Earnings Call: Q1 2021

Apr 29, 2021

Greetings, and welcome to the Ingevity First Quarter 2021 Earnings Webcast and Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bill Hamilton, Treasurer and Head of Investor Relations. Thank you, sir. You may begin. Thank you, Jesse. Good morning, everyone. Welcome to Ingevity's Q1 2021 Earnings Conference Call. Earlier this morning, we posted a presentation onto the Investors section of our website. If you haven't already done so, I encourage you to download this file, So you can follow along during the call. You can find it by visiting ir.ingevity.com under Events and Presentations. For participants who are logged into our webcast, the slides should be visible in the online viewing pane and also available to download. On Slide 2 of that deck, you will see our disclaimer that today's earnings call may contain forward looking statements. Relevant factors that could cause actual results to differ materially from these forward looking statements are contained in our earnings release and in our SEC filings, including our Form 10 ks and our most recent Form 10 Q, We expect to file later today. NuGevity undertakes no obligation to publicly release any revision to the projections and forward looking statements may during this call or to update them to reflect events or circumstances occurring after the date of this call. Throughout this call, we may refer to non GAAP financial measures, which are intended to supplement, not substitute for comparable GAAP measures. Definitions of these non GAAP financial measures and reconciliations to comparable GAAP financial measures are included in our earnings release and can be found on the Investor Relations section of our website. Our agenda is on Slide 3. With me today are John Fortson, President and CEO our new CFO, Mary Hall Mike Smith, President of Performance Chemicals Ed Woodcock, President of Performance Materials and Eric Ripple, Chief Growth and Innovation Officer. First, John will comment on the highlights of the quarter. Mike and Ed will review the performance of our 2 segments. Eric will discuss details of our recently announced strategic partnership with Green Gas USA Holdings LLC, Then Mary will comment on our current financial status. And lastly, John will discuss our revised guidance for the year. With that, I'll turn the call over to our CEO, John Fortson. Thanks, Bill, and good morning, everyone. Thank you for joining us, and we appreciate Your continued interest in Ingevity. Before we go any further, I'd like to take a moment to welcome 2 of our teammates to the call. First, I'd like to formally welcome Mary to the Ingevity team. Many of you know Mary from her former position at Quaker. We are thrilled that a professional of her caliber has joined Ingevity, And we know that you will be a valued member of our team in this critical role. Welcome, Mary. You may also have noticed that Bill Hamilton led the introduction of this call. Bill Bill is taking over IR duties from Jack Maurer, who has made the decision to retire. We wish Jack the best and we know Bill will do a great job in his new role as Treasurer and Head of IR. Bill led our FP and A efforts for the last 4 years and has spoken on some of the most recent earning calls. He knows this company inside and out, And I know you will enjoy working with him. With that, if you turn to slide 4, you'll note some highlights for the quarter. We had a strong first quarter. Demand improved across the board in all of our businesses. Revenues in the Q1 were $320,000,000 up 11% compared to the previous year's Q1. Our results were driven by both volume and price increases in certain key businesses. Automotive based activated Carbon sales were up sharply given last year's Q1 shutdowns in China. Engineered Polymers delivered and Experienced strong growth across many of its end use applications. Our industrial specialties business, which now includes oilfield applications, was up slightly And we're off to a good start to the paving season. With respect to earnings, adjusted EBITDA was $105,000,000 up 14% from the same period last year, Representing strong drop through. Our margins continue to hold up well across the board and as a result, our adjusted EBITDA margin for the Q1 Rose to 32.9 percent, up 90 basis points. We generated free cash flow of 34,000,000 And as a result, we're able to both reduce debt and repurchase shares in the quarter. Our leverage remains within our targeted 2 to 2.5 times range At 2.39 times. I want to thank everyone on the Ingevity team for their continued work. I am so proud of them, especially our manufacturing and supply chain employees. They remain committed to working productively amidst the constraints of operating in a COVID safe environment. Our performance this quarter is again a testament to the efforts of these employees across the company. Finally, Earlier this week, we announced an investment in Green Gas Holdings. We are really excited about this opportunity. Through our work on our absorbed natural gas We have learned a lot about how our technology and expertise can add value to the methane renewable natural gas value chain, And we are fortunate to have identified a partner in our region in Green Gas. We expect to be a significant market participant as We scale our investments and realize the value Ingevity provides. You will hear more from Eric Rippel in a few minutes. If you turn to slide 5, you'll see the Q1 results for Performance Chemicals. And at this point, I'll turn the call over to Mike Smith. Mike? Thanks, John. On Slide 5, you'll see our Performance Chemicals segment sales in the Q1 were $180,000,000 up almost 8% versus prior year period. Sales to pavement technology applications were slightly higher than the prior year and reached a 1st quarter record, driven by growth in our Evotherm warm mix asphalt product sales. Increased sales in North America were partially offset by other regions. Sales in Industrial Specialties Applications, as John mentioned, now include sales in Oilfield Technologies, reflecting the reduced size of that In our view that the category of products is another end use for toluyl fatty acid or TOFA and its derivatives. Industrial Specialty sales were up slightly due to increases above 10% to lubricants, adhesives and dispersing customers. These increases were partially offset by decreases in sales to oilfield applications due to a lower year over year North American rig count and drilling activity. In addition, the business implemented price increases for rosin and topa products. We are encouraged the Chinese gum rosin export price increased an additional 10% during the Q1 which is a continued positive signal of improving supply demand dynamics. Alternative vegetable and tallow based fatty acids have also increased in price during the Q1 and should support further improvement in toga prices. We are also very encouraged by our first commercial production of soy based fatty acid and derivatives during the Q1. This is an exciting and important step in expanding our market focus and product portfolio into products and applications we already have strong capabilities By broadening our raw material feedstocks beyond legacy crude tall oil, we made our first commercial sales of soy based fatty acid derivatives during the first half of April. Quarterly sales of Engineered Polymer Products were up a sharp 27% due to improved polyurethane demand in industrial equipment, Automotive applications, electronic devices, medical equipment and footwear. Sales grew in all geographic regions but were particularly strong in Asia. We realized strong technology adoption and sales growth in micro cellular polyurethane applications for battery pads in electric vehicles and in electronic devices. Engineered Polymer sales increases were largely due to volume improvement was also supported by price improvement. Performance Chemicals segment EBITDA for the Q1 was $32,000,000 up 2% versus the prior year quarter due to higher volumes and price mix, partially offset by slightly higher freight and raw material pricing. I will note that absent the effect of foreign currency exchange, Our segment EBITDA growth would have been more closely reflected sales growth. We continue to control costs and generate a good mix of our higher profitability products, which resulted in our adjusted EBITDA margin holding respectively at almost 18% in the Q1. With that, I'll turn the call over to Ed Woodcock Thanks, Mike. As you can see on Slide 6, revenues for the segment were up 16% at 100 and $41,000,000 Strong automotive production and sales in China supported by increased demand in South Korea and Europe drove growth for our activated carbon products used in gasoline vapor emission control system. Sales in China Nearly doubled versus the prior year period given the dramatic decrease in automotive production that occurred during February March of 2020 Due to COVID-nineteen, in the January February period for which data is currently available, China vehicle production and sales were both up substantially at 87% 75%, respectively. In the Q1, North American vehicle production was down 5% and was outpaced by sales in the U. S. And Canada, which rose 12%. The U. S. And Canada vehicle sales mix of light duty trucks and SUVs versus sedans Continues to maintain record levels, hitting over 78% during the quarter. This truck and SUV mix has trended high since April of 2020 and is favorable as these vehicles typically have larger canisters And multiple honeycombs as part of their evaporative emissions control systems. Additionally, US and Canada Tier 3 implementation is ongoing as some model year 2022 platforms were delayed due to COVID-nineteen impacts. The remaining Tier 3 implementations should be complete by the end of this year or by early 2022. OEMs continue to face production issues, primarily associated with the global semiconductor chip shortage and to a lesser extent, the Going global supply chain challenges. Based on IHS data, we estimate the Q1 impact to Ingevity of chip related production losses to be about $10,000,000 in revenue. We expect the chip supply issue to continue Throughout 2021 with the most significant impact in Q2, followed by gradual recovery in the second half of the year. That being said, the strong U. S. And Canada vehicle sales and production mix of trucks and SUVs And ongoing implementation of U. S. Tier 3 will continue to drive a favorable sales mix for us. Additionally, our process purification business, including sales into air filtration devices that combat the spread of COVID-nineteen, Continue to be a reliable and profitable revenue source for us outside of the automotive gasoline vapor emission control. Segment EBITDA was $74,000,000 up almost 20% versus the prior year period. Segment EBITDA margin Increased 190 basis points to 52%, reflecting our facilities across the globe operating at full utilization. I'll now turn the call over to Eric Rippel. Thanks, Ed, and good morning, everyone. On Slide 7, I'd like to provide more information about the strategic partnership With Green Gas USA Holdings, LLC that we announced earlier this week. As part of Ingevity 2.0, We stated our commitment to explore value added applications for activated carbon beyond vehicle gasoline vapor emission into growing markets such as renewable natural gas or RNG and human health. An example of these expansion efforts is our absorbed natural gas or AMG technology for light duty vehicles that we've spoken about previously And that we continue to advance with commercial and gas utility fleets across the U. S. In the course of our business development efforts with potential We were introduced to Green Gas. As we learn more about the Green Gas business model and the company's role in the larger RNG value chain, We recognized an opportunity to apply our activated carbon expertise to the purification, transport and bulk storage of natural gas. Green Gas is an integrated RNG solutions provider. Today, the company contracts with agricultural farms, landfills and industrial and municipal wastewater treatment facilities to collect and treat biogas from the organic waste of their operations. GreenGas then sells the treated biogas as pipeline quality, low carbon RNG. The company also provides compression, transportation and of natural gas directly to customers through its wholly owned pipeline injection point or as part of its virtual pipeline fleet services. Our partnership with Green Gas is a significant step in advancing Ingevity 2.0 as we work together with Green Gas To broaden the reach of RNG as a cleaner alternative energy and fuel solution, our investment will enable GreenGas to further develop Biogas Capture and Cleanup Systems at currently contracted and future RNG supply partners and help Green Gas fund incremental Our partnership is focused on 2 near term opportunities. First, we will accelerate the application of our AMG technology for the storage and transport of natural gas. We are currently engaged with Green Gas To launch a pilot program to deploy the first use of an activated carbon bulk storage tank to demonstrate the system's efficacy. 2nd, our collaboration will facilitate the use of RNG as part of our A and G vehicle platform by offering our fleet customers broader access The Greenhouse Gas Reduction Benefits of RNG when used as a transportation fuel. We are uniquely positioned to leverage our expertise Peace is an operating and technology partner for Green Gas. Our investment gives us a foothold in a rapidly expanding RNG industry, An industry in which we see tremendous overlap with Ingevity's purpose to protect, purify, protect and enhance the world. As we continue to pursue strategic partnerships and investments across the RNG value chain, we believe Green Gas has a substantial runway ahead of them and we are excited to work with our outstanding management team to further grow this business. At this point, I'll turn the call over to Mary. Thanks, Eric, and good morning. It's great to speak to you all today as part of the Ingevity team. I'll now briefly review our financial summary, which you'll find on Slide 8. Overall, this slide highlights our continued strong financial position, Which reflects our solid business performance combined with our discipline in managing costs and leverage. The stronger sales performance in the quarter led to a sequential and year over year increase in trade working capital, driven primarily The increase in accounts receivable. This is the primary reason why our operating cash flow and free cash flow were down versus last year. Also as you know, our working capital generally increases in the first half of the year as we prepare for paving season. We remain focused on careful management of working capital to optimize operating cash flow. Our leverage continued to improve With a net debt to adjusted EBITDA ratio of 2.39 times at the end of Q1, down from 2.4 Our weighted average cost of debt was approximately 3.7% And we have no meaningful debt maturities until 2023. We will continue to be opportunistic with share repurchases In 2021 as we were in 2020, in Q1 we repurchased 39,000,000 dollars of shares, bringing our total repurchases under our share repurchase authorization to $127,400,000 leaving approximately $373,000,000 available. In summary, our balance sheet Strong and we have ample liquidity to support our organic and inorganic growth initiatives. And now back over to you, John. Thank you, Mary. On Slide 9, I'd like to review our revised guidance for 2021. Based on our strong Q1 and continued optimism, we are increasing our fiscal year 2021 guidance for sales to be Between $1,275,000,000 $1,325,000,000 and adjusted EBITDA to between $410,000,000 $430,000,000 As our performance continues to improve, we are watching issues related to transportation and logistics, raw material inflation And automotive material disruptions that could become stronger headwinds throughout the rest of the year. Our intention is to address these issues as we always do, Head on through strong execution. We will play close attention to supply and demand in the market and both pass through costs and price our products appropriately to ensure we get the value we deserve. We believe deeply in the strength of our reenergized Ingevity 2.0 strategy and our team's ability to execute on the opportunities ahead. Our production of soy based products, the sale of honeycones into health and safety applications and Our investment in Green Gas are all examples of how we are positioning Ingevity for the future by entering adjacent growth markets where our assets and technologies provide us We intend to remain a best in class company as measured by growth, profitability and return on investment. Before we end the call, I'd like to encourage you all to attend the 2nd webinar in our series for investors and analysts this year, which occurs on May 26. We will focus on the end uses, growth opportunities and strategy for our Engineered Polymers business. In closing, I appreciate the work and efforts of our 17 50 employees worldwide. They are a distinct competitive advantage for us. We continue to believe very strongly in the long term potential of our company. We hope you share our enthusiasm for Ingevity. At this point, operator, we'll open the call up to questions. Thank you. Ladies and gentlemen, we will now be conducting the question and answer session. Our first question comes from John McNulty BMO Capital Markets. Please proceed with your question. Yes. Thanks for taking my question. I guess a question just regarding the overall seasonality of I mean, normally, when we look at your core platform, typically, Q1 is about 20% or so of EBITDA. Is there anything that would, Given all kind of the wonky moves that we're seeing in terms of like shipping channels and supply chain issues and what have you, is there anything that Dramatically shifts that or should we expect the usual seasonality with the help of paving coming in, in 2Q and 3Q, etcetera, etcetera? How should we be thinking about that? Yes. Look, it's a good question, John. I mean, look, there are a lot of wonky movements going on, to be blunt, as we kind of move through this stuff. That seasonality will remain, right? I mean, we are ramping up. We're all as I mentioned in the commentary, we're off to a decent start. We're optimistic about The paving season looks pretty good sitting here today, but we do get that. We also had issues when you think about it. Engineered Polymers really had a Ridiculously strong start. They delivered incredible performance. We hope that's sustainable, but we want to see how the year plays out. We've got to decide how much of that was restocking versus other longer term better more fundamental type sales. So Again, we're optimistic and feel good about it, but we want to be careful with that. And then you've also got this sort of strange dynamics on the auto market That you're going to see really throughout the year, right? Don't forget Q1 and Q2 are obviously pretty easy comps, Right, compared to what happened last year, but then you had a pretty remarkable snapback in Q3 and Q4 of last year and we're just going to have to see how the chip shortage Impacts that sort of comparable comparison year over year. But sitting here today at the macro level, we feel pretty good. We feel good. We're off to a really good start. Okay. Fair enough. And then I guess, look, your cash flow and your balance sheet improvements are, if anything, Probably ahead of where we would have expected and you're really making some pretty solid progress. I guess, can you speak to how you're thinking about Capital allocation as we look through this year and into next year, give us maybe an update in terms of the M and A pipeline and also how you're thinking about buybacks. You obviously Some shares down this past quarter and I guess how should we think about the potential for more of that as we go through the year? Yes. No, sure. I mean, look, as we've said, I mean, our capital allocation hasn't really fundamentally changed. We do view ourselves as having a lot of growth opportunities in front of us, and I think you'll see us continue to do invest in those. I mean, The investment strategy really will be a series of probably a number of smaller, more modest Investments as opposed to something sort of larger just given the state of the M and A market and also the opportunities that are in front of us, right? So You'll see us invest, but it's not mutually exclusive, right? I mean, this is a great quarter. And as an example, we invested. We also paid down or reduced debt and we bought back shares, right? So we're going to remain flexible. I think it is Important for you to realize though that we are going to buy back shares when we think we're have an opportunity to buy our shares at what we consider to be a value or a good price. But we think we can sort of do all 3 as the opportunities present themselves. Got it. No, makes sense. And maybe just one last question. When we think about the potential for an infrastructure bill, which admittedly there's kind of a lot of Fuzziness still around it, but I guess how should we think about when the bill is announced and it's a little bit more definitive, how long it would take for your paving business to actually Feel the real uptake at that point. Is it a 6 to 9 month thing? Is it multiyear? It obviously would be a great tailwind, John. I mean, the truth of the matter is Funding projects for infrastructure, there's typically a seasonal lag, right? I mean, the good news is, is that the projects that we're seeing for this year are pretty fully funded And ready to go. And so we have good line of sight into that. To the extent we get an infrastructure bill, that just bodes well, looking forward into the future 2021 and So we'd love to see 1, but it's not going to necessarily change our outlook for 2021. Got it. Thanks very much for the color. Thank you. Our next question comes from the line of Jon Tanwanteng With CJS Securities, please proceed with your question. Hey, good morning. Thank you for taking my questions. Great quarter and Mary, it's great to keep working with you. John, can you talk about what's built into your guidance at this point? I mean, it looks like you raised the year by the same amount that you beat the Is that more of a comment on the level of demand maybe not getting better or Any through the year or is it more of the input prices just eating up all the upside? No, look, I knew you were going to ask that question, John. So Look, obviously, it's a dollar for dollar uptick, right? But I think I would interpret it as Optimism to where we think the rest of the year is going. We obviously entered the year. There are a lot of uncertainties, right? The good news is vaccines are underway and it felt like things were recovering, but the auto industry has had some issues And it was unclear to us exactly how the recovery in the Performance Chemicals business would sort of unfold. But sitting here today, it feels good. And I would say our, I guess our risk position is probably skewered more to continued upside than downside. But you know us, I mean, we're not Not going to overpromise or be aspirational. We're going to tell you guys what we think, and what we feel we can deliver. So we did raise. We think we're off to a good start. Let's see how the rest of the year goes. We're 1 quarter in. Okay. Fair enough. Thank you. And then Can you just talk about the soy feedstock business a little bit more? I know you've been trying to do that for a little bit now. Just How big can that business be? How much of the capacity is utilizing? And are the margins similar to your CTO based businesses at this point? Well, I'll talk a little bit, but Mike can chime in here too. Look, the idea the sort of part of the genesis of This is to make sure that we operate our existing network at maximum utilization, right? And we do have the opportunity the way One of our facilities is configured to effectively sort of run soy in parallel to CTO, right? So That actually would provide us with some incremental capacity to use, which is a good thing. We're off to the races. I mean, My own view is this might be a $20,000,000 to $30,000,000 market, some point not this year, but eventually. But we're not done with just soy, right? I mean, we're going to look at other things, other feedstocks as well. And we may surprise ourselves To the upside in terms of expanding the market that we're looking at, but right now that's kind of what we're targeting. Mike, I don't know if you want to. Well, the only thing I'd add to that is I think There is a really interesting opportunity throughout our derivative product line. So, we've got a lot of obviously TOFA based derivatives that we have the opportunity to either Displays our augment with TOVA and free that up for the market. And from early looks, there may be really interesting value added Derivatives that we can make that have better functionality or improved functionality compared to TOFA based ones in our current market and that spans Oilfield, Industrial and Pavement Opportunities. So we are going to continue to evaluate the opportunities both with Sofa and also for a broader range of derivatives. It's a pretty exciting opportunity, John. I mean, it gives us a lot of flexibility And a lot of growth avenues, so we'll see how it evolves, but it's encouraging. I mean, my hat is off to Mike's A lot of effort and energy has gone into this, and we'll just see how it unfolds here over the next 18 months. Okay, great. Just one more if I could. The green gas business today, how big is that and kind of where do you see that in like 2 or 3 years? It's Pretty nascent today. I mean, it's got a handful of customers. In our mind, and I don't want to get sort of Don't consider this sort of official forecasting. This is just sort of a this stand alone opportunity probably has a revenue $50,000,000 to $60,000,000 in 4 or 5 years, right? This standalone green gas is configured today. Okay, great. Thank you. Thank you. Our next question comes from Daniel Rizzo with Jefferies. Please proceed with your question. Mr. Rizzo, your line is live. You may proceed with your questions. Sorry about that. I was on mute. Thank you for taking my question. So I was just looking at Performance Materials margins that Took kind of a big step forward, I assume, with the increase in Tier 3 standards. I was wondering if we're getting kind of close The peak here where any growth from here would be marginal or if there is another step change possible. Well, look, I've got Ed's here with me and we've gone back and forth about whether we should have fallen on our sword based on the comments we made last year. At the end of the day, Dan, we're going to drive margins as high as we can every single quarter, every single month, every single week, right? We are operating at max absorption, and we are seeing some impacts to demand. We talked about that. So Could there have been more upside had there been more demand in the market? Probably. But we're happy with where we are. We're going to fight every quarter to The highest margins we can, and we had a good quarter. Okay. That's actually that's very helpful. And then Just one other question. So obviously, the focus is on a national infrastructure bill. I was wondering if local infrastructure is kind of in a boom phase now or should be going forward, Just given some of the federal funding that's now going towards the states, if that could potentially be a tailwind as well? I think when it comes to federal funding towards the The fact that that had been reinstated and that support is there is very promising. We were a bit concerned as you may recall last year with state gas tax being significantly reduced and if that could have an impact and Fortunately, that seems to be behind us. We're happy with the backlog of projects as we enter this year. As John mentioned, if the significant Structure Bill gets passed, that's only going to provide further tailwinds and more growth opportunities in the years ahead. Thank you very much. Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer. Please proceed with your question. Hi, great. I wanted to kind of touch up on maybe a little bit of a forgotten business now that it's been slammed inside of Industrial Specialties, but Energy prices are way up. Some of other people operating in that space have Positive comments about oilfield. How are we thinking about the cadence of that going forward? And maybe like what are you seeing Maybe into the Q2 and into the back half of the year. Thanks. Yes, sure, Ian. The sequential Performance has certainly been better than we had anticipated at the end of last year. The first Quarter comp naturally is a very tough one because as you know the Q1 last year was really not impacted by demand. But as we look towards 2nd quarter, Q3 compared to last year it's up and on a sequential basis it's also improving. So the improved pricing is Very positive and should support investment and it's really a matter of really seeing on growing increases in demand and continued strong pricing, So we get further investment in drilling, but we're optimistic that on an ongoing basis, it will improve. Well, listen, just to be clear, that's not a forgotten And I mean, look, we it remains a good, credible, strong source of demand for TOFA for us. Just understand that From our perspective, that's how we view it, right? It is another alternate end market that we have to weigh against other end markets. And As we think about the business, we think about that segment as having an engineered polymers business, an asphalt business And a pine chemical or industrial specialties business, right? So don't misconstrue what we're doing is any signal that it's less important. It's a very important application within industrial specialties. Got you. All right guys, thank you very much. Very good quarter and thanks for all the guidance. Thank you. Thank you. Our next question comes from the line of Chris Kapsch with Loop Capital Markets. Please proceed with your question. Hi, good morning. First question is around the margin profile in the Performance Chemicals segment. You mentioned some pricing getting But the year over year margin was down despite I think what should have been a positive contribution Mix associated with the strength in Engineered Polymers, I might not have that right. I'm just wondering if you can talk about What we're seeing here is this just a lagged pricing pass through or pricing realization On higher CTO costs, any color there on how that dynamic plays out as we look forward in that subsequent quarters? Yes. I think you made an important point there on the pricing dynamics as we move forward. If you think about our pricing in the first Quarter, as you can imagine a lot of that is naturally set at the end of last year, tough competitive environment and that situation fortunately has changed. So Our price realization in the Q1 was not really all that significant, especially on rosin. We had Some modest improvement on TOFA, but what we see going forward second quarter and especially as we get into the second half of As our contract commitments unwind, much more significant price increase capability and realization. But during the Q1, we did realize and got hit with increasing raw material costs, whether it be Cyclohexanone with an engineered polymers or some CTO inflation, and so we're working hard to offset that and As we said, especially as we get in the second half of the year, we're going to have significant more price realization in Performance Chemicals. Okay. Thanks for that. And then just on the guidance, I'm just wondering if you can comment on What was contemplated in terms of North American auto builds given how important that is, particularly in light of Ford's comments Last night on their curtailments production in Q2, how much visibility do you have into knowing that was coming and Either with them or other OEs, because I imagine there's going to be similar announcements. Thank you. Yes, Chris, this is Ed. Just to comment a little bit on Ford obviously taking a hit in Q2. If you look at what GM did, their impact was probably more focused in Q1. So you kind of think of these chip issues as Rolling through the year in various waves and cycles. But ultimately, Ford is a large customer of ours, a very important customer. That being said, we are a global business and we're seeing growth outside of the U. S. That will help support the quarter. And relatively, we'll continue to monitor the issue, but at this point we feel we're in pretty good shape. We obviously had the benefit of their comments, Chris, before this call. So to answer your question, we're not surprised. Right. So the full year guide, I mean, ultimately, if there's shortages that affect production Today, it's going to be it's just late demand for tomorrow. So does that is that what's kind of reflected in the full year guide? Yes. I think we're Yes, to answer your question specific to the auto market, but just more broadly, again, we're sort of 1 quarter end, incredibly Great quarter. Really, really pleased with the Engineered Polymers business and what they were able to accomplish. They really have started delivering, but we got to see How this will be if it's sustained, right? We feel good, but we'll just we'll see. As I said earlier, I think if you were to ask me which way am I weighted, we're probably more optimistic We are pessimistic, but you know us, we're conservative in this regard. Yes. Okay. Thanks, guys. Thank you. Our next question comes from the line of Paretosh Misra with Berenberg. Please proceed with your question. Hi Paretosh. Hey, John. Thanks for taking my question. Can you talk a bit about your work on developing feedstocks For renewable diesel, any progress that was made during the quarter? Well, there's not a ton to report, Tash, only that We obviously are working to certify our feedstocks as something that would go into that marketplace, right? So When and if that becomes economically viable for us relative to other opportunities that we have, we would begin to take advantage of that We're ready. It's just that market is going to have to evolve. Got it. And then just as Follow-up on earlier question on your commercial production for that soy based fatty acid, wheat stock based product. And I'm sorry if I missed those comments, but how does that change the cost and pricing equation when you're using that feedstock It hasn't yet because it's still in its nascent stages, right? So just to be clear, right? But as Mike alluded to, I mean, we do have an opportunity Potentially in certain of our products to offer a sofa substitute, right? And our expectation would be That we would maintain our pricing and even potentially in some markets do better. It's interesting and Mike, you can chime in here. But SOFA, And some end market applications actually might be more efficacious or stronger or better product than actually TOFA, right? So We want to make sure that we get that value for that, right, in those end markets. I don't know, Mike, if you want to. No, the only other thing I'd add that John had mentioned earlier is We've been doing a lot of work from our technology team and our operation teams and we have Essentially free capacity by utilization of some of our distillation capabilities. So on the margin, that's a great cost And we're going to make sure we understand these markets and the opportunities and the value these products can deliver And make this as good a business as it can be. Thanks for the color, John and Mike. That's all I had. Thank you. Thank you. Thank you. Thank you. Our next question is coming from the line of Garo Norian with Palisade Capital Management. Please proceed with your question. Hey, guys. I wanted to see if you could talk a little bit more about the Engineered Polymers business. I mean, I think it's certainly By far the best quarter since you've owned the business and wanted to see what you're Kind of understanding as far as, are you guys making kind of progress in developing some of the products that you've been focused on? Or is it really more of, hey, we've Some end markets were down that have snapped back. Just any color on what's going on there? I think the team is making great progress on getting more technology adoption for Products that they've been working on for the last couple of years. There were some challenging end use demand dynamics from Middle of 2019 until the end of last year, so we naturally do have some improvement in end use demand dynamics, but also the Technology adoption for the specialty applications, high functionality caprolactone products has been great. We mentioned a couple of applications such as electronic vehicle batteries, so that's really been positive. We've got the specialty film coatings for automobiles that really seems to be Taking off medical devices picking up, so very broad based technology adoption and overall demand increases Really resulted in this business getting turned around and we're confident that a large percentage of that is highly sustainable Through the year. There may have been some pipeline fill in the Q1, but what we see and we look at our order books and the new customers coming in, we We are very encouraged by the technology adoption and demand growth for the business. That's great. And I think you had mentioned particular Strength in Asia. And I'm just curious, for that business, can you remind me what the rough kind of geographic exposures are? And if I recall historically you were talking about maybe even bringing some production into North America and didn't know where that stands? Yes, so let me answer the last question first. We are bringing production of polyol derivatives into North America. We We are going to be building a polyol production facility at our DeRidder, Louisiana. So that project is underway and we would expect That to be online roughly end of the Q1 of next year. And so as you also know, this business, The Engineered Polymer business is fairly geographically balanced. So we've got, let's say, 40% Europe, 30% Asia, 30% Americas and Asia in this particular quarter in a very strong quarter where all regions were up Over 10%, Asia was up the strongest on a percentage basis. That's great. Thanks so much. Thank you. We have no additional questions at this time. So I'd like to pass the floor back over to Mr. Hamilton for any additional closing comments. Thank you everyone for your time and interest this morning. We remain very positive about our long term business outlook and we look forward to talking with you again next quarter. Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect your lines at this time.