Chemours Company (The)

Good morning. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Comoros Company second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw the question, Again, press the star 1. Thank you. Brandon Onchez, Vice President of FP&A and Investor Relations, you may begin your conference.

Hi, thanks, Jeannie. Good morning, everybody. Welcome to the Chemours Company's second quarter 2023 earnings Q&A conference call. I'm joined today by Mark Newman, President and Chief Executive Officer, and our recently appointed Senior Vice President and Chief Financial Officer, Jonathan Locke. Before we start, I'd like to remind you that comments made on this call, as well as in the supplemental information provided in our presentation and on our website, contain forward-looking statements that involve risks and uncertainties as described in CMORSA's SEC filings. These forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events that may not be realized. Actual results may differ from may differ and Chemours undertakes no duty to update any forward-looking statements as a result of future developments of new information. During the course of this call, management will refer to certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance. A reconciliation of non-GAAP terms and adjustments are included in our release and at the end of our presentation. As a reminder, our prepared remarks, a full transcript plus our earnings deck, have been posted to the investor relations section of our website along our earnings release. This morning's call will focus purely on Q&A. With that, I'll turn the call over to our CEO, Marvin Mark.

Thank you, Brendan, and thank you all for joining us this morning. In addition to reporting solid results in the second quarter, as you saw from our press release, we had an active and productive quarter. In TSS, we had another all-time record quarter. And as you'll note, in the last six quarters, we've had five record quarters in TSS, which really speaks to the momentum and growth in this business. In APM, we had another double-digit growth quarter in our performance solutions business. And we launched the Mobility FC Membranes Company, which will be focused on Nafion membranes for the fuel cell requirements of the hydrogen economy. In TT, we made the difficult decision to close our Kuan Yin facility, and I just want to take this moment to acknowledge the profound impact the closure will have on our dedicated and skilled colleagues who have been valuable members of our team in Taiwan. During this transition, consistent with the ChemWorks culture, We will remain fully committed to working with our local leaders to offer support and assistance in this difficult transition. Additionally, as you saw, we reached a comprehensive settlement of PFAS-related drinking water claims of a defined class of U.S. public water systems. We also published our sixth sustainability report. which shows significant progress on both greenhouse gas and floor organic compound emission reductions. On capital allocation, we agreed to the sale of our glycolic acid business, which we expect to close this quarter. And we continue to return capital through dividend and stock repurchases to our shareholders. It was also a quarter marked by a number of leadership changes. On April 1, Denise Dignam became the president of our titanium technologies business. In early June, we had Jonathan Locke appointed to the CFO role. And obviously, Brandon Ange is stepping up into the investor relations slot. Matt Abbott became our chief enterprise transformation officer at the same time. And then earlier this week, we announced Joe Martinko, as the president of our thermal and specialized solutions business. So, you know, when I look at all the changes, including Gerardo Familia being named earlier this year behind Denise going into TT, you know, we've had a number of leadership changes, which really speaks to the strength of the talent on the Chemours bench and how well we're developing diverse and capable leaders of the future. You know, as I think of the quarter in total, I think it's a real demonstration of the Chemours brand of courageous chemistry. We did not miss a beat despite the leadership changes and we got a lot done. And, you know, as we face a week or second half this year, the team is full of energy and energized to drive continued great performance and to deliver value to our shareholders from our five strategic priorities. So with that, Jeannie, let's go to Q&A.

At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Arun Viswanathan from RBC Markets.

Your line is open. My apologies, one moment please. Mr. Vaswanathan, your line is open. Thanks.

Could I just ask about the TO2 plant closure? Is that plant maybe at the upper end of the cost curve? And maybe you can speak to the regional dynamics that led to that decision? Thanks.

Hi, everyone. Good morning, and thanks for your question. Yeah, as I said in my opening, this was a really difficult decision for us given the impact on our Chemours colleagues. As we look at where that plant and other plants are on the cost curve, it has been, since day one, designed to be more of a high-grade ore plant than what's more traditional in our North American facilities where we can use a broad spectrum of ores. Historically, great performance on uptime and safety metrics at that plant and productivity. But by design, a high-grade ore plant, which with some of the cost escalation we've seen in recent years, makes it more difficult. It has historically been a swing facility within the circuit. So by taking this plant out we get really two benefits. We fully task the circuit. We move from a variable cost perspective to more low-grade ore usage. And as you saw in our materials, we expect a run rate fixed cost reduction of about $50 million next year.

Thanks for that, Mark. And then if I could, as a follow-up, you know, you noted some challenges in the second half. Could you just elaborate on that? Is that the PO2, you know, volume weakness, and then maybe some weakness as well in the advanced materials part of APM? Or, yeah, could you just flesh that out? Thanks.

Yeah. You know, so after really a very robust recovery post-COVID in 2020, and several quarters of very strong demand. When we planned this year, we expected a more gradual recovery. We know early in the year others were thinking of a very robust recovery, especially in China post-COVID. And so we've always been of the mindset that we were going to have a gradual recovery. I think as we're getting into the second half, Our view is that versus our planning, we expect more modest demand recovery and maybe being pushed even into early 2024. So our expectations here sitting today is that in the second half, we would see volumes versus the first half flat to slightly up. And obviously, seasonally, you know q3 and q4 q4 especially tend to be weaker quarters so i would say we expect to see classes slightly up despite the fact that the second half seasonally is typically weaker your next question comes from the line of josh specter with ubs your line is open hey guys this is james cannon on for josh just

Hitting on the Taiwan plant again, just wondering if that has any impact on your mix of contracts. And as you continue to talk about changing and improving the quality of that business, is there anything that you're doing to think about changing the structures you have in place?

Yeah, no impact on our contracted business at all. The way we have looked at this decision is you know, can we serve our customer needs well going forward from our North American plants? And we've concluded we can. So this is not, there's really no, this is just a change in manufacturing, not a change in contracts. As you saw in the corridor, you know, we pursued more opportunities in both our flex and distribution channels. you know, which led to, you know, sequential growth in volumes as well. So, you know, I'll maybe ask Jonathan to comment more here on this in terms of how we see the dynamic here, you know, in the marketplace with respect to volumes.

Yeah, you know, obviously, as Mark said, in the second quarter, you could see the sequential growth in volumes of, you know, approximately 13%. While it's a good result sequentially coming at first quarter, it's not necessarily in line with, you know, what we would call a recovery. And so as we look out into the third and the fourth quarter, the second half, you know, that causes us to take the glide path down slightly, right, from the recovery we were expecting. So, but all in all, no change, James, to your question, to kind of our approach to the market. You know, we've been talking about our ability to de-bottleneck our facilities over the past couple of years. Obviously, that was delayed, you know, inside of COVID as a result of COVID. But we're confident that, you know, through this transition, you know, we won't miss a beat in terms of our ability to serve our customers both in the AP region and globally.

Got it. And just wanted to say congratulations to you, Jonathan. I have one other follow-up on the TIO2 business, and that's just if I think about volumes being relatively stable through the rest of the year, does your guidance anticipate any raw material benefit?

So clearly, you know, we're seeing some moderation in raw material costs. Some are more sticky than others. And obviously, you know, as we retask our remaining plants in TT that gives us an opportunity also to run at better utilization rates. So in my view is, you know, we continue to work very hard, our procurement team, on input costs. Clearly, you know, energy costs have come down, or as we have said earlier this year, has been moderating. And then our ore mix is advantaged, you know, by the decision we've made, you know, with respect to Kuan Yin.

Your next question comes from a line of Duffy Fisher with Goldman Sachs. Your line is open.

Good morning, guys. First question is just around the PFAS potential settlement. We've all seen that a number of state AGs have kind of stood up against the 3M settlement. Would you expect something similar for your settlement where there would be people, you know, that prominent that would try to either alter it or kill it? And if not, can yours go forward, do you think, with the judge if the 3Ms doesn't?

Yeah. Hey, Duffy. You know, listen, you know, we saw the news of, you know, of the AG opposition to the 3M settlement. You know, obviously when you're dealing with something this complex and this far-reaching, I think we would certainly expect folks to have an opinion on what they think the outcome should be. Sitting here today, we can't predict whether or not similar objections would be raised against our settlement or not. But I think that what we do have confidence in is that the settlement that we entered into based on what the plaintiffs have asked, is a very good settlement. And I think that that opinion has been reinforced by the court, right, that they believe that this is a good settlement. So we're going to continue to do what's asked of us by the court, certainly, and, you know, and work through the process first through preliminary approval and then ultimately, right, through final approval at the end. Great. Thanks.

And then if we could turn to refrigerants. Can you just update us on your latest thinking with the step down, particularly in North America with HFO? What do you think that does to pull forward volumes the rest of this year? And then can we still grow those volumes in the next year with the step down? And what are we seeing on supporting HFC pricing as we're moving into that step down for HFC?

So, Duffy, I'll ask Jonathan to comment further, but generally speaking, as we look at the second half, you know, we think, we believe that the step down is beneficial to our second half. Clearly, remember that this business has, you know, seasonally weaker, especially going into Q4. So, you know, bear that in mind as well. And obviously, you know, there are You know, we've had a very robust first half on OEM bill rates. You know, the question is, does that continue in the second half? And with weaker construction, you know, that's also a moderating impact. So listen, I think it's beneficial to TSS with the step down in terms of folks wanting to make sure they've utilized their quota. Clearly, with end demand being more modest, you know, in a somewhat weaker economy in the second half, you know, that could have an offsetting impact. But net-net, you know, we factored that into our guide.

Yeah. Hey, Duffy. I'll just build on that comment, you know, and just remind the folks on the call that the, you know, AIM step-down coming is 30%, and the FGAS step-down coming in Europe is 20%. So that's obviously a 2024 step. dynamic that we're going to, you know, that we're going to face into. And, you know, I know that Joe and his entire team are ready to serve the market to make sure that, you know, our OEM equipment customers get all of the product that they need to build out their fleets and to deliver that next generation of HFO hardware and to make sure that our, you know, distribution partners on the refill side are well taken care of, you know, through that coming transition. Just to be sure, you know, as we think about the guidance for the full, you know, the revised guidance for the full year, we haven't really baked in a material amount of pull forward, right? So we're not envisioning a scenario sitting here today where you get a material amount of pull forward in either the third or the fourth quarter. Obviously, the things that are going to drive that, right, through the summer and into the fall are going to be, you know, how hot is it? How much of an inventory depletion do we see down the channel? And, of course, you know, what is the strength of the overall economy? Does that give folks the confidence to say, hey, you know, I'm going to pull ahead some volume into 24? So, listen, I mean, this business continues to perform, you know, very well. And, you know, obviously with the coming 24 step-downs, as you all know, you know, we'll be ready to serve, you know, the refrigerant markets that need the product.

And maybe just one last comment, Duffy, obviously the step-down, in quota drives further adoption of HFO technology. We're hard at work at our Corpus Christi site to drive the 40% expansion there, which we expect to have completed by the end of next year.

Great. Thank you.

Your next question comes from the line of John McNulty from BMO. Your line is open.

Yeah, good morning. Thanks for taking my questions. So in the TI02 business, you seem to have some reasonable confidence that demand picks up. Is that coming from your customers? Like I know you've got, you know, you've got these longer-term contracts with customers. So you maybe have a little bit better peek behind the curtain in terms of what they're thinking the real demand pull is. So is it coming from that, or is it more just, look, we can't run at this low of a level for that long. There's just not that much inventory to realistically destock. I guess, how would you characterize your confidence on it?

Yeah, so John, as I said earlier, we had several quarters of very robust demand pull before things started to soften last year in Q3 and really much more so in Q4. Our view typically is a typical TI02 cycle is somewhere between 12 and 18 months. So obviously this one feels like it's more towards 18 than 12. And as you've seen recently by some of the commentary by some of the US coding companies, I think it's been a lot more favorable than it has been previously. So again, our view is, hey, this is taking a little longer. Yes, we continue to have a robust book of contracted business and really very active dialogue with key customers around the world, including the folks I've mentioned earlier here in the U.S. Jonathan, if you have any additional color.

Yeah, no, I mean, the only thing I'd add to that is that, you know, I think coming into the year, we thought that we would find the bottom kind of here in the, you know, early in the first half and the order book would speak to a turn in the second half. And that hasn't been the experience that we've had here in the second quarter. I think we continue to we continue to look out at the order book and feel like we're, you know, we're at the bottom, but the inflection is not turning. We're at the inflection point, but it's not turning as hard. As we think about what could happen next year in 24, we're not here to give a 24 guide, but certainly the North American Northern Hemisphere coding season in 2024 is what we're all playing for in terms of when we think the restock happens. It's just difficult for us to sit here today and think that ultimate end market demand has really declined in line with how we've seen the destock, right? So, you know, what we're trying to do right now in the very near term, as evidenced by what we're doing with our manufacturing circuit, is to reduce cost and improve our overall circuit utilization so that we're well set up for 2024.

Got it. Okay. Now that's helpful. And then I guess just on the TSS business, So kind of a look at like the cooling degree data and that type of thing would actually say 2Q, despite all the press about the hottest day in the world and all that kind of stuff, it was actually kind of a light start to the air conditioning season. But it looks like 3Q is really ramped up aggressively. Do you feel that pull? Like, is it something that I hesitate to say it's spot because that almost implies it's a commodity. But like, do you feel that? that pull when it gets hotter. And I guess, how should we think about how that plays out if the current trends continue throughout the rest of this year?

Yeah, so John, as you alluded to, we had a relatively cool first part of the summer, which delayed the start of the season. And obviously, with the more recent warm weather, we will see higher utilization rates or higher consumption of refrigerants as folks need to service their equipment to deal with the current weather patterns we're seeing, especially here in the US and Europe. And so our view has always been that any pull ahead related to the step down you know, would come later in the year dependent on, you know, how much quota folks had used throughout the year. A lot of the refrigerant product, you know, what's really great about our TSS business is that a significant portion of it, you know, is a replacement or a service business. And so, you know, there's not a lot of transparency. in terms of where distributors are in terms of consumption of inventory. And so, yes, it creates demand when you have hot days like we're seeing recently. But there's also quite a bit of inventory in the system held by distributors. And there's typically not a lot of line of sight as to where that inventory level is and whether folks will need to consume more, you know, to use up their quota. So, you know, as we reflected on the second half, we believe there will be some pull ahead as it relates to the step down. Folks will want to make sure they've used their quota. But a lot depends on utilization through, you know, through the end of the year, especially through the cooling season this summer. And we'll just kind of have to watch it as we go.

Got it. Appreciate the call.

Your next question comes from the line of Matthew Dio of Bank of America. Your line is open.

Yes, hi, good morning. This is . The first question I want to ask is a little bit longer term, but there's been a lot of press about submerging cooling for data centers and how this could benefit companies like Chemours. What are you seeing there, and how far are we from this actually being a decent-sized business for your company?

Yeah, so it is a great question. So we continue to work very diligently on developing and commercializing immersion cooling. We had talked about this several months ago in one of our investor updates on our thermal and specialized solutions business. And as we look at the explosion in AI and, you know, the need for high-speed data and data centers. We're very excited about what this technology will offer. You know, we'll have more to say in the future in terms of an official announcement. But, you know, I remain confident that immersion cooling is another significant growth franchise for thermal and specialized solutions and in a very direct way will tie to the growth of AI in the US especially and around the world. So more to come on that, but we remain confident that this is a technology that we can commercialize. Probably not in the immediate but certainly something that will be part of our planning as we look out between here and certainly the middle of the decade.

Okay, perfect. And I also want to ask a little bit about illegal refrigerant imports. There have been some articles and some mentions by the American HFC Coalition about a high amount of R401B refrigerant come to the U.S. from China. And I don't believe it was an issue for your second quarter results, but is it something that you're concerned about in the second half of the year?

Yeah, so hey there, it's Jonathan. You know, as we think about illegal imports, you know, we learned a lot of lessons out of Europe, right? So, you know, as we were launching HFO technology in Europe on the stationary side, you know, specifically, We learned a lot of lessons from the illegal imports that came across from Eastern Europe and Southern Europe and changed the quota dynamic in that market. So we took a lot of those learnings around inventory management, border control checks, and working with authorities and layered that into our approach to the U.S. market and worked a lot with EPA, Homeland Security, and a number of other agencies in order to make sure that as AIM was getting stood up, we had some of the right enforcement mechanisms in place and we created some awareness right around the issue. So obviously, we need to remain vigilant on illegal imports. It's not something we're ever going to take our eyes off of, To your question specifically about 410B, we wouldn't necessarily view that as an illegal import issue, but more of a composition of product issue. And the importation of that being used to kind of skirt other regulations around the import of 410A. So our teams are all over this. Joe and his entire team They work hand in hand with federal, state, and local authorities here in the U.S. to ensure that there isn't a problem going forward. So we'll keep an eye on it, but for now we remain confident that the law can be well enforced here in the U.S.

Your next question comes from the line of Lawrence Alexander with Jefferies. Your line is open.

Hi, this is Dan Rizwan for Lawrence. Given what you've done with the TIO2 plant, are there other facilities you're taking a look at that might be higher costs that might be shut down?

No, not at this time. And obviously, our expectation would be all of our remaining facilities utilize low-grade ores and a wide spectrum of ores, which is improves their cost competitiveness, so not at all.

And then, so have you stated what the utilization rate is now for TIO2 post the closing of this facility?

No, we haven't. You know, we typically update our nameplate capacity in our 10K disclosures once a year. The way I think you should think about this is, you know, the immediate impact of the Kuan Yin closure will obviously reduce our nameplate capacity. But we continue to work on de-bottlenecking of our remaining facilities such that I would expect over time the change in our nameplate capacity to be quite modest. So the immediate impact obviously is both a fixed cost reduction and a better utilization of our circuit. But, again, part of our analysis in making this tough decision was looking ahead to customer demand and being confident that, you know, with some of the work on the way to de-bottleneck our three facilities here in North America, that we could serve our customers well.

And last question. season next year is strong or stronger than expected, I guess you could easily flex up to meet any anticipated demand surge.

Yes, sir. And obviously, as Jonathan said, you know, we really wanted to take advantage of the continued weak demand to get our manufacturing footprint right in anticipation of a more robust 2024 so that A, we can serve our customers well. And obviously, from a profitability perspective, you know, we would get our TI or 2 business back into sort of the 20 to 25% EBITDA range. So, you know, again, we're thinking ahead to 2024 and how we serve that market well.

Thank you very much.

Your next question comes from the line of Mike Leadhead from Barclays. Your line is open.

Great. Thanks. Good morning, guys. First question on APM, could you maybe drill down into what areas you're seeing the demand weakness in the second half? And then separately, could you just update us on how you're seeing demand specifically developed for NAPION and your SEMICON PFA currently?

Yeah, Mike, that's a great question. Remember, we've always described 2023 as a transition year for APM. Well, what do we mean by that? We're really ramping up our ability to our capacity in our performance solution space to serve both clean energy and advanced electronics markets. And so In terms of where we're seeing weakness, it's in our advanced materials business. Think of that as either broad industrial or in some specific segments like land cables, which are tied to construction. We're seeing some weakness there as well. So I'd say, generally speaking, the weakness we're seeing is in our advanced materials business. On our performance solutions business, we remain sold out. And so what you're witnessing is our growth rate here this year is really capped by how much capacity we can liberate. So as we look at the second half, we expect advanced materials to be weaker from a volume perspective. And obviously there's only so much you can do in the second half to relieve capacity. And that's just the timing it takes to implement capital projects or in some cases to get permits to expand at some facilities. So the team's really hard at work in doing everything possible to maximize throughput in our performance solutions area. But there's just practical limits in what we can achieve in the second half while we're seeing a weakening of the advanced materials, which today is the larger portion of the total revenue of that business. Jonathan, I don't know if you have any additional color.

Yeah, no, the only other thing I'd add is that, you know, obviously, if you look at APM, like as a business regionally, our exposure to Asia Pacific is pretty high, right? It's 35, 40% of the overall business. And so as we think about that and kind of the lack of a strong recovery in China and whatever kind of spread that has the rest of Asia, that's certainly impacting the business. The only other thing I'd remind folks on the call of is that, you know, Q3 of 2022 is going to be a tough comp, right, for Q3 of 2023. So, you know, as we look ahead, we do expect a drop off there on a year-over-year basis in addition to something that's going to happen, you know, sequentially in terms of both top line and bottom line.

Great. That's super helpful. And then just second, on TIO2, could you maybe talk about your pricing assumptions as we go into the second half? And second, I think you previously talked about getting the business back to about 20% EBITDA margins to exit the year. Where do you think the bar is now, just given all the moving pieces we're seeing here?

Yeah, we don't provide pricing guidance on a forward-looking basis. As you saw in the recent quarter, our price was down 1%. That reflects both regional and customer mix. That also reflects channel mix with more volume, relatively speaking, going through flexing and distribution. Again, our view is the second half, you know, we've guided that volume we expect to be flat to slightly up. We're clearly working on rationalizing capacity, which will be beneficial starting in the second half, but really will show real benefit as we go into 2024. Great. Thank you.

Your next question comes from the line of John Roberts with Credit Suisse. Your line is open.

Thank you. Two questions. First, a short one. Do you plan to do a debt offering to fund your share of the PFAS settlement? And then the longer question is, how do you re-optimize the TIO2 network? Do you have some export? You mentioned it's a swing plant. So do you have some exports into Europe that you can serve from North America now? And do you just drop your customers in Asia?

Yeah. Hey, John, it's Jonathan here on your question about the financing. You know, we're obviously always looking at, you know, different mechanisms to drive liquidity here. Obviously, we have the sale of the glycolic acid business, which we project will close at the end of the month. So we're always looking at liquidity to make sure that our balance sheet is in order. Today, we feel good about the capital structure that we have to go forward liquidity, the business. So, you know, we'll approach that opportunistically. Obviously, we have the 2025 term loan B. I think that's what you're referring to, kind of the two term loans in front of us. So, you know, we'll continue to take a look at that. And if there's an open window, maybe think about doing something there.

And then, John, on the question with respect to our TI2 facilities, no, we don't plan to drop, quote, unquote, any customers. You know, we're very focused on very high levels of customer service. And today, actually, we leverage, you know, all of our plants to serve our customers' needs globally. Clearly, we'll have to readjust in terms of what plants are tasked with specific customer requirements. But that's something the team's very capable and has done before, so I don't expect any meaningful interruption here in terms of customer service or meeting customer requirements as a result of this decision.

Thank you.

Your next question comes from the line of Jeff Tsikowskis with J.P. Morgan. Your line is open.

Thanks very much. I've always thought that the capacity of the Taiwan plant was 160,000 tons. Is that right? And you've talked about the cost savings from closing the plant. Is the plant making any money, or is it losing money? What's the trade-off there?

Yeah, Jeff, you've asked two questions that we probably wouldn't answer in the sense of we don't disclose individual plant capacities, and we certainly don't report out, other than at a segment level, our profitability. As I mentioned, it is a higher-cost plant in our fleet because of its use of high-grade ore, and therefore... you know, the benefits of the closure is to more fully test the remaining plants and to reduce our dependence on high-grade ore. So, I think those together will have, you know, a meaningful benefit, as we've disclosed. It's a 50 million run rate cost savings, again, which we would expect to start to see in a pro-radish form in the second half here, but obviously on a run rate basis starting next year.

So is the $50 million a net cost savings? Is that net or there's an offset? Yes, sir. That's the net cost savings.

That's the net cost savings on the EBITDA, Jeff. And then obviously, as we disclosed in our press release and in our materials, there will be a $25 million cash impact here in 2023. and a similar number in 2024 in order to effectuate those. Those are cash costs associated with things like severance.

Okay. And for my follow-up, imports of titanium dioxide into China as of about August last year fell off a cliff. That is, maybe imports into China were something like 15,000 tons a month, and they fell to, I don't know, 4,000 tons a month. and they've stayed low since that time. Is that something which affected your decision? That is, is China now being more supplied by TIO2 companies in China? And secondly, in your comments, you said that the subsequent cost savings will be substantial in closing the plants. What is that about? That is, is there a cost Savings that's above that 50 million starting in 24.

That's meaningfully above So so Jeff clearly there is a fixed cost savings by eliminating a plant obviously, you know, there will be a continued focus on optimizing the remaining circuit and Obviously, you know the remaining circuit will will use a wider variety of horse but what we've disclosed for now is is the fixed cost savings, which we believe we will achieve as a result of that. Just to comment on China, again, I think there was a lot of euphoria earlier this year with the change in COVID-19 and the expectation that the China economy would come roaring back. And obviously, that hasn't happened. high-grade pigments into China are tied to some degree on high-end local consumption, but a lot to do with exports from China in things like furniture and other durable goods, which have also been down. So our view is high-grade imports into China are not necessarily being substituted by Chinese producers, but are being, you know, the demand is being impacted by, you know, where those products go into in terms of high-end furniture and laminates for export, which are also down, you know, tied to both a weaker economy in Europe and weaker construction in North America.

Thank you very much.

There are no further questions at this time. Mark Newman, I turn the call back over to you.

Jeanne, thank you. And thanks everyone for your interest. Again, we continue to be very active in terms of driving our five key strategic priorities. And I just really want to take this opportunity to thank our entire team of employees who are passionate and focused about moving the company forward. So thanks again, and we'll look forward to catching up with some of you on the road.

This concludes today's call.

You may now disconnect.