Earnings Call: Q3 2018

Oct 19, 2018

Good morning. Participants will be in listen only mode. Please note we are asking one question and one follow-up. Also, this event is being recorded. I would now like to turn the conference over to Sarabi Varsani, vice president of investor relations. Please go ahead. Thank you, Anita. Welcome to the Celanese Corporation Third Quarter 2018 Earnings Conference Call. My name is Sullivan Varshney, Vice President of Investor With me today are Mark Roar, Chairman and Chief Executive Officer Scott Richardson, Chief Financial Officer and Scott Sutton, Chief Operating Officer. Today's presentation includes statements about expectations for future results and plans that are forward looking statements. Actual results might differ materially from such statements. Additional information concerning factors that could cause actual results to materially differ can be found in the posted materials. We will also discuss non GAAP measures today. You can find information related to these non GAAP measures and reconciliations to the comparable GAAP measures on our website in the Investor Relations section. Form 8 K reports containing all these materials are available on the SEC's EDGAR system. Sebanese Corporation distributed its third quarter 2018 earnings release via Business Wire and posted slides and remarks about the quarter in the Investor Relations section of our website after market close. Since we published our comments yesterday, we will now open the line for your questions. We will begin the question please. The first question today comes from PJ Juvekar with Citi. Please go ahead. Yes, hi. Good morning. Good morning, TJ. Good morning. You know, every week, I get some kind of pricing because announcement Sellanese in acetyls. So my question is, how are your paint coatings and polyester fiber customers? It disprised increases. And, I guess, you've been leading the market in acetyls if there is new capacity that comes in, would that sort of offset the apple cart in terms of the discipline? Hey, P. J, this is Mark. Thanks. Let me back up a little bit. And there's over the years, people have kind of made fun of our price increases, but we do that for a reason, a very specific reason. When you deal with customers, my personal experience is customers don't mind pricing. They just don't want to be disadvantaged or surprised. And we'd go to great lengths to very openly share what's going on in the market and how we're responding to that. And then we had great lengths working individually with customers to help them moderate and manage and deal with those price increases. So broadly speaking, that's why you see us do what we do. And because of that, we have found that our customers always respond well to what we do. And I mean, sometimes it's tough for the respond well. We've not seen any unusual pushback or anything else in pricing. And if you look at at the levels of inflation we're seeing today, P. J, you've been been around a few years. You've seen lots of cycles of inflation. It's not that severe. I mean, there are different areas where it's hitting us, but it's not unusual nor is it anything that a few years ago, we didn't see on a routine kind of basis a month $100,000,000 year over year kind of the raw material inflation number. So I know there's a lot of worry about that out there, but I don't quite I can't quantifying online why people are so concerned about it. You got to work hard to stay ahead. We do. We work hard with our customers, but we haven't seen any particular issue with it. And I'll roll it back to say as you relate to polyester, no big issue, no big issue there. Yes, don't get paid on we appreciate your price increases and admire that you're able to raise pricing and recover raws. Yes, no, I didn't take it that way. I just want to make sure people understand that we do that a bit. We were a bit more public than others, we do that on purpose and we do it for a reason. I mean, it's really just to focus in and help our customers. And then just a more good question on your guidance for 2019. You mentioned that gains in EM engineered materials would be offset by winter seasonality. I was wondering if you can just explain what you mean by winter seasonality. Thank you. Well, if, thank you, P. J. Those of you that have followed things like the coating businesses in China for a while, understand that you go through these seasonality kind of periods. And classic in our business segments, you would have weaker winter seasons or falls and 4th quarters and weaker first quarters. And that varies between, very between coatings businesses in Europe, Chinese New Year, seasonality in auto builds. There were a lot of things that kind of roll into that generically. It's not a big deal. It's just it's just a kind of event that would occur, similar to weak sales in Europe in August. It's just something that happened. So What we saw last year though, which is a bit unique is we didn't see we didn't see that. We kind of powered through 1st and 4th. And there were a lot of subtle reasons why that is we believe that we're returning to that kind of normal movement. So again, it's not a big deal other than the fact that we didn't have it this as we started the year. So that's all we're saying there. That means that fundamentally, we see our over the next several years, we'd see is, have stronger middle mid cycles of the earnings a year than the end of cycle, end of beginning to end of the year. That's all it means, BJ. The next question comes from Jeff Zukauskas with JP Morgan. Please go ahead. Thanks very much. Good morning, Jeff. Hi, good morning. I noticed in your AI business that your volumes were lower sequentially. And my memory was you had all kinds of outages in the second quarter. So, why were volumes sequentially weaker? Yes. So, yeah, hi, Jeff. This is Scott Sutton. Look, I mean, we don't worry too much about sequential volumes when, you know, as you know, we run a model there where we go out and activate our networks. So sometimes we're in stronger in a certain derivative and sometimes we're out of that. You really have to think about the whole year for the health of the business. And for the whole year, even volumes in that business will increase. No, well, it's a very tight market. So, and you had very strong year over year pricing and you had very good pricing. So were you trying to maximize the profitability of the model in the third quarter? We always try to do that, Jake. Every minute of the day, we try to do that. And we're, We're in the market quite a few 100,000 tons per year in terms of buy resale in that process. It wasn't necessarily unusual quarter of that activity, but maybe a little bit more unusual. But yeah, we always try to make good decisions to maximize the profit for our share Yeah. And Jeff, I mean, I would really encourage you to think about the whole acetyl chain from a volume standpoint, not just what's shown as the AI segment and think about that on an annual basis The next question comes from Robert Koort of Goldman Sachs. Please go ahead. Good morning. Martin, I don't know if for you or Xavier or Scott, but I thought the comprehensive review you guys put out was excellent and helps answer a ton of questions ahead of time. And I really appreciate limiting your formal conference call remarks to none so we can ask questions. I wish all companies would approach it the same way. Let me ask my two questions, if I could. 1st, on I guess for Scott on Sutton on the EM model, do you guys feel it's more of a products expertise or process expertise. And I guess the question is really aimed at, can you bring in other, can you start going maybe down the pyramid to more commoditized or maybe less specialized plastics, but employ the same process to the same success? Or do you think it's limited by the types of products that you sell? Through EM? Well, Bob, I mean, really the real intellectual property in that business is the model. Right. Now how that manifests itself is being able to go out and match up our broadest solution set to the largest number of customer needs. I mean, clearly, we do well where there's a little bit more sophistication needed, right, by customers. But that also applies to what I'll call mid and lower range products as well. It's not exclusive only to those super sophisticated products. Got you. And then on the I thought you had a very interesting point about your auto demand relative to auto builds. Can you give us any sense from the outside how we can try to predict and calibrate your growth in that market when it seems to be so detached from OEM build rates? Yes. I mean, Bob, even across all markets, right? We're not necessarily dependent on absolute growth of the driver volumes in those businesses. But you've got to be able to think about sophisticated solutions. And sometimes when volumes are declining like did in auto in the third quarter, there's actually a bigger drive for unique solutions for cost savings or whatever it is from the customer. So I can't give you a way to connect to that. What I will just say is that we grew every single market segment and that's the plan going forward as well. Great. Thanks very much. Thanks Bob. The next question comes from John McNulty with BMO Capital Please go ahead. Yes, good morning. Thanks for taking my question. Look, there's been a lot of movement in the acetic acid price. It's been immediately get that you guys don't necessarily trade on spot. But I guess, how are you thinking about how pricing moves as we get into the fourth quarter and into 2019? And as far as 2019 goes, when you think about year over year, can it be up flat? I guess, how are you thinking about it? Not a lot, but it's what I would say, John. I mean, we work in that market to try to with all the molecules to try to maximize the net value back to our corporation. Classically, you would see a drift down in pricing a bit in for us in the beginning of 1st. And we certainly started seeing a little bit of that, but that There's been announcements by local Chinese companies actually driving pricing back higher in China, which is a bit unusual. So, we kind of I guess I'd say we just don't think about it too much. We think more about normal seasonality and normal seasonality would say that we'll be a little bit off in the 4th and a little bit off in the first, stronger in the middle quarter. So that's how we're kind of looking at normalized view year over year rather than an absolute dollar per ton price. So, Scott, do you have any other thoughts on that? Yes, Mark, I mean, I would just add that, that, you know, the way pricing comes about is by the number of activations we're able to do to our work. And you've seen us increase that and that'll increase next year. And underlying all that is fundamentals are still okay. Effective utilization is still okay. So you put those 2 things together, I think it's an okay situation. Got it. Thanks very much. And then just quick follow-up. You'd indicated in your in, I guess, your outlook for 2019, that there were going to be potentially some, I guess, the cost of some several large planned outages. I guess, how should we be thinking about the, I guess, the delta or the bogey between 2019 2018 in terms of About 50,000,000 about $50,000,000. Yes, so there's we have a huge internal turnaround where, expanding expanding and rebuilding from an efficiency point of view, one of our Palm assets. And I've been seeing that as a very, very large turnaround and those are quite expensive. Great. Thanks very much. Sure. The next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead. Yes, good morning. With regard to Engineered Materials, you've put forth a goal of having 5000 projects in 2020. Can you speak to, 2 aspects. 1st, how do you expect the average project size to trends between now and then? And then second, what sort of level of acquisition activity do you need or not need to achieve that level? Yes. So Kevin, this is Scott Sutton. In terms of size of average project, I mean, that's going to trend where it's been trending the the last couple of years, right? We are gonna increase the number of projects that we close or get a purchase order for. Taking it up to 5000 by 2020. We do have some assumption of 1 or 2 bolt ons a year between now and then that helps add to that pipeline. Most of it comes through organic growth, though. Okay. And second question, if I may, capital deployment, you raised your 2020 earnings goal to $12 up I think, 11 at the time of your Investor Day in May. Can you update us on what amount of capital deployment is embedded therein. My recollection is that it was excluding repurchases, but inclusive of some bolt on acquisitions. And I guess related to that, your press release indicates an ability to accelerate repurchases. Obviously, the market's been shall we say a little choppy? What are your latest thoughts on that subject? Yes, Kevin, this is Scott Richardson. So what we said at Investor Day was that we expected CapEx to be in the $350,000,000 range for the next 3 years. We're going to probably come in around $3.30 this year just with the timing of how the flows through. But we made the announcement on the Palm expansion. We have several other very attractive productivity and growth driven projects that we're looking at. So we're actually expecting that as we get to the end of that 3 year window that CapEx will actually tick up higher than that $350,000,000 level. We'll probably be kind of in that range, maybe plus minus a little bit next year, but we should be up to higher levels beginning in 2020 and beyond. And then, and that should just translate to continued earnings growth again through productivity and top line growth. On forward. And then on repurchases, yeah, our cash flow has been very strong this year. We stated this quarter that we expect to approach $1,200,000,000 of free cash flow. And so we do have the opportunity just given where the market has been to accelerate some of those repurchases that we had originally stated, we had said we were going to do $1,000,000,000 over the 3 year period from 2018 to 2020. Thank you very much. Kevin, this is Mar. Just real quick on 2 of those topics. It's a bit of an add on to what, Scott has said. I don't know that we've really explained well enough the opportunities that we have to incrementally expand our assets. And in most cases, Ketman, we can get a phenomenal return with no incremental volume. Other words, we have enough productivity opportunities in front of us. And I know that's a little bit hard to conceptualize, but when you have a global network of assets, and you're playing in a number of different fields as it relates to raw material values or costs, energy costs, logistics costs today, which are up over $60,000,000 over a 2 year period, you know, corporately for company like ours, there's tremendous value that can be created that way. And we have a series of those that we're evaluating in TNF. You've seen some of those announcements that are given returns from the 25% to 45% kind of range largely independent of material volume there. You should expect more capital going into that. And And so we haven't put out a number yet. Well, I think we've talked maybe more in January, Scott, on kind of what we see out there. But certainly in the near term, that 350 kind of number as But as we get up to the 2020 timeframe, it may be higher than that. Getting back to cash, we've reported this ability to press or being roughly around $1,200,000,000 this year. So you would expect that to grow as we go out in the next couple of years. We've tagged it at 3.6 We're going to work hard to see it's higher than that. We think even at constant earnings, we have the ability to kick out more cash. So So we're going to look for front to find ways to invest that cash in a phenomenal opportunities for us. We're staying on our bolt on acquisition, but we'd able to finance that pretty easily with the cash coming off the business. And then beyond that, we'll look to make sure that our dividend policy reflects our much higher level of cash flow and in share repurchase and accelerating those as Scott has said. Appreciate the additional color. The next question comes Anita, could you do that again, please? The next question comes from John Robert Please go ahead. Great. Thank you. Could you update us on any progress in replacing your filter tow deal that you had with Blackstone with an alternative transaction of some sort? We're still working that, John. It's Not a lot of options out there. We haven't found one yet. I'll remain convinced as does Scott and Scott that there are opportunities for us to do things out there. Maybe more structurally based around manufacturing, but we're working hard to try to find opportunities. Is there any risk for a second inventory correction in filter tow given the sort of general weakness in China? Or do you think inventories are low enough there that we don't have that risk right now? No, we're pretty comfortable that inventory levels are fine. We don't see that as being a risk. We've been the team has been active on trying to drop pricing in the world. We have some traction with that, which is good. And of course, we need that to offset some of the volume declines that, that are naturally occurring in the business, not dramatic, but that normal 2% per year. Thank you. Thank you. Next question comes from David Begleiter with Deutsche Bank. Please go ahead. You. Thank you. Good morning. Good morning, Dave. Mark, just on China, are you seeing some signs of slowing or softening in the economy? And just on these winter shutdown, I think your prepared comments suggested they might be even more severe than this year, but I mean, perhaps if they could be less severe last year due to the need to stimulate the economy. Can you just comment on that? Well, I think all three of us here would have slightly different version of I'll give my spend in Sutton and Richardson and Paolo. But, I mean, if you read publications, China is coming out reporting a little bit lower numbers. For those of us that have had to make a limit out of China for a long time, we never necessarily believe the prior numbers anyway. So I don't know quite what to read of whether it's 6.5% growth 7.5% growth myself. From my point of view, we don't see any dramatic slowing in China. I'm looking at the guys. Is that fair? I mean, this is Scott Sutton. I mean, our project pipeline is increasing nicely in China. In fact, and that's where a good bit of the growth has come from, even in last quarter. In China and acetyls, we've been able to make a lot more moves or activations as well. So it's really quite active. So if there is a slowdown occurring, I think it's occurring in a thoughtful way in a way that actually enhances commerce doesn't detract from commerce. Are placed to our business model strengths. I mean, another way of saying it. Out there, clearly, absolute auto sales have gone down, but the need to dramatically improve the quality of autos is just kind of off the chart. So we've not we just don't quite feel it is what I would say. Got it. And Mark, just on your M and A pipeline, I know you acquired Next Polymers announced that. How's the rest of the M and A pipeline looking for this year and even next year? Scott, do you want to? Yes, David, I would say that we still have a healthy pipeline particularly in engineered materials. And there's good opportunity to do some meaningful bolt ons next year. Thank you very much. The next question comes from Mike Sison with KeyBanc. Please go ahead. Hey, good morning. Nice quarter there. Mark, in terms of auto, I'm just curious, how much left is there to do in I mean, is there a lot of opportunities to continue to convert parts and plastics? And what are you converting now and what's the opportunity do you think over the next couple of years? Yes, it's infinite. I mean, what's the color of the future going to look like? It's probably going to be extruded if I had to guess. I mean, So, no, we see, I mean, you can only imagine the thousands of connections, the thousands of discrete part that go into autos, each one plays an intrinsic role and the quality of that vehicle, the aesthetics of that vehicle, the efficacy of that vehicle, the the fuel efficiency of it. And what the other dealers are always doing is trading off those value equations. The price of steel is not constant. The price of aluminum is constant. So you're always getting into a refinement and a removing of that. Electrification is really exciting for us, not only in the the lithium energy packets, pack alone, but the housing for that, the connections that are going in that, the design of the new consoles for those vehicles. The reduced weight, which dramatically expands the application of reinforced thermoplast sticks in structural parts. So it's I'm sure there's a limit to it, boss, but I kind of don't know what it is. Okay, great. And then when I think about the 2020 outlook for the segments, the oil change seems to be pretty much there. Can you maybe walk us through some of the up potential over the next couple of years there and maybe downside as well? Well, the upside potential for that business really is volume. You've got an industry that's running in the mid-eighty percent capacity utilization that has a history of losing on the average 3 production assets annually per year. If you look at kind of the run rate of upsets in this business, it's averages pretty close to 3 world scale assets per year are out. So think about 1,500,000 tons, out of a 16,000,000 dollars, $17,000,000, $18,000,000 ton market. Last year, we were probably $2,200,000,000, something like that. So it's a little bit unusual. High from that point of view, but that 100 year storm last year happens every 3, 4, 5 years. So we think we're in a period where the business is going to be tight We also think that the loose monetary policy of China, which really led to the one negative cycle we had in this business is gone. And I think gone for good, with the Blue Sky campaign, but also the need to get a return on your investment and, frankly, the inability for China to compete. Outside of China. So we see ourselves moving from one dip that lasted a long time to one upsize going to last a very long time. And for us, it's going to be a solid pricing incremental volume growth, the solid decline there. Great. Thank you. Sure. The next question comes from hanshan Panjabi with Baird. Please go ahead. Hey, guys. Good morning. Yes, sure. Hey, Mark, just to expand on that last point. So you noted a seasonal capacity utilization in the mid-80s on a global basis in 'eighteen. Do you expect that to get higher in 2019 or stay around the same? It just seems like things were a little bit tighter in 2018, given some industry disruptions and force majeures. Just trying to get a better sense of how you're thinking about 2019 specifically? When we do these kind of things, we don't we don't really fantasize about things on the fringe it could happen. So we kind of look at it as being pretty similar to this. I mean, demand will creep you up a little bit, but we're doing like a slight incremental expansion. Others may be doing a little pushed out more volume. So we think it's going to stay. For the most part in the mid-80s, maybe creep up a one turn or something. Okay. And then on the EM segment, operating margins inflected higher over year for 3Q after several quarters of declines due to both higher raw material costs and also some of the initial dilution from acquisitions. Looking back at 2016 margins were sort of in the mid-30s range for that segment. When do you think you can get those types of levels or is the mix of the business just different, versus back then? Yes, I mean, this is Scott Sutton. Look, I think we're operating right down, particularly the most recent quarter is a good healthy place for that business to be because we can grow it at that level. We can add on both bolt on acquisitions and lift their margins up and really add a lot of value to the company. To me, it's healthy where it is. Got it. Thank you. Thanks a lot. The next question comes from Aaron Sison Watson with RBC Capital Markets. Please go ahead. Good morning. I guess just wanted to understand, maybe the raw material picture There was some increase in some of the feedstocks over the last little while. Would that have any impact on you guys going forward given your athlete purchases? Yes. Oh, ethylene specifically? Specifically on ethylene? Yeah. Well, look, I mean, yeah, let's just start with that. I'll answer it more broad way to do. Okay. I'll answer it more broadly. I mean, the reality is you look at 3rd quarter, every single business, Ride Energy and Raw's went up. Every single business really able to cover that off with price. So look, I mean, we could feel some more impacts from that, but I think we're set up to completely cover that off. And then, just kind of just understanding the 3 year outlook on an earnings basis. What kind of cash deployment do you have in there and how is that split between buybacks and acquisitions? Yes. I mean, like we said, we have $1,000,000,000 earmarked for buybacks at this point in time, and we will bring some of that forward. And front load it. We will continue to deploy cash back into the business as our first choice through organic investment And, and we had earmarked a $1,000,000,000, and we said that may take a little higher than that towards the back end of these 3 years. And then, on acquisitions, we had said about $1,000,000,000 for acquisitions over the same period. So now we haven't done, on a ratable basis, this year, we haven't done that level. But as Scott said, we have some attractive things that we see potentially coming next year. Right. But is there a capacity to increase those given the over $3,000,000,000 that you can generate over 3 years? Sure. Yes, absolutely. And we're going to continue to be opportunistic with what's in front of us. Okay. All right. Thanks. Thanks a lot. The next question comes from Lawrence Alexander with Jefferies. Please go ahead. Hi, there. 2 quick ones. On AEM, you normally don't discuss trends on a regional basis. And I'm just curious, as you think about the way the project pipeline is evolving, if the large customers start rejiggering their global supply chains over the next 2, 3 years. Would you see any hiccup in the pattern or how would you flex to adjust for that? And secondly, Mark, your comment about productivity and taking advantage of more opportunities across the system. Some companies characterize this in terms of spreads and some characterize it in terms of taking advantage of volatility. And a few years ago, you used to talk about having $100,000,000 or so several chunks of headwinds that would happen under the surface and you would try and offset them. Is the issue sort of spreads or volatility or is it that there's fewer adverse areas of lumpiness than we've seen in the last few years? So, Scott, why don't you take the first one, which is sort of a view of changes in the world and EM supply chains moving around and what impact that would have on our business Yes, sure. I mean, Lawrence, look, in our EM business, I mean, we are growing in every region and yes, you see very short periods where it slower in one than the other, but we are positioned globally to put out solutions and move our supply chain around as we need to. So we don't see any kind of rejiggering of customers, supply change and so forth impacting that business at all. Okay. So you asked a lot of questions, Lawrence, on the last it. So I'll try to start with productivity and carry that forward. So, some folks on the call may not remember the 12, really the 13, 14 kind of timeframe, there was tremendous headwinds that faced our company. Orders of magnitude $500,000,000 between methanol and the loss with Southern contract, We had a huge step change almost overnight in FX. It was really big impactful for us. We had gone out in a very combustible way and late claim to profitability, from ethanol, which really wasn't going to happen in there. Through that period, we overcame those with a restaurant productivity effort and moving our business models. And had double digit earnings as well through that period. Since that time, we have doubled the profitability of this company. 3 years, we have doubled the profitability of the company. And we've done that in a real fundamental way employing these business models, directly to leverage our ability to manage complexity that exists out there and that's complexity that can be through volatility. It can be from trade flow movements. It can be in an EM business is related to the opportunities we bring these customers to create unique solutions and therefore differentiate themselves in the marketplace. Those models have been more and more refined. We're going through another element of full refinement today based on our learnings for the last 12, 18 months. And we think those models have yet to fully realize our potential. So we don't we stay right there. As it relates to out of pure productivity, through that period of time, if you look at it over the last couple of years, we've actually dropped our net productivity contributions. And that's not because there's not opportunities there, but we have really more to do, I'd say, with with the work on the model and that sort of thing. Now we're in a period where we can take a different look at productivity, which is to say we have volume growth opportunities out there, which gives us then comfort to look at embedded in efficiencies that exist from different regions of the world in different assets and take a position relative to that. So we think we have a new round of productivity in front of us. Will be a CapEx related productivity that can generate some very, very high returns. And I mentioned 2 of them that we've just talked about here over the last several days. So we think that we'll be able to move into that arena quite successfully we see that as enhancing the earnings capability of corporation, which gives us comfort, this level we're at today in a broad sense is like a resetting of a foundational level. That doesn't mean we're up every day a little more than the next day, but what it does mean we've got a different foundation base to work from. We don't see any reason why that should really change dramatically. Yeah, trade flows move around, but they have been moving around. Companies move around, but that's going on. China is strong, China is weak. That's all that stuff has happened throughout that time period that we've been under the last several years and we've been able to manage through that. So we don't have too much anxiety about it. And to be honest, we don't tend to micromanage it terribly. We don't spend a lot of time worrying about it. We look at the big fundamentals. So you need to think of selling these and you know as well as a company that has really good business models. You know, generates a lot of profitability to thick and thin a lot of cash through thick and thin. And most importantly, we don't do stupid things. You know, we manage that cash very well and we get it back to you guys as best we can. Okay, perfect. Thank you. Thanks. Next question comes from Duffy Fischer with Barclays. Please go ahead. Yes, good morning, Fellas. Good morning, Duffy. A couple of years ago, your Singapore plant was fairly uncompetitive in a low oil environment and then you had redone your carbon monoxide contract with Lindy making it competitive do we need to worry yeah, it's very dependent on oil and as it relates to, to bunker fuel. And as you know, that's gone through a sunset about abilities around concerns or not concerns, but uncertainty about how to manage the move to a low sulfur bunker. So, yeah, as that, as that unit gets pressed, it's going to be a little bit less competitive, but still, it still is a good unit for us, in operational. So you could enter a period if we get back above 100 where that unit is less competitive. Having said that, we have opportunities to do other things. That can surface with that. So we don't we're not particularly worried about it. Yes. And we did do some things a few years ago, as you alluded to Duffy, that does give us a little bit more, flexibility in those high oil environments. So we are exposed, but not as much as we were in the past. Okay. And then the announcement you made on Germany, can we read into that So Duffy, you're breaking up a bit. Can you repeat that? The announcement we lost yesterday announcement. Okay. I was just going to say with the announcement you made on Germany, can we read into that? Did the Ibancina plant, that is now on stream is filling out pretty nicely? And then, if that's fair, roughly how much has Ibancina contributing year over year because we're still annualizing, I think, the bump up in your ownership stake there. Duffy, this is Scott Sutton. So I mean, the announcement when we made in Germany about expanding that plan, right, is strictly because, you know, we're in a real healthy business situation there. You know, demand supply is tight and and it's time to add a little bit. And yes, I think you can read into that that, you know, the I've been seeing a palm plant is running very satisfactory. You do see our equity earnings in that business up almost all of that increase is due to better performance out of Evan Cena. Next question comes from Vincent Andrews with prepared comments correctly, I I saw you called out 4 percent organic volume growth in, in EM, in in in the sense that you'll get back to 6% to 9%. And then I guess the 4% was maybe due to some of the pricing you took. I'm just curious, are the customers buying less from you? Are they buying more from others? Or so is this a push out of demand around pricing or did you actually see some share for the meantime? Yes. Well, really, I mean, the main main driver of that. And again, you can't look too much at quarter to quarter, but main driver behind that was we, we have lifted price quite a bit to overcome the raw material inflation. So we ended up being successful with getting all that price and still growing volume as well. So I don't read any kind of fundamental shift in demand in that. Okay. And just as a follow-up, on the goal of the 5000 project wins, how would you characterize, do you have the intellectual capital needed to get to 5000 projects at a time? And do you have the sort of physical R and D footprint necessary, or would there be more investments in in people and facilities necessary to scale up that way? Well, I mean, we continue to invest in people. We have a very good team growing each day in terms of capability. We continue to invest in R&D. A lot of it is incremental capability as we improve the model as well. And then on the physical side of things, anymore? Yes, on the physical side of things, I mean, you've seen us make quite a number of announcements. We're in the process of expanding compounding capability at at least 4 or 5 sites. We're expanding 2 of our polymers that we've made announcements on as well. Both Palm and our GUR Ultra High molecular weight polyethylene. There'll be some more of those. Okay, understood. Thanks very much. Thank you. The next question comes from Jim Sheehan with SunTrust. Organic growth, you just spoke to, the deceleration that occurred because of the higher pass through of raw materials. It sounds like you did quite well in automotive. So, which end market actually experienced that demand destruction? Was it medical? Was it industrial? Something else? And what gives you the confidence in getting a reacceleration in that organic growth to the high single digits Yes, yes, sure. Well, let me now start and then I'll Scott to write into details. I think, I would Jim, I would I think it's best to look at this, not as markets. We talked at the, at our April session with you guys about the embedded growth process that we deal with. So we look beyond markets in a specific application. So for us, it's a very generic world out there, but generic being being that everything we do is specific to some unique trait and ability we can have and it's independent of the market. So we don't look at these like markets and we don't We don't analyze our movements, normally we put our teams in place. We don't do anything relative to markets. We really work at it as applications, differentiation. And if we do anything, we lump together simple applications to create programs that go into certain arenas. And so it's I like to answer your question, but it really we really don't look at it even that way. Thank you. The next question comes from Alex Yefremov with Nomura in Senate. Please go ahead. Good morning. Thank you. Understanding that your Palm portfolio is mostly differentiated. If you look at the industry as a whole, is Palm operating at a high rate at this point? Yes. I mean, the answer is yes. We have a lot of differentiated products. We also have some more standard products as well, but the whole industry is operating at a pretty high rate. Understood. Thank you. And on your guidance for 2019, is there any buyback or M and A assumption within that? Yes, what yes, not really. If you look at where we are from an earnings point of view, the buyback we're talking about is a pretty de minimis effect. And so it implied that we have the ability to forecast things in the 10, 20 set kind of range and we don't have that ability. So no. Understood. Thank you. Anita, let's take one more question and it will be the last for the call. The last question comes from Matthew Blair with Tudor, Pickering, Holt. Please go ahead. Hey, good morning. Thanks for taking my question. The release mentioned that project wins in EM were up 58% year over year. You provide a breakout or maybe any sort of general commentary on how much of this growth is coming from existing customers and how much coming from new customers? And where do you see the most opportunity going forward? Yes, I mean, that's right. I mean, Q3 of this year versus Q3 of last year, it is up those kind of percentages. We did close 925 projects. And that that comes from a real mix. I'm not going to give you the, you know, the exact numbers, but I think it's safe to say that both existing customers, our comprehensive solutions portfolio is being applied to a bigger set of their needs. And at the same time, we're also out there trying to translate those wins or those technologies to a new set of customers. So it really is both, Great. And then, in the fetal chain, we saw reports of a fair amount of plan and unplanned maintenance in Singapore and Nanjing in Q3, but then obviously the results were really strong. So I was curious if you felt like left any opportunity on the table in Q3? And if so, how much? No, no, we didn't, we, we really don't leave a lot of opportunity on the table, boss. I mean, we're vacuuming every corner of the world to do what we can to make money. We will now conclude the call. Thank you for your questions and for listening in this morning. We are available after the call to address any further questions you may have. Anita, please close the call. This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.