Q4 2023 Celanese Corp Earnings Call

Operator: Hello, and welcome to the Selanese Q4 2023 earnings calling webcast. If anyone should require operator assistance, please press star zero on your telephone keypad.

Hello, and welcome to the Celanese Q4, 2023 earnings call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. He may be placed in the question queue at any time by pressing star one on your telephone keypad would you.

Operator: A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star 1 on your telephone keypad. We do ask that you please ask one question and one follow-up. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Brandon Ayache, Vice President, Investor Relations. Please go ahead, Brandon.

Ask you. Please ask one question and one follow up as a reminder, this conference is being recorded.

Now my pleasure to turn the call over to Brandon I ask Vice President Investor Relations. Please go ahead Brandon.

Brandon Ayache: Thanks, Kevin. Welcome to the Celanese Corporation fourth quarter 2023 earnings conference call. My name is Brandon Ayache, Vice President of Investor Relations. And with me today on the call are Lori Ryerkerk, Chairman of the Board and Chief Executive Officer, Scott Richardson, Chief Operating Officer, and Chuck Kyrish, Chief Financial Officer. Celanese distributed its fourth quarter earnings release via BusinessWire 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 comparable GAAP measures on our website.

Brandon: Thanks, Kevin and welcome to the Celanese Corporation fourth quarter 2023 earnings Conference call. My name is Brandon and I ask Vice President of Investor Relations and with me today on the call are Lori Reichert Chairman of the Board and Chief Executive Officer, Scott Richardson, Chief operating Officer, and Chuck <unk> Chief Financial Officer.

Brandon: Celanese distributed its fourth 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.

Operator: Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both the press release and the prepared comments. Form 8K reports containing all these materials have also been submitted to the SEC. With that, Kevin, let's go ahead and open it up for questions. Thank you. We will now be conducting a question and answer session. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. You may press star 2 if you would like to remove your question.

Brandon: Today's presentation will also include forward looking statements. Please.

Brandon: Please review the cautionary language regarding forward looking statements, which can be found at the end of both the press release and the prepared comment.

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

Brandon: With that Kevin Let's go ahead and open up for questions.

Thank you well 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 you May press Star two if you like to remove your question from the queue. As a reminder, we ask you. Please ask one question and one follow up then return to the queue.

Operator: As a reminder, we ask that you please ask one question and one follow-up, then return. [inaudible] Our first question today is coming from Josh Spector from UBS. Your line is now live. Yeah, hi, good morning.

Brandon: Our first question today is coming from Josh Spector from UBS. Your line is now live.

Josh Spector: Yeah, Hi, good morning.

Joshua David Spector: I was wondering if you'd talk about your expectations for the M&M business in 2024, and kind of both near term and longer term. So in the first quarter, you seem to call out some improvement. I'm not really sure if that's an assumption of market improvement or price cost improvement of earnings. So wanted to clarify that.

Josh Spector: I was wondering if you could talk about your expectations for the coming out of the business and in 2024 and pay both near term and longer term. So in the first quarter you seem to call out some improvement I'm not really sure about that assumption of market improvement or price cost improvement.

Josh Spector: I wanted to clarify that and then second how do you layer on the cost savings versus market and everything else. The way you expect to exit the year. Thanks.

Lori J. Ryerkerk: And then second, kind of how do you layer on the cost savings versus market and everything else where you expect to exit the year? Thanks. Yeah, thanks for the question, Josh. If we look at the first quarter, we do expect a really meaningful lift in M&M earnings in the first quarter, and in fact, we expect the first quarter to be our highest quarterly EBITDA since the acquisition. I think that's, you know, a number of things.

Speaker Change: Yeah. Thanks for the question Josh if we look at first quarter, we do expect a really meaningful lift and Eminem earnings in the first quarter and in fact expect first quarter to be our highest EBITDA quarterly EBITDA since the acquisition I think that's a you know a number of things the biggest factor is really.

Lori J. Ryerkerk: The biggest factor is really starting to see the pull through of lower raw materials and lower fixed costs that we were generating this year but needed to move the volume through to flush the higher cost material through inventory. So I'd say, you know, that's over half of the improvement we expect to see in the first quarter. We do expect recovery and a recovery versus the seasonal de-stocking that we experienced in the fourth quarter, which was an issue for M&M. And then we start to see some of the initial fixed cost improvements from the footprint optimizations that we initiated last year and announced, although, you know, I would expect those to become more meaningful in the second half of the year and actually into next year as well.

Speaker Change: Are you starting to see the pull through of lower raw materials and lower fixed costs that.

Speaker Change: That we were generating this year, but needed to meet the volume through plus the higher cost material through inventory. So I'd say you know that over half of the improvement we expect to see in the first quarter, we do expect recovery in auto versus the seasonal destocking that we experienced in the fourth quarter, which was an issue for Eminem.

Speaker Change: And then we start to see some of the initial fixed cost improvements from the footprint optimization that we initiated last year and announce although you know we'd expect those to become more meaningful in the second half of the year and actually into next year as well.

Lori J. Ryerkerk: And so I'd say, you know, evidence for that is we are seeing variable margin improving in January as we start to see that inventory pull through of lower ROS and fixed costs. So we feel pretty confident in that. And you know, for some key areas like Zytel, we saw that really bottom out in the fourth quarter, and we're starting to see the recovery there.

Speaker Change: And so I'd say you know we do see evidence for that is we are seeing a variable margin improving in January as we start to see that inventory pull through of lower raw and fixed costs. So we feel pretty confident in that and you know for some key areas like I tell them. You know we saw that really bottom out in the fourth.

Speaker Change: And we're starting to see the recovery there so.

Lori J. Ryerkerk: So you know, I'd say we feel good about the first quarter and the meaningful uplift that we'll have in M&M next year as well. Fundamentally, I would say we continue to see M&M as a really great business. You know, all the reasons that we bought it are still there.

Speaker Change: You know I I'd say, we feel good about the first quarter and that meaningful uplift that will have in EM and EM next year as well.

Speaker Change: Fundamentally I would say, we continue to see Eminem as a really great business and you know all the reasons that we bought it are still there. We have just been a very difficult backdrop that has made it hard to get the full value of the synergies as well as some of the volume recovery in growth that we had counted on.

Joshua David Spector: We have just been through a very difficult backdrop that has made it hard to get the full value of the synergies as well as some of the volume recovery and growth that we had counted on. [inaudible] Okay, thank you. I'll leave it there.

Speaker Change: If you looked at it today and what would be a more normal demand backdrop, we would find that M&A would be accretive.

Okay. Thank you I'll leave it there.

Kevin William McCarthy: Thank you. The next question is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live. Yes, good morning.

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

Kevin W. McCarthy: Yes, good morning.

Lori J. Ryerkerk: Lori, I think you completed an SAP implementation just a few weeks ago. Can you comment on how that's going so far, you know, the level of integration across the company and remind us of what the benefits might be as your TSAs roll out? Yeah, thanks for the question, Kevin. If we so did do our SAP integration, the last version of that went live February 1.

Kevin W. McCarthy: Laurie I think you are completed and that's H P implementation, just a few weeks ago.

Kevin W. McCarthy: Can you comment on how that's going so far you know kind of the level of integration across the company and remind us of what the benefits might be as your TSA roll off.

Laurie: Yeah. Thanks for the question Kevin.

Laurie: If we do we did do our S. E. T integration. The last version of that went live February 1st maybe I should actually start out by thanking the over 600 people in the organization who have worked on the on the SAP integration not full time, obviously, but they had some role in it and really you know, we often think about it.

Lori J. Ryerkerk: You know, maybe I should actually start out by thanking the over 1600 people in the organization who have worked on the SAP integration, not full time, obviously, but have had some role in it. And really, you know, we often think about SAP integration as an IT effort, but it's really a full business effort, including finance, customer service, commercial businesses, you know, it goes across everybody. And our folks have worked very hard to make this a success, and only 15 months later, we did the integration, which I think is fast by any standard. And then it's after they'd already integrated the heritage of selling these businesses earlier last year onto the same SAP S4 platform.

Laurie: SAP integration as an I T effort, but it is really a full business effort, including the finance customer service commercial businesses, you know it goes across to everybody and our folks have worked very hard to make this a success and only 15 months. After we did the integration, which I think is as fast by any standard.

Laurie: And then as after they had already integrated the heritage Celanese businesses earlier last year under the same as a P. S School platform. So really excited to get this done I would say this is probably the last major step in our integration.

Lori J. Ryerkerk: So, you know, really excited to get this done. I would say this is probably the last major step in our integration. So supply chain production is all on the new platform running well, we're able to take an order, we're able to produce and ship an order, and we're able to get paid for an order. So that was the first order of business.

Laurie: And you know will really help at now as we keep layering on the various processes to the platform will really help us achieve the next level of synergy, including getting rid of the TSA from Dupont, but also the synergies of people being able to work together on one platform being able to have better.

Laurie: Access to the data et cetera, I'd say you know the integration went.

Laurie: Very smoothly so supply chain production are all on the new App platform running well, we're able to take an order we're able to produce it and ship an order and we're able to get paid for in order. So that was the first order of business and now we're gearing up for our first month end close on the new platform, but again I think it's been remarkably smooth.

Kevin William McCarthy: And now we're gearing up for our first month in close on the new platform. But again, I think it's been remarkably smooth, great kudos to the extended team that made that happen. And I'd say so far on the integration, we've seen no surprises. Thank you for that.

Laurie: The great kudos to the extended team that made that happen and I'd say so far in the integration we've seen no surprises.

Speaker Change: Thank you for that and then secondly, if I may can you comment on.

Lori J. Ryerkerk: And secondly, if I may, can you comment on your input cost outlook for 2024? And if those costs trended flat from here, what sort of benefit or tailwind might we expect for this? So I would say, you know, I mean, if you're talking about raw material costs, I mean, certainly, raw materials have come down versus where we were a year ago. And, you know, who knows what will happen.

Speaker Change: Your input cost outlook for 2024.

Speaker Change: Those costs trended flat from here what sort of.

Speaker Change: Tailwind might we expect for this year.

Speaker Change: Yeah.

Speaker Change: So yeah I would say you know I mean, if you're talking about raw material costs. I mean, certainly you know raws have come down versus where we were a year ago.

Speaker Change: And you know who knows what will happen, but we also know that we are now pulling through the lower cost of raw and lower fixed cost that we built on I would say you know 24 is very much a year of being able to deliver on the actions that were taken in 'twenty three.

Lori J. Ryerkerk: But we also know that we are now pulling through the lower cost of raw materials and lower fixed costs that we built on. I would say, you know, 24 is very much a year of being able to deliver on the actions that were taken in 23. And so, you know, I think that is something that is built in, obviously, to our outlook for the year. I think, you know, I think the important thing that we're focused on is, and we've talked about all year, is we want to continue to control what's controllable. At Celanese, we're really good at execution.

Speaker Change: And so I you know I think that is that is built in obviously to our outlook for the year. I think you know I think the important thing that we're focused on is and we've talked about all year is we want to continue to control what's controllable felony. We're really good at execution I think you'd see that with what we've done so far all of the project, we were able to take on it.

Kevin William McCarthy: I think you see that with what we've done so far, all of the projects we're able to take on at the same time. And so this, you know, really, as we move into 24, we see the benefits of that execution in 23, as well as all the steps we have in 24. Thanks very much.

Speaker Change: Same time and so this is really as we move into 'twenty four we see the benefits of that execution in 'twenty three as well as all of the steps we have in 'twenty four.

Thanks very much.

Jeffrey John Zekauskas: Thank you. The next question today is coming from Jeff Zekauskas from J.P. Morgan. Your line is now live. Thank you very much.

Speaker Change: Yeah.

Speaker Change: Thank you. Your next question today is coming from Jeff Zekauskas from JP Morgan. Your line is my life.

Jeff Zekauskas: Thanks very much.

Lori J. Ryerkerk: You said that the synergies in the M&M business would be $150 million. Does that mean that the adjusted EBIT growth in M&M should be at least $150 million in 2024 year-over-year? Thanks, Jeff. You know, no, because of a number of factors there. So the synergies we're expecting for this year are $150 million. But only about 40% of those actually show up in M&M. The vast majority of them do show up in the EM profile.

Jeff Zekauskas: You said that the synergies in the <unk> business would be $150 million does that mean that the adjusted EBIT growth and Eminem should be at least $150 million in 2024 year over year.

Jeff Zekauskas: Thanks, Jeff.

Speaker Change: No because a number of factors there so the synergies we're expecting for this year is the 150 million only about 40% of those actually show up in EM and EM. The vast majority of them do show up in the E M profile, but some of them also show up in N. B you other than other areas.

Lori J. Ryerkerk: But some of them also show up in BU and other areas. http://TheBusinessProfessor.com. Maybe to reframe it a different way, do you expect the M&M business to grow its EBIT exclusive of synergies? Yes. So, yes, thank you. I probably misunderstood your first question. We do expect growth across both our heritage EM businesses and a significant uplift in M&M businesses, even exclusive of Synergies for the year. I mean, if you think about our outlook for the year of $11 to $12, and think about, you know, we've called out 100,000, or sorry, $100 million more in acetyl. The remainder of the uplift from the $9 we were at this year really comes from that integrated EI. Thank you so much.

Speaker Change: Okay.

Speaker Change: Maybe to reframe it a different way.

Speaker Change: Do you expect the Eminem business to grow its EBIT it exclusive of the synergies.

Speaker Change: Yeah. So yeah. Thank you I probably misunderstood. Your first question, we do expect growth across both our heritage E M businesses and a significant uplift in Eminem businesses, even exclusive of synergies for the year I mean, if you think about our outlook for the year of a 11 and 12.

Speaker Change: <unk> and <unk>.

Speaker Change: Think about you know we've called out the 100000 $800 million more in acetyl the remainder of the uplift from the $9. We were at this you're really comes from that integrated E M business.

Speaker Change: Great. Thank you so much.

Michael Joseph Sison: Thank you. The next question today is coming from Mike Sisson from Wells Fargo. Your line is now live. Hey, good morning.

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

Michael J. Sison: Hey, good morning.

Michael Joseph Sison: I'm just wondering if you could help bridge us from 1Q to the remaining quarters. I know there seems to be a lot more headwinds in Q1, more synergies and everything else, all the positives are coming in 2Q to 3Q. So, when you think about going from, you know, $2 to a lot higher in the remaining three quarters, and how does that sort of happen?

Michael J. Sison: And then just wondering if you could help bridge us from one to the remaining quarters I know there seems to be a lot more headwind in Q1.

Michael J. Sison: The synergies and everything out all the positives are coming in Q3 Q. So so when you think about going from $2.

Michael J. Sison: So a lot higher in the remaining three quarters and I know, how how does that sort of happened and then are the last three quarters basically equal in EPS is kind of the way to look at it.

Lori J. Ryerkerk: And then are the last three quarters basically equal in EPS? Is that kind of the way to look at it? Yeah, thanks for the question, Mike. The way I look at it is, you know, if we look at what we're expecting to achieve in Q1, if you do the math, it says we need three to 340 in each of the remaining quarters. I would expect that to ramp up more in the second half, but I would still expect a pretty good ramp in the second quarter as well. So think about it this way: you don't have the turnaround in Q2 that you had in So that's a $50 million list.

Speaker Change: Yeah. Thanks for the question Mike.

Speaker Change: The way I look at it is you know if we look at what we're expecting to achieve in Q1. If you do the math. It says we need three to 340 each of the remaining quarters I would expect that to ramp up more in the second half, but I would still expect a pretty good ramp in the second quarter as well so think about it. This way you don't have the turn.

Speaker Change: And around in Q2 that you had in Q1, so that's a 50 million dollar list.

Speaker Change: And then in <unk> the vast majority of the additional lift in that quarter comes from E M and it's really synergies and flow through of lower cost inventory. It's returning to you know we have some seasonality in medical is always low in first quarter that should come back in the second quarter is so.

Michael Joseph Sison: So and then, you know, in AC, you start to see the benefits of the project as we move through the second quarter. So I would, I would say, we do expect a significant uplift in Q2, but even more uplift in Q3 and Q4. I would expect Q3 to be the highest quarter, because we would expect some seasonality again in Q4. Okay.

Speaker Change: And then you know in AC you start to see the benefits of the project as we move through the second quarter. So I you know I would I would say you know we do expect a significant uplift in Q2, but even more uplift in Q3 and Q4 I would expect Q3 to be the highest quarter, because we would expect some seasonality again in Q4.

Michael Joseph Sison: And then just a quick follow-up. You know, several companies have impaired assets from acquisitions over the last couple years. Now, I know M&M is underperformed, but are there any parts of M&M close to that in terms of impairment levels?

Speaker Change: Got it and then just a quick follow up.

Speaker Change: Several companies have a paradigm that's from acquisitions over the last couple of years that no I know Eminem is underperform, but are there any parts of a minimum close to that in terms of impairment levels and and so you know what what are the areas.

Lori J. Ryerkerk: And just so you know, what are the areas? Yeah, Mike, we'll look at that when that time comes. We've taken a look at that at the EM level and have not. [inaudible] I have not seen any markers on that that would cause us, at this point in time, to think that's a possibility.

Speaker Change: Yeah, Michael we will look at that when.

Speaker Change: When that time comes we've we've taken a look at that at the EM level and have not have not seen markers on that that would that would cause us at this point in time I think that's a that's a possibility.

Speaker Change: Right.

Ghansham Panjabi: Great, thank you. Thank you, next question is coming from Ghansham Panjabi from Baird. Your line is now live. Hey guys, good morning.

Speaker Change: Great. Thank you.

Speaker Change: Thank you next question is coming from Ghansham Panjabi from Baird. Your line is now live.

Hey, guys good morning.

Lori J. Ryerkerk: Hey Lori, you know, just on a high-level basis, what sort of global macroeconomic backdrop are you embedding as it relates to your guidance? You know, obviously interest rates are still high, ISM very mixed globally, China, you know, who knows? It still sounds like there's pockets of destocking, etc. on the durable goods side. How do you sort of factor all that in as it relates to the evolution?

Ghansham Panjabi: Hey, Lori just on a high level basis, what sort of global macroeconomic backdrop are you embedding as it relates to your guidance.

Ghansham Panjabi: Obviously interest rates are still high I had somebody makes globally, China, you know who knows it's still sensors, there's pockets of destocking et cetera on the durable goods side.

Ghansham Panjabi: How do you how do you sort of factored that all of that and as it relates to the evolution in 2021.

Lori J. Ryerkerk: Yeah, look, I would say at this stage, we are really focused on what we can control. So what we've seen assumed in our 11 to $12 guide is, you know, we see the kind of diminishing of de-stocking. So we are assuming that we are getting to the point of de-stocking; we are not, though, assuming a really big uptick in demand or restocking. So you know, I would say we're still assuming kind of below-normal demand patterns, but without the absence of de-stocking. So that is kind of the one upside that we're assuming, maybe a few percent at the most. And otherwise, it's really our outlook is really focused on what we can control. I would say if we look at the market, the good news is, I think, you know, as we're starting 24, although I'd like to say we're back to normal demand patterns, we're not.

Speaker Change: Yeah look I would say at this stage, we are really focused on what we can control. So what we've assumed in our 11% to 12 dollar guide. It is you know we see the kind of the diminishing of Destocking. So we are assuming that we are getting to the destock.

Speaker Change: We are not though assuming a really big uptick in demand are restocking. So you know I would say, we're still assuming kind of below normal demand patterns, but without the absence of destocking. So we are that is kind of the one upside that we're assuming that maybe a few percent it the most and otherwise.

Speaker Change: Really our outlook is really focused on what we can control I would say if we look at the at the market. I mean, good news is I think you know as we're starting 'twenty for although I'd like to say we're back in normal demand patterns were not but look we are starting to see some easing of some of the.

Lori J. Ryerkerk: But look, we are starting to see some easing of some of the demand and competitive challenges we had. We called out, you know, we're seeing less movement of materials out of Asia into Europe. So that indicates to us that demand is, you know, local demand is improving in China. And we see that I would say in China, generally, we feel like demand for Chinese consumption is approaching normal order patterns and normal levels. But the exports of goods out of China are still depressed, especially into Europe.

Speaker Change: The man and competitive challenges, we had we called out.

Speaker Change: You know, we're seeing less movement of materials out of Asia into Europe.

Speaker Change: That indicates to us that demand is.

Speaker Change: Local demand is improving in China, and we see that I would say in China generally we feel like demand for China consumption is approaching normal order patterns and normal levels, but the exports of goods out of China is still depressed, especially into Europe. So so theres still some some downside on demand there.

Lori J. Ryerkerk: So there's still some downside on demand there. I think, you know, in the Americas, we're seeing demand come back gradually. We saw some improvement in industrial in the fourth quarter, but then we saw the reduction in auto, which was seasonal de-stocking. I expect that to come back in the first quarter.

Speaker Change: I think you know in the Americas, we're seeing demand come back gradually we saw some improvement in industrial in the fourth quarter, but there than we thought of the reduction in auto which was seasonal destocking I expect that to come back in the first quarter, but again not anticipating a huge uptick in demand there for a consumer.

Lori J. Ryerkerk: But again, not anticipating a huge uptick in demand there for consumer goods and electronics, you know, in Europe, I'd say, similar to the US, but probably even a longer timeframe before we could return to demand. I mean, you know, the other thing I would add, though, is, look, we are seeing some improvement in construction. Unknown Executive, Salvator Tiano, Ghansham Panjabi, Chuck Kyrish, Celanese Corp. Okay, super helpful.

Speaker Change: Good and electronics.

Speaker Change: Europe, I'd say similar to the U S, but probably even a longer timeframe and before we could return to to demand I mean, you know the other thing I would add though is look we we are seeing some improvement in construction.

Speaker Change:

Speaker Change: Normalizing so that's good and that's supported by.

Speaker Change: Slight movement upward in terms of Bam pricing as well.

Speaker Change: Yeah.

Lori J. Ryerkerk: And then for the second question, you know, the outages in 2024 that seem front-end loaded, but with those both just sort of pull forward, just given weaker demand, or was that sort of in line with the original plan? No, I'd say it's very much in line with the original plan. In fact, you know, a little bit, we've pushed back a little out of 23 into 24, with the delay in the project to Clear Lake. But I would say these are planned turnarounds. These are turnarounds that occur every, you know, three years in the case of palm oil, four years in the case of methanol. And so, very much as planned.

Speaker Change: Okay Super helpful. And then for the second question you know the outages in 2024 Thats in front end loaded what would those bolt just sort of pull forward just given weaker demand or was that sort of in line with the original plan.

No I'd say, it's very much in line with the original plan.

Speaker Change: In fact, you know a little bit we've pushed back a little out of 23 into 'twenty for us.

Speaker Change: With the delay in the and the the project at clear Lake, but I would say. These these are planned turnarounds. These are turnaround that occur on an every.

Speaker Change: Three years in the case of Palm for years in the case of methanol and so very much as planned and I would also say they've gone very well we've gotten through all the major discovery work and no surprises so feel like we're on track to meet our to meet our plans around those turnarounds.

Lori J. Ryerkerk: And I would also say they've gone very well, we've gotten through all the major discovery work, and there were no surprises. So I feel like we're on track to meet our plans. Perfect, thanks so much.

Speaker Change: Okay perfect. Thanks, so much.

Aleksey V. Yefremov: Thank you. Our next question is coming from Aleksey Yefremov from KeyBank Capital Markets. Your line is now live. Thanks, and good morning. This is Ryan on for a like. The first question I want to dig into a little bit on nylon pricing. I believe at least one pair of yours is out in the market announcing some pricing.

Speaker Change: Thank you. Our next question is coming from Alexia from off from Keybanc capital markets. Your line is that life.

Speaker Change: Thanks, and good morning. This is a this is ryan on for Alexia.

Ryan: The first question I wanted to dig into a little bit on nylon pricing I believe at least one peer of yours is out in the market announcing some pricing are you seeing any momentum in the market here and can you just talk about what your expectations might be for the balance of the year.

Lori J. Ryerkerk: Are you seeing any momentum in the market here? And can you just talk about what your expectations might be for the balance? Yeah, look, nylon pricing varies a lot depending on region or by, you know, end use. But I would say, in general, we feel like we have hit kind of the bottom in terms of variable margins. So it's not just pricing that's important, but it's raw materials as well. So raws have come down. But I'd say, in general, we feel like we're coming off the bottom. But let me hand it over to Scott because I think he can get a bit more color. No, I think Lori hit it, Brian.

Ryan: Yeah.

Speaker Change: Yeah look nylon pricing it varies a lot depending by region or by you know our end use but I would say in general we feel like we hit kind of a bottom in terms of variable margins, but it's not just pricing that's important, but it's rather as well, but rather to come down.

Speaker Change: But I'd say in general we feel like we're coming off the bottom, but let me hand, it over to Scott because I think you can get a bit more color here.

Scott Richardson: No I think Laurie Laurie hit it Brian we are seeing a lot of stability, which is a really good thing and as Laurie mentioned, we're starting to see the flow through of our variable costs and so margins are expanding in the nylon business and we continue to work as we said in previous quarters to get back some of that share.

Scott A. Richardson: You know, we are seeing a lot of stability, which is a really good thing. And, as Lori mentioned, we're starting to see the flow through of variable costs. So margins are expanding in the nylon business, and we continue to work, as we said in previous quarters, to get back some of that share that had been lost prior to us closing the transaction. So we feel good about the trajectory as we work our way through this year of nylon. Great, that's very helpful. Thank you. And then if I just dig a little bit into the $150 million Synergy Target and your bridge for 24, if there's no demand improvement, and demand kind of trends sideways from here, do you still feel you're confident in being able to deliver on that target? Thanks. Yeah, so I feel really confident in our ability to deliver on that 150. I think if you look at it, it really is in three buckets.

Scott Richardson: That had been lost prior to US closing the transaction. So we feel good about the trajectory as we work our way through this year of the nylon business.

Scott Richardson: Yeah.

Scott Richardson: Great. That's very helpful. Thank you and then if I just dig a little bit into the $150 million synergy target in your bridge for 'twenty four.

Scott Richardson: If there's no demand improvement demand kind of trends sideways from here or do you still feel.

Scott Richardson: Confident in being able to deliver.

Scott Richardson: That target thanks.

Speaker Change: Yeah, So I feel really confident in our ability to deliver on that 150, I think if you look at it. It really is in three buckets I'm you know the first really being the footprint optimization steps that we've taken at the end of this year, which start to.

Scott A. Richardson: You know, the first really being the footprint optimization steps that we took at the end of this year, which will start to show up in the bottom line next year. So, you know, that's probably about 50 million dollars a year. We have the transition to the single SAP platform, which is happening now, which gets us out of the TSA, and we get other synergies from, and then we have cross-sell opportunities, which have been identified this year, and we closed one this year, which will, you know, start to come online next year, and we'll start to see the revenue return from. So, I feel very confident about that $150 million of synergies for 2020. Thank you. The next question is coming from Frank Mitsch from the Fermium Research Alliance. Hey, good morning.

Speaker Change: Show up in the bottom line next year. So you know that's probably about 50 million in the year, we have the transition to the single S. A P platform, which is happening now which gets us out of the TSA and we get other synergies from and then we have cross sell opportunities, which have been identified this year.

Speaker Change: Close one this year, which will start to come online next year and we'll start to see that revenue return problem. So I feel very confident about that $150 million of synergies for 2024.

Speaker Change: Thank you next question is coming from Frank Mitsch from Fermium Research. Your line is now live.

Frank J. Mitsch: Hey, good morning, if I could just follow up.

Frank Joseph Mitsch: If I could just follow up. Did you guys disclose what your M&M synergies were realized for 2023? I apologize if I missed that. I'm not sure if we disclosed it or not, but we achieved 100 million in synergies in 2023, a little bit lower than we had anticipated early in the year but still above what we had thought at the beginning of the year. And really, the reason for that was volume-related, just not seeing the volume recovery and some of the volume-related synergies not pulling through.

Frank J. Mitsch: Did you guys disclose what your Eminem synergies were realized for 2023, I apologies if I missed that.

Frank J. Mitsch: I'm not sure if we dispose or not but we achieved 100 million in synergies in 2023.

Frank J. Mitsch: Little bit lower than we had anticipated early in the year, but still above what we had thought at the beginning of the year and really the reason for that was the volume related just not seeing the volume recovery in some of the volume related synergies not pulling through but again that those synergies are they will just pull through at a later time as.

Lori J. Ryerkerk: But again, those synergies are still there; they will just pull through at a later time as volume recovers. Gotcha, understood, understood. And if I could, you know, ask a question on the asset deals chain. You know, back in the 21 investor day, you know, back when you had acetate toes split out, the expectation was that it was going to be relatively flat to 21 during 2023 at 245 million euros of EBIT. I suspect it might have been higher than that.

Frank J. Mitsch: Recover.

Speaker Change: Got you understood understood and if I can ask a question on the acetyl chain.

Speaker Change: Yes, I know back in the 21 Investor day back when you had acetate tow split out.

Speaker Change: The expectation was that it was going to be relatively flat to 'twenty, one and during 2023 or $245 million of EBIT. My I suspect it might have been higher than that can you give us an idea as to how well that part of the business is performing and where and what's your outlook is.

Lori J. Ryerkerk: Can you give us an idea as to how well that part of the business is performing and what your outlook is? Yeah, look, Acetate Toast had a really good year this year as a result of the work we did last year to really reset how we contracted and how we managed that business. As you'll recall, we pulled it in to be part of the Acetil chain to give us more flexibility and more optionality, much like we do for the rest of our projects.

Speaker Change: Yeah look acetate tows had a really good year. This year as a result of the work we did last year to really reset how we contracted in and how we manage that business as youll recall, we pulled it in to be part of the acetyl chain to give us more flexibility and more optionality much like we do for the rest.

Speaker Change: Of our projects. So I would say you know we called out you know our target was to get to the $245 million at Investor Day, I would say, we have meaningfully exceeded that target for the year, but again I think the important thing here is we are just running as part of the chain and you know that way we stable.

Lori J. Ryerkerk: So I would say, you know, we called out, you know, our target was to get to $245 million at Investor Day. I would say we have meaningfully exceeded that target for the year. But again, I think, you know, the important thing here is that we are just running as part of the chain. And, you know, that way we stabilize the earnings of the entire Acetil chain, much like we do with, say, redisbursable powders and other downstream derivatives. It simply gives us another outlet to pull acetic acid through the chain to make sure we can maximize value from the chain and, again, stabilize.

Speaker Change: The earnings of the entire acetyl chain much like we do with St Regis Perceval powders and other downstream derivatives. It simply gives us another outlet to Paul acetic acid to the chain to make sure we can maximize value from the chain and again stabilizer.

Frank Joseph Mitsch: Thank you, Lori. Thank you. The next question is coming from Vincent Andrews from Morgan Stanley. Your line is now live. Hi, this is Turner Henrickson on behalf of Vincent.

Speaker Change: Understood. Thank you Laurie.

Speaker Change: Thank you. Your next question is coming from Vincent Andrews from Morgan Stanley. Your line is alive.

Speaker Change: Hi, This is Turner Hendrix on for Vincent I was wondering if you could provide your updated view on auto builds for 2024 and the impact of slowing E. B sales on product mix in E M and Eminem also how exposed to China Auto China autos is the combined E M.

Vincent Stephen Andrews: I was wondering if you could provide your updated view on auto builds for 2024 and the impact of slowing EB sales on product mix in EM and M&M. Also, how it's supposed to affect Chinese autos, the combined EM and M&M business. Yeah, thanks, Turner. First, let me start with auto builds.

Speaker Change: Mmm business.

Speaker Change: Yeah. Thanks Turner first let me start with auto builds I think the industry most publications are projecting somewhere.

Scott A. Richardson: I think the industry, most publications are projecting somewhere, you know, more or less flattish builds. You know, our business tends to grow about 150 to 200 basis points above builds. So that's what we're baking into our current plan. When it comes to the mix of EVs, you know, we're largely across our EM portfolio pretty agnostic to whether it's an EV, an ICE vehicle, or, you know, honestly, hybrids are the best. And we have about 20% more accessible content on a hybrid vehicle.

Speaker Change: More or less flattish build.

Turner Hendrix: You know our business tends to grow about 150 to 200 basis points above builds so that's what we're baking into our current plan when it comes to the mix of the B's were largely across our portfolio pretty agnostic to whether it's an E b an ice vehicle.

Turner Hendrix: Or you know honestly hybrids are the best and we have about a 20% more accessible content on a hybrid vehicles. So starting particularly here in the U S to see more shifts to hybrid that tends to be a good thing for us overall, so really no impact if we see the mix impact here in the U S change away from Evs and move back to <unk>.

Scott A. Richardson: So, you know, we're starting, particularly here in the US, to see more shifts to hybrids, and that tends to be a good thing for us overall. So really, it will have no impact if we see the mix impact here in the US change away from EVs and move back to ICE or to hybrids. And from a China perspective, overall, if you kind of start at the corporate level, it's about a quarter of our overall sales. You bring that down into EM, pretty similar. And, you know, our overall exposure is kind of around that range as well, in terms of automotive. Great, thanks for the detail.

Turner Hendrix: Is workout hybrids and from a China perspective overall, if you kind of start at the corporate level, it's about a quarter of our overall sales I mean, you bring that down into E. M pretty similar and you know our overall exposure is kind of around that range as well in terms of automotive in China.

Speaker Change: Great. Thanks for the detail.

Vincent Stephen Andrews: On the lower raw materials cost in nylon, how significant is this expected to be in 2024? And what's the confidence that this will not get passed through to prices? You know, I think, as Lori mentioned, we have a bucket of lower variable and fixed costs that we think is going to flow through the earnings that could be the largest year over year benefit for us. A good chunk of that is in the nylon part of the M&M portfolio. So it has the ability to be a pretty significant driver of uplift year over year. But a lot will depend upon what happens with raw materials, as well as pricing, in the second half of the year. We feel good about where things are in the first half of the year, given the amount of inventory that we have in the order book, as we see it.

Speaker Change: The lower raw materials cost in nylon how significant is this expected to be in 'twenty 'twenty four and what's the confidence that these will not get pass through to price.

Speaker Change: You know I think.

Speaker Change: Lorie mentioned, you know we have a bucket of the lower variable and fixed costs that we think is going to flow through the earnings that could be the largest year over year benefit for us a good chunk of that is in the nylon part of the Eminem portfolio. So it has the ability to be a pretty significant driver.

Speaker Change: Of uplift year over year, a lot will depend upon what happens with raw materials as well as pricing in the second half of the year, we feel good about where things are in the first half of the year given the amount of inventory that we have in the order book as we see it.

Vincent Stephen Andrews: You know, pricing, as we said earlier, has kind of bottomed out in nylon, so we don't expect to see a lot of pricing impact downward from where it is today. So we feel very confident that the margins we're seeing right now, at least in the first half, are here. Okay, thanks for the call. Thank you. The next question is coming from Arun Viswanathan. From RBC, your line is now live. Arun, perhaps your phone is on me.

Speaker Change: You know pricing as we said earlier has kind of bottomed out in nylon. So we don't expect to see a lot of pricing impact downward from where it is today. So we feel very confident that the margins. We're seeing right now here at least in the first half are here to stay.

Speaker Change: Okay, well thanks for the color.

Speaker Change: Thank you. Your next question is coming from Arun Viswanathan from RBC. Your line is now live.

Okay.

Arun S. Viswanathan: Perhaps your phone is on mute.

Arun Shankar Viswanathan: [inaudible] Our next question is coming from David Begleiter from Deutsche Bank. Your line is now live. Thank you. Lori, can you talk to the foundational level of earnings and asset yields post the Clear Lake expansion coming on stream and given the step-up in asset-to-toe earnings we've seen this year? Yeah, it's pretty simple.

Speaker Change: Yeah.

Arun S. Viswanathan: Arun Your line is live.

Speaker Change: Please re queue.

Speaker Change: Next question is coming from David Begleiter from Deutsche Bank. Your line is alive.

David I. Begleiter: Thank you.

David I. Begleiter: Laura can you talk to the foundational level of earnings lost Hills post the clear Lake expansion coming on stream and given the.

David I. Begleiter: Step up in acetate tow earnings we've seen this year.

Laura: Yeah, it's pretty simple I mean, where are you know we said foundational level of earnings is $1 3 billion. Today I think we proved that in 2023 and what we're pretty sub foundational markets for most of the year.

Lori J. Ryerkerk: I mean, we're, you know, we said the foundational level of earnings is 1.3 billion today. I think we can prove that in 2023. And we're pretty sub-foundational markets for most of the year. And next year, we expect, or this year, I should say we expect that to increase by $100 million, which is really what we expect to get in productivity from the combination of Panther and our CCU project. Panther being sorry, the clear like a city gas.

Laura: And next year, we expect our this year I should say, we expect that to increase by $100 million, which is really what that what we expect to get in productivity from the combination of Panther and our CPU project Panther being sorry, the clear like acetic acid expansion.

Laura: And if you assume some a normalize level of ethical demand well what could their earnings power would be.

Lori J. Ryerkerk: And if you assume a normalized level of FTL demand, what could their earnings power be? Well, I mean, look, we've had years where we were over two billion dollars in asset sales. So I mean, you know, when we have fly-ups and those sorts of things, because the supply outages are sudden demand increases, that can be very high. But again, right now, we're focused on what we can control. And so I would, you know, focus on that 1.4 level of foundation. And one more thing, just on the tax rate: is 9% a good rate going beyond 2024? Hey David, this is Chuck.

Laura: Well I mean look we've had years, where we were over $2 billion and N. Acetyl. So I mean, when we have fly ups and those sorts of things because the supply outages are sudden demand increases that can be very high but again right. Now we're focused on what we can control and so I would focus on that 1.4 level.

Speaker Change: Foundational Arnie.

Speaker Change: And one more thing just on the tax rate is 9% a good rate going beyond 2024.

Speaker Change: Hey, David This is Joe for 'twenty 'twenty four we do expect a really similar rate to twenty-three I'd use 9% for now for that and we will update you. If that changes you know going forward, we feel like we're in a good position.

Chuck B. Kyrish: For 2024, we do expect a really similar rate to 2023. I'd use 9% for now for that. And we will update you if that changes. You know, going forward, we feel like we're in a good position. It'll depend on the jurisdictional mix of our earnings, and we'll update that each year. But we feel like we're in a pretty good position where we are. Thank you. Thank you. Our next question is coming from Arun Viswanathan from RBC. Your line is now live. Great, thanks for taking my question. Apologies for that earlier.

Joe: It'll depend on the jurisdictional mix of our earnings and we'll update that each year, but we feel like we're in a pretty good position, where we are right now.

Speaker Change: Thank you.

Okay.

Speaker Change: Thank you. Our next question is coming from Arun Viswanathan from RBC. Your line is now live.

Arun S. Viswanathan: Great. Thanks for taking my question and I apologize for that earlier, Yeah, I guess first off just on the deleveraging trajectory I know that the target obviously is to get to three turns as rapidly as possible. Maybe you can just walk us through the opportunity on free cash flow and and and how you're expecting to get.

Arun Shankar Viswanathan: Yeah, I guess first off, just on the deleveraging trajectory, I know that the target obviously is to get to three turns as rapidly as possible. Maybe you can just walk us through the opportunity for free cash flow and how you expect to get to that three turns. Is there any more opportunity to harvest a little bit more free cash flow out of working capital? Yeah, maybe we can start with that. Yeah, let me ask Chuck to cover the details.

Arun S. Viswanathan: That's returned is there any more opportunity to harvest a little bit more free cash flow out of working capital or.

Speaker Change: Yeah, maybe we could start with that.

Speaker Change: Yeah, Let me ask Chuck to cover the details, but you know what I would say is this year like we were last year, we're very focused on generation of free cash flow and deleveraging, we're very committed to maintaining that investment grade and so you know we are anxious to delever to that three times level. So that we will you know.

Lori J. Ryerkerk: But you know, what I would say is this year, like we were last year, we're very focused on the generation of free cash flow and deleveraging. We're very committed to maintaining that investment grade. And so you know, we are anxious to deliver at that three times the level so that we will, you know, have flexibility in how we use capital going forward and be able to, you know, move on with other opportunities in the company. But Chuck, let me let you walk through the bucket.

Chuck: The flexibility in how in our use of capital going forward and be able to you know move.

Chuck: Move on with other opportunities in the company, but Chuck Let me, let you walk through the buckets, yeah. Thanks, Laura and thanks, Arun Yeah of course I wanted I wanted to thank the global team that we have that drove the record free cash flow resulted in 23, there's a lot of work by a lot of smart people. So I just want to salute that for you for your efforts you know who you are out there.

Chuck B. Kyrish: Yeah, thanks. Thanks, Lori. Thanks, Arun. Yeah, first, I want to just thank the global teams that we have that drove the record free cash results in 23. That's a lot of work by a lot of smart people. So I just want to salute them for their efforts. You know who you are.

Chuck: 24.

Chuck B. Kyrish: You're up for 24, for 24. Look, let me give you a few key drivers that we're seeing for free cash right now. If we start with earnings. If you take our EPS guide, that would translate into about $300 million of incremental net income, give or take. On working capital, our target for 2024 is $100 million to $150 million of benefits for the year.

Chuck: For 24, let me give you a few key drivers that were that were seeing for free cash right now if we start with earnings.

Chuck: If you take our EPS guide that would translate into about 300 million of incremental net income give or take on working capital and our target for 'twenty four is $100 million to $150 million benefit for the year. This compares with little over 500 million cash benefit for the year in 'twenty three so so not us.

Chuck B. Kyrish: This compares with a little over $500 million cash benefit for the year in 2023, so not as much working capital benefit year over year, but we're still striving for working capital benefit within the year. This driver could change depending on how demand shapes up across 24, of course, and kind of how earnings and synergies ramp up. And we do know that capital expenditures should be lower year over year by $100 to $150 as we cycle out of a lot of large projects. Those are the key drivers.

Chuck: As much working capital benefit year over year, but work, we're still striving for working capital benefit within the year and this driver could change depending on how demand shapes up across 24 of course and kind of how earnings as synergies ramp and we do know that cap.

Chuck: Capex should be lower year over year by 100 to 150 as we cycle out of a lot of large projects. Those are the key drivers. There are some other puts and takes in that that we need to refine as the year goes on like cash tax and costs to achieve synergies, but I would focus on those key drivers right now you're in 'twenty four and as you know where we are.

Chuck B. Kyrish: There are some other puts and takes in that that we need to refine as the year goes on, like cash tax and costs to achieve synergies, but I would focus on those key drivers right now in 24. And, as you know, we are really focused on converting our earnings into cash flow, deleveraging the balance sheet. You know, we think we're going to finish this year much closer to our three-times target, and we expect to finish on our three-times target in 2024. Great, thanks for that. And then I just have one quick follow-up.

Chuck: We're really focused on converting our earnings into cash flow deleveraging the balance sheet. We think we're going to finish this year much closer to our three times target and we expect to finish two or three times target and in 2025.

Speaker Change: Great. Thanks for that and then just have one quick follow up I'm, just thinking about the portfolio as it stands now obviously you've gone through some changes.

Arun Shankar Viswanathan: Just thinking about the portfolio as it stands now, obviously, you've gone through some changes within the food ingredients and integrated M&M. Is there anything else on the horizon that we should be thinking about as far as portfolio management or potential divestitures or anything along those lines? Thanks.

Speaker Change: Changes within the.

Speaker Change: The food ingredients and and integrating Eminem.

Speaker Change: Is there anything else on the horizon that we should be thinking about as far as our portfolio management or.

Speaker Change: Potential divestitures or or anything along those lines.

Lori J. Ryerkerk: Yeah, thanks, Arun. Look, we still have a ways to go with the acquisition of M&M and the cleanup activities. I think as we get through S4, this is a big, big milestone for us and will allow us to, you know, find other opportunities to better run these businesses together. So that is kind of, first and foremost, our focus. But I would also say as it comes to divestitures, we will, as we've always been, be opportunistic and smart about it. And if we see the opportunity to divest something in the company that is worth more to someone else than it is to us, we will, of course, do it. Thanks. Thank you. Our next question today is from Hassan Ahmed from Olympic Global. Your line is now live. Morning, Lorraine, Scott.

Speaker Change: Yeah. Thanks, Arun look we still have a ways to go with the acquisition of Eminem and the cleanup activities I think as we get through <unk>. Four this is a big big milestone for us and will allow us to you know find other opportunities to better run these businesses together.

Speaker Change: That is kind of first and foremost our focus but I would also say as it comes to divestitures, we will as we've always been be opportunistic and smart about it and if we see the opportunity to divest something in the company that are is it worth more to someone else than it is to US we will of course pursue.

Speaker Change: Thanks.

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

Hassan Ahmed: Good morning, Lori and Scott.

Hassan Ijaz Ahmed: You know, a two-part question on the acetyl chain to start with. Your margins in Q4 sequentially were flat to even slightly up, which was a bit surprising to me, keeping in mind what the acetic acid to methanol spread did. So, you know, part one of the question is, you know, how did you achieve that margin expansion? And then, you know, as I sort of sit there and think about 2023 for acetic acid, there seem to have been quite a few industry outages, which I would imagine you guys benefited from. So, you know, as you guys sort of gave us that bridge to 2024 earnings, you're talking about a 50 to 75 million headwind from one off. Is the positive impact of sort of those outages baked into that as well? Yeah, thanks for the question, Hassan.

Hassan Ahmed: You know a two part question on the acetyl chain to start with.

Hassan Ahmed: Oh your margins in Q4 sequentially with flat to even slightly up you know, which was a bit surprising to me keeping in mind, what the acetic acid to mezzanine or spread did so you know bought one of the question is how did you achieve that margin expansion and then.

Hassan Ahmed: As I sort of sit there and think about 2023 for aesthetic.

Hassan Ahmed: Seem to have been quite a few industry outages.

Hassan Ahmed: Which I would imagine you guys benefited from.

Hassan Ahmed: So you know as you guys sort of gave us that grade for 'twenty to 'twenty four earnings Youre talking about a 50 to 75 million headwind from one offs.

Hassan Ahmed: Is the positive impact of sort of those outages baked into that as well.

Speaker Change: Yeah. Thanks for the question Hassan let me start by really kind of commending the team for continuing to flex this integrated value chain model.

Scott A. Richardson: Let me start by really kind of commending the team for continuing to innovate this integrated value chain model. You know, what you saw in the fourth quarter was a combination of the team flexing production as much as possible, given some of the outages that were unexpected in the Americas and flexing that to the highest-value end uses that we saw, and our teams in the field and manufacturing environment for really pulling costs down as much as possible, given the economic environment that we're in. As you alluded to, some of those will reverse out as we move our way into next year. But, you know, I think we do expect the markets to grow kind of at that global GDP level in the asset-to-value chain, which will give us some potential offset to any kind of industry outages that may or may not happen. You know, we are expecting utilization to remain in the 85 to 90% range. So, you know, much like you saw last year, if you see some dislocation in markets, we tend to be able to benefit from that. Very helpful, Scott.

Speaker Change: What you saw in the fourth quarter is a combination of the team vaccine production.

Speaker Change: As much as possible given some of the outages that were unexpected in the Americas and flexing that to the highest value and usage that we saw and to our teams in the field and manufacturing environment for really pulling costs down as much as possible given the economic environment that we're in as you alluded to some of those reverse out as we.

Speaker Change: Move our way into next year.

Speaker Change: You know I think we do expect the markets to grow kind of in that global GDP level and the answer to your value chain, which will give us some.

Speaker Change: Potential offset to any kind of industry outages that may or may not happen.

Speaker Change: We are expecting utilization to remain in kind of the 85% to 90% range. So youre much like you saw last year, if you see some dislocation in markets.

Speaker Change: Tend to be able to benefit from that in the short term.

Speaker Change: Very helpful, Scott and as a follow up on the sort of Eminem side of things.

Hassan Ijaz Ahmed: And as a follow-up on the sort of M&M side of things, you guys obviously shut down some nylon capacity. So, you know, if you could sort of talk a bit about what you're seeing in terms of near-to-medium-term supply and demand fundamentals for nylon, and, you know, part and parcel with that, you guys talked about maximizing your make versus buy decision. What's the thought process in light of what you're seeing in terms of nylon supply and demand fundamentals on the make versus buy as well? Our focus is creating a contemporary operating model for nylon, not relying on low-cost raw materials to create value but controlling where that value creation comes from.

Speaker Change: You know you guys. Obviously, you know shut down some nylon capacity. So you know if you could sort of talk a bit about what youre seeing in terms of near to medium term supply demand fundamentals on nylon and you know part and parcel with that you know in the last quarter you guys talked about maximizing your make less.

Speaker Change: Is buy decision you know, what's the thought process in light of what you're seeing in terms of Tonight on supply demand fundamentals on the make versus buy as well.

Speaker Change: Our focus is creating a contemporary operating model for nylon not relying on low cost raw materials to create value, but controlling you're aware that value creation comes from and for us that really comes from creating compounds that are unique for our customers and maximizing that.

Scott A. Richardson: And for us, that really comes from creating compounds that are unique to our customers and maximizing that part of the value chain as much as possible. We have the ability, given where the dynamics are, to make some of those make-first-buy decisions, as you mentioned, Hassan. And as we do that, we're going to be focused, much like we do in the acetyl chain, on what is the lowest cost to supply those compounds so we can remain competitive. But fundamentally, we are working to create a business model here that is a minimum of 25% EBITDA in any economic environment. And so the first steps of that, to take controllable costs out with the shutdown of our production capacity in Europe and then maximize our low-cost capacities that we have here in the Americas, as well as procurement. Very helpful, Scott. Thank you so much.

Speaker Change: The value chain as much as possible, we have the ability given where the dynamics are to make some of those make versus buy decisions. As you as you mentioned around our Hassan and you know as we do that we're gonna be focused much like we do in the acetyl chain on what is the lowest cost to supply those compounds. So we can remain competitive but fundamentally.

Speaker Change: We are working to create a business model here that is minimum of 25% EBITDA in any economic environment and so the first steps of that to take controllable costs out with the shutdown of our production capacity in Europe, and then maximize our low cost capacity that we have here in the Americas as well as purchases.

Speaker Change: Asia.

Speaker Change: Very helpful. Scott. Thank you so much.

Yeah.

Laurence Alexander: Thank you. The next question is coming from Lawrence Alexander from Jeffries. Your line is now live. Good morning.

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

Lori J. Ryerkerk: Can you clarify the EBITDA impact from incentive comp and working capital flows in 2023 and therefore the bridge to 2024? Yeah, so in 2020, sorry, I was just having a little trouble hearing your question. In 2023, you know, we reduced inventory by about $450 million. Of that, you know, 80% came from EM, the rest came from AC. I would say, you know, it was punitive to our EBIT for the year. But at the same time, our businesses did a really great job, you know, offsetting the impacts of that as well as minimizing them and making sure we took, you know, took some reductions in raw materials and intermediates and things that didn't have as much of a need for that. Great, just in terms of the incentive comp 2024 versus 2023. Is that in Cremona, Hadwell? I would, you know, for the inventory reductions, which will be less this year, I would expect a similar level of EBITDA hit for that, so I don't see that as being a year-on-year thing. Yeah, and on incentive comp, Lawrence, we don't I wouldn't expect it to be Thank you.

Laurence Alexander: Good morning can you clarify the EBITDA impact from incentive comp and working capital.

Laurence Alexander: Our flows in 2023, and therefore the bridge 2024.

Scott Richardson: Yeah. So in 'twenty 'twenty, sorry, it's just having a little trouble hearing your question.

Laurence Alexander: In 'twenty to 'twenty, three we reduced inventory by about $450 million of that you know, 80% came from and the rest came from AC.

Laurence Alexander: And why I would say you know it was punitive to our EBIT for the year at the same time, our businesses did a really great job you know offsetting the impacts of that as well as minimizing it and making sure. We took you know it took some reductions in raw materials intermediates and things that didn't have as much of an EBIT.

Speaker Change: Got it.

Speaker Change: Okay, great and just in terms of the incentive comp the 2024 versus 2023.

Speaker Change: Is that an incremental headwind.

Speaker Change: I was you know for the inventory reductions, which will be less this year I would expect a similar level of EBITDA.

Speaker Change: EBITDA hit for that so I don't see that as being a year on year headwind, yeah and on incentive comp Laurence we don't I wouldn't expect it to be material year over year.

Speaker Change: Thank you.

Speaker Change: Thank you. Your next question is coming from Salvator Tiano from Bank of America. Your line is now live.

Chuck B. Kyrish: Next question is coming from Salvator Tiano from Bank of America. Your line is now. Thank you very much. So, the first question I wanted to ask a little bit about is on the acetyl chain.

Speaker Change: Yeah.

Salvator Tiano: Thank you very much.

Salvator Tiano: So first question I wanted to.

Salvator Tiano: As koby.

Salvator Tiano: The absolute it'll change it seems like you're assuming acetic acid in the and wrong.

Salvator Tiano: It seems like you're assuming acetic acid and acetyls probably will be flat year on year, so the growth will come from the Clearlake expansion. What are you seeing with the supply? Because it seems to us that the supply could go down in China in 2024. Could this actually be an additional risk?

Salvator Tiano: Probably will be flat year over year. So the growth will come from the clear Lake expansion.

Salvator Tiano: What are your singles or something like that.

Salvator Tiano: Because it seems to us like a little supply coming online in China in 2024 could actually be it an additional risk and.

Salvator Tiano: And if acid prices do come down, is that not part of the $11 to $12 guidance? Yeah, Sal, thanks for your question. Let me try to answer it. You cut out on us a few times here.

Salvator Tiano: If asset prices do come down that is not part of the 11 to 12 dollar guidance.

Speaker Change: Yeah. So thanks for your question, let me try to answer it.

Speaker Change: You cut out on us a few times here.

Scott A. Richardson: Let me first kind of hit on what Lori talked about earlier around the $100 million really coming through productivity on a year-to-year basis. As we mentioned earlier on the call, we would expect to see growth more in line with GDP, so low single digits there, given what we're seeing kind of right now in the construction sector. That's kind of going to be offset by some of the outages that we had earlier in the year. So I would not focus too much on changes in utilization. The industry has more or less kind of already absorbed that new capacity that has come online in China. So really think about the year-over-year lift coming from our productivity project.

Speaker Change: Let me first kind of hit them.

Speaker Change: You know, what Lori talked about earlier around the $100 million really coming through productivity on a year.

Speaker Change: As we mentioned earlier on the call we would expect to see growth more in line with GDP. So low single digits are there given what we're seeing kind of right now in the construction sector as Lori talked about earlier.

Speaker Change: That's kind of going to be offset by some of the outages that we had earlier in the year. So I would not focus too much on changes in utilization on the <unk>.

Speaker Change: Industry has more or less kind of already absorbed the new capacity that has come online in China. So really think about the year over year left coming from our productivity projects.

Scott A. Richardson: And maybe if I could add just a little bit more color around that, if you actually look at, say, China asset pricing through the year, it was actually very steady throughout the year, except for a very short blip that we saw at the end of Q3, based on some outages in the industry. But that was very short-lived and really went away as we went through, you know, got into the fourth quarter.

Speaker Change: And maybe if I could add just a little bit more color around that if you actually look at say, China asset pricing through the year. It was actually very steady throughout the year, except for a very short blip that we saw at the end of Q3 based on some outages in the industry, but that was very short lived and really went away as we went through.

Speaker Change: Got it got into the fourth quarter. So you know I would say we saw capacity come online last year as well more capacity last year, then it's going to come online and that's already been absorbed and we're so about 85% to 90% utilization. So you know while there may be some additions in 'twenty four it is it is much smaller than we are.

Lori J. Ryerkerk: So, you know, I would say we saw capacity come online last year as well, more capacity last year than it's going to come online, and that's already been absorbed, and we're still at that 85 to 90% utilization. Okay, perfect. And for my follow-up, I want to ask a little bit about the Red Sea disruptions and assume that may even disrupt Asia's to Euro trade close. How could this impact Celanese earnings, especially in Europe? I guess I could see this being positive with regard to lower nylon or foam imports, but at the same time, it could affect the imports of some of the raw materials you use. So what would be the next impact, do you think?

Speaker Change: Experience in 'twenty, three and we didn't really see the twenty-three capacity ads have a long term impact on pricing.

Speaker Change: Okay perfect.

Speaker Change: For my follow up I want to ask little bit about the Red Sea disruptions and assuming.

Speaker Change: <unk> seen them disrupt inkjet the Google Craig close how could this impact.

Speaker Change: But how could we see them settling these earnings especially in Europe.

Speaker Change: Yes, I could see those being closely with regard to lower my little north palm imports, but at the same time it could affect the importance of some of the raw materials. So what do you.

Salvator Tiano: Yeah, I'm not sure that there'll be any benefit at this point in time. What I would say, though, this is a good reflection of the value of our global supply chain for all of our businesses, because despite the challenges in the Red Sea and the Suez, you know, there has been a lengthening of the supply chain for many, many producers and suppliers. There has also been, you know, that has added some cost for some of the folks trying to get into Europe, in particular from Asia.

Speaker Change: Thanks.

Speaker Change: Yeah, I'm not sure that there'll be any benefit at this point in time, what I would say, though this is a good reflection of the value of our global supply chain for all of our businesses because despite the challenges in the Red Sea in the Suez you know there has been a lengthening of supply chain for many many producers in some.

Speaker Change: Fliers.

Speaker Change: There has also been you know that's added some cost for some of the folks trying to get into Europe in particular from Asia, but because of our global supply chain. We are able to provide from other parts of the world. So we're not seeing the increase caught what I'd say is you know.

Lori J. Ryerkerk: But because of our global supply chain, we are able to provide from other parts of the world, so we're not seeing the increased cost. What I'd say is, you know, most of the effects we've seen are temporary as people adjust to the new lengthened global supply chain. So we're not really baking in any uplift or loss at this point from the issues in the Suez. Okay, thank you very much.

Speaker Change: Most of the effect, we've seen I'd say is temporary as people adjust to the new Linkedin global supply chain. So we're not really baking in any any uplift our lot at this point.

Speaker Change: From the issues in the field.

Speaker Change: Okay. Thank you very much.

Matthew Robert Lovseth Blair: Thank you. The next question today is coming from Matthew Blair from Tudor Pickering Hall. Your line is now live. Hey, good morning.

Speaker Change: Thank you. Your next question today is coming from Matthew Blair from Tudor Pickering Holt. Your line is now live.

Matthew Blair: Hey, good morning, so the automakers have been talking about running a lot leaner going forward and keeping their inventories low and and in supporting their margins rather than the previous way of just overproduce pinging them, putting everything on sale.

Matthew Robert Lovseth Blair: So the automakers have been talking about running a lot leaner going forward and keeping their inventories low and, and supporting their margins rather than the previous way of, you know, just overproducing and then putting everything on sale. And I was wondering, how do you see this shift from Celanese's perspective? Is this potentially exciting to you? Because, you know, perhaps it could result in higher margins for Celanese?

Matthew Blair: And I was wondering how do you see the shift from selling these as perspective is this potentially exciting to you because you know perhaps that could result in higher margins for celanese or what's.

Matthew Robert Lovseth Blair: Or is this potentially a concern because it might have some impact on your overall auto volumes? We don't see it as being really a material impact for us. I mean, if you think about carrying lower inventories, it's largely already kind of baked in to where things are right now. And honestly, it just creates, I think, less kind of ups and downs from what we've historically seen. Because you get restocking, and destocking. Not having that in the future certainly would not be a bad thing for us at all. But overall, we don't see really any significant difference. Sounds good!

Matthew Blair: We are concerned because they might have some impact on on your overall auto volumes.

Speaker Change: We don't see it as being a really a material impact for us I mean, if you think about.

Carrying lower inventories, it's largely already kind of been baked in to where things are right now and honestly. It just creates I think less kind of ups and downs from what we've historically seen because you get restocking destocking to not have that in the future certainly would not be a bad thing for us at all so but overall.

Speaker Change: We don't see really any significant impact.

Speaker Change: Okay.

Lori J. Ryerkerk: And then I just wanted to clarify on the Clear Lake Acetic Acid expansion, this $100 million in productivity. Is this also your estimate of the long-run EBITDA potential for this expansion? Or what do you think it could generate in a more normalized environment?

Speaker Change: Sounds good and then I just wanted to clarify on the clear Lake excuse me asset expansion.

Speaker Change: Million in productivity.

Speaker Change: This also your estimate of like the long run EBITDA potential for for this expansion or what do you think it could generate in a more normalized environment.

Lori J. Ryerkerk: Well, you know, remember, we justified the expansion of Clear Lake Acid and the CCU project, really, just on productivity. So catalyst savings, energy savings, less freight by shipping out of the US versus Asia to Europe, you know, so those sorts of things. So that $100 million, I would say is intact. It is also tied to the CCU project, which again, was a very low-cost project that was initially put in place just to generate additional methanol for use at our Clear Lake site. Now, we think there'll be more value from that as we go forward, as we see what customer demand is for low or carbon products. But you know, we probably won't have a good feel for that till later in the year and into 2025.

Speaker Change: Well you don't remember, we justify the expansion of clear like asset and the CCU project.

Speaker Change: Well they quit like just on productivity, so catalyst saving energy saving less freight by shipping out of the U S versus Asia to Europe. So those sorts of things. So that 100 million I would say is intact. It also tied to the CCU project, which again was a very low cost project that.

Speaker Change: It really was initially put in place just to generate additional methanol for use at our clear Lake site now we think there'll be more value from that as we go forward.

Speaker Change: As we see what customer demand is for lower carbon products.

Speaker Change: But you know, we probably won't have a good feel for that until later in the year and into 2020 five.

Matthew Robert Lovseth Blair: You know, if we were to get in a situation like we saw in 21, or other times, you know, even in 18, where a lot of supply disruption and rapid demand growth, obviously, we could use Clear Lake for a source of acetic acid and BAM production into those very tight markets, which would, you know, greatly increase the return. But again, we're not counting on that we justified the project based on productivity. And it's there as a flywheel if we get into periods of higher demand, Matthew. I'd add one of the other benefits in the near term for us is that it adds redundancy to our US Gulf Coast network. And, you know, we called out in prepared comments that, you know, we had some unexpected outages that would have more or less been offset had we had the new acetic acid unit up and operating. So it gives us that redundancy to ensure that, you know, some of the near-term blips that we've had in our US Gulf Coast network in the past, we're able to manage those better. Great, thank you very much. Thank you. The next question is coming from John Roberts from Mizzou. Your line is now live.

Speaker Change: If we were to get into a situation like we saw in 'twenty one or.

Speaker Change: Even in 18, where a lot of supply disruption rapid demand growth, obviously, we could use clear lake for as source of acetic acid in Bam production into those very tight markets, which would greatly increase the return, but again, we're not counting on that we justified the project based on productivity.

Speaker Change: And if there is a flywheel if we get into a period.

Speaker Change: Of higher demand and margins, Yeah, Matthew I'd I'd add one of the other benefits in the near term for us as it adds redundancy to our U S. Gulf Coast network, and we called out in the prepared comments that we had some unexpected outages that would have more or less been offset had we had the the newest citric acid unit up and operating so it gives us that redundancy.

Speaker Change: To ensure that you know some of the the near term blips that we've had in our U S. Gulf.

Speaker Change: Gulf Coast network in the past, we're able to manage those better in the future.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you. Your next question is coming from John Roberts from Mizuho. Your line is now live.

John Roberts: Thank you. Back to Sal's question on the Red Sea and the Suez, do you think the reduced Asian exports into Europe are coincident with the Red Sea incidents here? It seems odd that China would be improving before the Lunar New Year, and I think Japan just slipped back into recession.

John Roberts: Thank you back to Sal's question on the Red Sea in the Suez.

John Roberts: Think that reduced the Asia exports into Europe, or coincident with the Red Sea incidents here. It seems odd that China would be improving before lunar new year, and I think Japan, just slip back into recession. So we're not hearing from other companies about demand picking up in Asia.

Lori J. Ryerkerk: So we're not hearing from other companies about demand picking up in Asia. Yeah, so that really occurred before we started seeing the issues in the Red Sea. So I don't think they're related.

Speaker Change: Yeah, well, so that really occurred before we started seeing the issues in the Red Sea. So I don't think they relate it I think it does relate to demand picking up again for consumer use and in China in Asia.

Lori J. Ryerkerk: I think it does relate to demand picking up again for consumer use in, in, China, and in Asia, which is reducing the amount of material that is having to move out of Asia. So, you know, I think, subsequently, we may see that impact continue because of the Red Sea. But I really think it does demonstrate a strengthening of the market. And then, secondly, I'm not sure we heard earlier about the stocking cycle in BAMAC rubber. Is it harder to track customer inventory in that product area?

Speaker Change: Which is reducing the amount of material that is having to move out of Asia. So I. You know I think subsequently we may see that impact continue because of the red sea, but I really think it does demonstrate is strengthening any of the markets in Asia.

Speaker Change: Right.

Speaker Change: And then secondly, I'm not sure we heard earlier about the stocking cycle in fanuc rubber.

Speaker Change: Is it harder to track customer inventory in that product area.

Speaker Change: Well, let's say they Max a little unique in that you know it is a highly differentiated high value products, primarily used in auto it has some unique.

Lori J. Ryerkerk: Baymax is a little unique in that it is a highly differentiated, high-value product primarily used in cars. It has some unique attributes, and we have some unique marketing positions, so it's not provided by a lot of people. I would say it was one of the reasons, actually, that we were so interested in the M&M acquisitions. It was one of the product lines that we thought would be highly complementary to Santa Brain, and we, in fact, have found for future projects that it's highly complementary.

Speaker Change: Attribute and we have some unique marketing position. So it's not provided by a lot of people I would say when we it was one of the reasons actually that we were so interested in the M. N M acquisitions that was one of the product line that we thought would be highly complementary to stand up rain and we in fact are bound for future projects.

Speaker Change: Complementary, but I would also say due to reliability issues with varick and high demand. It was very constrained in 'twenty, one and 'twenty. Two so one of the things that we are focused on since the acquisition is resolving those reliability issues and increasing the production, which we were successful at doing I would say mid twenties.

Lori J. Ryerkerk: But I would also say, due to reliability issues and high demand, it was very constrained in 21 and 22. So one of the things that we have focused on since the acquisition is resolving those reliability issues and increasing production, which we were successful at doing. I would say mid-23, when we were able to get our volumes up, customers were buying up everything they could because they were used to having it go short. And so as we moved to the fourth quarter, they realized supply stability was better. And we went back to what I think will be, well, we had a low point in the fourth quarter. Thank you. Your next question is coming from Jaideep Pandya from On-Field Research for Linus. Line. Thanks a lot. The first question is on M&M.

Speaker Change: Right when we were able to get our volumes up we saw customers buying up everything they could because they were used to having it go short and so as we move through the fourth quarter. They realize supply stability was better and we went back to what I think will be well, we had a low point in fourth quarter and then I think this year as we.

Speaker Change: Go forward, we'll see more normal demand patterns versus kind of the high highs, we saw our second and third quarter in the low that we saw in fourth quarter.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is coming from J D power.

Speaker Change: From on field research for language that life.

Speaker Change: Thanks, a lot first question is if.

Speaker Change: If I go back to the.

Speaker Change: If you did the acquisition.

Hospice business is sort of nylon and then hop businesses is China and Asia. So when we look at the current level of earnings versus what you thought.

Speaker Change: 900 million, whereas the exercise shortfall regionally and product twice is this in Asia or is this actually in Europe U S.

Speaker Change: Our country is this it nylons.

Jaideep Mukesh Pandya: If I go back to the... [inaudible] question really is around the acetic value chain. You know, this year, potentially, you will still have some pressure because of demand versus supply upstream for acetic acid. What is your strategy with regard to VA and DPP in the middle stream or downstream? Are you going to push?

Speaker Change: Outside Nylons, that's my first question.

Speaker Change: The question really is around E aesthetic value chain.

Speaker Change: This year.

Speaker Change: Potentially you would still have some pressure because it'll be mined versus supply upstream in acetic acid. What is your strategy with regards to <unk> and DPP in the midstream or downstream are you going to Cushing.

Jaideep Mukesh Pandya: Gain more market share? Or are you happy to sort of have a more upstream position? Thanks a lot. Yeah, so maybe talk about the M&M acquisition. I mean, you're right, a significant amount is nylon, but some of it is high-temperature nylon, more specialized nylons.

Speaker Change: <unk> gained more market share or are you happy to sort of have a more upstream position. Thanks a lot.

Speaker Change: Yeah. So when we talk about the Eminem acquisition, I mean, you're right a significant amount is not a lot, but some of it is high temperature nylon more specialized nylons I think where we have seen.

Lori J. Ryerkerk: I think where we have seen the challenges since the acquisition in nylon are really around more standard grades and volumes that were lost in 2022 due to pricing decisions that were made at that time. I think the teams have done a really good job starting to get some of that back, which is important. And that will continue to happen again and again, and we will continue to see improvement in variable margin as we flow through what has now been produced with lower cost raw materials and lower fixed costs. So I don't know that it was really, you know, really why it was around nylon.

Speaker Change: The challenge has been the acquisition of nylon is really around more standard grade and volumes that were lost.

Speaker Change: In 2022 due to pricing decisions that were made at that time I think the teams have done a really good job I'm starting to get some of that back which is important.

Speaker Change: And that will continue to happen and again and we will continue to see improvement in variable margin as we flow through right. Now has been produced with lower cost raws and lower costs lower fixed costs.

Speaker Change: So I don't know that it was really.

Speaker Change: Really why it was around nylon.

Lori J. Ryerkerk: You know, I wouldn't say it was specific to any one region or not. I mean, DuPont was very strong in Asia outside of China, which has actually been a pretty stable market this year. They were stronger in the U.S., which for auto has been stronger. They weren't as strong in Europe.

Speaker Change: You know I wouldn't say it was specific to any one region or not I mean, Dupont was very strong in Asia outside of China, which has actually been a pretty stable market. This year. They were stronger in the U S, which for auto has been stronger they weren't as strong in Europe, we were.

Speaker Change: All of these are stronger there. So I would say, it's not specific to any one region, but it's been more of a challenge specific to the volume loss that happened in 2022, and the steps that we've taken to start recovering that volume.

Lori J. Ryerkerk: We were, you know, celanese was stronger there. So I would say it's not specific to any one region, but it's been more of a challenge. And your second question around acetic acid, maybe I'll ask Scott to take that. Yeah, very similar to what we saw last year, the current down dynamics that we're seeing in the market globally, it makes a lot more sense for us to be pushing product downstream, just given where some of the pricing and margin is on the upstream. And VAE has been a heavy lift, you know, for us from an earnings standpoint, along with our redispersible powders, as well as the acetate tow business, as we talked about And, you know, the current dynamics; it just makes a lot of sense for us to continue to maximize production as far downstream as we can.

Speaker Change: In a fairly a low demand environment.

And your second question around acetic acid, maybe I'll ask Scott to picked up very similar to what we saw last year and the current down dynamics that we're seeing in the market globally. It makes a lot more sense for us to be pushing product a downstream just given.

Scott Richardson: Where are some of the pricing and margin is on the upstream and he has been a heavy lift for.

Scott Richardson: For us from an earnings standpoint, along with our readers first of all powders as well as the acetate tow business as we talked about in.

Scott Richardson: The current dynamics.

Scott Richardson: Just makes a lot of sense for us to continue to maximize production as far downstream as we can.

Scott A. Richardson: Thank you, Kevin. We'll make the next question online. Certainly. Our final question today is coming from Patrick Cunningham from Citi. Your line is now live. Hi, good morning.

Scott Richardson: Kevin will make the next question.

Scott Richardson: Certainly our final question today is coming from Patrick Cunningham from Citi. Your line is not a lot Nicole.

Patrick David Cunningham: Maybe just a clarification, you know, on the $50 million in turnaround impacts, are the large majority isolated in the first quarter? And do you have any other planned turnarounds to be aware of in 2024 or early 2025? Thanks, Patrick. So the 50 million is in the first quarter there. We're up about 50 million from last year. So through the remainder of the year, there's probably another 50 million spread across the remainder of the three quarters. But that's consistent with last year.

Patrick Duffy Fischer: Hi, Good morning, maybe just a clarification on the $50 million turnaround impacts are the large majority of isolated in the first quarter and do you have any other planned turnarounds to be aware of in 'twenty 'twenty four early 2025.

Patrick Cunningham: Okay.

Patrick Duffy Fischer: Thanks, Patrick So the 50 million is in the first quarter, there were up about $50 million from last year or so through the remainder of the year Theres, probably another 50 million spread across the remainder remainder of the three quarters, but that's consistent with last year, so incremental to 'twenty three at $50 million and I would think of it all.

Scott A. Richardson: So the incremental to 23 is 50 million. And I would think of it all. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments. Thanks, everyone. We'd like to thank everyone for joining us. As always, we're around after the call. If you have any follow-up questions at all, Kevin, please go ahead and close out the call. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Patrick Duffy Fischer: Great in the first quarter.

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

Speaker Change: Thanks, everyone, we'd like to thank everyone for joining as always we're around after the call. If you have any follow up questions at all Kevin. Please go ahead and close out the call.

Speaker Change: Thank you 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.