Good morning, ladies and gentlemen, welcome to the Platform Specialty Products Corporation's third quarter 2018 earnings results conference call. This call is being recorded. At this time, all participants have been placed in a listen-only mode, the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press the star and one keys on your telephone keypad. If at any point your question has been answered, you may remove yourself from the question queue by pressing the pound key. We ask that when you pose your question, you pick up your handset to allow for optimal sound quality. Lastly, if you should require operator assistance, please press star and zero. It is now my pleasure to turn the floor over to Carey Dorman, Corporate Treasurer and Vice President, Investor Relations. Please go ahead, sir.
Good morning, thank you for participating on our third quarter 2018 earnings call. Joining me this morning are our CEO, Rakesh Sachdev, CFO, John Connolly, Ben Gliklich, our EVP of Operations and Strategy, Scot Benson, President of Performance Solutions, and Diego Lopez Casanello, President of Agricultural Solutions. Please note that in accordance with Regulation FD, or fair disclosure, we are webcasting this conference call. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Platform is strictly prohibited. Before we begin, please take note that unless otherwise specified, the results presented today relate to Platform's continuing operations and exclude any contribution from Agricultural Solutions which was qualified as discontinued operations in Q3. Please also note Platform's cautionary statement regarding forward-looking statements in the earnings release and supplemental slides issued and posted today in connection with this conference call.
Some of the statements made today will be considered forward-looking. All forward-looking statements are based on currently available information, Platform's reported results could differ materially from those predicted. Platform undertakes no obligation to update such statements as a result of new information, future events, or otherwise. Please refer to Platform's SEC filings for a more detailed description of the risk factors that may affect Platform's results. Please note that in the earnings release and the supplemental slides, Platform has provided financial information that has not been prepared in accordance with US GAAP. For definitions and reconciliations of these non-GAAP measures to comparable GAAP financial measures, please refer to the press release and the supplemental slides, which can be found on Platform's website at www.platformspecialtyproducts.com in the investor relations section under events and presentations. It is now my pleasure to introduce Rakesh Sachdev, Platform's CEO, for opening remarks. Rakesh?
Thank you, Carey, good morning, everyone, and welcome. In the third quarter, we are pleased to have reported low single-digit year-over-year growth in both sales and adjusted EBITDA, despite experiencing a modest FX headwind and softness in some end markets, particularly in Asia. This performance demonstrates the resilience of our business model and the importance of our company's diversification and highly variable cost structure. We are reaffirming our full-year adjusted EBITDA guidance for the company, excluding Arysta LifeScience, in the range of $425 million-$445 million. Considering increased FX headwinds and existing market conditions, we do expect to come in at the lower end of that range. This 2018 guidance includes about $5 million of the targeted $25 million in savings, which we expect to realize from the reorganization of Platform into Element Solutions.
We're making good progress on this workstream and are pleased to have begun to realize these efficiencies. Please note that with limited exception in our discussion today, we will focus on continuing operations. This excludes any contribution from our Agricultural Solutions business, Arysta, which we agreed to sell to UPL in a transaction set to close in the coming months. We will update you further today on our progress regarding this transaction, but in summary, we are working towards a timely completion. As you can see on slide three, we reported third quarter 2018 net sales of $489 million and adjusted EBITDA of $108 million. Net sales grew 3% on an organic basis, while adjusted EBITDA also grew 3% on a constant currency basis. Actual dollar results were impacted by modest currency headwinds, particularly from the Brazilian real and Chinese yuan. We saw organic growth across all our businesses.
Positive end market dynamics helped drive results in our industrial, graphics, and offshore businesses, tempered by softness in Asian electronics. Our industrial business experienced gains across the Americas and Europe, while Asia was impacted particularly by automotive markets that remain tepid into Q4. Although we would note, Asia makes up a quarter of that business. In addition, from a margin perspective, Europe was impacted by growth in Fernox, which is our water treatment business that has a lower than average margin. In electronics assembly and circuit board chemistry, continued weak demand for high-end mobile phones drove lighter volumes in Asia. In the Americas, our circuit board chemistry business realized volume gains through market growth, while Europe was essentially flat. These two regions are small relative to our business in Asia. Our semiconductor business saw healthy growth in Q3 as we won some new qualifications.
In electronics assembly, organic growth from both volume and mix in Americas and Europe was impacted by Asia softness and FX headwinds. As we look to the fourth quarter, we anticipate some continued demand softness in Asia, but we believe our memory disk and semiconductor businesses, while relatively small, will remain growth drivers. Given our geographic and end diversity with the electronic supply chain, on the whole, we expect our results to be less impacted by end market demand trends. Our offshore business again saw strong organic growth as the general recovery in energy has led to new rigs coming online. We expect continued growth into Q4, but are closely watching the recent energy price declines and their impact on decision making.
Our graphics business saw organic growth in line with our longer-term expectations as we lapped a slower third quarter in 2017 and saw a soft pickup in both Latin America and Asia. Both regions represent a secular tailwind for this business, so their contributions are encouraging. On EPS, we reported a GAAP diluted loss per share of $0.02 this quarter, which compares to a loss of $0.13 in the third quarter of 2017. This improvement is primarily attributable to a reported income tax benefit, lower interest expense, lower foreign exchange losses, and higher operating profit. Our adjusted earnings per share this quarter was $0.04.
We would note that adjusting our balance sheet to reflect the anticipated proceeds from the sale of Arysta, and therefore reducing interest expense through debt paydown, would positively impact adjusted EPS by about $0.13, which means that the adjusted EPS this quarter would have been about $0.17. We think about that $0.17 is the right earnings per share metric for this business this quarter. Our adjusted EBITDA increased 1% in reported dollars and increased 3% on a constant currency basis in the quarter over last year. Business mix in the quarter, primarily the outsized contribution of our lower margin industrial business relative to our electronics businesses, muted some of the growth in adjusted EBITDA, which we generally expect to exceed top-line growth. Mix within our electronics businesses was also a factor, as the Asian end market represents one of our highest margin areas.
Overall, despite softness in certain of our key end markets and moderate FX headwinds, our financial performance this quarter was consistent with our expectations. I would note that we are clearly seeing the same FX and end market dynamics as other specialty companies. However, we believe our diversity in terms of end markets and geographies insulates us from some of the dramatic swings in earnings associated with changes in end market demand that we see in other chemical companies. We have a resilient business model, and this quarter demonstrates it. Now let me turn the call over to John, our CFO, who will discuss cash flow and the balance sheet. John?
Thanks, Rakesh, and good morning, everyone. I am now on slide four, where we have a brief update on cash flow and our balance sheet. On a continuing operations basis, we generated $189 million of unlevered free cash flow year to date. We are looking at this number first on an unlevered basis, as the continuing operations accounting puts virtually all our interest expense into these results and obviously does not yet reflect the new capital structure we expect to implement in connection with the close of the Arysta transaction. On a reported basis, we saw a negative cash flow of $44 million in our continuing operations, which is burdened by our legacy capital structure and its related interest expense. This still reflects $31 million of year-over-year improvement.
On a similar continuing operations basis year to date, working capital investment remains in line with the prior year, and we expect a modest release in the fourth quarter, which is consistent with seasonal patterns. We expect the Element Solutions business to have a much more predictable and less volatile working capital profile than legacy Platform, which you can see in this quarter. Our outlook for net CapEx, interest, and cash taxes is in line with our previous expectation on a continuing operations basis. From a balance sheet perspective, Platform's net debt, including discontinued operations, decreased by approximately $30 million from the second quarter to $5.1 billion due to the translational FX benefit of a weaker EUR and cash flow generation. Our cash balance, including discontinued operations, was $403 million, and the revolver was undrawn at quarter end.
As we look forward, we expect to refinance most of our capital structure in conjunction with the closing of the Arysta transaction. In addition to less total debt and less leverage, we're also anticipating a lower cost of debt as we improve the credit profile of the business going forward. We look forward to sharing more detail on that when appropriate. With that, I'd like to turn the call back to Rakesh to provide additional color around our expectations for the rest of the year and an update on the Arysta transaction. Rakesh?
Thanks, John. On slide five, we discussed our expected outlook for the remainder of 2018, both financially and operationally. First, in line with our prior announcements, together with UPL, we are targeting December 31st, 2018, for the closing of Arysta. We are working closely with UPL on the closing and related integration, and both sides share excitement for the future. All necessary regulatory filings have already been made, and we have received antitrust approvals from Brazil, Colombia, South Africa, and the United States, amongst other jurisdictions. We believe we are making good progress on the remaining approvals. As previously announced, effective at close, we intend to rename our company to Element Solutions Inc and refine our organization and strategy to reflect a more nimble and efficient business profile.
This is a significant change in internal strategy and structure, and we have already made large strides in planning and executing against this objective. We are encouraged with the progress so far, both from an operational efficiency and cost-saving perspective. We will share more about Element later in the call, and we look forward to unveiling more of this in the coming months and at the investor day that we are planning for the first half of 2019. With the anticipated closing of the Arysta transaction, we expect net debt at closing of approximately $1 billion. As we reviewed during our second quarter call, there are several swing factors, including a working capital adjustment, that'll affect our net proceeds at closing. As John stated, the Element business is expected to have cash flow that is more consistent and less seasonal than Platform had historically.
Our expected closing leverage position should allow us to opportunistically execute our board-approved share buyback of up to $750 million and pursue other opportunities over the medium term. Nonetheless, we are committed to keeping leverage under three and a half times adjusted EBITDA for Element. Now we would like to spend a few minutes on Element Solutions. Turning to slide seven, we highlight key aspects of our business and overall vision. Chemical technology enabling performance and innovation. Element is a proprietary formulator of high-quality, differentiated specialty chemical solutions. Our customers across multiple end markets rely on our technologies and technical service as a critical enabler of their product development and manufacturing processes. Our consumable products are integral components of global high-value supply chains. You can also see here that Element is a diverse business in terms of products, end markets, and geographies.
Our businesses face multiple end markets but are all similar in that they deliver integral processes and services that enable our customers' high-value products. From our electronics-based businesses, which comprise more than 60% of Element Solutions, to our industrial and specialty businesses, our commercial and technical teams have close relationships with blue-chip customers who rely on our expertise. We believe Element's business model is a winning formula, and we are all excited about the future. I'll come back to the key attributes of our value proposition shortly, but I'll now turn it over to Ben, our EVP of Strategy and Operations, who will provide more details on Element's business offerings and capital allocation strategy. Ben?
Thank you, Rakesh. On slide eight, we've outlined our two primary businesses. First, electronics, and then industrial and specialty. Our electronics businesses consist of device assembly solutions, circuit board technologies, and semiconductor materials. Our products in these businesses range from fluxes and adhesives to enable device assembly to metal-based liquid chemistries to bond and protect connection points for PCB and semiconductor fabrication. These technologies are used in many, many products, with consumer electronics, communication infrastructure, and automotive electronics representing our largest markets. Our products are likely to be found in the cell phone in your pocket, the car in your garage, and the TV in your house. Our industrial and specialty businesses include technologies that decorate the high-end finishes in your car or your bathroom and protect against corrosion in long-lasting metal equipment, from car parts to oil and gas pipelines.
We also enable printing processes that make the label on your water bottle or your bag of chips, as well as facilitate the exploration and production of offshore energy sources. We believe our breadth and diversity provide resilience to our sales and profitability. As our consumable products are critical for production, our revenue is not based on our customers investing in new equipment or factories. It's based on production rates and content per unit. During slower economic periods when customers are not investing, our business does not go away. We believe this dynamic, combined with the highly variable cost nature of our operating model, allows us to deliver more stable and consistent performance. On slide nine, we've laid out where our products reside in our customer supply chains.
As you can see, a key attribute to our business is our complementary product offering across various markets, which we believe enhances our positioning within customer supply chains and makes us a partner of choice. For example, automobiles incorporate our circuitry and assembly technologies for entertainment and safety systems, as well as plating and anti-corrosion solutions to coat and protect parts of a car. Since our customers require consistency and reliability in their high-value products, our products become integral to their manufacturing processes, and our highly technical service keeps them running smoothly. Altogether, these drive sticky specifications and long-term customer relationships. We work at multiple levels within our customer supply chains, often directly engaging OEMs and tier 1 suppliers in their design and specification processes, especially for automotive and electronics end markets.
While the buyer of our product is often an applicator or lower tier supplier, we believe we also have the ability to influence this buyer's customers with the intention of being their product of choice. Therefore, we ultimately have two customers with different needs. We focus on delivering to both. We deliver service, quality, and value to the applicator, and innovation, reliability, and consistency to the OEM. We have co-located our formulation and technology service centers around many of our large customer and end-user sites, which helps facilitate the specification process on a global basis. Our customers have been increasingly focused on cost efficiency, shortening supply chain cycles, and sustainability. We believe our offerings enable us to meet their demands. Slide 10 outlines capital allocation priorities for Element. A combination of operational excellence and disciplined capital allocation strategy will help our businesses grow profitably in their respective markets.
Element's strong free cash flow generation profile and healthy balance sheet should translate into financial flexibility and provide us with the opportunity to invest in our strategic markets, pursue measured M&A, and deliver shareholder capital returns. We plan to continue deploying capital thoughtfully towards initiatives within our existing business, with the goal of achieving sustainable growth and margin expansion. This is not a business that requires material CapEx to maintain its margin or to grow. Even with adequate growth investments, given its cash flow generative capabilities, there will be excess cash flow for other purposes. In all cases, we intend to maintain net leverage inside of three and a half times. Before turning the call over to Rakesh to summarize the Element story and provide closing remarks, I would reiterate that we are excited to continue to share more about Element and its near-term prospects.
You should expect to hear more from us over the coming months. Rakesh?
Thanks, Ben. Slide 11 summarizes the key attributes of the Element Solutions business model. As you've seen, Element will be a diverse business in terms of products, end markets, and geographies. We are selective about where we play, choosing to focus on attractive markets where we have or believe we can attain a leading position. From an innovation perspective, we are inspired by and responsive to our customers' needs and the needs of the OEMs that often specify our chemistries into their end products. Our R&D is therefore increasingly focused on the requirements for reliability, connectivity, miniaturization, and sustainability. Ultimately, Element will be a customer-centric and results-oriented company through operational excellence and an efficient capital allocation strategy. The pairing of our commercial and innovation approach with the low capital requirements inherent in the model is a strong combination for resilient free cash flow growth.
As we look towards Q4, we remain focused on completing the Arysta transaction and closing the year in line with our expectations. We made great progress on our initiatives so far this year, and I'd like to take this opportunity to once again thank our global teams who continue to deliver as we reshape the company. We are looking forward to our new chapter with excitement. With that, operator, please open the line for questions.
The floor is now open for questions. At this time, if you have a question or comment, please press star and one on your touchtone phone. If at any point your question has been answered, you may remove yourself from the question queue by pressing the pound key. Again, we do ask that while you pose your question, you pick up your handset to provide for optimal sound quality. Thank you. We'll take our first question from Neel Kumar with Morgan Stanley. Please go ahead, your line is open.
Hi, good morning.
Good morning.
It seems like things are proceeding on time in terms of the Arysta transaction closing. I was just curious if you could comment on which regulatory approvals you're still waiting on.
Yeah. As we said, we have filed in all the jurisdictions. We have received a go-ahead from several that we mentioned in the call. At this point, I would say there are a few that are left. We are working with the European Commission, we are working with Mexico. Those are really the two big ones. Most of the others seem to be going on track. That's where we are. There's nothing that we have received from any of the regulatory authorities would indicate that we have to take a different course of action.
Okay, thanks. Then I was wondering if you could just offer any thoughts on the long-term margin potential of Element Solutions pro forma for the cost savings. It seems that it'll be around 23% margins. I know that you previously expected 50 basis points of gross margin improvement when you had with Ag Solutions. I was just curious if that's still a reasonable target for Element Solutions going forward.
Yeah, absolutely. That's still our goal. Our goal is to get a margin expansion of 50 basis points a year. This year, we have been sort of affected and impacted, as you said, by a mix issue. Our industrial businesses have been growing much faster than our electronics business. There's an appreciable difference in the margin structure of that. Our margins in all the business are going up, except when you put the mix together, it hurts us. That's what's happened. Within industrial, our Asia business was a little softer, and Asia represents a higher margin structure even within our industrial business. We've had a mix issue. We understand that, what's also happening on the positive side is a number of our advanced electronics businesses, which have a much higher margin than even our overall electronics businesses, have started to grow.
Our advanced assembly materials business in Alpha, which is where we go into the semiconductor side, that business is growing in the double digits. It's small right now, but it's going to help us on the margin front. We've also got the advanced electronic solutions business where we've been investing for semiconductors. That was a growth business also for us in Q3. I think there are very good signs that we are beginning to grow our businesses that have a high margin structure, and that should pay us dividends. Of course, we've talked about the operating leverage. We don't expect to increase our fixed cost and SG&A overhead at the same rate as we grow our top line.
We'll take our next question from Daniel Jester with Citi. Please go ahead. Your line is open.
Hey, good morning, everyone.
Good morning, Dan.
The slowdown that you discussed in the high-end smartphone market, is that something that is a third quarter or fourth quarter event, or is that something that could last into 2019 given the product announcement cycle in that market?
Listen, it's hard to say. We were expecting some pickup in the third quarter. We didn't see that. It was mostly in Korea. I would say for us, we are fairly insulated. We are a player with all the mobile phone companies around the globe. There is a mix shift that's taking place between the OEMs, and sometimes that temporarily affects us. Overall, I think as long as this market grows, and we expect the mobile market to be a growth market, it may not be growing as fast in the past, we still think this is a growth area for us.
You also comment about raw materials in your presentation about the impact that had on the margin. Can you just give us an update there, what you're seeing? We're seeing that, I guess, across a lot of specialty chemical producers. Just wondering what specifically you're seeing and what specifically you're doing to mitigate that as you go into next year. Thank you.
We've seen the raw material pressures for a while. We have actually mitigated that through a number of things that we're doing in our supply chains as well as through pricing. It's becoming a smaller issue. We don't have that much petroleum-based products that we use where we've had a significant inflation. Our inflation is probably a little less than many specialty chemical companies, our supply chain groups are very focused in mitigating that and hopefully eliminating it in the quarters to come.
We'll take our next question from James Sheehan with SunTrust. Please go ahead. Your line is open.
Morning, this is Ted on for Jim. How is organic growth currently trending in fourth quarter, how do you expect this to match up versus the FX headwinds you're experiencing, just given what you've seen so far?
Yeah. Listen, we grew 3% in Q3. I expect our Q4 growth to be a little higher, maybe 3%-4%. We said we'll grow in the 3%-5% range. I expect us to be in that range in Q4. No different. The FX headwind is going to be a little more in Q4, which is why we said we'll probably be tracking towards the lower end of our guidance. We had a headwind, as you know, in Q3. The headwind in Q4 is going to be somewhat higher.
Okay, thanks. Then, are you seeing any signs of inventory destocking among customers in any of your end markets?
Nothing of note.
Okay. Thank you.
Yeah. Thanks.
We'll take our next question from Aleksey Yefremov with Nomura Instinet. Please go ahead. Your line is open.
Good morning. This is Matt Skowronski on for Aleksey. Just to start off, with regard to offshore, how good is your visibility? In other words, how far in advance do your customers order? I know you mentioned that it could change this quarter because of recent movements in oil.
It's slow, as you know, and I'll ask Scot to comment on that. 70% of our business is tied to production. 30% of our business is tied to new drilling rigs. New drilling rigs have been coming on. We obviously have a lot of visibility on the new drill rigs. We know kind of where they are in the whole process. On the production side also, we get some visibility. It's not to the same extent as new drill rigs, I'll ask Scot, who's on the phone. Maybe he can give you a little more color on that.
Sure, Rakesh. Matt, we get very good visibility on our day-to-day production orders. Where things get a little bit more complex are on big, new umbilical fills, which are tied to capital expenditure and new lines and trees and rigs coming online. Those are a little farther out. We generally get good visibility, the visibility may be out quite a ways, and sometimes that can shift depending on the oil markets. As Rakesh said, for actual production and ongoing day-to-day drilling operations, we have decent visibility into that.
Understood. Thank you for that color. Forgive me if I missed it, but the $5 million of synergies to be realized in 2018, was any of that in 3Q?
A small piece. I think a couple of million dollars.
Thank you. We'll take our next question from Jonathan Tanwanteng with CJS Securities. Your line is open. Please go ahead.
Good morning, gentlemen. As it stands today, are you more biased towards repurchases now or M&A post-close? If it is M&A, are you already cultivating that pipeline, or are you waiting for the divestiture to close before you start pursuing assets?
Yeah. This is Ben speaking. Good morning, Jon. As I hope you heard from the call today, we're going to be measured in our capital allocation approach at these levels, buybacks seem attractive. That would be the nearest term use of capital. Any future M&A would be measured, as we said, into areas where we have existing competence or adjacencies. Complementary markets, adding capabilities, adding technologies. At the moment, buybacks seem pretty attractive at these levels.
Great. Then you called out $20 million in run rate savings in 2019. What should we expect on a realized basis as we go through the year?
It'll be a pretty large piece of that 20. Obviously, we are putting our plans together. We'll give you the cadence when we give you the guidance for 2019. You can assume that all of that will be actioned. Whether we'll get all of that in the P&L, we want to come back and give you that number.
Great. Thank you.
Yeah.
We'll take our next question from Roger Spitz with Bank of America. Your line is open. Please go ahead.
Thank you, and good morning. With regard to your new capital structure, in July, you provided an illustration of your pro forma capital structure where you refied the revolver and loans. You still showed the 5 7/8, but didn't show the 6 1/2s and 6s. Can you say if there's been any change in your thinking on your pro forma capital structure?
Sure, Roger. The $800 million of 5 7/8 notes from last year travel in the context of the transaction. We'd anticipate those sticking around. With regard to other activities and refinancing, we'll communicate that with the market when we're ready. Obviously, we'll have quite a bit of proceeds coming in, and we'll be de-levering pretty materially. It would be an attractive time to refinance much of the balance sheet.
Thank you. With regards to the off-balance sheet AR factoring facility, can you tell us what the balance was in September 2018, and will that travel with Arysta? The similar question on the on-balance sheet vendor customer guarantees that sat in the working capital liabilities.
Sure, Roger.
Go ahead.
Sure, Roger. We'll follow up with exact balances, the factoring relates to the Arysta business, you shouldn't expect to see factoring with Element going forward.
We'll take our next question from Joseph Reagor with Roth Capital Partners. Please go ahead, your line is open.
Morning, guys. A couple of minor questions. Most of my stuff's been touched on already. First thing, should we look at the Q3 income statement as essentially a clean view, like, R&D expense, G&A expense? Are those relatively where we should expect them to be, or were there any kind of one-time movements in those?
If you look at the P&L for Q3 on a continuing operations basis, that's a pretty good proxy for Element on a go-forward basis. We provided in an 8-K historical comparables for Element. That having been said, there is the corporate cost opportunity that we're executing against and that we've spoken to of about $25 million of savings, which we expect to have realized on a run rate basis by the end of 2019, that I would adjust for. The other difference is interest, where we are, in these financial statements and in historical financial statements, fully burdening the P&L with the complete balance sheet of Platform. Obviously the interest numbers will go down materially post-close.
Yeah, no, I agree. The SG&A that you see right now in the continuing op is obviously overstated because we're carrying the burden of the entire corporate cost in Element, which will reduce substantially. As Ben said, the interest expense is related to the entire amount of debt, including the debt we took on to buy the ag businesses. That's being tagged onto Element right now.
Okay, fair enough. Thinking about the balance sheet, the pro forma company, what's the comfortable cash level for you guys? As you're doing this debt repayment and share repurchases, what's a safe number to assume you guys want to stay above?
I think for cash in the business, minimum cash is somewhere between $100 million and $200 million.
Yeah. I think you guys know that the volatility in the Element business is going to be far less, because it's not as seasonal a business as our Arysta business is in the ag space. We think we can operate this business with cash on hand, somewhere between $100 million-$200 million.
Yeah.
Thanks, John.
As a reminder, please limit yourself to one question and one follow-up. We'll take our next question from John Roberts with UBS. Please go ahead. Your line is open.
Yeah, thank you. It's not that often that you talk about mix. How much can mix actually move your margins around or move your revenues around? I don't know if it's a 1% factor, or sometimes it could be as big as several %. You mentioned high-end cell phones and things like that maybe being weaker. I would think sort of a lot of the plating in appliance and auto is also down, which actually probably would be favorable mix, because that would be more lower-end product for you.
Yeah. Listen, when you look at our average gross margin in this business is a little north of about 42%, 43%. If you look at within these businesses, we have gross margins that range anywhere from 35% to 70%, right? We don't disclose all the minutiae of all the segments, but it could make a difference. If the industrial business grows at the expense of the electronics business, it could put about 30, 40 basis points of a margin impact on our margin.
Okay, thank you.
Yeah.
We'll take our last question from Robert Koort with Goldman Sachs. Please go ahead. Your line is open.
Good morning, guys. Chris Evans on for Bob. Just looking at the new business profile for Element Solutions. Just curious if you see any areas. You've got the electronics, the industrial specialties. Just curious if there's other end markets you'd like to expand into, or perhaps is there areas that you may not need going forward, that is, you still have opportunity to optimize your portfolio?
Well, we are in pretty large markets. If you look at the addressable markets that we can address, even with the businesses we are in, we estimate the total markets are north of about $12 billion. There's plenty of headroom for growth. We are in markets that are still very fragmented. We don't feel a compelling need that we have to do any transformation. I just want to make sure people understand that. There's a reason why we are changing the name of the company from Platform to Element Solutions. It should no longer be considered as a platform that just buys different legs. We are very confident. I think the plans that we have put in place for organic growth, of course, we're going to continue to look at M&A, that makes sense. There are a lot of bolt-on opportunities.
We're going to be very prudent in investing for both organic growth as well as making the right M&A acquisitions. We have a lot of headroom for growth in the businesses that we already in.
Great. Maybe two quick ones on the electronics business. One, it's a surprising de-rating in some of the peers that are more in the electronic or the semiconductor chemicals business. Just curious if you have any comment on any potential read across there. Just otherwise, maybe the assembly and circuit board solutions part of the business. Just curious, given the quick refresh rate of consumer electronics, do you see that your products are aligned with where those end markets are going? Or do you think there's any risk that maybe you'll have to start spending more cash to develop your products to meet changes in your end markets?
I would say first on the semiconductor side, we are still a small player. We are growing nicely. This is a growth business for us. We've been investing organically. We are working with semiconductor companies to come on stream on their new platforms. We feel very good. Again, it's a smaller piece of our business. Our total semiconductor business and our total electronics business is somewhere around 15%. That's a growth business for us. As far as the surface chemistry business, for us on the electronic side for circuit board, we have a leadership position in that, and especially our assembly business cuts across PC boards, across every industry and every application. It's a lower growth business, the large PCB business, but it's a great business for us. We don't see the same dynamic, as I said, because we are a smaller player in semiconductors.
With regard to your comment about innovation in consumer electronics, I would say that helps us, because we're on the leading edge of technology with OEMs and PCB manufacturers. As they innovate more quickly, we're in an opportunity to shine, and the higher the demands and the qualifications from the OEMs, the more margin opportunity there is for us. That's a positive trend for our business.
Thank you. There are no further questions at this time, I'll turn the floor back over to Rakesh Sachdev for any additional or closing remarks.
Thank you. Again, I just want to thank everybody on the call this morning. We are looking forward to, obviously, the transition that's going to be happening in the coming few months, for Platform and then into Element. We're really looking forward to sharing our forward-looking story about Element in the months to come. Again, thanks everybody for attending.
Thank you. This does conclude today's conference call. Please disconnect your line at this time and have a wonderful day.