Kraton Corporation
Q1 2021 Earnings Call Transcript

Published: 27 Feb 2021

[Operator:]

Good morning, and welcome to the Kraton Corporation Fourth Quarter 2020 Earnings Conference Call. My name is Dale, and I will be your conference facilitator. Today's conference is being recorded. I will now turn the meeting over to Mr. Gene Shiels, Director of Investor Relations. Sir, you may now begin.

[Gene Shiels:]

Thank you, Dale. Good morning, and welcome to the Kraton Corporation fourth quarter 2020 earnings call. With me on the call this morning are Kevin Fogarty, Kraton's President and Chief Executive Officer; and Atanas Atanasov, Kraton's Executive Vice President and Chief Financial Officer.

[Kevin Fogarty:]

Thanks, Gene, and good morning, everyone. I hope you're all being safe and staying healthy. As you well know, 2020 was a year like no other, given the unprecedented challenges posed by the global COVID-19 pandemic, especially the adverse impact on demand in many end markets and geographies. We are extremely pleased, not only with our financial results for the fourth quarter and the year overall, but in terms of how our entire organization responded to an altered operating environment. With the safety of our employees, our customers, suppliers and the communities in which we operate, our top priority in 2020, we responded quickly early in the year with enhanced safety protocols in our operating locations, and we successfully transitioned to a remote work environment for a significant number of our employees around the globe. I'm proud of the way our organization has continued to work almost seamlessly to preserve business continuity and the efficiency of our supply chains so that we are able to continue to serve the needs of our customers. This past year was also a good year to prove the resiliency of our business model and the benefits of our broad end market and portfolio diversification.

[Atanas Atanasov:]

Thanks, Kevin, and good morning, everyone. As we turn to Slide 5, I'll review the financial highlights of the fourth quarter of 2020. As Kevin pointed out, we're very pleased with our results for 2020 and, more specifically to this discussion, our fourth quarter results. As in the third quarter of 2020, we continue to see sequential recovery in demand from the low levels in the first half of 2020 associated with the adverse impact of COVID-19. The improved demand fundamentals continued in the fourth quarter, providing for solid financial results as we closed out the year. In terms of specific financial highlights, fourth quarter 2020 revenue was close to flat, down $1.8 million versus 4Q 2019. This was largely a function of the disposition of our Cariflex business early in the year, which had contributed approximately $45 million of revenue. Therefore, excluding Cariflex, sales grew approximately 12% over the same period in 2019. The relative stability in margins and higher sales volume in both our Polymer and Chemical segments contributed to fourth quarter 2020 adjusted EBITDA of $54.4 million, which was up $5.4 million or nearly 11% compared to the fourth quarter of 2019. Excluding the Cariflex EBITDA contribution in the fourth quarter of 2019, adjusted EBITDA associated with the Polymer and Chemical businesses was up approximately $21 million versus the year ago quarter. From a segment perspective, we delivered solid fourth quarter results in both our Polymer and Chemical segments. Polymer segment adjusted EBITDA for the fourth quarter of 2020 of $30.6 million was up 3.5% versus the year ago quarter and, excluding Cariflex, would have also been up $17 million compared to the fourth quarter of 2019, while adjusted EBITDA for the Chemical segment was up 22.3% compared to the fourth quarter of 2019. As Kevin just indicated, during the fourth quarter, we continued to focus on strengthening our balance sheet through debt reduction and improving our capital structure. During the quarter, we reduced consolidated net debt, excluding the effect of foreign currency, by $41.5 million.

[Kevin Fogarty:]

Thank you, Atanas. As we have noted, demand trends in both our Polymer and Chemical segments improved in the second half of 2020. And while we remain mindful of the disruptive potential of COVID-19, thus far in 2021, market trends are encouraging, and we expect our diverse end market exposure to continue to benefit us in 2021. Therefore, we currently expect to grow our core business of 5% to 7% this year. On Slide 10, we provide an update for our near-term outlook by key end use. In terms of major geographic exposures, in the Americas, we anticipate strong demand fundamentals with continued recovery in consumer and industrial applications. While in European markets, we currently see demand trends continuing to improve. Over the course of 2020, we saw demand trends in China and broader Asia also continuing to improve. Thus far in 2021, economic activity levels have been very encouraging. As China and broader Asia are key markets for our Specialty Polymers business, we enter 2021 well positioned to address opportunities in these important growth markets. In terms of end markets for 2021, we anticipate a continuation of solid demand for key applications that prove critical in 2020 in addressing unique market needs. As highlighted in prior quarters, we have seen favorable trends in adhesive markets over the past year driven by packaging demand and growth in e-commerce as well as other applications such as masks and gowns in health care markets. In addition, we have also satisfied new market needs relative to COVID-19, an innovative HSBC grade manufactured at our facility in Mailiao, Taiwan plant is being used in face masks to improve wearer comfort. In addition, with the development of vaccines to address COVID-19, our hydrogenated product grades are being used in insulation gels that are critical in temperature-controlled distribution of vaccines. Now in our more traditional businesses, while still early in the year, we look forward to a favorable paving and roofing season and further growth in automotive and consumer durable markets associated with further market adoption of innovation grades. In our Chemical segment, we are currently seeing favorable trends in all three of our major product categories of TOFA, TOR and our CST chain. In addition, for quite some time, Kraton has been active and a participant in the growing global market for biofuels and renewable diesel, and we see opportunities to expand our role in these applications in 2021 while remaining committed to our existing customers. As demand for biofuel grows, Kraton is well positioned with two refineries in the U.S. and two refineries in Europe as this footprint enables us to participate as a global supplier. Moreover, we have proven expertise with all necessary certification requirements already in place. We have a strong and diverse CTO supply position, and we have well-established and proven supply chain capabilities with the ability to ship CTO and CTO derivatives as well as pitch from the U.S. into the European market. Turning now to Slide 11, our participation in the growing biofuel market is but one example of how Kraton is working to address the growing global demand and need for bio-based renewable and sustainable alternatives. Kraton has long believed that our future success is dependent upon sustainable business practices and meeting society's needs for sustainable products. We are committed to making a positive difference for all our stakeholders through safe, compliant, socially and environmentally sound operations because we fundamentally believe that sustainable business practices are a prerequisite for meeting the expectations of all our shareholders and stakeholders alike today and into the future. Our commitment to sustainability is not just founded in words but in tangible evidence of our progress in driving sustainable business practices across our entire enterprise. This commitment is demonstrated through our membership in the American Chemistry Council, the European Chemical Industry Council and our participation in Responsible Care, the chemical industry's world-class standard for HS and ES management and performance excellence. If you have not had an opportunity to review our sustainability report, which is available on our website, I encourage you to do so. I'm proud of the progress that we have made to date in advancing our sustainability objectives. Turning now to Slide 12, from our perspective, the global focus on sustainability intensified in 2020. The world's needs are evolving, and Kraton and society as a whole must rise to the challenge. Our goal is to be an admired sustainable supplier of innovation-based solutions, whether it is through our Chemical segment or our Polymer segment. We believe that sustainable business practices create value for our customers and all our stakeholders. We embrace sustainability as a value driver, and it shapes our strategy as we move forward. Of course, our commitment to sustainability is not a final destination but a journey. And so, we expect to continue to define long-term objectives to safeguard our future. As part of this process, we will also continue to identify short-term tactics and initiatives at every level of our organization that are critical to delivering our longer-term vision. Turning now to Slide 13, through the groundwork we have already established, we are well on our way in driving sustainable business practices throughout our organization. As a member of Together for Sustainability, we remain committed to responsible practices and continual improvement in procurement. In 2020, we are awarded a Gold rating by Ecovadis in recognition of our progress in implementing systems to ensure responsible procurement. In addition, we have adopted management systems that include policies and procedures relative to compliance, labor practices and enhanced performance as it relates to HS&E. With safety as our first core value, specifically, we continually work to ensure the safety of our employees, the communities in which we work and all our stakeholders. We have long embraced diversity as evidenced by the composition of our Board of Directors, and in 2020, we adopted specific policies around the broader topic of diversity and inclusion, ensuring equal opportunities for all our employees. On an operational level, we are well on our way to meet our greenhouse gas intensity reduction target of 25% by 2030, and we will continue our work to reduce carbon emissions and energy intensity throughout our manufacturing organization. As we look downstream, we will continue to leverage the bio-based nature of our Chemical segment and our R&D capability as we develop and commercialize products that address our customers' needs for sustainable solutions. In this regard, during 2020, we made solid progress in commercialization of key platforms. On Slide 14, one of these platforms that has garnered significant interest from our adhesive customers is our REvolution rosin ester technology, which we believe has established the industry standard in terms of color and stability. As a bio-based offering and given its performance and product attributes, REvolution is a compelling alternative to hydrocarbon-based tackifiers for our adhesive customers. Customer response has exceeded our initial expectations, and given our positive expectations for global adhesive demand and our customers' evolving needs for sustainable inputs, we think REvolution is positioned for continued share growth. Turning to Slide 15, as you all well know, the societal sentiment with respect to hydrocarbon-based materials and single-use plastics continues to evolve. And while it is true that our Polymer segment utilizes hydrocarbon-derived raw materials, through the versatility and recyclability of our SBC chemistry, we are able to address growing market needs for sustainable solutions. One example is our CirKular+ technology, which is providing the industry with technology to facilitate growth in the CirKular economy by enabling more efficient recyclability of post-consumer plastics waste streams. As an additive in the processing of waste streams, CirKular is an effective – is effective as a compatibilizer, allowing increased use of multiresin waste streams, providing broader use and end functionality as well as productivity. And now on Slide 16, our most recently commercialized innovation, our Injected Molding Soft Skin, or IMSS, technology. We are extremely excited at this development as we've been working for some time to commercialize this technology that provides significant system-level cost savings in large, injection-molded automotive parts such as dash and door panels compared to slush molding processes. Other notable features of IMSS technology allow for lighter weight, recyclability, improved haptics and look and feel and improved aging performance with reduced VOC emissions and odor. This technology has been commercialized in the Buick GL6 in the fast-growing Chinese market. We look forward to translation into other vehicle platforms in the future. Lastly, given our continued enthusiasm for its potential in the fight against COVID-19 and other applications, I would be remiss in not acknowledging that we remain in the regulatory approval process for BIAXAM. While I don't have any specific update to provide at this time, I can assure you that we have remained focused on both the opportunities under Section 18, referred often to as the EPA's emergency exemption, and the broader Section 3 approval. We look forward to providing specific updates as soon as they become available. In closing, we enter 2021 energized by the solid performance we delivered in 2020 despite challenging market conditions. The positive momentum as we closed the year has continued into early 2021. And as I said, we currently expect our base business this year to grow 5% to 7%. We are positioned to benefit from further upside in our various end markets, and if the opportunity for further growth exists, you know we will pursue it. With those comments, we're happy to open the call up for your questions.

[Gene Shiels:]

Dale, can we move to the Q&A session, please?

[Operator:]

Sure. Thank you so much. Speakers, our first question comes from Chris Kapsch of Loop Capital Markets. Sir your line is now open. You may proceed

[Chris Kapsch:]

Yes, hi good morning. I was juggling multiple earnings conference calls this morning, so if this has been addressed, I apologize. But one thing I'm curious about is, in the pine chemicals business, you came into 2021 with some price increases targeted at TOFA on the table. And then most recently, you introduced an across-the-board price initiative. So, I'm curious if – about the visibility regarding the traction of these price increases and the magnitude of the traction. Is the effort here really just to offset some higher raw material costs? Or is there the opportunity to also capture extra margins given what seems to be sort of a healthier end market demand scenario vis-à-vis probably supported by some alternative materials? So just some color around that would be helpful.

[Kevin Fogarty:]

Sure, Chris. Thank you. Well, first of all, indeed, we have announced two price initiatives. And I would certainly say that those initiatives encapsulate both the need to make sure that we're covering any cost inflation that we may feel. But as well, the backdrop of our businesses, as I used – as I said in my commentary, about all three product grades have positivity, reflects the fact that we're addressing that through our price initiative. And we've often said, in our Chemical business, a lot of the pricing is a combination of both competitive factors within the pine chemical space as well as a very real price setting mechanisms and competitive factors in the inter-material space. We're seeing, certainly, in the case of the inter-materials, certainly inflationary pressure in that regard as well. So, our price increase initiatives certainly benefit from that backdrop.

[Chris Kapsch:]

Yes, Kevin, and I think you're referring to maybe there's an updraft clearly in gum rosin, also hydrocarbon. So, the fact that – and those are products that compete with TOR. So, for the first time, we've – at least in a while, visible evidence of trying to introduce pricing in TOR. So, I'm just wondering if that also underscores strengthening in demand for TOR. Is it really just the competitive set, in terms of the pricing, the market pricing dynamic? I'm just curious because, obviously, it would be helpful for the overall economics of your refiners to be able to produce more TOR if there's demand for it.

[Kevin Fogarty:]

In our view, absolutely, it reflects increased demand trends for the TOR molecule, including the derivative rosin ester. And so yes, that provides that positive impetus. But at the same time, I'll also remind you that vegetable oil markets – the underlying vegetable oil markets are certainly relevant when it comes to the pricing mechanisms that our TOFA chain competes in, and that's also provided for that positive backdrop I spoke of. Just a reminder.

[Chris Kapsch:]

Okay. And then I did have also one focused on BIAXAM. Well, it's twofold, really. So, one, appreciate your suggesting that you're obviously focused on the Section 3, Section 18 approvals. I think it's public knowledge that there in the Federal Register, there's an application by Delta Air Lines for the emergency use authorization. It looks like for their hubs in Salt Lake City and Minneapolis for the use of this product. And there was an open comment period that concluded, I think, last night. So I'm just curious with that open comment period having concluded for that emergency use request, if you're – if you have any color on how that process might play out from here in terms of time line and if, in fact, that gets traction.

[Kevin Fogarty:]

Sure, Chris. And might I just say that I don't mean to correct you, but the applications for emergency exemption actually come from the states. And obviously, Delta being the relevant partner with the states, but the state – the applications were actually filed by the states themselves. And you referenced two of the states. I would also add that the all-important state of Georgia, where the hub of Atlanta resides, is also now a subsequent filer to that Section 18 application. But with respect to the process, I think I've said all along that we have had very positive discussions with the EPA in the case of our desire to receive full Section 3 authorization for our new active ingredient, BIAXAM. Any Section 18, which we think is helpful, obviously, because of the urgency in the marketplace to fight COVID-19, is a good step forward towards that ultimate objective, which is the Section 3 blanket approval for the active ingredient. But I would say that, clearly, the fact that it's one of those stories where the bad news is, we have a new active ingredient. So, from an EPA perspective, they need to understand about it because the performance is certainly worth noting. But on the same time, too, the fact that it is a new active ingredient in a polymer form, that's what makes it truly novel and unique and, we think, is going to allow us, obviously, to take advantage of this superb technology, not just now to fight COVID-19 but in the future as well because we're thinking beyond just this one-time in our world's obviously pandemic-led priorities. We think it also has applications in the health care field and also in building construction beyond the public transportation reference in this Section 18 filing. So, it's a very robust process we're undergoing, and we're quite grateful for the level of cooperation that we received from the EPA because they are certainly – in regards to their desire to see new compelling technologies coming to market, they've certainly done all they can through their own obviously work processes.

[Chris Kapsch:]

The one follow-up on that. So, with this request from – I understand it's from the states but probably on the urging from Delta in this case. And if this were to go through, even under an emergency authorization, it seems like a strong testimonial for the relevance of this product and the intended use in this particular application. But like, is it safe to say that this would serve as a testimony or maybe catalyze the – a greater likelihood of a Section 3 approval? And yes, is there – do you think that if, in fact, the adoption for addressing COVID becomes a reality, if it helps the likelihood of this being a relevant product in some of those other non-COVID opportunities that you addressed? Thank you.

[Kevin Fogarty:]

Well, Chris, I mean it goes without saying that we wouldn't be pursuing Section 18 without a line of sight towards Section 3. Because Section 18, as we said, is very specific to a specific application. And our vision for where BIAXAM, we think, can be very beneficial to society goes well beyond that. Now do I also believe that a Section 18 is a good indicator of a Section 3? Well, presumably, yes. It's not – the reverse would be a negative indicator, I'm sure. So yes, I feel like it's a good step towards validation of the technology in the eyes of the EPA. But again, they have their process they need to work through. And I'm just here to say that, from my perspective, it's been a priority of them to find a way to make this new active ingredient, BIAXAM, a reality to fight COVID-19. That has certainly been a priority of the EPA.

[Chris Kapsch:]

Thank you.

[Operator:]

Our next question comes from the line of Vincent Anderson from Stifel. Sir, your line is now open you may proceed.

[Vincent Anderson:]

Yes, thanks. Good morning. And congratulations on the new HSBC application in automotive. I know it's been a long time coming. I wanted to start on pine chemicals. If my memory serves, you historically had been pretty lukewarm on the prospect of CTO as a preferred feedstock under RED II. So, I was just curious, what has changed in the market that has maybe shifted your view there and how you're participating right now, whether it's selling TOFA, or selling excess CTO to other biorefiners?

[Kevin Fogarty:]

Well, we've been following this, obviously, for quite some time, and it's just not as simple as just diverting certain volumes of TOFA to a new customer base. There's also a qualification process we need to go through. And so, we view it as an extension of the TOFA platform in every sense of the word. I mean the nice thing about our TOFA platform, as we talked about, it's got already a very diversified set of market alternatives that we serve, and this just adds to that diversification. So, we think that's a very positive direction for the business. And we've said for some time that, that's been one of the challenges in our TOR chain, clearly, which is just the opposite, which is it's been a very singular, for the most part, diversification in terms of where TOR molecule ultimately ends up. So, this is a positive trend in the industry, obviously, but we've got alternatives. And I guess the point I just want to make is Kraton is well situated to serve this growing biofuel market. And I think we all have to agree that – given the world that we're in and the desire for sustainability and renewability in the marketplace despite the fact this is, if you will, an EU directive that's driving this growth. And we believe it's here to stay. I mean we don't see this thing going backwards at all. So clearly, we need to adapt our ability to serve this growing market.

[Vincent Anderson:]

Understood. Thank you. So, in the context of some of these biorefiners in Europe processing CTO for direct biofuel production. I completely respect that you're not willing to discuss specifics of your feedstock supply arrangements, but how firm are your CTO commitments in Europe for those assets? Are they similar to your U.S. contracts? Or worst case, do you have excess offtake under your U.S. contracts and supplier European assets if CTO were to become tight over there?

[Kevin Fogarty:]

One thing we've always prided ourselves on, Vincent, is our relationship with our CTO suppliers, long-standing, strong relationships. We've always had a vision that, given the nature of our pine chemical business, it's in our best interest to be very, if you will, engaged in CTO relationships on a broad-based level so that, at the end of the day, depending on market circumstances, we're in a position to process more CTO or, if we need to, we can sell CTO from time to time in an opportunistic way. This is all kind of a part of our business makeup. It's a real strategic advantage for Kraton and certainly an advantage when we have this new outlet in the form of biodiesel.

[Vincent Anderson:]

Okay. Perfect. No, I appreciate that. If I could ask one more. I wanted to try to dig into price versus raws in polymers for a minute. So, in the fourth quarter, price/mix looked like it was implied to be down year-over-year. I know we had some pretty drastic feedstock price increases off the lows late in the quarter, and those are typically passed through. And then you announced a price increase in HSBCs around the start of the year. So, can you just maybe refresh us on that price over raws dynamic? And was that HSBC price increase adequate to cover feedstock cost inflation in those contracts that are non-raw material linked?

[Kevin Fogarty:]

Well, I can say this unequivocally because we've been doing this a long time in our Polymer business. Our price rate strategy is real clear when it comes to raw material pressure we see. We're going to get in front of this. We're going to move the price up to reflect at least that raw material increase that we know of and perhaps even raw material prices that we're anticipating in our price moves. From time to time, that could result in some margin lift in our business. Of course, that's all part of our Price Right strategy in itself because it goes – typically goes both ways.

[Vincent Anderson:]

All right thank you. Good luck on the rest of the year.

[Operator:]

Thank you so much. The next question comes from the line of John Roberts from UBS. Sir your line is now open. You may proceed.

[John Roberts:]

Yes, thank you. Since IMSS was launched in China, is that made in Taiwan? And is that something that Sinochem and LCY can do as well? Do you think the competition is going to be primarily other materials?

[Kevin Fogarty:]

So ultimately, the part is a compound, and we work with our partners to make the compound. But obviously, the compound is founded on Kraton polymer. I'm not going to say whether or not it's specifically a polymer that is made at only one location, but I will tell you, in the case of this material, yes, it was made in Taiwan.

[John Roberts:]

Okay. And then on the biodiesel opportunity, if the industry continues to grow, do these guys become competitors for CTO eventually against you rather than just the opportunity for yourselves in materials?

[Kevin Fogarty:]

Well, there's kind of two channels to get to the biofuel. There's a CTO direct channel, which some employ, and then there's a hydrogenation of the fatty acid channel. So, I guess, at the end of the day, it's one of those questions that depends. And I think like everything of chemical, whether you're biodiesel or a biorefiner do, you always look for the most efficient way to satisfy the market need. And our view is without, knowing where this industry is going to evolve to, the hydrogenation of the fatty acid looks to be a very attractive way for people to satisfy the RED II requirements while, at the same time, being truly optimal in the value chain and the supply chain.

[John Roberts:]

Thank you.

[Operator:]

Thank you so much. The next question comes from the line of Chris Kapsch from Loop Capital Markets. Sir your line is now open. You may proceed.

[Chris Kapsch:]

Yes, so my follow-up question was about the guidance – initial guidance for 2021. You have a number of price increases on the table in the Chemical business, a stronger demand environment. In your own – in the stoplight chart on Page 10, it looks like you've sort of improved the market outlook for sectors that comprise maybe almost half of sales. So, I'm wondering if that's what's translating into this base business of up 5% to 7%. It just seems like given the easy comparisons associated with COVID, given some of the momentum and some of the traction on some of these new commercial innovations that maybe we could – there could be upside. So just wondering how you thought about providing that guidance. If you go back a year ago, you guys' initial guidance pre-COVID for 2020 was, I think, $210 million, and you'd ended up doing $262 million. So, are you just – are you trying to take a posture similar to what you did a year ago, presumably? Any color on that process would be helpful. Thanks.

[Kevin Fogarty:]

Well, there's a lot of things we do around here, Chris, as part of our business model, but forecasting the next 12 months is one of the most difficult things to do, as you well know. So, we have a very robust process where we decide how we're going to look at the number of variables, the risks, the opportunities to come up with the requisite guidance that we try to provide. And so, what's unique, of course, about the way in which we approach 2021 is there's a couple of things that need to be factored in. One was, of course, the Cariflex stub period, which need to be removed from last year's performance and looking at this year's full year performance. And the second thing is this pretty extraordinary turnaround we do every six years and bear. And so, we want to call that out for investors to understand that. But beyond that, yes, I mean, we're feeling like at the very least, we ought to be able to deliver 5% to 7% business growth. Now I'll just say it, of course, if the positive trends that we're all feeling right now, in our business will remain intact over the course of the year, I think there's an opportunity to improve on that yet more. But we're not ready to say that yet. It's still February.

[Chris Kapsch:]

Okay. And then the other question I had was – and we've asked you this in meetings with investors. But the world is evolving so I want to get a current view. But in terms of your innovation platforms, which of the – and there's seemingly needle-moving kind of opportunities that you're starting to get traction on. I’m just wondering if you could sort of rank what the – in order, what the ones you're most excited about.

[Kevin Fogarty:]

Well, I'm excited about them all because I understand the implications to each of our businesses from the standpoint of driving our business growth objectives. But I mean, each one has their own story. Clearly, BIAXAM is potentially a platform in itself. And that's the way we're viewing it. That's the way we're staffing it. That's the way we're developing the potential for this BIAXAM polymer. In the case of the innovations in the business, look, I mean, we are in a world where sustainability is becoming absolutely critical to people's business models. And when you look at what REvolution is from the trees to begin with and then addressing the very shortfalls in the quality kind of challenges we've had in the past, having now closed that loop and closed the color gap and closed the stability gap, that's a very good thing for us. And I couldn't be more proud of our team for bringing that to market, and it continues to exceed our expectations in terms of customer adoption. And then the CirKular+ technology, I mean, if there's one thing we hear about, if you're participating in the plastics industry, it's single-use plastics and the problem that's caused in a societal sense. And here, we have a technology which not only can it advance the use of plastics for recycling, but it increases the productivity of the people – the very people that are trying to reuse plastics so that they don't have to separate otherwise unlike polymers. And we address that fundamentally with CirKular+. So yes, I can't help but be very excited about the potential of these innovations. And then you referenced IMSS. We've been working on this for quite some time. I'm sure you've heard from other people that tried to innovate in the automobile sense. There's a long approval process. They're typically a very risk-averse, if you will, community. But at the same time, it goes both ways. Once we are settled in a technology, that gives us some assurance that we're going to be able to build on it to grow further.

[Chris Kapsch:]

All right. That's helpful. And then this – well, not in innovation. I believe you have a polymer product that's used in telecom wire and cable. And so, I'm wondering if some of my companies I follow are benefiting from this 5G – this burgeoning 5G super cycle. And just wondering if you're similarly benefiting in your product sales into the wire and cable industry and if you see that as a driver here over the next couple of years. Thanks.

[Kevin Fogarty:]

Yes. I mean 5G conversions and the need for cable gels in installation, particularly in big subsea cables, that's a very good business for us. We kind of put that, quite frankly, in our established business bucket because we've been kind of leading in that space for many years.

[Chris Kapsch:]

Thank you.

[Operator:]

At this time, speakers, we don't have any questions in queue. You may proceed.

[Gene Shiels:]

Thank you, Dale. Well, we want to thank everybody this morning for their time and their interest in Kraton. And for our question-and-answer session, thanks for your thoughtful questions. There will be a replay of this call available later this morning, and you may access the replay by dialing [phone]. And this concludes our prepared comments this morning. Thank you.

[Operator:]

This concludes the Kraton Corporation's Fourth Quarter 2020 Earnings Conference Call. You may now disconnect.