© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and welcome to the Synthomer Q3 Trading Update Call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Calum MacLean, Chief Executive Officer. Please go ahead with your meeting.
Thank you very much, operator. Thanks, everybody, for attending the Synthomer Q3 trading call. I'm here today with Tim Hughes, Head of Investor Relations; and Stephen Bennett, CFO of Synthomer. I just like to start really with a little bit of a backdrop that it has been a challenging environment during quarter 3, which was a follow on. We had expected or hoped for a bit of a pickup in quarter 3, which didn't really come generally around the environment, and outlook for quarter 4 remains pretty much flat on where we are with quarter 3. I don't think you need me to tell you all the reasons why that's the case with the current trade wars, Brexit, automotive industry and depressed activity in some of Mainland Europe, in particular, and Germany would be probably the highlights of those. Notwithstanding the sort of market that we find ourselves in today, so I may run you through the businesses a little bit here in terms of where we've got to year-to-date and what the outlook looks like for the rest of the year. I won't take them in exact order that I've got them in the press release, the trading statement. But Functional Solutions, very much in line with the same period last year and we -- as you well know, we have new capacity coming in line. So I think the Functional Solutions business extremely robust in a very difficult environment that it's on or ahead of last year. Clearly, we would have liked to have seen it done better, but -- and it's not immune at the end of the day to the current environment. But the fact that it has shown to be that robust and coming in is we're pretty happy with where that is. And not to forget that Functional Solutions is effectively the business that we've acquired in acquiring or about to acquire OMNOVA. So that business firmly fits within that Functional Solutions division. Industrial Specialities, again, similar story to Functional Solutions and that's very much in line. You'll remember we were a little bit behind in quarter 1 and that was improving during quarter 2. Well, that, sort of, continued. And we fully expect this year to be in line with 2018's performance, if not slightly, a little bit slightly ahead depending on how quarter 4 goes. Again, a good sign of pretty robust within an environment, which, I mean, it's a global business, of course, but it's got a little bit of automotive exposure, et cetera, in there. So again, not immune to what we would call the current environment, but performance pretty, pretty good first 9 months to date in terms of where we are.Performance Elastomers, now moving on to the area with a bit more of focus. So I split it down into 2 really in the release because it is a, sort of, 2 stories within there. NBR, again, pretty positive in that respect in that volumes for the year-on-year have grown, which you would fully expect bearing in mind you know we brought on the 90,000 tonnes at the end of quarter 4. So volume's up compared to 2018. And margins year-on-year stable, which you should read into that, that the additional capacity coming into the market of both ourselves at the end of quarter 4 but also one of our competitors in the middle of 2019 that margins despite the capacities coming online have been reasonably stable year-on-year. So that business as a whole moves forward. SBR is the area we've highlighted today, which has probably had more of an impact. I mean we were pretty upfront with that during our presentations and our discussions in half 1 during -- when we went with the -- had half 1 results in August, where we saw challenging conditions. I think that hasn't improved dramatically across SBR. But the area which has been particularly difficult has been within the paper sector of our business. And you, I think, know we do about 500,000 tonnes of SBR, 300,000 tonnes of the 500,000 are going into the paper. It doesn't mean that this is not still a strong cash-generative business, it's just volumes are down in this area by around 10%, and that's a couple of factors really. Factor number one would be that we've had year-on-year a couple of paper mill closures and even a couple where we've had to back off because of credit issues, so that's impacted the volume. And then the second impact within this area is obviously with less volume, it's been a pretty competitive environment. So margins have come under a little bit of pressure when raw materials have been a little bit volatile as well. So year-on-year, the SBR business is around 10% down, and the majority of that within the paper industry. That being said, a little bit more stable at this moment in time having taken most of that pain during quarter 3, but stable at those lower levels. We are, as a result of that, and again, we've indicated this in our half 1, we are looking at, sort of, asset utilization. Clearly, if you lose a bit of volume, then, of course, you're making less volume on the same assets and the asset still have the cost associated with them. So the answer there, of course, is to look at, can you repurpose those assets into making something else, which is one thing that we're doing a little bit, but particularly, we could make some NBR, for example. But the other thing we're looking at is do we consolidate the assets somewhat. So we load up the large assets, which have got very low costs, good connections to raw materials, lowest cost to serve and see whether we reduce the total cost base of the business and, therefore, increase the margin. And then on top of that, clearly, let's see where the market goes during 2020. So that repurposing and utilization work is well underway, and I think we said in the trading statement that we'll probably talk to you in more detail about that come March 2020 when we come out with the full year results.Just a couple of words on OMNOVA. The OMNOVA acquisition all on schedule there. Clearly, we are not complete yet, so it's still arm's length between Synthomer and OMNOVA because we remain competitors till completion. Both sets of shareholders have now pretty unanimously approved the transaction, so that piece is behind us. The U.S. competition clearance has been given, so that means what we have left to complete still is European and Turkish approvals. And we are hoping at the moment that we'll do that ahead of schedule, but it's clearly not in our hands. But the view is that there's an opportunity we may get that complete before the end of the year. I think, likewise, as a management, we are pretty excited about that opportunity next year to widen the asset base, to improve the geography, et cetera, et cetera, and to get on with a pretty rapid integration of that business into Synthomer and clearly getting on with delivering the synergies in 2020.Finally, if I come to, sort of, the outlook for the rest of 2019. I think if you look in detail at the business, we've been pretty robust over the course of the first -- over this year. So the business results, albeit where we are today on SBR, we have benefited from what we would call the strong product portfolio. We're pretty diversified within the market and also the geographic presence, something that will improve even more with OMNOVA coming along. But not immune -- and that's what we said at half 1, not immune to some of those other factors that are going on. So for the year, outlook for finishing the year, we fully expect Functional Solutions, Industrial Specialities to be in line with the 2018 results. We would expect NBR to be ahead of 2018's results, mainly driven around the extra capacity. And of course, it's the increased weakness in the SBR and in particular the paper industry. Some of it one-off as a result of what's happened with some of the asset closures within the paper industry and others just being impacted by the general economy that, that will be clearly the area where we've fallen behind a bit in 2019 versus 2018. So as a result of that, if we don't see an uplift in quarter 4 and excluding the OMNOVA transaction, which we may well finish before the end of 2019, we are today revising our outlook to be circa 10% below the 2018 number, which just happens to be the consensus number as well, and that's the message of today. So I think on that basis I'm, as I mentioned, here with Stephen and with Tim. And operator, ready to take any questions.
[Operator Instructions] So our first question is Alex from Barclays.
I just wanted to probe a bit more into this SBR situation. Why has the volume deteriorated so quickly this year? And why have those mills run into trouble this year? And we know this [indiscernible] quite a long time now.And then secondly, it's becoming increasingly clear that one of your competitors in Europe is being a little bit more aggressive trying to shift volume. Is that still happening? Is that intensifying? What's your view on the market response to the low volumes, which historically has been pretty disciplined, it seems to be losing discipline a bit now?
Thanks, Alex. Yes, let me just -- I mean, there are -- and I think they're pretty well publicized, to be honest, so you can see them and you can follow-up afterwards with Tim if you want to, but it's pretty well publicized that there has been 1 or 2 paper mills that during the course of 2018 and '19 so year-on-year impacting our volumes, some it was at the end of quarter 14 -- quarter 4 2018, some of it at beginning of '19 where we were a material supplier to a mill that actually went into administration and closed down certain assets. So there's a couple of these instances that've gone on which is just those assets going out of business because of the competitiveness of the paper market today. So that's something, clearly. And on top of that, we have had 1 or 2 issues around credit where we've withdrawn volumes because of credit within that industry to avoid any bad debt and what have you and credit insurance that we weren't able to get. So that has impacted volumes somewhat. And if you're talking about 10% volume down in that sort of area, you're talking 30,000, 40,000 tonnes of reduction year-on-year in that side. So some of it's come to those closures. Again, competitors, in our SBR business -- or most people know in our SBR business that there are 2 major competitors within Europe: BSF and Trinseo, I think in a tough environment, it is a very -- it is very competitive, and we went into the negotiations for the annual contracts and there was a competitive environment, which we, broadly speaking, held on to our volumes, but it, of course, put the margins under a little bit of pressure during that discussions. I don't think that's any worse today than it's been over the course of 2019, but it's a fact of life when volumes go down and people try to keep plants loaded then that's what happens. I think that's one of the reasons why the underlying market has decreased, that you've got to look at your asset base and your cost base and that's currently what we're doing.
So just on that point, how long do you think it will take you to do a review of the SBR business and maybe either adjust your capacity or shift to put our lines accordingly? Is that something you can have done in 6 months or would it take more like 2 years to do that?
No, no, no that's very much ongoing now, Alex. We've been quite open that we've been looking at that. It's always been part of our SBR strategy. So in SBR, it's kind of different to the other businesses like Functional Solutions and Specialties in that we -- it's a bit -- it's a cash generator for us. So we drive -- we run at low costs, low delivery costs, and we operate on the biggest assets. So when we bought the BSF Pischelsdorf asset, we bought an asset which was absolutely upper quartile in size and scale and connection to raw materials, so it's the base from which we will fully load that asset and be producing the product at the lowest possible unit cost ex works. So that's been part of that ongoing strategy. And you don't spend a lot of money in R&D in these areas, but you're still selling some reasonably large volumes. And typically, the underlying market might be reducing by 1% or 2% or it might be flat year-on-year in the paper segment. But then, of course, in the other SBR segments, carpet is fairly flat. And on the specialty SBRs and the foam SBRs that go into more diverse applications, they're still growing. So although we've had this sort of one-off kind of hit in the last 12 months, I'm not -- certainly not anticipating that that's going to continue, but it doesn't mean that we don't continue to do the things that we were doing anyway, which is making sure we optimize our cost base and we produce close to the large mills that we do still supply. So the answer to your question is, that's been ongoing. And although we'll talk again in 2020 in the March result, it's just kind of keeping on the agenda for everybody, so that everyone can see that it is part of the strategy, it's kind of where we expected, the fact that we've had a couple of mills go out of business is -- has accelerated a little bit in terms of some of the things we're doing, but it's no change.
Question is from Sebastian from Berenberg.
I primarily focus on the cash flows. So Calum, you mentioned that SBR has been a cash flow driver for this business in the past. I'm just wondering, am I right in saying that currently Synthomer, broadly speaking, is making top 5% EBIT margins in this business? And what is the impact if the SBR difficulties were to continue on the delevering profile of the group post OMNOVA's? Because I think this part of the business contributed disproportionately to the available free cash flow for delevering relative to its onerous contribution.
Yes. Sebastian, so let's take the deleveraging. We are clearly very focused on that as we move into the transaction with OMNOVA. And what we've said in the statement, which we believe is absolutely right, is notwithstanding the reduction in the profits of the group, that does not materially impact the deleveraging profile that we see of Enlarged Group going forward. So it's -- the change in profitability has probably had an impact of 0.1 in terms of the leverage completion. And given that the information that we gave to the markets when we announced the transaction and the business model we were looking at, at that time, again, we do not anticipate that to have a significant impact in hitting, hence, repeating what we said at the time, we still believe that the deleveraging of the group will be less than 2x 2 years post completion and that's unchanged.
I think fundamental question don't get too concerned about one-off adjustment here in that nothing's fundamentally changed even in the SBR business. So -- the volumes we would expect going forward to stabilize broadly speaking. So I wouldn't get too concerned about one-off adjustment.
Could I as a follow-up ask, could you remind me of any of covenants with regards to leverage limits on the debtors company, if any?
Yes. The -- as we go into the transaction, what we'd agreed was a leverage limit of 4.25x, so we're a million miles away from that. And again, the out-of-the-box leverage at completion was targeted at 2.5, 2.6x.
Next question is Geoff from UBS.
Just a quick question. I was just wondering, could you give us an update on OMNOVA? And I appreciate that you're still competitors at arm's length, but we haven't heard much from them since the announcement of the deal. I'm just wondering how their business is ongoing from what you know from public sources.
Yes. I mean I think, Geoff, I mean, clearly, we've got some access to OMNOVA within the restrictions of competition law and not gun jumping in advance of completing this deal by whenever, end of November, early December. However, I think it'd be probably inappropriate for me to comment on our competitor's performance. But what I would come back to you and say is that their business is primarily in the Functional Solutions section of what we do. They took the decision, as I've said, when we talked about OMNOVA 2 years ago to exit the, sort of, let's call it, the paper latex market, which was the U.S.-based paper latex market didn't overlap with what we do, and that process is fundamentally completed when they close down their asset in Green Bay, and that's all public available information. So we are absolutely convinced that this is the right deal and the right sector and the synergies are there that we talked about and look forward to getting stuck into it really.
Next question is Dominic from Peel Hunt.
I think a number of questions obviously answered, but just a couple of follow-on, if I may. This point about the deleveraging, Stephen, and not materially changing the profile, can you just give us any sense as to whether it is achieved through perhaps lower CapEx? And then maybe just remind us of guidance for CapEx for the core business and assuming OMNOVA closes into next year.Secondly, just in terms of working the numbers through for the PE division, then we have look forward just to understand exactly how much the nitrile volumes are up year-on-year? And clearly, you'd have been selling some product of that asset Q4 last year, but I'm thinking obviously with regard to the full year impact of that asset running out, I guess that you still expect it to run a full tilt by the end of this year?
Dom, I'm going to take the first bit of that and then I'll let Stephen do the second -- no I'll take the second piece first, and then I'll let Stephen take the first bit second. So on the Nitriles, I think, what we've said quite openly to all our followers, investors, analysts is that we brought on 90,000 tonnes at the end of Q4 2018 and that we would feed that into the market in line with the market growth and that we were the company at that time coming into a reasonably snug market with the new capacity and that we would simply feed it in. Our expectations at that time was that we would be running at capacity by the end -- run rate, that is by the end of 2019, and that would be the way that we would feed in as per the demand. That hasn't changed. So where we stand today is that we are still expecting, and when I say expecting, then you can guess where we broadly are at this moment in time, to be running the asset at capacity by the end of 2019. And therefore, that means we'll get broadly speaking a 45,000 -- 40,000 tonnes of additional volumes coming through that in 2019, the balance of which, bearing in mind we are running hard will be seen in 2020.
Dom, it's Stephen. So just as a refresher, again, when we looked at the transaction that was announced earlier on this year, the indicative EBITDA of the Enlarged Group at that time using Synthomer's 2018 EBITDA, which was GBP 180 million, was probably allowing for some of the synergies GBP $0.25 billion, GBP 250 million EBITDA is what we're looking at. And the out-of-the-box leverage is about GBP 650 million. So if we're saying here today that the profits of Synthomer are a little bit lower, you can see why we are saying that it doesn't materially affect the leverage to start with because it's not significant in the context of the numbers I've just given you. And I think moreover, as we get into the transaction and there's clearly things that we will be hoping to do that weren't baked into our business case in the spirit of not wanting to push the envelope to get the transaction through and then be on the back foot, that's not the way we work. And therefore, that's why we are really, really confident with where we are today. In terms of your CapEx question, again, in the context of what we said at the transaction, Synthomer has increased CapEx since 2016 to about 75 -- GBP 60 million in 70 -- '17, GBP 75 million in '18 and probably GBP 75 million this year. What we said was as we move to the integration of OMNOVA, the resources that we used to manage the CapEx program will be diverted to the integration, and we will also -- and will also come to the end of the significant bow wave of CapEx that we outlined at the end of 2016. So the base case for us is that the CapEx will be about GBP 60 million -- circa GBP 60 million for Synthomer for 2020. And we did not change the OMNOVA's aspirations to spend CapEx of about GBP 20 million for 2020. For -- overall CapEx of the group will be about GBP 80 million. But importantly, the Synthomer CapEx will come off by 25% from the GBP 75 million to the GBP 60 million -- sorry, 20% from the GBP 75 million to the GBP 60 million that we just talked about.
Next question is Kevin from Numis Securities.
So obviously a lot of questions answered already. I just wanted to -- can I just sort of probe on SBR what do you think -- just a little bit more detail in terms of what happens from here? So when you think about, sort of, repurposing the asset and addressing that, do you, sort of, come back in March and we start to see the impacts of that, sort of, coming through? Or does -- going back to the point, does it take time to implement any change here and what, sort of, influence you think you could have on that? And I think you, sort of, alluded to stabilization in terms of the SBR side, just a bit of a feel as to what kind of gives you that confidence now of stability in SBR?
Don't want to second-guess other things that we're doing, but at the end of the day, we've already started on that work, Kevin, so it's not going to be a big surprise. Some of the initiatives that we are potentially looking at, and if you lose a slug of volume which you then want to accelerate some of these initiatives. I mean, the things that we are looking at is that our SBR assets, we can -- or certain of them, we can repurpose them to make some NBR, so nitriles. And there's been some of that ongoing already, particularly in one of our European assets and whether we accelerate that is something we can choose to do, particularly as we come towards the end of the year when our assets will be -- our existing assets will be reasonably full. Also, we're seeing increasing volumes these days of NBR outside of Asia. And I say increasing volumes, they're modest, but they allow us to have a low-cost base to supply nonranging volume from Europe. So that's one of the things we're certainly looking at. And whether we accelerate that a bit more and push a bit more volume through there, but it'll depend in terms of how the market growth goes, et cetera, et cetera. So that's one point. The second point is you can clearly -- as part of these relooking at utilizations, we could choose to close an asset [indiscernible]. Now if you just think about what happens when you lose, sort of -- or you reduce your volumes by 30,000 to 40,000 tonnes, it means you're running the existing assets with less volume, so therefore, you're spreading the cost over a wider -- over less volume. But if we reduce the number of assets, which we may -- or one of the assets, for example, which we may choose to do, then we will load up the others and reduce the cost per tonne, which clearly is an impact on the margin. Now as you know, that can be done reasonably quickly if you take the decision to do that. Now whether we will or not will depend on what we see the outlook for NBR, what we see the growth in the other SBR business areas and you know what our current outlook is for volume. So it's a -- there are number of things in there, and they're not long term, they can be acted on quite quickly. And the final piece, of course, is just around reducing costs. So if you're short of closing an asset, you can simply reduce costs when you're producing less and you need less cost to handle and to produce those products. So there's a number of levers we can pull, which were all part of the ongoing business anyway, and that's the sort of stuff that we are continuing to do. And I think saying that we'll give you an update in March is just -- is putting that flag in the ground really to keep it on the agenda.
Okay. And I may have missed this, is the quantity of the one-offs in the one-off kind of volume losses in SBR, did you call that out?
I don't think we called it in that respect, but if you're saying that volume in SBR is down 10%, the total SBR market's around 50,000 tonnes. I suspect around maybe half -- 500,000 tonnes of the 10% is 50,000 tonnes, I suspect maybe 1/2, maybe slightly over 1/2 of that might have come from losses as a result of closures and the balance has probably been on competitive situations where we've decided not to compete in those areas, or market is generally down, and there is an element of that, that you not necessarily lose market share. But in this current environment, market's down, that element of this volume may well come back as market recovers. Whereas, obviously, where the sites have come down that won't come back, that will be a one-off.
Sure. Sure. And can I just ask a follow-up, just in terms of, obviously the point on deleveraging going forward. I mean, do you think this is sort of today's news or the outlook at least or a change of views in terms of what you might do on synergies, for example, in terms of accelerating that process without being too specific, but clearly, are there kind of levers there you think you can pull to give people comfort on the deleveraging process?
That's very leading question, Kevin, in terms of what might or might not happen. I think you're right in saying that a company like Synthomer always has levers and things that are in their control. Stephen talked about CapEx, and our underlying safety health and environmental CapEx is much lower than our total CapEx we spend, so that's something you can always review as you go through. Fixed cost is always another one, if you ever wanted to go there, that you can you look at your cost base and control that. And obviously, when we buy and we complete OMNOVA, we have synergies that are in there for 2020. And what we've said there and what's built into our plan is that our synergies over 3 years are $29.6 million or broadly speaking $30 million. And we've said that we would deliver 50% of that run rate in year 1 and that's what's baked into our numbers. So let's hope we get off to a faster start. But we're not going to commit to anything more than that because that's what we put in the investment case. So -- But these are all things that the business will be looking at.
Sure. It's just an idea of flexibility, I guess, and the options you've got there. So no, that's very helpful.
Thank you, Kevin.
Next question is Martin Evans of HSBC.
It's just, I guess, a high-level question and more about into next year and beyond in terms of the demand side of the equation in your customer base. Do you see any kind of structural change? Because we're obviously hearing, as you've alluded to, there's challenges, the visibility is much lower, there's issues in auto and China tariffs and so on. But do you not think this is now the trading climate you're in, unfortunately, is basically the new norm, and therefore, sort of, more traditional rebound would be much harder to come by given, sort of, the general deflation on pricing and the visibility of much shorter order books? Or you are anticipating a return to a more V-shaped recovery, I guess, beyond the short-term issues?
Martin, anything I say now is clearly my opinion. It's not necessarily what's going to happen. But if you look at the backdrop today and certainly over the course of this year in 2019, I think Synthomer as a company has been impacted in a much, much less severe way than a lot of other, what I would call, diversified companies. So a lot of these diversified companies, I'm not going to name names, because I'm always told not to, but if you look at their numbers, they're down year-on-year by 20%, 30% typically. So today, up until to date, our numbers have been pretty much in line, and now we're talking about being maximum -- or being 10% below what we did last year. So first thing to say is I think our business performance in a very difficult environment, and that's measured by all the chemical industry results that are out there and where we're going, are actually very favorable. And we've talked a little bit about Functional Solutions, although we'd loved to have seen it better and it's not immune from these things, the good things that are underlying going on in that business has meant that we still going to come back on or above last year in an environment where a lot of these markets are down. Clearly, automotive is down, and there are impacts of some of the other things going on, but our business is pretty robust, and that's becoming one of the larger area. Same in Industrial Specialities. NBR has continued to grow. So NBR, which is going into medical and dentistry and all that sort of stuff, it's continued to grow within that environment. So you can argue it's been relatively immune from some of those things that are going on in terms of the growth profile and likewise in terms of the underlying margins per tonne in these businesses. So SBR, yes, is the area which has been somewhat impacted more. But it's not all of SBR, so it's not the SBR that's going into some of the businesses that are performing much better than others. So carpet is not anything like down as far as paper is. Foam is likewise pretty much year-on-year very similar in both, sort of, volumes and margin-type basis. So it's specifically here around paper. And then some of it, as I mentioned, is a one-off, and some of it is truly the underlying market of it.Going forward, what I would expect in terms of recovery, well, I mean, that's kind of driven by the global economy. Our view is that certainly in quarter 4 things will remain as they are. And our view, and as we go into 2020, would be more of the same in terms of what we've seen in 2019. Now that's not more decline, that's more stability, but not a lot of recovery. Now if there's an upside on that, it will be great, and if not, then we'll compete in that environment. And we will have a lot more levers, as the question that Kevin asked before, next year. So apart from those levers we can pull within our own business, whether it's cost, whether it's asset consolidation, whether it's CapEx, whether it's synergies, whether it's just introducing a bigger business, so we've got more levers that we will grow very significantly next year, a lot of that's through acquisition, of course, but we will continue to grow. So this is a very robust business. And the SBR discussion of today you have to look at that and say, well, what's the outlook for that business? Well, I think it'll go back to where it was, which paper, and this is just the paper element of SBR, is a declining market, which will decline at 1% or 2% per annum. And we have to compete in that market because it's still a good market to be in that we've got good products and reasonably -- within that reasonably long-term customers. And we'll continue to compete in that, and we'll focus very much on the low-cost assets and making sure we drive our cost down and we continue to enjoy the market that we have done previously. So I think we're well placed in that market to compete, albeit it's a competitive market.
Next question is Alex from Barclays.
Just a quick follow-up question. What exactly is the market for NBR latex in Europe? [indiscernible]. So what are the main applications in Europe if you need to further switch the assets?
Well, there are several assets now, Alex, which are about to be -- there are several companies that are starting to consume or about to consume NBR latex for gloves application. So what you're seeing is in Portugal, in Ukraine, in Turkey, that there are a number of facilities that are looking to open up glove blowing manufacturing assets, which we would look to supply. We also have some markets in -- some volumes in the U.S., and we can supply those from Europe in terms of the volumes as well. So -- and then, of course, the other thing is when your capacity gets full in Asia, there's no reason why whilst we've got free capacity in Europe, we can't move NBR to Asia. Freight rates aren't -- compared to bringing that capacity on instantaneously, it's something we can do at a time if the market's there to do it. So it's a combination. As we go forward and as the market gets bigger and bigger, then clearly, there are other applications that are coming out for NBR, but also you would expect -- albeit, the vast majority of production will clearly remain in Asia, you will expect pockets of production of glove manufacturers and what have you not in Europe as well. And it's some of those that we will, going forward, look to supply from our European asset base rather than ship it from Asia.
[Operator Instructions]
I think if there's no more questions I'll conclude it now, if I can, operator. So, look, a lot of people on the call today, and I understand that because of the actual messages itself, but not to overreact on these things, I think there's some very good positive messages likewise as well within the results. We are in a difficult global environment, and most companies are, depending on what your exposure is to some of these dynamics, you have a different impact on your business. I think we've done particularly well in this period across most of our businesses. SBR has been a little bit, as we've discussed today, impacted more than the others, but it doesn't change the ongoing strategy and the robustness of the portfolio and where we're going, where we're going with Synthomer, nor as Stephen has explained does it really change in any way our deleveraging profile and the strategy of what we're doing with the OMNOVA acquisition.So we are quite comfortable in that respect that we're on this path and we'll continue to drive the business with a very consistent strategy. So thank you all for attending. I'm sure there will be opportunities to catch up if anyone wants to direct with us. Otherwise, look forward to speaking to you in due course. Thank you.
Thank you all for attending. You may disconnect your lines. Goodbye.