This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Greetings. Welcome to Orion Engineer Carbid's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Wendy Wilson, Head of Investor Relations in Corporate Communications. Thank you. You may begin.
spk01: Thank you, Operator. Good morning, everyone, and welcome to Orion Engineered Carbon's conference call to discuss our first quarter 2021 financial results. I'm Wendy Wilson, Head of Investor Relations and Corporate Communications. With us today are Corning Painter, Chief Executive Officer, and Lauren Crenshaw, Chief Financial Officer. We issued our press release after the market closed yesterday, and we have posted a slide presentation to the investor relations portion of our website. We will be referencing this presentation during the call. Before we begin, I'd like to remind you that some of the comments made on today's call are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, May 7th. The company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. All non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release. I will now turn the call over to Corning Painter.
spk06: Thank you, Wendy. Good morning, everyone, and welcome to our first quarter earnings conference call. Following such an extraordinary year, I'm pleased that our business has started 2021 on such strong footing. Our specialty products are in high demand, driving outstanding year-over-year and sequential volume growth. Our rubber business is solid, realizing year-over-year and sequential volume gains. I want to thank the Orion commercial, production, customer service, and supply chain teams in particular for continuing to work safely in terms of COVID-19 and for their agility in managing a very active order book. COVID-19 infection rates are very high in some of the communities where we operate, and we continue to believe we have had no workplace contagion. From a community standpoint, true to our corporate values, we contributed funds this quarter to Hutchinson County United Way in Texas to support residents impacted by winter storm Uri. We operate a carbon black manufacturing facility in Hutchinson County's largest city, Borger, and have had the privilege of being part of the community for the past 93 years. I'm proud to say that we were able to operate our cogeneration plant there through the storm, which took down so many power generators. From a financial perspective, we reported first quarter adjusted EBITDA of $70.9 million, up 11% year over year, and up 7.4% sequentially, led by the strength of our specialty business, Notably, our adjusted EBITDA margin was 19.7%, up 70 basis points year over year, with a specialty EBITDA margin of 27.5%, up 410 basis points year over year. Looking to 2022, we're pleased to be gaining traction in many of our new offerings, particularly for advanced materials such as conductive grades for lithium-ion batteries and other applications. We also believe our rubber carbon black business is on track for a very robust 2022, and the customers appreciate our reliable local production that they can count on. As I've said before, we value agility, ensuring that on a sales and operations planning and logistics perspective, we remain ready to respond to whatever demand scenario ultimately transpires. You can refer to slide number 17 in this earnings deck if you're interested in how our businesses have responded since the ongoing demand recovery that began roughly three-quarters ago. As we have moved into 2021, consumer mobility trends are mixed globally. However, we may well see a vaccine-driven lift as public policies currently limiting mobility are eventually relaxed. On the commercial side of our business, commercial freight trends remain strong and seem likely to do so for the foreseeable future. The original equipment market drives approximately 40% of rubber volumes and 11% of specialty volumes. It bottomed around the second quarter of 2020 but picked up sharply roughly nine months ago and continues to trend favorably despite the well-publicized global semiconductor shortfall disrupting production at numerous factories around the world. Global light vehicle sales continue to show improvement year to date on a year-over-year basis. The combination of strong demand with supply chain snags has led to relatively low dealership inventory levels. As a result, we expect both the specialty and rubber segments of our business serving the OE market to benefit as the supply chain issues are resolved and production levels normalize. For the remainder of today's call, Lauren and I will cover the first quarter results and provide an update on the sustainability and growth investments we have underway. After our prepared remarks, we'll be happy to take your questions. Turning to our first quarter results in greater detail, as you can see on slide four, adjusted EBITDA rose to $70.9 million year over year, primarily driven by the sharp broad-based demand recovery across most specialty applications and geographies, partially offset by the unfavorable impact of rubber market dynamics in Korea, which have compressed margins, a one-time $2 million cost impact related to winter storm Uri, and higher incentive compensation accruals year over year. At this time, I'll turn the call over to Lawrence.
spk04: Thanks, Corning. Revenue was up 7.2% year-over-year and increased roughly 14.1% from the fourth quarter, reflecting a continuation of the strong recovery trends we have observed for the past three quarters now. Contribution margin rose 11.6% year-over-year, mainly due to higher specialty volumes. Adjusted EBITDA increased 11% year-over-year to $70.9 million, reflecting strong operating leverage partially offset by the factors mentioned by Corning earlier. Finally, we reported adjusted net income for the quarter of $31.2 million, up 17% year-over-year on higher adjusted EBITDA. The bridges on slide six provide greater detail in support of the comments I just shared on our quarterly results. Slide seven details our year-to-date sources and uses of cash. On a full year basis, we expect net debt to rise moderately year over year by an amount resembling the year-to-date increase in working capital, assuming that all prices average near current levels for the balance of the year. Our first quarter results reflected this trend directionally, with strong profitability being offset by the change in working capital and capital investments that advance our sustainability and growth initiatives. We expect next year to follow a similar pattern as this year from a discretionary cash flow perspective before delivering substantial free cash flow in 2023 and beyond. Slide eight summarizes our leverage and liquidity profile as of the end of the first quarter. Liquidity available at any leverage level was $310 million at quarter end. At the current stage of the economic cycle, at 3.3 times, we are less than a turn higher than our steady-state target net leverage of 2 to 2.5 times. We expect that ratio to continue drifting downward throughout the year and to ultimately approach targeted levels by year-end as economic conditions and our earnings continue to normalize. Overall, the strong state of our liquidity and the absence of any significant debt maturities until 2024 give us confidence in our ability to successfully navigate any demand scenario that transpires, fund our sustainability-related investments in the U.S., and advance select strategic growth initiatives that will position us to emerge stronger and with greater earnings capacity in the coming years. Moving to slide nine, Specialty volumes increased 22.4% year-over-year and rose 9.2% sequentially. Volumes were up year-over-year across most end markets and geographies. From a profitability perspective, adjusted EBITDA increased 41.3% year-over-year, reflecting strong operating leverage. The next slide breaks out the major year-over-year drivers of adjusted EBITDA for the specialty business, the most significant of which was higher volume. In market-wise, polymers and coatings were particularly strong. Geography-wise, the Europe, Middle East, and Asia-Pacific regions showed the greatest relative strength. Turning to slide 11, rubber volumes were up 3.3% year-on-year and up 6% sequentially. Geographically, MRG volumes rose in China, while volumes were flat to down in our tire business across most regions, with the exception of the Asia-Pacific regions. However, higher volumes did not translate into higher adjusted EBITDA due to a combination of the impact of Korea market dynamics, a roughly $2 million drag related to winter storm Yuri, and unfavorable regional sales mix with volumes rising disproportionately in areas such as the Asia-Pacific region where our margins are simply lower. Collectively, these factors drove the decline in adjusted EBITDA, which fell 12.9% year over year, despite higher volume. Slide 12 shows the development of adjusted EBITDA for the rubber carbon black business, as I just described, in greater detail. With that, I will turn the call back over to Corning.
spk06: Thanks, Lauren. Turning to capital allocation, our EPA investments in North America continue to advance. After COVID-19 related delays caused us to declare force majeure related to our efforts to install emission control systems at our Ivanhoe, Louisiana and Orange, Texas facilities, we ultimately got the Orange, Texas facility on stream per the original schedule. With regard to Ivanhoe, our current project schedule, which we share regularly with the EPA, calls for completion in the third quarter. Overall, our growth strategy remains centered on expanding capacity in the differentiated segments of our business. The results of this approach are reflected in our business mix, with approximately 75% of our adjusted EBITDA driven by specialty and technical rubber grades. An example of this strategy in action is that we have kicked off an expansion of our gas black production capacity in Germany, which is expected to be completed in phases over the next several years with the initial impact in 2021 and building into the future. These actions will set the stage for incremental high margin premium grade growth in the coming years and have the potential to gradually add an incremental $7 to $10 million of adjusted EBITDA to our run rate, building to that level over the next five years. Two major strategic initiatives that will expand our capacity to meet increasing demand and shift our earnings mix even further towards differentiated market segments are the 25 KT expansion of our Ravenna Italy facility and the construction of a 65 to 70 KT greenfield facility in Huabei, China. Ravenna is on track to begin ramping up in early 2022 and Huabei in 2023. Finally, turning to our outlook for the balance of the year, although our customers' visibility into the second half is less clear than usual, we are reinstating full-year 2021 adjusted EBITDA guidance in the range of $250 million to $280 million. And while the COVID-19 situation remains challenging in many countries, we are confident in our ability to navigate 2021 and beyond successfully. We believe that the strong demand will persist through the second quarter. Looking into the second half, however, some customers are not providing forecasts yet, while others are, but with significant caveats. Obviously, the COVID-19 situation, particularly in North America and Europe, is a key factor, and numerous supply chain challenges are in play as well. With a combination of less-than-usual customer visibility and restocking activity likely moderating, expected less favorable specialty product mix, and typical fourth quarter seasonality patterns, the midpoint of our adjusted EBITDA guidance anticipates commercial trends moderate in the second half. The upper end of our guidance range reflects our best estimate of our earnings potential if we are wrong about the second half moderation and instead see a scenario where the first half momentum continues unabated, better than expected second half specialty product mix, and less seasonal weakness in the fourth quarter than usual, amongst other possible factors. Given the many uncertainties today, our primary goal is simply to remain agile and ready to respond to whatever demand scenario transpires. In closing, the key messages I'd like to reiterate is that our business is doing very well, we've reinstated guidance, we're making headway in our differentiated products, with new investments to bolster this further. We're progressing our sustainability and growth investments, and we're on track to generate substantial free cash flow in 2023 and beyond. We look forward to the ongoing support of our investors as we continue to profitably and responsibly grow Orion in the coming years. With that, operator, please open the line for questions.
spk00: Yes. At this time, we'll be having a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Josh Spector with UBS. Please proceed.
spk02: Yeah, hey, guys. Thanks for taking my question. I was wondering if you could expand on what's going on in Korea and how that's impacting you. I guess I would have thought there would have maybe been more of a volume impact, but you're alluding to what's going on more as a margin or cost impact. So any detail you could provide there would be helpful.
spk06: Yeah, so what we have there is a – well, first of all, good morning, by the way. We have here – couple of customer specific situations and as their customer specific there's a limit to what we can say but I'll just say we're taking action and working through it and this is all in our guidance at this point okay is there any does it resolve in the next quarter or is this something your guidance assumes persists through the year I expect to make progress, but I do think that because it's customer-specific, Josh, it's just kind of hard to lay out a specific solution or what we see the timing because this is all subject to discussions.
spk04: Josh, I would say we don't expect some quick resolution, and that's all in our guidance.
spk02: Okay, fair enough. I'm just curious on specialty broadly then. where do you think you're at from, I guess, more of a normalized margin perspective? I guess I assume margins continue to see some pressure as higher costs flow through, given where oil is today versus where it was, but obviously demand remains strong, mix is a bit better. I mean, how are you thinking about things trend sequentially into 2Q and maybe into the second half?
spk06: So I really think of these as the separate individual markets more than the overall mix. From an overall mix perspective, however, one element is where are we constrained, right? And right now we have constraints on a number of our higher margin specialty products. That's one of the reasons why we mentioned that the bottlenecking activity. So to the extent that we are constrained on the growth in some of those areas, that obviously puts a pressure on us for the mix. And that's one of the things we look at as we go into the second quarter between potential changes in market demand, but also just capacity issues, that that's a challenge.
spk04: And, Josh, rather than quarter by quarter, last quarter I mentioned 680 to 690 GP per ton for the full year on average. That's still a good number. and it incorporates actions that our team has taken to offset raw material increases due to oil price. So that number is still good.
spk02: Okay, thank you. That's helpful. I'll turn it over. Thanks. Thanks, Josh.
spk00: Our next question is from Mike Layed with Barclays. Please proceed.
spk05: Great, thanks. Good morning, guys. Good morning, Mike. Good morning. First, the color on the full year guide was super helpful. It's clear on the moderating impacts you're expecting in the second half. But just curious how you're seeing things trend into 2Q. Obviously, you don't get URI repeating. You talked about channel inventories being low, but we're also seeing some OEM production slowdown. So can you just kind of help us think about how we should see all that shake out sequentially here for 2Q?
spk06: So we think Q2 is going to be a strong quarter for us. With respect to, first let's talk to the chip issue. Why that's out there, car companies do shift production around to other models. There's probably a net improvement for replacement tire as this plays out. So while that's a factor out there, we don't see that as a huge impact for us. And to some degree, demand that's maybe pushed down a little bit now, right, you'd expect to see later in the year from that perspective. But specifically, I think the market dynamics here remain quite good for the second quarter. It's really going to get into the second half of the year where we hear customers having some caution, meaning they think it's going to be good, but is it going to be at the current levels? Got it. That's helpful.
spk05: And then maybe as a follow-up, just two quick ones on cash flow, and if I could reference your slide seven. First, on working capital, if we just assume energy prices stay flat from here, would you assume working capital to stay flat or move higher or lower by year-end? And then second, that other line item I think was a use of $10 million of cash this quarter, where would you expect that to roughly shake out on a full-year basis?
spk04: For working capital, I think if all prices stay where they are, somewhere in that $40 million to $50 million use of cash is where we would expect it to be, depending upon our sales volumes for the balance of the year. And in terms of other, you could use – I would actually combine other and the change in provision line and tell you to use something like $20 million to $25 million for the full year. Great. Thank you, guys.
spk00: Our next question is from Kevin Hoskevar with North Coast Research. Please proceed.
spk03: Hey, good morning, everybody. Hi, Kevin. I wonder if you could comment on, you know, how capacity utilization is now in the business. You know, if I look at slide 21, you know, you show your capacity, and it looks like in 2020 you had 867,000 tons of volumes, and then, you know, you mentioned current available capacity at 181,000, 90,000 tons. So that's 1,052. You sold 254,000 tons in the quarter. And I don't think there's a ton of seasonality in the business. So if you annualize that, it seems to suggest you're operating at pretty high utilization rates. So I guess I'm curious your take in terms of how is the operating rates on the assets and how do you expect that to go going forward? Well, I guess you've given some color there. But yeah, what type of rates are you operating at currently?
spk06: Yeah, so we're at high rates right now, let's say above 90 in the EMEA and the APEC region. In the Americas, I'd say we're more in the 70s. But that's very much around specific lines that drive that and, you know, the relative demand for those specific lines. Okay.
spk03: And in terms of price and specialty, it seems like there's been some inflation, and here you have to go to the market and push through the inflationary pressures with pricing. And I think in a typical year, there's a little bit of a lag there, so there can be some price costs. pinch on as you do that. But, you know, given the strong environment, how would you say that that's going? Have you been able to push through pricing pretty, you know, quickly and timely on the specialty side? Or do you see any, you know, pinch in the price cost there?
spk06: The market dynamics are very favorable to pricing right now. I mean, demand is very high. Capacity is limited. Supply and demand laws are what they are. So we have been working that. I'm frankly disappointed we don't have more to show for that at this point, but that's something we're going to continue to work through this year. Okay.
spk02: All right. Thank you very much.
spk00: Our next question is from Jeff Tsikoskis with J.P. Morgan. Please proceed.
spk09: Thanks very much. In your rubber black business, there really wasn't very much growth at all. And I think your competitor in Massachusetts and both the United States and Europe, I think their volumes grew about 10%. And I think their profit increase was enormous. So what happened?
spk06: So if I'm going to just speak to our business versus comparing it to your hypothetical player there, I'd say that, first of all, we've made our moves in terms of pricing and where we think the appropriate value is, and that plays out sometimes in the marketplace. As we indicated in overall, as we look at it, the Korean market dynamics had a play for us. That we, although we show right now, if you look at the trailing 12 months, we're down from where we were, let's say, at the end of 2019, we would expect that to get back to roughly on par with where we were at the end of 2019. And finally, if we look to China, we play in different spaces. So we're heavily MRG there, so a different sort of play. And the rubber business we have that is going into actual tires, For us, it's much more the multinationals with whom we might have global agreements, and so a different sort of situation for us, a different market we're really playing in, as we're a very small part of that overall rubber market in China.
spk09: No, I excluded that. That is, I think your competitor grew 30% in China, but I think in the United States and Europe, they grew 10%.
spk06: Yeah, no, we saw that. And so I think there's, this then plays out to, I think what comes out of the annual pricing and volume negotiation. And what you see in that in part is where we are and, you know, where they are in that space. I'm not, we don't break down our volume performance for each area. As I indicated a moment ago, our European loading is really quite high. Okay.
spk09: So, um, If you look at your first quarter revenues and you think through the year, do you think your revenues would be lower in any quarter versus the first quarter? And if they were, in which segment might they be lower and why?
spk06: Well, I'll just speak. I can tell Lauren wants to jump in. But, I mean, I think there's one element of this is just seasonality. And while, you know, the fourth quarter is a way off, I'm not sure that, The business cycle has totally escaped seasonality.
spk04: And I would say that our second quarter is likely to be amongst our strongest. And for reasons Corning just cited, the fourth quarter, for seasonality reasons, would be weaker in the way we look at things. I would also just follow on the prior question to say, One quarter doesn't make a year, and this rubber carbon black business is tracking towards more than 90% of 2019 volumes for the full year. And so we're going to have a strong year for this business, and we're going to see strong growth year over year for this business.
spk09: Okay. Have you made any progress with your Evonik negotiations?
spk06: We indicated last year that we didn't think last year was a likely year for any solutions in terms of a settlement separate from the arbitration. We thought it was possible this year just the way things played out. Beyond a broad brush comment like that, there's really not very much we could say until we either you know, have a settlement or we go all the way to the ending of arbitration. And I would expect arbitration to go into 2022 if it goes all the way.
spk09: And then lastly, can you talk about what your competitive advantages are, if you have some, in the EV market? That is, how does your product portfolio compare to your competitors? What are you trying to do that? they're not doing or are you trying to do the same things that they're doing but, you know, you're just a little bit later to the market?
spk06: So there's different additives, different carbon additives that go into a lithium ion battery that compete for space in that. And I think that, you know, we're likely to see a solution in the end where there's a mix of materials that are inside the electrodes in those materials. Right now, our play in that space is around acetylene black. So there's, I'd say, one other player who's also in that space. And there's plenty of battery manufacturers for us all to kind of focus on. So we're really very focused on the people we are in development programs with for their needs. I think other people focus on other players.
spk09: What are your revenues in that area?
spk06: I don't think we're going to go to that. I would say right now our EV portfolio is a relatively small part of our overall conductives business portfolio. for Orion right now, but I think the positive thing for us is that, you know, we're gaining these qualifications, and we've seen it in the price increases and so forth we've announced around the settling black to enable us to kind of work our way out of previous supply arrangements to be able to reallocate more and more of this product into the EV space. We've said before that we saw the, let's say, EBITDA potential of that acquisition being in, let's say, the upper single digits in terms of EBITDA for Orion. And so, obviously, in the fullness of time, as this business continues to, you know, this very rapid growth, that would be an opportunity for further investment for us. Great.
spk09: Thank you so much.
spk00: Our next question is from John Tanwantang. with CJS Securities. Please proceed.
spk08: Good morning, guys. Thank you for taking my questions. A very nice quarter and good work on raising the guidance. My first one, and a lot of them have been answered already, is, Cornyn, can you just talk about the rubber dynamics entering 2022? I know you made a comment on them looking pretty robust so far. Can we expect, I guess, that pricing to come up as you had maybe expected? you know, before the pandemic? Are the supply and demand dynamics similar or are people adding capacity? You know, just help me think about how you're thinking about pricing and volumes in the out year.
spk06: Yeah, so I think that We're looking at a very good 2022. You can just see the confidence, the stimulus, all of this. I think it's an improving situation. This whole thing with the chips are still going to get resolved for us going forward. You see as the vaccines have come out what's happened in the U.S. in terms of mobility. I mean, if you've driven anywhere, you've experienced that personally. We see a number of expansions of different tire companies moving forward, a number of the Asian tire manufacturers, so that kind of long-term pressure. If you look at the notch data and you compare what they think demand and domestic supply is going to be, there's quite a gap that builds over the next several years, and we've seen customers wanting to negotiate early this year, and so I would read that as a sign that, you know, people recognize 2022 is going to be tight. Got it.
spk08: Is there kind of a ballpark pricing increase or maybe margin expansion, you know, range that you're looking at given these early discussions and positive outlook?
spk06: No, I think we've never given, let's say, a target. And I think for competitive reasons, we wouldn't want to do that in this sort of a setting.
spk08: Okay, fair enough. Just on inflation in general, I know you've gone through COGS and oil prices and everything else. Is there any concern on your CapEx and the cost to complete your EPA investments that those costs may rise in the near term or do you have those pretty locked down?
spk06: So I would say near-term costs typically are, right, because that equipment's all procured. It's more like the later projects where you'd have to look and see, but for this point we see ourselves being able to hold the budget.
spk08: Okay, great. And then, sorry, last one for me. Oops. How much – how much have you factored any potential benefit from an infrastructure bill, you know, into future performance? I mean, the obvious things would be I think batteries are mentioned. You know, pipe is something that would be probably used, heavy construction, tire usage, all of these things going through to you guys. Have you thought about the beneficial impact of that at all as, you know, as a potential for that bill to be passed, you know, get closed with?
spk06: Certainly we have. I think for us, if we look at it and where we are in loading right now, as I indicated earlier, somewhat high, there's a little bit of an opportunity in North America, but it also just says, okay, so when we think about where are the areas we need to put emphasis on, which are the directions we might want to reallocate current capacity towards, and we do think about that.
spk04: And, Kevin, I would add, if you want to start thinking about 2022, I would refer you to slide 21, and what you'll see is that, If we were able to sell, say, 90% plus of 2019 volume, we would still have another 80 KTs to really maximize our operating leverage. So even if this year we were at 90% plus, you look at that chart, because another 80 KTs of upside just from operating leverage in 2022 without considering any price. We'll see how the economy transpires, but we think there's continued leverage into next year.
spk06: And I think those dynamics then, you know, are certainly going to be a plus for us in terms of loading Ravenna 4 next year as well.
spk08: Okay. Got it. And just to go back on the infrastructure, if that bill passes, what would you expect your tax rate to go to?
spk04: Well, today, the way that our profitability mix by geography happens to be, we wouldn't expect a significant impact because of America's profitability levels not being perhaps as high as you might expect due to specific factors that are
spk06: Just to build out, we've talked about we still use the U.S. as an opportunity for us in a specialty business.
spk08: Got it understood. Thank you.
spk00: Our next question is from Lawrence Alexander with Jefferies. Please proceed.
spk07: Hi there. I guess just a couple of things. What are you seeing specifically in the wiring cable and building materials markets? Are you seeing any signs of a turn in those?
spk06: When you say, I mean, so those are, I'd say, fairly robust areas right now. When you say a turn, do you mean coming off, or which way are you speculating about a turn, Lawrence?
spk07: I just want to flesh out kind of how you're seeing sequential momentum in those.
spk06: I think we see most markets for us in a sequential way remaining robust. The question for us overall is just when you go into the second quarter and you talk to customers, there's a certain degree of less certainty and with some of them a little bit of a caution. But I think if we think immediately, sequentially, I expect a good second quarter.
spk07: Male Speaker 1 Okay. And how are the discussions evolving in the industry around decarbonization and implications for feedstock availability?
spk06: Male Speaker 2 So far, I'd say there's a lot of confidence around feedstock availability for a variety of reasons. But I would just point out that we are a party to Black Cycle, which is an end-of-life tire recycling program, which as part of that overall process does create carbon black oil, which can then be used to make new carbon black. We also are involved in what I'd say is green carbon black. So from renewable sources, we've had Printex Nature for a number of years, but we're also in a program using forest products or developing the capability to use forest products in the same way. So there's options for us, for sure, in terms of a more sustainable approach on carbon black.
spk07: And where do those two fit on the cost curve relative to kind of conventional carbon blacks?
spk06: Well, I think it's very early to say where they are compared to that, especially when we think about the renewable and agricultural and so forth like that. They're certainly a challenge to make the yield. They're a challenge to make the full range of carbon blacks, that kind of thing. I think when you think about end-of-life tire recycling, you're looking at, well, what's an overall solution that's needed for the industry in an environment where maybe you don't want to burn used tires and cement kills?
spk07: And how is the pipeline for bolt-on acquisitions?
spk06: So I'd say we consider acquisitions. There's... It depends upon how broadly one describes a bolt-on, and different people can disagree on that. But there certainly are, let's say, adjacent opportunities, for sure. In terms of specific in-carbon black, well, there's a limited number of major players. And then there's markets, places like China, which is still quite fragmented. And, you know, some people have participated in that.
spk07: But, I mean, should we expect you to be active in that, or what's the kind of degree of appetite?
spk06: So, I mean, I think we would always investigate and give good consideration to an attractive M&A activity, particularly those that we're close in. But we also wouldn't have a lot to say until we had something to say.
spk07: Fair enough. Okay, thank you.
spk00: As a reminder, just star one on your telephone keypad if you would like to ask a question. We will just pause for a brief moment and see if there's any final questions. Okay, there are no further questions. I would like to turn the conference back over to Corning Painter for closing comments.
spk06: Okay, well, a big thank you for everyone who took part in today's call. We know your time is valuable, and there's other places you can be, so we greatly appreciate spending this time with us and your interest in Orion engineered carbons. Have a good rest of your day. Thank you.
spk00: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Disclaimer