Q4 2024 AdvanSix Inc Earnings Call
To ask a question you May press Star then one on your telephone keypad and to withdraw from the queue. You May Press Star then two.
This conference is being recorded.
Speaker Change: I would now like to hand, the call to Adam Crespo, Vice President of Investor Relations and Treasurer. Please go ahead.
Speaker Change: Thank you M. J good morning, and welcome to advanced <unk> fourth quarter 2024 earnings Conference call with me here today are president and CEO, Erin Kane, and senior Vice President and CFO Sid managers for this.
Speaker Change: This call and webcast, including any non-GAAP reconciliations are available on our website at investors <unk> advanced six dotcom.
Speaker Change: Note that elements of this presentation contain forward looking statements that are based on our best view of the world and of our business as we see it today those elements can change and the actual results could differ materially from those projected and we ask that you consider them in that light.
Speaker Change: We refer you to the forward looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K as further updated in subsequent filings with the SEC.
Speaker Change: This morning, we will review our financial results for the fourth quarter and full year 2024 and share our outlook for our key product lines and end markets. Finally, we'll leave time for your questions at the end so with that I'll turn the call over to advanced <unk>, President and CEO Erin Kane.
Erin Kane: Thanks, Adam and good morning, everyone. We appreciate you joining us here today for our quarterly call.
Erin Kane: As you saw in our press release advances achieved commercial success and advance our key growth programs in 2024, while navigating operational performance that did not meet our expectations.
Erin Kane: It was a testament to the resilience of all of our dedicated teammates focused on delivering the financial results and shareholder value, while remaining committed to continuously improving our health safety and environmental performance and recovered and learned from our challenges.
Erin Kane: We continue to benefit from our diverse product portfolio with strong performance across our ammonium sulfate and acetone businesses.
Erin Kane: Robots market acceptance of our annual ammonium sulfate pre buy program also support and strong cash flow performance in the fourth quarter, resulting in positive free cash flow for the full year.
Erin Kane: This past year, we funded key growth and enterprise capital investments, including expansion of our granular ammonium sulfate capacity.
Erin Kane: Returning cash to shareholders through repurchases and dividends and maintained prudent leverage levels.
Erin Kane: As we move into 2025, we are well positioned to support our strategic growth priorities and we continue to focus on making the necessary investments at the right time to support our long term performance.
Lastly, I'd like to provide an update on two key developments in which we've made significant progress.
Erin Kane: First we reached final settlement, reflecting our ongoing efforts to recover losses associated with the 2019 P. S came in supplier shut down.
Erin Kane: This included $5 $3 million of insurance proceeds in the fourth quarter of 'twenty 'twenty four and a final omnibus settlement in the first quarter of 2025 of approximately $26 million.
Erin Kane: In total we have received approximately $39 million of aggregated insurance proceeds since the 2019 event.
Second is one of the largest producers of ammonia along the east coast. We were pleased to be one of the first industrial company is to be recognized for carbon capture into an approved lifecycle assessment, enabling initial 45, two tax credits of $9 $7 million claims in the fourth quarter.
Erin Kane: They both use C O two as a feedstock in downstream products and sell to customers for beneficial reuse in various applications.
Erin Kane: Our initial credits were for the 2018 in 2019 tax years, and we continue to pursue credits for subsequent periods.
Erin Kane: Both of these provide tailwind from an earnings per share and free cash flow perspective entering 2025.
Erin Kane: Now, let me turn the call over to Sid to walk through the financials.
Sid Managers: Thanks, Aaron and good morning, all I am now on slide four where I will provide a summary, and highlight key items of the fourth quarter 2020 full financials sale.
Sid Managers: Sales of $329 million in the quarter decreased approximately 14%.
Sid Managers: As the prior year sales.
Sid Managers: Sales volume decreased approximately 16%, primarily driven by the delayed ramp to full operating rates following our planned turnaround.
Sid Managers: Market based pricing was favorable by 2%.
Sid Managers: <unk> continued strength in ammonium sulfate and acetone adjusted EBITDA of $10 million declined $5 million versus the prior year, primarily driven by the timing and impact of planned turnarounds.
Sid Managers: Partially offset by changes and favorable sales mix, including lower lawn nutrients and nylon solutions export volumes.
Sid Managers: Favorable pricing net of raw material costs and insurance claim proceeds.
Sid Managers: As a reminder, the impact to pre tax income due to the planned turnaround in the quarter was approximately $47 million compared to zero in the prior year period.
Sid Managers: Adjusted earnings per share of nine cents increased by 19 fence versus the prior year.
Sid Managers: This included the impact of $9 7 million in 45, Q carbon capture tax credits that reduced our effective tax rate to three 1% for the full year 2024, compared to 21, 1% in the prior year period free.
Sid Managers: Free cash flow was $30 million in the quarter up $8 million versus the prior year.
Sid Managers: Cash flow from operations of $64 million increased $4 million versus the prior year, primarily due to the favorable impact of changes in working capital, including a strong ammonium sulfate pre buy program in the quarter.
Sid Managers: Capital expenditures of $34 million in the quarter decreased $4 million.
Sid Managers: Now, let's turn to the next slide.
Sid Managers: On slide five we've summarized our full year 'twenty 'twenty four financial results, our diverse portfolio advantage of our integrated business model and favorable industry dynamics, particularly in plant nutrients and acetone enabled us to successfully navigate the yellow and deliver folio.
Sid Managers: Adjusted EBITDA of $142 million adjusted earnings per share of $1 96.
Sid Managers: And positive free cash flow.
Sid Managers: Now, let's turn to slide six.
Sid Managers: On the left side of the page, we've highlighted our cash flow profile by quarter I too would like to thank all our dedicated and talented employees for their efforts to overcome and loan from the impacts of our operational challenges while driving commercial success.
Sid Managers: This demonstrates our persistent focus on effectively running our business to drive profitability.
Sid Managers: Through 2020 full we continued to fund key growth and enterprise investments, including our sustained program to return cash to shareholders and maintained prudent leverage levels. We ended the year at just about one turn of leverage and a healthy balance sheet continues to support optionality.
Sid Managers: For value creative capital allocation initiatives moving forward.
Sid Managers: Now, let's turn to slide seven.
Sid Managers: As Aaron mentioned I will provide a bit more detail on the 40 <unk> tax credits.
Sid Managers: We operate in approximately 600000 metric ton ammonia plant at our Hopewell, Virginia facility from which C. O. Two has generated the captured C. O two is used.
Sid Managers: As a feedstock in downstream products through chemical conversion or sold to a customer for beneficial reuse in essential applications, including food and beverage cold chain storage and more.
Sid Managers: Recently approved lifecycle assessment of greenhouse gas emissions allow the federal tax credit based on the amount of C. O two captured that would otherwise be emitted into the atmosphere.
Sid Managers: These credits are eligible as of February 2018, when the tax code change and applies or a 12 year period. The 45 Q credits represent a significant value driver for our business over the medium to long term.
Sid Managers: Credits reduce our effective tax rate calculated for utilization and are adjusted annually for inflation.
Aaron: Reclaimed $9 7 million in the fourth quarter of 2024 for the 2018 and 2019 tax years and continue to pursue these credits for subsequent periods now let me turn the call back to Aaron.
Aaron: Thanks, Ed and now on slide eight to discuss each of our key product lines, starting with our plant nutrient business.
Aaron: Our continued strong performance in <unk> and market acceptance of our pre buy program are further proof points to the resiliency of sulfur nutrition demand.
Aaron: Industry corn belt ammonium sulfate prices were up 15% year over year.
Aaron: In contrast, corn belt nitrogen pricing saw an 8% decline supporting healthy realized software premiums.
Aaron: Moving into 2025, our order book is robust and we are now filled out well into the second quarter, reflecting a favorable set up into the spring.
Aaron: The combination of strong top our nutrition demand and tailwind is from rising grain in nitrogen fertilizer prices is expected to support higher ammonium sulfate pricing in the first half year over year.
Aaron: We remain confident that the underlying industry fundamentals supported by crop prices stock to use ratios and expected planted acres among others will continue to support nutrient demand we.
Aaron: However, monitoring higher anticipated raw material prices, namely natural gas and software, which impact our overall price raw spread.
Aaron: Settled prices for both raws in the first quarter were higher than industry expectations and the forward curve and forecast would indicate a year over year headwind for 2025.
Long term remain excited about the growth prospects for this business and leveraging our expertise as a leader in this space.
Aaron: We continue to see strong demand for ammonium sulfate as far as I understand the value and seek ways to maximize crop E. L F.
Aaron: Our multiyear sustained growth program remains on track and its supporting market demand in North America with potential upside driven by increased adoption on soybeans.
Aaron: Anticipate production capability by the end of 2025 to reach a milestone of 72% granular conversion up from roughly 70% at the end of 'twenty 'twenty four.
Aaron: Let's turn to slide nine.
Aaron: For nylon persistent global oversupply conditions continued to pressure pricing and spreads.
Aaron: The Asia caprolactam over benzene spreads have essentially bounced around trough levels exiting 2024.
Aaron: We now expect a slower recovery off the trough.
Aaron: North American end market demand is relatively stable with improved domestic supply given the absence of supply chain disruptions in 2024.
Aaron: As a result from a volume perspective, it's been a relatively slow start to the year, including less disciplined competitive behavior impacting spreads in North America.
Aaron: Trade flows out of China, primarily to South East Asia, and Europe have also continued to limit pricing improvement globally.
Aaron: From a north America demand perspective, a lower rate interest rate environment.
Aaron: In time is expected to favorably impact building construction end markets.
Aaron: However, the pace and size of those potential reductions likely to drill out the time for meaningful impact should translate to fiber and filament applications.
Aaron: Demand across engineering plastics, and packaging remained stable overall with trade policy and tariffs essentially having the greatest impact on pricing and demand in the auto value chain in the near term.
Aaron: As we navigate what has become a protracted downturn in the cycle. We remain highly focused on supporting improved through cycle profitability by driving productivity optimizing our regional and product sales mix.
Aaron: And continuing to promote the value proposition of our differentiated in Ireland offerings.
Aaron: While benefiting from running at higher operating rates relative to our peers.
Aaron: Even our cost advantage, our caprolactam utilization rate at Hopewell is targeted to be 90% plus for 2025.
Aaron: Let's turn to slide 10.
Moving to chemical intermediates industry realized acetone prices of a refinery grade propylene costs generally remain healthy amid continued balanced well what supply and demand as lower phenol operating rates continue.
Aaron: Yes.
Aaron: Well for the year of balanced supply and demand conditions are expected to support acetone spreads above cycle averages.
Aaron: Here, we have also seen a slower start to the year, but the demand for acetone into the M&A markets remaining soft along with several downstream industry down turnarounds occurring this quarter.
Aaron: We're monitoring for any change in phenol demand signals, which can impact market supply.
Aaron: With potential interest rate cut slightly pushed out further.
Aaron: Phenol demand into building construction applications is also expected to be subdued.
Aaron: Demand across the chemical intermediates the rest of the chemical intermediates excuse me remains mixed overall there are many of these chemistries are high value applications in support of longer term growth and profitability.
Aaron: We are pleased to receive our new European patent grant in the fourth quarter for an easy blocks <unk> product used as an anti skinning agent for athletes paints and coatings.
Speaker Change: Let's turn to slide 11.
Speaker Change: To better help frame the various factors that impact our commercial results given a number of moving parts year over year and sequentially. We've highlighted here several relevant kpis and industry pricing metrics.
Speaker Change: Starting with raw materials.
Speaker Change: Forward curves and forecasts indicate significant year over year and sequential increases for both natural gas and sulfur prices in the first quarter as well as for the remainder of 2025.
Speaker Change: Natural gas and software represented approximately 10% and 6% respectively of our raw material costs in 2024.
Speaker Change: In plant nutrients, while we do expect ammonium sulfate premiums every urea to remain near the high end of historical ranges in 2025.
Speaker Change: The price raw spread is being impacted by these anticipated higher raw material prices.
Speaker Change: As a reminder, roughly half of our total company portfolio is on Formula or index based pricing, where we can pass through changes in our raw materials.
Speaker Change: For ammonium sulfate. However, this business has a freely negotiated and market oriented as farmers optimally buy nutrients on their value.
Speaker Change: Underlying nitrogen nutrient diets are influenced by your urea prices, which are currently based on industry margins on producer of gas costs out of Europe and not the U S.
Speaker Change: We then price our product with a premium for the value proposition of sulfur nutrition.
Speaker Change: Another important dynamic is to highlight that our ammonium sulfate order book is typically fill it out one quarter.
Speaker Change: As I mentioned earlier, we are currently selling into the second quarter. So industry pricing quoted today reflect sales were recognizing several months out.
Speaker Change: We will also be unwinding, our fourth quarter 2024 hour pre buy cash advances throughout the first half of the year with the majority of those sales in the second quarter.
Speaker Change: For the remainder of our key product lines, we're seeing estimated spreads declined sequentially into the first quarter.
Speaker Change: Acetone spreads are off the prior year highs, but are expected to remain above cycle averages.
Speaker Change: While the global nylon spreads are near trough levels entering 2025.
Speaker Change: Lastly, we anticipate our first quarter and island export mix to return to historical averages representing a sequential headwind.
Let's wrap up on slide 12, before moving to Q&A.
Speaker Change: Well like many others 'twenty 'twenty five is off to a slower start we continue to anticipate meaningful year over year earnings improvement for the full year 2025.
Speaker Change: This is supported by expected operational excellence and strong commercial performance across our diverse product portfolio.
Speaker Change: Our plant turnarounds are anticipated to be a tailwind year over year based on the scope and focus of this year's activities.
We also expect capex to be in the range of $140 million to $160 million, reflecting our planned progression of growth projects, including our sustained program and refined execution timing to address critical enterprise risk mitigation.
Speaker Change: Our organization's efforts are centered around improving through cycle profitability, which requires us to drive productivity optimize our regional and product sales mix and continued to promote the value proposition of our differentiated product portfolio.
Speaker Change: We understand that we're operating in an uncertain environment. However, the macro backdrop for the industries, we serve remains largely favorable overall.
Speaker Change: We expect some software premium supporting plant nutrients and.
Speaker Change: And a constructive global acetone supply and demand environment, which should serve as a counterbalance to any anticipated for a recovery of profit nylon solutions business.
Speaker Change: We continue to protect our healthy balance sheet, enabling our capital allocation framework to provide optionality for further value creation.
Speaker Change: We remain confident in our future prospects for advance X and are committed to delivering sustainable long term value to our shareholders with that Adam let's move to Q&A.
Adam Crespo: Thanks Erin.
Speaker Change: Can you please open the lines of questions.
Speaker Change: Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw. Your question you May Press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Today's first question comes from Charles <unk> with Piper Sandler. Please go ahead.
Speaker Change: Good morning, everybody.
Speaker Change: Couple of questions one on the conversion to granular side. You said you are heading for was 72% I mean is there a maximum would you go to 100 or does the market not really given that you move a lot to the Latin American market and at certain times of the year does that.
Preclude going to that higher level.
Speaker Change: Ultimately what level do you guys want to attain in terms of granular production on a.
Speaker Change: Yes.
Speaker Change: Yeah, So Charlie the sustain program as you may recall is being driven to a 75% target conversion.
Speaker Change: And so we don't anticipate that our assets will get to a 175% is.
Speaker Change: A nice stretch matching so that the north American domestic demand.
Speaker Change: This higher premium products and certainly on the export side you know that is.
Speaker Change: Typically more on our standard grade that we focused on there at this time, but obviously there is a.
Speaker Change: Both the technical Max that can be achieved and certainly making sure that we are driving to support our domestic customers.
Speaker Change: Got it.
Speaker Change: Another question is the female market.
Speaker Change: Still problematic and therefore, creating some opportunity for your acetone side since you guys consume a vast proportion of your phenol.
Speaker Change: Are you still running at above.
Speaker Change: What was the industry rates for phenol, and therefore, producing more acetone and that will remain sort of smog and for that reason is that still the situation out there.
Speaker Change: And when you look at I'm.
So they have brought our operating rates in the U S. Phenom rates are sitting at about 65, plus minus percent and we are targeting a a rate that is.
Speaker Change: Higher than that obviously because of our strong integration into our <unk> value chain, obviously, given that the vast majority of what we produce is forward integrated so again as we've talked in the past for us acetone and serves as a bit of a natural hedge right and at lower phenol operating rate environment.
Speaker Change: Right.
Speaker Change: And then just on the carbon capture side of it.
Speaker Change: The assumption is that it would be like.
Speaker Change: You've collected 18 19, you've got 2021 'twenty three 'twenty four to deal with.
Speaker Change: Is there any idea about that.
Speaker Change: Slide 25, we will produce excluding anything you may get on prior years, you guys have any estimate on that or any guidance on that number what it might be I know it may or not occur and quantify it but just what are we what are we potentially looking at there.
Speaker Change: So good question, Charlie and I Hope Youre doing well I think if you look the way to think about it is it's taken us five years to get to this point right with all the approvals filings et cetera for the 2018 in 2019 year. So on a run rate basis for the next several years you could assume a $5 million that are escalators given.
Speaker Change: Based on our utilization on what has been published by the IRS in terms of <unk>.
Speaker Change: Credit schedule with inflation baked in so that five 6 million run rate would expand.
Speaker Change: Okay, and then if I'm looking at it.
Speaker Change: I'm sorry go ahead.
Speaker Change: No I was just going to say the one thing to consider here, telling us where we do move sequentially because we have to file a lifecycle assessment for a certain time periods and then go back and perfect claims. So you know anything about sort of our our timeframe here. We are moving sequentially just as that as a note for you.
Speaker Change: Our consideration.
Speaker Change: Okay, and then on that front I mean, if you look at all of the carbon capture your you're doing now.
Speaker Change: Is that basically all you can do I mean.
Speaker Change: You can do or is there potentially more comment meaning you have to have the off take agreement all the off takes and all the rest of that stuff, but are you capturing all that you can or is there more than conceivably could be captured if you can find the encore.
Speaker Change: Yeah, so effectively when you look at what we consume internally and sort of incorporate through chemical and conversion into our downstream products and then with our three.
Speaker Change: Yeah, three partners for the offtake for beneficial reuse, we effectively have been meeting our venting very little processed via two for quite some time.
Speaker Change: Okay. So basically you've got pretty much all the number will be whatever whatever.
Speaker Change: Finally, finally get the credit for it yes.
Speaker Change: Okay. Thanks very much.
Speaker Change: Thank you.
Speaker Change: Thank you.
The next question comes from David Silver with C. L. King. Please go ahead.
David Silver: Okay, Hi, Thank you I guess I have several questions.
David Silver: First Oh, let me just look here first if you don't mind you.
David Silver: You know you did sketch out.
David Silver: Our range for capital spending in 2025 of 140 and $60 million.
David Silver: And I was hoping you could just take a minute and maybe.
David Silver: Call out the different buckets, there in particular, I mean, as I recall, I think 75 or 80 million might be sustaining so I'm kind of more more interested on the discretionary side or the non sustaining side.
David Silver: Certainly some of that goes into that.
Speaker Change: The ammonium sulfate expansion, but can you just maybe take a minute.
Speaker Change: Where else are you directing discretionary capex and 25. Thank you.
Speaker Change: Yes. Thanks, David Good question, Yeah, maybe I'll walk you through the framework and the way. It is bucket. So like you suggested so look this year, it's $140 million to $160 million, it's up from the 134 in 2024, but it primarily reflects the planned progression of our growth projects, including a sustained program and.
Speaker Change: A refinement I'd say on the execution timing over the various critical enterprise risk mitigation.
Speaker Change: Also there was a 10 million carryover from 'twenty to 'twenty four to 2025 based on execution. So that's that's one piece of it on the base maintenance capital, which improves and supports a safe and stable operations year over year, we expect that to be down and within our framework.
Speaker Change: That's offset by some of the enterprise programs, including spend for our Hopewell water permit and then as you know the Frankfurt DAK and boiler upgrade is supposed to wrap up this year. So that's another piece of it.
Speaker Change: But primarily the major driver moving the needle here is the growth.
Speaker Change: Capital investment related to sustain it was roughly $8 million last year and is projected to be in the $20 million to $25 million in 2025.
Speaker Change: So.
Speaker Change: If you think about this year versus next year as well 26 spend is likely to be flat to down with that framework that we adopt in terms of how we bucket and.
Speaker Change: And budget for.
Speaker Change: Okay, great. Thank you very much.
Speaker Change:
Speaker Change: Next question would be about a natural gas costs and in particular regional spreads. So erinn I think in your prepared remarks. So it may be the Kpis page you did touch on this briefly but.
Speaker Change: You know I do kind of track that regional spread.
Speaker Change: From when it got extremely wide a few years ago.
Speaker Change: And it's certainly not back to where it was and I don't know 2021 or 2022, but it has been ticking up.
Pretty pretty noticeably through the.
Speaker Change: Last few months of the year. So firstly I mean, I guess I was just wondering you know if you consider that kind of a maybe a secondary or a background support to your fertilizer business and then more directly but do you think that that has redirected.
Speaker Change: Global trade and in ammonium sulfate or other products.
Speaker Change: That you know impact on your <unk>.
Speaker Change: Competitiveness or competitive advantage in the domestic market.
Speaker Change: Yeah. So certainly from a new trends are let's call plant nutrients perspective, you know energy costs.
Speaker Change: Our important you know.
Speaker Change: Certainly as we think about how that impacts you know the.
Speaker Change: Marginal producer around the world for for nitrogen and certainly the EU is currently the marginal producer.
Speaker Change: And as part of certainly what is supporting the higher local urea prices.
Speaker Change: Certainly in combination with some supply disruptions.
Speaker Change: Higher our India demand you know other things around it around the world.
Speaker Change: But isn't necessarily impacting global a S. Trade. If you will it certainly is enabling a higher nitrogen based pricing and again of which we are then working to drive our premium for software nutrition.
Speaker Change: On top of that cell.
Speaker Change: There there is a play there right as a follow through on the nitrogen side, you know relative to energy costs in Europe, and Sharepoint and it definitely does impact them, you know producers and other value chains in which we operate when we think about the chemical intermediates.
Speaker Change: Here is that we're producing fino acetone in their region as well as certainly caprolactam and nylon and so.
Speaker Change: We continue to see that that impacts their utilization rates and you know as we've seen in nylon.
Speaker Change: You know that continues to attract imports from Asia, and China because of where they sit on on the cost curve. So yeah. I think the dynamic has remained the same it may just be sort of an amplification just given the current energy prices.
Speaker Change: Okay, and again on ammonium sulfate, but you called out.
Speaker Change: The the improved sulfur values implied or direct automotive them, so food and I'm. Just wondering I mean, there are very few fertilizer products that includes sulfur directly but.
Speaker Change: In the domestic market what what is the.
Speaker Change: Competitive way of providing that incremental sulfur, let's say to a fertilizer blenders that just elemental sulfur or is there. Another is there another way that you know that the channel gets the sulfur they need other than through your yours or someone else's ammonium sulfate product.
Speaker Change: Yeah. There certainly are in alternatives element of software as the one as you are you now point out, but when you just look at the sulfate farm all the software that we.
Speaker Change: We provide certainly it's the best option sort of pound for pound to deliver that attrition.
Speaker Change: You know that.
Speaker Change: The plants require you know elemental sulfur in comparison has just different types of issues and becoming plant available you know from a timing standpoint, because it has oxidizing the soil, which is slow right itself again, we go back to start of the year as our field research the education that we spend.
Speaker Change: With retailers and growers into the value chain.
Speaker Change: That certainly is again pound for pound the best.
Speaker Change: Nutrient first offer nutrition available.
Speaker Change: Okay. No. Thank you, yeah, and I knew there would be different agronomic benefits based on the formula that form of sulfur.
Speaker Change:
Speaker Change: Question on nylon, but you know you did call out.
<unk> increased competitive pressures and I was hoping you might be able to just add a little bit more color. There. So is is this the case, where I don't know.
Speaker Change: The sloppy marketing is maybe.
Speaker Change: Showing up in the form of extra spot.
Speaker Change: Adduct availability or is this the type of thing where maybe there's an X O.
Speaker Change: Michigan unexpected kind of end markets, where youre having to defend some.
Speaker Change: Maybe long held contract business, but.
Speaker Change: And I guess I'm asking that is.
Speaker Change: The <unk>.
Trick for you know, whether this is something that might last a quarter or two or whether it's maybe more more structural but.
Speaker Change: If you could maybe just touch on where the increased.
Speaker Change: Competitive pressures in the domestic market are.
Speaker Change: Our most visible thank you yeah.
Speaker Change: Sure.
Speaker Change: When do you think just sort of kind of the standards or the supply demand fundamentals.
Speaker Change: Demand has been relatively stable right now.
Speaker Change: I think it's mixed across the end markets in a relative to where it fits from let's say history, our pre COVID-19 levels.
Speaker Change: And fill them inches is down engineering plastics is sort of recovered.
Speaker Change: But it's been year on year, and we kind of see it as a stable given kind of where the value chain exist today, the big difference between 2020, four and 2020 five is.
Speaker Change: We were transparent in our operational disruptions.
Speaker Change: Another North American competitor had several force majeure as well last year and so you know the supply sideways a bit tighter domestically certainly we saw.
Speaker Change: Imports continuing to.
Speaker Change: Compete.
Speaker Change: Compete here, but what's what's restored knowledge of domestic supply right. So I think it's a natural consideration of.
Speaker Change: You know where folks are establishing and looking to either gain or defend share as you say in.
Speaker Change: In the in.
Speaker Change: In the year, given sort of that that fundamental change.
Speaker Change: They either relative to timing, Dave I think what.
Speaker Change: We wanted to clarify our remarks is that it.
Speaker Change: Clearly this chain is dealing with persistent oversupply.
Speaker Change: And.
You know we need to continue to to watch I think third party view.
Speaker Change: Views are that it's reached a point like in many other value chains, right, where you know ultimately some restructuring some exits have too to take place here and we know that where recent announcements.
Speaker Change: A large multinational.
Speaker Change: Operating in a space is going to cease production of caprolactam and nylon in Japan.
Speaker Change: By March 2027, and they're going to remain running there.
Speaker Change: Their plant in Spain.
Speaker Change: <unk> in the Czech Republic is exiting caprolactam by mid 2025.
Speaker Change: So there is there are some start.
Speaker Change: These two announcements are not fully restructuring, but I think but this is where we are we've been watching it.
Speaker Change: And so again, hence sort of our commentary that this is gonna be a slower recovery.
Speaker Change: Then, perhaps we had previously anticipated.
Speaker Change: Okay very good and then maybe just the last one for me, but you've called out the <unk>.
Positive outlook.
Speaker Change: For your fertilizer products sold into the AG markets.
Speaker Change: You also make you know some chemicals that end up in crop chemicals, and pesticides and whatnot.
Speaker Change: You know.
Speaker Change: Would you say the outlook for that portion of your business is also.
Speaker Change: As robust or positive or not.
Speaker Change: Not not tracking, but how might how might your broader AG portfolio be doing you know above and beyond the ammonium sulfate.
Speaker Change: Yeah.
Speaker Change: So we.
Speaker Change: We do yes.
Speaker Change: Certainly see kind of a continued challenge on.
Speaker Change: In the AG chemical space.
Speaker Change: You know I think that there's challenges that might see similar sentiment from others, although it's kind of mixed depending on perhaps what what chemical yield.
Speaker Change:
Speaker Change: You are operating in and and where you said. So you know we continue to contend with low price competition in Chinese imports in certain markets, particularly in our amines.
Speaker Change: In our business. So this is an area where.
Speaker Change: You know certainly we see our downstream customers.
Speaker Change: Who are taking our products and transforming into glyphosate type products are also experiencing some challenges. So this is a space we continue to perhaps see lag relative to.
Speaker Change: The positive.
Speaker Change: The trends, we're seeing in the dry fertilizer space.
Speaker Change: Okay terrific.
Speaker Change: That's it for me thank you very much.
David Silver: Thanks, David.
The next question is a follow up question from Charles <unk> with Piper Sandler. Please go ahead.
David Silver: Yes.
Speaker Change: Quick thing you were talking about.
Nylon production in China are maintaining a fairly high level despite issues in their economy.
Speaker Change: Has that created any thing.
Speaker Change: <unk> sort of additional competition for you guys are seeing any extra product from the aes that license.
Speaker Change: They you know they are running a lot of capital as well to run the nylon.
Speaker Change: Has that created any any issues in any particular markets or you're just not seeing anything at this point.
Speaker Change: Yeah certainly.
Speaker Change: You know all of that extra caprolactam production does come with ammonium sulfate output as U S.
Speaker Change: As you pointed out, albeit it comes out at a different ratio, but you.
Speaker Change: China has been primarily focused on the Brazil.
Speaker Change: Market and so we continue to see increasing exports.
Speaker Change: Sure.
Speaker Change: And their focus there and as a reminder, we do have the antidumping you know in the U S here cell.
Speaker Change: Obviously, when you look at sort of the two largest.
Speaker Change: In a market that exists today. They are their focus there and that enables us to continue to grow here in North America.
Speaker Change: Okay, Alright, that's it for me thank you.
Speaker Change: Thanks, Charlie.
Speaker Change: Thank you. This concludes our question and answer session I will now turn the call back over to Erin Kane for closing remarks.
Speaker Change: Thank you all again for your time and interest. This morning looking forward. We are confident in our demonstrated ability to perform through a multitude of environments. We are well positioned to deliver improved earnings performance year over year supported by a resilient business model our position as a diversified chemistry company and our strategic growth focus.
Speaker Change: We are confident in our strategies to support higher through cycle profitability and total shareholder returns.
Speaker Change: With that we look forward to speaking with you again next quarter stay safe and be well.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
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Speaker Change: [music].
Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].