Good afternoon, welcome to Ingevity's Investor Day 2023. My name is John Nypaver, and together with Meredith Versen , we are the investor relations team at the company. It's great to see everyone here. Thank you for joining, and thank you for joining those of you online. Before we begin, I got two housekeeping items. First, today management will be discussing non-GAAP financial measures. Management will be discussing non-GAAP financial measures today, and those measures are intended to supplement, not substitute for, comparable GAAP measures. We will have a reconciliation of these non-GAAP measures in our appendix for the slide deck. You can also find them in our 10-K.
Management will also be making forward looking statements. This is just a reminder that those statements are projections, and actual results may differ. We have a great agenda for you today. John Fortson, our CEO, will be up here in a moment to provide opening comments. He'll turn it over to our three business leads. They're all here. We've got Rich White to talk about Performance Chemicals, Ed Woodcock on Performance Materials, and all the way from the U.K., we've got Steve Hume to discuss our newest segment, Advanced Polymer Technologies. After Steve, Mary Hall, our CFO, will be out to give a financial overview. She'll turn it over to John for closing comments. Once John's done, we'll have a quick break. We'll bring everybody back in for a Q&A with the whole panel. All right.
Oh, just a reminder, we have booths set up in the back. If you haven't had a chance to visit them yet, they will be open after the Q&A. It's a great way to learn more about our products and end markets, so I definitely encourage you all to do that once we're done here. With that, we're gonna start with a video, and this video will give you a taste of who we are at Ingevity. Thank you.
At Ingevity, our purpose is to purify, protect, and enhance the world around us. We're committed to creating renewably sourced performance chemicals and materials that help reduce our environmental impact and safeguard the health of our planet today and for future generations. It's a big commitment, but we were born for this purpose. As a company with over 100 years' experience creating bio-based products, we've built our reputation on being a customer focused, responsible, sustainable solutions provider, we take that reputation seriously. We're Ingevity, a name that describes over 2,000 bold and dedicated people in 31 countries around the world, working safely with a shared vision to positively impact both the broader world and the communities in which we live.
Today, Ingevity's impact can be felt all around. Our pavement products are in enough roads to travel to the Moon and back while reducing CO2 paving emissions by up to 30%. Our products are in almost every automobile on the planet, generating longer lasting, durable components and preventing 40 million tons of greenhouse gases from being released every year. Our products protect farms from water pollution and make crops grow fuller. We're in planes, batteries, coffee cups, and running shoes.
We make watch bands more comfortable and phone cases more durable. We help drivers stay in their lanes and mark the walkways that get you safely across the street. We're fighting the world's plastic pollution problems by helping them biodegrade. We provide components for electric vehicles and create alternative energy fueling solutions that let school buses, trucks, and vans run on renewable gas sources. While looking to the future, we're discovering new solutions, helping customers solve tough challenges, and continuing to seek new opportunities for growth. We're making responsible choices to help make our world better, and we're committed to pouring our time, talent, and treasure into programs that support our local communities for decades to come. At Ingevity, our purpose is to purify, protect, and enhance the world around us, and we strive to make our customers, our environment, and our communities better because of it.
Well, good afternoon, everybody. Thanks for coming. I see a lot of faces of people that we recognize and a lot of new faces out there. We look forward to spending the next couple hours with you. We've got a lot of exciting stuff to talk about as Ingevity moves forward over the next couple of years. Before I get going, though, I'm gonna address kind of the elephant in the room, right? Which is what happened to the stock price over the last couple of weeks? I wish I had an answer. Truth of the matter is, you know, everybody's been calling in, many of you, some of you in the room over the last couple weeks saying, "Hey, you know, what's going on?
Am I missing something that the rest of the market knows? Obviously, we've talked a lot about crude tall oil and what's going on there. Those of you who know us know that we're very transparent, right? We believe very strongly in telling it like it is, and hopefully over the course of the next couple of hours, you'll understand exactly the markets that we operate in, what's changing in these dynamic markets, and what the opportunities are for Ingevity. Hopefully when this is done, you'll be as excited as we are about how we purify, protect, and enhance the world and grow this business going forward. You know, I love that video because it really talks about where Ingevity is. I love this slide too, because, you know, we're a B2B, right? Business to business.
You're not gonna find the name Ingevity in a grocery store or a pharmacy store. We're known for our Performance Materials and being in the internal combustion engine, but the truth of the matter is Ingevity's products are everywhere, right? We are everywhere. We're in your roads. We're in the Amazon boxes that get delivered to your front doorstep. We're increasingly in the knives and forks that you use to eat. Believe it or not, we're in the soda dispensers when you go to a fast food restaurant and punch up your Diet Coke. We're even in your kids' skateboards. We are everywhere. We do all that sustainably. We kinda joke internally that we're the sustainable company that everybody was waiting 100 years for people to actually appreciate and realize.
We have top quartile, top industry returns, profitability, we do that while maintaining or making sure that over 77% of our material comes from sustainable sources. If you back out Advanced Polymer Technologies, Steve Hume doesn't like it when I say that, the number's actually over 90%, we have a solution for that too in the future, which we're working on. You're not gonna find a lot of companies that have that type of sustainable sourcing. Because of that, we're increasingly being recognized for that, and this year we were awarded the EcoVadis Gold rating, which puts us in the top 3% of our peers from a sustainability perspective. We are rapidly approaching $2 billion of revenue and $500 million of EBITDA. We are more global as a company than we've ever been.
We're also derivatizing and providing more specialty products than we ever have as a company. We now report in three segments. Those of you who know us know our Performance Materials business. That's our activated carbon business. We also have our Performance Chemicals business, which is our legacy pine chemical business. Now we're actually gonna separate out Advanced Polymer Technologies. We are market leaders in all of these businesses. When you look across the product portfolio, we are number one or number two in every market position that we actually compete in. We're excited about the growth opportunities that you're gonna see in each of these segments going forward. We also have a lot to be proud of. Those of you who've been around us know that we've actually doubled our revenue and our EBITDA over the last six years.
That's an 11% revenue CAGR, 14% EBITDA CAGR. You're not gonna find a lot of companies out there, particularly in our space, who've actually produced those types of numbers over this period. We've done that while maintaining top quartile margins that are north of the mid-20%. We've completed three significant acquisitions during this time period, which allowed us to diversify the breadth of our offerings. On top of that, we've also bought back 6 million shares, which translates to about 14% of our shares outstanding from the time of the spend. We are very focused on delivering for shareholders. We have a lot of exciting opportunities going forward, which you're gonna hear about today. Those of you who know us know that truthfully, we are in transition, right?
There are a number of changes in our markets that we have been watching and preparing for the last several years, but they're here, and we are actively moving our portfolio today to respond to those changes and also to create opportunities for us. Today, we're gonna show you the strategy behind that, but also how we are executing to that, right? When you were out there earlier today, hopefully you had a chance to see the different AFAs. Stacy Jordahl and some of our colleagues were back there. We're making this stuff today. We are making this stuff today. We've been watching, observing, preparing, and we are in this transition. We will emerge a stronger and better company, and we will emerge a company that is more in market and customer focused, really doubling down on that versus our history of being product focused.
We will accelerate after that. We have a lot of regulatory tailwinds that are behind us in each of our three businesses, whether it's continually more strict auto emissions and a transition to electric vehicles, there's a lot of carbon in electric vehicles, whether it's a move away into the biofuel market and a broadening of plant based or oleo based chemistries moving forward and taking prominence as the petrochemical industry has to transition. We have opportunities that we will accelerate. Finally, we will move into what we call sort of the next generation of Ingevity, where we will exploit those markets. We will not only take share, but we will also continue to grow into many of these new markets. We're excited. Each of our three businesses has a unique set of opportunities, and we have a unique set of capabilities.
Most people are familiar with our legacy pine chemical business. The reality is we have a three plant network, which are a set of distillation columns. Those distillation columns can be used to distill and separate and make other chemistries besides crude tall oil. Almost any plant-based oil can be run through those facilities with very minimal modification. It's pretty exciting what we're doing with that. We have an 80 year history of doing this. We have very flexible fixed assets. We have an opportunity in markets to get above GDP and above market growth while maintaining margins that we've historically had in this business. Our activated carbon business, when we were first spun out, got a lot of attention. Still does. We still have room to run despite the electrification in our legacy old technologies.
On top of that, there's a lot of carbon that are used in batteries, and we are working now to look at how we will assist and facilitate that transition, and you'll hear more about that from Ed today. There are besides carbon, other products that are used in that value chain where if you wanna make it from a bio-based source, the process is very, very similar to what we do today. We have the opportunity to use our assets and our know how to participate in that, and we will. Finally, Advanced Polymer Technologies. This was an acquisition, but it's an exciting and incredible opportunity for us. It has a great litany of what I call old technology or old generation applications in coatings. Going forward, its biodegradability, it will play a major role as the world moves away from historical petroleum based polymers.
Tremendous opportunities for well above average growth while delivering margins that are in the mid to high 20s. All right. I'm going to talk a lot here, so bear with me, about what is going on in the crude tall oil market, because I do think that this has been weighing on people's minds over the last couple of months. I would call your attention to the slide on the right first, okay? We don't normally talk a lot about crude tall oil and its pricing because it's pretty proprietary, but that hard black line is crude tall oil. All right? That is its pricing relative to other oleo oils that are more commonly traded that you can find in a market, right? What's really happened is there's a regulation in Europe called RED II. All right?
If you want to go read it online, you can. It makes for great late night reading, I would encourage you to go to Annex Nine A and Nine B, which are in the back, because in those it lays out all of the different raw materials that can be used in Europe to synthetically create a diesel. Okay? Diesel is here to stay. Diesel is what's needed for heavy vehicle trucks. Biofuels are what's needed for sustainable aviation fuel, right? This technology is also coming to the United States. By 2024, it's estimated that about 2.5 billion gal of biodiesel will be produced online in North America, right?
What's happening in Europe is they've laid out this basket of different plant based oils, but then they've ruled out certain things because they don't want to drive inflation or there's a political reason to it, right? Anything that's tied to the food chain, olive oil, rapeseed oil, canola oil, is not in the basket. Can't be used right now, right? Palm oil, which is actually the largest source of oils out there, and it's hard to believe that at some point down the road they're gonna have to open this up, but because of the child labor issues in Malaysia and Indonesia, palm oil has been excluded, right? Right now, that puts crude tall oil and used cooking oil basically is the two main raw materials that are used for biodiesel in Europe. Okay?
It's not even crude tall oil, it's actually the tall oil fatty acid that they want to use. Okay? We'll talk about this later, but that presents tremendous opportunities for us, not only to as an alternate source of demand for our TOFA, but we're also one of the few companies out there that knows what to do with the other 60% of crude tall oil that is not TOFA, right? We have outlets for that. That led to a speculative bubble that occurred in the market towards the latter part of 2022 and into the first part of 2023. Okay? That speculation occurred even though other oleo based oils or other plant oils, prices were actually coming down because of global economic concerns, right? The price of most commodities rolled over, right?
There's about, and you'll notice this, about a three month lag typically between what happens in the broader oleo markets and what ends up happening with crude tall oil. Crude tall oil is not a very transparent market. It's pretty opaque, as many of you guys know. That pricing is pretty much what we've seen. Now, what you'll also notice is that you can see the price starting to turn and come back down, right? The reason why that is because biodiesel, because of the economic issues and what's happening over in Europe, the pricing is coming down, and therefore, the demand for crude tall oil is coming down to reflect that, right? Over time, and by that, I mean sort of the next five to seven years, many of these oils are all gonna converge to biodiesel pricing. That's what's gonna happen, right?
That's the situation we're in today. It spiked up on us pretty dramatically. It has begun to turn. We do think that we will see some relief of the pressure, but it's gonna remain elevated. Okay? It also helps explain why we're interested in looking at other feedstocks to create similar products, because if I can buy my feedstocks at lower prices, and those just happen to be some that we're using, right, soybean, palm, and rapeseed, we will have a cost advantage from where we sit today, right? The, the point on the left, which I think is important for people to understand, is. There's about 2 million tons of crude tall oil produced every year globally, okay? About 1 million tons in North America and about 1 million tons in Europe.
About 200,000 of that million tons in Europe right now is embargoed in Russia, right? It's trapped in Russia, can't be sold, okay? That's also putting pressure on the U.S. CTO market because European buyers that are used to buying from Russia have to go elsewhere, okay? Don't know how long that's gonna last, that is a part of the market dynamic that's showing up on the right side of the page, okay? That's a pretty static market. Most people know the world's not building more paper mills, right? In fact, they're shutting them. Evidence one is one in Charleston, South Carolina, the paper mill that we sit next to, they announced its closure last week. I also want to put this to bed. It's not going to impact our operations, okay?
We only buy about 10,000 tons of CTO from that plant, even though we buy 275,000 tons a year, okay? WestRock will replace that with CTO from other mills. It was a sick mill for a long period of time. Is it a pain for our people? Stacy Jordahl's back here somewhere. We're having to figure out how to, like, cut over the power generation. We're trying to figure out, you know, how to get the electricity and stuff, but yeah. It's just these are one-off rewiring costs, but they're not gonna impact our ability to perform our operations. In fact, we may end up saving money on some of these things when the dust settles because, as I mentioned, that was not a very efficient WestRock plant, right?
To go back to the main point, the world's not building a lot more paper mills, so this is a relatively static amount of CTO that's gonna be out there in the marketplace. What's happening is, because of the biodiesel market, there's incremental refining capacity coming online in the market, okay? In fact, there are three facilities being built or potentially being built today, right? Most of you guys know the last thing you need in a static supply market is more demand, right? That's also explaining part of the challenge.
It's also why entering into the supply agreements that we have with WestRock and Georgia-Pacific, which we just announced their re-up a few months ago, is so important because we are money good for 275,000 tons of CTO through the end of the decade into the next decade, okay. That's the nature. We will pay more for that crude tall oil, right. It will move with the market, right. We know we have it, and that's important because with all this capacity coming on, there's gonna be a game of musical chairs, and not everyone's gonna have a seat at the table.
We will have a seat at that table, and we will use that to our advantage, both in our legacy markets and in the new markets, because we know that we have over 10% of the capacity that will be provided, right? We will survive, and we will move forward, and our intention is to exploit those opportunities. It's pretty important to understand that, and I think there's a lot of confusion and noise out there. We're not short CTO, right? That's not gonna be an issue, right? We are paying more for it. We have to charge more to our customers, and we have a strategy to manage that. This is it.
You look at today, Again, this may be more information than you guys care, Historically we have run a three plant network at around 365,000 tons of utilization, okay? That's what we like. Our nameplate's higher than that, but that's kind of, if you go back over the last 10 or 15 years, that's what we've liked. The reality is, though, over the last probably five years, we've been running that at about 275,000-300,000, okay? We have not been running at max capacity. The reason for that is because if you know us, you know that we're constantly asking ourselves, "If we buy that marginal ton of CTO, can we make the profit that we want on it," right?
We're optimizing this continuous flow process, and lately we've been landing in the kind of 300,000 range, right? What that really means is that of our two plants or of our three plants, we've been running at 2/3 capacity utilization, right? Even though you don't see it and it doesn't show up necessarily, the truth of the matter is we've been running these three plants at, like, 66% utilization. That's one plant's worth of empty capacity, right? That we can use, right? What we're doing is we're taking those 275,000 tons, and we're shifting them to two of our plants, and then we're reconfiguring, even as we speak, Crossett into run alternative fatty acids. We want to service that same legacy customer base of TOFA and TOR customers, right?
We wanna, we wanna, you know, whether it, you can think of it as a $700 million business however you want or 275,000 tons of volume, their prices just went up, right? The cost of TOFA and TOR just went up for them, right? Some of our customers will be able to bear that, some of our adhesives customers, some of our asphalt or some of our asphalt customers. There's also going to be some that cannot afford it, right? This has happened before. The best analogy, for those of you who've been around, reminds me of the kinda 2019 period with what happened with tall oil rosin. If you guys remember, gum rosin pricing fell. We had a turpentine dislocation which really dropped the pricing of rosin, and people substituted out of ours, right?
Well, again, up until this point, we've had to send people down the road like that. We've had no alternate to offer them. Today, with our AFAs, we're going to be able to go to those customers, and we're already doing this in the oil field markets. We're increasingly doing it in the asphalt markets. We're doing it in other markets, but we're going to them and saying, "Look, here's an alternate that's non-TOFA based that we provide." We want to cover that same set of customers, that same volume, but using a broader set of offerings. What's interesting about AFA, though, and hopefully you can see it when you're outside, is it actually, and this is kind of sacrosanct inside our company sometimes, but canola fatty acid is in many ways better than a tall oil fatty acid, right?
It doesn't have the same amount of sulfur. It's clearer. It doesn't have the same odor. It can be used on a much broader array of applications because of that. You can actually eat TOFA, but I doubt you'll want to because it tastes like tree, right? Canola, canola's in food, right? It's in animal feed. It's also in personal care. Palm is in personal care. We have an opportunity to enter new markets that we're not doing today, incremental volume from where we are today. Finally, if you think about that, right, that means we're kind of left over with excess CTO-based products, right? We're not selling as much as we used to. We're gonna use that to enter the biofuels market. We're already selling into the biofuels market.
Rich is gonna talk to you about this today, but that's a huge opportunity for us and we plan to be there for that, right? When all is said and done, this actually represents just by modestly spending $20 million of capital and retooling one plant, we're actually gonna double the volumetric output of this segment, right? Rich will explain to you how that works. We're gonna go from 275,000, we're gonna double that, right, to potentially 550,000, right? Performance Materials. I will just state this unequivocally. We will be growing this business through the rest of the decade. I'll just say that one more time. We will be growing this business through the rest of the decade, and the reason why is there in the bottom right, okay?
When you have changing regulations in Europe and in China, and you double the content that's on a vehicle, it more than offsets the EV penetration, okay? I think the nuance that sometimes is lost on people, whether it's looking at the U.S. market or China or other markets, is that hybrids still use our technology, right? Just when you hear the term electric, you have to think all electric to exclude Ingevity, right? We could very well find ourselves in a position in the latter part of this decade where to some extent we're double dipping on a vehicle, meaning that we're gonna have some of our carbon in the electric vehicle battery, and we're gonna have some of our carbon in the legacy technology to support the old internal combustion engine, right? Ed will take you through all this math.
Regardless of the assumptions that you make, whether you're very aggressive or you're very conservative, or you believe in the EV, you don't believe in the EV, we're gonna spell it all out there for you. You'll see that we'll keep growing this business. Finally, APT. A lot of exciting opportunities here, and hopefully you had a chance to go out there and look at some of the displays. We will play a big role in bioplastics, right? We will play a big role in single use plastics because our stuff is biodegradable, okay? Effectively what it does, and Steve and I were talking about it before this presentation, you know, PLA is very brittle, right? What our material does is it allows that material to stay flexible and stay together, right? It's a plasticizer, but it biodegrades, right?
We will have a big role in that. We also will have a big role in automotive. Actually, automotive has been one of Steve's biggest growth drivers the last couple years, not just with batteries, but with other technologies that will survive or be a part of the next gen. Finally, footwear and apparel. We're actually really excited about this. I mean, people who know this business know that we've been in shoe counters for a long time, right? Not exactly the fanciest or sexiest application. It works. One of the largest sources of landfill waste is actually old clothes, right? Because, you know, once it kind of makes two or three turns through the Goodwill or what have you, they go to the landfill, right? We're actually getting involved now in working with apparel manufacturers to make those clothes ultimately biodegradable.
That shirt you saw out there is an example of one, right? Huge market. Finally, why invest in Ingevity? Listen, we are growth oriented. You're gonna see in the next page, our plan is to double our revenue and EBITDA again in seven years. You might say to yourself, given all the tailwinds and all the story here, how is that gonna be? I challenge you today as you listen to everybody to add up these different opportunities and the math is what the math is, okay? We talked about a doubling of volumetric capacity in Rich's Performance Chemicals. You'll see the math in the Performance Materials. You'll see the opportunities. When you add all that up, we're going to billion dollar of EBITDA in 2029. We have a history of doing this.
We have a history, an 80 year history of being an innovation leader. We know how to do this, and we intend to do it while maintaining our margin profile, which we consider in the, you know, mid-to-high 20s%, best in class. That's it mathematically. As you go through today, please fill in those blocks. You'll see them as we go through the presentation. Lastly, we have the team to do it. You know, Ed and I are the last two of the original spin squad. He doesn't like this, but yeah, Ed's got more time at Ingevity than me. Dinosaurs were still in the Charleston area when he first came to the company. We've assembled a world-class team from a breadth of different industries, some from the specialty chemical industry, some from other manufacturing industries.
I would stack the quality and caliber of this management team against any for a company of our size. We've been working hard. COVID, in some regards, was a hidden blessing for us because we had time to go away and really work on these things, and we're excited about where this company is going. With that, I'm gonna turn it over to Rich White.
Good afternoon, everyone, and thank you for coming today. Thank you for your interest in Ingevity. We're really excited to talk to you today about the Performance Chemicals business, and we have a lot to talk about, so let's get right to it. If you think about the Performance Chemicals business, since the spin, we've been able to see a 6% and 13% CAGR, respectively, on revenue and EBITDA. The business is broken down into two segments: the Industrial Specialties business and the Pavement Technologies business. Industrial Specialties business is a GDP business, somewhat cyclical, with products going into adhesives, oil field lubricants, and agricultural chemicals, and today makes up about 70% of Performance Chemicals. Pavement Technologies is a more growth-centered, year-over-year, high-margin business that is providing products to asphalt and road markings.
The double digit EBITDA that you see on the upper right-hand side of this chart was the direct result of us moving into very specialized markets, right? We take products and we derivatize them, as you heard John say. We don't only take products, we take a base product and then make it specialized for all the markets that we're gonna talk about here today. We saw these derivatized products grow greater than 10% since the spin, mostly through the work of innovation. We have technical centers not only in Charleston, but in Tulsa, Oklahoma, Lille, France, Mumbai, India, and Shanghai, which lends itself to the last chart you see, the last pie that you see on this chart, which is global expansion. 70% or greater than 70% of our business today is here in North America.
We have specific initiatives in each one of our businesses to drive growth across the whole portfolio. We liken this business as you think through and look through the slides that we're gonna go through today and hear what I'm going to say, we have likened this business to a historical, operationally product-driven business, and we're moving to a more market-driven, customer-focused business. In other words, This is what I make. Will you buy it? As opposed to you saying, This is what I need. Can you make it? You all know of Ingevity's commitment to purify, protect, and enhance the world. If green is your thing, it does not get any greener than Performance Chemicals. All of our raw materials, CTO, soy, canola, are from renewable feedstocks. All of our products are greater than 95% biobased. The actual number is even higher than that.
If you look in our pavement coatings, our cold recycling, in the cold recycling process, our products help reduce GHG by 90%. 90%. In our agricultural products, our products help reduce water runoff, which leads to cleaner waterways. In other words, green is definitely our thing. John spent a lot of time talking about our operation network, and we're gonna spend a fair amount of time talking about it right now. Historically, we have taken CTO, right, and fractionated into TOR. CTO, crude tall oil. I'm gonna use a lot of acronyms today. Crude tall oil, TOR, tall oil rosin, TOFA, tall oil fatty acid, AFA, alternative fatty acids. Just to get that out the way real quick.
We have historically, for the last 84 years, fractionated crude tall oil to go into all the markets you see here, and to a lesser extent, lignin, which we use to make all of our dispersion products going into ag, dyes, and batteries. What we are moving to is being able to do everything we do today or have been doing in the crude space, supplementing some of those same markets with alternative fatty acids and allowing us to go into new markets. To give you a pictorial of what that's gonna look like, today you see us having a three plant network that produces CTO across the entire network.
As John mentioned, our utilization rates haven't been as high as we would like, so we can take two sites, Charleston and DeRidder, and maximize the fractionation of CTO at those two sites. While utilizing our Crossett site to produce the AFA products, soy, canola, palm, but it's not palm, it's palm fatty acid distillate. We're not processing palm. We're taking the distillate from the palm process and using that to go into various markets, primarily animal nutrition, which we'll talk about. We'll take the legacy plus new, increase our overall capacity utilization, two plants on CTO, increasing the utilization, ability to expand those two plants if we need to. It's like, well, what if the CTO price comes down? What you gonna do? Are you gonna, like, turn Crossett back? No, we're not. We can put.
We can use nominal capital and expand either DeRidder or Charleston, right? Then run Crossett fully on AFA. What does that look like? Take a look at these two pictures right here. Today, we have a biorefinery system that is a very multi column type system through which we fractionate CTO. We need all those columns to fractionate the CTO. When we do that, we're getting both tall oil fatty acid, tall oil rosin, and some other products out. If we have an imbalance, in other words, if the team is selling a lot of TOFA, but the rosin market isn't so hot, that throws the plant out of balance because you have to have some place to put the rosin.
What we're saying is, Hey, as we move over to this, our Crossett facility, we'll be able to have a less dependent system where we can produce soy, we can run canola, we can run PFAD, we can get side streams of oleic and glycerin, and they're all independent of each other. They're not so dependent on what we see today with just fractionating the crude tall oil. We're really looking and excited about eliminating the imbalance at this one site and allow us to capitalize on the diversification and flexibility of running the Crossett facility, and we're really excited because it's all gonna be complete by the fall. We shut down Crossett from running CTO as far as of April first, and by the fall we'll be up and running.
We're running now, but it's not fully up and running and done, but we expect that to be finished by the fall. We're very, very excited about that, and look forward to your questions as we get later on. With that, I'd like to talk a little bit about Industrial Specialties and what's going on in that business. Certainly since the spin, we've seen a revenue of approximately 6% CAGR, but yet volatile, right? It is, it has been volatile. What have we done about it? We've shifted our focus into the higher margin, more stable markets that are more attractive to us. Things like adhesives, agricultural chemicals, lubricants. That's what we're gonna continue to do with this space. Global expansion is gonna be a theme. It may sound redundant.
It will sound redundant as I talk about it today because it is a thread that runs through entirety of the Performance Chemicals business. Right here in Industrial Specialties, one of the keys we're gonna do is global expansion of the business going forward. We see growth in both our legacy and new markets within Performance Chemicals. You see here on the top end of this chart, the historical markets that we've been playing in, that we're very confident that we can grow above the total addressable market rates that you're seeing here because of the energy transition, increased production of oil and gas around the world, growing population needs for food, and the focus on sustainability and ESG. We really wanna spend the time in the lighter green below. Biofuels, home, personal care, animal nutrition.
As John stated, we've been in this biofuel space for some time now. All of our sites are ISCC certified, which you need to be able to provide products into the biofuel space. We have multiple products that are approved at E.U., European biofuels producers. We have actively engaged, John Nypaver and I were in Finland earlier this year, with senior executives at many of the biofuel companies in Europe and here in the U.S. The economics within this space for our products today have yet to converge. John already mentioned the whole market, but if you think about the price of crude tall oil and brown grease, crude tall. I mean, sorry.
If you think about the price of used cooking oil and brown grease, those prices and the economics of those are much lower than what we need and what we want within our, within the space we play in today. That's going to converge. There's not enough raw materials in the world to satisfy the needs of this biofuel space going forward. We will be selling into this space. On the home side and personal care and animal nutrition, that's all new areas for us, right? We're already playing in the animal feed space a bit, but these are new areas for us, but they complete the third pillar of the strategy for Industrial Specialties. Those pillars, to restate, are pretty straightforward. One pillar is an industrial pillar.
That's what we have done and continue to be doing as I showed you on the plant network slide. We're gonna continue to go into the markets that we've been playing in. We'll do it with existing crude based products as well as new alternative fatty acid products. Pillar number one. Pillar number two is the biofuel space. We have our products approved there. We're testing AFA products. Guess what? We're able to spike it with a little bit of rosin 'cause some of the folks want rosin. Helps us get rid of some of the rosin, so that's a good thing also. That's the second pillar. The third pillar will be this home personal care and animal nutrition space, which will look for our products primarily from the AFA side.
Now, that could be a long chain, that could be a short chain, that could be a mid chain. That could be similar to TOFA products. That could be surfactant technology. Our team is actively engaged across all those technical centers with customers. Our team can tell you we've sent out hundreds of samples of our AFA products that are seeing really good traction today. For the future within the Industrial Specialties segment, we expect the CTO products to grow at probably 5%-8% CAGR over the time period. Through going into this new alternative fatty acid space, diversifying our product portfolio, optimizing our capacity utilization, we expect to see double-digit growth in this space, primarily led by these trends you see here. Oilfield global expansion. Adhesives, performance characteristics, and sustainability.
Agricultural sustainable products for good food development. AFA is gonna ramp up nicely. AFA, we expect to be one-third of this business by the end of the decade. We're really excited about this. Now, the Industrial Specialties other applications, we have them kind of bucketed into industrial applications here. Still be about GDP growth. We will continue to try to work to shift those products into more stable, higher margin markets. To be quite frank, we'll probably exit out of some of the markets because that's what it's gonna take for us to be able to achieve the goals that we've laid out for Industrial Specialties. Just to talk a little bit about some of the segments with adhesives. You all know e-commerce is here to stay. It's here to stay.
We can say that by all the boxes that are arriving at each one of our houses. It's not going anywhere. As the packaging industry continues to grow, we're gonna see that more and more recyclability of the cardboard that is being used. Because of that, we're gonna need to have adhesives that provide additional stickiness, so to speak. Our adhesives will be able to do that. Road markings. Road markings can be done a lot of different ways, right? They can be done from a paint standpoint. They can be done thermoplastic. They can be preformed, which is made and just laid on the road. We're excited about the technology that we have because the best technology for road marking in our estimation is thermoplastic.
Thermoplastic because it enhances the retroreflectivity, ability for a car to see the lane that is not historically seen by hydrocarbon or petrochemical-based products. We're really excited about the adhesives section and expect it to continue to grow. That business has actually doubled for us in the last three years, the adhesives segment of this business. With regard to oilfield, I've mentioned we expect to see globalization of these products, so down in Latin America, over in the Middle East, over in Asia, where primarily today, North America only represents 25% of the oil and gas industry. We've been partnering with our customers that have extensive network around the world to carefully select the technologies that they need to better enable themselves to work in this space.
Where improved consistency and scalability of the products help us to provide options in this area, and certainly new applications driven by the AFA technology. Today in 2023, this oilfield business, 15% of the revenue will be driven by AFA. Already today, 15% of this oilfield space revenue is being driven by alternative fatty acids, and we see that continuing to grow. Alternative fatty acids. It is, and will be, and has to be a game changer for us. Excited about this. This is not something we just happened on, so to speak, right? We knew that we wanted to diversify our offering to the marketplace. Diversifying our feedstock allows us to do that. Flexibility manufacturing is certainly key. By switching crossing over to AFA, we'll be able to do that also.
Multiple new products will come directly from us growing into this space, which will allow us to have more than 3x the products that we have today. As I mentioned to somebody out in the hall, one of the things that want you to make sure you keep in mind about our ability in this space is that, yes, there are other players in this space. There's nothing new under the sun if you didn't know that. Yes, there are many players in this space. Our ability allows us to do two things that most players can't do. Because of the size of our cross-facility, we're able to have the volume while at the same time provide niche. Most of the times in this space, you see companies that are providing large volumes or companies that are providing niche applications.
The work that our team is doing is gonna allow us to do both, and that's why we're so excited about that and focused on how to drive the derivatized products in the end markets. This is not just a volume game. This is not just us. Yes, our capacity is gonna go up. Yes, we'll have much more volume to sell, but it's not just about selling more volume. Do I wanna sell more volume? Yes. You wanna sell the volume in the right application. Right? In the right application. This is just a picture of the offerings which we are making today. Making products today. Suffice it to say, in 2023, we have eyes on upwards of $70 million of revenue in the AFA space. Let's talk about Pavement Technologies. Very interesting application and full of technology that most folks do not understand.
Our Pavement Technologies business is, has been, and will always be a very solid, high-growth, high-margin business for Ingevity. We're in the road. We're deep in the road. If you're looking at this picture here, that's about a depth of at least 30 in, maybe more. Those roads you drive on, that you run on, that you ride your bikes on, that have asphalt on them, 30 in or more deep, and we are in every layer. Every layer of that road, we're in. Our emulsions are in the base and interlayer. Our groundbreaking flagship product, Evotherm, is in the asphalt. Our polymer products are all over to preserve the top of the road. The striping business that we recently transacted back in last October, is on the top of the road. To put it quite simply, we own the road.
We own the road. We're in every part of the road. The business has shown consistent growth even through economic shutdowns. There are very few businesses, if any, that are recession-proof. The one thing you can say about Pavement Technologies is it's recession resistant. Even during COVID, out there paving roads. Our folks weren't home working from home. They were out with the local state municipalities paving roads during COVID. Recession-resistant. Not only with that, but the infrastructure bill that has recently come out is gonna provide a host of tailwind to the future of this business. Yes, I said I would be redundant. Global expansion is key here. I'm actually heading to Brazil this evening 'cause we have a big pavement initiative going on in Brazil. We've generated a host of opportunities down there we're going to capitalize on.
We have a host of opportunities that Andrew can tell you about, who's here today, that we've seen in India over the last year. global expansion is key, and we have the products and the technology to do it. If you think about the total addressable markets for both road markings and Pavement Technologies, it's quite massive. because of our number one or number two position in each of these, our advanced technology, which we have in both technologies, both markings and pavement, and the improving regulatory environment, we know that it'll allow us to capture well above what we see as the industry growth now and through the end of the decade. we think about the Pavement Technologies business.
We are very confident that we will see very good growth on the order of 13%-20% CAGR through the end of the decade. Increased focus on safety and volatility and safety and sustainability across all these segments. Road markings will continue to be regulated. We'll be able to leverage our performance, our Pavement Technologies business. We have Pavement Technologies folks all around the world. Our Ozark business is not all around the world. We're already leveraging the access we have to customers in the marketplace today to grow our road markings business. We'll continue to do that going forward. With regard to our technology adoption, we're sustainable, we're safer, we lower the emissions, and we lower the amount of energy that is needed to pave a road, which is all good for the industry and the environment.
What you don't see. These numbers are just organic growth. There was no other inorganic growth in these numbers. Suffice it to say, there are many players in the road marking space out there today, not just in North America, 'cause we visited them, and not just in Europe, 'cause we visiting them. We have the ability to see some further consolidation in this space that we don't see today. Everybody knows the PPGs, and PPG is a great company. Used to work there. This is road marking business. It's not just paint. This is road marking. We're looking to see about how to further expand our presence in this space. We're not a paint company. We're a road marking company. Just a few stories on the pavement side. We just love this technology.
This is a picture from Utah. Utah had put regulations in place to lower the emissions in the pavement process and were in the midst of buying equipment to help suck up the fumes that would come from paving the road. This is our Evotherm technology. Historical asphalt technology is called hot mix. Hot mix asphalt goes down at 300 degrees plus and throws off a lot of blue smoke, and blue smoke has high VOCs. High VOCs, bad thing. Our technology, warm mix technology, this technology can be applied as low as 160, but for the most part we apply between 200 and 225. It's applied. We don't apply it, but our technology goes into the asphalt.
This technology allows us to lower the VOC emissions, more options for the industry to reduce their costs, approximately 30% reduction in overall fuel usage on an annual basis, and eliminates the need for additional equipment. Very breakthrough technology that we are number one in the world in. When you think through it's important that you think through the technology, that our technologies allows asphalt to be manufactured at lower temperatures that not only provide the benefits to the folks that are laying it down, but to the community and to the environment. Remember I said, there's nothing greener than Performance Chemicals. This improves VOC, improves the air quality through reducing VOC.
It reduces fuel consumption, which reduces pavement costs, extends the life of the road up to 30%, and can reduce CO2 emissions by up to 30%, and certainly qualifies projects for various funding from a federal state level because of the reduced temperature that it is applied at. Another one of our technologies, this is from India, is called Cold Plant Recyclings or CPR. This is really cool if you like trains. This is a process through which you have this, what looks like a train. On the front of the train, it's digging up the road. In the middle of the train, it's starting to recycle that product, and our products go into that and allows it out the back end of the train to lay the road down.
It's a all-in-one process that can be done on a spot basis, a continuous basis, or we put satellite plants in place to be able to drive this product and expansion. It's great technology, recyclable, sustainable, green. Our pavement business is really on the front edge of the technology world. In road markings, as we've been saying, we expect to leverage our current pavement footprint to help drive additional growth in this space. As many of you may or may not know, this is a relationship business. These are state and local municipalities that are giving these contracts to small organizations, many of which are mom and pop, that wanna know that you're gonna help reduce their costs, you're gonna keep their workers safe, it's gonna be very sustainable. Overall, that's how we drive our growth in this space.
Technology, number one, the relationships our people have out there in the space, whether it's here in the States, whether it's as far away as Australia or India or down in Latin America and Canada, that is. This is a relationship business which directly ties with what we've transacted with the Ozark business coming on board. You know, if we look at the targets, going forward, we see tailwinds associated with the move for both Performance Materials, for road marking and Pavement Technologies to continue to grow from the macro trends driving growth in this space. Oil field expansion continue to be greater than overall growth for the industry.
New markets for AFA, both in existing and in growth applications, as well as additional growth in areas associated with home, personal care, and animal nutrition, all driving us to have an outlook for this business double what you're seeing today on both revenue and EBITDA. I just wanna leave you with a few things. Certainly, we have a focus on growth, whether it's geographic expansion or internal markets. The innovation leader, we are an innovation leader in all the spaces in which we operate, which help drive this growth, and diversifying our applications will allow us to do that also. I'd just like to leave you with that we see growth through innovation, diversification, increased optimized utilization, all provides a path for value creation across the entirety of the Performance Chemicals business.
With that, I'd like to thank you for your time and your listening. We'll be available for questions, and we'll turn it over to Ed to talk about Performance Materials.
Thanks, Rich. Make sure I've got the right one. Good afternoon. I do appreciate your time here today, and I'm excited to tell you about the Performance Materials business that I run. First, a quick introduction.
Sorry, here we go. First, a quick introduction about the business. Our carbon is unique in that our key raw material is hardwood sawdust, we use phosphoric acid as a catalyst to create pores into that carbon structure. We have five manufacturing sites located in the U.S. and China, three sites in the U.S. and two sites in China, which primarily serve the China market. Well, we manufacture four different product groups. First is carbon powder. That goes into filtration applications, we call that process purification. The other three product groups control gasoline vapor emissions in automobiles. Gasoline vapor emissions are generated by diurnal emissions. This is while your vehicle is parked during the day, the sun heats up the fuel, the vapors expand and exit the fuel tank.
Refueling emissions, which are the vapors that escape when you refill the fuel tank. Last, what we call bleed emissions. These are emissions that are the migration of the gasoline molecules out of the canister. These gasoline vapors, in each case, is directed towards the canister and are stored within the pores of the activated carbon. Periodically, fresh air is pulled through the canister by the vehicle's air intake system. This pulls the gasoline vapors out of the activated carbon pores and into the engine, where it is originally intended to power the vehicle. This is the process of how we capture and save 8 million gal of gasoline a day. In each case, our granular pelletized and ceramic activated carbon honeycombs are designed to capture and release the gasoline vapors. As you can see, the size of the canister increases with each regulation.
Tier one regulations require small canisters and use our granular activated carbon products. Europe is currently using a 1970s level of emissions control. Tier two regulations require a larger canister to capture the significant vapors from refueling. Pelleted carbons are necessary for this application. Today, China's regulations are at this Tier two level. Tier three canisters are roughly the same size as Tier two canisters but have the addition of honeycomb products, which converts the canister to a near-zero solution. Tier three is the most stringent regulation. The U.S. and Canada regulations are there today. Our carbon comes from a renewable resource, hardwood sawdust. Our carbon protects the environment. As I mentioned earlier, we save 8 million gal of gasoline a day. This prevents 40 million tons of CO2 every year that would otherwise be released into our atmosphere. Our carbons also purify billions of gallons of water.
We continue to innovate and find ways that our sustainable activated carbon products can purify, protect, and enhance the world around us. Our competitive advantage isn't in its patents, it's our know how. We manufacture carbon derived from hardwood sawdust that has a unique pore design engineered to capture and release gasoline vapors. We can produce carbon with different pore sizes to meet different customer demands. We manufacture at a scale big enough to supply auto production in all regions of the world. This has led to an industry leading reputation within the auto industry among OEMs and tier one suppliers. Our product is proven to last the life of the vehicle, and there have been no recalls in the 50-plus year history of our partnership with the auto industry. We do have patents which protect the IP of our newest technology that goes into today's low purge engines.
Patents are only a small part of the story. Our size, the uniqueness of our carbon, the ability to deliver quality at scale represent our greatest competitive advantages. This slide shows our historical financial performance. Since our spin off, we have generated CAGRs on revenue of 11% and 13% on EBITDA. Our EBITDA steps up when countries adopt new regulations. As you see from 2017 to 2020, when the U.S. and Canada phased in Tier three level requirements and when China moved to tier two in 2018 and 2019. As a result, margins improved from low 40% to the upper 40s. We are a global provider selling in all regions of the world. If you've followed us before, you have probably seen a version of this slide.
The right side of the page shows our expectation of when new regulations will occur in different countries. The left side shows our different products and the dollar content of our carbon in each of the products. You see that as regulations improve, our dollar content per vehicle doubles. The big movers fueling growth are the expected new regulations in Europe, taking them from tier 1 to tier 2, and the dollar content per vehicle for us will double from less than $5 to $10 per vehicle. A number of countries around the globe follow Europe's regulations. As Europe moves to tier 2 regulations, it's likely that those countries, such as India, will move to tier 2 regulations as well.
China is expected to move to tier three in the latter half of the decade, which means our dollar content per vehicle will double from roughly $10 to $20 per vehicle. Keep in mind our product is also on hybrid vehicles. In some cases, more carbon is required in hybrids due to the gas engine being shut off for longer period of times. Our models show that our legacy carbon business will grow even as more battery electric vehicles are adopted. Higher BEV adoption are offset by increased content per vehicle as emission standards improve. We typically use S&P Global estimates in regards to auto production forecast for modeling purposes. Using our model, we show the weighted average dollar content per vehicle to be nearly 40% by 2029. Our addressable markets only declines by roughly 5% as hybrids offer higher BEV adoption rates.
Multiplying the dollar content per vehicle by the addressable market, you see our revenue increases substantially. Remember, our product goes into gasoline engines as well as hybrids, which are also increasing as a % of total vehicle production. You may have heard today from Ford's president of Ford Blue say they expect strong ICE and hybrid sales well into the next decade. Using the S&P Global base case in our long term model, we show CAGR of 5%-9% over the next seven years. Different people have different views of BEV adoption rates, and we show a few of those in the table on the left hand side of the slide. If you take an aggressive BEV adoption rate scenario, we still show growth of over 3%.
If you think BEV adoption will be slower than that, we could have a CAGR approaching double digits at the margins in the upper forties. While the projections we share are focused on the continued growth we see in our legacy carbon business, we are also investing in ways of carbon can support the transition of battery electric vehicles. There is a lot of investment supporting this transition, and the technology is changing rapidly. We believe there will be a diverse number of products and solutions that open several opportunities for us to showcase how our carbon fits into these solutions. Batteries are complex and have many components, several of which utilize carbon. We invested in Nexeon, a company that provides silicon anode products and batteries. This isn't the only part of the battery we are exploring.
In fact, other components within the battery are using products that are made using similar manufacturing methods that we use today to make our activated carbon. We see opportunities in the anode as well in next gen battery technology, such as solid state, sodium ion batteries, and supercapacitors. The investment in Nexeon showcases the uniqueness of our carbon and assets. Silicon is better than graphite because of its significantly greater capacity, faster charging, and the ability to hold charge longer. The challenge with silicon is that it swells, putting stress on the battery cell and reduces the life of the battery. Our carbon structure allow the silicon to reside inside the pores, which effectively mitigates the negative impact of the swelling.
We made this investment because we believe silicon is going to be one of the many technologies used in next gen batteries, and silicon anodes are expected to grow the fastest out of the competing anode materials. Also, it's important to point out that hybrid vehicles will contain both a lithium-ion battery and evaporative emission canisters, allowing for even greater content in such a vehicle. In addition to the anode, we're also exploring other solutions for EV batteries. Solutions that potentially could use carbon include conductive additives, but other solutions would utilize our expertise in the manufacturing process rather than the carbon. For example, making bio-based graphite would be a similar process to our bio-based carbon.
The point I want to leave you with on this slide is that we are projecting healthy growth rates over the next seven years. That does not include any benefit from our investments in how we support the increased use of EV batteries. We are actively working on these new technologies and are confident we will be successful in providing solutions using our half century of expertise and the unique carbon we produce. This slide provides more details of our growth expectations. By mid-decade, we expect revenue between $625 million and $700 million, growing close to $1 billion by the end of the decade, all while maintaining margins in the mid to upper 40s%.
The growth story that is stricter emission regulations are coming, and as the industry leader in this space, we will naturally benefit as the dollar content per vehicle doubles as countries move up in emission standards. We have been manufacturing our unique activated carbon for more than 50 years using a renewable raw material. We have deep relationships with the auto industry. They trust us, and we have proven to be great partners along the way as we supply the world with our carbon. Finally, we grow at mid to high single digits over the next seven years. We expect to maintain our industry leading margins of mid to high 40s. With that, I thank you for your interest in Ingevity. Unfortunately, I will not be able to attend the Q&A. I do have a family commitment that I have to head to.
My right arm man, Jonathan, somewhere around in the back, he will be able to answer your questions as we get to the Q&A. Thank you, Jonathan. With that, I'll turn it over to Steve Hulme. Thank you very much.
Just put it on here. Just take these slides away. Thanks, Ed, and good afternoon, everyone. Today, I'm going to showcase the Advanced Polymer Technologies segment, or APT for short, and give you an insight into our exciting future. Recently, we've changed the name of the business from Engineered Polymers to Advanced Polymer Technologies, as it better describes what we do today and also what we're aiming to do in the future. Transformational growth opportunities do exist for this business through different product line extensions, but today my focus will be solely on the caprolactone, or as we call it, the Capa product line. Just a quick reminder of what we do in APT, specifically with caprolactone technology today. Traditional feedstocks such as cyclohexanone and hydrogen peroxide are used to make caprolactone monomer, which is then further derivatized into polyols and thermoplastics.
We sell into many applications today, such as coatings, adhesives, sealants, elastomers, bioplastics, and also some niche medical applications. Even though Capa technology is currently made using petrochemical feedstocks, a major value proposition of Capa is sustainability. Besides the biodegradable properties of our thermoplastics, Capa technology makes polyurethane products more durable. That is to say, longer lasting versus competitive materials. This durability has the potential to lower both cost in use and, importantly, lower carbon emissions. The Capa business was acquired by Ingevity at the beginning of 2019, and after a tough start, the business has rebounded very well, and we've shown positive growth. In 2022, our sales were $245 million. The business is highly derivatized. Our sales are regionally balanced, reflecting the global nature of the polyurethane industry, and our business has a broad market diversity. This profile helps the defensibility of our business.
In these unprecedented times of global focus on the environment, we absolutely believe the world needs Capa. Capa is an amazing, highly versatile material. We can tune Capa polyols to react with isocyanates to make highly durable polyurethanes that last longer, or we can make polycaprolactone thermoplastics that give an excellent biodegradability performance. Did you know there was a staggering 44 million pounds of synthetic textiles go to landfill every day here in the U.S. with no end-of-life options? Well, as John said earlier, Capa technology can change that, and we'll talk more about that later. Capa thermoplastics can biodegrade in multiple environments, and this provides the industry with an opportunity to innovate in multiple applications.
Our early focus was on packaging, new opportunities continue to be discovered in areas such as apparel, agriculture, and footwear. The durability aspects of Capa-based PU can also not be underestimated versus other materials as this leads to less waste. An additional benefit is due to their low viscosities, Capa polyols also provide coating formulators with the ability to reduce or even eliminate solvent. Excuse me. A result of these benefits, Capa technology has a significant runway for growth. This has been confirmed by third-party consultation during a recent market assessment. We believe the total Capa addressable market today is in excess of $1.1 billion. That's around 2.5x greater than the size of the market today.
Historically, we haven't fully explored Capa technology in all the key market segments shown here. Over the last few years, we've established growth strategies in all of these markets. Furthermore, we've also invested in state-of-the-art innovation center staffed with industry experts to execute this growth strategy. We strongly believe that Capa has a bright future in multiple markets. Our seven-year plan has identified growth potential across all markets but is highly concentrated on three main high growth, higher margin end markets. These are consumer packaging, automotive, and footwear and apparel. The upcoming slides will showcase these applications and the Capa value proposition. Firstly, let me focus on automotive, where as John said earlier, we've seen significant growth in recent years.
The bottom green colored section of the bar chart represents our traditional auto business that includes top coats, polyurethane leather, and jounce bumpers, which we expect to continue to grow at market or slightly above. Of greater interest is the growth we've seen in recent years in newer applications such as the paint protective films and multiple applications in EV battery technologies. Although paint protective films is not a new technology, growth in China is and will remain significant. This is due to the compressing of the value chain to make this an affordable option for mid to high-tier vehicles. This contrasts with this technology being a more expensive option in the West, where it is mainly limited to high-end supercars. Growth in recent years has been impressive, and we can expect it to continue at double-digit CAGRs. I'll give you more info on the next slide.
As EV battery technology develops, Capa has also provided a value-added proposition in many applications. Microcellular foams are used as compression pads between the battery cells. This helps stabilize the cells and manage the expansion and contraction during daily use and recharging. Alternatively, PU adhesives are also used to perform similar effects. The value proposition for Capa is that it provides high thermal and mechanical stability, which results in a reliable battery performance. Capa is also used to make specialty surfactants that we call hyperdispersants, and these are again used to effectively disperse conductive carbon in electric batteries, again leading to improved battery performance. I'm sure most people in this room have experienced the frustration or even the anger at finding door dings, scratches, stone chips, and staining from acidic bird droppings when inspecting their cars, especially when it was a recent investment.
Paint protective films made using Capa technology addresses these problems, protecting our investment in our vehicle and providing greater resale value. Capa polyols are the polyol technology of choice in this application and make up around 50%-60% of the thermoplastic urethane that is used in these films. The main advantages of Capa are improved chemical resistance, higher UV resistance, and higher impact resistance, and that allows all of these films to be guaranteed for more than seven years. Furthermore, such films are self-healing, allowing minor scratches to heal when exposed to sunlight or hot water. How about that for frustration avoided? Later on, if you get to see on the booth, Joel, who's Mr. Capa at the back there, can show you some of these paint protective films that we've had mocked up on some wing mirrors.
We do expect the Chinese market to grow to about 20% of all cars using this technology as an aftermarket sale. There's also multiple signs that the technology could become an additional OEM sale. Where again, you could order these films as an optional extra, just as you do with metallic paint today. When fully wrapped, each car generates about $20 of revenue for Capa, and penetration into the Chinese market in recent years has advanced to about 5%. Put another way, every 1% penetration of Capa in paint protective films in the global automotive market is worth about $14 million to us. The jury's out to whether or not, you know, the rest of the world will use the Chinese example, and you know, 20% of all cars will use paint protective films.
Our ultimate vision is that Capa-based films will be used on all cars. Switching gears to bioplastics. What are bioplastics? If you Google this, you will find many definitions. Currently, we prefer to use the definition according to the European Bioplastics. That definition is that bioplastics are either bio-based, that is to say they are made from renewable resources, or that they're biodegradable, or feature both properties. Definitions may change, different markets and regions may require different things. An approach we are taking in shaping our bioplastics strategy is to remove whatever barrier to entry we can to ensure Capa technology is a material of choice. For example, Capa is currently made from fossil-based materials, but we are exploring options such as circular feedstocks and even fully bio-based feedstocks.
Many of the bioplastics used today are really not drop-in replacements for commodity plastics. A strategy is required to optimize properties. This is where Capa comes in. It is used as an additive to improve processing, mechanical properties, or even improve biodegradability rates of other bioplastics. Today, Capa is less than 1% of the bioplastics market, which in turn is less than 1% of the plastics market by volume. Our long-term vision is that Capa should be greater than 2% of the bioplastics market, which is predicted to accelerate to about 5% of the total plastics market. Bioplastics growth will be driven by opportunities in multiple end applications. Consumer packaging has been an initial focus area for us, such as paper coatings, snack packaging, bags, and disposable cutlery.
As we said earlier, Capa is typically used in combination with other bioplastics as an additive or a co-resin to optimize performance, and this can either be processing, mechanical properties, or biodegradable performance. For example, most grades of PLA, which is one of the world's leading bioplastics today, it's only compostable in industrial conditions, and Capa can improve that. The right combinations of Capa and PLA can achieve home compostability, a more stringent test due to the lower temperature the test is conducted at. In recent years, working collaboratively with a few customers, we have advanced Capa technology beyond existing bioplastics and shown the ability of Capa to help traditional plastics. Yeah, that's right. Traditional plastics biodegrade. I think you'll agree that's an amazing technology development which potential really excites us. The first example is the styrofoam cups that all you guys have been using today, right?
If you look at the claims on there, sorry. First of all, what is Styrofoam? I mean, expanded polystyrene, also known as EPS or Styrofoam, it's used in many applications today. Most of the post consumer waste still ends up in landfill despite the efforts of a few to recycle. Virgin EPS is not readily biodegradable today, it remains persistent in the landfills and takes up space. The cups you were using have Capa inside as an additive, that enables the claims made on the cup. I'm sure you'll agree it's an amazing claim that these materials can be biodegraded by up to 90% within four years in suitable landfill conditions. This compares with around about 5% biodegradation for the virgin material.
Furthermore, there's no microplastics left behind, and decomposition gases are collected and burnt as fuel, adding again to the circular economy. The market for EPS is 10 million metric tons per annum, and every 1% market penetration by our customers is worth around $50 million in revenue to us. The second example is apparel. Over the last few years, we've been working confidentially with a key customer using Capa at additive levels that enable sustainable textiles. As I already called out, a staggering 44 million pounds of textiles are landfilled in the U.S. every day without an end-of-life option. Again, Capa technology addresses this. The technology is well-positioned to compete with conventional polyesters, and importantly, it has already been adopted by more than 20 major brands and clothing retailers.
The market for standard polyesters used in apparel, carpets, and curtains is 60 million metric tons per annum. Each 1% market penetration for our customers would be worth around $25 million to us. We are confident at least 2% market penetration is achievable. We all know that plastic pollution is one of the world's largest societal challenges. The fundamental targets of reduce, reuse, and recycle are all very valid and important to Ingevity. There are certain applications that just do not lend themselves to that logic. As I talked about earlier, we are firm believers that bioplastics have a place in the future of plastic materials by providing end-of-life options and contributing to a circular economy.
Furthermore, it is an unfortunate fact that plastics do leak into the environment, and as we know this is the case, why not use materials such as Capa, which can biodegrade in multiple environments and solve the issue of persistent pollution? A major value proposition for Capa is that it is readily biodegradable, and we hold certification in multiple environments to prove this matter, and not all bioplastics can claim this, so it is a real competitive advantage for us today. What does all this translate to financially? Given the still nascent nature of the bioplastics space, our revenue forecast has a range of 10%-15% CAGR. As you've probably recently seen, our EBITDA percentages have returned to the low to mid-twenties as we've addressed the energy inflation impacts in Europe.
Our EBITDA margins will improve further as we focus on higher-margin segments and drive innovation to further differentiate our position. As you've seen today, I've clearly demonstrated for you the exciting future that APT has. The macro trends in sustainability are helping to fuel our end market growth. We are the technology leader in application development, more than 85% of our innovation portfolio is linked to sustainability drivers. We work closely with customers and the industry bodies to make sure that we stay at the forefront of technology change. Ultimately, the ambition and momentum of my team is to drive this business and seize the financial opportunity to grow at revenues and EBITDA at double-digit CAGRs. Thank you for the opportunity to showcase APT, and with that, I'll hand it over to Mary Hall, CFO.
Thank you, Steve. As you've heard, we have a lot going on, but we are focused on delivering our growth strategy. To recap, in Performance Chemicals, our AFA transition opens up new markets, improves our operating costs, and allows us to do feedstock selection that will allow us to offer better products to customers. In Pavement and road Technologies, we are focused on regional and global growth. In Performance Materials, we're excited about the new regulations in Europe, the draft of regulations that have finally come out, we believe that after Europe, China will be next, we will be there. In Advanced Polymer Technologies, the focus is on growing revenue and improving margins as Capa's unique capabilities are increasingly in demand as sustainability trends take hold. As the numbers person, I'm most excited about how this translates to the financial results.
As John mentioned, over our past seven year history, we have doubled the revenue and profitability of the company. Our planned model models a doubling of revenue, more than double revenue from $1.5 billion-$1.7 billion of revenue to approximately $3.5 billion, and a doubling of EBITDA from $500 million to a billion , all while maintaining top-quartile specialty chemical EBITDA margins in the mid-to-high 20s%. This generates very strong free cash flow, more than $2 billion through 2029. Again, this is free cash flow, so that's after our estimate of capital spend that you see there, the $1.6 billion.
That organic capital spend through 2029 of $1.6 billion, you can see in the pie chart the breakdown of the different cost components or spend components with growth CapEx estimated to be about 45%-50% of the spend, so call it $700 million-$800 million, again, through 2029. Our major growth investments will be in APT to expand capacity across all areas, the monomer, the polyols, and the thermoplastics. We also plan to debottleneck and expand capacity in our activated carbon facilities to support the growth that we expect in Europe and China. I did wanna note that while our AFA transition and our pavement technologies business will require some capital spend to support their growth, it's relatively nominal. As you know, we have a history of employing a balanced capital allocation, and that doesn't change.
Our inorganic growth is a number one priority after funding our organic CapEx, and we plan to fund strategic initiatives that meet our fit, strategic fit, and financial return criteria. We also plan to continue to return cash to shareholders and to manage debt to ensure that we have prudent leverage and retain our access to capital markets. We continue to keep that 2 to 2.5x leverage target at the forefront. I wanted to give you a little more color on how we think about our inorganic strategy. Our inorganic growth focus is on bolt-ons to, again, grow the pavement and road markings business, bio-based chemistries that complement our existing markets and accelerate our presence into new markets, electric vehicle and non-auto carbon-related technologies, and specialty polymer technologies.
Some of the decision criteria that we use as we evaluate our inorganic opportunities: IRR that exceeds the cost of capital, ROIC that. We look at ROIC actually across the company and assess and monitor that regularly. Me in particular, I keep an eye on the time horizon because I like to be paid sooner rather than later. We look at the synergy opportunities, the likelihood and timing of those, the margin profile, consistency of earnings, does it enhance our sustainability profile, and the roll-up potential. Does it provide us with a platform opportunity, or is it a one and done? Some key takeaways. You've heard the word growth a few times today, but that is the plan: to double the revenue and EBITDA of the company through 2029, and I think we shared with you today some strategies of how we will execute that.
We plan to maintain and enhance our position as the green chemical company that actually makes money, while providing exceptional free cash flow, enough to support growth and return cash to shareholders while delivering exceptional financial results. Remember, our plan only incorporates or reflects organic growth initiatives, so there's significant upside potential from inorganic opportunities. With that, I will turn it over to John for some closing remarks. Thank you.
I will be brief. We're gonna take a quick break, and then we'll come back and do a Q&A since we've been sitting here for a couple hours. Look, we just hope you guys share our enthusiasm. We think we are uniquely positioned due to the market opportunities that we have and the changing regulatory and incentive environments. We've been waiting a long time for all these things sort of to converge. When you look across our company, we see the next sort of five to seven years of being an era of tremendous growth and opportunity, and we hope that you guys will come along on the journey with us. With that, why don't we take 10 minutes?
We'll take a 10-minute break, because I know you guys have been sitting here, and then we'll come back and just do some Q&A, and then we'll go out and have a reception. All right? 10 minutes.
Everybody from my era is gone.
This gathering, I'll bet that this is the first Investor Day anyone's ever heard the term acidic bird droppings used. Good job, Steve. What do you-
I could've used poop.
Huh?
What should I use?
All right. Q&A. Who wants to go first? Rizzo. Spring butt, got your hand up first.
Yeah. Hang on. We got a mic coming.
Oh.
Hi. Dan Rizzo from Jefferies. Just to start off with, you mentioned a lot about the, you know, AFAs. I was wondering if in terms of contract sourcing, for your CTO contracts, I think 85% of it has, is long term, and I was wondering if we can expect something similar with AFAs or is it kind of a different model?
Yeah, we are looking at that. I'm sorry, I didn't get your name. I'm sorry.
Dan Rizzo.
Dan. Hey, Dan.
He talks to him every earnings call.
Thank, I didn't hear it, though. Thanks for your question, Dan. You know, the difference between. We're looking at similar models to answer your question, but the difference between CTO and what we're seeing with these oils is that you can see them over long and short period of time, what the trends are. We wanna be able to follow the market trends of what we see on the pricing. We're not traders, as John and Mary will say, but we expect to contract the oils as needed, but look at it in a way that we're able to deal with the cyclicality that John showed you earlier.
One of the things you can do here, Dan, that you cannot do with crude tall oil, despite our best attempts to synthetically create this is, you can't hedge crude tall oil, right? If you think about the big 900 pound gorillas that operate in these sort of plant-based oils, they all have very active hedging because there's a forward curve, right? I mean, to what Rich is saying, where we want to go is to have customers, and this is why we use the term AltaVeg, right? We use a product that for most substitutions, not new markets, but for existing substitutions, we wanna be able to toggle to the plant oil that has the lowest cost for us, right? Have the product certified, right?
We're staying generic and not saying canola veg or rapeseed veg with our existing products because we want the flexibility to toggle to the lowest price, right? With an already certified product. For you guys as investors and for us as a company, there's gonna be a lot more visibility into our cost structure than we've had for a while because of this, right? And we will be able to take hedging actions that we haven't been able to do before, despite our best efforts. Go ahead. Oppenheimer.
Hi, it's Ian Zaffino from Oppenheimer. Can you guys maybe talk about as you transition to AFAs, what maybe the certification process is like or the approval process is like with your customer.
Yeah.
timing-wise, et cetera.
Yeah.
-situation?
That's a great question, and it varies by industry. For instance, our products are already being used in the Middle East, and we didn't have to get specific certifications for them to be used in our oil field, oil field applications. Here in the States, within oil field, the certification process can take 6 months or so. Within the pavement space, as Andrew can tell you, it can take one year, easily 1 year. With regard to the home, personal care, and animal nutrition space, we see sight of having to be GMP on the certification, and our folks are working towards that. I wanna speak to something that came up in the break with some of this.
Look, it's part of what I said in the slides. We're in transition, guys, right? you know, the next 9 months, as I said in the last earnings call, there's gonna be some choppiness as we kinda move through these because we've got things that we're trying to do to get done with this. The reality is many of these products, and you can go outside and look at the samples, they're better than what we make historically, right? I mean, Stacy can tell you, he's back there somewhere, we're actually spiking canola oil with tall oil rosin, right? Because it's an over-engineered product to what some of our existing customers need, and as people know, we need to move rosin, right?
The idea, we will kind of move through this for a few months, a few quarters, as we try to get this transition done. We're going to emerge with a lot more flexibility, and we're going to emerge with a more attractive margin profile, once we get on the backside of this. I know that for investors, that leaves you a choice as to when you want to get in or get out and how you want to participate in this. We feel strongly that that business, when we get done, it's going to be in a much better position.
If I could chime in to your question. When Rich said, you know, some products may be short-term.
Use the mic.
six months, a year, that's not from today. 'Cause as Rich said during his presentation, we've got hundreds of samples.
We're already selling.
We're already selling.
We're already selling product today.
Right.
Right.
those are coming-
More in the industrial space.
as we produce more.
My guess, and I know we didn't disclose this, but I mean, we're here in a public forum. My guess is that he'll hit $70 million-$80 million of sales this year or better in AFA-related stuff, right? That should give you some idea of where we're headed by the end of this, over the course of this year, right?
Thanks. It's Chris Kapsch with Loop Capital Markets, just gonna stick with the AFA transition theme. When I was talking to Rich and a couple of his team members before the start of this, I learned that it sounds like the Crossett asset, it's a little bit more complex, the refinery configuration versus maybe the other plants. Just wondering if that, as you transition that one and dedicate it to these AFAs, does that confer any competitive advantage in terms of the capabilities? Then conversely, does it undermine any flexibility or capability you have with the-
Right
...legacy CTO refining operations?
Well, similar to what I told you out there, Chris, from a competitive advantage standpoint and what I said here during the presentation, most of the companies that you see in this space are doing one of two things. They're buying that base product and going into niche areas, or they're selling very large volumes. Our competitive advantage is that we'll be able to do both, right? We'll be able to do both. It does not put us at a disadvantage in the market based on what we're seeing today. The reason we chose Crossett, which it sounds like you're sort of uncovering, Chris, is it's 1 continuous process, but there's sort of 5 columns that are a part of that. Like, we're basically taking that 1 and cutting it into thirds, right?
By doing that, we get three times the sort of access, right? By moving to AFA, we're not gonna have the rosin challenges in that plant. But in terms of being able to continue to do what we do in the existing in Charleston and in DeRidder, those are mostly where we service our oil field asphalt and adhesive guys today. It's not gonna change our existing. It's additive to what we do now. Uh-oh. Jonathan Tanwanteng.
Hi. Jonathan Tanwanteng with CJS. First question just a little bit longer term, and Mary gave you a little preview before. As you look at the guidance or the targets over the next several years, do you see that a little more front-end weighted or back-half weighted? Kinda help me understand what the pieces are to that as you go through to 2029.
Sure. I'll take a stab at that. The pace, you know, I'm sure won't be linear. In fact, the CapEx that I talked about in my section is weighted in that maybe first two to five, two-four year kind of timeframe. There is perhaps a little bit of back-weighting, if you will, toward the second half of the seven years, but not significantly. You'll see financial results improve near term in that horizon.
I mean, look, I also think that it's importantCapa and Pavement Technologies have some real tailwinds behind them in the near term, right? I think you will continue to see them put up some very, very good numbers over the next year or two. you know, Ed's business, now Jonathan, since you're here-
Mm-hmm
You know, will benefit obviously from these regulatory changes, but as the economy and the world sort of improves and more normalizes and auto builds improve, that business is gonna have some good tailwinds, right? To me, you've got three of the four that are looking at some really great opportunities. Now, what you do to discount, in fact, Garrow and I were debating this over the break, you know, while it is in transition, you know, This transition I think is well worth it and I think you'll see us make progress, but don't lose sight of those good businesses that are gonna have some pretty good years. So...
Second question. Can you hear me? Yep.
Yeah.
My second question is a little more near term. Are you seeing any of your customers turn over or go away because of the higher CTO pricing and the pricing you're pushing on them right now, number one? Number two, how much of those that are, you know, you're losing from the CTO side, are you picking back up on the AFA side, if any?
You wanna-
Yeah. That's a great question. If you listen to our Q1 earnings call, we talked about destocking, right? Initially, was there a market destocking going on? We're past that now and we're starting to see what happens. With regard to CTO prices, yes, some customers have said, "Whoa, that's a very high price," and we've been able to offer them the AFA and the great example of that is that some customers say, "Hey, I can't... I've looked at the AFA, it works, but it doesn't work maybe to what I want it to work," what does that do? That justifies the price for the TOFA. Right? It justifies the price for the TOFA.
The reality is there also are other competitive products out there, whether it's hydrocarbon-based products and, to a much lesser extent than four or five years ago, gum rosin. We have to play that game, John, that it's out there and we're dealing with it. We are seeing customers that are transitioning back, wanna go to AFA, then wanna go to AFA, and they say, "No, I really actually want the TOFA," which is justifying the higher price that we're seeing on that today.
I mean, the target is if we get the sort of volumetric increases. Right now, we're sort of 40% exposed to tall oil rosin in that business, which for those of you who've been around us know that that's kind of our Achilles heel, right? In a soft market, we always can place the TOFA. Just by doing what we're doing, we wanna get that number below 20%, right? That number will stay fixed as we increase our fatty acid options, which should bring down the volatility in that business once we get it there. Here comes John. Yep.
John McNulty of BMO. Two questions. First one on the CapEx plan. It looks like there's about $800 million of growth CapEx, which is, you know, you've gone through a decent CapEx cycle, so I guess, can you help us to think about where maybe some of the chunkier buckets might be there? The other question would just be on the Performance Chemicals business. It looks like the margin targets for mid-decade, which I'm assuming is 25-ish.
Mm-hmm
... are about 14.5%, not a whole lot of difference from where we are now, and then they spike up a bit. Can you help us to think about the transition of the margin profile in that business? Thanks.
I'll start with the CapEx piece of that. As I mentioned, and when you get a chance to look at the slides, so you're right, call it $700 million-$800 million of organic CapEx. Little more than half of that in the model is actually directed, earmarked if you will, toward growing the APT business. As I mentioned in my remarks, that is across that business, so monomer capacity, polyols, thermoplastics capacity. That is again, the largest single share of capital. We are planning to do some debottlenecking and expanding capacity in our Performance Materials business as those new regulations take hold.
The other thing I wanted to point out though too, meant to mention this in my remarks, we have a really good track record of being able to flex our CapEx as the pace of growth...
Mm-hmm
... changes 'cause again, it won't we don't expect everything to be linear here. We're good at that and our expectation is that we'll be able to nicely match the CapEx with the growth as it comes.
There is some, John, just so you know, some carbon expansion built into that to support future markets, right?
Take a question. Want me to take it?
Go ahead.
Yes, John, thank you for your second question. Certainly, we have to address, you know, the CTO inflation, actually moving down the AFA stream and the global expansion, which during the mid-decade. Is it 2025, or is it, you know, 2020 now to 2025? That will have an impact on that margin. When you see that lift from the middle of the decade on up, it's because we fully expect that not just that first pillar that I talked about, but also the biofuel pillar, the home personal care and animal feed pillar will have seen the lift off that we're expecting across the entire portfolio.
You may rest assured we'll go as fast as we can.
Well, you can rest assured that the team and I have been told that it'll be sooner than that.
Yeah, thanks. Vincent Anderson at Stifel. Maybe just leaving 2018 and all the monomer, you know, mess aside, 2022 we saw some solid earnings, dollar earnings growth in Capa after quite a bit of investment and turnover. Can you talk specifically to what changes you have made since coming in on the commercial strategy and maybe the pricing model side that really lends you confidence that you're gonna be able to capitalize on these growth opportunities?
Yeah. I joined about two and a half years ago, and, you know, the first couple of months getting to know the business and people like Joel at the back teaching me about it. When we actually looked into the strategy that the previous owners had, it was pretty solid. We've made some changes to the strategy, but mainly it's about execution. There'd perhaps not been the execution in the past. We've put, you know, again, some of the previous owners may not have had the money behind them at the time, and that's perhaps why they sold the business. Ingevity has put the money behind us, both in terms of capacity. We've built an innovation center that was, you know, GBP 5 million investment. We've staffed the business up.
I think I was number 92 employee when I joined. We have close to 190 today. We've really staffed up in the last couple of years. You know, when you're trying to grow a business like this with such an innovation model, you have to put people behind it. It had a pretty low SG&A before, that's what we've invested in and just executing.
Hi. Mike Sison, Wells Fargo. Two questions. For the road paving business, you've emphasized you're not a paint company. Can you maybe talk about what you're doing differently than the paint companies in managing this business? Does it allow you to pick up market share? Maybe as you look longer term, you've talked about wanting to do acquisitions or will you be a better candidate to acquire these businesses? My follow-up was more, I don't see a lot of companies ever in chemicals talk about double-digit organic growth. Pretty impressive. I've actually don't think I've ever seen it, to be quite honest, in chemicals. Maybe just talk about the confidence there. How much is within your control? I understand there could be recessions and stuff like that, just a little bit on that outlook. Thank you.
Yeah, no. Thank you for your question. With regard to the road markings business, one of the things that we have that nobody else has is number one position here in North America in pavement, our pavement technologies, and no less than that, around the world. What are we going to do? We're going to already leverage the existing relationships we have in the industry and the markings business comes along with that, comes along with it. They've trusted us. They trust our technology with all the performance characteristics that it has today, and we expect that that will help us to leverage it going forward. Not just that, though. If you look at paint, there's paint, there's thermoplastic, and there's preform.
Preform is for the most part, bike lanes and to some extent crosswalk, where paint is for stripes and thermoplastic is for stripes. With the regulations associated with not only the autonomous vehicles, but the current vehicles, as I mentioned earlier, with regard to lane assist, the thermoplastic technology is better than paint. It's just better than paint and it lasts longer than paint. Now, in the very upper areas of the country where it's really cold, they really can't use thermoplastics because the plows are scraping it up every year, right? It's not cost prohibitive. In the all the other areas where there's not the big snow belt, thermoplastic is the better alternative, and we see that same thing as we go outside of the U.S.
That's why we feel that we have a good position. Certainly, Most of the, if you look at, we know the names of all of them. Most of the smaller road marking companies are just that, smaller, privately held companies. Yes, from a public standpoint, there's only two, us and the other guy. All the rest of them are very small, publicly owned. When we transacted Ozark, it wasn't just to do Ozark. That was not the intent when we started down this train.
I'll take the second part. Well, first off, I would point you, Mike, to the last seven years, which were double-digit in revenue and EBITDA. This may sound, you know, I've got my old boss, Greg Kelly, in here, who I worked for for quite a while when I worked on Wall Street, who's a chemical banker by training. I don't really view us completely as a chemical company. I think we're a Performance Materials company, right? When you kinda take a walk through the different businesses, right? You look at Jonathan and Ed's business. That is not a chemical company, right? It does not move with chemical company end market exposures, right? Pavement Technologies is not really a chemical company moving at traditional chemical end market growth rates.
APT, I would argue, while it is a chemical company, really is a technology adoption story, right? That is sort of ideally situated for where the chemical industry is headed, right? Our real chemical business is the legacy Industrial Specialties part of Performance Chemicals.
Which does have that cyclicality, right? Hopefully we've laid out for you a strategy where we're trying to move away in that as well, right? Whether you wanna qualify oleochemicals as a chemical business or not, we don't really look at it that way. We're trying to diversify, we're trying to derivatize. Part of the attraction of Ozark, candidly, is that it uses tall oil rosin, right? Again, trying to solve a problem that sits in the cyclicality. Part of the reason you might see us buy more little Ozarks, like Rich is alluding to, is every time we do that, it takes more rosin. I hear you, but I think we're probably more of a materials business than we are a chemical. Sorry, all you chemical people in here.
I'm very confident in our ability to deliver that.
Well...
Hi, it's Chris Kapsch again with Loop Capital Markets. I had a question on the PM segment. I guess if Ed's not here, maybe for Jonathan or John. Just wanted to understand if in that long-term revenue and EBITDA CAGR through 2029, how much, if you can comment directionally at least, how much pricing is baked into that assumption on an annual basis, however you can talk about it? Also, a part of that, and I think, John, you just mentioned some of your CapExes for the carbon opportunity, you was a little bit of a teaser to suggest that you'll, you're pretty confident having success in the commercial traction in Nexeon, presumably. Wondering if you could talk about what sort of expectations are baked into that CAGR for the carbon business for lithium-ion batteries.
Brian, give him your mic, please.
All right. Thank you, Chris. You know, as we look at those forward-looking projections, the numbers we used as inputs around price in particular are in line with what we've done historically around price. The remainder of it is really based more on what's gonna be happening on regulatory adoption in Europe and in China.
Which is like low single digits, as you know.
Right. Yeah.
As you know, Chris, right. We've done more. We did more this past year, but that's kinda the norm. To get to your other point, look, we wrestle with this a lot internally. Should we put EV stuff in our model or not? None of the numbers that you have there reflect anything from Nexeon or the other initiatives we have underway. The reason we chose to do that is because Look, we're conservative, right? We are by nature. We've always been that way. My own view is within that forecast period, you will see electric battery numbers going into the forecast. I also think that market, despite all the noise and everything that's going on, is still very early days, right?
I don't wanna get out and commit to something that no one has real line of sight on, right? Once we get that line of sight, we'll add it to the forecast, and we'll put it on. I would consider that additive. From a CapEx perspective, we did make a decision to put some in there just because I think it's reasonable to expect that we will spend some money on it.
Just a follow-up to that 'cause I'm, you know, watching this battery tech roadmap evolve. There's a lot of different-
Yeah
... technologies there, to your point, I think. Just curious, though, when you think you, based on your partnership with Nexeon, may have some visibility on in and around their commercial success in terms of getting a successful JDA with a battery company or a OEM, anything like that? Thank you.
Well, look, I appreciate it. I mean, I don't wanna speak for them 'cause they're a private company, right? What I do know, and obviously we have a board seat, the board member's here, I'm not gonna tell you who it is or you'll pepper him to death. He is behind you. You can pick one of those guys. Look, I think you will see them make announcements in the not-too-distant future with regards to arrangements with consumers of these batteries, right? All that bodes well for us and we will benefit, not only as a shareholder, but, you know, we have our own supply agreement with them that will at some point kick in, right?
I don't want to fixate just on Nexeon, and that was part of the challenge of this presentation, right? That's a very interesting technology that lends itself to what we do and what we know, right? There's other pieces of this that are also that way, and I think you're going to see us participate in this market, and it's more than Nexeon. I know that's the one we've come out with. I know that's the one that, you know, you can see we put $60 million bucks, blah. There's a lot more work going on behind the scenes, including with carbons that we don't actually make today, right? I mean, stuff that we might have looked at in the past and said not worth it for us, but for this particular type of application might make some sense, right? Stay tuned.
I mean, I think It's moving so fast, by 2025 there'll be a lot more visibility on it. I don't wanna get out and promise stuff in 2028 and 2029 when I don't think anybody can credibly state that, right? It'll come. We got plenty of opportunities while we're working on that.
Yeah. Vincent again at Stifel. If I could follow on that. You know, you mentioned sodium-ion. I think we've talked about that before. The pore size that's traditionally used isn't, in general, amenable with your technology. Then you've also mentioned graphite, here. Two questions. Has anything changed on the sodium-ion side, or is that something that would change with your process? Then with the graphite, have you actually made it yet? If so, is it closer to natural flake or is it closer to
No.
the spherical?
The interior, nothing's changed, right? We continue to look at that and think there's opportunities. The graphite look, the process for making a biochar-based graphene and graphite is very similar to what we do today, right? We are eyeballing that very closely. Very closely. We'll see how it plays out. You know, one of the things that I think what's lost sometimes when people talk about that business, don't forget, we're the only guys that do this stuff commercially at scale certified by the auto industry today. Now, admittedly, it's certified for a different end use, but we have those guys in our facilities every year auditing, testing. You know, the term for qualification is called PPAP.
They're in there, because when you're doing it at that kind of scale, it's a pretty big deal to GM or for whomever the OEM is, right? We bring a lot of that to the table. We also bring a manufacturing process that not a lot of people understand, right? Chemically activated carbon from organic materials, there's not a lot of people that do that, right? Hence, we get a fair amount of interest in terms of the ability to use our scale and our knowledge. Uh-oh, here comes Garrow too. Hold on. We got another one from Vincent, you're next.
All right. This will be the last one, I promise. I saw the bar was getting set up.
You can hit me up out the, over the Woodford.
Yeah, I did have one more on Capa, though. I just, I kinda noted the footwear and apparel projections as well as, you know, the auto coatings, both very heavy in polyurethanes. Is there anything in the CapEx budget that would, you know, contemplate investing downstream to help accelerate some of those?
Good question, Vincent. we've looked as part of our growth options of going downstream. At this point, we just have so many opportunities to deal with what we're doing today. We've parked that one for now. you know, let's see how everything plays through. If it is a future opportunity to either secure, you know, Capa outlet or to gain higher margins ultimately, you know, we're not gonna be a massive system house by any means. There probably are a couple of niche areas we'd be interested in. Not right now.
Garrow?
All right, Garrow.
I'm just curious to get your thoughts on the leverage targets of 2 to 2.5, considering in your seven years as a public company, there have been more than one occasion where there seems to be a dislocation in the stock. You know, if you had lower leverage, you'd be able to potentially react differently than, you know, kind of running 2.5 with ideas.
That's up to you, though.
... with ideas on M&A and other things that you may, you know, need or want to have dry powder for.
Go ahead.
I just wanna make sure, would you advocate for a higher leverage target or a lower leverage target?
Well, personally, I prefer that you run lower in general.
Right
... with the ability to flex-
Right
you know, in a bigger way.
Yeah.
Well, we do that.
We do. Again, the 2 to 2.5x has I think served us well over time. The leverage through the acquisitions we've done, the GP asset, the Ozark, the Capa business, did not impede our ability to do those to take advantage of those opportunities. We delivered on the commitment that we made at that time, and that we continue to make, that if we seize an opportunity that causes leverage to bump into that 3x area, 3.5x area, we will only do that when we have very clear line of sight to the free cash flow that will quickly rebalance that leverage back toward our target. I think we've proven that we're committed to that, and that we can do it. Is that it? Okay.
No more-
One more.
Any more questions?
There's one over where Jonathan had one on the right.
Oh.
Oh, wait a minute.
There is one.
Andrew Wang's over there.
Oh, no. Okay. Yeah.
Hiding in the corner.
He's keeping us from the bar, folks. Okay.
It better be a good one.
Last one from me. Does your this is just a follow-up on Nexeon. Does your investment in them preclude you from offering your carbon to other silicon anode manufacturers, if they decide they wanna get in on your carbon?
It does within a range of performance parameters, right? I mean, there's different generations, if you will, of this technology, right? We are committed with a certain, with one of these generations to work with them.
What is the earliest you could supply someone else then if it came to that?
I don't know if I wanna go there 'cause I don't know if I know the answer to it, Jon, truthfully. Right now, I think the answer is we want to make a carbon or figure out the carbon for the generation of the technology that we're in today, right? Then make the next generation, which we're sort of committed to try and do, and then we'll see what happens after that, right?
Okay. Thank you, all. Hopefully, we'll see most of you out at the cocktail hour.