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Kraton Corporation (NYSE:KRA)
Q2 2021 Earnings Call
Jul 29, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Kraton Corporation's Second Quarter 2021 Earnings Conference Call. My name is Kirby, and I'll be your conference facilitator. [Operator Instructions]

I will now turn the call over to Mr. Gene Shiels, Director of Investor Relations.

H. Gene Shiels -- Director of Investor Relations

Thank you, Kirby. Good morning, and welcome to the Kraton Corporation second quarter 2021 earnings call. With me on the call this morning are Kevin Fogarty, Kraton's President and Chief Executive Officer; and Atanas Atanasov, Kraton's Executive Vice President and Chief Financial Officer. A copy of the second quarter news release and the related presentation material that we'll review this morning is available in the Investor Relations section on our website. Before we review the second quarter results, I'd like to draw your attention to the disclaimers on forward-looking information and the use of non-GAAP measures, included in our presentation this morning as well as yesterday's earnings press release.

During the call, we may make certain comments that are not statements of historical fact and thus constitute forward-looking statements. Investors are cautioned there maybe risks, uncertainties or other factors that could cause Kraton's actual performance to be significantly different from the expectations stated or implied by any forward-looking statements we make today. Our forward-looking statements speak only as of the date they're made, and we have no obligation to update such statements in the future.

Our business outlook is subject to a number of risk factors. As the format of this morning's presentation does not permit a full discussion of these risk factors, please refer to our forms 10-K, 10-Q and other regulatory filings available in the Investor Relations section of our website. Regarding the use of non-GAAP financial measures, a reconciliation of each non-GAAP financial measure we use to its most comparable GAAP financial measure was provided in yesterday's earnings release and in the appendix of the presentation material we'll look at this morning. Following our prepared comments, we'll open the line for your questions.

I'll now turn the call over to Kevin Fogarty. Kevin?

Kevin M. Fogarty -- President And Chief Executive Officer

Thank you, Gene, and good morning, everyone. The positive momentum in global demand that we experienced earlier this year continued throughout the second quarter, benefiting results for both our Polymer and Chemical segments. While we incurred substantial costs for the planned statutory turnaround at our Berre, France, site and although we faced continued inflation in raw material costs, the impact of these factors was largely as we had anticipated. As a result, we are pleased with our financial results for the second quarter as they were in-line with our internal expectations. As reported in yesterday's earnings release, adjusted EBITDA for the second quarter of 2021 was $61.8 million.

While this was down $7.7 million compared to the second quarter of last year, the decrease is attributable to three primary factors in our Polymer segment that we believe are transitory in nature and that masks the underlying positive momentum underway in the quarter, particularly in our Chemicals segment that we believe is setting the stage for positive full year 2020 results. Specifically, Polymer segment sales volume was up 10.9% compared to the second quarter of 2020, driven by broad-based demand growth across all regions for our Specialty Polymers business and higher sales into paving and roofing and adhesive applications within our Performance Products business.

In our Chemical segment, we saw a significant gain in sales volume, which increased over 32% compared to the second quarter of last year, during which time COVID-19 had had a pronounced impact on demand, while organic growth and favorable market dynamics provided for further expansion in unit margins. As a leader in the pine chemical industry, Kraton remains focused on expanding innovation-led growth and consistently encouraging adoption of truly sustainable pine chemical solutions to our customers to replace hydrocarbons for the benefit of all key stakeholders. In terms of the specific factors accounting for the decline in consolidated adjusted EBITDA versus the second quarter of 2020, during the quarter, we successfully completed the significant statutory turnaround at our Berre, France, site which occurs approximately every six years.

And as such, in the second quarter, we realized $16.9 million of costs associated with this turnaround. Excluding the turnaround costs alone, adjusted EBITDA would have been up $9.2 million or approximately 13% compared to the second quarter of 2020. In addition, the raw material environment in the second quarter of this year was the inverse of what we experienced in the second quarter of 2020. So far this year, we have seen significant inflation in raw material and transportation costs. In contrast, in the second quarter of last year, butadiene declined to a historically low price level, which had allowed for significant margin uplift. While the inflationary pressures have continued into the third quarter, I should note that based upon improved pricing we have achieved thus far in the third quarter and with continued price actions we expect to take, we are anticipating margin expansion in the second half of the year.

Now for those of you who have been following the company over the years, you will appreciate that periodic raw material inflation is inevitable in our Polymer segment. We understand this. And more importantly, our commercial teams know how to correspondingly respond in the marketplace with pricing actions. We have always maintained a critical element of our price right strategy has been to consistently pass along inflation in a manner that our customers can actually predict our behavior. That is what market leaders do. Nevertheless, while there is an inherent lag in price realization that can result in near-term margin pressure, I would again remind you that when the inflation turns to deflation, our pricing discipline typically also allows us to expand margins for a period of time, much like we did in 2017.

Finally, with regard to Polymer segment results. As discussed in our second quarter earnings call last year, we elected to leverage the extremely low butadiene prices through a strategic inventory build, which also contributed to an adjusted EBITDA margin of 26.4%, given the benefit of favorable fixed cost absorption on quarterly segment profitability. In terms of key strategic priorities, debt reduction remains a focus area. During the second quarter, we reduced consolidated net debt by $11.5 million, including $6.3 million of unfavorable impact from currency translation.

And as we have discussed previously, through the seasonal working capital release associated with our paving and roofing business, we historically generate the majority of our cash in the second half of the year. Therefore, we expect meaningful debt reduction over the next two quarters. Atanas will provide more insight into our expectations for debt reduction and balance sheet metrics in his comments. As evidence of our continued commitment to global, to a global circular economy by driving a sustainability focused mindset throughout our company, we are extremely pleased to be awarded a Platinum Level sustainability rating by EcoVadis in recognition of our efforts to integrate sustainable principles in our business and management systems.

The Platinum rating is the highest distinction in the EcoVadis sustainability rating structure, replaces Kraton in the top 1% of the universe of approximately 75,000 companies evaluated. In addition, our circular plus family of performance enhancing products recently received critical guidance recognition from the Association of Plastic Recyclers for our Series C-2000 and C-3000 Polymers for high-density polyethylene bottles. This recognition further highlights Kraton's ongoing commitment to providing sustainable solutions in packaging design and our efforts to facilitate expansion of the broader circular economy.

Lastly, while we do not have specifics we can share at this time regarding our progression toward broader commercial opportunities for BiaXam, during the second quarter, we continued our efforts in the pursuit of a Section-3 approval from the U.S. Environmental Protection Agency that we believe will provide for broader commercial applications for BiaXam. We continue to believe there are significant market application opportunities for our BiaXam technology. We're also very pleased to announce that Jeff Messer has recently joined Kraton to lead our BiaXam platform development. Jeff has substantial relevant experience in the antimicrobial space. He will oversee and manage all activities associated with BiaXam including evaluation development of potential market applications and oversight of the requisite regulatory processes. I'm now going to turn the call back to our Executive Vice President and Chief Financial Officer, Atanas Atanasov who will provide more specifics on our financial results for the second quarter of 2021.

Atanas?

Atanas H. Atanasov -- Executive Vice President, Chief Financial Officer And Treasurer

Thank you, Kevin, and good morning, everyone. I'll begin my comments on Slide five with a review of the second quarter 2021 financial highlights. In-light of the favorable market fundamentals and positive demand trends, Kevin referenced, and taking into account the impact of specific factors that played during the quarter, the bear turnaround inflationary pressures and tough comparisons against the second quarter of 2020, which benefited from lower raw material prices and the favorable fixed cost absorption associated with strategic inventory build. We're very pleased with our results for both the second quarter of 2021 and for the first half of the year. Moreover, we entered the third quarter well positioned to leverage positive market fundamentals.

And therefore, we remain encouraged by our prospects for the second half of 2021 and the year as a whole. During the second quarter of 2021, the rebound in global demand from the second quarter 2020 levels, in which COVID-19 was a factor combined with targeted market development actions led to a strong growth in sales volume. Chemical sales volume was up over 32% compared to the second quarter of 2020, and Polymer sales volume was up almost 11%. The increase in sales volume and higher average selling prices associated with higher average raw material costs were the primary drivers of the revenue increase versus the year ago quarter. Consolidated revenue for the second quarter of 2021 was $493.6 million, up $137.9 million or 38.8% compared to the second quarter of 2020.

Consolidated adjusted EBITDA for the second quarter was $61.8 million and while down $7.7 million compared to the second quarter of 2020. More than 100% of the decline is explained by costs associated with the turnaround at Berre, France. Excluding the $16.9 million of turnaround costs in the second quarter of 2021, adjusted EBITDA would have been up $9.2 million or 13.2%. As Kevin noted, the lower adjusted EBITDA compared to the second quarter of 2020 also reflects inflation in raw material and transportation costs and less favorable absorption of fixed costs, driven by turnaround activity, which results in a challenging comparison to the second quarter of last year, during which we'd benefited from declining raw material costs and in which our strategic inventory build gave rise to favorable absorption of fixed costs.

Chemical segment adjusted EBITDA for the second quarter of 2021 was $35.5 million, up 126.2% versus the year ago quarter, reflecting higher sales volume in part associated with post COVID-19 recovery and expanded yield margins in all product groups, with these positive drivers, partially offset by higher raw material and logistics costs. Polymer segment adjusted EBITDA for the second quarter of 2021 was $26.3 million, down $27.5 million compared to the second quarter of 2020, with the decrease principally reflecting costs associated with the bear turnaround and the impact of higher raw material and transportation and logistics costs and the change in fixed cost absorption between the two periods.

These pressures were partially offset by improved demand fundamentals and resulting in higher sales volume. During the second quarter, we reduced consolidated debt by $14.1 million, and we reduced consolidated net debt by $11.5 million, including the unfavorable $6.3 million effect of foreign currency. I'll now move to a review of segment results, starting with our Polymer segment on Page six. Second quarter 2021 revenue for the Polymer segment was $278.4 million, up $74.6 million compared to the year ago quarter. The increase was driven by higher average selling prices implemented in response to inflation in raw materials and transportation and logistics costs and the 10.9% increase in sales volume. Specialty polymer sales volume was up 14.6% versus the second quarter of last year. And this increase was driven by healthy demand recovery across all regions, with particular strength in consumer durables and automotive applications in North America and Europe.

Sales volume for Performance Products was up 12.6% compared to Q2 of 2020, principally due to higher sales in North America, paving and roofing applications and higher SIS sales into adhesives applications. The Polymer segment adjusted EBITDA was $26.3 million in the second quarter of 2021 and this was down $27.5 million compared to the second quarter of 2020. Again, the components of the decrease include the $16.9 million of costs associated with the bear turnaround, inflationary pressures on raw materials and transportation and logistics during the second quarter of 2021 compared to a deflationary raw material environment a year ago.

Particularly if you bid a dine and the absence of fixed cost distortion favorability, we had in the second quarter of 2020 associated with the strategic inventory build to leverage low butadiene prices, which benefited our margins in the second half of 2020. In fact, the second quarter 2021 draw on inventory during the bear turnaround led to less favorable absorption of fixed costs that we otherwise would have had in the second quarter. And therefore, the relative change in fixed cost absorption between the periods was magnified and the relative change between the two periods explains a significant portion of the period-over-period decline in adjusted EBITDA.

These factors had a market impact on the quarterly profitability for the Polymer segment. And as a result, the adjusted EBITDA margin was 9.5%, reflecting approximately 600 basis points reduction for costs associated with the bear turnaround. Similarly, there was a corresponding decline in adjusted gross profit per ton, which decreased from $1,040 per ton in the second quarter of 2020 to $615 per ton in the second quarter of 2021.

Of the 400 limited response to inflation in raw materials, with the balance largely reflecting the relative change in fixed costs absorption between the two periods. Looking at the year-to-date results for the Polymer segment. Revenue for the first six months of 2021 was $519.6 million, up $75.4 million compared to the first half of 2020. The increase in revenue reflects the benefit of higher sales volumes and higher average selling prices implemented in response to higher raw material and transportation and logistics costs. For the first half of 2021, Polymer segment sales volume increased 8.3% compared to the first half of 2020.

This growth was the result of a 19.4% increase in Specialty polymer sales volume with growth across all regions, but particularly into consumer durable applications in China and broader Asia and automotive applications in North America and Europe. In addition, sales volume for Performance Products increased 9.8% compared to the second quarter of 2020 on higher sales into paving and roofing applications in North America and Europe and higher sales of SIS associated with favorable global adhesives demand. The Polymer segment adjusted EBITDA for the six months ended June 30, 2021 was $63.8 million, and this was down $41.2 million compared to the first half of 2020.

Of the decrease, $10.3 million is attributable to the contribution from Cariflex in the first half of 2020, prior to its divestiture. And of the remaining $30.9 million decrease in adjusted EBITDA, $19.7 million is associated with costs of the statutory turnaround of our Berre, France, site. The $11.2 million balance of the decrease is attributable to the delta and fixed cost absorption between the two periods and the margin pressure associated with inflation in raw materials and transportation and logistics costs.

Given the foregoing, for the first half of 2021, the Polymer segment adjusted EBITDA margin was 12.3%, with the cost of the turnaround of bear having a negative impact on adjusted EBITDA margin of approximately 380 basis points. In addition, for the first half of 2021, Polymer segment adjusted gross profit was $711 per ton, down $345 per ton from the $1,056 per ton for the first half of 2020. Of this decrease, approximately 40% reflects the sale of Cariflex and inflationary pressures. Approximately 35% relates to the turnaround of bear, with the balance largely associated with the relative change in fixed cost absorption between the two periods, primarily associated with the inventory build in the first half of 2020 versus a turnaround and inventory draw in the first half of 2021.

Turning to Slide seven for a review of our Chemical segment results. Our Chemical segment results in 2021 continue to benefit from our diversified product portfolio and positive market dynamics, which have resulted in a post COVID-19 rebound in demand and favorable market trends providing for margin expansion across all product groups as we continue to execute strategic actions to innovate and develop new applications for our CTO derivatives. Strong global adhesive demand has contributed to higher sales of Tall oil rosin and rosin esters, while strong demand for broader vegetable oil markets combined with our targeting of broader application solutions has benefited our sales of Tall oil fatty assets and related upgrades.

The Chemical segment revenue for the second quarter of 2021 was $215.2 million, up $63.4 million compared to the second quarter of 2020. The increase reflects higher sales volume versus the second quarter of last year, in which demand was adversely impacted by COVID-19 and higher average sales prices associated with favorable market dynamics. Sales volume during the second quarter of 2021 was up 32.3% compared to the second quarter of 2020. Performance Chemicals sales volume was up 37.5% compared to the year ago quarter, with higher global demand for all product groups, including TOFA, TOR and related upgrades. Sales volume for adhesives was up 17.4%, driven by robust global demand fundamentals in adhesives markets, including positive trends in e-commerce and the sales volume for our Tires business was up 108% compared to the second quarter of 2020, in which the number of customers had idle production capacity due to COVID-19.

The second quarter 2021 adjusted EBITDA for the Chemical segment was up $35.5 million, up $19.8 million compared to the second quarter of 2020. The increase was attributable to higher sales volume and the expansion of unit margins despite higher raw material and logistics costs. As a result, for the second quarter of 2021, the adjusted EBITDA margin for the Chemical segment was 16.5%, up 620 basis points compared to the second quarter of last year. Looking at the Chemical segment results for the first half of 2021. The Chemical segment revenue for the first half of 2021 was $411.3 million, up $72.6 million compared to the first half of 2020. The increase was the result of higher sales volume and higher average sales prices associated with realization of price increases and favorable market fundamentals. For the first half of 2021, Chemical segment sales volume was up 15.1% versus the first half of 2020. Sales volume for Performance Chemical was up 13.9% on strong demand on TOFA and TOFA Derivatives and adhesive sales volume was up 14%, driven by positive global adhesive demand.

Sales volume for Tires was up 48.2% compared to the first half of 2020, reflecting the rebound in post-COVID demand and increased sales into innovation-based products. The Chemical segment adjusted EBITDA for the first half of 2021 was $65.8 million, up $23.4 million compared to the first half of 2020. Factors of the increase include higher sales volume associated with the rebound in post-COVID demand and higher sales prices and unit margins associated with positive market fundamentals and strategic price actions partially offset by higher raw material and logistics costs.

As such, the adjusted EBITDA margin for the first half of 2021 was 16%, up 350 basis points compared to the first half of 2020. Turning to Slide eight for a summary of consolidated results for the second quarter and first half of 2021. As already noted, second quarter 2021 consolidated adjusted EBITDA was $61.8 million. Given the impact of factors, including turnaround costs and the impact of raw material inflation on margins, the consolidated adjusted EBITDA margin for the second quarter was 12.5%.

The costs associated with the bear turnaround occurring approximately every six years had a negative impact of 340 basis points on the adjusted EBITDA margin. For the first six months ended June 30, 2021, consolidated adjusted EBITDA was $129.5 million, down $17.9 million versus the first six months of 2020. The adjusted EBITDA margin for the first six months of 2021 was 13.9%. This was down 490 basis points compared to the 18.8% for the first half of 2020, principally due to the impact of the bare turnaround costs, the relative change in fixed cost absorption previously referenced and the impact of inflationary pressures, all of which masked the 350 basis point improvement seen in the Chemical segment margin in the first six months of this year compared to the first half of 2020.

With the cost of the bear turnaround now behind us, and as we anticipate unit margin improvement in the second half of the year associated with further realization of increases in selling prices, we expect improvement in the consolidated adjusted EBITDA margin in the second half of this year. Second quarter 2021 diluted earnings was $1.11 per share and this compares to a loss of $0.25 per share in the second quarter of 2020. Adjusted diluted earnings were $0.32 per share in the second quarter of 2021 and this compares to $0.30 per share in the second quarter of 2020. For the first half of 2021, adjusted diluted earnings were $0.86 per share and this compares to $0.57 per share for the first half of 2020.

Turning to Slide nine for the balance and liquidity highlights. During the second quarter, consolidated debt was reduced by $14.1 million and consolidated net debt was reduced by $11.5 million, including the $6.3 million and favorable impact of currency. As previously noted, the majority of our cash generation typically occurs in the second half of the year. As such, we expect further debt reduction over the balance of 2021. And we therefore expect to achieve our target consolidated net debt leverage ratio of three turns or less by year-end.

Before I hand the call back over to Kevin, a few comments on guidance. As outlined in yesterday's press release and based upon our expectations for both demand and margin improvement in the second half of the year, we now expect adjusted EBITDA for the full year 2021 to be in the range of $280 million to $300 million. We also expect our sales of solid isoprene rubber to be heavily weighted toward the fourth quarter. And as such, we anticipate a fairly even distribution of second half 2020 adjusted EBITDA between the third and fourth quarters.

I will now turn the call back to Kevin. Kevin?

Kevin M. Fogarty -- President And Chief Executive Officer

Yeah. Thank you, Atanas. As we've done in past quarters, on Slide 10, we present our near-term outlook by geography and end-use application. As noted in our earlier comments, the global demand environment thus far in 2020 has been very favorable. In our Chemical segment, we have seen a strong rebound in demand as well as improved margins, both of which have been driven by fundamentals in the global vegetable oil markets, which has been a positive for our TOFA sales and in global adhesive markets, which has led to higher sales of TOR and rosin esters and improved pricing and margins compared with the first half of last year.

These factors have resulted improved financial results and higher profitability for the Chemical segment despite higher raw material costs and other inflationary pressures. As stated earlier, Kraton continues to promote the overall pine chemical industry recovery through expanding innovation-led growth and consistently encouraging adoption of truly sustainable plant chemical solutions to our customers to replace hydrocarbons for the benefit of all key stakeholders. In our Polymer segment, we continue to see solid demand trends across the breadth of the markets we serve, reflective both of solid market backdrop and Kraton's unique diversification and product offerings.

While the inflationary pressures have continued into the third quarter, as stated earlier, based upon improved pricing we have achieved thus far in the third quarter and with the continued price actions we expect to take, we're anticipating margin expansion in the second half of the year. Once again, let me state that we have always maintained a critical element of our price right strategy has been to consistently pass along inflation in a manner such that our customers can actually predict our behavior. And while there is inherent lag in price realization that can result in near-term margin pressure, I would again remind you that when the inflation turns to deflation, our pricing discipline typically allows us to expand margins for a period of time.

As a result of the foregoing, we do expect unit margin improvement for both our Polymer and Chemical segments in the second half of the year and we continue to actively address inflation through price increases. For the balance of the year, we expect the favorable global demand trends to continue, and therefore, this top right chart on Slide 10 for the first time is all green. That said, we, of course remain mindful of the disruptive potential of COVID-19, particularly in-light of the unfortunate spread of the more contagious delta variant.

In terms of specific end markets, we currently expect sales into adhesive and packaging, consumer durable and general industrial applications remain positive. And these three end users account for a significant portion of Polymer and Chemical segment sales. Specifically, in terms of our Adhesive business, which accounts for 27% of TTM revenue for our chem segment and 21% of our TTM revenue for our Poly segment, e-commerce continues to be a driving force in global adhesive markets supporting demand for labels, tapes and other packaging products.

During the quarter, we had higher sales of SIS into Adhesive applications. And we continue to see favorable market adoption of our novel revolution family of Rosin Ester formulations, which is being driven by underlying market demand as well as the customers' growing preference for bio-based and renewable options to replace hydrocarbon based materials. Furthermore, we are now in the midst of the summer paving season. And despite higher pricing for butadiene, we are seeing good overall market demand in our North American and European markets.

Although we have commented on the headwinds presented by inflation and transportation and logistical costs, in terms of our paving and roofing business, it has presented opportunities in 2021. As the higher cost of transportation for producers in Asia to ship to the North American and European markets has resulted in lower export volumes into these key markets. While weather always remains an unknown, at this time, we are anticipating a positive level of demand for the balance of the season. And lastly, despite the well-known global chip shortage, we continue to see favorable demand into automotive applications as well as in our Tires business, where sales are more linked to OEM specifications and new vehicle sales.

Lastly, during the second quarter, we saw higher levels of activity in oilfield markets, which has changed our outlook from neutral to positive. In summary, we anticipate favorable trends in both volumes and margins across the breadth of our end markets exposures as we move into the second half of the year with a significant bear turnaround now behind us and therefore costs and completion timeline known. And as we are now into the third quarter and better able to calibrate our full year expectations for the critical paving and roofing season, we're in a better position to update our full year 2021 expectations for adjusted EBITDA. As noted in yesterday's earnings release, and as Atanas shared with you, we now expect adjusted EBITDA for the full year of 2021 to fall within a range of $280 million to $300 million.

And with those comments, we're happy now to open the call up for questions. Operator?

Questions and Answers:

Operator

Thank you sir. [Operator Instructions] Our first question will come from the line of Chris Kapsch of Loop Capital Markets. Please go ahead.

Chris Kapsch -- Loop Capital Markets -- Analyst

Good morning! You mentioned -- you touched upon this in some of your formal comments about the adhesives end market. But it seems like the demand for TOR feeding that end market is notably strong, especially considering that it seems the C5 tackifiers supply is still in surplus. So just wondering, is there's a shortage of Chinese gum rosin that may be contributing? Can you just talk about the dynamics there? What is driving the outsized volume growth for the Rosin Ester based tackifiers? Is it more market strength or is revolution starting to get beyond cannibalization and starting to take share?

Kevin M. Fogarty -- President And Chief Executive Officer

Yeah. Thanks, Chris. Look, I don't think there's one answer. I think there's a multitude of parts that go into that answer. But certainly, your point about gum is true. That structural supply decrease or supply demand coming more in balance is favorable to us. But I'd also remind you that for Kraton, our focus continues to be innovation, driving sustainability through the comments I made earlier about the positioning revolution in front of OEM formulators such that they can appreciate the circular economy impacts of adopting revolution. So yeah, we're definitely seeing examples, where customers have opted to switch from hydrocarbon to use revolution and we think there's more to come. And that's exactly how we position it in the marketplace.

Chris Kapsch -- Loop Capital Markets -- Analyst

And then, my follow-up question is more on the balance sheet. And it's just extrapolating a little bit here, based on your implied second half guidance. If you think about next year and with some excess free cash flow, your leverage could be approaching mid-2s or with some growth maybe in EBITDA, maybe even low 2. So suddenly, you may have excess capital. I'm just wondering what your thoughts are in terms of deploying that excess capital? Are you inclined to implement a dividend or buybacks on the table? What are some of the Board's thinking on that? Thank you.

Atanas H. Atanasov -- Executive Vice President, Chief Financial Officer And Treasurer

Yeah. This is Atanas. I think as we -- as we go into next year and face the reality of continuous improvement in our balance sheet and cash flow situation, first of all, we've said that once we reduce debt to below three times, one of the areas of focus that we will look at, and we'll continue to look at is obviously organic growth. And we have a number of projects. And those, as you can appreciate come in at highly accretive low multiples. So that would be a priority for us. Obviously, we continue to invest in our innovation. And with respect to share repurchase, that's something that we'll take to our Board and would be a consideration.

Operator

Thank you. Our next question would come from the line of John Roberts of UBS. Your line is open please go ahead.

John Roberts -- UBS -- Analyst

Thanks and congratulations on the EcoVadis Platinum. Is there anything you can tell us about the strategic review that's been reported in press?

Kevin M. Fogarty -- President And Chief Executive Officer

Well, I appreciate you're asking the question. But at Kraton, we're not in a position to comment on any type of market speculation or rumors. Our focus continues to be on running the business. And we're pretty proud of the results we've achieved so far and optimistic as I just described in our comments about where our business is headed.

John Roberts -- UBS -- Analyst

The comparisons with 2020 obviously are affected by the pandemic. If we compared that second quarter 2019 in pre-pandemic, chemical tons are up 18% and polymers are up 5% in tons I think. Could you give us some granularity on where some of the product lines are on a volume basis versus pre-pandemic levels?

Kevin M. Fogarty -- President And Chief Executive Officer

Well, I think that you're comparing -- I think you said second quarter of 2019. So perhaps less COVID impact as I look. If I think back on 2019 though, I mean, I can still think about, particularly in our Polymer business, we had a certainly a China impact that was very much mindful for all of us in terms of what was happening with geopolitical challenges. It was also probably not the best paving season that we had in the last few years. So we probably benefit now as you kind of compare that quarter versus this quarter. But overall, I mean, look, this continues to be evidence in our view that the innovations that we are bringing to market are paying off in terms of market positioning.

The reliability of our service offering to our customers is something that we don't take lightly and we take very seriously. And we always want to be in a position to be the supplier of choice to our customers. And then, as I think about our Chemical business specifically, I think that the TOFA sales diversification that we've spoken to quite often continues to be a benefit for our portfolio of sales mix. And of course, most recently, we can now add the biodiesel aspect into that sales mix. So I think all these things are as a direct result of what we work on at Kraton in order to position our business to succeed in good times as the backdrop of today's marketplace would indicate, but also to make sure that when there's some challenging headwinds, we do well as we can. And that's kind of how you think about how we came out of this 2020 pandemic year, positioning for our business' future.

John Roberts -- UBS -- Analyst

And I'm thinking oilfield is probably still below second quarter 2019. I didn't know, would any other areas be below second quarter 2019 or everything would be up versus that other than oilfield?

Kevin M. Fogarty -- President And Chief Executive Officer

I don't know if I can answer this question specifically, because I'd have to go through each of the above segments. But again, I call you to that Slide 10 right now. And I can't remember a time when we've had the market dynamic that we've gotten all green on that stop light chart across each of our key market segments.

John Roberts -- UBS -- Analyst

Ok, Thank you.

Operator

[Operator Instructions] At this time, sir, I don't see any further questions. There is another follow-up question from John Roberts of UBS.

John Roberts -- UBS -- Analyst

I guess the mic is still mine. Can you tell us where delta Airline is on utilizing the existing emergency youth authorization for BiaXam? And do you expect any additional state level authorizations or the next thing will be the federal action?

Kevin M. Fogarty -- President And Chief Executive Officer

Yeah. I can tell you that delta continues to position BiaXam and used it in the facilities as expected. So no change there. But as we've said all along, while we're very proud of the Section-18 with the three states involved of Georgia, Minnesota and Utah, we think this is just in many ways a validation of the technology that we have to ensure that we can absolutely take back some into the marketplace with a full potential. And that only comes from a Section-3 full approval from the Environmental Protection Agency.

And the good news is we continue to work toward that objective as I said in my comments. And I don't think anything has changed in our view in terms of the market potential of this attractive antimicrobial. And I have said in the past that I think that the markets that -- and there are several markets, including public transportation, delink and construction and healthcare. But I think healthcare continues to present to us probably the strongest opportunity, because of the challenges that that the industry faces overall. And then, secondly, air filtration, where there really is no offering today in terms of antimicrobial protection of the filtered air. There's antimicrobial protection of the filter itself, but not of the filtered air. And those are the kind of target markets we'll be spending a lot of our time working on in the future.

John Roberts -- UBS -- Analyst

And then, secondly, it sounded like there were some timing issues in isoprene. What's going on there?

Kevin M. Fogarty -- President And Chief Executive Officer

Well, I think there were some supply disruption issues with respect to isoprene that probably shouldn't surprise anybody given the way this year started in terms of the coal snap in the Gulf region. And it's been worked through time. But I'll also say that Asia demand has been really strong, and that's where most of the isoprene in the world is consumed. So those two things. And what it means for Kraton obviously is making sure that through our strategic raw material supply arrangements, we're in a position even when those challenges and headwinds come up to kind of pull levers from other supply sources where we have relationships in order to continue to be able to produce the key polymers that our customers are looking for and they are in high demand these days. So that's probably what it reflects as much as anything. But we've been through this before I'll just say it. As I said in my prepared comments, in terms of the challenges that tight raw material markets present. And believe it or not, if you're sitting in our shoes, it's not all a challenge, it's a lot of hard work. But it's also a lot of opportunity. And we view it as opportunity to really differentiate ourselves in the marketplace through our supply chain optimization efforts as well as the relationships we have with our strategic raw material suppliers.

John Roberts -- UBS -- Analyst

Ok, Thank you.

Operator

Thank you. Our next question would come from Chris Kapsch of Loop Capital markets. Your line is open. Please go ahead.

Chris Kapsch -- Loop Capital Markets -- Analyst

So the follow-up question on the Chemicals business and notwithstanding an updraft in the cost of CTO feedstock. You're in an advantaged position there with availability. And in this quarter, it seems you derivatized, you ran more of that volume through your refining system versus say reselling the excess CTO you have. So I'm just wondering if -- what was the governor of that decision that is more closer demand or more. And then, with that I assume come some unit cost benefit. I'm just wondering about the sustainability of that benefit as you look forward over the balance of the year and into next year?

Kevin M. Fogarty -- President And Chief Executive Officer

Sure, Chris. So I mean, we're always typically in a position where we're buying more CTO than we consume. That's a good practice for us, good position for us always to be in. As we sourced additional CTO last year, we then went to work on obviously finding new market outlets for the derivative products, because it's in our interest to maximize the amount of material that we push through our refineries. And I think that's bearing fruit this year. And that's kind of what you're seeing in terms of more derivative sales versus CTO direct sales.

Chris Kapsch -- Loop Capital Markets -- Analyst

And I don't know, any comment Atanas on the sustainability of the unit cost benefit from that?

Atanas H. Atanasov -- Executive Vice President, Chief Financial Officer And Treasurer

Yeah. I mean, we're very much of the belief that those margins are sustainable. And what you're seeing this quarter is and really year-to-date is becoming more and more representative of what our view is on a go-forward basis.

Chris Kapsch -- Loop Capital Markets -- Analyst

And then, I just had a question about the raw materials more on the polymer side. Butadiene obviously has sort of doubled recently and there's disruption with some crackers down in the Gulf Coast and so forth. But you don't seem to have -- you have not seemed to have any issues with availability at least regarding feeding your Berre Ohio plant. So I'm just wondering what the strategy has been there? What -- is that -- and has that translated into an advantage for you guys? Thanks.

Kevin M. Fogarty -- President And Chief Executive Officer

Look, I'll go back to the same comments. The question before you was about -- with respect to security of supply. We've learned over time that security supply is also a function of diversity of supply. And I think we've always not pursued the short-term solutions. We've always looked at things much more longer-term in terms of our supply arrangements, so that we can find ourselves in a position when there is a market disruption, as you point out there is today. We're in a much better position to continue to source raw materials.

That's not to say that, that's not without effort and not posing some supply chain challenges for our team. I don't want anybody in Kraton to think that I don't see that because I do. They're working tirelessly to ensure our supply chains remain as undisrupted as possible. But nevertheless, I think it reflects some very good planning on our part. And the Gulf Coast is an interesting one. And clearly, most of the betadine comes out of the Gulf Coast, but there's other butadiene sources in North America, and that's where Kraton has always tried to leverage that diversification.

Operator

And at this time, I don't see any further questions on queue.

H. Gene Shiels -- Director of Investor Relations

All right, Kirby. Well, thank you very much. We appreciate the interest of all of our listeners and participants this morning. And I just wanted to briefly remind you there's a replay of the call that will start later on this morning and will be available through the middle of August. And to access that replay, you can dial 800-391-9846. And that concludes our prepared remarks. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

H. Gene Shiels -- Director of Investor Relations

Kevin M. Fogarty -- President And Chief Executive Officer

Atanas H. Atanasov -- Executive Vice President, Chief Financial Officer And Treasurer

Chris Kapsch -- Loop Capital Markets -- Analyst

John Roberts -- UBS -- Analyst

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