John Roberts: And then lastly, I know China is not that big, but you’ve got new capacity there and you sounded pretty upbeat about China. It’s confusing, I think, to a lot of companies what’s actually going on. What’s your read in the sustainability of the strength in China right now?
Corning Painter: So, I think sectors of the Chinese economy that are really set on exports, you can look at well is there a recovery in European consumer demand, North American consumer demand that kind of thing. In general, like maybe it’s like the story of the purchaser managed index, right? It’s like slightly above 50, but not much. So, I think it’s a slightly improved situation and sentiment from where like when I was there last in November. But I don’t think I wouldn’t read into that that it’s extremely bullish or that there isn’t still some negative sentiment in that market.
Operator: Our next question is from the line of Jon Tanwanteng with CJS Securities. Please go ahead.
Jon Tanwanteng: Hi, good morning. Thanks for taking my questions. I was wondering if you could talk a little bit more about pricing and the remaining capacity you have in 2024 ahead of this Russian import ban. Exactly how much upside are you seeing there or movement, I guess, are you seeing there? First in 2024 and two, is it impacting 2025 pricing negotiations if it doesn’t start it yet?
Corning Painter: Sure. So, in Europe specifically, a lot of the, let’s say, premier tire brands, they had already locked in their supply and they had locked in their supply without Russian carbon black. So, I’d say it’s more a play in the second area. So, I’d see we do see opportunities to pick up some additional volume there. Competition is really with Indian supply in that space. So, it’s a positive environment. It’s not like it’s unchecked positivity I would say. And I think definitely all this sets up for a very strong negotiation for next year.
Jon Tanwanteng: Okay. Have those discussions started yet for next year or is that later this year?
Corning Painter: Yes. I tried to make that clear in it. So, some people are in the framing, some people want to talk numbers. So that’s going already.
Jon Tanwanteng: And also, congratulations on the platinum rating. I was wondering if that impacts your pricing ability or is it just more nominal at this point?
Corning Painter: I think that for many of our customers are really concerned about sustainability and that is their preferred metric for sure. So, I think it really is just another validation that we’re a leader in this industry that we’re a supplier you can count on, you can count on for the long haul. And that sense of reliability and long-term commitment surely is worth something in this. And I think people have learned the risk of not playing the not locking up serious suppliers. So, I think it’s a net positive for us.
Jon Tanwanteng: What areas do you still see weakness in and kind of what are the prospects for improvement in those areas as you go through the year?
Corning Painter: Yes. Well, I would say North American tires is still a weaker area. Tire purchases are up much more than manufacture. So, let me clear. What I mean when I say North America tires, I mean North America tire manufacturing to a certain degree European tire manufacturing. And this then relies on the brands with really a better cost of ownership value proposition to customers, start earning back people’s business as people adjust to the pricing changes that have happened in the market and incomes are up and people sort of expect the new normal. I think that’s a big opportunity for the marketplace. I mean, in general, the in the specialty area, almost every market is up, some more than others. So, for example, in North America, if offshore wind and grid 2.0 and connecting up far flung wind on land, wind farms as that progresses, that’s the kind of thing that would increase demand in that particular market, that sort of thing.
Jon Tanwanteng: Thank you. And then finally, just an update on capital allocation you mentioned is important. I’m just wondering where is it most likely that you deploy excess cash in the next six months to 12 months?
Corning Painter: So, when we think about capital allocation, we think number one, just in terms of a framework about hey, what’s our cash flow, what are the other uses for cash. We also think about our share price relative to different ways of valuing and thinking about what the share price should be. Of course, the balance sheet and not just the balance sheet today, but what are the exposures to that working capital as Jeff mentioned with oil prices that sort of thing. And significant milestones such as Blue Port starting. So, we were not in the market in the first quarter. And I think if things play out relatively stable for this year and continue the trend, we’re likely not to be in the market. We do definitely see the share prices significantly undervalued and a really good opportunity.
With the EPA spending, we don’t have that draw on us when we do have positive cash flow. But it’s not of the magnitude that we’d really like. We did see our balance sheet, the ratio move up to 2.44. That’s really an artifact of EBITDA TTM effects. But nonetheless that went a little bit higher. So, on the balance of that, I think we’re unlikely to be in the market this year, but things can change as the year plays out.
