Materion Corp
NYSE:MTRN
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
97
139
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Materion Corp
You don't have any saved screeners yet
Greetings and welcome to the Materion Fourth Quarter 2021 Earnings Conference Call. There will be a Q&A session for today's conference following the presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Zaranec, Vice President, Corporate Controller, and Investor Relations. Please go ahead, sir.
Good morning. And thank you everyone for joining us on our fourth quarter 2021 earnings conference call. This is John Zaranec, Vice President, Corporate Controller, and Investor Relations for Materion Corporation. Before we begin our remarks this morning, I would like to point out that we have posted materials on the company's website that will reference as part of today's review of the quarterly results. You can also access the materials throughout the download feature on the earnings call webcast link. With me today is Jugal Vijayvargiya, President and Chief Executive Officer, and Shelly Chadwick, Vice President and Chief Financial Officer. Our format for today's conference call is as follows. Jugal will provide opening comments on the quarter, a recap of the year, and then update on key strategic initiatives. Following Jugal, Shelly will review the detailed financial results for the quarter and the year in addition to discussing our expectations for 2022, then we will open up the call for questions. Let me remind investors that any forward-looking statements made in this presentation, including those in the outlook section, and during the question and answer portion are based on current expectations. The company's actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning. Additionally, comments regarding earnings before interest and taxes, net income and earnings per share, reflect the adjusted GAAP numbers shown in attachments 4&5 in this morning's press release. The adjustments are made in the prior period for comparative purposes and remove special items, non-cash charges, and certain discrete income tax adjustments. And now, I'll turn over the call to Jugal for his comments.
Thanks, John, and welcome everyone. I'm pleased to share details of our record performance in both the fourth quarter and for the full year, as we look forward to an exciting year ahead in '22. The stage is set for another year of advancing our transformation strategy, resulting in above-market growth aligns with megatrends, increased earnings, and margin expansion. We delivered a record sales and earnings in the fourth quarter, finishing out a tremendous year for our company. Sales grew 27% year-over-year, while EBIT was up 50%. Not only did demand in our markets show continuous strength, but our organic initiatives helped to drive double-digit growth. We are showing the power of our outgrowth initiatives as we continue to build our pipeline of exciting opportunities and place a sharp focus on commercialization and execution. I'm very proud of our team for delivering for our customers, despite the challenges, the omicron spike brought about. Like most companies, we saw record COVID cases and related absences during the second half of December, that persisted into January, temporarily slowing our shipping rates but we expect we'll make up those sales by the second quarter. Despite the impact of these challenges, we still delivered a record results and expanded EBIT margins in Q4. While our vertical integration and pass-through pricing mechanisms keep us fairly insulated from major raw material pressures, we're closely managing the impact of other costs and labor inflation, and implementing selective price adjustments. The fourth quarter also marked the closure of the largest and most exciting acquisition in our company's history, HCS electronic materials. So far, the integration has been seamless, and our teams are coming together quickly and collaboratively with a sharp focus on delivering for our customers while managing strong growth. Thus far, this business is everything we expected it to be, with great people, high-quality products, and countless opportunities to create value. Financially, the acquisition contributed in-line with expectations in the fourth quarter, and we expect a strong 2022. 2021 has been a remarkable year for muttering out, as we delivered record levels of sales and earnings while making significant advancements in our strategy. We grew value-added sales almost 30 while increasing EBIT an impressive 79% year-over-year. We're truly transforming our company into an Advanced Materials leader and becoming our customers’ partner of choice. I'm excited about the many advancements we've made with our customer-focused projects this year as we work together to deliver products and solutions for the next-generation applications. Construction of our precision cloud strip plant is complete and we're moving on to the qualification phase. We are receiving excellent feedback from our customer, giving us confidence that the qualification will continue to progress smoothly. This opportunity is set to contribute more meaningfully this year as we start to ramp production in Q2. This year, we significantly increased our penetration in automotive, particularly in high-growth EV applications with strong upside potential. We also delivered tremendous above-market growth across several of our other end markets. Our R&D investments are contributing to this above-market growth, as we are able to develop new products for our customers’ latest applications. 2021 marked the first year our R&D spend crossed 3% of sales, and we expect to continue to drive increased levels of investment spending to fuel the opportunity pipeline. On the operational excellence front, our plants support an unprecedented levels of demand in the face of continued COVID uncertainty and labor challenges. In order to continue our efficiency progress, we implemented a pilot manufacturing AI initiative aimed at improving first-time quality and improving yields. Early results of this effort looking quite promising. We continued our progress on the inorganic front with the transformative acquisition of HCS-Electronic Materials, increasing our portfolio alignment with Hydro megatrends. As I mentioned, the acquisition is proving to be a very strong strategic fit, as we combine our portfolios to further advance our presence in the semiconductor market with all of the top customers. With the acquisition of Optics Balzers, we delivered $2 million of cost synergies in 2021 ahead of our planned pace while building a robust pipeline of opportunities that will drive future above-market growth. As we look forward to 2022, I'm really excited about what our team is set to deliver. We expect to exceed $1 billion in VA sales for the first time as we grow our business and continue to outpace the end markets which are poised for another year of solid growth. We're entering the year with the strongest quarter book we've seen in our company's history. To support our growth expectations, we're planning another year of robust capital spending, as we invest to build new capabilities for our customers and respond to increasing levels of demand. And we have the most talented and motivated team, is well aligned around our growth objectives. While challenges persist in today's environment, we expect we will successfully navigate and offset the impacts of labor constraints, inflationary pressures, and supply chain issues, as we have in 2021. With all of that, I'm highly confident we can achieve another year of record value-added sales, earnings, and EPS, along with expanded margins. In closing, let me reiterate how proud I am of what our team has accomplished in 2021, delivering record performance while building a strong pipeline of opportunities for the future. We're very optimistic about 2022 and look forward to another exciting year. Now, let me turn the call over to Shelly to cover the financials.
Thanks, Jugal, and good morning, everyone. During my comments, I will reference the slides posted on our website this morning, starting on Slide 15. As Jugal outlined, we achieved record quarterly value-added sales and adjusted EBITDA in the fourth quarter. Value-added sales which exclude the impact of pass-through precious metal costs, were $237.4 million for the quarter, up 27% from the prior year. The increase was driven by strong end market demand across most of our markets, including semiconductor, industrial, Aerospace, and defense and automotive, as well as meaningful impact from our organic outgrowth initiatives. We also had two months of HCS electronic materials results this quarter, which were in line with our expectations. We delivered an adjusted EBIT margin of 11.8% and adjusted earnings per share of a $1.3 up 47% as compared to the prior year. Looking at Slide 16, adjusted EBITDA in the quarter was 28.1 million up from 18.7 million last year. Our adjusted EBIT margin of 11.8% represents a 180 basis point improvement from a year ago. The increase in EBIT was largely driven by higher volume, improved pricing, stronger operating performance, and less unfavorable currency impact, as well as two months of contribution from HCS-Electronic Materials. These drivers were partially offset by investments in R&D and sales and marketing, as well as higher incentive comp and new facility start-up costs related to our new precision clad strip plant. Although we did see some slowdown in shipping rates in the back half of December due to the Omicron spike, we delivered impressive fourth quarter results above the midpoint of our guide. Moving to Slide 17, 2021 was a remarkable year for Materion as we delivered records for value-added sales, adjusted EBIT and adjusted earnings per share. VA sales reached an all-time high of $859.7 million, up 29% from the prior year. The increase was driven by robust and market demand, plus the impact of our outgrowth initiatives resulting in double-digit organic growth across major end markets. The late year edition of HCS-Electronic Materials also contributed nicely and is poised to be even more impactful in 2022. Adjusted EBIT for the year was $99.4 million, up 79% from $55.4 million last year. Our adjusted EBIT margin of 11.6%, represents a 330 basis point increase from a year ago. The increase was largely driven by higher volume, positive mix, improved pricing, and strong operating performance. This outstanding company performance resulted in a yearly record for adjusted EPS of $3.81, an increase of 88% versus the prior year. Now, let me review fourth quarter performance by business segment, starting with our Performance Alloys and Composites business on slide 18. Value-added sales were 115.8 million, an increase of 29% compared to the prior year. The year-over-year increase is driven by strong performance in the automotive, industrial, energy, and Aerospace end markets. EBIT, excluding special items was 17.6 million or 15.2% of value-added sales compared to 11.7 million or 13% of value-added sales in the fourth quarter of 2020. The increase was primarily due to higher volumes, positive pricing, and favorable operating performance, resulting in 220 basis points of margin expansion year-on-year. As it relates to the 2022 outlook, we currently have a strong order book heading into the year. We also expect the precision clad strip project to contribute more meaningfully in the second half of the year. In the meantime, we will see the impact of plant startup costs persist through the first half as we work through customer qualifications and complete the training and startup protocols for the plant. Next, let's turn to Advanced Materials on slide 19. Value-added sales were a quarterly record of $89.5 million, up 52% versus the prior year and exceeding the previous record set in Q3. The increase was driven by accelerating organic initiatives and strong end market demand, as well as two months of sales from HCS-Electronic Materials. EBIT, excluding special items was $12.5 million in the quarter compared to $7.2 million in the fourth quarter last year. Adjusted EBIT margins improved year-over-year by 180 basis points to 14%. The improvement in adjusted EBIT was due to increased demand, positive pricing, and strong mix. As we look forward to 2022, we expect the Advanced Materials business to deliver another year of strong outgrowth, especially in the semiconductor space. Additionally, a full-year of HCS-Electronic Materials will deliver a meaningful step up in both value-added sales and earnings. Finally, turning to the Precision Optics segment on Slide 20, fourth-quarter value-added sales were $32.4 million, down 16% compared to the prior year, but up 5% when excluding the LAC business and PCR filter sales from Q4 2020. The fourth quarter of 2020 saw the last quarter of shipments from the LAC business that was closed at the end of that year, so we saw a significant amount of pre -buying in the final days. In addition, sales-related to PCR COVID testing filters peaked in the fourth quarter last year. When excluding these two items, value-added sales increased due to growth in the consumer electronics and industrial end markets. EBIT excluding special items was $3.9 million or 12% of value-added sales, a year-over-year improvement of 90 basis points. Year-to-date adjusted EBIT margins are up about 60 basis points from prior year. The margin improvement resulted from cost management initiatives as we drove $2 million of cost synergies from the Optics Balzers acquisition for the full year of 2021. EBITDA margins for this business are 20% year-to-date, up 240 basis points versus the prior year, which is more indicative of the operational performance without the impact of higher acquisition-related amortization. As we look out into 2022, we expect to return to year-on-year growth with new business opportunities coming online in the second half. The first-half results will be tempered by some near-term headwinds with the decline in COVID, PCR testing, filter demand, and the discontinuation of a consumer electronics product application. This is a temporary impact, as the opportunity pipeline for this business is robust and growing. Now, moving to cash, debt and liquidity on Slide 21, we ended the year with a net debt position of $435.3 million and approximately $176 million of available capacity on the company's credit facility. Our pro forma leverage at 2.6 times remains well within our desired range. Strong operating performance allowed us to pay down 35 million of our recently assumed debt in the fourth quarter. As it relates to 2022, we are anticipating strong free cash flow, which will support continued investments in our business, as well as additional debt paydown. Transitioning to Slide 22, I want to take a moment to review some additional earnings metrics we will be reporting going forward. As our company continues to evolve, we want to focus on providing more visibility into our operational performance. As a result, starting in 2022, we're adding EBITDA for total company and the business segments, and EPS, excluding acquisition and amortization as key profitability metrics. These changes will align our results more closely with those of our peers and allow us to better reflect operational performance without the impact of non-cash charges. We plan to provide EBITDA information by segment for historical periods before we issue our 2022 earnings. Lastly, turning to the guidance summary on Slide 23, we expect to deliver another year of record results in 2022 with continued strong end market performance. Our customer-focused outgrowth initiatives and contributions from our recent acquisitions. We expect adjusted EPS, excluding acquisition amortization, in the range of $5.30 to $5.70 for the full year, an increase of 35% from 2021 at the midpoint. While we are moving to this metric without amortization for 2022, as this is the first quarter providing guidance in this method, we are also providing the comparable guidance for adjusted EPS in the range of $4.80 to $5.20, an increase of 31% from the prior year at the midpoint. Looking at the way the quarter is starting out, we expect results in the first quarter to be in line with those from Q4. This takes into account the Omicron impact continuing in January and new plant startup costs. We have also noted a few modeling assumptions for you on this slide, including some more detail on our expectations for capital investments. Our assumptions on capital expenditures include a few previously established investments including $10 million related to the second phase of our mine tailings pond project and planned investments for additional capacity at our HCS-electronic materials business to meet the extremely strong semiconductor demand. In closing, 2022 is shaping up to be another exciting year of strong growth and execution for Materion, resulting in record results and long term sustainable value creation for our stakeholders. This concludes our prepared remarks. We will now open the line for questions.
Ladies and gentlemen, the floor is now open for questions. [Operator Instructions]. We asked about well, posing your question, you please pick up your handset for listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Our first question is coming from Marco Rodriguez from Stonegate Capital Markets. Marco, your line is live, you may proceed.
Good morning, everyone. Thank you for taking my questions.
Good morning Marco.
[Indiscernible] Marco.
All right guys. I was wondering if maybe you could talk a little bit more in detail about gross margins in the quarter, may came in a little bit weaker least than what we expected, and it looks like all three segments were off a little bit versus prior cadence. So maybe if you can discuss what dynamics you saw in the quarter. I know you mentioned you saw some shipping issues with Omnicom, but just unpack some of those details there and then if you could may be discuss how you guys are thinking about gross margin and the cadence as we enter fiscal 22.
Yeah. Let me start on that one, Marco. So if I think about gross margins in Q4 versus maybe Q3, there certainly was some mixed impact. Q3, we talked about stronger shipments to defense customer and of our beryllium customer, which tend to be mixed positive, so we did not see that in Q4. In addition, when the Omicron spike happened later, part of December, it has a bit of an absorption impact because we weren't getting quite as much products out the door. So I would say those were the drivers. HCS-Electronic Materials also that comes in, it's slightly lower on the gross margin line, although in expander at the EBITDA level. So those are some of the items I would point to. As we think about next year, I think that gross margins are going to be strong. We're looking for expansion in the gross margin line outside of the HCS impact. And while we may start out slightly slow in Q1 again, because of the Omicron and the build and the plant startup costs, I think you're going to see expansion for gross margin full year.
Very helpful. In terms of that mix impacted through the fence and the Omicron impact, is there a way to rank it like was there more of a two-thirds impact from a lot of potential orders versus the absorption impact?
Yeah, I probably would order it the mix and plant start-up costs more so than the absorption.
Got it. Very helpful. And then in terms of the acquisitions that you guys have just made recently here, Optics Balzers and HCS, I know that obviously the acquisition synergies there were more about driving sales versus necessarily cost synergies. Can you update us on the process of getting those revenue synergies that Optics Balzers and then you will maybe -- if you can provide a sketch of your expectations for HCS?
Yeah. First of all, Marco, both of these acquisitions have been just fantastic additions to our portfolio as we've indicated. Optics Balzers has allowed us to create a global Optics portfolio and then HCS has just been a fantastic add. And not only for the semiconductor market which is as you know is a really strong market right now, but also great additions to our Aerospace and defense and industrial markets. So we're really excited about the two acquisitions that we've done. Like you said, our synergy level has been more focused on the top nine and less focused on the bottom line. However, we're making good progress on the bottom line as well. We've had some early wins already. In fact, on the HCS side, as we've looked at some combined procurement activities, our team has been really excited about putting the leverage of the combined entity into the supply base. We've had, as we indicated already in our remarks, around $2 million of cost synergies on the Optics Balzers side, and then on the top-line and the commercial side, it's really going well. I can tell you that our teams on the optics side have been working very well together, have identified, I'm going to guess in the neighborhood of $2 million to $4 million of synergies -- top-line synergies that we hope will start to kick in in the second half of this year than into -- really into '23 and '24. So we're quite excited about that and we think there's more so many to be done there. There's a lot of work going on, even though we've only had the company for three months with a HCS-Electronic Materials. There's a lot of work going on the synergy side there. As you know, this gave us a great inroads into the top 15 semiconductor players in the world and so we're able to leverage our portfolio both from our side and their side into the top 15 semiconductor players. It's quite exciting for us with these two acquisitions and we hope people will talk more about the top line synergies as we realize that over the -- during the year,
Very helpful. And then on another just larger picture question. As you guys look into fiscal ‘22, you obviously provided guidance. It's helpful as always. Can you may be discuss what you see as the biggest opportunities you see to be driving growth by segment perhaps, and then in that same vein, if you can may be discuss what are the challenges you see to achieving those goals?
Clearly, we've got the acquisition of HCS, of course, that's going to drive growth for us. We've got the acquisition of Optics, as well. Those two things that we've talked about already. We've got the Cloud Strip project that's going to help drive a meaningful step-up growth for us in '22. But really at the end of the day, I think what we've really been focused on and we've been talking to -- about it for a number of quarters and in fact, past several years, as we have ramped up, our R&D spending is our organic growth. The markets certainly have been strong and the markets were strong in '21 and we expect the markets to continue to be favorable going into '22 as we've noted in our deck. But I think our organic outgrowth is what we're really excited about. Our capital spending for '21 and our planned capital spending for '22 support that, so we're excited really, across the board. Whether you look at our PAC segment with the number of opportunities we have using our ToughMet product, our SupremEX product, our copper-nickel-tin type alloys. Whether you look at our ALD chemicals or aluminum scandium targets on the AM side, or you look at the automotive side with LIDAR -- for Precision Optics, you look at the automotive side, you know, with LIDAR opportunities, and general filter growth opportunities I think across a number of different markets. The organic out growth is what's quite exciting for us, and we think the markets will help support that, but more importantly, I think our organic initiatives that we have -- in the pipeline that we have, we're feeling good about.
Very helpful. Thank you, guys. I appreciate your time.
Thanks, Marco.
Thank you. [Operator Instructions] And the next question is coming from Phil Gibbs, from KeyBanc. Your line is live, you may proceed.
Thanks very much. Was I to read from your comments that you expect pricing, net of inflation to be to be a positive for your results in ‘22, meaning you're more than offsetting costs headwinds?
Yeah, Phil, we talk about all the time, that we do not want to be the sponge, right? We do not want to be the company in the middle that's having to deal with whether it's inflationary pressures, labor, cost challenges, other things. We want to make sure that we're providing value to our customers and we're getting paid for that value. So we've got a very robust process in our system, where we look at everything that's going on in the business and then we determine our pricing based on that. So it's our expectation that the headwinds that we're all seeing right now on the labor markets, on the inflationary markets, that we're taking those into account as we work with our customers and provide the right value to them.
Okay. And Shelly, on the clad piece, I think year-on-year in your bridge, you had over $3 million impact. From the qualification process or ramp up process, I think that was probably a stronger headwind relative to what we were expecting. Was that stronger relative to what you all were expecting to?
Well, I think we had talked about $0.20 to $0.25 for the year and it was certainly lighter in Q3. But if I look at Q3, Q4, we stacked up close to where I thought we would be. Coming into '22, there's still a lot to do in terms of making sure that the plan is ready to go, and it's not only qualifying the product but also safety and training protocol is a expense into going through there before we've got real revenue coming in. It's going to be really positive for the year, but headwind up through the first half.
That makes sense. And on the qualification piece, I think your deck said you are about 40% of the way through. Just what have you done so far? What else do you need to do? Because I think at least my perception was you've already been making some of this products already, so you know the process and you know the business, and you've you've seen the product before, so it's not completely new to you all and it's probably not completely new to your customers. So is that something that assist that process and then just where are you in terms of what else you need to do?
Yes, Phil Gibbs and making the product in our current facility at a smaller scale certainly helps, right? Gives us the runway into the new facility. Keep in mind it is a completely new facility with a completely new set of equipment and therefore new production that we're going to do. I think our teams have done a great job of making sure that all the equipment that we have has been qualified. We've gone through what we call process qualification and that we finished in the fourth quarter and just early parts of Q1. What we have really engaged in now, we are making the product in the new facility. We've actually shared that product and we'll continue to share that product as we're making it with the customer. They're going through a number of different tests on their side because we want to make sure that the process side and what we're doing from the new plant is going to be a good product for the customer. So even though the existing material, it is same material, but it is from a different plant. So the customer is going through and putting it through their qualification process. We expect we're roughly around 40% complete with that. Our expectation is that we'll complete that here over the next few months and then start to ramp up here in the second quarter. So we think it's going really well right now.
Thanks. And then last one for me is just on Aerospace and defense and then energy. What are you seeing there? What are your customers telling you and in terms of full-year expectations, I mean, I know from your texture in your slide that you're expecting high single-digit growth, but just anything more qualitatively that you can speak to. Thanks very much.
Well, I think first of all, from a market standpoint, we've had our third straight quarter of growth on the Aerospace side, or straight quarter of growth on the Oil & Gas side and we expect that to continue. Of course, it's clearly nowhere near the pre-pandemic levels as we've talked before, there is good increases in the oil rate count that has happened. There is good increases that have happened in the bill rates for the airplanes. But again, they're not anywhere near pre-pandemic levels. We expect what we're hearing from our customers as we expect continued to grow into ‘22 and we've factored that in. As we've noted in our deck as well into our guide that we've given for ‘22. What's really exciting for us though, Phil, on both of these markets is our content is increasing. So our content per plane. So the newer planes tend to have more content in fact than the earlier planes. So I think we're really excited about what the market growth. So the build rates that are going on in the oil rig count that are going up, et cetera. But what we're really even more excited about is the actual content increase per unit that we're going to able to supply into '22. So we're positively thinking about both of those markets into '22.
Thank you. And the next question is coming from Marisa Hernandez, from Sidoti. Marisa, your line is live, and you may proceed.
Thank you. And good morning, everybody.
Morning Marisa
Hi, Marisa
So a couple of questions here. First of all, on the growth -- on the sales growth for the year. The next sales for the year of 29%, how much of that coming from pricing? What's the pricing invest on that?
You're talking for '22?
No, for ‘21.
Sorry.
For '21. She's asking what's the overall year-on-year growth due to price.
Yes, we focus really on the price cost element of that Marisa, and as Jugal talked about earlier, really making sure that we're not absorbing any of the cost increases that we see. As you know, we've got the protections from our pass-through medal and our vertical integration, so while we are implementing price and in some cases it’s mid-single -- high single-digit pricing, you wouldn't see that in the total line for our sales. So we don't really talk about the percent of sales price impact or the dollar impact, other than to tell you it's positive on the price cost line.
Okay? So perhaps, if you focus on their differential, can you share what the differential was between price increases and cost pressures?
Yeah. I would call it in the 25 basis points impact in terms of the impact to gross margin.
That's helpful. Thank you, Shelly. So I'm not -- less you may have some on the capex. Obviously, you're investing a little bit more than normal, I would say. But I noticed that you have $20 million dedicated to the new HCS business. So what was the exact used for?
Yeah. Well, first of all, Marisa, as we've indicated, I think last year and again, for '22, we're really excited about the organic growth opportunities and then the associated capex that we can use to deliver that organic growth along with operational excellence, but there's a lot of our capex. We're really driving to improve our yields and improve our throughput into the plant. When we look at the $20 million that is related to the new acquisition, it's a number of different things. One of the things is to substantially continue to improve the cost structure and expand the margins of that business. So there's a number of things that that business does where they leverage outside characters and we think we have an opportunity to do some things more in-house than what we have done in the past or what that business has done in the past. We have some nice make-buy type of things, so those will be great synergy opportunities for us. So there's capex associated with that and then, let's face it, I mean 80% of the business is semiconductor and we know what semiconductor market has done and what it's expected to do and we want to make sure we're properly sized to take full advantage of that semiconductor market growth along with our synergy growth opportunities, so we're making sure we're investing in sort of -- ahead of time on that to be able to leverage the growth. So both growth, cost structure, margin expansion to make my type of decisions thatl of that is contributing to that $20 million.
Is there any specific fateful from facility investments, Jugal for volume?
It is their facility, so it's not a facility, it's more equipment?
Yes.
Yeah.
Yes. We're not building a new facility, new plant, we're leveraging the floor space that we have. We have good amount of floor space and so it is really just equipment upgrade as well as new equipment that we're putting in. And it's something that we've been planning and we've had in our thinking really since we acquired and so we're quite excited about it.
Okay. Thank you. So another area I wanted to ask if you can elaborate a little bit is your precision Optics segment. Obviously they're seeing a little bit of movement in terms of some product lines that you no longer have. So what's your one of these expecting about an annual run rate of sales and profitability structure for this business?
Yeah. Well, I think are positioned for all three of our businesses is the same, which is we want to make sure we're driving above market growth and the markets that those businesses are participating in. And we want to make sure we get to mid-teens margins. So that's the roadmap that we have for all three of our businesses, it's a roadmap and we want to make sure we're executing on. We've made great progress really in all three businesses. We have some of these near-term headwinds that we spoke of already on the optics side, but we're confident that over the longer run with the synergies that are going to happen between the two businesses, the continued operational excellence and efficiency improvements that we'll drive this business is going to contribute to the overall company goals of growth above-market, and deliver mid-teens type of margins.
Got it. Okay. And go ahead.
No, I was just going to say, as you know, this business was up full-year. We talked about that, right. I mean, it's up I think over 240 basis basis points of EBITDA and we expect it to do the same for '22.
Yeah. I just think the sales have been a little bit light.
Yeah. And I think as we talk, I mean, there is a couple of key things that are contributing that. And one is of course the closure of the LAC business. Second is that we did have a significant pickup in this business on the PCR testing and PCR testing filters, so that was a significant pickup in our 2020 for this business that has been declining and in fact will at some point will be a very small part of the sales. And then third is there is a contract that we had with a consumer application that has discontinued. So combination of those two, three things is what's leading to, I think, the near-term headwinds, but we expect these headwinds to move away during the year and start to deliver growth.
Great. Thank you for that. Last but not least, if I can ask a little bit about.-- They clad Protex, are you shipping for revenue or not yet.
We've been shipping for revenue is since Q4 of '20 from our existing.
The new facility that's what I'm asking?
No. The new facility we are right now in a qualification phase. So our expectation is that we will get qualified and then starting in second quarter we'll start to ramp. So we expect that to be the case. We think that from our existing facility to the new facility. We expect sales to I would say approximately double from '21 to '22 and and we think that's going to have a meaningful contribution into, particularly into the second half of this year.
So we should start seeing some revenue from this new facility in the second quarter?
I would say so. I think the second quarter right now it's still a little bit, let's say, to be determined in terms of how much, because it depends on the qualification timing and how quickly in the second quarter we can start to ramp up. But certainly in the third and fourth quarter, because that's kind of what we have modeled. But yes, I would say initial inklings in the second quarter.
Okay. Let me ask you the following. I -- I'm under the impression that the project is ramping maybe one quarter more slowly than I had thought. Is it the case from your point of view as well? And if so, is there an issue of volume of demand from the customer or just a qualification process takes a little longer? [Indiscernible], there would be great.
Yeah, I would say no. The project is ramping as exactly as we planned, which we had planned on really finishing the facility by the end of last year and then go through a qualification phase and then start to ramp. From our standpoint, I think it's exactly in line with what we had planned and which by the way, is quite impressive from our side considering all the COVID activity that the facility build and the facility startup had to go through. So I'm very, with impressed with the -- with what the team has delivered. I think from a customer standpoint, as we've indicated before, the customer is very interested in the product and would take really any product that we can produce. We're limited in our capacity in the current facility, otherwise, the customer would even take more product from our current facility. So, there is no issue from a demand standpoint from the customer side, I think it's just making sure we get the ramp -- sorry, the qualification done and then the ramp going so that we can really launch this business on a very flawless basis.
Thank you so much.
Thanks, Marisa.
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back over to John Zaranec for closing remarks.
Thank you. This concludes our fourth quarter 2021 Earnings Call. A recorded playback of this call will be available on the company's website, Materion.com. We would like to thank all of you for participating on this call this morning. And your interest in Materion. I will be available to answer any follow-up questions. My direct number is 216-383-4010. Thank you.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.