Venator Materials PLC
Q4 2019 Earnings Call Transcript

Published: 21 Feb 2020

[Operator:]

Good day and welcome to the Venator Materials Fourth Quarter Earnings Call. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to your host today, Jeffrey Schnell, Please go ahead.

[Jeffrey Schnell:]

Thank you Keith, and good morning everybody. I am Jeffrey Schnell, Director of Investor Relations for Venator Materials. Welcome to Venator’s Fourth Quarter 2019 Earnings Call. Joining us on the call today are Simon Turner, President and CEO and Kurt Ogden, Executive Vice President and CFO.This morning we’ve released our earnings for the fourth quarter and full year 2019 via press release and posted the release and accompanying slides to our website at venatorcorp.com. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking and while they reflect our current expectations, they involve risks and uncertainties that are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net income, free cash flow and net debt. You can find the reconciliations to the most directly comparable GAAP financial measures in our earnings release which has been posted to our website.It is now my pleasure to turn the call over to Simon.

[Simon Turner:]

Thanks, Jeff and good morning everyone. Let’s begin on Slide 3. 2019 was a challenging year. This macroeconomics uncertainty led to limited visibility not withstanding these headwinds Venator delivered $194 million of adjusted EBITDA and $0.24 of adjusted diluted earnings per share. We made significant progress on our strategic prioritize in 2019 and delivered on those items within our control including improving our cost space, strengthening our position in specialty and differentiate TiO2 and advancing our customer tailored approach to reduce our TiO2 price and margin volatility.Turning to slide 4, on our Titanium dioxide segment. In the fourth quarter our Titanium dioxide segment generated $30 million of adjusted EBITDA compared to $52 million in the fourth quarter of 2018. The average TiO2 selling price declined 4% in local currency compared to the prior year but remained stable on the sequential basis for the third consecutive quarter.This reflects our ongoing approach of matching our supplying network to customer commitments to reduce price and marginal volatility. Prices for functional TiO2 products were most impacted in Europe on a year-over-year basis. We exited the fourth quarter of 2019 with average prices in Europe and Asia below that of the more stable North American region on a U.S. dollar basis. Sequentially prices in local currency were relatively stable in our three main regions despite the historically softest quarter for demand.Titanium dioxide volumes increased 5% compared to the prior year period. The increase which was in Europe, North America was primarily a result of increased sales of new differentiated products, improved availability of certain products and high demand compared to the same period last year which was impacted by customer inventory reductions. On a sequential basis TiO2 volumes declined in line with normal seasonality.Before I highlight the regional trends impacting the TiO2 industry I'd like to update you on recent trends of specialty TiO2. In the fourth quarter we experienced soft demand in certain specialty applications namely for textiles. This was primarily result of destocking within the textile supply chain in China and elsewhere in Asia and was precipitated in part by the US-China trade disputes. We estimate more than three-quarters of global industry demand for these products in Asia including China. Notwithstanding soft demand in textiles prices for our specialty TiO2 products remained relatively stable adjusting for the impact of mix. Prices and demand for our specialty TiO2 products tend to be more resilient across the cycle due to the applications into which we sell. These dynamics underscore the investment in our specialty and differentiated TiO2 portfolio to strengthen our position in these higher value applications.We expect demand for our specialty and differentiated products to progressively improve throughout 2020. That said we continue to monitor the impact the Corona viruses having on demand and the supply chain. It remains too early for us to provide an assessment of the ultimate impact as the situation is still evolving.Looking at our business regionally, in North America demand increased in the fourth quarter compared to a weaker prior quarter and was flat sequentially. Our average TiO2 selling price in North America was stable both on a year-over-year and sequential basis reflecting our more stable customer mix and our customer tailored approach. Demand in pricing in Asia stabilized in the fourth quarter. However, as I previously mentioned it is too early to reply on the impact of the Corona virus on growth in Asia. Europe is our largest market for TiO2, compared to the fourth quarter of 2018 volumes in Europe increased modestly benefiting from higher sales of new differentiated products and improved demand compared to the fourth quarter of 2018 when customers reduced their inventory levelsOur average TiO2 price in Europe declined modestly in local currency compared to the prior year quarter and was stable on a sequential basis. In the fourth quarter raw material cost moved higher primarily from high grade ores. These headwinds which were in line with our expectations were partially offset by a $3 million benefit from our business improvement program.Turning to the TiO2 outlook for 2020, macroeconomic challenges are expected to remain in 2020. In the near term we expect volumes to improve sequentially and follow normal seasonal patterns. Specialty volumes are expected to progressively improve throughout the year subject to my comments earlier on China. We expect more modest raw material cost inflation in 2020 and are actively engaged of customers to implement price increases all regions to the inflationary pressures on our business. Longer term TiO2 industry fundamentals remain favorable. We remain focused on our customer tailored approach enhancing our specialty and differentiated TiO2 portfolio and improving our cost competitiveness throughout the TiO2 cycle.Turning to slide 5, on performance Additives. Revenues declined 7% compared to the prior year period driven by a 5% decline in volumes and a 2% unfavorable impact from foreign currency translation. Our average selling price is flat compared with the fourth quarter of 2018. I will provide some additional comments on the three main businesses within performance Additives. Compared to the fourth quarter of 2018 color pigments volumes were primarily impacted by lower demand for products into construction related applications in North America and portfolio optimization as we exited some low margin business. The impact from lower volumes was partially offset by lower raw material costs and the benefits of our costs and operational improvement initiatives. Timber treatment volumes declined compared to the prior year period primarily due to lower construction activity. The average selling price and margins were impacted by an adverse mix of sales. However, it was offset by lower raw material and other costs. Functional additive volumes were impacted by weaker than expected demand for automotive coatings and plastics. We are taking meaningful steps as part of our business improvement program to offset these market challenges and improve the profitability of this business.The performance additive segment generated $4 million of adjusted EBITDA in the quarter, up $1 million compared to the prior year quarter. In 2019 performance of the segment is impacted by significant market forces especially in the automotive coatings, plastics and construction applications. In 2020, we expect to capture additional benefits from our self-help initiatives.We continue to explore a potential sale of the color pigments business. This process is ongoing and we have set an aggressive timeline. The color pigments business generated $17 million of adjusted EBITDA in 2019 and we expect the benefit from our targeted cost initiatives in 2020 but because we are actively involved in a process to explore the potential sale of our color pigments business, we will not be providing additional commentary or taking questions on the matter.Turning to slide 6, we continue to be intensely focused on strengthening our business and improving our cash flow. We accelerated our 2019 business improvement program and delivered $20 million of benefits in 2019 including $5 million in the fourth quarter double our original full year target, we expect to complete all the actions necessary to deliver on our full 40 million target by the end of 2020, exiting the year at the full run rate level. On an absolute basis this program is expected to deliver $12 million of benefit in 2020. This does not include the benefits which I highlighted as part of the color pigments review. We are pleased to the execution today and are confident in our ability to deliver the target benefits as promised.I will now pass the call over to Kurt to discuss our financials. I will then return to provide some additional comments. Kurt?

[Kurt Ogden:]

Thanks Simon. Let's turn to Slide 7. In the fourth quarter total adjusted EBITDA declined $22 million compared to the prior year. The decline is primarily attributable to the adverse price mix in our TiO2 business and partially offset by higher volumes and the benefit of our business improvement program. Compared to the third quarter of 2019 total adjusted EBITDA declined by $27 million. Seasonally lower sales volumes in TiO2 and performance Additives were the largest contributor to the sequential decline. Price mix was also a headwind due to a lower contribution of specialty TiO2. We benefited in the quarter from improve fixed cost absorption in performance Additives and our TiO2 business as we built inventories and certain specialty and differentiated TiO2 products to assist in the transfer of the business from Pori.Turning to slide 8 and our capital resources, at the end of the fourth quarter net debt totaled $695 million and our net leverage ratio was approximately 3.6 times our trailing 12-month adjusted EBITDA. Total liquidity was approximately $307 million at the end of the year consisting of $55 million in cash and $252 million of undrawn availability under our asset based revolving lending facility. We do not have any significant debt maturities until 2024.We continue to enjoy relatively low cash taxes. This is primarily a function of the countries where income is generated and the net operating losses from which we benefit. In the quarter we recorded $157 million tax expense in connection with recognizing a full valuation allowance against certain net deferred tax assets. Importantly this does not prevent us from being able to utilize the associated NOLs in future periods and enjoying a low cash tax rate which we expect to be 10% to 15%.Our outlook for capital expenditures in 2020 is $80 million to $90 million including business transfer CapEx from Pori. We will remain vigilant with our CapEx budget and could reduce this outflow further should market conditions warrant. We expect cash interest in 2020 to be between $40 million to $45 million. In 2020 we expect our adjusted effective tax rate to be approximately 35% consistent with 2019 as we apply a normalized adjusted rate to better reflect the current weighted average tax rate applicable under the various jurisdictions in which we operate.We continue to expect a long term adjusted effective tax rate to be 15% to 20%. Cash restructuring payments in 2020 are expected to total $15 million to $20 million. This primarily includes our ongoing business improvement program, [indiscernible] and the cost savings related to our color pigments business.Other cash usage in 2020 are expected to be the approximately $75 million primarily consisting of pension obligations, joint venture capital expenditures and legal fees. We preliminarily expect the net change in working capital to be a modest source of cash in 2020. This is subject to market conditions and other factors. Finally our Pori-related expenses are expected to total $15 million to $20 million in 2020, down from an outflow of $64 million in 2019.We recognize the importance of returning to positive free cash flow and remain intensely focused on reducing our cash uses including CapEx to transfer business from Pori. We continue to make considerable progress on the transfer of many of our specialty and differentiated products into the existing network. As a result of the current economic environment and our financial resources we are exploring ways to optimize the remaining transfer of business from Pori. We believe this will include a lower total expected capital outlay and a lower associated EBITDA benefit than originally estimated with a similar if not higher economic return. We expect to update all material elements of our 2020 cash uses as necessary on our quarterly earnings calls.With that I'll turn it back over to Simon.

[Simon Turner:]

Thank you Kurt. 2019 was a challenging year but we remain focused on executing on those items within our control. In the near term we expect volumes to follow a more normal seasonal pattern in both TiO2 and performance Additives. We expect an improvement in TiO2 pricing from the benefits of our costs and operational improvement initiatives to partially offset inflationary pressures. Additionally, we expect to continue to manage our manufacturing network aligning production with customer commitments. We are focused on maximizing value to shareholders through the following. We're committed to our customer tailored approach by which we actively manage our production network and inventories along with the implementation of a more diverse range of customer agreements. The net effect reduces our price volatility. Evidence can be seen in our more stable 2019 pricing profile.We are focused on strengthening our leadership position in specialty and differentiated TiO2 made possible by our unique mix of assets, our specialty and differentiated TiO2 portfolio provides Venator the ability to partner with customers in high-growth and higher value applications. We continue to invest in strengthening and diversifying our products slate and it is these applications which contributed most of our 7% volume growth in 2019.We remain focused on enhancing our competitive position in all our businesses. We accelerated the delivery of our business improvement program and delivered $20 million of EBITDA improvements in 2019 versus the original target of $10 million. We expect to deliver the remaining cost and operational efficiencies as promised including the incremental benefits related to our color pigments business.Additionally we are actively evaluating opportunities to optimize our manufacturing capabilities and cost base to further improve our profitability.We remain intensely focused on reducing our cash uses and improving our free cash flow and are taking meaningful steps in 2020. As Kurt mentioned we expect to reduce our CapEx spend by approximately $30 million and I'll spend related to the Pori closure is expected that decrease by approximately $45 million compared to 2019.We are fully committed to maximizing shareholder value through active portfolio optimization. In the near term this includes exploring the potential sale of our color pigments business which is ongoing.Longer term TiO2 industry fundamentals remain favorable. We believe TiO2 industry inventory levels improved in 2019 and are lower than they were this time last year. Capacity additions are well understood and in line with normalized industry growth rates. We believe executing on our strategic priorities will enhance our competitiveness and create long term value for shareholders. With that we thank you for your continued interest in Venator. I would now like to open the call for questions.

[Operator:]

Yes, thank you. We will now begin the question and answer session. [Operator Instructions] And the first question comes from Duffy Fischer with Barclays.

[Duffy Fischer:]

Yes. Good morning guys. First question, is you're talking about the changes that you're thinking about for the Pori CapEx maybe I missed it but can you quantify how much different do you think the new plan will be from the old plan as far as endgame EBITDA drive and then the CapEx that we would need to spend for that?

[Simon Turner:]

Yes. So let me help you on that Duffy. It's Simon here. Look, I think September 2018 which will be announced our program for Pori that was about 18 months back. I think we can all see those 18 months have been pretty challenging. We had a pretty significant destock in the second half of 2018, very modest growth in 29 at the industry level and now of course as we enter the year, we see further uncertainty with Corona virus and so forth.So the circumstances has changed. I would like to point out here that by far away the largest part of the cash spent here at Pori is in the closure on wind down costs and we have got most of us spent behind us of the $280 million we announced we spent the $180 million. That would leave us a $100 million to run in full year 2018 we'd expect that to be 'around $20 million as Kurt said. So that's sort of like the lion share of the cash. On the CapEx side of the ledger which is to your question here we've been exploring ways to optimize the remaining transfer of the business and we expect that to come in at a higher economic return.So look we are looking at a lower CapEx for the remaining portion that would entail a lower EBITDA but of course as I said hopefully with a similar or higher economic return. We're still working through that Duffy. We don't have a number yet that we're prepared to share in that regard. We've still got a little bit of a ways to run but I would point out that for many of our products the transfer is complete and behind us. We spent $15 million in ‘19 with some more to spend in 2020.

[Duffy Fischer:]

Okay. Thank you. And then if you could maybe just walk through your large end markets and how fast do you think consumption growth was for those end markets of TiO2 in 2019 and then what would you anticipate for 2020?

[Simon Turner:]

Okay. So look as I said early 2018 with a terrible second half from a demand point of view, I think our view is the 2018 the industry contracted by about 6%. There was some more positive year-on-year growth in 2019 at the industry level. Nominal positive growth for us. Thanks mainly to our unit new products we sort of outpaced that overall. But if I think about it from 2019 what sort of like advanced faster or slower. I think in effect is probably to two tiers in that answer of the applications level rather than at the geographic level. So let's think about the applications first. I don't think that what we saw in 2019 between coatings and plastics at the aggregate level was dissimilar around the world but of course we would pick out automotive coatings and parts of interest which definitely were in that second tier of lower growth and from what we can see while we're not big on that in TiO2 were exposed to it in your Additives business that is still persisting.So that would be an example of the second tier. Predominantly I think we saw a demand for our inks and other specialties coming through in 2019 in the way we expected to which was at or even slightly above larger functional markets. We would call out as a second tier as sort of textiles application and we had a very soft end to the year we called it on our previous call, I think we call that again on this call. So that again would be sort of like lower rate.So if the question is by application where did we notice the difference I think we'd have to center in on automotive coatings and textile in the TiO2 world and similarly in analysis we'd have seen that in autos and electronics to some extent on plastics and coats depending which market you're in.So that explains it by a applications’ point of view and of course I think that obviously the geography lens if we put the geography lens on and of course it was the Chinese softness in the second half that stood out for us on a geographic basis. I hope that is responsive to the question of what we saw in 2019.2020, look we absence Corona virus as we closed last year and coming off the back of a net contracted industry these past two years of let's call it 5%, we would ordinarily expect the GDP plus rebound in 2020. The question is to what degree does Corona virus effect that or delay that and we don't have the answer to that I'm not going to represent you that we do but that would be our thinking [here to] we don't really -- we can't really say too much on Corona virus other than the years started off the first six, seven weeks of the year has started off our sales in the aggregate in line with our expectations for the first start of the year.The only notable comment I could make was that I do think in the broader Asia region there is some heightened concern around supply ability out of China for TiO2 as a result of the Corona virus. And that we have felt that a bit and heard that and received that a little more in this first start to the year. I hope that helps.

[Duffy Fischer:]

Great. Thank you guys.

[Simon Turner:]

Thanks Duffy.

[Operator:]

Thank you and the next question comes from David Begleiter with Deutsche Bank.

[David Begleiter:]

Thank you. Simon that was my focus while the supply issue in China and how that might impact your operations in Europe. Are you seeing yet any constraints on Chinese imports into Europe and to that support do you think some of these pricing issues that have been out have been announced?

[Simon Turner:]

Yes. There is a number of themes in that question. Can we like break it out a little bit there. Let's focus on a little bit about the Chinese point. Reminder of course to everyone I think people are well aware that we are not seeking to be the largest importer of product into China. We take technical specialty and differentiated products into China. One of the smaller importers. So we don't see the kind of direct head-to-head competition within China, although what we have noted in the second half of the last year is softness within China. We've noticed the gap in price and kind of develop wider between local Chinese prices and more Western producer prices.We've noted that the majority of Chinese producers have announced price increases in fact and I would point out that the smaller producers in China were already under pressure and this latest development with Corona virus will put them under even more pressure. So while we might be hearing sort of like concerns around the ability of China to export. We're certainly hearing that from our customers as I said. We saw yet to put any tangible evidence there. That's what we're being very cautious on calling it.Regarding the broader exports point what I would say to you is what we saw in 2019 was this sort of like repeat performance of a million tons of export out of China. We continue to see that the lion share of those exports went to emerging economies and that was second half loaded notably because of the trade disputes and so forth. Importantly though exports from China into the combined markets of North America and Europe declined on aggregate by around 15%. So hopefully those calibration points can help answer your question.

[David Begleiter:]

Very helpful. And just on the feedstock or cost what were [the up and play] 2019 Simon and what's your expectation for 2020?

[Simon Turner:]

So I think on if we took over all rows and feedstock we said pretty early on in 2019 where we have some clarity there that we'd expect to on board around $40 million of inflationary pressure in 2019, three-quarters of which would be in the feedstock area and that's basically how it played out in 2019.You may recall in our previous call we said that we didn't see the same kind of justification in case for similar type inflationary pressures in 2020. Of course that's our view. I think it's fair to say that we expect, we still expect more modest inflationary pressures in 2020. Without giving a number I think we can say that the pattern remains from feedstock and within that predominantly high-grade feedstock. So the patterns are quite clear. It's fair to say also we continue to negotiate hard with our suppliers around the eventual inflation costs.

[David Begleiter:]

Thank you.

[Operator:]

Thank you. And the next question comes from Bob Koort with Goldman Sachs.

[Unidentified Analyst:]

Good morning. This is [indiscernible] on for Bob. So you could provide some background on your recent price increase announcement? I guess on the back of kind of raw material inflation when does that price increase cover that raw material inflation and I guess the second is with lower inventory levels now and if we get into a situation where demand starts to improve again. Was kind of TiO2 sensitivity to tightening conditions considering the value stabilization efforts done by some of your peers?

[Simon Turner:]

Yes. Let’s be clear about stabilization. We continue to be through our customer tailored approach advocates some proponents of stabilization. We have stabilized our price for the last three quarters. Unfortunately, we have on boarded some raw material cost. So as we go out to customers we are looking at what has happened to date and what is yet to happen in 2020 as reasons why we will be adjusting prices upwards to restore margins. Of course as we saw in the stabilization process the rates of adjustment and movement quarter-on-quarter with prices was relatively small. So [indiscernible] to go into what degree we cover [rolls] because of course we're still negotiating with our consumers and if you could do and remind me of the last part of question I would be grateful.

[Unidentified Analyst:]

Yes. The price increase and whether that's kind of covering raw material inflation and what you expect to see?

[Simon Turner:]

Yes. Look I mean, as I said earlier to my earlier answer we would ordinarily expect to see growth in this TiO2 industry above GDP and a year after we'd had two years after we had net contraction and where we progressively lowered year-end inventories. So I think we're well said that and we've taken the decision to go out because we want to tackle these margin pressures of course and as part of stabilization initiatives it remains to be seen what will happen with tightness on the go forward basis for the rest of 2020 because we've got this near-term lack of clarity around the Corona virus but ordinarily we would expect it to outpace GDP and that of course would provide better conditions for price increase in 2020.

[Unidentified Analyst:]

Got it. That's helpful. And I guess sales mix it look like that was down 2% on year-over-year basis. Can you provide some color there and whether we can expect similar trends into 2020 for [indiscernible] specifically.

[Simon Turner:]

Yes. I think that relates predominantly [well] into the specialty segments and I think as you're aware we closed last year with a soft specialty segment predominantly in our Asia centered and China centered textiles application.

[Simon Turner:]

Got it. Thank you.

[Operator:]

Thank you. And the next question comes from P.J. Juvekar with Citi.

[Unidentified Analyst:]

Good morning Simon. It's Eric featuring on for P.J.

[Simon Turner:]

Hey Eric.

[Unidentified Analyst:]

Do you think we're at a trough with fourth quarter EBITDA margins and TiO2 or do you think there's still risks in first half at least attributed to Corona virus and alike?

[Simon Turner:]

Well, certainly there is risk, yes. I think there's risk but of course that could play out in unexpected ways and that's quite hard to predict here. I've heard various people advance various reasons where it could be sort of like a net positive but from our point of view what we would say is of course it was a season soft quarter in fourth quarter. So of course you have absorption issues typically there. We had some softness in specialty but we expect to see some stability of pricing as we cross the year from 2019 into 2020 and of course you've heard our earlier comments about price increases.

[Unidentified Analyst:]

Thanks and secondly a competitor announced that they could close EU [indiscernible] capacity at the end of this year and next. Could you do the same or talk about in the competitive dynamics at Duisburg and [indiscernible]?

[Simon Turner:]

Yes. I mean look of course could you go down the path of closing asset. Yes you could and I think over this past many years we have faced up to those difficult decisions when plants have become older and sub-economic. So yes you could of course. Our view though is you have to look at both the competitiveness of the plant and the net revenue stream that is included in each of those plants and I think as we alluded to in our call earlier in our prepared remarks in TiO2 we will continue to further look for optimization and efficiency opportunities within our broader circuit, reflecting the fact that 2019 will see the end of our currently running VIP. We've found $10 million of color base improvement and it's a way of life in this business we expect to go back, look for further opportunities and as we identify those we will share those with you.

[Eric Petrie:]

Thank you.

[Operator:]

Thank you. And the next question comes from John McNulty with BMO Capital Markets.

[John McNulty:]

Yes. Thanks for taking my question. Can you give us a little bit of color at least as to what insights you have as to the customer inventory levels and kind of where they stand relative to kind of a normal season time for this?

[Simon Turner:]

I don't think we, if I go through it by region I don't think we'd see anything out of the ordinary in the United States. I've characterized those inventories at this time year is normal. Similarly in Europe we do not see any evidence and as I said to you earlier we had seen lower Chinese exports on a net basis into Europe and the United States combined in 2019 but I think that it's fair to say at the industry level that our calculations and estimates in Venator suggest that the closing year-end inventories at the industry level were at least 10% lower than where they stood at the back end of 2018. So I think that's about good as a metric we can give you.

[John McNulty:]

Great, that's helpful. And then just with regard to the color pigments business and I know you can't comment on the asset sale. Can you give us some color as to how the cost-cutting program is working there and then kind of where what you've pulled out at this point and how that's progressing as you're kind of looking through 2020?

[Simon Turner:]

Yes. I mean look we identified [indiscernible]. It's not a front-end loaded program. Similar to the TiO2 area it's a mixture of projects. A smaller running projects several of which don't require CapEx around a multiple in the instance of site. So it's not dissimilar attempt by way of phasing and fragmentation to its larger kind of TiO2 cousin if you want to think about it that way.

[John McNulty:]

Great. Thanks very much for the color.

[Operator:]

Thank you. And the next question comes from Josh Spector with UBS.

[Josh Spector:]

Yes. Hey guys. Just in terms of thinking about potential China impacts in 1Q, can you help us understand how much of your sales go directly into China and how much of Europe and kind of rest of Asia goes into products that you think ultimately end up in demand in China?

[Simon Turner:]

Yes. I mean the second one is pretty tough because if you think about ourselves into Europe and North America into the bigger a larger established sort of like applications like coatings and plastics well A). Coatings, decorative coating particularly generally don't travel very well having lots of liquid associate with the final product. So the answer there is minimal. I guess there's probably some special part of coatings that does make it. Did so plastics in the sense that you tend to see a more specialty plastics aside you tend to see the more commoditized plastics flowing out of China into the rest of the world. So I think that the second part of the question is really from our point of view there's not that much we sell into Western markets that ends up being sold to consumers in China. We will be some but not much. In terms of the first part of the question the way I think about it is that we are one of the smaller exporters into China and I will be surprised if our sales of the fraction of the imports is greater than 10% of all imports. So again they go to specialize in differentiated applications predominantly.

[Josh Spector:]

Okay. Thanks and just in terms of your volume growth year-over-year you talked about that being led by new products. So I assume volume loss last year you're not filling those same volumes. I guess I'm trying to think about that dynamic of maybe where you're selling those new products into and what are the kind of end markets where you're getting some additional traction?

[Simon Turner:]

Well, I'm certainly happy to talk a little bit about that 7% year-on-year increase. The bulk of that came from new products and the way to think about that I think is in three buckets. It's about new type functional products and grades that we've launched which have been extremely well taken up in plastics and industrial coatings types of segments and another way to think about that is from a diversification play point of view you'll recall that we took on laminates business which is a diversification play for us but again was absent from prior year sales. So that's the way we think about those new products sales.

[Josh Spector:]

Okay. Thanks.

[Operator:]

Thank you. And the next question comes from Steve Byrne with Bank of America.

[Unidentified Analyst:]

[indiscernible] for Steve, thanks for taking my question. I wanted to talk about the Middle East the bottleneck projects. Do you see any of products coming from the Middle East and hitting Europe from these projects?

[Simon Turner:]

We are not in a position to comment on that but we haven't seen anything of that type.

[Unidentified Analyst:]

Okay sure. And just a little more high-level, are you seeing any further reductions of TiO2 content by global paint manufacturers and conversely are there any new developments in R&D regarding your applications or products that you think could benefit from increased TiO2?

[Simon Turner:]

I think fundamentally, the answer to your first prior question is no. We're not seeing any. It's quite stable. Prices are being stable and we had some turbulence in that regard some 10 years back almost now but no we don't see that as a fundamental driver. On the second part of your question there's nothing near-term that we see that would lead to any sort of even material radical improvements in overall TiO2 consumption. That's I wouldn't want to never say never of course there can be some embryonic applications that could lead to that in our years but that's really not a near-term issue.

[Unidentified Analyst:]

Sure. Thank you.

[Operator:]

Thank you. And the last question comes from Laurence Alexander with Jeffries.

[Laurence Alexander:]

Hi, could you benchmark what the current sales run rate is for the assets under potential divestiture and as you've seen sort of the mix of your business change has there been any significant change in seasonality first half versus back half compared to what was the run rate before the most recent downturn?

[Simon Turner:]

Laurence this is Simon, can I just clarify the point of your question. Both of those parts of the question relates to the performance Additive business?

[Laurence Alexander:]

No, so the second one is just across the entire portfolio. [indiscernible] sort of normal seasonality just want to be clear that has not changed in any structural way as you've shifted your portfolio mix.

[Simon Turner:]

Yes. So to be clear then the second part your question is seasonality. We do not see any fundamental shift in seasonality across TiO2 or the performance Additive business. That's not to say necessary though of course but sales have mimicked that in all cases because as we've seen over these past couple years we've had soft spots automotive where I talked about earlier and our textiles segment at the back end of 2019. So of course there can be reasons that it doesn't apparently look like seasonality but we don't think the base seasonality has changed. That's the second part the question. Sorry. Could you repeat the first part about color?

[Laurence Alexander:]

And then just be sales run rate that you're looking today that you gave. You mentioned the EBITDA just want to double check what the sales run rate is looking like?

[Kurt Ogden:]

Laurence, this is Kurt. We'll follow up with you on the sales number. We did want to provide greater transparency around the EBITDA. We had a sense for what the contribution was from that color pigments business but because we haven't broken out the sales I don't have that with me right now. Happy to follow up with you later.

[Laurence Alexander:]

Okay. Thank you.

[Operator:]

Thank you and the next question comes from Arun Viswanathan with RBC Capital Markets.

[Arun Viswanathan:]

Hey. Thanks. Good morning. I just wanted to go back to the China issue. Is there a way you could kind of share what you generated in sales in EBITDA in China in 2019?

[Simon Turner:]

Broadly no. I don't think we'd be prepared to share that information.

[Arun Viswanathan:]

Okay. And then also you commented on the export situation out of China and into Europe as being potentially more benign. Could you share more details on that? Thanks.

[Simon Turner:]

Yes. I didn't actually say potentially more benign, well I may have inferred that. Let me back up and be as clear as I can be about this, what I said is if we look back over these past period last year for instance or even prior to that what we have been saying about China is the trajectory of supply and build rate in China been slowing. Of course we saw inspection, environmental issues there's been a number of setbacks faced predominantly by but not exclusively by smaller Chinese producers and the net effect of that coupled with the fact that Western customers are extremely concerned to get supply reliability and quality consistency has meant that Chinese exports to Western markets of North America and Europe while they have grown in last year specifically were actually lower than the prior year. So there had been this notion that Chinese products would go onwards and upwards into Europe and North America and that has not happened. I believe that fundamentally relates to the two factors I mentioned supply reliability for whatever reason and quality consistency.

[Arun Viswanathan:]

And then just lastly if I may, I'm just on the price increase announcements. I guess what would you characterize as your chances of success for these increased announcements and what would drive kind of success there maybe you can just contextualize that with your raw material outlook as well? Thanks.

[Simon Turner:]

Yes. So look at a high-level basis we're convicted to these price increases. We have done, we have worked very closely to listen to our customers around, managing their pricing and they have predictability for us. Our margins got compressed. It looks like there's going to be a bit more of it so we're going to move our prices and we're aiming to offset our raw material inflationary pressures. We remain to be seen as to how that plays out but I think that we are certainly convicted to support those in all major regions.

[Arun Viswanathan:]

Thanks.

[Operator:]

Thank you. And the next question comes from Vincent Andrews with Morgan Stanley.

[Unidentified Analyst:]

Hi this is Steve on for Vincent. I just wanted to come back to the segment margin discussion in TiO2. So if you guys did about 12% this year and if that's kind of what we're going to call troughs and then in 2017 and 2018 you're more in the mid 20%, clearly probably not getting back to that level but can you kind of help us frame kind of what the expectation is this year, kind of with that being the bottom and the top kind of ends to the range?

[Kurt Ogden:]

Yes this is Kurt. I'm happy to take that. I think that our success in 2020 will largely be predicated on how successful we are with the sales price initiatives that we have. We think that it was the prudent thing to do to pass along the raw material inflation that we've seen in 2019 and as you have heard us outline we are aggressively tackling our cost which would also serve to improve our margins but difficult to put a number or even a range out there for you where we're still early in those price negotiations and so I think we'll wait and see how those come in.

[Steve Haynes:]

Okay. Thanks Kurt.

[Operator:]

Thank you. And your next question comes from Hassan Ahmed with Alembic Global.

[Hassan Ahmed:]

Morning Simon and Kurt. I just wanted to go back to the pricing, TiO2 pricing also some of the dynamics going on the ore side of things obviously you guys talked about wanting to offset higher ore -- from what I've been hearing it seems high-grade ore, the availability of high-grade ore seems to be questionable meaning high-grade ore seems to be very tight, supply demand wise. So my question really is could we sort of enter 2020 with a situation where high-grade ore is tighter than titanium dioxide and the industry actually struggles to pass through those higher ore costs and maybe you guys being far more sort of leveraged [indiscernible] benefit from those dynamics?

[Simon Turner:]

Well, I think thanks for the question Hassan. I mean I think that this point about high grade lower grade ore is a continuation of a theme that has developed over multiple years and of course you're right to point out that high grade markets are more sort of less sort of vendor choices in those market and it is true that we have seen in the higher grade buckets particularly in rutile and to some extent some of these of operational ups and downs in chloride slags that has become tighter. I think we can see our sort of way through this near part 2020 typically as we've said before we would sort of like try to bolt down requirements and prices in the front half and then come back with the second half typically six-month type negotiation. So I'm not sure we're at the stage yet which you imply. I would also say on the low grade that despite the fact that there are still inflationary pressures at a low grade level. It's just they have not eventuated in a pattern that we've seen on the high grade.

[Hassan Ahmed:]

Understood. Helpful. And as a follow-up completely appreciate the fact that Corona virus ongoing just to sort of figure out what demand impact it may have but obviously the supply side tends to be a bit more visible. What are you guys seeing in terms of supply curtailment for TiO2 in China on the back of the Corona virus?

[Simon Turner:]

I think as I said I take our comments here appropriately have sign in the sense that we not the big window on the world for China in the world of TiO2 because of the limited amount probably take in. So we have seen and heard of the type of dynamics over the Lunar New Year where holidays were extended and whether that affected the workforce, logistics, infrastructure, CEM Park and geography of course. There were broader impacts that meant that supply got interrupted. The question is does that rumble on and continue and that's the part we do not know. The part we've seen is curtailment and disruption over saw like limited time window app and somewhat beyond the Lunar New Year. We've yet to see anything more fundamentally different from that.

[Hassan Ahmed:]

Very helpful Simon. Thanks so much.

[Operator:]

Thank you and the next question comes from Jim Sheehan with SunTrust.

[Jim Sheehan:]

Morning Simon. What are your ultimate plans for the Pori site? Is there any opportunity to monetize the remaining assets there and how would your exploring of options for CapEx and so forth affect that decision-making?

[Simon Turner:]

Well, look I think an important point here it's a notice as we've already transferred some of those specialty products we're still committed to further transfer of specialty business. Let's be very clear about that. That is a strategic imperative for us within Venator. So of course what we're doing here is we have to be prudent with cash for well understood reasons and that forces us to examine in each and every part of our cash usage including all parts of the current and anticipated CapEx bill and that's what we're doing. It's about prudency with cash. It's not no reflection our commitment especially I want to be very-very-very clear about that. That's something we still deeply believe in.Are there opportunities to potentially sell the sites or part of the sites? Yes, there are. Are we exploring? Yes we are. So we will leave no stone unturned there to see if there's an alternative usage for that site. We have been successful on several occasions in our past as we've closed various sites and turn those into opportunities for others. So I think that's a path we will continually. We will give you a lot of focus on that in 2020 and of course we're going to work through that our best option for being prudent with the cache and optimizing our return from other specialty business transfers and we'll update you when we get to that point. We don't have that number here today.

[Jim Sheehan:]

Okay. Thank you and on your TiO2 business what level of volume growth is realistic in 2020 given the improvements you've made in your specialty production network and also new products. Do you expect to outgrow the market again in 2020?

[Simon Turner:]

I think it goes back Jim to my other comment about Corona virus. I think that there are times when this industry on the demand profile where things are more or less clear. Unfortunately we are in one of those latter periods where the demand is less clear near-term. So really does heavily depend on how that evolves and it is evolving day-by-day, week-by-week. All we can point you to is we would expect industry rebound, GDP plus in 2020 ordinarily and we'd like to think that still happens and of course you have the factor in the fact that we broadening, diversifying and strengthening our products slate and of course that will also plays into our ability to manage our volumes.

[Jim Sheehan:]

Thank you.

[Operator:]

Thank you. And the next question comes from Roger Spitz with Bank of America.

[Roger Spitz:]

Thank you. Good morning. Your TiO2 price was down 7% for the full year 2019 versus ‘18 but can you comment on what the 2019 price movement was bifurcated between chloride process TiO2 and sulfate process for instance another large TiO2 producer who has only chloride process TiO2 reported its price was only down 1% for the full year of ‘19.

[Simon Turner:]

Yes. I think this is not a chloride sulfate situation per se at all. This is first and foremost a regional footprint discussion because in 2018 with us having a 50% of our revenues in Europe and the European dollar selling price being some $300 plus greater than North America that is what plays into a year on your price decline. That is the driver not the application. What I would say is that generally speaking our specialty TiO2 which just happened to be exclusively sulfate of course those prices are more stable. So they did not drop in that period in any material sense. What I would say about the remainder of our business our functional sales we've got a mixture of chloride and sulfate into those businesses and the way pricing evolved was more a function of customer size than it was of technology.

[Roger Spitz:]

I see. I believe you said that global TiO2 demand declined for the industry by 6% early in a call if I heard that correctly. Your volumes were up 7% in 2019. Would that imply that you took of market share?

[Simon Turner:]

What I'm saying is that let me backtracking and I said that in 2019 we estimate that the industry stroke by 6% over ‘18 over ‘17 by 6% and ‘19 grew by a modest amount let's call it 1%. So over that period that 6% related to the prior year. But coming back to your 7% number it's a very straightforward assessment here. If you pro forma out the extra diversified laminate acquisition and the introductions of specific new products we grew in line with the market.

[Unidentified Analyst:]

Got it. Thank you very much.

[Operator:]

Thank you. And this concludes our question and answer session. I would like to turn the conference to Simon Turner for any closing comments.

[Simon Turner:]

Thank you. Thank you for your interest in Venator. We look forward to speaking to a meeting with many of you throughout the quarter. In the interim if you do you have any issues please reach out to Jeff with additional questions. Thanks again for joining the call and have a great weekend.

[Operator:]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.