Q4 2021 Eastman Chemical Co Earnings Call

January 28, 2022

Good day, everyone and welcome to the fourth quarter or full year 2021, Eastman Chemical conference call Today's conference is being recorded.

This call is being broadcast live on the Eastman website Www, Josh Eastman Dot Com, we will now turn the call over to Mr. Greg quicker of Eastman Chemical Company Investor Relations. Please go ahead Sir.

Thank you Tracy and Hello, everybody and thank you for joining us on.

On the call with me today are Mark Costa Board Chair and CEO , Willy Mclain, Senior Vice President and CFO , and Jake Laroe manager Investor Relations.

Yesterday after market closed we posted our fourth quarter and full year 2021 financial results news release, and SEC 8-K filing our slides and the related prepared remarks in the Investor section of our website Www Dot <unk> dot com.

Before we begin I'll cover two items.

First during this presentation you will hear certain forward looking statements concerning our plans and expectations.

Actual events or results could differ materially.

Certain factors related to future expectations are or will be detailed in our fourth quarter and full year 2021 financial results news release during this call in the preceding slides and prepared remarks and in our filings with the Securities and Exchange Commission, including the Form 10-Q filed for third quarter 2021, and the Form 10-K to be filed.

For full year 2021.

Second earnings referenced in this presentation exclude certain noncore and unusual items reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items are available in the fourth quarter and full year 2021 financial results news release.

As we posted the slides and the accompanying prepared remarks on our website last night, we will now go straight into Q&A Tracy. Please let's start with our first question.

Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.

I will take our first question from David Begleiter from Deutsche Bank. Please go ahead.

Thank you and good morning.

Mark just on advanced materials very nice guidance for 2022 can you talk to how much line of site you have to that several million dollars EBIT being performed this year between price increases and innovation.

Sure David it's good to hear from you and we are really excited about.

Advanced materials and its ability to deliver pretty substantial earnings growth as you just mentioned.

And I think to talk about it it's best to start with the context of last year.

Because it really feeds into why we're so confident about this year. So last year, both at the company level as well and particularly at the advanced materials level.

Primary demand was incredibly strong.

The consumer level.

Strong in transportation D&C durables.

A variety of markets textiles et cetera.

And so.

The constraint and serving it especially in advanced materials wasn't a demand situation it was a.

Outbound logistics and operational concern because the demand to come back.

And such a strong way.

Across the World of course rented a supply chain outbound logistics constraints in the industry.

And we at Eastman had operational constraints.

And so you've got all this primary demand then you've got the innovation driving.

The growth to be well above end markets, especially in durables and transportation and textiles.

Well, thanks else's fibers.

And.

And you've got these operational constraints that were in three buckets that were planned shutdowns.

And in particular in advanced materials, we had a pull forward the line conversion of Triton because that demand was so strong.

We're unable to serve it with existing capacity. So we add that line conversion that took a bunch of capacity offline.

During the second quarter of last year, and then we had a long shutdown in the fourth quarter to.

To expand capacity and improve reliability.

Bringing that facility set of facilities back up online in December took a lot longer than we expected.

Operational constrained demand through last year. So when you look at this year from a volume mix point of view, we expect to have a lot more capacity.

And we're in a better logistics position.

Serve all that demand innovation will continue to deliver a lot of strong growth on top of that.

That allows us to have a big.

Very large driver on that front.

In addition to that of course with the market being so constrained and tight last year, we had extraordinary inflation across the company and in the EM.

And it really accelerated through the back half of last year in advanced materials in particular.

So there was a period of time is always that takes prices to catch up to raws now on that front.

We did a great job of getting all of our prices back up and specialty plastics as well as new contracts and inner layers to recover the distribution.

Energy and raw material headwind.

That we had incurred.

And as we look forward.

Those prices are sufficient to cover.

Raw material and energy costs being similar to fourth quarter <unk>.

Increasing logistics headwind this year.

So you've got a.

At least $100 million of.

Spread tailwind that is fairly well defined by the prices we have in place now.

So you put those two together that's very strong growth and then there is still a cost tailwind as well for this segment. So when you have all those operational shutdowns like we did last year, it's not just the higher maintenance costs the loss volume opportunities. It also led to a very high.

Airfreight expense at the company level Airfreight was probably $65 million last year relative to a normal 10, and a lot of that was in advanced materials.

So our supply chains are much better shape, where we're not going to occur that airfreight. This year already have a good plan to materially reduce it back to that more normal level not all the way there, but good progress so you've got cost tailwind to some degree offset by gross spend but when you put it all together it adds up to a very impressive.

Our earnings outlook for advanced materials, and Youll see that immediately in the first quarter with strong sequential improvement is that volume and mix improves without the operational constraints constraints, so that in the fourth quarter, which was over $25 million there.

Spread expansions.

Good to occur by those prices that are already in place as we talked about in the cost will be a bit better. So we feel great about the segment and it's really a testament to the innovation rate, it's not just about markets, we're growing well above our markets.

Even in automotive being above the automotive challenges by a significant amount.

Very good and just one thing lesson on fibers, Mark you referenced strong growth in textile products.

Talk about the growth without those products into 'twenty, one as well as the earnings profitability and.

Or do you foresee for 2022 and textile products.

Yes, <unk> is a great story as you know we've been investing in and building out a new set of markets with an improved.

<unk> textile fiber.

And then we've been able to add sustainability.

To this value proposition with not just the biopolymer content that we've had for ever.

But now the asset fuel component the other 40% being derived from waste plastic so you've got a product that is.

Sustainable and sustainably grown forest wood pulp.

For moist plastic and certified biodegradable micro fibers, if they get into the ocean through the washing machine et cetera.

So that value proposition, especially for luxury brands in the women's wear market, where sustainability is a very important factors driving just tremendous growth.

From that market combined with market recovery from 2020.

So you saw a very good revenue and the fiber segment that was driven by this revenue volume mix was relatively stable in tow and so the revenue growth is really being driven by the great success, we're having in this space.

And it's exciting because we see that continuing the growth we're seeing in women's we're.

Also starting to get enough leisure.

Is creating a lot of opportunities to grow in fact, this is like <unk>, where we're moving quickly now to convert more tow lines to making.

Textile fibers to keep up with the growth that we see this year and the years to come.

It's an exciting story.

Obviously in this business by the way on the textile side did a nice job of keeping prices to keep up with raws.

The spread compression that happened in this segment was really on the test side.

Thank you very much.

We will now take our next question from Vincent Andrews from Morgan Stanley . Please go ahead.

Thank you and good morning, everyone.

Maybe you could just talk to us a bit more about the recycling plant announcement in France in two particular areas I'm interested in is one just on the milestones that you know the boxes need to check.

And your comfort that you're going to check those boxes and maybe over what period of time, you think you'll be able to do it and then following up on the textiles line of discussion I did notice.

That you did include textile applications.

As an.

Outlet for the France project. So I'm just curious in that overall project, how big are the mixed textiles might be and if the.

Versus maybe a year ago.

Coming on textiles for that type of a facility is really increasing.

Maybe thats going to be another vector to.

For these applications.

Thanks, Vince and we're really excited to get this second project announced obviously, we're incredibly excited about the first project we are building that.

That will be online at the end of this year are proving out this technology had much larger commercial scale at.

And enabling a very attractive, especially growth here in the short term, but as we look at the French project and getting a position in Europe to serve and enable the circular economy.

Is just an exciting opportunity we looked all over Europe , and France was.

A very unique opportunity that we're very excited about the French government was.

Very committed to be a leader on plastic waste in climate as you might imagine and really trying to develop the circular economy.

So they were willing to be aggressive on how they're going to approve the recycling infrastructure to support this plant.

And they were helpful in making sure we found the right instead of incentives right understanding and very available green feedstock.

Further the recycling feedstock as well as green energy and steam so a lot of factors came together make France, a very attractive location.

In Europe , as a market very attractive because especially in France those brand leaders.

Especially in the cosmetic luxury space.

You knew very forward leaning on sustainability on plastic waste and dealing with climate.

<unk> engagement they wanted to have a plant in their backyard. So once again good choice in France.

That allows us to have a very strong competitive position and being a solution provider in this space. So.

Market demand very strong.

As you saw a number of LOI in place one of the milestones that has to be completed Vincent is just completing those agreements to lock in both the specialty off take of this plant as well as the PDT offtake and I'll come to textiles in a moment.

We got to complete those agreements engagement is very strong and make sure. That's done the second thing of course is sourcing feedstock and we're making great progress with <unk>.

Suppliers with feedstock, whether theyre attractive aspects of France's there's over 600000 tons of polyester waste a year.

So tapping into that as well as other countries across Europe .

So we're confident we're going to get the feedstock, but you've got to make sure you have completed that sourcing and then the site selections of last part which is we have three very attractive sites identified they all have very attractive Greens green energy supply.

But we're working through.

What is the best one with the right logistics.

For both inbound and outbound as you are moving a lot of material here.

As well as that Green energy, which is key to our.

Carbon footprint and our cost structure.

And so we're working through all of that but I'm very confident all three sites are attractive, we just need to decide which ones. So we feel good about the track. We're on is just completing the work that we are going.

And then on Texas.

It will be yes.

On the textiles part Vincent textiles will be part of it is not our primary focus at the moment, because we've had so much engagement and the packaging and the specialty side, we've been primarily working with customers on that front. So we are starting engagement on the textile side right after packaging and plastic waste the biggest second contributor to <unk>.

Landfill as textile ways. So there is going to be a significant and meaningful circular economy. That's why we're having so much success in our cellulosic fibers is for the same reason, but we expect <unk> to be a part of this project, but I'm not yet sure what percentage I don't want to get into that at this point, but no doubt its a source of feedstock and its a <unk>.

<unk> of offtake.

Okay. It sounds exciting thanks very much guys.

Yep.

We will now take our next question from Jessica <unk> from Jpmorgan. Please go ahead.

Thanks very much.

In your script you talked about.

Elevated spreads in your chemical intermediates business.

That you thought in the second half might be more narrow.

Which are the spreads that are elevated now that might narrow later in the year.

Sure Good morning, Jeff.

Obviously spreads on the olefin side or the area, where we've had the most expansion through last year.

And there was a belief at some point markets will sort of normalize as supply and demand come into more balance.

And we thought that would happen in the fourth quarter and it has held up better than expected as you can see in our results and.

And we expect frankly, those spreads to continue to hold up as we go into the first quarter.

And then our forecast is based on moderation starting in the second quarter of becoming more towards normal in the back half of the year, which is just a forecast as we all know right now Jeff No one really knows exactly how that spread normalization is going to occur, but just to be clear that's what's in our assumptions. It's important to remember that there's other things that go on in this segment that create.

A lot of value right. So we've got very good volume mix upgrade, especially mix upgrade and the growth we have in AG functional amines and <unk>.

Specialty plasticizers and asset yields will actually be up in earnings in a meaningful way this year versus last year.

Last year, we had a very large shutdown at our <unk> complex, where we have a lot more volume to sell this year and CDK hydride because of contractual reasons didnt improve that much last year and is catching up to the better market conditions. This year and so we're going to have better margins in the sic and hydride, which really is the larger part of our business you have to remember acetic.

It is small co product for us and so we're not that levered to what's going on in that market.

A lot of positives going on not to mentioned substantial cost tailwind for this segment when you think about the.

Hi, shutdown schedule I mentioned in advanced materials, and how that's a tailwind that applies across the company.

And a good portion of that high shutdown unusually high shutdown schedule last year was in Ci right, we delayed a bunch of maintenance turnarounds from 2020 into 'twenty, one for safety reasons and keeping people from getting COVID-19 .

So we had a high schedule there we also had.

Some unplanned outages like urea, a few other outages and <unk> in the fourth quarter.

That were a headwind that will be all become a tailwind. So you got cost <unk> operational cost savings improvements.

And and then you've got these other businesses growing that net against whatever the normalization of <unk> on the olefin spreads.

Thank you.

In your.

Post French plant.

Okay.

Can you give us some insight into.

What you expect your customer agreements to look like do you want to carve up the plant and to.

Certain segments.

Yes.

I guess more defined radar for return that's less volatile based on various changes in costs or do you wish to go about it.

A different way.

So.

We definitely are focusing and design these plants.

With an absolute focus on maintaining steady spreads as much as possible.

To provide a very reliable source of EBITDA for the company.

And margin stability and how it shows up every year. So that's our focus now there are two models and how you do that the first model is a certain percentage of this plan. We will continue to be specialties like what we're doing in kingsport, there's tremendous amount of demand in cosmetics and electronics.

And some very sort of unique high value packaging items.

That are specialty products that we sell everyday now and we base those prices on on value and we have good differentiated position in the marketplace to maintain prices relative to raw material costs and so our pricing strategy for the specialty part of the plant would be what we do everyday and advanced materials.

In addition, and a good portion of the volume, we will be making PT for packaging.

And that will be the search our contracting model, we talked about at innovation day, Brad covered it pretty thoroughly.

And those will be take or pay long term contracts.

Is that the prices are based on the value that we have in providing mechanical recycling content to the marketplace remember that current food grade our pet is trading at a 40% to 50% premium to sort of Virgin PDT today and for the last couple of years in the European market and these will be cost pass through contracts. So we're not going to be <unk>.

<unk> risk on what the feedstock costs are.

Which makes a lot of sense for the customers because.

If the feedstock costs for US go up the food group mechanical recycling costs are going to go up even more.

So this is a hedge for them about the risk of buying mechanical recycle content relative to.

What the cost pass through contract would provide which will be relatively more stable.

So those are the kind of contracts, we'd have so stable margins.

Arrived from both parts of the plant the exact mix of what is going to be specialty versus PT and textiles is still being determined by us.

Because we were seeing a lot more especially demand than we originally expected.

And so that's good news or higher margins and so we're working on how to balance all of that out but whatever we build is going to be flexible. So the lines that <unk> will have the ability to flex and make our specialty co polyesters and the future. So we can always mix upgrade this facilities over time.

If that opportunity presents itself.

Okay, great. Thank you so much.

Okay.

We will now take our next question from P. J.

Please go ahead.

Yes, hi, good morning.

Mark.

In the PD business. Before then you got out what is your confidence level to get this 12% auto seed that you were talking about in this.

In this.

French plant and.

You talked about recycled pet.

We know it swings wildly.

Is that the.

Brian it's kind of locked in.

Your mind to get that 20% auto. So you can you just talk about that a little bit.

Sure in our absolute focus has been on this question because I have no intention of getting back into the merchant PT business that had wide.

<unk> and profitability I ran that business for quite some time.

A number of years ago, and not going back there. So we've been very clear with investors as well as customers that the approach. We're taking here is different and it goes back to what I just said.

Just question right. The PT part of this business is going to be a long term.

State contracts with.

Cost pass through structures, where we're not taking spread risk on what the price universes feedstock cost is that's the only way we're going to build this plan right. So those contracts have to get in place customers are engaged understand that that's what's in these LOI is that we're getting.

And of course, we got to still work through all the details are going to complete agreements, which is one of those milestones that Vince asked for a moment ago.

But to be clear, we're not get build the play unless we get it that way right, we're not going to slide back into sort of the volatile business that is the normal beauty business, especially <unk>.

We have a very wrong demonstrated track record for a few decades now, especially the last decade of delivering very strong volume growth, but also very steady spreads over time, obviously, there's like all specialties sort of expansion contraction with movements in deflation or inflation of your raw materials, but.

We have very differentiated positions and frankly this plant is going to give us even more differentiated position relative to competitors because we are going to have recycled content in our products.

In a plant based in Europe that gives us much better circular economy benefit for anyone who wants to buy from this plant.

The circular economy is a very regional concept. So when we build plants in Europe or in the U S. It's a significant advantage relative to Asian competitors.

And how we can sort of provide sort of within region solutions.

Great. Thank you and congrats on that plant. My next question is I think we're really excited.

Yeah. My next question is quickly on inventory levels and it looks like inventories must be low given that you are anticipating raw materials here.

Whats the inventory levels at your customers when you look down the chain or look across your portfolio is it has had quite low and you know some company that expecting some coiled back in business activity because of low inventories, what's what's your take on that thank you.

Yes, so inventories are at historic lows for us and as far as we can tell with our customer's historic lows for them too.

I should have put that in my string.

And David's question around advanced materials, that's another driver of volume growth on top of.

Good market pent up demand and.

And the logistics.

<unk> constraints being freed up at our innovation driving growth. There is this need to rebuild inventories all the way down the chain pretty much across every market I would say the only exception I can think of across all of our markets as tow where the cigarette customers are about normal inventories, but automotive obviously is a huge amount of pent up demand and need to build inventory.

<unk> building construction same thing durables.

Where we've seen a lot of growth there.

Still a lot of.

Inventory rebuild in that stream.

And the list goes on.

In AFP as well.

Coatings and.

Care chemicals and Amatriciana so enel.

Other upside that creates a lot of demand this year will still be pegged against what we can make and ship.

As we continue to expand capacity.

To enable more growth next year.

Thank you.

We will now take our next question from Kevin Mccarthy from vertical Research partners. Please go ahead.

Yes, good morning.

Signal plans to deploy $1 $4 billion of capital in 2022, and I was wondering if you could help us understand what.

The mix of repurchases versus M&A might be also the timing of that deployment recognizing that you're set to close the adhesives steel I would think relatively soon.

And then as a matter of clarification is that deployment included in your EPS range.

Yeah. Thanks, Kevin This is Willie for the question. So yes, we actually put a lot of the proceeds and the free cash flow to work at the end of 2021, So I would highlight that.

Yes.

Repurchased roughly 1 billion shares of which $700 million was during Q4, mostly.

November and December as we think about having $1 4 billion next year, it's a combination.

The proceeds from our adhesives divestiture, and we anticipate that that will be at the end of Q1.

On the closing standpoint.

As well as the additional.

I'll call it cash flow that we'll have.

From operations as we think about.

Also increased organic expense of $1 4 billion, we would expect to start putting that to work in Q2.

When we would expect to do that and you can think about probably greater than $1 billion on share repurchases.

With additional Optionality as we think about the other $400 million as.

As we get into the back half of the year and see how things develop with our portfolio of bolt on and pipeline.

Great. That's helpful. And then maybe mark as a follow up to that what are you looking to do with the bolt on M&A pipeline.

Strategically and.

However, you want to frame that in terms of.

Product interest or geographic interest or other objectives.

Yes. So we are looking at bolt on M&A I would say that we are exceptionally busy with our top especially innovation growth programs across the company and ensuring we deliver on that as well as building out the circular platform right. We've now got the project in Kingsport, We've got the announcement in France, we're still working on that third project.

In the U S and making progress on that.

That is a huge amount of EBITDA in play for a long term growth.

From an organic point of view from on the specialty side accelerated by all this circular opportunity.

So bolt on M&A as a priority, but it's after those two topics.

We do see opportunities in advanced materials, and AFP as I've said before our priorities remain the same around.

Ways to open up new markets with compounding capability and a few targeted areas.

In specialty plastics.

Renewal content of Triton is opening up new market opportunities in the <unk> space and some other more engineered performance dimensions than what we've had in our typical value proposition in electronics and automotive.

So a lot of opportunity there that we want to sort of make sure. We can exploit and grow we're always interested in growing our performance films business and have had a great track record of continued bolt ons there that should continue.

And then whether its performance.

Personal care or coating additives.

As those opportunities that leverage our very strong position in our technology platforms and our market positions that we will look at so it's really those four areas in animal nutrition right. So number of different places, where we could consider doing it.

And the markets are pretty overheated, and we're going to always remain disciplined in our capital deployment to make sure we get an attractive return for investors. So we'll just have to see if that gets done if it doesn't happen as Willie said that extra $400 million of cash above the $1 billion. This year will turn into share repurchases.

That's helpful. Thanks, a lot.

We will now take our next question from Mike Sison from Wells Fargo. Please go ahead.

Hey, good morning.

A quick one on Asps.

Looking for 10% growth versus last year and any commentary you have four businesses.

In the segment now will they all sort of growing that line some above some below.

Yes.

First of all we're really excited to have the new focused AFP.

And it has very attractive growth when you look at what we're guiding to a recast $450 million EBIT last year.

Of the E&P business, excluding tires adhesives.

So that is very strong growth.

And it really is the same story just not as extreme as the advanced materials story earlier right. So we've got very good volume mix growth in coatings and personal care in water treatment in animal nutrition and specialty fluids all of those.

Elements of the market where drivers of growth last year.

<unk> are expected to continue to be drivers of growth this year.

This is also a place where we had to.

Unusually high shutdown schedule.

Last year, especially.

For the care solutions business.

And so you've got just that freed up capacity to enable more volume growth on top of market growth.

As we go into this year and then you've got.

Restocking because none of these customers have inventory as I mentioned earlier, so theres the restocking benefit and then there is the innovative growth.

He is continuing to gain traction here and starting to sort of.

Builds like like what we have in advanced materials across coatings in care solutions.

Thats all contributing you've got spread improvement this business increased prices a lot faster last year, because a lot of their positions are in cost pass through contracts that track pretty quickly with the raws by definition.

And so those prices increased a lot. So we didn't have as much of a spread headwind in this business last year as we did in advanced materials. Therefore, this year, we're not going to have as much of a tailwind, but we're still going to have a meaningful tailwind.

And then of course, you've got the overall net cost structure being considerably lower this year for the company and AFP will pick up part of that.

And then it gets netted off by growth's been so well positioned to deliver growth and it's really across all the segments coatings residential constructions, obviously incredibly tight automotive has plenty of room for recovery this year.

We've got some actually great growth in semiconductors in the coatings business and.

Amatriciana is going to have a very good solid year in personal care is a great stable business with more capacity to sell this year.

Got it and then a follow up on advanced materials.

Just curious if you can give us a little bit of maybe sensitivity in the $100 million spend recovery oil is pretty high now and.

If inflation gets worse.

Does that affect that $100 million in.

And I guess, what would you just sort of make it up in intermediates in the event that happens.

So it's still pretty good.

Yes.

First of all we said greater than $100 million.

So we have some room for error with some of the more recent inflation to.

To deliver that $100 million.

Second.

We have good pricing power and a strong demand environment. We just spent considerable time talking about how a primary demand.

And our direct customer demand as well in access of of of what can be provided and.

And they and they need to rebuild inventory on top of that.

So we feel confident in that environment, we have pricing power and if we see raw material inflation go up we will increase prices further from where we are today.

But I think the team has done an excellent job when you look at the raw material inflation really didn't accelerate toward until towards the end of August .

And by January we caught up to it that's actually in the world of specialty is actually very good excellence. When you think about the extremity of this inflation we were chasing.

And a very good position for the first quarter.

And to be clear what our assumption is is on a full year basis. This year raw materials and energy youre going to be a headwind relative to last year, which is basically assuming.

Those prices remain elevated around fourth quarter. We are also expecting distribution cost to be a headwind this year.

As the supply chain intentions are not resolving anytime soon and the prices. We currently have in place gives you that greater than $100 million tailwind. So I think we're in a good position.

And well it keeps going up will raise prices.

Got it thank you.

We will now take our next question from John Roberts from UBS. Please go ahead.

Thank you are there any constraints on growing the green textile fiber business can we assume that for many years you can convert capacity from cig tow and.

Are there any constraints on putting more waste plastic into the gasifier to grow the asset deals component of that.

Yes. So there is no limitation to our ability to grow the textiles business long term. So we definitely have tow assets available to be converted and obviously the tow market continues to have sort of a 2% to 3% declined making additional capacity available.

So it is just time.

And capex to convert those lines.

Two.

Take the 95 years and we've had some really interesting breakthroughs on process innovation side to improve our ability to do that in a capital efficient manner. So we're really excited about that so.

We can definitely sort of convert capacity growth market.

And then when it comes to recycle content.

When we look at where we can go in Naya textiles, where we can go in engineered thermoplastics, especially.

Plastics, where we could go in foodservice.

And.

Which could be significant volume with our biodegradable polymers, we have the ability and the.

The micro beats, which isn't very much volume, but very high value.

We have plans in place where we can.

With reasonable capital.

<unk> the capability of front of the gasification complex to process, whatever plastic waste, we need to support all of that growth.

And then should we assume all of the PRT facilities going forward are going to have a mixed waste plastic processing as well you've got at Kingsport now you'll have it in France, and I was thinking before you would basically only have mixed waste in kingsport and the PRT plants would be really polyester only.

We will have it everywhere, it's really important just the scale of it will depend on the market and the opportunity that we're pursuing.

Whatever plastic you get even if it is quote unquote all polyester it's not.

Got it.

When it shows up at the plant gate Theres, all kinds of stuff rocks aluminum other polymers that are still in that Vale.

And you really don't want to put that in the plant. So to some degree you've got to have this processing on the front to make sure that what you are putting in the front of the plant.

There's pure polyester as possible and this is one of the competitive advantage I think that Eastman is going to have versus our competitors is this is a very efficient process, we've developed and patented on how to do that and if you don't have that ability no matter. How good. The Bel is that's being delivered to you youre going to have a serious conversion problem on whats going in the front end to getting high quality output on.

Back in one of the great things that 30 years of experience got us in working with.

Commercial scale plant.

Kodak and Eastman is.

We learned a lot about how to have high conversion conversion efficiency and how the how to have high energy efficiency.

So our plant capable of 93% conversion on our polyester level from.

From what goes into what comes out which is incredibly high compared to most technologies.

But you still got to make sure. It's polyester youre sticking on the front end so that mixed plus processing is another advantage that you've put together with all of our other advantages that.

Gives us confidence that we can be a leader in this space.

Thank you.

Yeah.

We will now take our next question from Frank Mitsch Fermium Research. Please go ahead.

Hey, good morning, Mark I can safely say that you had a more eventful Martin Luther King day than most people on this call that look that looked pretty impressive that backdrop to be sure.

One of the key drivers for growth in 'twenty, two is the $75 million tailwind from plant shutdowns and operational disruptions year over year.

Like the slide on I do like Slide 16, it shows kind of the.

The plant shutdowns, but if I'm reading that correctly, that's a 5 million net benefit and you are talking about $75 million is that just.

It's kind of the unplanned outages that you had in 'twenty, one or and then obviously you are not.

Counting on for 'twenty, two but how should we think about that.

Thanks, John I'll, let Willie answer question, but from a prolonged visit was great I put myself in lockdown for the two weeks leading up to it so I didn't get omicron and Couldnt go so.

But it was.

He was an impressive actually I have to say he was well brief detailed conversation that went for a long time with them around what he wants to the circular economy and how we're going to be the largest investment in France. This year.

And he wanted to make sure that the government is doing everything they can to ensure our success and so it was it was it was impressive to see them spend a lot of time with me and actually on the detail of making sure we succeed so.

It was a good experience.

But to the cost question I'll, let Willie ticket.

Thanks, Frank for the question.

To your point in 'twenty two there's several significant tailwind on the cost front. So first it's greater than $75 million versus last year and thats due to the unusually high planned shutdown schedule and the schedule should be about $50 million relative to that on a year over year basis, but we also had some unexpected.

Unexpected challenges like winter storm year.

Obviously that seems like a long time ago at this point.

If you think about I'll call it the momentum from 'twenty, we had to defer.

Several shutdowns end of 'twenty, one because of Covid.

And then also accelerated as Mark highlighted earlier.

The bottlenecks and to improve our reliability and it's not just the higher maintenance cost. It's the impact of that lost capacity that we had in 2021 that gives us.

The growth potential given the pent up demand in I'll call. It supply chain, that's still need to rebuild inventories.

Also there was an $85 million tailwind on variable comp that goes back to normal in 2022.

And we continue our operations transformation, and we think that'll be another $50 million to $75 million.

Now also as we enter 2022 inflation's going to be much higher than traditional we think that number is probably $100 million to $125 million.

So as you look at this.

Net tailwind is greater than $100 million and likely offset any of the scenarios on ci normalization of margins.

<unk>.

In other words, our growth forecast really centers on the belief that we can grow specialty volumes.

And catch up to the raw material headwinds and also the logistics headwinds that mark highlighted earlier and on top of that we'll be buying back shares.

Got you that's very helpful very detailed.

And then if I could ask a follow up on the on the moving of the pricing.

In specialties up to the level of inflation during this quarter.

That you've caught up and I know youre guiding to keep raws flat <unk> 'twenty one through the balance of 'twenty, two but if you get a situation that perhaps raws Dewey road, what's your confidence level in being able to hang on to your higher pricing.

Specialties arena or how should we think about that interplay.

Yes.

It all comes down to sort of why things happen, Frank but if raws are eroding because supply demand is a little bit more balanced but demand is still.

Reasonably good which I think I've covered earlier on our confidence in why that will be the case.

That becomes a tailwind.

So that would that would be an additional tailwind relative to our forecast.

Great. Thank you so much.

We will now take our next question from Bob <unk> from Goldman Sachs. Please go ahead.

Yes.

Thank you very much good morning.

I wanted to start out on that on the French announcement, the French plant.

You mentioned youre going to have the mixed plastic processing upfront what do you do with the non polyester stuff do you sell that to somebody else that gas advising burns that or where does it go exactly.

Yes.

So what we don't use goes back into the recycling stream and ends up being used by another recycling process. So for example, most of what would be leftover could be used by a pyrolysis plant and there are several of those kind of projects being developed in France. So they could take the material and turn that into a circular economy.

Enemy for the olefin world.

Worst case scenario it gets incinerated like it does today.

All of this material. These days is being incinerated right. So.

You got to keep in mind that the overall recycling industry is a significant need to sort of improve its infrastructure and its recycling right. So France alone is 600000 tons of polyester waste.

Just over half of that is packaging the rest is textiles, and carpets textiles and carpets as incinerate has no alternative solution until we show up in the polyester side of carpet in textiles, with a solution where it can be recycled.

So on the I know on the packaging side, only about 15% to 20% of what is captured.

By the mechanical recyclers.

Actually finds its way back into a bottle.

The rest of it ends up being Downcycled.

So as we sort of optimize the system.

The mechanical recycling feedstock.

As we've talked about degrades over time, so we have to have.

That's where this opportunity is so significant for us, but there's a whole ecosystem of recycling infrastructure, Bob that gets created and is mixed plastic plastic processing actually just doesn't just enable polyester for us, but it actually enables a cleaner feedstock for other technologies at the same time.

And can you license that technology it sounds like you've got something that's novel there.

Maybe there is a stream of licensing stream there.

Yes, we're looking at licensing and partnering opportunities because it in itself can really unlock and enable a lot of feedstock recycling infrastructure affordably.

So we're very much looking at that.

As part of how we partner with people who are going to sources feedstocks.

And other opportunities.

And then again in Kingsport youre going to Youre going to use some of your material that did do some tightening renew.

When it makes sense, if you're going to have a suite of products one of those being the <unk>.

I didn't plant.

And then that DMT in para xylene to.

An existing <unk> plant and have them OLED because they can still get the same renewable certificate for it and then you wouldn't have to spend the capital or maybe have a subscale plant versus a fossil fuel plant.

Yes.

It's unfortunate that simple a longtime ago DMT is a relatively high cost way to make the intermediate for making.

It enables a much higher performing product, which is why we use it in our specialty products. It gives you much better clarity and better performance on many dimensions. So we're DMT based as a competitive advantage for specialties, but the existing infrastructure that's in Europe .

And really across the world for that matter is based on PTA.

And so you can't just swap out deep PTA and use DMT and an existing <unk> plant you'd have to spend a significant amount of capital to convert the facility and once you start looking at that capital conversion cost you.

You might as well just built a new plant.

More it's a better integrated return.

Got you great. Thank you very much.

You bet.

We will now take our next question is from Matthew Deyoe from Bank of America. Please go ahead.

Yeah.

Thanks.

I wanted to talk a little bit about.

In tow and the conversions I mean is there a point where converging converting tow lines can happen at a.

Big enough rate that youll substantially tightened the tow market.

Or is that unlikely or too far out or.

Not the right way to think about it.

No. It's a very good question.

When we spend a lot of time on.

And as we look at.

The NIAID toll conversion as well as before you get to tow the ability to redeploy.

Lake the intermediate.

The polymer basically it goes into the spinning lines into foodservice.

And the thermoplastics.

Creates different ways to sort of redeploy the entire integrated stream and it created very tight stream relative to where it is today.

But yes, there are ways to look at converting capacity on the toll front Theres also new technologies in next generation technology, we're working at that I'm not getting into detail now that would be a different way to make the fiber at a much more capital efficient and advantaged.

Greenhouse way.

So we're pursuing all of those options.

And whether it makes the total tow industry exceptionally tight isn't just about US right. It's also about what happens with our competitors and what they do with their capacity.

And we're very fortunate to have.

Long multi decade history of innovation and Cellulosic to all these different specialty applications that allow us to create all these new opportunities for growth that allow us to keep our stream tight and grow it.

When you include the specialties.

With the fiber complex.

But.

It's not as clear that everyone else can do the same thing and so.

<unk>.

Hesitate to say that the industry in total is going to become extremely tight but I would tell you with the capacity reductions that have already happened in the tow industry over the last several years and were doing certainly tightening the market in a meaningful way.

Got it I appreciate that.

You might have kind of answered this a bit in Mike's question, but if I think about kind of the cadence on raw material recapture in AAM.

<unk>.

Is it really like can you weigh your back.

Or are we looking at here, where we're price overtakes raws, because I think things like advanced inner layers could see a meaningful step change kind of day, one just given annual pricing, but I don't know that thats, the correct way to think about it.

So day one.

Quarter relative to fourth quarter, youre going to see substantial spread expansion.

With the prices that we've put in place relative to Q4, that's a big driver of the not just annual outlook for advanced materials, but the strong improvement we're guiding to you about advanced materials on a Q1 to Q, sorry, Q4 to Q1 basis combined with the volume and mix growth. It really is a big substantial step up from where we were.

In the fourth quarter. So, yes, it's going to start happening right now it picks up momentum, though so the.

The expansion to gets more significant in the second third and fourth quarter.

When you look at it.

On a year over year basis.

For where all the value comes from.

Not just on spread but also on volume mix improvement.

We were really constrained because we're normally seasonally stronger in the second quarter and volume mix.

Last year, we couldn't do that because of the shutdown that we had to do.

Do the trade and conversion so.

A lot better ability to grow volume in the second quarter as well as spread improvement.

And we'll actually have a very good <unk>.

Second quarter relative to the first quarter when you put that together so what's happening now.

Thanks.

We will now take our next question from Alex <unk>.

From Keybanc. Please go ahead.

Thank you and good morning, everyone Mark.

Waste sorting is one of the key stats on recycling you talked about your experience was proprietary sorting process. So in terms of scale.

<unk> done so far in this area how much of a scale increase.

What are you going to be doing in France, or other sites, how much of an increase of operational risk isn't it.

Yes, theres really not much operational risk and the mixed plastics processing part of cleaning up the feedstock before the plant and its very low capital and the way to do it.

So we've already.

Are constructing the facility here for sort of a 110, Kmt or inbound feedstock.

To this facility.

And the same.

Larger scale facility will be built in Europe .

What's interesting is it's modular so.

As we look at this there is an opportunity to actually do it in multiple locations to be more logistically efficient in how we source waste and collaborate with sourcing partners. So we're still debating on how much we do it on site versus closer to where the feedstock is being sourced to get a more streamline stream moving across a road to us so.

Some design options, there with our sourcing partners our feedstock sources.

Now, we're trying to think that through.

And a follow up on our pad.

What is your cost position relative.

<unk> food grade mechanical or a path and on the pricing side do you think your customers would be willing to pay a premium for chemically recycled TVT versus mechanical or Pat.

So.

Our cost structures, we're not going to sort of get into debating and discussing sort of detailed cost structures, but what I can say is that.

When we look at our cost structure and the pricing.

Which is being.

Centered around the alternative material, which is mechanical recycle content.

We are in a very good position to have spreads that will then be sort of locked in and cost pass through contracts.

To deliver a greater than 12% return.

The.

From a premium point of view.

When you think about the quality of mechanical recycle versus our molecular recycled product our product is much higher quality.

Because the nature of Unzipping the polymer in purifying. It allows us to then have identical intermediates to what we use today from fossil fuels. So the products we make.

Both specialty as well as PD will literally be identical no compromise right Eric.

Air quality compromises with mechanical recycle.

And Hayes and color and its limited ability to be.

Recycled over time.

So we think and believe.

It is a more valuable product customers I think understand that.

But what's interesting is the way they many of them are looking at it as well our premium.

Is going to be in this zone.

It's actually.

Likely to be a hedge against the risk of mechanical recycled <unk> being a lot more expensive you've got to remember mechanical recycling can't remotely.

Provide enough material for the recycled content targets, the major brands et cetera themselves in Europe , and the U S. So the supply demand situation on the mechanical is going to continue to get tighter.

And so we provide a reliable source of very high quality product and we believe that demands.

A reasonable premium.

If we can let's make the next question the last one please.

We will now take our last question from Laurence Alexander from Jefferies. Please go ahead.

Good morning, two quick ones.

Yeah.

The level of urgency at the customers about restocking how do you see it as a more of a 2022 couple of quarters event or do you see that as a more drawn out tailwind that spills into 2023.

And can you give us update your thinking on the carbon renewable platform specifically.

Given the feedback you've had and the urgency both political tail wins and customer interests.

What we should see on that front.

Sure so on the inventory restocking question.

Presuming, we've got a growing economy this year around the world.

I think the world is going to struggle to keep up with demand.

It's hard to see that.

Anytime soon.

Going to the customers or Eastman for that matter are going to get inventories back to where they should be for a more stable level of performance.

So I think this could drag out through the year and go into next year, especially if the economy is.

Reasonably good.

When it comes to the CRT.

A lot of attention on the polyester renewable technology, and where we're going with the circular platforms, but I'm equally excited about what we're doing with our cellulosic.

Dream.

<unk> has been around for almost 100 years.

And it's amazing to see how sustainability is changed the <unk>.

Mindset around these products, where they've always sold on performance they've never sold on sustainability until three years ago.

And now you've got all these great performance elements and different applications from engineered thermoplastics to textiles to now.

Foodservice.

Being compostable and micro beads being biodegradable, so you've got a tremendous amount of growth opportunity across that spectrum of businesses that drive growth and I am AFP and fibers.

And as I said earlier, we are confident in the technology, we've been operating it now for quite some time.

Processing plastic waste really well there.

There are reasonable capital ways to sort of expand that capacity and grow with all of these markets.

And the margins in our Cellulosic.

Some of if not the highest margins in the company. So as we grow this stream.

Youre getting a nice mix upgrade not just the volume growth that asset utilization benefit. So it's all good.

So with that I'd like to just wrap up and just make a couple of quick comments.

We're really excited about our strategy to grow the company, believing the specialty model the circular platform the strength of our cash. We think these are all differentiators, but what is incredibly important for me to mention and highlight right now I couldnt be on this call talking about all of this if it wasn't for the employees we have around the world.

They've encountered phenomenal challenges and the chaos that we have.

Faced with this sort of snapback in demand and how to serve it and get through it.

Incredibly difficult logistics situations supply chain situations, pushing our plants incredibly hard.

And supporting all of that in every function across the company and at the same time they were able to.

Continue our specialty growth platforms of innovation across the company and add a circular platform on top of it.

To position us for a very strong EPS growth this year and well positioned to keep it going as we go into the future. So I just want to thank all of them because with Covid and the constraints in the work environment and in particular I want to thank the operators out there because.

They go into the plant every day since Covid started managing in a very difficult operating environment, while having to wear a mask and follow these safety protocols that's incredibly difficult.

And they are the real heroes in our company as the operators, who showed up and kept customer supply around the world every day and they get.

My deepest appreciation out of everyone for what we've been able to do so with that I'd love to thank you for that.

Complement all of them and thank you for your interest in Eastman and have a good day.

This concludes today's call. Thank you for your participation you may now disconnect.

Yes.

[music].

Yes.

[music].

Good day, everyone and welcome to the fourth quarter or full year 2021, Eastman Chemical conference call.

Today's conference is being recorded.

This call is being broadcast live on the Eastman website Www Eastman Dot Com, we will now turn the call over to Mr. Greg quicker of Eastman Chemical Company Investor Relations. Please go ahead Sir.

Thank you Tracy and Hello, everybody and thank you for joining us on.

On the call with me today are Mark Costa Board Chair and CEO , Willy Mclain, Senior Vice President and CFO , and Jake Laroe manager Investor Relations.

Before we begin I'll cover two items.

First during this presentation you will hear certain forward looking statements concerning our plans and expectations.

Actual events or results could differ materially.

For full year 2021.

Second earnings referenced in this presentation excludes certain noncore and unusual items reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items are available in the fourth quarter and full year 2021 financial results news release.

As we posted the slides and the accompanying prepared remarks on our website last night, we will now go straight into Q&A Tracy. Please let's start with our first question.

Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We will now take our first question from David Begleiter from Deutsche Bank. Please go ahead. Thank.

Thank you and good morning.

Mark just on advanced materials very nice guidance for 2022 can you talk to how much line of sight you have to that several million dollars EBIT.

EBIT being performed this year between price increases and innovation.

Sure David it's good to hear from you and we are really excited about.

Advanced materials and its ability to deliver pretty substantial earnings growth as you just mentioned.

And I think to talk about it it's best to start with the context of last year.

Because it really feeds into why we're so confident about this year. So last year, both at the company level as well and particularly at the advanced materials level.

Memory demand was incredibly strong.

At the consumer level.

Wrong in transportation D&C durables.

A variety of markets textiles et cetera.

And so the constraint and serving it especially in advanced materials wasn't a demand situation. It was a.

Outbound logistics and operational concern because the demand to come back.

And such a strong way.

Across the World of course rented a supply chain outbound logistics constraints in the industry.

And we at Eastman had operational constraints.

And so you've got all this primary demand then you've got the innovation driving.

The growth to be well above end markets, especially in durables and transportation and textiles.

Textile fibers.

And.

And you've got these operational constraints that were in three buckets that were planned shutdowns.

And in particular in advanced materials, we had a pull forward the line conversion of Triton because that demand was so strong.

We're unable to serve it with existing capacity. So we add that line conversion that took a bunch of capacity offline.

During the second quarter of last year, and then we had a long shutdown in the fourth quarter to.

To expand capacity and improve reliability.

And bringing that facility set of facilities back up online in December took a lot longer than we expected.

Operational constrained demand through last year. So when you look at this year from a volume mix point of view, we expect to have a lot more capacity.

And we're in a better logistics position.

Serve all that demand innovation will continue to deliver a lot of strong growth on top of that.

That allows us to have a big.

Very large driver on that front.

In addition to that of course with the market being so constrained and tight last year, we had extraordinary inflation across the company and an am.

And it really accelerated through the back half of last year in advanced materials in particular.

So there was a period of time is always that takes prices to catch up to raws now on that front.

We did a great job of getting all of our prices back up and specialty plastics as well as new contracts and inner layers to recover the distribution.

Energy and raw material headwind.

And that we had incurred.

And as we look forward.

Those prices are sufficient to cover.

Raw material and energy costs being similar to fourth quarter and increasing logistics headwind this year.

So you've got.

At least $100 million.

Spread tailwind that is fairly well defined by the prices we have in place now.

Airfreight expense at the company level Airfreight was probably $65 million last year relative to normal 10, and a lot of that was in advanced materials.

So our supply chains are much better shape, where we're not going to incur that airfreight. This year already have a good plan to materially reduce it back to that more normal level not all the way there, but good progress so you've got cost tailwind to some degree offset by gross spend but when you put it all together it adds up to a very impressive.

Our earnings outlook for advanced materials, and Youll see that immediately in the first quarter with strong sequential improvement is that volume and mix improves without the operational constraints constraints of that in the fourth quarter, which was over $25 million there.

Spread expansions.

<unk> incurred by those prices that are already in place as we've talked about in the cost will be a bit better. So we feel great about the segment and it's really a testament to the innovation rate, it's not just about markets, we're growing well above our markets.

Even in automotive being above the automotive challenges by a significant amount.

Very good and just one thing lesson on fibers, Mark you referenced strong growth in textile products.

Talk about the growth without those products in 'twenty, one as well as the earnings profitability in <unk>.

Foresee for 2022 and textile products.

Textiles has a great story as you know we've been investing in and building out a new set of markets with an improved <unk>.

The textile fiber.

And then we've been able to add sustainability.

To this value proposition with not just the biopolymer content that we've had for ever.

But now the asset fuel component the other 40% being derived from waste plastic so <unk> got a product that is.

Sustainable and sustainably grown forest wood pulp.

Made from waste plastic and certified biodegradable as micro fibers, if they get into the ocean through the washing machine et cetera.

So that value proposition, especially for luxury brands in the women's wear market, where sustainability is a very important factors driving just tremendous growth.

From that market combined with market recovery from 2020.

And it's exciting because we see that continuing the growth we're seeing in womens wear.

Also starting getting athleisure is creating a lot of opportunities to grow in fact, this is like <unk>, where we're moving quickly now to convert more tow lines to making.

Textile fibers to keep up with the growth that we see this year and the years to come.

It's an exciting story.

Obviously in this business by the way on the textile side did a nice job of keeping prices to keep up with raws.

The spread compression that happened in this segment was really on the <unk> side.

Thank you very much.

We will now take our next question from Vincent Andrews from Morgan Stanley . Please go ahead.

Thank you and good morning, everyone.

Maybe you could just talk to us a bit more about the recycling plant announcement in France in two particular areas I'm interested in is one just on the milestones that you are the boxes, you need to check and your comfort that you're going to check those boxes and maybe over what period of time, you think you'll be able to do it and then following up on the on the textiles.

Line of discussion I did notice.

That you did include textile applications.

As an.

Outlet for the France projects I'm, just curious in that overall project, how big of a mixed textiles might be and if the.

Versus maybe a year ago.

Coming on textiles for that type of a facility is really increasing and maybe thats going to be another vector to.

For these applications.

Thanks, Vince and we're really excited to get this second project announced obviously, we're incredibly excited about the first project we're building that.

That will be online at the end of this year proving out this technology at much larger commercial scale.

And enabling very attractive, especially growth here in the short term, but as we look at the French project and getting a position in Europe to serve and enable the circular economy.

Is just an exciting opportunity we looked all over Europe .

France was.

A very unique opportunity that we're very excited about the French government was.

Very committed to be a leader on plastic waste in climate as you might imagine and really trying to develop the circular economy.

So they were willing to be aggressive on how they're going to prove the recycling infrastructure to support this plan.

<unk>.

And.

Were helpful in making sure we found the right instead of incentives right understanding and very available green feedstock.

Further for the recycling feedstock as well as green energy and steam so a lot of factors came together make France, a very attractive location.

In Europe , as a market very attractive because especially in France those brand leaders.

Especially in the cosmetic luxury space.

Our new very forward leaning on sustainability on plastic waste and dealing with climate. So strong engagement. They wanted to have a plant in their backyard. So once again good choice in France.

That allows us to have a very strong competitive position and being a solution provider in this space. So.

Market demand very strong.

As you saw a number of Lois in place one of the milestones that has to be completed Vincent is just completing those agreements to lock in both the specialty offtake of this plant as well as the PT offtake and I'll come to textiles in a moment.

But it is this plant is going to be a mix. So the first plant is going to be primarily specialties. This plant will be a mix of continuing to have our specialty capability there around our co polyesters as well as making PDT for packaging. So we've got to complete those agreements engagement is very strong and make sure. That's done the second thing of course is sourcing feedstock and.

We're making great progress with.

<unk> of suppliers with feedstock, whether theyre attractive aspects of France's there's over 600000 tons of polyester waste a year.

So tapping into that as well as other countries across Europe .

But we're working through.

What is the best one with the right logistics.

For both inbound and outbound as Youre moving a lot of material here.

Well as you know that Green energy, which is key to our.

Carbon footprint and our cost structure.

And so we're working through all of that but I'm very confident in all three sites are attractive, we just need to decide which ones. So we feel good about the track. We're on is just completing the work that we are going.

And then on Texas.

It will be yes.

Landfill as textile ways. So there is going to be a significant and meaningful circular economy. That's why we're having so much success in our <unk> Cellulosic fibers is for the same reason, but we expect <unk> to be a part of this project, but I'm not yet sure what percentage I don't want to get into that at this point, but no doubt its a source of feedstock and its <unk>.

<unk> of offtake.

Okay. It sounds exciting thanks very much guys.

Yes.

We will now take our next question is from Jeff Zekauskas from Jpmorgan. Please go ahead.

Thanks very much.

In your script you talked about.

Elevated spreads in Europe chemical intermediates business.

That you thought in the second half might be more narrow.

What should the spreads that are elevated now that might narrow later into the year.

Sure Good morning, Jeff.

Obviously spreads on the olefin side or the area, where we've had the most expansion through last year.

And there was a belief at some point markets will sort of normalize as supply and demand come into more balance.

And we thought that would happen in the fourth quarter and it's held up better than expected as you can see in our results and.

And we expect frankly, those spreads to continue to hold up as we go into the first quarter.

And then our forecast is based on moderation starting in the second quarter and becoming more towards normal in the back half of the year, which is just a forecast as we all know right now Jeff No one really knows exactly how that spread normalization is going to occur, but just to be clear that's what's in our assumptions. It's important to remember that there's other things that go on in this segment that Craig.

A lot of value right. So we've got very good volume mix upgrade, especially mix upgrade and the growth we have in <unk>.

AG functional amines and.

Especially plasticizers and asset yields will actually be up in earnings in a meaningful way this year versus last year, because last year, we had a very large shutdown at our <unk> complex, where we have a lot more volume to sell this year.

Silicon hydride because of contractual reasons didnt improve that much last year and is catching up to the better market conditions. This year and so we're going to have better margins and are seeking hydride, which really is the larger part of our business you have to remember acetic acid is small co product for us and so we're not that levered to what's going on in that market.

A lot of positives going on not to mentioned substantial cost tailwind for this segment when you think about.

Hi, shutdown schedule I mentioned in advanced materials, and how that's a tailwind that applies across the company.

And a good portion of that high shutdown unusually high shutdown schedule last year was in Ci right, we delayed a bunch of maintenance turnarounds from 2020 into 'twenty one for safety reasons in keeping people from getting Covid. So we had a high schedule. There. We also had.

Some unplanned outages like urea a few other outages in Ci in the fourth quarter.

That.

Were a headwind that will be all become a tailwind so you've got to cost tailwind operational cost savings improvements.

And then you've got these other business is growing that net against whatever the normalization of Ci is on the olefin spreads.

Thank you.

In your.

Post French plant.

Can you give us some insight into.

What you expect to your customer agreements to look like do you want to carve up the plant into certain segments and half.

I guess more defined radar for return that's less volatile based on various changes in costs or do you wish to go about it.

In a different way.

So we are.

We definitely are focusing and design these plants.

With an absolute focus on maintaining steady spreads as much as possible.

To provide a very reliable source of EBITDA for the company.

And margin stability and how it shows up every year. So that's our focus now there are two models and how you do that the first model is a certain percentage of this plant will continue to be specialties like what we're doing in kingsport, there's tremendous amount of demand in cosmetics and electronics.

And some very sort of unique high value packaging items.

That are specialty products that we sell every day now and we base those prices on on value and we have good in a differentiated position in the marketplace to maintain prices relative to raw material costs and so our pricing strategy for the specialty part of the plant would be what we do everyday and advanced materials.

In addition, and a good portion of the volume, we will be making PT for packaging.

And that will be the search our contracting model, we talked about at innovation day, Brad covered it pretty thoroughly.

And those will be take or pay long term contracts.

That the prices are based on the value that we have in providing mechanical recycling content to the marketplace remember that current food grade our pet is trading at a 40% to 50% premium to sort of Virgin PDT today and for the last couple of years in the European market and these will be cost pass through contracts. So we're not going to be <unk>.

<unk> risk on what the feedstock costs are.

Which makes a lot of sense for the customers because.

If the feedstock cost for US go up the food grid mechanical recycling costs are going to go up even more.

So this is a hedge for them about the risk of buying mechanical recycle content relative to.

What the cost pass through contract would provide which will be relatively more stable.

So those are the kind of contracts, we'd have so stable margins.

Arrived from both parts of the plant the exact mix of what is going to be specialty versus PT and textiles.

Still being determined by us.

Because we were seeing a lot more especially demand than we originally expected.

And so that's good those are higher margins and so we're working on how to balance all of that out but whatever we build is going to be flexible. So the lines that <unk> will have the ability to flex and make our especially co polyesters and the future. So we can always mix upgrade these facilities over time.

If that opportunity presents itself.

Okay, great. Thank you so much.

We will now take our next question from P. J.

Please go ahead.

Yes, hi, good morning.

Mark.

You want in the PT business. Before then you got out what is your confidence level to get this 12% auto seed that you were talking about in this.

In this.

The French plant.

And.

You talked about recycled pet.

We know it swings wildly.

Is that the.

The spread is kind of locked in.

Your mind to get that 20% auto. So can you just talk about that a little bit.

Sure in our absolute focus has been on this question because I have no intention of getting back into the merchant business that had wide swings in profitability I ran that business for quite some time.

Number of years ago, and not going back there. So we've been very clear with investors as well as customers that the approach. We're taking here is different and it goes back to what I just said.

Jeffs question right. The PT part of this business is going to be in long term.

<unk> contracts.

With.

Cost pass through structures, where we're not taking spread risk on what the price universes feedstock cost is that's the only way we're going to build this mine right. So those contracts have to get in place customers are engaged understand that thats whats in these LOI is that we're getting.

And of course, we got to still work through all the details are going to complete agreements, which is one of those milestones that Vince asked for a moment ago.

But to be clear, we're not get build the plan unless we get it that way right, we're not going to slide back into sort of the volatile business that is the normal beauty business, especially <unk>.

In our plant based in Europe that gives us much better circular economy benefit for anyone who wants to buy from this plan.

<unk>.

The circular economy is a very regional concept. So when we build plants in Europe or in the U S. It's a significant advantage relative to Asian competitors.

And how we can sort of provide sort of within region solutions.

Great. Thank you and congrats on that plant. My next question is I think we're really excited.

Yeah. My next question is quickly on inventory levels and it looks like inventories must be low given that you are anticipating raw materials here.

Whats the inventory levels at your customers when you look down the chain or look across your portfolio is it is it quite low and some companies are expecting some coiled back in business activity because of low inventories what's your take on that thank you.

So inventories are at historic lows for us and as far as we can tell with our customer's historic lows for them too.

I should have put that in my string.

And David's question around advanced materials, that's another driver of volume growth on top of.

<unk> market pent up demand.

And the logistics constraints being freed up at our innovation driving growth. There is this need to rebuild inventories all the way down the chain pretty much across every market I would say the only exception I can think of across all of our markets as to where the cigarette customers are about normal inventories, but automotive obviously is a huge.

The amount of pent up demand and need to build inventory building construction same thing durables.

We've seen a lot of growth.

There's still a lot of it.

Inventory rebuild in that stream.

And the list goes on.

In AFP as well.

With coatings and.

Our care chemicals and am attrition so.

Another upside that creates a lot of demand this year will still be pegged against what we can make and ship.

As we continue to expand capacity.

To enable more growth next year.

Thank you.

We will now take our next question from Kevin Mccarthy from vertical Research partners. Please go ahead.

Yes, good morning.

You signaled plans to deploy one $4 billion of capital in 2022, and I was wondering if you could help us understand what the mix of repurchases versus M&A might be also the timing of that deployment recognizing that you said.

To close the adhesive steel.

Would think relatively soon.

And then as a matter of clarification is that deployment included in your EPS range.

Yeah. Thanks, Kevin This is Willie after the question. So yes, we actually put a lot of the proceeds and the free cash flow to work at the end of 2021, so that highlight that.

Repurchased roughly 1 billion shares of which $700 million was during Q4, mostly.

November and December as we think about having $1 4 billion next year, it's a combination.

The proceeds from our adhesives divestiture, and we anticipate that that will be at the end of Q1.

From a closing standpoint.

As well as the additional.

I'll call it cash flow that we'll have.

From operations as we think about.

Also increased organic expense of $1 $4 billion, we would expect to start putting that to work in Q2.

When we would expect to do that and you can think about probably greater than $1 billion on share repurchases.

With additional Optionality as we think about the other $400 million as.

As we get into the back half of the year and see how things develop with our portfolio of bolt on and pipeline.

Great. That's helpful. And then maybe mark as a follow up to that what are you looking to do with the bolt on M&A pipeline.

Strategically and.

However, you want to frame that in terms of.

Product interest or geographic interest or other objectives.

In the U S and making progress on that.

So that is a huge amount of EBITDA in play for long term growth.

From an organic point of view.

On the specialty side accelerated by all this circular opportunity.

So bolt on M&A as a priority, but it's after those two topics.

We do see opportunities in advanced materials, and AFP as I've said before our priorities remain the same around.

Ways to open up new markets with compounding capability and a few targeted areas.

And especially plastics.

<unk> content of Triton is opening up new market opportunities in the <unk> space and some other more engineered performance dimensions than what we've had in our typical value proposition in electronics and automotive.

So a lot of opportunity there that we want to sort of make sure. We can exploit to grow we're always interested in growing our performance films business and have had a great track record of continued bolt ons there that should continue.

And then whether its performance.

Personal care or coating additives.

As those opportunities that leverage our very strong position in our technology platforms and our market positions that will look at it. So it's one of those four areas in animal nutrition right. So number of different places, where we could consider doing it.

That's helpful. Thanks, a lot.

We will now take our next question from Mike Sison from Wells Fargo. Please go ahead.

Hey, good morning.

A quick one on Asps.

Looking for 10% growth versus last year and any commentary you have four businesses.

And this segment now will they all sort of growing that line some above some below.

Yes.

First of all we're really excited to have the new focused AFP.

And it has very attractive growth when you look at what we're guiding to a recast $450 million EBIT last year.

Of the A&P business, excluding tires adhesives.

So that is very strong growth.

And it really is the same story just not as extreme as the advanced materials Troy earlier right. So we've got very good volume mix growth in coatings and personal care in water treatment in animal nutrition and specialty fluids all of those.

Elements of the market where drivers of growth last year.

<unk> are expected to continue to be drivers of growth this year.

This is also a place where we had to.

Unusually high shutdown schedule.

Last year, especially.

For the care solutions business.

And so you've got just that freed up capacity to enable more volume growth on top of market growth.

As we go into this year and then you've got.

Restocking because none of these customers have inventory as I mentioned earlier. So there is the restocking benefit and then there is the innovative growth.

He is continuing to gain traction here and starting to sort of.

Builds like like what we have in advanced materials across coatings in care solutions.

And so.

So those prices increased a lot. So we didn't have as much of a spread headwind in this business last year as we did in advanced materials. Therefore, this year, we're not going to have as much of a tailwind, but we're still going to have a meaningful tailwind.

And then of course, you've got the overall net cost structure being considerably lower this year for the company and AFP will pick up part of that.

Gets netted off by gross spend so well positioned to deliver growth and it's really across all the segments coatings residential construction is obviously incredibly tight automotive has plenty of room for recovery this year.

We've got some actually great growth in semiconductors in the coatings business.

Amatriciana is going to have a very good solid year in personal care is a great stable business with more capacity to sell this year.

Got it and then a follow up in advanced materials.

Curious if you can give us a little bit of maybe sensitivity in the $100 million spend recovery oil is pretty high now and.

If inflation gets worse, how does that affect that $100 million in and I guess, what would you just sort of make it up in intermediates in the event that happens.

Yes.

They'll be pretty good.

Yes.

First of all we said greater than $100 million.

So we have some room for error with.

The more recent inflation.

To deliver that $100 million.

Second.

We have good pricing power and a strong demand environment. We just spent considerable time talking about how a primary demand.

And our direct customer demand as well in access of of of what can be provided and.

And they need to rebuild inventory on top of that.

So we feel confident in that environment, we have pricing power and if we see raw material inflation go up we will.

Increased prices further from where we are today.

But I think the team has done an excellent job when you look at the raw material inflation really didn't accelerate toward until towards the end of August .

And by January we caught up to it that's actually in the world of specialty is actually very good excellence. When you think about the extremity of this inflation we were chasing.

And a very good position for the first quarter.

And to be clear what our assumption is is on a full year basis. This year raw materials and energy youre going to be a headwind.

Relative to last year, which is basically assuming.

Those prices remain elevated around fourth quarter.

We are also expecting distribution cost to be a headwind this year.

As the supply chain intentions are not resolving anytime soon and the prices. We currently have in place gives you that greater than $100 million tailwind. So I think we're in a good position.

Well it keeps going up we will raise prices.

Got it thank you.

We will now take our next question from John Roberts from UBS. Please go ahead.

Thank you are there any constraints on growing the green textile fiber business can we assume that for many years you can convert capacity from cig tow and.

Are there any constraints on putting more waste plastic into the gasifier to grow the asset deals component of that.

Yes. So there is no limitation to our ability to grow the Nio textiles business long term. So we definitely have tow assets available to be converted and obviously the tow market continues to have sort of 2% to 3% declined making additional capacity available.

So it is just time.

And capex to convert those lines.

Two.

Make the 95 years and we've had some really interesting breakthroughs on process innovation side to improve our ability to do that in a capital efficient manner. So we're really excited about that so.

We can definitely sort of convert capacity growth market.

And then when it comes to recycle content.

When we look at where we can go in textiles, where we can go in engineered thermoplastics, especially.

Plastics, where we could go in foodservice.

<unk>.

Which could be significant volume with our biodegradable polymers, we have the ability.

The micro beats, which isn't very much volume, but very high value.

We have plans in place where we can.

With reasonable capital improve the capability of front of the gasification complex to process whatever plastic waste, we need to support all of that growth.

And then what should we assume all of the PRT facilities going forward are going to have a mixed waste plastic processing as well <unk> got at Kingsport now youll have it in France.

Thinking before you would basically only have mixed waste in kingsport and the PRT plants would be really polyester only.

We will have it everywhere, it's really important just the scale of it will depend on the market and the opportunity that we're pursuing.

Whatever plastic you get even if it is quote unquote all polyester it's not.

When it shows up at the plant gate Theres, all kinds of stuff rocks aluminum other polymers that are still in that Vale.

And you really don't want to put that in the plant. So to some degree you've got to have this processing on the front to make sure that what you are putting in the front of the plant is as pure polyester as possible and this is one of the competitive advantage that I think that Eastman is going to have versus our competitors is this is a very efficient process, we've developed and patented on how to do that and if.

You don't have that ability no matter how good the Bel is that's being delivered to you youre going to have a serious conversion problem on whats going in the front end to getting high quality output on the back in one of the great things that 30 years of experience got us in working with.

Commercial scale plant.

Kodak and Eastman is.

We learned a lot about how to have high conversion conversion efficiency and how to how to have high energy efficiency.

And so our plant capable of 93% conversion on our polyester level from.

From what goes into what comes out which is incredibly high compared to most technologies.

But you still got to make sure. It is polyester youre sitting in the front end so that mixed plus processing is another competitive advantage that you put together with all of our other advantages that.

Gives us confidence that we can be a leader in this space.

Thank you.

We will now take our next question is from Frank Mitsch Fermium Research. Please go ahead.

Hey, good morning, Mark I can safely say that you had a more eventful Martin Luther King day than most people on this call that look that look pretty impressive that backdrop to be sure.

Yes.

One of the key drivers for growth in 'twenty. Two is the 75 million tailwind from plant shutdowns and operational disruptions year over year.

Like the slide on I do like Slide 16, it shows kind of the.

The plant shutdowns, but if I'm reading that correctly, that's a $5 million net benefit and you are talking about $75 million is that just.

Kind of the unplanned outages that you had in 'twenty one or.

And then obviously youre not.

Counting on for 'twenty, two but how should we think about that.

Thanks, John I'll, let Willie answer question, but Macfarlane visit was great and I put myself in lockdown for the two weeks leading up to it so I didn't get omicron and Couldnt go so.

But it was.

He was an impressive actually I have to say he was well brief detailed conversation that went for a long time with them around what he wanted to the circular economy and how we're going to be the largest investment in France. This year.

It was a good experience.

But to the cost question I'll, let Willie ticket.

Thanks, Frank for the question.

Winter storm here.

Obviously that seems like a lot.

Long time ago at this point.

And if you think about I'll call. It the momentum from 'twenty, we had to defer.

Several shutdowns end of 'twenty, one because of Covid.

And then also accelerated as Mark highlighted earlier deep.

The bottlenecks and to improve our reliability and it's not just the higher maintenance cost. It's the impact of that lost capacity that we had in 2021 that gives us.

The growth potential given the pent up demand in I'll call. It supply chain, that's still need to rebuild inventories.

Also there is an $85 million tailwind on variable comp that goes back to normal in 2022 and.

And we continue our operations transformations, and we think that will be another $50 million to $75 million.

Now also as we enter 2022 inflation is going to be much higher than traditional we think that number is probably $100 million to $125 million.

So as you look at this.

Net tailwind is greater than a $100 million.

And it likely offset any of the scenarios on Ci normalization of margins.

And.

In other words, our growth forecast really centers on the belief that we can grow specialty volumes.

And catch up to the raw material headwinds and also the logistics headwinds that mark highlighted earlier and on top of that we will be buying back shares.

Got you.

Very helpful very detailed.

And then if I could ask a follow up on the on the moving of the pricing.

In specialties up to the level of inflation during this quarter.

That you've caught up and I know youre guiding to keep raws flat for Q 'twenty, one through the balance of 'twenty, two but if you get a situation that perhaps raws do we rode what's your confidence level in being able to hang on to your higher pricing.

Specialties arena or how should we think about that interplay.

Yes.

It all comes down to sort of why things happen, Frank but if raws are eroding because supply demand just has a little bit more balanced but demand is still.

Reasonably good which I think I've covered earlier on our confidence in why that will be the case.

That becomes a tailwind.

So that would that would be an additional tailwind relative to our forecast.

Great. Thank you so much.

We will now take our next question from Bob <unk> from Goldman Sachs. Please go ahead.

Yes.

Thank you very much good morning.

I wanted to start out on that on the French announcement, the French plant.

You mentioned youre going to have the mixed plastic processing upfront what do you do with the non polyester stuff do you sell that to somebody else net gas adviser burns that or where does it go exactly.

Yes.

<unk> for the olefin world.

At worst case scenario it gets incinerated like it does today.

All of this material. These days is being incinerated right. So.

You got to keep in mind that the overall recycling industry is a significant need to sort of improve its infrastructure and its recycling right. So France alone is 600000 tons of polyester ways.

So on the I know on the packaging side, only about 15% to 20% of what is captured.

By the mechanical recyclers.

Actually finds its way back into a bottle.

The rest of it ends up being Downcycled.

So as we sort of optimize the system.

The mechanical recycling feedstock.

As we've talked about the grades over time, so we have to have.

This molecular recycling technology to close this loop and it has to be done because plastic is by far the most carbon efficient product versus other materials. So if we're going to be science, driven that's where this opportunity is so significant for us, but there's a whole ecosystem of recycling infrastructure, Bob that gets created.

It is mixed plastic processing actually just doesn't just enable polyester for us, but it actually enables a cleaner feedstock for other technologies at the same time.

And can you license that technology it sounds like you've got something that's novel there.

Maybe there is a stream of licensing stream there.

Yes, we're looking at licensing and partnering opportunities because it in itself can really unlock and enable a lot of feedstock recycling infrastructure affordably.

So we're very much looking at that.

As part of how we partner with people, who are going to source of feedstock.

And other opportunities.

And then again in Kingsport youre going to Youre going to use some of your material that did do some tightening renew.

When it makes sense, if you're going to have a suite of.

One of those being resident plant.

And then that DMT in para xylene to.

Yes.

It's unfortunate that simple a longtime ago DMT is a relatively high cost way to make the intermediate for making.

And really across the world for that matter is based on PTA.

You might as well just built a new plant.

More it's a better integrated return.

Got you great. Thanks very much.

You bet.

We will now take our next question is from Matthew Deyoe from Bank of America. Please go ahead.

Thanks.

I wanted to talk a little bit about.

And so in the conversions I mean is there a point where converging converting tow lines can happen at a.

Big enough rate that youll substantially tightened the tow market or.

Or is that unlikely or too far out or.

Not the right way to think about it.

No. It's a very good question.

We spent a lot of time on.

And as we look at.

The <unk> conversion as well as before you get to tow the ability to redeploy.

Lake the intermediate.

The polymer basically it goes into the spinning lines into foodservice.

And the thermoplastics.

Creates different ways to sort of redeploy the entire integrated stream and it created very tight stream relative to where it is today.

Greenhouse way.

So we're pursuing all of those options.

And whether it makes the total tow industry exceptionally tight isn't just about US right. It's also about what happens with our competitors and what they do with their capacity.

And we're very fortunate to have.

When you include the specialties.

With the fiber complex.

But.

It's not as clear that everyone else can do the same thing and so.

<unk>.

I hesitate to say that the industry in total is going to become extremely tight but I would tell you with the capacity reductions that have already happened in the tow industry over the last several years and were doing certainly tightening the market in a meaningful way.

Got it I appreciate that.

You might have kind of answered this a bit in Mike's question, but if I think about kind of the cadence on raw material recapture in AAM.

<unk>.

Is it really like can you weigh your back.

Or are we looking at here, where we're price overtakes raws, because I think things like advanced inner layers could see a meaningful step change.

Day, one just given annual pricing, but I don't know that that's.

The correct way to think about it.

Yes.

Day one.

This quarter relative to fourth quarter, youre going to see substantial spread expansion.

With the prices that we've put in place relative to Q4, that's a big driver of the not just annual outlook for advanced materials, but the strong improvement we're guiding to you about the trans materials on a Q1 to Q I'm, sorry, Q4 to Q1 basis combined with the volume and mix growth. It really is a big substantial step up from where we were.

Were in the fourth quarter. So, yes, it's going to start happening right now it picks up momentum, though so.

The expansion it gets more significant in the second third and fourth quarter.

When you look at it.

On a year over year basis.

For where all the value comes from.

Not just on spread but also on volume mix improvement.

We were really constrained because we're normally seasonally stronger in the second quarter and volume mix, but.

Last year, we couldn't do that because of the shutdown that we had to do due to trade and conversion so.

A lot better ability to grow volume in the second quarter as well as spread improvement.

And we'll actually have a very good set.

Second quarter relative to the first quarter when you put that together so that's happening now.

Thanks.

We will now take our next question from Alex <unk> from Keybanc. Please go ahead.

Thank you and good morning, everyone. Marc So waste sorting is one of the key stats on recycling you talked about your experience was proprietary sorting process. So in terms of scale.

<unk> done so far in this area how much of a scale increase.

When youre going to be dealing in France, or other sites, how much of an increase of operational risk isn't it.

Yes, theres really not much operational risk and the mixed plastics processing part of cleaning up the feedstock before the plant and its very low capital and the way to do it.

So.

We've already Arkansas.

Constructing the facility here for sort of a 110, Kmt or inbound feedstock.

To this facility.

The same.

Larger scale facility will be built in Europe .

What's interesting is it's modular so.

There is definitely some design options there with our sourcing partners our feedstock sources.

We're trying to think that through.

And a follow up on our pad.

What is your cost position relative to food grade mechanical or a path and on the pricing side do you think your customers would be willing to pay a premium for chemically recycled TVT versus mechanical or pad.

So.

Our cost structures, we're not going to sort of get into debating and discussing sort of detailed cost structures, but what I can say is that we.

When we look at our cost structure and the pricing.

Which is being.

Centered around the alternative material, which is mechanical recycle content.

We are in a very good position to have spreads that will then be sort of locked in and cost pass through contracts.

To deliver a greater than 12% return.

The.

From a premium point of view.

When you think about the quality of mechanical recycle versus our molecular recycled product our product is much higher quality.

Because the nature of Unzipping the polymer in purifying. It allows us to then have identical intermediates to what we use today from fossil fuels. So the products we make.

Both specialty as well as PT will literally be identical no compromise rights that our air quality compromises with mechanical recycle.

Hayes and color and its limited ability to be.

Recycled over time.

So we think and believe.

It's a more valuable product customers I think understand that.

But what's interesting is the way they many of them are looking at it as well our premium.

Is going to be in this zone.

It's actually.

Likely to be a hedge against the risk of mechanical recycled <unk> being a lot more expensive you've got to remember mechanical recycling can't remotely.

Provide enough material for the recycled content targets for major brands et cetera themselves in Europe , and the U S. So the supply demand situation on the mechanical is going to continue to get tighter.

And so we provide a reliable source of very high quality product and we believe that demands.

A reasonable premium.

If we can let's make the next question the last one please.

We will now take our last question from Laurence Alexander from Jefferies. Please go ahead.

Good morning, two quick ones.

Yeah.

The level of urgency at the customers about restocking how do you see it as a more of a 2022 couple of quarters event or do you see it as a more drawn out tailwind that spills into 2023.

And can you give us update your thinking on the carbon renewal platform specifically.

Given the feedback you've had and the urgency both political tail wins and customer interest.

What we should see on that front.

Sure so on the inventory restocking question.

Presuming, we've got a growing economy this year around the world.

I think the world is going to struggle to keep up with demand.

It's hard to see that.

Anytime soon.

Going to the customers or Eastman for that matter are going to get inventories back to where they should be for a more stable level of performance.

So I think this could drag out through the year and go into next year, especially if the economy is.

Reasonably good.

When it comes to the CRT.

A lot of attention on the polyester renewable technology, and where we're going with those secure platforms, but I'm equally excited.

About what we're doing with our Cellulosic that is.

Stream, that's core to who Eastman has been around for almost 100 years.

And it's amazing to see how sustainability is changed.

Mindset around these products, where they've always sold on performance they've never sold on sustainability until three years ago.

And now you've got all these great performance elements and different applications from engineered thermoplastics to textiles to now.

Foodservice.

Being compostable and micro beads being biodegradable, so you've got a tremendous amount of growth opportunity across that spectrum of businesses that drive growth and am AFP and fibers.

And as I said earlier, we are confident in the technology, we've been operating it now for quite some time.

Processing plastic waste really well there.

There are reasonable capital ways to sort of expand that capacity and grow with all of these markets.

And the margins in our Cellulosic.

Some of if not the highest margins in the company. So as we grow this stream.

Youre getting a nice mix upgrade not just the volume growth that asset utilization benefit. So it's all good.

So with that I'd like to just wrap up and just make a couple of quick comments.

We're really excited about our strategy to grow the company, believing the specialty model the circular platform the strength of our cash. We think these are all differentiators, but what is incredibly important for me to mention and highlight right now is I couldnt be on this call talking about all of this if it wasn't for the employees we have around the world.

They've encountered phenomenal challenges and the chaos that we have.

Faced with this sort of snapback in demand and how to serve it and get through it.

Incredibly difficult logistics situations supply chain situations, pushing our plants incredibly hard.

And supporting all of that in every function across the company and at the same time they were able to.

Continue our specialty growth platforms of innovation across the company and add a circular platform on top of it.

They go into the plant every day since Covid started managing in a very difficult operating environment, while having to wear a mask and follow these safety protocols that's incredibly difficult.

And the real heroes in our company as the operators, who showed up and kept customer supply around the world every day.

<unk>.

My deepest appreciation of everyone for what we've been able to do so with that I'd love to thank you for that.

Complement all of them and thank you for your interest in Eastman and have a good day.

This concludes today's call. Thank you for your participation you may now disconnect.

Q4 2021 Eastman Chemical Co Earnings Call

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