Q1 2025 Huntsman Corp Earnings Call
Greetings and welcome to the Huntsman Corporation first quarter 2025 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Ivan Marcuse: I would now like to turn the conference over to your host Mr. Ivan Marcuse.
Speaker Change: Vice President of Investor Relations and corporate development. Please go ahead Sir.
Speaker Change: Thank you Melissa and good morning, everyone and welcome to Huntsman in the first quarter of 2025 earnings call joining us on the call today are Peter Huntsman, Chairman, CEO, and President and Sylvester Executive Vice President and CFO yesterday May 1st 2025, we released our earnings for the first quarter of 2025 via press release and posted to our website Huntsman com.
We also posted a set of slides and detailed commentary disgusting discussing the first quarter of 2025 on our website.
Speaker Change: Huntsville will provide some opening comments shortly and we will then move to question and answer session for the remainder of the call. During the call. Let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward looking statements and while they reflect our current expectations. They involve risks and uncertainties and are not guarantees of future performance.
Speaker Change: You should review, our as our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations.
Speaker Change: I plan on publicly updating or revising any forward looking statements during the quarter.
Speaker Change: Refer to a non-GAAP financial measures such as adjusted EBITDA, adjusted net income or loss and free cash flow you can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been pushed our website Huntsman com I'll now turn the call over to Peter Huntsman Ivan. Thank you very much just over two months ago at our last earn.
Speaker Change: Earnings call I started my comments by explaining why we did not give yearly guidance I'd, rather focus on quarterly guidance.
Speaker Change: And that was just before the first week of April when Liberation day liberated the New York stock exchange to some three trillion dollars of value before reciprocal tariffs 90 day pauses in 500 plus percent tariff rates were put on most goods flowing between the world's two largest and interdependent.
Speaker Change: Economic systems, along with varying degrees of tariffs on just about every trade swell in the world today.
Speaker Change: Today I'm not sure. If we can tell you what's going to be happening between now and the end of the week in either the macro economy or our own petrochemical industry.
Speaker Change: Assume that most Ceos, who have already reported their numbers. If they were to report again today would be changing their outlook.
Speaker Change: I wanted to see if we can take it make some sense as far as what we're seeing as far as what is happening today and some of the longer term implications for huntsman that we see as of today.
Speaker Change: Much of what we're seeing in our supply chains is a literal disconnect between orders and downstream demand.
Speaker Change: We see build rates for cars dropped low single digit percentages and by the time the supply chains move through Oems and down to US we are seeing double digit drops in some order patterns.
Speaker Change: It is not unlike what happens when someone tapped the brakes on a fast moving freeway and the car behind them apply its greater pressure three or four cars for their back cars are literally skidding to a halt.
Speaker Change: Now I do not see vehicle production housing materials airplanes, and power grid components dropping by double digit margins. However, I am seeing in the past few weeks suppliers panic and in the world of great and changing uncertainties.
Speaker Change: During inventories preserving working capital and stopping supply chains, especially those moving overseas well. These conditions remain per minute I think that is very highly unlikely I would see a scenario.
Speaker Change: Not unlike 'twenty 'twenty when supply chains, and inventories froze and the world stood in the state of promises as consumers manufacturers and suppliers trying to make sense of the short term.
Speaker Change: I've seen much if not all of the short term supply and demand issues driven largely by the unknown and uncertain conditions likely being resolved in the next few months as trade deals get done alternate supply lines and sources emerged and the dust from Liberation day finally saddles.
Speaker Change: Other aspects of this will be longer lasting north American MDI terrorists as a good example of.
Speaker Change: This past year, nearly 400000 tons were imported into the United States and the Americas market with about 75% of that coming from China.
This represents between 20 and 25% of the total domestic demand for the entire year.
Speaker Change: Just in the month of January of this year more than twice the amount of MDI that was imported a year ago was imported into the United States.
Speaker Change: By the end of the quarter and March imports had dropped by 60% into the Americas and greater than 75% from China.
Speaker Change: And it appears that this drop will continue into the second quarter. It was only one kiloton of MDI from China I came into the Americas in the first week of April.
Speaker Change: These terrorists seemingly are larger longer term in nature and I believe may have a greater impact on the Americas.
Speaker Change: Huntsman produces virtually all of our Americas materials in North America, where in an ideal location to benefit from this.
Speaker Change: More specifically during the latter part of the first quarter of this year as shipments from China were cancelled there seem to be an oversupply.
Speaker Change: Of MDI on the Asian markets Chinese MDI prices fell as did raw materials. However, in the past week these prices to stabilize and have actually recovered by 10%.
Speaker Change: Again, as we are well situated in our Chinese business as all of our MDI supply is domestically produced with an excellent team of local associates that operate this business again, how long will this last no one knows but orders seems to slowly be coming about in China and the Americas.
Markets Europe on the other hand, there is still trying to figure out if they have or even want.
Speaker Change: Industrial policy more to come on that one no doubt.
Speaker Change: I do not see the impact of tariffs, having a material impact.
Speaker Change: That's a material impact on our performance products and advanced materials divisions, I can clearly see what impact this will have on our customers and markets such as power the aerospace, but it seems things seem to be moving towards a slightly more confident place than they were just a week ago.
Speaker Change: This past quarter I told you that I thought we were seeing the bottom of MDI pricing or better put margins as we had seen announced price increases across the U S EU and China.
Speaker Change: Continue to believe this though there may be a bit choppiness in the numbers the MDI market weight may well be seeing better margin expansion from falling raw material prices then from rising MDI prices, however volumes will be of greatest importance the present market uncertainty.
Speaker Change: These do not provide us or our customers confidence for longer term inventory build and volume increase.
Speaker Change: We continue to be frustrated by the lack of a clear and realistic energy and European wide industrial policy, which is needed to encourage investment by us and others in Europe.
Speaker Change: We will continue to aggressively look at our cost and organizational structure and calibrate that to a shrinking industrial base.
Speaker Change: We see more companies struggling under the burden of high energy cost taxes and regulation in short we will not be waiting for the market to turn in our favor and we will continue to take the steps necessary to have a value creating business in Europe.
Speaker Change: We also continue to look for opportunities around the world that may provide a chance to increase our product footprint.
Speaker Change: We are careful to protect our balance sheet, we will continue to assess our assets and explore possible opportunities in the marketplace.
Speaker Change: Create shareholder value faster than just waiting for a market recovery.
Speaker Change: In short we are focused on capitalizing on the short term changes in volatility aligning our cost to longer term market realities and exploring various options to enhance our portfolio and create greater shareholder value with that operator, well open the lineup for any questions.
Speaker Change: Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from Mccann for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys to allow for as many question.
Speaker Change: As possible, we ask that you each keep to one question and one follow up thank you.
Speaker Change: Our first question comes from the line of Kevin Mccarthy with vertical Research partners. Please proceed with your question.
Speaker Change: Yeah.
Kevin Mccarthy: Yes, Thank you and good morning, Peter I appreciate your your description regarding what I would call a bullwhip effect.
Kevin Mccarthy: It strikes me that one of the things that might be a little bit different today is inventory levels are generally leaner than they were a few years ago. So I was wondering if you could speak to that you know what where are you seeing the most pronounced a bullet the factor volume reductions and where do you think there might be park.
Kevin Mccarthy: So our inventory more elevated or or leaner would be my first question. Thank you.
Kevin Mccarthy: Yeah.
Speaker Change: Kevin. Thank you very much excellent question, because it really strikes at the heart of the here and the now I mean, if we are seeing a bullwhip effect that will say I am not trying to contradict the guidance that we've given the second quarter as I sit here today and look at that guidance for second quarter I firmly believe Matt but by the end of the second quarter, we may well be seeing an inflow of.
Speaker Change: The orders that may have a material change on that outlook again, I think it's important that we give you. The clearest view that we have as of today and what we're seeing today.
Speaker Change: But as I look at that and what I would say our order patterns versus reality reality being how many cars are actually being built how many cars are actually being sold and.
Speaker Change: There's no doubt that there is a low single digit movement in the number of cars that are being produced there is some builders that are slowing production down in Mexico for example.
Speaker Change: In the overall scheme of what we're seeing in the automotive industry.
Speaker Change: More than just a few percentage points drop in production as we sit here today, we're <unk>.
Speaker Change: Getting raw materials in some applications not across the board, but in certain applications dropped as much as high as 15% to 20% downward just in the last week or two now again, how much of this is inventory fluctuation how much of this is just setting something in place.
Speaker Change: But there is a massive disconnect as far as what's being ordered and what's being produced I don't believe that there's a lot of inventory sitting in the auto supply chain I would say the same thing.
Speaker Change: The aerospace.
Speaker Change: I look at the number of planes that are being built versus the number of planes that are being delivered again those are two completely different numbers and then the supply chain as far as how many fuselages wings and so forth tail sections.
Speaker Change: That are being built.
Speaker Change: As one.
Speaker Change: One of the best end markets in our entire business is aerospace and you think with the customer base largely built on the backs of two companies that have multiyear back orders.
Speaker Change: That you would see one of the most consistent and reliable supply chains.
Speaker Change: And any of our end use market. So I think on a yearly basis. It all looks quite flat on a quarterly basis. There is quite a bit of volatility on a monthly basis. It's all over the place and so as I look at the auto as I look at aerospace.
Speaker Change: I would even say the same applies to to the downstream construction materials I look at the number of homes that are being built.
Speaker Change: Number of homes that are being sold and I compare that with products that are that are going to various applications, whether its installation or appliances, and so forth and you see much greater volatility so Kevin I'm, sorry, long winded answer, but I think.
Speaker Change: Before we get too hard with a lot of people out there really thinking how do you match today's drop off in demand with the reality of what's actually being consumed in the broader market. The simple fact is matters. The only the only parallel I've seen in the last 15 to 20 plus years.
Speaker Change: It's really 2020, when we saw a very very rapid sudden drop off in Covid and subsequently we start we saw your words this bullwhip effect.
Speaker Change: That came back in the latter part of 2020 and went all the way up through 'twenty one.
Speaker Change: Thank you for that Peter and then as a follow up.
Speaker Change: Would you hazard a guess as to how much the total company volume.
Speaker Change: Might've been been down if it was down in the month of April.
Speaker Change: And.
Speaker Change: The order books are shaping up for me.
Yes, I'd want to I'd want to look a little bit more closely at that I think when you'd be looking at across the board at all of the <unk>.
Speaker Change: Businesses.
Speaker Change: January and February for Us would have been what I would say it would be months.
Speaker Change: We're on target and we are meeting expectation, we really saw a great deal of volatility around those orders in the month of March and going into April and as I say it's.
Speaker Change: Obviously, we're in the very early part of May.
Speaker Change: Not a great deal of visibility right now, but it seems like the dust is gradually starting to saddle. So a lot of metaphors in there without giving you exact numbers.
Speaker Change: I don't have the exact numbers on the volume of the pricing as we look into the second quarter.
Speaker Change: Our single largest variable in the second quarter is going to be around what actually happens.
Speaker Change: With volumes.
Speaker Change: Order patterns in prices and I will just say that I'm not aware of any large customers that we have lost during this time period as well I say that because.
Speaker Change: I believe that what we're seeing is a lot of what a lot of other people are probably seeing the same thing.
Speaker Change: Okay.
Speaker Change: Yes.
Unidentified Moderator: Thank you. Our next question comes from the line of Patrick Cunningham with Citi. Please proceed with your question.
Patrick Cunningham: Hi, good morning.
Speaker Change: Trade uncertainty has clearly overwhelming everything but one of the goals is to increase U S manufacturing and maybe even get some tailwind for housing and infrastructure. How do you view the growth potential longer term if the policies work as intended and how much further reposition your asset footprint. If we live in this protectionist world.
Patrick Cunningham: Okay.
Patrick Cunningham: Well I'm not sure that as we look at our asset footprint and I continue to see kind of some some some vague question marks around Europe, but.
Patrick Cunningham: If you if you.
Patrick Cunningham: Okay, I'm, probably over simplifying things if you kind of look at it more protection. This view in China in a more protectionist view in America, and China has certainly started five six years ago, increasing their industrial capacity domesticating their industrial capacity, and so forth and becoming less reliant on imports largely doing what the USA.
Patrick Cunningham: Today, the vast majority of what we sell the vast majority of where we make money.
Patrick Cunningham: As in domestically produced product both in North America and in Asia.
Patrick Cunningham: So I don't see us having to change our.
Patrick Cunningham: Footprint, if you will manufacturing or otherwise.
Patrick Cunningham: To try to calibrate around where things seemingly are going now again that may have an impact on our downstream.
Patrick Cunningham: On our downstream demand on some of our products and so forth, but I think that we're in a pretty good position ourselves.
Patrick Cunningham: You did mentioned the construction margin markets in.
Patrick Cunningham: I would think that the single biggest issue probably certainly longer term, even more so than tariffs and tariffs you will recalibrate and will will will be able to work our way through the single biggest impact that we see between now and the end of the year on our earnings would be.
An improvement in that pickup in the North American residential and commercial construction.
Patrick Cunningham: Okay.
Patrick Cunningham: Yes.
Speaker Change: Understood very helpful and could you provide an update on the spray foam business as this business seeing a similar disconnect in downstream demand versus your orders and do you expect any sort of further pressure on this market just given homebuilders are under pressure at this point.
Patrick Cunningham: Yes, so bottom line is yes.
Patrick Cunningham: Thank you as you think about the spray foam business, that's going to both be a new homes, which is slowed and home remodeling, putting taking out a second mortgage or whatever and add at a higher interest rate and remodeling a home that that industry has obviously slowed as well. So yes, we would see that impact in both areas.
Ivan Marcuse: Patrick you will have seen that we announced the closure of our Walgreens.
Ivan Marcuse: <unk> first spray, we're consolidating everything down in Arlington in Texas on that side, just right sizing our footprint to ensure we've got the whole space right.
Ivan Marcuse: Yeah.
Unidentified Moderator: Thank you. Our next question comes from the line of Jeff Zekauskas with J P. Morgan. Please proceed with your question.
Jeff Zekauskas: Thanks very much.
Unidentified Moderator: Okay.
Unidentified Moderator: Can you talk about.
Unidentified Moderator: Pricing and MTI in North America, It seems that the nature of producers went out with meaningful price increases.
Unidentified Moderator: What happened in what continues to happen.
Unidentified Moderator: Well look we are still out there pushing price increases and so forth.
Unidentified Moderator: Yeah.
Unidentified Moderator: I'm not going to speak on behalf of our competitors I'll, let them speak for themselves and whatever decisions. They are trying to make.
Speaker Change: Jeff the objective of our price increases was to expand margins and if we can do that by maintaining our price.
Unidentified Moderator: And being able to take advantage of falling raw material prices.
Speaker Change: We'll certainly do that I would say that I think that we are in a a worst position.
Speaker Change: Position today than we were two months ago.
Speaker Change: When it comes to those prices being implemented due solely because of the lack of volume and the lack of demand that we're seeing in the market.
Speaker Change: Conversely, I would expect that as you see tariffs fully in effect in North America, perhaps even in China.
Speaker Change: And as you see volumes recover to a more normalized area youll see an opportunity for those price increases.
Speaker Change: More meaningfully.
Speaker Change: Implemented across the board.
Speaker Change: And then for Phil.
Speaker Change: I think inventories went up $100 million roughly sequentially.
Speaker Change: Is that mostly because you are in demand.
Speaker Change: Was less than you expected and you need to.
Speaker Change: Move your operating rates down and.
Speaker Change: Do you have any.
Speaker Change: Estimates for whether working capital will be a benefit or use this year.
Speaker Change: Yes, Jeff It came in about where we expected as a reminder, we've got a number of.
Speaker Change: Two in our hubs around the world, particularly the large one that we had in Rotterdam, where we have to build for that we've got some more minor ones during the second quarter in Geismar and challenging China as well as the turnarounds at our Conroe, Texas facility. So I expect avail, those numbers will come down in the second quarter and Youre right.
Speaker Change: Some calibration towards say.
Speaker Change: Our OLED is uncertain demand environment, but we will have our inventories back down.
Speaker Change: At the end of the second quarter for the full year I think we articulated we still expect happened improvement on our cash conversion cycle improved on that last year and we expect further improvements on that.
Speaker Change: So this year in terms of whether it be a source or use.
Speaker Change: Selfishly I hope doesn't use I hope, there's a booming economy by the fourth quarter and the fourth quarter activity is much higher.
Speaker Change: In the fourth quarter this year versus the fourth quarter last year, but our focus honestly is on what we can control are ensuring our cash conversion cycle was appropriately managed.
Speaker Change: Thank you. Our next question comes from the line of Josh Spector with UBS. Please proceed with your question.
Josh Spector: Hi, Good morning, I wanted to ask two things first on the trade balances for MDI I mean at least on the data that we have through February it looks like there's been a pickup in Germany imports into the U S. So as China backs out do you see a scenario, where Europe fills in that gap or the U S assets move up much more to fill that.
Josh Spector: I don't know if thats internal transfers that a competitor or something else going on or something with the market and then second just with your U S pricing, where you have spread pass through is over benzene pass throughs, how do those contracts renegotiate what's your ability to increase the spreads separate from the price increases. Thanks.
Josh Spector: Yes on the first part of that question.
Josh Spector: On the first part of that question, Yes, I would think that if somebody is bringing in product from Europe today.
Josh Spector: I can't imagine why they would be doing that.
Josh Spector: And our own manufacturing costs were in excess of $100 a ton higher cost in Europe, and then on top of that you have to pay what I think 6% to 8% duty or tariff and then on top of that you have to pay working capital you have to pay transportation, So youre talking there probably.
Josh Spector: Four to $500 a ton difference between Europe and the U S. So if somebody is shipping product in from Europe into the U S for economic benefit.
Josh Spector: I find that I found it really tough to understand why somebody would be doing that but.
Josh Spector: Sort of an operating upset you've got contractual obligations that you have to meet on the take or pay or something.
Josh Spector: So no I do not see Europe back filling.
Josh Spector: Asian material that otherwise would be coming to the U S.
Josh Spector: It has not been competitive to do that for at least the last three or four years.
Josh Spector: And I don't foresee in the future given the energy costs and so forth in Europe.
Josh Spector: Freight costs and tariffs and so forth.
I don't see how that could possibly make sense on a longer term basis.
Josh Spector: Yes on our pass through pricing remind you that just under about 50% of our overall North American volume is on some form or another of pass through so I think it's kind of I'm not going to say a standard in the industry that there are some segments that have longer term commit.
Josh Spector: Commitments to customers and so forth, where they favor that and others that do not tip.
Josh Spector: Typically those contracts I am not going to see.
Josh Spector: To all of them because they all very contract to contract, but typically you have anywhere from a three six.
Josh Spector: What I would call a pitstop, where you can pull off in the contracts.
Josh Spector: Can readjust the portion of that contract that is not related to raw materials I would call that would be a margin expansion or you can just choose to get out of the contract altogether, but.
Josh Spector: Again, thats going to vary customer to customer turned to turn but you typically every couple of months.
Josh Spector: Youll have a pitstop. So again, if you see one.
Josh Spector: Drop in benzene that happened, let's hypothetically say today.
Josh Spector: I would say that you probably have anywhere from a.
Josh Spector: 30 to 45 day time period of where your existing inventory is going to have to be worked through the system you have got benzene.
Josh Spector: If that price were to drop today, you've got benzene that you bought yesterday benzene is it's on the water and shipment to your plants, you've got benzene in form of Nitrobenzene crude MDI finished with all of that is price of that more expensive inventory. So the impact of that dollar cheaper benzine as of today is not going to be felt for some time.
Josh Spector: And then when it is youll instantaneously feel it on that 50% and again, that's a much higher percentage of what you see in Europe or in Asia.
Josh Spector: In the U S market at 50% you would feel that instantaneously and then the other 50% you would see that probably over a a six.
Josh Spector: A three to six maybe in a very few contracts as much as as long as nine months.
Josh Spector: Sort of a term contract in that so that last 50%.
Josh Spector: Would be tailing off there so again I would like to be I'll say, you see a dollar dropped today youre going to see the benefit today Conversely, when prices go up.
Josh Spector: We're not going to fully see the impact of that thinking taking effect and when prices go up people are packaging and so forth. We usually it gives us that amount of time.
Josh Spector: Conversely to.
Josh Spector: To respond to the markets and to be able to calibrate our production and our costs and so forth.
Josh Spector: So it works it works.
Josh Spector: The opposite.
Josh Spector: When prices are going up.
Josh Spector: Very helpful.
Josh Spector: Thanks Peter.
Unidentified Moderator: Thank you. Our next question comes from the line of Alexia <unk> with Keybanc capital markets. Please proceed with your question.
Speaker Change: Thanks, Good morning, everyone Peter.
Unidentified Moderator: This line of questioning.
Speaker Change: Chinese AXT foreigners.
Speaker Change: Moving to MDI to Canada and Mexico.
Speaker Change: Your customers being able to shift their consumption to those two countries.
Speaker Change: Well Manav may become the 51 to 52nd state.
Speaker Change: Okay I'm just kidding.
Speaker Change: Look, there's obviously going to be.
Speaker Change: There would be an advantage I assume each of those countries have their own independent.
Speaker Change: Trade.
Speaker Change: Tariffs and so forth that are that are going to be put into place.
Speaker Change: There have been some recent.
Speaker Change: Rather public.
Speaker Change: MDI consumers that have taken MDI finished product.
Speaker Change: In this form of building materials and other products on one customer or a company specifics that have brought that over the border and have been have been fined.
Speaker Change: And.
Speaker Change: And under investigation.
Speaker Change: Trying to avert duties that way so.
Speaker Change: <unk>.
Speaker Change: Again, when you look at what you produced in Canada, Youre going to have to be consuming that in Canada as well if you bring a finished product into the United States.
Speaker Change: Yes.
Speaker Change: John every single application, but on most of the applications.
Speaker Change: Youre going to have to be paying a duty on that proportion of MDI.
Speaker Change: Makes sense. Thanks for this and I wanted to ask you about the dividend can you share anything.
Speaker Change: About how the board on this topic.
Is the dividend something you already determined to keep at this level or is there a good argument to sort of derisk the balance sheet and as Jeff said free cash flow has been weaker.
Speaker Change: The winter for a while.
Speaker Change: I think if you look in the past and our company's past all through Covid, even through the economic recession going back 15 years ago. The dividend has been something that this company has always held.
Speaker Change: To be something very close to sacred.
Speaker Change: We as a management team.
Speaker Change: As we look beyond just the cash generation of the company itself, we look at that the $75 million. We've collected so far to date from our practice are legal settlement from our select dividend from other initiatives that we will have between now and the end of the year, we feel very confident that we will continue to generate the amount of.
Speaker Change: Cash necessary.
Speaker Change: We have a strong balance sheet and we have certainly have confidence in the future where the company is going to maintain the dividend.
Speaker Change: So at this time that certainly is not a question that we're grappling with.
Speaker Change: We recognize yields are high right now, let's say they always are in trough conditions.
Speaker Change: As Peter indicated we got one $3 billion of liquidity debt maturities of $29 31, and 34, seven managing the cash side appropriately.
Speaker Change: Thank you. Our next question comes from the line of Mike Harrison with Seaport Research Partners. Please proceed with your question.
Mike Harrison: Hi, good morning, Peter.
Mike Harrison: Peter along with all of the tariff related uncertainty you guys had.
Mike Harrison: Turnaround going on Rotterdam that I think bled into the second quarter to the <unk>.
Mike Harrison: Unplanned outage at the <unk> facility in Germany. It sounds like there was a fire.
Mike Harrison: And in automotive customer facility can you quantify the impact that those disruptions to EBITDA in Q1.
Speaker Change: And then Phil mentioned, some more planned turnarounds for Q2, how much headwind is baked into the EBITDA guidance from those those plans.
Mike Harrison: I guess disruptions or turnarounds.
Mike Harrison: Yes, I would say Rotterdam.
Mike Harrison: As we've guided I think on a previous call we talked about a 15 million dollar hit.
Mike Harrison: In the first half kind of $5 million in the first quarter second $10 million in the second quarter.
Mike Harrison: We continue to stand by that though we are literally in.
Mike Harrison: The course of the next few days here, we are literally going through a startup.
Mike Harrison: Of our lines as we speak and.
Mike Harrison: Equally as important as our lines and lines of our customers and suppliers, who are also starting up their facilities. The Rotterdam is a particularly tricky one because we can only run as far and as fast as.
Mike Harrison: Our customers do on this whole thing as far as the fire is concerned.
Yes, that's probably around a 3 million dollar hit.
Mike Harrison: Again, we don't have anything to do with the fire, but it did impact some of the order flows coming from our advanced materials going into I think it's particularly into the EV applications.
Mike Harrison: Unlike I think.
Mike Harrison: Mike.
Mike Harrison: And so incredibly sitting in European law, given that demand that we see there and given imports into.
Mike Harrison: Into China, So that has a negligible impact it does have a large impact when you look at sort of year on year growth numbers, where it looks quite dramatic PPE was down 16%, but once you strip out the <unk>.
Mike Harrison: European side of the business it was down more like 3% to 4% overall, yeah virtually all of that was European on a single site.
Mike Harrison: Alright, and then the Geismar in China, and I think you've mentioned in another facility for for Q2 are those pretty modest in terms of impact for Q2.
Mike Harrison: Yes, relatively small amount you should you should focus on that also that when there are also some impact impacts for us.
Mike Harrison: Yes, the impact on the others will largely be around the movement in stock inventory, which <unk> already addressed.
Unidentified Moderator: Thank you. Our next question comes from the line of Michael Sison with Wells Fargo. Please proceed with your question.
Michael Sison: Hey, good morning.
Speaker Change: Peter some some of the consultants see a pretty good increase in MDI margins sequentially in <unk> versus <unk> versus <unk>.
Michael Sison: Driven by pricing.
Speaker Change: Do you have thoughts in terms of.
Speaker Change: Industry profitability heading it to take here.
Speaker Change: Well again, if I, if I take a snapshot of today.
Speaker Change: As I said earlier in my comments, it's around volley.
Speaker Change: Volume.
Speaker Change: Again as I look at pricing.
Speaker Change: Europe.
Speaker Change: Price is kind of matching raw materials as I look at the U S.
I think that we have an opportunity to expand margin, if we're able to maintain our price or slightly increase our price hopefully get it up even further.
Speaker Change: And take advantage of falling raw material prices.
Speaker Change: Asia again, I've talked about the falloff that we saw going into the second quarter. It's been a whopping eight days now that we've celebrated the price is either not been following are gradually been coming up.
Speaker Change: So I'll continue to take out one day at a time, but I want to emphasize that.
Speaker Change: Days into.
A dead cat bounce or.
Alright, just to send a bunch of cat lovers on a dead cat bounce or.
Speaker Change: Yes, it might be something that.
Speaker Change: The product that was destined for North America that was being put on ships early in the first quarter. It was taken off ships and put back into the Chinese market.
Speaker Change: That product has been adequately absorbed into the Chinese market and the Chinese markets and now better balance. So we kind of look at a price going from 18 5000 per ton down to about 14, two today sitting at like 15 two.
Speaker Change: Again that's.
Speaker Change: A lot of volatility, but that prices to where we were.
Speaker Change: Once ago or so it's been pretty stable for the last couple of months.
Speaker Change: And it's been fairly healthy given where we are in the other parts of the world. So.
Speaker Change: I think Asia continues to be.
Speaker Change: Yes, it will be interesting to see what happens here over the next couple of weeks on pricing.
Speaker Change: Got it and then.
Speaker Change: No I understand that it's difficult to to take a look beyond Q, but what do you think you need to see or want to see to have a better second half.
Speaker Change: In terms of earnings versus the first half.
Speaker Change: If the U S economy goes into a recession, albeit.
Speaker Change: It seems like we've been in a chemical recession for quite some time.
Speaker Change: What happens what do you think you need to do to keep earnings yes.
Speaker Change: At these levels.
Speaker Change: Well I certainly would like to see earnings improved materially from these levels and again as we look at the single biggest variable in the second quarter as we kind of look at it around where we had hoped second quarter would be versus where we see second quarter. Today. The biggest single variable that we see is around volume and pricing.
Speaker Change: And that's going to be in my opinion.
Speaker Change: 100%, but largely a function of certainty if you see certainty in the market and if people have an idea as to where tariffs are going.
Speaker Change: Where supply chains are moving.
And.
Speaker Change: Yes.
Speaker Change: That entire impact youll see volumes recover and.
Speaker Change: I believe that as you start seeing more and more trade deals get completed that certainty slowly recovers back into the market.
Speaker Change: I hope that by the end of the quarter that will be surprised that the improvement volume, but that volume does have to improve and I believe that it will eventually prove but just simply because there is a massive disconnect.
Speaker Change: I've said between what consumers what people are using what they are buying what they are spending on and what we are supplying into those markets.
Speaker Change: Theres, just not that much excess inventory in the system.
Unidentified Moderator: Thank you. Our next question comes from the line of Arun Viswanathan with RBC capital markets. Please proceed with your question.
Arun Viswanathan: Great. Thanks for taking my question I Hope you guys are doing well.
Speaker Change: I guess I had a question about the guidance so.
Arun Viswanathan: It looks like your first half now is.
No.
Arun Viswanathan: <unk> will be coming in around 150 or in that range and if you were to annualize that net income seasonality.
Arun Viswanathan: Get to like at $3 50 range, which as you know.
Speaker Change: I think quite a bit below what we started the year expecting so obviously, Peter you went through a lot of the.
Speaker Change: Potential pullback amongst your customers and then the potential positive bullwhip effect that can.
Speaker Change: Follow that.
Speaker Change: Hi.
Speaker Change:
Speaker Change: Am I thinking about.
Speaker Change: Level of confidence in EBITDA for the year in the right way.
Speaker Change: I just don't want to get ahead of our skis here just given all that uncertainty out there. Thanks.
Speaker Change: Yes personally.
Speaker Change: Yes, so we're doing very well thank you for your comments.
Speaker Change: Personally I would hope that we certainly finished the second half of the year better than the first half of the year I think the guidance that we gave in the first quarter.
Speaker Change: Call, we purposely avoided giving yearly.
Speaker Change: Direction, just because it was so hazy, then and I think it is far hazier today.
Speaker Change: Then it was then.
Speaker Change: I hate to say that given the fact that we're three months further end of the year.
Speaker Change: I mean.
Speaker Change: Half.
Speaker Change: I have a lot of hope for the second half but.
Speaker Change: Can't sit here and say that we've seen a bunch of orders that are going to give us a great deal of confidence.
Speaker Change: So.
Speaker Change: Probably would just avoid.
Speaker Change: Trying to tell you what we're going to end the year.
Speaker Change: My personal opinion.
Speaker Change: I think it's true.
Speaker Change: Inventories are low I think demand in backlog on demand in housing and a lot of the products, we produce the build out of aerospace in the recovery of it.
Speaker Change: Build out of our electrical grid to components and so forth going into that.
The expansion that we're going to continue to see in technologies in Evs and so forth. These all would tell you that.
Speaker Change: Theres going to be a growth in demand and theres going to be a.
Unidentified Moderator: Hey, operator any more questions.
Speaker Change: Yes.
Speaker Change: I'm sorry.
Speaker Change: Our next question comes from the line of John Roberts with Mizuho Securities. Please proceed with your question.
John Roberts: Thanks, Peter are you seeing uniform weakness across composite wood versus automotive versus installation or is there some differentiation there and then secondly.
Speaker Change: During 2020.
Speaker Change: Lot of the small spray foam customers got stimulus at least to keep them going.
Speaker Change: Do you think they survived this kind of correction right now.
Speaker Change: Yes, I've got no idea as to what our competition will be doing and spray foam I've not heard nor nor seeing any talk legislation or anything around.
Speaker Change: Any sort of stimulus that would be it would be.
Speaker Change: Directed towards a particular segment of any of our customer basis.
Speaker Change: So I would kind of be surprised to see that.
Speaker Change: Yes. It is.
Speaker Change: As we look at the difference between OSB installation automotive.
Speaker Change: I think that there is just a general trend right now of uncertainty and that uncertainty right now just past people.
Speaker Change: Bringing down inventories, bringing down orders on the short term preserving capital strengthening the balance sheet.
Speaker Change: Doing doing yes.
Speaker Change: Those kind of emergency steps that you see in moments in times of uncertainty until there is greater certainty. So I'm not sure that it's all necessarily tied industry the industry as much as it is the general sentiment.
Speaker Change: Ill.
Speaker Change: Of the industry.
Speaker Change: Thank you.
Speaker Change: Thank you.
Unidentified Moderator: Thank you. Our next question comes from the line of Frank Mitsch with Fermium Research. Please proceed with your question.
Frank Mitsch: Good morning, and thanks say congrats to Tony Hankins on his pending retirement was a pleasure to work with them and by the way I'm not sure. If it was just me but.
Frank Mitsch: In the last five minutes or so the conference call is being coming in and out perhaps that was just my phone but.
Frank Mitsch: Peter I appreciate the reference to Covid in terms of the paralysis that we're seeing now.
Frank Mitsch: But I took a look back at Covid and really it was just one quarter was the second quarter of 'twenty that was that was very poor the first quarter and third quarter 'twenty you posted very strong results.
Frank Mitsch: And here, we are it looks like the second quarter is the third quarter of really poor results.
I mean.
Frank Mitsch: Is this is this systematic or you believe that it is episodic.
Frank Mitsch: We're going to get out of it youre going to go back to posting kind of 200 million type.
Frank Mitsch: EBITDA quarters.
Frank Mitsch: It gives you confidence that this is not.
Frank Mitsch: Systemic.
Frank Mitsch: Decline in your in your business lines.
Frank Mitsch: What gives me confidence is the disconnect between.
Frank Mitsch: Our sales were down to automotive were down 10% in their sales were down 10% in the whole value chain was going down 10%.
Frank Mitsch: I would say this is systematic I'd say, there's probably longer term, we ought to be we ought to be getting ready for it.
Frank Mitsch: I'm simply not seeing that and as I talk to customers and I talk to the board members that I've talked to people that are involved.
Frank Mitsch: Involved in the auto into the aerospace.
Frank Mitsch: And even into the homebuilders.
Speaker Change: Don't get that indication Franklin I can sit here and say that I have talked to everybody and I can refer to accurately reflect everybody sentiment in this.
Speaker Change: But I do believe that that I've only seen this sort of disconnect between the panic in orders.
Speaker Change: We are seeing today.
Speaker Change: And that which we've seen previously I would also just note that COVID-19, we saw lumpiness of the impact of Covid. There's no doubt in North America was certainly a second quarter phenomenon and I think it happened a little bit later than that in Europe, the impact on European P&L.
Speaker Change: It happened previous to that on the Chinese P&L in the Chinese P&L also spill again kind of a second time in the latter part of 2020, So I don't want to get I don't want to get too technical the comparisons between.
Speaker Change: Covid and where we are today I will just say the only comparison I was trying to make.
Speaker Change: It is more just around the.
Speaker Change: A couple of months that we saw a disconnect between.
Speaker Change: Inventory customer demand and pull through.
Speaker Change: The ultimate.
Speaker Change: Supply chain.
Speaker Change: Okay understood and can you provide an update on the Malaysia facility in Europe. It seems like a couple of things happening there one youre looking to.
Speaker Change: Make a decision on it I think by mid year, but then you also had an unplanned outage, what's going on there whats the how.
Speaker Change: Should we think about that.
Speaker Change: I would think about that.
Speaker Change: We think that by the middle part of this year that we will be in a position to announce.
Speaker Change: Permanent decision as it pertains to that asset.
Speaker Change: Europe continues to be flooded.
Speaker Change: With <unk> coming in from China, and coming in directly from Russia via Turkey.
Speaker Change: And it also continues to be flooded not just with Malaysia, but also downstream PR materials as well so.
Speaker Change: It's kind of getting hit in multiple areas and.
So.
Speaker Change: In addition to our operating issues that we have.
Speaker Change: In Germany.
Speaker Change: Are seeing headwinds as just the overall demand in the margin erosion that we see in <unk> in Europe.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Salvador Ciano with Bank of America. Please proceed with your question.
Salvador Ciano: Yes. Thank you good morning, so firstly on MDI I wanted to ask.
Salvador Ciano: How are you so far in Q1 or in Q2, managing your MDI system.
Salvador Ciano: Your upstream MDI plants, given the reduced demand and specifically on Geismar I remember a little bit over a year ago, you broke down the line.
Salvador Ciano: Already restarted the smaller of the units there.
Salvador Ciano: So is this something that you may have to stop using it again or are you still producing in Q1.
Salvador Ciano: No I would say that if anything we're hoping to see greater capacity utilization we brought.
Salvador Ciano: Line, one down in Q1 and part B.
Salvador Ciano: Because obviously.
Salvador Ciano: Low margins and in part because.
We believe that there was a lot of uncompetitive.
Salvador Ciano: Material being imported into the United States and that was having into the Americas market and that was having an impact on it so with.
Salvador Ciano: With tariffs that are in place with the.
Salvador Ciano: With the change of imports and so forth that we're saying if anything I see it.
Salvador Ciano: Demand ought to be picking up for domestically produced MDI, our downstream system houses in the U S. I would remind you that we don't have too many.
Salvador Ciano: In the U S. We produce polyolefin.
Salvador Ciano: Raw material is going into our spray foam in our other polyol business.
Salvador Ciano: Continues to be a great business for us, we're consolidating I would say that our hps business.
Salvador Ciano: As.
Salvador Ciano: It's a separate business, we look at internally, but we try to run it as competitive believes we can integrate with the rest of our business in some regards I look that as a downstream systems business as well and we're obviously consolidating that operation and making sure that our costs are aligned with the market realities.
Salvador Ciano: In Europe, we've continued to do we've announced the closure of our <unk>, Germany and the reduction of some of our other sites and facilities around Europe, and we'll continue to look at our overall footprint. There. So yes, we'll continue to look at our costs will continue to look at the overall structural demand and profitability of our entire chain.
Salvador Ciano: But this year I think that even if.
Salvador Ciano: Even if we remain in somewhat sluggish.
Salvador Ciano: Economic environment.
Salvador Ciano: The the opportunity to increase domestically produced MDI in North America will likely improve through the year.
Salvador Ciano: Great perfect and I wanted to follow up on.
Salvador Ciano: The appeal MTBE JV in China, if you can give a little bit more outlook now on <unk>.
Salvador Ciano: You expect for perhaps the next few quarters.
Salvador Ciano: If there is any more clarity I guess on what would be deemed that you receive on 2026 based on what is happening right now in earnings.
Salvador Ciano: Yes, so I mean.
Salvador Ciano: As we said.
Salvador Ciano: Our equity dividends for 25 will be a lot lower than they were in 2004.
Salvador Ciano: MTBE.
Salvador Ciano: Margins started to decline.
Salvador Ciano: Towards the backend of last year and you can follow those margins.
Salvador Ciano: CMA via our Isis.
Salvador Ciano: Close to breakeven today as oil has come off Duffy. It's now below 60 brings download about 60, so close to breakeven.
Salvador Ciano: Now that's why we've guided to where we we have in the second quarter and that second quarter equity income will be about $20 million below where we were in the second quarter of last year. So there is a launch bridge there just on the fee income side, how that plays out for the remainder of the year I think it will be dictated by economic activity.
Salvador Ciano: Certainly around tariffs, where royal has had so overall MTBE has had a long history of being a low margin and then being able to turnaround to higher margin. So I went on that position today to guide.
Salvador Ciano: Dividends are going to looking in 2006 over 25, that's an extremely volatile volatile products in market.
Salvador Ciano: Yes.
Speaker Change: Thank you. Our next question comes from the line of Matthew Blair with GBH. Please proceed with your question.
Matthew Blair: Thank you and good morning, Peter.
Matthew Blair: Can I ask a question on the debt picture here. So you took care of some notes in the first quarter. Thank you stand around four times net levered on an LTM basis, if we look at that more on a annualized first half basis around five five times net leverage do you need to reduce debt or are you still comfortable at where you are at.
Matthew Blair: Well I'm certainly not comfortable with the margins that are being earned in the business they ought to be higher and I believe that they.
Matthew Blair: We'll be getting higher and.
Matthew Blair: I think we're taking a snapshot in time as to where our debt levels are.
Matthew Blair: What I would think right now would be a.
Matthew Blair: Yes.
Matthew Blair: It's certainly a low.
Matthew Blair: As we as we leave the.
Matthew Blair: First quarter going into the second quarter and would hope for some improvement there.
Matthew Blair: But no I think as we look at our longer term debt levels on a normalized EBITDA basis.
Matthew Blair: We continue to be in a position where I believe we have a very strong balance sheet.
Matthew Blair: Yes.
Matthew Blair: If you look.
Matthew Blair: We've got.
Matthew Blair: Bond maturities 29, 31, and 30 415 billion of net debt for this portfolio and over a cycle.
Matthew Blair: Good numbers.
Matthew Blair: See a trough economics now well aware of our liquidity as I've said, it's $1 $3 billion is also Apple.
Matthew Blair: And we will do all of the relevant things that you would expect to adequately protect me.
Matthew Blair: Balance sheet.
Matthew Blair: Longer maturity profile that we have on bonds.
Matthew Blair: Yeah.
Matthew Blair: Sounds good and then I think the prepared comments you mentioned that your construction volumes of your overall business were down 6% quarter over quarter in Q1, which seems like an unusual counter seasonal move was that weakness coming more from from commercial or.
Matthew Blair: More from the residential side.
Matthew Blair: I believe that was mostly from the residential side of the business and.
Matthew Blair: I would think that a lot of that again had to do more with the buying patterns rather than the demand patterns on on the construction side.
Matthew Blair: Normally you do actually expect.
Matthew Blair: A slight decline when you move from Q4 to Q1, when we look at it relatively simply.
Matthew Blair: In Q4, you have December is allowing months, whereas in quarter quarter. One you have January and February as low months, particularly with Chinese new year. So that's the way to kind of think about that sequential movement. When it comes to construction globally.
Speaker Change: Thank you. Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question.
Emily Fosco: Hi, Good morning, this is Emily Fosco Andre Dave Begleiter.
Speaker Change: You announced the doubling of your cost savings to $100 million do you have any sort of early preview of where these savings will be coming from.
Speaker Change: Well very good question, we will be giving more details about this.
Speaker Change: Don't like announcing cost savings until we literally have it down to exact numbers and details and so forth.
Speaker Change: Feel very confident that we're heading there exactly where that is.
Speaker Change: We'll be located and so forth I think I gave some indications about having to calibrate.
Speaker Change: Our cost structure to the market realities, particularly in Europe.
Speaker Change: But.
Speaker Change: I think we'll be giving more light and more color on that.
Speaker Change: As the quarter progresses.
Speaker Change: Got it thank you.
Speaker Change: Thank you. Our next question comes from the line of Hassan Ahmed with Alembic Global. Please proceed with your question.
Hassan Ahmed: Good morning, Peter and Phil.
Speaker Change: Apologies if someone's asked this question previously my line was cutting in and out.
Speaker Change: Just wanted to revisit some of the commentary around MDI, specifically, you talked about 20% to 25% of U S. MDI demand being met exports from China.
Speaker Change: I completely understand that it's highly unpredictable what the future of these targets will be but I mean, when I sit there and think about.
Speaker Change: The impact of tariffs and above and beyond that more specifically for MDI.
Speaker Change: Anti dumping investigation, that's going on I think it's fair to assume that that Chinese product.
Speaker Change: And then on anti dumping would there will be a duties on that product.
Speaker Change: Missing something because it just seems beyond some of these very near term trends of loading up on sort of Chinese exports into the U S market.
Speaker Change: And sort of the issues caused by that in the near term I mean beyond the near term the setup actually seems highly favorable if you are producing product in the U S.
Am I thinking about this the right way.
Speaker Change: That's all right.
Speaker Change: Very good question. Thank you very much.
Ed: Thanks, Ed.
Ed: I think that you are so a couple of things I don't want to I don't want to go down a rabbit hole here, but I want to ensure that we kind of clarify what's long term and kind of what short term first of all when we talk about 20% 25% supply.
Ed: Going to the market that's for the Americas that's for.
Ed: North South.
Ed: Status for the America, Brian can you talk about the United States that number would even be higher than that 20%.
Speaker Change: So when you think about tariffs and where they are I think about where we were at the beginning of the year, which was what I would call. The 301 tariff. These were tariffs that were put in place in the first Trump administration. They were maintained through the Biden administration reason I bring that up is I would consider these to be longer term tariffs. These are about 31 five.
Ed: 5% tariffs that were in place.
Ed: In addition to that all then put kind of a second bucket of what I would call. The Trump tariffs knows of the tariffs that were.
Ed: That were put in place over the course of the last 30 to 60 days now I may be a little bit off on these tariffs because they seemingly have changed.
Ed: Back and forth a little bit, but those today are around 145%. The reason I put those in the second bucket is.
Ed: They came rather suddenly and all of a sudden you might see.
Ed: Chichi paying and Trump emerged from a trade or something like that and say they're gone.
Ed: Im not expecting that to happen, but again they came suddenly they can leave just as suddenly and so I would say that the Trump tariffs around 145% added to the 31% I guess you just over the 175% Theres also an anti dumping case, it's quite separate and apart from what I would call the Trump tariffs.
Ed: And this is around the <unk>.
Ed: And the Commerce Department and as I think about those.
Ed: Cases.
Ed: In March of this year, the ITC ruled that there was a reasonable indication that there's been an impact on domestic industry supply balances profitability. So on so forth from Chinese imports.
Ed: The Commerce Department is now conducting a preliminary investigation.
Ed: And that's supposed to be done by around the middle of September of this year.
Ed: Assuming that they rule.
Ed: <unk> and that investigation that will then go to E Commerce and ITC The International Trade Commission.
Ed: I'll conduct a final investigation to determine.
Ed: The dumping the amount that would probably be adjudicated sometime final decision sometime around February with a final ruling is putting into place March of next year that could be anywhere from 3% to 500%. The reason I put that in the third bucket is thats quite apart from any sentiment.
Speaker Change: President may or may not have read any negotiations that he has.
Speaker Change: With somebody that's an ITC in the Commerce Department ruling and if that is put into effect. Those go for a period of five years before they are revisit it.
Speaker Change: So you kind of have again.
Speaker Change: Trump tariffs, 31% the Trump arbitrary.
Speaker Change: They are because I'm sure a lot of logic in thought went into it the Trump arbitrary tariffs.
Speaker Change: <unk> of 145% that we think could come and go and then there is this anti dumping case, it can be anywhere from 3% to 500% and again that could be put into place and could be put into place on a long term basis.
Speaker Change: For multiple years, so, yes, I think that to answer your.
Speaker Change: Question.
Speaker Change: Yes.
Speaker Change: I can sit here and say that I claim to know the impact of all of that because it's all happening as we speak but.
Speaker Change: I think you'd have to be pretty naive to think that if those were all implemented or if any two of those three were implemented.
Speaker Change: That would not have an impact.
Speaker Change: The North American.
Speaker Change: Marketplace, and I think that my comments earlier about having to shut down part of our production. When you reopen that production demand comes back you're hiring more people.
Speaker Change: Youre hiring.
Speaker Change: Youre spending more domestically you're producing more domestically.
Speaker Change: Paying higher taxes domestically and you see the impact of that so yes that is all playing out in real time Hassan and I greatly apologize for a long winded answer.
Speaker Change: Or is it all and as a quick follow up.
Speaker Change: Obviously uncertainty.
Speaker Change: If I were a Chinese polyurethane producer.
Speaker Change: Facing these headwinds I guess I would probably be thinking about maybe some rationalization and.
Speaker Change: Adding to those wells.
Speaker Change: I mean of course, China sort of imports around 40% to 50% of their LPG needs.
Speaker Change: Propane in particular from the U S right and obviously.
Speaker Change: On the surface. It seems that those are going to be direct as well.
Speaker Change: And if you take a look at the last couple of years, China has more than doubled its PVH capacity right. So.
Speaker Change: So.
Speaker Change: All of a sudden that guidance would I'd like to thank Doug <unk>.
Speaker Change: Maybe there'll be some shuttering of dose deviate units because they have become highly uneconomic right, which in theory will impact propylene supply and which in theory.
Speaker Change: Impact deal and polyurethane economics, so I mean.
Speaker Change: Again is that the right way of thinking about it and are you seeing any indications of rationalization.
Speaker Change: On the back of all of these headwinds.
Speaker Change: Yes, it's an excellent point is on <unk>.
Speaker Change: Well thought through I think that as you look at these they're each going to be treated differently I look at it at the.
Speaker Change: The Ngls that are being imported into China from the U S and.
Speaker Change: What degree those are our tariff coming or going into China I noticed this last week, China dropped its tariff on ethane.
Speaker Change: <unk> raw material for gas.
Speaker Change: Cracking into ethylene and polyethylene so.
Speaker Change: Yes, you are already starting to see backwards movement in certain areas and certain products that are being.
Speaker Change: Being freed up if you will but there will be a great deal of I think of change coming in the next quarter or two I don't think it's going to play out in the next couple of years I think we can play out.
Speaker Change: In the next quarter or two and what exactly international producers decided to do.
Speaker Change: As is purely up in the air.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Operator, I think we have any more questions, we will take that but I know we're beyond the top of the hour and I think it's pretty crowded day with calls right now so.
Speaker Change: We have no other questions at this time so at this point I will conclude our Q&A session and our call. We thank you for your interest and your participation you may now disconnect your lines.