Earnings Call: Q3 2020

Nov 4, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the Chemours Company's 3rd quarter earnings conference call. At this time, I would now like to hand the conference over to your speaker today, Jonathan Locke, Vice President, Corporate Development And Investor Relations. Thank you. Please go ahead, sir. Good morning, and welcome to the Chemours Company's 3rd quarter 2020 earnings conference call. I'm joined today by Mark Vergnano, President and Chief Executive Officer Mark Newman, Vice President and Chief Operating and Sameer Rahan, Senior Vice President And Chief Financial Officer. Before we start, I'd like to remind you that comments made on this call as well as the supplemental information provided in our presentation and on our website contain forward looking statements that involve risks and uncertainties, including the impact of COVID 19 on our business and operations and the other risks and uncertainties described in the documents Chemours is filed with the SEC. These forward looking statements are not guarantees of future performance, are based on any forward looking statements as a result of future developments or new information. During the course of this call, management will refer to certain non GAAP financial measures that we believe are useful to investors evaluating the company's performance A reconciliation of non GAAP terms and adjustments are included in our release and at the end of this presentation. With that, I'll turn the call over to our CEO, Mark Fernandez, who will review the highlights from the third quarter. Mark? Thank you, Jonathan, and thank you everyone for joining us this morning. As I could imagine, many of you were up late last night monitoring the presidential election here in the United States. In spite of continued global macroeconomic weakness, and uncertainty, we continued to deliver solid financial results on the back of strong execution in the third quarter. I am proud of this company's continued resilience and determination through this unprecedented period of economic and social disruption. The tough measures we took earlier in the year to address the COVID 19 pandemic have paid dividends across the business. As we move into the early stages of a recovery, we feel well positioned in all of our end markets. Our true north remains the health of our people and support of our customers and communities. It has served us well through the beginning of the pandemic and will continue to be our guide as we forge ahead. Looking now to the results, the global economy continued to stabilize in the third quarter and in many sectors we began to find some footing for recovery. It has certainly not been a synchronized bounce off the bottom, but demand has started to pick up in a way which suggests some momentum ahead into 2021. This will obviously be impacted by the course of the COVID-nineteen pandemic and we continue to actively monitor regional and national actions taken in response to increasing cases in different parts of the world. I'm happy to report that we delivered $210,000,000 Q2 and slightly down from $248,000,000 in the prior year. More importantly, we continue to see the benefits of our cash flow strategy and delivered $252,000,000 of free cash flow in the quarter. This represents an increase of $92,000,000 from the same period in 2019. Our continued strong cash generation was driven by CapEx tightening cost discipline and improved operating performance across the portfolio. We remain on track to deliver on our $160,000,000 cost savings target and $125,000,000 reduction in CapEx for the full year. As we move into the early phases of the recovery, we continue to maintain flexibility across the supply chain. This gives us the ability to find growth where demand has returned, while managing inventory levels for the total enterprise. With liquidity of $1,700,000,000 at the end of Q3. On our revolver in the third quarter. Finally, we published our 3rd annual corporate responsibility commitment or CRC report in September. I'm extremely proud of this year's report. If you haven't had a chance to review our report in detail, please see the Investor Relations section of our website. Let's turn to the next chart, and I will take you through our CRC and our goals in more detail. Our CRC represents our commitment to responsible chemistry. It's our collective promise to the world and lays out 10 goals, We call these our 10 by 30 goals, and they cover 3 distinct pillars: inspired people, shared planet, and evolved portfolio Each goal speaks to a specific area where Chemours will make an impact on the world and contain specific benchmarks we are working toward. We have mapped each commitment to specific UN sustainable development goals to help our stakeholders understand our contribution to the ideals we are committed to transparency. As you read these goals, I hope that you share my sense of optimism and purpose in our CRC. I also hope you agree that these goals are the hallmark of responsible chemistry and something that everyone in our industry should aspire to. Turning to the next chart. So what progress did we make in 2019? I'd like to share 6 of our achievements here across our 3 pillars, which I think speak to the type of change we're trying to drive over time. Starting with our inspired people pillar. In 2019, Komor's U. S. And Mexico were both certified for the 2nd consecutive year by great places to work, with Chemours Mexico ranking in the top 50. In addition, 12 Chemours facilities were recognized by the American Chemistry Council for outstanding achievements and safety, a testament to those teams who are living our holistic safety value ensuring that we have a strong culture and are a magnet for talent in the chemical sector is a very high priority for me as I think about the long term vision for Chemours. The inspired people pillar is critical to ensuring that we continue to track and retain the best talent we can as a company. Moving to our shared planet pillar, Kmoore's developed OCTEON reduce global warming potential of refrigerants. In 2019, Opiant adoption helped avoid the equivalent of 27,000,000 metric tons of CO2 emissions, I'm also proud to say that 48 percent of our products were sold in recyclable packaging, an achievement both our customers and supply chain partners footprint and impact, but to invent products which can contribute to a healthier world. Finally, our evolved portfolio pillar In 2019, the Society of the Chemical Industry, America's group, more FBI, presented Chemours with the more metal. Named for the founder of Intel Gordon Moore. The award was presented to John Swarrin, one of our technical fellows for his work on Teflon Eagle Elite, a plant based durable water repellent finish. We also made significant progress in 2019, base lining our supply chains sustainability performance, increasing by 9 fold our coverage to about 40% of suppliers by spend. Our progress here helps us to ensure that one day we can stand behind not just the sustainability of our products, but the ingredients and supply chains that are used to create them. By creativity, teamwork and overall hard work. It's still early in our journey, but we're off to a solid start. During our next few earnings calls, I will share specifics Before turning things over to Sameer, I'd like to close my introductory remarks with a quick recap of our COVID-nineteen response plan that we outlined earlier in the year. 2, maintaining a strong balance sheet and liquidity position and 3, focusing on cash generation in 2020. As a company, we have been focused on executing against all the elements of this plan And as you can see, we remain on track headed into the fourth quarter. The success of this plan has required difficult choices hard work and shared sacrifice from all corners of Chemours. So I would like to acknowledge all our team members for their contributions thus far in the year. With that, I'll begin my comments on Chart 7. 2nd quarter revenue was $1,200,000,000, down 11% from 2019. Adjusted EBITDA declined $38,000,000 to $210,000,000. Margins declined slightly on a year over year basis to 17%. This decline in margins is primarily driven by lower margins in titanium technologies and chemical solutions, partially offset by higher margins in fluoroproducts. GAAP net income was $76,000,000, while adjusted net income was $78,000,000. This resulted in GAAP earnings of $0.46 per share, flat relative to last year, and adjusted earnings of $4.7 per share. Free cash flow was $252,000,000, an improvement of $92,000,000 from the same quarter in working capital discipline and CapEx management, which we announced earlier in the year. Given the current uncertainty in the global macroeconomic environment, we intend to continue on our strategy of running a 4th quarter dividend of $0.25 per share. This is unchanged from the prior quarter and will be payable to shareholders of record as of November 16. Turning to Chart 8. 3rd quarter 2020 adjusted EBITDA was $210,000,000, down from $248,000,000 in third quarter of 2019. Price was a headwind for all three segments in the quarter on a year over year basis. Also on year over year basis, volume was down in Fluoroproducts And Chemical Solutions more than offsetting high volume in titanium technology. Currency was a small benefit in the 3rd quarter, primarily driven by a stronger euro versus the U. S. Dollar. Lower costs across the company and stronger operating performance in Florida products combined for a $66,000,000 benefit in the quarter. Before we leave this chart, I do want to highlight that sales volume in all three segments experienced very strong sequential improvements, with the most significant being a 26% sequential improvement in Titanium Technologies. This strong sequential demand resulted in an improvement in both adjusted EBITDA and margins. I'll cover liquidity starting on the next chart. As Mark said in his opening remarks, our liquidity position remains strong. We ended the quarter with $956,000,000 of cash on hand after using $300,000,000 to repay our cautionary revolver draw from earlier in the year. 3rd quarter operating cash flow was $299,000,000, while CapEx was $47,000,000. $41,000,000 was a return to shareholders in the form of dividends. Free cash flow was $252,000,000, a $92,000,000 improvement in comparison to the same period last year. This is the 3rd best free cash flow quarter since spin off. Really highlighting the hard work and focus of everyone in the company to drive free cash flow under tough and volatile macroeconomic conditions. We ended the quarter with net debt of $3,200,000,000. We continue to believe that a balance sheet provides us ample flexibility to navigate these uncertain times and are pleased with our cash flow generation thus far in 2020. Turning to Chart 10. Our leverage profile, maturity Towers and covenant headroom continue to be sources of strength for comores, even in these uncertain times. In total, we have approximately $1,700,000,000 of liquidity including $956,000,000 of global cash and Our now undrawn revolver has availability of $702,000,000 net of outstanding letters of credit. Our senior secured net leverage ratio is 0.8 times and continues to be well below the 2 times maintenance covenant levels. Our maturity towers are well balanced and spaced with our nearest maturity in 2023. I'll now turn the call over to Mark Newman to cover our segment results. Thanks, Sameer. I'll commence my remarks on Chart 11, but let me start by recognizing the Chemours team that since the 1st days of this pandemic have been focused on executing our response plan. I'm very proud of We are encouraged by the significant sequential improvement in all regions and most of the segments. We recognize that we continue living and confident in our in the Fluoro Products segment reflect the uneven pace of the recovery from COVID-nineteen. A stronger than expected recovery in refrigerant in mobile applications. This was more than offset by weaker polymers demand due to our position further back in the supply chain and a delayed demand recovery in other polymer segments. Floro Products net sales in the 3rd quarter were $533,000,000, down 16% from the 3rd quarter of 2019. Pricing in the segment was a 5% headwind, driven by mix and contractual price adjustments. Adjusted EBITDA came in at $112,000,000 with margins of quarter reflects a 15% sequential improvement, but an 8% headwind in comparison with the same period last year. The lower net sales were partially offset by significant improvements in operating performance, the ramp up of Opteon production at our Corpus Christi site and cost reduction efforts across the business. Given the current state of the global pandemic, Aftian sales are dependent on a sustained recovery in automotive bill rates globally, which we believe is underway. We will continue our efforts and believe that our efforts we expanded our market access in the fast growing auto aftermarket in the U S by working with top retailers including AutoZone and O'Reilly's. In the audit OEMs, we are focused on maintaining profitability that allows us to continue to given our position in most supply chains but we remain well positioned and are actively managing our supply change to adjust to changing customer needs quickly. We continue to see real long term potential in the growth of Fluoropolymers tied to the Hydrogen Economy and 5G through our venture activities. As Mark mentioned earlier, we continue to be laser focused on delivering solid operational performance alongside productivity gains to bolster margins in our Fluor businesses. Moving on to our Chemical Solutions segment on chart 12, sales in the 3rd quarter were $88,000,000, down 37%, reflecting the lower revenue from our sale downs, driven primarily by COVID-nineteen, which started in the second quarter, continued to impact mining solution results in the third quarter. Adjusted EBITDA was $12,000,000 and segment margins of 14% declined 200 basis points from 16% in the prior year. This result reflects licensing income recognized in the same of last year partially offset by our cost saving efforts. As we move forward, demand should normalize as customer minds return to full operation. We continue to focus on our full year cost reduction actions cash generation and operational readiness. Finally, we remain on track to shut down our inland business at the end of this year. I'll cover our titanium $612,000,000, almost equal to that of last year. Volumes were 4% higher on a year over year basis in as we move past the Q2 bottom on the back of the stronger coatings, plastics and laminate demand. Price was stable on a sequential basis, a product of our Thai pure value stabilization strategy, and AVA contract structure. RINs related to COVID-nineteen across some end markets and segments. We are working with our customers in real beyond our AVA contracts, the Flex platform allowed us to serve non contracted customers as they to reach additional customers and territories Segment adjusted EBITDA of $129,000,000 resulted in margins of 21%. This 200 basis points sequential improvement reflects the benefit of improved circuit utilization and higher volumes, partially offset by choices to improve cash flow in 2020 and ready our we continue to believe we're in the beginning stages of a broader market recovery. As Mark mentioned, this could be impacted by We will King Capital. With that, I'll turn things back over to Mark. Thanks, Mark. Turning to the last chart, I'd like to end the prepared portion of our remarks today with a few thoughts on the shape of the recovery and the outlook more broadly. From COVID-nineteen to social justice to the unusually strong hurricane season. However, the people of Chemours had risen to each and every challenge with incredible determination. It has been inspiring to see this team undeterred by the events 2020 and continuing to press forward on behalf of our customers. Chemours is adapting in real time, and we have used actually improve our productivity over the course of the last several months. I expect that many of these changes will become permanent and will increase the clock speed of Chemours going forward. Looking ahead, my view is that we continue to be in the early stages of a recovery. We believe improving. As a company, we remain focused on the things we can control, including operational excellence, working capital and inventory management, and supplying our customers with what they need. These efforts are directed at maximizing cash generation, which gives us strategic flexibility and staying power through these uncertain times. While the balance sheet provides flexibility in staying power, we must never lose sight in what gives us our true strength. We have the best people, technology, products of anyone in the industry. We continue to drive from low cost, invent new and exciting products and bring to life our vision of responsible chemistry. These attributes are foundational to the company and give me confidence that our future is bright and the best is yet to you. And your first question here comes from the line of John McNulty from BMO Capital Markets. Please go ahead. Your line is now open. So maybe the first one, with regard to the price mix in Titanium Technologies, it was down about 5%, which seemed actually a little bit lower than what we would have expected So can you speak to the dynamics that are driving that right now? And also how we should be thinking about that going forward? And if if we, if we, if there's any kind of light at the end of the tunnel in terms of maybe starting to see that turn up as well? Yes, good morning, John. I guess the best way to look at that first is look at it sequentially, right? So if you look at it from second quarter to third quarter, you got to strip out everything in our price is both minerals as well as TiO2 pigment. So when you strip out minerals, which is primarily zircon, You're more in the range of about a 1% delta second quarter to 3rd quarter. And if you dig into that one more time, what you'll see is that primarily all product mix. At all. It's all product mix from that standpoint. The 5% you're talking about is really year on year. That was all from the end of last year. If you remember, really tried to drive market share specifically in the plastics market where we lost a lot of share and that really occurred at the end of 2019. So you're not seeing any delta in price going on right now. Got it. That's helpful. And then, and just maybe as a follow-up, like in the titanium technologies area, look, you had some really impressive the volumes in the quarter. And it looks like there's a lot of puts and takes going on right now. I mean, it certainly looks like inventories are low. You've got relatively strong demand, but you've got COVID resurging, I guess. Can you give us your thoughts on how to think about whether we're going to see the usual seasonal dip in the fourth quarter and maybe early thoughts on 2021 when you're thinking about volume growth in this segment? Yes. I'd say the volume across TiO2 for us has been really demand related. So you still continue to have strong coatings demand. DIY continue to be strong in third quarter. Contractor, coatings have been picking up. We saw significant laminate improvement. So a lot of our laminate customers with furniture and flooring really picked up. That's more Europe and Asia, but that was a big pickup for us, at same time. So we're seeing demand, pull through being very strong. When you look at it from a regional perspective, John, double digit growth across every region, whether it's North America, Asia, including China, Europe and Latin America. So we're seeing very strong pickup from a volume across all the segments, across all the regions that we can we think is going to continue. And because of that, we do not feel at this point in time that we're going to see a seasonal drop in the 4th quarter. Your next question comes from the line of Duffy Fischer from Barclays. Please go ahead. Your line is now open. Yes, good morning, Fellas. Couple of questions are around Opteon. So, first one is just relative to before COVID in the mobile market, how close are we back to, the same levels of volume? Yes. So, Apteon recovery was quite significant sequentially. We probably see a doubling of volume sequentially as the automotive plants came back on Duffy. But when you look at global auto demand, year over year. We're still down about 5%. The results in the quarter were aided by some of the good work we've done in the aftermarket space, with, with, particular here in the U. S. But on an auto OEM basis, we continue to be surprised to the upside in terms of bills, but obviously something we watch very closely here as we go through war with respect to COVID-nineteen and the impact, say, in Europe. But so far, have been very encouraged by strong auto especially in the U. S. And Western Europe. But we're still down in the quarter year over year. Okay. And then with the step down coming in Europe, the first step down we had was very beneficial for you guys, but we didn't have the legal report issue at that time. With that overlaying it, do the illegal imports do you think get most of the benefit of the step down or do you think you guys will still see a big bump in the HFO from that step down next year? Yes, I would say we're encouraged by the fact that the step down is coming and the efforts continue to ramp up around illegal imports. As we've said in prior calls, we think this is going to take some time to bear fruit. And obviously, there's still a legal product in the market in spite of the step down. So My sense is Duffy, this is going to take more than 1 or 2 quarters. And we certainly don't see any further deterioration in terms of year over year performance related to illegals. And so with the step down and the work we're doing on illegals, we would expect to see continued strengthening, but it's going to be a slower recovery there. Okay. And then maybe sneak in one last one. DuPont's CEO on their call said that they've had recent conversations with you guys about a potential deal. So from your side, can you just frame what you think the likelihood is and kind of what the framework of a deal might look like? Yes, Duffy, it's Mark. We continue to have conversations. Ed and I continue to talk. We talked this week So from that standpoint, we're trying to make progress there. As I've always said, the key for us is to make sure that we have if we come up with an agreement that it's something that our shareholders will embrace, right? So it's got to be shareholder friendly for us. And I know Ed feels the same way. It's got to be share holder friendly for him. So to us, that's the bellwether for us. This is going to be something that our shareholders would look at and say, this is something that that works for them. And so these are complicated and they just take, they take time and, we keep working through and I think we have less issues now than the first time we had talked to you guys about this. So I'm optimistic we can get there, but it's always hard work. From that standpoint. But yes, we are, we continue to talk and our goal is to get this thing done only if it could be good for our shareholders. Great. Thank you, guys. Your next question comes from the line of Josh Spector with UBS. Please go ahead. Your line is now open. Yes. Hey, guys. Thanks for taking my question. Just wondering within fluoropolymers, you give us some granularity around how much the automotive exposed polymers were down maybe relative to the rest of the polymers segment? And how you're thinking about that developing over the next quarter in terms of a lagged recovery based on where you are in the supply chain? Is that something you see getting better next quarter or is that still a longer term recovery there? Thanks. Yes, I would say auto represents probably close to 25% to 30% of our Polymer business. So it's a meaningful portion And obviously within the polymer space, we tend to be at a Tier 3 level in the supply chain. So further back, within the quarter, while we were down sequentially on polymers, we did see continued strengthening in the quarter in Q3 So as we look to Q4, we would expect to see continued strengthening there. And shifting gears in terms of your CRC goals, I thought the sustainability offering target was kind of interesting. You're aiming to get to around 50% of sales, meeting UN Sustainability goals from your earlier report, you're around 10% or so, I think. That's a pretty big gap. I mean, I'm assuming Opteon growth within the mix of the factor in closing that gap, but I'm wondering outside of that, what do you guys do to get there? Yes. And so, Geoff, for Mark, I sit on top of that team in terms of every month, we go through our progress there. And we have interim goals to get to, our 2030 goals. We are on track in all our interim goals. I feel very confident we're going to get to 50%. Yeah, Opteon is going to be a big play on that. We have a lot of offerings on the both on the TT side as well as in the Fluoropolymer side. They're going to be additive to this. So this is something we keep in front of us all the time. And our new product development, which we're gonna really drive forward. Don't forget, we are the leader in membranes in the hydrogen economy. Our nifion membrane is sort of the bellwether, if you will, both on fuel cells as well as on hydrogen generation. So that's going to be a key part of our growth as well. Your next question comes from the line of Bob Koort with Goldman Sachs. Please go ahead. Your line is now open. Thanks very much. I was hoping maybe you could help me dimensionalize the upside in titanium technologies. You've gone through the stabilization process and proved that you can key prices at a pretty healthy level even when demand disappears. Just curious, how do you think about the upcycle and demand comes back. Obviously, you guys get a disproportionate amount of the volume benefit. But is it an issue where you can get back into those sort of mid 40s EBITDA levels? Or because there won't be as strong of a price component to an upcycle, should we think about something more moderated? Yes. I think, Bob, you're going to have to think about our business being more like the mid to upper 20s in terms of EBITDA margins. That's the more logical place for us to be. As we put these ADA contracts in place for our customers, number 1, it gives them stability. It also gives them the ability not to add inventory when they don't need to. So we think the benefit of sort of cutting down this by stock destock kind of cycle, is worth that sacrifice from that standpoint. So these will be very healthy margins, but they'll be more like in the mid-20s to upper 20s as we're going forward. And as you see, we are seeing the volume start to build. So building with our customers is Most of this volume increase is happening with our AVA contract customers, right? So picking the right customers and working with them is really what's going to benefit us. Got it. And Martin Newman, I think you said something about your situation in the fluoropolymers where your position is in the supply chain means a slower recovery. Can you explain maybe a little bit more specifically what you mean there? Yes, I just mean, we are supplying to folks who make parts for the auto industry. So we're lower we're not direct so opt in, we supply directly to auto OEMs, in the polymer space as it relates to auto, we're supplying to folks who are making components for auto OEM. So we're further back in the supply chain. And my only point there, Bob, is the recovery is a phase delay because we're further back in the supply chain. So when you look at Q2 polymers, They didn't they weren't as impacted by the disruption with COVID-nineteen as say Opteon was. Optian came roaring back in Q3 and polymers is seeing a lagged recovery. So I'd say as it relates to auto, expect to see more of a lag there. And should it be a whipping effect then when it kicks back in? There should be that same sort of surge that you've seen in Opteon or no? We would expect that the volumes go up from here, yes, from Q3 for sure, yes. Yes. Your next question comes from the line of Jeff Zekauskas from JP Morgan. Please go ahead. Your line is now open. Thanks very much. If I think about Chemours and some historical firms, maybe your TiO2 volumes peaked in 2017, and maybe there are 20 to 30 percent lower today. In the old days, people used to describe the Titanium dioxide industry as growing at about a 3% rate. Do you think the industry has grown at a 3% rate since 2017? Or if it hasn't, what rate do you think it grown at and how has the industry changed over time and you're placing it? Well, for sure, this is a GDP growth industry. Jeff. So from that standpoint, we're always going to be right around GDP as an industry. Some years, it's a little bit above some years is a little bit below. And again, one of the concepts we had with value stabilization was to stop the destocking restocking phenomenon, which would drive volumes way above GDP some years and way below GDP other years. So I think the best way to look at this industry is GDP growth. That's how, at least, how we look at it from that standpoint. And our goal is going to be, can we at minimum be at that kind of growth rate and where we can gain market share because we have better products, better service, or the customer mix that we have is going to be growing faster. That's how we're going to be above GDP going forward. But I think as an industry overall, that's the best way to think about it. Okay. And in your negotiation with DuPont, Is it fair to say that your objective is to have some kind of cap on liabilities? Is that what you're trying to achieve? Or you're trying to achieve something else? Again, I'm not going to go through the details of the negotiation, but we're looking for some level of sharing between the 2, because as you know today, we have, those liabilities are heading toward us. And so from that standpoint, what's most important to us is the level of sharing. And I think that's, that's high on the list for us. Your next question comes from the line of Vincent Andrews from Morgan Stanley. Thank you, and good morning, everyone. Just as we sit here in November, I know that you're probably starting your 2021 planning process, I wonder if you could just give us sort of some dimension around how you're thinking about both the cost you took out this year as well as the cap that came out this year, how much of that you might be able to keep out permanently versus springing back in 'twenty one? And then to tie that into titanium, When do you think you'll get back to the plan you were on coming into the year, which was to focus on really getting that market share back? Thanks. Yes. Maybe just to get started on that, and then I'll ask Samir to sort of some a little bit of color from that standpoint on the cost. I you're right. We're no different than everyone else. We're starting to do our planning sort of hard to do perfect planning when you're in the middle of a pandemic, but we do see the recovery happening. We see that continuing here in the fourth quarter. Which I think is going to give us confidence going into 2021. We will continue to look at opportunities to gain market share on the TT side, as we've said. We did not want to be disruptive when the markets were sort of influx as they've been, but I think we're getting to a point now where we're seeing things get a little bit more stable. We're able, as you can see from our volumes this quarter, I think we're going to be able to to show some level of market share gains without having to do anything with price, basically by driving with our customers, that that we're working with, as well as seeing some recovery in some of the markets where we have some advantage like laminates. As from a cost perspective, maybe I'll ask Samir to talk a little bit about the cost and the CapEx side, at least of how we're thinking of that right now. Sure. Thanks, Mark. Hi, Vincent. And if you look at the actions that we took this year on a cost side, roughly $160,000,000 worth of out, I would say 80% is delivered by Q3. And as we're going to start looking at 'twenty one, we expect to retain at least 20% of that next year. Still, you know, we're working on things to see what, how we can increase, but at least 20%, we feel pretty comfortable and confident that we can retain in 'twenty one. And then as you're going to look at the CapEx side, we reduced the CapEx by $125,000,000 this year from the initial guide that we had given of $400,000,000 for CapEx, the way you should think about Minson for us is, as we have told in the past, run and maintain roughly 2.25 kind of a range. And have another $50,000,000 tied to the corporate responsibility commitments that we have made. And then we do have growth initiatives that we want to bring along. But, as we give the 21 guide, we'll be a lot more transparent and give you guys the building blocks. But that's how you should roughly think about this thing. $225,000,000 roughly run and maintain $50,000,000 in the end of the zip code. It varies year over year, but that's a corporate responsibility commitment, capital, And then we do have some really high return growth stuff that we want to bring back. Okay. Thank you very much guys. Your next question comes from the line of Pijay Yveshikar from Citi. Please go ahead. Your line is now open. Hi, good morning, Mark. It's there, Petri on for P. J. Good morning. On the noted OCTEON expansion into AutoZone in O'Reilly, what is the addressable market opportunity there and what kind of growth rates should we expect? And is that retail exposure a drag or benefit to current margins? Yes. So that's a big opportunity for us. And I don't know if Mark wants to add anything to the tail end of this one. But that's a huge opportunity for us. And remember, still early innings on the aftermarket, right? Because it's only been just a few years since Apteon has been at the OEM level. So you can look at this as a nice growth rate they are very solid margins. So these are plus margins above, what you would have at the OEM level. And the market is gonna continue to grow as you have more and more vehicles out there, that have Opteon in them. So, having this direct channel, if you will, to these 2 very, very key players is extremely important for our future growth. And I don't know, Mark, if you want to add anything to that. Yes. Mark, the only thing I would add is obviously you know, you know, the SAR rates here in the U. S. And Europe. So think of that all of the U. S. By 2021 being on HFO technology and then think of that car part growing every year in terms of HFO including Opteon usage. So significant car park already in the U. S. And Europe and growing every year at U S. R. So pretty significant growth near term and this is good business for us. Helpful. Thank you. And then secondly, on TiO2, do you expect continued margin expansion in the fourth quarter, similar to competitor based on current order books? Well, we had our margins, you saw our margins improve from, obviously, last quarter to this quarter. I think our margins will be similar as we're going into the fourth quarter. Where are you going to see the change in margin in terms of how that starts moving up? Is as we get more utilization on our facilities. So as volumes come into our, come into Chemours, where you're going to see the margin expansion. And we believe that'll be more in line with 2021 than you'll see in the fourth quarter. And Mark, the only other thing I would add is, we continue to focus on running the business for cash. So we make those trade offs as we look at margin versus cash as we go into the end of the year. Your next question comes from the line of Arun Viswanathan from RBC Capital Markets. Please go ahead. Your line is now open. Great, thanks for taking my question. I just wanted to get your thoughts on, maybe some of the the consultant outlooks in TiO2, it looks like, maybe they have a small increase on price next year in the back half, maybe $50 a ton or 2%. And then they also have maybe a larger decrease in feedstock assumptions, maybe $100 a ton or so, And I guess, are you seeing that kind of trends in both in pricing as well as costs over the next year? Is that something that, you think could happen or could we see a larger increase in the back half of next year in pricing? Us? So I'd say from a pricing perspective, we did see some nominal increases on our Flex channel in the quarter. So we're seeing Flex is a portal that we can use as market tightness goes forward. So my Mark commented right at the beginning that on an account level basis, prices were stable sequentially, but we are starting to see some indications in the Flex channel that we could take price over time. As it relates to ore, we remain well supplied on ore and we see ore as quite stable in the current environment. So I wouldn't comment just early on in terms of what we would expect for ore, but other to say that the market seems quite stable to us today. And then just as a follow-up, could you also maybe provide some color on where you think inventories are in different regions as well as exports it appears that the industry has gone through a couple of years of pretty sizable destocking yet, maybe there's some skewness in in these days sales measures because demand is down. So would you say actual inventories or kind of normal or high or low or how would you kind of characterize the inventory picture out there? Yes, I'd say sitting here today, we think inventory levels are pretty normal. Obviously, there was quite a bit of destocking last year. So we certainly are not dealing with a significant inventory overhang in our view. And obviously, you saw the robust nature of sales improvement sequentially. And as that continues inventory from a days perspective would continue to come down. So our sense is We're in the early stages of a recovery. And, we see volume to the upside from where we sit today. Hey, Arun, it's Mark. Just to add to that, remember, the value proposition that we have in our ADA contracts is that customers don't have to add inventory. So they don't have the stock up, right? There's no logic for them to have to do that. They're not having to get in front of a price increase. So Again, we believe that our customers, their volume is really demand related. And if we look across all the regions, we look across all the segments. We really believe that this is demand related, not inventory related. That said, as we start seeing, and as I mentioned early on, we see a fourth quarter that is not your typical fourth quarter of seasonality. Appears to be continued strength in volume in the fourth quarter. We expect that, hopefully to continue into the first quarter assuming that there's no issues with COVID-nineteen going forward. Our job is to make sure we have the inventory in our side available to our customers for their growth. So as we look at how to manage cash for the rest of the year, Mark said it really well, we are managing for cash, but at the same time, we want to make sure we have the our customers need as they grow into the next quarter. So we're always looking at that, but inventory in the channel I think it's very normal. In fact, I'd say is not anticipated, if you will, inventory bills, as you would normally see in a typical cycle, because of the nature of our ADA contracts. Great. Thanks. Yes. Your next question comes from the line of Roger Spitz with Bank of America. Please go ahead. Your line is now open. Thank you, and good morning. How much zircon are you producing and selling in Metric tons? Is that most all from the in Georgia mine or is it also from the old Starke, Florida mine? It's from both. It's from our it's from our own mines, down in Florida and Georgia. We don't break that out, right now, Roger, from that standpoint, but all this Earthcon that we produce is out of both Florida and Georgia. Got it. And in terms of the Nat FiAN membranes, can you give any sense of what percent of four products sales that is? I mean, is this a couple of percent or less meaningful or more meaningful? Yes, I would say we don't break out that product line usage, but it would be a more meaningful percent than what you quoted. Yes. And I'd say, Roger, Nathan, from a membrane standpoint, is something that we're probably going to bring forward, early next year to everybody and talk a little bit more about because it's always been, a product line that we've had, it's been increasing around the fuel cell side, but really where we see the biggest is going to be a hydrogen generation. So we'll probably break that out to you guys in a maybe a very specific way to to share where we see the growth opportunities on Nafion sometime in the first half of next year. Okay. So it's not just using chlor alkali membrane cells right now. Saying it's also used in some fuel cells as well at the moment? Yes, it's used in all three, right? It's used in chlor alkali, which is the traditional plate for it. It's used in fuel cells. Remember, DuPont was one of the originators of fuel cell technology. So it's used in fuel cells and it's used in hydrogen membrane. All three today. Questions at this time. I will turn the call back over to Mark Frgano, CEO, for any closing comments. Great. Well, thank you all for taking the time this morning. I know we're in some strange times. I don't know if I can get any stranger after going through the, what was a wild night the presidential election, and I have a feeling it's going to be a wild few days. But I do want to just reinforce, we feel very good about the quarter we just had, we feel very good about where things are leading toward the next quarter. And hopefully, our goal is continually to be managing this business for cash, making sure that we're delivering everything that our customers need and making sure all our employees are safe as we get through this pandemic. So all I'd say is, thank you all very much for your time. Thanks for your interest. Please stay safe and stay well. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.