Good morning, ladies and gentlemen, and welcome to Avient Corporation's Second Quarter 2020 Conference Call. My name is Sara, and I will be the operator today. At this time, all participants are in a listen-only mode. We will have a question-and-answer session at the end of the conference. As a reminder, this call is being recorded for replay purposes. At this time, I would like to turn the call over to Joe Di Salvo, Vice President, Treasurer, and Investor Relations. Please proceed.

Thank you, Sara. Good morning and welcome to everyone joining us on the call today. Before beginning, we’d like to remind you that statements made during this conference call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events that are not guarantees of future performance. They’re based on management’s expectation and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statement. Some of these risks and uncertainties can be found in the company’s filings with the Securities and Exchange Commission, as well as in today’s press release. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the earnings release posted on the Avient website, where the company describes the non-GAAP measures and provides a reconciliation for the most comparable GAAP financial measures. Joining me today is our Chairman, President, and Chief Executive Officer, Bob Patterson; and Executive Vice President and Chief Financial Officer, Brad Richardson. Now, I will turn the call over to Bob.

Well, thanks, Joe, and good morning, everyone and welcome to our second quarter 2020 earnings call, the first ever as Avient Corporation. I'd like to begin our call today with an acknowledgment of support for those who have been impacted by the coronavirus. Our heartfelt appreciation also goes out to the countless frontline workers and first responders as they continue to play an important role in the response and recovery effort. At Avient, our first priority remains the health and safety of our associates, customers, and all stakeholders. We continue to adhere to government guidelines and protocols as well as other preventative measures to help stop the spread of the virus. As we do, we continue to serve our customers as an essential supplier and partner. On June 16, we held a mid-quarter investor call during which we commented on our second quarter expectations in light of the pandemic. As we now share our actual results, we report we delivered adjusted EPS of $0.39, which is $0.03 better than we expected at the time. Recall that to provide an apples-to-apples comparison to the prior year, these results exclude the impact of the financing for the Clariant Masterbatch acquisition. Including the additional shares from the equity offering in February and the debt raised in May, our adjusted EPS for the second quarter was $0.28. The improvement was driven by an increase in sales in Asia in the last two weeks of the quarter and better than expected margins in Color. We believe Asia is recovering from the pandemic, but also is a leading manufacturer of products that are specifically aiding in the world's response efforts. Sales in the region increased 13% over the prior year. This was not enough to offset weaker demand in Europe and the Americas; however, overall second quarter sales declined 18.6% or 17% on a constant currency basis. That's a challenging decline for sure, but we have benefited from our historic efforts to reposition our portfolio with a greater emphasis on healthcare and packaging. Sales into these markets were up 7% and 3%, respectively, in the quarter. With the acquisition of Clariant Masterbatch, we take an even bigger step forward toward a more specialized and more sustainable portfolio. And the numbers speak for themselves, while we didn't know the masterbatch business in the second quarter, they achieved adjusted EBITDA of $37 million in Q2, up slightly from what they reported in the prior year. Like us, they were deemed essential in the COVID response and recovery and their associates continue to serve critical industries, such as packaging, consumer care products, and healthcare. Recall that approximately 75% of their sales are into these end markets. And they also benefited from a strong presence in Asia, where they achieved EBITDA growth just as we did. For months now, investors have been concerned that we might be buying a business in distress from the pandemic. That simply isn't true. Here is what is true. We have acquired a business that is effectively achieving a run rate EBITDA of $130 million, which is what we estimated when we reported in December when we announced the acquisition. We are inheriting a very talented management team and an organization with a passion for innovation and customer service. We have quickly validated our initial synergy estimate of $60 million and identified potential upside that we believe we can deliver even in a COVID environment. We expect the acquisition will be immediately accretive to adjusted earnings per share in the third quarter, our first together. Excluding amortization step up, which we have not finalized, we expect Clariant will add approximately $0.10 of EPS accretion in Q3. This approximates what we expect Clariant will deliver from a cash perspective. And recall from our December presentation that our three-year goal for EPS accretion on this same basis is $0.85. So, $0.10 in the initial quarter of ownership is a great start. This is an exciting time for us, and it is an important inflection point in our specialty journey. Brad is going to provide some further details on the second quarter, and then I'll make some closing remarks. Brad?

Bob, well, thank you very much and good morning, everyone. As I always do, I'm going to start with our GAAP results. In the second quarter, we reported GAAP earnings per share from continuing operations of $0.25. Special items in the quarter resulted in a net after-tax charge of $2.6 million. Special items in the second quarter were primarily associated with acquisition-related and restructuring costs, which were largely offset by insurance reimbursements from previously incurred environmental costs and a mark-to-market pension adjustment. Adjusted EPS for the quarter was $0.39, as Bob noted, which excludes the impact of the financing for the Clariant acquisition. Total company revenue declined 18.6% in the second quarter compared to the prior year, with weaker foreign currencies impacting total company sales by 1.3%. Automotive and consumer discretionary markets accounted for 70% of the sales decline. This is not a surprise given the shutdowns that took place for much of April and May in the automotive and retail spaces. From a regional standpoint, sales in Europe were down 22%, excluding the impact of changes in foreign currencies. This was primarily due to weak demand in automotive and industrial applications. Unfavorable foreign currencies negatively impacted the region's overall sales by 4%. In North America, sales declined 21%, primarily due to the automotive production shutdowns and demand for consumer discretionary applications. These include things like outdoor high-performance sports, electronic accessories such as cellphone cases, and sporting and leisure apparel. The regional performance in North America and Europe are in stark contrast to what we experienced in Asia, where sales increased 17% for the quarter on a constant currency basis. Growth in the region was driven by new business wins in healthcare applications for the COVID-19 response, along with continued strong demand for our Barrier additives used in food and beverage packaging. We certainly hope Asia can serve as a roadmap for what is possible and ahead in the pandemic recovery for the other regions of the world. In reviewing our segments for the second quarter, SEM sales and operating income were down 19% and 32%, respectively. Lower sales were partially offset by cost containment actions, which reduced SG&A expense 12% versus the prior year second quarter. The SEM segment was primarily impacted by the automotive and wire and cable end markets in Europe and North America. Our composite businesses were also negatively impacted as demand for transportation and oil and gas declined. Sales and operating income for the Color, Additives, and Ink segment declined 15% and 24%, respectively. Lower sales were partially offset by improved mix and cost containment actions, which reduced SG&A expense 11% versus the prior year second quarter. As we previously commented, the Color business benefited from healthcare applications used in the COVID-19 response as well as continued strong demand for its packaging applications. For the Color segment, packaging sales were up 5% and healthcare sales nearly doubled over the prior year second quarter. The increased sales in these end markets provide a better than expected margins driven by improved mix. Please note that the Color segment's performance I just discussed does not include the impact of the Clariant Masterbatch business. Since the acquisition closed on July 1, the acquired business performance will be included in our Color segment results beginning in the third quarter. Lastly, sales and operating income declined 22% and 27% within our Distribution segment, again primarily due to the automotive shutdowns. Lower sales were partially offset by improved mix and cost containment actions, which reduced SG&A expense 11% versus the prior year second quarter. From a cash flow perspective, we generated $80 million of free cash flow in the second quarter in line with the prior year as reduced working capital offset lower earnings. During our last call, I emphasized our cash flow as a significant strength for us. And it certainly is. Pro forma for the Clariant acquisition and tax payments made in July associated with the PP&S investment, we have $450 million in cash on the balance sheet and over $700 million in available liquidity. In summary, we are in an excellent position to navigate the near-term dynamics of the pandemic and begin the very important work of integrating our two companies. It is important to note that it is still too early to predict when and how the markets will recover. Accordingly, we don't plan to provide specific EPS guidance for the third quarter. What we can tell you is that orders for the month of July are down about 15%. This is an improvement sequentially from Q2, but still off from the prior year for sure. We are seeing some early signs of automotive business picking up, as well as spending on discretionary items, but these appear to be returning gradually. We expect Clariant will add $250 million of revenues in the third quarter. And as Bob mentioned, it will be immediately accretive, adding $0.10 of EPS. This excludes the impact of depreciation and amortization from the step up in the asset values associated with purchase accounting. We are in the middle of the process to complete the allocation of the purchase price. We believe this immediate EPS accretion is incredibly relevant for our investors to assess our cash return on our investment. I think what is also relevant is the quality of the business we acquired, its specialty composition and resiliency during this challenging economic environment. Bob will now provide some comments, including an update on Clariant.

Thanks Brad. I'm very proud of our team's accomplishments this quarter, navigating the COVID-19 pandemic while at the same time completing the acquisition of Clariant's Masterbatch business, the largest in our company's history. We have been very purposeful and clear in our initial communications just as we are being now in our early integration. And that is, this is a joining of two great companies to make it an even better and stronger organization that is more global and more innovative. As good as the legacy PolyOne and Clariant organizations were separately, we're better together as a new company with a new brand. Avient is rooted A, in Europe, which means the future and B, which means life. In it, you can hear environment and invention, two important areas of focus for us as we emphasize sustainable solutions. Quite simply, it's a new name for a new company. I've been with the company now for 12 years, and I've always respected Clariant Masterbatch. We've been the best of competitors in both legacy PolyOne and Clariant shared a passion for innovation, customer service, and for taking care of our associates. I never viewed the goal to acquire Clariant, but rather to build a new team together. This is the opportunity that we now have in front of us. And I believe with our new collective brand, that's exactly what we will do. The new brand is about the cultural integration of over 9,000 talented, passionate, and proud associates as it is about anything else. Over the past several decades, legacy PolyOne and Clariant Masterbatch have each built the strong legacy of success, and it is important that as we come together, we learn from each other and harness the best of our two organizations. This is a time when the world craves a path forward out of the pandemic. As green shoots begin to emerge, the world will once again prioritize sustainability, innovation, and economic growth. We will rely on strong relationships and partnerships and demand a more inclusive society. By joining our two incredible and complementary businesses into one, I feel like we are in a better position than ever before to help in the response and recovery and to create future value for all our stakeholders. Having closed the acquisition on the 1st of July, we have hit the ground running with integration efforts well underway. Despite the challenges brought on by the pandemic, we are confident that we will be able to execute our plans and achieve our synergy targets. We plan to provide a more thorough update on integration progress and synergies on our next call. As we look ahead, we believe there are encouraging economic signs. You heard our performance in Asia versus the other regions. Our plants are fully operational, commercial activity is picking up. And again, China in particular has demonstrated that COVID can be managed and economic growth can return. Automotive plants around the world are reopening and there appears to be demand for passenger vehicles. In the consumer space, production of products like off-road vehicles really came to a halt in the second quarter, but toward the end of the quarter, our customers were finding that the dealers were running short on inventory as consumers rushed to buy them. Many people have turned to the outdoors as a respite from the confines of COVID lockdowns. Now, no one is waving the recovery flag yet, but following the considerable decline for the last three months, these are positive signs. That being said, we expect any recovery in the U.S. and Europe to be gradual. Unlike the rapid spread of the virus and then the swift and ensuing shutdowns throughout Europe and the Americas, recovery will take time. And if there's one thing that we have learned or relearned about people during this pandemic is that individual attitudes and behaviors vary drastically. I make this comment because when there is a more consistent and higher level of individual comfort that the pandemic can be managed, I believe that's when consumerism and commerce will likely return to pre-COVID levels. The addition of Clariant will certainly help our performance and we have highlighted it and expect the business will perform well in the second half of the year. And this was a main factor that attracted us to the business in the first place. They have market-leading technology and specialty less cyclical end markets. And I say they have, it's really we have, because they are us and we are them. And together, we are Avient. The new kind of specialty materials company, a great place to work for our associates and an investment opportunity poised for growth and value creation for our shareholders. With that, I'm happy to take any questions from anyone on the call. Thank you.

Thank you. The call lines are now open. Your first question comes from Mike Harrison with Seaport Global. Your line is now open.

Hi, good morning.

Hey, Mike.

Good morning.

Bob, I was wondering if you can comment a little bit on customer inventory levels. I know you just mentioned that in some places you're seeing that there's been demand and maybe the dealers or the stores don't have enough inventory to keep things on the shelves. At this point, do you feel like you're seeing essentially real-time demand, or is there still some destocking going on? Is there any restocking going on, maybe just walk through some of your key end markets and let us know what you're seeing?

I want to focus on two key areas: automotive and off-road vehicles. In off-road vehicles specifically, we've noticed that dealers were facing inventory shortages. As operations started to resume towards the end of the quarter, we didn't immediately observe an increase in demand. I believe there was a delay, possibly because some suppliers still had inventory on hand, or customers had their own stock for production. It's hard to determine the exact cause. However, I do think there's some inventory in the system that is being cleared out during the startup phase, and we anticipate a demand increase in the third quarter.

All right. And then I know you're reluctant to give EPS guidance, I think maybe a starting point is kind of where Q2 was, and then adding the $0.10 of the accretion from Clariant. But maybe can you talk about some of the key variables in the outlook? Is it really just demand related or pandemic related, or are there some other levers or areas where you feel like you have some more control over how you can perform in Q3?

The primary uncertainty is really the pace and extent of recovery. There has been a surge in cases in certain regions, which may continue to dampen demand. This is the key unknown factor. When I consider the main influences on our performance in the third quarter, this is the most significant. However, I do see some positive signs, particularly in automotive off-road vehicles and some areas of consumer discretionary spending, which were not evident in the second quarter. Regarding July orders, a 15% decline is an improvement compared to the year-over-year decline in Q2, suggesting a potential uptick in demand.

All right. Sounds good. Thanks very much.

Yeah.

Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is now open.

Thank you and good morning, everyone.

Morning, Vincent.

Could you clarify if the $0.10 from Clariant includes synergies? Also, is that $0.10 reflective of a run rate? Would it contribute $0.40 toward the $0.85 goal, or is there something specific about the third quarter that might cause that $0.10 to be higher or lower than the typical run rate due to seasonality or other factors?

Yeah, so the first thing is there's probably about $1.5 million of synergies in there with respect to really administrative costs in terms of employees that did not begin with the acquisition on day one, just by design from the acquisition. So, that's not a big number. It will obviously get bigger as we get toward the end of the year. With respect to the $0.10 number, again, that excludes the step up and amortization we're working on that right now. And then the way to think about that is I'd say, look, there is seasonality in the Clariant Masterbatch business. It's very similar to our own where the first half of the year is quite a bit stronger than the second half. So, when I think about that run rate, if we were just bringing over their business and looking at it on that basis, that accretion would be higher than it is in the first half than it is in the second half of the year, if that helps.

That’s very helpful. And just as a follow-up. Are there any costs that you've avoided in the second quarter just with having things closed or whatever else that will have to come back later in the year, sales return or anything like that and anything like that we should be keeping in mind for our model?

Travel has nearly halted due to the lockdowns. In China, customers are beginning to reconnect with suppliers and hold face-to-face meetings again, mainly on an international scale. However, looking at year-over-year trends, our travel and entertainment expenses, along with the typical trade shows we would have attended, have decreased by about $5.5 million in the second quarter compared to last year. I don't anticipate a recovery of these expenses in the third quarter. Eventually, they may return, but as the world adjusts to a new normal, I doubt we will return to the previous levels of travel anytime soon. We do not expect these expenses to rebound in Q3.

Okay. Thanks very much, guys.

Yeah.

Thank you. Our next question comes from the line of Mike Sison with Wells Fargo. Your line is now open.

Hey everyone. Great quarter. Can you provide some additional details on the $37 million for the second quarter, which is an increase year-over-year? That's quite impressive considering your Color business faced a decline. Are there specific initiatives that are performing well, and could you share some insight into why they seem to be doing better for the full year?

Yeah. I mean, look, it really comes down to end market exposure, Mike, and 75% of their sales are into packaging consumer staples and then healthcare. Those were actually very good markets for us in our Color segment as well in the second quarter and up also. The primary difference between the performance of our two businesses in the second quarter really was consumer discretionary items. As you know, we have a large screen printing inks business that was down considerably, and then also our exposure to auto. I mean, those are the two things that I'd say really do differentiate them from us. And again, kind of hearkens back to our investment thesis of exactly why we were interested in buying Clariant and bringing in the company, is that improvement in the portfolio. So, that's the biggest thing, plus candidly, their exposure to Asia and Asia had a very good quarter in the second quarter for them as it did for us.

Got it. As a quick follow-up, you mentioned feeling positive about the $0.85 and the long-term $500 million EBITDA target. Could you clarify the path to that figure as a reminder? Also, considering Clariant's performance so far, is it still on the same timeline you initially envisioned, or has it potentially accelerated?

We are confident in our timeline and our ability to achieve the $60 million synergy capture even in a COVID environment. During our next call, we will provide an update on our synergy expectations. The preliminary reviews between our two organizations have been very positive, and we believe there is potential for upside. I feel comfortable with the timing and magnitude of our projections. Ultimately, reaching $500 million will depend on the recovery from the pandemic and the performance of our underlying EBITDA. Regarding the expected $0.85 accretion number, we are optimistic that this remains achievable within the same timeframe.

Great. Thank you.

Thank you. Our next question comes from the line of Frank Mitsch with Fermium Research. Your line is now open.

Good morning, gentlemen. If I could follow-up candidly upside on the synergy side. I mean, you guys had indicated that sourcing was going to be 40 and an early key and clearly, that's one of the things that you guys can just look at your purchase price is that you're paying for ROS between Clariant and the heritage PolyOne. Is that one of the areas that's giving you confidence on that quote candidly, there'll be upside on the synergies?

We see potential for improvement in all three cost categories we mentioned in December. However, we believe we can achieve the most progress quickly in the area of sourcing synergies. That's correct, and it's important to keep this in mind, especially as we move into the second half of this year.

All right. Terrific. Regarding the pace of business, you mentioned that for heritage PolyOne, April was down 15%, and May was down 20%, which suggests June was down in the upper teens. You indicated that July is down 15%. Are things improving for heritage PolyOne? Additionally, it's impressive that Clariant showed growth in the second quarter. How is heritage Clariant performing in July?

First of all, I want to clarify that from the sales perspective, the Clariant Masterbatch business experienced a decline in the second quarter, but EBITDA saw a slight increase. There was a mix effect involved. We expect their sales to decrease by about 7% in Q3, yet we anticipate a positive contribution to EBITDA. This should provide some perspective on their sales performance in relation to the July orders for the legacy PolyOne business, which saw a decline of about 15%. I want to emphasize that when Brad referred to this figure, he was specifically talking about the legacy or heritage PolyOne businesses.

No. Understood. But that page is better than what it was, correct?

Correct. Yes. Yes. Sorry.

Thank you. Our next question comes from the line of Lawrence Alexander with Jefferies. Your line is now open.

Good morning. So, can you give us a feel for the degree to which you're seeing any change in the types of innovation requests that you're seeing, particularly in the packaging and the automotive channels?

Yeah.

Are you seeing a pivot into the types of projects people are working on?

It’s interesting because when everyone first went into lockdown mode, there was a noticeable period of quiet. All industries and organizations were focused on figuring out how to maintain supply, especially in essential sectors. However, it didn't take too long for the focus to shift back to innovation. In our labs, we noticed an increase in requests, possibly due to reduced activity allowing customers more time to consider long-term projects they hadn’t revisited. This could be attributed to the change in dynamics of working from home compared to being in the office. Regardless, there was a significant amount of innovation activity in the second quarter. Overall, the themes we observed remained consistent with what we’ve experienced in the past, focusing on sustainability, lightweighting, and packaging. This trend extended to other industries as well, although there was less emphasis on the automotive sector due to shutdowns. In those other industries, we consistently observed themes around lightweighting and sustainability.

Have you noticed any significant opportunities or shifts in the competitive landscape, particularly regarding talent acquisition? What is your view on the available pool of salespeople and researchers, and how does it compare to your ideal talent pool as you anticipate developments in the coming years?

First of all, I want to express how proud I am that throughout the pandemic, we have prioritized the well-being of our associates and reaffirmed our commitment to them and the culture we are building here. I would like to highlight our positive retention efforts. I haven't observed any significant disorder or upheaval, although some industries may be experiencing considerable demand drops and are considering layoffs or workforce reductions. This situation could present opportunities for us in specific technical fields, such as composites. However, there's not much more I can add on that front.

Okay. Thank you.

Yeah.

Thank you. Our next question comes from the line of Colin Rusch with Oppenheimer. Your line is now open.

Thanks so much, guys. I want to follow-up on that same thread around potential premium for advanced materials or high-performance materials that are coming from recycled inputs. And I'm curious what you're seeing in terms of the supply chain on recyclable polypropylene, polyethylene, any innovation there that you're hopeful about as you look at incremental sourcing and the potential for you guys to get a premium for those products with recycled material?

Yeah. I mean, look, first, we're a founding member of the Alliance to End Plastic Waste, and our participation in that organization has given us a lot of really good insight into and helping to actually invest in and drive some pretty significant infrastructure projects that will improve the capture of plastic waste and the ultimate recycling of it. I mentioned that first because there really is a supply issue with respect to access to recycled content, and companies are stating goals in terms of how much they want to achieve by certain years in the future. But the first thing we have to really resolve and provide is, is supply. So, there are a number of projects underway that I think will drive that. Those have continued albeit, perhaps a little slower as a result of COVID. But I think that's the most important observation is that very important and necessary infrastructure is going into places, like Indonesia, Southeast Asia, for example, that I think will provide necessary supply. When that's the case, I think you will see a higher degree of recycled content.

Great. And just shifting gears a little bit with fiber networks. There's a lot of different views on the cadence of 5G growth, but what are you seeing right now? There's potential for some acceleration here starting in the back half, but where are you seeing from your customers on that 5G opportunity?

The cadence of … A - Unidentified Company Representative 5G growth.

Yeah.

I didn't hear that very well. Thanks. My colleagues here hear better than I do. So, yeah. So, there definitely was a slowdown in the first half of the year. And if I look at our fiber line business, for example, and what we experienced with respect it, there was a year-over-year sales decline, but it wasn't significant. And we actually view potential upside here with respect to 5G because as the world has worked from home in such a broader fashion than it ever has in the past and utilized technology to connect with each other, there's a need for more bandwidth, right? There's a need for faster, better connections. I think that's going to drive an acceleration of 5G and infrastructure build-out in the U.S., which is a real good guy for us. So, we're hearing that from our customers. I think that's a reasonable trend or conclusion to draw. Candidly, I don't think people are going to go back to traveling in the traditional way anytime soon.

Great. Thanks so much.

Thank you. Our next question comes from the line of Jim Sheehan with SunTrust. Your line is now open.

Good morning. Thanks for taking my question. So, on the Clariant Masterbatch business, could you talk about also the performance of the first quarter of 2020 and how maybe that compares to legacy PolyOne Color business? And also with respect to the synergies on there, what adjustments are you making for the pandemic that maybe you didn't expect to make?

In the first quarter, our Color segment saw a slight decline in sales, but EBITDA increased slightly. This trend aligns with the results of our other business segments. Most of the pandemic’s impact for us didn't begin until April, which resulted in a similar performance across both businesses for the quarter. We have also assessed the pandemic's impact on Clariant by reviewing each end market, similar to how we analyze our own operations. Fortunately, since a large portion of sales is directed towards packaging and essential consumer products, the impact has been manageable, unlike what we've observed in the automotive and consumer discretionary sectors. There will be a decline in sales, as I noted in response to Frank's question regarding our forecasts for the third quarter; however, this decline is not as significant as what we see in other affected industries.

Terrific. Could you also address any raw material advantages you're currently experiencing? I believe some key raw materials have decreased year-to-date. How much inventory do you still need to process before these raw materials may stop being beneficial for you? Additionally, could you comment on the masterbatch business in that context?

Yeah. So, in the second quarter, lower raw material costs were a slight positive for us in the order of magnitude of probably $4 million, $5 million, pretty consistent with what we saw in the first quarter. Our inventory turns over pretty fast. So to the extent that prices move up or down, we experienced that. But one thing I'd point out though, is there's always a lot of focus on maybe some of the majors in the base resins. But again, the preponderance of our spend really is in all of the other special ingredients that go into a specialty formulation. So, while we're experiencing a downward trend in those majors, other things are flat to maybe up slightly. So, I expect to still see a small benefit here in the third quarter.

Does that go for the masterbatch business as well?

Correct. Yeah.

Thank you.

Yeah.

Thank you. Our next question comes from the line of Rosemarie Morbelli with G. Research. Your line is now open.

Thank you. Good morning, everyone.

Good morning.

Bob, I was wondering how you have changed the way you run your business during the pandemic, whether in Asia, Europe, or the U.S. How have you adjusted, and which of those changes will remain as you move forward, making your company stronger post-pandemic?

The way we connect with our associates has now entirely shifted to phone or video. Everyone has become much more adept at using technology for this purpose, and I believe this will help us and likely others become more efficient organizations in the future. However, I do miss the personal interactions and the time I spend with our associates and customers face-to-face. I hope we can return to some level of travel eventually, as those in-person connections are vital. From a strategic perspective, the pandemic has clarified for us where to concentrate our efforts in terms of end markets and specialty products. In many cases, specialty products have outperformed commodities. Additionally, our focus on packaging and healthcare markets has been validated. So, it feels more like the pandemic has reinforced our existing strategies rather than changed them.

All right. Thanks. And when we look at Europe, now as I understand it, a lot of the lockdown has resulted in people taking, well, time off. They didn't have a choice, but that's counting as vacation time. So, does that mean that in August of this year, we are not going to see half of Europe shutting down, whether it is for you, Clariant or that really hasn’t changed?

We're not planning really on much of a change. But I have to say that does remain to be seen. Given where demand levels are right now, we're still expecting that there is a seasonal effect in the third quarter versus Q2, which is typically down for us, that being one of the reasons in terms of European demand. So, at this point, I'm not expecting any change, but we'll see how this plays out here in the next couple of weeks.

Thank you. Your SG&A decreased by either 11% or 12% year-over-year. You mentioned that not much of this will be returning in the third quarter. Going forward, how much of this reduction do you believe is permanent? Are we likely to see SG&A return to previous levels, or will it remain approximately 5% to 10% lower in the future?

In total, the year-over-year decline in SG&A is influenced by travel and trade show-related costs. We have also seen lower personnel and benefits expenses, including this year's reduced incentives compared to last year. Essentially, we don't expect any significant changes in Q3 concerning travel and trade show costs. Long-term, our performance will affect incentives, but I don't anticipate reaching the previous levels of travel and trade show expenses, at least not in 2021. Maybe when things return to normal, whatever that looks like, it might happen, but we don’t foresee it in the near future.

Thank you.

Okay. Thanks Rosemarie. And thanks everyone for your questions and also for your time to dial-in to the call today. We look forward to providing everybody a further update on the Clariant integration, our synergies, and our performance on our next call. Take care. Bye for now.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.