Thank you for standing by, and welcome to the Ashland Global Holdings Inc. Second Quarter 2021 Earnings Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's call is being recorded. I would now like to hand the call over to Seth Mrozek. Please go ahead.

Thank you, Michelle. Good morning everyone, and welcome to Ashland's Second Quarter Fiscal Year 2021 Earnings Conference Call and Webcast. My name is Seth Mrozek, Director, Ashland Investor Relations.

Thank you, Seth, and good morning to everyone. Before I begin, I'd like to thank you for your participation this morning. First and foremost, I'm pleased by the progress our business units are making as we execute our strategy. We continued to operate safely, with a clear focus on the safety and well-being of our employees, as we manage through this difficult pandemic.

Thank you, Guillermo, and good morning everyone. Please turn to slide eight. Total Ashland sales in the quarter were $598 million, down 2% versus the prior year. Favorable currency contributed to 3% growth during the quarter. Excluding key items, SG&A and R&D costs again declined in the quarter as we realized the positive impact of the cost reduction programs. However, as Guillermo previously discussed, we experienced $11 million of additional costs related to the US Gulf Coast storm and subsequent Texas freeze. In addition, our legacy environmental reserves increased roughly $4 million more than we expected at the beginning of the quarter. While not anticipated at the beginning of the quarter, these incremental environmental charges do occur from time to time. What's important to note is that cash costs for legacy environmental remediation remain very consistent year after year, and we do not anticipate that changing.

Hey, thanks, Kevin. Please turn to slide 15. With the first half of the fiscal year 2021 complete, our priorities remain very clear: drive margin expansion; enhance free cash flow conversion; continue to demonstrate our business and operating resilience; and accelerate profitable growth. To achieve these objectives, we have clear levers that we plan to act on with the same discipline we showed in 2020. We're finalizing the capture of our $50 million SARD cost savings commitment, most of which was completed in 2020, and accelerate the implementation and capture of the $50 million in cost of goods sold reductions we have already identified. Between both these cost initiatives, we've implemented over 85% of the planned actions to date. We're going to drive productivity and mix improvement from innovation, focus on our more profitable strategic segments, and exit lower-end product lines we feel we cannot improve. We will align our capital allocation priorities for CapEx and working capital consistent with our strategic priorities. During fiscal year 2020, we had the opportunity to demonstrate the underlying resilience of our business as well as the improved operating discipline. We will remain focused on driving the continuous improvement of our business-centric model and this operating discipline. Our focus continues to be on shifting to accelerate profitable growth drivers, both organic and inorganic. Please turn to slide 16. As a reminder, earlier this year, we announced the signing of a definitive agreement to acquire the Personal Care business of Schülke & Mayr. We're incredibly excited about this opportunity as it broadens the breadth of our Specialty Additives solution we can provide our customers in the personal care end markets. We continue to expect to close on the acquisition during this June quarter. And as I previously indicated, we look forward to welcoming the Schülke & Mayr Personal Care team to Ashland. Please turn to slide 17. As we're seeing with recent developments around the world, COVID remains the biggest uncertainty. Although with different types of drivers, controls versus vaccinations, China and the US are leading other regions in terms of the global recovery. Like the US, most other countries will find vaccinations the most likely path to sustainable reopening of their economies and general economic recovery. Government actions to support the economy will continue to promote demand, but the impact will vary across markets. Assuming the current trend line and related uncertainty, our expectations are that the pharma and nutraceutical segments will continue to show strong demand, as health and wellness will remain at the center of everyone's attention. Demand for most personal care segments will continue to be resilient, driven by hygiene concerns and stay-at-home lifestyles. However, the recovery of segments linked to social and recreational consumer behaviors that depend on the reopening of the economy will take longer to recover globally. Industrial demand will continue to recover, driven by increased consumer spending as well as increased comfort with advancing projects given improved contractor safety protocols. Short-term, the raw material and supply chain tightness will present some challenges that will vary by business. Overall, we maintain our positive outlook on the recovery, but expect to see some mix changes in recovery across markets. The acceleration of vaccination rates will be the major driver of reopening the global economy. Please turn to slide 18. If we assume vaccinations will be the primary driver of the global recovery, at current vaccination rates, it would take over a year for many countries to achieve vaccination rates needed to open their economies, and this will most likely occur in our fiscal year 2020 timeframe. Given the global profile of our business, the acceleration of the global recovery is important to Ashland. Our Performance Adhesives business is 85% US-centric and should continue to see strong demand recovery. However, our additives portfolio is very global with roughly 75% of our sales outside the US. In the case of Personal Care and household, roughly 70% of our sales are outside the US. As I indicated, most of our business will continue to see demand recovery if current trend lines continue. Our segments that continue to be impacted by the COVID changes in consumer and social recreational behaviors are mostly in Personal Care. Please turn to slide 19. Although we continue to see robust demand in most of our segments, the segments impacted by consumer and social recreational behavior changes continue to be the same ones we've discussed in prior calls: hair styling, sun care, denture adhesives, and hand sanitizers. Hair Styling has been impacted by changes in consumer grooming habits, given stay-at-home dynamics, as well as concerns with visiting hair salons. This is the largest impacted segment for us. Sun Care continues to be impacted by reduced vacation travel. The use of dentures has been impacted by reduced socializing, mask-wearing, and some industry destocking. Although the hand sanitizer segment experienced significant growth in 2020 due to the pandemic, there was a significant overstock build that is still being worked off. From a demand perspective, personal use of hand sanitizers has stabilized and remains strong. However, the expected increase in demand that was to be driven by the reopening of schools, restaurants, and travel has been delayed. For these segments, we expect consumer demand to be in line with 2020, so the issue is more about the timing of the recovery. Please turn to Slide 20. In line with these comments, our forward-looking insights are that we will continue to see overall recovery of demand, but the mix across businesses may vary. We'll see stable life science growth, some delayed recovery in personal care segments, and continued recovery in industrial segments, especially in the US and China. We expect foreign exchange to remain favorable. We will continue to execute our self-help actions to offset some of the headwinds we encountered in the first half of the year, the strike in Belgium, and Storm Uri. Our businesses, especially adhesives, will continue to manage the pricing raw material dynamics as they have in the past. With this, our outlook is for fiscal year 2021 revenue to be in the $2.4 billion to $2.5 billion range and EBITDA to be in the $570 million to $590 million range. Upsides not included in this outlook are the acceleration in raw material availability that would allow us to rebuild inventory and capture higher cost absorption and/or incremental demand. The outlook also excludes future contributions from Schulke & Mayr's preservative business, which is expected to close this quarter. Please turn to Slide 21. In summary, I am pleased to report that other than the Storm Uri impact, our businesses are performing in line with our expectations. We are maintaining our focus, continuing to advance our strategy, including profitable inorganic growth through M&A, furthering our commercial and innovation activities, executing our self-help actions, and proactively managing pricing and raw material dynamics. While the timing of the global recovery following the COVID-19 pandemic and the raw material supply stabilization are outside our control, we are focused on the things that we can control. We're working to offset the impact of the US Gulf Coast freeze through improved plant absorption as we rebuild inventories. We are expanding our product line offering in personal care segments that have been less impacted by the pandemic. We're executing our strategy of portfolio transformation and profitable growth. And we are continuing to drive our internal self-help actions. We're also excited about the opportunity to share our broader perspective on Ashland's long-term strategy and objectives in an upcoming Investor Day. While we initially planned to host an in-person event, the pace of the recovery from the pandemic may warrant a virtual event this summer. Our internal teams are working diligently on the planning process, and we plan to announce a date for the event in the near future. We look forward to sharing more details with you soon. Please turn to Slide 23. In closing, I want to thank the Ashland team once again for their leadership and proactive participation in an uncertain environment. We are fortunate to be a premier specialty materials company with high-quality businesses that have leadership positions in defensive markets. I'm pleased by the resilience demonstrated by our people and business and look forward to the opportunities that lie ahead. Thank you. And operator, let's move to Q&A.

Our first question comes from David Begleiter with Deutsche Bank. Your line is open.

Thank you, Guillermo. And Kevin, can you discuss the cadence of second half earnings given there will likely be some peaking raw material costs in Q3?

So on the raw material costs, one thing that's important to note is the biggest impact that we've had when we talk about raw materials, especially the additives business, is not costs. It's availability. And it's not necessarily the major raw materials. It's a small ingredient that we need, and we can't make the product without it. So raw materials don't just look at the raw material pricing or cost side of things; dynamics. It's the availability itself that has been the bigger impact for a big part of our portfolio. In terms of the cost side of things, the biggest impact is in adhesives. That's the petrochemical linked side, acrylics and polyurethanes. We're moving on that. Most of that you are going to see in Q3. I think we had some impact; raw materials went up in the quarter, but availability wasn't there. So it's not like the procurement was as high. We are seeing some raw materials coming back a little bit already from the peaks of the last quarter. But that's really – the raw material dynamic is really going to be more of an adhesive story rather than a broad Ashland story.

Yes. And I would say on an overall basis, when you look at our outlook versus the prior year, price cost is very balanced over the entire portfolio. I mean, as Guillermo indicated for a portion of the additives portfolio, it's more about availability over the timing of the availability.

Yes. And David, one comment I would add sort of to interject, because I did see some notes and messages just talking about pricing, what's happening and especially expectations relative to other companies because some of the results are driven by pricing. I do want to make a point that we are not a commodity company. Pricing is not the big driver. We're striving to become much more of an additive with a bend towards the consumer side of the portfolio that has more pricing stability. It's about innovation and value pricing. So some of the comparisons that I've seen are probably not appropriate because we're not a commodity company. So we're trying to look at other companies; our peers would be more the additives of players in other areas. So again, this pricing raw material story is much more of an adhesive story because it's more of that petrochemical profile. But for the rest, you're going to see a very different dynamic going forward.

No, no. Very clear. And the second question, just to use that C word unfortunately. BDO prices are up sharply in the June quarter contract prices are. I would expect I&S earnings to be up sharply as a result in Q3 versus Q2. Is that a fair assumption?

Yes. Yes, it is. That is more the commodity type profile and most of that is happening in Q3 already.

Thank you. Thank you very much.

Our next question comes from John Roberts with UBS. Your line is open.

Hi, guys. This is Lucas Beaumont on for John. Thanks for taking my question. In Personal Care, after adjusting for the exited resale business, what was the exit rate on sales there coming out of March? And has that turned positive yet in April? And could you just discuss how you see the underlying organic trends progressing in the second half, please?

Yes. I would say that some segments are experiencing a slower recovery. The demand was actually high in the last quarter. When we mention sales being shifted from one quarter to another, it's based on our forecast and the fact that we couldn't ship to customers. We received a lot more orders due to strong demand, but we couldn't fully commit to them because of the raw material situation. The market currently has a lot of noise because some of those orders are from others who also couldn't supply. So, there's a bit more uncertainty in demand dynamics in the short term. However, as the raw material situation improves, things should start to stabilize. We're likely to see a pattern more in line with last year for some of these segments. The upside recovery is something we can't control, and I believe it will take a bit longer. Nevertheless, we are definitely seeing improved demand in the core segments.

Cool. Thanks. And just on coatings, paint is the largest end market for industrial specialties, I believe. Architectural has been outperforming industrial paint until recently. But that seems like that's going to shift back the other way now with industrial to outperform more as we come out of the pandemic. So I have the perception that you're more exposed to architectural than industrial. But maybe you could help us understand what your outlook is there for the paint markets and then how that dynamic will impact the business.

Yes. Our largest segment is Architectural Coatings, and our results in this area have been strong, either meeting or exceeding expectations. We serve customers globally and have gained market share due to the team's excellent efforts. As we look ahead, we see industrial coatings as a key growth area, with new developments underway. The pandemic did affect the architectural coatings market, but its impact seems to be diminishing now. Particularly in the contractor segment, new safety protocols have made contractors and homeowners feel more secure about projects. This year, contractors are more willing to work in homes, creating a favorable environment for recovery. I believe there will continue to be robust demand for our products, with a strong recovery on the horizon. While DIY projects had previously been very strong, it was speculated that demand might lessen, but so far, we see both DIY and contractor segments remaining solid.

Our next question comes from John McNulty with BMO Capital Markets. Your line is open.

Thank you for answering my questions. It seems like you believe that the issues related to the Texas freeze will allow you to recoup revenue. Additionally, it appears there are enough positive factors to help counterbalance the costs associated with that situation. Can you clarify what specific strategies or factors, whether related to revenue or costs, you have in place to help mitigate the Uri-related expenses for the remainder of the year?

So at a minimum, and it's really about the raw material availability. We have enough availability. We've been meeting our demand. So that's been very good. But the raw material situation is still tight. The teams are working very actively. The good news is it's improving. Every week it's improving significantly. I would say with the level of improvement we've seen so far, we feel probably the risk to meeting our core demand is lowering significantly. I'd like to see the availability improve a little bit more to where we feel confident that we can really start rebuilding inventory. Two things you're going to see is one that we just have the raw materials that we can run our plants and build inventory. That will be a straight absorption impact. The other thing is demand still remains strong. Other people are also having issues with supply. So there is some incremental demand there that maybe we don't build inventory and we sell more. What's not clear right now is really going to be dependent on the raw material situation. But the good news is we're seeing improvements, and we're feeling more and more confident in that area.

Got it. No, that makes sense. So go ahead.

John, yes, you look at the math in the quarter. So $134 million reported. We had $11 million specifically in the quarter for freeze. As Guillermo said, likely to be able to recover a chunk of that if raws do what we would expect them to do. You can call it $4 million to $8 million of legacy corporate stuff environmental being the biggest chunk of that, and about $3 million or so of push GP into the current quarter. And it really gets you – as you look at the March quarter, just to emphasize this it really gets you right on top of if not above the consensus numbers; if you, kind of, weed through all of the noise. And as Guillermo indicated, demand remains robust. We don't see that changing in the industrial segments. We've talked about what we expect out of the consumer segments in terms of the puts and takes. So I think we're confident that we can offset a chunk of that freeze impact over the course of the year, presuming raw material availability continues to improve.

Got it. Got it. Okay. That makes sense. And then Kevin maybe a question or another question that maybe you can help us to fill in the gap on. So on the cash flow front, certainly the first half of the year you're off to a much better start than usual. And I think look, 1Q had some bigger benefits than usual. But I guess it looks like you're on target to kind of exceed even your longer-term target of kind of a 60% cash conversion cycle. Is that fair, or are there other puts and takes that we should be thinking about that maybe temper that down a little bit as we look throughout the rest of this year?

So it's a good question. There are really two big moving pieces for this fiscal year. We're going to have about $40 million of restructuring related cash costs that will pay out over the course of the year. So that's obviously a negative to the overall number. We've talked about that. On the positive, and more or less offsetting that, is we're continuing to work on working capital. Especially with the exit of some of this low-margin product line business in personal care, we're primarily selling out of inventory as we do that. We should continue to see incremental improvements in working capital. So there are puts and takes to that, but I don't disagree with your math in terms of where we will likely end up assuming things play out as expected over the remainder of the fiscal year. Yes, it's probably fair to say that Q1 was a bit stronger than would be normal. But I think it's also fair to say that we're continuing to focus very clearly and closely on the working capital dynamic, not just inventory, but also receivables, and to a lesser extent payables because we're pretty much in line on payables anyway. But for sure on the receivables front, each team continues to make progress in its own way in reducing days outstanding. We don't have any problem with collections, but our terms on an overall basis are too long. Each business unit is working on that in their own way. I'm pleased with how they're approaching it and the progress they've made. We should continue to see a bit of tailwind on the working capital side over the course of time. Once we get through the restructuring piece, the numbers will be a lot cleaner.

Got it. Very clear. Thanks very much for the help.

Sure.

Our next question comes from Mike Harrison with Seaport Global. Your line is open.

Hi, good morning.

Good morning, Michael.

Within the PC&H business, you quantified the lower margin volume that you exited. Maybe give us an update on where we are in that process? Are we almost to the point where we're going to stop seeing that headwind? And then can you maybe give us some examples of the non-pandemic impacted applications where you're looking to expand your presence and your product offering within PC&H?

We are currently navigating the exit process, which involves significant collaboration with key customers. While the transition is carefully planned, we must consider their requirements regarding supply changes. This process will take place throughout this year and into the next. Most of the changes are expected to occur this year, but we are managing specific timelines for particular customers and areas. As we exit, it's important to note that this does not drive our core business. Our goal is to do this responsibly, considering our ongoing activities with these customers. Regarding your question about personal care segments, our focus is on rebalancing our innovation initiatives, particularly in ESG-driven areas. This will create growth opportunities and involve reformulating products with new ingredients. For instance, in the hair care market, shampoos and conditioners constitute about 80%, while styling products make up nearly 20%. Hair styling is a significant part of our portfolio, amounting to almost half of our business. We are observing a shift in ESG from liquid products to bars in shampoos and conditioners. This is a small but expanding segment that we are actively working on to help our customers enhance their offerings. We see a lot of potential for reducing packaging and shipping in line with ESG principles. This is an area where we can significantly contribute. We're also exploring cross-selling opportunities across segments as we develop new products focused on biodegradability and specific performance criteria, particularly in oral care, which could also be applicable in hair care and other categories. The team is addressing both long-term and short-term goals. The long-term focus is on innovation, while in the short term, we are working on how to quickly redeploy our existing products through technical services and regional labs to adapt our portfolio for emerging market opportunities. These initiatives will take time, but they present exciting opportunities in the coming years.

All right. And then I believe you mentioned that you feel like you're about 85% of the way on the SARD and cost of goods sold productivity actions. It sounds like the SARD is all complete. But maybe an update on what further progress needs to happen on the cost of goods sold side?

I think most of it has been worked through and communicated. We're working through some of the final sites. In Europe it takes a little bit longer with just working through the process. But everything is working very well and we're confident that we're going to meet our timeline, so no big concerns. If you step back just on the results, the businesses actually are doing as we expected. There are no surprises there. The self-help actions, no surprises there. Everything is moving. So we feel very good about the underlying performance and outlook. The challenges on the recovery, we know what they are. We're working through them. We’re going to manage through them. External things that are happening, the storm, obviously, was the big impact. I also want to point out the environmental; it's mostly legacy things. By definition, these are going to be chunky. You can't forecast them; if you could forecast them you'd have to take the charge. So by definition this is a technical process. Whenever they do the work, they get the data, they have to then take action to adjust to the reserves. It's not – it's a reserve. These are not things that really are reflective of the underlying performance of the businesses.

All right. Thanks very much.

Our next question comes from Mike Sison with Wells Fargo. Your line is open.

Hey, guys. I was wondering, so if you think about the midpoint of your outlook for EBITDA in 2021 being up $50 million from 2020. And I just want to make sure I have sort of the EBITDA walk-down. Could you maybe walk us through cost savings, contribution, volume leverage, FX? And then obviously, you gave some storm negatives. But I just want to make sure the walk is better understood?

Okay. So let me make a few comments. And then Kevin maybe you can go through a little bit of the details on some of the walk drivers. Obviously, as we talked about when we did the first quarter, the fourth quarter, the beginning of the year call for the outlook of the year; I mean, we felt very good in terms of the self-help being a big driver for the year in improvement. That gave us a lot of confidence that there was going to be significant improvement. Definitely, I would say that has been a major driver. The recovery on the industrial side is obviously the other big driver, which is happening, and we're taking actions on very well. The other parts are – those are the more robust businesses that have held up last year. The details of the puts and takes on share, new products, development mix improvements, those are more nuanced activities that we're driving. But Kevin, do you want to go into any specific or more specific comments?

Yeah. I think in terms of our outlook that we talked about earlier in the year, which we actually upsized when we upsized last call was on the self-help, $20 million to $25 million was our expectation. As Guillermo indicated, let's say the industrial recovery has been more robust and continues to be that way, which is a plus. When you look at it from a mix perspective, we've definitely seen improved mix in the business with each business unit doing a really nice job of driving higher-value product lines. So we're seeing uplift there. That's playing a positive role when you look at the overall. Net-net our expectations for corporate for the full year are pretty much on target, maybe a little high but not much. That’s a bit of a negative on an overall basis but just a bit. It's also important to point out that we talked about storm impact. That's going to be a total of $14 million to the negative. To be clear, our range does not project any recovery from that. It also doesn't project any upside from the Schulke & Mayr acquisition and integration, which there will be some. We just don't know how much. We also had the Doel strike, which is part of our process to execute on the cost of goods sold program. That was an $8 million or $9 million negative impact to the financials for the year. Look at the $570 million to $590 million considering the better part of $25 million of headwinds from Uri and the impact of the strike at our Doel Belgium plant, I think it all adds up to be a pretty strong year. Again, not presuming any upside from recapturing storm costs, which we believe it will be and also not including anything for the acquisition and integration of the Schulke & Mayr deal.

Got it. And a quick follow-up. Guillermo, in terms of Consumer Specialties as a whole, when do you think we see growth? Just straight up year-over-year growth for the businesses, excluding Schulke & Mayr. And what type of growth do you think the segment should do at some point down the road?

Yeah. If you look at the underlying demand and we internally tend to take out the exits because that's defined. The timing of it might be a little bit of noise, but it's been pretty much on target. Our overall target for these segments, the underlying market will be market plus a little bit of growth. So 2% to 5% underlying market; those are the segments we're selling into. We'd like to be above that over time. That will require all these innovations and portfolio shifts to really get all that. I think this is true this year. We will still see some noise. If you look at the segments that I highlighted, the four segments that are impacted, they're not the biggest part, but roughly maybe 30% of the business. The part of it is not getting the resilience that we would like to see. That's the part that we're working through at this point. I mean, I can't really predict when the recovery is going to be because I do think this is really about the opening up of the economy. You see it around the world. As an example, hand sanitizer we got new business with customers to supply schools and in a certain European country. They called and said the orders are delayed because the school system is closed. We're going to have to manage through that. But I think definitely in 2022, we will start seeing that global improvement as vaccinations really start hitting the rest of the world. I think that's the biggest challenge. I hope it's clear. We're not a US-centric business in a lot of these portfolios. The US is performing very well, but the other parts really do need a little bit more of a pickup in the opening up of the economies.

Our next question comes from Jeff Zekauskas with JPMorgan. Your line is open.

Thanks very much. I think your SG&A cost was $106 million in the first quarter, and I think it was $84 million in the second quarter. What happened there? And what's a normal SG&A cost for the quarter?

Kevin, do you want to take this one?

Yeah. I would say where we are right now, we should continue to see the positive impact of the cost-out program roll through. I would say, normal SG&A for the quarter is going to be around $100 million going forward in total. That's a good place to peg it for total SG&A.

So why was it so low this quarter? Did you reduce management compensation? What caused such a significant sequential decline?

I would say it's more of a timing thing than anything else at this point. I mean, we didn't make any major changes to comp or anything like that. No.

Our next question comes from Rosemarie Morbelli with G.research. Your line is open.

Thank you. Good morning everyone.

Good morning.

I was wondering if you could talk about the size of your naturally derived products and what do you think it could be two to three years out. I understand that Schulke is going to add to it. And linked to that question, do you think that customers are willing to pay more for it? Therefore, are the margins going to be above your traditional product lines?

Yes. So first, excellent question. Frankly, this is going to be a big focus when we do our Investor Day to show a little bit more details both at the company level and business unit level. A significant part of our portfolio, I would describe as sustainable, based on natural, naturally derived, biodegradable. We see just on the nature of some of the products, cellulosics, the nature of our materials. We're starting with a very strong base, especially in our additives business. If you look at the adhesive side, that is mostly petrochemical. So it's acrylic and polyurethane. There it's more about our technology to help our customers develop ESG value through their products. Composite light weighting, those kinds of things, enabling wood and construction. So it's more about our customers' products. On the consumer side, it's much more about our own sustainability. Customers are willing to pay more for value, not just pay more for product. The biggest challenge, as we see companies develop more ESG-driven technology, is performance. The products need to perform. Just creating a biodegradable hair gel or similar product is nice, but if it doesn't work, nobody's going to buy it. So it's a balance, and I think that's where the excitement comes. There's a lot of opportunities for innovation and value creation, both to replace existing technologies with newer, more IP differentiated products that customers will pay a premium for, and also capture share or enable new categories. As I said, the example of solid shampoo and conditioner is very exciting. A lot of major players are coming in now, where previously it was a niche little product. The ingredients they want to use in those more ESG products will by nature be focused on more sustainable type products. So I think the short end is we have a significant part of our portfolio, and we're developing it even more. It will be an exciting part of our portfolio transformation. As an example, the whole Avoca part that we were mostly focused on for fragrance carrier plant extracts as an example. Now we probably will hear us talk less about Avoca per se. Now it's about extraction capabilities to develop and expand the portfolio. We’re looking at ways to bring in new products and offerings to our customers in that area. So that will be the center of a lot of personal care focus for us.

Thank you. And then just following up on the hair or other type of categories on personal care, which have been affected by a change in consumer behavior. I was wondering if you could share with us the difference between what you see in the US and what you see in Europe. I mean, the US is opening up. So are you seeing the benefit even though it is a smaller part of your overall business?

Yes. Generally, we are observing some improvements across all consumer categories. The main issue is determining the extent of these improvements. The return to office attendance remains significantly lower, as many companies are taking different measures despite the end of COVID. There will be a rebalancing between work and social activities. We are noticing a slight increase in social activities, while many companies are still operating remotely, resulting in a drop in daily usage compared to historical trends. In restaurant and social environments, particularly in areas where reopening has occurred, we see people returning to some of their previous habits. However, as you've noted, in Europe, many regions are still showing lower activity levels. In parts of Asia and Brazil, we are also observing a slowdown due to the pandemic, and those areas are definitely experiencing declines.

All right. Thank you.

There are no further questions. Let's turn the call back over to Guillermo Novo for closing remarks.

Okay. Well, I want to thank everybody for your interest in our results this quarter and your participation. As Kevin summarized, I think we're very excited about where we are with the businesses, their underlying performance, and the execution of our strategy. We look forward to meeting with all of you in the coming weeks and discussing to share more details. More importantly, we're really looking forward to our Investor Day, so we can lay out more of the long-term growth opportunities and margin improvement opportunities that we see for our future. So thank you very much for your interest, and stay safe.

Ladies and gentlemen, this does conclude the conference. You may now disconnect. Everyone have a great day.