Earnings Call: Q4 2020

Feb 12, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the Chemours Company 4th Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the conference over to your first speaker today, Jonathan Locke, Vice President, Corporate Development and Investor Relations. Please go ahead, Mr. Locke. Good morning, and welcome to The Chemours Company's 4th Quarter and Full Year 2020 Earnings Conference Call. I'm joined today by Mark Vergnano, President and Chief Executive Officer Mark Newman, Senior Vice President and Chief Operating Officer and Sameer Rohan, Senior Vice President and Chief Financial Officer. Before we start, I'd like to remind you that comments made on this As well as supplemental information provided in our presentation and on our website contain forward looking statements and the other risks and uncertainties described in the documents Kumorsus filed with the SEC. These forward looking statements are not guarantees Future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ, and Chemours undertakes no duty to update any forward looking statements as a result of future developments for new information. During the course of this call, management will refer to certain non GAAP financial measures that we believe are useful to With that, I'll turn the call over to our CEO, Mark Vergnana, who will review the highlights from the Q4 and full year 2020. Mark? Thank you, Jonathan, and thank you everyone for joining us this morning. I'll begin my remarks on Chart 3. The resilience of Chemours was put on full display in 2020. As we rose to meet each challenge the year threw at us, I was reminded Through it all, this team stayed focused on our true north, the safety of our people and their families, Our customers and the communities in which we operate. In the end, we delivered another year of solid results reflective Of that unity of purpose. I'd like to take a moment to thank the entire Chemours team for their commitment over the last year, with the reminder that our Efforts must continue. We forge ahead in 2021 with the same resolve, determination and energy we have taken to every challenge Looking back on 2020, our COVID-nineteen response set the early tone for As you've heard me say on the last few calls, we focused on 3 key areas. 1, putting our employees, customers 2, maintaining a strong balance sheet and liquidity position and 3, focusing on cash generation in 2020. The team executed exceptionally here, and I can certainly say the urgency and speed with which we acted paid dividends throughout the year. From a commercial perspective, we continue to build on the success of our Ti Pure value stabilization expanded our Opteon portfolio with entry into the mobile aftermarket, which we believe will be a significant source of value. Chemours continues to deliver innovative chemistry and business models, which create long term value for our customers. After bottoming in Q2, the momentum we saw in Q3 continued to build into Q4. Our full year financial results reflect the strength of our recovery, most notably the $540,000,000 of free cash flow we delivered. Our free cash flow for the full year 2020 was $371,000,000 higher than in 2019. This included executing actions to reduce costs by $160,000,000 and our CapEx by $125,000,000 in response to the pandemic. We also took advantage of favorable conditions in the debt capital markets to refinance some of our debt, Extending our maturities and further strengthening our balance sheet. We continue to maintain strong liquidity and financial flexibility. More recently, on January 22 this year, we announced the resolution of our legal dispute with DuPont and Corteva and the establishment At the same time, we announced the settlement of the Ohio PFOA MDL litigation, ex the Abbott case, which remains on appeal with $29,000,000 of that $83,000,000 settlement contributed by Chemours. The press release and 8 ks from January 22 contain the details, including the binding MOU. As I said at that time, we view this agreement as providing significant protection and risk reduction for Chemours shareholders. Finally, we have announced the 4th quarter split of our Fluoroproducts segment into 2 new reportable segments, Thermal and Specialized Solutions or TSS and Advanced Performance Materials or APM. Mark Newman is going to cover the details behind the resegmentation when he covers the business results. Before that though, I'd like to share with you some leadership And why we are so excited about the future here at Chemours. Moving to Chart 4. First off, Brian Snell, the President of our Titanium Technology segment will be retiring after 40 plus years with the company. Brian has led our Titanium Technologies segment since spin. And under his leadership, we have transformed our TiO2 business significantly. We added world class capacity at our Altamira, Mexico facility, improved our cost position globally, Further developed our mining capabilities and implemented a unique go to market model in TypePure Value Stabilization or TVS. I'm proud to have called Brian a colleague and friend over the past 30 years in both DuPont and Chemours. His legacy will live on within Chemours for years to come. Ed Sparks, who currently leads our Fluoroproducts and Chemical Solutions segment, We'll be taking over leadership responsibilities for Titanium Technologies, while retaining responsibilities for Chemical Solutions. Ed is a seasoned leader with deep operating technical and commercial experience, primarily in our Titanium Technologies segment where he started his career and where he spent most of his time with the company. Ed is a great leader And a great thinker. I look forward to working with him and the entire TT team to take our Ti Pure franchise to new Turning now to Chart 5. As you all saw in the press release in the 4th quarter, We divided our Fluoroproducts business into 2 new reportable segments. Fluorochemicals becomes Thermal and Specialized Solutions, While Fluoropolymers becomes Advanced Performance Materials, we've got 2 great women lined up to lead these segments. Alicia Bellezza will lead our TSS business. Alicia has been leading this business within Fluoroproducts Over the last year, Annette has had a variety of roles in her career with Chemours, including VP of Global Sales, Commercial Operations And supply chain for our TT segment, Corporate Treasurer and our leader of the Investor Relations function. Alicia is an excellent leader and will be driving our growth in Opteon, Freon and the rest of the TSS portfolio. Denise Bingham will lead the APM business. Denise has deep experience in the chemical industry with over 30 years of commercial Most recently, Denise was VP of Operations for Fluoroproducts and led a significant transformation effort to improve our manufacturing processes and reliability. I look forward to working with Denise as she continues to improve To have the bench strength to promote these 3 talented leaders from within Chemours to their new positions. Congratulations to you all. With that, I'd like to turn things over to Sameer to go over the financial results from last quarter and the full year. Sameer? Thanks, Mark. Turning to Chart 6. We delivered solid full year 2020 results, with performance weighted to a relatively strong second half, in line with the global macroeconomic recovery. Full year net sales were $5,000,000,000 as COVID-nineteen impacted demand across all segments and End markets. GAAP EPS and adjusted EPS were $1.32 per share and $1.98 per share, respectively. Despite the drop in demand, adjusted EBITDA was $879,000,000 with margins holding flat at 18% on a year over year basis. This was a result of our $116,000,000 cost savings initiative launched in early 2020, which was partially offset by expenses incurred late in Q4 related to legacy litigation work and remediation activities at our faithful site. Looking ahead, we anticipate this cost program to continue to benefit the business in 2021 beyond. We expect to convert roughly 20% of the 2020 cost savings to structural savings that will benefit us on ongoing basis. CapEx declined from $481,000,000 in 2019 to $267,000,000 in 2020, largely due to deferrals of both projects. As Mark mentioned on the previous chart, free cash flow was strong at $540,000,000 up $371,000,000 from the prior year Despite lower underlying earnings, we continue to focus our business on cash generation throughout the year. Turning now to the results for the quarter, which I'll cover on Chart 7. 4th quarter revenue of $1,300,000,000 was essentially flat to last year's 4th quarter, reflecting strength in the recovery and demand momentum from the 3rd quarter. Sequential volumes improved by 9% with pricing holding up, an atypical result for this time of the year given the seasonality of our businesses. Both net income and EPS improved on a year over year basis and adjusted EBITDA rose $19,000,000 to $246,000,000 for the quarter. Margins rose slightly on a year over year basis to 18% and held steady from the prior quarter on a sequential basis. Free cash flow was $300,000,000 This is the 3rd best free cash flow quarter since spin off. The combination of cost controls, Working capital discipline and lower CapEx were key drivers in achieving this great result. In total, Q4 was a solid quarter to close the year on and demonstrate the momentum in the businesses as we move into the 1st part of 2021. As a final note, Our Board of Directors approved the Q1 2021 dividend of $0.25 per share. This is unchanged from the prior quarter and will be payable to shareholders of record as of February 26, 2021. Chemours continues to deliver consistent and stable dividends to shareholders even through the worst portions of the COVID-nineteen pandemic, a testament to the strength of our businesses, balance sheet and cash generation potential. Turning to Chart 8, let's review the EBITDA bridge for the Q4. Q4 2020 adjusted EBITDA was $246,000,000 up from $227,000,000 in the prior year period. Price was a headwind across all segments on a year over year Partially offset by improved volumes in titanium technologies and increased SFO adoption in our blends business. Currency was a small benefit in 4th quarter with stronger euro versus US dollar being the primary driver. Lower costs across all of our segments were partially offset by higher corporate costs related to environmental remediation at Faithful Works and higher legacy legal costs. In total, cost and other contributed $31,000,000 to adjusted EBITDA on a year over year basis. Overall, Q4 was a strong result for Comoros, and I would like to thank the team for the extra effort to close the year strong. Let's turn to Chart 9, where I will cover liquidity. As I have said on the last few calls, liquidity and our balance sheet remain strong. Our cash balance at the end of 2020 was just over $1,100,000,000 an increase of $149,000,000 from Q3 2020. Operating cash flow was $353,000,000 while CapEx was $53,000,000 Dividends to shareholders were $41,000,000 As we previously disclosed, during the Q4, we completed the refinancing of our 2023 U. S. Dollar bonds. We refinanced a roughly $900,000,000 of 2023 bonds with issuance of new 800,000,000 2028 bonds and using $100,000,000 of balance sheet cash. The interest rate on the new bonds is 5.75% versus 6% 5.8% on the older bonds. As a result, we were able to extend the maturity tower, reduce the principal amount and lower our annual interest We ended 2020 with $4,100,000,000 of gross debt. Debt net of cash was $3,000,000,000 resulting in trading net leverage of approximately 3.4 times. We continue to be well positioned from a balance sheet and liquidity perspective as the recovery continues. With that, I'll turn things over to Mark Newman, our Chief Operating Officer to talk about the recent segment split and provide more color on the business results. Mark? Thanks, Sameer, and good morning, everyone. I'll begin my remarks on Chart 10. Being customer centric is a value we hold high at Chemours, core to how we drive growth and create value over the long term. Today, we're taking the step on our journey to create a more customer centric organization through the creation of 2 new We believe that this change helps us better align with the fast evolving needs of our customers as we shift This new alignment builds on the success we have had across our products, both chemicals and polymers, by bringing us closer to the customers we serve. We are confident that this change will allow us to speed up our innovation, better allocate resources to the most attractive growth opportunities, which are tied to secular trends in each business and drive accountability for execution across the new segments. Finally, we believe you, our investors, will benefit from this additional clarity on the composition of our businesses. The key factors driving performance and clarity on the long term value creation potential of Chemours. Let's talk about thermal and specialized solutions starting on this chart. As industrialization and globalization advance, The ability of refrigeration to support comfort, safety and health are becoming more critical. Our Thermal and Specialized Solutions business enables modern mobile air conditioning, stationary cooling and coal supply chain. We invented the category with Freon and today our blockbuster low GWP refrigerant option Opteon refrigerants is robust with patents that extend into the late 2020s and even the 2030s For some, supporting our continued differentiation in the marketplace for years to come. The combination of our category leadership and substantial investment in this sector have enabled us to deliver strong cash returns over time. As a result, we believe the business is well positioned to continue to generate significant cash Looking ahead, things are evolving fast. From mobile devices to computer data centers The cars we drive. Progress means getting faster, smaller and therefore, hotter. As a result, The world needs innovative solutions for cooling and thermal management. Our TSS segment is focused on developing new sustainable solutions across a wide range of high growth and emerging end markets. I am confident That under Alicia's leadership, we will achieve the full potential of the Opteon platform and unlock tremendous value through our PSS segment. Let's turn to Chart 11 and our new Advanced Performance Materials segment, which consists of our portfolio of high performance polymers. The most demanding and essential applications which enable modern life Continue to drive material specifications and performance demands even higher. Our APM portfolio of polymers have the highest performance envelope in their respective categories from thermal stability to friction management to unique dielectric and chemical properties. APM products are specified into a broad range of markets A number of our brands enable renewable energy and electrification, provide high end sealing, Lubrication, chemical and structural support where other materials fail. Most notably, Powering fuel cells and PEM electrolyzers. We believe our expertise In building unique solutions from our chemistry is unmatched and demand will only increase with time. I look forward to working with Denise to improve performance through the course of the current recovery, while investing to unlock the growth potential in this segment. Now moving to the segment results, which start on Chart 12. Our Titanium Technologies segment continued to build momentum across the second half of the year with volumes increasing on both And our operations and supply chain have responded well to the increased volume. Pigment pricing at the account level was stable throughout the year with prices in certain channels rising into year end. The team continued to execute against our TVA strategy in 2020, delivering new AVA contracts and growing our share of volume through Flex and distribution. Full year adjusted EBITDA increased 1% from 2019 Despite the sharp declines early in the year, resulting in margins of 21%, relatively flat versus the prior year, 4th quarter net sales and adjusted EBITDA rose 13% 30% respectively, on a year over year basis. More importantly, net sales rose 13% and adjusted EBITDA increased The breadth of the recovery across the portfolio. Looking ahead, we expect the recovery to continue into 2021 With a much more normal coating season ahead in Q2 and Q3, we are of course operating cautiously Given the ongoing COVID-nineteen pandemic across most of our major markets, TVS, which we pioneered And believe is a key customer benefit continues to be a source of differentiation and strength For us with our customers, AVA customers continue to realize the benefits of reliable sourcing and predictable price. Flex gives us unique value proposition with new and existing customers Without the commitments of long term contracts, we will continue to leverage the gains we have made in both these channels to gain share Consistent with our goals. Finally, from a cost perspective, we are anticipating some inflation as supply chains adjust across our industry. While these could temper the margin improvement opportunity across the year, we do believe they are transient in nature as we continue to regain share in this segment. Moving to Chart 13. We have our first look at our Thermal and Specialized Solutions segment or TSS as we Call it. 2020 full year net sales of $1,100,000,000 were down 16% from 2019, Reflecting COVID-nineteen related demand headwinds, automotive plant shutdowns early in the pandemic had a significant impact on volumes given our Tier 1 relationship with many OEMs. Price was a 7% headwind, primarily due to contractual price downs and softer stationary market conditions. Demand recovered in Q3 and Q4 Adjusted EBITDA for the full year 2020 was $354,000,000 as productivity gains from our to 32% on a full year basis, reflecting productivity gains and cost actions across the business. As we look ahead, the business continues to expand Optune's presence in the auto aftermarket as we announced earlier in 2020. We're also investing behind additional growth in station rebalance. We continue to drive enhanced enforcement Of EFCAS regulations in Europe, in the wake of the 2021 quarter step down, though we have yet to see sustained evidence of a turn. In the U. S, the recently passed AIM Act should drive additional volumes for Opteon stationary blends As HFCs are phased down over time, we continue to believe our portfolio of low GWP opt in refrigerants are well positioned to capture share and help our customers do their part to combat climate change. Turning to Chart 14, now to cover our Advanced Performance Materials or APM segment. Full year net sales for the business were $1,100,000,000 again reflecting COVID-nineteen demand declines across nearly all And geographies, volumes were down 15% on a year over year basis, while price was a relatively small 2% headwind. Adjusted EBITDA of $126,000,000 resulted in margins of 11% on a full year 2020 basis, down from 2019 levels. Looking at the Q4 performance, we did see a solid rebound from Q3 on a sequential basis As net sales improved 16% from Q3 to $279,000,000 Volume improved across all geographies and most end markets and margins expanded by 600 basis points sequentially from the Q3 trough. The pace of the recovery continues to build here in the early parts of the year across most of our APM portfolio. In 2021, Denise and her team will be focused on improving the performance of the business, Driving top line recovery and growth, while continuing to execute on productivity and cost actions started in 2020. While many of our APM end markets were strongly impacted by the pandemic, we believe we are well positioned to benefit from the recovery with significant margin expansion potential ahead. Moving ahead to our Chemical Solutions segment on Chart 15. Full year sales were $358,000,000 down 33% compared to 2019, reflecting portfolio changes. Customer mine shutdowns And COVID-nineteen related issues reduced demand for our core mining solutions product lines starting in Q2 and extended into Q3. However, volumes began to improve in Q4 with December sales the highest in 2020. Full year adjusted EBITDA was $73,000,000 a strong technology licensing sales in Q4 helped to offset weaker performance in prior quarters. As a result, full year margins were 20%, an improvement of 500 basis points from 2019. The business will look to extend its 4th quarter performance into 2021, continuing strong momentum in mining solutions and leveraging strong global demand for glycolic acid. I would like to cover our 2021 guidance starting on Chart Our outlook has been built in the context of an ongoing pandemic and a non synchronized global recovery with several supply chain stresses. Starting at the top, we expect to generate Between $1,000,000,000 $1,150,000,000 of adjusted EBITDA in 2021. At the midpoint, This represents a 22% improvement over our 2020 results. We are projecting CapEx of approximately $350,000,000 As some of the projects deferred from 2020 are restarted later this year. As a result, We are targeting free cash flow of greater than $350,000,000 which includes disbursements of approximately $45,000,000 in 2020 COVID relief program deferrals. We continue to hold true to the discipline of returning the majority of our free cash flow to shareholders through our dividend and share repurchase programs. On the next chart and consistent with prior years, we're providing a bit more color on the composition of our CapEx for 2021. For the upcoming year, we expect run and maintain capital to be steady at around $200,000,000 As we've said in the For 2021, we are bringing back some of the growth investments which we deferred in 2020. These are the highest IRR and most strategic programs in the portfolio, and we anticipate they will drive in growth programs in 2021. Regulatory and sustainability CapEx of 70 $5,000,000 make up the remainder of our $350,000,000 target. I want to assure you That the organization continues to apply the lessons learned from the cost efficiency and capital frugality that served us well in 2020, all while focused on maximizing the value of our great portfolio of businesses. With that, I'll turn things back over to Mark. Thanks, Mark. Turning to the last chart. As we close our remarks, I'd like to take a moment to Step back from 2020 and take a more holistic view of the 5 year journey we've been on here at Chemours. Since spin, we've been focused on creating a different Kind of chemistry company, a company which could showcase the power of chemistry and delights our customers and investors with a structure and behaviors that fits the world we live in. Starting with our 5 point transformation plan, we set out to change Foundations of the business to build a more focused portfolio, a leaner fit for purpose cost structure and a culture that rewards performance excellence. Not only did we execute rapidly on that vision, we codified these ambitions in our values, customer centered, Refreshing simplicity, collective entrepreneurship, safety obsession and unshakable integrity to ensure that Spirit of the transformation would live on. Next, we set out to invest in our core businesses. We put significant capital to work to build for the future, including our new Ultomera TiO2 line, our Corpus Christi Appian facility and the Chemours discovery hub. At the same time, we invested in changing our business models such as Ti Pure Value Stabilization to help soften the cyclicality that presented issues to our Shareholders and our customers. We initiated our aggressive 10 corporate responsibility commitments, A shining example of creating a win win win for ourselves, our customers and the planet. Chemours is proof that Customer value and sustainability do not have to be a zero sum game. We can create solutions that work for All our stakeholders, it just takes a bit of courage and the conviction to see it through. Finally, we have Always been looking for opportunities to derisk Chemours for you, our investors. The agreement we just struck with DuPont and Corteva last month Does just that. As I look forward now to the next 5 years, I could not be more excited about our potential as a company. From solid and more stable growth of our Ti Pure franchise to the realization of the full potential of the Opteon platform To growth in our APM Polymers, which are at the heart of the engine that will drive the hydrogen economy and 5 gs infrastructure. The best is certainly yet to come here at Chemours. With that, operator, please open the line for questions. Thank you. Your first question this morning comes from John McNulty from BMO Capital Markets. Please go ahead. Yes. Good morning. Thanks for taking my question and congratulations on our really When you think about the TiO2 industry and the up cycle that looks like we're starting to enter at this point, I guess, can you kind of help us to think about how you expect to participate in it with regard to both pricing and Important on volume capture, how should we be thinking about that? Yes, John, great question. As we look at you're right, we're seeing a nice uplift. Q4, I think we saw every segment, every region have significant growth. We're seeing that continue as we go into the beginning This year, so number 1, we're going to participate in the growth. We've been very clear to everyone that We want to get back to our capacity share by the end of this year, beginning of 'twenty two. So that's our goal. So you will continue to see us Move along in terms of that standpoint. So that's where the volume will play for us and we see that very positive. We're getting more people coming into our ABA contracts the same time, so that's giving us confidence as well. From the price standpoint, obviously, we have some adjustments that could be made Inside the ABA contracts, but the basis of those agreements are really to give stability to our customers. The Flex portal obviously gives us the biggest opportunity on price. ADA gives us some opportunity because remember there is adjustments in there based on producer price indexes. But in terms of the Flex portal, which as we said is still going to be a significant portion Of our volume, we have the ability to move that price every day. In fact, we continually move that price and that is moving on a steady stream up right now. So I think we have the opportunity to participate both on the volume side and on the price side. Got it. And that's oh, sorry, go ahead. Mark, I might just add, we have Pricing capability, both in Flex and in our distributor channel. So we do have Ability to take price on a significant portion of our volume, but to Mark's point, our AVA customers Enjoy the protections of long term agreements, which we do as well. Got it. Fair enough. No, thanks for the color. And then I guess as a follow-up on the Fluoro business, first of all, thanks for breaking out the 2 divisions because it definitely helps us to think about it the right way. I guess thinking about it though, like looking at the Advanced Performance Materials side, the margins in middle year are a little bit lighter than what we even Thought they were, but it's obviously it's a snapshot in time right now and it's an odd time to be kind of getting that snapshot. So I guess Can you speak to how we should think about the operating leverage in that business and where when we're back to kind of more normalized volumes like where we should be thinking about the margin Sure, Jim. Maybe let me start there and then I'll hand it over to Mark to give you a little bit more detail. But you're right, so you see the margins that we're sitting on now. Ed Sparks, as he was leading that business and Denise Dingham, who is running our operations, have been really working over the past year, year and a half, Really getting the cost points right inside that business. So we have tremendous leverage from a variable margin standpoint. Demand will move as we drive our demand and we've talked about the demand of the existing business, but also the idea that 5 gs as well as some of this membrane work in fuel cells and the hydrogen economy are going to push demand even further beyond that Are going to be really be the lift that's going to take those margins up. So we anticipate by the end of this year, we should be at a run rate At the high teens of margin, EBITDA margin in that business. And if you look back in time, that's where this business was when you had Higher volumes. Now we've taken that class point down inside the business to give us that leverage to be able to do this. So we need additional volume, but you don't need Ridiculous additional volume to get there. That's why we believe by the end of the year, we'll be at that kind of a runway. And Mark, I don't know if you want to add anything to that. Yes. Mark, the only other thing I would add To give color on the margins this year is, in our focus of running the business for cash, that segment is probably disproportionately affected given the operating leverage. But as we Fortunately affected given the operating leverage. But as we work into the recovery, which is on the way, You'll see the impact there. And to Mark's point, Denise was key to a lot of the structural costs and operating reliability improvements in that business. So you will see that reflected as we get stronger top line And hold the line on cost, you will see that reflected in improved margins. And as Mark said, we think high teens is something we should be striving for this Your next question comes from Hassan Ahmed from Alembic Global Advisors. Please go ahead. Good morning, Mark. Good morning. Mark, wanted to revisit titanium dioxide again. Look, you guys talked about some cost pressures as you look At 2021, as I take a look at sort of spot pricing for a variety of sort of ores, it Seems that there seems to be some overpricing momentum evolving. And on the other side of it, there's obviously been a lot of talk about Higher shipping costs and how those higher costs are playing a role in So price increments for a variety of commodities. So I'd love if you could parse out those 2 sort of cost components, How you guys are thinking about those in 2021 and what you guys may do to offset some of those costs? Yes. A lot of the work we're doing on the TT side this year, and if you look At our capital spend, if you went underneath that, a lot of the CapEx that we're going to be using on the TT side is really driven off of cost To drive down costs. So whether that is to expand our ore capability in our Florida mine, the Florida and Georgia mines Or whether it's to allow us to use the lower grade ore across the broader portfolio of Chemours, That's where a lot of our investments are going. So we're very focused on what we need to be doing to ongoing, not just this year, but ongoing Really operate at a lower cost point within that TT segment. From an ore perspective, most of our ore is already contracted for the year. So that's not going to be an effect on us. I think your hypothesis is right is that ore usually follows pigment prices. So if pigment prices move up, I think over time through the year, you have a hypothesis of that you could see ore prices come up, but that's going to be a minimal effect to us The contracting that we already have in place from that standpoint. And then from a shipping point of view, I think that's something we're all dealing with in terms of Cost from that standpoint. And again, we try to be as efficient and effective as possible around that being a large player in many of our Product lines give us some of the advantages that we have around the shipping side. So I think we have that pretty well in hand from that standpoint and something that We've contemplated inside of our guidance. Very clear. Very clear. And as a follow-up, you guys touched on titanium Volumes, obviously, you guys are in a unique sort of situation where you can gain market share through the course of 2021. What I'm trying to understand is, as I take a look at sort of consultant demand growth estimates for TiO2 globally, you have some sort of big numbers out there for 2021, sort of call it 7%, 8% demand growth year on year. I'm just trying to figure out, Obviously, the market will grow the way the market will grow. I mean, how should we think about how you guys are situated in that growing pie In terms of how you could potentially grow above and beyond the market growth kit, meaning Could you grow like 200, 300 basis points above whatever TiO2 market demand growth is for 2021? Yes. So clearly, Hassan, we see an opportunity in a tighter market dynamic, which we're experiencing today To regain share and therefore to take a disproportionate share of the high grade pigment growth as we go into this year. So that's certainly part of how we're moving forward and that could translate To even lower double digit growth potentially as we look to the full year. So that's the way you should be thinking about it is, Yes, the market growth is certainly a robust year mid or high single digit And we should be above that. Very good. And maybe just one last thing to add to that. Don't forget, we have capacity. So we have the capacity We need to meet the needs. And the way our ABA contracts are structured, if the market grows, remember, we don't have volume commitments with our customers, we have market share commitments with them. And so as the market grows, we grow with them. So as Mark said, we have the capacity and the ability to grow beyond the market growth. Perfect. Thank you so much. Your next question comes from Bob Koort from Goldman Sachs. Please go ahead. Thank you. Good morning. Hey, Bob. I think John maybe asked it, but I wanted to dive a little deeper into the margin potential. I guess I was A little surprised that APM margins were still weak. I think you thought maybe get up to mid teens, which maybe argued at the last TSS was high 30s, low 40s. So when we think about the recovery path back to that $780,000,000 or so of EBITDA for the combined fluoro. Can you give us some sense on what the cadence is to get back there and if you were to get to Same industry conditions as TSS gotten so much better because of Opteon and the new plant that 780 isn't a ceiling, it could be significantly higher? Yes, Bob, when you look at TSS, again, the Opteon plant and the continued growth of Opteon as a product line, obviously, is what the enhanced margin is Obviously, is what the enhanced margin is playing out. So the more volume from Opteon, the more we can run our Corpus facility That really enhances the margin there. On the APM side, we believe we could get to a run rate of the high teens by the end of the year. And then that's not even taking into account the volume that we're really trying to drive on these other areas around 5 gs and membranes that go into fuel cells and hydrogen, which we It's probably an 18 to 24 month kind of growth idea from that standpoint. So we feel fairly confident. And so when you combine those, Yes, we probably had a very high peak at one point of the combined floral businesses. A lot of things played out during that time. And inside of that, don't forget, was a very high HFC price during that period. So that's the one that we have to put over the slide. They're probably not going to see Those kind of HFC prices going forward. But you are going to continue to see really, really good drive on Opteon, you're going to see drive on. And as the quarter comes in, you're going to have less HFCs. That's just the way it works, but you're going to have more on that side. So you might not be able to get to the Stream margin size that we had before, but you're going to see continued improvement in both of these as we go forward. That's helpful. And could I ask on the AIM Act? It looks I guess it's not definitive how it progresses, but it looks to echo what's happened in Europe. So would you See the same sort of 15 year path, 3 year step downs. And is there an opportunity for a quota System in North America like you've seen in Europe? Thanks. Yes, absolutely. That's usually the way that thing works. And now it goes Just to be real clear, the AMAC is in place now. It's been legislated, so we have it. Now the EPA puts the rulemaking in place, right? So the EPA now takes this And they put the rulemaking in place. And in the past, it has been very much a quota based system with a Sliding scale in terms of when that happens. And they're in the midst of doing that now. Obviously, we're getting our voice in there by setting where the base Level is as well as when the quarter step downs will happen. So this is something that will be very positive for us. Great. Thank you. Sure. Your next question comes from Josh Spector from UBS. Please go ahead. Yes. Hey, guys. Thanks for taking the questions. Just a couple on the PFOS agreement that you have with DuPont and Corteva. So part of that is you shared half the ongoing costs to address the heritage liabilities. I'm wondering now, if you had that agreement in place last year, what would be the impact EBITDA and free cash flow, based on them sharing that and how that flows through? And also related with that, your free cash flow guide is at $350,000,000 Does that include the $100,000,000 escrow payment for this year? Hey, Josh. This is Sameet. Let me just address the first question. If you just to level set, right, all the legacy PFAS, be it environmental remediation or the legal costs are in the Corporate and other segment in our disclosures. So historically, the impact you have to divide into 2. The PFAS legal costs on average over the last 5 years of spend has been roughly $30,000,000 And if you look at a fifty-fifty We should see a $15,000,000 benefit to the EBITDA and to the free cash flow from the legacy cost sharing. But I just want to Just point one thing out that given the COVID-nineteen impact on the level of activity in 2020, the year over year impact is probably going to be more than the $10,000,000 kind of a range. But that's how you should think about the impact from the PFAS legal cost side. On the environmental side, a Majority of these costs are actually adjusted out of the adjusted EBITDA. So you're going to see a very minimal benefit to the adjusted EBITDA. It's really a free cash flow story here. So as the money gets spent and the projects cost gets shared, you're going to see an impact on the free cash flow relative to history, but that's very project based. It really depends on the year on year on what projects are going to line down. But that won't be any just EBITDA earnings impact that you're going to see. And going back to your question regarding the guide on $350,000,000 $350,000,000 does not include the $100,000,000 escrow payment. Which is not part of free cash flow, though. It is not part of the cost, yes. Okay. Thanks. That's helpful. And just a question on the split with Fluoroproducts. I'm just Now that you separate the earnings piece of it, which segment has the upstream assets? And how are you transferring the fluorocarbon intermediate Across those segments, I'm trying to kind of figure out, is there any economic impact in that allocation that kind of makes a difference in terms of the presentation? Yes. I'll give you well, Mark, go ahead. Yes. I was just going to say the TSS segment is where the supply chain starts With the manufacturer of HF at our La Porte facility, and so the up Stream of the value chain converting chlorospar into HF and refrigerants starts in TSS and is transferred at cost to our Fluoropolymers business for all of the downstream applications. Thanks. That's helpful. You're welcome. Your next question comes from Arun Dushwana san from RBC Capital Markets. Please go ahead. Great, thanks. Good morning. I appreciate the detail on the guidance as well and congrats on getting through 'twenty. I guess I just wanted to ask, maybe you could parse out the guidance a little bit further by segment. What kind of growth are you expecting In the 2 fluoro segments, do you expect any progress on the illegal import side and maybe some Recovery on the automotive driving fluorochemicals higher. And then similarly with TiO2, many of the consultants are forecasting a pretty sharp recovery in So maybe 7% to 10% price increases. So it just appears that is there any element of conservatism in your guidance? Is the back half weighted? Maybe you can just talk through some of the breakouts on that range. Yes, great question. And obviously, as we work at this stage of the year, as we work through COVID-nineteen and its impact around the world, We think it's prudent to be cautious in how we're thinking about the markets. Clearly, as we talked to earlier, we see good growth, strong industry growth On TiO2 and we see our ability to participate above that based on our available capacity and how our contracts work And how our go to market strategy works. As I look at our fluoro businesses, clearly, We see growth in volume on the auto side. There are some questions around how much of that will be impacted by the current Semiconductor chip shortage, but certainly our view is some of the losses in volume will be somewhat recovered this year and that's We're looking at the market. On our TSS segment, I also wanted to flag, we are seeing some of the roll off Various HFC products like R-twenty two this year. So we have a transition In effect there. And so that's part of the calculus of the full year. And then on TES on APM, our Polymers business, that's been the slowest business to recover based on where we sit in the supply chain. But as we came into the end of the year, We're seeing good growth there. And so I would say as we look at our full year guide, probably the best operating leverage in terms of year over year improvement We'll be in our TiO2 and APM segments and that's how we look at the full year. If you look at the midpoint of the guide, The $1,075,000,000 versus last year, that's about a $200,000,000 improvement in EBITDA. And when you consider that, that absorbs some of the That we deferred last year of about $120,000,000 or so that's back in our numbers. That's all part of the calculus of our year over year guide. So we're seeing great demand signals across all of our businesses and we're very encouraged by that. We think it's prudent Be cautious where we are at this point in the year, given COVID and given some of the supply chain Stresses that we're seeing early in the year. Your next question comes from Duffy Fischer from Barclays. Please go ahead. Yes. Good morning, fellas. Hey, Doug. First call around floral. So particularly in Europe, can you Talk a little bit more specifically about what the step down will do in 2021 with your view versus the legal imports, what that does to your overall volume? And then maybe parse out, price was down 7% in the 4th quarter. What part of that was mix? What part of that was just Auto reductions that you've got built in year over year and how much of that was baseline? Yes. Duffy, I'd say that what we So in the price down is a mix of contractual price reductions as well as Some customer mix on the blend side that we're seeing. To your question around You know the step down in the quarter. We think that's certainly helpful and we're seeing some Green shoots as it relates to the blends market in Europe today. Clearly, We need more effective FTS regulations in terms of how they work. We are all over that. And as said previously, we expect that we throughout this year, we should start to see some traction in that regard. So I would say in general, our view is The blends market, we're seeing some positive signals, but probably too early to call in terms of the overall Okay. And then just one housekeeping one. I think I saw you only give us 2 years of history with the new segments. 1, is that correct? And 2, if it is, what are you planning to give us as far as historical data, Quarterly annual and when should we expect that? Yes, Samir. Yes. Duffy, in the 10 ks that we will file, you will see a 3 year data on that one for the 3 segments for the 4 segments. Okay, great. Thank you, guys. Thanks, Stephanie. Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead. Thank you and good morning everyone. I just want to make sure I fully understood the modest cost step up that you're Talking about the titanium section in 2021. And maybe you could just help us understand, presumably there's some unit cost benefit from the significant volume that you're planning on getting back. But is this modest cost step up going to offset that such that we should be modeling flattish unit costs in 'twenty one versus 'twenty? Or how should we be thinking about it? Yes. Just to be clear, Vincent, I we see significant operating leverage in this business. And while we are Flagging that we are in an inflationary environment on some of the inputs. As Mark said earlier in the call, we have significant Contractual commitments around input. So we certainly wouldn't be expecting that to overshadow The EBITDA improvement in the segment. And our view is we should be throughout the year Back to sort of a mid-20s EBITDA margin in this business. Okay. That's very helpful. And then just as a follow-up, Could you just help us bridge the free cash flow year over year? I see the CapEx is up, but obviously the EBITDA is going to be up. So How much working capital are you anticipating coming back? And it sounds like the legal issue is below this line. But what else is going on in that bridge year over year and what do you anticipate doing with your free cash flow? Thank you. Yes. So maybe I'll start there and certainly Sameer can add Additional color. If you look at the guide of $350,000,000 and then you add back some of the payments that we deferred In COVID that we're paying this year of about $50,000,000 your starting point is about $400,000,000 Clearly, we are participating In the upside on the revenue as the market recovers and that is a use of working capital, Our expectation is we through working capital productivity, we'll be relatively flat on working capital. But clearly, as we try to make improvements there or continue to focus, that could be upside beyond the $400,000,000 and That's certainly the intent as we sit here today. Sameer, I don't know if you have any other comments. Yes, Mark. I think you hit it. Vince, I just want to clarify 2 quick points. The deferment of the payment that Mark just talked about, these are all the COVID-nineteen programs that are offered in different geographies. So these are not any kind of business costs that's being pushed out. Most of these are in the form of taxes that you will see. Again, it's all kind of disclosed in our 10 ks, will be disclosed in the 10 ks that we'll see later today. And the other point that I would say is as you kind of think about the free cash flow, I just wanted to ground you back into a free cash flow conversion, right? I mean, even when you look at a 350 And the $45,000,000 of the deferred tax payments that we'll make in 2021, which are tied to 20 We get to free cash flow conversion well north of 40%. So as you're going to think about our free cash flow, I would ground you back into the free cash flow conversion as you're going to think about it. Thank you. That's all very helpful. I appreciate it. This concludes the Q and A portion of today's call. And I would now like to turn it back Mark Bergano for final comments. Thank you, Carol. And listen, thanks everyone for joining us today. As you can probably hear from our voices, We're very happy with the way Q4 ended. We're very happy the way 2021 is starting and we're even more optimistic of where we think The year is going to go. So thank you to all of our employees who have just really done everything they could to make 2020 As successful as it was, but we are very, very excited about where the prospects of this company are and where we can really take 2021. Ladies and gentlemen, this concludes today's conference call. Thank you once again for participating. You may now disconnect.