Ladies and gentlemen, thank you for standing by, and welcome to the Ashland Global Holdings, Inc. Third Quarter 2020 Earnings Conference Call. At this time all participant are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Seth Mrozek, Director of Investor Relations. Please go ahead sir.

Thank you, Chris. Good morning, everyone, and welcome to Ashland's third quarter fiscal 2020 earnings conference call and webcast. My name is Seth Mrozek, Director, Ashland Investor Relations. Joining me on the call today are Guillermo Novo, Ashland’s Chairman and Chief Executive Officer; and Kevin Willis, Senior Vice President and Chief Financial Officer. We released preliminary results for the quarter ended June 30, 2020, at approximately 5:00 PM Eastern Time yesterday, July 28. The news release issued last night was furnished to the SEC in a Form 8-K. During this morning's call, we will reference slides that are currently being webcast on our website, ashland.com, under the Investor Relations section. The slides can also be found on the Investor Relations section of our website. We encourage you to follow along with the webcast during the call. Please turn to Slide 2. As a reminder, during today's call, we will be making forward-looking statements on several matters, including our outlook for fiscal year 2020. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. We believe any such statements are based on reasonable assumptions, but cannot assure that such expectations will be achieved. Please refer to Slide 2 of the presentation for a more complete explanation of those risks and uncertainties and the limits applicable to forward-looking statements. Please also note that we will be referring to certain actual and projected financial metrics of Ashland on an adjusted basis which are non-GAAP financial measures. We will refer to these measures to adjusted - as adjusted and present them in order to supplement your understanding and assessment of the financial performance of our ongoing business. Non-GAAP measures should not be considered a substitute or superior to financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures, as well as reconciliations of the non-GAAP measures to those GAAP measures are available on our website and in the appendix of today’s slide presentation. Please turn to Slide 3. Guillermo will begin the call this morning with an overview of Ashland’s results in the fiscal third quarter. Next, Kevin will provide a more detailed review of financial results for the quarter, and finally Guillermo will close with key priorities and planning in the current economic environment in addition to providing his thoughts on important next steps. We will then open the line for questions. Now, please turn to Slide 5 and I will turn the call over to Guillermo for his opening comments. Guillermo?

Thank you, Seth, and good morning to everyone. Before I begin, I'd like to thank you for your participation this morning. I hope that everyone is safe and healthy in these unprecedented times. Since the emergence of the coronavirus in China in January, the Ashland team has worked tirelessly to address the impact of the pandemic. First and foremost, this has meant protecting the health and safety of our employees. Second, we have continued to supply our customers and the critical industries we serve. And third, we have worked to ensure that Ashland is well positioned even in the event of a prolonged impact from the pandemic. Despite all the challenges presented over the last few months, we have maintained a strong focus on advancing our strategic initiatives to restructure Ashland. We have heightened our sense of urgency in executing our transformation as it is doing more than just positioning us for future growth and performance. It's also helping us navigate better through this COVID-19 environment. We've operationalized our new business unit model and the teams are working to improve performance across the portfolio. The teams have also refreshed their respective strategies in order to best serve our customers and profitably grow our businesses. And we're continuing to drive our self-help actions to improve Ashland's cost structure, performance and cash generation. Please turn to Slide 6. In summary, Q3 results demonstrate the value of our leadership position in high quality end markets and the importance of the actions we are taking internally. Our consumer businesses performed particularly well. Life science demand continues to hold up across pharma, nutraceuticals and nutrition. Nutraceutical sales continue to improve with a strong June performance as new business has started to close our share loss impact from prior year. Overall personal care and households also performed well but experienced some variation across segments. Industrial businesses continue to be impacted by the COVID-19 pandemic. However, given the diverse industries we serve, we have seen significant variation across markets. As economies have started to reopen and industries restart operations we are seeing strengthening demand. On the self-help side, we continue to make significant progress on driving our business focus, restructuring costs and improving margins. We continue to take actions to reduce costs, working capital and capital spending in order to conserve cash and maintain flexibility in this environment. I would like to recognize the entire Ashland team for their focus and commitment to our success during these challenging times. It's a real privilege to be part of this team. Let me now pass the call over to Kevin to review our Q3 results in more detail. Kevin?

Thank you, Guillermo, and good morning, everyone. Please turn to Slide 8. Total Ashland sales in the quarter were $574 million down 10% from the year-ago period due to lower sales in all three business groups. Negative currency impact represented 1 point of this decline. SG&A and R&D costs again declined significantly in the quarter as we realize the positive impact of the cost reduction program and new cost actions that we've taken. It should also be noted that travel and entertainment and incentive compensation expense were lower due to the COVID-19 pandemic. In total, Ashland's adjusted EBITDA was $143 million, a 2% increase over the prior year quarter. Adjusted EPS excluding acquisition, amortization was a $1.12 per share up 8% from the prior year. As a reminder, adjusted EPS excluding acquisition amortization is a new financial metric we introduced last quarter and will continue reporting in the future. Now, let's review the results of each of our three business groups. Please turn to Slide 9. I'll begin with consumer specialties. Demand for our consumer ingredients was resilient throughout the quarter and we demonstrated strong growth in pharmaceutical excipients, biofunctional ingredients and additives for hand sanitizer. Sales were $344 million down 1% from the prior year quarter. The impact of unfavorable currency represented a negative 1% impact. The impact of business losses last year in Pharmachem and oral represented an additional 3 percentage points of decline. Excluding the Pharmachem and oral care’s share losses and currency impact, life sciences sales were up 4% and personal care and household sales were down 1% both over prior year. Excluding the known business losses, the life sciences and personal care and household businesses performed well in the quarter. Price mix was favorable during the quarter which drove improvement in gross profit margin, reduced…

Thank you, Kevin. Please turn to Slide 14. We continue to make significant progress in our transformation changing our business model, restructuring costs and improving Ashland’s profitability. We completed the business restructuring and the operating model changes. Ongoing work is now focused on dry driving continuous improvement driving focus, ownership and accountability, upgrading our management systems and processes and developing our teams. Our self-help initiatives remain on track. We continue to expect to achieve over $40 million of annual run rate of cost savings by the end of September. For savings above the $40 million, we plan to retain optionality to redeploy these savings to support our growth initiatives or if needed respond to unexpected developments. To drive additional margin improvement and improve our competitiveness, we have started to work to drive productivity and cost reductions on the cost of goods sold or COGS side of our business. We will update you as our plans progress. We're also continuing to act to improve our inventory position through near-term inventory management initiatives. Our plan is to take our more significant actions in Q4 to reduce inventory levels. Therefore, we now expect a fixed cost absorption impact of $20 million to $30 million in the September quarter. These initiatives will help generate additional cash in Q4 and the beginning of the next fiscal year. Our intent is to use this transformation as a foundation on which to grow and improve the quality of our company. In this journey, we're also advancing our planning and strategic next steps. Please turn to Slide 15. As we look at Ashland, our core business is centered around additives for specialty applications. This is a unique high quality space where innovation is critical to bring solutions to our customers. In general, additives tend to be low cost…

[Operator Instructions] And our first question comes from the line of John McNulty with BMO Capital Markets. Your line is now open.

Yes, thanks for taking my question and congratulations on a solid performance in a tough environment. I guess a couple of questions just around the margin front. So you had a target of 25% EBITDA margins and you pretty much hit them actually this quarter. But it really, look there's a lot of puts and takes and there are some temporary trends that are helping, I would imagine and some that are permanent? So I guess can you help us to parse out how much of what you've kind of delivered this quarter is kind of a sustainable level and how much maybe we should think there may be some give back at some point in the next quarter or two?

Right yes, I think John as you’ve pointed out, I think there's two lines of impact. One are those driven by actions that we're taking and they're clearly having impact where the mix improvement has been part of the contribution. We have been focusing on higher parts of our - higher quality parts of our portfolio, pruning already started, doing some pruning of lower end businesses, managing our costs are contributing. The run rates are starting to pick up. We should hit that by the end of the quarter. So there's a lot of actions that have helped us. There is also some that we need to recognize are - they’re COVID related in terms of travel. So there are some lower costs that are also impacting. So what I look at as we look at this transformation is the trend line moving where we're going and it is. We're going to go. We'll have some, some quarter, quarter ups and downs in that trajectory just based on some of the situational things like the travel and all that. But as - hopefully once the COVID situation improves we'll see things like T&E and other cost increase, but that should come with higher revenue as the economies improve. So we feel a significant part is really fundamental and driven by the actions that we're taking. For next year, the part that we still haven't seen full impact is - as we started looking at our cost of goods sold side.

That’s helpful and maybe can you give us some color as to how you're thinking about the opportunities that are there whether it's the size of them or even just some buckets in terms of where the improvements maybe on the cost of goods side because it is something you've been pretty excited about?

Right.

The last quarter or so?

Oh, we start to get to that to our target of over 25% EBITDA margins. We needed to get around 400 basis points. So, on the SARD and R&D side I think we already have half of that. So, the minimum target would be to get the other half out of cost. That's a much bigger bucket of spending and there are a lot of opportunities there. So, it's how we structure ourselves, how we run our plans looking our footprints, our network of warehousing, logistics, raw materials. So there's a lot of different areas that we are working on and we're going to take the same approach we did with SARD just start doing it and we'll report as we go and hopefully, the improvement starts contributing throughout the year.

Great, thanks very much for the color.

Yes and John I mean, we're in the early days of that, but as Guillermo said we're very focused on just moving forward and taking action. And as we move more deeply into it, I mean imagine this, but one of the things we're certainly looking at are things like warehouse cost and how to right-size those and it wouldn't be unreasonable to expect more inventory actions to occur as we move into Q4. But those will be - anything we do in that regard would likely be non-cash and called out. So, would be an impact to adjusted EBITDA. Just like most of the restructuring and improvement work that we have been doing. So the other thing I would mentioned you’re very aware this, I know but think about [ph] the callers. But as we move into Q4 - the other action that we're taking around inventory that's going to impact our fixed cost absorption by $20 million to $30 million will obviously have an impact on margins as well. But that's more of a one-time thing to get inventory levels where they need to be. It will generate roughly 2x that much cash. And then as we all know our Q1 tends to be a light quarter. So as you think about EBITDA margins the work we're doing to move forward, Guillermo referenced the 400 basis points that's based on Ashland being when he came on board about a 21% EBITDA margin business on a full year basis. So we're working to get that - get to that minimum level of 25% and make that a very sustainable thing. We've made really good progress, but there's still - more work to do obviously and the COGS work is going to be a big part of that.

Got it. It sounds like - you've got pretty clear line of sight is that something that you think you can deliver on the next say 12 months to 18 months is that kind of a reasonable timeframe to think about that?

Definitely, John, we're going to move with urgency. I think - and where there's multiple drivers for that. The crisis itself, I think that just strengthened our performance and allows us to - not have to do other things short-term things that are more COVID-19-related. So focusing on our fundamental strategy is very critical. I think it also helps on our growth. I mean some of the segments will be more competitive. We can drive growth so this is about running our business moving forward. And nobody is confused on what the - upside. This is not just about improving margin. This is about driving the quality of the company and contributing to our strategy.

Great, thanks a lot.

And our next question comes from the line of David Begleiter with Deutsche Bank. Your line is now open.

Thank you, good morning. Guillermo, in the Industrial segment how much was volume down in June and where did it stand in July?

So, Kevin can give you the specific numbers, but June we did see some pick-up across multiple, multiple segments and understandably I mean the April/May some industries just basically shutdown. If you look in our adhesive business, transportation and construction were significantly down, much more than our average. The DIY was very strong. And as other companies have reported, the contractor segment was softer. We did see - start seeing a pickup in the June quarter hopefully, that that continues. But those are probably - the construction, the transportation and the contractors are probably the hardest ones - that they're improving. So I do think that will sustain, but I'm not - it's very difficult to forecast how much better sequentially up or down. You could be up or down single-digits just based on specific developments around COVID.

Can you tell us the exact volume decline in June and where it is in July for industrials?

So June year-over-year volumes were down about 25%. Obviously, profitability was down way, way less than that, partly due to cost management, partly due to better mix. But overall volumes were down around 25% for the industrial side of the business.

And Kevin, where they’re running in July?

We've definitely seen some improvement I would say. I think like a lot of others, can't give you a number. July is not over. So, but as Guillermo said we've definitely seen - we’ve definitely seen things seem to stabilize and start to pick up some.

And I would characterize it - the really down segments have started to improve. The ones that were already were down, but more in the teens or low 20s. Those have stayed more stable, but things like transportation, like construction and the contractor pay market those are the ones that we've seen more of the pickup.

Yes I would say, if you look at the June quarter, April and May were really what I would call the trough. And we started - we did start to see some improvement in June. And as Guillermo indicated, we've seen some of that continuing into July and while we're cautiously optimistic, there's a lot of uncertainty in the world out there right now. I would say from my view of the company, I think all the things that we can manage I think the individual business unit teams are managing those very, very well in terms of their respective end markets and how they approach them, the competitive landscape, et cetera and we're still very focused obviously on continuing with the cost improvement and working through the COGS piece of the equation as well.

And Kevin and?

And there’s a lot of…

And for consumer, do you have the same volume metric for June. How much was down and should it improve in July as well?

Generally, the consumer side was fine [ph]. I mean yes, I kind of went through the top line piece of that. And life sciences, if you take out previously discussed share losses and currency, life sciences was up 4%, Personal Care & Household was down about 1% and that’s more of and book issue. And it’s really on a consumer side, it's less about volume, it's more about - quality of the business, quality of the portfolio. The volume piece on consumer tends to be way, way smaller than the industrial. It's maybe a third of the volumes actually go through the consumer business or it’s actually less than the third so.

Dave the one comment I would say on volume just to make a point of that. As we look at improvement, it's not just cost side. We are seeing on the nutraceutical side June - very strong June beating our prior year with the share loss. So we're gaining business, we're starting to feel the impact. There’s still a lot more work to do in improving margins things like that, that the teams are working on, but on the commercial side, we are making big traction. Same thing, oral care, it’s actually performed well, some new product introductions that are contributing. So there’s a lot also commercial actions that we’re taking within the environment. Obviously, it is a more challenging environment just because of the COVID situation, but we are making progress in that front too.

Thank you very much, very helpful.

Your next question comes from the line of Chris Parkinson with Credit Suisse. Your line is now open.

Great, thank you. In terms of the secular move towards natural ingredients in personal care and rheology modification and waterborne architectural coating, can you just talk about your competitive industry positioning and your just general assessment of your long-term growth opportunity including the potential to expand into more industrial type applications in the latter? Thank you.

Yes, so look - we’re doing a lot on the sustainability side that - as we start talking moving forward more about - less about COVID and cost reduction all that and more about the strategies that we're rolling out for each business. Sustainability plays a huge role, I think the personal care and household is the spearhead of that initiative. Given that that market segment is - in many respects leading the customers, the consumers are really leading that in a much bigger way. So, we're fortunate again as a specialty additives player. If you look at our portfolio with cellulosic, a lot of the technologies by functions we have, we actually have a very sustainable portfolio if you look at natural products. The whole focus is around natural products, natural derived products, biodegradability, responsible sourcing, but at the end of the day it's also all about innovation. I mean, we want to be sustainable, but we want to drive it with innovation. Just to have a non-differentiated sustainable product that's going to be just table stakes. It's not what's going to drive our future. So what we're doing now is, really looking at our innovation portfolio and making sure that we're accelerating those areas that we think we can create the highest impact in terms of innovation value for our customers as well as differentiation for our portfolio. So a lot there, you'll start hearing about it. And I would say personal care at the forefront. I think in the industrial side, the customer base is moving a little bit slower in that area. But again, if you look at our actual portfolio on the industrial side, a lot of products are cellulosics is an example. So, cellulose-based products that puts - in a good position there. And what we're looking in the industrial side is not just the sustainability of our products, but what is the value our products bring to our customers. If you look at adhesives we're working a lot into lightweight construct, the light weighting vehicles for fuel efficiency. So there's a lot of benefits in the use of our products equally in construction enabling wood-based construction materials. That also drives a lot of the sustainability. So, we'll be laying out more of that, but huge area in terms of our innovation focus and a significant emphasis being placed on that.

Got it. And so - you're clearly focusing on establishing [ph] portfolio just - of course for long-term growth. But just well after the current cost actions in just fiscal year 2021. How should the street just be thinking about cash conversion, this year versus your expectation for further improvement in 2021 and 2022, just what's the basic framework there? Thank you.

Yes, I think in this year you're going to have two things. On one side - all the portfolio quality improvement mix, getting our margins up, getting cost down, so all that will contribute to our conversion. Clearly, this year and into next year - as we deal with our cost of goods sold, there will be some cash impact in terms of achieving those cost savings. So, we’ll have to work through that. I think this year and next, it's about laying the foundation for the future. But there will be some costs impact in achieving the cost savings. But Kevin, I don't know if you want to comment anything else there, but high level that that's probably where I'm looking at it.

Yes, no I think that's right. I mean the environment that we're in, let’s put COVID off to the side. As we get through the cash cost of the restructuring on the SG&A, R&D side as well as cash cost associated with the COGS work we're going to do. I think we're going to be in a really good position from a cash conversion perspective. I think yes, you look at - you just look at the June quarter and I would say the June quarter from a cash generation perspective was stronger than normal. But free cash flow in the June quarter was $112 million including restructuring in the low 120s excluding on an EBITDA base of $143 million. Now good [ph], we've been breaking down on CapEx and a lot of other related things to conserve cash and improve our liquidity position which is quite strong as you know. But I mean going forward I think we have a clear path to very strong, very solid cash conversion in terms of how we're thinking about the business. And so, I'm pleased with the progress that we've made on that front. There is more work to do as Guillermo indicated, but we've got the balance sheet in good shape and no near-term maturities of any significance. Good handle, good handle on our leverage, our debt service and all that. And so, I mean I think we’re in a really good spot from that perspective. So, I'm pretty excited about where we are there.

Thank you.

And our next question comes from the line of John Roberts with UBS. Your line is now open.

Thank you. You noted strength in biofunctional ingredients and additives for hand sanitizers. What chemicals are those and are they in life science, are they in Personal Care & Household?

So these are in the Personal Care & Household. So these are plant-based, the biofunctionals so plant-based extracts that very unique extracts that we then, our customers take as key ingredients in some of their skin care products for example. So a lot of the high end applications, we've had a few important product launches and that's been growing as we've said over the last few quarters, that's been a really fast growing area where we're seeing a lot of differentiation. Our focus on biofunctional is - its biofunctional and then this whole biotech that we want to develop is more biofunctional. And then if you look at the biopharma side of the equation. So as you get into injectables and new therapies in the life science area. So there it's about extraction, fermentation, purification. So we have a lot of those capabilities for example in our biofunctional business out of France, our Vincience. Avoca itself is a high volume biotech type activity and even in the Pharmachem side and the nutraceutical, we do some of these activities fermentation, separation, those kinds of things. These groups haven't been really coordinated or talking to each other. What we want to make sure is that we're building now bigger capabilities around this. So that we can grow both in the biofunctional areas or bio - on material things like that in the personal care space. But really drive more of that growth initiative into the biopharma area later on. So, most of the sales today are personal care and obviously, in the life science we want to develop. And the hand sanitizer business, most of it is - its personal care and then household side.

Okay. And then, price was down 10% for Intermediates and Solvents. You purchased BDO in Europe so, was the European cost for BDO also down 10%?

No remember, we sold our plants when we did the INEOS deal, we have one plant in the U.S. now, the Lima plant. So it's all - we're all captively sourced from the U.S. The issue that we have there - I would describe the I&S business in two ways, the merchant business, the majority of the BDO is not the biggest part although we talk a lot about it, it’s not the biggest part of our merchant business. We have other products that go into pharma, into semiconductors that are the bulk of the volume there that has - actually been very stable. Margins have been stable. Sales have been stable. The BDO part has two dimensions to it, it is a small part of our merchant business. So, volumes have been a little bit softer and pricing has been lower. And then, we do the transfer pricing to the captive business and that’s at market price. Therefore, we see - and that’s where we’ve seen the lower volumes. So the BDO is where we’ve seen the softness. The rest of the portfolio is holding up pretty well.

Yes and all of our BDO usage is in the U.S. are at Culver City and Texas City.

Thank you.

And our next question comes from the line of Mike Harrison with Seaport Global. Your line is now open.

Hi. Good morning.

Hi, Mike.

You mentioned the fixed cost absorption headwind that you are expecting in the fourth quarter. Did you also experience some fixed cost absorption impact in Q3?

Yes, I’ll comment a little bit, but the bulk of it when you're trying to take these actions and we're really slowing down plans stopping them from an inventory perspective and trying to do other activities that we would have normally done. It’s better to do it in a coordinated basis. So most of those actions are really taking place in the fourth quarter. The whole issue now and this is part, not just on the inventory side. I think as we move to these business units that I mentioned in my prepared comments. The issue now is really focusing on our management systems and processes. So that we have operating discipline both for day-to-day P&L management, but also strategically. So things like our S&OP process, sales and operations management process. All the businesses, meeting, reviewing demand, inventory, supply plans, all the issues that they need to run the business and make sure that we're running to a balanced plan which in the past we didn't have that coordinated effort. So we could have demand and production activities being a little bit disjoining. We’re bringing that altogether so that that we can do it. So as demand did slowdown, we do adjust our production so there could be come impacts, but the big ones will be in the fourth quarter. Similarly I would say different - totally different area, but on the process discipline is our innovation. So, all the businesses now are doing the same thing looking at their portfolios. It's not run by R&D only it's all these teams and we're trying to get that same discipline in all our processes that we work on.

All right. And then maybe another kind of operational related question is at one point in the past you guys had made a decision to move a lot of your plant maintenance and overall activity into I believe the fiscal first quarter seasonally slower time. When you knew that you wouldn't have to be running your plants as intensively anyway. Is that going to continue to be the case that - there is a coordinated effort to do most of the maintenance during Q1 or is it going to be more of an as needed basis?

Well we're going to do it - like we're shutting down plants now in fourth quarter we'll try to do as much as we can now. So, the issue is being aligning all those activities to your operating plan. And right now the operating plan is focus on bringing down our inventories in the fourth quarter, so we will try to do as much as we can in the fourth quarter.

Understood, thanks very much.

And our next question comes from the line of Laurence Alexander with Jefferies. Your line is now open.

Hi there, two questions. First on the innovation side, I guess peers who have been on a similar path of trying to sort of refocus and upgrade their capabilities often seem to have a multi-year campaign of bolt-on M&A targeting technology platforms. Should we expect something similar from you and if so, can you give us a sense for like what the magnitude of spend in that direction might be to sort of reinforce your in-house capabilities?

Right, no I think it's both. First and foremost - as much as we can do organically through innovation, through our own investments, obviously those are the ones that are more in our control. So that's a big part of our focus. A good example - is the one I gave of really bringing together several of our businesses that are already involved in those areas and try to make sure that we're leveraging the capabilities we have to, the maximum potential. But in some areas M&A will be an important part of the strategy. In areas, if I look at personal care, we are already one of the largest players in that space. It's not about critical mass. So there - we would probably look at more targeted bolt-ons. I think in the pharma space, in the biopharma, we'd probably look at some, some areas there. I think it's too early to talk about values and what targets. But I think those are going to be the priority areas that we look at. And expanding - the overall additive portfolio I mean some of these things, you can try to grow organically others - additives it's - to be an additive company of our scale takes a long time to build. And that's why it's very difficult for most companies to really play in this space. So once you have the critical mass leveraging that is a competitive advantage that we want to use.

And can you give a sense as you look at the additive landscape of what you would categorically not do, not look at, not touch, not get involved with?

I think the issue that we need to look at in all the things it’s about technology differentiation and value. Even I would say, even on the sustainability side, just doing sustainability of being me to - those are going to be table stake things that you do, but we want to make sure that we're focused on innovation and differentiation with sustainability as we do that. So, there are segments, there are additive segments that are not necessarily additives that they go into - they're much more competitive in the scope between commodity companies, specialty companies. Additives, I think it's at the extreme of more differentiation. There is a lot of specialties that today are more semi-specialties, a little bit more competitive lower margin that's probably not the area of interest. We really want to use that some of these unique chemistries that are niche, that are hard to build, and that you need to have operating discipline of an additive centric company.

Thank you.

Thanks.

And our next question comes from the line of Jeffrey Zekauskas with JPMorgan. Your line is now open.

Thanks very much. You said you've got a $20 million to $30 million of cost pressure in the fourth quarter from lower inventories. How much do you have to lower your inventories on a dollar basis and what are the inventories that you have too much of and why do you have too much of those inventories?

Okay. I think we haven't given specific numbers and all that, But if you at just general metrics of our inventory levels its high compared to what I would say peer groups or other areas. And I think it’s part of - so we're going to bring it down. It's a significant number. So we look at inventory levels, you should have, again with a discipline process, use your radical inventory that you need to run your business, you add a safety stock and that should be your inventory levels. We are considerably higher in those levels. And I think how we got there, it’s what I was mentioning of having a robust SNLP process, where each business has a total view of what's happening in their business, demand planning, inventory planning, supply planning, their network, new business development all of those activities that we do it on a month-to-month basis. That was not necessarily a robust process. Therefore if your demand plan is not accurate or if your manufacturing plan is not tied into some of the market developments slowing down, you end up building inventory over time. So I think it's more about the discipline that we're putting. I think what we've shown right now especially with the crisis is, fundamentally, our business - our company is focused on high-quality. We have leadership positions and high-quality businesses that are more resilient and that's a very good thing. It’s a good pond to fish. And the second thing I hope everybody is seeing is that, we’re taking our actions to improve ourselves not just in cost, but an operating discipline. It's also having impact. So we're in a good space and we are becoming a much more disciplined operating company both day-to-day operations and also in terms of strategy and direction. Those are the two things that I think we're starting to show. What we need now, as we move forward, is show that that discipline that we can maintain this level of operational performance as we move forward. And more importantly that we can now shift to growth and higher quality growth in our portfolio.

Okay. And...

Jeff, Jeff, directionally it's going to be about 2x cash generated for every dollar of lost absorption. I mean so to the extent, we slow the plants down, $20 million in the quarter that should generate around $40 million of cash from inventory.

Yes.

Not necessarily all in the same quarter but rule of thumb, that's how you should think about it?

Okay, great. And then lastly how big is your hand sanitizer business and how fast does it grow?

Again we tend for competitive reasons, not to give that level of segment specific information. But we have a significant and growing business. If you think about it, hand sanitizers a lot of it now is, the rheology the thickening capabilities, the additives that go in there, now people are using them much more. If you or anybody goes to a store sometimes you put it on and it's very liquidity or you have residue, salts, the formulations aren't stable. A lot of the products that we're bringing in now are not just giving the rheology, but they give you a better feel, and in the hand sanitizer better stability. And in high seat as an example, so I think now it's not just about the first few months it's just produce something. I think now that it is a product that people are using more. We're seeing a lot higher focus on the quality and the other properties and that’s what we do in personal care. So, it really plays well into our portfolio, but especially around the rheology side of the equation.

Okay. Great. Thank you so much.

[Operator Instructions] And our last question comes from the line of Mike Sison with Wells Fargo. Your line is now open.

Hi guys, nice quarter.

Hi Mike.

Guillermo, it sounds like you're working on or starting to work on some growth initiatives here for each of the segments. When you think about the Consumer Specialties and Industrials what type of growth do you think you can get these businesses to outside of some of the COVID issues that we are having now?

All right. So, I think that the first step we're looking at is get the quality up. So, our margins, the quality of the portfolio that we have clearly which are the high-end segments that we really want to drive. So, and that's what we're doing now. As we look at growth, these markets, pharma, it's a very long cycle to innovate. In general, we would have seen 3% to 6% growth a year in some of the segments. Personal care again the fundamental market is not a booming market in terms of double-digit growth rates, some sub-segments are. So, our whole view is look, our base markets are going to grow at or above GDP. Our objective is can we grow at 100 basis points to 300 basis points above market and that's really - so, we can get to a company with above 25% EBITDA margins, high cash flow conversion, and a growth rate of 100 to 300 basis points above market. I think we have a very exciting and profitable machine. And then we’ll augment it with portfolio actions that we can do some step changes in the middle.

Great. And one quick follow-up on maybe 2021. Can you may be give us a little bit of help of what you have sort of in your favor, you've got [indiscernible], you've got some cost of goods. How much of that flows through in 2021. And then did you sort of get back the impact on COGS in 2021 as well. So, it looks like you have a lot of sort of momentum as you head in 2021 on your own?

Yes. And you know when we started this before COVID really became an issue. I mean our whole premise was that we would get the improvement of 400 - minimum 400 basis points based on our existing business not assuming that we're going to grow into it all that, just make sure that we're structuring ourselves for that. So, I think that will help us well during this year and into next year of just getting the quality of our portfolio and we control that. I think those are actions that are driven by us. How much of it will flow through, the value will be there, but if the markets pick up, obviously we'll do a lot better. The part that we don't control is demand and the - I don't think anybody has a 100% clarity of where that part is. So, our issue is making sure that we focus our portfolio on these high-end segments that are more resilient. That's our core position and we will go with the market there and then focus on our performance of things we control. Our operating discipline, our strategy, focus on sustainability, all these hard core things that will both impact short-term results but also position us for the future.

Thank you.

Beautiful. Thank you.

Thank you. And this does conclude today's question-and-answer session. I would now like to turn the call back to Guillermo Novo for closing remarks.

Well, just wanted to say then, thank you to everyone for your time and interest. I know that we’ll have an opportunity to connect with many of you over the coming weeks. I'm looking forward to that. And for now please stay safe and we look forward to connecting with you in the near future. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.