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Operator
Good morning, ladies and gentlemen, and welcome to the Trinzio fourth quarter 2022 financial results conference call. We welcome the Trinzio management team, Frank Bozich, president and CEO, David Stacey, executive vice president and CFO, and Andy Myers, director of investor relations. Today's conference call will include brief remarks by the management team, followed by a question and answer session. The company distributed its press release along with its presentation slides at close of market Wednesday, February 8th. These documents are posted on the company's investor relations website and furnished on a Form 8K filled with the Securities and Exchange Commission. If anyone should require operator assistance during the call, please press star then zero on your telephone. And I will now hand the call over to Andy Myers.
Trinzio
Thanks, Abby, and good morning, everyone. At this time, all participants are in a listen-only mode. After our brief remarks, instructions will follow to participate in the question and answer session. Our disclosure rules and cautionary note on forward-looking statements are noted on slide two. During this presentation, we may make certain forward-looking statements, including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described, or implied in these statements. Factors that could cause actual results to differ include, but are not limited to, risk factors set forth in item 1A of our annual report on Form 10-K, or in our other filings made with the Securities and Exchange Commission. The company undertakes no obligation to update or revise its forward-looking statements. Today's presentation includes certain non-GAAP measurements. A reconciliation of these measurements to corresponding GAAP measures is provided in the earnings release and in the appendix of our investor presentation. A replay of the conference call and transcript will be archived on the company's investor relations website shortly following the call. The replay will be available until February 9, 2024. Now, I'd like to turn the call over to Frank Bozich.
Abby
Thanks, Andy, and welcome to our year-end 2022 call. I'm proud of what we accomplished over the course of 2022 while being faced with significant macroeconomic headwinds, which are well documented at this point. Operating in this challenging environment did lead to earnings and cash generation that were below our expectations, especially following our record profitability in 2021. But we focused our efforts throughout the past year on initiatives that will improve our strategic position when demand recovers. These can be broken down into three categories, asset restructuring, organizational improvements, and growth in specialty products and our sustainable technologies. In the second half of 2022, we announced an asset restructuring plan to improve our competitive footprint. This included the closure of our styrene production plant in Bolland, Germany, and one of the carbonate production line in Stade, Germany. Both closures are expected to result in lower costs, as well as reduced exposure to cyclical commodity markets. The restructuring is expected to result in $60 million of annual profitability improvement versus the fourth quarter run rate, and essentially all of it should be realized in 2023. In addition, we still plan to separate the Sirenix business as an integral step to further shift our production portfolio towards specialty materials. While the formal sales process remains paused, we have largely completed the separation work and will be well prepared to complete the process when the opportunity comes. We improved our organizational structure through the creation of a Chief Commercial Officer, Chief Sustainability Officer, and Chief Technology Officer roles. These three key positions will enhance the execution of our strategy, enabling us to better serve our customers, achieving our sustainability goals, and grow our product portfolio. We continue our growth in specialty products and sustainability, even in a challenging economic environment. We made significant progress on integrating the 2021 acquisitions of PMMA business, and ArisTech services to unlock cost synergies and tap into additional revenue opportunities through new specialty product offerings. For example, our North American volume and unit margin of specialty residents grew 2% and 12% year-over-year in 2022, despite a slowing market. In November, we completed the ERP implementation for the legacy all-to-glass sites, which resulted in lower costs by exiting the Arkham of TSAs. We remain on schedule to capture the $60 million of annual run rate synergies by the end of 2024. These acquisitions have expanded our offerings of unique solutions to our customers, especially in material substitution applications. For example, replacing fiberglass with ABS to provide rigid backing for PMMA sheets in bath and spa applications. provides our customers with high-performing product that's also more environmentally friendly. We're also seeing strong results in both of our products containing recycled materials, which are in very high demand from our customers. During 2022, the volume and variable margin of these products grew 63% and 69%, respectively, versus the prior year. While these products represented only 1% of the sales volume of the company, they delivered 3% of the variable margin for the whole company, which confirms they have very high growth potential and more market resiliency. Supporting this effort, we have created a strong IP pipeline, which has more than doubled from the 2020 level. This gives me confidence that we'll continue to grow our product offerings in both sustainable solutions and specialty materials. The growth of products containing recycled materials is moving us closer to achieving one of our 2030 sustainability goals, which is that 40% of Trinzio products will be sustainably advantaged by 2030. We're making progress on our other goals as well, including reduced carbon emissions and achieving improved gender balance in our workforce. Perhaps most importantly, we delivered another excellent year of VHS performance with 74% of eligible sites receiving a triple zero award, meaning the site achieved no injuries, spills, or process safety incidents. Trinzio has been an industry leader in safety and responsible operations since its formation, and I want to commend our employees and leaders for continuing to make safety and responsible site operations a priority. Next, I'd like to briefly discuss our view on the economic environment during the fourth quarter. We observed many of the same macroeconomic headwinds that were prevalent during the third quarter, including subdued demand stemming from geopolitical conflict and elevated energy costs in Europe, COVID-19-related impacts in China, and rising interest rates, which especially curbed demand for building and construction applications. These lower demand levels and overall economic uncertainty prompted a continuation of significant de-stocking from our customers and an earlier than normal year-run shutdowns. Additionally, the low level of demand in China, coupled with high production costs in Europe, created a temporary arbitrage window for Asian produced products to make their way into Europe and North America. This created volume and margin pressure for some of our globally traded, less specialized products, including ABS, polycarbonate, MMA, and PMMA extruded sheets. While this situation existed in the second half of 2022, we don't view this as a structural change in trade flows, and we expect this temporary headwind to fade, especially as demand improves in China and the costs continue to moderate in Europe. Before I turn the call over to Dave, I'd like to provide more detail on the drivers of the recent performance and engineered materials segment. The fourth quarter was adversely affected by several factors which impacted both volumes and margins. First, the quarter was impacted by $10 million due to the losses on natural gas hedges that were put in place in the second half of 2022. Customer destocking continued in the fourth quarter due to declining prices, inventory management, and extended year-end shutdowns, which resulted in an EBITDA impact of about $10 million. We anticipate that we will see an end of destocking early this year, likely in the first quarter. In addition, underlying market weakness from economic uncertainty and high interest rates continue to impact demand, particularly in building and construction and consumer durable applications. And this had an EBITDA impact of about $15 million during the quarter. I would also like to highlight the spike in MMA-related feedstock costs in Europe in the second half of 2022 and the window this created for lower-cost Asian imports. Like most of the industry, we utilized the C3 route to MMA synthesis. but we are somewhat unique in the European market in that we neutralize spent sulfuric acid in our process with ammonia to produce ammonium sulfate, which we sell into the fertilizer market. In almost all market conditions, this is a cost advantage as we realize the credit for ammonium sulfate sales as an offset to MMA manufacturing costs. Two critical raw materials in this process are methane and ammonia. And in the second half of 22, 2022, methane and ammonia prices rose in dramatic fashion. Even with a significant increase in ammonium sulfate prices, we could not offset the net impact of the cost increases because the price of ammonium sulfate was capped by lower cost imports and because of economic considerations for farmers. The high ammonia cost was driven by extensive shutdowns in ammonia production in Europe, which led to our main supplier to declare force majeure. Conversely, a significant amount of MMA capacity in China utilizes the C4 production route. Low gasoline demand in China, stemming from COVID shutdowns, created an abundant supply of C4, which temporarily lowered MMA production costs in China. This, along with the lower end market demand in Asia, created a temporary window for lower cost MMA and standard grade PMMA to be sold into Europe. We do not believe these are long-term structural issues for us, and we anticipate this situation will normalize, with lower energy and ammonia prices in Europe, along with more normal mobility and demand returning in China over the course of this year. In any event, we have other supply chain options to help alleviate this impact in the medium term if necessary. We estimate this temporary arbitrage impact The fourth quarter results by about $10 million in engineered materials. Obviously, we're not satisfied with the recent earnings in engineered materials, but we view the current headwinds as temporary and expect significant earnings improvement when energy prices normalize and demand returns. We take an action where possible, such as restructuring of the PMMA sheet business in North America, and we're prepared to take additional steps as appropriate. As we'll also add, I'm encouraged that the margin of our more specialized products in the segment, such as specialty and modified PMMA resins and PC-ADS compounds, have been maintained in this environment, in an environment with steeply rising costs. And now I'd like to turn the call over to Dave. We'll talk through the financials.
Andy
Thank you, Frank. Our fourth quarter adjusted EBITDA was below our previously announced guidance. due to $19 million of negative net timing impacts caused by falling raw material prices, as well as $15 million of unfavorable impact from natural gas hedges. I'd like to spend a minute explaining our philosophy related to the use of natural gas hedging to manage our cost risk and how it has changed over the last nine months. Volumetrically, about 60% of the gas we purchase is in Europe. In 2022, this represented over 90% of our cash spent on natural gas. We formed a view in mid-2022 that record gas prices in Europe would have to fall because of the high levels of storage and declining industrial demand. As such, we hedged our natural gas only out a few months. We've since seen European natural gas prices fall over 80%, and North American gas prices by over 60%, and we've been layering in 2023 and some 2024 hedges on the way down. Because we don't qualify for hedge accounting treatment for all of our hedges, we will have some mark-to-market volatility in the P&L going forward, but I wouldn't expect it to be the same magnitude as Q4. During the quarter, we recorded a non-cash $297 million goodwill impairment charge related to the PMMA and AptX services acquisitions. The impairment charge resulted from our annual goodwill impairment analysis and was deemed necessary given the challenging macroeconomic environment, particularly for building and construction, as well as a prolonged drop in our market capitalization. We view these businesses as integral components of our evolution as a specialty materials provider and remain excited about the growth opportunities they will provide in the future. Fourth quarter free cash flow of negative $20 million was below our expectation, caused mainly by lower earnings and the $34 million payment to the European Commission to settle the 2018 styrene purchasing investigation. An accrual for this was booked earlier in the year, and with this cash payment, we consider this to be closed. We ended the year with $717 million of available liquidity, including $212 million of cash on the balance sheet. As it relates to capital structure, our nearest term maturity is a $660 million term loan that matures in September 2024. The financing markets have improved considerably to start the year, and refinancing this loan is a priority for us. Our strong liquidity position and our view that the bottom of this earnings cycle is behind us gives us great confidence in our ability to weather this economic downturn. Now I'll turn the call back over to Frank, who will talk about our expectations for 2023 and the first quarter. Thanks, Dave.
Abby
Looking back at 2022, it was a year of two halves, with the second half earning substantially lower than the first half. This decrease was essentially from lower demand, which led to both reduced sales volume as well as margins. While raw materials and energy prices were elevated in the first half of last year, these costs were passed through on our pricing. However, higher interest rates and energy prices, as well as COVID lockdowns in China, eroded consumer spending in all three regions. resulting in lower sales volumes and margins. So we view an increase in demand as the number one catalyst for earnings improvement. For the full year 2023, we're guiding to a net income of $3 million to $33 million and an adjusted EBITDA of $375 million to $425 million. We expect demand levels to improve as the year progresses, with first quarter sales volumes slightly higher than fourth quarter from seasonality. We view this as the trough level demand. For the remainder of the year, we see volumes about 10% higher than this trough level, which equates to about $30 million of the EBITDA per quarter. To give you some added perspective, a 10% volume increase would represent a recovery of about half the volume drop from the first half to the second half of 2022. This 10% increase should come from a few areas. First, the end of the Asian arbitrage window, which we see closing in February based on the steep drop in natural gas and ammonia prices in Europe. Second, and also a contributing factor to the end of the arbitrage window, we're forecasting flat volume growth in Asia in the first quarter and a 10% increase from this level for the remainder of the year. We view this as a very modest assumption in the context of the depressed demand levels we've seen in China over the last three quarters. This is supported by feedback we've received by key customers in the appliance segment. Third, the end of destocking, which we believe will occur in the first quarter, but many customers will likely keep inventories until signs of real demand recovery emerge. You can see in the appendix of our earnings deck that prior destocking cycles for ABS and polystyrene products have taken about two quarters to play out, and it's typically followed by a snapback driven by restocking. Our outlook for 2023 does not reflect the typical sharp rise in orders from restocking. Finally, modest auto growth. We expect the global automotive market to grow by low single-digit percentage, but we expect to grow at a higher rate due to our mix of applications as well as geographic exposure to regions where more growth is anticipated, such as North America. where days demand of inventory is still meaningfully lower than the historical averages. We see this 2023 forecast assumptions as independent from an economic recovery or restocking cycle, both of which would represent an upside to our plan. Clearly, an increase in sales volume will be a key factor for higher earnings, but we're anticipating additional benefits from the footprint actions that we've implemented, which are expected to increase annual adjusted EBITDA by approximately $60 million versus the fourth quarter run rate. Cash generation is anticipated to improve in 2023, as well, with expected cash from operations of $100 million and a break-even free cash flow. This implies capital spending of $100 million, which is about $50 million lower than last year. Our CapEx guidance includes all necessary plant maintenance, as well as the continuation of our growth programs, which have yielded very positive results, including expanded offerings of specialty products, sustainable solutions, and unique offerings in material substitution. We have decided to postpone the second phase of our ERP implementation, which largely involved migrating our legacy businesses to Esperanto. Our cash guidance also includes a $40 million cash outlay for the asset restructuring actions, as well as a working capital use given the expected higher demand at the end of 2023. There's no question that the business conditions in the second half of 2022 were some of the most challenging that we faced as a company. But we believe that we've weathered the worst of this downturn, and based on the actions we've taken along with the destocking cycle winding down, we are poised to grow earnings in 2023. The order book we have so far in Q1 is encouraging, and we're confident in our ability to generate and manage cash even in a period of prolonged, weaker demand, and will benefit as we continue evolving into a company offering more specialty and sustainable products. And now we're happy to take your questions.
Operator
Thank you. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again. And we will pause for just a moment to compile the Q&A roster. We will take our first question from Matthew Blair with PPH. Your line is open.
Matthew Blair
Hey, good morning, Frank and Dave. I thought the commentary on the recycled products was pretty interesting. He said it was 1% of your volumes, but 3% of your margins. Could you talk about how you price these recycled products? Is it like a fixed contract, like a fixed spread on your end? And then as we think about this price premium that you're getting, how much of that comes from like regulatory factors and how much of that is just like a voluntary premium that these brands pay to improve their ESG scores?
Abby
Thanks for the question. Great question. Most of the premium we're getting is basically being driven by self-imposed goals that most of our end customers are setting on themselves, you know, rounding related to CO2 intensity reduction. And we're basically, in the current environment, relative to the availability of these materials, there's an unlimited demand. So, you know, we see this as, you know, a big opportunity for us then is we're trying to accelerate the availability of the key feedstocks that allow us to supply more into the market every quarter. So there are some regulatory drivers that will come. I think there's some various packaging taxes that will be imposed in Europe, and I think that's reflected in the pricing that we're getting. But, again, most of it is self-imposed, and it's a negotiated price rather than a formulaic price that we have with the customers.
Matthew Blair
Sounds good. And then, Frank, you called out weakness in Q4 in areas like construction, durables, and electronics. Could you talk about how each of those markets are faring today versus the Q4 level?
Abby
Yeah, so what we're seeing is a level in Q1 that would be consistent with that level, you know, but obviously with the normal Q1 seasonality. So, so far, we haven't We aren't seeing a significant demand increase in those underlying markets other than seasonality.
Bolin
Great. Thank you very much.
Operator
And we will take our next question from Frank Mitch with Furman Research. Your line is open.
Frank Mitch
Thank you. Given your headquarters location, I feel like I need to say go Eagles. Okay. We'll see on Sunday. Hey, David, I have a random question for you that's in the footnotes at the bottom of slide 16 talking about your 2026 revolver suggesting that it's going to end at $102 million at the end of the first quarter. Can you talk a little bit about that and what are you meaning to imply there?
Andy
Well, yeah. So the revolver, it has and always has a covenant attached to it that measures a certain leverage ratio, and if that leverage ratio goes above a certain threshold, which we're not at the end of the year, but we likely will be at the end of the first quarter, the availability under the revolver shrinks to 30% of the revolver. So if you have a $335 million revolver, we have a small amount of letters of credit drawn against that, which is just normal business data. So all that is available to us today. At the end of the first quarter, I expect on an LTM basis, our leverage ratio will go beyond what's stipulated in the covenants, at which point only 30% or $102 million will have available to us under the revolver. Okay, so that's how that works. That's the mechanics of that. You know, given the guidance that we laid out here today and what we expect to happen in business, we expect that leverage ratio to go below the threshold and have the full availability under the revolver by the end of the year. But, look, to be clear, Frank, I don't see that affecting us operationally. As we said, we ended the year with 212 of cash. We have $150 million, you know, effectively an ABO, an asset-backed receivables line available to us. There's no covenants attached to that, and that's a fully committed facility. And then, you know, and then beyond that, we would still have $102 million available under the revolver. So, you know, we highlighted that and put that in there because we think it's instructive for investors, but, you know, I don't foresee the need for us to, you know, to need that liquidity.
Frank Mitch
That's an excellent synopsis. I sincerely appreciate that. And Frank, coming back to the engineer materials business, some of the expectation is to see an improvement post-Chinese New Year. I'm curious, you did mention that your order book is somewhat encouraging. Can you add a little more color with respect to the engineer materials business and what you're seeing there and expectations there?
Frank
Sure.
Abby
I think that clearly we've One of the big benefits that we're going to have is not having the hedge headwind that we had in Q4 and Q1. So I would expect that to be an improvement over where we were in the quarter. We'll have some normal seasonality. But, you know, as it relates to that arbitrage window and sort of the destocking, I think there's going to be overhang through Q1 is what we would anticipate. And then we get back to more of a normalized situation. over the course of 2023, we'll get back to levels like we were in the first half of 2022, which was about a $35 million per quarter run rate in the business. Now, for us to get back to where we should be with the business, we need to see a structural market improvement in automotive and in building and construction, particularly around the Asian imports that sales of building and construction products in Asia that used to be exported into Europe. So we see that as a longer-term improvement. But, you know, our expectation is we get back to the first half 2022 levels in the second half of 2023. Thank you so much.
Operator
And we will take our next question from David Begleiter with Deutsche Bank. Your line is open.
David Begleiter
Thank you. Good morning, Frank and Dave. Frank, just on European natural gas prices, given the reduction we've seen, any change in your thought process on European asset restructuring?
Abby
Well, first of all, no. I don't believe that any of the actions that we've taken, you know, I'm I would have any reason to second-guess those given the reduction. I think that's consistent both strategically and in the near-term financial. And in fact, you know, we're going to see a benefit from both of those restructuring plans early in 2023. You know, I'll just give you this color. Bolin was – our Bolin Skyreen monomer plant was only – contributed a positive EBITDA contribution in two quarters during the last three years. So, again, you know, this is the right decision long-term, and we'll see the near-term benefit from it. Obviously, with improvement, we'll see our other assets be more competitive versus, like I described in the script, versus this temporary arbitrage window, which we see largely closing at this point.
David Begleiter
Very helpful. And just to give a view on the global styrene cycle the next couple of years in terms of new capacity and margins and how that might trend?
Bolin
Yeah, hi, Dave. This is Dave.
Andy
I'll take that. I would say, first of all, I'll start off with Amstey. Amstey continues to be a very steady performer despite the, you know, kind of truck-level conditions. You know, it's low-cost Gulf Coast producers. So, I mean, I see them as being relatively immune. We would see the building cycle, we would see 23 as probably the trough maybe 24, 23, 24 at the latest, but ending of the trough or ending of the capacity, probably 2023. Um, and then, um, um, you know, mid, mid single digit additions coming online globally in 2023. And that's all in China, obviously. Uh, and then starting to recover from there. So I would say, you know, probably some recovery and, um, global styrene margins and operating rates in 2024-25. Now, the thing I would say is with the closure of Bolin, I mean, we've kind of, you know, substantially reduced our exposure to styrene. You know, we're now just producing at the one site in Ternus in the Netherlands that is just, you know, it's just supplying our internal downstream needs within Europe. So, you know, closing that site, I think,
Bolin
kind of reduces our, you know, the, uh, profit, uh, exposure to the siren cycle.
David Begleiter
Thank you. Very helpful.
Operator
And as a reminder, it is star one. If you would like to ask a question, we will take our next question from Michael Lighthead with Barclays. Your line is open.
Michael Lighthead
Great. Thanks. Good morning, guys. Um, First question, can you just talk or give a little bit more color about your expectations for first quarter EVA dot growth sequentially? And then second, if I heard correctly, it sounds like you're really not assuming much, if at all, economic recovery in your full year guidance. So, I mean, it just optically seems like a pretty steep ramp from the back half of 22. So can you just help square that for us?
Abby
Yeah, let me – yeah, I think the best way to think about the – to bridge Q4 to, like a Q1, is, you know, basically Q4 excluding raw material timing was about $25 million of EBITDA. It also included $15 million of hedge headwind, you know, and then additionally we'll benefit from about $15 million in the quarter from the run rate savings from the restructuring activities that we get. And then normal, we'll have about, you know, a normal benefit from some of the year-end effector, you know, seasonality plus lower cost in Europe. And that gets us, I mean, we have a high degree of confidence in those factors adding to the Q4 run rate and Q1. And then as we described, You know, if we recover, we think there's a 10% volume increase from this level from a number of factors, Asia recovery, also the end of this arbitrage pressure that we saw in Europe and North America. And so, you know, a 10% recovery in volume from those levels at $30 million per quarter of adjusted EBITDA. So we don't see that as a very aggressive assumption. You know, we really contemplate not a lot of underlying improvement beyond that. So, there's upside if we see that.
Michael Lighthead
Great. Thank you for all that clarity. And then, second, I just wanted to ask briefly on the styrenic separation. I mean, Dave just talked about a pretty choppy styrene outlook until 24-25, and obviously a lot's changed since you started the sale process a year and a half ago. So, Can you maybe just talk about how your approach, if at all, has kind of changed? Is there a different kind of suitable valuation or structure for separation? Just, again, broadly how you're approaching it today versus maybe when we started this off.
Abby
Well, I think, one, we've improved the business with the actions that we've taken as Dave outlined with Bolin. I think also that as we've gone through this cycle, it's demonstrated the resilience of this business, our polystyrene business, So, you know, I think that those are all very helpful. And the other thing I would point out is this year we're taking the first steps to establish our own recycled polystyrene assets in Europe with a project that, frankly, we see as being the best in class in the industry. I think those things will position the asset to be more attractive than it was when we initially marketed it. And, you know, when the capital markets improve and we see, you know, coupled with those improvements in the business, we'll make a decision on when to restart that process. But I guess when, you know, the bottom line is I see it as, a more attractive and a better positioned asset to sell when the capital markets improve based on those actions.
Michael Lighthead
Great. Thank you.
Operator
And we will take our next question from Lawrence Alexander with Jefferies. Your line is open.
Frank
Hi. It's Dan Rizwan for Lawrence. Thanks for taking my question. I just have one. I was just wondering if the macro environment, particularly in North America, were to deteriorate significantly, Do you still see a bridge where you can hit the low end of your 2023 outlook?
Andy
Yeah, hi. It's Dave. I'll answer that. The answer is yes. I mean, we have a pretty small footprint in North America. In fact, a large footprint is for GAB, which is America's Sirenix, which I see as, as I mentioned earlier, you know, if you look historically, a pretty stable, quite a stable EBITDA generator. So beyond that, our footprint in North America is actually quite small. So our exposure to North America, I'd say, is we've got two latex plants that maybe have some compounding business that primarily serves automotive in North America, but those are relatively small. So I think the answer is yes, we do see a pass bill to hitting the low end of the guidance in that scenario. I think in terms of earnings exposure, I think we have far more exposure, both direct and indirect, to recovery in China than we do to what happens in North America, not only because of demand in China and in Greater Asia, but also because of the overwash that currently exists from stuff produced in Asia not getting soaked up in oil. So that's how I would answer that question. Okay.
Frank
All right. Thank you very much.
Operator
And we will take our next question from Angel Castillo with Morgan Stanley. Your line is open.
Angel Castillo
Hello. Good morning. This is actually Stefan Diaz sitting in for Angel. So I guess a quick question here. You postponed your legacy ERP upgrade in 2023. Is this something that you expect would come back in 2024, or how should we think maybe, I think, generally regarding CapEx or general investments?
Bolin
Well, yeah.
Abby
Frankly, we don't have to do this conversion. We're under no time pressure to do that conversion in 2024. As conditions improve and we fully fund our other priorities, we'll make a decision on that. Obviously, we want to do it, and there's operational benefits and cost savings from doing that implementation. But right now, that significant spend is not a priority in this environment. Again, I wouldn't put us on the clock for any specific timing to do it. We're under no pressure to.
Angel Castillo
Great. Thanks for the color. And then in your EM segment, could you give a little bit of color on where your operating rates are and where do you see them progressing throughout 2023?
Bolin
So, yeah, that's a great question.
Abby
So I would say for us in low 70% operating rates is where the, you know, our PMMA assets are running. The Asset utilization on MMA is quite different by region. And clearly in Europe, during the second half of last year, there was significant capacity that was idled. So operating rates in Europe have been extremely low in the second half of last year, and volumes moved from, as we pointed out, from Asia into the region. So... You know, I would say we would expect some of those assets to restart in 2023, but some of them are marginal assets on the cost curve anyway, and it's possible they don't restart at all. So, you know, I guess that's how I would characterize it.
Angel Castillo
Great. Thanks for the call, Frank.
Operator
We will take our next question from Hassan Ahmed with Alembic Global Investors. Your line is open.
Hassan Ahmed
Morning, Frank and Dave. You know, I just wanted to revisit, you know, a couple of the questions that were asked earlier on the full-year guidance, you know, $375 to $425 million in EBITDA. I mean, from the sounds of it, it seems you guys are being pretty conservative with the, you know, 10% volume increase. It seems you're factoring into this guidance. I mean, you had some interesting charts in the presentation which, you know, looked at where volumes are right now, what a snapback could look like. So now looking at those historic trends, you know, if things do actually snap back and if, you know, the restocking is actually fairly rapid, what could those volumes look like? So that's one part of it. And again, going back to this sort of full year guidance, also want to get a sense of what European nat gas prices you're factoring in as well.
Bolin
Yeah, I'll take the last question first, Asan.
Andy
I mean, we, you know, generally when we do forecasts, we forecast based on what the current forward curve for natural gas is. So, you know, we're kind of in the, in Europe, we're kind of in the high 50s or 60 right now. So that's what we're, That's what's, you know, baked into the guidance that we're giving right now.
Abby
So, you know, if we got – so I guess if you – going to the first part of your question, if you – if we saw a recovery back to the first half 22 levels – that would be an additional $30 million of EBITDA per quarter, incremental to what we've already guided. Now, I'll remind you, in the first half of 2022, there was also some volume pressure in the underlying markets because of the chip shortage and chip constraints in automotive, as well as some... pressure on Chinese production that was essentially sales that would go into Europe. So, you know, again, I think we would expect that a real snapback would get us back to the half one 2022 levels, but there's still market improvement well above that that's possible if we see markets normalized completely.
Hassan Ahmed
Understood, understood. And sort of moving gears a bit, look, it seems like 23 is still sort of a trough-ish year or coming out of a trough. And then we go into 24 and 25, and you guys have obviously some chunky debt maturities. So I'm just trying to sort of think through how you guys are thinking about shared buybacks. I mean, I would imagine they're off the table for a while.
Abby
Yeah, that's not a priority. Right, in this environment right now.
Hassan Ahmed
Understood. Very helpful, guys.
Abby
Thank you so much.
Operator
And we will take our next question from Eric Petrie with Citi. Your line is open.
Eric Petrie
Hey, good morning, Frank and Dave. Hi, Eric. How much of engineered materials is more commoditized, the PMMA sheet and MMA versus resins and compounds?
Abby
So, if you... If you look at the volume mix, about slightly over 50% of the volume that we've historically had in the business is formulated, formulated specialty materials. And as I mentioned on the call, the margins and volume of those materials actually held up quite well. Then you have less formulated materials. or non-formulated materials or more standard grade materials like standard grade resins and or the PMMA sheet business. And that's where we saw most of the volume pressure when the prices between the regions dislocated so dramatically in the second half. So I would say 50% to 60% is formulated and compounded in specialty applications and 40% of it is more standard-grade materials.
Eric Petrie
Okay, helpful. And then I think the prior rule of thumb for your Europe styrene assets was a $50 ton styrene monomer change equaled $35 million of earnings. It sounds like Ternusin is a little more profitable. So how does that change? And then how much styrene monomer are you going to be buying with the closure of Bolland?
Abby
So let me take the second half of that question. So, you know, we're somewhere about a third of our purchases will be merchant market purchases now with the closure of Bolin. And then with Ternus and operating, you know, we can make the other two-thirds of our needs.
Andy
Yeah, I'll take, Eric, the second half of that question. I think the rule of thumb, you're right, the old rule of thumb was a $50 change in margin would be about $35 million. That is now about $20 million. Thank you.
Operator
And, ladies and gentlemen, that is all the time we have for questions today, and this will conclude today's conference call. We thank you for your participation, and you may now disconnect.
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