Avient Company (AVNT), a number one supplier of specialised polymer supplies, companies, and options, just lately held a webcast to debate its fourth quarter 2023 outcomes. The corporate introduced Dr. Ashish Khandpur as the brand new President and CEO, following the retirement of Robert Patterson. With a constructive outlook on future progress, Avient reported a 24% improve in adjusted EPS for the quarter, regardless of a 9% decline in gross sales. The earnings name additionally offered steering for the primary quarter of 2024, projecting an 8% improve in EPS.

Key Takeaways

• Dr. Ashish Khandpur succeeds Robert Patterson as President and CEO of Avient Company.
• This fall adjusted EPS rose by 24% year-over-year, reaching $0.52.
• Gross sales declined by 9%, however EBITDA grew by 7% resulting from pricing methods, deflation, and value management.
• The corporate forecasts Q1 2024 EPS to be $0.68, marking an 8% improve from the earlier 12 months.
• Adjusted EPS steering for 2024 is about between $2.40 to $2.65, with adjusted EBITDA predicted to be $505 million to $535 million.
• Avient’s capital allocation technique prioritizes natural progress and potential small bolt-on acquisitions, with a give attention to rising dividends and decreasing debt.

Firm Outlook

• Avient is remodeling to a 100% specialty portfolio and expects worthwhile progress beneath new management.
• The corporate is optimistic about demand enchancment in packaging and client markets, sturdy protection functions demand, and progress in rising areas.
• Uncooked materials deflation is anticipated to profit the primary half of the 12 months, whereas the second half might face challenges resulting from an incentive reset and better rates of interest.
• Avient’s capital construction stays versatile, with no near-term maturities and no restrictive debt covenants.

Bearish Highlights

• Healthcare finish market gross sales decreased by 9%, though potential enchancment is anticipated in 2024.
• Constructing and building and industrial sectors remained gentle.
• Weak spot within the telecommunications market is attributed to rising rates of interest and destocking.
• The Specialty Engineered Supplies section noticed a lower in EBITDA resulting from weak demand within the telecommunications finish market.

Bullish Highlights

• Packaging (NYSE:) and client finish markets are exhibiting indicators of enchancment.
• The Shade, Components, and Inks section skilled a 20% progress in EBITDA.
• Optimistic gross sales progress was noticed in Latin America’s packaging finish market.
• Fiber optic cable demand is anticipated to enhance within the second half of 2024 with the funding of the BEAD program.

Misses

• Gross sales within the fourth quarter had been down 9% resulting from weaker demand.
• The corporate didn’t present steering for 2025.

Q&A Highlights

• New CEO Khandpur mentioned market positioning in Latin America and plans for capturing progress alternatives.
• The corporate goals to scale operations in Latin America if it turns into a bigger hub.
• Avient is specializing in expertise and knowledge to serve prospects effectively with out considerably rising SG&A prices.
• R&D spending shall be allotted primarily based on progress priorities, with no particular goal proportion.
• The corporate’s aim is to scale back leverage to a 2 instances ratio.
• Order visibility is shorter than regular, with present visibility about 20 days out.
• The influence of the Chinese language New 12 months and Easter on demand is being monitored.
• The telecom enterprise, particularly the fiber line enterprise, represents about 4% of gross sales.

Avient Company’s earnings name highlighted a strategic shift towards a completely specialised portfolio and the implementation of efficient price administration practices. The corporate’s management change marks a brand new chapter, and with Dr. Khandpur’s intensive expertise, Avient is poised to navigate by way of the challenges and capitalize on progress alternatives within the coming 12 months.

InvestingPro Insights

Avient Company (AVNT) has demonstrated resilience in a difficult market, with their most up-to-date monetary reviews reflecting a strategic give attention to profitability and progress. As traders analyze Avient’s efficiency and outlook, key metrics from InvestingPro present a deeper understanding of the corporate’s monetary well being and future potential.

InvestingPro Knowledge:

• Market Cap (Adjusted): 3550M USD

• P/E Ratio: 5.97, indicating a probably undervalued inventory given the corporate’s earnings.

• Dividend Yield: 2.85%, showcasing the corporate’s dedication to returning worth to shareholders.

InvestingPro Ideas:

1. Avient has established a monitor document of constant dividend funds, having raised its dividend for 13 consecutive years. This displays a secure monetary place and a shareholder-friendly coverage.

2. With internet revenue anticipated to develop this 12 months, traders can stay up for potential earnings growth, which may drive the inventory value upward.

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Full transcript – PolyOne Corp (AVNT) This fall 2023:

Operator: Good morning, women and gents, and welcome to Avient Company’s Webcast to Talk about the Firm’s Fourth Quarter 2023 Outcomes. My identify is Norma and I will be your operator for at present. At the moment, all individuals are in a listen-only mode. We may have a question-and-answer session following the corporate’s ready remarks. As a reminder, this convention is being recorded for replay functions. I might now like to show the decision over to Joe Di Salvo, Vice President, Treasurer and Investor Relations. Please go forward.

Giuseppe Di Salvo: Thanks. And good morning to everybody becoming a member of us on the decision at present. Earlier than starting, I would prefer to remind you that statements made throughout this webcast could also be thought-about forward-looking statements throughout the that means of the Personal Securities Litigation Reform Act of 1995. Ahead-looking statements will give present expectations or forecast of future occasions and will not be ensures of future efficiency. They’re primarily based on administration’s expectation and contain quite a lot of enterprise dangers and uncertainties, any of which may trigger precise outcomes to vary materially from these expressed in or implied by the forward-looking statements. Please consult with the investor presentation for this webcast for quite a lot of elements that might trigger precise outcomes to vary. Throughout the dialogue at present, the corporate will use each GAAP and non-GAAP monetary measures. Please consult with the presentation posted on the Avient web site the place the corporate describes the non-GAAP measures and gives a reconciliation or historic non-GAAP monetary measures to their most instantly comparable GAAP monetary measures. Becoming a member of me at present is our President and Chief Govt Officer, Dr. Ashish Khandpur, and Senior Vice President and Chief Monetary Officer, Jamie Beggs. We even have Bob Patterson, who’s serving in a transition advisory function with the corporate. Bob will briefly make some opening remarks earlier than we begin the dialogue on efficiency. I’ll now hand the decision over to Bob to start.

Robert Patterson: Thanks, Joe. Good morning, everybody. Final November, I introduced my plans to retire and pursue my lifelong ardour for educating and spending extra time doing that on the College of Michigan, my alma mater. At the moment, I’ve the privilege of introducing Dr. Ashish Khandpur, who succeeds me as Avient’s new president and chief govt officer. Ashish took over on December 1, and brings a contemporary perspective to our specialty portfolio that has undergone an amazing transformation over the previous decade. Ashish joined us from 3M the place he spent 28 years. A chemical engineer by schooling and commerce, he started his profession there and rose to grow to be chief expertise officer of the corporate. Over these almost three a long time, he distinguished himself as an excellent scientists, innovator, and finally, a confirmed enterprise chief and operator. His final function at 3M was group president of transportation and electronics, a $9 billion enterprise. It is a enterprise he took into excessive progress finish markets with new applied sciences and functions, which is precisely the place Avient is targeted. I’ve been with the corporate nearly 16 years in complete, and almost 10 as CEO. Throughout that point, we now have upgraded our portfolio by divesting commodity companies and reinvesting the proceeds in two transformational and 17 bolt-on acquisitions. We’re the primary main coloration formulator on the planet. We have now constructed a composites portfolio from scratch, which incorporates Dyneema, the world’s strongest fiber. We have fully remodeled the place EBITDA is generated from and now have 100% of our companies devoted to formulating specialty options. I look again on my time with the corporate with quite a lot of delight and appreciation for what we completed. The remodeled portfolio is an ideal springboard for Ashish to raise Avient to the subsequent stage of efficiency. I am assured he’ll drive worthwhile progress and create long run worth for our shareholders. His background and experiences are good for the subsequent period in Avient’s journey. To our associates, shareholders and board of administrators, I thanks on your assist and belief throughout my tenure. I now depart you in very succesful palms with Ashish, Jamie and the 9,500 associates at Avient I’ve had the pleasure of working with.

Ashish Khandpur: Thanks, Bob. And congratulations in your retirement. A metamorphosis of any form is troublesome, troublesome for a company to undergo, however much more difficult for the particular person main it. These achievements of remodeling Avient to 100% specialty portfolio took dedication, expertise, and positively management. Bob has offered all three. It’s a retirement well-earned and I want him the easiest in well being and happiness. Within the first two months I’ve been with Avient, I’ve had an opportunity to fulfill with a number of stakeholders, together with traders, prospects, and naturally, our gifted associates. A standard query I get is, why did I be part of Avient. Whereas there are lots of elements to contemplate when altering roles, it finally boils all the way down to the large potential I see to profitably develop the corporate. Doing so requires a tradition of sturdy buyer focus and a related portfolio of applied sciences, each of which Avient possesses. Leveraging these, together with amplifying innovation in excessive progress market segments or round secular tendencies will assist us develop profitably in a sustained method. This may also require some daring pondering, prioritization and appearing with braveness, that are all management traits I’ve personally developed and honed over time, and that I shall be purposeful to instill in my groups as nicely. Over the past a number of years, the corporate has highlighted its 4 key progress drivers of sustainable options, composites, healthcare and rising areas. I see these as secular progress areas, and so they at present make up 60% of our enterprise. The group did an ideal job laying out the market dynamics underlying sustainable options, in addition to showcasing a lot of our differentiated formulations ultimately September’s Investor Day. I am additionally impressed with the trajectory of our composites portfolio because it continues to displace wooden, glass or steel in an rising variety of functions. And whereas a smaller portion of our portfolio at present, the healthcare enterprise is sticky, worthwhile, and an space that can proceed to develop steadily as our inhabitants ages and other people pattern in the direction of extra self-care. Now, turning to our earnings announcement this morning, I am extraordinarily happy to complete the 12 months with fourth quarter adjusted EPS of $0.52, reflecting a rise of 24% over the prior-year quarter. Jamie will present extra particulars on some steering for 2024 in a second, however first I’ll share a couple of observations on the demand tendencies we’re seeing throughout the tip markets and the foremost areas of the world that we serve. As we famous in our earnings launch, our two largest finish markets of packaging and client benefited from the slower tempo of destocking through the fourth quarter. They make up a bit greater than 40% of our gross sales. And whereas nonetheless down year-over-year, they’re much much less offered than in earlier quarters. It’s price noting that each packaging and client gross sales had been down sequentially solely 4% and three%, respectively, from the third quarter to the fourth, regardless of the very fact typical fourth quarter seasonality we skilled in our enterprise. This, together with the order tendencies to begin the 12 months and insights from our prospects, provides us confidence that destocking has largely come to an finish in these areas and that orders are extra of a mirrored image of underlying demand. We mentioned the healthcare finish market intimately in our final quarterly earnings name. Whereas fourth quarter gross sales in healthcare had been down 9% year-over-year, the tempo of destocking has additionally began to gradual. This fall gross sales had been up sequentially 3% from Q3. Basically, the underlying demand from shoppers for well being care functions stay regular. Examples embody the elevated use of self-injection pens for drug supply, steady glucose displays to handle diabetes, in addition to catheters and tubings utilized in surgical procedures. And whereas a few of our healthcare prospects proceed to handle the stock ranges to begin the 12 months, we count on to see enchancment in demand as we progress by way of 2024. In industries that are delicate to rates of interest and are extra capital intensive, corresponding to constructing and building and industrial, we do see continued softness, each from destocking and general demand. There are new enterprise good points in composite functions changing typical constructing supplies, which ought to present some offsets to the economic and constructing and building finish markets. Telecommunications was the weakest finish marketplace for us within the fourth quarter, and we count on softness to proceed within the first half of 2024. Rising rates of interest and destocking have undoubtedly impacted demand right here, as has the delayed timing of tasks flowing from the BEAD program. Jamie will cowl extra particulars on this matter once we focus on SEM’s efficiency. Rounding out the tip markets, gross sales and protection functions proceed to be sturdy, as demand stays excessive in gentle of continued geopolitical tensions and up to date conflicts abroad. The first progress is in private safety the place Dyneema performs a big function in defending troopers with ballistic vests and helmets. Shifting on to the regional observations. Every of the areas have completely different fundamentals which have resulted in various efficiency in 2023 and can proceed to affect how we stay up for 2024. Beginning with our largest area, we count on the US and Canada to proceed to enhance because the 12 months progresses, given client sentiment seems to be resilient regardless of larger rates of interest. This area does have barely extra publicity to well being care, which means probably sluggish progress within the close to time period, however ought to finally drive larger progress as destocking ends. Telecommunications may also be a big tailwind as soon as destocking ends and when the federal funding is totally allotted to states to increase the set up of fiber optic cable beneath the BEAD program. In EMEA, demand stays tepid with client staying cautious resulting from extended geopolitical points, larger rates of interest and the shortage of presidency stimulus or infrastructure spending in comparison with different areas. Nevertheless, protection is a vibrant spot and destocking seems to have ended for packaging, which is the most important finish market within the area. In Asia, our outlook stays cautious resulting from uncertainties within the China economic system, and it stays to be seen how the brand new authorities stimulus package deal will translate to spurring the economic system in 2024. Whereas Latin America solely represents 5% of our enterprise, we do view it as an necessary area not solely to faucet into native market alternatives, but additionally as a area the place our world prospects look in the direction of shifting manufacturing. Our gross sales had been up year-over-year in Latin America within the fourth quarter in our largest finish market, packaging, and we count on that momentum to proceed into 2024. With that, I’ll now hand it off to Jamie, who will focus on our fourth quarter outcomes in addition to our preliminary outlook for 2024.

Jamie Beggs: Thanks, Ashish. Your overview gives good context to now dive deeper into our outcomes. As Ashish talked about earlier, we delivered adjusted EPS of $0.52, exceeding our steering of $0.47. This was pushed by a slight beat in gross sales and favorable internet curiosity expense. Fourth quarter adjusted EBITDA margins of 15.9% was additionally barely forward of our steering and displays a 240 foundation level enchancment versus the prior 12 months. This margin growth was pushed by favorable combine, deflating enter prices and prudent price administration. Favorable combine got here from bettering demand in packaging and client finish markets, in addition to sure functions in our composites platform, corresponding to protection. Regionally, Europe was the important thing contributor to the margin growth and drove the year-over-year earnings progress within the quarter. efficiency versus the prior 12 months fourth quarter, gross sales had been down 9%, principally resulting from weaker demand, with some offset in value and blend and a marginal profit from FX. Finally, our skill to cost successfully, seize deflation and handle prices allowed us to develop EBITDA by 7% and adjusted EPS by 24%. From a section perspective, Shade, Components and Inks grew EBITDA 20% within the quarter, pushed by the earnings enchancment in Europe. As we mentioned earlier than, lots of the remaining price synergies associated to the Clariant acquisition had been to come back from Europe, as we rationalized operations and adjusted staffing ranges. These price reductions helped the underside line in addition to the influence of uncooked materials deflation. Shade additionally benefited from bettering demand in client and packaging market, which has a good influence on combine for the section. The Specialty Engineered Supplies section was down $6 million in EBITDA from the prior-year quarter and $5 million of this discount is because of publicity within the telecommunications finish market the place demand was considerably down. Particularly, this impacted our fiber line enterprise that gives composite functions utilizing fiber optic cable. This finish market has been impacted by stock destocking and timing of the funding associated to the BEAD program. For many who aren’t acquainted, BEAD, also called Broadband Fairness Entry and Deployment, is a $42 billion program to increase excessive pace web entry by funding infrastructure and adoption packages within the US. States submitted plans to the federal government and approval is imminent. We anticipate fiber optic cable demand to enhance within the second half of 2024 because the states started receiving funds for his or her broadband deployment tasks, after which grow to be extra vital in 2025. Much like coloration, SEM additionally benefited from uncooked materials deflation and favorable combine, pushed by sure composite functions within the constructing and building house, in addition to in protection. This stuff, together with price actions, partially offset the discount in demand. Shifting to the fourth quarter EBITDA bridge, we spotlight the influence of demand, value and blend, in addition to uncooked materials prices on a year-over-year foundation. Beginning with demand, it’s down much less in comparison with earlier quarters because the tempo of destocking slowed in most finish markets. Additionally highlighted on this bridge is the influence of pricing and deflation, which greater than offset decrease demand. That is the third consecutive quarter we have seen uncooked materials deflation on a year-over-year foundation, and we count on that to proceed as we begin 2024. Additional down, you will additionally see the influence of sure price discount actions that had been initiated at first of 2023, together with focused European restructuring and diminished discretionary spend, which offered a $13 million profit within the quarter. These price management efforts greater than offset wage inflation. All in all, we had been capable of develop EBITDA 7% regardless of gross sales being down 9% for the quarter. Turning to 2024, we’re offering steering at present for the primary quarter and full 12 months. We count on Q1 earnings per share of $0.68, which might mirror an 8% improve over the prior 12 months. This takes under consideration the tip market and regional tendencies Ashish commented on earlier. To reiterate, we’re seeing bettering tendencies in our largest finish markets, packaging and client, and powerful demand for protection functions. Balancing that is the continued destocking in telecommunications and healthcare in addition to finish markets which might be extra delicate to larger rates of interest, corresponding to constructing and building and transportation. On a full 12 months foundation, we anticipate adjusted earnings per share between $2.40 to $2.65 and adjusted EBITDA of $505 million to $535 million. We’re offering a spread to account for various eventualities of how demand may finally play out in 2024. We’re optimistic that demand within the US will strengthen as destocking involves an finish throughout all markets. We additionally see progress in rising areas corresponding to Southeast Asia and Latin America, however we’re extra conservative on our view of China since their progress shall be depending on elevated client spending and sentiments. Lastly, Europe’s underlying demand is prone to be muted, however we will confidently say destocking is finished and we imagine sustainable options, particularly in packaging, will assist us develop year-over-year. We do count on uncooked materials deflation to offer a profit within the first half of the 12 months. Conversely, within the again half, we now have some headwinds related to an incentive reset. Curiosity expense is anticipated to be between $105 million and $110 million in 2024. That is barely decrease than 2023 primarily based on the latest SOFR curves and the total 12 months advantage of the $100 million paydown that we did in August of final 12 months. As well as, we count on our efficient tax price to be between 23% and 25%. We’re taking a balanced view of 2024, the place we’re optimistic that demand will enhance, but additionally aware that there are specific financial elements that might affect specific finish markets and areas. Earlier than we open the traces for questions, I will now flip the decision again over to Ashish for a couple of closing remarks.

Ashish Khandpur: Thanks, Jamie. I am very happy that we completed the 12 months higher than anticipated, and we view that as constructive information as we head into 2024. It has been a few months since I joined Avient. I’ve spent a lot of my time in nice discussions with traders, prospects and workers, digging into our companies, portfolio and the innovation pipeline. Timing was good, in that simply two weeks in the past we hosted our annual management convention the place we introduced collectively our high 150 leaders to have interaction and align on expectations, in addition to elevated collaboration throughout companies. Amongst my many encouraging takeaways from the convention is that we now have a buyer centered group that likes to win and is totally dedicated to doing so going ahead. What’s subsequent for me is to proceed having strong dialogue with our many stakeholders. Given the range of our buyer base and expertise portfolio, these conversations are proving to be extraordinarily invaluable, as we additional evolve how and the place we serve our present and future prospects to profitably develop our enterprise. Which leads me to some top-of-mind issues that can grow to be core themes of our pondering as we evolve our technique. First is driving worthwhile natural high line progress, whereas increasing our margins on the underside line. We have now ample alternatives to drive worthwhile progress by specializing in our prospects, leveraging secular tendencies, combining our expertise platforms, and profitable share within the market. The second is amplifying innovation. That is an space of nice curiosity and alternative as nicely. Sturdy buyer pushed innovation is close to and expensive to my coronary heart, not simply due to my background, however as a result of I’ve seen firsthand the way it powers enterprise and delivers progress and margin growth. We’re an progressive firm and, in our future, we shall be much more so. And the third is round persevering with to construct and spend money on our management and other people. Avient has a extremely aggressive and collaborative tradition. We dwell our model of problem accepted and embrace the world required to ship on these challenges. Our subsequent chapter at Avient will problem us in new and thrilling methods. So we are going to proceed to make sure our groups are ready for future success. Once more, I’ll have extra to share as our technique and plans are constructed out. However let me shut with this. In my quick time right here to this point, it has clearly solidified my very first impressions that Avient is a essentially sturdy firm and we now have vital progress forward of us. That concludes our ready remarks. Jamie and I are completely satisfied to reply any of your questions now.

Operator: [Operator Instructions]. And our first query will come from the road of Michael Sison with Wells Fargo.

Michael Sison: I suppose my first query, for 2024, are you able to give us a considered the vary of gross sales progress for 2024 relative to the steering, type of the low finish/backside finish? And possibly if you assume volumes will form of inflect and switch constructive?

Ashish Khandpur: Let me simply reply that one to begin with after which Jamie will add to it. As you heard within the ready remarks, we’re not offering steering on the gross sales per se. However to get to the estimates that we now have offered on the vary, you will notice that you will want gross sales to develop from low-single-digits to mid-single-digits as a complete vary. With respect to your second a part of the query on inflection level, I feel it is the story of first half/second half, as we see it. I feel it’ll be a reasonably flattish first half for those who ask me. After which many of the demand progress is constructed into the second half. So, Jamie, would you want so as to add one thing?

Jamie Beggs: Mike, I feel we tried to explain within the name at present, the primary half specifically, if we check out telecom and healthcare the place we nonetheless see discontinued destocking, I feel that is the rationale why we imagine that the primary half shall be slower than the second half when it comes to quantity restoration. However we do see some dynamics throughout the market specifically, for those who have a look at protection and telecom probably coming again, the again half shall be stronger general. Hopefully, that provides you some additional readability on how we predict gross sales may evolve for the 12 months.

Michael Sison: Only a fast follow-up. Ashish, I do know it is nonetheless a bit bit early, however when you consider form of the long term earnings energy for Avient, any preliminary ideas of the place EBITDA may get again to when it comes to a agency restoration over the subsequent couple of years?

Ashish Khandpur: Mike, I feel a few issues right here. One is that, within the close to time period, as we identified, our progress drivers, the 4 progress drivers of sustainable options, composites, healthcare, and the rising areas are going to be a catalyst for not simply progress, as a result of they’re in excessive progress markets rising at 5% plus finish markets, but additionally for margin growth as a result of they’re accretive to the margin. So I feel that can allow you to with percentages to get higher as that pie grows. So, proper now, these 4 progress drivers are 60% of the income. And so, as they proceed to develop, they grow to be larger piece of the pie and create extra worth. Then on high of that, within the close to time period, we will increase that progress additional by actually notching up cross promoting and collaboration throughout companies, in addition to replication at scale, which implies, actually, how briskly can we replicate our success with one buyer at different locations with scale, particularly with some OEM accounts, that is an ideal alternative for us. On high of that, over time, we will construct the brand new progress vectors, which might be coming from markets that are rising quick. There’s heaps taking place on the planet of expertise, on the planet of regulatory, and so forth, so forth. And so, these create alternatives for us as a result of supplies will play a giant piece as these applied sciences are getting realized. And so, for us, it’s discovering a few extra progress vectors that can scale the place our expertise portfolio is related and the place we now have entry to the client. So, I feel a mixture of these three issues that I discussed would give us not simply progress, but additionally good margin growth as a result of we shall be differentiated.

Operator: The following query comes from line of Frank Mitsch with Fermium Analysis.

Aziza Gazieva: It is Aziza on for Frank. For my first query, I used to be questioning, following these current years of notable portfolio transformation that the corporate has undergone, how ought to we be fascinated about capital allocation priorities for this 12 months and possibly even subsequent 12 months?

Ashish Khandpur: As you’ve got heard in my ready remarks, one in every of our high priorities is to develop high line progress organically profitably. And so, I feel that units the place to begin for our capital allocation technique as nicely. We are going to make investments extra in natural half than we now have been. And as we determine new progress vectors, that can want extra assets, not simply R&D, but additionally industrial in addition to operational facet. However I feel natural progress shall be our high precedence. On the M&A facet, we now have finished an ideal job with the portfolio piece that Bob talked about in his remarks. And we’re nonetheless integrating the 2 large acquisitions we did within the final three years. So, within the close to time period, I do not see any large acquisitions, however I cannot rule out acquisitions per se. We have now a cadence on M&A. And if any acquisitions are finished, they are going to be smaller in measurement and doubtless bolt-on. In fact, our dedication to giving again to shareholders on dividends is there. We proceed to increase the dividends as our earnings will develop. That dedication is there. Lastly, we now have been paying debt. Over the past 15 months, we now have paid $300 million of debt. And as our earnings develop and demand comes again, we may have flexibility in both paying the debt again or shopping for again shares. So these choices will be made as related.

Jamie Beggs: Aziza, I feel you discover that we now have quite a lot of flexibility with regards to probably both paying down debt or share repurchases as a result of we have no close to time period maturities till 2025, in addition to we have no restrictive debt covenants. So we now have quite a lot of flexibility in our capital construction to have the ability to pivot as we see alternatives within the market.

Aziza Gazieva: The commentary on the tip markets and geographies, it is useful pondering of the total 12 months steering. I used to be questioning if it might be doable to type of break down that EBITDA, $505 million to $535 million. For among the different underlying assumptions so far as internet value profit, price inflation, only for the total 12 months, the way you guys take into consideration results and simply among the different underlying bridge objects for 2024 EBITDA?

Jamie Beggs: I will begin. Aziza, one of many issues that has been factored into our steering, one is to what Ashish talked about earlier to Mike might be low to mid-single-digit high line progress. First half or the second half dynamics, he defined. We do count on uncooked materials deflation within the first half and a bit little bit of an unknown within the second half, relying on how market situations roll out. However that is in all probability $20 million to $30 million within the first half. And we talked about this on the decision, within the again half, we do have some headwinds almost about incentives being reset. In order that’s one thing else to contemplate within the vary. However these are the first elements. You talked about FX, there’s not going to be an entire lot of FX dynamics. I do know the euro has strengthened from 2023 to 2024, however we additionally see another currencies which have weakened in opposition to the US greenback, just like the , that is mainly going to offset most of that.

Operator: Our subsequent query comes from the road of Mike Harrison with Seaport Analysis Companions.

Mike Harrison: I used to be questioning if we may possibly dig in a bit bit extra on the enhancements that you’ve got seen within the destocking tendencies in packaging and client. Would you say that the tendencies have been type of precisely the identical in each of these markets? Perhaps just a bit extra coloration on what you had been seeing in This fall and possibly what order patterns are trying like and what prospects are saying to this point in Q1?

Ashish Khandpur: Perhaps I will begin. And if Jamie wish to add to that, she will do this. As I discussed within the ready remarks, proper, the packaging and client declined slower than what we might see in typical seasonality from Q3 to This fall. In order that was a constructive, in fact. After which, as we’re trying into Q1 and the way issues are shaping up, we’re seeing that these tendencies are persevering with in the correct path. So we really feel fairly good that many of the destocking is over in packaging and client markets. With respect to geographies, I feel we nonetheless see some slowness within the European market with packaging and client. Though the destocking is over, however the demand facet is a bit bit slower. However remainder of the world, we’re seeing underlying demand to maintain shifting in the correct path going ahead.

Jamie Beggs: Mike, so as to add on to Ashish’s feedback, the packaging was down 5% on a year-over-year foundation, which is a big enchancment from the place we now have been trending for 2023. And as we stay up for Q1, we count on that to grow to be even decrease variance on a year-over-year foundation. Shopper was down 12% within the fourth quarter. Though we imagine destocking has come to an finish, I do assume that the demand related to client is actually not a lot of a restocking, however simply decrease stock ranges to handle decrease demand. After which, if we have a look particularly in China, that is the place we see some weak spot in client, which isn’t to be surprising, simply due to that sentiment that is in that area.

Mike Harrison: Ashish, you are coming from an organization with a a lot bigger R&D group with quite a lot of nice capabilities. I do know it is early days. However are you able to speak a bit bit about what you see throughout the Avient R&D group that you just assume they’re doing nicely and possibly what areas you would possibly look to enhance?

Ashish Khandpur: Though I come from a giant firm, I can let you know Avient is fairly sturdy with processes and R&D capabilities as nicely. The largest factor that R&D can do actually good is specializing in the client and ranging from there to innovate. And I feel that is one factor that Avient will get very nicely. So I am actually impressed with the client focus this group has. The gathering of expertise portfolios, over time, with completely different acquisitions has given us many constructing blocks now that we will begin placing collectively, mixing and matching, collaborating throughout companies to create extra worth than what we now have been doing previously. That is a possibility for us going ahead.

Operator: The following query comes from the road of Laurence Alexander with Jefferies.

Daniel Rizzo: It is Dan Rizzo on for Laurence. You talked about that uncooked materials prices are deflating within the first half. Is that going to be adopted by some value kickbacks to your prospects?

Ashish Khandpur: From our perspective, we see that the group has finished an excellent job sustaining the pricing self-discipline, whilst issues have begun to normalize. So we do not see a lot influence of pricing lower on income. If there may be something, it’ll be very remoted and minimal in nature. We really feel like we create differentiation, and by bringing worth to the purchasers, and that provides us a bit bit extra sticking energy and aggressive benefit versus our competitors.

Daniel Rizzo: As volumes flip constructive and probably speed up, how ought to we take into consideration incremental margins within the two completely different segments?

Ashish Khandpur: On the CAI facet, the colour facet, we must always see count on incremental margins simply because we now have finished quite a lot of good work there with respect to driving synergies, but additionally the fee reductions and issues like that. So, that ought to translate into – and also you’re seeing that in fourth quarter, the outcomes that Jaime confirmed, how sturdy the margin was. And there, the group has finished an ideal job on price discount, sustaining value self-discipline, and in addition margin growth. On the SEM facet, margin growth story will rely upon what occurs to the destocking story on the telecom facet, what occurs to the destocking story on the healthcare facet, but additionally how sturdy the demand for Dyneema stays, which, as you understand, is fairly accretive to our margins. So all these three issues would play a giant necessary combine to outline the margins on the SEM facet, after which that, in fact, determines the entire margin for the corporate as nicely.

Operator: The following query comes from the road of Kristen Owen with Oppenheimer & Firm.

Kristen Owen: Wished to ask in regards to the free money circulation outlook for subsequent 12 months. As you might be speaking a few potential return to progress and seeing among the combine advantages after which among the working capital that you’ve got been carrying over the past couple of years, simply how we must always take into consideration free money circulation within the context of return to progress?

Jamie Beggs: There is a couple completely different dynamics within the money circulation simply to take into accounts. The return to progress, we might count on a money use on working capital. A great way to consider that in your fashions is we do have a few 12% working capital runway. We count on that to proceed. The group has finished a extremely nice job managing stock in gentle of gross sales being extra unsure. In order that’s going to be one of many elements that shall be of use for this coming 12 months. One other dynamic, what you noticed on the steering slide, is that our capital expenditures will transfer as much as $140 million. We did about $120 million final 12 months. The rise is actually primarily centered on sure IT investments to drive larger productiveness effectivity, in addition to the use knowledge. And that is actually centered across the S/4HANA implementation that can start this 12 months and can go into the subsequent couple of years. And we gave data on the tax price in addition to curiosity. So that ought to provide the major parts as we take into consideration free money circulation for the 12 months.

Kristen Owen: I did wish to ask about that CapEx quantity. So thanks for the context there. Considerably of a associated query to form of funding for progress and natural progress alternatives. Ashish, you had talked about in your ready remarks, notably round Latin America, and as we’re fascinated about among the close to shoring tendencies, are you able to simply assist us perceive that the market positioning in Latin America, the way you’re positioning to seize a few of these tendencies?

Ashish Khandpur: Truly, with respect to R&D on the natural facet, if you consider Latin America, particularly, the most important markets are packaging and client. And so, we now have to work – as nearshoring occurs, whether or not that goes into no matter industries are enjoying, wherever our prospects are enjoying, we now have to play with them in that a part of the world. And that is what provides us the market to hurry benefit, that is what provides us the closeness to buyer benefit, and the relationships that we construct. I feel ultimately, we comply with the place our prospects are going. And if Latin America turns into a much bigger hub, we are going to accordingly scale our operations and our capabilities in that a part of the world as nicely.

Operator: And our subsequent query comes from the road of David Huang with Deutsche Financial institution.

David Huang: Ashish, getting your give attention to natural progress, I suppose two questions. One, given the service depth your online business has, ought to we count on a interval of elevated SG&A prices, given your focus to drive progress and reinvest? Second, I feel R&D traditionally is under 3% for Avient. Is that the correct stage going ahead?

Ashish Khandpur: Service depth, as you mentioned, so much is occurring with respect to the world altering, because the depth is rising, however there’s additionally expertise getting accessible to serve prospects higher. And I feel a bit little bit of that’s what Jamie was mentioning, with the S/4HANA and using knowledge to serve prospects in a extra environment friendly manner. So I do not count on our SG&A to develop larger with respect to serve the depth for the purchasers, to serve our prospects higher. I feel our groups are doing an excellent job when it comes to actually doing the very best use of buyer stratification and using knowledge and data to serve our prospects in a more adept manner. And even expertise, particularly in our coloration, for instance, we at the moment are utilizing digital instruments to show round coloration matches sooner with our prospects from 4 days to 2 days, for instance. And I feel that is an actual enchancment and can give us a aggressive benefit. In order that’s simply an instance of how we’re utilizing expertise to serve our prospects higher. On the R&D at 3%, I do not assume there is a magic quantity for R&D as a proportion. As I mentioned proper now, we’re taking a look at how we prioritize no matter we’re spending within the locations the place we ought to be spending it, that are the areas of progress for us, and are we feeding them within the acceptable manner? And as we evolve our technique and construct new vectors, if we have to add extra, we’ll do this not simply in R&D, however different components of the group as nicely as a result of, I mentioned, every part needs to be linked to the technique ultimately. And no matter is required to do this, we’ll put assets accordingly.

David Huang: On leverage, I do not assume you are assuming a debt paydown this 12 months. However I feel beforehand, you had a goal of two.2 instances by 2024. Is that also a legitimate goal?

Jamie Beggs: Our aim is to get down nearer to 2 instances. We ended the 12 months about 3.1 instances. Based mostly on the place we’re anticipating the 12 months to finish up, we’ll be under that as nicely. And as you understand, we use a internet debt quantity. So, regardless, if we really pay down debt or maintain it on the stability sheet, that leverage quantity does not transfer, however we’re dedicated to being nearer to 2 instances over time.

Operator: [Operator Instructions]. Our subsequent query comes from the road of Vincent Andrews with Morgan Stanley.

Turner Hinrichs: That is Turner Hinrichs on for Vincent. I am questioning for those who may measurement or simply present further coloration on the chance for fiber optic talked about for 2025. And what are you anticipating as that ramps up within the second half of this 12 months?

Jamie Beggs: That is our telecom enterprise, particularly our fiber line enterprise, which represents about 4% of gross sales, simply to place that in context. We do count on the primary half to nonetheless be in a destocking mode with some restoration within the again half. However I might say it is fairly muted. On a year-over-year foundation, I do not count on there to be a lot progress there, contemplating how a lot first half destocking we nonetheless count on there to be. And as we glance into 2025, it actually depends on how that BEAD program is rolled out. There is a large alternative almost about fiber optics and laying down and bringing web entry throughout rural areas. We did present some data at one in every of our final investor days, that was again in September, about how that chance can develop. And we nonetheless imagine in that. However we’re not offering any steering at this level for 2025.

Turner Hinrichs: How was your order visibility this quarter? And might you present any notes on combine? Final quarter, particularly, you had famous visibility was shorter than regular resulting from plant shutdowns. Is that affecting the primary quarter in any respect?

Jamie Beggs: So, from a visibility standpoint, and we talked about this within the final quarter as nicely, is that every one of our prospects are managing stock very tightly as they monitor the demand from their prospects. So, it is about 20 days out now versus, possibly a couple of months in the past or a 12 months in the past, it was nearer to love 45 days. So it’s one thing that we’re monitoring, we now have to be nimble on our provide chain to have the ability to meet that. Some visibility points as we take into consideration the primary quarter is that we’re in the course of Chinese language New 12 months. So, proper how Asia goes to come back again is an element that we’re taking a look at till they really begin putting orders once more. That is an element. After which the way it finally ends up enjoying out even with Easter coming in a bit bit otherwise within the first quarter versus the second quarter final 12 months is one thing that we’re additionally watching. However that ought to provide you with some context. It is a bit bit shorter. We’re assured in our steering that we’re giving out for the primary quarter. However it’s a a lot shorter visibility than we have had traditionally.

Operator: Thanks. I am at present exhibiting no additional questions presently. This concludes at present’s convention name. Thanks on your participation. You might now disconnect. Everybody, have a beautiful day.

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