Albemarle Corporation (ALB) Presents at J.P. Morgan Industrials Brokers Conference (Transcript)
Albemarle Corporation (NYSE:ALB) J.P. Morgan Industrials Conference March 10, 2020 1:35 PM ET
Scott Tozier - Chief Financial Officer
Netha Johnson - President, Bromine Specialties
Dave Ryan - Investor Relations
Conference Call Participants
Jeff Zekauskas - JP Morgan
Ladies and gentlemen, thank you for standing by and welcome to the Albemarle Corporation at the JP Morgan Industrials Conference. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded [Operator Instructions].
I would now like to hand the conference over to your speaker today, Jeff Zekauskas, Managing Director of Global Equity at JP Morgan. Sir please go ahead.
Thanks very much. I'd like to welcome everyone this afternoon to our Virtual Industrials Conference. We changed the format of our 2020 conference to a virtual one in the interests of health and safety, and thank you for attending this afternoon.
It's my pleasure to introduce Scott Tozier, Chief Financial Officer of Albemarle. Scott has been CFO of Albemarle for almost 10 years following the long tenure at Honeywell. Joining Scott is Netha Johnson, Netha joint Albemarle in 2018 to lead the Bromine chemicals division after years at 3M Corporation and Dave Ryan in Investor Relations is also part of the team.
Scott will present. Albemarle’s slides are on their website if you wish to follow along and then after his presentation there will be a fireside chat format. Scott?
Thanks Jeff and good afternoon everyone. Just before we start, I’d just ask you to reference the first two pages; one on forward looking statements and the second on our non-GAAP measures.
As you look at page four, Albemarle is an industry leader in three competitive businesses across the globe. Each business is really well positioned to capture growth in great secular trend markets; whether that's the adoption of a new technology, whether that's the growing global middle class, whether that's a regulation that’s going to drive something that needs to happen in the market place, our products and our innovation are the catalysts that help to drive those secular trends. Yet we are a very, very small portion of the cost of that solution.
When you look at those secular trends, and the value that our products deliver and our absolute focus on costs, we should drive significant adjusted EBITDA growth over the next five years and in 2024 should allow us to generate anywhere from $800 million to $1 billion in free cash flow.
Turning to page five, really for those of you that are new to the story, just a quick recap. We are a diverse business. We’re in over 75 countries in every region around the world, with different, but high margin secular growth businesses. Each segment has a role in our future, helping us achieve the profitability, growth and free cash flow that we expect over the next five years. We got a strong legacy.
To be around for 132 years, you have to be a leader in whatever businesses that you're in. You also need to be able to execute effectively. And third, and maybe most importantly, you've got to be able to adapt over and over again.
Page six goes through our long term strategy that we rolled out in 2017, and reiterated in December at our Investor Day. That overall strategy remains intact, but as we've done over 132 years, we've adapted the execution to account for a rapidly changing environment in the lithium business, and I want to talk about each one of these strategic pillars.
First is grow, we remain committed to smart investments in lithium to allow us to capture that organic growth and the demand outlook for lithium remains robust. We are uniquely qualified to capture that growth. If you look at our resources, we have enough lithium to serve our share of the demand for the next 10 to 15 years, and we are now focused on generating strong free cash flow across our businesses to support that growth and give us the option, if and when the economics meet our hurdle rates to buy or build additional lithium conversion assets. The capital intensity of any of those additions need to be lower than what they are today.
If you look at maximize, Bromine and Catalyst are solid businesses in their own right. They possess strong customer relationships. They are market leaders; they have solid profitability, margins and throw out significant cash flow. We need to expand what we're doing in those businesses to lithium to reduce our operating costs.
We recently implemented an ERP system that should be a game changer for us in terms of the efficiency of our business model. We started an initiative to reduce spending in a sustainable manner by $100 million or more by 2021, and we're in the process of implementing a multi-year plan to reduce our cost and then increase our yields in our lithium manufacturing process.
If you look at assessment, I think we've proven that we're active portfolio managers through the actions we've taken over many years to get us where we are today. We actively evaluate our portfolio and review that with our Board of Directors on a regular basis. That review led to a decision recently to pursue a potential sale of two businesses; Fine Chemistry Services and our Performance Catalyst Solutions businesses.
There has been strong interest in both of those businesses, but if we don't get offers that meet the valuation that we expect, we’ll keep the businesses and run them. Assuming that we do receive offers that meet the valuation hurdle, I would expect those transactions to close sometime in 2020.
Finally, invest. We are committed to investing in our businesses, but we’ll remain disciplined in how we allocate our capital. At a very high level, our investment grade rating and the annual increase in our dividend are critical priorities for Albemarle. We remain acutely focused on organic growth, which has largely been focused on building or buying lithium conversion assets to position us for future growth if and when the economics make sense.
Turning to page seven, in 2019 we conducted a materiality assessment to identify sustainability topics, most relevant to Albemarle strategy and our future. That assessment came from employees and leadership, but more importantly it came from our customers, our vendors, our shareholders and potential shareholders, and from that feedback, we developed this customized framework that focuses on four critical quadrants.
First, our people and the workplace, with the focus on safety, diversity, inclusion and talent development. Natural resource management essentially is how do we minimize our footprint and how do we do more with less of the earth's resources. Community engagement means having a positive impact on the communities where we live, work and play. And finally, our sustainable business model which creates long term stakeholder value through a commitment to quality, innovation, financial stability, reliability and ethical business conduct.
So we are on a journey and we have a lot more work to do here, but doing the right thing and being profitable and not at odds with each other. We expect to do both equally well and we are going to continue to monitor these quadrants and we’ll start reporting on metrics and on improvements in those metrics in our 2021 annual plan.
Page eight gives some highlights of our cost savings initiatives. Our sustainable cost savings program is well underway and we've identified over 100 discrete projects, assigned project ownership and instituted a tracking dashboard. We have included $50 million of anticipated savings in our 2020 guidance. About 40% of the savings will come from selling and administrative costs. About 40% will also come from reduced factory spending and operational efficiency, and the last 20% of savings will come from supply chain activities like procurement and logistics.
For example, one program will consolidate the number of freight forwards that we use across the globe. We are confident in our ability to achieve this milestone in 2020 and reach our targeted run rate of $100 million or more by the end of 2021.
Now let's turn to some current events on page nine and we’ll focus on the coronavirus. I'm going to begin with that, and then talk about the impacts on 2020 and our business outlook. First of all, our thoughts are with the families who have been impacted by this virus. For Albemarle, we’ve had zero confirmed cases among our employees, but we are diligently managing the situation to protect our employees and the local communities.
In lithium we continue to operate safely at our China production site in Xinyu and Chengdu and are back to full operations. To-date we’ve experienced minimal order reductions from our customers, and have been able to produce the quantities needed to fulfill orders. However, each of our businesses is experiencing logistics delays and the potential impact on deliveries to our customers and deliveries of raw materials to our facilities remains an area of concern and one we're watching carefully.
Our current view is that global EV production for 2020 will be impacted by 3 to 5 percentage points and that translates to about 5,000 metric tons of LCE’s. The coronavirus has also impacted Chinese competitors and the supply demand balance is roughly the same as our expectations coming into the year.
There is a risk that the automotive OEM slowdown in China will have further ripple effects. For example, the potential of the inventory building up at the battery manufacturers could impact us later in the year, as well as the potential for further OEM shutdowns in Europe and North America.
As the virus spreads, our lithium hydroxide conversion plant construction at Kemerton, Western Australia, which relies in part on equipments sourced from China could experience delays. We currently expect about four weeks of delay in receiving the equipment that we expect from China. To-date though, we've been able to manage around this through managing our schedule, as well as being able to identify some key alternate suppliers.
Turning to catalysts, our largest risk is lower FCC sales to customers who export fuel into China, to the degree that transportation within China continues to be restricted. In the last three weeks since our earnings call, we have seen incrementally lower FCC volumes, particularly out of Taiwan and Korea.
A secondary risk is that raw materials that we source from China are not available, but today we currently have sufficient inventory to cover our requirements well into the second quarter and I think at this point that that's a diminishing risk.
It Bromine the primary risk is related to logistics, caused by a shortage of drivers and equipments such as sea containers, ships and trucks. Overall, we expect a weak first quarter in China and depending on the continued length and severity of the outbreak, our operations could be further impacted.
At this time we are modeling a U shaped recovery, and expect to recover any first half earnings shortfalls in the second half. We do expect our first quarter EBITDA to be down by around 25% now year-on-year and our first half to be down around 20%.
Turning to our businesses and some snapshot, let’s focus on Bromine first on page 10. The global Bromine industry is about $2.6 billion and in 2019 we were about $1 billion of that, so we’re definitely a market leader here. We have strong adjusted EBITDA margins of 33% and we have an adjusted EBITDA of $328 million. In between now and 2024, we expect this business to grow between 1.5% and 2.5%, and have adjusted EBITDA margins between 28% and 32%.
One of the unique characteristics of the Bromine business is it is very hard to enter this market. The barriers of entry are high and with that we have the ability to limit competitors that come into this market in the future.
And on the right hand side of that slide, we talk about the markets that we pay in. First of all flame retardants. Key applications of flame retardants include electronics, construction and automotive. We also play in the oil field market and that's really around deep sea drawing and around clear brand fluids that allow the fluids to be weighted down to where the drawing actually occurs. We also have solutions in the pharma and also PET business and many other markets.
What this means is, because we're diversified, we are stable and we are able to produce consistent results. If you look at the growth rates of our markets, you can see that those markets providing long term necessary CAGR for us to deliver GDP type growth going into the future. So we have an advantage position, we have stable end markets, and we have strong sustainable cash flow to help the company drive our strategy.
We expect 2020 adjusted-EBITDA performance in Bromine to be flat to slightly down compared to 2019. Demand for flame retardants and another Bromine derivatives is expected to remain stable, however slightly increased supply across the industry could put price pressure on the second half.
Now we are operating in a sold out position, meaning we have little to no headroom to make up any price degradation with volume growth. However we will continue to optimize our sales into markets that provide us with the highest margins.
Page 11 goes into another of our businesses, Catalyst. Our refining Catalyst business operates with quality margins in the high 20s and is a stable cash flow generator for the company. We have leading position in FCC Catalysts that's Fluid Catalytic Cracking Catalysts as well as HPC that's Hydro Processing Catalysts. Between now and 2024 we expect this business to grow between 3% and 5% and have adjusted EBITDA margins between 26% and 28%.
FCC Catalysts are primarily used by refiner to determine what the yields are from that refinery, whether it be chemicals, different fuels, diesel, gasoline, that's the core function of FCC Catalyst. One particular strength within that market relate to bottom cracking, so that's really they heavier fee going into FCC unit. We also have an advantage in FCC catalyst in olefins output. Olefins, whether it be propylene, either C-3 or C-4, they are either used in making plastics or making alkaline which is used as an octane enhancer for gasoline.
Hydro Processing Catalyst are used within a refinery to purify the streams within that refinery. For example, the feed going into an FCC unit or a hydro cracker or the output such as diesel or gasoline or fuel oil for bunker fuel. We have differentiated technologies with high activity, which help our customers be successful within those operations.
In 2020, we expect catalyst adjusted EBITDA to be flat to slightly up year-on-year with the second half somewhat stronger than the first. FCC catalysts are expected to benefit from strong demand and an improved product mix. However FCC units are operating at full capacity, limiting our ability to benefit from any additional volume upside. HPC is expected to be slightly down based on our incumbency mix and at lower year in distillate turnarounds and change outs.
Now let’s turn toe lithium on page 12. At a glance, lithium is a $1.3 billion highly profitable business, with 41% EBITDA margins playing in three fundamental areas. 50% of our sales are in energy storage, the second is an industrial market and these are the same analogues of the many products that are used in energy storage and have the similar chemistry, but very often a different product form that is used in glass, grease and other industrial applications.
And then those thoughts can be further derivitised and Albemarle is a leader in doing this into metals, organometallic products and a like that are used in a range of specialty applications like synthetic rubbers, pharmaceuticals and Ag products.
We hare vertically integrated with a low cost resource position and the fundamentals for from a growth standpoint are very compelling because they're based on favorable public policy, particularly in places like China and in Europe. By some estimates, the investment in this area is over $225 billion, going into energy storage over the next five years and none of it is possible without lithium, which makes the security that supplied very important to our customer base.
Page 13, gives some details around our forecast of energy demand and we expect that the demand will reach 1 million metric tons by 2025.
I want to highlight a few of the key metrics that you see on the tables on the right side of that chart. I think first of all you see that overall growth rate is 24% CAGR on a lithium demand basis, and it represents a 3x growth over the next six years. So specifically in the lithium that goes and EVs, we’re going to be growing from 35% share of demand for EV's up to 70% so doubling and that's a 6x growth factor.
Another thing that you'll notice in this table is we’ve broken it down into real consumption versus inventory changes and this has been particularly important to do over the last 12 months because we've seen some changes in behavior whereas the last six years there's been this progressive buildup of inventory and in the last 12 months we've seen some drawdown and that will continue into 2020 and that has an effect on the apparent demand that we've seen in the market. And another couple of metrics on the bottom of the table that highly EV's, we see electric vehicle penetration going from around 3% share of new light vehicle sales in 2019 up to 18% in 2025.
Page 14, talks about our strategy in lithium. First, let me talk – we’ll continue to manage the world's best resources and that means continuing to drive sustainable practices which we are already a leader in. It means continuing to keep the geographic diversity. We already have that built as a foundation and it means continue to drive best practices to get cost out of those resources and get the lowest cost possible.
The second is expanding capacity with discipline. That means reducing our capital intensity. We're working on how we can reduce that intensity now and it means building to customer commitments. We are not going to over build. We will build when a customer commits to us and it means through that that they're providing a strong return, but that's the denominator of the return calculation.
The numerator comes from the next two strategies; it comes from how we operate our conversion plans, driving the best cost position and operational excellence in those lean, low cost operations, operating everyone of this plants on a world class standards that's consistent across the world in sustaining our leadership and quality, reliability and sustainability.
And then finally, everything rests on the foundation of our customers and so as long term relationships, differentiated offerings that we can bring to them. All this is guided by our company values and has rooted in sustainability and safety.
On page 15, we talk about our growth. Between now and 2024 we expect this business to grow between 12% and 17% and have adjusted EBITDA margins between 40% and 45%. And about that margin, 40% to 45%, it's important to know that we can get to that level without price improvements.
We've given a company based, our bottoms up view of what we can do and we believe 2020 is a truck for us. From that trough, we can get into that range of 40% to 45% without any improvement in price over this period of time.
It comes from volume, filling out our plants on the capacity plants. It comes from cost, the significant cost reduction that we're going to do through operational excellence, and it comes from differentiation. We have segments we sell into that are less price sensitive. We have new innovations and then all we believe will be able to outperform, through this period of time even in a low price environment.
2020 will be a pivotal year for lithium. EV growth in Europe is expected to accelerate, driven by fleet wide Co2 reduction targets. Growth in China is still uncertain. We saw the market begin to stabilize at the end of 2019, and expect growth to return in 2020; however, it will be impacted by a coronavirus and obviously that adds a measure of uncertainty on how exactly the year will play out.
Although we anticipate the total lithium demand to increase by about 45,000 metric tons now and inventories to begin to tighten by the end of the year by mid-2020 or mid-2021, our own volume growth will be around 3% in 2020 and will be limited until we commissioned the La Negra III/IV Lithium carbonate expansion in early 2021.
We have reached agreement with all, but one of our contract customers, and we are sold out on battery grade materials. Although the prior inventory build-up and additional supply availability put pressure on pricing for 2020 versus our prices in 2019, we believe that market pricing has stabilized. Our unfavorable pricing will be partially offset by lower cost as a result of reduced totaling volumes, higher operating rates, lower royalties in Chile, and the impact of our cost savings program, and consequently we expect a year-over-year decline in adjusted EBITDA in this business of about 20%.
On page 16, it highlights our guidance and this is our 2020 guidance from our latest earnings call and the 2024 outlook from Investor Day in December. As you look at the total company, you can expect a five year revenue CAGR for the total company, around 6% to 9% and in 2024 EBITDA margins between 32% and 36%, resulting in an EBITDA between $1.5 billion and $1.8 billion; that's a five year CAGR of 21%.
EBITDA will generate free cash flow and we're expecting that it'll hit $1 billion in 2024. So while 2020 is going to be a challenging year, I am very confident in our team's ability to face those challenges, strengthen the company through operational excellence and deliver on our commitments.
And finally on page 17, let me talk about how we prioritize spending our cash flow. Our first priority for capital allocation is to grow our dividends and a close second is to maintain our investment grade credit rating to ensure we have financial flexibility. Third, is reinvestment. Growing our lithium capacity to meet the market demands and accelerating our productivity effort.
Fourth, we focus on growth through M&A and joint ventures that will accelerate and strengthen our strong global positioning and deliver on our strategy, and finally as our last priority and when there's excess balance sheet capacity, we will return cash to shareholders through share buybacks.
And now I'd like to turn the remaining time back over to Jeff for the fire-side chat.
Q - Jeff Zekauskas
Thanks very much for a very complete summary of Albemarle today Scott. Albemarle is in the process of searching for a new CEO. Are there particular characteristics that Albemarle was looking for or particular capabilities in the new CEO or is it a much more wide open search?
A - Scott Tozier
Well Jeff, it’s a good question. I mean we have obviously our purpose and outlined our strategy in our Investor Day this past December and I kind of hit some of the highlights from that in my prepared remarks, and really we need an individual to move forward with that outlined strategy. Likely that someone's going to be more operationally focused, who has the ability to see around the corner, you know build up that into the strategy and is consistent with Albemarle’s values and culture and I think seeing around that corner is important, because lithium is still developing as an industry and there’s going to be more changes to how things happen, and you know we'll need some – the CEO to be helping us ask the right questions around that.
Clearly someone’s got to be able to communicate our strategy, right, at all levels and so you know ultimately I think you know Luke plans to retire in June. You know if we find some before then then you know he'll retire earlier and he obviously will stick around to help with the transition, so.
I mean, if you're aware Scott, have you narrowed down your list of candidates or are you still in the search process of looking for new candidates?
A - Scott Tozier
Yes, so we're actually using Spencer Stuart for the search and you know we're looking at both internal and external candidates. So you know more to come as we develop that slate.
Okay. In turning to lithium, in 2019 Albemarle had various usual production outages. Can you remind us what was the cost of all of the different outages and turnarounds and events and how they might compare to a possible performance in 2020?
A - Scott Tozier
Yes, so if you remember we actually – in 2019 we had the rain event, so we had some significant rain in Chile in the first part of the year and it affected our first half production by around 3,000 metric tons of carbon. And then further we had some equipment issues in the third quarter that affected our operations in the range of 1,500 to 2,000 metric tons. So basically around 5,000 metric tons of column, like you said, unusual production outages.
As you look at going into 2020, I mentioned that our volumetric growth in lithium is 3% and so that would tell you that you know we should be at around you know 3,000 tons worth the growth, 3,000 tons to 4,000 tons worth the growth.
However, if you look at our own production, so internal production, so internal production, it's actually closer to 10% and we've reduced the amount of tolling that we’re doing outside, and we've done that because tolling is very much more expensive than internal production, and so as a result, even though volume is only up 3%, we’ll actually see benefit from that mix change in our EBITDA in 2020.
I know that you’ve had the benefits of an expansion of capacity at Talison that are really quite significant. Why can't the Talison rock be used to push your lithium volumes forward faster in 2020?
A - Scott Tozier
Yeah, it's really a question of how much demand is out there, and to a small extent what the price is. And so, we along with our partner Tianqi, operate the Talison mine to meet the shared demand from the two partners. You should not be thinking about us – first of all, we do not sell spodumene into the market by agreement. It only can go to Albemarle and to Tianqi and further the two partners are required to convert it before it gets sold into the market.
And then secondarily, even though we have that expansion, the conversion capacity isn't there yet, and so we have to continue to build out our conversion capacity because ultimately that's where Albemarle's bottleneck is.
If you look at our resources, that's going to be Talison, Nevada, Chile. We're only operating at about 25% of the available annual capacity of those resources. Our constraint is the conversion plants that are required to convert that material. And we’ll bring those online like I mentioned, when we have customer commitments and we feel we have got good returns on those projects.
One of the complicating factors in China has been changes in their subsidy system for electric vehicles. Some people think that the weakness in 2019, electric vehicle sales in China stems from lower subsidies. Is your view that over time subsidies will be eliminated in China, however slowly or do you believe that they'll be increased? How do you see the subsidy system there going forward?
A - Scott Tozier
Yeah, it's interesting. I mean, I think several years ago China announced that they were going to stop, they were going to start reducing the consumer subsidy that a consumer gets when they purchase a vehicle, and they started that two years ago. They put that on hold in 2020, in part to try to stabilize demand.
My expectation, and to be honest Jeff, there's more than just that consumer subsidy that's behind what's going on in China. There are production - there's production quotas, there's requirements in order to push to use hi nickel capacity batteries. There are provinces and cities that have benefits in place if you buy an electric vehicle or a new energy vehicles they call them, versus an internal combustion engine. So, the consumer subsidies is only one part of what's going on.
So, our belief and my belief is that if you put all of those together, China has a vested interest and continues to show that they are going to support the electric vehicle or new energy vehicle and the battery industry in China, to the point where they can start to export vehicles to North America and Europe, and I think that's really what's behind what they're trying to do.
So, while the form of the subsidy or the support that they are giving may change. You know, we do believe that they are going to continue to drive, to be able to take advantage of their first mover or position to become the electric vehicle supplier to the world.
Your history is to sell lithium carbonate equivalent under long term contracts, and for a period of time when the lithium market was very tight, I think Albemarle interests and the interest of the buyer really coincided. They were able to get the product that they needed at a reasonable price, without very much inflation over a longer period of time.
And then, as the market became more adequately supplied and volume growth slowed down, the dynamics shifted a little bit and what you did was, you conceded some price for 2020. Do the customer's at Albemarle want that same long term contract structure or are there different contractual demands that they have or are there longer term contractual demands altering or evolving?
A - Scott Tozier
Yes, I would say that, what we did in 2020, is the long term contracts are still in place. All the components of that, your volume commitments, you know the pricing commitments are in place and we did agree in 2020 to give a price concessions for the year of 2020 and the overall outcome of that is that our pricing on a year-over-year basis for the lithium segment will be down around, in the mid-teens and we’ve seen carbonate and technical grade material down further than that, and hydroxide down less than that, just to put it all in perspective.
And part of the reason we gave that concession for one year is so that we could better understand how this market is going to develop. One of the things that we've learned is that a one-size-fits-all contract is not going to work; it's really not appropriate. Every customer and we're only talking around 10 to 15 customers here, but each of the customers have different requirements. Some of them are price sensitive, right, so they'll trade off other qualities for price.
Some of them want long term surety of supply, others want you know, a reliability or product quality and others want the latest and greatest material that's out there, so they can have the latest and greatest battery. So we've got to recognize in our contracting and how we participate in this market, those differences and start to build that into the way we sell and it's very much like Bromine Jeff.
You know Bromine well. I mean there's no one-size fits all. You're selling, even though you might be selling exactly the same product, but what you're selling to the customer is so much more than just that product. We need that same thinking in lithium and we're using 2022 to get ourselves there.
I would just add to Jeff that ultimately our pricing, that with the concessions that we gave, we're still selling in 2020 at a premium above the bid price that's out in the market. So, I think another factor that we've learned is that Albemarle does, and the customer does value Albemarle enough to pay a premium to work with us.
Is there any way to roughly describe that premium? Is it very small or large or in between?
A - Scott Tozier
I would say it's double digit percentage, how is that?
Double digit percentage, okay. Maybe a question on Bromine. The key markets for Bromine are electronics and oil field services. Are you seeing the difference in pricing and demand in those two markets.
A - Scott Tozier
Yes, Netha maybe you can take that. So electronics and oil field services are you seeing a difference in pricing and demand in those two areas?
Yeah, we'll talk on the demand side. First, right now we're seeing pretty stable demand in the electronics and in the oil field. If you look what’s happened here, with the two major economic impacts with the virus, and then the reason one with the oil pricing, that has not affected our demand. What's different is in the supply chain logistics on the electronic side and flame retardant side is a little bit different. We're seeing some impact there, and the shortage in drivers, containers and those types of things in logistics that are going to have a slight impact, a little bit more than we expected in Q1.
On the oil field side, that drop in pricing, we see no impact throughout the calendar year and that's just because where we fit in these projects; typically they're down to the last 5% of spin before we get engaged. So, we’re going to spin that in 2020. We’re not going to close those projects out.
It’s the projects in 2021 and 2022 that are going to be impacted by the price of oil, if there is a long term, a reduction in that. And we typically lag about 12 months when we see impact there, 12 to 15 months, but we will see impact in our business results they.
On the flip side we do see a tailwind thought. When the oil prices go down about 30% of our raw materials are oil based, so we should – if those prices pay down, we should be able to get a nice tailwind on the raw material side.
Okay, right. Thank you very much for a very complete presentation. That will close our session. Thanks very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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