Venator Materials PLC Ordinary Shares

Good day, ladies and gentlemen, and welcome to the Venator Materials Third Quarter 2020 Earnings Call. All participants are currently in listen-only mode, and should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star and then two. I would now like to turn the conference over to Kate Robertson. Please go ahead.

Thank you, Chris, and good morning, everyone. I am Kate Robertson, Investor Relations for Benatar Materials. Welcome to Benatar's third quarter 2020 earnings call. Joining us on the call today are Simon Turner, President and CEO, and Kurt Ogden, Executive Vice President and CFO. This morning, we released our earnings for the third quarter 2020 via press release and posted the release and accompanying slides to our website at BenethorCorp.com. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking, and while they reflect our current expectations, they may involve risks and uncertainties and are not guarantees of future performance. You should review our filings of the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, free cash flow, and net debt. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website. It is now my pleasure to turn the call over to Simon.

Thanks, Kate, and good morning, everyone. Welcome to our third quarter 2020 earnings call. Firstly, I would like to thank all of our associates for how they have responded to the constant challenge of the COVID-19 pandemic. They are all a credit to our business and our values. Let's begin on slide three. Venator delivered 17 million of adjusted EBITDA in the third quarter. Our total sales volume declined 9% compared to the prior year period, primarily as a result of the pandemic. Compared to the prior year quarter, we have seen a gradual recovery in demand for most of our products, resulting in a 3% increase in sales volumes, notwithstanding the fact that the third quarter is traditionally seasonally weaker than the second quarter. and we suffered the impact of Hurricane Laura within our CO2 segment. I would also like to point out that our timber treatment and color pigments businesses continue to demonstrate resilience in the challenging macroeconomic environment. We delivered $24 million of free cash flow in the quarter, primarily due to reduction of inventories as we aligned our production to meet demand. Turning to slide four on our cost programs. We are continuously looking to implement additional self-help actions to improve our cost profile and competitiveness. As you know, we have had several cost reduction programs that we have successfully delivered on. As previously promised, we recently started a new 2020 business improvement program focused on further reducing our cost. We expect this program to deliver 55 million of annual EBITDA improvement by the end of 2022 compared to 2019. The 2020 Business Improvement Programme is incremental to our 2019 Business Improvement Programme and includes 10 million of colour pigment savings previously identified and as well as 45 million of other savings from manufacturing cost improvement and SG&A. As a result, we anticipate there will be an approximately 10% reduction in workforce, primarily in Germany. These savings will more than replace approximately 30 million of non-recurring savings from our COVID-19 initiatives. The manufacturing cost improvements come from across our network and include our intention to permanently reduce 50 kilotons of CO2 and 50 kilotons of functional additives nameplate capacity in Germany. We expect future cash restructuring costs to deliver the 2020 Business Improvement Program to be within the range of 45 to 50 million. Of the $60 million we expect to save in 2020, we have recognized around 75% of these savings year-to-date. In 2021, we expect to deliver total savings of approximately $65 million as we more than offset the non-recurring savings from our COVID-19 initiatives. Turning to slide five in our titanium dioxide segment. In the third quarter, our titanium dioxide sales volumes increased by 2% compared to the prior quarter. Excluding the impact of Hurricane Laura, the improvement would have been 4%. TO2 sales volumes declined by 11% compared to the prior year period and represents an improvement from the second quarter comparison as we return to a more normalized demand environment. Our average TO2 price remains stable in USD, but declined 3% sequentially in local currency, particularly as a result of unfavorable product mix, which lowered the TO2 average selling price. Looking at our business regionally, on a relative basis, North America was the most resilient region in the quarter, followed by APAC and Europe. Excluding the impact of Hurricane Laura, sales volumes in North America were comparable to the second quarter. APAC demand was stable with the second quarter, and there was a notable recovery in Europe for a myriad of our functional TO2 products, which was expected as Europe was impacted by the most restrictive policy responses to the pandemic. in the first half of 2020. In the third quarter, we generated $21 million of adjusted EBITDA on our titanium dioxide segment, compared to $51 million in 3Q19 and $35 million in the prior quarter. The impact of unabsorbed fixed costs as we moderated production at our manufacturing facilities to better align with demand was the largest driver of the decrease. These costs were partially offset by our cost reduction initiative. Turning to the outlook, we are monitoring the current resurgence of COVID-19 across various locations and corresponding impacts on our businesses. At this moment, our sales in October and order book for November do not suggest any further weakness to the COVID-19 resurgence. In the fourth quarter, we expect to see some seasonality with our sales volumes compared to the third quarter of 2020 and expect prices to remain stable. We are beginning to see a modest improvement in textile demand within our specialty TO2 business. The pace and shape of recovery remains contingent on policy responses to the pandemic. Turning to slide six and performance additives. Revenues in the third quarter of 2020 were similar to the prior year. An improvement in average selling prices and positive sales makes more than offset lower demand related to COVID-19. We continue to see weak demand in automotive end-use applications, impacting demand for certain of our functional additives products. On the other hand, we continue to see strong demand for our timber treatment products, as DIY trends in North America remain healthy. Sequential volume in color pigments improves significantly in a quarter which is typically seasonally softer due to higher construction sales, which in turn reduce the average selling price. The performance additive segment generated 5 million of adjusted EBITDA in the third quarter, down 8 million compared to the prior year period. The impact of unabsorbed fixed costs as we moderated production at our manufacturing facilities to better align with demand was the largest driver of the decrease. These costs were partially offset by our cost reduction initiatives. As I mentioned earlier, we intend to rationalize capacity of our functional alternatives facility in Germany to further manage our controllable costs. These actions, along with the 10 billion color pigments cost and operational efficiencies, will deliver incremental EBITDA within the performance additive segment through 2022. As an RTO2 business, we are monitoring the current resurgence of COVID-19 across various locations for any impact to our performance additive businesses. At the moment, our sales in October and order book for November do not suggest any further weakness due to COVID-19 resurgence. In the fourth quarter, we expect demand to decline in line with normal seasonality and pricing for our performance additive segment to remain stable compared to the prior quarter, with differences by product and application. I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt? Thanks, Simon.

Let's go ahead and turn to slide number seven. In the third quarter, total adjusted EBITDA declined 33 million compared to the prior year period. The decline was primarily attributable to lower demand, resulting in lower sales volumes and unfavorable fixed cost absorption as we moderated production at our plants while managing our inventory levels in response to the needs of our customers during the COVID-19 pandemic. These were partially offset by lower SG&A costs from our business improvement program and our COVID-19 cost reduction initiatives. Compared to the second quarter, total adjusted EBITDA decreased by 20 million. The decline was primarily attributable to unfavorable fixed cost absorption as we moderated production at our plants while managing our inventory levels in response to customer demand during the pandemic. This was partially offset by a sequential improvement in sales volumes in our TO2 and performance additive segments. Turning to slide A and our cash flow bridge. We continue our intense focus on improving our free cash flow profile. In the third quarter, we generated 24 million of positive free cash flow. This was primarily due to efficient working capital management as we aligned our production network to meet demand with a strict focus on inventory management. Looking forward to the fourth quarter, we are further reducing our estimated 2020 cash uses associated with restructuring and PORI-related items by 5 million each. At the end of the third quarter, total liquidity was 472 million, consisting of 208 million in cash, and $264 million of undrawn availability under our asset-based revolving lending facility. We do not have any significant long-term maturities until 2024. We will continue to exercise rigorous discipline over our cash uses and capital deployment as we work toward improving our operational cash flow. With that, I'll turn it back to Simon.

Thanks, Kev. On August the 28th, we announced that funds advised by SK Capital Partners LP have agreed to purchase approximately 42.5 million shares, representing just under 40% of Venator's outstanding shares, from Huntsman Corporation. The transaction is subject to regulatory approvals which are progressing well, and the transaction is expected to close near year end. Our third quarter results demonstrate our commitment to our customer-tailored approach, the execution of our business improvement programs, and our relentless focus on cash generation. Our business is beginning to see a gradual recovery in demand for most products, notwithstanding what is traditionally a seasonally lower quarter and the impact of Hurricane Laura in our TO2 segment. In the fourth quarter, we expect historical seasonal patterns to be muted with stable selling prices. A favorable benefit from increased production rates will largely be offset by higher feedstock costs and lower savings from our non-recurring COVID-19 initiatives. Our strategy remains as follows. We are committed to our customer-tailored approach in both our TO2 and performance additive segments. This balance has the anticipated effect of reducing margin volatility and improving visibility for us and our customers. We are focused on strengthening our leadership position in specialty and differentiated TO2 as well as improving the mix in our performance additive segments. As promised, we have identified new cost savings, which along with the 10 million color pigments cost and operational efficiencies, will deliver 55 million of annual savings by the end of 2022 and improve the cost competitiveness of our business. This new program builds on our successful delivery of prior cost reduction initiatives. As Kurt mentioned, we delivered positive free cash flow in the third quarter, and our expected cash uses in 2020 will be significantly below that of 2019. We are fully committed to maximizing shareholder value through active portfolio optimization. The process to explore a potential sale of the color pigments business remains on pause due to COVID-19. In the interim, we remain committed to enhancing the profitability of this business. Notwithstanding the uncertainty surrounding the resurgence of COVID-19, we continue to execute our strategic priorities. I am encouraged by the positive signals in the third quarter, the strength of our order book, and our new improvement initiatives that will strengthen our competitiveness. With that, we thank you for your continued interest in Venator and would now like to open the call for questions.

Thank you very much, Seth. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. Our first question is from David Degleiter of Deutsche Bank. Please go ahead.

Hi, this is David Huang here for Dave. I guess first, just on TIO2 pricing, do you see any opportunities for TIO2 pricing to move higher in 2021?

Yeah, I mean, this is Simon here. Just in response to that question, I think that we've seen some pretty tough trading conditions these past several quarters, including this year and even prior to that. We've talked significantly about our pricing program and our customer-tailored approach here on these calls many times, which have seen, once again, and delivered a stable price pricing environment during these tough trading conditions. So, you know, directionally, as we come out of this year and we see the recovery, depending on the profile of that recovery from the pandemic, both at the industry level and for the business, yeah, directionally, we would expect to see price increase. We're getting to the price increase zone in 2021. Okay.

Okay, and then just on Q4 EBITDA, given your underlying improvement and some seasonality and cost saves and everything, do you expect your Q4 and also, I mean, return of Lake Charles capacity, do you expect your Q4 EBITDA to be higher than Q3?

Yeah, look, I think the way we think about that right now with everything we've seen in the round, and there are quite a lot of moving parts, We see that the earnings would likely be similar. Clearly, you know, historically we would expect a sort of down seasonality in the fourth quarter being traditionally the lowest volume quarter. We expect that seasonality still to be there given our, you know, sales and application footprint, but much more muted. You know, we do have some further all costs and some unwind of some of our one-time COVID cases. non-recurring COVID savings to set against us. So, you know, there are a number of moving parts, pricing to remain stable, but, you know, in the round, I expect it to be similar.

Okay. Thank you.

Thank you. The next question is from Josh Spector of UBS. Please go ahead.

Yeah. Hi. Thanks for taking my question. Just to follow up on the seed cost, seed stock cost side of things, Are you able to quantify what you're thinking about inflation would be Q on Q? And can you give us some context of what that cost would look like for next year versus this year at this point?

Yeah, look, I don't think we'd be willing to break out in quarter numbers. I think what we can say about feedstock, you know, of course, it depends by feedstock types of family. But broadly speaking, you know, we would see feedstocks be a net tailwind of in 2021. There's still quite a bit of discussion and negotiations to go there. So, you know, we won't be dimensioning that, you know, should we choose to dimension that will probably only be, you know, sometime in the front end of next year. We'll have to see what that brings. But, you know, at this point, we could confirm we expect to see a tailwind.

Judge, this is Curt. Let me just add to what Simon has said. As we look into 2021 and we expect to pick up a tailwind related to ore feedstocks, we ought to just also note that it's likely that those benefits will be partially offset by higher energy costs as we compare that element of our cost to sales year on year as well. But all up, we would expect a net tailwind, but some different moving elements within there.

Got it. Yeah, thanks for that. And just in terms of your nameplate shutdowns in TO2 and within the performance additives and functional side of the business, does that impact your volumes that you had output in 2019 relative to what you're seeing, or do you think that do those volumes move elsewhere within the circuit so that your production a year or two ago could be similar to those levels in the future?

Yeah, I don't think we expect to see any reduced ability to fulfill sales orders by these changes. You know, one has to recognize those are nameplate figures. Some of that capacity, frankly, has not been utilized yet. And we think, you know, we have always been and continue to be on the page that, you know, we would look at the next stretch of sub-economic capacity. And we would look to improve the overall efficiency of our network by spreading those pounds around the parts of the circuit. So, you know, it's not preventing us making sales. It's not constraining us. And, you know, it's just an orderly part of the manufacturing improvement process we expect to execute.

Okay.

Thank you. Pleasure. Thank you. The next question is from Hassan Ahmed of Olympic Global. Please go ahead.

Morning, Simon and Kurt. Morning, Hassan. You know, just wanted to revisit your comment about feedstock costs and, you know, them being a tailwind in 2021. You know, just a little confused because it seems ilmenite prices are on the rise. Certainly it seemed that they were through the course of the third quarter. So what gives you guys confidence that, you know, Illuminate and just generally feedstock costs will be a tailwind or overcost will be a tailwind in 2021, keeping some of these dynamics in mind? I mean, is it just the way you guys' contracts are structured, or is this a broader call on the market that you feel that there may be some slackness in maybe supply-demand fundamentals, particularly on the lower-grade ore side of things.

Yeah, look, I think it's a little bit of both, frankly, Sam. I mean, you know we buy significant volumes of ilmenite, and that's not to say there haven't been cost pressures on ilmenite, but you've got to look over these past 24 months how we've onboarded feedstock costs and more to the point at which they hit our accounts and flow through. And, you know, so there can be a time phasing aspect to this. So, you know, there's that. And then, of course, you know, we don't buy quite as much as some baskets of high-grade chloride materials as others. And those tend to, you know, see the higher inflationary pressures, you know. Couple that with some of the conversations we've had with our suppliers, you know, it's that picture that we put together. I grant you there are different moving parts and there can be difference within. But at the aggregate level, you know, we still believe, you know, we will see a tailwind.

Very helpful. And as a follow-up, you know, in your prepared remarks, you talked about demand growth by region, you know, highlighting obviously North America and the demand fence there, but also sort of talking about the APAC region and, you know, how demand was pretty decent there as well. You know, in hearing some of the commentary from your competitors, you know, it appeared that APAC wasn't as strong as it could be and some of them identified India as a bit of a sore point, right? I mean, you know, presumably because of some of the lockdowns there and the like. So how should we be thinking about that demand, particularly in India, as we go through the course of the fourth quarter?

Yeah, look, I think it's an interesting point you raised there, Hassan, and it brings me on to something I think we feel, you know, we should really point out here. You know, if you stand back and you look at the year to date rather than just the last three months, if you stand back and look at the three quarters of the year to date, broadly speaking, we would see our overall volumetric demand, particularly in functional markets, pretty much on a par with most others of our competitors at the aggregate level. And at the big picture level, as I've already mentioned, we saw stable prices. I think at the big picture, you can see people are in a line. with the odd exception, broadly in a line. If you narrow it down to what we see in the third quarter and the fourth, I mean, you know, I think that our volumes, you know, will basically be driven by more by our, you know, applications footprint. So, you know, we've made no secret over the years that, you know, we are biased towards more specialized and differentiated segments. We have lower exposure to, you know, large decorative coatings businesses around the world. In the third quarter, we saw very strong, you know, growth in that segment in North America, which, frankly, you know, we weren't best positioned to satisfy even, you know, without the fact that we had our asset in Lake Charles impacted by the hurricane. So clearly we wouldn't have seen that as much in North America. We achieved a very good recovery in Europe in the third quarter there. which I think you'd expect. We've got a large position in Europe. We were pleased with that recovery we saw in Europe in the third quarter. In Asia, we believe that overall there was a pretty reasonable recovery. We didn't see it in our numbers. And to your specific point about India, we have a very low exposure to India. So we're not best placed to comment around India and South America, which I think some of our competitors have commented on, as I've seen in reports. So I think that, you know, our sort of growth profile, notwithstanding the fact it's not dissimilar on the year-to-date basis, within the third quarter and probably within the fourth quarter is driven more by the fact we've got less exposure to large decorative and more exposure to you know, specialty and differentiated. And so, you know, obviously where our specialty textile segment sees a muted demand, that hurts us, and that plays into the sort of like, you know, growth comps. So I think that it's really application mixed more than geography, a little bit of lower exposure to North America maybe that drive the differences. I hope that sort of answers your question.

Very much so. Thanks so much, Eamon.

Thank you. Thank you. The next question is from John McMulty of BMO Capital Markets.

Hey, good morning. This is Colton being on for John. So two questions. Hey, two questions. First of all, you know, as you were just mentioning, you do have a slightly different application footprint than some of your other publicly traded peers. So could you just remind us in a normal year of what would that 3Q to 4Q seasonality look like for you guys?

Yeah, so I think overall you'd expect a double-digit sort of percentage drop-off in the fourth quarter versus the third quarter, maybe a little bit less than that. You know, but sort of let's say 8% to 10% type of range would be a more specific, you know, average typically if there is such a thing. And that's a fairly sort of time-worn sort of, you know, ratio that we typically expect to see.

Okay, thanks. That's really helpful. And second of all, I was just wondering, you know, on your slide about TIO2, you mentioned that some of the impact from Hurricane Laura was mitigated through insurance proceeds. So I was just wondering, did the actual earnings impact from Hurricane Laura end up being less or different than that $10 million that you guys pointed to in September?

Yeah, I think that, you know, we indicated at that time, you know, things were forming at that point. We thought there would be less than $10 million, but, you know, the way it's played out, we think that number, you should think about that as $5 million. Okay, thank you. That's really helpful.

Thanks, guys.

Thank you. The next question is from P.J. Juvecar of Citi.

Please go ahead. Hi, good morning. It's Eric Petrion for P.J. You know, based on your discussions with SK Capital, you know, how are they looking to optimize the portfolio and do they see low-hanging fruit to increase cash generation? I guess related to that question is you're underexposed to architectural codings and have kind of missed out on the DIY strength. So are you happy with the portfolio mix in the long run?

Let's make a couple of points there. First off, you know, as we said earlier, that we're progressing well with the SK Capital transactions progressing well, but, of course, it's not complete. And we don't expect that to close, you know, near year end. It's way too early to get into any questions around possible implications and impacts of that because it's yet to happen. We have to respect, obviously, regulatory processes here, which we are doing. So we won't be commenting on that at this stage. And maybe just a second. Point there is, you know, let's be clear is that we do have good exposure in certain locations to architectural decorative coatings, notably in Europe where we've got a larger sales footprint. So it's not that we have missed out on it. It's just that in the Asian and North American regions, we probably have less exposure, and it's there we've missed out. It's not a sort of absolute we've missed out. We do sell significant volumes to architectural decorative coatings.

Okay, thanks. And secondly, on your 50,000 tons reduction in TiO2 capacity, what is the timing of that? And is most of that low quality? And then on the flip side, could you consider increasing or returning additional specialty tons lost from Pori? Does the market warrant, you know, those incremental tons?

Yeah, I mean, I think the second part of your question, the market doesn't warrant it at this point. I mean, as you know, we've had, you know, this ongoing, we have had for a little while this softness in the textile segment, which is supplied, you know, from Germany. You know, the plant has supplied, made and supplied in Germany, those plants that have made and supplied both specialty and functional products over the years. So, you know, if you think about when, you know, which stage that capacity would come out, you know, we will be able to take that capacity out during the course of 2021 next year But as I said, you shouldn't really think about it as being 50,000 tons of actual in-play capacity. It's 50,000 tons of nameplate capacity, and a smaller amount of that has been in play. And we think we can more profitably remove that part, distribute it amongst the more efficient parts of our network, and thus improve our performance.

Thank you, Sam.

Pleasure. Thank you. The next question is from Arun Vishwanathan of RBC Capital Markets. Please go ahead.

Great. Thanks for taking my question.

I'm just curious on your market outlook. You noted maybe there's some possibility for price increases in the second half of 2021. Could you just elaborate on that? What gives you the confidence on that side? And maybe if you could offer some comments on supply and demand and inventory as well. Have you seen any reduction in global inventories? And is that part of your comment? Or could you just offer some thoughts on those things? Thanks.

Yeah, I think, you know, big picture again, you look at these past year and a half, there's been, you know, I speak here for Venator, of course. I can't speak on behalf of others. But on behalf of ourselves, we've carefully managed, you know, production circuit, inventory controls, cash, and, you know, our sales to our customers with our pricing. We think we struck the right balance. There's been times, you know, the third quarter, let's face it, we've had to moderate quite hard where that's been a bit tough. But, you know, we delivered the positive $24 million cash flow within the quarter. You know, we've got our inventory set at pretty tight levels now, and we're aiming to sort of, you know, replicate the position we were in in the front end of 2020 in the front end of 2021 until we got blown off course a bit by the pandemic, which was being well set to take advantage of upswing in demand and get to some pricing power. Now, I didn't actually say the second half of 2021. I said directionally in 2021. Not yet willing to comment on the timing of that, but we think, you know, we're getting into the price increase zone by carefully managing our inventories into early next year, seeing how the recovery unfolds, and, you know, well positioned then to expand margin.

And then if I could ask another question just on the business improvement program. I understand that it's always challenging to think about capacity changes, but you noted that this was potentially maybe on the upper end of the cost curve. Do you think there's other capacity out there maybe within the industry that would also fall into that bucket, and do you see further rationalization either within your portfolio or elsewhere within the industry? Thanks.

Yeah, it's tough to comment on the rest of the industry and to say we think there probably is some, but we wouldn't dare comment on the job of others to speak for themselves. So I would refrain from talking on behalf of others other than to say there probably is some similar types of capacity increments that could be removed. But for ourselves, I think, you know, this is probably now, you know, enough to be going on with. We don't see any other sort of capacity reductions and curtailments. In fact, you know, with this curtailment here and this retirement of this capacity, it's going to nicely bring our, you know, facilities up to sort of like a very efficiently optimal sort of level. And, you know, that's what's going to get our focus over these next 12 months in particular.

Great. Thanks. Thank you. Next question is from Lawrence Alexander of Jefferies. Please go ahead.

Good morning. So, on the timing of the pending restructuring charges, is most of that going to be in 2021, or will it be split between 2021 and 2022?

Now, the way to think about that 45 to 50 million charges, Lawrence, is to think about it split half-half between 2021 and 2022.

And do you have a sense for any incremental productivity that we can expect after 2022? I mean, is it going to just be productivity to offset inflation, or is there room to do more adjustments that just take more time to prepare? Can you just repeat the question? I'm not sure I understood the very last part of that. Is there – Is the size of the restructuring sort of an attempt to capture sort of the most that you can do? I mean, so is this sort of the optimized network, or are there other initiatives that you can do that will take another six or 12 months to prepare before you can make decisions on them?

Yeah, look, I think that, you know, this will take up most of the sort of like limits of the capacity as we currently see the circuit. There is always, of course, scope to, you know, nip out more tons on the sort of like capacity creep basis. I expect that to continue. But if the question is, you know, do we see any natural candidates for meaningful capacity increase that are, you know, sort of the no-brainer economics, I think the answer to that is probably no, you know, in that timeframe.

Thank you.

Pleasure. Thank you. The next question is from Stephen Byrne of Bank of America Securities. Please go ahead.

Yes, thank you. I believe it can be quite challenging to cut headcount in Germany and would welcome your comments on that with respect to both government and union obstacles. Is that pretty well underway? And or is that 45 to 50 million restructuring costs have some potential risk to it?

No, look, I think that we wouldn't be laying out these numbers if we didn't believe in the integrity of these numbers. You know, of course, you know, we want to be crystal clear that, you know, we will respect, you know, union and labor agreements in Germany. We are in consultation, advanced stages of consultation, I would describe that. So, you know, we feel good about, you know, the fact that this is how we're going to proceed. Of course, it's never easy and it's not something we like doing in reducing numbers of associates. But I will tell you that, you know, in 2015 and since the time we've owned those German assets, we have gone through this process before. We are well versed in the process. You know, the materials, the protocols, we have followed them again this time. And, you know, we have every confidence that we will, you know, deliver on the program that we've outlined. I would also like to just reiterate that, you know, that $45 to $50 million isn't all a German restructuring cost. I mean, there is a significant fraction of the program targeted at SG&A, $20 million. There is some color pigments, you know, improvement in that number. So it's not all located within Germany.

Steve, I'd just add to that that we have yet to recognize a restructuring charge in the P&L for that 45 to 50, although we feel really good about our ability to deliver the full 55 million of benefits, because we are still in consultation, that charge for the restructuring expense will be coming in subsequent quarters.

Okay, thank you for that. And Simon, you talked about perhaps some of the softness in TIO2 volumes being that you're underweight in North American architectural, but still globally, not a bad end market and plastic also being a very large end market for TIO2 for you. I was curious to hear your view or whether you have any visibility on inventory levels of your customers, whether they are being cautious and running their own inventories down, and thus there could be an inventory restocking component with the overall recovery?

Yeah, I mean, I think that is possible. You know, we would see them at the moment at normal levels, you know, at best. We don't think anyone's currently you know, blown up those inventories that inflated them in plastics or coatings. And, you know, to your point, I mean, earlier on in the pandemic, in fact, coatings was impacted more than plastics. And, you know, so our overweight in plastics kind of helped us earlier in the year, which is why I think you've got to look at, you know, the big picture, which is year to date of how our volumes have been. And I think they're pretty much in line with most others. But I still believe that both ourselves and our customers have been very cautious through this pandemic. They're playing it as it comes, and we'll be positioned to get into margin improvement zone as we exit this year, assuming that we don't suffer any major reverses in the pandemic recovery.

Thank you.

Thank you very much. The next question is from Vincent Andrews of Morgan Stanley. Please go ahead.

Hi, this is Steve Haynes for Vincent. I just wanted to come back to a comment you just made on margin improvement in 2021. There's a lot of moving pieces, so how should we be kind of sizing that relative to history? Is 2019 kind of a good starting point for that? And just any kind of directional comment there would be appreciated.

Yeah, look, I mean, I think there's a couple of ways of thinking about this. You know, we've clearly got some programs of work here which are going to give us some self-help benefits that are going to play into margins. We'd expect the recovery and the sort of scalability of the volumes in itself to help us with our unitary margins. We've spoken about a tailwind, which for ROAS, which we're yet to sort of dimension and talk in more detail. We'll come back on that. And, of course, we talked directly about the ability to improve price in 2021. So I think if you put that together and you look at our pattern of margins these past two to three years, well, let's face it, the trough has been less of a sort of like a damaging trough as certainly the prior one was in 2015 and 2016. you know, we still believe we can take this business to a sort of 20%, you know, mid-cycle margin business. And I think that's what we're shooting for. For TIO2. For TIO2.

Thank you. Thank you. The last question is from Brian DeRubio of the East Canadian.

Good morning. As I'm looking at your results over the last two years, you guys saw a pretty nice pickup in volume sort of right around the same time as one of your competitors stuck to a premium pricing strategy, that being Comoros. As Comoros is getting a little bit more aggressive on price, what changing dynamics are you seeing in the industry at this point in time?

Yeah, I mean, look, as you've already pointed out, others will speak for themselves and data is out there in the public domain. So I shan't address that other than acknowledge it's there and I concur with what you've said is what I've seen in reports. Speaking for ourselves, though, in Venezuela, I think it's very important to note that we've seen these past seven quarters at stable pricing. And, you know, that is, you know, it doesn't sound like, you know, big news, but if you go back over the past 20 to 30 years I've been in this industry, you know, with the sort of demand conditions we face, that is a very good result. And those sort of more stable prices have turned out, in my view, to be a price worth fighting for and we've held on to. So, You know, we've been quite vocal about, you know, not really looking to gain or lose share. I think if you look at the big picture and take a step back, you know, we still basically have the same sort of share levels we were, you know. We're focusing more, though, on getting that cash balance right, getting our inventories right, and that blend against servicing our customers better. and making sure they always get what we promise them. And I think they're starting to see the benefit of it, and they're sort of getting used to that. And that's why, you know, we're saying again in the fourth quarter, things are pretty tough out there, but we've still got this pandemic to cope with, but we're predicting stable prices. So I think, you know, it's well said.

Got it. Thank you very much.

Thank you very much. So we have no further questions, and I will now turn the conference back to Mr. Simon Turner for any closing remarks.

Thanks very much, Chris. And, you know, I'd just like to say to everyone on the call, you know, thank you. Thank you to all our associates for your work, our customers and suppliers for working with our business. We hope you all stay safe. at this time, of course, as ever. And we really look forward to resuming, you know, the times where we can see you personally face-to-face and conduct meetings with you. And with that, please don't hesitate to reach out to Kate here in Investor Relations. Thank you for your continued interest in Benator. And we look forward to speaking to you again on future occasions. Thank you very much.

Thank you very much. Ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.