Q4 2024 Trinseo PLC Earnings Call
After a brief remarks instructions will follow to participate in the question and answer session. Our disclosure rules and cautionary note on forward looking statements are noted on slide two.
During this presentation, we may make certain forward looking statements, including issuing guidance and describing our future expectations.
We must caution you that actual results could differ materially from what is discussed described or implied in these statements.
Factors that could cause actual results to differ include but are not limited to the risk factors set forth in item one a of our annual report on Form 10-K or in our other filings made with the Securities and Exchange Commission.
The company undertakes no obligation to update or revise its forward looking statements.
Today's presentation includes certain non-GAAP financial measurements.
A reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release.
The nature of our Investor presentation.
A replay of today's conference call, a transcript and the transcript will be archived on the company's Investor Relations website. Shortly following the conference call.
The replay will be available until February.
Frank: <unk> thousand 26, now I would like to turn the call over to Frank.
Thanks, Pete and welcome to our yearend 2024 earnings call.
Frank: Before we get into our financial results I'd like to highlight some of our outstanding safety achievements as we've had one of the safest summers in the history of the company this past year.
Frank: I'm proud to announce that 19 production and recycling facilities all of our global R&D teams and two site service teams received the Triple Zero Award, which.
Frank: Which represents zero recordable injuries zero spills and zero process safety events for the entire year.
Frank: With an injury rate of just 0.3, we continue to operate in the top quartile of companies in the American Chemistry Council.
Frank: And outperformed many of our peers.
Frank: These results are a testament to the priority that we place on safety and everything that we do and not a reflection on the dedication that our people have to creating a safe work environment.
Frank: Moving on to our operational results. This past year saw a continuation in some case cases worsening of many of the market challenges that the chemical industry faced in 2023.
Frank: Do you have political uncertainty elevated inflation and relatively high interest rates eroded consumer confidence across the globe, which adversely affected our largest end markets of auto building and construction and most significantly Europe, most significantly in Europe and China.
Despite these macroeconomic challenges we were able to improve our full year adjusted EBITDA by $50 million.
Frank: Because of the self help actions that we've taken over the past couple of years amid.
Frank: Amid these challenging times, our focus has been on executing actions within our control and aligned toward transformation strategy as we wait for the macroeconomic environment to inevitably recover.
Frank: These included exiting are unprofitable and energy intensive styrene inversion polycarbonate production operations.
Frank: Consolidating several of our PMMA sheet operations and right sizing the company and its support functions based on the new operating footprint.
Frank: We also implemented new supply chain systems and processes that enable the greater than 20% reduction in days of inventory to a level that can be sustained through the cycle.
Frank: Finally, we took actions to extend our near term debt maturity to 2028, and a greatly improved our liquidity.
Frank: All of these actions have resulted in more efficient and focused company.
Frank: Compared to the first half of 2022, when we began these actions our energy intensity has decreased by approximately 45% and maintenance Capex has decreased by more than 35%.
Frank: And do the work process improvements and footprint reductions.
Frank: We have reduced our total head count by approximately 20%.
Frank: These actions have allowed us to continue to make progress on our strategic initiatives and circular technologies.
Frank: We continue to grow our recycled content containing product offerings with sales, increasing 47% versus prior year and representing now 4% of the total company variable margin in 2024.
Frank: Sales volumes were higher to higher margin case applications continued to make up an increasing percentage of volumes in our latex binders segment.
Frank: Accounting for 11% of our total segment sales volumes and 18% of our total segment variable margin in 2024.
Frank: And in our engineered materials segment, PMMA resin sales and margins continued to show resilience as volumes increased 3% year over year. Despite a very weak end market demand environment.
Frank: We have also made significant advancements in our circular technologies. These include commissioning our polycarbonate dissolution pilot facility and.
Frank: In the opening our ABS dissolution pilot plants, and RPM and made him up de polymerization demo facility in 2024.
Frank: We anticipate scaling up the P C in PMMA technologies at a road, Italy site and the PC dissolution.
Frank: Technology at our genres had gotten triangles site to support the growing demand from our auto clients.
Frank: Next I want to spend a few moments discussing our recently announced agreement with Deepak nitrate limited.
Frank: In November we agreed to supply our polycarbonate license as well as all proprietary Virgin Poly carbonate production equipment from our <unk>, Germany facility to Deepak for a combined total of $52 million.
Frank: While the economics of producing Virgin polycarbonate at our <unk> facility.
Frank: Have become unprofitable and led to our decision to exit that site.
Frank: Our polycarbonate technology remains highly valued and the assets can still be utilized.
Frank: We view this agreement as mutually beneficial to both companies and see this as the initial steps of our strategic and collaborative partnership with Deepak.
Frank: We also see India as a significant growth market returns Youre currently has minimal exposure.
Frank: We believe in a base case scenario of at least 7% compound annual demand growth through the end of the decade in our target end markets.
Frank: Before I hand, the call over to Dave I'd like to make a few comments regarding our fourth quarter results.
Dave: Core business results were in line with our expectations.
Dave: As seasonally lower volumes and extended year end shutdowns lead to sequentially lower profitability.
Dave: Falling raw material prices resulted in significant negative timing impacts in our polymer solutions segment and Americas Irenics, while this led to lower adjusted EBITDA than originally anticipated the lower raw material prices led to lower working capital balances, which contributed to the highest.
Dave: Free cash flow generation in over two years.
Dave: Now I'd like to turn the call over to Dave.
Dave: Thanks, Frank before I get into fourth quarter results I'd like to spend a few minutes discussing our new reporting segments.
Dave: At the end of the third quarter, we announced restructuring measures that included combining the management of our engineered materials plastic solutions and polystyrene businesses.
Dave: As a result, we made to substitute changes to our reportable segments.
Dave: To be more representative of this new structure and how we intend to operate the businesses going forward.
Dave: First the automotive compounding business that was previously part of plastic solutions has been moved into engineered materials.
Dave: This was a natural move since we already have a smaller compounding business.
Dave: And significant automotive exposure within engineered materials.
Dave: The second change is that we are combining polystyrene with.
Dave: With the two remaining businesses and plastic solutions.
Dave: S a N and.
Dave: And they are renaming this segment polymer solutions.
Dave: Okay.
Dave: I also want to highlight that in January we closed on a transaction that increased our available liquidity by approximately a $150 million.
Dave: And extended the maturity date of the $115 million of debt that was due in 2025 to 2028.
Dave: Pro forma after this transaction, we ended 2024 with almost $500 million of available liquidity and no maturities until 2028.
Dave: Moving onto financial results fourth quarter, adjusted EBITDA of $26 million was $6 million higher than prior year and included a $9 million unfavorable net timing impact.
Dave: Primarily in plastic solutions as styrene prices fell throughout the quarter.
Dave: Fourth quarter results were also negatively impacted by an additional $15 million of unfavorable net timing at Americas <unk>.
Dave: Due to falling raw material costs.
Absent these headwinds core business results were in line with expectation.
Dave: And improved versus prior year for each of our operating segments.
Dave: Engineered materials saw the highest year over year improvement due to moderating input costs improved PMMA pricing and a 61% increase in volume sold into consumer electronics applications.
Dave: Cash provided by operations during the quarter was $85 million.
Dave: Which resulted in free cash flow of $64 million.
Frank: Now I'll turn the call back over to Frank.
Frank: Thanks, Dave.
Frank: Looking ahead to 2025, we do not currently anticipate meaningful demand recovery in our major end markets geopolitics negatively impacted our business over the past three years and we look forward to the resolution of some of the worldwide conflicts that disrupted global trade flows and the decreased European competitiveness.
Frank: With this in mind I'd like to give a brief update on the sale process of our joint venture Americas <unk>, we along with our partner remain committed to so let me start with a focus on maximizing value to this end, we expect an improved valuation environment. Later this year, which would result in a <unk>.
Frank: Mining later than originally anticipated.
Frank: We remain very confident that the sale process will be successful and we will update the market. Once we have more clarity on timing.
Frank: We expect the first quarter of 2025 to be sequentially better than Q4, following the pronounced seasonality and negative timing impacts that we experienced at year end.
Frank: We are seeing seasonally higher volumes to begin Q1, but still expect first quarter volumes to be lower year over year due to continued weakness in automotive and building and construction end markets and in paper applications in Asia.
Frank: As a result, we expect Q1, adjusted EBITDA of $60 million to $80 million, which includes a one time $26 million contribution from the polycarbonate technology license agreement to Deepak.
Okay.
Frank: I believe the actions we've taken over the past two years have positioned us well for an eventual market and recovery.
Frank: And the refinancing trend that transaction, which we recently closed in January gives us ample runway to continue pursuing our strategy.
Frank: And now we're happy to take your questions.
Frank: Thank you.
Frank: The floor is now open for questions. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Frank: We would like to withdraw your question simply press Star one again.
Frank: You are called upon to ask the question and are listening via allowed to speak on your device. Please pickup your handset and ensure that your phone is not on mute when asking a question.
Frank Mitsch: Your first question comes from the line of Frank Mitsch.
Speaker Change: Fermium Research your line is open.
Frank Mitsch: Hey, good morning folks.
Speaker Change: I wanted to I wanted to follow up on slide 14 in terms of the cash spend that youre expecting for 2025.
Speaker Change: Standing at $390 million of Frank I believe are lower perhaps it was David last quarter was mentioning a number in the low three hundreds.
Speaker Change: In terms of <unk>.
Speaker Change: In terms of the spending I'm, just curious as to where youre seeing.
Speaker Change: The net cash expenditures pick up from what it was a few months ago.
Speaker Change: Okay.
Frank Mitsch: Good morning, Frank.
Speaker Change: The only changes I would say the only changes phase.
Frank Mitsch: Based on the last time we.
Frank Mitsch: Tom talked about this figure which is admittedly higher than it was last year is in working capital I mean predicting working capital.
Frank Mitsch: The $40 million outflow of working capital as a function of really two things.
Speaker Change: Volume over the course of the year, which as Frank said, we don't know.
Frank Mitsch: We're not baking into our forecast any any.
Frank Mitsch: Thing of significance, there, but also raw material prices, so our working capital balances is.
Frank Mitsch: At the end.
Frank Mitsch: The working capital inflow or outflow is really a function of our forecast of raw material prices at the end of the year, which admittedly Frank standing here February 13th is not making that a little hard to predict so.
Frank Mitsch: That that line items, particularly as.
Frank Mitsch: Is is quite.
Frank Mitsch: Likely to change going forward.
Frank Mitsch: Cash taxes might a little bit higher than what they were last year also Frank last year, I think was more like $20 million and Thats just a function of higher profitability. So that's those are the only changes.
Frank Mitsch: Okay Alright.
Frank Mitsch: Totally understand.
Frank Mitsch: And and.
Frank Mitsch: David when you were talking about the negative timing impacts in <unk> restraining profitability or restraining the EBITDA.
Frank Mitsch: That was reported.
Frank Mitsch: Due to due to lower styrene monomer of course that cuts that cuts two ways. Because you guys are now merchant.
Frank Mitsch: Styrene monomer purchasers, so I'm curious as to how we should think about the benefits that I guess youre seeing in <unk> from the lower styrene pricing how would you how would you factor that in to the overall profitability.
Frank Mitsch: Yes.
Frank Mitsch: Frankly, a lot of.
Frank Mitsch: Thank you.
Frank Mitsch: Can imagine that a lot of our pricing on their styrene containing products are.
Frank Mitsch: Our index on the.
Frank Mitsch: On the styrene index pricing, so it's generally a pass through.
Frank Mitsch: Okay got you got you okay.
Frank Mitsch: Alright, understood and then I assume in terms of the delay on the M. Sty sale from the first half of this year to the second half of this year. Obviously you guys are operating.
Frank Mitsch: Hand in glove with CP Chem correct.
Frank Mitsch: Yes, we're in close.
Frank Mitsch: We're in close cooperation with our joint venture partner and again as I said we.
Frank Mitsch: Anticipates.
Frank Mitsch: Okay.
Frank Mitsch: Yeah.
Frank Mitsch: The improved results.
Frank Mitsch: And a better valuation environment later this year.
Frank Mitsch: Got you. Thanks, so much.
Speaker Change: Your next question comes from the line of Matthew Blair of Tudor, Pickering, and Holt and company. Your line is open.
Matthew Blair: Thank you and good morning, hopefully you can hear me okay.
Matthew Blair: I had two questions on the Q1 guidance first how much of an impact if any is embedded from rising European natural gas.
Matthew Blair: Prices in the Q1 guide and could you provide an update on any sort of hedges you might have for 2025 and then two is there any assumption on net timing benefits in that Q1 guide. Thank you.
Matthew Blair: So yes.
Matthew Blair: Great question, so there there will be.
Matthew Blair: In Q1 timing of pricing lag due to natural gas price increases and those input.
Matthew Blair: Into mainly E M.
Matthew Blair: That are.
Matthew Blair: Based on natural gas prices, so we would expect.
Matthew Blair: Debt.
Matthew Blair: Our current expectation is that.
Quarterly pricing that we provided at the end of last year for Q1 to our customers, we wouldnt fully recover.
Matthew Blair: Put a cost increase from the natural gas prices.
Matthew Blair: Okay.
Matthew Blair: And thats mainly related issue.
Matthew Blair: Matt.
Matthew Blair: Matthew.
Speaker Change: As it relates to hedging look we've obviously been monitoring this very closely we have been.
Matthew Blair: Putting in hedges generally for the short term in the first quarter.
Obviously I am sure you have seen the news are.
Matthew Blair: There's a lot of positive kind of speculation coming out of.
Matthew Blair: Some resolution to the Ukraine situation.
Matthew Blair: And a follow on to that would be a potential reopening of supply from Russia to Europe with natural gas, which obviously I think would have a very deflation.
Matthew Blair: Deflationary effect on our natural gas prices in Europe. So we're.
Matthew Blair: Sure.
Matthew Blair: So we do have some hedges in place for the first part of this year, it's low it's less it's less than 50%.
Speaker Change: And Abbvie.
Speaker Change: Obviously, it's the near term prices really impacted more by the weather than anything else, but also looking.
Speaker Change: Looking longer term or.
Speaker Change: Watching the Ukraine situation closely.
Speaker Change: Little bit reticent, and proudly right now given that to put out any kind of long term hedges in natural gas for Europe.
Matthew Blair: I do Wassa, just Matthew just want to point out I mean.
Speaker Change: We've exited our energy intensive businesses in Europe.
Matthew Blair: The <unk> plants as well as Polycarbonates.
Matthew Blair: The only the only real energy intensive operation that we still have as MMA production, enabling so our energy intensity has gone down considerably.
Matthew Blair: Since the last time I went through it.
Matthew Blair: About half of what it used to be so the last time, we went through this.
Matthew Blair: The last time, we had an energy crisis in Europe, our exposure was to exit what it is today.
Matthew Blair: Okay.
Matthew Blair: That's helpful. Thank you and I.
Matthew Blair: My follow up it seems like one of the bright spots in the quarter was in engineered materials, you mentioned, the 61% increase in volumes into consumer electronics.
Matthew Blair: Do you have any more details here was just the result of like a new product launch and maybe a onetime benefit or do you think this can be more sustainable. Thank you.
Matthew Blair: Yes so.
Matthew Blair: Maybe just.
Matthew Blair: Think one of the big things year over year was that you had a very low base in 2023 by comparison. So 23 was the low year end consumer electronics for many reasons and end consumer demand. So one youre starting at a low point, but I'm really excited about the work that the team has done.
Matthew Blair: During the course of late 'twenty, three and into 2024 to diversify our customer base. So I would.
Matthew Blair: Sure.
Matthew Blair: I would generally say that while this has been a really strong growth part of our business and.
Matthew Blair: One of the biggest areas for recycled containing products.
Matthew Blair: Where we're selling into the consumer electronics area.
Matthew Blair: It was a fairly concentrated customer base and on these would be the larger brand names in consumer electronics, and we've done a very good job.
Matthew Blair: First defining our sales into new customers.
Matthew Blair: Last year and these are really bespoke products, it's not.
Matthew Blair: We are custom formulating a product with six up to 60% to 70% recycled content for specific applications and so for that reason. We think these are really resilient sales and again at the.
Matthew Blair: The two big drivers are the year over year comparison as.
Matthew Blair: As well as diversification of our customer base.
Matthew Blair: Great. Thank you.
Speaker Change: Your next question comes from the line of Hassan Ahmed of Alembic Global Advisors. Your line is open.
Hassan Ahmed: Good morning, Frank.
Speaker Change: A question around guidance.
Hassan Ahmed: Guys are guiding to.
Hassan Ahmed: Call it midpoint of guidance 17 million for Q1.
Hassan Ahmed: And I understand there are some moving parts associated with that but if I annualize that that's $218 million.
Hassan Ahmed: I mean, I know, they're all these sort of macro uncertainties and delight, but how should we be thinking about.
Hassan Ahmed: 2025.
Hassan Ahmed: Yes.
Hassan Ahmed: Look I mean, we.
Hassan Ahmed: Great question.
Speaker Change: And for the reasons that you said were not adequate.
Speaker Change: We're reluctant to try and predict the full year guide at this point, but look we're very confident in continued positive earnings development in 2025 and the drivers are.
Speaker Change: I'll give you the buckets, so what we announced with Deepak so $26 million of EBITDA contribution from the licensing agreement the SG&A reductions that we announced last year in restructuring will give a full year.
Speaker Change: Benefit of $25 million.
Speaker Change: PC the PUC asset closure and then the subsequent sourcing agreements with that as well as the new business Awards that we've received and qualifying new customers are similar in magnitude to those previous two areas and then lastly, I would point out that.
Speaker Change: We would expect a much more normalized earnings contribution or EBITDA contribution from <unk> This year and.
Speaker Change: You could do the math, but over the past four years EBITDA contribution for trends here from our participation in <unk> was $68 million and we would expect.
Speaker Change: Contribution closer to that than the result, we had last year. So.
Speaker Change: Those are the big buckets of contribution excluding market, but the <unk>.
Speaker Change: Market whatever happens in the market and so.
Speaker Change: I would.
Speaker Change: That's how I would think about it once you land your market assumptions on the underlying demand.
Speaker Change: Very helpful, Frank and as a follow up.
Speaker Change: We've seen a nice sort of rebound.
Speaker Change: The engineered materials segment EBITDA margin wise.
Speaker Change: You know.
Speaker Change: Last quarter, it was 12% EBITDA margins now at 10%, which obviously year on year.
Speaker Change: Is it is a healthy sort of expansion.
Speaker Change: How are you now with <unk>.
Speaker Change: All the moving parts and the changes we've seen in the macro thinking about normalized earnings and normalized EBITDA margins in that segment.
Speaker Change: Yes, Hi Hassan.
Speaker Change: We've been it's impossible for it.
Speaker Change: Does it take.
Speaker Change: Yes.
Speaker Change: Again, I Couldnt tell you what normal is so.
Speaker Change: What I can tell you is we're confident in our ability to show positive earnings momentum in E. M. I think we have a great portfolio just as we talked about look at.
Speaker Change: In last year's environment, where we saw I would say generally and many of our end markets. Some weakening in demand we were able to grow.
Speaker Change: Okay.
Speaker Change: PMT resident and 3% in volume.
Speaker Change: Fantastic story in the growth that we've seen in our.
Speaker Change: Engineered compounds that go into consumer electronics, it's over 60% growth and then the other thing that I would point to is our.
Speaker Change: These same customers are demanding.
Speaker Change: Significant pull from the market for recycled and circular solutions.
Speaker Change: And we believe we have a unique and leadership position in recycling technology for ABS PVC and PMMA that go into those end segments.
Speaker Change: So those investments that we will continue to drive will give us.
Speaker Change: Continued momentum there so I feel good about the work the team has done in the band.
Speaker Change: There's more to come.
Frank Mitsch: That's very helpful. Thanks, so much Frank.
Speaker Change: Your next question comes from the line of Laurence Alexander of Jefferies. Your line is open.
Laurence Alexander: So good morning, three questions. Just one is on the circularity and recycling can you just give a sense for what your.
Speaker Change: Total <unk> of your platform is.
Speaker Change: And those products and how the margins compare with the balance of your business.
Speaker Change: And then can you touch on what you think the capex needs might be down the road say over four or five years.
Speaker Change: <unk>.
Speaker Change: The recycling platforms are going to start to scale up.
Speaker Change: So the volume of the recycled containing products for all of 2024.
Speaker Change: And I'm looking at.
Speaker Change: And Dave to keeping your I think it was 4% for the full year, but it was growing as the year progressed. So I think that tour in Q4, it actually got to 5% of our total total volume.
Speaker Change: The.
Speaker Change: Sales of recycled containing products grew.
Speaker Change: As I said over 40% last year, so we're seeing.
Speaker Change: Relative to our ability to supply and source the material, we see relatively unlimited demand.
Speaker Change: From our end customers.
Speaker Change: So.
Speaker Change: Going to the Capex.
Speaker Change: It's a really interesting and dynamic.
Speaker Change: Dynamic question on this but these are <unk>.
Speaker Change: These investments are not significant either high single digit or low double digit million modules. So these are modular investments that we would make where we could.
Speaker Change: Install those at our various downstream plants and the investments depending again, it's early days, but it's high single digit to low double digit millions per module.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And then you asked about margin premium.
Speaker Change: We are seeing.
Speaker Change: In each of the areas.
Speaker Change: Sustainable offering or a circular offering in PC.
Speaker Change: ABS and PMA as well as polystyrene in multiple $100.
Speaker Change: Range are significant.
Speaker Change: Significant premiums over Virgin.
Speaker Change: The Virgin premiums.
Speaker Change: Our Virgin markets.
Speaker Change: And so is it fair to say that the payback on any of the modular investments will probably be like 152 years.
Speaker Change:
Speaker Change: Yes, it's pretty mature.
Speaker Change: It's premature for us to.
Speaker Change: For me to lean into that.
Speaker Change: Ill give you a real view on that but we're seeing very positive preliminarily, we see that these would be very positive irr's on these types of investments.
Speaker Change:
Speaker Change: But again, it's early stages and we're in the process of preliminary engineering, and we'll know more in the by the second half of the year.
Speaker Change: And then just lastly could you just calibrate what you're hearing from your customers about.
Speaker Change: Further destocking, our working capital efficiency initiatives and how much of that is baked into your outlook in terms of being sort of a fairly steady demand environment.
Speaker Change: Yes.
Speaker Change: I would generally say is that we think that our value chains have gotten pretty pretty tight.
Speaker Change: We think that we've done a great job along in partnership with our customers too.
Speaker Change: Take any slack out of the supply chains.
Speaker Change: And we haven't heard of any significant additional initiatives where people would be looking to take.
Speaker Change: Our inventory levels down we haven't we haven't seen that night I guess, maybe this is the one data point that we are looking at.
Speaker Change: From a longer term.
Speaker Change: Our mid term demand standpoint is what is.
Speaker Change: Let's talk about building construction and automotive.
Speaker Change: Since 2008, Theres been a deficit in North America, and Europe in terms of new construction versus household formation.
Speaker Change: So there's massive pent up demand there we think the value chain.
Speaker Change: Largely.
Speaker Change: Become balanced and then in automotive while demand is weaker it's a consumer confidence issue, it's not a inventory.
Speaker Change: Don't see it as an inventory issue and in the medium term, we see the Asia that we watched the age of the car Park.
Speaker Change: And the data that we.
Speaker Change: We just looked at this morning would tell us that in Europe. The car Park. The auto fleet is over 12 years old which is a historical historically.
Speaker Change: Highest level of age of the car parking in North America. It's over 12 years, which is one of the oldest fleets that I remember in my career so.
Speaker Change: Yes.
Speaker Change: We don't see a big drive to.
Speaker Change: To destock.
Speaker Change: Yes.
Speaker Change: Yes. Thank you.
Speaker Change: Your next question comes from the line of Roger Spitz of Bank of America. Your line is open.
Roger Spitz: Thank you very much first could you speak about the impact of tariffs for instance, how much do you sell it there.
Roger Spitz: Canada, Mexico, and China from directly from the USA.
Roger Spitz: Yes so.
Roger Spitz: On tariffs.
Roger Spitz: Thinking about tariffs in three dimensions. Okay. So dimension number one is okay. What are we importing at what are our purchases from countries that could be subject to import tariffs.
Roger Spitz: And.
Roger Spitz: We believe that impact will be negligible to us because we are the purchases are relatively small.
Roger Spitz: And in and the commodities that we're buying from those countries are in oversupply and so we have the ability to switch it to avoid the tariff switch our suppliers. The second dimension is where do we sell our products from the U S production into countries, where there could be <unk>.
Roger Spitz: Tori tariffs and.
Roger Spitz: And I would just say in general.
Roger Spitz: Of the Europe by far most of the U S production is consumed in the U S.
Roger Spitz: Our exports from the U S to Canada, and Mexico represent low single digit percentages of our overall.
Roger Spitz: Of our overall sales and 80% of those are in the auto value chain and we're highly specified into the tiers. So we don't necessarily believe that we will see an impact in terms of demand.
Roger Spitz: Sitting here today, if tariffs were imposed on those sales and then the third bucket or the third dimension, which is unknowable at this point is what would be that end market.
Roger Spitz: Demand impact on the imposition of significant tariffs.
Roger Spitz: There's a lot of uncertainty and we just don't know.
Roger Spitz: At this juncture.
Speaker Change: Thank you for that and my other question I'm looking at slide 12 of the deck.
Roger Spitz: For instance, our securitization at $15 million leftover.
Speaker Change: Availability excuse me does that mean that I guess.
Speaker Change: We'll come out with the Q, but are you drawing $100 million under the AAR securitization or is.
Speaker Change: Or is there a borrowing base limitations here.
Speaker Change: Yeah, Hi, Roger Good morning, it's Dave So Theres a park, there's a borrowing base so that the.
Speaker Change: The amount we have to borrow against obviously the function of the receivables balance and the legal entities that participate in the program.
Speaker Change: The receivables balance was quite low understandably at the end of Q4.
Speaker Change: Just because of the season does kind of seasonal seasonality of sales in the quarter. So our borrowing we were able to so it's $150 million facility.
Speaker Change: Most always going back in time, we've had full availability based on the borrowing base.
Speaker Change: It happened to be particularly low at the end of the year because of lower seasonal volumes, but also lower prices I talked about earlier that big drop in styrene prices.
Speaker Change: We have $125 million at the end of the quarter able to be borrowed.
Speaker Change: And there was a $75 million drawn.
Speaker Change: I would expect that borrowing base that borrowing base will be higher in Q1.
Speaker Change: Got it perfect. Thank you very much.
Speaker Change: And your last question comes from the line of Alex Kelsey of Wells Fargo. Your line is open.
Alex Kelsey: Hey, guys. Thanks for taking the question.
Alex Kelsey: A couple of follow ups from I think what's been asked already with regard to the E&S segment. Just now that there is automotive so automotive components in there as well the $27 million reported in Q4, how much of that was peer M versus auto.
Alex Kelsey: Of the $27 million.
Alex Kelsey: Okay.
Speaker Change: Alex There was always a pretty significant automotive automotive exposure in engineered materials in fact auto and building and construction at our largest end markets for what I would call legacy legacy engineered materials.
Speaker Change: So PMMA written lot of PMA resin apt.
Speaker Change: Applications.
Speaker Change: I don't have a number for it we'll have to get it up the percentage the automotive compounding business that moved into.
Speaker Change: Yes.
Speaker Change: And Tien Tsin, we'll have to get that and give it to you offline, but I just wanted to.
Speaker Change: The automotive compounding segment non automotive in general, but okay. That's fine we can we can follow up.
Speaker Change: Another one on the license sale.
Speaker Change: Indian partner could you just remind us the duration of that agreement and then I guess the bigger question is if there is a exploration on that agreement to the extent that the license and technology is still valuable can you enter into a similar agreement again.
Speaker Change: And then on the other question on that partnership.
Speaker Change: Frank I think you mentioned.
Speaker Change: The start of a strategic relationship with that partner can you just talk about what that means or anything else, we should expect with them.
Speaker Change: Yes, no. Thanks, that's a great question, maybe let me let.
Speaker Change: Let me give you a little color a little more background on who <unk> tried is deepak is one of the largest Indian public company.
Speaker Change: Public companies in the chemical industry. They are the largest phenol acetone producer in India.
Speaker Change: And this is an attempt.
Speaker Change: This is a move on their part to move downstream to forward integrate in these value chains, because India is a net importer of polycarbonate there is no domestic production.
Speaker Change: As well and so.
Speaker Change: <unk>.
This depth sort of there.
Speaker Change: <unk> strategy there.
Speaker Change: Sales are over there a multibillion dollar revenue company market cap of $4 5 billion.
Speaker Change: So they are a substantial company and have a great presence and cost position in the value chain we participate.
Speaker Change: So.
Speaker Change: It's India.
Speaker Change: In my career I've had a lot of operations in India, It's a hard.
Speaker Change: It's hard to get critical mass in India. So partnerships are important and so having.
Speaker Change: A substantial company that you're partnered with that gives you access to the market is important and like we said earlier in our downstream formulated products, we would see.
Speaker Change: High single digit compounded annual growth rate in our end markets for our solutions and.
Speaker Change: It's a big opportunity for us going forward.
Speaker Change: So on the.
Speaker Change: The license it's a perpetual license. We believe are as I've said in the script. We believe our polycarbonate technology is unique and one of the best technologies in the industry.
Speaker Change: In Germany, It was a disadvantage but for a number of reasons.
Speaker Change: But elsewhere. It has a significant value and then we have the option to expand the capacity.
Speaker Change: With Deepak as well as provide other licenses in other geographies.
Speaker Change: Okay. Okay. That's very helpful. Two more from me if I may on 2025, I understand lots of moving pieces and you're reticent to offer a true guide out there, but if I just take the cleansing docs in the last transaction.
Speaker Change: 25 estimate of 300 to 350 of EBITDA as we sit here today, knowing what we know and don't know about the market do you think that those are still a reasonable goalpost for the year.
Speaker Change: Yes.
Speaker Change: We're not going to give guidance for the full year or even bracket it but what I would tell you because theres so much market uncertainty.
Speaker Change: There's positives and negatives that are in development.
Speaker Change: Oxford last night.
Speaker Change: Developments so it's.
Speaker Change: I don't want to bracket, where we would end up but I would go back to the comments that I would make that I made I think for Hassan.
Speaker Change: No.
Speaker Change: We're very confident and positive earnings momentum and because of.
Speaker Change: A lot of the actions we've taken are well within our control and those buckets are what we've talked about with Deepak.
Speaker Change: G&A restructuring.
Speaker Change: The make versus buy decision in polycarbonate and the closure and <unk> as well as business wins, and then again on what more noise based earning.
Speaker Change: Contribution from Amsterdam.
Speaker Change: Alright.
Speaker Change: That's a.
Speaker Change: Pretty positive.
Speaker Change: Those are positive benefits this.
Speaker Change: This year right.
Speaker Change: Alright, and last one if I may just the status of cost cuts.
Speaker Change: David I think you mentioned 25 to be realized in 2025 again, just looking at the whole deck that was posted with the last transaction.
It was noted there was $80 million of cost out to be realized in 25 can you just help me sort of bridge those numbers or more simply just kind of remind us where you guys stand in terms of total cost outs from the various closures in the corporate restructuring how much has been realized to date and what we should expect in 'twenty five and maybe into 'twenty six.
Speaker Change: Thank you.
Speaker Change: Yes, well.
Speaker Change: We will have to go back to you and try and.
Speaker Change: I don't I'm not sure I could give you an answer to that question what I am very certain of is the incremental SG&A benefit.
Speaker Change: From the actions that we announced late last year of $25 million.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: The impact of Polycarbonates.
Speaker Change: Is there we realized some of that there is an incremental benefit.
Speaker Change: From some of that and again, it's different I'd have to we'll have to follow up with you to give you a complete.
Speaker Change: Analysis of that but what I would tell you is we've taken fixed cost down by well over $100 million over the past two years and we are and we're on track to deliver everything that we've announced so on VC.
I don't know I'm looking at Dave.
Speaker Change: The answer to that better than I did so Alex look.
Speaker Change: The actions that we've taken we will get the full year realization of savings in 2025 substantially I mean for that.
Speaker Change: The head count reductions.
Speaker Change: The SG&A.
Speaker Change: SG&A restructuring that's $30 million, we've got five last year, we'll get an incremental 25. So we'll get the full run rate of that this year. We'll also get the full realization of the Polycarbon is savings obviously, the styrene stuff was done years earlier. So we're already seeing the full the full effect of that in 2025.
Speaker Change: Okay.
Speaker Change: Thank you we have time for one more question. It comes from the line of David Begleiter of Deutsche Bank. Your line is open.
Speaker Change: Thank you just a couple of questions.
Speaker Change: Back to guidance and I am sorry, but one more try.
Speaker Change: In Q1.
Speaker Change: Hi comment agreement if you look at that mid Forty's EBITDA.
Speaker Change: Two years, you've seen a progression of roughly $20 million sequentially higher than Q2.
Speaker Change: It gets you to about mid <unk> for Q2 is that good run rate or is that good proxy at least.
Speaker Change: Directionally speaking for Q2 versus Q1, perhaps mid sixties versus.
Speaker Change: Where we are right now.
David Begleiter: Yes, David Thanks for the question.
Speaker Change: Actually.
Speaker Change: Q1 is somewhat more depressed than normal because it's been a slower start to the year than than typical and then I would also say is that we have pricing lag.
Speaker Change: In Q1, that's not immaterial mainly because.
Speaker Change: Because we give we have been providing quarterly pricing we priced the product.
Speaker Change: Our products to our end customers at the end of Q4.
Speaker Change: And.
Speaker Change: Again, it's very volatile, but input cost a lot of the input costs and the EMA in Europe are based on natural gas price and the TGF has gone up and those related products that are based on TPS.
Speaker Change: Have gone up with them. So if we see today, we see some pricing lag that would not be recurring after Q1, So I would.
Speaker Change: I would say, yes, I would agree with your acute.
Speaker Change: Q2s, and three Q2, and three will be an improvement.
Speaker Change: Over Q1, but it would not I wouldn't compare it to prior year simply because we're seeing more pronounced.
Speaker Change: More pronounced slow start to the year and then we hit the pricing like.
Speaker Change: Understood and just on polystyrene or these assets core now to to trim deal.
Speaker Change: No.
Speaker Change: Our polystyrene assets are great assets they are actually.
Speaker Change: <unk> done a great job.
Speaker Change: Managing those in the past couple of years to optimize the free cash flow generation of the assets but.
Speaker Change: We believe that other people could would be investors would invest in the growth of those assets and we continue to fields.
Speaker Change: Inbounds and work with potential buyers for those assets, but on an individual basis around the world.
Speaker Change: And there is nothing to report, but again theres activity and interest. So we would continue to explore the possibility of selling those individual assets and are doing that.
Speaker Change: And just one last thing on <unk> is it fair to say the process sales process has been has been halted and it is has been halted one wasn't halted.
Speaker Change: It's not halted.
Speaker Change: We are.
Speaker Change: As I said, we're working in conjunction with our partner we.
Speaker Change: Our goal is to monetize our interest in <unk> and we will continue to progress that but we want to time our process to optimize value.
Speaker Change: And.
Speaker Change: So that just means the later marketing.
Speaker Change: Than we had originally anticipated.
Speaker Change: Thank you.
Speaker Change: With no further questions that concludes our Q&A session.
Speaker Change: We thank you for your participation. This concludes today's conference call you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: [music].