Earnings Call: Q2 2021

Jul 29, 2021

Good morning, and welcome to Orbea Second Quarter 2021 Earnings Conference Call. As we turn to Slide 1, all participants will be in listen only mode. After today's presentation, there will be an opportunity to ask In the interest of time, we will limit participants to one question only. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Javier Luna, Orbio's Capital Markets and Investor Relations Director. Please go ahead, sir. Thank you, Sarah. Good morning, and welcome to Orbia's Q2 2021 earnings conference call. We appreciate your time and participation today. Joining me are Sameer Baratbaj, CEO and Edgardo Carlos, CFO, a friendly reminder before we continue, some of our comments today Will contain forward looking statements based on our current view of our business and actual future results may differ materially. Today's call should be considered in conjunction with cautionary statements contained in our earnings release and in our most recent periodic E and D report. The company disclaims any obligation to update or revise any such forward looking statements. With that, Let me now turn the call over to Sameer. Thank you, Javier, and good morning, everyone. Let me start By again recognizing our 21,500 plus associates for their dedication to Orbea and to serving our customers despite COVID-nineteen and other challenges. Although the pandemic is not over globally, we continue to be optimistic as vaccination rates improve. We will continue to be watchful of regional conditions and we will remain vigilant about employee health as we adhere to rigorous safety and sanitation protocol. Let me now provide a high level overview of the 2nd quarter's positive business performance. I'm on Slide 3. 1st, Orbia delivered another incredibly strong consecutive quarter, building on the positive momentum that started in the second half of last year. Revenues and EBITDA have reached historic highs, delivering strong growth both year over year and sequentially. While this is a testament to the resiliency of our business model and improving global economic conditions, It is noteworthy that we also managed through some headwinds in the quarter due to supply chain disruptions, labor constraints and rising raw material and freight costs, as well as some continuing regional COVID-nineteen pressures, particularly in India. Our results were supported by actions to mitigate higher costs and supply chain issues when we realized benefit from a diversified and integrated portfolio of businesses. On this point, and as we have seen in the last several quarters, Supply disruptions in the raw materials value chain have hindered our non integrated competitors, while we have been able to The string of outstanding consecutive results are the outcome in large part of synergies associated with our integrated portfolio. Demand continues to be very strong across all product lines and our growth initiatives are working. EBITDA growth was 113% year over year and 24% sequentially with positive movement across all businesses except for Dura Line and Netafim. Comparisons to the Q2 of 2020 are difficult for both businesses And Dura Line in particular, given that raw material prices were at historically low levels at this time last year. Dura Line also typically experiences a 3 to 4 month time lag before the company is able to recover higher raw material costs with increased pricing. I am confident that the margins for Dura Line should start improving in the second half of twenty twenty one. Furthermore, all our businesses experienced strong market demand. We executed well on offsetting rising costs through proactive pricing plans and cost reduction actions. Our EBITDA margin of 25% improved 629 basis points year over year and 140 basis points sequentially. This was translated into free cash flow of $264,000,000 during the quarter. Orbea also continues to prioritize investments in environmental sustainability in the communities in which we operate and in governance. We published our 2020 sustainability report earlier in the Q2, which can be found on Orbea's website. Last but not the least, we announced several weeks ago that Eka will depart Orbea to pursue other interests. Ekka joined Orbea as Group CFO in August 2019 and has been a great partner to me and others on the executive leadership team. He will support a smooth transition of responsibilities to his successor through the Q3 of 2021. The Board initiated a search at the time of the announcement of Ekah's departure. The process is going smoothly and we look forward to providing an update once we have identified a successor. Let me now turn over to Ekhar to go through our financial performance in further detail. Ekhar? Thank you very much, Sameer, for your words, and good morning, everybody. We continue delivering sequential growth both in top line And EBITDA since the Q3 of 2020 following global economic recovery. On a consolidated basis, Our net revenue for the Q2 was $2,200,000,000 up 59% year over year With a strong growth across all businesses, EBITDA was up 113% with margins Increasing 6 29 basis points despite the rising input costs in raw material, transportation and labor. Our strong performance in the 2nd quarter also compares very positively to pre pandemic performance levels in 2019. It is not worthy to mention our outstanding performance for the last 12 months in which we saw revenue exceeding $7,500,000,000 and an EBITDA of 1,750,000,000 With our free cash flow reaching $610,000,000 and our return on invested capital back to the 2 digit with 10.7%. We delivered strong free cash flow of €264,000,000 during the quarter despite an increase in working capital tied to significantly higher sales activity sequentially and to some extent higher raw material costs in our inventories. Net debt has been reduced to $2,700,000,000 as a result of strong cash generation in the quarter, representing a net Debt to EBITDA ratio of 1.56x, reaching 1 of the lowest leverage levels in years. Capital expenditure of $63,000,000 were up 17% compared to last year. In addition, during the quarter, we returned to shareholders $50,000,000 in dividends as the first of the 4 installments for the full year 2021, and we acquired 31,000,000 in shares under our buyback program. During the quarter, Orbia issued 2 sustainability linked senior notes, a 5 years $600,000,000 note and a 10 years $500,000,000 note at an annual cost of 1.875 percent And 2.875%, respectively. Proceeds were used to refinance selected existing debt. In total, we reduced our average cost of debt by 50 bps point to 4.1% And extended our average debt maturity from 12.6 to 14.1 years, with our next significant maturity extended to 2026. In conclusion, we have a very strong balance sheet that provide us with significant opportunity To invest in growth organically as well as make selective acquisitions and return cash to shareholders as appropriate. Now please turn to Slide number 5, and let me give you some color of the performance by each of the businesses. Let me start with Polymer Solutions. We delivered another Quarter of exceptional results, fueled by strong top line growth and margin expansion. Revenues were up 93% driven by strong PVC pricing from continued high demand in the building and construction market. PVC prices continue at historically high level, driven by global supply scarcity. EBITDA was up 348 percent with a margin of 34.9%. We expect PVC demand to continue to be strong for the remaining of the year, although PVC prices should start to ease in the second half of the year as supplies recovered to normalized level. However, as we had been saying For some time, we do anticipate the PVC prices to settle at a comparatively higher level Until more capacity is added. Wavin posted another high performance We're reaching all time records in profitability supported by the very strong demand in the building, infrastructure and agriculture market, both in Europe and LatAm. Revenue were also up 93% from a very weak Q2 of 2020. We also saw some pre buying as customer remain cautious about supplies. While we experienced higher input cost constraint, we offset most of the impact with operational cost improvement Coming from continued footprint optimization and SKU rationalization, commercial actions while Increased volume of high value added products, we are able to meet demand in Europe and LatAm Despite raw material scarcity due to our integrated business model that Sameer mentioned earlier, EBITDA reached $140,000,000 up 4 19%, representing a margin of 17.8%. We expect that demand will continue to be strong globally. In this environment, Wavin continue to expand its market share in the more attractive aboveground segment, while also investing in high growth regions such as India and Indonesia. Now let me turn to Netafim, which also experienced continued strong market demand driven by Strong agricultural market following higher commodity prices for crops, including corn, carton, Coffee and other, which dropped revenue growth. Significant increases in raw material costs not yet Fully reflected in our pricing, temporarily impacted margin. Revenue increased 27% on a broad based geographical Demand, while the U. S, Europe and Turkey were ahead of the rest and more than offset the market weakness due to COVID-nineteen in regions such as India and to some extent countries in LatAm. EBITDA decreased by 4%, reaching a margin of 16.1%. We have been facing unprecedented level of cost inflation, in particular, in raw material Transportation for some months now. We expect demand to continue to remain robust, and we will continue to invest in capacity to keep up With this positive dynamic. In Dura Line and in spite of the healthy demand primarily in the U. S, We have experienced significant pressure on our margins, driven by the continued increase of raw material and freight costs that are not yet fully reflected in our pricing, partially due to a pricing formula mechanism embedded in long term contract with our key customers. We also experienced longer lead time related to labor shortage in the U. S. And Europe. Revenue increased 24%, driven by higher volume and prices, geographic expansion and sales coverage. EBITDA, however, was down 44%, following the reasons I just commented on. I also want to remind you that the Q2 of last year was an extraordinary high performance quarter for Dura Line as we benefit from the historically low cost of resin. We expect raw material cost inflation and supply chain 4th quarter when prices will fully offset the current raw material environment. The fundamental of Dura Line Are very strong following megatrend investment in high speed connectivity around the world. Last but not the least, quarter revenue increased by 21% from higher volume and prices in refrigerant and HF segment. However, the assets for an aluminum fluoride market remain challenged. EBITDA increased by 6%, offset partially by higher input costs. This resulted in an EBITDA margin of 34.4%. We expect demand in quarter market to strengthen, and we are cautiously optimistic that the improvement in result of this quarter show the start of a sustained recovery per quarter. In summary, another quarter of strong financial performance with a focus on execution for operational and commercial excellence while deploying our growth strategy. Now please let me turn it back to Sameer for final comments. Thank you, Erika. I am now on Slide 6. Next, I would like to discuss our strategy. As we have demonstrated, Our integrated business model provides significant advantages with security of supply being the most evident. Other benefits include realizing efficiencies in product development, cost synergies and the ability to leverage our geographic footprint. We are seeing a strong rebound in most of our end markets and are pursuing value generating organic growth projects in each of our businesses. We have identified target areas for potential bolt on acquisitions and we are well positioned with lower leverage and historically low borrowing costs. Finally, we continue to emphasize sustainability, Investing in the communities in which we operate and enhanced corporate governance. In sum, Our strategy is to invest in growth and focus on value creation for global leverage while maintaining our commitment to advance life around the world. We are expanding capacity to meet demand and investing in geographic expansion, downstream growth, high margin services and developing or acquiring cutting edge technologies and capabilities. In the Q2, we continue to make these growth investments. Let me share a few examples with you. In Polymer Solutions, we are actively exploring to expand our capacity in a capital efficient manner in order to meet demand. Alphagary completed the acquisition Of the majority share ownership of Shakun Polymers Limited, Shakun is a market leader in the production of compounds of wire and cable markets in the Indian subcontinent. While this is a smaller acquisition, it has a diversified footprint and next generation products that will allow us to expand our market share in Asia. In Bavin, investments in strategic high value segments are driving momentum, While we continue work repurposing 2 former Dura Line sites in India, we are also steering efforts to develop a site in Indonesia. Netafim completed the acquisition of Hakon Horticultural Products and also launched a new groundbreaking product, Alpha Disc, the most advanced disc filtration solution in the market. These investments enable Netafim to continue to help solve critical global challenges associated with water scarcity and food security. In Dura Line, we continue to invest in geographic sales coverage and technical skills. Major conduit capacity expansions are underway across the U. S. In the Southeast, Texas and on the West Coast. CURA Has brought to market CLIA-473A, the first of its next generation low global warming potential refrigerants. This is the first touch point in launching a broad portfolio of sustainable energy efficient refrigerants for a variety of heating, cooling and refrigeration applications. Finally, Orbia Ventures led and completed an investment in battery resources, which was announced last quarter and complements CURA's R and D work in lithium ion battery chemistries that will enable the world's transition to sustainable energy. We will continue to drive our growth agenda, investing across All our business groups and taking advantage of the high ROI opportunities that will help us create sustained value for shareholders. Finally, let me update you on our expectations for 2021 and capital allocation plans. I'm on slide 7. Clearly, our businesses have been performing extremely well and better than we expected in the first half of the year. We anticipate that the conditions driving this growth will continue in the second half. As a result, we now expect EBITDA growth in the range of 32% to 35%, up from the previous 15% given in our last earnings call. This revised outlook assumes no pandemic related or other disruptions to Orbea's businesses. For the full year, we continue to expect strong cash generation As global markets continue to recover, supply chains improve and additional investments in working capital normalize. We will continue to prioritize organic growth and strategic bolt on acquisitions, while maintaining our day to day investments in operational excellence and ES and G. Let me close by reinforcing the resilience Of Orbea's business model and strategy, I'm on Slide 8. We remain focused on growth while improving our cost position, Recognizing and using the advantage our integration provides and improving our liquidity and cash positions, We are also committed to embedding sustainability into a strategic decision making process across our business portfolio. We are proud of the performance our global team has continued to deliver and are cautiously optimistic in our updated outlook. Our portfolio of businesses is well positioned with opportunities for growth as well as returning cash to shareholders. We will continue to be disciplined with your capital and focused on sustainable success. Finally, I would like to thank Eka once more for his outstanding contributions to Orbea's transformation journey, And I wish him the very best in his future endeavors. Thank you. Operator, we are ready to take questions. Thank you. We will now begin the question and answer session. Our first question comes from Nikhilaj Lichtman with Morgan Stanley. Please go ahead. Good morning. Congratulations on the phenomenal results there. On Wahwin, first question. Can you provide a bit of a color on the regional breakdown and some of the trends that you're seeing. To what degree was this driven by LatAm? To what degree was this driven by Europe? And anything you can say in terms of when you expect supplies for non integrated players to kind of normalize? And then second question, if I may, if you could provide any color on Dura Line and Netafim, sort of the breakdown Between volume and price, you commented, I think, on the strong volume outlook for Dura Line. What are you seeing? We just don't have the data necessarily to separate volume and price in these two So any color there would be highly appreciated. Thanks a lot and again congrats on the numbers. Thank you. Thank you, Nick. Let me address the first, the Wavin performance. Again, I mean, when we compare versus last year probably is an easy comparison, but also when you compare versus last quarter, that was a very strong performance. I would say that roughly the $50,000,000 increase in EBITDA coming from the Q1 It's split €30,000,000 in Europe €20,000,000 in LatAm primarily. But really there are several factors that are contributing to this outstanding performance in Huawei. First of all, as we commented, The value of the integration with the PVC chain is bringing a relevant position to satisfy our customer needs in this environment, Most importantly in LatAm and to some extent in Europe. 2nd, there was a continued execution of our operational excellence plan And further footprint rationalization, now we are focusing in Ireland, Lithuania and Norway. But if you remember, In late 2019 and during 2020, we conducted a significant Downsizing or restructuring of our footprint, getting optimization in several facilities, consolidating production, that Bring a lot of value in terms of better logistics and much better cost utilization with full utilization of the facilities. 3rd, this is very important. I will mention several times, we continue doing significant inroads In the very high value added segment like stormwater management and indoor climate system, pretty much in Europe and now moving into LatAm as well, where also several of our high end products are totally sold out at this point in time. 4, Definitely, we have an easy comparison, as I said, with 2020. But still, I mean, the disciplining costs really help us to bring a significant value for LATAM and EMEA. And also, we are continuing transitioning toward monetizing Services for prefab investment and piloting with connected products as well as Market expansion in APAC incorporating the Dura Line Brownfield operation in India, which is a very important project. We do see a strong momentum in Wavin continuing in Q3, while demand continue very strong, and we will aiming to maintain our healthy margins. I will pause it here and Sameer, probably you can go over Duraline and NetApp. Sure. Yes. So Nick, I think, great question on Wavin. And without a doubt, you can see the Our integrated model working here because the security of supply that we have, particularly in LatAm, It has really benefited us across the entire chain. And even in Europe, This has benefited us in a pretty strong thing because there have been a host of issues. But fundamentally, demand remains Very strong. You had a second question around Dura Line, whether it's volume or price. And what I can tell you is fundamental demand in the Dura Line business remains very strong and this is driven by A large part of it is U. S, driven by the growth in 5 gs, the rural deployment of fiber, cloud computing And all of our major customers have significant growth plans. And as a result of which, we are having to accelerate Our investments in debottlenecking and increasing our capacity. And so volume performance for Dura Line It has been fundamentally strong. Much of what we are seeing here is has been caused by the two factors. 1 is the fact that it takes several months to catch up on price and we did have disruptions related to Raw material availability and labor shortages that prevented us from fulfilling as many orders as we would have liked In the last quarter. So hopefully that helps, Nick. Very helpful. If I may, just a follow-up question On that, yes, I think it becomes abundantly clear when you look at your numbers that integration works really, really well this quarter and probably going forward Next quarter is given the supply issues. I thought the answer related to the structural part was quite interesting. Is there any way That we can sort of quantify, I know year on year, sequential, everything is kind of difficult. But can we say It played a 30% role or can we quantify that the importance of having taken some cost out of the system on a more structural basis in order to So Nick, I think So we have been continually optimizing our structural costs in Wavin and then of course when we In a combined, Wavin Amanco, the LATAM operations and we are continually looking at ways to optimize our footprint, Improve our cost position and it's a relentless journey and this doesn't happen overnight and with every step we take We are improving our overall margins by 0.5 percentage point, 1 percentage point and inching our way to the Mid teens for overall Wavin, right? And so, I think that's the best way I can answer that question. And we are not done yet. I mean, there's a few more opportunities where we are looking to improve our structural cost position And we'll keep doing that. Our next question comes from Frank McGann with Bank of America. Please go ahead. Okay. Good morning. Thank you very much. Just to Follow-up in Polymer Solutions. The JV with OxyChem, I was wondering if you could Anton, how important improvements were there in this quarter and how over the next 2 to 3 quarters You could potentially see those either staying as strong as they are or potentially softening a bit? Yes. Very good question, Frank. So in the Polymer Solutions Business Group, The JV, the cracker JV with Oxy plays an extremely critical role in positioning us Much closer to the left of the supply curve versus the competition. And I would say despite the challenges we faced in the quarter, weather related challenges, logistics related challenges, It's the integration in the cracker that's really benefiting us and the ethane, ethane spreads that we are seeing As well as the downstream VC and PVC spread, that's for us that's absolutely critical. And so and we see that benefit continuing going forward. In this value chain, It's incredibly important to be integrated all the way, right from caustic chlorine to ethylene to VCM and to PVC. And it's a critical part of our success and will be going forward. Yes. If I can add something, Hamir, to give a color, Frank. Clearly, today, Of course, the margins are very, very high. But even last year, remember where the price of the PVC was close to 550, $600,000,000 We were able to get a very reasonable cost variable cost structure to continue making profit in that environment Because of the full integration with the crackers. So it has been proven in a very extreme condition like last year, Not to mention now we are enjoying this incredible moment for the PBC. Is there any way to quantify how much it Contributed in the quarter to you? So, it's I think Both factors, if you look at the components of the PVC chain, Frank, so there's the margins in each of these components. There's the ECU, There is the ethylene the cracker and the downstream. And historically, The profit pools have been more upstream in the cracker and in the ECU. But I would say that In the past couple of quarters, we have it's more balanced, both upstream in the cracker portion as well as on the downstream side where the between VCM and PBC are also quite substantial. And so I don't have specific numbers off the top of my head, but I would say it's a very balanced View of profitability across that chain. Our next question comes from Andres Cardona with Citibank. Please go ahead. Hi. Good morning, everyone, and congratulations on the 2nd quarter results. What I would like to ask has to do with the performance of the share because Year to date, we have seen a very strong performance of the company at the operational level and the outlook Remains very strong, but there seems to be a disconnection between the performance of the operation of the company And the equity performance. So what I would like to get from you is, what type of concerns have you identified from the market About the business plan or whatever you have get from the market. And the second one will be a derivative of the first one is What can the management do to solve these type of concerns and help the performance of the Equity to follow the strong performance of the operational business. Thanks. Andres, thank you for the question. And also thank you for your coverage where We see that your understanding of our business is actually quite good. It is disappointing to not see the stock follow the performance of the company. And as we have talked to A number of analysts and investors, what we realize is there is still a perception out there Around our earlier strategy that we were going to sell the Vinyl business and essentially become a downstream company and participate only in the higher value Downstream part of the chain. And what me, Eka and the rest of the management team I'm going to be focused on going forward is to really help our analysts who cover us and investors understand That the perception that the upstream part of the chain is low value is not the right perception. Okay. This apparently commodity business is having extremely high EBITDA margins And even when it normalizes, it will settle down at substantially higher levels and is a strong generator of cash that we can deploy across our value chain in much higher value in other value added opportunities. And so, I think it's very important for everybody to understand our growth strategy and we are know that we are now seeing A lot of benefit from the integrated chain. We have substantial growth opportunities in each and every one of our businesses, Both organic opportunities as well as strategic bolt ons that we can continue growing this company. And I think in order to do that, we plan to sometime in the next few months, we will organize an Investor Day And we'll invite all of you to come and spend time with me, with the business group leaders, And we will go deep and explain the excitement we have in each of our businesses. And hopefully, that's going to address any concerns people have about our strategy and the fact that this company post pandemic is incredibly well positioned to grow. We have a strong post pandemic recovery in most of our businesses. We are yet to see a recovery in Kura, but that should come As the situation the supply demand situation corrects in that part of the chain, we have historically The lowest cost of borrowing and we have strong cash generation and now is the time to invest and grow And that's what we're going to be focused on. And I think when analysts like yourselves and investors appreciate The magnitude of the opportunities we have in each of these businesses and the relentless focus we have on execution You know, while being extremely disciplined, you know, from a commercial excellence standpoint, cost management standpoint, and we are able to deliver sustained earnings growth, you know, The stock price should follow. Thanks, Andy, for the very detailed answer and for the kind words. Our next question comes from Luis Carvalho with UBS. Please go ahead. Hi, everyone. Thanks, Sameer, for taking the question. Eduardo, Very good luck and best of luck. And thanks for the partnership during the times and also to all of you congrats on the results very strong. I basically have 2 questions here. If I may come back to the last question and take your answers Sameer, At least to me and maybe I have missed something over the past couple of quarters, but your speech is, I would say, At least to me again points to a different, I would say, different direction in terms of capital allocation strategy of the company. And while I hear you saying that due to the Polymer business do bring some synergies with other of your businesses, It's way more cyclical than others and essentially nowadays we're talking about the peak of the cycle, right? So back to the capital allocation strategy. As you just said, you have a very low net debt to be the level. You already paid some dividends. You gave some details about do not pursue To divest from the Polymer business anymore and gave some of the details about each of The segments, but what will be the driver here in terms when you think about the capital allocation strategy? And to the last question, would you consider to actually to perform some buybacks now? Or is it something that you're looking When you look to the acquisitions, for example, with the growth, you're looking to ROE, ROIC, what are the metrics Or the thresholds that you're looking that we can try to, I don't know, track looking forward? And the second question, It's also a follow-up in one previous question in terms of the how resilient and recurring the results For the Q2, Murr, of course, that you gave, you updated your EBITDA guidance for the rest of for 2022, sorry, for 2021, sorry. But I'm just trying to, I don't know, get a sense from you guys, What will be the outlook for 2022 as we are almost in August and I think that investors are starting to look to 2022 results? Thank you. Okay. Luis, again, an excellent question. And let me address that head on. This whole perception of peak of cycle, right? Let's talk about cycle. What causes cyclicality in any commodity business? And cyclicality so demand It is growing monotonically. I mean, it's growing continuously and especially demand for PVC, driven by emerging markets And demand for clean water, sanitation, building and construction is growing at a significant clip, 4%, 5%, 6% a year globally, which is higher than world GDP, right? Cyclicality is caused by extremely large additions of capacity at the same time that the market cannot absorb that capacity And so for a period of time, prices go down and it causes the cyclicality and that's what people have been used to. Now if you look at the Vinyl chain, this is an industry that has been grossly under invested in over the past decade. Most of the assets out there are very old and falling apart, which is why you have so many supply disruption. Now, of course, all these force majeures and supply disruptions We'll go away and PVC prices will come back to some normalized level, but that normalized level It's going to be at a very different level than what it was only a couple of 3 years ago because demand Has continued to grow. And so, I think it's very important to address this perception of peak part of the cycle And because nobody can add capacity overnight, including us, any of these projects we are talking about are Multi $100,000,000 or $1,000,000,000 projects and they need to be capital efficient and they take at least 2 to 3 years to execute. So I think I would everybody should understand that for the next few years, At least it's our view that this is an industry that will be constrained until there is substantial addition of capacity. Now in that context, for us the integration has tremendous value. We will invest across the whole value chain. So for example, we are looking at capital efficient ways to debottleneck our PVC assets To see if we can create more capacity through minimal investment in capital, we are looking at potential alternatives to increase our VCM capacity as well. Keep in mind that there's very few players in the world that have the skill sets to operate in this space. And it's not easy to thread the needle in an industry that's associated with both cost of chlorine and with PVC. And we are one of the few companies that has the ability to do so and we will do that carefully. Having said that, We are going to allocate capital across our chain. As I mentioned, We are looking at growth projects in Kura, in the refrigerant change, in the energy storage chain. We are looking at expansions in VAVIN, particularly in India and Indonesia. We are looking for ways to enter the U. S. Markets. We have strong fundamental growth in Dura Line and Netafim and frankly the challenge will be to keep up with adding enough capacity to meet the demand. So you can see that from a capital allocation standpoint, it will be across the chain and we will prioritize products Projects that has the highest returns on invested capital and create long term value and have a strategic Linked to one another, right? Your second question was on outlook for 2022. And Erika can shed some more light on this. Yes. Sure. Sameer, thank you. Thank you, Luis, also for the question and for the nice partnership that we developed together. In terms of 2022, probably still A little bit early to provide full color, but assuming that we will see PVC prices come into a range Of at least $200,000 $300 per tonne above historical levels, we may see some impact in our earnings in the range of $100,000,000 $250,000,000 However, it is very important to mention that some of our engines are not at full Significantly above 2019 level, both in top line and bottom line. And this is probably the more that we can share at this point in time. Okay. Okay. And thank you very much for your answers. Sameer, if I may, just do a quick follow-up on your first answer. The idea of potentially listing Orbio in other stock exchange like, I don't know, U. S. Or How this process is online nowadays? Thank you. I'm sorry for the third question. Yes. No, no, it's that's a good question because it's been on people's mind. And look, while we don't rule out Such a listing at some point in the future, that whole transition can be quite distracting To the business at a time when we need to be focused on driving growth and creating value, right? And so Our focus in the near term is going to be on value creation and over time There are several levers for unlocking that value and capturing that value, and we will not hesitate to exercise those levers at that point of time. But to directly answer your question, it's not an urgent thing for us right now Our next question comes from Alejandro Zamacona with Credit Suisse. Please go ahead. Hi, Samir. Hi, Gerardo and Javier. Thanks for the call and thanks for taking my questions. Just a quick question on the guidance Infrastructure plan, probably tough to quantify at this point, but any thoughts around any business So Andrew, it's a really good question. And as you said, it's tough to identify across all the sectors, but if I Go business by business, clearly the infrastructure plan is going to require basic and advanced materials. And so all of our businesses associated with those materials should benefit whether it is PVC, specialty resins, Specialty compounds, our pipe and fittings business, Dura Line in particular, in addition to Biden's plan, there are already significant plans For rural deployment of fiber and providing broadband access more unilaterally across the country. And so we are already benefiting from that. The new potential driver longer term again for us would be Some of the encouragement that the Biden administration is providing for the transition to sustainable energy and so particularly supporting any projects associated with lithium ion batteries or product and technology development. And we are investing in that area even as we speak. Thank you, Samir. Thank you. Our next question comes from Ben Isaacson with Scotiabank. Please go ahead. Hi, thank you. This is Ziyad on for Ben and congratulations again on the quarter. It was a great beat and a lot of what you said kind of came I just have a quick question on just the growth initiatives. You talked briefly about in the capital allocation priorities, how you're looking at organic growth as well as But is there any way we can frame the magnitude of those investments maybe in terms of a dollar amount spend or maybe a target EBITDA that you're looking To achieve with the opportunities you're seeing in your pipeline today? Thank you. So great. And again, this is very high level, Ben, in terms of size and scale of these opportunities, some of these are tens of 1,000,000 of dollars of investment, Some range from $50,000,000 to $200,000,000 And then of course in the Vinyl business, it will be that's a much longer scale projects Those are several $100,000,000 type of investments, okay. I'm talking about organic growth projects or joint ventures where we co invest capital in a growth opportunity. In terms of bolt on acquisitions, Once again, let me remind everyone, our focus is on is being very selective In terms of either addressing a gap in our geographic footprint and or acquiring technology that we can acquire and leverage worldwide. And these typically again are in the range of tens of 1,000,000 of dollars to maybe a couple of 100,000,000 dollars, $300,000,000 Now having said that, my philosophy on M and A and our company's philosophy on M and A is, An M and A deal only makes sense if you have significant growth and significant synergies such that the returns on invested capital You know, pay off over time. And if we cannot make that happen, you know, we're not going to lose any such deal like that. And so we'll be very disciplined When it comes to M and A, and very, very selective when it comes to M and A, but we don't rule that out. Thank you. That makes a lot of sense. And I guess just to confirm, in terms of the specific timings, if we're thinking about in the PVC businesses, That has maybe a longer runway for us before we start seeing those initiatives, whereas elsewhere it could be maybe shorter term where we're seeing those initiatives really start contributing to EBITDA? Absolutely, Ben. More so in our downstream businesses as we are seeing strong fundamental growth and demand. This is about debottlenecking our plants, adding extrusion lines, and these can happen on a much quicker timescale. And given the growth in demand, these will also pay off much quicker as well, right? But it's a different Scale we are talking about, Brian. So with the diversification we have across our portfolio and the slew of opportunities we have, Our goal is to deliver steady earnings growth over the next several years. Perfect. Thank you very much. Our next question comes from Leonardo Marcondes with Tuohy BBA, please go ahead. Hi, guys. Thank you. Thanks for taking my questions. First, I would like to know if you guys could explain a little bit the dynamics of passing through Higher costs in the Dura Line and Netafimis segments. Basically, I'm trying to get a bit more color on the margin compression for this business during this quarter. And second, I would like to know if you guys could give us a bit more All your most recent acquisitions, I mean, what are the contributions in terms of revenues and margins you guys expect Then to deliver over the next year. So that's my 2 questions. Thank you. Ektar, do you want to take the margin compression question for Dura Line and Netafim? And then I can take the second question on the acquisitions. Yes. Clearly, the impact of the raw material and the cost structure of Duraline It's more severe than Inetofen, which encompasses many other Products, not only the resins. And I will say that today, based on the all the price increases that we have done, We have covered probably a little bit more than 60% to 65% of the increase in raw materials. So there's a lack Of at least 3 months to catch up with the full impact of the raw material. And again, we have been developed for many years Excellent relationship with key customers that are on the long term basis, and we are really Expecting, of course, all the terms and conditions to continue supply on time. We know that this sometimes go Like last year, it was very positive for us. This year, it's exactly the opposite. In the case of Netafim, I will say that today we are having an impact of approximately 6% to 7% in the total cost that has not been yet recovered. But again, there are a lot of actions that are taking place. And of course, the more that we but again, There was another increase in resins in July that was not expected. So at the end of the day, it's taking longer to fully cover. But again, the most significant one affected was Duraline. Yes. I think Leonardo, You'll see the cycle with which we engage with customers in Dura Line is different from Netafim. So in Netafim, it's short cycle with Dura Line, it's long term projects. And so it just takes longer get the increases through, especially with some of these strategic customers. But I'm fully confident that the team has taken every measure possible to catch up. And by Q4, we should have caught up and Netafim will be earlier than that. While we are in Q3, Netafim should be fully caught up as well. And then once we are there, that's a good position to be in. To answer your second question on our acquisitions, We announced an acquisition of a controlling interest in Shakun Polymer in India And Shakun is the leader of high end wire and cable products in the entire region. This includes India, Middle East, Africa and have had tremendous growth over the years. And We have complementary set of products and together with the synergies that we will realize with Sharpen, There is an opportunity to substantially grow the business not only in India but in the entire region. So we have Great expectations from this venture. Then the second one Is the acquisition of Hakon Horticultural Products, the greenhouse technology company that we acquired in the Netherlands. And The contribution to earnings of that company are not material. That is mainly a technology and capability acquisition, Which we can now leverage across the world through our footprint and Netafim on every continent. We are very excited about the opportunities in the greenhouse space in the U. S, In China, in Australia and many other places. And so that in combination with Netafim Has significant promise over the next several years. Our next question is a follow-up from Nikolaj Lipman with Morgan Stanley. Please go ahead. Thank you. And sorry for coming back and perhaps being a bit slow. Just to make sure that I understood what you were saying about growth You expect both the top line and the bottom line to show positive growth 'twenty two or 'twenty one. Is that correct? And if so, can you give any color on the importance, if any, of acquisitions in that statement? Thanks, guys. No, So Nick, my comment was referring to 2019. So basically, I mean, 2020, I tried to Take aside because of the COVID issue, 2021, we do have some significant Hey, Quinn. So what I say is on a normalized basis, we're going to be landing in 2022, both From top line and bottom line, significantly above 2019 levels. Got it. Thanks for the clarification. Makes sense. You're welcome. Thank you. And I will now turn the call back over to CEO, Sameer, for any closing comments. Thank you, Sarah. We are very well positioned To continue to capture growth and are confident in our ability to deliver strong returns as we support our stakeholders and communities worldwide. I thank you again for joining us today and look forward to talking to you all again at the end of next quarter.