Earnings Call: Q4 2020

Feb 9, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the 4th Quarter 2020 Avient Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would like to hand the conference over to one of your speakers today, Mr. Joe DeSalvio, VP, Treasurer and Investor Relations. Sir, please go ahead. Thank you, Ms. Sheryl, quarter. And good morning, and welcome to our Q4 2020 earnings call. Before beginning, we'd like to remind you that statements made during this webcast quarter. This may be considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements quarter. We'll give current expectations or forecast of future events and are not guarantees of future performance. They're based on management's expectation and involve a number of business risks and uncertainties, Any of which could cause actual results to differ materially from those expressed and or implied by the forward looking statement. Please refer to the investor presentation for the webcast posted on Avian's website for a number of factors that could cause actual results to differ. Quarter. During today's discussion, the company will use both GAAP and non GAAP financial measures. Please refer to the presentation posted on Avian's website where the company describes the non GAAP financial measures and provides a reconciliation for historical non GAAP financial measures to the most directly comparable GAAP financial measures. In addition, unless otherwise stated, comparisons to prior year will be pro form a for the Clariant Master Batch acquisition as if the business had been together during all periods referenced. Joining me today is our Chairman, President and Chief Executive Officer, Bob Patterson and Senior Vice President and Chief Financial Officer, Jamie Beggs. Now I will turn the call over to Bob. Well, thanks, Joe, and good morning, everyone. I'd like to start this morning in the same way we had the last few quarters with an acknowledgment and words of support For those who have been impacted by the COVID pandemic, the rollout of a vaccine brings new hope, yet this pandemic is not over, and we remain mindful of the many ways it is impacting people around the world. Our heartfelt appreciation goes out to the countless frontline workers and first responders as they continue to play such an important role in the response. Looking back on 2020, it was certainly a year Like no other. And I'm extremely pleased with how we finished delivering record 4th quarter results. The demand we reported in December Surpassed our expectations as every segment and region grew over the prior year. 4th quarter sales increased 8 percent to just shy of $1,000,000,000 which is a record for Avian. Demand for applications in consumer and healthcare applications Strengthened considerably. From a bottom line perspective, this growth coupled with Clariant synergy capture Increased our EPS to $0.52 on an adjusted basis. That's better than we expected back in December and 73% higher quarter. As I said, each of our 3 segments delivered strong revenue and operating income growth quarter with SCM leading the way. EM had its highest ever quarterly operating income, expanding that measure by 58%, Driven by demand for our composite technologies and in the outdoor high performance space. Color Additives and Inks also achieved record operating income, growing 45%. The Color segment certainly benefited from early synergy capture and the reopening of the economy, but also contributing was increased demand for consumer quarter. As well as gains in healthcare and sustainable solutions for food and beverage packaging. And lastly, our distribution segment had a strong finish to the year with demand improving in consumer and healthcare applications. So it truly was an outstanding performance to finish a very challenging yet important year. Certainly, everyone will remember 2020 for the pandemic and how it affected so many people around the world. For our associates and our stakeholders, it will also be remembered as a pivotal year, one of new beginnings, resiliency and a validation of our workplace culture. In July, we completed the transformational acquisition of the Clarion Master Batch Business and we became Avient. We chose our new name to inspire our associates and the go to market with a brand that better represents who we are today, not who we were 20 years ago. But more importantly, this new name and brand sent a message that this was not an acquisition of Clarion Master Batch by PolyOne. Rather, this was an opportunity to bring 2 world leaders together and create something better. And we are better together. And I'm also so pleased with the previous investments that we have made in composites, Which helped EM to deliver the results they did for the year. In total, we navigated a global pandemic To deliver 11% adjusted EPS growth for 2020, we generated the highest level of free cash flow in the company's history, Ultimately delevering the balance sheet from 3.5 to 2.7 times net debt to EBITDA and all within 6 months of closing The Master Batch acquisition, which is a year and a half ahead of schedule. It was a galvanizing year for us. We took care of each other and our customers. I say this all the time, but really mean that culture is everything. We've built a great one here at Avian. And this was evidenced by our certification as a great place to work based on employee survey scores of all our associates around the world. The Clarion Master Bats acquisition has certainly got a lot of attention this year as it should. It's transformed our portfolio, particularly our presence in high growth and less cyclical end markets. As the chart shows, nearly 60% of company sales now come from healthcare, packaging and consumer end markets. And when we think back to March of last year, as the world was bracing for a significant economic downturn, There are those who question how well the masterbatch business would perform through such a period. And now we know. And the 2020 performance demonstrates the quality of the business we acquired and we are only scratching the surface of its ultimate potential. We talk a lot about the cost synergies and we're ahead of schedule in that regard, projecting $35,000,000 in 2021 And in total, it's $75,000,000 But what we're really excited about is what the business brings longer term, Such as complementary technologies and high growth end markets, the joint innovation power of our combined assets and collaboration, a unified focus on the next generation of sustainable solutions and a broader opportunity to cross sell among all Avian businesses. And this positions us uniquely with our customers. Next, for the last several years, we have been investing in high growth end markets With a focus on what I just said, sustainable solutions and these new technologies. And I believe it's clearly paying off with better mix. And we have seen substantial margin expansion this year as a result. This is a big deal. For investors who followed us in our early years, you know margin expansion was a hallmark of our success and it will be again. Previously, I mentioned our investment in composites and in the outdoor high performance industry. We view this technology in this space as the next frontier of metal replacement whose performance and application can achieve superior benefits Of being lighter weight without sacrificing strength. We started investing in this platform a number of years ago. And it really was a core part of our long term invest to grow strategy. And as you know, we also dedicated commercial resources in a big way quarter. To a number of end markets, but specifically the outdoor industry. And over the last 2 years, we have seen demand increase substantially as we expected. Our portfolio of composites has grown and our composites team continues to build momentum. It's exciting And Kalei, it's a driving the horse behind the future growth and investment that we expect to see for the segment and the company. Free cash flow and capital allocation have been a strength for Avient for over the last decade. With the cash we generated this year, we were able to reduce our net debt to EBITDA as I previously mentioned, confidently increase our dividend for the 10th consecutive year and opportunistically buyback 1,300,000 shares at an average price of 17 point $0.89 Behind all that we do is a robust and vibrant culture. In the fall of this last year, we conducted our employee engagement survey, inclusive of our newest associates So this is 8,400 employees across 45 countries. And the survey results speak volumes About how well the integration is going, but more importantly, about who we are becoming as Avian. I'm extremely proud that we were certified again is a great place to work. We have a culture that prioritizes our employees' safety, health and welfare, Diversity and Inclusion values excellence and execution and has a deep passion for helping our customers Overcome their sustainability and material challenges. As you can see, we have accomplished a lot in 2020. And we also have great momentum to start 2021. We're excited to share our outlook for the upcoming year, Which Jamie will do now. Thank you, Bob. As 2021 is already in full swing, we would like to provide some context and outlook for the upcoming year. We clearly finished 2020 with impressive results and we are continuing to see robust demand in the Q1 of 2021. Quarter. Yet like everyone, we remain mindful that the coronavirus pandemic continues and with that comes potential volatility as we make our way through the year. Things that we can't control include the integration with Clariant. I continue to be amazed at the energy and excitement that is being generated from combined organizations and couldn't be more proud of how we've come together as a team. As for integration in the coming year, quarter. We expect to realize $35,000,000 of synergies in 2021, which is an incremental $30,000,000 over 2020. Quarter. These synergies will primarily be driven by harmonization of raw material pricing and integration of administrative functions. Quarter. For the Q1, we expect total company sales to increase approximately 10%. Specifically, we expect the healthcare and consumer end quarter. Healthcare sales will be driven by new business gains and applications such as glucose monitoring devices, antigen test kits and specialized medical tubing. We also see recovering demand for applications used in elective procedures. Consumer sales will benefit from continued underlying demand for composite technologies used in outdoor high performance applications such as snowmobiles and ATBs. Packaging is also expected to provide mid to high single digit growth led by demand for our sustainable solutions for food and beverage packaging. An example includes performance additives that facilitate the use of recycled PET. Lastly, certain end markets such as transportation should also provide growth, quarter. Benefiting from the economic recovery as automakers ramp up production. The bottom line impact of all of this is that we expect to grow adjusted EPS approximately 30 2%. For the full year, we expect total company sales to increase 8% year over year. We expect all end markets to grow With the more cyclical markets such as transportation, industrial and construction to approach 2019 levels. This assumes a continued recovery through the 2nd quarter quarter and normalizing seasonality in the Q4 of 2021, which is why we project the Q1 sales to be up 10% and the full year to be up 8%. For more details on our growth assumptions, we have provided a bridge from 2020 to 2021. We've laid out 4 growth drivers of our business that we've quarter. We have a line of sight to grow double digits in Sustainable Solutions, Healthcare and Composite Applications. We have innovative product launches in 2021 that will capture new business. We see evolving COVID applications that help in vaccine distribution. Elective procedures and healthcare are also starting to recover. In addition, we see increased demand for our sustainable solutions used in food and beverage packaging as well as lightweighting materials used in the transportation space. Lastly, we expect another robust year for outdoor high performance applications. Of course, underlying growth is underlying growth in GDP will quarter. As we discussed, our 2020 performance benefited from certain COVID response applications such as N95 mask as well as certain outdoor high performance applications, which may not repeat this year. This may prove to be conservative, but if they don't repeat, we estimate these two items to quarter. Foreign currencies are expected to add approximately $85,000,000 or 2% of sales based on current quarter. Looking at how this flows through to operating income, you can see the positive impact from our core growth drivers, which is huge, as well as the bottom line contribution from Clariant's synergy capture. We do expect some higher costs this year due to higher incentives, normal merit increases and potentially higher travel costs. Generating free cash flow is core to our business model and this year will be another year of high cash generation. Quarter. We do have some investments in working capital to support the sales growth as well as restructuring activities to capture synergies associated with Clarion. From a leverage perspective, we expect to finish the year at 2.1 net debt to EBITDA. We want to put our capital to work, which includes pursuing strategic M and A with a focus on specialty engineered materials, particularly in composite technologies. I'll turn the call back over to Bob now for some concluding Thanks, Jamie. Before we take questions, I wanted to share a couple other slides that I'm sure most, if not all of you have from our previous investor presentations. And I'll start with this. Avian is a new company, How, where and why we win is important for our investors to understand because we have a unique position And play a critical role in product development for our customers. We provide over 21,000 customers Formulated Solutions, not Commodities. We do this fast, we do this often and we do it all over the world With over 100 production and distribution facilities, we are where our customers need us. When we win, we create value For you and all our stakeholders. We covered each of these levers at various points throughout today's webcast. But in summary, Here are the key reasons why we are creating value now and why we're set up well to continue to do so far into the future. Quarter. Our growth projections for 2021 reflect a strong start to the year and are appropriately conservative. While we are benefiting from a combination of new business gains and early signs of economic recovery, the full year impact Of when and how vaccine rollout will take place is still to be determined. Regardless, we expect improving mix from continued strong demand for our sustainable solutions, healthcare and composites as Jamie said. And this along with synergy capture will drive 24 percent adjusted EPS growth. This translates to EBITDA of $510,000,000 which will be by far the highest in the company's history and with significant upside in years to come for all the reasons we've covered today. In doing this, we'll reduce our net leverage to 2.1 times and have the balance sheet flexibility to invest in future innovation and M and A this year. As the CEO of this company telling our story and articulating our value is one of the many responsibilities that I have. You may recall that I spoke on our Q3 investor call about this. We've since included details and peer comparisons in our investor deck and we've repeated them here. I don't plan to go through them today, but I'll just say that over time, I believe we are going to be recognized for what and who we are. And that is a business that is high touch and asset light with very strong growth prospects in sustainable solutions, Healthcare and Composites to name a few. We create a ton of cash. We've got an awesome culture and that should not be overlooked. I plan to continue to tell our story, do it better and more often until it is understood and appreciated. That's my commitment to our shareholders and our associates. And I got to tell you, I am pumped up to do it. We've covered a lot of ground today in this webcast Because we covered a lot of ground this last year, but we have even higher expectations for the years to come. With that, we'll open up the line for questions. Joe? Star then 1 on your touchtone telephone. To prevent any background noise. We ask that you please place your line on mute once your question has been stated. Our first question comes from the line of Mike Sison with Wells Fargo. Your line is open. Please go ahead. Hey, good morning. Congrats on a strong 2020. Bob, can you maybe walk through some of the sales synergy potential you see with Clariant as you head into 2021? Yes. I mean, I think in 2021, there is a really important focus that we have on Basically business as usual when I think about combining the 2 legacy PolyOne and Clarion organizations. There's obviously a ton of work to do, Mike, with respect to responding to the response and recovery efforts of COVID, those are the highest priorities. So I think in 2021, it's about identifying opportunities for future years And the areas of focus will be on sustainable solutions, healthcare, most likely Customer opportunities as well as overlapping streams of R and D and customer support activities. So Those are the areas, but I really see the longer term benefit from revenue synergies coming in post 2021. Got it. And then for Engineered Materials, composites has been has gained a lot of momentum over the last couple of years. Can you maybe give us an update, how big that business is now? What type of growth do you see in composites in 2021? Yes. Look, it's just a little bit over. It's about $200,000,000 of revenue in total. If you look at the bridge schedule that Jamie walked you through, it will Give you the composite assumptions for this year. Look, there is an assumption in the year that this year that Maybe some of what we saw in the 4th quarter doesn't repeat. Maybe that's conservative. We'll see how this year plays out. But I think if you put those 2 together, Mike, that will help you get a sense for composite numbers for this year. Great. Thank you. Yes. Thank you. And our next question comes from the line of Bob Koort with Goldman Sachs. Your line is open. Please go ahead. Quarter. Good morning. Thanks very much. On the Color business, obviously, some pretty strong success there on the integration. How do you think about maybe a mid or a longer term target on margin structure that after you've harvested all those synergies? What might you think is a run rate a few years out? Yes. I mean, obviously, we're already off to a really good start there. The legacy PolyOne color business, as you know, had EBITDA margins in excess of 20%. And I view that as a really good long term target for what this segment can ultimately do together. We've talked a little bit about some differences between the two portfolios of legacy Clariont versus legacy PolyOne, but I don't see why we can't get back To that level of performance. And then I know you guys have worked on ESG type stuff for quite a long time quarter is fashionable. I'm wondering, I don't know maybe Joe is the right guy to answer this, but how have you seen inbounds from that investment theme and what are you guys doing to cultivate that since it sure seems like a value enhancement option for a lot of companies out there these days? Hey, Bob. Yes, this is Joe. This has been something that has been part of our strategy, quarter our strategy, right? It's not something we just started doing because it became in vogue. And so it is part of our growth strategy. We do get a lot of discussions or questions from inbound questions from investors on this topic. And if you look at our most recent sustainability report, we've really beefed it up and added goals, long term goals and targets to help address some of the metrics that are out there from the regulatory bodies in this area. And so it's really starting to gain some traction. If you look at Some of the conferences will be out here in the next couple of months. We'll be targeting ESG conferences with some of the sell side to help continue to promote this, but It's really starting to gain traction momentum and it's something that we've been doing for many years. It's not something that's new to us. So thanks for pointing that out. Got you. Okay. Thanks guys. Thank you. Thank you. And our next question comes from the line of Frank Mitsch with Pharma Research. Your line is open. Please go ahead. Good morning and nice end to the year. Bob, I want to follow-up on the comment you made. You used the term your I thought you used the term with respect to guidance where you talked about appropriately conservative. Now it turns out that the $0.48 guidance you issued for quarter in the middle of December turned out to be appropriately conservative. What went right to be able to post that fee in the Q4. Yes. So the comment that I was making conservative about really was related to 2021. What I was saying, I think we're being appropriately conservative and I'm happy to come back to that. But with respect to specifically Q4, Really, it was almost entirely and we had some level of revenue beat, which was candidly just demand across all regions and all businesses, Very strong finish to the year and a little bit better margins in the Color segment. Got you. And I I don't think I've ever been teed up better by a CEO to ask a follow-up question. So yes, let's come back to the appropriately conservative $2.40 for 'twenty one. Well, one thing that we have in this estimate is, I think a really conservative sort of sec View on the second half of the year, specifically the Q4. Obviously, it's way too early to call or project what is going to happen. But the reality is the Q4 of 2020 was the strongest we've ever had. Typically, we've got seasonality in this business and Q4 is Typically weaker than Q3 that didn't occur in 2020. And so as we've modeled and created the 240, I think we've been conservative with respect to what we think Q4 of this year will look like. Secondly, I think we're also being conservative with respect to margins. I just think we're going to have better margins than kind of what rolls up and builds into this number. But We'll see as the year progresses. We certainly had a great track record with margin expansion in the second half of twenty twenty. Quarter. Very helpful. And just to confirm, you're currently modeling in Q4 to be seasonally down as it historically is Relative to the Q3, correct? That is correct. Thank you, sir. Yes. Thank you. And our next question comes from the line of P. J. Juvekar with Citi. Your line is open. Please go ahead. All right. We'll move to the next question. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open. Please go ahead. Hi, thank you for taking our question. This is Angel Castillo on for Vincent. Just a quick follow-up, I guess, on the cash deployment aspect. I think in the past, you talked about Interested in composites and continuing to grow these high growth specialty businesses, but maybe there was a little bit of, I guess, delay or I guess impact from COVID-nineteen and the ability to travel. As you get look at 2021 and where we are today, How are you seeing, 1, your pipeline evolve? And 2, are some of these potential opportunities continuing to move forward and despite the delays? Yes. I think the I mean the dialogue is continuing with some of the Opportunities that we started those discussions with last year. Some feel a little bit like they're in a holding pattern because of what you just said that we can't travel and really just feel like that's a necessary thing to do. Sellers seem to be okay with that. We're okay with that. There's a couple others though that our businesses that we have already had a relationship with and know well that could be further along. So It's kind of a spectrum of things. I think that where the real challenge comes in, of course, is just if you haven't been to the plants, if you haven't met team of 4, really difficult to move something forward until you can do so in person. That's very helpful. Thank you. And then just wanted to ask about the free cash flow guidance of $250,000,000 for 2021. Obviously, another strong year and some, As you mentioned, some use of working capital. As we think about the roll up of Clariant, I think Clariant just year over year, if we assume kind of the first half of twenty twenty wasn't included, was a $30,000,000 to $35,000,000 tailwind for next year. And then also just thinking about working capital improvement, I think in the past you've said that, just approving or getting clearance where legacy PolyOne is kind of like a 2 to 3 point points of improvement from a working capital perspective. So I just was wondering if that's included in the guidance where that's potential upside, just From what you've kind of laid out. I mean, you're correct on the headline difference between their legacy working capital as a percentage of sales in our own. We do not have the Clariont working capital number getting all the way to where our legacy PolyOne is In 2021, but we do have improvement on a percentage of sales basis in there. So could it be upside if we do better? Certainly. But for right now, we've just got a modest improvement. Understood. Thank you. Thank you. And our next question comes from P. J. Juvekar with Citi. Your line is open. Please go ahead. Hey, good morning. Sorry about that. Can you hear me? Yes, we can. Great. Thanks, Bob. When you give guidance of 8% organic growth year, I mean next year, I mean 2021. Can you break that down between price and volume? How much pricing power do you have with oil prices and raw materials in general going up. Do you expect any further pricing? And then sort of related to that question on organic growth, And how much of your sales would you say are from products that were introduced in the last 3 years? Is that a matrix that you track? Thank you. I'll take the last one first and that is we do track a vitality index. However, we track percentage of revenue from products introduced in the last 5 years. So I don't know a 3 year number, but I can tell you in the last 5 years, our expectation is Percentage of sales should be right around 36% or 37%. So we've always considered anything above 35% to be world class. So I think in 2021, we'll be right in the right down the fairway of what we where we want to be in that regard. With respect to the 8% sales growth, There is some FX contribution in there. You can see that in the bridge schedule that we've got in the deck. But beyond that, look, we effectively view that growth is principally underlying unit demand. Because I know there's been a lot of questions and thoughts on inflation and what's taking place. Right now, we have 2 areas in particular, polyethylene and polypropylene that get a lot of focus and attention. It's a very small percentage of what we buy. And we could probably give it even more robust answer on raw materials if somebody wants it. But I just tell you right now, we're not we don't have something in our plan for a major inflationary price increase because we're not seeing that yet, But we would handle that appropriately if we did. So I guess the way to think about that 8% is that's real underlying demand growth, excluding the FX Delta I just described. Great. And just a quick question on your Masterbatches deal. Given how well it worked quarter. Thank you and your execution was quite good. Why wouldn't you look at another deal similar to that given low rates and take advantage of that? And can you talk about the pipeline and what your thinking is there? Thank you. Yes, I mean, look, we'd love to do another deal like this, right? And I'd say, look, the Clariant deal was a number of years in the making. From the first time we ever started Talking about it to when we earnestly started talking about it to when we finally got it done in July of 2020. Unfortunately, these things do take time. I'd say there's a number of things that we are looking at that we are excited about. What I love is that look when you look at the cash flow we generated this last year, what we're projecting for 2021, We're going to get something done if and when we can and we think it's a good fit. It's just a matter of having all that line up so that we can. So that's the plan. Thank you so much. Thank you. And our next question comes from the line of Mike Harrison with Seaport Global Research Securities Great. Wanted to kind of come back to this raw material question. Maybe can you take a step back And discuss some of the changes that have occurred in the raw material slate now that your Color business has doubled in size. You mentioned PE and Key are smaller components than people might think. Presumably pigments have increased in terms of your spend. So Talk about that and maybe what your outlook is for inflation in some of those pigments based raw materials. Hi, Mike. This is Jamie. It's a great observation. So about half of our raws now are non hydro group carbon base primarily with the CAI portion of our business, which is pigments, TiO2 and performance additives. They've been very stable through 2020 and our outlook is for 2021. For perspective, going back to polyethylene and polypropylene that Bob mentioned earlier, those only represent 15% of our raw materials. And even so, it takes a little bit more effort to dig into it a little bit More because of the market indices don't really represent exactly what we purchased for our businesses. In particular, we buy plastic extrusion formulations and we also purchase those polymers and recycled content as well. So we don't see the magnitude of inflation that you would normally see just by looking at the indices. And I think lastly, A lot of the headlines today is in the North America region. And in fact, if we talk about polyethylene and polypropylene, Europe was down in Q4. And so if you did a walk of what happened last quarter, we actually saw a raw material benefit. And while we do see some of the market indices moving up for 2021, like Bob said, we don't think the magnitude is that large. And where there is Some pockets where that may be the case. We definitely have the ability to raise price to be able to push that through. All right. That's very helpful. Thanks. And then, Bob, maybe can you talk a little bit about the cyclical businesses? Quarter. It seems like you're expecting a recovery to continue into 2021. Maybe comment on what you're seeing in terms of monthly trends in some of those businesses and some thoughts on where customer inventory levels are and any potential for restocking cycle in 2021. Sure. Just as a reminder, you mentioned cyclical, so I'll just throw out Maybe transportation, which is about 8% of sales, building and construction is even less. Those things have all seemed to have trended positively in the last few months. As you know, there is some sort of Headline, let's say, concerns about the ability to continue to do so because of chip shortages and things like that that's impacting the automotive industry. But anyway, I think there's continued improvement in these cyclical spaces and we're seeing that right now. The second part of your question, I think was related to customer inventories. And I tell you, It's a really challenging time right now because a lot of raw materials are actually in short supply. And I think customers are Feeling that, we certainly are. And I think that I don't think anybody is stockpiling stuff right now or feeling like they've got enough to be content. In some cases, people are trying to get whatever they can for those things that are in short supply because demand continues to be very strong. So I don't think we're sitting on a lot of inventory right now. I don't think our customers are either. And hopefully that's a good thing for demand here for the 1st part of the year. All right. Thanks very much. Yes. Thank you. And our next question comes from the line of Ben Kallo with Baird. Your line is open. Please go ahead. Hey, guys. Hi, Ben. So, hey Bob, you gave a point guidance for 2021. I don't think you've ever done I'm new on the stock, Maybe just like 8 or 9 years. But I'll talk about visibility a little bit. And then 2, Like if we go back to your last Analyst Day, and then the one before that, it started out With OpEx guidance and that was you talked about that before is a driver of the stock Or the company and what you're focused on. And then the last thing I want to say, you talked more about ROIC. And so could you both talk about that visibility into your guide and then what metrics you Are looking for as you go forward that we should be looking for? Is that there was like silver, then platinum, then gold or whatever it was? Right on. There's a lot of stuff in there, Ben. So let me see how I can I'll take these here and the order I can and I remember them. So we're starting point with $2.40 I mean, look, some people prefer to give a range, others may prefer to just give a point estimate that they kind of view as a best estimate. Candidly, either one of those is based on assumptions and certain scenarios as you put into the forecast. I've tried to convey 1 or 2 of those scenarios already in the sense of kind of how we look at Q4 for this year, maybe margins And looking at those things kind of conservatively. So philosophically, other people kind of just had their feelings about whether or not Our range is helpful because sometimes it says you exactly know the lower end and the higher end and that's not always true either. So Hey, look, this is our best estimate. I think it's a really good way to start the year. And I think a great point estimate for us to think about for the year. With respect to going back to some of those previous investor days, I think, look, ROIC is always going to be important, right? That's It's just a measure of how well we're doing against our investment dollars. And I think you were harkening back And then today, we even way before that, right, which was all about margins. And there's a really good slide from that that we really should resurrect Because I think that margin growth is going to be an important part of our story going forward as it was then. I tried to make that comment in the call today, which is that for those of you who followed us for a long time and you have, you remember that. And I think that's going to be important part of the growth story. So we didn't have a slide on that with respect to margin projections. I think as this year goes on and we see how this plays out for this year though, that's worth revisiting. And I know Bob asked a similar question about where color can get to. So Anyway, I feel really good about our trajectory and I think we're on a really good path with respect to those things. And as the year goes on, I think we can put more data around it. Maybe I'll jump into it and thanks. I know you're coming to our sustainability conference. But From a broader perspective now, do you guys envision doing a kind of Analyst Day or some revisit to what you're doing and when would you think that would happen? Sorry, Joe. Did you say sorry, Joe? Yes, let me clear my next 6 months. Yes, I think we'll give that some consideration, Ben, and we'll report back to you. All right. Thanks guys. Certainly. Thank you. And our next question comes from the line of Colin Rusch with Oppenheimer. Your line is open. Please go ahead. Thanks so much. Guys, can you speak to any discussions that you're having Lightweighting and mid tier replacements outside of outdoor performance at this point, particularly as it gets into the auto sector or some of these other areas where you guys have some meaningful opportunities for live learning. Yes, I mean, look, it's still up, I mean, right at the top of the list for your transportation applications. I mean, I mentioned in response to an earlier question that that's not as big a part of our portfolio as it once was, but look, it's still 8% to 9% of our sales and it matters. So I'd say applications and transportation are still Really important in that regard. And as you know, look, we do lots and lots of small things. So we wouldn't be pointing to something that's massive in scale in terms of application examples. But the ones that we are doing in those space are very much focused on lightweighting and they matter. What was I thought interesting about this last year was that in some respects, it kind of felt like maybe innovation got put into the parking lot. Quarter. But in other respects, it seemed like the ability to communicate more frequently with customers by WebEx, maybe actually Put some things back on the table that weren't before. So I was actually really encouraged sort of net net on the year With respect to how much customers are still thinking about lightweighting, they're thinking about sustainable solutions, and can only lightweighting in packaging is a big deal. I I think you mentioned outdoor performance and we obviously talk about that a lot, but lightweighting for packaging is right at the top too. Okay. That's super helpful. And I think you kind of are leading into my next question. We're seeing an increasing number of companies make commitments around reaching net 0 by 2040. And obviously with the robust ESG practice that you guys have, it allows you over a certain amount of transparency, not just around environmental issues, but your entire business. What are you seeing in terms of customer engagement on trying to work towards some of those net zero goals with you guys as a supplier. It seems like some of that purchasing power is going to start dictating operational terms for different companies. Just curious how How mature that is and kind of where you're at with that sort of this year? Yes. I mean, I think it's mature. I think that There's a lot of customer energy, excitement and support for discussion around sustainability initiatives. I mean, like never before. I mean, it used to be something that was kind of an interesting side conversation, but didn't get a lot of traction unless a customer thought it was somehow going to be cheaper. That's just not the case anymore. And I'll tell you, we're having some really robust conversations with customers And we talk about sustainability and things we can help them do and help ourselves. It's front and center with respect to new product development and design and what's going on right now. I mean, it really is, particularly in the food and beverage packaging space. Thanks so much, guys. Sure. Thank you. And our next question comes from the line of Laurence Alexander with Jefferies. Your line is open. Please go ahead. Hi, guys. It's Dan Rizzo with Laurence. How are you? Hi, David. Good. So just getting back to the revenue synergies, I know you mentioned that the first priority is identifying them. I was just wondering how long the runway is from there. I mean, after they're identified, is there a long sales cycle? Does it take like a year or 2 to kind of really make traction with generating additional revenue from cross selling? Well, look, there's already some that are identified. I think it's spectrum of both identification and then sales cycle timing. So certain things, look, We're just talking about bringing Clariant and Legacy PolyOne together. So I'll just focus on color for the time being. Some of these things are Food and beverage packaging related. Some are healthcare that can be long cycle stuff, right, particularly with respect to Additives. And I do think additives is a big area of opportunity. So some of that's longer cycle. Some of it, I think could be quick wins that we get as early as the end of this year by bringing the businesses together. I just want to continue to reiterate just how important it is to have business as usual for a period of time As we bring customers together, as we align our sales and commercial organizations, I think that message is really important. And then lastly, as to maybe a follow on to the last question and answer session on sustainable solutions. I think those things actually would historically have a longer cycle time, but customers are going to make them half faster. So those kind of things could happen Again, as soon as end of this year, beginning of next year. All right. Thank you for the color there. And then just one other question. Some of the other companies have mentioned that there's some logistical issues recently just due to a pandemic, just raising costs. I was wondering if you guys are seeing something similar? Logistical issues, I mean, if you mean with respect to like raw material shortages, That is certainly something we've seen in a variety of different places. It has caused some disruptions in a few of our businesses, but that's it. Look, with respect to freight, Freight costs are going up, things are getting tight. That makes things more challenging at times. But nothing else that's on our radar screen unless I miss Understood your question. No, I was referring to actually freight and transportation costs, but you did answer it. Okay. Thank you. Thanks, Matt. Thank you. And our next question comes from the line of Jadeep Pandey with On Field Security. Your line is open. Please go ahead. Thanks a lot. So very good growth in the Clariant legacy business last year 13% despite hello, can you hear me? Yes, we can hear you. We can hear you. We could hear you. JD, your line might be on mute. Hello? Yes, we can hear you. We can hear you. Hi. Can you hear me? Yes. Hello? Hello? Yes. Hi. Yes. Yes, I was just going to start with the Clariant legacy business where you saw 13% growth in EBITDA. If you can give us some color on organic growth and sort of what was driving this given the fact that you only had $5,000,000 synergies last year? And then sort of more longer term question around this business is, if I sort of throw in your synergy target in there, do you think fundamentally this business actually, if you guys were running it and you threw all the sort of right growth elements to it would be In your top tier in terms of margins. So that's the first question. The second question is Sort of around your healthcare business actually and maybe together of AVN and Clarion. Do you have any opportunity with regards to catheters and vials, especially in this vaccination drive as the world sort of scrambles for glass vials. That's my second question. And then finally, I know you probably want to do this in a step by step manner, but when I look through your synergy targets for Clarion, you've upgraded the sourcing element. But do you think there's still quite a lot of scope for you to combine the production network between the 2 companies, now that it is 1 company really. And therefore, There is there could be more scope for synergy upgrades going forward. Thanks a lot. Absolutely. A lot of stuff there. Let me So number 1 is on the legacy Clarion performance for 2020. And if you look recall that This is a business that went through the pandemic just like the rest of ours. So when you look at 13% EBITDA growth On the surface of it, someone may or you have to put the year in context to really appreciate that. And I go back to the Q2 of the year when EBITDA was flat, The flat was awesome in Q2, right? So and that really was a testament to their presence in healthcare And food and beverage packaging is really 2 key end markets, which is again, I think a growth driver for the full year results. And that is look organic with the exception of how you call organic in the meaning that yes, We did achieve $5,000,000 of synergies this year. A portion of that does go to the legacy Clariant business and we're projecting $35,000,000 coming up in the next year. The next question was around healthcare and specifically applications around catheters and vials. We do have a connection into minimally invasive catheters for certain types of procedures. And we also do have a connection, a pretty significant one into vials and test kits. So when Jamie was presenting The bridge schedule today, as you said, hey, look, there are some things that we did last year that may not repeat. For example, N95 masks, you probably won't see the same level of demand for Those in 'twenty one as you did in 'twenty. However, some of that could be offset by what we're seeing with testing kits and so on. So That's how we've tried to actually present that healthcare dynamic this year. And then lastly, on the synergy targets, I do think there's more opportunity from our operational perspective. Some of these things are a little bit longer term. There's one in particular that we actually really like and it's kind of in development right now. But I think given the timeframe that, that will take place, We're just not sure if that can happen inside the 3 year time window. So for now, we're just trying to really focus on what can we get done from a cost perspective inside 3 years. If this other idea is something we can pull forward, we will and we'll update our targets accordingly. Thanks a lot. Quarter. Absolutely. Thank you, TJ. Thank you. And our next question comes from the line of Vincent Anderson with Stifel. Your line is open. Please go ahead. Yes, thanks. Good morning, everyone. Bob, maybe a tough number to pin down, but when you think about your 6% constant currency growth, Given your confidence, how much of that would you be able to attribute to maybe specific applications or business wins that you have a really good line of sight on versus maybe your assumptions on the broader cycle. Yeah. Again, I got to kind of split the year into 2 halves and say, look right now, I feel like we got a really good read on the Q1 and we're off to a strong start and I think these estimates are conservative in that regard. What's challenging to really sort of project is how does this play out in the second half And in particular, this Q4, which as you know, was really strong for us in 2020 and how that manifests So it's always challenging for us to try to put granular assumptions out there on these But right now with what we're seeing in the first half of the year, if you go and look at the bridge schedule Jamie presented, We feel good about those categories and the applications that are inside of those. We got pretty good line of sight too. Excellent. Thanks. And then maybe can we hit reset really quick on composites? Yes, you said we're still holding around $200,000,000 of sales, obviously, with 2020 being tough. But maybe just revisiting Kind of a rough breakdown between the different businesses that are in there. How many of those are still in the process of being commercialized and maybe a bit of a drag on margins today. And then just finally, what you're excited to be bringing to the market now that we're kind of moving back to a more normal demand environment? Yes. Look, there's about, I'd say $60,000,000 of that to let's say 80 It's really directly related to the 5 gs and fiber optic infrastructure. It didn't come up really at all today. I think is A good grower for us that we put into this composites bucket. And then of course, we've got composites that are directly going into The outdoor space, which was probably another 40 to 60 with the balance being in industrial applications and Some presence in oil and gas exploration. I'm not sure if that works out perfectly to being a third, a third, a third, but Hopefully that helps, gives you some better perspective on the breakdown. By end market, there isn't one of those I mean, they're all really good and very profitable by end market looking at it that way. It's kind of by technology where you see some differences. And If I look at some of the leading edge thermoplastic composite technology, that's place where we still got a significant amount of investment, still A lot of customer acceptance to come to get some new products introduced, but a lot of opportunity For the future. So there's some mix in margin there by technology, but not really by end market. It's helpful. Thank you. Absolutely. Thank you. And this does conclude today's question and answer session. And I would like to turn the conference back over to Bob Patterson for any further remarks. All right. Well, thanks everyone for joining us on the call. We look forward to hopefully seeing many of you in well, maybe not in But on WebEx or otherwise, there's some upcoming conferences along the way, and of course, updating you on our Q1 results when we I'll have those in hand end of April, beginning of May. Take care. Bye for now. Ladies and gentlemen, this does conclude today's program. You may all disconnect. Everyone have a great day.