Q3 2023 Celanese Corp Earnings Call

Speaker 1: Hello and welcome to the Selenys Q3 2023 earnings calling webcast. If anyone would require operator assistance please press star zero under telephone keypad. A question and answer session will follow the formal presentation.

Hello, and welcome to the Celanese Q3, 2023 earnings call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad, Oh question and answer session will follow the formal presentation. You May press star one at any times, replacing the question queue as a remark.

Speaker 1: You may press star one at any time to be placed in the question cue. As a reminder, this conference is being recorded.

This conference is being recorded.

Speaker 1: It's not my pleasure to turn the clover to Brandon Ayash in this relations.

Now my pleasure to turn the call over to Brendan I asked you know that's the relations. Please go ahead.

Speaker 2: Thanks Kevin. Welcome to the Cellonies Corporation, third quarter, 2023, Ernie.

Thanks, Kevin and welcome to the Celanese Corporation third quarter 2023 earnings Conference call. My Name's, Brandon I asked Vice President Investor Relations and with me today on the call are Lori Wright Kirk Chairman of the Board and Chief Executive Officer, and Scott Richardson, Chief Financial Officer.

Speaker 2: My name is Brandon Ayash, Vice President and Investor Relations, and with me today on the call are Lori Ryarkirk, Chairman of the Board and Chief Executive Officer, and Scott Richards in Chief Financial.

Speaker 2: Salonies is to lead its third quarter earnings release via business wire and post you prepared comments on our investor relations website yesterday afternoon. As a reminder, we'll discuss non- GAAP financial measures today. You can find definitions of these measures as well as reconciliation to the comfortable GAAP measures on our website. Today's presentation will also include

Celanese distributed its third quarter earnings release via business wire and posted prepared comments on our Investor Relations website yesterday afternoon.

As a reminder, we'll discuss non-GAAP financial measures today.

You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website today's.

Today's presentation will also include forward looking statements.

Speaker 2: Please review the cautionary language regarding forward-looking statements which can be found at the end of both oppressorly as well as the prepared comments.

Please review the cautionary language regarding forward looking statements, which can be found at the end of both the press release as well as the prepared comments.

Speaker 2: Form 8K reports containing all of these materials have also been submitted to the ECU.

Form 8-K reports containing all of these materials have also been submitted to the SEC.

Speaker 2: Before opening it up for your questions, let me turn it over to Laurie to provide a few introductory comments.

Before opening it up for your questions, Let me turn it over to Lori to provide a few introductory comments.

Speaker 2: Thanks, Brandon. So we've done and announced a lot recently. So I just wanted to take a minute or two to emphasize again exactly what we are all working so hard to achieve at cell.

Thanks, Brennan, so we've done them and announced a lot recently, so I just wanted to take a minute or two to emphasize again exactly what we are all working so hard to achieve that celanese.

Speaker 3: I can confidently say that at no point in our history has there been a greater opportunity for cellarines to deliver significant earnings growth as in the next few years. In the acetil chain, we continue to enhance our earnings power and optionality with projects like the Acetic Acid Expansionant Clear Lake and the Methinol Expansion, also Acid Clear Lake, which will dramatically strengthen our sustainable product off.

I can confidently say that at no point in our history has there been a greater opportunity for celanese to deliver significant earnings growth as in the next few years in the acetyl chain, we continued to enhance our earnings power and Optionality with projects like the acetic acid expansion at clear Lake and the methanol expansion also like the lake which will dramatically.

We strengthen our sustainable product offerings of <unk>.

Speaker 3: Of course, in Engineering Materials, we continue to integrate and synergize the M&M acquisition, which transforms EM into the preeminent global specialty materials provider.

Course in engineering materials, we continue to integrate and synergize, the Eminem acquisition, which transforms <unk> into the preeminent global specialty materials provider.

Speaker 3: This important valuable work has been made more challenging in the demand backdrop that remains exceptionally weak and valid.

This important and valuable work has been made more challenging demand backdrop that remained exceptionally weak and volatile our visibility into future macro conditions as limited regardless. Our teams have worked tremendously hard to deliver three consecutive quarters of earnings growth since closing, the MNF acquisition and to position us to meaningfully.

Speaker 3: Our visibility into future macro conditions is limited. Regardless, our teams have worked tremendously hard to deliver three consecutive quarters of earnings growth since closing the M&M acquisition and to position us to meaningfully exceed our full year objective to reduce net debt by $1 billion in 2023. The work has not been easy and I sincerely thank each of our employees for their individual contributions and dedication.

They exceed our full year objective to reduce net debt by $1 billion. In 2023. The work has not been easy and I sincerely. Thank each of our employees for their individual contributions and dedication.

Speaker 3: Quite frankly, while the work is moving forward at pace, the macro environment has temporarily leased the mass some of the underlying financial benefits of our actions to strengthen our business. But we remain resolute in continuing to take decisive and controllable actions.

Quite frankly, why the work is moving forward at pace the macro environment has temporarily in the mask some of the underlying financial benefit of our actions to strengthen our business, but we remain resolute in continuing to take decisive and controllable actions. Our most recent actions, including the announced changes to our leadership team and manufacturing.

Speaker 3: Our most recent actions, including the announced changes to our leadership team and manufacturing footprint, our evidence of our ongoing commitment to drive earnings growth and execute against our delivery and sheeting plan. The purpose behind the changes I've made in our executive leadership team is to enhance the alignment of our individual strengths and experience to accelerate and deliver on the many value-enhancing opportunities before us.

<unk> footprint are evidence of our ongoing commitment to drive earnings growth and execute against our deleveraging plan. The purpose behind the changes I've made and our executive leadership team is to enhance the alignment of our individual strengths and experience to accelerate and deliver on the many value enhancing opportunities before us Scott.

Speaker 3: Scott, Chuck, and Ashley are exceptionally well-prepared for their new roles, and I am confident these changes will immediately enhance the value we drive as a collective leadership team.

And Ashley our exceptionally well prepared for their new roles and I am confident these changes will immediately enhance the value we drive as a collective leadership team I speak for our leadership team and broader Celanese insane, we are fully engaged and committed to delivering on the opportunities before us with that Kevin Let me turn it back over to you to open it up for <unk>.

Speaker 3: I seek for our leadership team and broader felonies and say, we are fully engaged and committed to delivering on the opportunities before us. With that, Kevin, let me turn it back over to you to open it up.

Questions.

Speaker 1: I'll be conducting a question and answer session. If you'd like to be placed in the question, Q, please press Star One on your telephone keypad. A confirmation tone will indicate your line is in the question, Q. One moment please.

Certainly, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. One moment. Please while we poll for questions.

Speaker 1: Our first question is coming from Mike Lighthead, from Barkley's Riliner's Alive.

Our first question is coming from Michael I had from Barclays. Your line is now live.

Speaker 4: Great, thanks. Good morning and congrats to Scott, Chuck, and Ashley on the new rules. Lori, I wanted to start on engineer materials pricing. I think in the prepared remarks, you made a comment that pressure is widened throughout the year, but nothing indicates it's structural. So maybe just talk a bit more about your confidence here or maybe what you've seen in previous downpickals versus now. Just what gives you the confidence in making that comment.

Great. Thanks, Good morning, and congrats to Scott, Chuck and actually on the new roles.

Laurie I wanted to just start on engineered materials pricing I think in the prepared remarks, you made a comment that pressure is widen throughout the year, but nothing indicates that structural so can you maybe just talk a bit more about your confidence here and maybe what you've seen in previous down cycles versus now just what gives you the.

In making that comment.

Yeah.

Speaker 3: Yeah, if I think about pricing, and again, I'll split it into two, you know, what we've really seen is pretty good price stability in differentiated products. What we've seen then is more of the volume impact there associated with consumer durable, consumer electronics. You know, there we've just seen a pretty significant volume decline as we've seen consumer demand come off this year as people have shifted their spending to more services and experiences. You know, where we've really seen the price.

Yeah, if I think about pricing and again I'll split it into two you know what we've really seen it's pretty good price stability and differentiated products, what we've seen them as more of the volume impact there associated with consumer durable consumer electronics. There. We've just seen a pretty significant volume decline as we think and say.

Where demand come off this year as people have shifted their spending to more services and experiences you know where we've really seen the price pressure is for more standard grade materials, where you know we're seeing quite a bit of linked in the industry in terms of supply softer demand and you know everyone having to take price.

Speaker 3: where we're seeing quite a bit of length in the industry in terms of supply, softer demand, and everyone having to take price action to come down. What I would say is one of the reasons we're taking the steps that we've announced around Intrope and other, is really to better position our supply with the current demand scenario by shutting down some of our higher cost operating capacity, filling those customer needs with lower cost capacity we already have, or even purchases if that's lower. And then in the future, as we see demand start to come.

Soon to come down you know what I would say is you know one of the reasons. We're taking this step that we've announced around intra another is really to better position our supply with the current demand scenario by shutting down some of our higher cost operating capacity filling those customer needs with lower cost capacity, we already have or even.

Purchases of that slower and then in the future as we see demand start to come back to what I would consider a more normalized level, we should be able to provide that demand from other asset that we already have in our network and through no and low cost. The bottleneck. So you know again I think we're in a kind of unique position structurally with very little exports out of.

Speaker 3: And then in the future, as we see demand start to come back to what I would consider a more normalized level, you know, we should be able to provide that demand from other assets that we already have in our network and through no and low-cost bottlenecks. So, you know, again, I think we're in a kind of unique position structurally with very little exports out of China, a very soft, soft environment in Europe .

China, a very soft soft environment in Europe, and feel confident in time it will come up I mean auto is a great example, auto it's been very solid this year, we expect that to continue medical has been solid. So I think we really are just seeing a reflection of consumer preference and consumer spending, which we believe it's temporary and off the highs.

Speaker 3: And, you know, feel confident in time it will come up. I mean, auto is a great example. Auto has been very solid this year. We expect that to continue. Medical's been solid. So I think we really are just seeing a reflection of consumer preference and consumer spending, which we believe is temporary and off the highs that we saw in 2020.

We saw in 'twenty one.

Speaker 4: Great, thank you. And then a question for Scott, maybe on free cash flow. I think in Lori's 24 outlook, she laid out in the prepare remarks maybe three or four hundred million of earnings improvement next year. You guys are probably getting a similar type of amount of working capital benefit this year. So as we think about free cash generation next year, as relatively flat year on year, a good starting point today, or they're further working capital or other cash benefits, you think you can get next year.

Great. Thank you and then a question for Scott maybe on free cash flow I think in lori's twenty-four outlooks you laid out in the prepared remarks, maybe three or $400 million of earnings improvement next year.

Guys are probably getting a similar type of amount of working capital benefit this year.

As we think about free cash generation next year is relatively flat year on year, a good starting point today or is there further working capital or other cash benefits. You think you can get next year.

Speaker 2: Yeah, thanks, Mike. You know, we're going to work to ensure that as we see earnings growth, that we put that as much to the bottom line of free cash flow as possible. You know, we've called out CapEx being $100 million lighter next year as well. I think the variable will be working capital, and it depends upon kind of what happens with raw material pricing, as well as depending on kind of where sales are and what happens with the accounts receivable line. But, you know, we're going to do everything we can to continue to bring inventory down next year. There could be an opportunity for further reduction, depending on what happens with demand, as well as in the raw material lane.

Yeah. Thanks, Mike I, you know, we're going to work to ensure that as we see earnings growth that we put that as much of it to the bottom line and free cash flow as possible.

We've called out Capex being $100 million lighter next year as well I think the the variable will be working capital and it depends upon kind of what happens with raw material pricing as well as depending on where sales are and what happens with the accounts receivable line, but we're going to do everything we can to continue to bring them in.

Tori down next year, there could be an opportunity for further reduction depending on what happens with demand as well as in the raw material landscape.

Speaker 5: Great, thank you.

Great. Thank you.

Speaker 1: Thank you. Next question is coming from Jeffs the Corskis from JP Morgan, your line of now live.

Thank you. Your next question is coming from Jeff Zekauskas from Jpmorgan. Your line is now live.

Thanks very much.

Speaker 6: I think Eastman's filter toe profits are up, I don't know, 225 million through the nine months. There was no mention of filter toe in your remarks. How's that business doing? And how is it affecting?

I think eastland's.

Filter tow profits are up I don't know $225 million through the nine months. There was no mention of filter tow in your remarks.

How is that business doing and how is it affecting.

The acetyl chain earnings.

Speaker 3: Jeff, as you know, we are running that as an end-to-end chain now. We're treating toe as we do other downstream derivatives.

Jeff as you know we are running that as a as an end to end chain now are treating tow as we do other downstream derivatives.

Speaker 3: What I would say is we're seeing similar impacts in tow. Now, we are seeing in the second half a reset of contract pricing, which is bringing those margins down slightly from the first half, but that was anticipated with the way the contracts are set up. But I would say, you know, we're still on track to exceed the $245 million that we set out earlier this year as our target.

What I would say is we're seeing similar impacts in tow now we are seeing in the second half a reset of contract pricing, which is bringing those margins down slightly from from the first half, but that was anticipated with the way the contracts are set up but I would say you know we're still on track to exceed the 245 million.

And that we set out earlier this year is our target for scale.

Speaker 6: I'm, you're, you're closing your German, your German nylon.

Yeah.

You're closing your German your chairman nylon facility.

Speaker 6: Is that about 15 percent of your nameplate capacity in nylon? And what utilization rate are you running at in nylon generally?

That about 15% of your nameplate capacity in nylon and you know what what utilization rate are you running out of nylon generally.

Speaker 3: Yeah, so UNITROP actually is one of the four plants that we have for nylon and it represents right at 25% of our total capacity.

Yeah. So in Europe actually is one of the four plants that we have for nylon and it represents right at 25% of our total capacity.

Speaker 3: I don't have the overall total utilization numbers in front of us, but I would characterize this just as much like we've done with POM and other assets where we've really worked on, you know, concentrating our footprint.

I don't have that overall total utilization numbers in front of us, but I would characterize as just as much like we've done with with palm and other assets, where we really worked on.

Concentrating our footprint, taking it out either underutilized or less profitable assets in order to ship volume into lower cost and more profitable asset you know getting more flexibility in our networks in terms of purchasing either of you know polymer are different raw material.

Speaker 3: Taking out either underutilized or less profitable assets in order to shift volume into lower cost, more profitable assets, you know, getting more flexibility in our networks in terms of.

Speaker 3: purchasing either of polymer or different raw materials, depending on where we produce. That's what we're trying to build here with the intro shut down is we knew going into the deal that we believe that DuPont had excess capacity. Now that we've had some time to look at it, we believe shutting down the intro is the best way to really adjust our cost basis on nylon while still maintaining compounding in Europe , which is necessary for our customers.

Depending on where we produce you know that's what we're trying to build here with the interim shut down and we knew going into the deal that are we believe that Dupont had excess capacity now that we've had some time to look at it we believe shutting down the interrupted the best way to really adjust our cost basis on nylon while still.

Maintaining compounding in Europe, which is necessary for our customers.

Speaker 3: You know, but I would say this is very consistent with what you've seen us done over the last ten or so years in Celanese where we've probably shut down over 15 facilities in the last ten years as we've implemented these models.

Yeah, but I would say this is very consistent with what you've seen is done over the last 10, or so years and celanese, where we've probably shut down over 15 facilities in the last 10 years as we've implemented these models.

Great. Thank you so much.

Speaker 1: Thank you. Next question today is coming from Mike Sisson from Wells Fargo. Your line is now live.

Thank you next question today is coming from Mike Sison from Wells Fargo. Your line is now live.

Speaker 7: Hey, good morning. Um, yeah, I've been told I need to do more math these days. So if I add up sort of your, your bridges that you gave for 24 and just use the lower end of the, um, inventory stuff, it looks like a no volume growth. You could do $12 or better. Um, is that the right math? And then can you help us on what or how to frame up volume and inflation or deflation upside?

Hey, good morning.

And told they need to do more mass. These days, so if I add up sort of your your bridges that you gave for 24 end and just use the lower end of the inventory stuff looks like on no volume growth you could do $12 or better is that the right math and then can you help us on what.

Or how to frame up volume and inflation or deflation upside.

24.

Speaker 3: Yeah, Mike, we laid out the various buckets. So I think you can do them out. I mean, just to reiterate, we do expect to get more than 150 million in additional M&M synergy.

Yeah, Mike.

We laid out the the various buckets. So I think you can do the math I mean, you know just to reiterate you know, we do expect to get more than 150 million and additional Eminem synergy.

Speaker 3: With some of the acceleration of the manufacturing footprint optimization, hopefully we can exceed that amount as well since we didn't have all of that baked in.

With some of the acceleration of the manufacturing footprint optimization, hopefully, we can exceed that amount as well since we didn't have all of that baked in we should get another 100 million once we get clear lake acetic acid start it up.

Speaker 3: We should get another $100 million once we get Clear Like Acetic Acid started up.

Speaker 3: Debt service goes down by about $50 million. You know, we'll have less inventory reduction next year, so less margin impact from that. And then, you know, I think as you're saying, the big issue there is really going to be, you know, what is the benefit we see for flushing through higher cost inventory? And you know, this could be a very big number. It will depend on what happens with ROS. As you know, we're in quite a volatile raw material environment right now.

Debt service goes down by about 50 million you know, we'll have less inventory reduction next year, so less margin impact from that and then you know I think as you're saying the biggest the big issue. There is really going to be you know what is the benefit we see for flushing through higher cost inventory and you know this could be a very big number it will depend.

On what happens with Ross as you know we're in quite a volatile raw material environment right now and then you know what happens with them.

Speaker 3: And then what happens with...

Speaker 3: demand going forward if demand stays low, you know, then, you know, I think these are the things we're focused on because these are what we can control. If demand goes up, obviously we'll get more margin, but we will also probably see some increase again in working capital. So I would just say there's still a lot of volatility and uncertainty around next year, and that's why we're just really focusing on those big buckets that we outlined that are in our control. Today's recalls. For Metro 8, Pay transparency to demand ret Hay?r, theéqu peligrosal of some wind energy sector with its system found on the

Going forward if demand stays low you know then you know I think the these are the things we're focused on because these are what we can control if demand goes up obviously, we'll get more margin, but we will also probably see some increase again in working capital. So I would just say theres still a lot of volatility and uncertainty around next year and that's why we're just really folk.

As seen on those those big buckets that we outlined that are in our control.

Got it and then.

Speaker 7: When you think about 2024, you know, what do you think?

When you think about the 'twenty 'twenty four you know what what do you think.

Speaker 7: What could happen to China, auto, and some of your own markets? Any initial thoughts when you talk to customers of what the design environment could be next year?

Could happen two to China auto and some of your end markets.

You know any initial thoughts when you've talked to customers of of what the demand environment could be next year.

Speaker 3: Yeah, you know, again, if you could tell me what December is going to look like, maybe I'd be better at thinking about 2024. I mean, things are very uncertain and volatile at this point. You know, I would say on auto, you know, consistent with the forecast you're seeing on auto bills, we expect to see some moderate growth in auto really across all sectors, a couple percent.

Yeah I get you know again, if you can tell me what December is going to look like maybe I'd be better at thinking about 'twenty 'twenty four I mean things are very uncertain and volatile at this point you know I would say on auto you know consistent with the forecast you're seeing on auto builds we expect to see some moderate growth in auto really across all.

Sector's, a couple percent and and our growth should track that we expect medical continues to be strong I would say you know based on conversations with customers I would expect some moderate growth across next year as we start to see some demand coming back, but I would also.

Speaker 3: and our growth should track that. We expect medical continue to be strong. I would say, you know, based on conversations with customers, I would expect some moderate growth across next year as we start to see some demand coming back. But I would also say the timing of when that starts and the pace at which that happens is very uncertain.

Say the timing of when that starts and the pace at which that happens is is very uncertain.

Speaker 3: So, you know, certainly a lot less conviction at this point on next year than we might usually have at this point given the volatility we're seeing.

So you know, it's certainly a lot less conviction at this point on next year than we might usually have at this point given the volatility we're seeing.

Got it and congrats to everybody.

Thank you Mike.

Speaker 1: Thank you. Next question today is coming from Josh Spector from UBS. Your line is now live.

Thank you next question today is coming from Josh Spector from UBS. Your line is now live.

Speaker 8: Yeah, hi. Thanks for taking my question. So I wanted to follow up on the price cost or like the inventory or lower cost inventory that can flow through. I guess, Lori, you sound a bit more uncertain on that, but it still could be large. I guess if you look at where pricing is in fourth quarter, is that a level, if that holds, you would actually get a spread benefit into next year? Or do you need pricing to move up from here? So just wondering around the kind of moving parts there.

Yeah, Hi, Thanks for taking my question. So I wanted to follow up on the price cost or like the inventory at a lower cost inventory that can flow through I guess Laurie.

A bit more uncertain on that but it still could be large.

Yes, if you look at where pricing is in fourth quarter is that a level. If that holds you would actually get a spread benefit into next year or do you need pricing to move up from here.

Wondering around the kind of moving parts there.

Speaker 3: No, look, even I think at the pricing we're seeing now, we are starting to see some pull through of that lower cost inventory. And we see, you know, that as a moderate impact on our quarter on quarter growth. So I think even at these pricing, we would expect to continue to see some portion of that pull through. Obviously, if we saw pricing increase, that would help more. But, you know, we also have to consider what the price of raw is going in. And we are seeing some upward pressure on raw materials this quarter as well.

No look even I think at the pricing. We're seeing now we are starting to see some pull through of that lower cost inventory and we see that as a as a moderate impact on our quarter on quarter growth. So I think even at these pricing we would expect to continue to see some portion of that pull through obviously, if we saw pricing increase that would help more but.

We also have to consider what the price of raws going in and we are seeing some upward pressure on on raw materials this quarter as well, but look I would say in all cases, we expect some impact from that flushing through up higher cost inventory. It's just the magnitude will depend on rods as well as future pricing.

Speaker 3: But, look, I would say in all cases we expect some impact from that flushing through of higher cost inventory. It's just the magnitude will depend on ROAS as well as future prices.

Speaker 8: Okay yeah I guess just maybe dependent that when you talk about it being the biggest bridge item if pricing stays where it is is that a true statement or does that come down?

Okay, Yeah, I guess, just maybe dependent that it when you talk about it being the biggest bridge item if pricing stays where it is is that a true statement or does that come down.

Speaker 3: I would say if pricing and raw stay where they are, that would still be a true statement.

I would say pricing in raws stay where they are that would still be a true statement.

Speaker 8: Okay. Thank you. I'll leave it there. Thanks.

Okay. Thank you I'll leave it there thanks.

Okay.

Speaker 1: Thank you. Next question today coming from Vincent Andrews from Morgan Stanley . Your line is now live.

Thank you. Your next question today is coming from Vincent Andrews from Morgan Stanley. Your line is now live.

Speaker 6: Thank you and good morning to all Congratulations to those with with with with with new role.

Thank you and good morning to all and congratulations to those with with with no new role excuse me.

Speaker 2: I just wanted to ask a couple of things. One, in Asatils in the third quarter, there clearly was a benefit despite a bunch of headwinds from outages in Asia. So, I'm wondering if you have any way of sort of sizing that in the third quarter and what you anticipate in the fourth quarter. It seems like there's some comments that you're still going to have some higher pricing flowing through in the fourth quarter. And I'm just wondering if that's just sort of a.

I just wanted to ask a couple of things one in Asa pills in the third quarter. There clearly was a was a benefit.

A bunch of headwinds from outages in Asia. So I'm wondering if you have any way of sort of sizing that are in the third quarter and what you anticipate.

In the fourth quarter. It seems like there were some comments that you're still going to have some some higher pricing flowing through in the fourth quarter and I'm. Just wondering if that's just sort of.

Speaker 2: a delay of inventory slowing through or what. And then secondly, on the tax rate, I understand why it's lower this year and that it was originally contemplated in the lower guidance. But if the demand environment's gonna stay not all that different from where it is today, at least through the first half next year, does that mean you have a lower than normal tax rate next year as well? Thanks. Yeah, then, let me see. Thank you.

A delay of inventory flowing through or or or what and then secondly on the tax rate.

I understand why it's lower this year and that it was originally contemplated in the lower guidance, but if the demand environment is going to stay not all that different from where it is today at least through the first half next year does that mean, you have a lower than normal tax rate next year as well. Thanks.

Yeah, Let me see let me see if I can answer that you know what I would say is we did see a positive influence from the higher priced Asia pricing that we saw as a result of supply outages in the third quarter. Most of those occurred in the last few weeks of the year I would think of those as.

Speaker 3: You know, what I would say is we did see a positive influence from the higher Asia pricing that we saw as a result of supply outages.

Speaker 3: in the third quarter. Most of those occurred in the last few weeks of the year.

Speaker 3: I would think of those as, you know, pretty much offsetting the impacts of the contract pricing reduction that we had called out.

As you know pretty much offsetting the and the impact of that contract pricing reduction that we had called out and you know the turnaround impact that we saw what I would say is going into the fourth quarter. Now we're really we've seen that price dropped back to closer to the cost curve maybe.

Speaker 3: and, you know, the turnaround impact that we saw.

Speaker 3: What I would say is, going into the fourth quarter now, we're really, we've seen that price drop back to closer to the cost curve, maybe slightly above it, so we've kind of lost that benefit. In China, we will see a little bit of benefit, although significantly less of that in the Western Hemisphere in the fourth quarter, you know, because typically Western Hemisphere pricing lags by about a quarter. So, you know, we'll see some benefit, but not to the same extent that we saw the benefit in the third quarter.

Slightly above it.

So we've kind of lost that benefit in China, we will see a little bit of benefit although significantly less of that in the western hemisphere in the fourth quarter, you know because typically western hemisphere pricing lag by about a quarter. So you know, we'll see some benefit but not to the same extent that we saw the benefit in the third quarter.

Speaker 2: And then on the tax rate, Vincent, a lot's just going to depend upon the geographic mix of earnings. If things stay exactly as they are this year, then, you know, certainly we could be at lower levels. If we see things normalize back to kind of what I would say is the normal mix of geographic demand, then we'd be back more next year in that kind of 12 percent range.

And then on the tax rate than say no. A lot is just going to depend upon the geographic mix of earnings if things stay exactly as they are this year, then certainly we could be at lower levels. If we see things normalize back to kind of what I would say is that the normal mix of geographic demand then we'd be back more.

Our next year and in that kind of 12% range.

Thanks very much.

Yeah.

Speaker 1: Thank you. Next question today is coming from David Beckmeyer from Deutsche Bank. Your line is now live.

Thank you next question today is coming from David Begleiter from Deutsche Bank. Your line is now live.

Speaker 6: Thank you and good morning and first congratulations to Scott Truck and Ashley.

Thank you and good morning, and first congratulations to Scott trucking nationally.

Speaker 6: uh... lori and scott just funny and pricing uh... pricings up about thirty eight percent in twenty one twenty two

Lori and Scott just on the E M pricing, our pricing is up about 38% in 'twenty one 'twenty two.

It should be done this year, maybe around 8% if we could go back to pre 'twenty one cost levels do we retain some portion of this price increase and if so why is that the case.

Speaker 6: If we go back to pre-'21 cost levels, do we retain some portion of this price increase? And if so, why is that?

Speaker 3: That seems like a very long time ago Dave. What I would say is the good news is we are seeing volumes come back and so in some areas like medical, like auto, we're kind of back to 2019 levels. I think, you know,

That seems like a very long time ago that.

You know what I would say is the good news is we are seeing volumes come back and so in some areas like medical like auto we're kind of back to 2019 levels.

I think you know.

Speaker 3: So pricing, similar, or margins probably similar. Again, consumer domain.

So pricing similar or are.

You know margins, probably similar again, you know consumer demand.

Speaker 3: Durable goods, electronic, very, very soft. Pricing for differentiated grades, okay. I think that's something that we can keep.

Terrible good electronics, very very soft I get pricing for differentiated grades. Okay. I think that's something that that we can keep them I think you know with the.

Speaker 3: I think with the current low demand and therefore the long supply for some of those standard grades, we're going to need to see some more demand before we can get the pricing back up to those kind of levels.

Kind of the current low demand and therefore, the long supply for some of those standard grade you know it we're gonna see need to see some more demand before we can get the pricing back up to those kind of level.

Speaker 2: Yeah, David, I would just add, I think, you know, given some of the structural changes that we're making, we do think we should be able to hold that price, you know, as we get back to kind of normalize laws. And, you know, I think, you know, one of the things we've talked about is now with the engineer materials business and the ask-teel business being about the same size, you know, as we see in more normalized demand environment.

Yeah, David I would just add I think you know given some of the structural changes that we're making we do think we should be able to hold that that price you know as we get back to kind of normalize raws and you know I think you know one of the things. We've talked about is now with the engineered materials business and the Hill's business being about the same.

As we see in more normalized demand environment.

Speaker 2: the raw material landscape move up and down, you know, we should see some counter movement in margins in EM versus Assateel. So, you know, overall, it should kind of fundamentally lower earnings volatility for the enterprise as a whole, you know, once we get back into kind of normalized.

The raw material landscape move up and down we should see some counter movement in margins in E M versus asset deal. So overall, it should kind of fundamentally lower earnings volatility for the enterprise as a whole you know once we get back into kind of normalized conditions.

Speaker 6: Very good. And just on clear lake the S expansion for next year, how is your thinking about the ramp up to the hundred million dollars of normalize Analyze earning should be half of that next year and that

Very good and just on clear Lake D. S expansion for next year, how are you thinking about the ramp up to the $100 million of normalized annualized earning should be half of that next year in that range or something more or less thank you.

Speaker 3: Yeah, look, the Clear Lake Acid expansion will start up within the first quarter, and so I would expect that ramp-up to start kind of immediately after the start-up.

Luckily the clear Lake asset expansion will start up within the first quarter and so I would expect that ramp up to start kind of immediately after the start up.

Thank you.

Okay.

Speaker 1: Thank you. Next question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Thank you. Your next question today is coming from Kevin Mccarthy from vertical Research partners. Your line is now live.

Speaker 9: Good morning. Laurie, I think in your prepared remarks.

Good morning.

Laurie I think in your prepared remarks, you'd mentioned that you ceased production at certain engineered materials facilities in Brazil, Argentina and Germany.

Speaker 9: cease production at certain engineered

Speaker 9: beyond the nylon shutdown that you discussed previously. Can you just put that into context for us? It was an entirely clear on whether these are temporary idling or more permanent structural changes.

Beyond the the nylon shut down that you discussed previously can you just put that into context for us.

Isn't entirely clear on whether these are temporary idling or or more permanent.

Structural changes, maybe you could talk through kind of where you are in that asset rationalization process today.

Speaker 9: Talk through kind of where you are in that as a rationalization process today.

Speaker 3: Yeah, I would say for them, the majority of the ones that that we've named. So the ones in Argentina, Brazil.

Yeah, I would say for them the majority of the ones that that we've named so the ones in Argentina and Brazil.

Speaker 3: and Europe , you know, these are more permanent shutdowns. Now, we are taking temporary actions in things like BAM in Frankfurt and others. We're really, we're using that as flex capacity to meet the current demands of the network, which is, you know, lower than normal, but where we will need that capacity when we come up again.

And Europe you know these are more permanent shut down now we are taking temporary actions in things like Bam in Frankfurt and others.

We're really we're using that as flex capacity to meet the current demands in the network, which is lower than normal, but where we will need that capacity when we come up again, but the ones. We've announced recently I would consider those structural changes to really.

Speaker 3: But the ones we've announced recently, I would consider those structural changes to really, you know, redefine where we are on the cost curve by taking out our highest cost.

Redefine where we are on the cost curve by taking out our highest cost producers.

Speaker 9: it's helpful and then I wanted to follow up on synergies.

Okay. That's helpful and then I wanted to follow up on synergies.

Can you.

Speaker 9: Tell us what the synergy related benefit was in 3Q and what you're expecting in 4Q. And then when we look at the targeted tailwind of 150 million next year, would you describe that as rateable or ramping throughout the course of?

Tell us what the synergy related benefit was in <unk> and <unk>.

What you're expecting in four Q and then when we look at the targeted tailwind of $150 million next year would you describe that as ratable or ramping throughout the course of 'twenty four.

Speaker 3: Yeah, so Q3 was actually a little bit lower than we anticipated because some of our volume, I would say at the lower end of the kind of 10 to 15, it's a quintal uplift we had expected on Synergy.

Yeah. So Q3 was actually a little bit lower than we anticipated because some of our I would say at the lower end of that kind of 10 to 15, it's sequential uplift we had expected on synergies because with our volumes a little bit lower you know some of our synergies are volume related again, we expect though a small synergy sequential synergy increase.

Speaker 3: because with our volumes a little bit lower, you know, some of our synergies are volume-related. Again, we expect, though, a small sequential synergy increase in the fourth quarter, but the real synergies will start to come in after we do the completion of our cutover to SAP. Next year, in the first quarter.

In the fourth quarter.

But the real synergies will start to come in after we do the completion of our cut over to S. A pea next year in the first quarter, you know and after we take some of the shutdowns that we announced for example, the shut downs and he felt that will happen in January and February. So you know the synergies will definitely ran across.

Speaker 3: And after we take some of the shutdowns that we announced, for example, the shutdowns in New New New York that will happen in January and February . So, you know, synergies will definitely ramp across 2024 but I would say starting more in the second quarter into the second quarter and through the end of the year.

'twenty 'twenty, four but I would say starting more in the second quarter into the second quarter and through the end of the year.

Speaker 2: Yeah, Kevin, in the third quarter, synergies were around 30 million in total, which was incrementally up about 10-11 off of Q2.

Yeah, Kevin in the third quarter synergies are around $30 million in total which was incrementally up about 10 11 off of Q2.

Got it thank you so much.

Speaker 1: Thank you. Next question today is coming from Hassan Ahmed from Olympic Global. Your line is now live.

Thank you next question today is coming from Hassan Ahmed from Alembic Global Your line is now live.

Speaker 10: Morning, Laurie. Laurie, in your prepared remarks, you guys talked about maximizing the make versus by flexibility.

Good morning Laurie.

Or are you in your prepared remarks, you guys talked about maximizing the make versus buy flexibility.

Speaker 10: I mean, you know, to me, the legacy sort of selenie sport for you.

And you know to me the legacy sort of Celanese portfolio.

Speaker 10: you know, you're pretty much optimized that side of things. So is it fair to assume that a lot of this sort of optimization work will be on the EM side of it? So that's part one of the question. And the second part is that it seems that, you know, right now there's a fair bit of idling or permanent shuttering going on. Could this also mean, you know, in the future, some greenfield build out happening as well?

You know you're pretty much optimized that side of things. So is it fair to assume that a lot of this sort of optimization work will be on the EM side of it. So that's part one of the question and the second part is that it seems that you know right now, there's a fair bit of idling or permanent shuttering going on.

This also mean you know in the future.

Greenfield build outs happening as well.

Speaker 3: Yeah, thanks for the question, Sam. So what I would say is, you know, we're really focused on building the flexibility across.

Yeah. Thanks for the question.

So what I would say is you know, we're really focused on building and flexibility across all of our products and so you know we're not just looking at make versus buy flexibility, but we're also looking at sourcing flexibility for raw materials regional flexibility.

Speaker 3: all of our products. And so, you know, we're not just looking at make versus buy flexibility, but we're also looking at

Speaker 3: Sourcing flexibility for raw materials, regional flexibility, flexibility in contract commitment, you know, much as we did with tow, more multi-sourcing versus single sourcing. You know, specifically for PA66, yes, we want the flexibility to make versus buy, especially in this low demand period where we can often buy cheaper than we can make in Europe in particular because of higher energy costs and higher fixed costs and higher raw.

Flexibility and contract commitment you know much is as we did with toe.

More multi sourcing versus single sourcing them, you know specifically for P. A six six yes, we want the flexibility to make versus buy especially in this low demand period, where we can often buy cheaper than we can make in Europe in particular, because of higher energy costs and higher fixed costs higher wrong, there, but I would say you know this has been a key.

Speaker 3: there. But I would say, you know, this has been a consistent theme in Selenies and one we're just now applying to the heritage and and I'm for

Consistent theme and Celanese and one more just now applying to the heritage AR and am portfolio.

Speaker 3: So, you know, I think, you know, but, you know, I would say we've also applied this and asked TILS with some of our contracting around raw materials and others. I mean, it is a way we continue to deliver value uplift year on year even without a large amount of volume growth.

You know I think you know, but you know I would say we've also applied this in as deals with some of our contracting around raw materials and others. I mean, it is a way we continue to develop and deliver value uplift year on year, even without a large amount of volume growth. So I think you know we.

Speaker 3: So I think, you know, we expect that to continue and I think, you know, as a result of that, you will continue to see some footprint optimization continuing over the next few years.

We expect that to continue and I think you know as a result of that you will continue to see some footprint optimization are continuing over the next few years.

Speaker 3: And I would say, in terms of greenfields, I wouldn't anticipate, you know, any time in the next many years, a lot of greenfield bills. I think what you'll continue to see is take advantage of the footprint we have and the opportunity to do no and low-cost bottlenecks.

And I would say in terms of Greenfield I wouldn't anticipate them.

Anytime in the next many years a lot of Greenfield builds I think what Youll continue to see us take advantage of the footprint, we have and the opportunities to do no and low cost the bottlenecks around the world much like the clear Lake expansion, where we're basically doubling the size of our units for $400 million. So.

Speaker 3: around the world, much like the clear lake expansion, where we're basically doubling the size of our unit for $400 million.

Speaker 3: So, you know, we think we have a lot of opportunity already on the ground to significantly expand our footprint without majoring.

We think we have a lot of opportunity already on the ground to significantly expand our footprint without major investment.

Speaker 10: Very fair. And just switching gears a little bit. Look, I completely understand that visibility is extremely low right now. But just thinking beyond the near term, I mean, with some sort of historical context as well. I mean, this destalk has been unprecedented, both in terms of absolute volume declines as well as the ongoing duration of things.

Very fair.

And just switching gears a little bit.

Look.

Completely sort of understand that visibility is extremely low right now, but you know just thinking be on sort of the near term I mean, you know with with some sort of historical context as well I mean this destocking has been has been unprecedented both in terms of absolute volume declines as well as.

The ongoing duration of it so just as you sort of sit there and look at you know the legacy celanese portfolio as well as the history you know of living through these destocking with the acquired businesses.

Speaker 10: So just as you sort of sit there and look at the legacy Selanese portfolio, as well as the history of living through these destocks with the acquired businesses, I mean, what could a potential eventual restock look like?

What could a potential eventual restart looks like.

Speaker 3: Yeah, look, at some point, I think there will be some restocking. You know, when that happens, I would say, you know, highly uncertain. Right now we're just happy to see people starting to return to normal order patterns in some.

Yeah look I at some point I you know I think there will be some restocking you know when that happens. It's I would say you know highly uncertain right now we're just happy to see people starting to return to normal order patterns in some polymers in particular I think I.

Speaker 3: Polymer is in particular, I think, I still retain more.

Sales were saying more you know I think yeah, I would think about restocking must be you know a few percent, but again I think that could be spread across a pretty significant period, because I think people will be nervous to rapidly restock. After what we've been through the last year.

Speaker 3: I think I would think about restocking as being a few percent. But again, I think that could be spread across a pretty significant period. As I think people will be nervous to rapidly restock after what we've been through the last year.

Very helpful. Thank you so much.

Speaker 1: Thank you. Next question is coming from Alexei Yefremov from KeyBank Capital Markets. Your line is now live.

Thank you. Your next question is coming from Alexia from off from Keybanc capital markets. Your line is now live.

Speaker 9: Thanks, and good morning, everyone. I wanted to return to the Aminam synergies in your 2024 bridge. 150 million improvement. Does it depend on volume improvement or or or or or demand improvement or or is it into balance?

Thanks, and good morning, everyone I wanted to return to the Eminem synergies in your 2020 for bridge the $150 million improvement does it depends on volume improvement or or or or demand improvement or is it independent of it.

Speaker 3: So the 150 million, what I would say is, look, initially I would say there was some volume improvement in that because some of the synergies are volume related.

So the 150 million what I would say is look at initially I would say there was some volume improvement and that because some of the synergies are volume related.

I think that's why you see us continuing to accelerate some of our manufacturing footprint work to better to better align current demand with our supply and we will get synergies from there. So I would say you know we are fully committed to delivering well over $150 million. This year the blend may.

Speaker 3: to better align current demands with our supply, and we will get synergies from there. So I would say, you know, we are fully committed to delivering well over the $150 million this year. The blend may be slightly different than we had set out, say, a year ago at the time of the deal, but we think we have sufficient, you know, activities underway to deliver.

Be slightly different than we had set out say a year ago at the time of the deal, but we think we have sufficient activities underway to deliver that.

Speaker 9: Thanks, Lori. And then staying with EM, you just announced shutdown of some assets. Have you seen the industry and your peers either idle or announce permanent shutdowns and any significant polymer changes?

Thanks, Lori and then staying with US Yeah, you just announced shut down of some assets have you seen the industry and your peers, either idle or or announced permanent shutdowns and are there any significant polymer chains.

Speaker 3: Yeah, I think, you know, if we look at the industry, probably specifically, you know, P-A-66 is where we've seen the most activity. You know, we have seen some additional capacity being built out in Asia.

Yeah, I think if we look at the industry I'm, probably specifically you know P. 866 is where we've seen the most activity we have seen some additional capacity being built out in Asia.

Speaker 3: It's particularly in China for Nylon Polymer, which has increased market length in a period of lower demand.

Particularly in China for nylon polymer, which has increased market length in a period of lower demand.

Speaker 3: And, therefore, we've had some increased competition, depressed pricing, you've seen all those impacts. I think what you see, though, is much like our shutdown, we start to see other industry participants take action. So we've seen a nylon intermediate producer announce the shutdown of one of their largest assets here in the last month.

And therefore, we've had some increased competition and depressed pricing you've seen all those impact I think what you'll see though is much like our shut down when we start to see other industry participants take action. So we've seen a nylon intermediate producer announced the shutdown of one of their largest asset here in the last month.

Speaker 3: which represents about 10% of the intermediate production. So I think you see the intermediate using this as an opportunity to take out some of the legacy higher cost assets and different parts of the world that have become quite high cost and work towards rebalancing. Again, when demand returns, I think it will be in a much better position, but I do think you've seen a number of commercial actions going on across the industry to address it. So I think you've seen a number of commercial actions going on across the industry to address the future of the world.

Which represents about 10% of the intermediate production. So I think you see the intermediate using this as an opportunity to take out some of the legacy higher cost assets in different parts of the world that have become quite high cost.

And work towards rebalancing again, when demand return I think it will be in a much better position, but I do think you've seen a number of commercial actions going on across the industry to address it.

Thanks, Laura.

Speaker 1: That next question is coming from Frank Mitch from the research reliners now live.

Thank you next question is coming from Frank Mitsch from from your research. Your line is now live.

Speaker 6: Good morning, and let me also offer my congrats. Maybe if I could ask the DSTOC question a little differently. You mentioned in the release, the prepare marks, that you're seeing it end here in the fourth quarter and the Americas and Asia, though, will continue in Europe . What gives you the confidence that we're going to be finally done in the Americas and Asia and such that 2024 we're going to see underlying demand growth in those regions?

Good morning, and let me also offer my my congrats.

And maybe if I could ask the destock question a little differently.

You mentioned in the release the prepared remarks that you're seeing and.

Here in the fourth quarter in the Americas, and Asia, though will continue in Europe, what gives you the confidence that.

That we're going to be finally done in the Americas, and Asia and such as such that 2024, we're going to see underlying demand growth in those regions.

Speaker 3: Yeah, I think our confidence really comes from, you know, obviously conversations with our distributors and our direct customers as well. But also just the buying patterns we're seeing in the US. I mean, we don't have a lot of visibility into future purchasing because what we're finding is

Yeah, I think our confidence really comes from you know, obviously conversations with our distributors and our direct customers as well, but also just the buying patterns. We're seeing in the U S. I mean, we don't have a lot of visibility into future purchasing because what we're finding is when now, especially in the Americas when people want to buy.

Speaker 3: you know when now especially in the americans when people want to buy they want it now which adjust to us that they are fully destoxed because they don't have inventory in their chain that they can they can pull on and i think you know in the u.s. at least we're starting to see some recovery

They want it now which suggest to us that they are fully restocked, because they don't have inventory and their team that they can they can call on and I think you know in the U S. At least we're starting to see some recovery, especially in those areas that had been weak like consumer durables electronics, So maybe more normal demand pattern. So I think you know.

Speaker 3: especially in those areas that have been weak, like consumer durables and electronics.

Speaker 3: to maybe more normal demand patterns. So I think, you know, it's the customer buying patterns that I would trigger off of to say, we feel pretty confident that we're at the end of desocking in the US.

It's the customer buying patterns that that I would trigger off up to say, we feel pretty confident that we're at the end of destocking in the U S. I would say less so in China, China I would describe as consumer demand in China for China is come back to I would say near normal level.

Speaker 3: I would say less so in China. China I would describe as consumer demand in China for China.

Speaker 3: is come back to, I would say, near normal level, but obviously, China export volumes are still very weak, which is a significant portion of the China demand. And then in Europe , I would just say, you know, outside of auto, we really just don't see any improvement in Europe as, I think consumer confidence remains very low in light of the war in the Ukraine and higher energy prices and higher inflation.

But obviously, China export volumes are still very weak, which is a significant portion of the China demand and then in Europe I would just say I you know outside of auto we really just don't see any improvement in Europe as I think consumer confidence remains very low in light of the war in Ukraine and higher energy prices.

And higher inflation.

Speaker 3: You know, we're just not saying that that behavior starts to pick up in your

Just not seen that that behavior start to pick up in Europe yet.

Speaker 11: Gotcha. That's very helpful. And then the early look at 2024 suggests that there's a bunch of one-time cost actions that you took in 23 that will not be repeated. So that should set up an easier comp. I'm just curious if you could kind of quantify or provide an order of magnitude of that. And perhaps if plant turnarounds also play a role in some expectations for 24 to be better than 23, any color there would be very helpful.

Got you that's very helpful and then.

They look at the early look at 2024 suggests that there is a bunch of onetime cost actions that you took in 23 that will not be repeated so that should set up an easier comp I'm. Just curious if you could kind of.

Quantify or provide an order of magnitude of that and perhaps if if plant turnarounds also play a role in and some expectations for 'twenty four to be better than 23, any any color there would be very helpful.

Speaker 3: Yeah, I think, you know, we had called out a couple quarters ago, 60 to 80 million of one-time actions that we were taking this year to really offset some of the softness we were seeing still in the second quarter. And, you know, we're achieving those across third quarter and fourth quarter. What I would say is those are really related to actions we've taken to idle lines, you know, to cut costs out of facilities that aren't running full.

Yeah.

I think we've called out a couple of quarters ago 60 to 80 million of onetime actions that we're taking this year to really offset some of the softness we were seeing still in the second quarter and we're achieving those across third quarter and fourth quarter. What I would say is those are really related to actions we've taken to idle line.

To cut costs out of facilities that aren't running full.

Speaker 3: You know, if demand is not picked up, obviously we will continue to realize those benefits next year as well. If demand picks up, we will be more than happy to spend that money again in order to capture the margin that will come from the increased demand.

If demand does not pick up obviously, we will continue to realize those benefits next year as well if demand picks up we will be more than happy to spend that money again in order to capture the margin that will come from from the increased demand.

Speaker 3: So, you know, I don't see that as a big factor either way and our bridge from 23 to 24 because we'll either get it in earnings or we'll continue to see it as cost saving.

You know I don't see that as a big factor either way in our bridge from 'twenty three 'twenty four because we'll either get it in earnings or will continue to see it is cost savings.

Yeah, Frank and I would tell you our focus is really on now actioning other things that are going to be more permanent in nature, given some of the things we called out in the prepared comments. So we can make in a more sustainable cost reductions and really the lower the overall fixed cost base of the company and that then gives us an ability to withstand lower.

Demand environment in the future and get much greater leverage on the fixed cost that we have.

Great. Thanks, so much.

Speaker 1: Thank you. Next question is coming from a room this one out there from RBC capital markets. Your line is now live.

Thank you. Your next question is coming from Arun Viswanathan from RBC capital markets. Your line is my life.

Yeah.

Great. Thanks for taking my question.

Speaker 12: Congrats to everyone on the new roles as well. So, I'm just looking at the bridge for 24, and again, obviously a lot of questions have been asked here, but if we think about Q3, but around 625 and Q4,

Congrats everyone on their new roles as well.

So I am just looking at the bridge for 'twenty four and again, obviously the questions are asked here, but if we if we think about.

Q3 EBITA array.

<unk> 625 and in Q4.

Speaker 12: looking a little bit similar from your segment commentary makeup.

Looking a little bit similar from your segment commentary makeup.

Speaker 12: And you're exiting the year, it may be like a, you know, $2.5 billion run rate. You have maybe 100 coming from the AC uplift. And then, you know, 150 from incremental synergies. And then maybe a couple other items, including the lack of an inventory hit.

You're exiting the year at maybe like a you know two and a half billion dollar run rate.

Have a maybe 100 coming from the AC uplift.

And then you know $1 50 from incremental synergies and then maybe a couple of other items you couldn't be.

Lack of an inventory hits so that.

Speaker 12: So that puts us at maybe 2.8 or between 2.8 and 3 billion. Are we thinking about that correctly as far as evitagos? And it's volume, the main driver that would push you above that range.

That puts us at maybe yeah, two eight or or between $2 83 billion.

Are we are we thinking about that correctly as far as EBITDA goes and as.

As volume the main driver that would push you above that range.

Speaker 3: Yeah, again, you know, we've called out what those factors are. I would say, you know, the big unknown at this point remains demand and pricing, particularly raw material pricing, which, as we've seen this year, can cause quite a lot of volatility. Hopefully we'll be able to give better guidance next quarter.

Yeah again, we've called out what those factors are I would say you know the big unknown at this point.

<unk> remained demand and pricing, particularly raw material pricing, which as we've seen this year can cause quite a lot of volatility.

Hopefully, we'll be able to give us a better guidance next quarter.

Speaker 12: Okay, I appreciate that. And maybe I can just ask one on the balance sheet. So obviously a lot of progress there as well.

Okay I appreciate that and maybe I can just ask one on the balance sheet. So obviously a lot of progress there as well.

Speaker 12: Restructuring the depth profile and redovasiling.

Restructuring the debt profile and retail of a filing.

Speaker 12: Do you expect any other further opportunities there, and I guess, could you just reiterate what your target leverage level is, maybe, as you exit 24?

Do you expect any other further opportunities there and I guess could you just reiterate what your target.

Leverage level is maybe as you exit 'twenty four.

Speaker 2: Yeah, Rune, I mean, our focus right now is continued to accelerate cash generation and aggressively repay debt. You know, we have obviously moved the materities out since we last talked a quarter ago, but certainly now our focus is on bringing down, you know, overall net debt.

Yeah, Arun I mean, our focus right now is continued to accelerate cash generation and aggressively repay debt. We have obviously moved the maturities out since we last talked a quarter ago.

But certainly now our focus is on bringing down the overall net debt, we're going to be focused on repatriating cash and using that cash to reduce debt and then with the cash generation.

Speaker 2: You know, we're going to be focused on repatriating cash and using that cash to reduce debt. And then with the cash generation, you know, we should, next year, you know, between repatriation, cash gen, we should be able to.

Should next year, you know between repatriation cash Jan we should be able to do to reduce debt.

Speaker 2: to reduce debt by almost $2 billion net debt reduction, certainly well north of a billion. So I think from...

That by you know almost $2 billion net debt reduction certainly well north of a billion. So I think you know from.

Speaker 13: From that standpoint, that's where the focus is today. We don't have a need really to adjust maturities or refinance. Certainly if markets change, we'll be opportunistic around that. But we're going to continue to focus on every single quarter, marching down and bringing our leverage levels down with a target to get to three times as quickly as possible.

From that standpoint, that's where the focus is today, we don't have a need really to adjust maturities are refinanced certainly if markets change we'll be opportunistic around that but we're going to continue to focus on every single quarter marching down and bringing our leverage levels down with a target to get to that.

Three times as quickly as possible.

Great. Thanks.

Speaker 1: Next question is coming from Laurence Alexander from Jeffries, you're right, is now live.

Thank you next question is coming from Laurence Alexander from Jefferies. Your line is now live.

So good morning I'm just.

Speaker 13: And you think about kind of improving the productivity at in the acid heals through shrinking the past year. And it gets to also parts of VM.

When you speak about kind of you know.

Hum.

Improving the productivity in the asset yields through shrinking capacity I guess also as parts of the.

Speaker 13: If you think about the next three, four years, if there is no significant surge in demand,

If you think about the next three four years, if there is new significant surge in demand.

Speaker 13: how much of your capacity could be optimized or rationalized through shifting through process improvements at your larger facilities and de-bottlenecking and upgrading the network? In other words, how far are we in this upgrading process?

How much of your capacity could be optimized or rationalize through.

Shifting through process improvements at your larger facilities of Debottlenecking.

Upgrading the network in other words, how far are we in this upgrading process.

Speaker 13: And at what point would you need to start considering just a new greenfield process?

And at what point would you need to start considering just through new Greenfield projects.

Speaker 3: Yeah, let me take them as two separate. I would say on Asset Hills, we have done a lot of work over many years now to really reduce the number of facilities that we have.

Yeah, let me take them as two separate I, you know I would say on asset Hills, we have done a lot of work over many years now to really reduce the number of facilities that we have.

Speaker 3: and really you have larger, very efficient facilities strategically located regionally. And our activities, including the big expansion, I could lay, but we've also had many, many small expansions and many of our downstream derivatives.

And really have larger very efficient facilities strategically located regionally and our activities, including the big expansion I'd say leg, but we've also had many many small expansions in many of our downstream derivatives.

Speaker 3: to basically keep us at the same or greater volumes and certainly much higher margins.

To basically keep it at the same or greater volumes and certainly much higher margin.

Speaker 3: as a result. I would say we've also done that work in the Heritage EM for Folio over the last, called it 10 years as we adopted the new models and the project pipeline models. And you've seen a lot of those actions in the announcements we've made over the last.

As a result, I would say we've also done that work in the heritage am portfolio over the last call. It 10 years as we adopted the new models and the project pipeline models and you've seen a lot of those actions in the announcements we've made over the last 10 years I think now for us that now taken the Eminem portfolio and applying that.

Speaker 3: 10 years. I think now that's now taking the M&M portfolio and applying that same mindset to that thought I don't really have a number yet what that means in terms of capacity that we would take out. Again, I don't really see any time in the near to medium future any need for greenfield because we have sufficient capacity.

Same mindset to that so I don't really have a number yet what that means in terms of.

Capacity that we would take out again, I don't really see anytime in the near to medium future any need for greenfield because we have sufficient capacity, even with some of the strategic shutdown in our existing network and we have a team that's exceptionally good at finding low and no cost debottleneck.

Speaker 3: even with some of the strategic shutdowns in our existing network and we have a team that's exceptionally good at finding low and no-costy bottlenecks toward existing assets to add very efficiently and inexpensively additional capacity.

So our existing assets to add very efficiently and inexpensively additional capacity.

Thank you.

Speaker 1: Thank you. Next question today is coming from Salvador Tiano, from Bank of America. Your line is now live.

Thank you. Our next question today is coming from Salvator Tiano from Bank of America. Your line is now live.

Speaker 14: Thank you. Firstly, I want to ask a little bit. As you said, the shutdowns in engineer materials are a part of the 150 million synergy. So I'm just wondering, where do these actions in your original plans when you acquired the default assets or where do they more, I guess, in response to recent market conditions? And I guess if the latter, why wouldn't the synergy target increase given that these would be from the latter?

Yes. Thank you personally I want to ask a little bit.

You said that the shutdown. So you mentioned there must be a real sharp that'd be part of the $150 million just I'm just wondering.

Where does these actions are in euro regional plans when you acquired the Dupont assets are.

Or was it more just in response to recent market conditions and.

I guess each of them lots of them.

You know what why wouldn't the synergy target increase even though this would be incremental actions.

Speaker 3: Yeah, great question. Look, we knew at the time of the acquisition, or we believed at the time of the acquisition, that Duke Collins had.

Yeah, Great question look we knew at the time of the acquisition are we believed at the time of the acquisition that Dupont had more than sufficient capacity to meet normal demand conditions and requirement.

Speaker 3: more than sufficient capacity to meet normal demand conditions and requirement.

Speaker 3: and we assume that some would be more efficient or less efficient than others, we just didn't know which assets those would be. So we've needed this time we've had since the acquisition to really look at how all of these plants are operating, what their cost structures look like, and, you know, where the most opportunities are.

And we assume that some would be more efficient and are less efficient than other we just didn't know what assets those would be so we've needed that time, we've had since the acquisition to really look at how all of these plants are operating what their cost structures look like and where the most opportunities are to really.

Speaker 3: to really fine-tune our footprint to build in the most flexibility, the most synergy.

A fine tune our footprint to build and the most flexibility. The most synergy you know the lowest cost footprint like I said it much as we've done with celanese over the last 10 years. So the Atkins Youre seeing is taking now is really addressing.

Speaker 3: you know the lowest cost footprint like said much as we've done with the cellar needs over the last ten years.

Speaker 3: So the actions you're seeing us taking now is really addressing that over capacity and now that we've been able to identify where that is. Some of the temporary shutdowns and line shutdowns, things were taken are more in response to the near term demand environment, leaving a flexibility for the future. But the things like intro and Argentine in those that we've announced that they are more permanent.

That overcapacity now that we've been able to identify where that is some of the temporary shutdowns in and line shutdowns and things were taken are more in response to the.

Near term demand environment, leaving a flexibility for the future, but the things like it drove in Argentina, and those that we've announced that they are more permanent in nature.

Speaker 14: Okay, perfect. I also want to ask a little bit about your Q4 guidance and assumptions. I think there's a lot of questions regarding what's the demand disruption, destocking, et cetera, but I think that what makes, I guess, your outlook a little bit different than most of the companies that have reported so far is that you made the comment, if I understood correctly, you expect a more muted destocking in Q4 than normal, whereas I would say the vast majority of your competitors expect the...

Okay perfect.

While still a bit above your Q4 guidance assumptions.

I think there's a lot of questions regarding what's the.

Distraction spoke.

We started et cetera, but I think the what makes it gives your ultimate goal would be different but most of the coal mines that have reported so far.

Maybe a comment if I understood correctly, you expect a more muted destocking due for them normal, whereas I would say the vast majority of your competitors expect.

Speaker 14: the same if not a more intense stocking order.

Say equal to or more intense stocking quarter, what what why do you would be for versus.

Speaker 14: And just most of the other can go from them.

And yes emotional thing.

The other chemical companies here.

Speaker 3: Yeah, I mean, I can't really comment on what anybody else believes is going to happen. As I called out earlier, we base our views on what we're hearing from our customers, what we're hearing from our distributors, the customer order patterns that we're seeing and our experience with those order patterns.

Yeah, I mean, I can't really comment I want anybody else believes is going to happen as I called out earlier, you know we base our views on what we're hearing from our customers. What we're hearing from our distributors the customer order patterns that we're seeing in our experience with those order pattern.

Speaker 3: You know, it certainly it helps that half of our volume and engineer material is going into automotive and we expect automotive to be quite solid across Q3 to Q4. So we're really just dealing with, you know, the other portions of our demand when we're looking at what is the impact for the fourth quarter. So again, I can't really say why we'd be different but certainly our share of auto may be one of those impacts.

Certainly it helps that half of our volume and engineered material is going into automotive and we expect automotive to be quite solid across Q3 to Q4.

So were really just dealing with you know the other portions of our demand when.

When we're looking at what is what is the impact for the for the fourth quarter. So again I can't really say why we'd be different but certainly our share of auto maybe one of those impacts.

Perfect. Thank you very much.

Speaker 1: Thank you. Next question today is coming from Andrew Ketches. From Barclays, your line is now live.

Thank you next question today is coming from Andrew catch Us from Barclays. Your line is not life.

Speaker 12: Yeah, thanks. Just to clarify the comment earlier on the debt repayment. So it's not like you said cash flow will be used to handle the maturity is not that you've reprothiled, but that excess cash you're running, can you just remind us where your operating needs are and can you get all the way down there in 2024?

Yeah. Thanks, just to clarify the comment earlier on the debt repayment. So it sounds like you said cash flow will be used to handle the maturity is now that you've re profile, but that excess cash you're running can you just remind us where your operating needs are and can you get all the way down there in 2024.

Speaker 2: Yeah, thanks Andrew. Cash balance is a little north of $1.3 billion right now and we'll be repatriating that cash now in the coming months. And then once we get integrated on one system which we expect to happen in the early part of next year, then we'll be able to start moving that cash balance down to where we think we can minimum needs would be right around.

Yeah, Thanks, Andrew cash balances, a little north of $1 $3 billion right now and will be repatriating that cash now in the coming months.

And then once we get integrated on one system, which we expect to happen in the early part of next year, then we'll be able to start moving that cash balance down to where we think we can minimum needs would be right around $500 million. So we definitely are confident that we'll be able to get to that 500 million dollar level.

Speaker 2: $500 million. So we definitely are confident that we'll be able to get to that $500 million level during 2020.

During 2024.

Speaker 6: Okay, great. And then I just didn't catch the answer on the leveraged metric. I knew you said three times in the past. Are you putting a horizon or a timeline on that at this point?

Okay, Great and then I just didn't catch the answer on the leverage metrics. I know you said three times in the past or are you, putting it a horizon or a timeline on that at this point.

Speaker 2: No, I mean, look, we had originally targeted the end of 2024 and we're going to do everything we can to get get close to that. At last quarter, we said, you know, it may bleed into the early part of 2025. A lot just depends upon what happens with, you know, our cost reduction plans, which is another reason why we continue to take aggressive action on getting, you know, controllable earnings improvement from cost reduction and then where, you know, the macro and, you know, the demand plans that we have.

No I mean look we had originally targeted the end of 2024, and we're going to do everything we can to get get close to that last quarter. We said you know it may bleed into the early part of 2025, a lot just depends upon what happens with our cost reduction plans, which is another reason why we continued to take aggressive action on.

Getting a controllable earnings improvement from cost reduction and then where are you know the macro and the demand plans that we have the other things that teams are doing largely in engineered materials is really working the revenue synergy side of things and you know the revenue synergy side, bringing Eminem into our project pipeline model you will see.

Speaker 2: The other things that teams are doing, largely in engineer materials, is really working the revenue synergy side of things. And, you know, the revenue synergy side of bringing M&M into our project pipeline model, you know, will start to yield opportunities and close wins as we get further into 2024. So the pace and speed at which we're able to execute on those plans will certainly help us accelerate that deleveraging plan.

Start to yield opportunities and then close wins as we get further into 2024, so the pace and speed at which we're able to execute on those plans will certainly help us accelerate that deleveraging plan.

That's great. Thank you.

Speaker 1: Thank you next question is coming from Patrick Cunningham from City Your Life is now live.

Thank you next question is coming from Patrick Cunningham from Citi. Your line is now live.

Speaker 15: Hi, good morning. Thanks for taking my question. How are you thinking about potential portfolio actions? Let's say if demand does not get better from PR. Is there anything that maybe stands out as separable or where you can structure a similar field as the food ingredients shaving?

Hi, Good morning. Thanks for taking my question how are you thinking about potential portfolio actions, let's say if demand does not get S&P and is there anything that maybe stands out as separable and where you can structure a similar deal if he didn't medians television.

Speaker 3: Yeah, I think as we've called out in past calls, you know, we are going to continue to be opportunistic and disciplined in our approach to divestment. We continue to look at a number of assets from both the Heritage Celanese as well as the M&M portfolio as possible divestiture targets.

Yeah, I think we've called out in past calls we are going to continue to be opportunistic and.

Discipline in our approach to.

Divestment.

We continue to look at a number of assets from both the Heritage Foundation as well as the Eminem portfolio as possible divestiture target, but we really need to understand what the future potential of those assets are and what the value to US is and then identify other parties that will value them more than we value them. So.

Speaker 3: But we really need to understand what the future potential of those assets are and what the value to us is and then identify other parties that will value them more than we value them. So I would say we continue to look for opportunities, but we will be selective about what we do so it doesn't impact long-term growth as well as making sure we get fair value.

You know I would say, we continue to look for opportunities, but yeah, we will be selective about what we do so it doesn't impact long term growth.

As well as making sure we're getting fair value for it.

Speaker 15: got it. And then just on the ECO CC brand with products containing recyclable CO2, you know, what sort of relative premiums do you expect to achieve? And then would you be fulfilling incremental demand there? Or is that more of just, you know, optionality with the rest of the book?

Got it and then just on the East Coast DC brand with products containing recycled to what sort of relative to premiums do you expect to achieve and then would you be fulfilling incremental demand there or is that more of just optionality with the rest of the portfolio.

Speaker 3: I think you've said it best in terms of optionality. We actually started that project just on credits and it was justified based just on additional methanol for use in...

Well I think you've said it best in terms of Optionality, we actually started that project just on credit and it was justified based just on additional methanol for youth and in clear Lake.

Speaker 3: and really the cost advantage of make versus buy for methanol on an average basis. So that was the justification for the project.

And really the cost advantage of make versus buy for methanol on an average basis. So that was the justification for the project since the time, we started the project obviously markets have continued to develop for more sustainable products for lower carbon footprint product and we do believe for certain that there will be.

Speaker 3: Since the time we started the project, obviously markets have continued to develop for more sustainable products, for lower carbon footprint products, and we do believe for certain that there will be...

Speaker 3: a premium that will be available for more sustainable products. I would think not so much, I don't anticipate we will be in the biomethonol market. Our intent is to take that methanol.

A a premium that will be available for more sustainable products I would think not so much I don't anticipate we will be in the bio methanol market. Our intent is to take that methanol and further convert it into lower carbon downstream derivatives. So they lower.

Speaker 3: and further convert it into lower carbon downstream derivatives, so think lower carbon acetic acid, lower carbon BAM, lower carbon BAE, lower carbon POM, and other polymers. And that's really where we think the advantage is as end users will see more value in being able to have low carbon. So, you know, think of it simply as being able to, through this project, you know, put

Harbin is unique asset lower carbon bam or carbon VA lower carbon palm and another polymers and that's really where we think the advantages as end users, we will see more value in being able to have a low carbon. So you know think of it simply as being able to through this project.

Put them.

Speaker 3: CO2 in the paint on your wall, that would otherwise be fended to the atmosphere.

Two in the paint on your wall that would otherwise be built into the atmosphere. I mean, that's where we see the premium coming from people who.

Speaker 3: I mean, that's where we see the premium coming from people who want to have that impact on their environmental footprint.

Want to have that impact on their environmental footprint.

Great very helpful.

Speaker 1: Take a next question, is anyone from, Dundaya from An????????, from arm ???o research? Online does not live.

Thank you next question is coming from J D. Denier from onshore research. Your line is now live.

Speaker 16: I think the first question is really on the nylon.

The first question is really on the nylon chain.

Speaker 16: There is a lot of upstream capacity in Monomers and Polymers coming in Asia.

There is a lot of upstream capacity.

In monomers and polymers coming in Asia. So could you just tell us like maybe on a fundamental basis, how do you add value EUR dialogues for our portfolio and you know in.

Speaker 16: So could you just tell us like, you know, maybe on a fundamental basis?

Speaker 16: How do you add value in your nylon sort of portfolio? And, you know, in the long run, why would you actually want to be more in the polymerization? Why wouldn't you want to be more downstream asset light?

In the long run why would you actually want to be more into polymerization why would you want to be more downstream asset light use this capacity that is coming in Asia and create more product differentiation. That's my first question and then on the acetyl side.

Speaker 16: use this capacity that is coming in Asia and create more product differentiation. On the acetyl side, there is capacity again coming in China. Some of the plants have been laid this year and ramping into next year. How do you see demand supply balance in acid and and ramp next year? Thanks a lot.

There is capacity again coming in China. Some of the plants have been late this year and ramping into next year. So how do you see demand supply balance in asset and Bob next year. Thanks, a lot.

Thanks for the question as I said earlier.

Speaker 3: You know, we do see the polymerization capacity and some intermediate capacity coming on stream in China. We have seen some other industry shutdowns going on, but we remain really excited about PA66. Again, a lot of what's coming on is polymer. A lot of the value is adding in compounding. A lot of our PA66 goes into highly differentiated products where we are the sole supplier.

We do see the polymerization capacity in some intermediate capacity coming Onstream in China.

We have seen some other industry shutdowns going on but we remain really excited about P. Eight six that again a lot of what's coming on is polymer a lot of the value is adding in compounding a lot of our <unk> six goes into highly differentiated products, where we are the sole suppliers and we see a lot of future potential.

Speaker 3: And we see a lot of future potential for PA66 in EVs, for example. You know, uniquely to EVs, lately we've had applications for battery cell frames and in-plates, high voltage connector, brackets and mounts for electric motors.

All four P 866 in Evs for example.

You know uniquely to Evs lately, we've had applications for battery cell claims frames and in place high voltage connector brackets and mounts for electric motors. So we see the evs continuing to extend to the extent that we see some some.

Speaker 3: So we see the EVs continuing to extend to the extent that we see some moderation in EV production. We think that will be in favor of hybrids and hybrids have even more TA66 content. So that's only a good thing for us.

Moderation in EV production, we think that will be in favor of hybrids and hybrids have even more ta six six content. So that's only a good thing for US and then if you look at the next five years, we also see electricity demand more than doubling partly driven by E. D. But also driven by the electrification of everything.

Speaker 3: And then if you look at the next five years, we also see electricity demand more than doubling, partly driven by EV, but also driven by the electrification of everything. And there will be a strong pull on PA-6X for that in building out electrical infrastructure.

And there will be a strong pull on P 866 for that and building out electrical infrastructure, but again these don't tend to be.

Speaker 3: But again, these don't tend to be standard grade materials. These tend to be highly differentiated. They need fire retardants. They need all sorts of different things. And that's where we really see the value being added is in the differentiation achieved through compounding.

They integrate materials these tend to be highly differentiated they need fire retardant, they need all sorts of different things and that's where we really see the value being added is in the differentiation of <unk>.

Achieved through compounding.

Speaker 3: And look, we always want the flexibility to make versus buy because we do see these markets swing because of outages and other things going on. So this is really about building more optionality into this chain in a way that didn't have because they had a very cumbersome take or pay. They had a lot of over capacity. They had single sourcing. We have been systematically resolving new issues so that we will have a flexible and highly optional PA66 chain. What we think we can achieve significant value of.

And look we always want the flexibility to make versus buy because we do see these market swing because of outages and other things going on so this is really about building more optionality into this chain in a way that M and M didn't have because they got a very cumbersome take or pay they had a lot of overcapacity they had.

Single sourcing we have been systematically resolving these issues. So that we will have a flexible and highly optional six chain, where we think we can achieve significant value uplift.

Speaker 2: Kevin, we'll take the next question of their last one, please.

Kevin will take the next question is our last one please.

Certainly our final question today is coming from John Roberts from Mizuho. Your line is that life.

Speaker 2: Thanks and congrats to all as well. After the startup of Clear Lake BAM in early 2024, do you have the option of permanently closing the BAM unit in Frankfurt or do you need to maintain some optionality and flexibility by only doing temporary closures and excluding any one-time upfront costs? Is there a significant cost difference between a permanent closure in operating Frankfurt and a stop and start mode?

Thanks, and congrats to all as well.

After the startup of clear like Sam in early 2024, do you have the option to permanently closing the van unit in Frankfurt or do you need to maintain some optionality and flexibility by only doing temporary closures and excluding any one time upfront costs is there a significant cost difference between a permanent closure in operating Frankfurt.

Stop and start mode.

Speaker 2: Yeah, John , we're building a new acetic acid plant in Clarelite, not a VAM unit. So, you know, we did the expansion in Clarelite in VAM a number of years ago. So we feel really good about our current network.

Yes, John.

We're building a new acetic acid plant in clear Lake Nona Bam unit. So we did the expansion in clear Lake and Bam a number of years ago. So we feel really good about our current network and Bam.

Speaker 2: And do you think the pro long, Gellron, divestment process contributed to some of the weakness in engineering materials, Mark?

And do you think the prolonged dull room divestment process contributed to some of the weakness in engineered engineered materials market.

Speaker 3: Yeah, I, you know, hard to say, but I don't, we haven't really seen that that's been an impact at all and, and terms of impacting the palm.

Yeah, I I, you know hard to say, but I don't we haven't really seen that that's been an impact at all in terms of impacting the palm market.

Thank you.

Speaker 1: Thank you. We reach end of our question and recession. I'd like to turn the floor back over to Brandon for further closing.

Thank you we've reached end of our question and answer session I'd like to turn the floor back over to Brandon for any further or closing comments.

Speaker 1: Thank you Kevin. We'd like to thank everyone for listening in today as always, we're around for any questions that you have. Kevin, please go ahead and close up call. Thank you. That does conclude today's telecom for its webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Thank you Kevin we'd like to thank everyone for listening in today and as always we're around for any follow up questions that you have.

Please go ahead and for the call.

That does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.