Earnings Call: Q1 2018

Apr 17, 2018

Good morning, and welcome to the Celanese First Quarter 2018 Earnings Call. After today's presentation, there will be an opportunity Please note this event is being recorded. I would now like to turn the conference over to Suravi Varshney, Please go ahead. Thank you, Steven. Welcome to the Celanese Corporation First Quarter 2018 Earnings Conference Call. My name is Suravi Varshney, Vice President, Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer Scott 7, Chief Operating Officer and Scott Richardson, Chief Financial Officer. Suddenys Corporation's first quarter 2018 earnings release was distributed via business buyer yesterday after market close. Slides and prepared remarks for the quarter were also posted on our website www.celamese.com in the Investor Relations section. As a reminder, some of the matters discussed today and included in our presentation may include forward looking statements concerning, for example, our future objectives and plans. Please note the cautionary language contained in the posted slides. Also, some of the matters discussed and presented include references to non GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included with the press release and on our website in the Investor Relations section under Financial Information. The earnings release and non GAAP reconciliations have been submitted to the SEC on a Form 8 K. The slides and press and prepared comments have also been submitted to the from Mark Roar and then open up for your questions. I'd like to turn the call over to Mark now. Thanks, Sarvi, and welcome everyone listening in today. I'll begin with just a few highlights before opening the call for your questions. 16% sequentially to $1,850,000,000. With strong pricing and volume support, we are pleased to announce GAAP earnings of 2.68 dollars per share and adjusted earnings of $2.79 per share. Engineered Materials Acate tow and the accrual chain, as well as our affiliates, all reported strong results, continuing to trend that has been underway for some time. Adjusted EBIT margins expanded by 300 basis points, achieving record operating EBITDA of $553,000,000 and EBIT margin EBITDA margins of 30%. Engine Materials reported net sales of $665,000,000 supporting record segment income of $182,000,000, driven by projects, acquisitions and higher sales in Asia. Volume increased 19% year over year and adjusted EBIT margins for Engineered Materials came in at 27%. The affiliate earnings grew 26 percent year over year to $54,000,000. We saw strong growth in Asia and we commercialized over 740 new projects this quarter. The estate towed segment income in the first quarter was $78,000,000, declining a bit year over year as unique carryovers in the first quarter of 2017 did not repeat themselves. The STL chain grew 32% year over year, and 18% sequentially to report net sales of $1,000,000,000 for the quarter and record income of $253,000,000. Modest, but consistent demand growth and Thai regional supply dynamics helped lift pricing and generate the significant growth in earnings. Margins expanded to 24% as more than 400 basis points sequentially with strong asset and derivative pricing in all markets. The rest of this year, we expect Engineered Materials to build on its success with more than 3000 project wins with additional bolt on acquisitions and continued growth in Asia Earnings in Estate Toe should step down slightly next quarter and remain at that level through the year. Consistent demand growth and business fundamentals through the acetyl Chain should support earnings growth through 2019 2020. Given the strong performance in all these businesses, we increased our expected guidance and adjusted earnings per share to the 20% to 25% range. Over 2017. With that, I'll now turn it back to Surby. Thank you, Mark. I'd like to request all callers to please limit to one question and follow ups. Steven, please open the line to Q And A now. And our first question comes from Lawrence Alexander with Jefferies. Please go ahead. Good morning. I guess, 1st of all, on the acquisition contribution to Engineered Materials. I noticed that you didn't break it out specifically as a, just embedded in the volumes. And I think it was a few quarters ago you were talking about, you spoke about how You expect acquisitions to scale up over time because they give you multiple shots on goal. Can you give us a sense for how much of capacity you have in Engineered Materials or what kind of investment cycle you need to do to support the volume growth you're seeing? Yes, Scott, you want to just take a stab at that number? Yes. I mean, look, along with those acquisitions, did come the ability to easily expand capacity without much capital. And we're in the process of doing that and we still have some available. However, at the same time, we have a number of investments going on in both compounding and at least one polymer. It's expansion that are underway this year and we expect more of that in the future. So we're doing both items. Organic expansion and extending the capacity that we acquired through acquisitions. And that fits, with $300,000,000 to $350,000,000 of capital or projected for the next several years, in previous calls with them. And then secondly, can you update your thinking on the Chinese environmental tightening and the related shutdowns In particular, I guess, how you're thinking about the tailwind from 2018 into 2019 2020, do you see it subsiding, or do you or what do you see the as the longer term trend for the acetyls business? Yes, I think if you think about the, the F Steels business, you've got to take a long term view and you've got to think of slow rate of change. So we have a business that is growing 2% or 3% per year, maybe accelerating a little bit, so maybe 3% or 4% right now. But that kind of percentage is per year. And a few look back at the cycle, probably in the 11 timeframe, we peaked out in shell capacity somewhere in there. So you had this big build up in China, as you well know, Lawrence, the 2000 and 8 and on 10 kind of time period where money was free and everybody wanted to build a plant and they wanted to convert coal, which was also free in China. So it was an easy conversion to make. Since then, capacity has been, relatively flat. And you've seen that creep slowly build effective capacity utilization. And so imagine a 3% 2% or 3% decline in that that capacity over the time, available capacity. So we found ourselves today at the 80% kind of range, on average, a little bit above that. We saw short term a short term, in the last couple of quarters, some pinch on that. So maybe it's 384, 85, something like that short term, capacity utilization. When we look at, China per se and the regulations that are going on in the host of those and all the regions that are impacted, we believe there's going to be 5% capacity reduction as that runs its course, over the next 3 or 4 years, that kind of timeframe. So we think you've got 5% coming off the top of that at that time. At the same time, you're going to be from the bottom taken away another 6%, 5% or 6%. So there should be about a 10% uptick. Net net over the next 3 or 4 years. Great. If you made it that, are you implying that you need to add capacity? Mean, just as a clarification? Well, I think the incremental capacity, yes, we're adding incremental capacity now as you know. And from my point of view, as you get into sometime in the next decade, you'll see capacity addition come off. But it's a long ways away. And today, I think what I'm seeing is incremental capacity is a way to go. The other thing you can do is you can look at finding ways to bring new molecules to market. That's the kind of thing you're going to see happening now. The tightness is going to be with us for a while. Our next question comes from David Begleiter with Deutsche Bank. Please go ahead. Thank you. Mark, in Asset Hills, while on to Lawrence's question, what the normalized earnings rate here absent obviously Q1 benefit from the outages. And I think you said, did you say you expect to see operating rates increase 10% in the industry going forward? So based on that, how should we think about normalized earnings power in acetyls over the next 2, 3 years? Well, we're going to go into a lot of detail on it in a few weeks, and I don't want to steal the thunder of that. But what I, I, I, we don't have a normalized earnings in our own view of that that, that earnings should grow and should continue to grow in that business for a good while. And, so a lot of people believe this business is being cyclical, but I think if you really look at on a capacity point of view, it's only kind of going through one cycle in the last 18 years by my math. And, and demand has been pretty consistent. And it was just way overbuilt when that happened. So I think we're moving back to a high capacity utilization scenario you would routinely see prices of absolute $1000 a ton. We're nowhere close to that kind of level today. So I think you're going to see it continue to grow, David, as as we get out through this, the next 2 3 4 years. Understood. And just on acetate tow market, is there a plan B now post the JV being not going through? Yes, I think we got plan D too. We got BC and D we're working. So just we said it'd be flat. We're putting forth plans and we'll share those with you guys to keep it flat through this next planning cycle. Through 2020. And we'll share that when we get together in a few weeks. Our next question comes from Frank Mitsch with Wells Fargo Securities. Please go ahead. Yes. Good morning. Just to follow-up on the acetyls and the question about normalized and so forth. Do you have any sense as to given the fly up in, oh, first of all, I forgot to say, hey, congratulations on your new role, Mr. Richardson. Thank you. Hey, so what do you think the fly up benefit was from the from the very tight market conditions and acetyls was in Q1. Obviously, this $231,000,000 blew away any prior. Would you say 50,000,000 dollars, $60,000,000, $70,000,000 of a short term benefit that you realized in the quarter? I don't know if we've looked at that way. I'm looking at Scott. I mean, the machine, the machine produced that number. And yeah, the machine wasn't in place. We didn't have flexibility. We didn't have adaptability. We were locked in the long term contracts at a cost plus basis. I'm not sure what it would have been. It would have been heck a lot less than than that. Yes. And I would, Mark, this is Scott and Frank. I would add to that that really what's going on here is you do see the fundamentals improving. And like Mark said, those fundamental will be improving over the course of the next few years. You can imagine that even within those improving fundamentals, that you do get a little variability quarter to quarter. So there's a little extra sitting in Q1 relative to where we might be in Q2, but not a great deal. Yes. No, it's an interesting it's an interesting comment that, that you are expecting acetyls up in 2019 after setting up a very, very difficult comp, for the first quarter. So obviously there isn't a great expectation for, for you that, that, that will continue, to improve, on the operating basis. And just if I could, you know, free cash flow obviously was on the light side, here in the first quarter. How should we think about the cadence of free cash flow to get to that over $900,000,000 for 2018. Yes, Frank, this is Scott Richardson. We expect that to catch up through the year. So what we saw in the first quarter was really just the timing of collections. So, about 40% of our Q1 sales occurred in the month of March. And so just from a timing standpoint, a lot of that collection, pushes into April. Mark talked about the strength that we saw in Asia. We have slightly longer terms there. So that plays a role as well. And Scott Sutton, talked about, new capacity that we get for very little investment in our acquisitions. One of the things that we do is really optimize how we produce and run on those assets, which is kind of moving from what was a make to order model we had in those businesses when we acquired them. To a better balance between make the order, make the stock. And so you saw inventory tick up as well. In addition, we had a little bit of increased in CapEx to support the growth in the businesses. So that those are really the reasons for, where the free cash flow number came in Q1 and we to catch that up as we move through the year. All right. Thank you. Thanks, Mike. Our next question comes from P. J. Juvekar with Citi. Please go ahead. Yes. Hi. Good morning. I just want to go back to Axadis one more time. I think you mentioned that or you were hinting that this business should continue to grow into 2019. But in your prepared remarks here, you're saying that margins were 24% and you expect 20% margins for the year. So that implies some back in second half. Can you just talk about that? Well, I think we're just we're trying to range from these things a little bit. It's a we had a 24% margin in the quarter and it was up 100 basis points over the prior quarter at 20%. I think what we'd say is a normalized margin rate for us is between 2420, somewhere in that for the year. I'm looking at Scott when say that, but something like that. And, so when you get past margin, you got volume. And so volume is a function of demand, but also people are up or down and things like that. So you could have a bit of volume pullback as we go through the year at some of these units restart, P. J. I mean, that's how we kind of do the math. It's not, we're not contracted out on a volume basis of take or take on a contract. So we're real time in the market. So we're trying to anticipate exactly what the market's doing with that. We also have turnarounds. We have 6 different turnarounds scheduled this year. We have a couple of them occurring and, coming up next month. That's probably a $30,000,000 hit, that kind of thing. We usually don't talk about that too much, but So those things happen and go through. And we don't think very much about them. I would urge you guys not to as well. They don't really a long term, they don't really impact the numbers. Okay. And now that the 2 deals it's called off, one of your competitors is taking tow into other products like fibers. I was wondering if you can talk a little bit about that and Is there plans to shut down any capacity? Yes, we'll talk a fair amount about it at the Investor Day. What I would say is right now, no. I mean, you know, there's, some other folks that do a great job in Fibers have been in a long time. We kind of got out of that business. So I think difficult for us to see running back in there. We have other applications that we're quite proud of that pushes more polymer side and film side. And there's innovation out there. It's pretty cool, pretty interesting we're working on. There are productivity things that we're planning and we'll share more as time goes on. And collection of all that, we believe, plus plus strong performance in China and growing performance in China. We think those things wash out and we'll be able to have 3 years or so of no matter what the market does, kind of pretty stable earnings, flat earnings. And there's still options for us to do other things. So we'll share more of that with you. I think the important thing that you should hear from me is that as it relates to cash flow from that business. We don't see that changing over the next 3 years. Our next question comes from Bob Koort with Goldman Sachs. Please go ahead. Marco, when you guys contemplate strategy 30 for the EM business, do you anticipate you can continue to achieve those high single organic volume growth rates? And then what more do you need in that toolkit either from a product or geographic standpoint? And can you talk about the staffing needs as you continue to grow that business so aggressively? Well, I'll make it just a brief comment and then let Scott dig into that, if you wouldn't mind Scott. But if you look at that business and success that the team has had, there. We've grown earnings, I believe I'm about saying $70,000,000, $80,000,000 to $90,000,000 year over year for the last 3 years. You should think in terms of this year of us being north of 100 to 100 plus in that growth and that's kind of the embedded rate that we built in a model. So we see that kind of continuing, if I say that. This is a strong growth and strong contribution, business out there. We believe that the project model is, to the end, S curve is nowhere near curbed out. And then we have plans to over curves on top of that with things like translation. So we feel really strongly that that model is going to continue to generate that high single digits kind of kind of growth that's out there. And that's kind of a year over year basis, not necessarily quarter to quarter kind of thing. Scott, you want to talk about It's all process about where that business is going from a point of view of products and markets and mess up. Yes, sure. I mean, yes, Bob, Scott here. Look, I mean, that business really is set up to not only extend earnings, but grow earnings further. And to your question, what do we really need to be able to do that? Well, I mean, as you know, we have a pretty novel there that matches up the robust market opportunity that we have really with the broadest solution set in the industry. So you'll see us do things like expand that solution set. Some of that will be organic, but it could be inorganic as well. There are a few polymer that we're not experts in today, that we can do that. We also have opportunity in other geographies. We may not have a giant presence today, and that's a prime target for a bolt on acquisitions. I mean, look, the key to making this work is we have a great team, running this business and operating in this business. And that novel model is our intellectual property. And that great team focuses on working that model every day improving processes so that we can be globally connected and solve solutions around the world for customers and that's what we'll continue to do. And do you have any metrics that you can share around headcount on our product development, R and D. I mean, obviously, if you're growing that fast, I assume it's got to be a burden on your internal staffing and growth there. Can you talk about how you achieve that? Well, yeah, I mean, I wouldn't tell you it's a burden of course. I would think more of the challenge. I mean, the number one metric we have, you know, is, is well known number of projects that we get wins on, you know, we'll get 3000 purchase orders for new projects this year. But what will go up is our commercialization rate. We brought that from a lower level up to almost 45% today. We are adding some resources, Bob, but we also continue to get more efficient as well. Thanks very much. Yes, I'll make a comment on that in a bit of what Scott said. The focus on efficiency is what's made that model has been an element we've needed in that model to make it work with the organization that we have. That improving efficiency, we would we start to top out that S curve. So we've not done that yet. What we're focused on now other dimensions. So we think of these as the classic S curve. So, you know, the development phase, the growth phase and the duration, as you know, as we move up that curve in this machine, it gets better and better that machine, it's important that we find ways to translate more of these because translation is another whole another dimension of efficacy of this model. And we'll talk about that in 2 weeks, how we approach that, how we lever our success in one area to another area. And to be very honest, we're just scratching the surface on that. That's going to I say that that's going to make our growth here happen without, you know, proportionate addition of resources, because we just get better and better at what we do, and it becomes easier for us to Got it. I look forward to hearing about it. Yes, thank you. Our next question comes from Ghansham Panjabi with Robert W. Baird. Please go ahead. Hey guys, good morning. Mark, I was hoping you could kind of back up a bit and touch on the overall sort of macro. You call it China as a driver both engineered materials and acetyls. What about the other regions? How would you sort of characterize global growth as we sit today? Well, from a very high level for us, the entire world is doing well. We have strong business in the Americas and improving footprints across the Americas. We have very strong performance in Europe and great innovation in Europe, great connectivity with all the major OEMs and more innovative OEMs. Europe that really drops a lot of growth in Norway and Europe and around the world. In Japan, we're seeing stronger performance and we're seeing more connectivity with the Japanese OE ins inside Japan with our team and that crew translates into business outside of Japan as well. And then you get into into China. China just continues to improve and they're, it's classic, it's classic material upgrade, a lot of work with autos there, a lot of work with consumer goods there. And it's all to make them better for their local market. So we see every place doing pretty well. Okay. And just a second question, last quarter you pointed towards the legacy Consumer Specialty segment being flat on an EPS basis, 2018. Do you still think that will be the case in the context of the resegmentation of food? And then can you sort of update us on the EPS contributions from each of the segments given your guidance raise for the year? Thanks. Yes, so I'll start that with, big hell, yeah, we look at it as Estates tell now is what we call it. And we're good stewards of that business. And we've been saying we'll be flat for a couple of years and we've been flat for a couple of years. And and it will be really flat this year. So we're able to manage that business in a way that we continue earnings by the fact that there is a gradual decline underway. I do want to mention that business is a lot calmer today since we've kind of run through that capacity drop that occurred when the Chinese Squid import in so much material. So that's almost fully run its course. So now you see more of a normal lot situation. So yeah, we're going to be flat this year and I think we can be that way for the next 3 years, which is a basis of kind of our plan. And the EBIT, you said that sort of the EBIT kind of by segment. Mhmm. Yep. So I'll take a stab at the Scott wave in wave in a little bit. So I've already just told you we're flat. You got that in Estate Tow. Is flat. So that's pretty easy one to do. And flat for us, it's plus or minus $10,000,000, something like that. So we're not that good, but but flat is what we'd say that to be. If you look at, at the end business, we've already told you 100 plus. That's kind of that business. And you get into 200, 200 plus in, in the, the Seadrill change business. And that's kind of how the math's going to work out for this year. Thank you so much. Our next question comes from Mike Sison with KeyBanc. Please go ahead. Hey guys, nice quarter. Thanks, Mark. Mark, when you think about Engineered Materials, you've doubled the business. Since the last downturn and when you think about the pace of acquisitions potential, what do you see as the potential to grow this business over the next 3 to 5 years. I don't know if it's gotten into that. Scott, you want to wait on that. Yes. I mean, look, hi, Mike, Scott Sutton. You know, I think in terms of of more acquisitions. There's a broad slate of candidates out there and we have a very big pipeline. And, you know, we are talking to 1 to 200 over the course of 12 months that we put through a funnel process. And you know, you've seen us come up with and be able to match objectives. We said we do nylon and we've done nylon. Now we're looking even at other, growth technology initiatives that we have, for example, medical energy storage, these things will be trying to acquisitions that match up to those needs. But at the end of the day, there's a lot of opportunity out there, Mike. It's about finding the best opportunity. And of course, we're going to pay the right value for these. You know, we target around a multiple of 10. So there's really not a cap on engineered materials. And you got to remember where, call it, 1% of global engineered materials business out there. So there's plenty of opportunity, right? It's just a matter of us progressing on those. The 70, 80, 90, 100 plus, I mean, if you look at 100,000,001,000,000 if you just look at the additive factor of that, that is the base model we have in place today. And we still have opportunity to make that work the way it's work. We don't see that changing, Mike. What we've not talked about is increased optionality we're getting as we go into business. The business is getting a bit tighter. So, with a lot of these Engineered Materials, the capacity is not long in is getting to be quite short. We've got incremental expansions underway. We'll be adding more volume as we go through these next several years, self producing more volume, which is a good thing that's needed by the market. Very, very cost effective for us to do that. And we still not talked about a bigger deal, but there's a couple of those out there that we continue to play with. So I think this business you laid a straight hedge on what's happened the last several years, that's how I plan it out. Right. Okay. Great. And then In terms of your outlook for 2018 in Engineered Materials, I think I might have missed, but your first quarter organic growth was I I forgot. I don't know what that was, but for the full year, it should be what high single digits to maybe double digits for organic growth? Yes. And so, Mike, I mean, if you think from a volume standpoint for the full year organically, it should be in the high single digits. If you think about what happened in first quarter, just think about it from a revenue standpoint. You know, the acquisitions added almost half of that revenue growth Our next question comes from Duffy Fischer with Barclays. Please go ahead. Question just on Ivensina, started up early this year. Can you flush out how that's going to roll through this year? How long it'll take for that plant to kind of fill out, how much was just the step up in ownership versus, again, you've increased operating rates throughout this year. And then does that anniversary kind of all the way through the first half of next year then? Yes. And so, Duffy, this is this is Scott again. I mean, we did start up that Palm Plant expansion there last year. We've been withdrawing volume from in a pretty good clip so far that supported our growth. It's not running at capacity and it'll take through this year probably to get to that level. The earnings have stepped up a little bit and they'll sort of stay at that stepped up level through the rest of the year. Most of that coming from the increased, economic ownership that we have there. It's not going to be a dramatic step up. I mean, there's even turnaround scheduled within that joint venture as well, but you'll see similar to where it is in first quarter. Great. Thanks. And then if you could just comment on the Slide 9, you talked little bit about free cash flow from that slide, but can you talk about just cash flow from ops, you know, the big step down each of the last 2 years kind of from that base? Of high 200s and what's eaten away at that cash flow? Yes Duffy, it's really just timing. For us, we see again, being greater than $900,000,000 for the year. And so just what we saw from the strength of the business, particularly in the second half, of the quarter, we're collecting that now in April and we see that continuing as we move through the year. So we should up as we move through the 2nd quarter and into 3rd quarter and be back on that trajectory of being in excess of those kind of quarterly how we track quarterly going forward through the balance of the year. Our next question comes from John Roberts with UBS. Please go ahead. With the benefit from trading activity in acetyls above normal in the quarter, Eastman didn't come back until the start of the quarter. So I would would imagine opportunities for trading were still high at the start of the quarter. Ana, what your question is. What do you mean trading? Well, I think you said last year, you traded at least the equivalent of a world scale plant it sounded like it was above average last year? Yeah. I think, yeah, we're I think activity early in the year early this year was a lot more pricing oriented than volume was our volume, we did trade some. We did move some third party volume in that period of time. As we get into this this quarter, still some pricing and some volume that's going on. Okay. And then in Singtel, In Singtel, you mentioned there may still be opportunities to extract further value. The Blackstone deal had operational synergies, but I think it also gave you a path to potentially deconsolidate down the road. Do you think you could still find a path to deconsolidate without some sort of merger deal? It's a bit harder. I think with the EU, which is a real disappointment, I'll be very honest from you look up from an economist perspective, there's no reason not to for that deal not to occur, but the European Union has some funny views on this concept the overlap and they just didn't want to prove anything unless there was no overlap, which means basically you couldn't do the deal. So I think we see a path where we could do a deal in theory and have it passed to the European Union, but I think practically it's going to be it's more difficult. Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thanks and good morning. I understand the first quarter free cash flow dynamics, but I just want to make sure I'm clear on you raised guidance, but the full year free cash flow, if I'm correct, you're still calling for the same above $900,000,000. Is that just a continue of the issue that as you have higher prices in AI, you obviously have higher working capital from an inventory in and receivables perspective and you just have to kind of get into a rolling period where that stays the same and then you get the release of cash flow? Yes, I mean, that's the best way to look at it. I mean, there's really nothing fundamental, going on that's of issue. We talked a little bit about the rise in inventory from the M and A integration activities that's going to continue. And then we expect, obviously to collect that. Again, there's nothing fundamental. Terms are a little bit longer given the dynamics we're seeing right now. Because we have more sales in Asia, and we saw pricing move up in Asia, particularly through the quarter. And given the outlook that we stated for the balance of the year, I think that's kind of how we see it flowing through, but that we don't really see a fundamental issue Yes, on an annualized basis, that's right. I think the short term as well, we spend a bit more on capital ratably right now than we have been last few quarters. So that's, that was a little bit of a draw in the first quarter as well. Thank you. And just as a follow-up, I can't help noticing that oil $75 again, where would TCX become and where would you get that going again? Is it much higher than current levels or how you're thinking about that if you're thinking about it at all? Yeah. We're not really thinking about it at all. I, I'm looking at the team. I left there thinking about it and not tell me about them. They look guilty over there, Vincent. I'm not sure. But you know, go ahead, Scott. Yeah, it's interesting. I mean, certainly, you know, ethanol demand for fuel in China is up. There's still the questions over organic versus synthetic to to get over. Yeah. China can't meet their ethanol mandate. And So I think they're struggling with it. So that could surface some things there, but we're really not we're not actually pushing it. Our next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead. Good morning. Just to follow-up on the guidance here. So the 20% to 25% EPS growth, is there a way to kind of characterize, maybe how much is persistent is Seadrill's upside, or maybe the acquisition contribution or EM doing better than expected? I mean, I guess, I'm just curious as to the mechanism as to this kind of coming back down, was lower ethylene maybe a positive for your VAM margins in Q1 or? I think it's, yeah, just a rule of thumb, you can't use you can't be too specific with your numbers when you're looking at big numbers like this. But generally speaking, we've outlined that we're going to have a very, very strong year in materials. And And they're all feel a good start and we expect that to continue as we go through the year. So that's that 100 plus kind of quantity. We've tows flat year over year plus minus $10,000,000 to $50,000,000 bucks, something like that, it's flat. And then you get into the chain business. And the chain business had $100,000,000 to $140,000,000 kind of 1st quarter think we're 200 plus for the year. So you're going to see that moderate a bit. But it doesn't mean online business is not really strong. I mean, that's several movements in pricing and incremental volumes and things like that will moderate. We've got a bunch of turnarounds to do on those. Each one of those pokes is in the offer of $10,000,000 to $15,000,000 and we have 6 of those. So that'll all be plugged into that scenario, that rolls out as we go through the year. So you should expect stronger first half than the second half, but you should also expect that, that, the next year is stronger than this year. Mark, I would just would just add to that that, look, I mean, the business strategies are working and materialize and there are good concrete fundamentals underneath all three businesses. And that's why we're confident in saying that this will this will continue. I mean, the acetyls team continues to implement their model. And so does the engineered materials teams you see that moving forward. Okay. Thanks. That's helpful. And then on the acquisition pipeline, you mentioned compounding earlier, I are there any other particular substrates or capabilities you're looking for? And, what do you still have the plan to use the other half maybe for buybacks or maybe you can just reiterate your plans for cash there? Yes. And the buyback question, we haven't really made a decision on that. We'll share more in the weeks ahead with our plans on share buybacks. That's in part because we see lots of M and A activity, theoretically in front of us. So we need to sort through that just a little bit. I really not say which molecule should go in after and things like that in the M and A. What I will say just echo what Scott has pointed to is that we tend to look at at initiatives. And that can be a polymer based initiative, which fell into heat and into nylon. And so that was this big initiative we've been on. And we've gone from being a small player in there, I think that perhaps the largest independent compound of nylon, if not, if not, we're pretty close. So that moves move we've made and we now have moves like that underway in medical and energy storage and things like that. So we'll see how those unfold as time goes on. Our next question comes from Jim Sheehan with SunTrust. Please go ahead. Thanks. I'd like to clarify on acetyl intermediate. Of trading activity, was there a one time trading gain or loss in the numbers for this quarter? No, the answer, I mean, the answer to that is no, but what I will say is that we have this globally connected model that we go out and activate the network and we measure how we're doing and how we're growing by how we activate that network and we continue to increase those number of activations. But there's no specific kind of one off trading gain, gain or something like that. I just want to be clear about that. Thanks. And then in Engineered Materials, you talked about, how you see margins progressing over the next few quarters. When you're adding in, acquisitions, you've talked about those being dilutive. Do you expect to completely offset debt solution and to actually expand margins? And also with the re segmentation, how should we think about margin, the margin runway in that business? Well, look, as long as we're running bolt ons, I mean, you can expect that, that margin to be around 19% to 20 percent without the equity income from bolt ons, we did. If we weren't doing bolt ons, you'd see that come up a little bit. As far as the re segmentation where we put the food ingredients into the Engineered Materials business because the project pipeline runs in a similar fashion. And you got to think in terms of maybe that's 5% of the overall Engineered Materials business. So it's really not impactful. And how dilutive is that business to the segment? Not dilutive similar. Thank you. Thank you. Our next question comes from Hassan Ahmed with Alembic. Global. Please go ahead. Good morning, Mark. Mark, a question on the AI side of things. Look, you your earlier remarks talked about, volume growth being quite robust in Q1. And then sort of, not being strong over the next couple year on year volume growth in Q1, which kind of seems relatively normal. So I'm just trying to understand, on the volume front, what we should expect from the remainder of the year? Yes, I think we believe that 3% to 5% as you look out in over the next several years, it should be a pretty average growth for us. I'm looking Scott, but I think that's right. Now, you know, the quarter to quarter, that can be up and down and But that's what I that's where I think we are. And if you look back over your shoulder, it's been more like 1 to 2. Percent. So it doesn't take much to make a real difference. And we have a number of these free incremental expansions we're doing. And so we can, we can secure that volume and we can also build into that volume in ways we get a very high return. So we're seeing that volume picture for us be, and we'll share more about that in a few days. But the big part of our continued growth in earnings in this business. Understood. Understood. Now, the methanol side of seems to be, you know, continue to be quite strong. You know, price is high. Supply demand seems to be relatively tight. So any further thoughts about showed second facility in the U. S? Well, we continue to look at it. I think, it's not it doesn't hit the the priority level of these other things we're doing right now, but it's certainly a, it remains a very, very viable project. And we'll just keep you guys posted on our thoughts with them. Our next question comes Mr. McCarthy, your line is open. Sorry, I had you on mute. This is a Matt on for Kevin, but just looking at the proposed Chinese import tariffs on plasticized cellulose acetate. I mean, I know you have 4 tow facilities under JV with CNTC locally in China. So I don't, I guess, expect it to pertain to you specifically on a company basis, but what do you anticipate will be the fallout on an industry level, if there is any? Hey, Matt, this is Scott Sutton. I mean, what I would say is you're right. I mean, most of those joint ventures are back integrated into take flake. We supply a little bit in there, but we actually supply it from outside the U. S. From another facility. So we're not impacted. Other acetate flake does flow into China there. So there could be some impact yet to be seen. I would say on that, though, too, Matt, is that the volumes are pretty low now for everybody. I mean, it's not, I wouldn't get too worked up over that. Sort of come down. And then as a follow-up, I guess, you buy a fair amount of ethylene for your VAM and poly production. I think we kind of estimate you somewhere around like 1,250,000,000 to 1,000,000,000 a year. I mean ethylene prices are at historic lows. So was that a tailwind for the quarter? Or do you anticipate this to be larger for 2Q? And do you a spot buyer or a contract buyer? Now if you look at it around the world, you're right, but we buy a lot of ethylene in Asia. We buy a lot in Europe and we buy in the U. S. As well. U. S. Has a lot of pass through, ties to raw materials, so most of that's covered in pass through. So we don't see a lot of impact of ethylene, especially spot ethylene U. S. That's what will have much impact on us. Our next question comes Materials. Where do you stand in your efforts to raise prices? I think you're pursuing that earlier this year. Are you continuing to raise in the second quarter? And also, where do you stand in realizing the full benefit of the recent acquisitions that you made? What's the level of accretion? Incrementally in terms of EPS or margin that we can see later in 2018 or in 2019? Yeah. And so this is, this is Scott, Alex. In terms of pricing, right, we're having some success raising price. You can see that sequentially prices has come up and we've just announced another round. They're in the process of implementing prices. And we expect to be successful with most of those, those increases. Second part of your question was what topic remind me again? Sorry, recent acquisitions in materials, what's a are you fully realizing the benefit of integration or is there some incremental benefit Yeah. I mean, no, there's incremental benefit left, right? I mean, maybe we're a third of the way through with integrating those those 3 acquisitions. You know, I won't give specific numbers, but remember, we went back and said that, look, 1 or 2 of those added 10 a share in the 1st year and another one maybe added $0.05 a share. So everything's progressing, you know, to plan. But at the end of the day, those will double triple those values over the course of the 1st 3 years. That's the way to think about it. Thank you. Stephen, 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. Steven, please close the call. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.