Earnings Transcript for UNVR - Q4 Fiscal Year 2021

Operator: Good morning, ladies and gentlemen, and welcome to Univar Solutions' Fourth Quarter 2021 Earnings Conference Call. My name is Alex, and I will be your host operator on this call. [Operator Instructions] I will now turn the meeting over to your host for today's call, Heather Kos, Vice President of Investor Relations and Communications at Univar Solutions. Heather, over to you.

Heather Kos : Thank you, and good morning. Welcome to Univar Solutions' Fourth Quarter Earnings Call and Webcast. Joining our call today are David Jukes, President and Chief Executive Officer; and Nick Alexos, Executive Vice President and Chief Financial Officer. Last night, we released our financial results for the fourth quarter ended December 31, 2021, and posted to our corporate website at univarsolutions.com, a supplemental slide presentation to go with today's call. The slide presentation should be viewed along with the earnings release, which has also been posted on our website. During this call, as summarized on Slide 2, we will refer to certain non-GAAP financial measures for which you can find the reconciliations to the most directly comparable GAAP financial measure in our earnings release and the supplemental slide presentation. As referenced on Slide 2, we will make statements about our estimates, projections, outlook, forecasts and/or expectations for the future. All such statements are forward-looking, and while they reflect our current estimates, they involve risks and uncertainties and are not guarantees of future performance. Please see our SEC filings for a more detailed summary of the risks and uncertainties inherent in our business and our expectations for the future. On Slide 3, you will see the agenda for the call. David will start with fourth quarter highlights and end market trends. Nick will walk through our financial update, and then David will close with progress on our business strategy. Following that, we will take your questions. With that, I'll now turn the call over to David for his opening remarks.

David Jukes : Thank you, Heather and good morning, good afternoon and good evening to everyone. And thanks for joining our call. I'm delighted to report another exceptional quarter and outstanding year. Thanks to our resilient business model and a hard working talented team over the past three years has transformed the business. Driven by solid commercial execution and sense on the customer experience. We deliver strong year-over-year growth despite the challenges of pandemic, transport and constrained supply. We remain focused on continued organic and margin growth, maximizing cash flow, as well as inorganic growth opportunities to further leverage our cost structure, strong regional infrastructure, owned assets and digital advantage. As you've already seen, key highlights from the quarter are, we delivered exceptional Q4 adjusted EBITDA of $207 million and a full year's EBITDA of $798 million, with liquidity of a $1 billion at quarter end. Market share growth in the quarter as evidenced by our policy of win loss ratio, and higher retention levels for new customers. Our sales at higher margin in Ingredients & Specialties grew by $0.5 billion in the year to $3.3 billion. Our digital investments a yearly yield benefits with 45% of our US customers now registered on our ecommerce channels, and able to utilize 24/7 self service capabilities. We completed the acquisition of Sweetmix, one of the top five distributors in Brazil of Ingredients & Specialties chemical to expand both our food ingredients and case portfolio in Brazil. And with our strong performance and deleveraging goal achieved ahead of schedule, we returned $50 million of capital to shareholders by a share repurchases. In the fourth quarter, we continued our trend about pacing prior year in both sales and margin to enlarge part to our committed market position in key products, as well as utilizing our extensive network of facilities and the advantage of our own trucking fleet. We believe this course was a clear validation of our core value proposition and providing security and supply safely to our customers and sound product stewardship to our supplier partners. Looking at the end markets, our industrial solutions portfolio saw accelerated double digit growth, with strong performance in case particularly in polyurethane formulation, homecare and industrial cleaning and lubricants and metalworking fluids also performed strongly due to demand in our strategic and our strategic supply position. Despite challenges in the supply chain, we found opportunities to grow and deliver new solutions for our customers and suppliers. Personal Care and Food Ingredients continues that trend of double digit growth in all sub sectors. Personal Care demand saw especially strong growth in perfumes and extracts, while in food growth has come from increased demand in prepared foods and hospitality as well as from our new supplier authorization. Our value to customers in both end markets continues to grow as we formulate solutions to meet growth trends in the market and expand in more sustainable and clean label ingredients. Within the General Industrial portfolio, we see strong demand across a variety of markets, with ongoing strength in chemical manufacturing, and increasing demand in mining chemistries, our extensive organic chemistry portfolio that supports the growth in these segments. While the ability to leverage our scale has enabled us to provide customers with continuity of supply. Our services revenue was down in Q4 given the ongoing impact and constrained supply of capacity. Our primary strategy in this market remains to leverage our distribution capabilities to provide full lifecycle chemical product management to the market. Although now much smaller part of our business, we saw growth in refining and chemical processing, as higher oil prices have accelerated reinvestment with increased customer demand for more sustainable solutions in this sector. The 2022 given confidence in our strategic priorities, operational execution, expected market share growth and chemical pricing expected to stay at higher level through the first half of the year. We estimate an adjusted EBITDA guidance of $260 million to $280 million for Q1 ‘22 and a full year 2022 of $860 million to $890 million with resulting strong cash flows. We look forward to 2022 where can be solely focused on customers and on growth as we leverage our assets base, including our extensive private fleet and digital capabilities. We believe a much improved commercial execution, as well as our long standing commitment to our ESG goals, positions us for continued success well beyond the next four quarters. We believe we have the right people, products, tools, and strategy to grow our deliver gross profit at rates greater than general consensus in the economy. And as such, I believe we are in a strong position to deliver long-term sustainable shareholder value. Now, let me turn the call over to Nick. He'll walk you through our fourth quarter results and our outlook before I comment on our key strategies, and we get to your questions.

Nick Alexos: Thank you, David. Good morning, and hello to all. I'm pleased to share Univar Solutions’ Q4 financial results, update you on our business activities and provide our outlook for 2022. Sales were up 23.5% on a constant currency basis. Excluding results of the exited Canadian agriculture businesses and Distrupol from the prior year’s financials, we estimate net sales to be up 28.8%, whereas the corresponding gross profit was up 32.7% also on a constant currency basis. These growth rates were primarily impacted by chemical price inflation, but also reflect strong operational execution. Fourth quarter adjusted EBITDA of $207 million was up by 40.6% on a constant currency basis, and adjusting for the exited businesses. This increase was primarily driven by the chemical price inflation, and most importantly, the commercial and operational efficiency of our teams to navigate through the ongoing supply chain challenges as well as strong customer demand. We also benefited from the realization of Nexeo net synergies partially offset by higher WS&A and the effects of Distrupol divestiture. WS&A was impacted by higher operating costs and variable compensation. For our detailed schedules in the appendix, adjusted earnings per diluted share were $0.60 in the quarter, an increase from $0.34 in the prior year fourth quarter. Operating cash flow of $175 million was significantly higher versus the prior year period, primarily due to the higher net income. Net working capital was a slight use as quarter-over-quarter sales rose with chemical price inflation and volumes were stronger than our typical Q4. Wherever possible, we also continue to invest in inventory in order to support strong customer demand. Capital expenditures for the quarter were $42 million and next year integration related expenses were on plan at $13 million. Our ROIC was 14.4% for the quarter, reflecting the strong performance and efficient asset utilization. And net debt leverage now stands at 2.5x, which is below our original S22 yearend target of 3.0x and it's net of the $50 million in cash return to shareholders during Q4 2021. On Friday, we've aggregated the key metrics across our four reporting segments, and we provide details in the appendix. Except for Canada, sales were higher across all geographies, benefiting from chemical price inflation, operational execution, and market share gains. Canada's reported decline was largely due to our exit from the Canadian agriculture businesses with strong gross profit and adjusted EBITDA growth across all the regions and strong margins. In EMEA and LATAM, gross profit margins were impacted by cost inflation and LATAM EBITDA margins were lowered, as we have reallocated corporate costs, reflecting the SAP implementation across the Americas. Turning over to our 2022 outlook. We expect strong end market demand throughout the year, continued market share gains and solid operational execution, building on our successes in 2021. We also estimate a continuation of current chemical price levels, at least through the first half of 2022. Additionally, we expect to benefit from normalized variable compensation versus the prior year, which will help offset chemical price deflation that may occur in the second half. We have targeted gross profit growth greater than the consensus for economic growth which is currently estimated at 3.5% for 2022. We expect to continue executing well through the ongoing supply chain disruptions and increase our market share across all geographical segments, as well as within ingredients and specialties and chemicals and services. We expect that Nexeo synergies for the year estimated $19 million and cost efficiency strategies outlined at Analysts Day last November will be the leading drivers for margin expansion in 2022 and into 2023. As mentioned previously, we expect to utilize our authorized share repurchase program to add a minimum buyback amounts related to executive compensation dilution. As a result, we are guiding a diluted share count range of 171 to 172 million shares by year end 2022. Accounting for these factors our guidance for adjusted EBITDA is between $860 million and $890 million for fiscal year 2022 as David mentioned earlier, with guidance for Q1 2022 in the range of $260 million to $280 million. Let's look at some of our cash flow highlights of our 2022 outlook. We are targeting net working capital of 13.5% to 14% of annualized quarterly sales by year end 2022 recognizing we ended 2021 above that range. As the supply chain disruption starts to normalize by end of 2022 networking capital is estimated to be a source of cash. Cash taxes to be paid are expected to be higher, principally due to the 2022 taxable earnings level and the runoff of NOLs. We expect our non-GAAP effective tax rate to continue to be in the 28% to 30% range. We expect that other expenses will be a use of cash versus being a significant source in 2021. A mentioned in the last quarter’s call, the high variable compensation accruals in 2021 type of sales and profits will be paid in Q1 of 2022. This line item in our summary cash flow typically have an annual cash use of $30 million to $50 million. Our next year integration expenses have been completed, and we are expecting approximately $135 million of capital expenditures for 2022. Consequently, we're targeting net free cash flow of $430 million to $445 million for 2022, which is approximately 50% conversion from adjusted EBITDA. Through 2024, the net debt leverage is expected to range between 2x to 2.5x as mentioned at our recent Analysts Day. And during the same period in line with our commitment to return capital to shareholders, we are targeting an average return of 20% to 30% of adjusted net income. Our strong results for the quarter reflect solid execution of our strategies throughout the business as we seek to take full advantage of our leadership positions in the market, build on our momentum, and remain focused on growth. We're excited with our outlook for the full year 2022 and beyond. And we are continuing to implement plans to achieve an adjusted EBITDA margin of 9% for the full year 2023. I will again emphasize that our teams every day continue to drive strong performance in challenging environments. Thank you and David.

David Jukes: Thank you, Nick. Nick mentioned our recent Analysts Day and actively highlighted our market leading approach to suppliers, customers and trends globally through ingredients and specialties or I&S for short. Compared to chemicals and services, I&S typically has higher growth rates, on average grown two under plus basis points greater than economic consensus is largely built on exclusive supply relationships, has stickier customers and brings higher gross profit. In 2021, I&S grew gross profit 28% year-over-year to $897 million and it's comparable in size and scale for the so called pure play specialty distributors, but enjoys a clear advantage of levering the scale and resources of our facilities and transport infrastructure. Only the last mile of distribution as we do we believe is a clear differentiator and value creation opportunity. And with our new authorizations, recent Sweetmix acquisition and ongoing investment in our technical resources and capabilities, we expect continued growth across a broad range of specialty end markets. We also continue to strengthen chemicals and services by growing C&S gross profits 15% year-over-year, launching new partnerships, for example in water treatment with Nutrien, improving on-time delivery metrics and customer satisfaction and growing share with our customers while maintaining our impressive safety record. With our operating model fully in place, we can now be singularly focused on building the effortless experience we believe our customers deserve. And are making investments in our people, our facilities, and the end markets expertise to create more value for suppliers, customers, and then consumers. We are excited about the progress of our business strategy and continued growth and our market share supported by new products authorizations. Our value supplier partners trust that our network of chemists, chemical engineers, food scientists, application development professionals can address growing trends. And we are integral in helping our customers launch innovative, more sustainable, and clean formulations. We recently opened our latest food Solution Center in The Hatchery Chicago, which is at the forefront of innovation. With key customers and suppliers headquarters in the area and other 1,200 food manufacturing companies, we consider it the perfect location to drive supplier and customer engagement as well as attract top talent all while helping advance The Hatchery Chicago and our commitments to diversity, equity and inclusion. And we broke ground at a new state-of-the-art chemical distribution facility in Western Canada, which we expect will expand our reach in the region while providing improved service levels and a reduction in outbound logistics costs and a lower carbon footprints. With our strong earnings, and our net leverage well below our original year end goal of 3x, we can see to evaluate selective bolt-on acquisitions, such as our recent deal in Brazil, which builds on existing supply and customer relationships. And we continue to target average capital return of 20% to 30% of adjusted net income to shareholders. Our commitment to being a digital leader continues unabated as we accelerate the Omni channel approach that is essential in today's hybrid working environment. We believe our current investments in the three areas of customer acquisition, retention and self-service are enabling sales growth and reducing our operating costs while providing a competitive moat against our regional competition. These investments help streamline the customer experience, as well as increase our agility and responsiveness throughout the diverse markets we serve. And as we do serve diverse markets, it's imperative that we develop experiences and content that are relevant to our customers and are not simply generic. To that end, we've now launched dedicated digital portals for both our food ingredients and HIC business become hot on the heels of our launch in Q4, thebeautyingredients.com. These portals allow us to position our product portfolio content and technical expertise in a simple to use format tailored to the specific needs of customers in those different end markets. Customers can learn, sample and buy products, using a suite of formulation ideas and offering with a specific focus on improving end product performance and sustainability. We are combining ecommerce capabilities with our industry knowledge and expertise to offer what we believe is an unmatched Omni channel support for prospects and customers no matter where they are in the product development or purchasing journey. We've also continued to expand our self-service capabilities, provide our customers 24/7 end-to- end support. From finding products online and placing orders to downloading supporting documentation and paying invoices. We're making it easier than ever, search, outsource and self-serve anytime from anywhere. We'll streamline the buying journey and creating a digitized, end-to-end supply chain that is easy, reliable and drives customer preference. Our digital vision is clear, meeting customers wherever, whenever and however they want to engage with us. And we're beginning to realize this as a source of sustained competitive advantage. I’ve spoken before about putting the customer at the center of all we do and our commitment to measuring and getting insights into the customer experience through our net promoter scores. Our overall scores through December remain good with our global score holding over Q3 despite continued supply chain challenges in the marketplace, we're listening to our customers’ essential feedback and captured over 30,000 responses in 2021 through our NPS process. Combining this data with our advanced analytics capabilities, we accelerate the development of our customer 360 predictive insights tool and are excited to launch this new capability across the US this quarter. This will provide visibility of an individual customer experience and proactively alert functional teams ahead of any issues that might be surfacing. Pull together our digital investments and customer centric approach is designed to maximize the effectiveness and scale of our operations, filling data into strategic asset and making it easier for customers and suppliers to do businesses. Moving to ESG, we've made strides with our agenda and outlined a clear path toward carbon neutrality by 2050. Evidence of this in 2021, includes being named by Newsweek as one of America's most responsible companies for 2022, achieving the maximum score of 100 for the Human Rights Commission Corporate Equality Index for the second year running, being awarded new supplier authorizations for a variety of more environmentally friendly ingredients and solutions. Continued investment in projects like solar energy for our sites in the US, Europe and Brazil, to reduce our carbon footprint in line with our next zero commitments, launching a corporate philanthropy strategy to engage our communities through volunteerism, advocacy, and donations. We continue to put safety first, which is evidenced by a world class safety record and continues to advance our diversity, equity and inclusion goals. ESG is a priority for us, understanding that it's our home our responsibility. It touches each of our core values and aligns with our vision to redefine distribution, and be the most valued chemicals and ingredient distributor on the planet, as well as being better stewards of the Earth's resources. So before we come to your questions, I want to recognize and thank our employees who were critical to the Univar Solutions’ transformation over these past through years. Putting the customer at the center of all we do remains our north star, it’s our people that continue to make a difference, and our purpose that drive this to help keep our communities healthy, fed, clean and safe. We have rebuilt the business from the inside out and to develop a strong commercial culture based on growth through customer preference. We've upgraded our asset footprints, expanded our private transportation fleet, augmenting our salesforce and customer service coverage and enhanced our technical capabilities through a broaden set of products application and formulation expertise with a dedicated end market focus. We divested non-core businesses, which is allowed us to focus on our core chemical ingredients strategy and reduce leverage by becoming an easier story for investors to understand. We've invested in digital tools that will help us attract new customers, retain existing customers and streamline our processes, reducing our operating costs which centered on the customer experience. And through our purpose, values and relentless talent focus, we strive to be a place where the best people want to work, growing our people to grow our business. Today, we are a business offering a full line got opportunities and solutions, serving a diverse range of end markets, making us as resilient as we are valuable and leveraging our strong regional infrastructure to deliver on global trends. So to summarize, we did have an exceptional Q4 and 2021 full year adjusted EBITDA. We expect 2022 full year adjusted EBITDA guidance in the range of $860 million to $890 million, with resulting net free cash flow between $430 million and $445 million. We delivered $25 million in Nexeo synergies in 2021 remain on track to achieve our commitments of $120 million in net synergies by early 2022. We deliver divestment proceeds and effectively de-levered to 2.5x. Additionally, we laid out new 2024 financial targets of $950 million of pre-acquisition adjusted EBITDA driven by organic gross profit growth and productivity improvements with adjusted EBITDA margins greater than 9% and 50% net free cash flow conversion. We plan to use that cash to fund growth initiatives through a combination of high ROI capital investments, selective accretive bolt-on acquisition and return of capital to shareholders. We believe we are perfectly positioned to deliver enhance shareholder value, while fulfilling our purpose and commitments to our people and communities. Thanks for your attention. Please stay healthy and safe. And with that, we'll open it up for questions.

Operator: [Operator Instructions] Our first question for today comes from Bob Koort of Goldman Sachs.

Bob Koort: Thanks, good morning. David, you guys obviously had a very strong quarter and gave very strong guidance. I was a little curious about the cadence of that guidance. I know you mentioned pricing going to be very strong through the first half. But it looks like the sequential lift in the first quarter is going to be something like 30% typically, it's only about 6% or 7%. And year-over-year, looks like 30% as well. But the first quarter is typically about a quarter of the annual EBITDA. So can you tell us what's going on in terms of the cadence where you, some shooting out very strongly at the beginning of the year, and then maybe soften a bit as you go through the year?

David Jukes: Sure, good morning, Bob. And thanks for the question. We're very proud of what we delivered in 2021. And we go into 2022 with a good degree of momentum. And we're really focused on those strategic priorities of putting the customer at the center of all we do and taking every advantage we can to drive growth, we've got really good demand and strong commercial execution going into Q1. We have visibility really for the first half of the year. In Q1, we do think we'll have some benefits from some extraordinary pricing, probably something around $30 million. So if you back that out, it gives you a kind of a more normalized spread, but we are performing incredibly well. I couldn't be more proud of this team.

Bob Koort: Great. And on Canada I was just curious, I know you're emphasizing I&S exposure across the company in the growth opportunity there. I know it's Canada had very, very strong margins. And yet maybe the lowest I&S concentration among your regions. Can you tell us what's going on in Canadian profitability and what we might expect in ’22?

David Jukes: Sure. I mean Canada, Canadian businesses is a really good business. And we've transformed that over the last 24 months or so exiting the agricultural business. I think that the restructuring and the transformation that we made in North America is really now foundational and broad based. And in Canada, we've got a really strong team that's executing well, it has really good geographical coverage in both the East and in the West. Our investment in a new facility in the West really backs our commitment to the chemicals and services business. So we like chemicals and services. We think it's a really good business, we're going to back it right across our portfolio. But we also like our Ingredients & Specialties business, it has a higher growth profile. You saw that business week with $0.5 billion last year 39% something growth and so we see great opportunities in Canada to continue to develop that growth there as well.

Operator: Our next question comes from Joshua Spector of UBS.

Joshua Spector: Yes, hi, thanks for taking my question. And congrats on a good quarter and solid year. I wanted to kind of try again on Bob's question and maybe not necessarily the cadence in 1Q to 2Q. But can you give us a thought on the EBITDA guide first half versus second half, trying to get a feel of where that normalized EBITDA kind of is where you see things settling out here.

David Jukes: Thanks for the question, Josh and good morning. Look, we exited the year 8.4% EBITDA margin, we're on track to exit this year at 9%. And we're very confident about our ability to do that through share growth and also through our productivity. We do have good visibility for the first half. We don't have visibility really into the second half. So we're very confident about what we're seeing for the first half of the year. I think we're being a little more circumspect about the second half until we get better visibility in there. And certainly world events over the last couple of days who knows what that's going to lead us the second half. So we're trying to share what we do now. But we feel very confident in bridging that 8.4 to exit in this year and 9% EBITDA margin.

Nick Alexos: Yes, I would just add, Josh, and thanks again for your question and your research report out this morning, that we expect Q4 of this year to be a normal seasonal period, as it has been in the past. Clearly Q4 2021 was very strong. When you look at our prior Q4s, I think you'll see that our Q4 this year, will evidence the continued growth in the business. And also just to clarify, the 9% that David reference is going to be a cost structure that gets us to a 9% for a full year 2023. Our expectation for EBITDA margins this year is higher than what we ended up in 2021. And on that path to a full year 9% in 2023.

Joshua Spector: Okay, thanks for that. And I was just wondering if you could expand a bit on your plans for cash use in 2022. I mean given you are at your targeted leverage range at lower EBITDA on 2021 versus what you expect for 2022. Could you deploy all of that $400 plus millions of free cash flow this year? Or do you see a need to delever towards the bottom of the range before you do that? Thanks.

David Jukes: Well, we're going to balance between high ROI capital investments and organic growth, and we do see some good inorganic growth opportunities out there. And then returning cash to shareholders, we do want to continue to pay our debt down, our target that we stated at our Analysts Day, last year, with 2x to 2.5x, we're at the upper end of that. We'd like to get to the lower end of that. But we do see plenty of opportunities to deploy capital for really high ROI growth, which is our primary concern, both organic and inorganic, as well as maintain that commitment to return 20% to 30% of adjusted net income to shareholders.

Operator: Our next question comes from Laurent Favre of BNP Paribas.

Laurent Favre: Yes, thank you. And good morning, David, on the slide 11, where you provide the data on I&S versus chemicals and services. I was wondering if you could tell us about the split between volumes and pricing in the 28% for I&S, is it mostly pricing? In the guidance are you assuming the normalization of pricing is mostly in C&S? Or do you also expect pricing to normalize in I&S? Thank you.

David Jukes: Good morning, Laurent and afternoon to you. Thanks for the question. I think I'd point you on that slide to the 110 new authorizations that we delivered in 2021. They deliver meaningful share growth for us. So there's a blend there of good volume growth, good share growth, as well as some pricing benefit. We're really pleased with the way that group is organized. And it's delivering, it's a really important channel now within our business. And I think it's very comparable with anything else out there. And I think it's starting to be recognized by the market that way the way it's being recognized by our customers and suppliers. In the chemicals and services business, that has some bigger volumes in there. And so some of the price swings in there are a little more apparent. But we've seen strong pricing and strong price dynamics, rights across the whole portfolio. Not always all at the same time. We would expect that to continue through at least at the first half of this year. And into we'll see what happens in the second half. But I&S group share a group volumes and I said I point you to 110 new authorizations, that's meaningful share growth.

Laurent Favre: Thank you that's actually on my follow up on the new authorizations in ’21, 110 is obviously the number. Is it a sign that you've had more suppliers looking to reshuffle their supply chains after the nightmare of COVID? Or is it more a case of you gaining more share of a new authorization number which is normal or little bit of both?

David Jukes: Look, I think it's a bit of both. I think certainly what we've demonstrated is through owning our facilities and our own trucking fleet, that we can have more control of our supply chain therefore be more reliable channel partner for many of our partners as well as now working with them to see how we can connect those supply chains to help drive their ESG goals. So I think there's quite a lot of things that we have there. And again, quite a competitive moat that we have around those assets, and trucking that we have, but also having this global channel that we now have in I&S, we have some partners who wants to work with us on a global basis to be able to drive the trends that they're following right across our global basis. So that organization that we now have, and managing that in a in a truly global structure, but still going to market in a very, very local way, is quite a compelling thing for our suppliers. And they are choosing to use that channel more and more.

Operator: Our next question comes from Kevin McCarthy of Vertical Research Partners.

Kevin McCarthy: Good morning, and thank you. Question for you on market share gains in your materials last night you reference share gains and I think in several areas. And I was wondering if you could expand on that? How much do you think that distribution industry volumes grew in 2021? And where is Univar seeing premium volume growth versus the industry in terms of regions or product categories perhaps?

David Jukes: Kevin, good morning, and thanks for the question. Look, I think that when we look at our share gains, I mean, I think in a very constrained supply, a market we were able to grow volumes, year-over-year, not massively. But that's around a very constrained supply, we were able to provide product -- get product, and we have brilliant suppliers, great partnerships with that put us in advantage position, our win loss ratio is up in all regions, our new customer attraction is up in all regions, our digital channels are bringing in customers that we couldn't have got to before. So we're seeing customers coming into us and staying with us rights across our portfolio. In Ingredients & Specialties, we have high retention levels there and that's helping and supporting that as I&S business becomes larger and more so we can channel within our business that also helps a customer retention. But you know that we're focused on putting the customer at the center of all we do of driving customer preference. And that's really reflected in our NPS scores and now are really internal, ruthless pursuit of improving our core to be so much more easy to buy from, and improve that customer experience really growth through that customer experience and putting the customer at the center of all we do, which now all the transformation is behind us we can really singly focus on is a tremendous affiliate for growth for us.

Kevin McCarthy: Okay, thank you for that. And then secondly, I was wondering if you could comment on pricing trajectory? Would you expect your average selling prices to continue to increase sequentially in the first quarter versus the fourth quarter? And if so, how much might that be the case? Just thinking about the bridge into the first quarter, if I understood your prior comment correctly, David, it sounded like price was expected to help you by $30 million. And I guess I'm curious as to where the balance of improvement comes from as well. It looks like you're either does expect it to improve perhaps $60 million or $65 million sequentially.

David Jukes: Yes, so as you rightly thought we're highlighting sort of $30 million in this quarter over the previous quarter of pricing from unusual and setting prices on certain chemistries. I mean pricing is a difficult one to assess at the moment, the old price is going up. And so therefore, that's going to firm the prices on some of the petrochemicals that we sell, some of the old hydrocarbon chain. So I think we got reasonable visibility into the first half. I mean, again, I have no idea what's going to happen if energy supplies in Europe get disrupted and German manufacturers struggle to produce and what that does for them. I just can't even imagine what that is. What we can see right now is we see some unusual pricing in the first quarter which we think will go away and through the second quarter we're seeing a firming of pricing in other markets and so we're not seeing chemical price deflation, we're seeing chemical price stability. But that'll just erode our margin slightly as the opportunity to take a stop profit on a rising price goes away.

Operator: Our next question comes from Laurence Alexander of Jefferies.

Unidentified Analyst: Hi, everyone. This is Kevin on for Laurence, thanks for taking the questions. I just had one question on incentive comp, it appears to be a pretty big swing factor. And I just wanted to get a sense of what a more normalized level was, and I guess any color around incentive comp, I’ll appreciate. Thank you.

David Jukes: Kevin, thanks for the question. I think we, the results on last year will demonstrate to the extent incentive comp was paid out right across the business very well. And I'm really delighted that our people's hard work has been reflected in what their bonus check looking like, they worked very hard of the last three years to transform this business. And that transformation has been as I said earlier on foundational and broad based and led to the numbers we're at today. I think we flagged in Q4, maybe at our Analysts Day that was about $60 million.

Nick Alexos: We flagged David, we flagged 40 in Q4, and given the continued outperformance the differential is really 60, 2021 versus 2022.

David Jukes: Okay, so that gives you the kind of spectrum of numbers. So you can build your model on that for 2022 and beyond.

Operator: Our next question comes from Steve Byrne of Bank of America.

Unidentified Analyst: This is Matt Deo on for Steve. So you talked a little bit about the supply chain issues. And I totally get it constricting volume but like how much demand in the market do you think is going on that given the lingering supply chain headwinds? Do you think volumes are underperforming by 100 basis points, 200 basis points, and 400 basis points? What's your view there?

David Jukes: Good morning, Matt. And thanks for the question. I'm not sure I can answer it. But I can tell you is that demand is very strong. And supply is constrained. And we are very fortunate with our facilities and our own trucking fleet and discrete supply relationships that we have, we are probably an advantage position and have a really competitive moat around those assets that allows us to perform better than certainly some of our smaller competitors. I think I'm not sure whether it's 100 basis points. So I have no idea. I have no way of measuring that. But I do know that supply is tight supply is constrained, we do have a large number of products on order control and have had really since the big freeze in the US Gulf last year. But how big demand could be I don't know how long the peace enduring I've got no idea.

Unidentified Analyst: I guess maybe a different way to ask the question is like how much and what percent of your inventory is below what you would consider to be normal stock level? Do you have sales for that?

David Jukes: Well, again, it depends on what normal stock level would be. I mean, certainly what we're choosing to do is take inventory where we can, and then feeding it out appropriately to customers who have been loyal to us and supportive us over a period of time. So I think our inventory is probably imbalanced to wherever they were – what we'd normally expect to have it. But our selling patterns will be different because we're not selling everything out of the door. We've been very careful and cautious about how we sell to make sure that we support our customers and support the demand.

Operator: Our next question for today comes from Michael McGinn of Wells Fargo.

Michael McGinn: Hey, good morning, everybody. I'm sorry if I missed this, did you provide any financial parameters around Sweetmix in terms of growth contribution mix? And then if we were to kind of pro forma the business and looking at slide, so I don't have the slide number, but if we were looking at the business and pro forma, what is LATAM I&S exposure now with that contribution?

David Jukes: Good morning, Mike. Thanks for the question. I mean we didn't disclose details on Sweetmix. It is a very exciting deal for us, it is only came in on December the 1st. So for 2021 numbers, its de minimis really, what I can say is we're thrilled to have that business, the team are really strong team, the suppliers that come with it, our partners from other parts of the world, and you've already extended with those suppliers in product range there. So it's been a very good first 5, 6, 7 weeks of that acquisition.

Nick Alexos: And Michael, you'll see in the 10-K, the transaction value is around $50 million, take into account all factors we feel it’s accretive to our business, and would add to the LATAM portfolio, strengthening their I&S mix.

Michael McGinn: Okay, great. I appreciate that. And then, maybe can you remind us how the business performs? And what are the kind of swing factors in a rising dollar environment right now?

David Jukes: So Michael get out -- maybe the question in a rising dollar environment.

Nick Alexos: Yes, basically about 35% of our business, Michael is non US. And so clearly, when the rising dollar is you'll have less foreign currency coming in. And that would be a headwind. Consequently, we also have the offsetting of expenses overseas. So we do actually break out in our 10-K, the differential impact on our performance and growth rate for FX. I don't have that in front of me, but it'll be in the 10-K.

Michael McGinn: Right, so you're mostly in region for that region. So you're translating expenses from a weaker currency back into a stronger currency.

Nick Alexos: That’s right. That’s exactly right.

Michael McGinn: Yes, so I guess what I was getting at is, you have some sales headwind, but then you had some cost tailwind? I was trying to walk through the mechanics of that. Anyways, what?

David Jukes: Yes. And so Heather just pulled up for me, you'll see on page 38 and 10-K, which we'll file later, 10% strength of the US dollar is about a negative $2.3 million impact to our net income. Yes, net income.

Michael McGinn: Okay. That’s what I was looking for. Appreciate it.

David Jukes: You'll see that in the 10-K.

Operator: Thank you. Our final question for the day as a follow up question from Bob Koort of Goldman Sachs.

Bob Koort: Hi, guys. Thanks for letting me back in. I was just curious why not a more ambitious share repurchase program given the substantial free cash flow?

David Jukes: Hi, Bob. I mean, again, very good question. Firstly, we only got authorization to do that in the back end of last year, and we executed $50 million of the $500 million authorization that we have in November, which I think is getting out of the blocks fairly quickly. As I said earlier, on this year, we want to balance our capital priorities between higher ROI capital investments and some M&A and some good inorganic M&A and we see good opportunities out there, and then returning cash to shareholders. So I think that the share buybacks will be part of that capital strategy in 2022 as we've outlined with the share buyback authorization but now returning 20% to 30% of adjusted net income to shareholders due to commitments, and we'll see into that as the year goes, how we balance that between the options to do that.

Bob Koort: David, would that still take precedence and over initiating a dividend at some point?

David Jukes: Well, the dividend is something that board consistently reviewing. And that's something we'll continue to do. Thank you. We have no further questions for today. So I'll hand back to Heather Kos for any closing remarks.

Heather Kos : Thank you, ladies and gentlemen, for your interest in Univar Solutions. If you have any follow up questions, please reach out to the investor relations team. This does conclude today's call.

Operator: Thank you for joining today’s call. You may now disconnect.