Celanese Corporation (XOM) Earnings Call Transcript & Summary

Greetings, and welcome to the Celanese Update Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Brandon Ayache, Senior Director of Investor Relations. Thank you. You may begin.

Thanks, Diego. Welcome to the Celanese Corporation conference call to discuss the agreement to acquire the Santoprene TPV elastomers business from ExxonMobil. My name is Brandon Ayache, Senior Director of Investor Relations. With me today on the call are Lori Ryerkerk, Chairman and Chief Executive Officer; Tom Kelly, Senior Vice President of Engineered Materials; and Scott Richardson, Chief Financial Officer. The press release announcing this acquisition was distributed via Businesswire earlier this morning and posted on our Investor Relations website, along with presentation slides and accompanying prepared remarks. These items were also included in an 8-K issued earlier this morning. As a reminder, some of the matters discussed today may include forward-looking statements. Also, some of the matters discussed include references to non-GAAP financial measures. Explanations of company non-GAAP measures and reconciliations to the comparable historical company GAAP measures are included on our Investor Relations website under Financial Information. Please also note the language regarding forward-looking statements and non-GAAP financial disclosures contained in the slide. With that, let me turn it over to Lori for some introductory comments.

Thanks, Brandon, and welcome to everyone listening in today. As I'm sure most of you have already read the extensive overview materials we put out earlier this morning, including the slides in the prepared remarks. I will keep my comments brief. We are very pleased today to announce the agreement to acquire the Santoprene business of ExxonMobil. They are a leading global producer of thermoplastic vulcanizate or TPV. The Santoprene products are renowned across a variety of end uses, including automotive. Today, we already have a small TPV product line within Engineered Materials, which was part of our acquisition of SOFTER. We understand the tailored functionality that TPV brings to different application areas, and we are really thrilled by the opportunity to make Santoprene one of our flagship product lines in Engineered Materials. This transaction is a prime example of the type of M&A opportunities we are targeting. Simply put, this transaction checks virtually all of the boxes we highlighted at our recent Investor Day in terms of M&A priorities. In particular, we are pleased to be putting our excess cash to use in this way to drive growth and value creation in Engineered Materials. We really view this as a culmination of the capital optimization strategy that began with the monetization of our passive investment in Polyplastics last year for $1.575 billion followed by $500 million in share repurchases in the second half of last year and now the acquisition of Santoprene to drive meaningful EPS accretion. As a result, Engineered Materials not only has greater control over its financial performance and earnings, but also a broader solution set to bring to our customers. We are excited to welcome the Santoprene team to Celanese and committed to working together to drive continued growth in Engineered Materials. With that, let me turn it back to Brandon for Q&A.

Thanks, Lori. Diego, let's please go ahead and open the line for Q&A.

[Operator Instructions] Our first question comes from Ghansham Panjabi with Baird.

This is actually Matthew Krueger sitting in for Ghansham. So understanding that the average EBITDA for the acquired assets over the past 4 years has been around $100 million. Can you talk a bit about the historical volatility of the earnings stream for Santoprene, also providing some additional details around the current or projected revenue base and the historical or expected organic growth rates of the business? Just any details around those kind of topics would be helpful.

Yes. I think if we look at the last 5 years, as we stated in the material, Santoprene has averaged around $100 million EBITDA. Now that does include the period of 2020 where Santoprene was affected by the shutdown in auto, much as we were in our Engineered Materials business. In fact, if you look at their '19 to '20 decline in earnings, it was pretty consistent with what we saw in our own businesses that are heavily weighted towards automotive. And then I think further in 2021, the Santoprene business has been further challenged by pretty extreme raw material volatility kind of well beyond what is normally expected. So we feel really confident going forward that the kind of base level of earnings before synergies in this business is around that $115 million per year. And we don't really see the normal raw material volatility as being something much different than we experienced in our other lines of Engineered Materials businesses. And so we'll be able to apply the same pricing model, the same go forward, the same project management models to the Santoprene business that we've been able to apply to our other Engineered Materials business to deliver consistently strong margins.

Yes, Matt, and the revenue of the business is right around $500 million.

Great. Great. That's helpful. And then just if I can kind of follow up on the synergy topic. I believe there was a reference to synergy estimates potentially being on the conservative end of the spectrum. I was just hoping that you could talk a bit about what the typical synergy capture looks like for Celanese on a percentage of sales basis for percentage of EBITDA basis; however, you prefer to talk about it. And then maybe touch on why the synergy capture timeline seems somewhat lengthy for the announced deal? Is that kind of a 4-year time horizon? Just any thoughts there would be great.

Yes. Let me talk about synergies a little bit, and I'll turn it over to either Scott or Tom, who will talk about kind of historical levels of synergy capture. If we look at the synergy levels, yes, we agree, we think $35 million is on the low end. As you know, we're fairly conservative usually as when we look at synergies. The largest portion of that is really due to cost savings, we think having a local manufacturing presence in China, which Exxon currently doesn't have, which will really allow us to capture those logistics and raw material savings by having a local strategy in China. There's other cost savings by leveraging our existing compounding lines in some of the various regions to replace tolling that Exxon was doing. So there are real savings there associated with the manufacture and movement of the Santoprene project that we've already been able to identify through this evaluation process. And then, of course, consistent with Celanese, we do see significant revenue synergies as well, really capturing some of the opportunities in electric vehicles, which we've already shown our strength in the past year growing their medical business from what is now a very small business, but what we think is a lot more application. Strengthening -- using our strong relationships, we already have with the European OEMs to really expand the European presence there and then really leveraging the Santoprene commercial team to sell the full Celanese elastomer portfolio as well as leveraging our Celanese team to be able to incorporate the full portfolio of Santoprene. So we feel really strongly about the cost synergies, the revenue synergies. And as we said, we do anticipate greater than $35 million a year in terms of synergies. I think on the timeline, we've probably been a little more conservative than we've been in the past. And it's really based on our experience with SOFTER and Nilit and Omni and some of the other acquisitions we had a few years ago where we've really seen it takes almost 3 years to realize the full value of the synergies. We've said 4 here because it's a larger acquisition. So there's a larger scale of integration. But having said that, we'll achieve 80%, we think, of the synergies by year 3.

And maybe just a follow on. The -- I would think about the cost synergies coming earlier and then the revenue synergies, which if you look at it, they're predominantly in highly specified markets like auto and medical and the time to achieve those synergies -- those revenue synergies is typically a little bit longer.

Our next question comes from Jeff Zekauskas with JPMorgan.

What are the EBIT margins of the company? And can you describe the raw material slate? How do you make this stuff? And do you have ongoing agreements with ExxonMobil?

Yes. So Jeff, the EBITDA margins are right around 20%, which is a little bit higher than the EBITDA margins that we've seen from past acquisitions that we've done. So we feel like being able to kind of very quickly with the synergy plan that we have lift the margins to our normalized EM margins, will happen pretty quickly.

Yes. And on raw materials, the key raw materials are EPDM and polypropylene, and we've entered into long-term agreements with ExxonMobil for supply of those materials. But there is flexibility in those agreements as we move along. And just like we do in our current business, we'll plan on optimizing sourcing over the next 2 to 3 years.

I asked what the EBIT margin was, not what the EBITDA margin was?

Yes. So Jeff, if you -- the depreciation and amortization of this business is pretty small, right? I would use a number right around $10 million.

Our next question comes from John Roberts with UBS.

Congratulations on the deal. If you look at Slide 5 with the capacity of the competitors, that's a narrow definition, I guess, of TPVs. Should we consider TPOs like Lyondell and Dow and DuPont and styrene block copolymers like Kraton Corp. Is that a better way to define the market?

Probably not, John. I would think about -- so first of all, yes, that slide does represent TPV capacities. The materials that we would then go in, try to substitute our EPDM predominantly. That's kind of closest competitor to TPV. But also we have opportunities to replace PVC and silicone's TPO, probably not as much.

And then the text talks about it enhances recyclability and flame retardant. How does that work?

Yes. So from a recyclability standpoint, the really cool thing about TPVs versus materials like EPDM, for example, is that when you're actually molding the finished part with the TPV, if there's any scrap, that scrap can then be recycled in the process to drive efficiencies. If you think about EPDM, that scrap cannot be reused. So that's an example of what we have around the benefits of the recyclability. It's more in the actual processing of the material. Although there are opportunities, if we can secure finished products that are used, you could also recycle those as well. As it relates to the flame retardant opportunities, this is an area where we really feel that we can leverage the work that we've done in other parts of our business to bring in some of our flame retardant technologies to open up new opportunities for Santoprene with the portfolio that they're bringing in.

I think the other comment on kind of the ESG aspect is you also have the opportunity to use recycled material. So whether it's internal recycle or like recycled PP, you can use recycled materials in making Santoprene as well.

And that's because it's a mechanical compounding that you're -- that's not really blent.

Yes, that's right, John. The term is reactive extrusion. So there is like a reaction that takes place, but you can certainly use the recycled polypropylene to manufacture the product.

Our next question comes from Mike Sison with Wells Fargo.

This is Richard on for Mike. My question is on capacity. It looks like you're getting 19,000 tons of capacity. Can you talk about what's the current utilization rates expected there? And then your existing elastomer capacity, can you remind us how much you have there? And the third part is in terms of going forward, as demand grows, how scalable do you expect those plants to be? And what's the investment going to be required to keep up with the growth in the industry?

So ExxonMobil completed an expansion of the Newport Wales facility, I believe, in the 2017 time frame. And there's still room in that expansion to grow, So we feel really good about our ability to grow the business with the capacity that's already in place. But we do see an opportunity to leverage our current footprint of compounding assets around the world, whether it's in Forli, Italy; Silao, Mexico; Brazil; or Nanjing to further expand and supply our products on more of a local basis. So we're going to be looking for opportunities there. The investments to do that are relatively low. These are -- these assets are highly capital efficient. And so I wouldn't think about them in terms of large investments and CapEx.

Okay. And then just maybe on your current elastomer capacity, how do you -- you said you would probably utilize those to potentially service the TPV market as well?

Yes, we can certainly leverage our current assets to expand as well.

Okay. And then just on buybacks, I know it looks like you completed the proceeds from the PPC divestment, but how do you -- how should we think about buybacks going forward for the rest of this year and then into 2022?

Yes. So we increased our buyback plan in the April call, and that is still on track. So no change to the buyback strategy that we previously outlined. This deal doesn't impact that at all.

Our next question comes from Bob Koort with Goldman Sachs.

Just wanted to understand a little bit more about what's going on with the Asian business here. I think you show it's 40% of sales, but you don't have manufacturing. I think maybe Tom or Lori, you intimated there is some tooling. So are these materials that are made locally or do you ship for those from the U.K. or Florida? How do you get to that big Asian exposure? And then how do you utilize your assets to create some opportunity there?

Yes. So currently, all of the demand in Asia is serviced from either the Newport Wales or Pensacola, Florida location. And that's where we see a huge opportunity, right? We've already got our compounding footprint in Nanjing. We feel like with a very modest capital investment, we can begin to source those products locally. And that will deliver synergies down the road. Just both in terms of cost, then ultimately in terms of our local supply and responsiveness should enable us to grow our position there as well.

And then you talked about leveraging the customer overlap. Obviously, you've got an excellent innovation model, commercialization model. Is there a large share of customers that they serve that you don't or vice versa in particularly in the auto chain? Or is the overlap already pretty high?

I would say the overlap in the auto chain is likely very high due to our position and their position there. But I think outside of auto, we are pretty confident that they were calling on a customer base that we currently don't access. So I think about building any construction in particular. We've got no position there today. They've got a great position in weatherseal applications. So we feel like there's opportunities for the sales force that currently is moving Santoprene to also pull through many of our elastomer products that we acquired as part of the SOFTER acquisition through their channel and also create opportunities for more traditional engineered thermoplastics that those customers as well have.

And Tom, when I try to think of how these products are positioned in your sort of engineering res and pyramid, I think you mentioned displacing PVC or EPDM. So that doesn't sound as high value. Can you talk about maybe a price per pound that's typical or just where do you fit on that sort of spectrum between the most performance demanding high dollar, high-value materials and maybe the more commoditized materials from which these are made?

Yes. Santoprene, I would say the areas where we play, Bob, with either Santoprene or other parts of our elastomers portfolio are actually priced, in many cases, higher than where we sell our traditional engineered thermoplastics. So these are really value-added applications that were targeted generally very highly specified. And so I would think of fathom as very comparable in terms of rapid order.

Your next question comes from Duffy Fischer with Barclays.

With respect to the upstream integration, when you look at that average $100 million of EBITDA over the last several years, how is the EPDM and the polypropylene accounted for because Exxon is integrated? And then on your longer-term contract with them, are those at market or are those advantaged contracts going forward?

Bob, thanks for the question. Really, we see them as being at market. I mean we think that the valuations we put out there reflect fair market value of raw materials, and we'll have those agreements as well going forward.

Yes. And we are -- we will be one of the largest buyers of these materials. So we think the pricing definitely is going to be competitive, Duffy.

Okay. And then just what is the structural growth rate of this business historically? And on the EVs, you talked about kind of 3 to 4 kilograms of product versus 2 on the traditional IC. Is that already there on the existing hybrids and EVs? Or is that something that you think will get engineered in over time?

Yes. So maybe I'll answer the second question first. That's something that will grow over time. The -- if you think about electric vehicles, one of the great applications that we have to go after right now is in cooling hoses. Traditionally, in an internal combustion engine vehicle, you could not use TPV because the operating temperatures of the growing system were much higher. With EVs, it's lower and now TPV has got a great play. And the advantage here is that in these cooling systems, you can use about half as much TPV. So even though the price points for TPV are much higher than EPDM, you actually get lower cost and use for the end customer. So there's a lot of attraction there. Plus the other advantage is that as they manufacture these cooling hoses, the -- any EPDM that's kind of scrapped from the process cannot get reused, whereas the TPV, it can. So you've also got a benefit for the OEM in terms of just lower cost overall, plus the sustainability benefit of the OEM to reuse it. But it'll take time for EVs to grow and pull along, say, for example, this additional growth.

And then the growth rates, Duffy, you're in the 4% to 5% range.

Our next question comes from Vincent Andrews with Morgan Stanley.

This is Angel Castillo on for Vincent. I just wanted to ask in terms of the synergies, it sounds like there are some investments that maybe aren't a huge material in terms of repurposing some of your existing capacity to be able to sell TPV in other regions. Just curious, what are the overall costs of the synergies as we think about over the next few years?

Yes. When we look at synergies, as we said, this is utilizing existing assets, taking advantage of existing networks and all these sorts of things. So we actually don't see high -- the cost to achieve the synergies is quite moderate. So I mean, certainly, it was accounted for that in our numbers. But it's a very moderate level of investment. I would say, it fits well within already what we've laid out in terms of capital spend over the next several years.

Okay. That's helpful. And then as we think about capital allocation going forward, so it sounds like no change to the buybacks. But if I'm not mistaken, you still have flexibility or capacity within your balance sheet to do more. So how should we think about other allocations of -- or uses of capital going forward in terms of other bolt-ons? I think in the past, you've talked about seeing opportunities in both SDOs and perhaps other areas of EM. So curious what you've seen there in terms of capital use.

Yes. Maybe to take a step back, I mean, we've worked really hard as a company over the last 2 years to really strengthen the core of our operations. So really driving reliability, driving quality, driving improvements in our supply chain and in our business model, which has really given us the confidence to effectively integrate and add substantial value uplift from a deal of this magnitude. But that said, we have actually significant bandwidth remaining, not just financial, as you referred to, but also in our people and our systems, which we think will allow us to continue to pursue additional M&A activity, be they other bolt-ons of this size or even are smaller or even still transformational activity. As an example, recently, we also just announced and have worked simultaneously the acquisition of Grupa Azoty, which although it's small, it's still a good add to our portfolio. And we've also had a number of smaller unannounced acquisitions during this time period. So our teams have a lot of bandwidth. We have the ability to continue to do acquisitions, and we will not shy away from continuing to look at large acquisitions, including transformational if they become available.

Our next question comes from Hassan Ahmed with Alembic Global.

Lori, I just wanted to go back to a question around EBITDA margins. It seems to me that if I were to take a look at the run rate sort of EBITDA that you guys mentioned, call it, $100 million that the business under ExxonMobil was, call it, 25% EBITDA margins. If I factor in the sort of cost and growth synergies you guys are talking about, you're probably going to take it from sort of the mid-20% EBITDA margin level to the mid-30s. So first question is, is that the right way of thinking about it? And part and parcel with that is that you obviously mentioned 2020 was a bit of a quirky year in terms of, obviously, auto volumes. And then in '21, I would imagine with sort of what's happening in polypropylene, we've seen some volatility as well. So could you actually address in terms of EBITDA margins, what that volatility look like?

Yes. So to start with your first question. I mean, I think if you look at the simple math, I mean, Exxon has been delivering over the last 5 years, $100 million EBITDA on an approximately $0.5 billion sales base. So it's probably around a 20% EBITDA margin historically. And we believe through synergies and other uplift, we will get that to margins consistent with the rest of our EM portfolio, which is in the high 20s -- high 20% to 30%. So I would think of the business that way. And again, around raw material volatility, what we're seeing in '21, we do think it's a bit abnormal with EPDM and it has to do with the freeze and all the other things that we've seen impact a lot of our other businesses in a very unusual way. Going forward, we would expect the same level of volatility in raw materials for this -- for Santoprene as we do for our other Engineered Materials. And I would say once we have the ability to apply the same kind of business model look forward pricing models that we use, we would expect to see a good dampening of it. Santoprene, like our other businesses, is really value and use based for kind of 2/3 of the materials. So again, very similar to our Engineered Materials portfolio. And so we think we will be able to moderate that volatility much as we have with our Engineered Materials over the past many years.

Understood. Very helpful. And as a follow-up, could you just broadly talk about what you guys are seeing in the M&A market? And where I'm sort of coming with that question from is that, it just seems that coming out of the pandemic or during the pandemic, there was a hesitation certainly on the part of sellers to sell at what they consider to be sort of depressed or trough as sort of profitability levels. So have you begun to see the M&A market open up? Are you seeing more opportunities than normal? I just want to sort of get your views on what we should expect in terms of bolt-ons from you guys going forward? Is it a point in time where we should expect above trend bolt-ons, below trend and just broadly on M&A in general?

Yes. I think overall in the M&A market, both bolt-on and transformational, I mean, you can see there are more deals getting done. It has started to open up, especially as we get into 2021 and people can start looking at 2021 earnings as well as having a better outlook into what 2022 will look like. So I think we're still opening up. But that said, there's a lot of cash out there, and there's a lot of competition for products -- projects. So it is a very competitive M&A market as we saw with the big process for Santoprene, but we do think still a lot of opportunities for us as we go forward over the next year or 2.

Our next question comes from David Begleiter with Deutsche Bank.

Lori, just looking back at the EBITDA, how does the 2022 EBITDA forecast of $115 million compared to pre-pandemic 2019? Is it similar, higher or lower?

So I mean, 2022 will still be higher than 2019. I mean there are some other dynamics going on there at that time. But again, if you look at as we already start to see raw materials starting to moderate a bit for EPDM, for PPE, for other components, we should get the benefit of that as we move into 2022. And then as we apply our models and business practices, we think that will be a sustainable level of earnings, which will only grow as we apply benefits from the synergies we'll get.

Very good. And just this is the last day of the quarter, can you give us an update on how trends progress throughout the quarter here?

Yes. I think clearly, everybody can follow what's publicly available for the acetyl industry pricing levels in China and elsewhere. And as you've seen, these have really held up at elevated levels, we see demand for acetyls continuing to be very strong globally. And with the pent-up demand and the typical outage activities, supply levels have continued to be strong, but still short. And so we've not yet seen a return to normalized pricing as we had anticipated back in April. So given that strength, we do expect to be above our previously published Q2 guidance. And again, there's no question we think these pricing models will moderate. The question is when and how quickly. Obviously, we're just wrapping up Q2 now. Once we close the books and report earnings, we'll be in a position to give more detail on our drivers for -- based on Q2 and what we expect to see as we flow into Q3 and, overall, what that means for the second half of the year. But overall, I would say, clearly, ATV and dynamics remained very strong. Engineered Materials remained strong as well and in line with what we had previously put out in terms of guidance.

Next question comes from Matthew Blair with Tudor, Pickering, Holt & Co.

Lori, I think there was a comment that the expansion CapEx figure is pretty low. Is there a maintenance CapEx number you could share? And really, what I'm hoping is that we could translate that $115 million EBITDA figure into a free cash flow number.

Yes. Look, I don't have an exact number to share with you. But what I will say is this is a high free cash flow business. It is a pretty low maintenance cost business and certainly maintenance CapEx. I mean this is actually a pretty small footprint and a pretty low capital investment for these facilities, given the nature of the process itself. And Exxon has a highly efficient process maybe compared to some competing technologies out there. So we really don't see this. Again, I wouldn't think of this adding any significant CapEx spend to what we previously shared with you in terms of our CapEx numbers going forward.

Yes. Matthew, as we look at M&A targets, we do look at -- are the business models in the way businesses operate? Does it fit with how we operate? And as you know, we like a concentrated manufacturing footprint to the fact that we're getting 2 assets, and we can then add capacity at our existing assets in Asia, we think fits very much in line with our base business, which is really high generation of free cash flow. And that was one of the things that really attracted us to this business in addition to what we think is a really attractive synergy environment.

Absolutely. And then can you comment in terms of the sales process? Was this an auction? Or was it directly negotiated?

No. This was -- this did go through an auction process. And so we went through several rounds in the auction and got to exclusivity with Exxon just a few months ago as we work through that process.

Yes. And Matthew, with any auction process, there's a lot of work. And so we really thank our internal team who spent many, many hours working through this in partnership with ExxonMobil, the seller here on this deal, and thank them for all their efforts.

Our next question comes from Kevin McCarthy with Vertical Research Partners.

Lori, if we look back to the 2017 through 2019 time frame, Celanese did a number of deals in EM, including SOFTER and Nilit and some smaller ones as well. The last 2 years or shall I say, the first couple of years of your tenure have been more quiet. Does today's announcement marked a change? Do you see significant potential for acceleration for external growth in Engineered Materials over the next 3 to 5 years?

Yes. I wouldn't say it marked a change. I mean we certainly spent the last 2 years, including the time during COVID when it was not a good environment, which accounts for over one of those years. Really working on strengthening our core, adding organic capital investments, which we hadn't been doing aggressively in a long time and really putting our money to use into what we thought would be the most value-adding applications. Obviously, we have continued to look at M&A. We've done a number -- like we did Elotex, we did Grupo, as I said, a number of other smaller M&A that were not significant enough to actually publish. So I would say, we've remained active in the M&A market. It's just the environment for M&A in late '19, '20 was not great. But we've continued to be active and continued to make deals where it was possible, where it was value added. We are extremely disciplined in what we go after and what we ultimately agreed to do and, frankly, walked away from several potential M&As because they didn't meet our value criteria. So I wouldn't say it's a marked change. I would say that the market is starting to open up. And so there may be more opportunities now as we go forward as compared to the last 2 years.

Yes, Kevin, we've done with, what I would say is, really a purposeful push here to drive value. Over the last year, we've done 2 of the largest deals in company history with: first, the divestiture of the Polyplastics business and then putting that cash to work, first in share buybacks to make it initially accretive and now taking the balance of that cash and deploying it here for this deal, which post synergies, we think, will add at least $0.90 of earnings. That's about $1 of value creation has come from these 2 deals. So we definitely -- even though the market hasn't been great, we have done everything we can to continue to push and take advantage of the opportunities that are in front of us.

Understood. I appreciate the color there. And then secondly, if I may, I wanted to ask you about the end-use market exposure. If I look at Slide 5, it appears as though about 65% of sales are derived from the combination of weatherseal and non-weatherseal applications in autos. Generally, your exposure to autos, in my mind, anyway, has been dwindling for more than a decade. So how do you weigh the concentration in a cyclical end-use market with the benefits associated from more substrates, cross-selling opportunities and growth in general? How are you thinking about that balance?

Yes. So I'll make a few comments, and then Tom may want to add in. I mean if you look -- our current portfolio in EM, as we said many times, currently makes up, say, about 1/3 of EM. And so on a pro forma basis, when you combine this with Santoprene, that's only growing to 40%. So that is not a huge change, substantially increasing our exposure to a single end use market. And we do think there are great opportunities in auto, not just the recovery, not just the pent-up demand, but also future mobility. And we see, as Tom laid out in his example, we see great opportunities for Santoprene into electric vehicles consistent with our push into electric vehicles for some of our other models. So we don't see this as -- this is not -- but it's an ICE engine, end use. This is about also pushing this into other high-end applications, specifically in EV. And then we do think Santoprene will be highly additive to other high-value applications like medical, like consumer appliances and some other markets like construction, which Tom pointed out, which we're currently not in. So yes, it is currently heavily weighted towards auto. We don't think that skews us too heavily that way. But we really see the opportunities to grow other end uses that will eventually probably bring us more back in balance again across end users.

Diego, please make our next question our last one.

Our final question comes from Matthew DeYoe with Bank of America.

So if we look at the growth going forward in Santoprene, from a high level, is this going to be kind of like an OEM vehicle and industrial production play? I know you talked about the EV opportunity for content increase. But are there other substitution opportunities that drive growth in excess of market just as we think about the profile for the business? And then somewhat related, if I think about Celanese's EM business is highly solutions based and utilizing the technology to penetrate new markets, I mean, is this an opportunity for Santoprene as well? Or do you see this particular product is kind of best fit for where it is as far as sealants and things like that?

Yes. So a couple of comments I would make. Certainly, Lori laid out the case for automotive pretty well, right? You've got recovering auto and strong growth in auto expected for the next several years, plus increasing content being certainly a major reason why this makes a lot of sense and really we see it as a home run. But if you think about medical, right, there are a diverse range of applications that they're in today, but at a very low level. And some of that are very highly demanding, right? If you think about the tubing for peristaltic pumps that are used in hospitals where you need really tight control of delivery of these solutions, a perfect example where Santoprene plays today, but could grow pretty substantially. And we haven't even talked about how we leverage our current medical channel, which has been built up to move our products and use that to move Santoprene through, say, for example, areas of drug device delivery. So we see huge potential ahead in medical. And as Lori mentioned, building and construction and other applications. I think in terms of technology, one of the things that we've learned through due diligence and having a clean team set up to do that is there's a lot of intellectual property at ExxonMobil, both in terms of patents and trade secret that we feel like is really untapped. And it's something that we can leverage with the functionality that we've developed over time in our broader portfolio to maximize the value in some new and emerging applications as well. So we just see huge potential in front of us.

I'll now turn it back to Brandon Ayache for closing comments.

Thanks, Diego. We'd really like to thank everyone for listening in today. As always, we're available after the call for any further questions you might have. Diego, please go ahead and close out the call.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.