Q4 2023 Ecovyst Inc Earnings Call
Well sites on hold we do appreciate your patience in holding and ask that you. Please continue to standby. Thanks again.
Operator: We do appreciate your patience and hold the [inaudible] Stand by, we're about to Good morning, my name is Beau, and I'll be your conference operator today. Welcome to Ecovyst's fourth quarter 2023 earnings conference call and, Please note, today's call is being recorded and should run approximately. Currently, all participants have been placed in listen-only mode. After the speaker's remarks, there will be a question and answer session. Later, you will have the opportunity to ask questions during the question and answer session, and you may register to ask a question at any time by pressing star 1. You may also withdraw yourself from the queue by pressing star 1.
[music].
Please standby were about to begin.
Good morning, My name is Bob and I'll be your conference operator today welcome to equal basis fourth quarter 2023 earnings conference call and webcast.
Please note today's call is being recorded and should run approximately one hour.
Currently all participants have been placed in a listen only mode to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Later, you will have the opportunity to ask questions. During the question and answer session and you May Register to ask a question at any time by pressing star one on your telephone keypad may also withdraw yourself from the queue by pressing star two.
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Gene Shields: Now, at this time, I'll turn things over to Mr. Gene Shields, director of an, go ahead. Thank you, operator. Good morning, and welcome to the Ecovyst fourth quarter and full year 2023 earnings call. With me on the call this morning are Kurt Bitting, Ecovyst's Chief Executive Officer, and Mike Feehan, Ecovyst's Chief Financial Officer. Following our prepared remarks this morning, we'll take your questions.
At this time I'll turn things over to Mr. Gene Shiels director of Investor Relations. Please go ahead Sir.
Thank you operator, good morning, and welcome to the <unk> fourth quarter and full year 2023 earnings call.
With me on the call. This morning are Coke bidding you could just chief Executive Officer, and Mike <unk> Chief Financial Officer.
Following our prepared remarks this morning will take your questions.
Gene Shields: Please note that some of the information shared today is forward-looking information, including information about the company's financial and operating performance, strategies, our anticipated in-use demand trends, and our 2024 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 provided 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 presentation materials posted on the investor section of our website at ecovyst.com. I'll now turn the call over to Kurt Bitting. Kurt?
Please note that some of the information shared today is forward looking information.
Including information about the company's financial and operating performance strategies.
Our anticipated end use demand trends and our 2024 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 provided 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 presentation materials posted on the investors section of our website at each of the Dot com.
I'll now turn the call over to Curt bidding Kurt.
Thank you gene and good morning.
Kurt Bitting: Thank you, Gene, and good morning. First, I want to thank my Ecovyst colleagues for delivering a strong finish in 2023. Despite the economic uncertainty and operational challenges that we faced last year, our Ecovyst colleagues remain dedicated to their core purpose of delivering high-quality products and reliable services to our valued customers. Despite macroeconomic uncertainty, relative stability and demand fundamentals across the majority of our end uses for both ecoservices and advanced materials and catalysts helped Ecovyst deliver solid financial results for the fourth quarter of 2023. High refinery utilization, favorable gasoline demand, and the trend toward higher octane and cleaner burning fuels continued to drive outlet production in 2023, providing support for our regeneration services business, where volume was up compared to the fourth quarter of 2023.
First I want to thank my <unk> colleagues for delivering a strong finish to 2023.
Despite the economic uncertainty and operational challenges that we faced last year, our eco vis colleagues remain dedicated to their core purpose of delivering high quality products and reliable services to our valued customers.
Despite the macroeconomic uncertainty relative stability in demand fundamentals across the majority of our end uses for both eco services and advanced materials and catalyst helped to equal this deliver solid financial results for the fourth quarter of 2023.
High refinery utilization favorable gasoline demand and the trend toward higher octane and cleaner burning fuels continued to drive absolute production in 2023, providing support for our regeneration services business, where volume was up compared to the fourth quarter of 2023.
Kurt Bitting: Sales volume for virgin sulfuric acid was also up compared to the fourth quarter of 2023, albeit with weaker pricing dynamics associated with softer macroeconomic conditions, particularly in industrial applications. In Advanced Materials and Catalysts, fourth quarter sales were up considerably compared to the fourth quarter of 2022. While polyethylene sales volume was lower compared to the prior year fourth quarter, higher pricing and strong demand for hydrocracking catalysts and customized catalyst applications contributed to the sales growth. Given these volume and pricing dynamics, our fourth quarter 2023 adjusted EBITDA was $70 million. During the fourth quarter, we maintained our focus on the strategic initiatives and operational priorities that we believe are positioning Ecovyst to deliver strong growth in the future in our core and industrial applications, as well as in the emerging applications we discussed at our November Investor Day.
Sales volume for Virgin sulfuric acid was also up compared to the fourth quarter of 2023, albeit with weaker pricing dynamics associated with softer macroeconomic conditions, particularly in industrial applications.
In advanced materials, and catalyst fourth quarter sales were up considerably compared to the fourth quarter of 2022.
While polyethylene sales volume was lower compared to the prior year fourth quarter higher pricing and strong demand for hydrocracking catalyst and customized catalyst applications contributed to the sales growth.
Given these volume and pricing dynamics, our fourth quarter 2023, adjusted EBITDA was $70 million.
During the fourth quarter, we maintained our focus on the strategic initiatives and operational priorities that we believe are positioning each of us to deliver strong growth in the future in our core and industrial applications as well as in the emerging applications. We discussed in our November Investor Day.
Kurt Bitting: For the Zealist Joint Venture, these emerging applications include the ongoing expansion of sustainable fuel production, both for renewable diesel and sustainable aviation fuel, and catalysts specifically designed for advanced recycling of plastic waste. We are benefiting from the growth in renewable diesel today, and we expect our zeolite technologies for alcohol-to-jet SAF production to gain additional momentum this year. For our Advanced Silicas Portfolio, we highlighted a number of nascent platforms, including our AlphaCat Advanced Silicas and our AlphaSelect Functionalized Silicas for use in applications such as immobilized enzymes, carbon capture, and clean water.
For the Zelus joint venture. These emerging applications include the ongoing expansion of sustainable fuel production, both for renewable diesel and sustainable aviation fuel and catalysts, specifically design for advanced recycling of plastic waste.
We are benefiting from the growth in renewable diesel today, and we expect our zeolite technologies for alcohol alcohol to jet Saf production to gain additional momentum this year.
For our advanced Silicon portfolio, we highlighted a number of nascent platforms, including our Alphacat advanced silicone and our alpha select functional I still goes for use in applications, such as immobilized enzymes carbon capture and clean water.
Kurt Bitting: I am pleased to announce that during the fourth quarter, we achieved our first sale of advanced silicas for enzyme applications, and we anticipate additional sales this year as we look to expand our support for all these emerging applications. In light of our favorable financial results for the quarter, cash generation remained positive, providing for a reduction in our net debt leverage ratio. We ended the year with a net debt leverage ratio of three times, down from 3.2 times at the end of the third quarter.
I'm pleased to announce that during the fourth quarter, we achieved our first sale of advanced silicone for enzyme applications and we anticipate additional sales this year as we look to expand our support for all these emerging applications.
In light of our favorable financial results for the quarter cash generation remained positive providing for reduction in our net debt leverage ratio. We ended the year with a net debt leverage ratio of three times down from three two times at the end of the third quarter.
Kurt Bitting: In terms of capital allocation priorities, continued reduction in our leverage ratio remains a key focus as we look to make substantial progress this year toward our target leverage ratio of below two and a half times. Lastly, over the past three years, we have made significant progress in supporting our customers with more sustainable products and technology. In addition, we have worked to drive more sustainable business practices across our organization. Consistent with the spirit of continuous improvement, two years ago, we were recognized by Ecovadas with a Silver Medal Sustainability Rating. Last year, in recognition of our continued progress, we achieved gold medal status with Ecovata. I'm now pleased to report that Ecovyst has recently achieved platinum medal status with Ecovatus in recognition of our incremental efforts to integrate the principles of sustainability and corporate social responsibility into our overall business practices.
In terms of capital allocation priorities continued reduction in our leverage ratio remains a key focus as we look to make substantial progress this year toward our target leverage ratio of below two five times.
Lastly over the past three years, we have made significant progress in supporting our customers with more sustainable products and technologies and.
In addition, we have worked to drive more sustainable business practices across the organization.
Consistent with the spirit of continuous improvement two years ago, we were recognized by <unk> with a silver medal sustainability rating.
Last year in recognition of our continued progress we achieved gold medal status with eco Vitus.
I am pleased now pleased to report that equals. This recently achieved platinum metals status with Eagle virus in recognition of our incremental efforts to integrate the principles of sustainability and corporate social responsibility into our overall business practices.
Kurt Bitting: This recognition places Ecovyst in the top 1% of all companies rated in our peer group. Now, as we turn to slide six, I'll provide an update on our near-term demand outlook. We believe the long-term demand trends for the end-uses we serve remain very compelling, and I want to emphasize that the longer-term end-use outlook, growth expectations, and financial targets we shared at our November Investor Day remain intact. However, for 2024, we believe there is significant near-term economic uncertainty arising from a number of factors, including persistent inflation, rising interest rates, destocking, geopolitical tensions, and weak demand in Europe Given the current uncertain macroeconomic environment, we are cautious about the trajectory of near-term demand trends.
This recognition places eco list in the top 1% of all companies rated in our peer group.
As we turn to slide six I'll provide an update on our near term demand outlook.
We believe the long term demand trends for the end uses we serve remain very compelling and I want to emphasize that the longer term and use outlook growth expectations and financial targets. We shared in our November investor day remain intact.
However for 2024, we believe there is significant near term economic uncertainty arising from a number of factors, including persistent inflation rising interest rates destocking geopolitical tensions and weak demand in Europe and China.
Given the current uncertain macroeconomic environment, we are cautious about the trajectory of near term demand trends.
Kurt Bitting: As a result, while we anticipate stronger demand fundamentals in the second half of 2024, we have tempered our expectations for the first half of the year. For our regeneration services business, we expect high refinery utilization with stable gasoline demand and increased exports in 2024. As alkaline demand continues to be driven by tightening fuel standards such as Tier 3, we expect these fundamentals will continue to provide a favorable backdrop for our regeneration services business this year. For virgin sulfuric acid, in light of the significant impact that Winter Storm Elliott and the production headwinds we faced in 2023 had on sulfuric acid sales, we expect volume recovery for virgin sulfuric acid in 2024. Specifically, for our sales into the production of nylon intermediates, while destocking was a factor in the demand softness we experienced in 2023, we believe the destocking phase is behind us.
As a result, while we anticipate stronger demand fundamentals in the second half of 2024, we have tempered our expectations for the first half of the year.
For our regeneration services business, we expect high refinery utilization with stable gasoline demand and increased exports in 2024.
As alcohol if demand continues to be driven by tightening fuel standards such as tier three we expect these fundamentals will continue to provide a favorable backdrop for our regeneration services business. This year.
For Virgin sulfuric acid in light of the significant impact that winter storm Elliott and the production headwinds we faced in 2023 had on sulfuric acid sales, we expect volume recovery for Virgin sulfuric acid in 2024.
Specifically for our sales into the production of nylon intermediates, while Destocking was a factor in the demand softness we experienced in 2023, we believe the Destocking phase is behind US. However, the global demand outlook for engineered plastics remains uncertain in part due to surplus capacity and continued demand weakness.
Kurt Bitting: However, the global demand outlook for engineered plastics remains uncertain, in part due to surplus capacity and continued demand weakness in Asia. We expect sulfuric acid demand for the mining applications that we service to remain stable in 2024, with ongoing copper expansion projects in the U.S. and the longer-term projected global supply deficit for copper underpinning demand. We believe the economics of these expansion projects remain favorable with current copper prices.
Miss in Asia.
We expect sulphuric acid demand for the mining applications that we service to remain stable in 2024 with ongoing copper expansion projects in the U S and the longer term projected global supply deficit for copter underpinning demand. We believe the economics of these expansion projects remain favorable with current cop.
<unk> prices.
For the wide range of industrial applications. We serve we expect the portfolio effect will provide a level of stability for Virgin sulfuric acid sales in 2024 with stable to positive demand in many end use applications, serving to counter softer demand and others.
Kurt Bitting: For the wide range of industrial applications we serve, we expect the portfolio effect will provide a level of stability for virgin sulfuric acid sales in 2024, with stable to positive demand in many end-use applications serving to counter softer demand in others. We expect relative stability in end uses such as lead acid batteries, water treatment, and chloralkali to balance the potential for eroding demand in end uses such as paper and packaging where demand weakness is being driven by capacity rationalization in certain geographies. Overall, for the first half of 2024, we see softer industrial demand for virgin sulfuric acid. And while a significant amount of our virgin sulfuric acid sales are under long-term contracts, we currently see weaker market sentiment, resulting in pricing pressure for short-dated contracts and spot sales. For our CHEM 32 Catalyst Activation business, we see demand remaining strong in 2024, supported by continued growth in sustainable fuel production and expanded customer interest. Likewise, we see stable demand for our treatment services business, with demand and activity levels highly correlated to factors such as consumer spending. Turning to Advanced Materials in Cattle
We expect relative stability in end uses such as lead acid batteries water treatment and chlor alkali to balance the potential for eroding demand and end uses such as paper and packaging where demand weakness is being driven by capacity rationalization in certain geographies.
Overall for the first half of 2024, we see softer industrial demand for Virgin sulfuric acid and while significant amount of our Virgin sulfuric acid sales are under long term contract. We currently see weaker market sentiment, resulting in pricing pressure for short dated contracts and spot sales.
For our Chem 32 catalyst activation business, we see demand remaining strong in 2024 supported by continued growth in sustainable fuel production and expanded customer interest Likewise, we see stable demand for our treatment services business with demand and activity levels highly correlated to factors such as.
<unk> spending.
Turning to advanced materials and catalyst for.
Kurt Bitting: For Advanced Silicas, we believe that the inventory destocking that adversely impacted demand for polyethylene catalysts over the second half of 2023 has run its course. While market forecasts are projecting global polyethylene demand to be up 2-3% in 2024, we believe that excess global capacity will continue to weigh on operating costs. As such, we are not projecting a significant near-term change in the demand for polyethylene catalysts, but the prospect of a stronger second half of this year exists. We believe we are well-positioned for a recovery in demand, particularly given our representation in North American and Middle Eastern markets, where raw material and energy costs provide more favorable production economies. Following positive sales momentum in the fourth quarter in North America, we expect modestly lower operating rates in the mid-80 percent range, with weaker first quarter sales as customers work through end-of-year inventory.
For advanced silicone <unk>, we believe that the inventory destocking that adversely impacted demand for polyethylene catalyst over the second half of 2023 has run its course.
While market forecasts are projecting global polyethylene demand to be up 2% to 3% in 2024, we believe that excess global capacity will continue to weigh on operating rates as such we are not projecting a significant near term change in the demand for polyethylene catalysts, but the prospect of a stronger second half of this.
This year exists. We believe we are well positioned for a recovery in demand, particularly given our representation in north American and middle Eastern markets, where raw material and energy costs provide more favorable production economics.
Following positive sales momentum in the fourth quarter in North America, we expect modestly lower operating rates in the mid 80% range with weaker first quarter sales as customers work through end of year inventories.
Kurt Bitting: In the Middle East, we expect operating rates to remain robust, supported by a cost-advantaged feedstock position and strong export activity. For Europe, we expect polyethylene demand to decline in 2024 due to the poor economic climate. And in Asia-Pacific, we expect the Lunar New Year and sluggish restocking activity to be a factor in the first quarter. Within our zeolite joint venture, our core applications include hydrocracking catalysts for petroleum-based fuels and zeolites used in emission control applications.
In the Middle East, we expect operating rates to remain robust supported by a cost advantaged feedstock position and strong export activity.
For Europe, we expect polyethylene demand to decline in 2024 due to the poor economic climate and in Asia Pacific, We expect the lunar new year and sluggish restocking activity to be a factor in the first quarter.
Within our <unk> joint venture our core applications include hydrocracking catalyst for petroleum based fuels and zeolites used in emission control applications.
Kurt Bitting: Hydrocracking catalysts are high-value-add fixed-bed catalysts that refineries change out every three to four years. Even though we expect refinery margins to remain healthy for 2024, many large customers completed catalyst changeouts last year, so we believe 2023 was likely a near-term peak year for sales of hydrocracking catalysts, and we currently expect that 2024 will be a lower cycle year for hydrocracking catalyst sales. In terms of sales pace, we have lowered our sales projections for the first quarter due to revised order time. For our sales and emission control applications, we expect the current economic environment will translate into lower production and delivery of heavy-duty diesel vehicles. Turning to the production of sustainable fuels, which include both renewable diesel and sustainable aviation fuel, or SAS, our zeolites are used in the de-waxing phase of those fuels production processes.
Cracking catalysts are high value add fixed bed catalyst that refineries change out every three to four years.
Even though we expect refinery margins to remain healthy for 2020 for many large customers completed catalyst change outs last year. So we believe 2023 was likely a near term peak year for sales of hydrocracking catalyst.
And we currently expect a 2024 will be a lower cycle year for hydrocracking catalyst sales.
In terms of sales cadence, we have lowered our sales projections for the first quarter due to revised order timing.
For our sales into the mission control applications, we expect the current economic environment will translate into lower production and delivery of heavy duty diesel vehicles.
Turning to the production of sustainable fuels, which include both renewable diesel and sustainable aviation fuel or S. A S. R. Zeolites are used in the D. Waxing phase of those sustainable fuels production processes, we expect robust sales in 2024 with sales likely stronger in the second half of the year.
Kurt Bitting: We expect robust sales in 2024, with sales likely stronger in the second half of the year. North American Renewable Diesel and Sustainable Aviation Fuel Capacity is projected to grow by approximately 33% this year, supported by attractive financial incentives, with eight production facilities expected to start up in 2024. For the European Union, renewable diesel and SAF capacity is projected to grow by 43% this year, with nine facilities expected to start up in 2024. Looking forward, we see good progress in licensor activity supporting pilot production of SAEF using alternative technology referred to as alcohol to jet. Our zeolites have a key role to play in the agglomeration phase of this emerging technology, where our catalysts are used to build carbon chains in the production of SAF.
North American renewable diesel and sustainable aviation fuel capacity is projected to grow by approximately 33%. This year supported by attractive financial incentives with eight production facilities expected to startup in 2024.
For the European Union renewable diesel and Saf capacity is projected to grow by 43%. This year with nine facilities expected to startup in 2024.
Looking forward, we see good progress in licensor activity supporting pilot production of SaaS using alternate technology referred to as alcohol to jet.
Our zeolite have a key role to play in the old liberalization phase of this emerging technology, where our catalysts are used to build the card and carbon change in the production of SaaS.
We believe the focus on advanced recycling technologies for plastic waste provides significant growth opportunities for <unk>. We continue to work with industry leaders on the application of zeolites in these recycling processes in which our Opal Infinity family of catalysts provides a step change reduction in thermal intensity for cattle.
Kurt Bitting: We believe the focus on advanced recycling technologies for plastic waste provides significant growth opportunities for Ecovys. We continue to work with industry leaders on the application of zeolites in these recycling processes, where our Opal Infinity family of catalysts provides a step-change reduction in thermal intensity for catalytic pyrolysis, and where ZI's catalysts can be used to enhance the quality of pyrolysis oil, providing higher value end products and expanding potential for use as feedstocks in chemical production. As we discussed at our recent Investor Day, we have already had pilot sales of our catalysts for advanced recycling. This year, there are 12 Advanced Recycling Plants for Plastic Waste Recycling expected to be commissioned.
Lytic prices and where Z ice catalysts can be used to enhance the quality of paralysis oil providing higher value add products and expanding potential for use as feedstocks in chemical production.
As we discussed in our recent Investor day, we have already had pilot sales of our catalysts for advanced recycling.
This year there are 12 advanced recycling plants for plastic waste recycling and expect it to be commission and with the momentum we see in this area. We continue to expect commercial sales in early 2025.
Michael P. Feehan: And with the momentum we see in this area, we continue to expect commercial sales in early 2025. I'll now turn the call over to Mike for a more detailed discussion of our fourth quarter and full year financial results. Thank you, Kurt.
I'll now turn the call over to Mike for a more detailed discussion of our fourth quarter and full year financial results.
Okay.
Thank you Kurt I'll begin with a review of our fourth quarter and full year 2023 financial results.
Michael P. Feehan: I will begin with a review of our fourth quarter and full year 2023 financial results. Fourth quarter sales, including our proportionate 50% share of sales from the Zealous joint venture, were $226 million compared to $223 million in the fourth quarter of 2022. Higher sales volume across both businesses and the benefit of continued favorable pricing within advanced materials and catalysts was largely offset by the $9 million impact from the pass-through of lower sulfur costs, as well as the pass-through of lower natural gas and freight costs within ecoservices. Adjusted EBITDA for the fourth quarter was $70 million, up 1% over the prior year fourth quarter. Favorable pricing, and higher sales volume were partially offset by lower net pricing in eco services The consolidated adjusted evenum margin for the fourth quarter was 31%, in line with the fourth quarter of 2022, on a full year basis.
Fourth quarter sales, including our proportionate, 50% share of sales from the <unk> joint venture.
Our $226 million.
Compared to $223 million in the fourth quarter of 2022.
Higher sales volume across both businesses and the benefit of continued favorable pricing within advanced materials and catalyst was largely offset by the $9 million impact from the pass through of lower sulfur costs as well as the pass through of lower natural gas and freight costs within <unk>.
Those services.
Adjusted EBITDA for the fourth quarter was $70 million up one.
Sent over the prior year fourth quarter.
Favorable pricing and higher sales volume were partially offset by lower net pricing and eco services on lower raw material pass through pricing.
The consolidated adjusted EBITDA margin for the fourth quarter was 31% in line with the fourth quarter of 2022.
On a full year basis total sales for 2023, including our proportionate 50% share of sales from the Zelus joint venture where $848 million.
Michael P. Feehan: Total sales for 2023, including our proportionate 50% share of sales from the Zealous joint venture, were $848 million, compared to $953 million in 2022. Of the change in sales, $86 million was associated with the pass-through effect on pricing of lower sulfur costs. The balance of the decrease reflects lower sales volume for virgin sulfuric acid, lower demand for polyethylene catalysts, and the relative timing of niche custom catalyst sales. However, this was partially offset by higher average selling prices across both segments. Full year 2023 adjusted EBITDA was $260 million, down 6% compared to $277 million for 2022, driven by lower sales volume, along with higher unplanned repair and maintenance costs. The full year 2023 Adjusted Even Margin was 31%, up compared to 29% in 2022.
Compared to $953 million in 2022.
The change in sales $86 million was associated with the pass through effect on pricing of lower sulfur costs.
The balance of the decrease reflects lower sales volume for Virgin sulfuric acid lower demand for polyethylene catalyst and the relative timing of niche custom catalyst sales.
This was partially offset by higher average selling prices across both segments.
Full year 2023, adjusted EBITDA was $260 million down, 6% compared to $277 million for 2022.
Driven by the lower sales volume, along with higher unplanned repair and maintenance costs.
The full year 2023, adjusted EBITDA margin was 31% up compared to 29% in 2022.
As we move to the next slide I'll highlight the primary components of the change in adjusted EBITDA compared to the fourth quarter of the prior year.
Michael P. Feehan: As we move to the next slide, I'll highlight the primary components of the change in adjusted EBITDA compared to the fourth quarter of the prior year. Similar to the last several quarters, average sulfur costs for the fourth quarter of 2023 were lower than in the prior year. The pass-through of these lower sulfur costs had an impact of $9 million in variable costs with a corresponding reduction in average selling price. As such, the lower sulfur cost pass-through on sales during the quarter had no impact on adjusted EBITDA.
Similar to the last several quarters average sulfur costs for the fourth quarter of 2023 were lower than in the prior year.
Pass through of these lower sulfur costs had an impact of $9 million and variable cost with a corresponding reduction in average selling prices as such the lower sulfur cost pass through on sales during the quarter had no impact on adjusted EBITDA.
Michael P. Feehan: Our price-to-variable-cost ratio continues to be favorable. While variable costs were lower for the quarter, the pass-through pricing on some of these costs, including natural gas and freight, was also lowered.
Our price to variable cost ratio continues to be favorable while variable costs were lower for the quarter. The pass through pricing on some of these costs, including natural gas and freight were also lower however.
Michael P. Feehan: However, implemented and base price increases continue to be favorable, generating a positive price to cost ratio. Turning to the segment results, we will begin with eco-survey. Ecoservices sales for the fourth quarter were $141 million compared to $160 million in the fourth quarter of 2022.
However, implemented and base price increases continued to be favorable generating a positive price to cost ratio.
Turning to the segment results, we will begin with eco services.
<unk> services sales for the fourth quarter were $141 million compared to $160 million in the fourth quarter of 2022.
Michael P. Feehan: The change in sales primarily reflects the pass-through of lower sulfur costs of $9 million and lower pricing in regeneration services, associated with the pass-through of lower natural gas and freight costs. These factors were partially offset by higher regeneration services volume and higher demand for virgin sulfuric acid for mining and opportunistic spot sales. Ecoservices' adjusted EBITDA was $48 million in the fourth quarter, compared to $54 million in the prior year. While demand remained strong for both regeneration services and versions of sulfuric acid, the decrease in adjusted EBITDA was driven by lower net pricing associated with lower raw material pass-through prices. Ecoservices even adjusted its margin for the fourth quarter by 34 percent, in line with the fourth quarter of 2022.
The change in sales primarily reflects the pass through of lower sulfur costs of $9 million and lower pricing in regeneration services associated with the pass through of lower natural gas and freight costs.
These factors were partially offset by higher regeneration services volume and higher demand for Virgin sulfuric acid for mining and opportunistic spot sales.
Eco services adjusted EBITDA was $48 million in the fourth quarter compared to $54 million in the prior year.
While demand remained strong in both regeneration services and version Sulphuric acid. The decrease in adjusted EBITDA was driven by lower net pricing associated with lower raw material pass through pricing.
Eco services adjusted EBITDA margin for the fourth quarter was 34% in line with the fourth quarter of 2022.
Michael P. Feehan: Turning to Advanced Materials and Catalysts. Total fourth-quarter sales for Advanced Materials and Catalysts, including our 50% proportionate share of ZLS joint venture sales, were $84 million, up $21 million or nearly 34% compared to the fourth quarter of 2022 for Advanced Silica. Fourth quarter sales of $31 million were up 37% compared to the year-ago quarter, reflecting higher sales across all product lines. While sales volume for polyethylene catalysts was lower compared to the fourth quarter of 2022, favorable pricing and the higher sales of niche custom catalysts drove the increase year over year. For the Zealous joint venture, sales were $53 million, up $13 million, or 32% compared to the fourth quarter of 2022, primarily driven by higher sales of hydrocracking catalysts.
Turning to advanced materials and catalyst.
Total fourth quarter sales for advanced materials, and catalyst, including our 50% proportionate share of the <unk> joint venture sales were $84 million up $21 million or nearly 34% compared to the fourth quarter of 2022.
For advanced silica as fourth quarter sales of $31 million were up 37% compared to the year ago quarter.
<unk> higher sales across all product lines.
While sales volume for polyethylene catalysts was lower compared to the fourth quarter of 2022.
Favorable pricing and the higher sales and niche custom catalyst drove the increase year over year.
Yes.
For the Zelus joint venture sales were $53 million up $13 million or 32% compared to the fourth quarter of 2022.
Primarily driven by higher sales of hydrocracking catalyst.
Fourth quarter 2023, adjusted EBITDA for advanced materials, and catalyst was $27 million up $7 million or 34% compared to the year ago quarter with the increase driven by higher pricing and sales volume.
Michael P. Feehan: Fourth quarter 2023 adjusted EBITDA for advanced materials and catalysts was $27 million, up $7 million, or 34%, compared to the year-ago quarter, with the increase driven by higher pricing and sales volume, adjusted even a margin for advanced materials and catalysts with 32% in line with the fourth quarter of 2022. Turning to cash and leverage on the next slide, during the fourth quarter, cash generation was very strong, providing for a reduction in our net debt leverage ratio of three times as we continue to make progress towards our net debt target of less than two and a half times. On a full-year basis, pre-cash flow generation was $72 million.
Adjusted EBITDA margin for advanced materials, and catalyst was 32% in line with the fourth quarter of 2022.
Turning to cash and leverage on the next slide during.
During the fourth quarter cash generation was very strong providing for a reduction in our net debt leverage ratio of three times as we continue to make progress towards our net target of less than two five times.
On a full year basis free cash flow generation was $72 million. This was in line with our recent expectations, but below the prior year driven by the lower adjusted EBITDA.
Michael P. Feehan: This was in line with our recent expectations but below the prior year driven by lower adjusted EBITDA, lower dividends from our zealous joint venture, cash taxes, and cash interest, as well as an unfavorable change in working capital year over year. As discussed at our Investor Day in November, we continue to target a cash conversion ratio of approximately 75%. For 2023, our cash conversion ratio was 75%. We continue to maintain a balanced approach to capital allocation with net leverage reduction remaining a key priority. During 2023, we used cash to repurchase shares, largely in connection with secondary offerings of our equity sponsors. In 2023, we repurchased 7.5 million shares for $79 million. Our balance sheet remains in strong shape. At year-end, we had total available liquidity of $152 million, comprised of $88 million of cash and availability under our ABL facility of $64 million.
Lower dividends from our zealous joint venture.
Higher cash taxes and cash interests as.
As well as an unfavorable change in working capital year over year.
As discussed in our Investor day in November we continue to target a cash conversion ratio of approximately 75%.
For 2023, our cash conversion ratio was 75%.
We continue to maintain a balanced approach for capital allocation with net leverage reduction remaining a key priority <unk>.
During 2023, we used cash to repurchase shares largely in connection with secondary offerings of our equity sponsors.
In 2023, we repurchased seven 5 million shares for $79 million.
Our balance sheet remains in strong shape.
At year end, we had total available liquidity of $152 million.
Apprised of $88 million of cash and availability under our ABL facility of $64 million.
Michael P. Feehan: We have one tranche of debt outstanding, which matures in 2028, and excluding outstanding letters of credit, there were no outstanding borrowings under our APL facility at year end. We have capped our interest exposure on approximately 75% of our outstanding debt out to the third quarter of 2026, and our weighted average cost of debt was approximately 5% during 2023. Now let's turn to guidance and expectations for 2024. For 2024, we expect sales on a gap basis to be between $715 and $755 million, and we expect our proportionate 50% share of sales for the ZLIS joint venture to be between $145 and $165 million. As such, we anticipate total sales, including our proportionate share of the ZLIS joint venture sales, to be between $860 and $920 million, or up approximately 5% at the midpoint compared to 2023.
We have one tranche of debt outstanding which matures in 2028.
Excluding outstanding letters of credit there were no outstanding borrowings under our ABL facility at year end.
We have kept our interest exposure on approximately 75% of our outstanding debt out to the third quarter of 2026.
And our weighted average cost of debt was approximately 5% during 2023.
Now, let's turn to guidance and expectations for 2024.
Our 2024, we expect sales on a GAAP basis to be between 715 and $755 million and we expect our proportionate 50% share sales for the Zelus joint venture to be between 145 and $165 million.
As such we anticipate total sales, including our proportionate share of the Zelus joint venture sales to be between 860 and $920 million or up approximately 5% at the midpoint compared to 2023.
In terms of the pass through effect of sulfur pricing we.
Michael P. Feehan: We are currently expecting a very modest decrease in average sulfur pricing for the first half of 2024, with the impact on sales largely immaterial. As Kurt discussed in his comments about our end-use demand outlook, the value of octane and alkalite remains favorable, and we expect continued high refinery utilization to support regeneration services activity. We expect a modest but cautious recovery of virgin sulfuric acid sales relative to 2023, primarily related to demand for virgin sulfuric acid going into the production of nylon intermediates and the expectation for higher year-over-year production volumes. As such, we expect sales and eco-services to be up mid-single digits, and Advanced Materials and Catalysts. We expect improvement in demand conditions for polyethylene catalysts and growth in our customized catalyst application to drive high single-digit to low double-digit sales growth in advanced silicon.
We are currently expecting a very modest decrease in average sulfur pricing for the first half of 2024.
With the impact on sales largely immaterial.
As Kirk discussed in his comments about our end use demand outlook the value of octane and alcohol. It remains favorable and we expect continued high refinery utilization to support regeneration services activity.
We expect a modest but cautious recovery of Virgin sulfuric acid sales relative to 2023.
Primarily related to demand for Virgin sulfuric acid going into the production of nylon intermediates.
And the expectation for higher year over year production volume.
As such we expect sales in eco services to be up mid single digits.
In advanced materials and catalyst, we expect improvement in demand conditions for polyethylene catalyst and growth in our customized catalyst applications.
To drive high single digit to low double digit sales growth in advanced silicon.
And for the <unk> joint venture, while we expect continued growth and sustainable fuel catalyst sales in 2024 sales of hydrocracking catalyst are expected to be significantly lower which is typical when coming off peak year like we experienced in 2023.
Michael P. Feehan: And for the Zealist joint venture, while we expect continued growth and sustainable fuel catalyst sales in 2024, sales of hydrocracking catalysts are expected to be significantly lower, which is typical when coming off a peak year like we experienced in 2023. For 2024, we are expecting adjusted EBITDA to land in the range of $255 to $275 million, in terms of segment expectations. For the full year 2024, we expect adjusted EBITDA for Ecoservices to reflect a mid to high single-digit percentage increase compared to 2023 based on the anticipated recovery of virgin acid sales into nylon intermediates, strong virgin acid sales into mining, and higher contracted pricing and regeneration services, although this is somewhat offset by downward pressure on virgin acid prices. Driven by the Uncertain.
For 2024, we are expecting adjusted EBITDA to land in the range of $255 million to $275 million.
In terms of segment expectations for the full year 2024, we expect adjusted EBITDA for Eco services to reflect a mid to high single digit percentage increase compared to 2023 based on the anticipated recovery of Virgin acid sales into nylon intermediates.
<unk> strong virgin acid sales into the mining and higher contracted pricing and regeneration services.
This is somewhat offset by downward pressure on virgin acid pricing driven by the uncertain.
Michael P. Feehan: Macroeconomic Environment, and $10 to $15 million of higher maintenance and turnaround costs associated with enhancing our operational reliability to help ensure long-term volume, as we discussed during our November 2023 Investor Day. For advanced materials and catalysts, we expect 2024 overall adjusted EBITDA to be in line with 2023. Advanced Silicas is expected to be up on a high single-digit basis, driven by more normalized demand growth for polyethylene catalysts and sales into emerging areas. Adjusted EBITDA for the ZLIS joint venture, however, is expected to be down on a high single-digit percentage basis, driven by lower sales of hydrocracking catalysts off a peak year in 2023. Anticipated unfavorable fixed cost absorption associated with production and sales timing and increased costs to accelerate the growth in our emerging applications. In addition, we expect our corporate costs to be around $30 million on an annual basis.
The macroeconomic environment and.
And $10 million to $15 million of higher maintenance and turnaround costs associated with enhancing our operational reliability to.
To help ensure long term volume increases as we discussed during our November 2023 Investor day.
For advanced materials and catalyst, we expect 2024 overall adjusted EBITDA to be in line with 2023.
Advanced silicone <unk> is expected to be up on a high single digit basis, driven by more normalized demand growth for polyethylene catalyst and sales into emerging areas.
Adjusted EBITDA for the Zelus joint venture However is expected to be down on a high single digit percentage basis, driven by lower sales of hydrocracking catalyst off a peak year in 2023 and.
Anticipated unfavorable fixed cost absorption associated with production and sales timing and.
And increased costs to accelerate the growth in our emerging applications.
In addition, we expect our corporate cost to be around $30 million on an annual basis.
For the full year 2024, we are expecting adjusted free cash flow of $85 million to $105 million, including capex of $70 million to $80 million in 2020 for the.
Michael P. Feehan: For the full year 2024, we are expecting adjusted free cash flow of $85 to $105 million, including CapEx of $70 to $80 million in 2024. The higher CapEx reflects costs associated with the previously announced expansion of advanced silica capacity in our Kansas City site and investment in our Chem 32 catalyst activation business. Given this expectation for cash generation and assuming no use of cash for other capital allocation priorities,
The higher Capex reflects cost associated with the previously announced expansion of advanced silicon capacity in our Kansas City site and investment in our Chem 32 catalyst activation business.
Given this expectation for cash generation and assuming no uses of cash for other capital allocation priorities, we expect to delever nearly a half a turn resulting in significant progress towards our target net debt leverage ratio of below two five times.
Michael P. Feehan: We expect to delever nearly a half a turn, resulting in significant progress towards our target net debt leverage ratio of below two and a half times. For interest expense, taking into account the interest caps that we have in place, which cover approximately 75% of our exposure, we are projecting a range of $45 to $55 million, with a weighted average cost of debt of approximately 5.5%.
For interest expense taking into account the interest caps that we have in place, which cover approximately 75% of our exposure.
We are projecting a range of $45 million to $55 million with a weighted average cost of debt of approximately five 5%.
Having covered our expectations for the full year of 2024.
Michael P. Feehan: Having covered our expectations for the full year of 2024, I want to provide some directional guidance for the first quarter of 2020. On a consolidated basis, we expect first quarter 2024 adjusted EBITDA to be approximately $40 million. For Ecoservices, in light of the impact of winter storm Elliot and the impact of the extended turnarounds in the first quarter of last year, we expect first quarter 2024 adjusted EBITDA to be up approximately 10% compared to the first quarter of 2023. For advanced materials and catalysts, we expect first quarter 2024 adjusted EBITDA to be between $7 to $8 million. The lower adjusted EBITDA compared to the prior year is primarily driven by a cautious view around the recovery of the polyethylene market and Anticipated Unfavorable Fixed Cost Absorption Associated with Production and Sale Time. I will now hand the call back to Kurt for some closing remarks. Thank you, Mike.
I want to provide some directional guidance for the first quarter of 2024.
On a consolidated basis, we expect first quarter 2024, adjusted EBITDA to be approximately $40 million.
Our eco services in light of the impact of winter storm Elliot and impact of the extended turnarounds in the first quarter of last year. We expect first quarter 2024, adjusted EBIT to be up approximately 10% compared to the first quarter of 2023.
For advanced materials and catalyst, we expect first quarter 2024, adjusted EBITDA to be between $7 million to $8 million.
Lower adjusted EBITDA compared to the prior year is primarily driven by a cautious view around the recovery of the polyethylene market.
And anticipated unfavorable fixed cost absorption associated with production and sales timing.
I will now hand, the call back to Kurt for some closing remarks.
Thank you Mike.
Kurt Bitting: Despite near-term economic uncertainty, we remain positive about the long-term growth opportunities for Ecovyst. We believe our core and industrial businesses will continue to experience solid growth. We have well-established customer relationships, leadership positions in the end uses we serve, and we have articulated our plans to drive efficiency gains and to support sales growth through automation, debottlenecking opportunities, capacity expansions, and reliability initiatives in our eco-services segment that will also translate into incremental volume and sales opportunities. For our Regeneration Services business, we believe the role of Alkalit in the production of cleaner burning fuels is well appreciated, and the long-term demand outlook for refined products in North America and the export markets our customers serve will continue to provide opportunities for growth.
Despite near term economic uncertainty, we remain positive on the long term growth opportunities for <unk>, We believe our core and industrial businesses will continue to experience solid growth.
We have well established customer relationships leadership positions in the end uses we serve and we have articulated our plan to drive efficiency gains and to support sales growth through automation debottlenecking opportunities capacity expansions and through reliability initiatives in our ecosystem segment that will also translate in.
The incremental volume and sales opportunity.
For our regeneration services business, we believe the role of alkylate in the production of cleaner burning fuels is well appreciated and the long term demand outlook for refined products in North America, and the export markets. Our customers serve will continue to provide opportunities for growth.
Kurt Bitting: Although we see some near-term demand softness in some industrial applications for virgin sulfuric acid, mining demand remains strong, and we expect further improvement in demand for virgin sulfuric acid sales in the production of nylon intermediates as the global economy improves. We also believe the portfolio of PESFEC for the balance of our industrial applications will continue to provide a level of overall stability.
Although we see some near term demand softness in some industrial applications for Virgin sulfuric acid mining demand remains strong and we expect further improvement in demand for Virgin sulfuric acid sales ended production of nylon intermediates as the global economy improves.
We also believe the portfolio are perfect for the balance of our industrial applications will continue to provide a level of overall stability.
In terms of our sales of polyethylene catalyst, we believe global polyethylene demand will return to historic growth rates of approximately 3%.
Kurt Bitting: In terms of our sales of polyethylene catalysts, we believe global polyethylene demand will return to historic growth rates of approximately 3%. Specifically, for Ecovyst, we expect our sales of polyethylene catalysts will continue to grow differentially to the overall market, benefiting from our customized catalyst design approach and our leading supply share positions in North America and the Middle East, which benefit from advantaged feedstock and energy costs. Lastly, we have announced a significant expansion of polyethylene catalyst production capacity at our Kansas City site that is supported by firm customer commitments providing further support for our future growth expectations. Moreover, we are energized by the opportunities for growth provided by emerging technologies, which are not just aspirations. We continue to see robust growth in catalysts supporting the production of sustainable fuels. We have a technology leadership position for zeolites for advanced recycling technologies. And we have developed advanced silicas and functionalized silicas that position us to capture growth and enzyme immobilization in food, chemical, and biomass-based processes, as well as carbon capture and water treatment applications.
Specifically for <unk>, we expect our sales of polyethylene catalyst will continue to grow differentially to the overall market.
Benefiting from our customized catalysts design approach and our leading supply share positions in North America, and the middle East, which benefit from advantaged feedstock and energy costs.
Lastly, we have announced a significant expansion of polyethylene catalyst production capacity at our Kansas City site that is supported by firm customer commitments, providing further support for our future growth expectations.
Moreover, we are energized by the opportunities for growth provided by emerging technologies, which are not just aspirational. We continue to see robust growth in catalyst supporting the production of sustainable fuels, we have the technology leadership position for zeolites for advance recycling technologies and we have developed advanced silicon.
And functional eyes silica is that position us to capture growth in enzyme immobilization and food chemical and biomass based processes as well as carbon capture and water treatment applications.
In summary, we have a portfolio of products and technologies that we believe provide for compelling organic EBITDA growth as we discussed in our Investor day.
The long term growth trends supporting Eagle this products and services is reflected in the anticipated 2020 for volume growth across the majority of our product lines.
Kurt Bitting: In summary, we have a portfolio of products and technologies that we believe provide for compelling organic EBITDA growth, as we discussed in our investor day. The long-term growth trend supporting Ecovyst products and services is reflected in the anticipated 2024 volume growth across the majority of our product lines. Our current guidance reflects our caution around near-term demand conditions and the expected off-cycle year for event-driven hydrocracking sales. As I indicated earlier, we believe the second half of the year could provide for improved demand conditions, including stronger scales of virgin sulfuric acid and polyethylene catalysts, and we will capture opportunities for incremental growth as they arise. At this time, I will ask the operator to open the line for questions. Thank you, Mr. Bitting. Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone keypad, and you may remove yourself from the queue at any time by pressing star two.
Our current guidance reflects our caution around near term demand conditions and the expected off cycle year for event driven hydrocracking sales.
As I indicated earlier, we believe the second half of the year could provide for improved demand conditions, including stronger sales of Virgin sulfuric acid and polyethylene catalyst and we will capture opportunities for incremental growth as they arise.
At this time I will ask the operator to open the line for questions.
Thank you Mr bidding, ladies and gentlemen at this time, if you would like to ask a question. Please press star one on your telephone keypad and you may remove yourself from the acute anytime by pressing star to once again its star one to ask a question. This morning, and we will go first to Patrick Cunningham at Citi.
Hi, Good morning. This is Eric Zhang on for Patrick My first question is what is driving the higher pricing for <unk>.
Key catalysts and do you expect that trend to continue.
Hi, Eric this is curt well for the poly for polyethylene.
We do believe that Destocking that we saw really in the latter half of 2023 is largely behind us and we do expect double digit sales growth during the year, albeit.
Operator: Once again, it's star number one to ask a question this morning, and we'll go first to Patrick Cunningham. Hi, good morning. This is Eric Zhang on behalf of Patrick.
Weighted towards the second half of the year and we've implemented we've implemented price increases as time goes along and has allowed us on our contracted prices just to further comment really on polyethylene our expectations are it's it's geographic.
Eric Zhang: My first question is, what is driving the higher pricing for PE catalysts? And do you expect that trend to continue? Hi Eric, this is Kurt.
Centric as well where most of our sales are centered in North America as well as the middle East where those regions heavy high advantage in terms of raw materials and lower energy costs.
Kurt Bitting: Well, you know, for polyethylene, we do believe that the stocking that we saw really in the latter half of 2023 is largely behind us, and we do expect double-digit sales growth during the year, albeit, and we've implemented price increases as time goes along, which has allowed us to stay on our contracted prices. Just a further comment really on polyethylene, our expectations there, it's geographic-centric as well, where most of our sales are centered in North America as well as the Middle East, where those regions have a high advantage in terms of raw materials and lower energy costs. Europe, we're less exposed to, and less exposed in Asia Pacific, and those two regions generally have more of a muted recovery or less of an uptick this year. I got it.
Europe, we're less less exposed and less exposed in Asia Pacific in those two regions generally have more.
More of a muted recovery or less have less of an uptick this year.
Okay got it. Thank you and my last question is with an eco services can you elaborate on any trends that youre seeing with existing customers re contracting.
Have there been any difficulties in getting customers to re sign thank you.
Yes, thanks for the question.
When you look at the regeneration business every year those contracts are generally longer in length. So anywhere five to 10 years. So any given year. There is re constantly all of certain basket of contracts that are up for.
Kurt Bitting: Thank you. And my last question is, within Ecoservices, can you elaborate on any trends that you're seeing with existing customers recontracting? Have there been any difficulties in getting customers to resign?
Renegotiation and re contracting so I would say as time has gone on gone along we've re upped those customers and we've been successful at implementing price increases as time has gone along and Virgin acid about 90% of our customers are under a long term contract basis.
Kurt Bitting: So when you look at the regeneration business every year, those contracts are generally longer in length. So anywhere, you know, five to 10 years.
Kurt Bitting: So any given year, there's recon, you know, a certain basket of contracts that are up for renegotiation and recontracting. So I would say, as time has gone along, we've re-upped those customers. And, you know, we've been successful at implementing price increases as time has gone along. In virgin acid, you know, about 90% of our customers are under a long-term contract basis.
The 10% that we call on a spot sales or short dated contracts.
It's where we've seen a little bit of pricing pressure as I've mentioned on the call and Thats really related I would say mainly to the industrial space, where we see some caution from some of those industrial consumers around 2024.
Great. Thank you.
Thank you. We'll go next now to Alexia <unk> at Keybanc capital markets.
Thanks, and good morning, everyone just a follow up on the on the industrial piece of Virgin.
Kurt Bitting: You know, the 10% that we call on spot sales or short-dated contracts, that's where we've seen a little bit of pricing pressure, as I mentioned on the call. And that's really related, I would say, mainly to the industrial space, where we see some caution from some of those industrial consumers around 2024. Great, thank you. Thank you. We go next now to Aleksey Yefremov at KeyBank Capital. Thanks. Good morning, everyone.
Asset sales.
Quantify the magnitude of this price pressure either.
As a total percent.
Your virgin acid business or as a percent of that.
Bucket of short term contracts.
Sure.
Morning, Lesche, so virgin acid again, when you look at our portfolio on Virgin acid, 90% of it is really under long term agreements, which were are adjusting on longer term contracts right. So it's just that 10% that's on that short dated or call spot spot.
Aleksey V. Yefremov: Just to follow up on the industrial piece of virgin acid sales, could you quantify the magnitude of this price pressure either, you know, as a total percent of your virgin acid business or as a percent of that? You know, the bucket of short-term contracts. Sure. Good morning, Leski.
Spot sales those towards those sorts of things so.
Kurt Bitting: So, Virgin Acid, again, when you look at our portfolio on Virgin Acid, 90% of it is really under long-term agreements, which we're adjusting on longer-term contracts, right? So it's just that 10% that's on that short-dated, or we call it spot sales, those sorts of things. So, what we see in this area is, again, some cautious customers on the industrial side, and there's also been some rationalization, really, in the pulp and paper industry. We don't move a lot of volume into that industry, but it has created, I guess, some pockets of oversupply in different geographies where we don't operate. But that's created some temporary imbalances in a couple of the geographies that really have to settle itself out. So, if we had to quantify that really, Leski, you talk about 10% of our Virgin Acid portfolio, it's probably $5 million to $10 million in terms of pricing that's subject to..., you know, this pressure that we're seeing in the industrial space. Thanks, Kurt.
What we see in this area is again some cautious.
Customers on the <unk> on the industrial side and Theres also been some rationalization really in the in the pulp and paper industry, we don't.
Move a lot of volume into that industry, but it has created I guess, some pockets of oversupply in different geographies, where we don't where.
Where we don't operate but thats created some might say temporary imbalances and a couple of the geographies that really has to settle itself out. So if I had if we had to quantify that really lesche you talk about 10% of our Virgin acid portfolio is probably $5 million to $10 million in terms of pricing.
That's subject to.
This pressure that we're seeing in the industrial space.
Thanks very helpful.
You mentioned.
Accelerated.
<unk> costs are driven by investments in these emerging applications kind of heart from outside you. Josh. This is because it just costs more to do what you envision or where is it really that there is bigger opportunity and those opportunities are coming faster.
Kurt Bitting: Very helpful. You mentioned accelerated increased costs driven by, you know, investments in these emerging applications. Kind of hard from outside to judge.
<unk> done this.
Yeah. So if you.
As we stated during our Investor day.
Growing our emerging technologies as a is.
Kurt Bitting: Is this because, you know, it just costs more to do what you imagine? Or is it really that, you know, there's bigger opportunities, or those opportunities are coming faster? Could you elaborate on that?
Is it really a key priority for us when we look at.
Some of the things like advanced plastics recycling sustainable fuels. The advancements now that we're making on the mobilized enzymes. So we're really on the front end of that where we're building out our capabilities in those areas building out our sales and marketing capabilities in this area. So we're making those front end investments as expected.
Kurt Bitting: Yeah, so as we stated during our Investor Day, growing our emerging technologies is a, you know, is really a key priority for us when we look at things like advanced plastics recycling, sustainable fuels, the advancements now that we're making on immobilized enzymes. So we're really on the front end of that where we're building out our, you know, our capabilities in those areas, building out our sales and marketing capabilities in those areas. So we're making those front end investments as expected to deliver, you know, long-term, long-term sales, as we outlined in our Investor Day. Thanks a lot.
To deliver long term long term sales as we outlined in our Investor day.
Thanks, a lot.
Thank you well go next now to John Mcnulty of BMO.
Yes. Good morning, Thanks for thanks for taking my questions. So a question on the EBITDA and advanced materials and catalyst. So it looks like the first half is going to be there were excuse me. The first quarter is going to be basically almost half of what it was the prior year, which kind of implies the back half.
The remaining three quarters excuse me is basically flattish.
Michael P. Feehan: Thank you. We go next to John McNulty at BMO. Yeah, good morning. Thanks for taking my question. So question on EBITDA on advanced materials and catalysts. So it looks like the first half is going to, or excuse me, the first quarter is going to be basically almost half of what it was the prior year, which kind of implies the back half, or the remaining three quarters, excuse me, are basically flattish. So I guess, can you help us to think about where the improvement comes from? Is the bulk of it just the lumpiness on the HPC catalyst side? Or is it the polyethylene ramp that you're talking about? I guess what's the bigger contributor to kind of the weakness in 1Q and the snapback as we look at kind of the remaining three quarters? Hey John, this is Mike.
So I guess can you help us to think about where the improvement comes from is it is the bulk of it just the lumpiness in the HBC catalysts side or is it the polyethylene ramp that you're talking about I guess, what's the what's the bigger contributor to kind of the weakness in <unk> and the snapback as we look.
The remaining three quarters.
Yeah, Hey, John This is Mike Thanks for the question.
Yes, it's a combination of all those factors right. So.
We mentioned earlier that we're seeing a little bit of a <unk>.
Cautious feel in Q1 around polyethylene.
Starting out, but we do expect the polyethylene demand to continue and actually improve over the prior year.
Call it in a double digit basis.
We also see that hydrocracking, while we came off a peak year from last year.
Michael P. Feehan: Thanks for the question. Yeah, it's a combination of all those factors, right? So, you know, we mentioned earlier that we're seeing a little bit of a cautious feel in Q1 around polyethylene, starting out, but we do expect the polyethylene demand to continue and actually improve over the prior year, call it a double-digit basis. We also see that hydrocracking, while we came off a peak year from last year, it is a little lighter in Q1 than originally anticipated, but we do see it growing in Q So, you know, it's a little bit of the nature of the business, primarily around the hydrocracking and the timing along with some of the niche custom catalysts. Polyethylene is more constant.
It is a little lighter in Q1 than originally anticipated, but we do see it growing in Q2 Q3 and into Q4 so.
It's a little bit of the nature of the business, primarily around the hydrocracking and the timing.
Along with some of the niche custom catalysts polyethylene is more constant however, just given off of what we saw in 2023, it's a little lighter starting out but it's ramping up certainly in the later half of the year.
Got it okay now that makes that makes sense and then.
In one of the slides you highlighted some weakness in the heavy duty truck markets, which I assume is tied to some of the regulate at the new regulations, where there was maybe a little bit of pull forward I guess, how long does that normally lap is that a year does it tend to last a little bit longer than that I guess, how should we be thinking about that.
Michael P. Feehan: However, you know, just given what we saw in 2023, it's a little lighter starting out, but it's ramping up certainly in the latter half of the year. Got it. Okay, now that makes sense. And then, in one of the slides, you highlighted some weakness in the heavy duty truck markets, which I assume is tied to some of the new regulations where there was maybe a little bit of pull forward. I guess how long does that normally last? Is that a year? Does it tend to last a little bit longer than that?
Yeah. Thanks, John there's a couple of headwinds there really in the trucking, where there's just a general I would say slowdown in that transportation segment right now, which is I think linked to the general economic uncertainty going on so and then there are also coming off working off a pretty big backlog.
Log that had developed in 'twenty, one 'twenty two 'twenty three where.
A lot of trucks.
There was a big back orders and they've worked those also you see some slowness. There. Additionally, the euro seven regulation that was due to go in.
Kurt Bitting: I guess how should we be thinking about that? Yeah, thanks, John. You know, there's a couple headwinds there really in the trucking industry where there's just a general, you know, I'd say slowdown in that transportation segment right now, which is, I think, linked to the general economic uncertainty going on. So and then they're also coming off, working off a pretty big backlog that had developed in, you know, 21, 22, and 23, where a lot of trucks were, you know, So you see some slowness here.
In effect in 2027 Europeans have delayed that for two years, which is pushed off some of the I'd say next generation catalyst technologies that we're going to go into those trucks that were going to reduce emissions by 80%. So the combination of those things is kind of.
Created a little bit of the headwind for that for that segment. This year.
Got it thanks very much for the call.
Thank you well go next now to David Begleiter at Deutsche Bank.
Thank you good morning.
Kurt Bitting: Additionally, the Euro 7 regulation that was due to go in effect in 2027, Europeans have delayed that for two years, which has, you know, pushed off some of the, I'd say, next generation catalyst technologies that were going to go into those trucks that were going to reduce emissions by 80%. So the combination of those things has kind of created a little bit of a headwind for that segment this year. I got it.
Kurt and Eco services, you had a number of headwinds in 2023, you know the winter storm outages turnarounds and some weak demand and destocking.
So given that why isn't the EBITDA growth, a little faster than mid 5% plus and 24.
Yes sure. Thanks for the thanks for the question David So yes.
As we stated on the call in a few times.
It's.
We've taken a cautious look for 2020 for many of our customers, particularly in that I'd say that industrial segment have have adopted cautious approaches for 2024 and Thats played into our overall opinion on the demand trends is it <unk>.
John Patrick McNulty: Thanks very much for the call. Thank you. We go next to David Begleiter.
David L. Begleiter: Thank you, good morning. Kurt, in ecoservices, you had a number of headwinds in 2023, you know, the winter storm, outages, turnarounds, and some weak demand, and these stocks. So given that, why isn't the EBITDA growth a little faster? The mid 5% plus in 2020. Yeah, sure. Thanks for the thanks for the question, David. So, you know, as we stated on the call and a few times, you know, it's, we've taken a cautious look at 2024. Many of our customers, particularly in that industrial segment, have adopted cautious approaches for 2024, and that's played into our overall opinion on the demand trends, especially as it relates to virgin sulfuric acid. But when you look at what we expect from 2024 in eco services, refining margins, or the refining business, remains healthy. We expect a strong year for regeneration. The treatment services business and Chem 32 both look to have very full schedules this year.
Really as it relates to the Virgin sulfuric acid, but when you look at the what we expect from 2024 and ecosystem rift.
Refining margins are refining business remains healthy we expect a.
Strong year for regeneration the treatment services business and Kent 32, both look to have very full schedules this year.
The Virgin acid business, where we do plan on moving more volume into the market this year, particularly into nylon, where where there was headwinds last year, we see a recovery there I wouldn't say, it's necessarily up cycle year. However, we do expect to move more product into into that nylon segment, where we see that.
Some of the headwinds on eco services is that earlier on one of the questions I talked about that industrial space and the pricing pressure. It is creating in that short term and spot pricing segment of the Virgin acid asset space as well as we're spending about $10 million to $15 million more on.
Maintenance and reliability this year during the Investor day, we talked about we have a long term.
Kurt Bitting: It's the virgin acid business where we do plan on moving more volume into the market this year, particularly into nylon where there were headwinds last year. We see a recovery there. But I wouldn't say it's necessarily an upcycle year.
Reliability enhancement program that we're instituting which is a combination of really additional resources at the plants as well as some automation, which is there really to deliver higher reliability as well as debottlenecking at the plants over time. So that's some of the some of the change you see there is really pushing in.
Kurt Bitting: However, we do expect to move more product into that nylon segment. Where we see some of the headwinds on eco services are that earlier on, one of the questions I talked about the industrial space and the pricing pressure it's creating in that short term and spot pricing segment of the virgin acid space. As well as, we're spending about $10 to $15 million more on maintenance and reliability this year. During investor day, we talked about how we have a long-term reliability enhancement program that we're instituting. This is a combination of really additional resources at the plants, as well as some automation, which is there really to deliver higher reliability, as well as reduce bottlenecking at the plants over time.
That extra cost to kickoff that reliability enhancement program.
And Craig on that program is that a one time effort or should we.
In 2005 should that come back down by $10 million to $15 million or should that be sustained at this higher level.
Yes, some of that will be in.
I Didnt mentioned too we do have additional turnaround costs. So that will some of that will be sustained because it's going to be the resources, we're putting in place will be.
On a sustained basis, we do have accelerated turnaround costs. This year, which it's those mostly are actually going to take place in the first half of the year and then the automation piece that we're putting in place obviously well go onto the plan. So I would think of the portion of that will be sustained over the or the.
Kurt Bitting: So that's some of the change you see there is really pushing for that extra cost to kick off that reliability enhancement program. On that program, is that a one-time effort, or should I go back down by 10 to 15 million dollars, or should I be sustained at this higher level? Some of that will be, and I didn't mention too, we do have additional turnaround costs. So some of that will be sustained because it's going to be, you know, the resources we're putting in place will be on a sustained basis. We do have accelerated turnaround costs this year, which are mostly going to take place in the first half of the year. And then the automation piece that we're putting in place obviously will go into the plan. So I would think a portion of that will be sustained over the, you know, foreseeable horizon. Thank you. Thank you. We go next now to Hamed Khorsand at BWS. Hey, good morning.
The horizon.
Thank you.
Yes.
Thank you. We'll go next now to med croissant at Dws financials.
Hey, good morning. So first question I had was.
Given what has happened in 2003 to your business.
How have you adjusted in 'twenty four I mean are you through all the inventory you might have had in 'twenty three because of the disruptions.
And so forth so what kind of.
Lingering effects are there from 'twenty four from those effects in 'twenty three.
Yes, good morning, Amit.
I think really what in.
In terms of 2023, we obviously had $20 million ish of headwinds that we're operating.
<unk> related in the Eco services business. When you go back to the winter storm that started out at the beginning of 2023 and then we had.
The extended maintenance downtime at the Houston plant. So we don't expect those those events. This year, obviously it just talks about the enhanced reliability program, which will yield higher volumes and we do expect to.
Hamed Khorsand: So the first question I had was, Given what happened in 23 to your business, how have you adjusted in 24? Are you through all the inventory that you might have had in 23 because of the disruptions and so forth? So what kind of, you know...
Produce and sell more Virgin sulfuric acid volumes this year, even though I've talked about some of the indie.
Kurt Bitting: Lingering effects are there from 24 from those effects. Yeah, good morning, Hamed. I think really what, in terms of 2023, we obviously had 20 million-ish headwinds that were, you know, operational related in the eco-services business when you go back to the winter storm that started out at the beginning of 2023, and then we had the extended maintenance downtime at the Houston plant. [inaudible] I think the other areas that we talked about last year that were headwinds for us were polyethylene catalyst, which in the second half of the year there was destocking that went on. We see that abating and recovering, and as Mike said, particularly in the second half, so we do expect polyethylene catalyst to be up in double digits this year.
Industrial headwinds and some of the pockets in the Virgin acid market.
I think the other areas that we talked about last year that were headwinds for us was polyethylene catalysts, which in the second half of the year. There was destocking that went on.
We see that abating and recovering as and as Mike said, particularly in the second half. So we do expect polyethylene catalyst to be up in <unk>.
Digits. This year, and then secondly, the nylon segment, which impacted the Virgin acid.
Business last year in the second half we saw Destocking in that area. We do expect nylon volume to be up for us this year, albeit not certainly a high cycle year, but certainly a recovery there.
Kurt Bitting: And then secondly, the nylon segment, which impacted the virgin acid business last year in the second half, we saw destocking in that area. We do expect nylon volume to be up for us this year, albeit not, you know, certainly a high-cycle year, but certainly a recovery. Okay, and my last question is on, you know, the slides provided today. You're, you know, highlighting the slow conditions for heavy-duty vehicles. That's a new item for you on the slide. Why is that such a big deal now versus prior quarters where that was not even an issue or even from a positive or negative side? I mean, how bad of a drag is this that you're highlighting it now?
Okay.
Okay and my last question is on.
The slides provided today you're.
Highlighting.
Yes.
The slow conditions for heavy duty vehicles.
That's a new item for you on the slide.
Why is that such a big deal now versus prior quarters, where that was not even an issue, even though from a positive or negative side.
How about that drag is this that you're highlighting it now.
Yes, I think it's not a.
I think in the past.
Over the past year or two.
Business was largely <unk>.
Moving along in terms of the backlog of the heavy duty diesel vehicles.
Kurt Bitting: Yeah, I think, Hamed, it's not a, you know, I think in the past, over the past, you know, year or two, that the business was largely just moving along in terms of the backlog of the heavy duty diesel vehicles. It's not an overly huge segment for us. And essentially, you know, we view that market as, you know, we see headwinds there in terms of just demand for overall heavy duty diesel vehicles, as well as the regulatory thing that I mentioned earlier on Euro 7. But, you know, when we look at it from a sales standpoint, it's flattish for us. So I wouldn't necessarily call it a huge drag for us.
And overly huge segment for us and essentially we view that market is.
We see headwinds there in terms of just the demand for overall heavy duty diesel vehicles as well as the regulation thing and I mentioned earlier on on Euro seven but when we look at it from a sales standpoint, it's flattish for us so I wouldn't call it necessarily a huge drag for us. It's just it's an area that we see in the segue.
There definitely are headwinds in that in that segment.
Okay. Thank you.
Thank you and just a reminder, ladies and gentlemen, any questions. Please press star one this morning, well go next now to David Silver at CL King.
Kurt Bitting: It's just, it's an area that we see in the, you know, in the segment that, you know, there definitely are headwinds in that segment. Okay, thank you. And just a reminder, ladies and gentlemen, if you have any questions, please feel free to reach out to us. We'll be happy to answer any of your questions. Thank you. We'll go next now to David Silver.
Yes, hi, thank you very much.
I had a question maybe about some of your spending initiatives over the next year, but for starters there is.
Something of an increase on your in your Capex spend.
And I'm guessing some part of that is Kansas City.
David Cyrus Silver: Bye-bye. Yeah, hi, thank you very much. I had a question about some of your spending initiatives over the next year, but for starters, there is something of an increase in your CapEx spend. And I'm guessing, you know, some part of that is Kansas City. And along those lines, just with the timeline there, I was just wondering if the spend might, the CAPEX spend might have even been a little bigger to, you know, prepare for the anticipated demand growth. And then beyond that, I'm just wondering if you could articulate or highlight any increase in either R&D spend or pre-commercialization type of spending. But, you know, beyond, you know, beyond, I guess, the operational things, I mean, what other kind of spending initiatives should we be thinking about to support your growth, which you highlighted in the release and in some of your comments here? But, you know, is there a way to kind of get a bigger, a clearer view of that? Thanks. Yeah, hi David. Good morning. This is Mike.
And along those lines just with the timeline. There I was just I was just wondering or I was wondering if the spend the.
The capex spend might have even been a little bigger too.
Prepare.
For the anticipated demand growth and then beyond that I'm. Just wondering if you could articulate or highlight any increase in either R&D spend or pre commercialization type of spending but.
Beyond.
Beyond I guess, the operational things I mean, what other kind of spending initiatives should we be thinking about to support your growth, which you highlighted.
In the.
In the release and in some of your comments here, but.
Is there is there a way to kind of get a bigger.
Clearer view of that please thank you.
Yeah, Hi, David Good morning. This is Mike so on the first part of the question around capital spending you are correct, we do see about.
Given our guidance range at the midpoint of rough roughly $10 million increase in Capex spending.
Michael P. Feehan: So on the first part of the question around capital spending, you are correct. We do see about, You know, given our guidance range at the midpoint, roughly $10 million increase in CapEx spending. The predominance of that is associated with the Kansas City expansion, and I think we mentioned this during our investor day that, you know, would take a period of time, you know, certainly over at least a two-year period going into 2025. So, you know, our spend on that facility is not a bottoms-up approach. We already have structures and availability there.
The predominance of that is associated with the Kansas City expansion and I think we mentioned this during our investor day that debt.
It would take a period of time.
Over certainly over at least two year period going into 2025, so our spend.
On that facility is not a <unk>.
Bottoms up approach, we already have structures and available there. We're just expanding upon that so the capex cost is not.
Perhaps as significant as you might think we're building a brand new plant, but we are adding about 50%.
Michael P. Feehan: We're just expanding upon that. So the CapEx cost is not, you know, perhaps as significant as you might think with building a brand-new plant, but we are adding about 50% capacity for making our polyethylene catalyst there, capital spending around Ecoservices to continue to start to look at and expand our Chem32 catalyst activation business. So there's some spending in there as well.
Capacity for making our polyethylene catalyst there.
We also have some additional costs.
And the.
Capital spending around eco services to to continue to start to look and expand our $10 32 catalyst activation business. So there is some spending in there as well.
When you look at the R&D and pre commercial Kurt mentioned earlier that we are seeing some additional spending.
In the.
Just as we start to ramp up some of our emerging products. So we are seeing a little bit of additional cost there, but again as we mentioned we're very excited on where our sales have been taking us we've already had some sales in 2023 related to the bio catalysis and a lot of it is exactly how we articulated during our <unk>.
Michael P. Feehan: When you look at R&D and pre-commercial, Kurt mentioned earlier that we are seeing some additional spending in the, you know, just as we start to ramp up some of our emerging products. So we are seeing a little bit of additional cost there, but again, as we mentioned, we're very excited about where our sales have been taking us. We've already had some sales in 2023 related to biocatalysis, and a lot of it is exactly what we articulated during our November investor day. And hopefully, we also talked a little bit more about the spending on eco-services related to the reliability and turnaround costs that we talked about earlier. So hopefully, that covers some of your costs and your questions on cost and spending. Yeah, thank you for that. And then, maybe just from another angle.
Remember Investor day.
And hopefully.
We also talked a little bit more about the spending on eco services related to the reliability and turnaround cost that we talked about earlier, so hopefully that cover some of your cost your questions on the.
Cost and spending.
Okay.
Yes. Thank you for that and then maybe just from another angle.
I was wondering about the operational plans the downtime overall planned by your.
Portfolio of refining customers. So I guess refining margins largely have been very healthy for the last few years and.
Kurt Bitting: Yeah, I was wondering about the operational plans, the overall downtime planned by your portfolio of refining customers. So I guess, you know, refining margins have largely been very healthy for the last few years. And, anecdotally, I guess a lot of refineries have deferred or delayed downtime as much as they could to take advantage of what they viewed as favorable profit opportunities. As you kind of look at the planned downtime and planned operating strategies that your refinery customers have shared with you, I mean, should we expect another year of, you know, very high or close to full utilization there? Or are there some major outages or downtime planned, you know, relative to maybe 2023 or 2022, excluding the weather? Bye.
Anecdotally I guess a lot of refineries have.
Deferred or delayed downtime as much as they could take advantage of what they viewed as favorable.
Profit profit opportunities.
As you kind of look at the planned.
Downtime and planned operating strategies.
Your refiner customers have shared with you.
Should we expect another year of very high or close to full utilization there or are there some major outages or downtime planned relative to maybe 2023 or 2022, excluding the weather events.
<unk>.
Kurt Bitting: Sure. Thanks, David. So in terms of, you know, when we look at refinery downtime, it affects two parts of the business differently. When you look at eco services on the acid regeneration, we don't really see a particularly high number of customer turnarounds this year in that in their oscillation units. So we're expecting, I would say, more of an average year when it comes to hydrocracking catalysts. Obviously, we're coming off a peak cycle year in 2023, selling hydrocracking catalysts, some of those turnarounds took place in Q4 of 2023. Some of them are taking place in Q1, 2024.
Sure. Thanks, David So in terms of when we look at the refinery.
Down time.
Two parts of the business differently. When you look at eco services on the acid regeneration, we don't really see a particularly.
High amount of customer turnarounds this year in that in their alkylation units. So we're expecting I would say more of an more of an average year. We look at hydrocracking catalysts, obviously coming off a peak cycle year in 2023, selling hydrocracking catalyst that some of those turnarounds took place.
In Q4 of 2023 some of them are taking place in Q1 2024, they were buying the catalyst to have an on site for their turnaround. So we expect and again hydrocracking to be more of a low cycle. This year. So we do expect less turnarounds in that space as well, but those are for our customers. So.
Kurt Bitting: They were buying the catalyst to have it on site for their turnaround. So we expect, and again, hydrocracking to be more of a low cycle this year. So we do expect fewer turnarounds in that space as well. But those are for our customers.
<unk>.
There certainly are other refiners or other regions that could have different issues, but in general I think we see certainty average in the eco services side and less turnarounds in hydrocracking, just because it's an off cycle year.
Kurt Bitting: There certainly are other refiners or other regions that could have different issues. But in general, I think we'd be average in the eco-services side and have fewer turnarounds in hydrocracking just because it's an off-cycle. Yeah, yes, he did highlight that there.
Yeah.
Yes, you did highlight that there okay. That's great. Thank you very much.
David Cyrus Silver: Okay, that's great. Thank you very much. We'll take a follow-up question now. Yeah, thanks for taking my follow up. So on the polyethylene catalyst demand, which is a pretty strong forecast for the year, up double digits, I guess, can you help us to think about how much of that's just core industry growth versus, you know, account wins? Because I think you have had a bunch of wins, and some assets are still in the process of ramping up. So those may be some of the benefits. But can you help us to think about that high level?
Okay.
And we will take a follow up question now from John Mcnulty of BMO.
Yes, Thanks for taking my my follow ups so on the on the.
The ethylene catalyst demand, which which is a pretty strong forecast for the year up double digits. I guess can you help us to think about how much of that is just core industry growth versus account wins, because I think you have had a bunch of wins in some some assets are still in the process of ramping up so so that maybe some of the benefit but can you help us to think about that high level.
Sure I mean, I think it's a mix really John of both.
<unk> and just increased utilization rates. So you see a recovery, particularly I would.
John Patrick McNulty: Sure. I mean, I think, you know, it's a mix really, John, of both winds and just increased utilization rates. So you see a recovery. Particularly, I would say, the Middle East and North America are right now, you know, at very low natural gas prices enjoying a huge arbitrage window in polyethylene production.
Middle East and North America are right now at very low natural gas prices are enjoying a huge arbitrage window in in polyethylene production. So we obviously have a little heavier weighting to the to those areas. So we're receiving we're seeing some recovery in that area and again I think Mike.
Kurt Bitting: So we obviously have a little heavier weighting on those areas. So we're receiving, and we're seeing some recovery in that area. And again, I think Mike mentioned, we're, you know, it's more second half weighted, so a lot of its recovery, but yes, some, and some of its recovery from new account winds that we've had as well. So it's a little bit of a mixed bag, but, you know, if I had to give it a weighting, I'd say it's more just on the general recovery side.
Mentioned, where it's more second half more second half weighted so a lot of its recovery, but yes. Some of its recovery of new account wins that we've had as well so it's a little bit of a mixed bag, but if I had to give it the waiting I'd say, it's more just on the general recovery side.
Got it thanks for the color.
And ladies and gentlemen, it appears we have no further questions today, so that will bring us to the conclusion of equal this fourth quarter 2023 earnings conference call, we'd like to thank you all so much for joining us today and wish you all a great remainder of your day Goodbye.
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Operator: Got it. Thanks for the call. And ladies and gentlemen, it appears we have no further questions today, so that, for the 2023 Earnings Conference Call, we'd like to thank you all. [inaudible] Ruh-roh-roh-roh-roh-roh-roh.
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