Earnings Call: Q3 2019

Nov 5, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Chemours Company Third Quarter Earnings Call. At this I would now like to turn the conference over to your speaker today. Jonathan Locke, Vice President, Corporate Development And Investor Relations. Thank you. Please go ahead, sir. Good morning. Happy Tuesday, everybody. Welcome to the Chemours Company's third quarter 2019 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 Rahhan, Senior Vice President And Chief Financial Officer. Before we start, I'd like to remind you that the 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 those described in the documents, Chemours is filed with the SEC. These forward looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ and Kamora undertakes no risk duty to update any forward looking statements as a result During the course of this A reconciliation of non GAAP terms and adjustments are included in our release and at the end of this presentation. I will now turn the call over to our CEO, Mark Vergnano, who will review the highlights from the quarter. Mark? Thanks, Jonathan. Good morning, everyone, and thank you for joining us today. Starting on Chart 3, as you all saw in our press release from a few weeks ago, Ed Sparks has been appointed President of our Fluoroproducts segment reporting to Mark Newman. Ed started his career with DuPont 25 years ago at our new Johnsonville site. He has held positions of increasing global responsibility at DuPont And Chemours, including sales, operations, technology, as well as corporate strategy and capital planning. Most recently, Ed served as President of Chemical Solutions, and he will retain responsibility for that business in this newly expanded role. We are very lucky to have such a talented leader opportunity for improvement across the segment and I believe Ed has the right mix of operating and commercial experience to drive the need to change. I look forward to Ed and Mark working together to take our business performance to the next level over the coming years. Again Ed my sincerest. Congratulations. Moving to our 3rd quarter results and highlights from the quarter on the next chart. Results in the quarter reflect a weaker macro and continued sluggishness across many of our core markets. Asia has been notably weak with the ongoing U. S.-China dispute clearly affecting confidence across the entire region. While the global environment has proven challenging, we have been focusing on execution and managing the elements of the business within our control. In the face of these market conditions, In Titanium Technologies, we increased volume through our Flex channel and will continue to leverage this channel to help us to continue to regain share moving forward. We also announced the launch of a new TiO2 grade for inks under the Ti Pure Select brand, a key milestone as we enter the lucrative specialty TiO2 market. In addition to finding new sources of growth we're working to simplify our portfolio to enable To this end in September, we announced the shutdown of our methylamines and methylamides business, a non core portion of our Chemical Solutions segment. We anticipate the shutdown of the asset to be complete by December. Finally, we published our 2nd annual corporate responsibility commitment report in September. I'm going to take you through site. So turning to Chart 5, last year we published our 1st corporate responsibility commitment. Embodied in a set of 10 ambitious goals which we aim to achieve by 2030. These goals cover our commitment to our planet, our people and a future proof sustainable portfolio. This report was a unique statement in the chemical sector and we believe it sets us apart from our peers. This September, we published our second annual CRC report with transparent metrics to track progress that we've made. We have made significant progress at our sites through the products we sell and within our own workforce. For example, we recently installed a new combined cycle heat and power system at our new Johnstonville site, which will reduce our greenhouse gas emissions by 145,000 tons of CO2 equivalent per year. It's a lower cost, lower footprint solution that is a great example of how we can make investments that benefit the bottom line and the planet. From a product perspective, we estimate that opteon, our low global warming refrigerant technology, will eliminate 325,000,000 tons of CO2 equivalent on a global basis by 2025. This is equivalent to offsetting the CO2 emissions of 11 point That's the power of sustainable chemistry. And that's the reason why we are working so hard to accelerate the adoption of this great technology worldwide. Finally we continue to work towards building a more balanced global team with 50% of positions filled by women and 20 percent of all U. S. Positions filled by ethnically diverse employees. As I said in our last call, we will benefit tremendously from the diverse points of view we bring to address problems To be clear, we don't have all the answers yet. Our CRC goals are not checked the box exercises that business as usual will allow us to achieve. However, I know that our collective energy can create the change necessary to make our 2030 objectives a reality. It is this work and our tireless dedication to it that helps make us a new kind of chemistry company. With that I'll turn things over to Samir to go over our financial results for the quarter. I'll be back at the end of the call to provide some thoughts on our priorities heading into next year. Thanks Mark. Let's move to Chart number 6. Sales of $1,400,000,000 were flat relative to the 2nd quarter and $200,000,000 below sales in the third quarter of 2018. Lower volumes of tighter pigment drove the decline as soft global demand continued past the midpoint of the year. GAAP net income was $76,000,000 and adjusted net income was $98,000,000. GAAP EPS of $0.46 per share and adjusted EPS of $0.59 per share were in line with lower earnings in the quarter. We recognized $34,000,000 of restructuring business and cost savings initiatives. Adjusted EBITDA of $248,000,000 was impacted by lower margins across the two main segments. Titanium Technologies margins continue to be impacted by low volumes and fixed costs under absorption across the circuit. Total Products margins declined as illegal imports affected sales of high margin Opiant plants, based refrigerants and FCAS quota sales. Mark will provide more detail here when he discusses Fluor Products segment results. On the second quarter call, I indicated that free cash flow had turned positive in June, We carried that momentum into Q3. Free cash flow for the third quarter was $160,000,000 That is driven by cash flow from operations of $288,000,000 and CapEx spend of $128,000,000. Turning to page, 3rd quarter adjusted EBITDA was $248,000,000, down $187,000,000 from the same period a In total, volume was a $100,000,000 headwind in the quarter. Lower prices accounted for an additional $55,000,000 of headwind through a combination of lower global refrigerate prices, lower pass through pricing in certain chemical solutions, product lines, and some mix and channel adjustments in our Titanium Technologies segment. Cost in other was a $27,000,000 headwind in the quarter on a year over year basis. This is primarily due to lower FCAS quota sales and fixed costs under absorption. Operational headwinds in the quarter were offset by the benefits from the ramp up of Opteon production at our Corpus Christi site. Mark Newman will give you more details about this when he covers the segment results. Moving ahead to the liquidity section on Chart 8, we continue to believe in the strength of our balance sheet even as we move through a period of lower earnings. We ended the quarter with nearly $700,000,000 of cash up from $630,000,000 at the end of the second quarter. Cash flow from operations was $288,000,000 in the quarter, reflecting increased volumes from Titanium Technologies on a sequential basis. CapEx was a $128,000,000 use of cash and we returned $41,000,000 to shareholders via dividend in the quarter. Our net debt at the end of the 3rd quarter stood at approximately $3,500,000,000 and that results in net leverage of approximately 3.1 times on a trailing 12 month basis. I'll now turn things over to Mark Newman, our Chief Operating Officer, to discuss segment performance. Thanks Sameer. Moving ahead to the next chart. Headwinds from illegal imports continue to weigh on results in Fluoroproducts. We're accelerating our corrective actions from a regulatory environmental trade and public awareness perspective. While there have been a number of high profile seizures of illegal refrigerants in 2019, we have not yet reached a tipping point where we believe illegal activity is fully under control. That being said, we remain committed to working with our industry partners on counter measures at the state and EU level. We remain optimistic that rule of law and the fundamental value of F gas as a regulatory scheme will result in an uptick in enforcement ahead of the 2021 quarter step down. Flora Products net sales in the 3rd quarter totaled $636,000,000, down from $682,000,000 in the third quarter of 2018. We continue to observe sales weakness particularly in Asia, where automotive and electronics demand have declined in the wake of the China US trade issues. In my visits with our customers and channel partners, the demand outlook remains uncertain. Adjusted EBITDA came in $122,000,000, reflecting lower demand for our high margin Opteon stationary blends and lower F gas quota sales in the quarter compared to the third quarter of 2018. These headwinds were partially offset by continued adoption of Opteon refrigerants into new automotive platforms in the US and Asia as well as Fluoropolymer application development activities. On the positive side, We saw the ramp up of Opteon production at our Corpus Christi site, but this benefit was offset by operational headwinds elsewhere in our circuit, which have now been resolved. These operating issues reduce fluoroproducts adjusted EBITDA margins by approximately 3% Ed and I are not happy with our operational performance this year, and we are taking actions to improve execution. Moving to chart 10, I'd like to share more details on our investment that we're making at our Fayetteville Works Facility. Specifically the capital investment in our new thermal oxidizer or T. O, as we call it. While impressive, I'm not sure the picture on the chart does justice to the scale of the investment we're making to control emissions at this site. The T. O. Is a state of the art fluorinated organics chemical emissions control system. It is designed to eliminate fluorinated organic chemicals with greater than 99% efficiency. The T. O is the product of significant technology and engineering work by our teams in Wilmington and in Fayetteville. I am very proud of the people across Chemours who have come together to make it a reality. Brian Long, our Fayetteville plant manager, along with our enterprise capital team, have been hard at work over the past several months, bringing the project online, and I'm excited to announce that theTO was mechanically complete as of October 31st. I believe this $100,000,000 investment in first of its kind technology is a tangible example of our commitment our drive to meet our 2030 CRC goals. Moving to Chart 11 onto our Chemical Solutions segment. Sales in the third quarter were $140,000,000, reflecting lower contractual pricing and volumes in a few product lines, within Performance Chemicals And Intermediates. Mining Solutions demand was stable despite the headwind of a contractor blockade at a customer mine in Mexico, which affected our shipments negatively in the quarter. Adjusted EBITDA was $23,000,000 and segment margins of 17% were the highest in any quarter on record. This also marks the 3rd consecutive quarter of expanding adjusted EBITDA margins in this segment. The product of better operating and market discipline across the segment. As Mark mentioned at the start of the call, We announced the shutdown of our methylamines and methylamides business at Bell West Virginia. This was a business that did not meet our long term return objectives inside our portfolio and we plan to reallocate resources to help drive growth and profitability elsewhere in the Chemours portfolio. We're pushing to close the year strong in chemical solutions behind continued performance from our mining solutions business and incremental productivity improvements across the rest of the segment portfolio. I'll cover our Titanium Technologies starting on the next chart. 3rd quarter sales came in at $614,000,000. Price declined at about 2% on both a sequential and year over year basis, reflecting product mix changes new channel development and the impact of increasing Flex sales. Volumes were down 20% year over year, but up by approximately 10% on a sequential basis. Similar to last quarter, adjusted EBITDA of $137,000,000 was the result or in raw material inflation continue to be within expectations. Turning to the outlook, While we believe inventory levels downstream to be at or below normal levels, the overall demand environment appears to be balanced with limited visibility for progressively over the next several quarters. With prices holding at levels, which we believe reflect the value and use of our products, and destocking ending earlier in the year, we remain confident in the long term outlook for TiO2 pigment and are fully committed during the quarter on all three elements, which stand behind tie pure value stabilization or TBS. From a commercial perspective, we had our first full quarter of Flex and began to get to a global scale with the new portal. We believe Flex will be a critical piece of the digital Chemours going forward 2nd, from a manufacturing and supply chain perspective, We're making great progress on our integration of Southern IONICS Minerals and have been impressed with the team and the capabilities we acquired in August. Finally, on new offerings, I'm proud to announce the launch of our new low abrasion product the ink's market under the new Ti Pure Select brand. We have a growing pipeline of new products for specialty applications set to hit the market over the next 18 months targeted at specialty applications like inks We know our customers are going to love these products and I look forward to telling you more about the pipeline on future calls. As you can see we are investing in all three of the critical elements behind TBS and believe that over the long term these investments will create significant shareholder value. With that, I'd like to turn things back to Mark. Thanks, Mark. Turning to the next chart, we wanted to provide some early thoughts on 2020 as we move toward the end of the year. We will be providing formal guidance early in the New Year, but these are some of the key themes that have emerged as our planning process for 2020 is now fully underway. 1st, achieving top line growth in an uncertain market. We will be focused on ensuring that we can maintain This means engaging with our customers and creating the new product services and offerings to help them be more successful. In fluoroproducts, we are helping equipment OEMs create the next generation of hardware that is HFO specific and will bring Opteon Technology to a broader range of stationary applications. Mark discussed the launch of our new Ti Pure Select grades for inks and what that means for our customers. As our technology continues to evolve and improve, we will look to expand our footprint and enable Ti Pure chloride pigment to reach new end markets and geographies around the world. 2nd, operational discipline and productivity. Given the weak global economic environment, we are working hard Furthermore, we are redoubling our efforts in maintenance and engineering to ensure we don't have a repeat of the operating issues, which hit will bring a renewed focus to our manufacturing network to ensure we deliver on this goal. 3rd we will prioritize free cash flow generation. We are determined to maximize free cash flow conversion as a business and we'll be looking to more rapidly convert operating earnings into cash. We will return the majority against our CRC commitments in 2020. It is a bedrock of this company and we will not back down from the commitments we've made to our shared planet our communities and our teams around along with the specific initiatives we're working With that, operator, please Your first question comes from Duffy Fischer of Barclays. Your line is open. First question is just around fluoro. The EBITDA, whether sequential or year over year was down more than sales. Can you walk through the puts and takes on that? Cause, obviously, it's not just volumes and decremental margin, but the base business must be losing some price. So Can you just kind of bucket, how much was price? How much was price in Fgas versus HFO? And just give us a little bit more color around the fluoro? Sure Duffy. Good morning. Let me start and then I'll hand it to Mark. You're right that we had we also had some operating issues, right? So we had some operational issues that that hurt us. You saw where their margin ended up. If you take those operating issues out of there, we'd be back into our low to mid-20s kind of margin. So that had an effect on it, but let me give it to Mark and he can walk you through Thanks, Mark. So, Duffy, I would say the way I think about our floral business is the effect of illegal imports is in line with our prior quarter guidance. About $125,000,000 a year. Bear in mind that the impact of quota sales is somewhat lumpy. So if you're comparing to quarter last year where you had more quarter sales, you need to kind of keep that in front of you. And then finally, as Mark mentioned, We had some operational headwinds in the quarter. The way I think about our operating side of the business is we continue to ramp up volumes at our Corpus Christi facility. That should have a natural benefit to our margins as we go forward. But in the quarter, that was kind of overshadowed with some of the headwinds we had in the rest of our circuit. So you know, it it it offset that gain that you would normally see. And as Mark said, without that, you know, without the operational headwinds, would be in the mid 20s as as we've kind of guided to this year. Okay. And then on HFO, you said it still growing, would it be growing on all three on on the volume level on a sales dollar level and on an EBITDA level? So our our OPT and YF, you know, targeted at mobile air conditions, air conditioning is growing. It's a double digit growth story still. Obviously, the legal import aspect affects the ramp up of Opteon blends year over year. So that's where we're having the headwinds is felt on the blends on the Mac Mobile Air Conditioning segment, we continue to see double digit volume growth as well. So to your point, Duffy, all three are growing from a volume revenue, earnings perspective. If you think about to Mark's point on the Opteon side, where we're seeing the growth obviously is the U. S, remember, we've always talked about the U. S. We'll move to 100% utilization of HFO in the mobile market. It's probably close to 75% as we get toward the end of the year. And Japan now is moving very quickly up a ramp by next year, they'll be at 40% of their whole car park. So those are really what the drivers are for us. Your next question comes from John McNulty of BMO Capital Markets. Your line is open. Good morning. Thanks for taking my question. So with regard to the TiO2 volumes, they didn't come back quite as quickly as we would have expected given we seem to be past the destocking phase. I guess as can you give us an update as to how you're thinking about the health of the TiO2 market and your ability to drive volume recovery versus some of your peers who may be at at least so far this year seem to have been, been running a bit ahead of you, how you can drive that recovery going forward? Well, John, if you think about it, we as we install TBS earlier in the year, The whole goal of that program was really about giving, supply surety to our customers as well as price predictability. I don't think we would have told you when we started that that we would have expected, to lose share during that period of time, but we have. As you look at the move from last quarter to this quarter, we believe we've gained some share back. As you can see, as our volume turned up, quarter upon quarter. And that's really the area that we lost our share was primarily around the plastics market. The our contracts really work extremely well in the coating side. The plastic side is where we had some issues with our customers. And now that we have our Ti Pure Flex portal up and running and operating, that's where we're able to gain share back with that group. Because they could put in orders up to 6 months in advance now through that and we could move the price as we need to based on what we're trying to accomplish. So we feel like we have all our tools in the in the toolkit now. And I would say that we're gaining the share back that we want to and we're doing it in a thoughtful way as we're moving forward from that standpoint. Got it. And then in your in your comments for 2020, you spoke to focusing on cash flow generation. I guess what are the measures that you can take to squeeze out that incremental cash? Like, how should we be thinking about what you can do relative to the 2019 year as we look to 2020 and look at your cash flows. Yes. Well, number 1 is, we have not been happy with our EBITDA performance. So obviously, we're going to we believe that we can increase our EBITDA performance both from a stamp point of as I said earlier on the top line growth that we want to drive, but also around the cost line. We've got a lot of initiatives because we have a little bit of an uncertainty. Listen, we do not predict that there's a recession around the corner. That's not what we lead, but we do believe it's a little bit uncertain in terms of the marketplace. So we're going to take some actions on costs to give us a little bit of balance there. The other is we have very high raw material inventories right now and we've got to work those through. You can't do that all in one go. So we have that really focused for 2020 to get those inventory levels. So I'd say working capital is the other area that we really want to work on. Great. Thanks for the color. Last piece is CapEx. We had some heavy CapEx this year. We're going to be a little bit more judicious next year as we go forward as well. So when you think about the free cash flow generation, I'd say it's all those three pieces. Thanks a lot, Mark. Your next question comes from Don Carson of Susquehanna Financial. Your line is open. Yes. Thank you. Mark, a couple of questions. First, you didn't update your guidance. Is it that uncertain a fourth quarter outlook, that that you're not putting a range. And then secondly, can you give us an update on some of the legal issues here? I guess, really 3, 3 issues. 1, the, the the separation agreement with DuPont, the the Ohio PFOA cases, and, also, what's happening on firefighting phone. Sure, Don. Well, 1st of all, you know, we haven't changed our guidance and we talked last time. So that's why you didn't hear us do anything different about that. So we continue to operate in the range of guidance that we gave everybody before. Around the legal side of it. As I've said before, not much I could talk about the DuPont loss, who we have refiled our reply to, to DuPont's motion to dismiss that is public. And I'm sure folks could read that. As I've always said, that that, briefing in there is pretty self explanatory. I probably can't go in any more detail than you see there because there's a lot of detail in that. But that continues in the Chancery Court here in Delaware. On the Ohio cases, as you might have seen, this is the MDL, really that case load has not grown. It's about where it had been before. Judge Sargas has taken a case that was going to be tried in November. And he's now combined that with another case. So the first trial right now is set for January, and we continue to prepare for that. And we continue to really want to be aggressive around, driving that. And then, finally, around the or firefighting foam side of it. As we have always said, most of these cases are really around PFOs. There are many defendants in those cases. It's going to take a long time to develop. And again, we have never manufactured or used PFOS DuPont before us never manufactured or use PFOs from that standpoint. And as we've always said, we've never made firefighting foams, as well. So we feel that that's something that's probably in in the distance and we're a minor player here. Thank you. Your next question comes from Bob Koort of Goldman Sachs. Your line is open. Thanks. Good morning. Mark, you talked about the 10% sequential growth and as evidence of some market share recapture, what would sort of be the typical seasonal change from second to third quarter? And then I guess the fourth quarter of last year was the first time in TiO2. You saw a real meaningful volume drop. Should we expect then that you could have stable or better volumes year on year in fourth quarter? Yeah, I'd say, normally, Bob, you would see a seasonally 3rd quarter, down versus second quarter. So, we've been, we've been aggressive at the plastics market really working with our plastics customers. To make some to make it viable for them in terms of our offering. That's really been the work. I would say as you look toward fourth quarter, We continue to believe it'll be flat to up from that standpoint. So that's really how we're trying to drive. Thanks. And then you also, in KEMSA, you talked about, record margin levels. Does getting out of the metal businesses move the margin needle much? On a pro form a basis? Yes, it helps. Yeah, Bob, it is Martin Newman here. It will help. It it's been a business that's below our return objectives and, part of our strategy to make Bell closer to breakeven. But certainly from an overall segment margin basis, it will help us. Bob, one of the things we've always said since the beginning since we spun is we believe that with the work we could do in chem solutions, we could move that segment toward the the typical average EBITDA margin of the company, which would be in the mid-20s. And that's our goal. Our goal continues to be to bring chem solutions up into the low to mid-20s in margin. And, you saw us at a high teens, this this quarter. And as we execute off of the closure of the methylamines business, we think we're going to get very close to the 20% range and we continue to work on. Great. Thank you. Your next question comes from Arun Viswanathan of RBC Capital. Your line is open. Hey, thanks. Good morning. I guess first off in TiO2, I I just wanted to get your thoughts on, you know, some of the comments made earlier, looks like, you you're still kind of, a little bit cautious on the volume outlook. Thing just give us a little bit more of what hearing from your customers as far as maybe whether it be inventory, that they have. Or or even on your side and if that's been fully destocked. And and if if so, why wouldn't you be a little bit more encouraged with the backdrop, what would it take? Is is it just industrial production or anything else that you're watching? Thanks. Yeah. Arun, it's Mark Newman here. I would say our view is the destocking is largely complete. It's really do we have enough economic stimulus today to create, you know, higher demand going forward. So I think our view is you know, we don't see anything certainly in the fourth quarter, you know, as we look globally that would drive a bounce in the fourth quarter in terms of demand. But we do are starting to believe as we look out that we'll see progressive improvements in demand as we go through 2020. And so we expect the year to get stronger as we move through the year based on where we think we are on inventories today. And our expectation that as some of these current uncertainties in the marketplace get cleared up especially around trade that we'd start to see, you know, strength in demand coming back as we move through the year. I would also say from our perspective, we didn't have our full arsenal of product offerings or channel offerings in our last quarter. This was the 1st quarter where we had the full capability of flex we continue to innovate and make that channel more attractive to our customers and especially in segments where we lost share. So that plus, you know, the product offerings that we announced that we're bringing to market, you know, our view is we have a very strong portfolio that we're gonna make full use of as we move into 2020, even in spite of weak market demand. And Arun, the only thing I'd add to Mark's comments and he mentioned in the beginning, but we think that the channel has very low inventory levels of Ti2 pigment in So you're not going to need a whole lot of pull in the marketplace for things to turn up. We're positioned well to be able to take care of that. We have capacity, ready to be able to handle that and really be able to meet our customer's needs when that occurs. Thanks. And and just as a follow-up, on on the Fluoro side, you mentioned that, you feel you haven't reached a tipping point. In controlling the illegal import situation. Could you just elaborate there? What's it gonna take? Any any thoughts on on timing And and and and if you haven't reached the tipping point, is it because, the problem continues to to get worse, or is it the a case that it's slightly different this time around. Maybe just provide some more detail there. Thanks. Yeah. So we have an industry wide you know, concerted efforts around advocacy on enforcement. This is a tax trade and environmental issues. So we really believe there's a significant basis here for greater enforcement we're complementing that with a lot of investigative work as to where the illegal imports are coming through. And then we're raising public awareness. This is the equivalent of having, you know, by our estimates, $5,000,000 to $6,000,000 additional cars on the road. So We are we're working on all three fronts with our industry partners. We have seen a couple of high profile seizures this year in Greece and Poland. Our view is this is something that will continue to have greater impact as we move through 2020, but, you know, our focus today is to ensure maximum impact as we look at the next step down in quarter requirements happening in 2021. So, this is not going to happen in a single day. But we're encouraged by some of the early indicators of our success and we'll continue to do more, you know, on on the points I mentioned earlier. And to Mark's point, we're not alone here, right? So we're working with, many of the refrigerant suppliers out here who are also impacted by this. From our standpoint, this is a very important issue for us. But it's an important issue for the world. I mean, you're talking about 20,000,000 to 30,000,000 tons of carbon dioxide going in the atmosphere because of this. So this is, this is something that the European Commission and the EU understands is not good for the world, not good for the environment, but also not good for them in terms of perspective, as Mark mentioned. So all the constituents, whether it's the refrigerant manufacturers or the EU or the individual states, all understand that this is something that hurts everyone, and we've gotta fix it together. And so we we've been continuing to put a full court press on this. We'll continue to do that until this thing is solved. Your next question comes from Josh Spector of UBS. Yeah. Hey, guys. I was wondering if you could bucket your sales of TiO2 in the quarter between how much are in their long term contracts versus what percent would be under flex portal sales? Yes, we have about over 50% in our contracts, today. The remainder would either go through distribution, or through our Flex portal. So it'd be a mixture of those 2, but about over half is in our long term contracts. I guess I'd be curious if you can give some more context around the dynamic around price mix relative to you regaining some share. I guess, assuming that flex portal plays a part in that would you expect pricing to decline as you came back share in the fourth quarter, or how do you see that mix playing out? Yeah, I think we think that price will be fairly stable. We might have some small, increments of price coming down, but that would be really isolated to how we operate the Flex portal from that standpoint. But I don't you shouldn't consider that to be dramatic it's primarily in the plastic space is where we're working that, where we have grades that are very specific to those customers. From that standpoint, but you shouldn't be expecting dramatic changes in price. I think it'll be subtle and small and targeted. Maybe the only thing I'll add here is, you know, the Flex portal gives Kimor as a unique advantage to have very targeted price discovery in the marketplace by product line and by segment. And so, you know, this is a really very precise tool in in helping us as we move forward in time in terms of the adaptations that we need to make going forward. I think that's really important for everyone to understand is that the way we're going to the market and I know we've talked about this for probably a year now about TVS is a very different route to market than we've ever done or anyone has ever done. These ADA contracts are really stable contracts with our customers. Gives them, as I mentioned before, surety of supply as well as predictability and price. But this tool that we're using, which is the flex portal tool, as Mark says, really allows us to do discovery around price. But at the same time, these things change and can quickly change depending on what we're learning or what we're getting back from our customers. So it gives us a lot of tools here to be able to work percent. Okay. Thanks. Your next question comes from Lawrence Alexander of Jefferies. Your line is open. Hi. This is Adam Bubas on for Lawrence Alexander. I was wondering in TiO2, could you provide any detail around end markets here? Was wondering, like, where was demand weakest? And if you saw any signs of, demand stabilizing in either plastics coatings or paper? Geographically, Asia continues to be, you know, a week. As we've said earlier, you know, we've we've made some gains in the quarter on plastics, but we continue to regain, you know, share there. And then we have seen some weakness in laminates as well, but we continue to assess that going forward. Coatings appears to be stable, and fairly strong across. To Mark's point, I'd say regionally Asia seems to be the weakest. And we're seeing some regain now on the plastics side coatings has been stable all year wrong in our opinion. And North America then continues to be the strongest market. Okay, great. Thanks a lot. And my last question, after the shutdown in chemical solutions, I was just wondering potential areas for, portfolio simplification, from here on? Yeah, it's something we constantly look at in terms of our portfolio in terms of where's the best place to invest and what is our where do we have the right to grow? So, I think you've seen us since the very beginning be aggressive around our portfolio and we'll continue to do that. Okay. Thank you very much. Your next question comes from Vincent Andrews of Morgan Stanley. Your line is open. Hi guys. This is Steve Haynes on for Vincent. I just wanted to maybe ask a question on on the margin side in TiO2. There was a comment about continued margin compression in the slide deck. So how should we be thinking about that relative to what you did in the third quarter and kind of on a year over year basis in 2020? So, you know, the margins have compressed this year on a year over year basis, primarily due to, you know, the impact of lower fixed cost absorption with our lower volumes. The big delta this year is volume with price being relatively stable. Obviously, our plan is to have a very thoughtful regain of share against our capacity availability over time, and we're going to do that very thoughtfully. And as we do that, we would expect, you know, better fixed cost absorption and, you know, we'll continue to evaluate market dynamics in terms of other dimensions as we move forward. Okay. And then maybe just a follow-up on the, specialty business in TiO2, if you could maybe provide some color on the overall plan there, from a strategic perspective? Yeah, this is an area that and for those of you who follow the TiO2 industry, you know, especially when you get into the specialty areas, whether things or fibers. These are areas that for the most part, chloride hasn't played a big role in. We've had some breakthroughs technology breakthroughs here. For instance, in the new grade we talked about, we can get into the ink market with that with a much brighter product So it allows some functionality that maybe other products won't have. So what we're trying to look at is where do we bring added functionality to our customers, that that allows them to either have a unique offering, a different offering or a better offering from that standpoint. And I think that our TT Tea team has done a really nice job of evaluating how to use our technology in a different way. In that area. And as Mark mentioned before, we have a nice roadmap over the next 18 months of product introductions that we can bring into the marketplace. That I think will be exciting for our customers and allow us to really get into areas that in all honesty, we haven't been in before. So this is areas for us that we see future growth for us and enhanced products for our customers. Your next question comes from P. J. Juvekar of Citi. Hi, Mark. It's Eric Petrie on for P. J. Your cash flow from up your cash flow from operations year to 250,000,000. What are the levers to get you to the 600,000,000 full year target? Yeah, this is Samirik. Essentially, if you look at, the free cash flow for the full year, typically at Q4, we tend to have quite a bit of working capital unwind as well. And we that's where we are focused on. As Mark mentioned earlier, right, on the raw material side, we are a little heavy. So we are looking at bunch of options to how we're going to drive that in a value creative way. So it's all gonna be around the working capital side and anything else that we can drive on the cost side. So we feel pretty good about where we need to get to. Thank you. And secondly with your new introductions into the specialty end markets, how fast do you think those end customers and inks and fibers will switch from sulfate grade to chloride grade. And what kind of margin uplifts do you expect? Yeah. You know, I don't think we can we can give you a good forecast to that. You know, the product just got introduced. We're just working with our our customers, they're being sampled to them right now. And it's really going to, come down to does this give them more value, or more opportunity versus what they have today in their portfolio? So I think it's really on our customers as they adopt these and really drive that. But as I said, our strategy is, as part of the total PBF strategy, It's not just about contracts. It's not just about a portal. It's not just about having a low cost, capacity increases it's also about new product offerings and this fits right in the wheelhouse of our TVF strategy of new offerings. Thank you. Your next question comes from Jeff Zekauskas of JP Morgan. Your line is open. Thanks very much. I think that your titanium dioxide production tonnage or sales tonnage maybe down, I don't know, 250,000 tons this year. And maybe that's equivalent to 4% of global industry demand, which which is just enormous. And the volumes at, you know, tronox are also down, can you place some of this volume contraction in context in that classically people think about the titanium dioxide and rate growing, you know, 2% or 3%. But it looks like this year, it's shrinking. I don't know, 5%, 6%. What do you think about that? Yes. No, Jeff, you're right. And I would say that we probably have seen one of the largest destocking events in the history of this industry. And I don't think people felt that in the beginning. But this has been a significant destocking event that's happened across the world. Number one. 2 is you don't have any significant market pull going on across the world. Mark alluded to that earlier before when he said, we probably don't need much of an incentives across the world to be able create demand here. So I think you've just had a combination of significant destocking across the board at the same time barely uncertain market conditions, that just have held down GDP. Now remember, the biggest weakness we've seen around the world has been Asia and Asia has been the driver of GDP growth around the world for the last decade. So I think when you put that all together, that's to us what we're seeing, which is why I don't think you're going to need to see a very dramatic change in the market dynamics to pull, demand for TiO2. I think that could happen relatively quickly depending on the market conditions. Right now, we just don't have a clear line of sight around what the market's going to do from a from a, just a macro point of view, but it doesn't take much for this to change dramatically because, as Mark said before, I think the inventory levels are at significantly low levels across the board across all our customer base and downstream from them. Okay. And then, thank you for that. And then for my follow-up, I don't think C8 chemicals, whether it's PFA S or PFOA, have been declared hazardous substances by the EPA. If the EPA does declare them as hazardous substances, How does that affect the liability profile for these chemicals regardless of who's responsible for it that whether it's you or 3M or DuPont or somebody else. That is, how does the change in the categorization of the chemicals affect the ultimate ultimate liabilities? And would would these companies be responsible for the costs of cleanup that have already taken place, or is it only things that go forward? Yeah. So first of all, you're absolutely right. It is they are not, CA is not considered a hazardous substance by the EPA. At this point in time. We can't speculate from that standpoint what'll happen if that was a declaration. But remember, the way the EPA does this is usually in a very science based approach. Again, for us, we don't participate in C8 chemistry any longer. We never did. DuPont got out of that almost a decade ago now from that standpoint. So you're talking about legacy situation out there to start with. What happens if that occurs? Again, that is really up to the EPA. The EPA at that point has lots of choices of how they would want to handle that. So I think it's really hard, Jeff, to speculate what that would mean, in the future. Okay. Thanks so much. Your final questions come from Jim Sheehan of SunTrust. Your line is open. Thanks. This is Pete Osterland on for Jim. On Fluoro Products, has there been any negative price or margin impacts for your Opteon portfolio related to the slower ramp for the Opteon blends or have margins been generally stable over the past couple of quarters? It's it's primarily a volume story, you know, with the with the, you know, the impact of illegal imports As I said earlier, on the on the mobile air conditioning side, we continue to see, you know, double digit volume growth with some contractual price declines baked into our revenue going forward. And, you know, our plan obviously is as we ramp up corpus to get better on the COGS side on our HFO technology. Thank you. I will now return the call to Mark Brignano for closing remarks. Thank you, Chris. And again, I want to thank everyone for your time this morning. Thank you for your continued interest in Chemours. And we look forward to seeing you while we're on the road here in the fourth quarter. Thanks again. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.