Celanese Corp - Series A (CE) — Q4 2015 Earnings Call Transcript

Thanks, Carrie. Welcome to the Celanese Corporation fourth quarter 2015 conference call. My name is Chuck Kyrish, Vice President, Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer; and Chris Jensen, Senior Vice President and Chief Financial Officer. The Celanese Corporation’s fourth quarter 2015 earnings release was distributed via Business Wire yesterday after market close. The slides for the call and our prepared comments for the quarter were also posted on our website, www.celanese.com, in the Investor Relations section. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, Celanese Corporation’s future objectives and results. Please note the cautionary language contained in the posted slides. Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included on our website in the Investor Relations section under Financial Information. The earnings release, non-GAAP reconciliations, presentation and prepared comments have been submitted to the SEC in a current report on Form 8-K. This morning, we’ll begin with introductory comments from Mark Rohr, and then we’ll field your questions. I’d now like to turn the call over to Mark.

Thanks, Chuck, and good morning, everyone. Our prepared remarks were released with earnings, so I’ll keep my comments brief and then open the line for your questions. Today I’m pleased to report adjusted earnings of $6.02 per share for 2015 with EBIT margins of 21.8%. That’s a 320 basis point improvement year-over-year. We also generated record levels of free cash flow and returned $594 million to shareholders through share repurchases and dividends, a great financial year for Celanese. 2015 was also a year of tremendous organizational change at Celanese. As we accomplished several foundation objectives, which will contribute meaningfully towards achieving our 2018 financial targets. We aligned the company behind two complementary cores, driving clarity and focus through the corporation, while realizing significant synergies and leveraging the skills of our teams. We built the largest, most efficient, and lowest cost per ton U.S. Methanol plant in record time to replace an existing, I’m sorry, replace an expiring supply contract. We improved our manufacturing footprint and took steps to ensure commercial flexibility and our ability to take advantage of market opportunities. We implemented a robust pipeline process and launched over 1,000 new projects and through all of this, we delivered around $100 million of broad-based productivity gains across the company. Looking ahead to 2016, we’re confident of our business models, structure, and the teams we have in place to manage the challenging macro environment the world finds itself in today, one of declining energy and raw material prices, demand uncertainty, and currency volatility. We expect our commercial strategies and new product introductions, our pipeline successes along with our focus on delivering $100 million in productivity will also allow us to grow earnings this year by 5% to 10% keeping us well on track to meet our 2018 financial objectives. With that, I’ll now turn it over to Chuck for Q&A.

Right, thanks, Mark. So we’d like everybody on the phone to limit your questions to one question and one follow-up. Let’s go ahead and get started.

Good morning. This is Dan Rizzo for Laurence. In terms of Acetyl, I know things haven’t quite bottomed out there yet. I mean, what kind of visibility do you have going into 2016? Is this something where we’re going to have to just bring, I mean, step down our assumptions every two or three years or is it something that we think is finally kind of bottoming out here?

Well, I think there’s a couple of things going on there. The uncertainty in the market is largely based on the uncertainty around the amount of tow China is going to import. Tow volumes imported several years ago were well north of 100,000 tons, maybe 120,000 tons or so. Last year, we think they went to 50,000 to 60,000 tons. It is uncertain what they’re going to do this year, but I would not be surprised for them to reduce it again this year to some level. So that creates uncertainty back in the market. We’re taking steps to offset the ripple effect of that. So we’re looking at being flat year-over-year in tow. But I will say that the sooner that China can get to its end game the better, I think, for that market to stabilize and for things to reverse their course.

And then you mean, I think, you launched the 1,000 new products last year I mean, what’s – going forward, I mean, what’s the current – is there – I mean, the pipeline still as full, is it coming in a bit, or is it expanding?

Yes, as we look at it right now, we probably, we would forecast to be at 1,200 this year kind of level. We have – we’ve internally we need to keep growing that and we have programs in a way to grow that some of the launches you’ve seen of our new products in the marketplace like stepping out in nylon. We have some great technology there that we never leverage. So we’re doing more of that kind of activity and that’s certainly going to help us to expand our market and market space and I think they’ll help us launch more and more new projects.

Great, thanks. Carrie, let’s move onto our next question please.

Yes, good morning, folks. Question just around the profitability spread kind of between the upstream and the downstream. The upstream suffered a little bit in the most reported quarter, but the downstream held onto it. I think there’s some concern that that’s just a lead lag effect and then maybe some of that bleeds away as we go through this year. But can you just kind of talk about your ability to hang onto that pricing in the downstream products, kind of throughout the rest of this year?

Well, Duffy, I think, if you look at what’s happened and I’ll take currency as an example. We certainly were able to hold onto two-thirds of that margin this thing sort of compressed and we had a big currency impact. That’s I think pretty dramatically reduced this year, as we go forward as we anticipate quite as much currency volatility impact it. So I would say that directionally we feel okay about keeping that kind of ratio. But for us to keep that ratio, we need to have some stability. In other words, if things keep dropping at some point, Duffy, it could get hard to hold onto it, I think, just because of the uncertainty. Now, but we – let me see things now as we think a lot of the deflation has run its course, not all of it perhaps, but a lot of it has. And so we’re predicting that things will stabilize as we go through the first half of the year and they start getting better towards the second half.

Great. And then on the contract buyout, should we think about you guys making about your cost of capital on that, so if you invested $175 million, that’s going to be a $15 to $20 million benefit from buying out that contract? Is that the right way to think about it?

That’s really a good way of looking at it.

Okay, great. And then how does that leave Singapore as far as competitiveness and, say, versus producing and managing?

Well, today, today’s oil price is very competitive. It’s roughly the same advantage that you have in the U.S., so much more so than coal-based material. So we expect with the new supply agreement in place, we would be able to take advantage of that and drive greater market opportunities with that business.

Okay, thanks, Dan. Carrie, let’s move on to the next question.

Thanks. Just a question on the free cash flow comments. I mean, I assume, I get that modest increase is expected of the $733 million, not of the $556 million. But just curious, are you anticipating the definition of modest to me sounds like you’re saying it’s going to grow less than your earnings are going to grow, I’m just curious why that would be, because I think of next year or this year service being more lower raw materials flowing through inventory and so forth, so you kind of think, you’d have a working capital benefit, but maybe I’m missing something?

Yes, a couple of things. So first, yes, I realized that my comments didn’t clarify very well that when I said modest increase that’s about the $733 million, right, so that’s right. When we talk about 5% to 10% earnings growth, we’re talking about earnings per share, and as you know, we plan to do some share repurchases. So not all of that translates to cash flow growth. So you will get cash flow growth from underlying earnings increases. What I would tell you on working capital is, we had really strong working capital performance in the fourth quarter. And that is why that $733 million number sounds a bit better than what we talked about at our Investor Day, I remember exactly what I said, but it’s somewhere in the 600s, I think we said. So working capital had really strong fourth quarter performance. I think that probably goes back the other way a little bit in 2016, because I’m not sure we can sustain that same level of working capital. The other thing that I would mention to you is that, our capital spend net of the mid Mitsui reimbursement came in the low 300s in 2015, and that’s a little bit lower than what I guided to you at Investor Day. The reason for that is that some of our late in the year capital spend did not actually get paid in cash in December; it’s trickling into 2016. So I’ll be paying for some number of $30 million or $40 million of 2015 capital in 2016. Now again, I would reemphasize that we expect our sort of normal range to be more of the $250 million to $300 million of capital spend going forward.

Okay. And just as a follow-up, what is your expected tax rate for 2016? And just on the couple of comments and the comments from last night about you had some – there was a change in the rate, because there were some tax – there were some losses in jurisdictions without tax benefits. What were those and just how should we think about the tax rate in 2016 in general?

Are you asking about the GAAP tax rate or the tax rate we use for adjusted EPS?

Well, I’m asking for your – for 2016, I wanted to know what we should be using for adjusted EPS? And then, yes, on the GAAP rate for 2015, you said the increase was primarily attributable to losses in jurisdictions without an earning benefit?

Okay, I got it, got it. So for modeling for our adjusted earnings per share, we’re assuming that we’re going to be able to hold flat at 18% in 2016. I’ll say what we all would say, which is, as your jurisdictional mix of earnings unfolds during the year that can always change, but that’s our starting point. As far as our comments on the GAAP tax rate, which went from 33% in 2014 to 41% in 2015, yes, we said most of that is attributable to losses in jurisdictions without an earning benefit. And what that really means is, if you require or if you have big deferred tax assets, which are net operating loss carryforwards to post a valuation allowance against those depending on what jurisdiction they’re in. So you see, we had these very large charges for the contract termination in Singapore and the impairments in China. So you have to tax effect those and there are jurisdictions and you end up posting valuation allowances against those, that’s why it’s such a big number this year.

Okay. Thanks very much.

All right. Thanks, Vincent. Carrie, let’s move onto the next one.

Thank you. Good morning. Mark, in AI, how should we think about the methanol impact in 2016 versus 2015?

You mean, in terms of straight financial impact?

Exactly given the…

Yes, yes. I think $10 million a quarter is the kind of – and I’m going back to pre and post contract, does that make sense? So when we had the contract in place versus today, it’s probably worse per quarter, so $40 million per year.

Fair enough. And just looking at consumer given your forecast for flat tow year-over-year. Can segment income and consumer be flat as well year-over-year, or it could be up year-over-year given lower raw materials?

No, I think that there are a lot of puts and takes in that – in the material section there that’s pushing us towards a pretty flat year in that group. So let me give you one example of that – Ibn Sina joint venture is in there and that venture is getting hammered with lower oil price, which really impacts MTBE price. And so the return on that is getting pushed and we have two turnarounds in that venture this year as well, so it’s down $30 million. So we have a few big things like that that are pushing it. So net-net, I think we’re looking at for the material segment a pretty flat year. So up in engineered materials a little bit down in consumer and that’s pretty flat.

Got it. Thank you.

Thank you.

Thanks, David. Carrie, let’s go onto the next question please.

Yes, good morning, gentlemen. Nice startup on the methanol plant, seems like that’s running smoothly so kudos. I’m trying to understand a little bit more about the Singapore CO contract and why one vendor would be so far out of whack on the pricing side? Is there any – can you help me understand what exactly happened over there? I understand that you’re now going to earn your return on – your cost of capital plus on how you figured it all out. But I’m trying to see how we got into the situation?

Well, I don’t want to dwell too much details about the contract, but it was a disadvantage contract. We terminated that contract and we renegotiated a new contract, and we basically paid a termination fee to get out of that contract. So it’s not unusual for these contracts to have different bases based on the time that they were put together. And when this contract was put together, it made perfect sense and just evolved to a situation where it was not beneficial.

Okay. And I guess I can understand that. You talked about stepping into nylon, obviously this was one of the focal areas in terms of M&A at the recent Investor Day. Where do you stand on doing something on an inorganic basis in that area? Should we be surprised to see something on that front or not?

Well, we think that our model, Frank, is really pretty unique what we are doing and we are getting lots of accolades from our customers. One of the things our customers have told us is that we need more products in that portfolio, because when they got to solve a problem, they will quite often look to classical solutions of it. So if you look at if it’s historically a nylon problem, we may not be made aware of that opportunity. So we think it’s critical for us to add more products to our portfolio, things like PEEK, things like nylon, and we will back integrate in those as it makes sense is the way I would say that. So you shouldn’t be too surprised if we find a way to do that and announce we’re doing it at some point.

Thanks so much.

Thanks, Frank.

Thank you, Frank. Carrie, let’s move onto the next question please.

Yes, hi. Good morning, Mark. There are a lot of moving parts in Acetyl’s cost curve. Chinese coal prices have come down, so that should benefit you there. In the U.S. your advantage has declined, but also methanol has come down quite a bit. So you’re buying methanol and that should be a benefit. So can you just sort of put all that together and walk us through the Acetyl’s cost curve and how it stands today?

Yes. So if you, I think, my best on that, I think, as basis coal has come down in China quite dramatically and methanol has come down quite dramatically. The probably the biggest factor has been the consumption trend of methanol. There was a lot of methanol embedded in China, a lot of methanol plants built in anticipation of tremendous demand for methanol to olefins, P.J., and that’s not quite played out as people anticipated. So we find ourselves a bit long on methanol or longer on methanol than we’d like, so methanol prices have come down. What that does, it tends to push down the cost pretty dramatically in the Acetyl chain. And so we’ve seen Acetyl cost go down, and we’ll also see Acetyl margins collapse a bit in China, as demand for the Acetyl products has been pretty weak. So that’s a little bit of a world standard, if I can say that P.J. And methanol prices in the U.S. have backed up to basically China pricing less freight. So you’ve seen U.S. prices dropped quite sharply in the U.S. for methanol. So when you roll all that together, what I will say is that the U.S. continues to be hands down the lowest cost producer of Acetyl products. I think you’re seeing with oil prices at their current levels, you’re seeing in Singapore in oil-based in that same range. And you’re seeing China versus those two be quite disadvantage.

Okay, interesting. Thank you for that. And then question on AEM margin expansion. You did a good job of keeping the price while raw materials went down. So is that an initial benefit and would your customers look for some take backs on that and how do you see that playing out? Thank you.

Well, I think, thanks P.J. I think we have been resolute there. We’ve actually lost some volume in some cases, because we were so tough in that regard. And so I think this kind of necessary outcome you’ve got to find that line, and so we found in a couple places and we have to rethink that and go recapture that volume probably at a lower price in some cases. I think what I see today and the material space, people still are quite driven for a better solution. And I gave that one example just one example of the sunroof application, where you can find ways to not only meet weight or performance criteria, but you can also improve throughput. So in that case, this company got a much, much better product and solves a lot of needs they have plus they got a higher throughput. We can price that product higher, and they’re happy, they’re still making more money and the OEM is happier. So that desire on the part of our customers and I think those opportunities these new product launches really give us ability to hold our net margins out there and I say hold, because you’re going to get some deterioration and I mean two product as deflation continues to hit us.

That’s great. Thank you very much.

Sure.

All right. Thank you, P.J. Carrie, let’s move onto the next question please.

Good morning. This is Ryan Berney on for Bob. I just had a question kind of trimming on back of P.J.’s question there on, it seems like you’re really trying to aim for kind of pricing per value in your discussions with your customers. So I think my question is, assuming we start to see some tick up in oil prices some time over the next year or two. Is there any ability for you to push that price back there, or do you feel like the customers will kind of use that against you on that side, and there will be kind of a little bit of shrink there?

Well, I think for the most part, we structure our contracts where we have the ability to push through inflation. When you price for value you kind of – you move away from that equation a little bit. So you have a discreet transaction about the value equation you’re bringing, so raws don’t enter in that debate. So what I would say with that is that everything new that we’ve rolled into will have that priced in the value equation. The legacy products you’ll have to work that through if that makes sense. So short-term impact could occur if oil popped back up to $100 a barrel. But I don’t think our contract base would be very lasting for us, we pretty quickly pass it through.

Great, thanks. And then maybe I could also ask if kind of in your comments around the destocking in light of the leg down in the commodity prices. Does that mean that you feel like deflation is nearing an end, maybe if there is some also maybe the kind of the follow through that perhaps the destocking is over too or is that not what you meant?

I think when you look at it, if you take the time which we’ve done is and you really plot out currency, you plot out all the raw materials that are out there in the world. What you will see is, if there has been, for the most part things have trended down and started to operate at relatively constant levels that makes sense. It’s – I don’t want to forecast we’re totally at the bottom yet. But I think for the most part $30 oil is going to move to the system if I could use that as an example. And maybe we’re 80% of the way there or something, but we’re not 20%. So my kind of view is that the first half of this year is going to be us establishing that foundation at bottom and then things will start to move up from that.

Great, thanks.

Thank you.

Thank you, Ryan. Carrie, let’s move onto next question please.

Thanks very much.

Good morning, Jeff.

Hi, good morning, Mark. There’s all kinds of controversy as to whether China is going to have a hard landing or a soft landing? Do you have any opinions on that subject, given how larger your operations is there?

Yes, it’s – we still have opinions, Jeff. I’m not sure how you should weigh them. But what we see when we go there and engage with all of the customers we have in China and even government officials is that, they have a pretty clear view of where they are. And that view is they’re on a journey to transition that economy, they feel pretty comfortable with demand. So I know we sit and like to lay claim that their GDP growth is not what they say. And I think I would kind of dispute that, I think, it’s exactly what they say. The flip side is, there are not any kind of businesses that most of the chemical industry is in. So we’re seeing much lower growth rates. So my kind of gut is, when I listen to those guys, when I see the construction underway and I see the consumer appetite, which we’re enjoying a lot of success with, I think, China is not as bad in as bad a situation as everybody professes to be. I think it is tough in some sectors, and it’s certainly tough the closer you are to raw materials and manufacturing, but it’s also doing really, really well. In the consumer arena, it’s doing really well in areas away from the coast. So my – kind of my gut is, Jeff, what I would say is, I don’t think it’s in right fall off the face of the earth, I think it’s going to be a – in some way it’s a low year in China, but I don’t think it’s going to be a continued deterioration in china.

And then lastly with the AI result. Do you think that they’re now representative of what the first half is going to look like, or is the trend in margins up or down as best as you can tell?

Yes, Jeff, it’s all went there. I think fundamentally what we’re seeing is that the – what we’re expecting is business trends kinds of as they are now to stay kind of as they are for a bit. We’re not expecting a lot of activity, anything great to happen. And I think probably we’ve already entered Chinese New Year is our kind of reality. So I think the first half of the year is going to be the weaker half for us if I can say that, but that’s kind of consistent with the trends and how we close the year.

Okay, great. Thank you so much.

Thank you, Jeff.

Good morning, Mark. Wanted to revisit the AI segment. Obviously you’re a bit confusing, we saw EBITDA margins at around 22% in Q1 of 2015. And in the fourth quarter, they’re less than 14%. And along that period obviously, we’ve seen some steep declines in methanol pricing? So the first part of the question is how much today are these AI margins a function of methanol pricing. Meaning, I mean, with the ebbs and flows in methanol pricing should we continue to expect this volatility in AI margins? And part and parcel with that question basically is that in the past you had talked about a more normal or sustainable AI EBIT margin of 15%, so call it around an 18% EBITDA margin. And it seems from your earlier remarks that now you’re guiding to a lower sort of sustainable level of margins, is that correct?

Well you asked a lot of questions here boss. Let me backup a little bit so…

I mean, in a nutshell I’m just trying to figure out sustainable AI margins going forward in the current raw material pricing environment?

Yes. So we’re in a transition environment is what I would say right now. So the margins have been compressed especially in Asia dramatically compressed really driven by weak demand and collapse in raw materials. So we’ve seen a real margin compression in Asia and that’s leaked a little bit around the world if I can say. Although there’s not a lot of moving material outside of Asia. And so that’s been part of the margin compression. The other part is that some of those numbers you quoted were based on a time when there have been a very unusual series of outages in the VAM industry and that would certainly contribute in a very favorable way to those margins. So we’ve always said that we believe through thick and thin 15 is a right place to be, sometimes it would be a bit harder than that sometimes it would be lower than that on those margins. So I don’t see if I could say that, I don’t see the situation we’re being in now is a situation that’s going to continue. I think the margin in China will slowly start to improve in that process. And so I’m expecting we’ll be able to draw margins back up to a 15 and above before too long.

Fair enough. And as a follow-up, you touched upon the China earlier. Obviously, since the end of last year, there have been some dramatic feedstock cost escalations in Saudi Arabia. What sort of EBITDA hit should we expect out of Mecina from the sort of feedstock cost escalation in Saudi?

For this year it’s down $30 million now that 30 half of that or so is increased costs that we’re going through.

Yes, Chris – it’s probably a little less than that. It’s the raw that’s more the pricing. They also have some major turnarounds that essentially take them.

So call it $10 million for…

Yes.

Got it. Very good. Thanks so much, guys.

Thank you, Hassan.

Thank you. So, Carrie, let’s move onto the next one.

Good morning, Mark. You mentioned productivity contributed about $100 million in 2015. How much do you expect your productivity initiatives to contribute in 2016?

Well, we needed to be the same number. So that’s why we baked into our plans and that’s where we’re working for another $100 million.

Okay. Also on your intentions for your expansion in the U.S. Gulf Coast Bishop more particularly, do the lower oil prices affect your willingness to spend capital expanding there?

No, I think, we have the ability to make those expansions in a very, very cost effective way and we’re seeing pretty strong growth demand in those products. So no, it doesn’t impact us at all.

Thank you.

Thanks a lot.

Great. Thank you, Jim. Carrie, next question please.

Good morning. Thank you. Did your fourth quarter results in Acetyl’s include any sort of one-time negative impact, such as de-stocking or inventory holding losses and maybe excessive downtime at Nanjing and Singapore?

Well, there were few one-time items in there. We had an inventory correction in there. The hit is, we have some barges that didn’t ship out. Those together were $8 to $10 million I think of one-time kind of impact in that business, I’m looking at Chris, but I don’t…

That’s about right.

I think that’s – well, I’ll say it’s about – it would be limited $10 million, I think is what I would say.

All right. Thank you, Mark. And more broadly, did you experience destocking across your businesses elsewhere?

Yes, I don’t know so far as to say destocking. I think you broadly have a reluctant customer out in the world today, where they just don’t want to buy. So you’re seeing people kind of just not delay purchasing is almost what they’re doing, if that makes sense. So I think the flush-through if there has been enough oversupply has already kind of occurred and now we have people hanging around trying to see if we were at the bottom yet or if the market is going to start improving. So it’s more a weak consumer.

Got it. Thanks a lot.

Thank you.

Thank you, Carrie. Let’s move onto the next question please.

Great, thank you. Just had a question, you’ve got it to 5% to 10% EPS growth. Can you just help us understand the levers that would get you to the upper end of that? Is it mainly macro stuff, or is it stuff within your control?

No, I think you get the upper end of that; we need the second half to be materially stronger than the first half. Now, we think that may happen. But in the lower end of the range you have seen things, we think we can control, and the upper hand is we need some help from the global economy.

So, just specifically on that then, maybe you can just elaborate on what you’re seeing in the end markets? Is there a chance that tow will be down next year? And then also in autos have you seen any kind of skittishness? Are we peaking at levels where we are now, similarly in China and then in Europe as well, what are you hearing from your customers?

Yes, I’ll just run through a few things and ask Chris to hop in here in just a minute. Yes, you should have a view that we’ve kind of factored in tow being weaker this year than last year. And we’re not in a position to say exactly, because contracts are still underway, but we believe in those numbers we put out there that tow is going to be a bit weaker year-over-year in there, that’s on the negative side. On the positive side in there it’s clear that I think most – the conventional wisdom is that autos have peaked, even though we’re seeing forecast of roughly a 3% growth rate year-over-year globally in autos. We drill into that what’s going in autos, though, is that the opportunities remain very, very strong for us. And just tremendous interest in our products, we’ve got almost more things to work on that we can handle. So we think that autos are going to continue to be a good story for us and engineered materials continues to be a very good story even in this weak market. When you look at the Acetyl Chain, the closer you are to the consumer, our industrial specialties business, we’ve had great success there this last year and predicting that to continue. In this year and we’re predicting that that area is away from China we got a start to have a bigger impact on our business. And you may know we’re expanding a plant or building a plant in Singapore that will be completed this year. And so we’re doing a lot of prep work relative to that. I mentioned the Singapore situation and the economic situation there that’s been improved as we negotiated in the supply agreement. We think there will be an opportunity to take advantage of that and extract more value out of Southeast Asia than we have in the past. So when you roll all those things up and don’t discount our productivity efforts which are very strong with us, that's where we get in the 5% kind of range. And so we feel pretty good about that number. I think when you look at the 10%, we need a little bit of bounce here in this marketplace and we need demand to pick up a little bit stronger than it is right now.

The only thing that I’d add to what Mark said just to reiterate we’re going to drive productivity, we’re shooting for $100 million. The other thing I’d remind you is you saw us take a number of actions to control, what we can control around our footprint, around contract structure, and we did those things knowing that we’re in a tough environment and we’re going to do what we can do to push on cost and structure contracts the way we wanted to structure.

Great. Thank you.

Carrie, let’s move onto the last question.

Thank you. Within engineered materials what were the strongest areas and also what were the weaker ones then that offset the strength in some of the strong areas? I mean, is it year-over-year volume – year-over-year sales were relatively flat, I think, or volumes were relatively flat?

Yes, I think the strongest areas, I mean, I’m going to speak a bit generically for us. We’ve had some really good success with products that we’re bringing into in the consumer markets like appliances and durable goods, washing machine, things like that dish washers that have opened up some real opportunities for us that they were not there in the past. We’ve had in autos more success and it’s reflected in numbers getting our products built in the new models that are going to start coming on for us this year and next that are out there. We’ve also had some good success with composites, as we’re seeing more and more interest in thermoplastic versus thermoset composites in a number of applications. Those areas I would say we’ve probably done the best and I feel Poly has been a great success for us and it’s keying up some real strong increase profitability as the folks deal with the temperature, the need to really move deal with a hot temperature from LED lighting and things like that, those areas have been really strong for us.

But you were flat year-over-year in volumes, so what were the offsetting areas?

Well, the offsetting areas is where I was jacking price too much and I got rejected. So it wasn’t so much a market offset as it us pushing harder than perhaps I should push.

And then as a follow up, most of your engineered plastics have some vertical integration advantages. As you grow the nylon platform, whether you do it organically, inorganically, is there a vertical integration strategy that will follow from the products launch strategy?

I think, I guess, there’s two parts to that. It’s often quite nicely vertically integrated. But it can often be a disadvantage too if you’ve got a business that doesn’t return as cost of capital on the manufacturing sector. So we’re trying not to constrain ourselves and require ourselves to be vertically integrated. So in a case of nylon, we’ve got great technology, we’re getting in the market. We continue to look for opportunities to vertically integrate. And so if we can find those in a way that will be good for us and our shareholders will take advantage of that. But we don’t want to require that to be in these markets.

Thank you.

Thank you.

Thank you, John. We appreciate everybody’s time this morning. We’ll be around for questions later today. Carrie, at this point, I’ll turn the call back over to you.