Okay. Good morning, everyone, and welcome to Avient's 2024 Investor Day. I'm Joe Di Salvo, Vice President, Treasurer and Investor Relations. Investor Days are always exciting. They give all of you an opportunity to hear from our broader leadership team. But today's Investor Day has an added benefit. It was almost exactly a year ago to the day when Dr. Ashish Khandpur became Avient's President and Chief Executive Officer. And today will be the first time that we formally shared our strategy under Ashish's leadership. You're going to hear from the following presenters today. First, Ashish will start off walking through the details of the strategy. Then our business presidents will give an overview and explain how they're deploying the strategy within their respective businesses.
And our two segment presidents include Woon Keat Moh, who leads our Color, Additives and Inks business, and Chris Pederson, who leads our Specialty Engineered Materials business. Chris will also welcome Mike Mosley to the stage. Mike is the general manager of our Advanced Composites business within the Specialty Engineered Materials segment. Following the business presentations, Jamie Beggs, our Chief Financial Officer, will bring it together with a summary on what it means for our long-term financial targets, as well as our capital allocation priorities. Following Jamie's presentation, we'll have a Q&A session. So if you can please hold your questions until that time. Today's event is all about Avient's long-term strategy. It's not intended to cover 2024 expected results or expectations for 2025. We intend to address those topics at our fourth quarter earnings call, which will take place in February of next year.
Before we officially kick things off, I need to remind everyone that we'll be making forward-looking statements and using non-GAAP financial measures. Please refer to the disclaimer for the forward-looking statements and risk factors associated with those, as well as the reconciliations for non-GAAP measures, both of which will be included in our presentation, which will be made available on our website at the conclusion of today's event, and with that, we can get started.
The world is changing in ways we can hardly imagine. Secular trends are opening up new, fast-growing markets worldwide. Housing is in short supply, not only in the U.S., but across the globe. Demand for electrical power is soaring, and it must be reliably transmitted to where it's needed. Healthcare is becoming increasingly personalized and self-administered. Government regulations are tightening. Sustainability is no longer a luxury. It's a necessity, and while these long-term trends are creating new opportunities, they also present challenges. At Avient, we meet these challenges head-on. Our approach: intersecting high-growth markets and secular trends with our technologies to create platforms of scale. We can do this because we have extraordinary technical know-how and a proven track record supporting the world's leading brands. Avient materials are found in thousands of applications in virtually every household and every industry across the globe.
From construction to defense, energy to healthcare, packaging to transportation, we are there. Our composites help to strengthen buildings, fortify electrical grids, enable global connectivity, and save the lives of our soldiers and law enforcement professionals. Our additives provide sustainable alternatives to traditional flame retardants and PFAS technologies. Our colorants and engineered materials make products look better and last longer. Our packaging solutions help to enhance recyclability while reducing weight and energy consumption. Our healthcare materials enable manufacturing of drug delivery and lifesaving devices, making medical care more accessible and more effective. We are an innovator of material solutions to help our customers succeed while enabling a sustainable world. Welcome to the new Avient.
Good morning, and welcome to the Avient Investor Day. As you may know, I joined the company about a year ago after working for nearly three decades for a large materials science company, and I believe that great companies create value by a very strong strategy where different parts of the company come together synergistically to win in the marketplace. They are able to create value by making the whole to be greater than the sum of the parts. They are also able to see, as one of my bosses used to say, both through a microscope and a telescope, understanding the importance of delivering short-term results while also building pipelines for opportunities of growth for a sustained future, and they use disciplined processes to execute every day, delivering results consistently and reliably.
We hope that today what you will hear today as our strategic approach will touch upon all these aspects in some form or another. So let me make it easy for you and give you the punchline upfront. This is an executive summary of the key messages that you'll hear today. Our primary focus is to drive organic top-line growth with margin expansion on the bottom line. Our approach to do that is to intersect secular trends and high-growth markets with our broad portfolio of technologies to create platforms of scale. We have conducted extensive portfolio prioritization and identified growth vectors that will not only catalyze growth in our core, but will also help us build businesses of scale in markets that are supported by secular trends.
Our margin expansion will be driven by volume, productivity, mix, use of digital tools and processes, and a differentiated pipeline of products that is enabled by hybridization of our technologies. To deliver this strategy, we have defined four strategic drivers, which are portfolio prioritization, amplifying innovation, digital for operational excellence and growth, and leadership, talent, and culture for the Avient of the future. But the most important thing that you'll hear today is how this company is evolving to its next phase, which is to become an innovator of material solutions to help our customers succeed while enabling a sustainable world. A quick introduction to the company: last year, we finished at $3.1 billion in sales and with 9,000+ employees worldwide.
We are a large global business, which is very diverse in its portfolio and operates through two business segments of Color, Additives and Inks, or CAI, and Specialty Engineered Materials, or SEM. We serve diverse markets and customers with a rich portfolio of technologies and products. And the company has a great record of delivering healthy cash flow generation, which has helped us pay and grow dividends for 14 years consecutively. Over the last one year, I've spent a lot of time with our customers across the world, talking to them. And I have realized that we have many opportunities in front of us. First, there are plenty of opportunities to grow the core business. I was visiting a customer in Europe. They supply automotive interior carpets to European OEMs.
And due to changes in EU regulations around sustainability and increased use of recycled content in the automotive carpets, our customers were desperate to find solutions to compete with the fast-changing regulatory environment. In short, they needed our help. It is also an opportunity for us to gain share because our local competitors in Europe are not as tech-savvy and are not able to navigate the complex and constantly changing regulations there. Second, we have an opportunity to become even more relevant to our customers by bringing them solutions from across Avient. This is especially true where our expertise of color and functional additives starts to intersect the composites platform in the SEM portfolio.
We can become more, for example, we can become more relevant to our customers in decking business, where we can bring color, UV lightweighting, improved workability, and recyclability from our CAI portfolio, and augment that with the strength and durability of the SEM portfolio through the use of our composite tapes, which will also help reduce the amount of material usage to construct the deck, and then I see opportunities which are emerging from the fast-changing world around us. There are technology, regulatory, geopolitical, and societal trends that are creating high-growth markets for materials science companies like us. If we can intersect these high-growth trends and these secular trends and these high-growth markets with our technology portfolios, we can create businesses of scale in markets that are growing at 10%+ CAGR.
For example, there is a severe housing shortage in the U.S. , and we are seeing enhanced use of composites in building and construction. Our portfolio lends very well to this trend, and we can quickly expand our offering of solutions by building on our current portfolio. Similarly, you must have heard or read how there is a need for increased power generation and distribution led by trends or driven by trends which are high-performance computing, artificial intelligence, and electric mobility. These are causing derivative growth opportunities for Avient, where our current portfolio of electricity distribution is very well established and can be further evolved very rapidly. Moving down to the bottom of the list, the trends of personalized, self-administered healthcare solutions for diabetes, obesity, and sleep apnea make our portfolio of engineered materials, colors, and functional additives extremely exciting and relevant to capitalize on this opportunity.
So we have drafted a very simple two-pronged strategy to capitalize on the opportunities that present to us both in our core and for building businesses in high-growth markets. First and foremost, we want to make sure that we grow our core businesses. And to capitalize the growth in the core, we are enhancing our focus on the customer, bringing them solutions from across Avient to help them overcome their challenges. Start seeing things from their lens and become a partner of choice as they are trying to navigate the evolving and complex world around them. This also means that internally, we have to eliminate our complexity of portfolios, our go-to-market models, and organizational structures so that we can become easier to do business with.
We have prioritized growth vectors to capitalize on the growth in the core and are amplifying innovation in those prioritized areas to create pipelines of products and platforms and resourcing them both on the commercialization side and the innovation side. We will be using digital tools and processes for driving growth and operational excellence in the company, and we are executing through disciplined processes to gain share and penetrate geographically to expand our customer base. All this will help us grow our core businesses above macro because of taking winning share and all the different things that I just mentioned. Augmenting the growth in the core will be the second prong of our strategy, which is to play bigger and bolder in high-growth markets and portfolios that are supported by secular trends. For this, we have prioritized company-level growth vectors, which were chosen using a four-point selection criteria.
First, they have to be in markets that are supported by secular trends and are growing at least 10% + CAGR. Second, we have technology in-house that can be used as is or can be hybridized or combined to create differentiated products and solutions. Third, we need access to the customer to take these products and solutions to those markets. And fourth, these businesses have to scale rapidly so that we create meaningful businesses for Avient over the midterm. And finally, we have an opportunity in some cases to move up the value chain, get closer to the end-user customer, which will not only enhance our addressable market size, but will also improve our ability to innovate faster and improve our margins. So you will hear from our business leaders today how they are operationalizing this two-pronged strategy in their respective businesses.
You will hear what they are doing differently to capitalize the core and build new platforms of scale in their respective business units. You will hear from both Moh and Chris Pederson how they are winning in the core in the healthcare markets by working closely with customers that are driving the trends there. You will hear from Moh how his core portfolio of functional additives is creating growth opportunities lightweighting and improved workability of composites. Chris will talk about how he's growing the core composites business in defense and law enforcement as he's saving the lives of soldiers and policemen across the world, and on the other side of building new platforms, you'll hear from Moh how the demand for PFAS-free materials is creating a big growth opportunity for us.
And you will hear from Mike Mosley, who's building our Advanced Composites business in building and construction and energy markets, exemplifying how he's intersecting market trends in those areas. So to summarize our strategy, we have a two-pronged approach: capitalize the core and build new platforms of scale. Our core will grow above macro, driven by share wins and accelerated growth in certain portfolios for which we have identified the growth vectors. And on the other side, our portfolios in high-growth markets will grow much faster than the core, which will help us build businesses of scale rapidly because these are in markets by definition which are growing faster than 10% + CAGR. And to drive this strategy, we are doing several things. We are prioritizing our programs, portfolios, and resources. We are managing our growth vectors differently.
When you are building businesses, you do things differently versus when you are driving core. And so we are making sure that we are putting the right talent, the right organizational structures, and the right processes to govern these growth vectors. We are creating space for our investments by reallocating resources from other parts of the portfolios and also reducing our operating costs. And we are getting more strategic about our front-end and back-end structures so that we can innovate for and serve our customers effectively and efficiently. Which really brings me down to what our strategic drivers are. All those things that I mentioned come together to define our four strategic drivers, which will help us execute our strategy day-to-day in the company.
Portfolio prioritization will help us articulate what our growth portfolios are and also define which are the businesses where we need to drive more efficiencies so that we can create space for our investment in those growth portfolios, amplifying innovation in those growth areas and building differentiated product pipelines of scale. That's an important part for us and a fundamental part of our strategic approach, and then use of digital tools and processes to drive efficiencies and growth in the company, and finally, and probably the most important of all, is the leadership, talent, and culture for the Avient of the future. Leadership and talent that is most relevant to the size and kind of company that we want to be in the future, and also culture so that we can act as a company of 9,000+ minds harnessing the power of collaboration and building on each other's ideas.
So let me go over these things, all the strategic drivers one by one, and also point out what we are doing in each of these things. On portfolio prioritization, we have mapped the entire set of company portfolios on the classic lifecycle curve. This has helped us categorize our product portfolios in different buckets. It has prioritized for us which businesses we can grow faster by feeding them with some investments, which businesses we need to go after for more profitability, and which businesses we can go after for both growth and profitability. It has also helped us identify growth vectors, which will help us capitalize the growth in the core and build businesses of scale in fast-growth markets because we can play bigger and bolder there at a company level.
As a result, we are making several company-level bets in select portfolios to rapidly build businesses of scale there. Avient has ample opportunity to create value by amplifying and further strengthening our innovation muscle. Over time, the company has acquired a broad portfolio of technologies both in the CAI and SEM businesses. Our big opportunity, and I would call it low-hanging, easy opportunity, is to leverage those technologies from one portfolio to another. For example, our expertise in UV stabilization of plastics in the CAI portfolio can be easily leveraged to stabilize composites in the SEM portfolio. Additionally, these individual technologies can be further combined or hybridized to create unique and differentiated products. Chris Pederson will talk about this point in his presentation.
Finally, we have consolidated the backend of product innovation from across the company in our prioritized areas of growth so that we can create capability and capacity in R&D that is much needed to build and commercialize platforms of scale. Let me give you an example on how we are building growth platforms in high-growth areas or high-growth markets in composites and building and construction. If you follow the top row of the three time horizons of the existing, evolving, and emerging portfolio of Avient in this space, you can see on the extreme left that we have a product in thermoplastic sandwich panels, which is used in the building and construction industry. Today, our customer takes our panel and laminates another board to it to make the panel fire retardant, the whole assembly fire retardant, so that it can pass the interior use requirements.
If you're trying to build a wall out of this material, it has to pass the interior use requirements. Our teams have innovated a new material set by hybridizing multiple technologies from across Avient to create a panel that is self-flame-retardant and actually becomes a ceramic when exposed to flames, thus easily passing the stringent and very demanding fire testing requirements of that application. This eliminates the need for the customer to put another board on our panel, saving them time and money. And it also gives an opportunity for us to improve our revenue and margins by moving up the value chain through our power of innovation. Similar to amplifying innovation, digital can create a lot of value for Avient by driving operational efficiencies, by improving our customer responsiveness, and by enabling faster innovation. Our approach to digital is really use of applied projects.
We are applying real-time practical projects on the job, essentially, in high-value creation projects so that we can see what we can get from digital on driving our operational excellence or growth. In the near term, our focus areas in this space are building relevant expertise in the organization, which we absolutely have to do, driving manufacturing efficiency and productivity through the use of increased automation and reduced human interference, increasing our competitive advantage in our color business by faster color matching capability using digital, and to improve our commercialization effectiveness by driving more customized and user-friendly marketing using digital tools. Those are our areas of focus. So let me take a minute and talk about how we have evolved as a company over time and what our next phase of evolution is going to be.
We have evolved from a commodity portfolio and compounder to a specialty formulator of materials enabled by a bunch of acquisitions and divestitures. This has helped us to increase our Adjusted EBITDA margin from about 5% in 2006 to 16% in 2023. In our next journey of evolution, we will become the innovator of material solutions to help our customers succeed while enabling a sustainable world.
What this means is that we will evolve from just being a specialty formulator to providing solutions from across Avient to help our customers achieve whatever they are trying to accomplish, that our teams have a mindset of building platforms and pipelines of products for sustained growth, and that we are making or building these platforms in markets that are in high-growth market spaces or areas, and also driving a largely organic strategy, which we can complement with M&A over time as and if needed. Now, over time, the company has built a bunch of strengths which will become foundational as we evolve in our next phase. These strengths are our unwavering customer focus, our diverse technology portfolio, our financial rigor and prudence, and our culture of safety and sustainability.
You now know our new purpose is to become an innovator of material solutions to help our customers succeed while enabling a sustainable world. This purpose will be achieved by our strategy of intersecting high-growth markets and secular trends with our technologies to create product platforms of scale both in the core and in high-growth markets that are growing at 10%+ CAGR. And this strategy will be operationalized day-to-day, building upon our foundational strength through our four strategic drivers of portfolio prioritization, amplify innovation, digital for operational excellence and growth, and leadership, talent, and culture for the Avient of the future. We believe that executing this strategy and framework will create top-line growth and bottom-line margin expansion for a sustained period of time for the company. We have already started redesigning our organizations and incentive plans to drive this strategy.
We are strengthening our leadership positions in several areas that we felt needed to be strengthened. We have reorganized our color or CAI organization under a single global leadership and eliminated structure and complexity to serve our customers more effectively, especially in Europe. We have instituted disciplined sales processes and a play-to-win mentality in the team there. In the SEM businesses, we have resourced upfront dedicated organizations and focused folks with expertise which are around our prioritized growth vectors. In R&D, we have consolidated the backend in our prioritized areas of growth to create scale as well as capacity, capability to create platforms. We have hired a new CTO who's known for innovation and understands how to build businesses working closely with business teams.
On the other side, on the business side, we have augmented our strength both in commercial excellence and in new building business capabilities by creating a new position of new business development and marketing excellence for which we have already hired a new Senior Vice President who's sitting. By the way, both the CTO and the SVP of marketing excellence are here, and Jamie will introduce them more, but just so that you know, they are sitting right in this room. Then on our incentive plans, which will be rolled out January 1, 2025, that has been approved by our board already. The incentive plans directly link to our strategy and our company's goal of driving the top-line and bottom-line growth. It's directly linking to that so that we get the results that we want.
As we have started our journey, we have made sure that we have put a very strong and committed team that's leading the change. We have augmented our existing Avient talent and leadership and added to them folks that are strong and proven leaders in their areas that they are leading now. They are all hires from outside, and we have complemented our internal talent with talent from outside. This team works like one cohesive unit and understands the importance of driving company-level agenda and priorities. It also understands the importance of driving short-term results while building capabilities and pipelines for the medium and longer term. With that, I will give it to Moh, who runs our global CAI business, and I'll be back here for any questions you have at the end of the presentations. Thank you.
Thank you, Ashish. Good morning, everyone.
Great to see all of you, and I see some familiar faces in the room as well. The last time I presented here in New York, I was sharing about my experience on relocating from Asia to Cleveland, and at that time, I was cautiously excited about going through my first winter in Cleveland. Well, I'm happy to report back. I went through three winters going through my fourth one, and I like it, and as you can see, we have some new members that are joining our leadership team, and I'm pretty sure they are cautiously excited about going through their first winter in Cleveland as well, but one thing for sure, I'm really excited to be working with them and looking forward to it. Well, I'm also very excited today to share with you our new strategic approach for Color, Additives and Inks business.
Now, I spent my entire career in specialty chemicals and the material space, and over 20 years of that was focused specifically on color. Now, I learned during one of my first jobs selling dyestuffs and pigments that color matters. Now, color matters to our customers because it matters to the consumers. Now, if you think about it, color actually plays an important role in our life. For sure, color definitely matters for Avient as well because it's part of our core business and our future growth plans. Now, as a kid growing up, one of my earliest memories was learning my colors, even before alphabets and numbers. Hope you'll share the same memories. Color is definitely an important part. Now, for our consumer, sorry, even as kids then, right?
And as adults now, you still get asked the same question, "What's your favorite color?" And why is that? Because people are passionate about color. It helps to define things. It differentiates. And color creates emotion. And for our consumer brands, for consumer brands, which is also our customers, color matters to them. Why? Because it builds loyalty. Now, are you a Home Depot orange or are you a Lowe's blue? Are you a Coca-Cola red or Pepsi blue? Or maybe perhaps an A&W Root Beer brown, right? Those are established brand colors. Now, for many of our customers, the color that matters to them changes constantly. And that's because of the seasonality and trends that they go through. And it does require us to not only help them to meet their color requirements now, but also to forecast for the future. And that really makes color fun and challenging.
And that's also a reason why I love this business. And in Avient, we are actually pretty good at it as well. In fact, we are the leading color solutions provider in the industry. Now, we are global, yet nimble and innovative. If you are a global OEM that's looking for color consistency across the world, we are your provider. And if you are a niche or regional player, we are also your provider. Now, our color solutions help to differentiate and enhance the aesthetic appeal of our customers and products. And that's not the only thing we do. A big and growing part of what we do is actually helping our customers' products with enhanced functional properties. And we also make plastics more sustainable. And that's through our solutions that help increase recyclability and lightweighting.
We also have solutions that help safeguard and preserve package contents and extending the product shelf life. Now, we do have the capabilities and know-how to serve every end market, and we do that. Our two largest end markets are in packaging and consumer. Now, that really ties back to my earlier comment about how consumers are so passionate about color. Now, I also want to point out healthcare here. Just healthcare is an end market that has been a focus and will continue to be a focus for us as we are seeing a lot of secular trends that are drawing growth in this market, which I'll be sharing a little bit more later on. In terms of geographic standpoint, our largest two geographies are the U.S., Canada, and EMEA, which is Europe, the Middle East, and Africa. Those two regions combine more than 70% of our sales. We are also seeing excellent growth opportunities in our emerging regions of Latin America and Asia. Now, we know color matters to our customers, but what are we doing to help our customers? What are customers looking for? It is about service and quality, and it's about speed and consistency, which is also our value proposition. We are really good at it because we have a team that has the knowledge, skills, and experience to help our customers. Not only that, we also have color design centers that actually help to accelerate the color design process for our customers and brand owners. Now, we also have a manufacturing footprint that allows us to serve customers locally. That's important. It's our Avient global reach with a local touch offering.
This is critical for customers across, right? Our 79 manufacturing sites are able to provide quick delivery and ease of logistics. We are also able to provide supply chain security and flexibility. And this is really critical, especially in the market environment that we are in right now, which is really dynamic and ever-changing. Now, we also have 550 commercial resources, and that includes our technical service team as well. That's growing, collaborating, and providing technical support to our customers. While at the same time, they are also prospecting for new ones to support our organic growth plans. Additives represent our biggest opportunity in our segment. And this is really driven from the need for solutions that enable sustainability, especially in the packaging end market, where almost everyone is frantically pursuing recycling requirements, trying to meet the requirements by the regulators and by consumers as well.
And we also have a broad portfolio of additive solutions that's continuing to grow. And as we continue to innovate to support our customers, helps to continue to differentiate their products. Now, let's look at our portfolio within our segment. First, on colorants, we are unbiased to the technology or form. We actually have solid and liquid, and we offer both. Now, this allows us to actually be able to recommend and design our color formulations based on the technology that best suits our customer processes, which allows the best possible outcome. And our customers value that. Our additives portfolio enhances functional properties of polymers in various areas. And the list is long. So just a few examples. It helps to increase recyclability, enhance flame retardancy, improve barrier properties, and many more. Now, we also offer screen printing inks in water-based, plastic-based, and bio-based as well.
It depends on the customer's preference. Now, this is used in T-shirt, textile, and sports jersey printing. Here, I would also want to add that after 10 years of using the representative blue, maize and blue jersey on our slides, we have made a change. Now, Jamie might have an influence on the selection of the Texas Longhorns jersey here. On our fourth category, we have the specialty coatings and dispersions. Now, this is our vinyl formulations that are available in plastic-based and powder form. And of course, our silicone dispersions as well. Now, these are used in aircraft interiors, outdoor furniture, playgrounds, and many silicone products. Now, using that as a backdrop of our business, I wanted to move on to how are we going to execute this with our new strategy. First, let me start with catalyzing the core.
Now, earlier this year, I was given the additional responsibility of Europe, the Middle East, and Africa region. And during my initial visit to the sites, talking to our team, talking to customers, one thing that was apparent, customers are expecting more from us, especially from a speed standpoint. They want shorter lead time, and they want us to be more responsive. And what we have done, we have streamlined our organization, integrated businesses, which is to enable us to be more nimble and to be more responsive to not only our customer needs, but also the market demand. And we have been able to do that, which allows us, at the end of the day, to enable customers easier for customers to do business with us. And part of us growing organically this year is really because due to the fact that we are winning business.
That's through our customized growth tactics that are tailored across for every region. For example, in the U.S., Canada, we have put more focus and went deeper into our global key accounts. In Europe, we have enhanced our customer focus and made it easier to go to the market strategy. In Asia and Latin America, we have actually expanded our customer base by additional local account penetration. Now, you heard about digital being our strategic driver. We have increased our usage of digital tools to really enhance our service level to our customers. One great example here is the usage of our award-winning PCR color prediction tool, which really helps our customers to quickly select the best color for their post-consumer resin package that they need to work with. Now, in addition to catalyzing the core, we'll be building new platforms of scale.
For CAI, this will be a focus on platforms that have high growth opportunity. I'll be sharing a little bit later on one of it, which Ashish mentioned as well, which is on the non-PFAS functional additive. Using this slide earlier from Ashish is about how we are intersecting our secular trends and high-growth markets with our technologies. For CAI, there's a few trends here as well that I wanted to point out. Now, regulatory trends are limiting the use of halogenated flame retardants and PFAS, which really drives the need for alternative materials. Sustainability efforts are driving the reduction of greenhouse gas emissions, which also creates opportunity lightweighting. the increased usage of personalized self-administered healthcare solutions is driving the increase for drug delivery devices and home care medical equipment.
Now, our portfolio is able to support the secular trends and the growth in the market. But let me go a little bit deeper into some of that. First, I wanted to touch on healthcare. Now, you heard from Ashish that healthcare is a focus for both CAI and SEM. Chris will be sharing a little bit later on in terms of how SEM is focusing on healthcare. Now, for CAI, I just wanted to point out drug delivery devices, which are auto injector pens, syringes, and inhalers. Now, this market is expected to grow at a CAGR of above 10%. And the demand is really driven by the need for diabetes and weight loss drugs. Now, investments are being poured into this market by the pharmaceutical giants that operate in this segment. There are significant opportunities here. Now, the customers are very risk averse.
They require strict regulatory compliance, and they need reliable supply and global reach. Avient checks all the boxes. Our quality management systems and operational excellence provide them the confidence that we are able to manage this effectively. In fact, we actually added on ISO 13485 manufacturing sites across the last few years. Now, ISO 13485 is the quality management system for manufacturing of medical equipment. We actually, right now, have six ISO 13485 accredited sites across our network and across all our major regions, which is very critical in terms of supporting the growth that we have in this market. Now, our plan to win here is not just designed for drug delivery devices. It's also for other devices within the healthcare segment. That includes in vitro diagnostic devices, remote monitoring devices, packaging, and even medical equipment.
Next, I want to talk lightweighting, which is part of catalyzing the core. lightweighting is important from an economical, environmental, and functional benefit. Lightweight products do have benefits if you think about it. It requires less energy for production and transportation, which reduces overall operational costs. And it also reduces greenhouse gas emissions, which ties well with our circular economy goal of minimizing waste and resources. Now, when you think lightweighting, it's not just about composites replacing huge metal parts, which actually we do have that. And I'm sure Mike and Chris are more than happy to share with you what we have from a composite standpoint. But for CAI, our additives portfolio does have a lot of additives that provide lightweighting benefits. And one example is our chemical foaming agent. It's an additive that actually creates cells and voids in the polymer structure.
It is used widely in the building and construction space. The end application that's used in is wood- plastic decking, floor, and ceiling trims. If you think about it, it not only reduces material usage, lightweighting allows easier transportation. From a functional standpoint, it actually helps with easy installation. Putting a nail or a screw through the panel is so much easier versus if it was a solid form. Opportunities are not just only in building and construction. In transportation, for example, automotive OEMs, regardless if it's an electric vehicle or internal combustion engine car, they are all in a quest for fuel efficiency. lightweighting opportunities right there. It doesn't stop there. There's also opportunities in bulky consumer goods and even PET bottles.
That really helps our customers to meet their sustainability goals and also for consumers to do their part for a better planet. Next, I want to touch on how we are building new platforms of scale. Now, this is related to a circular trend, PFAS. Now, PFAS is gaining a lot of attention recently because it's being phased out or being regulated out of applications, and especially applications that have contact with food. Now, PFAS is commonly used in products so that it meets performance standards of resisting stain, oil, water. And it's also used in processing aids that are used in the manufacturing of flexible film, artificial turf. And the reason why processing aids are used is really to help with efficiency and reduce melt fracture. Now, the challenge for the industry is to have the same performance while complying with PFAS regulation.
Now, this is an exciting challenge that we are happy to help, and the opportunities are significant. Now, I also want to point out that we are already serving customers that are faced with the PFAS challenge. That puts us in a really good situation because we have established relationships and trust to be able to collaborate with those customers to develop and innovate new alternatives. Now, we can take those successes and build platforms of scale. Now, we have actually success in replacing PFAS in certain applications, and we are moving on to evolving challenges. We are committed, and we have a dedicated R&D team that's working on this that continues to innovate and develop new alternatives. Now, this trend is not going to stop. It's going to move, and we will see new needs as new challenges emerge.
Now, I spoke about how we are going to execute on our strategy and the strategic drivers for CAI. I thought it would be a good time to shift over on how this would be reflected in our financials. Now, in recent years, we have shown excellent discipline, both in years where we saw challenges in demand and where we have seen growth like the current one. Now, we have benefited from synergies from our prior acquisition, and we have maintained strong pricing discipline during inflationary and deflationary periods. Now, first, the strategic drivers are actually going to help us to expand our margins even further. First, we are going to increase our operating leverage moving forward. And we are going to, we do not need large investment in capital or SG&A.
Rather, we are going to do it through growing our organic top line and also prioritizing our existing resources. And secondly, strategic portfolio prioritization is going to help improve our product mix, and that is going to expand our gross margin. And it's going to be targeted investments in high-growth platforms like the functional additives and healthcare. Lastly, we are going to enhance our productivity. And we are going to leverage on our proven track record of our operational discipline and also taking it even further with our Lean Six Sigma culture and digital tools to streamline our operations so that we are able to increase our efficiencies. Now, taking all this together in combination with our foundational strength, we will expand our margin by 350 basis points.
In summary, as my team and I consider the four new strategic drivers, it has already triggered a lot of exciting activity on how we would execute this within our segment. I mentioned about catalyzing the core and building new platforms of scale. That's portfolio prioritization, and it's already underway. We have already accelerated the development and commercialization of our functional additives. Now, you heard me mention about how we have been able to win this year. That's really through customized growth tactics that are tailored for each of the regions, and we are going to double down on that, and our sales team, our commercial team, will be trained accordingly.
On the digital front, we will be deploying systems and tools to help to speed up our development and enhance our service level to our customers, which will translate to top-line growth and using it within our operations to improve our operation efficiency, expanding our operating margins. From an organization standpoint, we have streamlined our organization with fewer business units. That's really to reduce internal complexity, making it easier for customers to do business with us. Now, that goes for leadership as well. As mentioned earlier, I now lead the global segment, and I'm honored to have been given the opportunity to do it. I'm very passionate about helping our customers, and I see a lot of opportunities for us to do even more. In alignment with our new strategy, I'm really excited in terms of our growth prospect and success with this new strategy.
Thank you for your time and attention. I would like to now pass it on to Chris Pederson to share the strategy overview of S pecialty E ngineered Materials. Thank you.
Well, thank you, Moh. And good morning, everybody. I certainly appreciate the opportunity to talk about our SEM business. But before I do, I want to share a little bit about my own story. And it's a story that started 33 years ago. It's hard to believe, but 33 years ago, as a newly graduated engineer and with a growing knowledge of advanced materials. And my first job right out of college was working on some of the most advanced military airplanes in the world. Pretty intimidating environment to start your career in. And I was given a lot more responsibility than I probably deserved at that time. But of course, you had to learn a lot.
It had a permanent impact on how I view the value that is created when you combine a real deep understanding of your customer and the needs of the application, and you marry that with a real deep understanding of the possibility of material science. At that point, I had to really rely on the supply base because I didn't know enough to solve these problems and really had to leverage the knowledge that they had and the capability that they had to really solve these problems. It had a permanent impact on how I now view how material suppliers can create real value. It is by understanding your customer, but it's by also understanding the possibilities of your portfolio in total and how you can combine technologies to solve problems. It is the sole reason I joined Avient six years ago.
I believed in the technology capability. I believed in the work that we were doing to advance the portfolio. And I believed in the path forward. And I believed in the ability to create a stronger engineered materials business, which we have. And I'm proud to share that with you today. So as a high-level summary, SEM is a business that really looks to take advanced materials and solve difficult problems for our customers across the markets that I show here. Last year, we were about $1.1 billion in sales, split among the three regions, but really for the vast majority of it, it's in the U.S. and in Europe. And our portfolio is now roughly evenly split between our legacy portfolio of engineered materials and composites. That wasn't always the case. When I joined in 2018, composites made up about 15% of our portfolio.
Through a purposeful strategy of M&A and organic growth, that's now roughly 60%. That allows us to take advantage of the benefits that come from combining fibers and polymers that deliver unique performance properties. But it's not all about composites for SEM. Our engineered materials, our legacy engineered materials portfolio, still has a lot of vitality. And here, we also combine multiple materials together, different polymer systems, functional additives with polymers, reinforcing fillers to drive performance that all allow us to give specific attributes that bring value to our customers. If they want a specific balance of strength and stiffness or flexibility, we understand the material science to give them a solution. We can also design materials that prevent bad things from happening, resistance to fire, protection from the harmful effects of UV radiation.
And we can design materials that amplify other positive effects, increase conductivity, or add attributes to the material that help our customers make their processes more efficient. And they go into critical applications like healthcare devices or ultra-pure materials that are used in the manufacture of high-performance semiconductors. And we're going to share a few examples with you later in the presentation. Now, in composites, we also combine multiple materials that give real value to our customers. And most of the time, it's about weight, but it's also about driving manufacturing efficiency in their processes. And it is this synergistic benefit of combining a formulated polymer and a reinforcing fiber, and that's typically glass or carbon or, in our case, Dyneema. And by providing a number of different product forms, engineered fibers, tapes, fabrics, panels, extruded components, we can address a number of customer needs across multiple markets.
Applications like in the electrical infrastructure where our pultruded composite rods go into making electrical insulators or in defense where our Dyneema products save lives going into high-performance ballistic vests or in building construction where our tapes and panels provide lightweight and efficiency for our customers. Now, we're going to share a few examples in these areas with you here in a few slides, but what you'll hear and what you'll see in those examples is an approach that we're taking to leverage our entire portfolio. In a sense, taking technologies from one part of our business for our legacy portfolio, combining that with composites to deliver even more differentiated value, in a sense, hybridizing our technology, and so as an example, I'll walk through this. Two examples. One where we've for years supplied panels into the marine environment to really act as strength members in the hull.
We've also talked about the insulators that we supply into, and now we've replicated those technologies into new markets and applications. Similar panel technology now goes into building and construction. The same pultrusion technology we use for rods is now being used to manufacture extremely lightweight, durable composite poles. The same can be said about our legacy portfolio. For years, we've supplied materials that are UV-resistant, fire-retardant, those technologies that we've advanced and have advanced and created the next generation of those technologies, but now we're combining, essentially hybridizing, building those same fire-retardant or UV capabilities into components like building and construction panels, which, as Ashish pointed out, really eliminates steps in our customers' processes and saves cost and weight, and the same can be said in the utility space, building those same characteristics into components that we already make, providing our customers even more differentiated value.
This is an approach that we're using across our portfolio, an approach to create even more differentiated technology for our customers. When you can combine that with secular trends, it creates a real growth engine for the company. Now, Ashish shared this chart, and all of these are certainly important for SEM as well, but there are a few that are of particular importance and are relevant to the examples that we're going to share with you today. The shortage of housing is driving an openness and a rethink of how you design and build homes, including new materials, and opens up opportunities for our thermoplastic panels. Increased demand for power generation is driving increased demand for the types of products that we already supply and new products that we will supply into the energy sector. Heightened geopolitical tensions certainly have driven an increase in defense spending.
This drives an increase in military articles, including ballistic vests, which utilize our high-performance materials. And lastly, the increase in personalized and self-administered healthcare solutions drives demand for a number of engineered materials in various devices and components. And this is an area that I'd like to start, as in healthcare, with the first example. So healthcare for us is a very key market. And with the secular trends that we just talked about, it is expected to grow well above GDP for the foreseeable future. And in fact, it's estimated there are 500 million people in the world today that live with diabetes that could benefit from being able to monitor their own glucose levels with continuous glucose monitoring devices. It's also estimated there's 25 million adults in the U.S. alone that suffer from sleep apnea that can benefit from respiratory care devices like CPAP machines.
And our materials go into all these applications. And customers are pretty demanding in this space. They demand a certain level of performance characteristics, durability, strength, stiffness, purity. But they also demand it from a source they can rely on, one that has the quality systems, the capability, and the know-how to ensure that they're going to get what they need for their products. And that's Avient. We have those capabilities. It's part of what we do every day that builds the confidence in what they need because what they do is important. They're making products that improve people's lives. And in some cases, they save people's lives.
In other parts of our portfolio, we help save lives, which is a second example that I want to show, which is in composite materials for defense and law enforcement, where our Dyneema products go into producing extremely high-performance, extremely lightweight ballistic protection, vests, inserts, helmets, shields, and with the increase in NATO countries, certainly defense spending is up there, but it's up around the world, and Europe has fundamentally changed their security outlook, and they're fundamentally changing their outlook on defense spending, and this is a market that demands lightweight, right? Every pound a soldier or law enforcement or police officer is asked to carry is pretty critical, certainly critical to them, right, so it's critical to us as well, and we continue to innovate in this space. This is a space where we make our own polymer system, which we can design and tailor.
We can tailor our fiber manufacturing process. We can tailor and advance the tape and fabric manufacturing processes to meet what our customers really need to drive performance, and we do. We innovate in this space. In fact, last year, we launched our latest generation of Dyneema products, which allow our customers to save up to 20% versus the next highest performance products on the market. That's a big deal, right, but we're not just focused on vests. We're also expanding the number of applications that we're focused on. Even though vests have been the vast majority of our sales in this space, there's an increased demand in doing the same thing in other applications, increased demand in high-performance and very lightweight helmets that allow soldiers in the field to meet much more increasing threats. There's also an increase in demand for protecting the top side of military vehicles.
With the advent of drone warfare, no longer are you just focused on protecting the bottom side of the vehicle, but now the top side. And when you start adding weight to the top side of a vehicle because of center of gravity effects, every single pound is absolutely critical. And so where Dyneema's superior strength and weight comes into play is of real value to our customer. So strength and weight, that's a common theme. It's a common theme you've heard me say. It's a common theme we hear from our customers. They demand it. We supply it. And it's a common theme for composites in general. And so the next couple of examples I'm going to share with you or will share with you is also in the composite space. But to share those with you, I'm going to introduce our next speaker, and that's Mike Mosley.
Mike is the General Manager for our Advanced Composites business. Mike joined us in 2018, same year I did. And Mike has over 30+ years of unique experience in industry. He's going to share with you some exciting opportunities we have in the energy and building and construction market. Mike.
Thank you, Chris, and good morning. My name is Mike Mosley. I lead our Advanced Composites group within Avient. And like Chris said, I've been doing this for a long time. And what I've been doing during the duration of my career, I've used composites. I've produced composites and applied them in the field. And what I find most interesting about composites is its flexibility, its creativity, and its adaptability. In the Marine Corps, which is my foundation, we are taught to overcome, improvise, and adapt. That's exactly what you can do with composites.
You can take resin, whether it be thermoplastic or thermoset resin, and you can apply fiber to it, whether it be glass, carbon, et cetera. And we can consolidate that to make nearly anything that is only limited by our creativity and, of course, physics. But how is that used in the industry? What does that mean to the industry? And it's about performance. As a pilot, performance is everything. And what is performance? It's lighter, faster, stronger. Fast forward to my professional career, our customers are asking for lighter, faster, stronger. In all industries we support, whether it be industrial, whether it be transportation, marine, building and construction, electrical, outdoor high performance, and even healthcare, lighter, faster, stronger. But what's unique about Avient is our synergy with our other business units, working with our engineered materials and our color and additives group to create one more aspect, and that's functionality.
Functionality that gives us impact resistance, UV resistance, and now fire retardancy. That's going to be a big part of what we do. But we can also customize what we're doing for aesthetics, acoustics, insulative properties, water resistance, and obviously color. So what does that mean for our customers? It means that we can support them with being lighter, faster, stronger, and now more functional than ever. Lighter in that we compete with traditional materials in the composite space, wood, steel, and concrete. We're obviously lighter than those materials. It makes it easy of handling, shipping, et cetera. But we're also faster because with the products that we make go into our customers' products that really accelerate their productivity. And that makes them faster, whether it be installing products or using it in their system. But stronger is another key aspect, and that is that we can provide strength.
We can design reinforced composites to meet certain criteria and performance. That's obviously going to increase durability and lifespan of our products. Couple that with functionality. We're really set up to win in this space. So I'm going to talk about two very specific areas that we're going to grow, markets that are growing that we believe that we can build platforms of scale. And that's going to be in building and construction and electrical and infrastructure. Two fast-growing markets with a lot of challenges with labor and other things. So we're going to talk about. And we're poised to really serve these markets. We have the talent, the expertise, the capability, and the scalability to meet this demand. We all know that housing is in high demand. You already heard in previous presentations where we're already doing composite decking. We're doing garage doors.
We're doing ballistic panels, all going into the building and construction space. But what we're seeing now as a growth area, and we're well-positioned to scale and to compete and to provide for our customers, is working with them to provide custom wall systems, roofs, floors, et cetera, for modular and prefabricated construction. But what we're going to win in this space is our ability to scale, our ability to produce, our manufacturing efficiencies, and our velocities. Couple that with our functionality of impact resistance, scalability, and fire retardancy, we're going to win. So having said that, this is a new, exciting growth opportunity for us. We're seeing a lot of opportunity. We're already working in that space. You can see ideas where panels are being produced in a factory, prefabricated, and installed into a high-rise condominium. And these aren't just cheap units.
These are very high-end apartment condominiums and single-family homes and multifamily homes. It's really going to change the way that building construction is being done. We're going to move from being construction on-site to being assembled on-site, where a lot of the factory is going to be producing those panels and shipping into a site. So that reduces the demand for very skilled labor, which we're struggling with as an industry. Moreover, we're going to build more platforms of scale with composites for electrical and energy. More specifically, it's about electrical infrastructure, the transmission and distribution of power. We all know that power is in demand, obviously driven by EV, AI, data collection, and everything above. But the demand is the challenge or the issue is getting the power from the sources generated, whether it be wind, solar, oil and gas, nuclear, it doesn't matter.
It's got to be transmitted to the outlet that you're plugged into, and that's the challenge. Obviously, with that demand, we're expanding our infrastructure, but the existing infrastructure is aging. We know that about half the utility poles in the market are greater than 50 years old, and why does that matter? Because there's going to be replacement of existing infrastructure. They're going to be expanding infrastructure, and we're well-positioned for that. We're already currently leaders in this space that we provide composite insulator rods. Everything that sits on a pole that the power line sits on will sit on a product that's highly likely made by us, so we're going to benefit from this growth, but it's really going to get supercharged because of the demand for energy, and the reason it's going to get supercharged is the government's obviously providing incentive for this as well.
There's legislation passed with the Inflation Reduction Act and the Infrastructure Bill. Both have $65 billion in each bill set aside to expand our infrastructure and to harden our grid. We're well-positioned to capitalize on this opportunity, and it's going to continue to grow. This is a platform of scale for us because we can respond to it. We're already positioned. We already know the customers, and we can provide all the products associated with this infrastructure thing. But we can also differentiate with our ability to scale and produce at high rates. So in summary, what I'd like for you to remember is we talked about lighter, faster, stronger, and now functional. That's going to help us capitalize and help us win in this space. Couple that with our ability to produce and our ability to scale.
We're going to really grow in this space, and we're going to see a lot of volume and success here. So with that said, I'll turn it back over to Chris. Thank you.
So those are just a few of the great examples of where we're putting our focus and where we're prioritizing our resources and investments. And it's healthcare, defense, composites, composites for building and construction, and for energy infrastructure. Each one of these is driven by secular trends that are driving growth. And where we have differentiated technology, where we have access to key customers, and where we can grow both the core and create platforms of scale. And we win in these markets. And we win because we have a competitive advantage. And it comes from these elements. Breadth and depth of our portfolio.
There's nobody in the industry that has the breadth and depth of the portfolio that we have. We provide formulated thermoplastics, advanced elastomers, and a whole slew in a broad range of composite applications and materials and material forms, but we also have a global footprint, but that's with a local understanding of our customer, but for global OEMs, we can service them worldwide as well, and we have an organization that has a strong expertise in material science and in manufacturing, and quite frankly, the interaction between those two, which is important as well, and we do so with a confidence that goes to our customers because of our quality systems, our understanding of regulatory issues, and, as we discussed in last year's Sustainability Day, the ability to provide products that make their products more sustainable.
And so this competitive advantage, along with the strategy that we've laid out, really is going to be what's going to enable us to sustainably drive long-term growth. But it's not just about top-line growth. It also is about margin expansion, and we're focused here as well. And it really comes from three elements. One is operating leverage. As we see organic volume growth, as we've seen organic volume growth, we'll get leverage on our fixed costs, including SG&A efficiencies as we prioritize our resources towards high-growth areas. Mixed improvement as well. As we see growth from especially the examples we just showed, they're in higher-margin platforms such as composites and healthcare. And third is productivity. We're focused on driving yield efficiency or improvements across our site, especially in our legacy sites, but also harmonizing raw materials globally and optimizing our supply chain.
So in summary, I hope you get a flavor for what we're focused on in the SEM businesses and the opportunities that we have in front of us. And I want to just leave you really with these four things that are our primary area of focus within the strategic drivers. The first is catalyzing the core, getting the most out of what we already have, leveraging our broad technology portfolio, our applications expertise, our footprint, our capabilities to drive growth in our core. And two, certainly focused on driving growth in composites, building new platforms of scale with differentiated technology. But we're also becoming more efficient, reallocating resources to the highest growth markets and opportunities and driving our cost down. Whether that's in manufacturing or raw materials or supply chain, we're really focused on becoming more efficient.
So I want to leave you with one last thought: the future is bright for SEM. And as a career guy in this space, I've seen a proliferation of advancements over three decades. And I can tell you that there is much more to come from SEM. We have the technical capability. We have the people of the organization and the tenacity, really, to go after and take advantage of this situation and continue to grow with our customers. So again, I appreciate your time. And now I'd like to introduce the next speaker who will provide an overall summary and outlook on our financials, and that's our Chief Financial Officer, Jamie Beggs.
Well, thank you, Chris, and thanks to all the presenters today.
For those in the room or online who have not had the pleasure to meet, my name is Jamie Beggs, and I've had the pleasure to serve as Avient CFO for the past four years. One of the most critical relationships for a CFO is with the CEO, and not just because of the reporting relationship, but it's how these roles need to interact. Most importantly, they need to be strategically aligned and trust each other. With Ashish's arrival last December, I was very optimistic that we would have a great connection, but I also knew that we needed to spend time with each other in order to build trust, so what better way to spend time with someone than to travel with them, and when I say travel, I mean weeks of travel across the globe.
We are with this person morning, noon, and night, and jet lag, I might add. Needless to say, I may have a few stories to share, but I'll start with just one. So Ashish only has two requirements for a hotel room. I may have a few more. His are that it's clean and that it has a gym. What I learned is that Ashish runs every day. He's very dedicated to getting in his set distance every morning. One of the first times I saw him in the gym, I noticed how fast he was running, faster than my normal pace, and I thought, "Man, he is a runner. He must really love this." Well, I was very surprised to find out later that afternoon that he absolutely hates running. He runs that fast just to get it over with.
I think it takes a ton of discipline and execution to be able to get up every single day, especially when the circumstances are not ideal, to be able to complete a run. And I think these are what makes somebody very successful in life. There are also some of the key attributes that have made Avient successful as we've evolved our strategy over the past decade or evolved our portfolio: discipline and execution, even through unprecedented events. As I've gotten to know Ashish over the past year, I can confidently say that his approach, background, and leadership is a perfect match for the portfolio that we've created through transformative M&A and the next chapter of Avient. And here we are. The chapter has been already started. If you've been following us for a while, we have returned to growth in 2024.
We've also been very proactive in making key organizational changes that Ashish laid out earlier today. I'm particularly excited about the new business development role that Mike Irwin is leading and his fresh perspective on how we build and hunt for platforms of scale. Phil Clark, our Chief Technology Officer, he has a phenomenal background to help the segment supercharge their current innovation programs as well as deliver the next series of platforms that will drive sustainable pipeline growth for the company. I'd be remiss not to mention Amy Sanders, who's our new Chief Legal Officer. She happens to also be a fellow Texas Longhorn. Moh, our favorite color is burnt orange. Most importantly, the organization has wholeheartedly welcomed all of the leadership additions to the organization, and we are all strategically aligned to growing the top line and expanding the bottom line.
Well, we also know that a strategy without execution doesn't mean a whole lot, and what gets measured gets done. So we are also aligning our compensation plans to this new strategy. And this would include adding revenue growth in addition to operating income expansion, as well as cash generation to our incentive plans. Each of our associates will get a tailored plan, whether they are catalyzing the core or creating platforms that scale. Both are critical to the execution of the strategy, and we will recognize and reward our associates accordingly. The other thing that you heard a lot about today is change, a lot of positive change. But I also want to make it clear that this strategy is not a rebuild.
We are building upon the foundational strengths that Avient has made it successful in the past, and these foundational strengths will make us successful in the future. They include our focus on safety, our global reach with local touch with customers, our commercial and operational discipline, and, of course, sustainability. Because for Avient, sustainability is not solely a compliance exercise. We have strategically built a portfolio of material solutions aligned to the circular trend, and we have served our customers as well as grown our business in this space. It represents approximately a third of our portfolio today. Recall last year we held a Sustainability Day for our investors, and the content of that day focused exclusively on our technologies, our end markets, and the wide breadth of ways that we help our customers renew, reduce, and preserve.
You heard about many of these. You heard about many of the applications from the team today. Moh talked about our broad functional additives portfolio that is reducing material usage as well as improving product performance. Mike Mosley talked about how the Advanced Composites materials are hardening the grid to support the need for reliable energy. Chris Pederson talked about how we preserve human life, either through life-saving healthcare applications as well as personal protection use in the military and law enforcement. Renew, reduce, and preserve remain in focus for us in terms of investments and technology as well as commercial pursuit. Whether you had a chance to attend our Sustainability Day last year or not, I highly encourage you to go back to those materials, which are still available on our website. It's a great reminder of how we help our customers enable a sustainable world.
And we're doing our part as well to operate sustainably by keeping our own house clean. We are regularly recognized by ratings firms with leading industry positions, and we continue to improve. Over the past year, EcoVadis upgraded us to a gold standard, which puts us in the top 5% of all reporting companies. This is an important accreditation with our customers because many of them use this as a criteria to pick their preferred suppliers. It gives us a competitive advantage, especially when working with global OEMs. The CDP, which stands for the Carbon Disclosure Project, measures transparency with regards to ESG disclosures. We also moved up to an A-, which means that we are well-positioned to be in compliance with changing European regulations as well as potential U.S. law changes in the future. I also wanted to call out the three proxy firms on the bottom here.
They have also given us high marks with regards to ESG, which is aligned to driving shareholder value, and the last one that I'll call out here today is that we were just awarded a new award just last month from Newsweek and was named as one of America's Greenest Companies. This was determined by a third party on environmental performance in terms of greenhouse gas emissions, water usage, and waste generation, so as Ashish laid out and the teams talked about today, we have a two-pronged approach to driving sustainable growth, and it's starting with, first, catalyze the core, which is all about maximizing what we have in the portfolio today. It's managing those businesses according to where they are in their life cycle to win share, translate existing technologies, and replicate our success in emerging and developing markets.
We expect this portion of our portfolio to grow in excess of GDP. The second part is making company-level investments in product platforms that have the ability to scale meaningfully and grow double digits. Also important to this strategy is portfolio prioritization, which is an enabler, and how we will be disciplined in how we redeploy resources to fuel these new growth areas. In other words, we don't expect our SG&A as a percentage of sales to increase. In fact, we expect to get further leverage from these investments as we continue to grow over time. Another area that we talked about today is driving a sustainable pipeline of growth, and we showed some portfolio maps of how we could do that.
We gave some examples of products that we're selling today, how those technologies will evolve to the next series of applications, and ultimately how they will merge with some development to create a pipeline that will deliver in the near term as well as in the long run. The combined two-prong approach is expected to grow revenue sustainably 100-200 basis points above GDP. In addition to our organic revenue growth targets that we've laid out today, we also have a goal of increasing EBITDA margins to greater than 20%, and the pathway to get there is detailed on this slide. About half of the improvement will come from operating leverage and not through just organic revenue growth, but also from SG&A efficiencies from portfolio prioritization. We also expect to expand margins from product mix as margin-accretive platforms will grow faster than the rest of the portfolio.
Then lastly, we also have a goal of more than offsetting inflation with productivity projects. These things will be in the areas focused on manufacturing and sourcing, such as harmonizing raw materials, improving yields, as well as looking at plant utilization and our overall footprint. These activities will also be supercharged by our digital strategy, which is being led by our new CIO, Leslie Sequeira . He's looking at ways to incorporate things like machine learning and generative AI into these processes. He's also looking at utilizing digital for growth as well. Moh mentioned this earlier, but speed to market is very critical in color. So we're working on a project to cut the time from color design to product delivery by up to 70% using our ColorNow digital services. This is a huge win for our customers and a sales enabler for us.
The path to an increment of 400 basis points is very achievable and is supported by our foundational strength of commercial and operational discipline. In summary, this is what the expectations are for our new strategy that we laid out today. We expect to grow revenue 100- 200 basis points above the GDP by catalyzing the core and building platforms that scale. We have a pathway to expand margins north of 20% through operating leverage, mix improvement, and productivity. By leveraging the top line and expanding margins, we expect Adjusted EPS to grow in excess of 10% per year. In addition to laying out our long-term financial targets today, we did want to highlight our balanced and disciplined approach to capital deployment. Over the past five years, you can see from this chart of how we deployed $1.1 billion in adjusted free cash flow.
As our prior strategy focused on M&A and building the current portfolio that we have today, you can see the weighting towards M&A. But we have also been very disciplined about keeping a healthy balance sheet. And in fact, over the past few years, we've paid down over $300 million of debt, and our expected net debt to EBITDA should be under three times as we exit out of 2024. While doing all this, we've also been conscientious of returning cash to our shareholders through our dividend. We have a very proud history of increasing our dividend every year since its initiation in 2011, and our current dividend yield is approximately 2% of our share price. As we enter into the next chapter of Avient, we're going to be keeping that same disciplined approach with regards to capital allocation.
We feel the best investment for our cash is back into the business where we'll be fueling growth as well as expanding margins. We expect our annual CapEx spend to be approximately 3%-5% of revenue going forward. We also want to maintain our dividend policy of increasing that every year with underlying earnings growth. Just recently, we announced our 14th consecutive increase, which again is a reflection of management's confidence in our ability to grow earnings longer term, as well as return cash back to shareholders. Also, a high priority for us is maintaining a healthy balance sheet, and we have a goal of reducing our leverage down to two and a half times in the near term. Once debt is below or in that mid-twos, we expect that we'll have much more flexibility to be able to buy back shares opportunistically.
Last but not least, we've been very intentional today about talking about organic growth. Instead of our strategy being M&A, we expect it to be used as a complement or an avenue to complement the strategy that was laid out today. I don't expect any meaningful use of cash to be used towards acquisitions in the near term. Why invest in Avient now? We've transformed our portfolio, and as the dust settled, we'd have returned back to growth. We have a well-defined plan to grow revenues in excess of the market. We have a new CEO who's laid out a vision to create platforms that scale, all while maximizing the impact of the core. We have a fresh perspective on how we're looking at our technologies and how they intersect with high-growth markets and secular trends.
We have a big bag of Avient technologies that has not been fully utilized and deployed yet. And as we hybridize these technologies, we will create differentiation and scale. We have a pathway to expand margins north of 20%, not just with innovation, but also with operational excellence. With our global reach and our customer intimacy, we have the ability to partner with global OEMs, and we operate seamlessly across all major regions and multiple cultures to be able to customize our go-to-market approach. We serve locally and win globally. And last but not least, a hallmark of Avient is our ability to execute and generate cash. We are all very highly motivated to win and create value for all of our stakeholders. Plus, we have a proven history of delivering results.
Before I turn it over to the team to start the Q&A session, I did want to make a few closing remarks. First, another story about Ashish. On his very first day, he held a global town hall where he was able to share about his background, his values, pictures of his family, and he came across so humble and personal that it broke the ice with the organization. On that day, he wore a jacket similar to the one that he has on today. When you cram the entire headquarters into a large conference room with blinding lights because of the recording equipment, it was bound to get hot. Ashish made everyone laugh as he was wiping his forehead off, and it became just that more personal and real to the organization.
Many of the presenters that are here today, they've been through. Oh, let me back up one more time. One of the things from that session is that because he became so real and personal, his strategy is also simple. It's easy to understand, and it's the right one at the right time for Avient. Many of the presenters here today have been with the organization through the tremendous amount of transformation that we've accomplished over the past decade. The resulting improvements in our operations, our end markets, and our portfolio have set the stage for the next chapter of Avient. In Ashish's first year, he has strengthened and coalesced the leadership team to the strategy that was laid out today. He's made great additions to the team.
We've already called that Mike and Phil are here today, and they would love to spend some time with you over lunch or maybe in a future discussion. So on behalf of the leadership team at Avient and our 9,000 associates across the globe, I can attest that we are energized about the next chapter of Avient to become an innovator of material solutions, helping our customers succeed, all while enabling a sustainable world. So with that, I'd like to invite the presenters back up on stage and have Joe also come back to facilitate a Q&A session.
Nice job. That sounds good. All right. We will move to the question-and-answer session. We have Brandon and Kyle here in the room. They have microphones.
I will call on you, and then if you can just wait for the microphone to come over so the folks on the webcast can hear the question. I'll start in the back with Laurence.
So Laurence Alexander, Jefferies, just two related questions about the devil in the details timing. You mentioned in the slides operating leverage as one of the factors to get the margin expansion. Is that a cyclical operating leverage, or is that just you see a path to that regardless of the cycle? And secondly, if there is no significant cyclical lift, do you see the targets as doable within five years, or should we think of them as 10- 15 years, and then a cyclical recovery pulls it forward?
Maybe I'll answer the first part. The second part first, and then Jamie will add if as needed.
I think the way you should obviously, we did not want to benchmark against a percentage number because we are dependent on markets, and so we wanted to benchmark against the markets. So you saw the numbers the way they are. So it depends on how the markets perform, and that will help us answer your second question better, but in the absence of everything else, if I were to go out on a limb and say, "I should never do that as a CEO," but somewhere between the mid to longer term is the answer, and that's what we have modeled in our books right now, but again, it depends on how the markets perform. On the first part, maybe I'll ask Jamie to comment on that one cyclical part.
Sure.
I guess from our perspective and how we looked at our long-term strategic plan, we're kind of using the market growth being a GDP or an IPI or to that extent. And so that's sort of what we modeled out here. So I would say it's not completely dependent on a cyclical economy either coming back one way or the other, but obviously that would help either accelerate or decelerate the timeline. And that's why we're being a little bit vague, because about half of the improvement that we talked about today was due to operating leverage coming back.
Okay. Next, Frank Mitsch.
Thank you, Frank Mitsch from Fermium Research. Just to follow on the last question, in terms of, I can understand on the EBITDA margin side that that may take some time and operating leverage, et cetera.
In terms of 100-200 basis points above GDP growth, is there a reason that that might not be in the cards for 2025 to bring it to a more real date? And then secondly, Mike, I'd be fascinated on the opportunity in the utility poles. In my hometown, I've seen what looks to me to be galvanized steel just going up relatively new. Where is Avient on replacing utility poles around the country? What's the glide path there? Because that does look like that could be pretty sizable.
Frank, I'll answer your first question, and then since you asked directly, Mike Mosley, he'll answer the second one. The first part is that 100-200 basis points, we are clearly not providing guidance for 2025 right now.
But I think based on what you saw here, I think that you should expect that our teams should be performing better than the macro because that's what we have been doing this year as well. And all the hard work that the teams have done in driving different sales processes, discipline, innovation is already bearing fruit for us. So now I also feel that as time goes on and our innovation flywheel takes off, things could even get better, but I want to contain my excitement and promise what we feel right now we can deliver. So with that, Mike Mosley, if you want to talk about the poles.
Yeah. Thanks, Frank, for that question. No, we're excited about it. So to give you an idea, we have been making composite utility poles for quite some time, for about 10 years.
We see the acceleration taking off, and what we're really doing is preparing ourselves for that acceleration. We're setting up more capacity, more availability, and to really capitalize on our current position as a leader in the insulator space. So we see that as an opportunity. You mentioned galvanized steel. There's also concrete poles, and obviously wood is the big player in that space. Obviously, they don't make a lot of tall straight trees anymore, so there's definitely opportunity. But opportunity abounds with our functionality, with being able to provide UV protection and fire retardancy now for out West and things like that is obviously going to really create a lot of opportunities for us and really accelerate our business. But we're going to start seeing it in 2025, some more growth there.
Frank, maybe I'll just add one more comment to what Mike said.
One of the reasons we brought Mike Irwin on board is that we need to understand the value chains of these new areas much better. We want to go deep in certain areas and really build functionality in terms of market expertise and understand the whole value chain, where the money changes hands, who is making how much profit, et cetera, and what's our value proposition. And as we map those things out, especially in these new areas that we are prioritizing and are emerging because we start prioritizing, and then they become moved from emerging to evolving to finally existing. And that's a trend that we want to continue, but we need. That's the marketing muscle we want to build in the organization much stronger because then we can be more targeted and more surgical about where we want to go deeper and hunt there.
The next question comes from Vincent.
Thank you. Vincent Andrews from Morgan Stanley. Two questions. One, I was wondering if you could discuss the PFAS opportunity a bit more in terms of who or what else you're competing with and sort of where you think your particular advantages are against those alternatives. And then secondly, just a little bit more detail on the new compensation program. If I heard correctly, it's sales and EBITDA, I assume, margin-oriented rather than dollars. But any sort of further info you could provide on just sort of the return metrics, whether it's margins or return on capital or just sort of how you're thinking about that and how that's being employed within the organization.
So let me take the PFAS one first. I mean, it's amazing how many things PFAS touch.
And I have a little bit more experience in this space because I come from a company which had a big background in that and now exiting that whole space. So the opportunity is everything that you can imagine, and it's everywhere. It's really big. And it could be in consumer, everything that gets coated, needles that are used for vaccine delivery, or anything that goes in your cars, or I think food packaging, flexible film is a big opportunity for processing aids, polymer processing aids. You saw the picture that Moh showed on his was how a flexible film is made, and that's where they are used. And Moh showed you the pipettes being coated with PFAS so that there is no drop left when you are so the opportunities are everywhere, right?
Wherever there is hydrophobicity needed or resistance to chemical nature needed or high temperature needed, that's where PFAS really excel very well. So what we have done is we have looked at where do we have, going back to our criteria, where we have the markets which are growing faster, where we have access to customers so that once we have an innovation, we can take it to the market, where we have the technology in-house that we can build upon so that we can build business of scale. So that's the four-point selection criteria that we had used to identify what specific applications of PFAS. And Moh showed some of them on his chart. So you can go back and look at that. Those are the areas that we are initially targeting that's in our platform development stage.
Competition, though? What other materials are you competing against?
Yeah.
So the whole world is changing. There is direct competition, indirect competition. Obviously, it's non-fluorine-based materials. That's what everybody's trying to do. And I think this is also an opportunistic thing with time. I think the first to win in certain places can go a long way. And so that's why we have really amplified our efforts in this area because we showed you that we already have one application. We are in pilots in a couple of other applications right now, but I'm sure our competition is doing the same. And we would be naive to say that other people are not chasing it. But the pie is so big, we feel like we can still grab a lot of land there.
Thank you.
And then on the second question on comp, maybe Jamie, you want to comment on that.
Sure. So it will be in addition.
So we're adding two different metrics to it. So we historically have always measured operating income. We typically had a cash component, but not cash from operations. So we'll be specifically adding organic revenue growth with our operating income from a dollar perspective. And so when we create those targets, we expect a certain EBITDA margin. So there's math that's involved, but it's given the businesses a tangible dollar target on both the top line and on the bottom line. And then we also wanted to make sure that cash from operations was meeting expectations in terms from a shareholder perspective. So it's an actual dollar amount on an annualized basis that we'll be adding to that metric as well.
Mike Sison, next question here.
Mike Sison, Wells Fargo. Wanted to dig in a little bit on the revenue growth.
Materials companies growing above GDP has been as elusive as the Browns winning a Super Bowl. So you have a lot of big markets. I mean, the addressable markets and the growth factors you noted are really big, right? So I guess is there one or two that you feel really good about gaining that market share, getting that growth over the next couple of years? And given the size, it doesn't really seem you need a lot of GDP to just generate that type of growth. So I guess just maybe a little bit more in depth with maybe the team on the addressable markets and where you can see that growth. And then maybe in colors, hopefully wine and gold is something that is there because I think the Cavs have got us a championship this year.
I think if I answer your question, first of all, we have growth vectors both in the core and in high-growth market spaces. I hope that came across the presentation that the growth vectors are because core is very important for us to grow. And so the growth vectors that we talked about today in healthcare, for example, or in composites for defense, those are the applications that we continue to feel like, "Hey, we can grow much faster than the GDP." And I think the team pointed towards that kind of stuff. And then on platforms of scale, as we are trying new things, Vincent just asked a question on PFAS. We're excited about it. It could be big. It could be small. It could be somewhere in between.
And that's the nature of some of these growth vectors that not everything is going to become big, but we have to take enough hits on certain things. And that's why making company-level bets in some of these, which businesses wouldn't have done on their own, fully knowing that not everything is going to pan out as we are planning, but still going with an open mind to pivot as we see the opportunity and learn more about it. But what Mike Mosley presented on energy, we have a well-established platform there already of several tens of millions of dollars in that space out of composites. And so it's very easy to grow that part because we already have access to the customer. We are well-established with the technology. We can innovate there faster and so on and so forth.
So we're excited about that space for sure. Building and construction as well as energy are the two big ones that we are excited about. But we are excited about a lot of other things that we did not present here today too.
I think David up front had a question.
Thanks. David Begleiter, Deutsche Bank. I guess on the portfolio mapping you mentioned, how big is the decline bucket? And is it mostly just a natural cannibalization when you introduce new products, or is there a structural component that you think you can divest in the future? And the second question is related to the productivity. How should you think about the timing of the realization there? And do you expect the full benefit from that to be offset by the higher upfront investment in SG&A R&D in the near term?
Very good question. So both of them.
I mean, first of all, on the portfolio, I think there are some businesses that we are managing for cash, and I would hate to give you a number, but there is nothing there that is causing a hard burn. It's just that we have to manage them for the right amount of resources that we allocate to them, so those are the businesses we are taking resources out of and trying to feed them into the growth part of the portfolio. With respect to productivity, and again, this is classic. You can use any methodology. There will be always some quadrant where certain parts of your portfolio will sit, so you can do portfolio prioritization forever, and you should do it as a continuous process, but that doesn't mean that you need to start divesting stuff whether it's needed or not.
We don't see anything big there that's causing us a hard burn right now that's not creating value that we have to get rid of tomorrow. The other thing is that we have done a lot of M&A and divestitures in this company, and that really, if you think about it, it takes a lot of resources and energy to manage that part, and we are trying to, for some time, stabilize that part so that we can focus on the innovation piece, which is the next phase that we want to go to, so I think at this point in time, nothing big major on M&A or divestitures is on the card. With respect to productivity and timing, I think it's not something out there and that we are making upfront investments. We try to make clear that we are reprioritizing resources.
I think we should start seeing productivity every year from us on those things. It's not something that will happen in the future only, and we are investing now. It's an ongoing process every year that we expect productivity.
I do think there's probably a longer tail on some of the footprint optimization. Those things just take a lot more care and understanding, so really understanding where our utilization needs to be. I think that may take a little bit longer. Some of the other ones that we talked about, there's things that are in flight and things that we'll continue to work on and doesn't need as much upfront investment.
Some of it could be enabled faster with digital technology, but we'll take each of those projects individually to make sure it has a return, not just blanketly putting in technology for technology's sake.
I just want to make one more point. I know there's many questions here. I think you have to appreciate this is a lot of change. And we are still digesting other acquisitions that we have done. And I showed you lots of opportunity of how we can utilize technology from one domain to another, from one acquisition to another. All those opportunities are sitting right now in front of our eyes. And so for us, there's a lot of things that we can do now with what we have and not distract the organization. And that's part of the thinking as you come in.
Once things stabilize more and we get more of those things cross-fertilized with respect to technology and hybridization and get the innovation flywheel going, then we can look at other opportunities. I think right now it's not the time to do that.
Kristen, Brendan, or Kyle, if you guys can bring a microphone up here.
Hi, Kristen Owen from Oppenheimer. Sort of a follow-up to this last set of questions. With respect to taking bigger shots on goal, maybe more shots on goal in areas that combine aspects of the portfolio, you're not spending incremental on SG&A as a percentage of sales, but perhaps what needs to change with how you go to market your sales organization, bringing that portfolio together, who you're talking to on the other side of the table? How is that evolving with all of these changes that you've announced?
Yeah.
I think customers are key for us. I talked about enhanced focus on customers and start seeing things from their perspective versus how we want to take our product to the market. I mean, I'll give you an example of how we got more efficient in Moh's business in Europe, where we just did recent restructuring. We acquired two different portfolios of color, a liquid and a solid. We had two teams approaching the same customer. Think of it from a customer's perspective. They don't care whether it's solid color or liquid color. They want a solution to their problem. That's a very simple example where we could have gotten. But it was part of the natural progression. When you acquire things, it takes a time to stabilize the organization so that you don't lose your revenues, you don't lose your customers.
Once you are there, then you move to the next part of. So we are at that stage of really seeing things from the customer's perspective and simplifying our own internal complexities so that we become easier to do business with. But I think key account management is a big opportunity for us. And I can tell you that that's really the way for us to bring the total Avient together rather than thinking SEM and CAI kind of thinking. I think that's a big opportunity for us. And honestly speaking, the worlds of SEM and CAI have started to interact with each other already. And we showed that in the decking example that I presented. And I think more of those applications are happening. So we need to have a team which can align on the front end.
That's why we mentioned about focused front end and the back end structures that we are getting more strategic about because we have to see things from a customer on the front end, but on the back end, we need to optimize our organization to serve them in the best way.
And then my follow-up question is also related to the productivity portion of your EBITDA bridge. You've got your regular cadence of productivity and annual improvement, but the raw materials and procurement piece seem maybe incremental to what we've seen historically. So I'm wondering if you could speak to the raw materials procurement piece, what you're specifically doing there.
Yeah.
So as you've been following us for a long time, Kristen, you know that we have a long history to be able, especially in the last few years when we saw tremendous inflation on the raw materials side, and now you're seeing a little bit of deflation that happened this year and then things kind of settling out. So we purposely just left raw materials out because we're confident that no matter what happens in that environment, we'll be able to either do what we did in the past, which is have a net price benefit either on the up or the down. So then the question really becomes, what does your outlook look like for raw materials at the end of the day? And you're probably a better expert at that than I am at this juncture.
So we kind of just assumed and based on our prior experiences that this is something that we know how to handle and we'll continue to do so going forward.
Next question up here, Mike Harrison.
Hi, thanks. Mike Harrison with Seaport Research Partners. Chris, I had a question for you. You mentioned yield improvement within the engineered materials business. And I think that Dyneema business that you acquired brought in some operational expertise that you've been trying to leverage to other parts of the composites business. Can you maybe give us a little bit more detail on where you are with that yield improvement and productivity journey within composites? And then the second question I had was for Moh. I was a little surprised to hear that additives are actually the biggest growth opportunity within the Color, Additives and Inks business.
Can you break out how much of the business today is additives and maybe give us a sense of what portion of your customers who are using color are also relying on you for additives as part of a master batch solution?
Chris, do you want to go first?
Yeah, sure, Mike. So with respect to Dyneema, I'd say over the last few years, they've been really focused on increasing efficiencies in their own operations as well. We are taking advantage of some of that broadly across our other businesses. But I would say most of it's happening within the business units themselves. For example, in Mike's business in Advanced Composites, they've done a lot of good work to implement automation in some of their sites. That's really allowed us to grow without having to add significant resource.
Mike's team's looking at leveraging that broadly across the res t of his businesses.
In terms of, that's a great question. So in terms of additives, the key growth that we are seeing is actually driven from the need. You heard about how important sustainability is, and especially in the packaging end market. That's where we are seeing huge growth opportunities because there's a need for solutions that help enable sustainability. Now, in terms of the breakdown, there's actually customers that are actually utilizing our colors. Do this also have a need for additives depending on the functional they need? In terms of the breakdown, we're actually from an additives portfolio, we are closer to the north of closer to 30% right now. So that is why we are seeing a lot of opportunities that we could actually grow from that portfolio.
Other questions?
I thought we got one up front here.
Dmitry Silversteyn with Water Tower Research. Just wanted to follow up on the previous questions. When you talk so you've talked about kind of getting focused on the back end and the front end structures as part of your productivity improvement programs. Can you provide a little bit more granularity on that? I know Ashish, you talked about the liquid and solid colors being one example. Are there other examples we can look forward to?
Yeah. So I mean, for example, once we prioritized the areas of growth, we had a bunch of these R&D people sprinkled across different business units, different businesses. And we felt. I gave an example of how if you understand UV stability, it doesn't matter whether you are in SEM organization or you are in CAI organization. Both have plastics that need UV stability understanding.
So, what we did is we identified all these. If you look at our strategic plan, there are certain portfolios that create a lot of growth. And that portfolio, we've consolidated the back end of R&D. And we took people from Chris's business and we took people from Moh's business and we put them all together because we wanted to build enough capacity. And that's needed when you're trying to build platforms. And these people can now be leveraged for both the businesses. So it's not just a productivity play. It's also a growth play. Because if you have done R&D and I come out of an R&D background, you understand you don't build platforms with five, 10 people sitting on that. You need enough capacity to do that. And we didn't want to hire more. We had enough people in-house. We needed to utilize them better.
Understood.
And then maybe a question for Jamie. You've identified 3%-5% of sales as your target for CapEx. I've never associated Avient with a high CapEx needing company. Typically, you're looking at kind of 2%-3% CapEx for a mature business. So what will be the major CapEx needs that the business will have over the next 3- 5 years that will get you to that 3%-5% of sales?
Yeah. So currently, based on our guidance that's been out there, it's 4% today. And so I would expect it's the midpoint of what we've been able to give out. There is some opportunity specifically in certain platforms where we need to build capacity. And that's really where that's driving it.
Maybe if you've been following us for a long time, I'm not sure how long you have, where it's been something a little bit lower. The other piece of that is we used to have distribution in our business, and that took no capital whatsoever. So part of this is the change in the portfolio. So we still think it's a lower amount. So we're not backwards integrated in the polymer for most of our platforms except for Dyneema. And being able to make sure that we have enough capacity, specifically in the composite side, which does have a higher CapEx as a percentage of spend, but they also warrant that with the amount of EBITDA margins they also drop as well.
So if I ask the question a little bit differently, how much of that 3%-5% is maintenance CapEx versus growth CapEx?
Yeah.
So we've been doing a lot of analysis on that. I would say currently about, I would call it strategic projects that we're working on, it's about half. And the rest of it, we'll have to do maintenance, EH&S, and sometimes some other platforms just to make sure they're running well.
Okay. So that's more reasonable. And then final question, if I may. Just looking at the slides, you talked about 350 basis points improvement in margin for the colors and additives business and about 300 basis points for the engineered materials business. But on the final corporate slide, you have 400+ basis points. So where does that 75 basis points extra coming from?
Corporate leverage.
Corporate leverage. Okay.
Yes.
Okay. Any other questions in the room here? Okay. Well, I think this concludes our event.
For those of you here in person, we will have a lunch in the room where you had coffee and breakfast this morning. And I look forward to speaking with you if you're able to stick around. And I hope all of you found this insightful and are as inspired as we are about the bright future we have ahead. Thank you.