Trinseo PLC (AKE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to today's Trinseo conference call. We welcome the Trinseo management team: Frank Bozich, President and CEO; David Stasse, Executive Vice President and CFO; and Andy Myers, Director of Investor Relations. Today's conference call will include remarks by the management team followed by a question-and-answer session. The company distributed its press release along with its presentation slides prior to today's market opening. These documents are posted on the company's Investor Relations website and furnished on a Form 8-K filed with the Securities and Exchange Commission. [Operator Instructions] I will now hand the call over to Andy Myers.

Thank you, Carol, and good morning, everyone. [Operator Instructions] Our disclosure rules and cautionary note on forward-looking statements are noted on Slides 2 and 3. During this presentation, we may make certain forward-looking statements, including expectations concerning our proposed acquisition of Arkema's PMMA business, including cost saving and synergy expectations, issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described or implied in these statements. Factors that could cause actual results to differ include, but are not limited to, our ability to complete the transaction and meet the conditions to closing, including obtaining required regulatory approvals; our ability to adequately fund the transaction; our ability to generate expected cost savings and synergies from the transaction; and the factors described in our press release and investor presentation as well as the risk factors set forth in Item 1a of our annual report on Form 10-K or in our other filings made with the Securities and Exchange Commission. The company undertakes no obligation to update or revise its forward-looking statements. Today's presentation includes certain non-GAAP measurements for Trinseo. A reconciliation of these measurements to corresponding GAAP measures is provided in the press release and in the appendix of our investor presentation. This presentation also includes certain financial information related to Arkema's PMMA business, which is unaudited and derived from information provided to Trinseo by Arkema management with certain Trinseo management adjustments reflected. This information does not reflect conformance to accounting principles and policies followed by Trinseo. A replay of the conference call and transcript will be archived on the company's Investor Relations website shortly following the conference call. The replay will be available until December 14, 2021. Now I'd like to turn the call over to Frank Bozich.

Thank you, Andy, and good morning, everyone. We have several pieces of important and really exciting news to share with you. First, the strength of our business continued in Q4, and I'm pleased to say that we expect Q4 performance to be some of the best results we've seen over the past 2 years. We anticipate net income will be in the range of $58 million to $68 million, and adjusted EBITDA will be between $137 million and $152 million. These expectations include a favorable pretax $20 million net timing impact. These results are due to the continued strong demand across all of our segments, improved margins because of commercial excellence efforts, and reduced costs due to the continuation of cost containment initiatives implemented earlier in 2020. Despite raw material -- increasing raw material prices, we expect to generate at least $75 million of free cash flow in Q4. The second topic is a very exciting one for us, and it represents the first steps in the transformation of Trinseo into an advanced materials specialty solutions provider. We have entered into an agreement to acquire Arkema's global polymethyl methacrylate and activated methyl methacrylate business for a purchase price of EUR 1.137 billion. This price reflects an enterprise value multiple of 6.2x 2020 EBITDA, including cost and tax synergies. We have identified significant cost synergies, which we estimate to be approximately $50 million per year. Furthermore, the transaction enables a broader process and systems transformation within Trinseo, which we anticipate will result in an additional $25 million in annual cost savings. Let me provide some additional context for the strategic rationale for the transaction. Just over 18 months ago, we completed a strategic assessment of our business portfolio that identified the business characteristics that would lead or would result in us delivering the greatest long-term value to our shareholders. We then identified which of our existing segments had these characteristics and also focused on end markets that had megatrend tailwinds. The 2 areas of our business that address these megatrends are the Engineered Materials applications in our previous Performance Plastics segment and CASE applications in our Latex Binders segment. Both areas have enjoyed attractive growth rates in recent years, have gross margins in the 25% range, have low capital intensity and have very low earnings volatility. In fact, Engineered Materials has achieved a variable margin annual growth rate of about 15% since 2018. We then focused our inorganic growth efforts on identifying adjacent chemistries serving these same applications, which offer the same or even improved characteristics. This effort was completed earlier this year, and among these chemistries, PMMA was at the very top of our list. I wanted to share this background to make the point that acquiring these PMMA assets was the result of a very focused and deliberate process. We're very excited to add Arkema's PMMA portfolio to ours as it significantly increases our scale in Engineered Materials and provides the following attributes: gross margin of about 30%, high free cash flow conversion of almost 90%, lower volatility through the cycle, significant cost and revenue synergies, and it's a trigger for the harmonization of IT systems in Trinseo, which we anticipate will create an additional $25 million in savings. And it has a strong cultural fit with a focus on sustainability. And most importantly, it is the first step in the transformation of Trinseo to become a specialty solutions provider. Now let me take a few moments to describe the business in more detail. The PMMA market is a very attractive market, where the top 5 suppliers represent over 50% of the total market. The applications for PMMA represent end markets with significant overlap with many of our current applications, most notably building and construction, automotive, lighting, consumer electronics and medical. Arkema's PMMA business is a top 3 supplier in both North America and Europe. And in these regions, they have the broadest range of differentiated solutions. Their offerings include PMMA compounds, cast sheets and extruded sheets, and there is a high degree of differentiation in many of the offerings. This high degree of specialization differentiates this business and makes it highly resilient and defensible through the cycle. We will be acquiring 7 manufacturing sites and several R&D centers in North America and Europe. In addition, we will gain a robust pipeline of opportunities to grow the compounded PMMA into specialty applications. There is a strong cultural fit within the business for Trinseo, with their approximately 900 people all aligned around a strong foundation in ESG values. While we're very excited about the characteristics of this business and the strong team who will be joining Trinseo, we're equally excited about our ability to improve the business through the synergies we've identified. While the business has had very little presence in Asia, the largest and highest growth region for PMMA, this represents a major growth opportunity for Trinseo. Because we already serve the same markets in China and across Asia with our Engineered Materials and Base Plastics, we are very confident that we can leverage this overlap to add meaningful revenue upsides in the near term. So why am I confident we can leverage our market and geographic position to penetrate the Asian market? Because we've proven we can do this in our existing portfolio. In ABS, for example, we invested in new plants in China in 2017. And since that time, we've added over $25 million in variable margin by leveraging our presence in the region with key automotive, appliance and consumer electronics customers. I am confident we can achieve the same success with PMMA. Like the growth opportunities, I'm confident in our ability to deliver the cost synergies. We have a proven track record in executing business excellence programs in Trinseo. In 2020, for example, we reduced structural fixed costs by $25 million per year at the start of the COVID-19 pandemic. In addition, we reduced costs in 2020 by an additional $15 million from temporary measures. In operations, we have had a history of more than offsetting inflation via plant productivity initiatives. From an ERP system standpoint, Arkema PMMA currently operates on 6 different ERP systems and has allocated costs from Arkema to support these. A major opportunity for the broader Trinseo organization is to harmonize all IT systems to one global ERP system over the next 2 years following the close of the transaction. This will not only achieve savings in the PMA -- PMMA business, but should deliver an incremental $25 million in cost savings to Trinseo that are not included in our valuation. Using this transaction as the catalyst to migrate to industry-standard systems and business processes is expected to result in these significant savings over the coming 24 months while we are delivering the cost synergies for PMMA. As a second step in our portfolio transformation, we've begun a process to divest our industry-leading Synthetic Rubber business. This decision reflects our view that while synthetic rubber is a great business with a fantastic market position, our pathway to ongoing growth is more attractive by focusing on CASE and Engineered Materials. There are several other industry participants who've expressed an interest in our business, and we are confident that we will reach an agreement to sell the business in the first half of 2021. Now I'd like to hand it over to Dave, who can describe the deal specifics and the financials.

Thank you, Frank, and good morning, everyone. I'd like to build on Frank's comments by providing a little more color on 3 topics: the multiple paid, cost synergies and financing. The purchase price of EUR 1.137 billion represents a 9.1x multiple of 2020 EBITDA, including a COVID adjustment factor of EUR 14 million. When adjusting for an estimated EUR 100 million of tax benefits from step-up depreciation and EUR 42 million of cost synergies, that multiple drops to 6.2x, which is a 0.5 turn below our current trading multiple. The $50 million of cost synergies we've identified fall into a few different natural buckets. About half of the synergies will come from the elimination of allocated costs from Arkema's corporate functions and from combining the PMMA business with our existing Engineered Materials business. The other half will come from procurement harmonization and for migrating the manufacturing footprint into our operational excellence framework. You'll see in our presentation on Slide 16, we've shown the expected phasing of these cost synergies. Please note that we expect a midyear 2021 closing, so year 1 on the slide is the second half of 2021 and the first half of 2022. We expect to reach the full run rate of $50 million of cost synergies in mid-2023. The final area I'd like to discuss is financing. We intend to finance the transaction with an issuance of long-term debt prior to closing, plus about $250 million of cash on hand. Post-closing, we expect net leverage to be in the mid-3s pro forma for the $50 million of cost synergies. Our prioritization for excess cash flow in the near term will be to deleverage the balance sheet. We believe we can reduce leverage by a full turn to the mid-2s in 2023. To that end, we've announced an immediate reduction to our dividend of $0.08 per share and the suspension of our share repurchase program. We feel this is a prudent step to take until our leverage returns to a more moderate level. Before I turn the call back to Frank, let me share with you the 4 reasons why, from a financial perspective, this transaction makes a lot of sense for Trinseo. Inclusive of synergies, as I said earlier, we're buying this business for 6.2x 2020 EBITDA. Over the last 5 years, Trinseo's average multiple is 6.1x. Over that same time frame, the EBITDA margin of the PMMA business is more than double that of Trinseo's. So for the same multiple, we're buying a business that has consistently delivered meaningfully higher margins and free cash conversion. Second, the transaction is accretive to both EPS and free cash flow by double-digit percentage points in 2022. Third, the return on invested capital of the PMMA business is several percentage points higher than our WACC when full synergies are achieved in 2023. And finally, although our leverage is increasing, the leverage is very manageable, especially given the momentum in our business and the pro forma cash generation of the pro forma company. So with that, I'll turn the call back over to Frank.

Thanks, Dave. Let me conclude by reinforcing how important and attractive this acquisition is for us in the longer term. This purchase is a critical step in our long-term transformation to become a specialty solutions provider. The transaction increases the specialty portion of our portfolio from 25% to 50% and is expected to significantly increase our EBITDA margins. We are shifting the portfolio to businesses that have leading positions, higher and more stable margins and sustainable long-term growth. Current Trinseo businesses that do not meet these requirements will be assessed for possible separation at the appropriate time. We believe the addition of PMMA is an excellent first step in our portfolio transformation that will ultimately include the separation of some of our commodity businesses. Our short-term focus will be on deleveraging the balance sheet, integrating PMMA and executing on the synergies and process improvements, including the revenue upsides. Our long-term focus will be on becoming a world-class specialty solutions provider that enjoys higher margins, less cyclicality, higher growth and continued very strong free cash flow. We look forward to the Arkema PMMA team joining Trinseo. And we believe the complementary nature of the transaction should drive growth opportunities for our employees and increase shareholder value. We are very confident that we can continue to invest in this business and leverage the great market position that they have built. Thanks, and we're very excited to take your questions.

[Operator Instructions] Your first question today comes from David Begleiter from Deutsche Bank.

Congrats on the transaction. Frank, just on the separation of the commodity styrene businesses, is there a timing you're thinking about when that might occur?

No specific timing, David. Our focus in the near term, as we said, is really to integrate. And in the process of that integration effort, we're going to be improving that business. And at the appropriate time, we'll assess how we might separate and what pieces of the company would be included in that separation. So thanks for the -- and thanks for the comment.

Got it. And just on the opportunities in Asia you mentioned, do you need to add some local capacity? And would you expect some pricing pressure to try to gain some share from existing players in that region?

So the -- yes, great question. We -- the team has -- at Arkema had done an assessment on the investment required to put capacity in Asia. And it's really a relatively modest investment, we think, between $40 million and $50 million for a greenfield plant. Now we have existing infrastructure, so we'll have to assess that in detail. But really, I don't see this with -- our entry into the market with this portfolio will create a lot of margin pressure because this is really a solutions business. It's not a commodity resin business where supply/demand factors figure into the margins. It's really engaging those customers and developing specific solutions for them. So for that reason, it really -- the supply/demand dynamics are much less important than your ability to have a solutions group on the ground, engaging with the customers, which we do. And that's one of the big reasons we've been so successful in Engineered Materials, particularly in Asia.

Your next question comes from Laurence Alexander from Jefferies.

This is Dan Rizzo on for Laurence. Could you just give a little more detail on how these businesses fit together? In addition to the customer overlap or the cross-selling, can you just talk about where the materials science and processing skills complement each other or overlaps in the raw material purchasing?

Yes. So thanks for the question. So there's multiple areas of fit here, and let me go back to what we -- the assessment process that we made. Our main goal in identifying where to expand our portfolio was driven by broadening our offering into the markets that we already serve in Engineered Materials, for example. So the fact that the PMMA resin business offers compounded solutions to those same customer end uses, for example, in automotive, building and construction, consumer electronics and medical, is one of the biggest parts of the fit. The other thing, and as you pointed out, there's a very similar application know-how to tailor-make the solution and formulate PMMA compounds as there is our current Engineered Materials portfolio. And that's -- and frankly, that skill is a great differentiator within the Arkema business. And let me also build on this by referencing the Slide 12 in our presentation deck, because I think that will give you a flavor for how differentiated this business is and what kind of skills they have in addressing our customer solutions. And I would point to the number of customers that are served by the resin business, which is really mostly compounds, that there's 663 SKUs at customized product solutions that go to almost 484 ship-to locations around the world. And that's 78% of the business' EBITDA contribution. So it's a great fit, great know-how with customer applications and very similar to what we do in Engineered Materials.

Okay. And then as you look at what you're doing with Synthetic Rubber, would you anticipate moving that to discontinued operations before there's any announcement on the sale or the divestiture?

Yes. Dan, it's Dave. I think the answer to that is yes, it's something we'll have to obviously review with our corporate controller and accounting function. But I think the answer to your question is likely yes.

Our next question comes from Frank Mitsch from Fermium Research.

Way to shake things up on a December Monday morning. David, I was struck by your comment regarding an adjustment for COVID in 2020. And I was wondering if you could just drill into that a little bit deeper as to how you guys have anticipated this has impacted the PMMA business. I mean part of me when I saw this, I'm like, well, the sheeting that probably is used in certain PPE-type applications and cordoning off areas of schools and restaurants and hospitals and things of that nature. If you could explain a little bit more as to what you think that impact was in 2020, so we get a baseline to look at '21 and beyond.

Yes, sure. I'd be happy to, Frank. So the EUR 14 million of COVID adjustment that I highlighted is really a drop in demand for automotive application in 2020. So that's really what that is. I think what I'd like to do is just to -- part of -- there's going to be an element of education I understand with everybody on what this business really is. And I think let me just give you a couple of kind of facts, I guess, for grounding. I think Frank mentioned earlier, about 78% of the EBITDA of the business comes from resins, compounded applications, or what's called resins. 15% of the EBITDA is for sheet. And sheet, the biggest -- one of the big applications, and that's very topical these days, obviously, is what you'd see when you go into the bank or the grocery store, that kind of sheet. The remaining 10% is MMA, which is the business is backward integrated into MMA in Europe, and they do have a long position there. So that lent itself into the merchant market. So that's kind of the breakdown of the EBITDA. Looking at the transition from 2019 to 2020, EBITDA in the business, you'll see that there is a drop in EBITDA, I mean, consistent with what everybody is seeing. About 2/3 of that drop is really from MMA margin. So from the -- what I mentioned earlier, there's merchant sales into the European merchant MMA market. The other 1/3 is really mix. And that mix differential, the volume of the whole business was pretty flat in '19 to '20. But there's a big mix shift from the drop in volume going to automotive applications, which are very high margins. And that was offset by COVID protection barrier sheeting, just like you just said, which has clearly has lower margins. So I think that's kind of a little bit of a background, Frank. Hopefully, that's helpful.

That is very helpful, thank you. I kind of assimilated it a little bit better. And just -- and I do appreciate the slide on the timing of the synergies. Have you had discussions with the works councils as of yet? And what's your take there as the receptivity there?

No, we haven't had any engagement with the works councils. That's a process that will be undertaken by Arkema as part of the process leading up to the finalization of the transaction.

Our next question comes from Angel Castillo from Morgan Stanley.

Congratulations on the deal. So just one quick question on the Asia expansion. As we think about trying to, I guess, expand the PMMA exposure of the [ Arkema ] business in Asia, any differences we should account for in terms of end market exposure and how that may differ versus the current end market exposure that Arkema has?

Honestly, there is very little exposure to Asia. Our intention would be to leverage our relationships with our existing Asian customers in the automotive, construction, consumer electronics and medical fields in Asia where we currently serve and also to globalize -- expand the sales that the Arkema business currently has in North America and Europe to those global customers that have presences in Asia Pacific. So I don't see a significant shift in the end market exposure. It's -- there's a significant overlap. It's simply an unserved area currently that we would anticipate having an opportunity to service in the future.

Okay. And then in terms of -- for a while, polycarbonate was a business you were deemphasizing and perhaps moving away from. As we think about the acquisition of PMMA, is polycarbonate more of a core, perhaps maybe more overlap in cross-selling, or at least opportunity to look at the 2 technologies or 2 products and see how to, I guess, create revenue from having the 2 offerings? Any thoughts around how that business is changing in terms of its strategic or core perspective for the company and how to think about it going forward?

So let me -- maybe just let me remind you that really we have polycarbonate -- our polycarbonate position is twofold. One, we use poly -- half of our polycarbonate capacity goes into our downstream compounded solutions, mainly in Engineered Materials. And those are very, very attractive parts of our business, and we've always maintained that, and we like that part of polycarbonate. The other half of the business was where we were selling the surplus capacity we had in Stade into the merchant polycarbonate market. And that was less attractive given the market dynamics, but that was basically a commodity part of the business. Let me just go back and reinforce the point that the PMMA resin business that Dave described is much, much more like our compounded engineered materials, where they're formulating a specific solution as opposed to selling commodity resins.

Our next question comes from Hassan Ahmed from Alembic Global.

Frank, question around just end market exposures. It just seems on the surface, without really digging deeper into what your sort of overall pre-deal, post-deal sort of end market exposure may look like, that you're kind of doubling down on the auto side of things, maybe increasing your leverage to the building and construction side of the market as well. As you sort of sit there and think about the risk/return associated with the deal, how are you thinking about sort of the end market exposure with regards to these 2 end markets?

Yes. So thanks. Great question. And when we looked at the end market exposure, we asked ourselves 2 questions. One, what's happening in those underlying markets? But also, what's happening with this specific chemistry in those markets? And what we've seen is that PMMA resin or the compounded PMMA solutions are actually winning technologies in those applications in automotive, it's winning new applications for many of its various features and -- because of its optical clarity, its mar resistance, et cetera, and the same in building and construction. So it's a combination of whether we -- the dynamic of the market itself, but also how these technologies are winning in those markets. And we really like how PMMA is winning in those applications. Other markets where there's significant growth is in electronics, lighting and medical. And we like both how the -- we like those markets for the resilience and the growth rates, but also how PMMA is winning share -- technology share in those markets. So that's how we looked at it.

Understood, understood. Now on a slightly sort of more on a sort of managing the acquisition level, look, you guys rightly highlighted the higher-margin nature of the PMMA business. And as you did that, you talked about providing solutions, right? I mean, historically, we've seen acquisitions within the chemical industry, where transformative acquisitions, where you're going from commodity portfolio more towards a specialty portfolio. And, historically, depending on the company you look at, the track record can be a bit mixed. And to me, I think the main difference that arises between certain acquisitions that go well versus others that don't as this commodity to specialty transformation happens, is how the sales force has dealt with how -- because, obviously, there's a mindset change, right? I mean you're not just selling sort of cyclical low-margin commodity products, now it's more based on solutions and the like. So again, how are you guys thinking about, if at all, there will be a change in how you deal with this business line versus the other? Will there be sort of what you will do to maybe even retain some of the sales stars and bring on board some of that specialty thought process?

So no, thanks. Great question, and let me answer it in a couple of ways. One, we already have some expertise in our Engineered Materials that this isn't a completely uncharted territory for us. We're already doing this and providing solutions in Engineered Materials, but granted, it's a very small part of our overall portfolio. How we'll manage the integration is -- our view is we become a lot more like the acquired business. So we fully intend to preserve what we've acquired and those skill sets. And that's an incredibly valuable -- that knowledge and that solution mindset is part of the value of what we acquired, and we will preserve that. So that's critical to it. And I'd just point out, it might sound immodest, but I've done this a number of times, and we've always been successful. So I think I know how to do this, and our organization knows how to do it.

And if you don't mind, Frank, if I may throw this out, and I think you kind of sort of touched on this that from your past life, I mean if you could also talk a little bit about how your past life experiences have kind of sort of helped you in such sort of M&A activity you're dealing with such businesses.

I'd just point out that I was the integration lead for the IMO that integrated Engelhard Corporation into BASF. And we were very successful in preserving the business, continuing to grow through that integration effort and preserving those differences in that specialty catalyst business that were important, while we delivered significant synergy that mainly happened in the functions and in the way you run your assets. So we did that. At SI Group, we did the same thing. So again, I'm very confident we can do this. This is a great team in both Trinseo and in Arkema. And again, our -- we want to reinforce and preserve what we acquired, and we will build on it.

Our next question comes from Matthew Blair from Tudor, Pickering, Holt.

I appreciate this is more of a solutions business, but do you have a view on the normalized underlying demand growth rate for PMMA? It seems like it could be pretty high, just given the exposure to areas like autos and construction as well as the Asia exposure, too.

Yes. The overall market growth rate globally is approximately 2% CAGR, is right around 2%. The Asia Pacific growth rate is significantly faster. And if you look at our base case financial assumptions that we built into our valuation, we assumed a growth rate of under 2% going forward. So we took a very conservative view to that. Now what I would tell you is this business has had a history of growing much faster than the broader PMMA market because of their solution know-how. And again -- and we -- just like we have in Engineered Materials, where I referenced we've grown gross profit of 15% since 2018 in that business, and it's because we have the ability to deliver specific customer solutions and engage the customer on that rather than broad -- it's not a supply/demand or underlying market share or a market growth rate driver. So I think those businesses are very similar, and the growth rate will largely depend on our ability to build that solution focus and capability locally.

That's helpful. And then could you elaborate a little more on the thinking behind selling Synthetic Rubber? We always regard this as one of your specialty businesses. It seems like you're pretty bullish on SSBR growth, and there's obviously a lot of overlap with the existing styrene business. So could you just provide a few more details on the thinking? Why Synthetic Rubber? Why not Latex Binders or something else? And then also, I think LANXESS did a sale on synthetic rubber a few years ago at about a 7.3x multiple. Is that a good starting point for your valuation? Or do you think you could get something significantly better?

Well, let me start with the last part of the question first. So when LANXESS sold their business, ARLANXEO, it did not have the SSBR position in the hyper -- very high-end SSBR synthetic rubber that we do. So actually, I like our business quite a bit and our position in the market quite a bit relative to their portfolio. Now going back to the thinking behind why sell it, as you point out, we do like -- I like that business. I think it's a great business. We have a great market position. It's just when we assessed our pathway to growth in Trinseo in transformation, growing synthetic rubber where we have a singular plant, and it's a much more capital-intensive business, we felt we were much better able to have a clear pathway to growing our CASE applications and Engineered Materials. The markets are much more fragmented, and the capital intensity of growth in those markets is much lower than synthetic rubber. And that being said, we've had a number of parties engage us over the past 6 months, expressing an interest in our synthetic rubber for the reasons I stated. We have a great SSBR position. And so when we factored all those things together and that our growth rate or our growth pathway was really easier in CASE and Engineered Materials, we felt it was a good time and moment to explore our options for divestiture.

Our next question comes from Eric Petrie from Citi.

Can you just talk about the long-term historical average for EBITDA CAGR from the acquired business and how it performed after a great financial crisis, as I believe Arkema shuttered some capacity in 2009?

Yes. I can't give you -- go back through that period. I think a couple of things I would point out. The market structure was significantly different a decade ago than it is now. But I would just point to how it's performed since 2017, and it's enjoyed consistently very high margins in high teen, mid-20 EBITDA margins over that period. And we've seen how it's performed in this crisis. And it was very resilient in Q2, and we see the pathway to recovery consistent with market recovery in automotive and building and construction. So irrespective of how it performed a decade ago and in the financial crisis with a different industry structure, we're very confident that what we're seeing now is consistent with how it will perform in the future.

Yes. And I just wanted to clarify one point. I mean I think the point on EBITDA margins, I mean it's consistently been mid- to high 20s. So if I go back to the last several years, and I'll quote you the numbers on EBITDA margins: 2017, 28%; 2018, 27%; 2019, 28%; 2020, albeit a COVID-affected year, lower, obviously, but still 24%. So it's been a very consistent performer on a margin level.

Okay. And Dave, I appreciate that. I was looking more for nominal dollar amount. But in regards and kind of related to that, how does raw materials pass through into this business? And kind of how do you set your contract terms? Because you said it's a solutions business, so wondering if you could provide any color on that. And then in terms of raw materials, this is a little bit different business. I think it's in the acrylics rather than styrene. So any comments you can provide on its raw materials?

Yes, so a great question. And what I would point to and going back to that how specialized this business is, is it has very, very little contract pricing with cost -- or cost-plus pricing where raw materials pass through. The pricing model is really a value-based or solutions-based pricing based on the value created at the customer. So raw material pass-through is -- raw material costs are largely irrelevant to the pricing model to this business. As it relates to the feedstocks and the raw materials, we are actually a pretty large consumer of acrylics in our Latex Binders business, acrylic monomer. We actually are also a fairly significant buyer of MMA that goes into our Latex Binders business. And that's a reasonably good-sized source of synergy for us in acquiring this. So we understand the dynamics of that business and the feedstocks and how that -- from a purchasing standpoint.

Eric, I'll just add one thing to what Frank said. I mean one of the things that really impressed us when we did the diligence on the business was the resilience and really steady unit margin on the resin business, so the downstream business. So over the years, kind of '17, '18, '19, I mean there were significant swings in MMA prices and MMA margins. But despite that, the unit variable margin on the downstream resin business stayed really, really steady at very high levels. So I think that's testament to the outstanding job on a commercial level that the Arkema PMMA team has done there and maintained the value-based pricing that Frank talked about.

Ladies and gentlemen, this concludes today's question-and-answer session and also concludes today's conference call. We would like to thank you for participating, and you may now disconnect.