AdvanSix Inc. (ASIX) Q4 2022 Earnings Call Transcript

AdvanSix Inc. (NYSE:ASIX) Q4 2022 Results Conference Call February 17, 2023 9:00 AM ET

Company Participants

Adam Kressel - Vice President, Investor Relations and Treasurer

Erin Kane - President, Chief Executive Officer

Michael Preston - Senior Vice President, Chief Financial Officer

Conference Call Participants

Charles Neivert - Piper Sandler

Vincent Anderson - Stifel

David Silver - CL King

Operator

Good morning, and invited to nan AdvanSix Fourth Quarter 2022 Earnings Conference Call. All participants will beryllium successful listen-only mode [Operator Instructions]. Please statement this arena is being recorded.

I would now for illustration to move nan convention complete to Adam Kressel, VP Investor Relations and Treasurer. Please spell ahead.

Adam Kressel

Thank you, Andrew. Good greeting and invited to AdvanSix's 4th fourth 2022 net convention call. With maine present coming are President and CEO, Erin Kane, and Senior Vice President and CFO, Michael Preston. This telephone and webcast, including immoderate non-GAAP reconciliations, are disposable connected our website astatine investors.advansix.com.

Note that elements of this position incorporate forward-looking statements that are based connected our champion position of nan world and of our business arsenic we spot it today. Those elements tin alteration and nan existent results could disagree materially from those projected, and we inquire that you see them successful that light. We mention you to nan forward-looking statements included successful our property merchandise and net presentation. In addition, we place nan rule risks and uncertainties that impact our capacity successful our SEC filings, including our yearly study connected Form 10-K arsenic further updated successful consequent filings pinch nan SEC.

This greeting we’ll reappraisal our financial results for nan 4th fourth and afloat twelvemonth 2022 and stock our outlook for our cardinal merchandise lines and extremity markets. Finally, we’ll time off clip for your questions astatine nan end.

So astatine that, I'll move the telephone complete to AdvanSix's President and CEO, Erin Kane.

Erin Kane

Thanks, Adam, and bully greeting everyone. Thank you for joining america and for your continued liking successful AdvanSix. As you saw successful our property release, AdvanSix, delivered grounds yearly income net and rate travel capacity successful 2022, reflecting beardown commercialized execution. This builds connected our track grounds of capacity pinch net maturation for nan 3rd consecutive year.

And fto maine stock a fewer highlights earlier Mike covers nan specifications of our financials successful a moment.

We proceed to use from our diversified portfolio, an integrated, efficient, and costs advantage business model. In nan 4th quarter, our beardown commercialized capacity helped to offset pockets of soft extremity marketplace demand, customer destocking and operational challenges. Cash travel procreation continued to beryllium robust to adjacent retired nan twelvemonth supporting disciplines and worth accretive superior deployment. In 2022, we enhanced our superior deployment pinch nan acquisition of U.S. Amines and an summation successful return of rate to shareholders done stock repurchases and an accrued dividend, while further reducing debt.

Our Board of Directors has approved an further $75 cardinal stock repurchase authorization, reinforcing nan elasticity we've built into our superior allocation strategy. We've besides had respective breathtaking recognitions recently. I americium pleased to denote that we proceed to beryllium recognized for our beardown firm governance and attraction connected sustainability. AdvanSix was precocious awarded its 2nd consecutive platinum standing for firm societal work from EcoVadis. This continues to rank america among nan apical 1% of each companies assessed.

In addition, nan National Association of Corporate Directors New Jersey Chapter has recognized AdvanSix arsenic a Public Company Board of nan year. Leading pinch transparency and accountability enables america to present amended results for our stakeholders while driving our semipermanent strategies forward.

And looking to 2023, we judge that we are well-positioned for different twelvemonth of differentiated performance, supported by a divers merchandise portfolio, continued beardown cultivation and fertilizer manufacture fundamentals, and nan resilience of our business model.

Roughly one-third of our portfolio is successful nan cultivation sector, including Ag chemicals and our position successful this charismatic marketplace has extended moreover further done our acquisitions of U.S. Amines arsenic good arsenic nan packaged ammonium sulfate business, CIS, and integrated investments to grow our precocious worth granular ammonium sulfate.

While we do expect nan challenges of an uncertain environment, and expect request weakness successful respective marketplace segments wrong our nylon and chemic intermediate merchandise lines, we stay assured successful our demonstrated expertise to execute and execute done various macroeconomic cycles.

We person structurally improved nan net powerfulness of this business and our competitory advantage will support america moving disproportionately higher planned accumulation rates successful 2023 to complement our beardown commercialized performance. Our patient equilibrium expanse will besides service america good and proceed to support our expertise to deploy superior and maximize shareholder value.

With that, I'll move it complete to Mike to talk nan financial specifications [technical difficulty].

Michael Preston

Thanks, Erin, and bully morning. I'm now connected Slide four, wherever I'll supply a summary of nan afloat twelvemonth 2022 financial results. As Erin pointed out, it was terrific capacity crossed nan board, arsenic commercialized -- beardown commercialized execution much than offset measurement declines and earthy worldly ostentation resulting successful important apical and bottom-line growth. Sales of $1.9 billion, adjusted EBITDA of $308 million, adjusted net per stock of $6.28, and free rate travel of $184 cardinal each represented grounds yearly performance.

We've now accrued net for 3 consecutive years and judge this represents differentiated capacity versus our peers.

Let's move to Slide 5 to recap nan 4th fourth results. Sales of $404 cardinal decreased astir 5% successful nan 4th quarter, chiefly driven by 15% diminution successful volume. Pockets of Soft, extremity marketplace demand, and customer destocking contributed to nan measurement decline. Pricing was favorable by 6%, comprised of an summation successful market-based pricing up 10%, chiefly driven by higher ammonium sulfate pricing. This was partially offset by 4% diminution successful earthy worldly walk done pricing, pursuing a nett costs alteration successful benzene and propylene.

The acquisition of U.S. Amines added astir 4% to income arsenic well. Adjusted EBITDA was $67 million. I will item nan cardinal year-over-year variances connected nan adjacent slide. Adjusted net per stock was a $1.27 up 44% versus nan anterior year.

And finally, free rate travel reached $41 million, up 194% versus nan anterior year. Cash travel from operations of $70 cardinal accrued $36 cardinal chiefly owed to higher nett income. Capital expenditures up $28 cardinal successful nan 4th accrued $9 cardinal versus nan anterior year.

Let's move to Slide six. Here we item a fewer of nan cardinal drivers of our 4th fourth adjusted EBITDA capacity year-over-year. Pricing complete earthy materials was a $44 cardinal benefit. Tracking our cardinal adaptable separator drivers, ammonium sulfate connected a nett value complete a earthy state and sulfur basis, remained affirmative year-over-year. Reflecting nan beardown underlying Ag situation arsenic good arsenic our expertise to thrust our sulfur nutrient worth proposition.

Chemical intermediates value complete earthy dispersed was affirmative year-over-year arsenic well, mostly reflecting acetone separator complete pursuing propylene costs. Performance crossed our caprolactam and nylon portfolio complete our cardinal raws was astir level year-over-year. The measurement was astir $26 cardinal unfavorable successful nan quarter, chiefly owed to customer destocking and soft extremity marketplace request crossed immoderate of our portfolio. We saw nan astir effect crossed our nylon and chemic intermediates merchandise lines, peculiarly products serving user durables and building and building extremity markets.

The effect of our planned scheme turnarounds was a known tailwind to our year-over-year capacity arsenic we had nary turnaround activities successful nan 4th fourth of ‘22 versus astir $80 cardinal successful nan 4th fourth of 2021. As you whitethorn recall, we completed our 2022 multi-site planned and turnaround successful nan 3rd 4th of 2022.

Finally, we saw astir $21 cardinal successful higher costs and works walk driven by an summation successful state inferior prices and an summation successful non-raw worldly inflation, chiefly connected proscription costs.

Operational capacity successful December successful peculiar was impacted by highly acold temperatures crossed our integrated worth chain. As a result, our quarterly utilization was astir level to nan 4th fourth of 2021 and beneath humanities tally rates for a non-outage quarter.

Let's move to nan adjacent slide. On nan near broadside of Page seven, we've highlighted our robust 2022 rate travel generation, which was chiefly driven by nett income of $172 cardinal and $39 cardinal favorable effect of networking capital, including astir $32 cardinal of ammonium sulfate pre-buy rate advances successful nan 4th quarter.

CapEx was astir $89 cardinal for nan year, driven by a planned summation successful attraction and health, information and biology projects. I would item that complete nan past 12 months, our free rate travel output is astir 17% and our free rate travel conversion is 107%, which reflects nan patient rate travel procreation and value of net our business exemplary delivers.

On nan correct broadside of nan page we've depicted our superior allocation since 2017. As you tin see, we've enhanced our superior deployment successful 2022 pinch nan acquisition of U.S. Amines astatine a meaningful measurement up successful rate return to shareholders, each while further reducing indebtedness levels. In 2022, we returned a mixed $49 cardinal to shareholders by measurement of dividends and stock repurchases.

Our adjacent quarterly dividend of $0.145 per stock will beryllium made payable connected March 17th for shareholders arsenic of grounds day March 3rd. We are successful a favorable position pinch our patient equilibrium sheet, peculiarly arsenic we participate a much uncertain macro situation successful 2023.

Now let's move to Slide eight. We stay disciplined successful our attack to investing successful nan business for semipermanent sustainable returns. We've generated beardown returns connected invested superior and person outperformed peers, which is simply a testament to nan net powerfulness created from our investments on pinch our operational and commercialized execution.

We proceed to attraction connected improving done rhythm profitability crossed nan business pinch nan extremity of generating higher lows and higher highs. We expect an summation successful superior expenditures successful 2023, which see -- which will see a operation of captious infrastructure, different attraction and maturation and costs savings projects arsenic well. These projects are captious for safe, sustainable, and accordant semipermanent performance. Our maturation task pipeline amongst others, includes projects to support our multi-year extremity to double net of nan U.S. Amines business and grow our granular ammonium sulfate conversion.

So pinch that, fto maine move nan telephone backmost to Erin.

Erin Kane

Thanks, Mike. I'm now connected Slide 9 to talk each of our cardinal merchandise lines. Starting pinch nylon. The world composite value earthy dispersed remained comparatively level sequentially and year-over-year successful nan 4th quarter.

Asia spreads, however, declined much severely arsenic COVID lockdowns successful China led to weaker request and excess proviso moving to different regions astatine little prices. Textiles request declines successful Asia has impacted world nylon manufacture proviso and request conditions. Well, not a important extremity usage for advancing income directly, textiles represents nan largest nylon extremity usage globally and are impacted by greater consuming U.S. and Europe markets, which look accrued uncertainty pinch respect to user spending connected good.

Now from an extremity marketplace position successful North America, nan business is rather mixed. In nan fibre and filament abstraction wherever we service our carpet customers, we've seen a slowdown done nan concatenation pinch continued inventory corrections, which we expect to proceed successful nan first half of nan year. In engineered plastics, while we are expecting sequential measurement betterment from nan 4th fourth into 2023, nan value compression retired of Asia is impacting world pricing.

Now, arsenic a reminder, astir 30% of our nylon portfolio serves this abstraction into applications specified arsenic auto, user and different business goods. And present we are seeing resin pricing moving astatine a aggregate little than nan alteration of earthy worldly input cost. And past arsenic a agleam spot, packaging continues to beryllium a unchangeable extremity market, and contempt immoderate inventory drawdowns astatine twelvemonth extremity remains a resilient extremity exertion for our business. We proceed to attraction connected being a reliable North American supplier and we'll optimize our operation arsenic we person successful nan past to meet customer request and navigate done these dynamics.

Moving to ammonium sulfate. We've witnessed nitrogen prices travel down from importantly higher levels seen earlier successful 2022. Nitrogen proviso readiness arsenic good arsenic little power costs, peculiarly successful Europe, person supported a simplification successful nutrient pricing. While it is not uncommon to spot a seasonal rule and request exiting nan year, we stay assured that nan resilient underlying cultivation manufacture fundamentals supported by harvest prices, husbandman profitability, fertilizer affordability, expected planted acres and banal to usage ratios will proceed to support beardown nutrient demand. And truthful contempt immoderate cautious buying behaviour up of nan season, we stay good positioned to service our cardinal customers arsenic we move into nan bosom of nan home planting season.

And lastly, turning to chemic intermediates. Industry realized acetone prices complete refinery people propylene costs improved year-over-year and sequentially successful nan 4th quarter. Propylene costs person continued to inclination little connected ample proviso complete nan past fewer months. While acetone request downstream has seen immoderate softness into nan ample purchaser applications, we spot proviso arsenic balanced to tight, supported by unchangeable acetone imports into nan U.S. and little phenol operating rates globally connected reduced request into building and building and different business applications.

I'll constituent retired present that our integrated operating exemplary serves america good successful manufacture dynamics for illustration these.

Now let's move to Slide 10 to talk our outlook. We expect capacity successful 2023 to erstwhile again show nan resilience of our business exemplary and our expertise to navigate done nan challenges of an uncertain environment. We expect favorable underlying cultivation manufacture fundamentals to continue. We besides expect nan balanced proviso and request conditions for North American acetone fixed little phenol manufacture operating rates globally. We'll besides person nan imaginable for immoderate tightness, peculiarly successful nan first half of 2023.

We do expect headwinds successful user durables and building building extremity markets crossed our nylon and different chemic intermediates merchandise lines. And arsenic I shared earlier, this will person implications for some measurement and price.

Now for reference, we've shared our income by extremity marketplace vulnerability connected nan near manus broadside of nan page. We are a diversified chemistry institution and nan scope of our extremity marketplace vulnerability helps insulate nan institution from important variability successful immoderate 1 merchandise lines, arsenic demonstrated by our results successful respective environments.

Operationally, we proceed our attraction connected safe, stable, and sustainable performance, while driving little variability successful utilization rates, which successful move drives our improved customer acquisition and higher returns for nan business. Our integrated worth concatenation and competitory costs advantage enables america to target moving our plants astatine those disproportionately higher rates than nan manufacture connected average.

For nan afloat twelvemonth 2023, we are projecting CapEx walk to beryllium astir $110 cardinal to $120 million. This scope reflects higher walk to support captious infrastructure improvements, different maintenance, arsenic good arsenic further maturation and costs savings projects. We expect nan pre-tax effect of planned works turnarounds to beryllium successful nan scope of $20 cardinal to $33 cardinal successful 2023, a tailwind compared to astir $50 cardinal for nan afloat twelvemonth 2022.

And lastly, we expect our effective taxation complaint for nan twelvemonth to beryllium astir 24% and expect rate pension contributions to beryllium astir zero to $5 million, pursuing $20 cardinal successful contributions successful 2022, bringing our defined use scheme to a astir afloat funded status.

Let's move a descent 11 to wrap up earlier moving to Q&A. As we've shared previously, we judge that AdvanSix offers a compelling finance thesis complete nan short, medium, and agelong term. Our starring North American position and advantaged plus guidelines coupled pinch our businesslike and thin business model, supply inherent competitory advantages.

And we're aligned to those divers group of extremity marketplace applications. Let pointed retired and reiterate again, astir 1 3rd of our portfolio is supported by vulnerability to beardown cultivation fundamentals. We besides proceed to put for semipermanent maturation crossed nan broader portfolio into applications specified arsenic paints and coatings, electronics, and different solvents.

Supplementing our vulnerability to these divers and usage applications. We activity to heighten our income operation done our differentiated merchandise portfolio, which are connected margins that are astir doubly our mean guidelines business maturation margins, and besides proceed to make smart and subject investments successful our assets to prolong and amended throughput and profitability. We person substantially accrued nan net powerfulness of this business pinch our attraction connected done rhythm profitability.

Lastly, our enhanced superior allocation model provides upside and optionality for further worth creation. So, all, and we consciousness very bully astir nan strategies we've implemented, which proceed to support expectations for advance's semipermanent sustainable performance.

So, pinch that, Adam, let's move to Q&A.

Adam Kressel

Thanks Erin. Andrew, please unfastened nan statement for questions.

Question-and-Answer Session

Operator

[Operator Instructions] The first mobility comes from Charles Neivert pinch Piper Sandler. Pease spell ahead.

Charles Neivert

Good greeting everyone. I person a speedy question. In position of nan CapEx, really do I look astatine that crossed nan people of nan year? Is location going to beryllium reasonably evenly dispersed out? Is location 1 aliases 2 quarters that are going to beryllium heavier than others? And past successful position of nan activity getting done, does immoderate of that bring benignant of accrued efficiencies that mightiness lead to possibly a mini tweak successful capacity aliases thing of that quality that comes? Or is it conscionable much of semipermanent attraction that has to get done to amended nan existing equipment, et cetera.

Michael Preston

Yes, Charlie, typically nan CapEx walk tally rates are heavier successful nan 2nd half than nan first half. As we benignant of ramp up present from, nan $90 cardinal levels successful 2022 to astir nan 110 to 120 successful 2023. And, you know, again, immoderate of nan summation successful nan walk is, captious infrastructure activity astatine our sites, different repair and attraction projects, which, you know, we've demonstrated has an effect and improves, our safe and unchangeable cognition support safe and unchangeable operations going guardant here. So that's what I would expect. So probably, successful nan benignant of 60% scope successful nan 2nd half, 60% to 70% 2nd half versus first half.

Charles Neivert

Got it. And past successful position of nan activity of merchandise that you guys are seeing, meaning I'm assuming China is exporting wherever they typically haven't exported because they person immoderate excess accumulation and they want to support running. I mean, do you spot that, has that, nan cadence of that merchandise aliases has that changed astatine each complete nan last, let's opportunity mates of months? Or is it maintaining nan level, nan higher level and looking astatine it going forward, do you person immoderate thought erstwhile things are, mightiness travel backmost to, let's opportunity they're much normal authorities or, preexisting?

Erin Kane

No, certainly. We've seen this inclination again and it's a confluence of factors arsenic you, pointed retired present complete nan past mates of months, astir apt starting precocious Q3 done Q4 coming into nan commencement of nan year, and it's nan little surely request successful nan region -- now impacting those waste and acquisition flows, right? So, we're besides seeing, not conscionable Chinese resin, but besides surely resin from different countries, being exported into nan European Union. Obviously, that started successful 2022, surely pinch nan higher costs considerations successful Europe and nan pullback connected their operating rates moving into South America and Mexico arsenic well.

And we've besides seen, downstream products including compounded resins -- connected batch of Asia moving into America and Mexico. Certainly, OEMs person world footprints, truthful location is this unit of really do they compete and how, what is nan consideration, against nan corporate group of overseas assets. So, it's surely we're watching for nan rebound, surely successful a betterment successful nan region, evidently to propulsion their volumes backmost up.

You person debased operating rates starting to beryllium seen successful extracurricular of China. They're astir 50%, truthful hopefully that will lend arsenic well. So, I deliberation it will surely beryllium a first half, information really agelong it moves into that. Certainly, there's contracted measurement here's for us, but there's besides freely negotiated and spot-oriented products arsenic well.

But again, we spot this predominantly successful that engineered integrative space. And certainly, freight arsenic well, conscionable arsenic different confluence of factors, freight rates dropped dramatically successful nan backmost half of nan twelvemonth and benignant of making transport, which whitethorn person been would've impacted benignant of landed costs has moderated present arsenic well.

Charles Neivert

Got it. Okay. Thanks very much. I'll travel backmost if I person thing more. Thanks.

Erin Kane

Okay.

Michael Preston

Thanks Charles.

Operator

[Operator Instructions] The adjacent mobility comes from Vincent Anderson pinch Stifel. Please spell ahead.

Vincent Anderson

Thanks, and bully greeting everyone. You made a constituent to travel retired and opportunity a mates of times, truthful you'll beryllium moving nan plants very difficult adjacent year, harder than this year. And that's benignant of contempt this request outlook successful nan past that's involved, things for illustration spot export sales, but you've besides mentioned complete nan past mates of years an improved U.S. marketplace stock successful nylon specifically.

And you besides person a equilibrium expanse that tin grip greater inventory builds if you needed to thin connected that. So, I'm conscionable wondering really your commercialized strategy whitethorn look different successful this peculiar downturn versus what we've observed successful anterior years?

Erin Kane

Thanks for nan question. I'm surely happy to benignant of explain and supply a small spot much colour astir nan statement. Certainly, is we person discussed passim benignant of 2022, we didn't person arsenic beardown arsenic an operational twelvemonth arsenic we usually would have. And certainly, comparative to each nan strategies we person successful spot astir safe sustainable operations that it continues to beryllium a halfway attraction for us.

The commentary astir nan returning of works utilization rates is again, ensuring that our strategies are delivering nan outcomes we expect. Our integrated worth concatenation allows america to tally people higher rates to start. So, let's benignant of break it down conscionable quickly here. So, our Phenol plants are operating astatine slightest 15% higher rates than different North American players correct now because of our integrated position connected phenol successful a marketplace wherever phenol request is off, right?

So, that again allows america to person nan beingness successful nan acetone market, which again serves america well. In dream lipid and moving headdress ammonium sulfate. We person -- and our assured successful a beardown outpouring play comparative to request for fertilizer. So again, it's important for america to get our capacity backmost and to guarantee that we are moving to fulfill our customer demands there. Obviously, and moving done for caprolactam and nylon

Here we person 2 things going on. In immoderate cases, it's a measurement consideration, arsenic I pointed out, mostly successful fibre and filament. It's a pricing information associated pinch engineering plastics and packaging is remaining robust and resilient. So, I deliberation what you'll spot america do is, yes, we person operation arsenic a lever for this statement and for this enterprise.

But up to, and including arsenic you say, reasoning astir nan correct inventory builds against nan correct separator income those are each things that spell into our calculus, and we person each those degrees of state of which to propulsion and run done this market, which I deliberation differentiates america and separates america from different competitors successful nan space.

Vincent Anderson

Perfect, very helpful. Thanks. And if my mathematics is correct, this possibly a large if connected a Friday, but it looks for illustration your aiming’s revenues were really up sequentially successful nan 4th quarter. Do I person that right? And if so, tin you talk astir what was going connected there?

Michael Preston

Yeah. When you look astatine nan 3rd to 4th fourth sequential span here, you'll statement that astir a percent constituent connected full gross was driven by M&A. And that's each U.S. Amines. And immoderate of that is they're serving. When you look astatine nan Ag sector, and nan seasonality associated pinch that tin effect nan timing of revenues from a 4th to quarter. So much of this was a spot of a seasonal betterment and we would expect besides nan first half of nan twelvemonth to beryllium beardown arsenic nan season, is that a precocious level typically successful nan first half.

Vincent Anderson

Okay. Excellent. And actually, a speedy 1 successful nan akin vein. Your rate advances picked up rather a spot versus anterior years, obviously, excluding past year. Can you speak to really overmuch of that represented a higher percent of your 2Q fertilizer volumes versus conscionable value being higher successful that dollar amount?

Erin Kane

Sure. We tin surely supply immoderate clarity there. So again, we did proceed pinch a pre-buy this year, arsenic it was successful nan liking of our customers and a desire to proceed pinch one. What we would opportunity is that nan measurement for nan pre-buy would beryllium connected mean accordant pinch nan pre-buys that we conducted successful nan years anterior to past year. So, let's telephone it '19 '20, '20 '21. The quality really being -- nan marketplace value being higher than that timeframe.

Vincent Anderson

Okay. Perfect, tanks.

Operator

The adjacent question, nan adjacent mobility comes from David Silver pinch CL King. Please spell ahead.

David Silver

Hi. Good morning. I'm going to pass you successful advance, I've had an different morning, truthful I joined nan telephone late. But so, I'm going to make you repetition yourself connected 1 aliases 2 things, but could we conscionable commencement -- could you conscionable summarize what nan operational challenges were this quarter? Again, I wasn't capable to perceive to your opening remarks, but some successful nan -- if you could conscionable qualify nan root of it, and past if you quantified it astatine all, I'd admit you conscionable summarize, including that remark arsenic well. Thank you.

Michael Preston

Yes. Sure, David. Happy to supply a small spot much color. Where we saw immoderate much of nan little utilization rates comparative to what we had planned was later successful nan quarter, peculiarly successful December. You whitethorn recall, we deed a drawstring of upwind crossed nan state that had immoderate very frigid temperatures that impacted not only us, but besides others successful nan industry. And that resulted successful america moving astatine little rates than what we would've liked.

And truthful that, was nan main driver successful nan 4th and we're comfortable that we took each nan basal actions to get backmost up to scheme here, and will and do expect amended capacity present arsenic we get into nan first quarter.

David Silver

Okay. Thank you for that. I wanted to inquire a mobility astir U.S. Amines. So, it's been -- you've owned it now for 3 afloat quarters. And I was conscionable wondering if you could conscionable talk astir nan integration, talk astir nan synergies you've been capable to recognize cost, but besides gross if location are immoderate crossover benefits.

And then, pinch your CapEx walk for adjacent year, nan higher CapEx spend, really much, if thing of that is really dedicated to executing connected immoderate comments you made successful nan past astir location being immoderate beautiful straightforward description opportunities there. Thank you.

Erin Kane

Sure, David. So, we're really coming up connected a year, which is terrific, and I would stock that nan integration has gone well. The functional integration is mostly complete, which is great. It went to scheme arsenic has benignant of nan past mates of quarters comparative to our expectations, successful bringing nan portfolio into our fold. So again, we're pleased pinch wherever we sit, we're connected target to wherever we were expecting to be. And truthful that's important.

One of nan considerations erstwhile we announced nan acquisition was really astir that this was an plus aliases group of assets successful a business that landed itself for early growth. So our superior attraction was to statesman executing against those projects wherever we saw opportunity to return nan multi-faceted assets that they possessed, which are much pots and pans oriented to grow capacity sets and statesman to usage them successful a caller and expanded ways.

So again, nan CapEx targets -- again, CapEx present nan assets are not arsenic CapEx intensive arsenic our different assets. So again, we person begun deploying against those projects to alteration america to grow capacity sets. So location are a number of Amines that we tin make, including, psycho hexamine, improving nan accumulation of isopropyl intoxicant and things that are wrong nan views, different diamine. And, we proceed to person customers and imaginable customers scope out.

And truthful again, that is wherever we are headed to comparative to nan worth creation of nan acquisition alternatively than much accepted income synergies arsenic you asked about. So again, connected track, I deliberation arsenic we proceed to advancement we'll beryllium capable to, speak much astir those items, but, we are wherever we expected to beryllium and proceed to activity that plan.

David Silver

Okay. And conscionable to travel up connected that, successful nan past you've talked about, I judge $200 cardinal aliases truthful of specialty intermediate different specialty merchandise revenues aliases differentiated revenues. Where do you deliberation that tally complaint is now and what are your -- erstwhile you deliberation astir 2023, is that going to comprise a increasing percent of your wide revenues aliases wide net powerfulness successful your estimation? What is nan -- what is budgeted benignant for that clutch of differentiated products?

Erin Kane

No, it's existent again. Certainly we person been proud of nan maturation that we person seen, really complete nan past 5 years arsenic we pointed retired successful anterior sessions. Significant maturation successful our some precocious purity intermediates and precocious worth intermediates that are going into areas of paints and coatings and electronics, expanding and continuing to turn for our ligament and cablegram connected co-polymer income and nylon.

What I would say, David, is that, while these are differentiated products, they're not needfully immune per se to nan world considerations and extremity marketplace dynamics. So surely semipermanent trends for these applications are very affirmative and it's why we've proceed to put and proceed to deliberation astir our portfolios successful these spaces. But they tin person considerations for request conscionable for illustration different applications. And so, there's continued focus. But for instance, you know, semiconductors arsenic things benignant of move down and group are reasoning astir acquisition of equipment successful 2023, whitethorn possibly beryllium astatine a different complaint of maturation than we've seen successful nan past fewer years.

Europe has besides seen a slowdown successful pains, coatings, and sealant. So again, this is simply a semipermanent attraction for us. And I deliberation that benignant of nan cardinal takeaway is that it's not wholly immune, but again, we expect these things to retrieve and proceed to person those semipermanent opportunities for us.

David Silver

Okay, great. I'm going to support going if you don't mind. Everyone other had their first shot, truthful excessively bad for them. But, I wanted to inquire you a mobility astir nylon and successful particular, I conjecture nan building aliases related uses and successful North America, I conjecture residential building broadside of things has slowed down a adjacent magnitude and what do I know? But if nan Fed is continuing to raise liking rates, I'm reasoning that could person incremental antagonistic effects, let's say, connected owe rates and things for illustration that.

How do you deliberation astir trading I guess, aliases allocating, your nylon capacity to different extremity markets and what makes consciousness successful an uncertain economical environment, but decidedly 1 wherever residential building seems to beryllium connected nan downturn correct now? I'll extremity there, but convey you.

Erin Kane

No, arsenic you say, surely residential building is being deed much powerfully than commercial. That said, nylon plays good into nan commercialized space. We would spot that surely areas for illustration lodging, hospitality these are areas wherever nan user is still spending we deliberation astir nan latest reports income against leisure and hospitality and those types of services proceed to beryllium beardown areas. It generates opportunities for continued remodeling and upgrades, truthful location is simply a mix, but surely that tin beryllium a situation and surely will beryllium astir impacted by inflation, user confidence, liking rates, and we spot that successful remodeling activity coming down arsenic you say, lodging starts and surely existing location sales.

But again, nylon -- focusing connected that commercialized abstraction is going to beryllium important for america arsenic we navigate through, nan corporate group of dynamics for this. Again, our assets to nutrient nylon person immoderate flexibility. So, again, it's 1 of those degrees of state that we person to negociate operation on nan way. Customers are still buying, we want to make judge that we are supporting those cardinal folks. Opportunities astir successful this abstraction of sustainability are becoming important arsenic well.

And truthful liking successful our post-industrial recycled grades and post-consumer recycled grades are going to beryllium important present arsenic they are successful different applications arsenic well. So, again, astatine nan extremity we've sewage nan elasticity of our assets. We've sewage benignant of a operation of ensuring that we are capturing nan commercialized opportunities moreover arsenic a smaller guidelines residential effect connected carpet whitethorn travel into play. And then, really ensuring that -- and we've proven this successful nan past that we tin propulsion those levers and navigate through.

David Silver

Probably thing you haven't seen before, but liking rates person been truthful debased recently. I don't know. I just, wanted to perceive you talk done that, truthful convey you.

One past question. And this has to do pinch Europe, and I guess, nan effect of little earthy state costs location on, I guess, world waste and acquisition patterns. But I guess, earthy state has travel good disconnected of its, spiking highs of nan past year, twelvemonth and a half. And I'm conscionable wondering since earthy state is utilized efficaciously for some fertilizers that could beryllium produced successful Europe arsenic good arsenic nylon and caprolactam. I mean, I'm conscionable wondering if you're seeing aliases anticipating immoderate displacement successful waste and acquisition patterns, successful different words, import merchandise that utilized to beryllium exported to Europe, imported into Europe, whitethorn now get backed out. And conscionable wondering if you're seeing immoderate of that connected either nylon aliases successful fertilizer to this point. And what mightiness your expectations beryllium going forward?

Erin Kane

Yes. Certainly, arsenic nan wide business has improved successful Europe. As you constituent retired connected nan input cost, improving, nan sentiment to nutrient correct and successful a number of chains, they still person benignant of reduced request successful general. And weakness that they're going to person to benignant done successful a number of extremity applications arsenic we've touched on. So, it's 1 where, yes, there's -- erstwhile we deliberation astir accumulation of nutrients, those rates person picked up chiefly for surely nan location request there. We'll see, for illustration I said, it's Europe's astir apt 50%, capacity utilization arsenic we cognize it correct now successful caprolactam done nan chain.

But this is simply a abstraction wherever world waste and acquisition is understood, and surely things moving successful from Asia went successful heavy past twelvemonth arsenic well. And they'll edifice themselves accordingly arsenic we move forward. It's difficult to opportunity that there's a definitive move present 1 measurement aliases nan other. But again, these are world markets connected that sense. But certainly, they person their location nuances arsenic well. So Europe is surely a buyer's marketplace for a nylon, truthful there's going to beryllium produced certainly, it's a unit location conscionable because you person a magnitude of supply, and successful fertilizer you've sewage world buying conscionable slowing down successful general. And truthful again, nitrogen capacity there, we would put astatine astir 70%.

So for illustration thing else, this is what nan world is going to person to navigate done some globally and regionally, I deliberation moving guardant arsenic we advancement done nan year.

Michael Preston

Yes. And moreover though earthy state prices person travel down, they're still -- erstwhile you deliberation of those prices comparative to history and connected a comparative ground to for illustration nan U.S., they're still high, right? So that's conscionable different information there, Dave.

David Silver

Yes. No, they're decidedly still is that location disparity. No question. Okay. Thank you very much. I admit each nan color.

Operator

This concludes our question-and-answer session. I would for illustration to move nan convention backmost complete to Erin Kane for immoderate closing remarks.

Erin Kane

Thank you each again for your clip and liking this morning. Despite immoderate macro headwinds and operational challenges successful nan 4th quarter, our capacity reflects nan resilience of our business exemplary and our expertise to navigate and execute successful a multitude of environments. Following nan grounds capacity successful 2022 we look guardant to continued execution of our strategical priorities successful 2023 and are committed to delivering semipermanent worth to our shareholders. With that we look guardant to speaking pinch you again adjacent quarter. Stay safe and beryllium well.

Operator

The convention has now concluded.