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Trinseo S.A. (NYSE:TSE)
Q4 2020 Earnings Call
Feb 4, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Trinseo Fourth Quarter 2020 Financial Results Conference Call. We welcome the Trinseo management team, Frank Bozich, President and CEO; David Stasse, Executive Vice President and CFO; and Andy Myers, Director of Investor Relations.

Today's conference call will include brief remarks by the management team, followed by a question-and-answer session. The company distributed its press release, along with its presentation slides, at close of market yesterday. These documents are posted on the company's Investor Relations website and furnished on the Form 8-K filed with the Securities and Exchange Commission. [Operator instructions]

I will now turn the call over to Andy Myers.

Andy Myers -- Director, Investor Relations

Thank you, Crystal, and good morning, everyone. At this time, all participants are in a listen-only mode. After our brief remarks, instructions will follow to participate in the question-and-answer session. Our disclosure rules and cautionary note on forward-looking statements are noted on Slide 2. During this presentation, we may make certain forward-looking statements, including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is discussed, described or implied in these statements.

Factors that could cause actual results to differ include, but are not limited to, risk factors set forth in Item 1A of our Annual Report on Form 10-K or in our other filings made with the Securities and Exchange Commission. The company undertakes no obligation to update or revise its forward-looking statements.

Today's presentation includes certain non-GAAP measurements. A reconciliation of these measurements to corresponding GAAP measures is provided in our earnings release and in the appendix of our investor presentation. A replay of the conference call and transcript will be archived on the company's Investor Relations website shortly following the conference call. The replay will be available until February 4, 2022.

Now, I'd like to turn the call over to Frank Bozich.

Frank A. Bozich -- President and Chief Executive Officer

Thanks, Andy. And welcome to Trinseo's fourth quarter earnings call. First and foremost, I'd like to start by thanking our employees for all of their continued hard work, especially given the unprecedented economic and social issues during 2020, which made for the most challenging environment I've experienced in my 35 years in the industry. I was very impressed with how agile our team was and how they adapted to rapidly changing working conditions. We were never overwhelmed by the crisis as everyone remained very collaborative, focused and engaged throughout the year. I have no doubt that their passion enabled us to successfully weather the storm and emerge in an even stronger financial position compared to the beginning of 2020. I'm very proud of what we accomplished and I'm looking forward to a very bright future for Trinseo.

Moving to our financial performance, I'm overall very pleased with our 2020 results. As we noted in our December-issued guidance, we continued to see improved demand and profitability across the company in the fourth quarter with strong pre-tax income and adjusted EBITDA at its highest level in more than three years. Excluding feedstocks, our total sales volume in the fourth quarter was 6% higher than prior year as we observed strengthened demand in many of our end markets, including appliances, tires and especially automotive where fourth quarter volume was 7% higher than the prior year after declines of 65% in the second quarter and 13% in the third quarter.

Stronger automotive demand led to tighter ABS market, which, along with our commercial excellence actions, resulted in the highest quarterly adjusted EBITDA for our Base Plastic segments since the beginning of 2018. In addition, our Polystyrene segment enjoyed its highest full year adjusted EBITDA ever. The Polystyrene team has done an excellent job of implemented value-based pricing in its more differentiated products like high-impact polystyrene for appliances.

For the full year, our Engineered Materials segment achieved its highest adjusted EBITDA ever despite a challenging macroeconomic environment. The fourth quarter, which was our highest earnings quarter ever for the segment, experienced volume improvement from prior quarters due to demand strength, mainly in consumer electronics and footwear applications.

In Latex Binders, sales volume for the full year was essentially flat versus prior year as increases to the higher margin case and board applications were offset by a decrease in graphical paper. Case volumes grew by 5% over the course of the year, including a 13% growth in the fourth quarter. This mix improvement in Latex Binders is in line with our strategy for the segment and we expect continued growth in case applications as the Rheinmunster acquisition from the fourth quarter of 2019 has enabled us to expand into alternative chemistries in more attractive applications.

Looking back at 2020, when we celebrated our 10-year anniversary as a company, I'm very proud of what we were able to accomplish. The safety of our employees remains the utmost importance to Trinseo and I'm happy to announce that in 2020, 16 of our 25 plants earned the Triple Zero Award, meaning that there were no injuries, spills and/or processes' safety incidents at those facilities during the year. That impressive statistic reflects the commitment to safety that our employees and site leaders adhere to daily. And our goal is to achieve one or more years of zero-recordable injuries for all of our global employees and contractors by 2030.

This is an example of one of the 2030 sustainability goals that we set for ourselves this year. These goals, which include initiatives like increasing our offering of sustainably advantaged products, further reducing our carbon emissions and increasing the percentage of women in senior management and executive positions were released in July along with our Annual Sustainability Report.

Setting these goals is part of our vision to become a leader in providing sustainable solutions and to position ourselves as a workplace which attracts top talent, while we successfully compete in a sustainable economy. I was pleased with the sustainability progress that we made in 2020, especially the ways in which we increased the sustainability of our product portfolio. There were several milestones that were truly market-leading, including the launch of our PULSE ECO Series of recycled containing resins for the automotive market. In Polystyrene, we partnered with a German food-packaging customer, Fernholz to use Form Fill Seal formulations with 40% recycled polystyrene.

In Engineered Materials, sales with recycled-based polycarbonate compounds, which are used mainly in consumer electronics applications, grew 50% in 2020 and sales volume doubled in bio-based footwear applications. Three of our sites achieved Mass Balance Certification in 2020, which will allow for a more transparent tracking of sustainably advantaged materials at a large scale. Most importantly, we can expand our offering of circular materials to our key customers.

Lastly, we've made further progress on our joint plan with INEOS for our polystyrene recycling plant in Europe. This plant will represent a significant step forward for polystyrene circularity as its goal is to break down polystyrene back to styrene monomer for use in numerous applications.

While we'll still have more to accomplish in sustainability, I'm proud of this year's achievements and we continue to be recognized as a leader in this area as evidenced by Newsweek naming us as one of the Top 100 Most Responsible Companies for 2021, which made us number three in the materials industry. I look forward to sharing more sustainability updates and accomplishments over the course of 2021.

2020 was an excellent year for cash generation. Our full year cash from operations was $255 million, which led to free cash flow of $173 million. Throughout the year, we were able to effectively manage costs from structural programs put in place prior to the pandemic as well as short-term cost actions in response to the pandemic, which were successful, thanks to the quick and thorough implementation by our employees.

For the full year, we captured cost savings of $30 million, which were split roughly equally between structural and short-term savings. Going forward, we expect structural savings of $25 million per year and we will keep short-term cost actions in place as long as we feel this is prudent. We ended the year with $589 million in cash and entered 2021 with a strong balance sheet and liquidity position.

Perhaps the biggest development of the past year was our agreement to acquire Arkema's PMMA business, which represents the first steps in the transformation of Trinseo into an advanced materials specialty solutions provider. We're very excited to add this business to our portfolio as we believe it will significantly increase our scale and engineered materials and provide higher margins, high free cash flow conversion and lower volatility throughout the cycle. In addition to being a strong strategic fit, we anticipate that the transaction will allow us to harmonize IT systems within Trinseo, which will create significant efficiency in the legacy Trinseo organization.

In the time since we announced the acquisition, we have established and fully staffed an integration management office comprised of members of both Arkema and Trinseo. Integrating this business is one of our highest priorities and we're still targeting closing the acquisition by the middle of the year.

2020 ended the year with favorable market conditions for many of our segments. That positive momentum has continued into the first quarter as we are now observing similar and, at some instances, improved market conditions. Demand-strengthened applications such as automotive and appliances are not only providing volume benefits to many of our segments, but the increased demand is contributing to higher margins in ABS, polycarbonate and polystyrene. However, despite this improvement in underlying market performance, we expect first quarter adjusted EBITDA to be sequentially lower as we don't expect to enjoy the favorable net timing benefit of $29 million that we did in Q4 to repeat itself in Q1.

Given the strong start to the year, we estimate full year earnings in 2021 to be significantly higher than each of the prior two years with an estimated net income of $167 million to $200 million and adjusted EBITDA of $400 million to $450 million. This range assumes a full-year contribution from synthetic rubber and no contribution from the announced PMMA acquisition.

With this expected performance and resulting cash generation, we are now targeting a net leverage ratio of approximately 3 times at the end of 2021 pro forma for the PMMA acquisition with further deleveraging thereafter.

Let me conclude by saying how excited I am about the company's future and our transformation into a specialty materials and sustainable solution provider where success will be determined more by how we differentiate our products and the value we create by working with our customers to solve problems. I'm looking forward to closing the acquisition and integrating the PMMA business, implementing best practices, welcoming our new employees and upgrading and harmonizing our business systems.

In addition, we will continue to pursue additional growth in business optimization activities. I'm equally enthusiastic about the pursuit to achieve our long-term sustainability goals, including working with our customers to provide value-based and sustainable products. As always, we remain extremely focused on maximizing shareholder value.

Now, Crystal, you can open the phone line for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Frank Mitsch with Fermium Research.

Frank Mitsch -- Fermium Research -- Analyst

Excellent job on the pronunciation. Thank you. Hey, Frank. Wanted to -- nice entity. But listen, I wanted to talk about '21. Your guidance of $400 million to $450 million of EBITDA on the basis of -- as the company exists today -- actually looks like a nice increase relative to where the Street is, given there's some confusion as to who has PMMA in, who doesn't etc. But it does look like material increase year-over-year. Where do you see segment wise -- where do you see the most upside among your various segments as we think about '21 versus '20?

Frank A. Bozich -- President and Chief Executive Officer

So, year-over-year, we would see that in our Base Plastics. And we're seeing really excellent traction with that group in how their value-based pricing. And then there's a second component that currently there's some supply chain tightness that we're benefiting from that when we look at that range, we don't anticipate will continue for the full-year or will normalize after the outage season in Q1, but we're benefiting from those Comex initiatives. Obviously, rubber returning to normal will be a big improvement year-over-year as we get back to pre-COVID level demands. So, those two segments are really where we see the biggest year-over-year improvement.

Frank Mitsch -- Fermium Research -- Analyst

Got you. And that's -- obviously the second quarter was very negatively impacted in synthetic rubber. And speaking of that business, it seems like the environment for M&A is picking up here. Can you discuss what your thoughts are in terms of the ability to monetize that business? How are you feeling today relative to where you felt a few months ago when you first announced that initiative?

Frank A. Bozich -- President and Chief Executive Officer

Yeah. So we're -- we've seen significant interest in the business and we're really confident that we'll conclude our process to evaluate our options by the middle of the year.

Frank Mitsch -- Fermium Research -- Analyst

Got you. Thank you so much.

Frank A. Bozich -- President and Chief Executive Officer

Thanks, Frank.

Operator

Your next question comes from the line of David Begleiter with Deutsche Bank.

Katherine Griffin -- Deutsche Bank -- Analyst

Hey. Good morning. Thanks for taking the question. This is Katherine Griffin on for David. So, the first question on guidance. So it seems like excluding the timing impact, EBITDA should be up in Q1 versus Q4. So then if we kind of assume that Q1 is up from, let's say, $120 million X timing, then relative to the full-year 2021 guidance, is the EBITDA cadence for Q2 through Q4 somewhere like in the $100 million range. Am I thinking about that right?

Frank A. Bozich -- President and Chief Executive Officer

Yeah. I think you've got Q1 -- your assessment of Q1 is accurate. So we -- X timing, we would expect Q1 to be better than Q4, but not that enough to offset the $29 million in timing benefit that we got in Q4. But -- and then, we would -- but again, we need to remember there's two factors -- well, we're currently experiencing some supply chain or enjoying some supply chain tightness in Q1 during -- due to it being a normal outage season and then some off-market disruptions that are occurring. And we expect those to normalize after Q1. And then we would expect also the normal Q4 seasonality that we typically have in the business. So that's how we get to the range.

Katherine Griffin -- Deutsche Bank -- Analyst

Great. Thank you. And then, just thinking about kind of the cadence of temporary cost savings coming back next year, could you just talk about kind of how you expect those to flow through just as like inventories and demand kind of gets better?

Frank A. Bozich -- President and Chief Executive Officer

I think, if I understand the question, I think -- I'm going to answer or address the question of when we think we'll relax the short-term cost savings measures that we've continued to keep in place, if that's what you're asking. So...

Katherine Griffin -- Deutsche Bank -- Analyst

Yes. That's perfect. Thank you.

Frank A. Bozich -- President and Chief Executive Officer

Okay. So we had -- in total last year, we had $30 million contribution from a combination of both structural and short-term cost savings initiatives. We will keep those short-term cost savings initiatives in place until we get more certainty that the recovery is here to stay and the market outlook progresses. So, again, I don't have an exact timetable for when we would relax that. But...

David Stasse -- Executive Vice President and Chief Financial Officer

Yeah, Katherine, this is Dave. Maybe I'll add a couple of things. I mean, look, the elements of -- there were really, as Frank said, we took $30 million of cost actions in '20. About half of that was structural and half of that was, what I would call, temporary. The full-year impact of the half that was structural, be it $25 million, so over $25 million structural cost savings out of the company in '21. The part that it's temporary, I mean, a big part of that's T&E, for example, travel and entertainment. I mean, no body's traveling in the company right now. So, what we've budgeted -- and this is all baked into our guidance. What we've kind of assumed is, those elements, trade shows, T&E, things like that will return to kind of pre-COVID levels in the second half of the year. We'll have to see if that plays out or not. But that's kind of gives you the perspective, I think, of how we think about that.

Katherine Griffin -- Deutsche Bank -- Analyst

Yeah. Great. Thanks so much.

Operator

Your next question comes from the line of Hassan Ahmed with Alembic Global.

Hassan Ahmed -- Alembic Global -- Analyst

Morning, Frank and David.

Frank A. Bozich -- President and Chief Executive Officer

Morning, Hassan.

Hassan Ahmed -- Alembic Global -- Analyst

I was taking a look at your volumes, obviously sequentially really good performance in engineered materials and synthetic rubber. And obviously I understand certain end markets, autos in particular, picking up quite nicely. As you guys sort of came up with your guidance, could you talk a bit about the sustainability of some of these volume levels that you're seeing particularly in these two segments?

Frank A. Bozich -- President and Chief Executive Officer

So, I would say that we feel very confident in both engineered materials and synthetic rubber volumes continuing at the current levels, assuming the recovery sustains itself. So, there's a couple of things that are driving that beyond just market recovery. And a lot of it is based on the new products that we're introducing. As we've mentioned in the commentary, in engineered materials, we're really getting good traction with our post-consumer waste containing or recycled containing of materials that go into consumer electronics. We're also getting good traction on bio-based materials that go into footwear. So, irrespective of market dynamics, we're winning new business with those innovations and we're winning those at better margins than non-recycled or sustainable materials.

In synthetic rubber, you have a similar dynamic playing itself out where it's an innovation-driven business and performance tires. And we've been -- we've introduced new grades that are being specified. And those platform wins are going to result in growth going forward. So, again, we think that the volumes that we're enjoying today are sort of pre-COVID level volumes, but the mix has improved because of those commercial activities we've taken.

Hassan Ahmed -- Alembic Global -- Analyst

Understood. Understood. Very helpful. And again, on the 2021 guidance, a lot of your sort of raw material supply contracts were expiring last year. So obviously this would be the first year, 2021, when, be it benzene, ethylene, BD, styrene and BPA, a variety of these sort of raw materials will sort of be under the umbrella of new contracts. So could you talk a bit about how we should think about the puts and takes of the 2021 guidance in light of some of these new raw material contracts you guys may have structured?

Frank A. Bozich -- President and Chief Executive Officer

Yeah. The -- what I would say is that we have more market-based contracts across the board. And in particular, in polystyrene or in styrene monomer for benzene and ethylene, we had new contracts that we're operating under. But again, we believe that those reflect the current market conditions. And there are some benefits that we're seeing from that that are passing through into our 2021 outlook, but it's not significant. Really, the big driver for 2021 improvements are the market conditions and the commercial actions that we're taking.

Hassan Ahmed -- Alembic Global -- Analyst

Got it. So, overall kind of net neutral in terms of year-over-year?

Frank A. Bozich -- President and Chief Executive Officer

I would say, overall slightly positive.

Hassan Ahmed -- Alembic Global -- Analyst

Slightly positive. Perfect. Thank you so much, Frank.

Operator

Your next question comes from the line of Matthew Blair with TPH & Co.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Good morning. I was hoping you could just elaborate a little bit more on your expectations for polystyrene in 2021. And just in particular, how sustainable are the strong 2020 results?

Frank A. Bozich -- President and Chief Executive Officer

So, at this point, we believe their price -- the benefits we're seeing in 2020 are pretty sticky. A lot of that is driven by commercial actions and demand for packaged foods and increased demand for appliances from changing conditions that were driven by COVID. So, again, we're pretty confident that what we've been doing in polystyrene, we'll see that benefit throughout 2021.

And the other thing I want to point out is, we're also seeing a significant benefit from the introduction of the circular polystyrene products that we've introduced. And so, as we accelerate and shift our mix to more sustainable products, we're going to -- actually I would expect that we would see a further improvement in our margins and our growth simply because those products are in very high demand. And most of our end consumers and the end consumer products companies really want to introduce products that are more sustainable. And we're a leader now in that. So, as we continue to make progress, I would expect not only sustainability for our performance but improvement.

David Stasse -- Executive Vice President and Chief Financial Officer

Matthew, this is Dave. I'd like to add one thing. About a quarter of our polystyrene revenue is high-impact polystyrene --excuse me, of our polystyrene volume is high-impact polystyrene that's sold to appliance manufacturers in Asia. And that's clearly a -- it's a good market and we've got a differentiated product there. And that's one of the areas where we've really capitalized on what Frank mentioned earlier on the value-based pricing. So, I just want you to keep in mind, a quarter of our polystyrene businesses, it is differentiated product. And just to kind of buttress what Frank said about the stickiness or sustainability of that, I mean, I just wanted to keep that part in mind that we do have a differentiated element of the portfolio there.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Sounds good. And then, how would you characterize the spring 2021 turnaround season for styrene? Is it likely to be above average?

Frank A. Bozich -- President and Chief Executive Officer

No, we think it'll be normal.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Laurence Alexander with Jefferies & Company.

Laurence Alexander -- Jefferies -- Analyst

Good morning. Two questions. First of all, on the value-based pricing initiatives, where do you think Trinseo is in terms of capturing the potential of that? And how far do you have room to go in terms of structural improvement in your margins?

And then secondly, as you think about the characterization of where Trinseo wants to be as a more solutions-focused specialty chemical company, can you characterize what skill sets you have internally that really drive that and how much need to be brought in through hiring -- a shift in hiring practices or M&A, just in terms of acquiring skill sets in technology platforms?

Frank A. Bozich -- President and Chief Executive Officer

So -- yeah, I'm going to start with the second part of that question. It's a great question. And we believe that really a lot of the skills and the expertise that will enable us to be successful as a solution provider comes from the acquired company. And so, preserving and bringing -- successfully integrating those new employees who understand the markets that they serve and their customer needs are really critical. And that's the key to success in specialty businesses is the market understanding, customer -- and understanding how to fulfill customer needs.

So, you make the key point as being mindful of acquiring assets or bringing assets in and successfully retaining that skill set to solve problems and being a solution provider is critical. That's something that we have to acquire with. We won't be able to grow that successfully in these new applications or new chemistries. If you think about going to the first part of the question, how much runway do we have to continue to improve in our Comex initiatives. I think there's quite a bit. And -- but again, I would put it more in terms of our -- shifting our portfolio to the more sustainable solutions type mix.

So, as you can see, we're really focused on introducing to the customer base recycled containing materials, containing circular polystyrene could contain bio-based material. And we're seeing high demand for that. As we secure, I would say, there's -- as they qualify those materials, I believe the rate limiting factor will really be our ability to secure feed the appropriate feedstocks for those materials. But I would think there's a long runway for improvement as we continue to introduce and broaden that offering to our customer base.

Laurence Alexander -- Jefferies -- Analyst

And then, just lastly, the bio-based materials and the recycled materials or either of those or both of them delivering higher margins in terms of cents per pound and rather than percentage margins, just in terms of actual cash margins.

Frank A. Bozich -- President and Chief Executive Officer

So, the simple answer is yes. Both in percentage margin terms and in absolute dollar terms per unit, they're improving.

Laurence Alexander -- Jefferies -- Analyst

Okay. Thank you.

Operator

Your next question comes from the line of Eric Petrie with Citi.

Eric Petrie -- Citigroup -- Analyst

Hey. Good morning, Frank.

Frank A. Bozich -- President and Chief Executive Officer

Good morning, Eric.

Eric Petrie -- Citigroup -- Analyst

If I were to annualize second half '20 EBITDA, excluding the inventory reeval, you get to $440 million. And that compares to your range of $400 million to $450 million. So, can you talk about the $10 million upside, where that's come from and then $40 million downside?

Frank A. Bozich -- President and Chief Executive Officer

Yeah. When we look at the second half, I'm not sure, there is a pretty difficult exercise to go through when you look at the second half to strip out how much pent-up demand from Q2 slipped into the Q3 and Q4. So, I'd rather look at our financial forecasts from our customer base and the forward outlook we're getting from our customers and really build that based on a bottoms-up basis with how the product lines. So -- and that's how we got to the range that we've got is really that detailed forecast that we're getting from our customer base. Because, again, as you pointed out, second half '20 had a lot of moving parts that it's hard to estimate how much inventory rebuild, how much pent-up demand there was. And so, again, we did more of a bottoms-up build.

Eric Petrie -- Citigroup -- Analyst

Okay. Secondly, rubber volumes in the quarter, I think, were stronger than expected. How do you see demand this year for E-SBR and S-SBR grades and did you see any inventory restocking?

Frank A. Bozich -- President and Chief Executive Officer

So, what we're seeing right now is strong -- we're seeing strong demand, but little ability from the retailers or the tire producers to build inventory. In fact, inventory levels are staying relatively strong -- or staying relatively stable. And the other thing I would point out with our volumes in synthetic rubber is, we've been successful in 2020 to win new business with new customers, in particular in Asia, and with some new grades. And so that stronger demand -- we're seeing a demand recovery, but also we're seeing a mix change from a historical business where we're seeing more growth and more volume coming from new customers in Asia.

Eric Petrie -- Citigroup -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Angel Castillo with Morgan Stanley.

Angel Castillo -- Morgan Stanley -- Analyst

Good morning and thank you for taking my question. I was hoping you could walk us through how you're thinking about working capital in 2021 and the magnitude of potential use of cash as sales recover?

David Stasse -- Executive Vice President and Chief Financial Officer

Yeah. Angel, hi, it's Dave. We gave our slide decks some kind of the pieces, I guess, so you can work your way toward a free cash flow estimate for '20. And if you take the midpoint of our guidance range of $425 million EBITDA and walk through those pieces, you'll get to a free cash flow number of $240 million and that's at working capital neutral. I think the biggest driver of our working capital is obviously feedstock prices. Now, we don't currently foresee a lot of volatility in feedstock prices through the year, I mean, as far as we can see. So we've not forecasted anything for the year in either direction related to feedstock prices.

What I would say operationally is, we took our inventories down considerably in 2020. We dropped our inventory volumes about 20% of the company. And we're going to keep it there. So we're not going to be building inventory as a company. I think we do have opportunity in other working capital areas that we've implemented some initiatives within the company to further reduce our working capital numbers.

So, I guess, the net of the answer to your question is, on a flat feedstock price level, I would estimate that we'll reduce working capital in the year. I would put a number of $40 million to $50 million probably on it just through our own operational initiatives.

Angel Castillo -- Morgan Stanley -- Analyst

Understood. That's very helpful. And then separately, Frank, I was hoping you could talk a little bit more about your sustainability initiatives. You're clearly having a lot of success with winning new business with your product launching, whether it's PULSE ECO or recycled value-based PC and bio-based TPUs that you mentioned. So, maybe if you could just kind of expand on that and give us a little bit more color, what is the EBITDA contribution of kind of your total sustainability portfolio? Have -- some margins are clearly better than kind of the fossil fuel-based products. But how has that progressed over the year as you've ramped up sales? And then, at what point does your capacity footprint become kind of a good problem in the sense of needing to expand?

Frank A. Bozich -- President and Chief Executive Officer

Yeah. There's a lot there. And honestly I couldn't give you an answer for the uplift in margin across the portfolio of the sustainable products versus none. What I would tell you is, because there's so many different products and so much going on -- but I would just say, in general, some of the prices are multiples of virgin material in certain categories and the others, it's doubled -- you should be thinking double-digit unit margin improvements. But again, this is a broad-based effort that we're making across every one of our business units. And I actually, I didn't even mention this on the call. What I would also say is, we've got our first order for bio-based synthetic rubber in the end of last year.

So, we received mass balance certification for our Schkopau, Germany site. And we're seeing the tire companies really looking to change their environmental and sustainability footprint. And so, there's a lot of interest in this. Now, again, it will take -- there's a bit of a long runway in certain industries like the tire industry to qualify those materials, but the good news where we're using chemically recycled or bio-based feed that -- is that those end products basically have the same performance characteristics when we use that feed as virgin material.

So I know I didn't give you specifically the answer you're looking for, but I would just say, there's a long runway and you should be thinking, as we're successful in that, relatively significant improvement in unit margins.

Angel Castillo -- Morgan Stanley -- Analyst

That's very helpful. Thank you.

Operator

Your next question comes from the line of Bob Koort with Goldman Sachs.

Tom Glinski -- Goldman Sachs -- Analyst

Hi everyone. This is Tom Glinski on for Bob. So, first question, it just sounds like you're expecting to be maybe a year ahead of schedule on the delevering target post the Arkema acquisition. Could you just speak to what we should expect to see on your capital allocation priorities, maybe in the back half of this year and into 2022 between M&A, repurchase, reupping the dividend?

David Stasse -- Executive Vice President and Chief Financial Officer

Yeah, hi. This is Dave Stasse. I'll answer that question. You're right. We are ahead of schedule. And the reason we're ahead of schedule is for two things. One is because of the cash generation and also because our EBITDA forecast has risen since we last forecast the number. So we do think we'll be in the neighborhood of 3 times net lever by the end of 2021 with -- as we announced in the -- when we announced the PMMA acquisition, we did reduce our dividend and suspend the share repurchase program. Those two things will be something we'll have to assess as we move forward in the context of other cash needs for the company -- for the new company and those cash need could be organic growth projects for the acquired business or other acquisitions. So it's just something we'll have to look at as we go forward post-closing.

Frank A. Bozich -- President and Chief Executive Officer

Yeah. I guess, maybe just -- I want to build on the one point that Dave is making. We will continue -- as we said in December when we made this announcement, we will continue to explore opportunities to broaden the offering that we have to case in engineered materials customers through M&A and other bringing in new product lines. Now obviously, our first priority is to integrate the PMMA business and to get our systems harmonized. But the other thing is to, at the appropriate time, we would also -- we will be looking to separate more of the commodity products to help fund that growth. So, we're balancing all of those factors when we think about the future and our capital allocation.

Tom Glinski -- Goldman Sachs -- Analyst

That's helpful. And then, on CASE Applications, performance was quite strong in 2020. Could you just go through the moving parts and maybe what outperformed, what underperformed within that sub-business?

Frank A. Bozich -- President and Chief Executive Officer

So, well, the CASE Applications, with the acquisition of the Rheinmunster plant in Germany, we have more flexibility in terms of customizing smaller lot production and more tailored solutions for our customers. But what I think you could read into that is that we saw really strong traction in introducing new products. In applications in particular, I would point out DIY. So, the DIY market in adhesives and sealants did quite well last year. We also introduced other new grades and materials based on the technology that we have now in Rheinmunster and those got good traction. But I think if I were to point to some end market that really was robust, it was DIY and I think -- and construction applications. Those were quite strong.

Tom Glinski -- Goldman Sachs -- Analyst

Got it. Thanks for the help.

Operator

Your last question is a follow-up from Laurence Alexander with Jefferies.

Laurence Alexander -- Jefferies -- Analyst

I just want to revisit the discussion around the bio-based and recycled products. Are those by implication or are those being included or will they be excluded from any divestitures as its decision to exit the commodity positions in Trinseo's portfolio?

Frank A. Bozich -- President and Chief Executive Officer

Every -- so, the simple answer is no. So, in every one of our product areas and our business segments, we are trying -- we believe in that increasing the ratio of sustainable products is to our advantage and we're seeing big demand from our customers. So, across every one of our product segments, we're introducing those products. And as we make -- evaluate what businesses to sell, if that were to happen in the future, those products that are intrinsic to that product line would go with it.

Laurence Alexander -- Jefferies -- Analyst

Okay. Perfect. Thanks.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Andy Myers -- Director, Investor Relations

Frank A. Bozich -- President and Chief Executive Officer

David Stasse -- Executive Vice President and Chief Financial Officer

Frank Mitsch -- Fermium Research -- Analyst

Katherine Griffin -- Deutsche Bank -- Analyst

Hassan Ahmed -- Alembic Global -- Analyst

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Laurence Alexander -- Jefferies -- Analyst

Eric Petrie -- Citigroup -- Analyst

Angel Castillo -- Morgan Stanley -- Analyst

Tom Glinski -- Goldman Sachs -- Analyst

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