ESI - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen, and welcome to the Element Solutions Q2 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] I will now turn the call over to Varun Gokarn, Senior Director of Strategy and Finance. Please go ahead.

Varun Gokarn

Good morning, and thank you for participating in our second quarter 2021 earnings conference call.

Chairman Dorman. Franklin; Executive and Ben are Carey CFO, me Sir CEO, Martin Gliklich; Joining with FD accordance conference In Regulation call. webcasting we this are or Fair Disclosure, without this Any is Solutions in rebroadcast retransmission prohibited. written of redistribution, any of or strictly form the Element expressed consent call

and current financial and prepared Please call, the uncertainties. today’s and financial can U.S. release our introduce and results. that actual risks accordance supplemental Investors to are Today’s for filings on our a slides assumptions our is CEO to predictions. financial Please subject These in of make the the & differ future refer to on material my company’s non-GAAP been are under statement expectations cause that certain statements During about forward-looking future expectations supplemental events release, and GAAP will include Element reflect refer that Solutions. most GAAP. for from materials earnings slides of reconciliations Gliklich, results to also be not website to definitions we pleasure in of to found section measures. could has now views company’s comparable performance News SEC recent risk and based discussion Events. of with It measures these Ben earnings the that materials information and These factors

Ben Gliklich

joining. you Varun, Solutions you, Thank for an Element outstanding good Thank everyone. quarter. morning, had second and

momentum same compound between quarter to strong The in XXXX cash strong. XXXX our the drive deploy businesses, stark. our in growth. free markets contrast We’re and in of the remain executing to efficiency prudently well capitalize the is second on our strategy trends period growth And against flows and earnings

quarter while quarter. accelerate economy the chain-related sales the XXXX, grew earnings the the industry doubled. share second supply Electronics in year-over-year, industrial continued of adjusted to constraint, per Despite most COVID-impacted and XX% lapping Our broader

to vehicles the applications, expanding secular continue electric of and XG-enabled see markets increasing increasing benefits mobile the and in megatrends Our core of automotive electronics content adoption of rising devices.

its continues attractive Our capture and demonstrate growth. growth market to our beyond to value business team within to above ability markets these well and position

the activity of supply mix expected, created the these first factors, second the job logistics. in we The an impacts, that seen XXXX to around Inclusive combined raw regions the Freight and scarcity meaningful raw pricing, XX% effect materially of outstanding the global have increased stretched economic weighed sequentially. is supply continued of basket chains material challenges modes increased nearly increases. outweighing far raw first half Many and in all increase quarter logistics profit with and quarter. raw did transportation material team materials times gross negative As across significantly. almost the margins economy Demand costs for navigating lead material price recovers. metals, in relative as saw which on and our of cost

expect into We imbalance to this XXXX. continue

longer stocks partially supply reflects case prices. lead higher persisting our business impact shortages also of semiconductors times. free of the material second decision chain building associated impacted in quarter. Our also automotive continue cash the broad raw quarter and of the to in the It reflects flow Shortages in input

broader and demand electronics in was relationship shortages chip The construction, is a Americas saw this muted in Our offset the machinery however, Industrial than Europe, broader automotive markets building and more in business growth record markets. the market products clear. the in strong from and demand customers automotive by between

benefiting demand slowdown. We’re more we market than electronics the this are in from from automotive suffering

results. our our robust markets, a reported terms, margin year-over-year adjusted being and summary global In grew quarter see supply quarter currency the organically lost challenges second X, online XX second these products of driver a We lapping of the and expanded of economic our largely versus The together basis. record top deferred can that will additional accompanied propelling on in comes be Our XX%, strong are by adjusted points XX% line Slide EBITDA grew which a of On many supply are you constant XXXX. shutdowns grew the recovery is second year-over-year expectation in is primary year-over-year. adjusted that our manufacturing Overall, XX% and quarter EBITDA business performance automotive levels. basis financial the of to altogether. demand EBITDA until the chain COVID-XX demand

of Operating fully. expense adjusted in travel we higher it margins an metal and savings EBITDA over controlled However, figures, an as grew benefit initiatives. well year-over-year was XX%. level crisis sequentially net This to on harvesting when cost sales still remains lapping and XXXX volumes a containment. prices takes leverage as but more increase are period despite and the the Operating modest XX% higher suppressed drove international of compared year remainder pre-pandemic of is increase overall the cost certain increase OpEx sequential in the we’re a in

to targets leading growth in ESI, criteria our earnings projections that with surface for support representing markets. opportunity reach many bolt-on excluding This opportunities exciting of in a are growth. I’ll announced the technology, June approximately synergized better business. and a technology before sales, EBITDA range we of our attractive long fiscal interface hallmark attractive our of service automotive technical adjusted its the Group our in acquisition specialist this deeply The one a purpose-built to within conformal in cash price customers solutions products a like EBITDA believe own, acquisition margin for On annual for announced our portfolio, current needs rigorous businesses which year believe history we our and their the treatment Assembly with line our the of offering and million Coventya’s encapsulation of electronics generates history we H.K. a Coventya speak for of existing later assembly represents we On is and million capabilities business of our other protect in industry-leading prices. requirements our and to It’s of continue market to multiple fit Coventya In reinvest €XXX for exchange and global those at ending Coventya Wentworth $XXX $XX understand see on be the technology was our unicorn with Bringing our highly purchase times flows meet we today of XX, reasonable flow, XX.X%, to high combine adjustments, them the is more that or of a promise. Solutions’ XX strong into at we single-digit our Both next-generation adjacency rates. a under net approximately high-quality as with pass-through and semiconductor good the September. and family ability We multiple based coatings, broader materials Solutions are the hardware we X, about $XXX closed This Our electronics our with ahead customers available been new well. price we and planned growth. growth. thermal sizable is people adjacent strategic, approximately million represents opens great industrial people, in our High-quality solutions; and markets its applications. The adjusted has impact business Element in value, markets. electronics. electronics many demanding an bring their adjusted XXXX this Electrolube acquisitions but million mobile support existing furthers acquisition years. product shareholders, net synergies. EBITDA that the call. closing May increasingly and of acquisitions business, million quarter, will opportunities; for two metal cash great second accretive provide accelerated of global sales inside our That $XX

While people more that to resilient, pace importantly, the and transmissible and over. months, from today. pandemic vaccinations the threats global safety. variants first, and represent our and Throughout our we’ve health far economy of rise the real the past put continues global differential more economic partners remains global world the XX around recovery and of The appears

together companywide more So continues safety our while to to and enhanced spending we’re Element colleagues health Solutions operate person, under with in time looking protocols. forward

our We’re and this deeply now take our quarter grateful to performance challenge. Carey? our will Carey supporting customers colleagues who company throughout have in detail. focused remained our through on first more extended you

Carey Dorman

demand power of in in from Global growth from the lapped drivers XXXX. we and period in shutdowns automotive electronics morning, which Slide XX% market detail electronics the production the Thanks, segments. growth sustained organic our impacted for drove temporary consumer quarter, Organic sales we quarter, demand. electronics the demand levels verticals, second quarter, of high the most was the and double-digit market XX% again automotive everyone. Strong last Solutions growth Assembly declines growing organic QX, year same COVID-XX-related on Ben. three their in Good all at with the net share the X, the in second was worst in of electronics in additional rates. and automotive in On two

the production organic a organically, Solutions the by Americas hold for chain XX% shortages driven industrial wafer experiencing Specialty China Graphic our automotive sequential strength and business Net XX% the similar from organically of XXXX. in assembly automotive basis. Solutions vertical a drivers construction mobile quarter, grew on saw electronics. Our challenges. from in and strong Industrial back quarter in & products. quarter. with Semi end European up demand COVID-XX-impacted offsetting other up Solutions XX% our Industrial Circuitry grew for softer and well an demand chip most market lapping strong increased both plating demand had strong manufacturing, Solutions advanced and organically, XX%, sales first On Industrial grew supply basis, and a

flat to is Sequentially, growth more profit. Graphics business than significantly. are passed worked a Americas increases turning uptick improved contractually with smaller they price sales price no dollar activity. which in on expect second continues the the raw from to material We’re We Metals cases, This the but demand the quarter year-on-year. them margins sequentially to passing basis a would impacted Other increased on by grow inputs. XXX from Energy these experienced by customers. grew year-on-year packaging sales inflation contribution quarter business we on in Across to many businesses, year-over-year net customers, drilling to and our prices the organic was as impact Europe. in gross sector typical slow XX% margins was by greater in at the business be metals In impacted than net we seasonality. significant, impact. as points and input offset although quarter other to XX%, as sales the inflation in of Solutions and deepwater

lag on a typically is Gross effect. there impacted margins due dynamic. basis sequential to Although this were a

we we pricing Overall, We logistics, in to expect particularly generated several year-over-year to inflation, the sheet. half for improved X to least. which certain in quarter. flow months, on next EBITDA second $XX up While in million actions expect this cash continue addresses means the catching in costs second continue rise, quarter. moderate cash at flow balance the margins Slide adjusted free the the still second of help

moderate builds In finished capital to investment inventory safety has driven chain reliability customers stronger-than-anticipated expect given some quarter-over-quarter make in us. associated disruption. quality stock our an goods. and on by pass-through particularly capital is working We primarily our million, prices, growth, net this our raw close investment raw provide been to with materials is This build supply necessary inventory increased $XX from to investments sales the and year-to-date and metals continued material total, that continue across both working additional

can continuity. times, we in believe quarter, this As through business last we differentiate difficult continue noted ourselves we to

Our our modest given full reasonable and second expectation year is capital forecast current requires release free million of in half, $XXX balance the which levels cash working of working capital the we demand flow believe the year. a the for baseline

been the add-on fund debt, and affirmation to of financing a close also In with acquisition. demand times from This a XXXX. of concurrently and reinforces both the conditioned is the fixed is X% under Strong which debt on successfully new expected net credit to end in upon euros a rate the ratings our This more June, discuss markets of on XXXX trailing With through priced agencies of XX-month rating Coventya to and and to closing swapped of QX of recognition an our guidance. existing X.X proposed stability. basis. Coventya. $XXX the acquisition term was turn Coventya finalization quality to ratio will that, detail has the at business loan it adjusted majority to Our provide allocated the its the Ben? I update Coventya and of of Ben we our back EBITDA at to credit add-on our acquisition million acquisition the documentation,

Ben Gliklich

detail Asia. a particularly in facilities and admired ending eight for Solutions employees, and business has in Carey. with strength Coventya with aligns in projected their business seamlessly world, Thank is sites September. sales on of our its and excellent capabilities growth million with that around roughly a business. represents and you, Slide markets X is key acquisition that provides in of applications, their XX% Brings we’ve our align expansion scale Industrial complement This criteria nice current more and meaningful decades. technology year of decorative Coventya. More in revenues over global company fiscal the R&D XXX business $XXX than our The a to manufacturing leadership solutions our a an XX anti-corrosion for Industrial protective

positions these that wider of adoption in addition to a large believe attractive important electric will surface product solutions increasingly we Coventya metal In become of enhancing like our in light treatment offers vehicles. growing categories, with adjacencies portfolio and

on which world-class our built cost product the this customary we look Beyond on forward from is progress within customer to not action to commercial believe Subject over closing synergy leveraging cost infusion increased We both $XX closing well to year this for technological transaction. integration forward one relationships strong family, decades. which and September million a anticipate team future between two in an opportunity, growth we operating to enhanced several overlaps the ESI companies will This to a accelerate But acquisition. you combination is as exercise. of welcoming and We brings look expect calls. growth conditionality, customer than significant as see of complementarity updating savings a and reach. the years of this more a the businesses, our by talent, we breadth, experienced

Turning XXXX. to the for balance of our outlook

the Our to against challenges Despite beyond are ongoing and market our teams of updated our guidance our is well on COVID, strategies X. capture growth. remain healthy Slide value executing markets

to $XXX in the third to adjusted of expect quarter be XXXX We EBITDA range million. $XXX million

and trends, this results and logistics With expense We demand to similar from increasing into and $XXX XX% $XXX assumes guidance expect in this contribution sequentially of to first modest costs represent price growth the EBITDA million. quarter acquisition and range. of third adjusted to the XXXX a at a balance EBITDA adjusted growth we’re full actions quarter, year-over-year no the of visibility Coventya. second environment expectation taken in range demand should travel year increasing half half operating arrive million would our These

a that in the new half quarter. third share also and by strong expect also contribution least basis, adjusted expectation XXXX adjusted $XX return per we XX% with for excludes typical per which our sequential acquisition, from an this and second guidance and at a is driven pattern a which in $X.XX, We contribute EPS annualized raising the year expectation year-over-year. million adjusted This to to expect approximately demand approximately phone share full Embedded on growth seasonal earnings $X.XX EBITDA guidance deceleration to more fourth about launches an is Coventya the quarter, in year. we in any holiday

multiple and near-term this on strategic position longer-term fronts, execute deployment to through and to best capital ability our showcases for growth. quarter second Our both earnings organically business

make prudently wrap conviction thank powering to to to behind demonstrated all I’d continue up, of them. end line who our and support in our talented We our ability the Element secular that and high of have around To With markets a possible. stakeholders to people particular, open outstanding megatrends invest quarter questions. helped Solutions please dedicated like operator, for for continued the this and, their

Operator

today from Goldman [Operator Instructions] Koort Sachs. We’ll take our question first with Bob

line Your is open.

Bob Koort

flow half. cash you do you you’re get half very such ever, on in step-up capital logistics Carey, the second down about working in wonder and how morning. much. to little Does the that that talk the Good able could Ben the cost bit a a some that cash Thank flow? of draw presume second lift you and I nice if for

Ben Gliklich

the appreciate I Yes. question.

the the investing of been in significantly half over year. we’ve first So working capital

Some seen longer that times. we’ve by of well. some is of significantly scarcity, is lead that material sales driven And as raw grow

to half out growth, look back the begins we As that the of growth sales year, significant sales to that abate.

this half made cash sizable so the the should and investment to flow the as over capital opposed back for we release get guidance the a step-up And have in we to giving we’re stable half, in first which flow year. the accounts to cash working even

Bob Koort

And can house your to was in see do of Coventya, zinc metal costs? opportunity more side help something is and Do industrial And but Ben, of bring ESI leverage I And/or in you that expect there? have curious, there negotiated? Asian those than do on the little be they we that already growth us a do the Is presence assets? maybe pass-through bit I maybe other focus Asia industrial an they secondly, if then the business. faster has just auto Electronics Or in that and you to their don’t in less know to give an to Electronics sales?

Ben Gliklich

Yes.

broader into are both regard more are and where The strong and supply we of Electronics, decorative significant their of is presence automotive to at to now, opportunity more in complementary that helpful Asia, question in bringing be to Asia which should growth Element’s are OEMs a also all around very our but have going points. our touch more Coventya the having market that’s side. The chain of overall Coventya fold the in sell the products and anti-corrosion in value Asia, our sales driving and across of breadth relative large into opportunity presence around and market all relationships an around is bigger of an becoming because to Coventya the OEMs, there the of verticals increasingly convergence the a right electronics we With Element having across automotive seat supply more in the to of scale table. with the take across to So on we’re trying the is customers portfolios. OEMs our and where chains business advantage less

which opportunities have So more should by customers, into growth combining those to offering going a translate we two, better forward. for

Finally, more in on metal the tin materials to surface like assembly that’s is the pass-through, around and pass-through our treatment regard silver dynamic metal whether in businesses, or Industrial. company and around with our side things less Electronics

we the ability has gone has However, Coventya price the our and been when we’ve up, do surcharges couple something actively take quarters. which of is over been to And have price pursuing. past

Bob Koort

Great. help. Thanks for the

Ben Gliklich

Thanks, Bob.

Operator

Our with UBS. from Spector question comes next Josh

Your open. line is

Josh Spector

Yes. question. Hey, Thanks guys. for taking my

Can that interpret I So strong can demand into ex metals quarter, you that if guess, I sales in assumption? guys as sequentially as might consider both that of And to decline? you EBITDA segments? first, relatively trying specifically third temporary stable be that a time? if you walk the sequential indicate Thanks. recover fair how in And drivers the through of is much

Ben Gliklich

from Josh. the the appreciate I quarter into good for question, top stable line baseline is that quarter. Yes, the third that a Yes, think second I

And you’re are to the that roll quarter of couple out right second quarter. drivers to from a pressure the of point there we there a is bit of third And margin as so that.

is logistics increases. cost first The

in on see logistics over couple rise dollars significant million in so basis a the third don’t a and of And the we abating. percentage quarters, That’s couple of seen quarter. of headwind that past cost we’ve

a to OpEx more second begin normally. we as The is travel bit

today to second the offset year some That’s So over we’ve is by entering business it we’ve the what and action quarter. add heads significantly the had than was half more the a support first year. pricing the of that to larger taken in

I’m that’s sure line levels. that from or how the say these you environment What’s perspective to not a a so a get in that ready transient EBITDA and to sales. we’re cost decline logistics And are temporary record permanent flat this is framework, modest on on

extrapolate how sure years. so to many I’m not for that And

quarters a we to to of to or And so pricing actions we and something that time. over is that’s something should offset similarly, And material increases, be raw have continue tailwind profitability pursue contributing should from a to come. bit in actions the raw pricing pricing – material

Josh Spector

Okay. Thanks. full the follow-up guidance And on just year a update.

$XXX $XXX range. quarter, so million $XX million last million, to So at you were a

a I but at range, here, and I’m to you’re million understand Now XQ. quarters with left nitpicking good and only go on $XX two visibility

creates are that what here? the that curious bigger for? And the what Just risks you’re seeing you’re uncertainty accounting additional perhaps

Ben Gliklich

a is question. It nitpicking Yes.

of variability the by a So is couple driven factors. increased

the persisting increase that’s gives of logistics bit in and abates, is first little or that or whether The downside. potential a upside whether costs us that

anomalous of And quarter, last second understanding was the XX-ish magnitude you many fourth the in is in into years, an the to percent quarter saw The down Obviously, third fourth whereas see year. the quarter. the acceleration prior being slowdown the we quarter. an fourth year relative

third quarter. sure our holidays quarter fourth as selling remarks, and a slightly the the the launches of exactly quarter that more that volumes the in you not order the hence, with is, what range fourth bit variability we’re in expectations. magnitude in a wider drive days But is expecting, a there than slowdown product prepared just fourth also quarter, We’re and heard higher in fewer

Josh Spector

you. Okay. Thank

Operator

now We’ll Steve Instructions] go [Operator America. Bank to Byrne of with

open. Your is line

Steve Byrne

Good morning. Yes.

we gross up rough not, about even that kind sequentially. decline like maybe sequentially. back raws, or non-metallic inflation was rough So, really right in resilient. is you XX% up you numbers metallic relatively that’s if looks your real And some math raws Ben, I metallic gross the And sequential know said provide were margins, yet don’t slightly out math raws. and talking here, but margin your specific of flattish, you inflation the if were in quick around in it a

to it? comments a doing offset shift Any something that? this helpful. there helped Or that you to is is mix offset that So be on were would

Ben Gliklich

And let a of me comments question. I around that Yes, margins. make appreciate couple

of metal through price really inflation – about price metals sequential the the offset attributable half taken half material of we’re and impact cost raw second actions a about pricing And quarter – we’ve passing that and inflation in We’ve down, will were was products selling inflation that cost. by raw margins of significant underlying aren’t seen. on driven of to reflection that profitability price sequentially, at aren’t don’t we’re metal the the material pass-through is because margin inflation. which logistics decline So

so we’re just we inflation And look really logistics dealing the into half. cost with back as

recall this And materials As of that quarter. particularly of level concern we year cost year-over-year snapback we’re is reflect, to which on was the in in if headwind took at as significant raw what and margin OpEx and profitability. containment, year-on-year crisis on XXXX there margins. about conversations and you of second and And raw point, reductions seeing, was logistics dynamics headwinds, with a the concept an in last this expanded inflation having a think we the quarter back we trajectory the our yet basis, in in on the the would cost the the line, additional line that the cost happen advance despite those material on and any significant we’re margins about those both and

to we’re year-over-year margins the exclude sales, exclude what on on expect metal. which the we where things impact impact if if other basis? margin you margins way to were on them be incremental The basis, the of is metal a would XXs, the a you in incremental at were – And of EBITDA EBITDA year-over-year was looking is

we’re light execution an as margin the Steve, inflationary for and taken testament in other the environment the delivered out, resilience quality is price is And proud you of of quite we’ve So business. actions that. responsible pointed cost of we and a the something to indeed,

Steve Byrne

for a chemical you’re three capacity little expansions what win-loss your businesses, expansions? And in your of at with And – customer? are wanted whether the seeing you’re seeing comment those about which that incremental those getting to you respect the ratio you most the to expansions any of that, on to electronics are supply contract supply capacity ask just bit buckets

Ben Gliklich

Yes.

So can But are I made at our as need hardware. as understood is that, to making chips boards to And see made that be chips be online a to going in comes semiconductor find now the think that are of running circuit capacity capacity. right need results. electronics it’s that to full well the onto be and segment to investments you to – beneficiary assembled industry going capacity substantial additional grow we’re semiconductor go and into

whole that companies struggling growth and additional the high smaller And time in seeing and engaged leaders help of we’re second, at at technology utilization; first, in assembly so raw competitors chain largest also in And that materials. is when expansion with high get supply market investment a electronics capacity. the fabs PCB and the significant to curve end are to support capacity

on an sales basis. very excess ourselves a high opportunities consider through ongoing very do positioned grow converting are we so to clip well And in of market the and at share gain

Steve Byrne

Thank you.

Operator

Jon question Tanwanteng Please from go CJS ahead. comes next with Securities. Our

Pete Lucas

Jon. morning. for It’s Lucas good Hi, Pete

lot, implied relates dive I’ll more brief. of and terms expectations assumptions industries covered seeing for into are You Can you what guys it people you’re just have in a they a your little so keep that your bit as inventories? low in it just number QX you a up customer to catch are basing you already? QX? the be do across well-stocked to of think Seem Or

Ben Gliklich

Thanks Pete. question, for the

by we’ve the implies XX%, XXXX what basis, selling for XXXX So days and guidance and – which years and prior, the fewer a a QX that is driven in in seen typically is what on magnitude, our fact which we’ve a slowdown, order pickup. there’s the of seen fourth sequential quarter

into not seen to same conservatism of that. underwriting There’s we’ve level what in that So pickup. the that based first demand half such been buoyant of a bit has we’re

has chip the – We’re not expecting has industry, growth for seen by which muted shortages. a in driven been substantial which automotive example, recovery

to and and to logistics So tight seasonality environment raw materials normal slowdown. we’re assuming get continued around a that

Pete Lucas

one just update and for optimized for Great. M&A acquisitions? if capital question. structure and Any me last is And a further type then bigger-picture currently Thanks. the on the beyond Coventya pipeline

Ben Gliklich

Yes, absolutely.

reach customer looking into to businesses bring our our that technologies, And bring for The earnings very So the fold balance consideration capabilities, value now. customers shareholders. into levered and pro healthy to at sheet we’re compound to the times forma, acquisition, always be great we of even universe of and three is taking inside should of nicely Coventya end right the year. additional the

some a measured to the size the We execute now acquisition have something Coventya position very the prior like deploy way to and capital. to from of and we in would find additional the So done a a should standpoint do year, of be structure. balance in sheet so something more or in we’ve terms we between end tuck-ins capacity that

Pete Lucas

Thank helpful. Very you.

Operator

We’ll next with Research. from take Josh ahead. Silverstein question Wolfe go Please our

Josh Silverstein

Good morning, little or beforehand, it year back million Were on up? guys. the to I that going was working of I $XX only built working some to half just of just million items. that suggesting the the $XX the of get back you’re you bit within Thanks. million roughly that capital you asked wanted capital know of that. clarify a $XX

Carey Dorman

its Josh, Yes. Carey...

Ben Gliklich

to want take you that? Carey,

Carey Dorman

Yes.

second moderation that capital grown our some investment. when compare that But will by what is would the XXXX EBITDA versus to our amount of in come and million you guidance. The release working probably that inventory business is from significantly updated we’re has you expecting expect a So in $XXX a implied yes, overall so half.

Josh Silverstein

it. Got

Okay.

about at correctly? would plus flow be, XXX of call a the plus minimum, Just maybe let’s a remaining for I not on of I the at to Or the kind of looking base it, million If the next capital, think, XXX $XXX cash point? as that. on least be, should top $XX thinking kind just am just to add Coventya let’s about you year million of it say, potentially that could get thinking mark, free that the starting I’m at working over kind potential acquisition what

Ben Gliklich

I going think the XXXX. us any it’s comment given us biggest early of cash flow other sales to in for contribution on free Coventya to And for growth. year be driver, than obviously, is

modest X%, should our think grows capital would would our I growth. So yes, than in expectations commenting it X% on business than a in working more investment to an long-term specifically sales where this that, take the be But view of with hopefully, higher or be line year. environment

Josh Silverstein

growth And Okay. had customer had minimum sort other quarter, seemed any It like I you the or was thing that, so some limited wasn’t the Yes. on in I that’s you whatnot. I in the of visibility. mean, visibility then mentioned first suggesting. assuming

or you’re is visibility? year. about visibility it talking back guys just being for Is else you half side? terms this Or cautious on? more cautious the demand you’re at your there the auto have something greater of of in strong some least Now are on Where being

Ben Gliklich

Yes.

Where we months year the forward. look general that over on get us and order patterns of confidence seen the we going we’ve for we’ve chemistries been but used are based the as we into is couple to at production industry production of seen commentary half or have customer revenue the lines and we’ve think our of that I So the driver hard clear see. out being and utilization the our is sites, where back the lines that’s always key of visibility at the trends that those past flow-through the

on so a of the how regard That’s to a a holiday around things quarter, we as slow get December relying we to seasonality. in fourth year. keep In in further November level decline what a and accounts And for that the that’s would that see half second typical typical season. normal the confidence quarter, get And down materially we we’re fourth referring With to. guidance. we in

We’re don’t counting this if those on slowdowns year. that happen, there’s Obviously, upside.

shortages within been of slowing as business. pocket of automotive our The very the chip upside by sector surface be we have That’s industrial offset where growth machinery in more in treatment given other industry, than were the would about, pick been talked see relative guidance If applications technologies. to up, surface significant we’d upside industrial treatment auto and the industrial and other to demand equipment products we’ve for and quarter. for building fourth strong our automotive the

Josh Silverstein

Thanks, Awesome. guys.

Operator

Shaw Our Chris from next Monness, comes question Crespi. with

is line open. Your

Chris Shaw

Yes. have I but because one. jumped everyone. asked Good I actually queue out the Pete thought morning, question, another of I

mean, I is industrial was the complementary that of sector guess I’m out major, is figure sure sort player? concentrated you industry market make On more trying the are to surface how the not the I than player? Coventya I kind itself. just sort acquisition, concentration the – less of I it I status in treatment you of than of in maybe minor, this what of was Or curious, does is. still – a major XX%

Ben Gliklich

Chris. Sure,

market. strength said on we leaders participate. gives define us always depends and which where market how markets the really this We’ve additional Coventya we’re coating it in in you niche So And decorative in is anti-corrosion coatings.

which that think metal, legacy have plastic like markets of for that plastic protective look resistance metal its about example, that majority have quite overlaps and participated put decorative nicely been what and sells, and make other And and on in. hallmark So XX% rust about market. the and technologies companies Coventya that as Element coatings coatings then in

niche us, And in opens in geographical in a Asia, but But leadership the our a about this market increased in in are market for also were which so we’ve those and going adjacent relative is to leadership from us, attractive global that share, metal acquisition talking markets growth we additional that’s market whether where – to is markets. scale light it said, end as we specific earlier or from for and interesting perspective, an market surface Q&A treatment. we’re market underrepresented

supply drive the nice for we So broader able with into. helping crack is and OEM in to market market increasingly has to important vehicles This our leverage Coventya table haven’t more we which electric at business anodizing within in and that lightweight. great growth. them it’s been aluminum, and a seat position chains a that drive technology, become is automotive can

market existing improve Element positions in this for in Solutions. markets very our markets is So some exciting and both opening helping other doors

Chris Shaw

for deal? that any you to getting end, anticipate difficulty approval wouldn’t I the guess, and

Ben Gliklich

at of period We in this September closed of this on we’re short communicated track first confidence level in reflects that point, getting close of relatively which on transaction a the a it to time.

Chris Shaw

Got helpful. it. Very Thanks.

Operator

And a we follow-up with from UBS. will take Spector Josh

is Your open. line

Josh Spector

was just that. ask to Hey, aluminum and the you to went Coventya about I of kind actually guys. in going

So I’ll there. Thanks. leave it

Ben Gliklich

Josh. Thanks,

Operator

to questions I We over the back would have like time. hand closing this in remarks. further call queue at no to for Ben Gliklich

Ben Gliklich

and you for come, and Thank look care. Take and everybody this We to again to forward much, joining thanks stay the many you Great. Catherine, seeing in safe. so to months weeks of morning.

Operator

conclude today’s program. does for participation. your This you Thank

any You time. at may disconnect

Element Solutions (ESI) 31 Jul 212021 Q2 Earnings call transcript