity between on the M&A side between sort of the Costco does.
In Asia, and Europe , and you were talking about.
More sort of Chinese product coming into the European market from the sounds of it that probably is still lingering on.
Is that the case first of all.
The.
Actually what we've seen as a decreased amount of material coming in from Asia into.
Into Europe , and it's really based on the lowering of that.
European input costs. So Europe is close the gap from the peak Delta that we saw last year.
There are still some import quantities, but its being reduced I think the important thing to take away from our our commentary is that.
No.
Our European asset.
Our expectation for mid cycle learnings is just lower four due to the MMA.
Cost competitiveness than it used to be.
Understood understood and then again sort of going back to that Q4 sort of earnings presentation.
There was a chart in there that you know.
Look.
Historic Destocking.
You talked about how destocking typically lasted to cortez and the restock.
Did want to ask was quite impressive.
Now with all of these changes that you talked about it on the M&A side be it on the European cost structure side.
Even some of the closures that you guys are announcing.
How are you thinking about volume rebound on on a go forward basis.
The.
Well I'm going to let me if I understand the question.
We would anticipate we believe there is a restocking cycle that will happen simply.
Simply because of the dislocation between chemical output and industrial output.
Right now we're in a period.
Almost as long as the great recession in a way so I cant you cant see a dislocation between chemical production and industrial output that sustains itself at these levels. So there has to be some correction at some point.
The various value chains.
It's very difficult to predict when we think that'll happen but.
I'm not sure if I'm answering.
Is that.
The timing of that recovery is the question or the magnitude of the recovery.
Got most of the answer, but I guess, where I was headed with the question was that look I mean relative to some of the commentary that you made back in Q4 as you presented those charts, obviously they've been.
Some structural changes in the marketplace, particularly on the M&A side. So the question really was as Youre thinking about the new normal.
Earnings profile.
Hi.
The volume aspect also been factored into that new normal meaning.
Meaning are we in this new normal.
Your volume growth may not actually be as good as you previously previously perceived it to be.
Even in a recovery.
What I would tell you is that our volume recovery.
Our outlook for China growth is lower today.
Then it was six months ago.
The forecast that we've been monitoring and the outlook for 2025 growth in in the industrial output in China. Just since February of this year has decreased approximately 20% the growth rate for 2025.
From various forecasting agencies, so our outlook for growth in China is lower our overall demand growth I would say.
I am still very optimistic about our ability to grow volumes, especially because of the adjacent markets that our growth programs target as well as our ability to replace Virgin material with recycled material in both the ABS and polycarbonate and in PMMA is we.
Continue to advance those.
<unk>.
While I think.
Some of the value chain. So we participate in are structurally disadvantaged recycling has become more advantaged and that's a growth opportunity for us in our value chain.
Very helpful. Thank you so much.
Thank you well go next now to Laurence Alexander at Jefferies.
Good morning to what extent are your restructuring savings contingent on.
A recovery in demand.
And I guess then related to that if demand does not improve in the first half or first few several quarters or even just next year, if it's flat lines.
What's your scope for further restructuring actions or kind of are you getting pretty much as lean as you can get.
So thanks Laurence.
The answer to the first question is it's not dependent on volume recovery.
<unk>.
Those are real hard cost saving.
<unk>.
Dollars that we believe will come irrespective of a volume recovery.
We see in the broader markets.
The answer to the second question is look we we have.
As I mentioned in the script.
In the prepared remarks, we have been making investments.
That allow us to flex the way, we operate our global network to move products between sites.
To optimize.
Optimize the network to have an overall lower costs. So there are always things we can do.
<unk> forward and there are additional significant things that we're constantly evaluating to use our regional network to optimize our cost structure.
Those were not included in the <unk>.
The 100 million dollar or is this $70 million to $90 million of improvement that we.
That we've talked about are defined and these initiatives already.
Laurence I would like to just add a clarifying statement to that Frank just that the restructuring actions that we're discussing today or our 70 to 90 million that we had in the press release, but it hasnt come up on this call.
Our hedge losses.
Will be between 30% and $35 million less in 2024, then they then they are and theyre going to be in 2023. So.
Yes, so it Frank.
Mentioned, you add the two of those up and Thats, how all other things being equal 2024 would be $100 million benefit from restructuring in that gas hedges.
Versus 'twenty three.
Okay, great. Thanks.
Thank you the next now to Roger Spitz of Bank of America.
Thank you very much appreciate it.
First question is the $215 million EBITDA guidance for this year suggests 120 <unk> hundred 28 in the back half.
Assuming your numbers.
On a reported basis.
Q3 will be lower than Q2 54.
Q4 will be higher than <unk> 74.
SUNS correctly.
How do you get to this.
Numbering a traditionally seasonally weak quarter.
Yes.
Zinc.
Yeah.
Our guidance of $2 15 reflects is <unk>.
$60 million a quarter on average on the back half of the year and there'll.
There'll be some headwind as Dave said from the news in the styrene monomer outage ensure news and in the short term offset by.
Tailwind associated with earnings from <unk>.
<unk>.
The <unk> of that.
Impossible to tell you, but I think so.
To say that our guidance reflects a $120 million in the second half of the year.
Raj.
Yes, Roger one of the thing look or as I was just mentioning in the natural gas hedges a minute ago are yes. We go through the we had $18 million of hedge losses in Q1 12 in Q2.
In the back half of the year, we'd see that number being around <unk>. So the.
The impact of hedge losses goes down.
As we go throughout the year as well.
Sorry in the pile.
Pile on a little bit to give you more color.
The.
In engineered materials the credit we get from ammonium sulfate sales is typically seasonally lower in Q3 than it is in Q4 because the.
Fertilization season.
<unk>.
In southern Europe .
Is really Q4 and early winter. So typically we would see a seasonal uplift in prices in Q4 relative to Q3 for ammonium sulfate.
Thank you for that and then.
So after taking out the $200 million of.
Working capital inflow.
How should we think about.
Working capital going forward I mean.
Are you starting to EUR 500.
I'm using.
Current assets current liabilities other than cash and debt and some other stuff.
Yes.
That would suggest you go down to about 300, which haven't been at very long time.
You can see on the recovery at all obviously, it's a high class problem, but I mean are you.
They are balancing really ought to be.
Material working capital outflow in 2024.
You start.
Going to why you're looking at.
So Roger Youre right were operating at very low level of working capital and that's reflective of the.
The low level of volumes, we've been we've been selling for the past four quarters as well as low prices feedstock prices are low as well. So we've got we've had huge deflation in the balance sheet. So clearly.
When there is a recovery that.
We're going to have we're going to have an increase in prices and volume and we will see where we will have a working capital increase.
I think probably ratchet the way I would.
Characterize that.
The gains we've made or the release of working capital is half of it.
We think we can hold onto it because our days, we've got much better on managing days of inventory.
Substantially all of the reduction in working capital. We've seen this year year to date has been from D pounds of inventory not prices.
So we've just gotten much better and putting a lot of rigor around our.
Our supply chain processes as you can appreciate to reduce that.
To reduce the days of inventory that we're carrying I think we can.
In a recovery scenario hold on to half of what.
What we've what we've produced.
Okay.
Thank you and ladies and gentlemen that is all the time, we have for questions. This morning, we'd like to thank you for joining the <unk> second quarter 2023 financial results Conference call and we all wish you a great day Goodbye.
Please wait the conference will begin shortly.
Sure.
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