Q2 2024 Ashland Inc Earnings Call

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Unknown Executive: Ashland's innovative technology platforms rooted in environmental, social, and governance principles address customers' needs for differentiated, high-performance products, regulatory actions, and global consumer desires for transparency. This new era of Ashland innovation expands the possibilities across the world of additives and specialty ingredients, paving the way for a more transparent and sustainable future in the manufacture of pharmaceuticals, personal care, and healthcare. Paint & Coatings, and other markets. And as you test with customers, you can tune that platform in terms of increasing a certain feature, or decreasing a feature, or perhaps grafting a different molecule onto the backbone.

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New era of Ashland innovation expands the possibilities across the world of attitudes and specialty ingredients paving the way for a more transparent and sustainable future and the manufacturer of pharmaceuticals.

Personal care.

Paint and coatings.

And other markets.

And as you test with customers you can tune that platform in terms of increasing a certain feature or decreasing a feature or perhaps grasping a different molecule onto onto the backbone and the platform allows you to go into multiple different markets and different applications within.

Unknown Executive: And the platform allows you to go into multiple different markets in different applications within those markets. Scalable to a wide range of markets, Ashland's first-of-their-kind transformed vegetable oils include high-performing products that serve as a delivery system for oral care, SPF booster for skin care, dispersant for coatings, film former for pharmaceuticals, and seed treatment for crop care. Ashland's new tunable super-wetting agents are biodegradable, water-soluble, and yield no waste.

And those markets.

Scalable to a wide range of markets Ashland's first of their kind of transformed vegetable oils include high performing products that serve as a delivery system for oral care S. P. F booster for skincare disbursement for coatings film former for pharmaceutical and see.

Treatment for crop care.

Excellent new tunable Super wedding agents are biodegradable water soluble and yield no waste.

Unknown Executive: They bring defect-free film formation for coatings, enhanced drug solubility in pharmaceuticals, superior leaf wetting for crop care, and are a biodegradable emulsifier in personal care products. Ashland's pH neutralizer platform is clear, odor-free, water-soluble, and tunable to each customer's needs. These are just three remarkable examples of Ashland's new technologies, with even more platform innovations for you to explore. Innovation is part of our DNA because the world is changing, and we have to change with it.

Defect free film formation for coatings.

Hans drug solubility and pharmaceuticals superior leaf wedding for crop care and are a biodegradable emulsifier in personal care products.

<unk> P. H neutralize her platform is clear odor free water soluble and tunable to each customers needs. These are just three remarkable examples of ashland's, new technologies with even more platform innovations for you to explore innovation for us as part of our DNA.

Unknown Executive: At Ashland, we are not just scientists, marketers, salespeople, and businesspeople. We are solvers. Innovative change agents responsibly solving for a better world. Contact us to learn more. www.ashland.com slash platform, Good day, and thank you for standing by. Welcome to the Ashland Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

The water is changing and we have to change with it.

Speaker Change: Ashwin, we are not just scientists marketers say.

Those people and business people we are.

Our solvers.

Speaker Change: The innovative change agents responsibly solving for a better world.

Speaker Change: Contact us to learn more.

Ashland Dotcom slash platforms.

Speaker Change: Good day, and thank you for standing by.

Speaker Change: Welcome to the Ashland, Inc. Second quarter 2024 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: Ask a question during the session you'll need to press star one on your telephone.

Speaker Change: And here an automated message advising your hand is raised.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, William Whitaker, Vice President of Finance and Director of Investor Relations. Please go ahead.

Speaker Change: Draw. Your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your Speaker today, William Whitaker, Vice President of Finance and director of Investor Relations. Please go ahead.

William Whitaker: Thank you, Daniel. Hello, everyone, and welcome to Ashland's second quarter fiscal year 2024 earnings conference call and webcast. My name is William Whitaker, Vice President of Finance and Director of Investor Relations. Joining me on the call today are Guillermo Novo, Ashland Chair and Chief Executive Officer, and Kevin Willis, Senior Vice President and Chief Financial Officer. Ashland released results for the quarter ended March 31st, 2024 at approximately 5 p.m. Eastern Time yesterday, April 30th. The news release issued last night was furnished to the SEC in a Form 8K.

William Whitaker: Thank you Daniel Hello, everyone and welcome to Ashland's second quarter fiscal year 2024 earnings Conference call and webcast. My name is William <unk>, Vice President of Finance and director of Investor Relations.

William Whitaker: Joining me on the call today are Guillermo Novo Ashland Chair, and Chief Executive Officer, and Kevin Willis Senior Vice President and Chief Financial Officer.

William Whitaker: Ashland released results for the quarter ended March 31, 2024 at approximately five P. M. Eastern time yesterday April 30.

William Whitaker: The news release issued last night was furnished to the SEC in a form 8-K.

William Whitaker: During today's call, we will reference slides that are currently being webcast on our website ashland.com under the investor relations section. We encourage you to follow along with the webcast during the call. Please turn to slide two.

Speaker Change: During today's call we will reference slides that are currently being webcast on our website Ashland dot com under the Investor Relations section.

Speaker Change: We encourage you to follow along with the webcast during the call.

Speaker Change: Please turn to slide two.

William Whitaker: As a reminder, during today's call, we will be making forward-looking statements on several matters, including our financial outlook for our third quarter and full year fiscal 2024. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. We do not believe any such statements are based.

Speaker Change: As a reminder, during today's call, we'll be making forward looking statements on several matters, including our financial outlook for our third quarter and full year fiscal 2024.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections.

William Whitaker: We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please refer to slide 2 of the presentation for an explanation of those risks and uncertainties and the limits applicable to forward-looking states. You can also review our most recent content under item 1A for a comprehensive discussion of the risk factors impacting our business. Please also note that we'll be referring to certain actual and projected financial metrics of Ashland on an adjusted basis, which are non-GAAP financial measures.

Speaker Change: We do not believe any such statements are based we believe any such statements are based on reasonable assumptions, but cannot assure that such expectations will be achieved.

Speaker Change: Please refer to slide two of the presentation for an explanation of those risks and uncertainties and the limits applicable to forward looking statements.

Speaker Change: You can also review our most recent Form 10-K.

Speaker Change: Under item one a for a comprehensive discussion of the risk factors impacting our business.

Speaker Change: Please also note that we will be referring to certain actual and projected financial metrics of Ashland on an adjusted basis, which are non-GAAP financial measures.

William Whitaker: We refer to these measures as adjusted and present them to supplement your understanding and assessment of the financial performance of our ongoing business. Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP.

Speaker Change: We will refer to these measures as adjusted and present them to supplement your understanding and assessment of the financial performance of the ongoing business.

Speaker Change: non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP.

William Whitaker: The most directly comparable gap measures, as well as reconciliations of the non-gap measures to those gap measures, are available on our website and in the appendix of today's slide presentation. Please turn to slide three. Guillermo will begin the call this morning with an overview of Ashland's performance and results in the second quarter. Next, Kevin will provide a detailed review of financial results for the quarter, followed by commentary related to Ashland's outlook for its third quarter and full year fiscal 2024.

Speaker Change: The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available on our website and in the appendix of today's slide presentation.

Speaker Change: Please turn to slide three.

Speaker Change: Guillermo will begin the call. This morning, with an overview of Ashland's performance and results in the second quarter next Kevin will provide a detailed review of financial results for the quarter, followed by commentary related to Ashland, the outlook for our third quarter and full year fiscal 2024.

Guillermo Novo: I will then provide an update related to ashland's strategic priorities and then we'll open your line for questions.

William Whitaker: Guillermo will then provide an update related to Ashland's strategic priorities, and then we will open your line for questions. Please turn to slide five. I will now turn the call over to Guillermo for his opening comments. Thank you, William. And hello, everyone.

Speaker Change: Please turn to slide five I will now turn the call over to Guillermo for his opening comments Guillermo.

Guillermo Novo: Thank you William and Hello, everyone. Thank you for your interest in Ashland and for your participation today.

Guillermo Novo: Thank you for your interest in Ashland and for your participation today. Financial results for the March quarter exceeded our adjusted EBITDA Outlook range issued on January 30, 2024, with revenues at the mid- Overall sales declined 5% from the prior quarter to $570 million. However, improving sales trends noted in our last conference call continued for the balance of the second quarter, delivering year-over-year volume growth for the first time since June of 2022.

Guillermo Novo: Financial results for the March quarter exceeded our adjusted EBITDA outlook range issued on January 32024 with revenues at the midpoint.

Speaker Change: Overall sales declined 5% from the prior quarter to $570 million.

Speaker Change: Improving sales trends noted in our last conference call continued for the balance of the second quarter delivering year over year volume growth for the first time since June of 2022 quarter.

Guillermo Novo: While still early from a trending perspective, the breadth of our ongoing recovery, as well as the constructive external data, reinforces our belief that demand normalization is underway within personal care and specialty additive segments. Looking ahead, April sales are reflective of continued personal care and specialty additive momentum. Then life science stable demand in pharma cellulosics was more than offset by the normalization of competitive dynamics in pharma PBT. PPP volumes were stable sequentially, and we expect overall for my year-over-year comparisons to improve in the second half as we lap our strong prior year call.

Speaker Change: While still early in the from a trending perspective.

Speaker Change: Breath of our ongoing recovery as well as the constructive external data reinforces our belief that demand normalization is underway within personal care and specialty additive segments.

Speaker Change: Looking ahead April sales are reflective of continued personal care and specialty additives momentum.

Speaker Change: And then life science stable demand and farm Italia low six was more than offset by the normalization of competitive dynamics in pharma pvt.

Speaker Change: I'm up.

Speaker Change: Pvp volumes were stable sequentially and we expect overall.

Speaker Change: Farm out year over year comparisons to improve in the second half as we lap our strong prior year comp.

Guillermo Novo: Pricing was down primarily within intermediates as the Ashland team worked to strike an appropriate balance with moderating costs and increasing competitive activity. Excluding intermediates, lower prices were largely consistent with favorable raw material costs. The largest impact on our second quarter profitability versus the prior year quarter was intermediate pricing and the reset of variable compensation. Production volumes were down 5%, primarily related to specialty additives and intermediates, while overall sales were up 3% versus the prior year.

Speaker Change: Pricing was down primarily within intermediates.

Speaker Change: The Ashland team work to strike, an appropriate balance with moderating costs and increasing competitive activities excluding.

Speaker Change: Excluding intermediates lower prices was largely consistent with favorable raw material costs.

Speaker Change: The largest impact in our second quarter profitability versus prior year quarter were intermediate pricing and the reset of variable compensation.

Speaker Change: <unk> volumes were down 5% primarily related to specialty additives and intermediates, while overall sales were up 3% versus the prior year.

Guillermo Novo: Based on current inventory levels and demand forecast, we expect to produce at or slightly above sales volume for the balance of the fiscal year. Overall, while adjusted EBITDA for the quarter decreased 13% to $126 million, it was above expectations for the quarter. However, reduced income, partly offset by share repurchase activity over the last year, yielded an 11% decrease in adjusted EPS to $1.27. Please turn to slide 6.

Speaker Change: Based on current inventory levels and demand forecast, we expect to produce at or slightly above the sales volume for the balance of the fiscal year.

Speaker Change: Overall, while adjusted EBITDA for the quarter decreased 13% to $126 million it was above expectations for the quarter.

Speaker Change: Reduced income, partly offset with share repurchase activity over the last year yielded an 11% decrease in adjusted EPS to $1 27.

Speaker Change: Please turn to slide six.

Guillermo Novo: Overall sales declined due to the factors that I referenced earlier, with the largest relative impact on our intermediates and life science business units. However, notably, personal care sales turned positive for the first time since Q4, fiscal year 22, with momentum in several end markets and regions. sequentially, overall sales volume increased 30% with a proportional increase in production. This was the key driver of the 710 basis points of quarter over quarter adjusted EBITDA margin improvement for the company. Life Science, Personal Care, and Intermediates delivered high quality margins for the quarter.

Speaker Change: Overall sales declined due to the factors that I referenced earlier with the largest relative impact in our intermediates and life science business units, notably personal care sales turned positive for the first time since Q4.

Speaker Change: Fiscal year 'twenty, two with momentum in several end markets and regions.

Speaker Change: Sequentially overall sales volume increased 30% with a proportional increase in production.

Speaker Change: This was the key driver of the 710 basis points quarter over quarter, adjusted EBITDA margin improvement for the company.

Speaker Change: Life Science personal care and intermediates delivered high quality margins for the quarter.

Guillermo Novo: Specialty Additives was able to improve adjusted EBITDA margins by over 1,200 basis points quarter over quarter with an opportunity to further expand going forward. Well, this is a return to a more typical overall adjusted EBITDA margin for Ashland. We believe there's opportunity to improve to the mid 20s in the second half. Please turn to slide seven. Take a step back.

Speaker Change: Specialty additives was able to improve adjusted EBITDA margins by over 1200 basis points quarter over quarter with an opportunity to further expand going forward.

Speaker Change: While this is a return to a more typical.

Speaker Change: Overall, adjusted EBITDA margin for Ashland, We believe theres opportunity to improve to the mid twenty's in the second half.

Speaker Change: Please turn to slide seven.

Speaker Change: Taking a step back there.

Guillermo Novo: The broad themes impacting our performance going forward are the normalization of demand, the quality and resiliency of our core markets, and building organic growth catalysts. Normalization is simply the return to customer trend demand following last year's unprecedented and extended de-stocking. This is about the convergence of our demand with our customers' demand. Even under a flat to low market growth scenario, our volume demand should increase, driving both improved sales and production volumes, which will improve financial performance. From our perspective, demand is normalized.

Speaker Change: The broad themes impacting our performance going forward are the normalization of demand.

Speaker Change: Quality and resiliency of our core markets and building organic growth catalysts.

Speaker Change: Normalization is simply the return to customer trend demand following last year's unprecedented and extended Destocking. This is about the convergence of our demand with our customers' demand.

Speaker Change: Even under a low flat to low market growth scenario, our volume demand should increase driving both improved sales and production volumes, which will improve financial performance from our perspective demand is normalizing.

Guillermo Novo: Kevin will further explain these dynamics and their impact on our outlook in the presentation. Once demand has normalized, the fundamentals of the core business will drive underlying performance. Our core businesses are focused on high-value and resilient consumer-based industries, pharma, personal care, and coding. For most of our customers, or the customers we serve, end market demand has been resilient and is expected to remain resilient.

Speaker Change: Kevin will further explain these dynamics impacts.

John Kevin Willis: And then the impacts on.

John Kevin Willis: On our outlook.

Speaker Change: Presentation.

Speaker Change: Once demand has normalized the fundamentals of the core business will drive underlying performance.

Speaker Change: Our core businesses, our focus on high value and resilient consumer based industries pharma personal care and coatings.

Speaker Change: For most of our customers are the customers, we serve and market demand has been resilient and is expected to remain resilient.

Guillermo Novo: All these markets have strong underlying megatrends that will continue to provide profitable growth opportunities. Lastly, we will continue to improve our underlying business performance. Our portfolio improvement actions will improve our portfolio and the quality and resilience of our business. Kevin will provide a detailed update later, but our portfolio optimization activities remain on track. Longer term, it's about having strong catalysts to drive our company's future profitable growth. Our strategic priorities of Execute, Globalize, Innovate, and Acquire will provide us with unique profitable growth catalysts over the coming decade. Many of these opportunities are not factored in or reflected in our current valuation.

Speaker Change: All of these markets have strong underlying.

Speaker Change: Mega trends that will continue to provide profitable growth opportunities.

Speaker Change: Lastly, we will continue to improve our underlying business mix, our portfolio improvement actions will improve our portfolio and the quality and resilience of our business mix, Kevin will provide a detailed update later, but our portfolio optimization activities remain on track.

Speaker Change: Longer term, it's about having strong catalysts to drive our company's future profitable growth.

Speaker Change: Our strategic priorities of execute globalize innovate and acquire will provide us unique profitable growth catalysts over the coming decade.

Speaker Change: Many of these opportunities are not factored in or reflected in our current valuation.

Guillermo Novo: If we look at execute, we have the opportunity to further strengthen our core businesses through productivity, commercial excellence, and innovation. On Globalize, we have four strong businesses that represent 10% of our sales and are well positioned to grow and improve our profitability. We're actively investing in these businesses. Lastly, our Innovate strategic priority presents us with the most powerful growth catalysts. New differentiated technologies, mostly with a high sustainability profile, can expand our available target market. I've been personally involved in many meetings with our major customers across our core industries.

Speaker Change: If we look at execute we have the opportunity to further strengthen our core businesses through productivity commercial excellence and innovation.

Speaker Change: On globalize, we have four strong businesses that represent 10% of our sales and are well positioned to grow and improve our profitability.

Speaker Change: We are actively investing on these businesses.

Speaker Change: Lastly, our innovate strategic priority presents us with the most powerful growth catalyst opportunity.

Speaker Change: New differentiated technologies, mostly with highly high sustainability profile can expand our available target markets.

Speaker Change: I've been personally involved in many meetings with our major customers across our core industries customer interest and excitement about these technologies is high.

Guillermo Novo: Customer interest and excitement about these technologies is high. Overall, we're encouraged by our second quarter results, which increase our confidence in achieving our full year outlook. While there still is uncertainty regarding the pace of a complete normalization, stable customer demand, consumer demand, lower inventories in the value chain, and our own order patterns suggest the early stages of demand normalization are underway. We continue to position the company for more resilient operations with our planning and portfolio shaping. And last but certainly not least,

Speaker Change: Overall, we are encouraged by our second quarter results, which increase our confidence in achieving our full year outlook. While there still is uncertainty regarding the pace of a complete normalization.

Speaker Change: Stable.

Speaker Change: Customer demand consumer demand lower inventories in the value chain and our own order pattern suggests the early stages of demand normalization is underway.

Speaker Change: We continued to position the company for more resilient operations.

Speaker Change: With our planning and portfolio shaping actions.

Speaker Change: And last but certainly not least we.

Guillermo Novo: We are excited about our potential or the potential of our growth catalysts. We recognize that the success strivers and capabilities of the past may not be the ones we need to drive the growth catalysts of the future. We are taking action to strengthen our capabilities. We have been refining our organization. Hiring new talent with different experiences and investing in our people, processes, and technologies to reflect a growth mindset. With that said, let me now turn the call over to Kevin to review our Q2 results in more detail. Kevin

Speaker Change: We are excited about our potential for the potential of our growth catalyst, we recognize that the six X drivers.

Speaker Change: And capabilities of the past may not be the ones, we need to drive the growth catalyst of the future. We are taking action to strengthen our capabilities, we have been refining our organization.

Speaker Change: Hiring new talent with different experiences and investing in our people processes and technologies to reflect a growth mindset.

Speaker Change: With that let me now turn the call over to Kevin to review, our Q2 <unk>.

Speaker Change: Results in more detail Kevin.

John Kevin Willis: Thank you, Guillermo, and good morning, everyone. Please turn to slide nine. Total Ashland sales in the quarter were $575 million, down 5% compared to the prior year. However, year-over-year quarterly volumes modestly increased for the first time since June 2022 as demand normalizes within the personal care and specialty additive segment. These volume gains were partially upset by unfavorable life sciences volume, softer pricing, and a moderately deflationary raw material environment, primarily within the intermediates and specialty editors. Gross profit margin increased 20 basis points to 32.9% in the quarter.

John Kevin Willis: Thank you Guillermo and good morning, everyone. Please turn to slide nine.

John Kevin Willis: Total Ashland sales in the quarter were $575 million down 5% compared to prior year.

John Kevin Willis: Year over year quarterly volumes modestly increased for the first time since June 2022, as demand normalizes within the personal care and specialty additives segments.

Speaker Change: These volume gains were partially offset by unfavorable life sciences volumes pricing was softer in a moderately deflationary raw material environment, primarily within the intermediates and specialty additives segments gross profit margin increased 20 basis points to 32, 9% in the quarter. This improvement was largely due to <unk>.

John Kevin Willis: This improvement was largely due to overall production costs that were favorable in the quarter and product mix. This was partially offset by unfavorable intermediates pricing versus raw materials. Favorable production costs were a result of generally lower spend across the segments, partially offset by lower absorption. When excluding key items, SG&A, R&D, and intangible amortization costs were $117 million, up from $110 million in the prior year, mainly reflecting variable compensation resets and merit increases.

Speaker Change: Overall production costs that were favorable in the quarter and product mix. This was partially offset by unfavorable intermediates pricing versus raw materials.

Speaker Change: Favorable production costs were a result of generally lower spend across the segments, partially offset by lower absorption.

Speaker Change: When excluding key items, SG&A, R&D and intangible amortization costs were $117 million up from $110 million in the prior year, mainly reflecting variable compensation reset and merit increases and total ashland's adjusted EBITDA for the quarter was 126 million.

John Kevin Willis: In total, Ashland's adjusted EBITDA for the quarter was $126 million, down 13% from the prior year. Ashland's adjusted EBITDA margin for the quarter was 21.9%, down from 24% in the prior year. Adjusted EPS, excluding acquisition, and amortization, for the quarter was $1.27 per share, down from $1.43 in the prior year quarter.

Speaker Change: Down 13% from the prior year.

Speaker Change: <unk> adjusted EBITDA margin for the quarter was 21, 9% down from 24% in the prior year.

Speaker Change: Adjusted EPS, excluding acquisition amortization for the quarter was $1 27 per share down from $1 43 in the prior year quarter.

John Kevin Willis: Now, let's review the results of each of our four operating segments. Please turn to slide 11. Within life sciences, sustained demand for pharmacellulosics was more than offset by normalized competitive dynamics of pharma PVP when compared to a strong prior year period. Nutrition volumes demonstrated moderate sequential improvement but continued to be challenged when compared to the prior year period due to lower demand, while nutraceutical sales remained strong. Overall pricing for Life Sciences was modestly lower, but Life Sciences sales declined by 8% to $222 million.

Speaker Change: Now, let's review the results of each of our four operating segments. Please turn to slide 11.

Speaker Change: Within the life Sciences sustained demand in pharma cellulosic was more than offset by normalized competitive dynamics of pharma pvp when compared to a strong prior year period.

Speaker Change: Nutrition volumes demonstrated moderate sequential improvement, but continued to be challenged when compared to the prior year period due to lower demand while nutraceutical sales remained strong.

Speaker Change: Overall pricing for life Sciences was modestly lower <unk>.

Speaker Change: Life Sciences sales declined by 8% to $222 million.

John Kevin Willis: Adjusted EBITDA decreased by 12% to $66 million, primarily reflecting lower PVP sales volumes and unfavorable product mix partially offset with favorable pricing versus raw materials. Adjusted EBITDA margin decreased 160 basis points to 29.7%. Please turn to slide 12. Stronger Demand positively impacted personal care volumes within most end markets. Revenue growth was most pronounced in the APAC region and Europe. Oral care sales were also positively impacted by order timing with a key customer, which is expected to result in lower buying in Q4 before normalizing again in Q1 of next. While sequentially improving in the quarter, our Evoca business remains challenged as customers move from plant-based to lower-cost bio-based materials.

Speaker Change: Adjusted EBITDA decreased by 12% to $66 million.

Speaker Change: Primarily reflecting lower pvp sales volumes and unfavorable product mix, partially offset with favorable pricing versus raw materials.

Speaker Change: Adjusted EBITDA margin decreased 160 basis points to 29, 7%.

Speaker Change: Please turn to slide 12.

Speaker Change: Stronger demand positively impacted personal care volumes within most end markets revenue growth was most pronounced in the APAC region and Europe.

Speaker Change: Oral care sales were also positively impacted by order timing with a key customer which is expected to result in lower buying in Q4 before normalizing again in Q1 of next year.

Speaker Change: While sequentially improving in the quarter, our local business remains challenged as customers move from plant based to lower cost Biobased materials, we continue to assess opportunities to improve the underperformance of this business line.

John Kevin Willis: We continue to assess opportunities to improve the underperformance of this business law. Overall, pricing for personal care was moderately lower, and personal care sales increased by 1% to $169 million. However, personal care sales for the quarter, excluding Avoca, were up high single digits year over year.

Speaker Change: Overall pricing for personal care was moderately lower <unk>.

Speaker Change: Personal care sales increased by 1% to $169 million personal care sales for the quarter, excluding <unk> were up high single digits year over year.

John Kevin Willis: Adjusted EBITDA increased 29% to $45 million, primarily reflecting increased sales volumes, favorable product mix, and production costs, partially offset by variable compensation. Favorable production costs were a result of lower spend and higher absorption. The adjusted EBITDA margin increased 560 basis points to 26.6%. Please turn to slide 13. Stronger demand positively impacted specialty additives volumes within coatings and performance specialties, partially offset by lower energy end market volumes. Sales growth versus the prior year was most pronounced in the APAC region in Europe. Overall, pricing for specialty additives was lower, primarily reflecting increased competition in APAC, but was mostly offset by favorable raw material costs. For the quarter, specialty additive sales declined by 2% to $157 million.

Speaker Change: Adjusted EBITDA increased 29% to $45 million, primarily reflecting increased sales volumes favorable product mix and production costs, partially offset with variable compensation reset.

Speaker Change: Production costs were a result of lower spend and higher absorption.

Speaker Change: Adjusted EBITDA margin increased 560 basis points to 26, 6%.

Speaker Change: Please turn to slide 13.

Speaker Change: Stronger demand positively impacted specialty additives volumes within coatings and performance specialties, partially offset by lower energy and market volumes.

Speaker Change: <unk> growth versus the prior year was most pronounced in the APAC region in Europe.

Speaker Change: All pricing for specialty additives was lower primarily reflecting increased competition in APAC, but was mostly offset by favorable raw materials for the quarter specialty additives sales declined by 2% to $157 million.

John Kevin Willis: Adjusted EBITDA declined by 21% to $27 million, primarily reflecting unfavorable production costs, moderately unfavorable pricing versus raw materials, and variable compensation retail. Unfavorable production costs were a result of lower spend more than offset by lower absorption; the adjusted EBITDA margin declined by 390 basis points to 17.2%. Please turn to slide 14. Intermediates reported sales of $40 million, down 22% compared to the prior year, driven by broadly lower pricing and captive volume. Intermediates reported adjusted EBITDA of $12 million, 30% of the dollar margin compared to $20 million in the prior year, primarily reflecting lower prices. Please turn to slide 15.

Speaker Change: Adjusted EBITDA declined by 21% to $27 million.

Speaker Change: Primarily reflecting unfavorable production costs moderately unfavorable pricing versus raw materials and variable compensation reset.

Speaker Change: Unfavorable production costs were a result of lower spend more than offset by lower absorption adjusted EBITDA margin declined by 390 basis points to 17, 2%.

Speaker Change: Please turn to slide 14.

Speaker Change: Intermediates reported sales of $40 million down 22% compared to the prior year, driven by broadly lower pricing and captive volumes inner.

Speaker Change: Intermediates reported adjusted EBITDA of $12 million.

Speaker Change: 30% EBITDA margin compared to 2000 $20 million in the prior year, primarily reflecting lower pricing.

Speaker Change: Please turn to slide 15.

John Kevin Willis: Ashland continues to have a very strong financial position. As of the end of March, we had cash on hand of $439 million, with total available liquidity of roughly $1 billion. Our net debt was $889 million, which is about 2.2 turns of leverage. We have no floating rate debt outstanding, no long-term debt maturities for the next three years, and all of our outstanding debt is subject to investment grade style credit.

Speaker Change: Ashland continues to have a very strong financial position.

Speaker Change: As of the end of March we had cash on hand of $439 million with total available liquidity of roughly $1 billion.

Speaker Change: Our net debt was $889 million, which is about two two turns of leverage.

Speaker Change: We have no floating rate debt outstanding no long term debt maturities for the next three years and all of our outstanding debt is subject to investment grade style of credit terms.

John Kevin Willis: We have $900 million remaining under the current Evergreen Share Repurchase Authorization. Our balanced and disciplined capital allocation approach has deployed $1.05 billion to share repurchases and retired 11.1 million shares since June 2021. We are continuing to invest in our existing businesses and technology platforms to grow organically, while pursuing our strategy of targeted bolt-on M&A opportunities focused on pharma, personal care, and coding; please turn to slide 16. Ashland prudently managed production and inventory levels as we monitored the normalization of demand.

Speaker Change: We have $900 million remaining under the current evergreen share repurchase authorization, our balanced and disciplined capital allocation approach as deployed 1.15 billion to share repurchases and retired 11 1 million shares since June 2021.

Speaker Change: We are continuing to invest in our existing businesses businesses and technology platforms to grow organically, while pursuing our strategy of targeted bolt on M&A opportunities focused on pharma personal care and coatings.

Speaker Change: Please turn to slide 16.

Speaker Change: Ashwin prudently manage production and inventory levels as we monitored the normalization of demand inventory levels have decreased $180 million when compared to the prior year quarter and $38 million sequentially.

John Kevin Willis: Inventory levels have decreased $180 million when compared to the prior year quarter and $38 million sequentially. Our actions should better position us for more resilient performance and profit momentum across demand scenarios as the year progresses. Overall ongoing free cash flow for the quarter was $4 million and $70 million fiscal year to date.

Speaker Change: Our actions should better position us for more resilient performance and profit momentum across demand scenarios as the year progresses.

Speaker Change: Overall ongoing free cash flow for the quarter was $4 million and $70 million fiscal year to date.

John Kevin Willis: For the fiscal year, we expect to generate a free cash flow conversion of approximately 50%. Our progressive dividend policy remains an important part of our capital allocation strategy and reflects our confidence in the company's long-term profitable growth outlook. Ashland has grown its annual dividend every year since 2009, compounding at 18% per year during that time. We target an annual dividend payout ratio of approximately 30% of adjusted income from continuing operations over the long term, and we are committed to increasing the dividend annually as we have done so. With that, I will now provide an update on the execution pillar of our strategic priorities in addition to an updated outlook. Please turn to slide eight.

Speaker Change: For the fiscal year, we expect to generate a free cash flow conversion of approximately 50%.

Speaker Change: Our progressive dividend policy remains an important part of our capital allocation strategy and reflects our confidence in the company's long term profitable growth outlook.

Speaker Change: <unk> has grown its annual dividend every year since 2009 compounding at 18% per year during that time.

Speaker Change: We target an annual dividend payout ratio of approximately 30% of adjusted income from continuing operations over the long term and are committed to increase the dividend annually as we've demonstrated.

Speaker Change: With that I will now provide an update on the execute pillar of our strategic priorities. In addition to an updated outlook. Please turn to slide 18.

John Kevin Willis: We continue to have four primary portfolio actions underway. The nutraceutical sales process is ongoing, and we continue to expect a signing and closing within this fiscal year. CMC production has been shut down at Hopewell, and inventory levels are being drawn down while we migrate select production volumes into our Alize France manufacturing facility. We have also optimized industrial MC by consolidating production capacity in dual Belgium. As a result, Ashland will be reducing its volume exposure in several lower-value, more cyclical industrial segments, including the construction end market.

Speaker Change: We continue to have four primary portfolio actions underway.

Speaker Change: In nutraceutical sales process is ongoing and we continue to expect a signing and closing within this fiscal year.

Speaker Change: CMC production has been shut down at Hopewell and inventory levels are being drawn down while we migrate select production volumes into our LSA, France manufacturing facility.

Speaker Change: We have also optimized industrial EMC by consolidated production capacity and dual Belgium.

Speaker Change: As a result, Ashland will be reducing its volume exposure in several lower value more cyclical industrial segments, including the construction end market.

John Kevin Willis: Ashland will continue to operate its remaining MC production unit at dual to grow and higher value segment. Our CNC and MC actions led to $27 million of accelerated depreciation and $20 million in restructuring and separation costs for the quarter.

Speaker Change: Ashland will continue to operate its remaining EMC production unit dual to grow in higher value segments.

Speaker Change: Our CNC and M C actions led to $27 million of accelerated depreciation.

Speaker Change: And $20 million in restructuring and separation costs for the quarter.

John Kevin Willis: Ashland continues to advance its work to improve the productivity of its HEC business, and specific actions will be communicated in due course. We are committed to acting with appropriate urgency to deliver on our commitments, including the reduction of all stranded costs to drive an EBITDA-neutral outcome and improve overall margins for the company. In summary, all portfolio actions are on track to deliver a more resilient portfolio with stronger performance by the end of the calendar year. Please turn to slide 19.

Speaker Change: Ashland continues to advance its work to improve the productivity of its hec business and specific actions will be communicated in due course.

Speaker Change: We are committed to act with appropriate urgency to deliver on our commitments, including the reduction of all stranded costs to drive an EBITDA neutral outcome and improved overall margins for the company.

Speaker Change: In summary.

Speaker Change: Our portfolio actions are on track to deliver a more resilient portfolio with stronger performance by the end of calendar year 2024.

Speaker Change: Please turn to slide 19.

John Kevin Willis: As we look ahead, the ongoing question is the timing and magnitude of demand normalization. We recognize that our 2023 baseline was subdued on the heels of supply constraints and overstocking, followed by a significant de-stock. Understanding market trends is critical to forecasting a recovery; in market demand, demand has remained stable and resilient. As Guillermo mentioned, our current demand patterns and market intelligence suggest demand normalization is, Even under a flattish end market demand outlook, we expect demand to grow from our 2023 baseline, as highlighted on the right side of the chart. Of course, demand evolution in the coming months will further narrow the range of recovery scenarios for the full year.

Speaker Change: As we look ahead. The ongoing question is the timing and magnitude of demand normalization, we recognize that our 2023 baseline was subdued on the heels of supply constraints and Overstocking, followed by a significant destocking understanding and market trends is critical to forecasting a recovery.

Speaker Change: End market demand has remained stable and resilient as Guillermo mentioned, our current demand patterns in market intelligence suggests demand normalization is continuing.

Speaker Change: Even under a flattish end market demand outlook, we expect to grow from our 2023 baseline as highlighted on the right side of the chart.

Speaker Change: Course demand evolution in coming months will further narrow the range of recovery scenarios for the full year.

John Kevin Willis: In the near term, we've had a good start to the quarter, and we're expecting this trend to continue with second half year over year revenue growth of high single digits to low double digits, excluding portfolio optimization. Our current full year forecast reflects demand normalization throughout the remainder of our fiscal year and does not contemplate customer restocking. Please turn to slide 20.

Speaker Change: In the near term we've had a good start to the quarter and we're expecting this trend to continue with second half year over year revenue growth to be high single digits to low double digits, excluding portfolio optimization actions.

Speaker Change: Our current full year forecast reflects demand normalization throughout the remainder of our fiscal year end does not contemplate customer restocking.

Speaker Change: Please turn to slide 20.

Speaker Change: Personal care and specialty additives are expected to benefit from demand normalization with favorable second half comps difficult life Sciences comps are expected to improve as the year progresses, we're expecting softer overall pricing, mostly offset with raw material deflation excluding intermediates.

John Kevin Willis: Personal care and specialty additives are expected to benefit from demand normalization with favorable second half costs. Difficult life sciences comps are expected to improve as the year progresses. We're expecting softer overall pricing, mostly offset by raw material deflation, excluding intermediates. We expect significant year-over-year absorption favorability as production is forecasted to normalize, and we compare against last year's inventory corrective action. sequentially, specialty additives is expected to demonstrate continued margin growth as production increases to align with improved seasonal demand. Lastly, the portfolio optimization activities are expected to generate 200 to 250 basis points of adjusted EBITDA margin expansion at full realization in fiscal 25 and 26.

Speaker Change: We expect significant year over year absorption favorability as production is forecasted to normalize and we compare against last year's inventory corrective actions.

Speaker Change: Sequentially specialty additives is expected to demonstrate continued margin growth as production increases to align with improved seasonal demand.

Speaker Change: Lastly, the portfolio optimization activities are expected to generate 200 to 250 basis points of adjusted EBITDA margin expansion at full realization in fiscal 'twenty, five and 'twenty six.

John Kevin Willis: For the fiscal third quarter, the company expects sales in the range of 560 to 580 million dollars and adjusted EBITDA in the range of 138 to 148 million dollars. For the full year, we now expect sales in the range of $2.15 to $2.225 billion and adjusted EBITDA in the range of $470 to $500 million. Key risks and opportunities are listed on the slide; demand recovery, variability in plant loading, and price versus raw materials continue to be the most critical for the full year financial results. Now, let me turn the call back to Guillermo to provide an update on our strategic priorities.

Speaker Change: For the fiscal third quarter, the company expects sales in the range of $560 to $580 million and adjusted EBITDA in the range of $138 million to $148 million for the full year. We now expect sales in the range of $2. One five to two to two 5 billion and adjusted EBITDA.

Speaker Change: In the range of $470 million to $500 million.

Speaker Change: Key risks and opportunities are listed on the slide.

Speaker Change: Demand recovery variability in plant loading and price versus raw materials.

Speaker Change: <unk> to be most critical for the full year financial results and now let me turn the call back to Guillermo to provide an update on our strategic priorities Guillermo.

Guillermo Novo: Thank you, Kevin. Please turn to slide 22. Our strategic priorities remain unchanged and continue to guide our action. Investments and Profitable Growth As we have discussed before, the priorities include execute, globalize, innovate, and acquire. As Kevin shared, we're making good progress on our execute priorities, and the resulting impact will further strengthen Ashland's financial resilience. Our globalize and innovate priorities are expected to serve as a growth catalyst, extending and expanding improved results from demand normalization and the Portfolio Optimization Act.

Guillermo Novo: Thank you Kevin.

Guillermo Novo: Please turn to slide 22, our.

Guillermo Novo: Our strategic priorities remain unchanged and continue to guide our actions investments and profitable growth expectations that.

Guillermo Novo: As we have discussed before the priorities include execute globalize innovate and acquire.

Guillermo Novo: As Kevin shared we're making good progress on our execute priorities and the resulting impact will further strengthen ashland's financial resilience.

Guillermo Novo: Our globalized and innovate priorities are expected to serve as a growth catalyst extending and expanding improved results from demand normalization and the portfolio optimization actions. We are pleased to report that the Ashland team is making progress in both areas.

Guillermo Novo: We are pleased to report that the Ashland team is making progress in both areas. Please turn to slide 23, activities underway to globalize four of our extremely attractive business minds, which currently represent 10% of our sales. They are injectables.

Speaker Change: Please turn to slide 23.

Speaker Change: Activities underway to globalize four of our extremely attractive business lines.

Guillermo Novo: Which currently represent 10% of our sales.

Guillermo Novo: They are injectables.

Guillermo Novo: OSD, tablet film coatings, biofunctionals, and preservatives, two in the pharma and two in the personal care business. We continue to make progress in our globalization efforts for these profitable growth businesses. In pharma, the injectable business continues to make progress, expanding the innovation project pipeline across early, mid, and commercial stage projects. During the last year, we have grown our pipeline of injectable projects by 50%. Although it's starting from a small base, our injectable business performance is nearly 100% ahead of our first top expectations for this year and 180% above the prior year.

Guillermo Novo: OSD.

Guillermo Novo: Tablet temp coatings, Biopharma, <unk> and preservatives, two in pharma and personal care.

Guillermo Novo: We continue to make progress in our globalization efforts for these profitable growth businesses.

Guillermo Novo: In pharma the injectable business continues to make progress expanding the innovation project pipeline across early mid and commercial stage projects.

Guillermo Novo: During the last year, we have grown our pipeline of inject injectable projects by 50%.

Guillermo Novo: Although it's starting from a small base our injectable business performance is nearly.

Guillermo Novo: 100% ahead of our first top expectations for this year and 180% above prior year.

Guillermo Novo: We continue to invest in both technical and manufacturing capabilities and expect to inaugurate our new Ireland facility this year in Q4. The OSD film coatings business continues to globalize its manufacturing and technical footprint to enhance its ability to address local needs. During the quarter, we successfully acquired Latin in India to build out our OSD film coding business infrastructure in a key region.

Guillermo Novo: We continue to invest in both technical and manufacturing capabilities and expect to inaugurate our new Ireland facility. This year in Q4.

Guillermo Novo: The OSD film coatings business continues to globalize, its manufacturing and technical footprint to enhance its ability to address local needs.

Guillermo Novo: During the quarter, we successfully acquired Latin in India to build out our OSD film coatings business infrastructure and a key region.

Guillermo Novo: We're also starting the process of converting an existing nutrition site in Brazil to support OSD coatings and, in addition, to support our biofunctionals business. This conversion is a great example of repurposing assets to be more efficient with capital and speed to market to enable growth. And we're innovating with an exciting pipeline of technologies that will provide increased productivity to our customers. Shifting to personal care, BioFunctials continues to innovate well, leading the personal care segment in new product introduction revenue this year.

Guillermo Novo: We're also starting the process of converting an existing nutrition site in Brazil to support OSB coatings and in addition to support our buyers.

Guillermo Novo: By functional business.

Guillermo Novo: This conversion is a great example of repurposing assets to be more efficient with capital and speed to market to enable growth.

Guillermo Novo: And we're innovating with an exciting pipeline of technologies that will provide increased productivity.

Guillermo Novo: To our customers.

Guillermo Novo: Shifting to personal care.

Guillermo Novo: <unk> continues to innovate well, leading the personal care segment and new product introduction revenue this year.

Guillermo Novo: We have also experienced the recovery of sales into China, an important market, and the location of our newly commissioned production facility. We will now be able to innovate and produce locally for our customers. We expect this business to maintain strong growth momentum. The preservatives business is advancing several projects to optimize our manufacturing and supply chain to reduce overall costs, enabling local supply and further support continued share gain.

Guillermo Novo: We have also experienced the recovery of sales into China, an important market and the location of our newly commissioned production facility.

Guillermo Novo: We will now be able to innovate and produce locally for our customers.

Guillermo Novo: We expect this business to maintain strong growth momentum.

Guillermo Novo: The preservative business is advancing several project to optimize our manufacturing and supply chain to reduce overall cost, enabling local supply and further support support continued share gains.

Guillermo Novo: We're also continuing to innovate, expanding our natural actives portfolio, as well as advancing new process technology to improve productivity. All four business lines took steps to accelerate globalization activities and remain hyper focused on implementing their respective business plans to deliver highly accretive margins and growth for the company. Please turn to slide 24. Innovation is a fundamental component of our growth strategy, underscored in the video at the beginning of the webcast. Ashland's new, leading, scalable technology platforms, paired with market leadership, are at the core of our business model.

Guillermo Novo: We're also continuing to innovate expanding our natural active portfolio as well as advancing new process technology to improve productivity.

Guillermo Novo: All four business lines took steps to accelerate globalization activities and remain hyper focused on implementing their respective business plans to deliver highly accretive margins and growth for the company.

Guillermo Novo: Please turn to slide 24.

Guillermo Novo: Innovation is a fundamental component of our growth strategy strategy.

Guillermo Novo: Underscored in the video on the onset of the webcast.

Guillermo Novo: <unk>, new leading scalable technology platforms paired with market leadership is at the core of our business model. We are hyper focused on executing our innovation strategy launching new products and engaging customers.

Guillermo Novo: We are hyper-focused on executing our innovation strategy, launching new products, and engaging customers. As we indicated in the last call, we have launched our first super wetters targeting coatings, and we will be launching new variants targeting other markets. We have launched several liquid cellulose plus products and are now developing new products targeting Asia and Latin America, as well as exploring the value of this technology and personal care application.

Guillermo Novo: As we indicated last call we have launched our first super wetter weather is targeting coatings, and we will be launching new variants.

Guillermo Novo: <unk> other markets.

Guillermo Novo: We have launched several liquid cellulose plus products and are now developing new products targeting Asia, and Latin America as well as exploring the value of this technology in personal care applications.

Guillermo Novo: In bioresorbable polymers, we currently have a pipeline of over 160 customer projects, and we expect the pipeline to continue to grow as we establish commercial traction on sales from recently launched products such as Biotel and Biolose, which are transformed vegetable oil or TBO technology, have probably received the highest level of interest across our customer base, given their performance, functional tunability, and Sustainability Profile. I've personally been involved in many of the customer meetings, and it's truly exciting to see the enthusiasm for the technology and the interest in collaborating with us to develop this technology across multiple markets and applications. Based on additional developments we've made on TBO, I'm also very excited about the opportunities TBO may open for Ashland in existing high volume, high value applications.

Guillermo Novo: And by a resorbable polymers. We currently have a pipeline of over 160 customer projects and we expect the pipeline to continue to grow as we establish commercial traction on sales from recently launched products, such as <unk> and <unk>.

Guillermo Novo: Our transformed vegetable oil or TBO technology.

Guillermo Novo: Has probably received the highest level of interest across our customer base given its performance functional tune ability.

Guillermo Novo: And sustainability profile.

Guillermo Novo: I personally been involved in many of the customer meetings and is truly exciting to see the enthusiasm about the technology and the interest in collaborating with us to develop this technology across multiple markets and applications.

Guillermo Novo: Based on additional developments, we've made on TBO I'm also very excited about the opportunities TBO.

Guillermo Novo: May open for Ashland, an existing high volume high value application.

Guillermo Novo: We recognize that innovation can be a lot more long-term in nature. But as we launch more products, we expect to gain commercial momentum, as well as validate the value of these exciting new technology platforms. Our current focus is on developing several joint development agreements or JDAs with key industry leaders. Please turn to slide 25.

Guillermo Novo: We recognize that innovation can be a lot more long term in nature.

Guillermo Novo: But as we launch more products, we expect to gain commercial momentum as well as validate the value of these exciting new technology platforms. Our current focus is on developing several joint development agreements for <unk> with our key with key industry leaders.

Guillermo Novo: In closing, we will stay on strategy, maintain operating and capital allocation discipline, and take appropriate actions to drive fiscal year 2024 performance. We are investing in our innovate and globalize strategy while increasing customer innovation engagement to advance our growth capability. We're leveraging the opportunity to refine the portfolio and improve our overall quality and focus on the big three business. We're encouraged by the second quarter momentum, and we believe we're poised to capitalize on continued improvement in demand trends.

Guillermo Novo: Please turn to slide 25 in closing, we will stay on strategy maintain operating and capital allocation discipline and take appropriate actions to drive fiscal year 2020 for performance.

Guillermo Novo: Investing in our innovate and globalized strategy, while increasing customer innovation engagement to advance our growth capabilities, we're leveraging the opportunity to refine the portfolio and improve our overall quality and focus on the big three businesses.

Guillermo Novo: We're encouraged by the second quarter momentum and we believe we are poised to capitalize on continued improvement in demand trends.

Guillermo Novo: Demonstrating continued progress in our normalizations, resiliency in our business portfolio, and the value of our growth catalyst themes will be key going forward. We are confident in the quality and resilience of our strategy and business. I want to thank the Ashland team once again for their leadership and proactive ownership of the businesses in a dynamic environment. Thank you for your time, and Daniel, let's move to Q&A. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again.

Guillermo Novo: Demonstrating continued progress in our normalization resiliency in our business portfolio and the value of our growth catalysts themes will be key going forward. We are confident in the quality and resilience of our strategy and business I want to thank the Ashland team once again for their leadership.

Guillermo Novo: And proactive ownership of their businesses.

Guillermo Novo: <unk> environment.

Speaker Change: Thank you for your time and Daniel let's move to Q&A.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Operator: In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A room. Our first question comes from Michael Sison with Wells Fargo. Your line is open. Hey guys, nice start to the year.

Speaker Change: Interest of time, we ask that you. Please limit yourself to one question and one follow up.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from Michael Sison with Wells Fargo. Your line is open.

Michael Joseph Sison: Hey, guys nice start to the year.

Michael Joseph Sison: When you think about the, Yeah, sorry. When you think about the second half run rate and how you grow that into 2025, is that the best way to think about sort of the growth or where your EBIT dollar margin should be as we head into 2025? If you just look at the three points that we made about the normalized quality of our portfolio and then the growth catalyst, the rest of the year normalization is going to be the biggest driver of our performance. So, you know, we are seeing this in the higher seasonal part of the year.

Michael Joseph Sison: But when you think about.

Michael Joseph Sison: Yeah, sorry, yeah. When you think about the second half run rate and how you drove that 25 is that the best way to think about sort of the growth our way or EBITDA margins should be as we head into <unk> into 'twenty five.

Speaker Change: If you just look.

Speaker Change: The three points that we made on on normalized quality of our portfolio and then the growth catalysts. The rest of the year normalization is going to be the biggest driver of our performance. So.

Guillermo Novo: So the demand is working out as expected. So we should be seeing that increase in revenue and proportional gross profit. But the bigger issue is going to be, obviously, our loading of our plants as that volume comes in. That's sort of the projection.

Speaker Change: We are seeing this as the higher seasonal.

Speaker Change: Part of the year.

Speaker Change: <unk> is working out as expected so we should be seeing that increase in revenue.

Speaker Change: And proportional gross profit.

Speaker Change: But the bigger issue is going to be obviously, our loading of our plants as that volume comes in that sort of the projections. So most of the year, it's about normalization and about managing price versus raw materials to balance out.

Speaker Change: Any adjustments in.

Speaker Change: And the industry.

Guillermo Novo: So most of the year, it's about normalization and about managing price versus raw materials to balance out any adjustments in in in the industry as we move forward. And the other catalysts really take take a forward look. Most of our customers, if you look at our end markets, are expecting more resilience. You have a few customers that were impacted a little bit more that are actually coming out with more positive results in in their specific. Great.

Speaker Change: As we move forward then the other catalysts really take take a forward look most of our customers. If you look at our end markets are expecting more resilience you have a few customers that were impacted a little bit more that are.

Speaker Change: Actually coming out with more positive results in their specific businesses.

Michael Joseph Sison: And then just a quick follow-up on Evoca and the challenges there. What do you think the strategic plan for that will be going forward? That's a good question, Mike.

Speaker Change: Great and then just a quick follow up on a vote and the challenges there, but what do you think.

Speaker Change: The strategic plan for that will be going forward.

Guillermo Novo: I mean, we've talked about this for a long time now. You know, this business has been challenged since 2018-19. I think the issue is some of our customers have moved to bio-based technology. You know, we had a big impact a few years ago when that process was taking place. In the last few years, with the shortages, I think we were able to stabilize the business. I think now, as things normalize in terms of everybody's capacity and where they're going, I think that we expect that trend to continue on moving to lower cost bio-based production.

Speaker Change: Good question Mike.

Speaker Change: We've talked about this for a long time now.

Speaker Change: Now this business has been challenged.

Speaker Change: Since 2018 19.

Speaker Change: I think the issue is some of our customers that moved to bio based technology.

Speaker Change: We had a big impact a few years ago when that process is taking place.

Speaker Change: The.

Speaker Change: The last few years, where the shortages I think we were able to stabilize the business I think now as things normalize in terms of everybody's capacity and where they're going I think that.

Guillermo Novo: So, we're working through what we want to do with that part of the portfolio, as we said in the last call. We don't have any more specific details to share at this point in time, but it's something that's on our radar. Thank you.

Speaker Change: That trend to continue on moving to lower cost Biobased production. So we're working through what we wanted to do.

Speaker Change: That part of the portfolio as we said in last call.

Speaker Change: We don't have any more specific details to share at this point in time, but its something thats on our radar screen.

Speaker Change: Alright, thank you.

Operator: One moment for our next question, and our next question comes from Lawrence Alexander with Jeffreys or Linus. Good morning.

Speaker Change: Thank you.

Speaker Change: For our next question.

Speaker Change: And our next question comes from Laurence Alexander with Jefferies. Your line is open.

Laurence Alexander: First, just on the inventory cycle at customers, to what degree are you getting feedback that customers feel they will need to rebuild or adjust inventory levels? Are there any end market channels that you see a kind of more chance of a restock cycle in 2025? Wait, I'll go ahead.

Laurence Alexander: Good morning.

Laurence Alexander: First just on the inventory cycle that the customers what to what degree are you getting feedback that customers feel they will need to rebuild or adjusted inventory levels are there any end market channels that you see kind of more chance of a restock cycle in 2025.

Guillermo Novo: Go ahead. No, on that question, you know, I think it's more of the normalization, as we said in our call, people have, you know, the de-stalking is over. I don't think anybody's necessarily, I mean...

Laurence Alexander: Yeah.

Speaker Change: Go ahead go ahead.

Speaker Change: No on that question.

Speaker Change: I think it's more of the normalization as we said in our call people have.

Speaker Change: The Destocking is over I don't think anybody is necessarily I mean.

Guillermo Novo: There might be a customer here or there, but in the big picture, it's about getting now to their demand, and they need to sell a unit; they have to buy a unit, just to maintain the current appropriate inventory levels. I think what will change is as their sales change. Right now, most of the projections are more vague, but as their sales change, their days of inventory, I think that's when we'll see a little bit more restocking. But I assume that that'll be more of a 2025 problem.

Speaker Change: There might be a customer here or there, but in the big picture.

Speaker Change: It's about getting now to their demand and they need to sell a unit they got to buy unit just to maintain the current.

Speaker Change: Appropriate inventory levels, I think what will changes as their sales change right now most of the projections are more flattish, but is there a sales change their days of inventory I think that's when we'll see a little bit more restocking, but I assume that that'll be more of a 2025 issue. So the focus should be more normalization.

Guillermo Novo: So the focus should be more on normalization. You know, that convergence of our demand to their demand is the big impact at this point in time. And then related to that, are you seeing kind of a shift by customers towards pulling forward R&D cycles because now they have more flex time available as demand trends and inventory levels kind of, you know, that volatility settles out, or can you just characterize like how much demand pull you have?

Speaker Change: That convergence of our demand to their to their demand is the big the big impact at this point in time.

Speaker Change: And then related to that are you seeing kind of a shift by customers towards pulling forward R&D cycles, because now they have more flex time available as demand trends inventory levels kind of that that volatility settles out.

Speaker Change: Or can you just characterize like how much demand pull you have.

Guillermo Novo: For just reformulation, adaptation, innovation, not just in the new growth platform but just across the portfolio. Yeah, you know, I wouldn't, you know, I would split it up, you know, demand pull of things, people moving forward on the normal business. I don't think that's going to change so much.

Speaker Change: For just re formulation adaptation innovation not just in the new probe.

Speaker Change: New growth platform just across the portfolio.

Speaker Change: Yeah.

Speaker Change: I wouldn't I would.

Speaker Change: Split it up demand pull of things people moving forward on the normal business I don't think thats going to change so much I do think your point on an innovation, that's what excites us and I think we have advanced pretty well so as people start to reformulate. If you look at the last few years most of our customers labs. If you look at 2000.

Guillermo Novo: I do think your point on innovation is what excites us, and I think we've advanced pretty well. So as people start to reformulate, if you look at the last few years, most of our customers' labs, you know, if you look at 2021-22, they were trying to find alternative raw materials, managing costs, reformulating, so labs weren't necessarily in their peak innovation momentum. I think now, as things normalize for them too, there's more stability and supply, we will get more into that cadence.

Speaker Change: 'twenty one 'twenty two they were trying to find alternative raw materials.

Speaker Change: Managing cost Reformulating, so labs werent necessarily in their peak innovation.

Speaker Change: Momentum I think now as things normalize for them to theirs.

Guillermo Novo: And I do think there is some more built-up interest in accelerating the innovation. I can say, you know, we've been visiting all our major customers, introducing new technology platforms in all the industries, pharma, personal care, and coatings, introducing new levels of interest, not just in the technology, but you can see that that interest in, hey, getting back to innovation, they want to grow, they want to launch their new products.

Speaker Change: There is more stability in supply, we will get more into that cadence and I do think there is some more built up interest in accelerating the innovation.

Speaker Change: I can say.

Speaker Change: Been visiting all our major customers introducing.

Speaker Change: And all of the industries pharma personal care and coatings, introducing the new technology platforms.

Speaker Change: Very high level of interest not just in the technology, but you can see that that interest in getting back to innovation. They want to grow they want to launch their new products. So it's a great timing for us to be introducing new products and I do think that we'll see a wave.

Guillermo Novo: So it's a great time for us to be introducing new products, and I do think that we'll see a wave in 2025 of more new products, new formulated products. And that whole theme of sustainability. Now, I would say performance with sustainability, not just sustainability on its own, is going to be the big driver for the industry to move to more equal or better performing, more sustainable products, and I think we're very well positioned for that. Thank you. Thank you.

Speaker Change: In 2025 of more new products, new formulated products.

Speaker Change: And that whole theme of sustainability.

Speaker Change: No I would say performance with sustainability not just sustainability on its own is going to be the big driver count can the industry move to <unk>.

Speaker Change: Equal or better performing more sustainable products and I think we're very well positioned for that.

Speaker Change: Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from.

Operator: One moment for our next question. Our next question comes from David Begleiter with Deutsche Bank. Your line is now open. Thank you. Good morning.

Speaker Change: David Begleiter with Deutsche Bank. Your line is now.

David L. Begleiter: Thank you and good morning.

David L. Begleiter: Guillermo, just an especially important question is what you are seeing on pricing trends and in this business and potentially going forward? You know, I think as we saw in the inflationary time, this is a reminder, when inflation came up, we moved on pricing, but we didn't really expand margins, we sort of kept them whole; most of the improvement in 2021-22 was mixed actions that we took. I think as we look at the slowdown in the economy and now just competitive pressures, probably near term, a little bit of pressure, especially in Asia and Latin America, where you see a little bit more aggressiveness and different players trying to gain share in this environment. But I think, you know, the normalization trends, longer term, we expect them to go back to trend, which is we'll move, maintain margins and keep prices. So it's really going to be just a timing issue.

David L. Begleiter: Just on especially additives what are you seeing on pricing trends in this business and potentially going forward.

David L. Begleiter: I think as we saw in the inflationary time, just as a reminder, when inflation came up.

David L. Begleiter: We moved on pricing, but we didn't really expand margins, we sort of kept them whole most of the improvement in 2021 22 was mix actions that we took.

David L. Begleiter: As we look at it.

Speaker Change: Slow down.

Speaker Change: The economy and now just competitive pressures, probably near term a little bit of pressure, especially in Asia Latin America.

Speaker Change: You see a little bit more aggressiveness.

David L. Begleiter: Different players trying to gain share in this environment.

David L. Begleiter: But I think the normalization trends longer term, we expect them to go to trend which is.

David L. Begleiter: We'll move maintain margins.

David L. Begleiter: While the pricing so it's really going to be just a timing so far we've been able to offset the two pretty well.

Guillermo Novo: So far, we've been able to offset the two pretty well. But I think as demand starts picking up, we'll see how raw materials trend. Because I think the issue now is a lot of our, and I look at our own suppliers running slower. Raw materials, you know, when will they start going up again as volumes come back? So I think this normalization period is going to be a little bit more choppy in terms of the timing of pricing versus raw material shifts, favorable and unfavorable. But in the longer term, we don't expect any big change in the long-term dynamics on the pricing side. Very good

David L. Begleiter: But I think as demand starts picking up we'll see how how raw materials trends because I think you should know is a lot of our.

David L. Begleiter: Look at our own suppliers running slower raw materials.

David L. Begleiter: When will they start going up again as volumes come back. So I think this normalization period, it's going to be a little bit more choppy in terms of the timing of pricing versus raw material chips favorable and favorable.

David L. Begleiter: But the longer term, we don't expect any big change.

David L. Begleiter: The long term dynamics on the pricing side.

David L. Begleiter: And just on volumes, what do you expect volumes to be up year over year in? You know, we expect volumes to be up across the board in all the businesses, even if you take Kevin's comments, the PVP, and and you know, we're we're lapping some of the key comps from last year. So sales volumes will be increasing. But the bigger thing is not about the demand side; it's about our production side. You know, there are significant volumes; we haven't given specific numbers and all that, but it is a significant increase, especially when you compare it to last year. If you remember last year, in the first half, we overproduced.

Speaker Change: Very good and just on volumes, what do you expect volumes to be up year over year in Q3.

Speaker Change: We expect volumes to be up across the board.

Speaker Change: And all of the businesses, even if you can.

Speaker Change: Kevin's comments.

David L. Begleiter: The Pvp in.

David L. Begleiter: We're lapping some of the.

David L. Begleiter: The key.

David L. Begleiter:

David L. Begleiter: Comps from last year or so.

David L. Begleiter: <unk> sales volumes will be increase.

David L. Begleiter: Increasing.

David L. Begleiter: But the bigger thing is not about the demand side, but our production side.

David L. Begleiter: There are significant volumes, we haven't given specific numbers and all that but.

David L. Begleiter: It is a significant increase, especially when you compare to last year. If you remember last year first half we overproduced.

David L. Begleiter: Have we took bigger.

David L. Begleiter: Actions to control inventories.

David L. Begleiter: Youre going to see this is going to be a more of a pickup versus the last year that we were in control mode. So it is going to be a quite a <unk>.

David L. Begleiter: Significant improvement in production volume. So I think look forward look at both what were saying in terms of sales volumes, but also production volumes, but Kevin I don't know if you have any other thoughts on that balance.

Guillermo Novo: [inaudible] Yeah, the outlook would imply mid single-digit volume growth in Q3 year over year, and sales. Pretty much across the board, volume growth, and sales growth numbers will be, you know, will be that or maybe a bit better than that on an overall basis for the second half of the total. You know, Q3, there's a little noise in Q3 and Q4 because of the restructuring actions around CMC and MC. So your top line is a little bit muted. But if you look at it on an overall volume basis, thank you very much.

John Kevin Willis: Yes, the outlook would imply mid single digit volume growth in Q3 year over year.

John Kevin Willis: And sales pretty much across the board.

John Kevin Willis: Volume growth the sales growth numbers will.

John Kevin Willis: We'll be we'll be that or maybe a bit better than that on an overall basis for the second half in total.

John Kevin Willis: Q3.

John Kevin Willis: So there's a little noise in Q3, and Q4 because of the restructuring actions around CMC NMC.

John Kevin Willis: Top line is a little bit muted, but if you look at it on an overall volume basis for them.

John Kevin Willis: The core business should be up about mid single digits.

Speaker Change: Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from Chris Parkinson with Wolf Research. Your line is open. Great, thank you so much. I just want to turn back to the pharma business.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

John Kevin Willis: Our next question comes from Chris Parkinson with Wolfe Research Your line is open.

Christopher S. Parkinson: You know, it seems like you're lapping some comps and PVP based on, I guess, a competitor outage a while back, but can you just take a step back and remind us of what you view the normalized growth rate of that business? It seems like you've had a lot of solid initiatives over the past few years that have been muted by a little bit of noise in Central Asia and even a little bit in Latin America. So, just remind us of, you know, how we should be thinking about this business, normalized volumes, and then potential areas of upside optionality. Thank you so much.

Christopher S. Parkinson: Great. Thank you so much I just wanted to turn back to the pharma business it.

Christopher S. Parkinson: It seems like Youre lapping some comps and Pvp based on I guess a competitor outage.

Christopher S. Parkinson: A while back but can you just take a step back and remind us of what you view the normalized growth rate is.

Christopher S. Parkinson: Of that business. It seems like you've had a lot of solid initiatives over the past few years that it would be muted by a little bit of noise in central Asia, even a little bit in Latin America. So can you just remind us in terms of how we should be thinking about this business normalized volumes and then potential areas of upside optionality. Thank you so much okay.

Guillermo Novo: Thanks, Chris. If you look at PVP, there are several dynamics that I would highlight. One, as you said, last year, you know, some players had outages.

Speaker Change: Thanks, Chris.

Christopher S. Parkinson: You look at Pvp.

Christopher S. Parkinson: Several several dynamics that I would highlight.

Christopher S. Parkinson: Highlight one as you said the last year. Some some players were had outages so.

John Kevin Willis: We said last year.

John Kevin Willis: The business is doing great.

John Kevin Willis: The Pvp business was a little bit higher and that we expected it to normalize.

John Kevin Willis: Once everybody came back on stream.

John Kevin Willis: It's not a surprise.

Guillermo Novo: So, you know, as we said last year, the business was doing great, but the PVP business was a little bit higher than we expected it to normalize once everybody came back on stream, and this is not a surprise and is happening as we speak. What's changed, I guess, a little bit is the Chinese dynamics on experts and pricing, especially in Asia and Latin America. And I think this is not necessarily a pharma-driven issue only.

John Kevin Willis: And happening happening as we speak.

John Kevin Willis: What's changed I guess, a little bit more.

John Kevin Willis: The China dynamics on experts and.

John Kevin Willis: And pricing, especially in <unk>.

John Kevin Willis: Asia, and Latin America, and I think this is not a just not a pharma necessarily driven issue only.

Guillermo Novo: It's more the whole dynamic of the BDO chain, BDO prices being very down, the non-integrated players being able to buy very cheaply because costs are down, and obviously, a lot more pressure on loading their plants and all that.

John Kevin Willis: It's more the whole dynamic.

John Kevin Willis: The BDO chain BDO prices being very down the non integrated players being able to buy very cheaply because.

John Kevin Willis: Costs are down and obviously a lot more pressure on loading their plants and all that I think as other markets that we're not even in but.

Guillermo Novo: I think as other markets that we're not even in, but polyurethanes, fibers, all this go up, and the core BDO demand and costs go up, which is probably going to start happening towards the back end of this year and more into next year, when that part of the demand and the cycle starts normalizing, I think you're also going to see some normalization of competitive activity. I think the next few months we're monitoring this normalization period, anytime when there are changes, when you have the most choppiness, volumes coming up, people, you know, reacting to trying to load their plants and all that, that's when we're going to see a little bit of the noise. But the longer-term trend line should normalize as the entire value chain, you know, cost structure normalizes, and volumes normalize. I got it.

John Kevin Willis: Polyurethane fibers all of this go up and the core BDO demand and cost go up.

John Kevin Willis: Which probably going to start happening towards the back end of this year and more into next year.

John Kevin Willis: As part of the demand and the cycle starts normalizing I think youre also going to see some some normalization of competitive activity I think the next few months we're monitoring.

John Kevin Willis: This normalization period anytime when there's changes when you have the most choppiness volumes coming up people.

John Kevin Willis: Reacting to trying to load their plants and all that that's where we're going to see a little bit of noise, but the longer term trend line should should normalize.

John Kevin Willis: The entire value chain.

John Kevin Willis: Cost structure normalizes and volumes normalize.

Christopher S. Parkinson: And then if you look, Chris, if you look at that business, historically, it's been low to mid single-digit growth very consistently, if you eliminate some of the noise over the past couple of years, and we would expect that to be the case going forward, any x any kind of platform innovation, technologies in that business that take hold, that would be, that would be an accelerator over and above what we would normally. We can look forward to that And then just very quickly, once again, there's been, you know, kind of, you've gone through a couple choppy quarters based on destocking and personal care.

Speaker Change: Got it.

John Kevin Willis: If you look Chris if you look at that business historically.

John Kevin Willis: Been low to mid single digit growth very consistently if you eliminate some of the noise over the past couple of years and we would expect that to be the case going forward ex any ex any kind of platform innovation.

John Kevin Willis: Technologies in that business that take hold that would be that would be an accelerator over and above what we would normally see.

Christopher S. Parkinson: But, you know, Guillermo, behind the scenes for years, you've been working on, you know, a lot of new product portfolios. It seems like things are beginning to change. I understand, we don't get ahead of ourselves. But what is the CEO, are you the most enthusiastic about? I mean, is it biodegradables, biofunctions, biofunctionals, bioactives, like, just when we take a step back by end market or product, like, are there things behind the scenes that you were kind of just thinking about? Wow, I'm really optimistic about this. But destocking is holding me back a little bit.

John Kevin Willis: We can look forward to that and then just very quickly once again theres been kind of you've gone through a couple of choppy quarters based on the destocking in personal care, but Guillermo.

John Kevin Willis: Behind the scenes for years <unk> been working on a lot of new product portfolios. It seems like things are beginning to inflect I understand we don't really get ahead of ourselves but.

John Kevin Willis: What as CEO are you. The most enthusiastic about is it biodegradable bio functions by a bunch of those bioactive is like just when we take a step back by end market or products like are there things behind the scenes that youre kind of just thinking about while I'm really optimistic on this but destocking told me back a little bit in from we are.

John Kevin Willis: As I say today.

Speaker Change: What is your current thought process. Thank you so.

Guillermo Novo: And from where we are, as I say today, what is your current thought process? Thank you. So let me take you business by business on that response. I think it is a very important one because there is a lot of, you know, normalization, good core markets. But these catalysts, what I feel good about, you know, for our company, the catalysts that we have are significant, especially given our size. So they're not just good growth opportunities relative to our size, to the size of the markets, and the opportunities that we have. It's significant; it can really change our future. So, if you go through each of the segments,

Speaker Change: So let me let me take you business by business on that response I think it is a very important one because a lot of.

Speaker Change: Normalization, good core market, but these catalysts what I feel good.

John Kevin Willis: For our.

John Kevin Willis: Company the catalysts that we have are significant, especially given our size. So they're not just good growth opportunities relevant relative to our size of company to the size of the market opportunities that we have it's significant it really can change our future. So if you go through each of the segments.

Guillermo Novo: You know, life science, we have a very strong portfolio of core technologies which stabilize the PVP. But if you look at all our cellulosics, our benacel, our clue cells, there's great growth opportunities there for the foreseeable future. Our issue there was really making sure that the pipeline for the longer term, that we have that next wave of things that we can start growing. And that's what excites me. If you look at injectables, we now have, you know, we've been working on our bioresorbable polymers. The pipeline, we'll start sharing more when we have our next innovation update, but really exciting pipeline, growing, you know, higher purity products, new market applications, a lot of great things that just expand our market portfolio.

John Kevin Willis: Life Science, we have a very strong portfolio of core technologies.

John Kevin Willis: With stabilizing the Pvp, but if you look at all of our cellulose takes our Venezuela <unk> cells.

John Kevin Willis: There is great growth opportunities there for the foreseeable future. Our issue there was really making sure that the pipeline for the longer term that we have that next wave of things that we can start growing and that's what excites me. If you look at Injectables. We now have we've been working on are by a reserve build of polymers. The pipeline, we'll start sharing more.

John Kevin Willis: When we have our next innovation update, but really exciting pipeline growing.

John Kevin Willis: Higher purity products new market.

John Kevin Willis: Applications, a lot of great things that just expand our market portfolio, our soluble <unk>, our super letters for them, they're not looking at Super orders are solid lasers open us opportunities in the injectable area open up opportunities in the consumable areas and bio processing in other areas. They use a lot of these things.

Guillermo Novo: Our solubilizers, our superwetters, for them, they're not looking at superwetters, they're solubilizers that open up opportunities for us in the injectable area, open up opportunities in the consumable areas, in bioprocessing, and other areas they use a lot of these things. Same thing with the pH neutralizer, the TVO, really exciting opportunities.

John Kevin Willis: Same thing with the ph neutralized or.

John Kevin Willis: The TBO really exciting opportunity if you look at.

John Kevin Willis: Film coating, some really great development that really can can transform our position in the market.

John Kevin Willis: And Thats.

John Kevin Willis: Very large segment is bigger than the Pvp segment as an example, and we're a small player there so huge growth opportunity for them and then the agribusiness we have done trials now with both the Super wetter for leaf coatings and the oil the TBO as a binder for seed coatings great results we.

John Kevin Willis: Expect to launch both of those because of regulatory reasons will probably start in Brazil. In 2025. So all of these are scalable very significant for the size of our personal of our life science business very very significant and Thats where were putting our.

John Kevin Willis: Energy and effort personal care.

John Kevin Willis: <unk> to sustainability, what we've learned and what we've really looked at is look it's not a shift to sustainability. It's about performance the products our customers want sustainability, but it's got to perform and have a cost profile that is competitive with the current technology.

John Kevin Willis: Almost it's too difficult to make the transition if youre going to double your costs, a consumer will not be able to payors. So we're very excited now with a lot of the new developments.

John Kevin Willis: TBO looked at that.

John Kevin Willis: The novel Cellulosic starch based.

Guillermo Novo: If you look at, you know, film coatings, some really great developments that can transform our position in the market, and that's a very large segment. You know, the feedback from customers has been incredibly exciting for us. And these technologies, because they're tunable, we're going into new skin applications, new hair applications, and even new oral care applications, which is a very sizable market for us. And we want to rejuvenate it in terms of the technologies. It even opens up opportunities in the household area, just given the performance of these products. And in coatings, actually, I will tell you that coatings is probably the one that's transformed the most.

John Kevin Willis: Cellulosic based yield free.

John Kevin Willis: The feedback from customers has been incredibly exciting for.

John Kevin Willis: These technologies because they are tunable, we're going into new skin applications, new hair applications, and even new oral care application, which is <unk>.

John Kevin Willis: Very sizable market for us and we want a rejuvenated in terms in terms of the technologies, even opens up opportunities in the household area.

John Kevin Willis: Just given the performance of these products and in coatings actually I will tell you that coatings is probably the one that's transformed the bumps we have been concentrated on rheology, that's been sort of our core business with one of the largest if not the largest rheology player in coatings, but were narrow we're not our coatings business is not like our lifestyle.

Guillermo Novo: We have been concentrated on rheology. That's been sort of our core business. We're one of the largest, if not the largest, rheology player in coatings. But we're narrow.

John Kevin Willis: In personal care that we have a big portfolio.

Guillermo Novo: We're not, our coatings business is not like our life science and personal care business where we have a big portfolio. This platform, these new platforms actually open the door to a lot of new technologies, the super wetters, sizable markets, the pH note, a very sizable market. The PBOs, we're taking them in totally different directions. Unknown Executive, Guillermo Novo, Ashland Global Holdings, Unknown Executive, Guillermo Novo, Ashland Global Holdings, Unknown Executive, Guillermo Novo, Concentrated Market of Customers.

John Kevin Willis: This platform these new platforms actually opened the door.

John Kevin Willis: A lot of new technologies, the Super wetter sizeable markets the very sizable market.

John Kevin Willis: The <unk> were taking them into totally different directions.

John Kevin Willis: They are dispersed since their film formers. These are things that can enhance <unk> efficiency that can be co binders. They can I mean, theres a lot of things and as you know in coatings Theres nothing small.

Guillermo Novo: We're well positioned with them. They're very excited about these technologies. So again, you know, we see great growth opportunities. So for us right now, these are, if you've seen, we've made changes in our organization, we're investing. It's the right thing to do, what I was saying in the call, this recognition, that the future road for us is not the same as the past road. It's different.

John Kevin Willis: A concentrated market our customers, we're well positioned with them, they're very excited about these technologies. So again.

John Kevin Willis: We see great growth opportunities so for US right. Now these are if you've seen we've made changes in our organization we're investing.

John Kevin Willis: It is the right one.

John Kevin Willis: What I was saying in the call this recognition.

John Kevin Willis: That.

John Kevin Willis: The future road for US is not the same as the past road, it's different we need to bring in new skills. It's about innovation growth, it's about engaging our customers differently to really develop and this is going to be a long term.

Guillermo Novo: We need to bring in new skills. It's about innovation growth. It's about engaging our customers differently to really develop. And this is going to be a long-term road.

Guillermo Novo: The good news for us is we have the globalized business, which can generate near-term growth. And then, as we launch some of these new products, I think we'll go through the introduction cycle with our customers. I think getting a few big JDAs with customers is going to be important because some of these products, we don't want to invent them for them. We want them to be part of designing the products that they want for their applications.

John Kevin Willis: Wrote the good news for US is we have the globalized, which can generate near term growth and then as we launch some of these new products I think we'll go over the.

John Kevin Willis: The introduction cycle with our customers I think getting a few big <unk> with customers is going to be important because some of these products. We don't want to invent it for them, we want them to be part of designing the products that they want for their applications and the interest has been very hot so as you can tell I'm very excited about this this is where we're putting.

Guillermo Novo: And the interest has been very high. So, as you can tell, I'm very excited about this. This is where we're putting our energy, our resources, and frankly, this isn't valued.

John Kevin Willis: Our energy, our resources and and frankly this isn't valued in our evaluation. This isn't recognized at all at this point in time and I think that's a great opportunity and a great catalyst for not just the company's growth, but for the valuation growth.

Guillermo Novo: In our valuation, this isn't recognized at all at this point in time, and I think that's a great opportunity and a great catalyst for not just the company's growth but for the valuation growth of Ashley. Thank you for the color.

John Kevin Willis: Ashley.

Speaker Change: Thank you for the color.

Speaker Change: Yes.

Operator: Good. Thank you. One moment for our next question. Our next question comes from Josh Spector with UBS. Your line is open. Hi, good morning.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from.

John Kevin Willis: Josh Spector with UBS Your line is open.

Joshua David Spector: I wanted to come back to the volume discussion a little bit. And if I just put some numbers out there, you're kind of presenting 2021 as maybe the right baseline. Your volumes in the second quarter are about 10% below. You have a lot of moving parts in the second half.

Joshua David Spector: Yes, hi, good morning, I wanted to come back to the volume discussion a little bit and if I just put some numbers out there.

Joshua David Spector: Kind of presenting 2021 is maybe the right baseline.

Joshua David Spector: Volumes in the second quarter, you are about 10% below you have a lot of moving parts in the second half I guess my math as you exited maybe a 5% volumes going away with essentially zero to very little profit dollars does that mean youre volumes sequentially improve something like 5%.

Joshua David Spector: I guess my math is your exits maybe are 5% volumes going away with essentially zero to very little profit dollars. Does that mean your volumes sequentially improve something like 5%? And where I'm trying to go is if you're saying your end market demand is flat to maybe up versus 2021, is that 5% gap in volume? basically, the amount of reconnection that's left to go versus your guidance, or would you describe it differently? I, you know, and let me make some comments. Kevin, maybe you want to talk.

Joshua David Spector: And what I'm trying to go is it youre, saying your end market demand is flat to maybe up versus 2021.

Joshua David Spector: Is that 5% GAAP and volumes basically the amount of reconnection, that's left to go versus your guidance or would you describe it differently.

Speaker Change: And let me make some comments and Kevin maybe you want to talk I think that the issue in responding to that it's hard to respond at a total level given just volumes in these businesses, where theyre additives, you can't compare preservatives or by a functional volumes too.

Guillermo Novo: I think that the issue in responding to that it's hard to respond at a total level given just volumes in these businesses where their additives, you know, you can't compare preservatives or biofunctional volumes to HEC or other areas. So we look at it more segment by segment on what's happening to the volumes because then you can get some distortions. As you said, clearly, the reduction in our portfolio actions will reduce volume, but we're taking out costs, and it wasn't at a significant profit.

Speaker Change: <unk>.

John Kevin Willis: Two hec or other areas. So we look at it more segment by segment on what's happening to the volumes.

John Kevin Willis: Because then you can get some distortion. So as you said clearly the reduction in our portfolio actions will reduce volume.

John Kevin Willis: But we're taking out cost and it wasn't that significant.

Speaker Change: Profit so I do think.

Guillermo Novo: So I do think that sales volume versus production volumes. Sales volumes, you're going to see, as Kevin said, some continued increase. And if you look at the high volume areas for us, PVP, high volume, significant from a loading perspective. PVP, ATC, our Benacel and our Clousel lines, all of those we're expected to see continued momentum. We have to get to the normalization, which I would say is more somewhere in between 20, 21 type volumes in those areas.

Speaker Change: Sales volume versus production volumes sales volumes youre going to see as Kevin said some continued increase.

Speaker Change: And if you look at the high volume areas for Us Pvp.

Speaker Change: Volume significant from a loading perspective Pvp Hec.

Speaker Change: Our burner cell and our crews cell lines all of those were expected to see continued momentum.

Speaker Change: We got to get to the normalization, which I would say, it's more somewhere in between 2021 type volumes.

Speaker Change:

Guillermo Novo: 20, 20, 20, 21, that we'll start getting that momentum back and should be in the mid to mid-single digits once we normalize. So that's the biggest driver. In the other areas, it's volume, but you can't compare the total numbers because the volumes are significantly lower, higher value, lower volume.

Speaker Change: In those areas 21, 2000, 22021 that will start getting that that momentum back in and it should be in the <unk>.

Speaker Change: <unk>.

Speaker Change: Mid to mid single digits. Once we normalize so thats the biggest driver in the other areas its volume, but you can't compare the.

Speaker Change: The total numbers because of the volume.

Speaker Change: Our cigna.

Speaker Change: Significant lower higher value lower volume bio.

Guillermo Novo: Biofunctions, as an example, you won't see it on the volume side, but it's high price per kilo. That one was significantly down. Some of the major customers were down because of travel and things like that. And China was down significantly, a very important market. So the recovery there will be very important for our volumes. Equally, the preservative business was also impacted.

Speaker Change: <unk> functions as an example.

Speaker Change: You won't see it on the volume side, but it's.

Speaker Change: Hi price for per kilo.

Speaker Change: That one was significantly down.

Speaker Change: Some of the major customers were down because of travel and things like that and China was down significantly very important markets. So the recovery there will be very important for our volumes equally the preservative business.

Speaker Change: No.

Guillermo Novo: Similarly, a lot of the growth that we have in Asia and all that, and that's starting to pick up. So you won't see it so much on the total volume lines, but on the revenue line, we expect that to be higher than in mid-single digits, more relative to the performance in the last year. Those will pick up much, much more.

Speaker Change: Was also impacted similarly lot of the growth that we have in Asia, and all of that and Thats starting to pick up so you won't see it so much on the total volume lines.

Speaker Change: But on the revenue line, we expect that to be higher than mid single more more more relative to the performance in the last year those will pick up much much more.

Guillermo Novo: And we can go out segment by segment, but it's very hard to give you just an overall number, just given the dynamics and the differences between our businesses. But Kevin, do you have any other comments you would give? Yeah, sure, of the restructuring work that we're doing around CMC, MC, and obviously. Unknown Executive, Guillermo Novo, Ashok Kalyana, Min Chong, Osama Musa, Ashland Global Holdings, of what volumes we've been doing. So we'll see that we'll see that negative impact.

Speaker Change: And we can go out segment by segment, but it's very hard to give you just an overall number.

Speaker Change: Just given the dynamics in the differences between our business, but Kevin do you have any other comments you would get.

John Kevin Willis: Yes sure.

John Kevin Willis: Of the restructuring work that we're doing around CMC EMC on obviously just.

John Kevin Willis: Kind of off to the side of the nutraceutical. So very little of that has actually had any kind of impact on the volume line at this point on an annualized basis volume going away is probably around 5%.

John Kevin Willis: <unk>.

Speaker Change: Kind of what the volumes we've been doing so we will see that we will see that negative impact and as that becomes more pronounced we can we can certainly call that out so you understand.

John Kevin Willis: And as that becomes more pronounced, we can certainly call that out. So you'll understand what's happening kind of on an ongoing basis, and we'll work to do that. But again, very little of that has happened yet. We'll start seeing that in Q3. And then, and then obviously, presumably, we get the nutraceutical sale closed, which we're confident we will do, then there'll be a more pronounced impact from that. But again, we can call those things out. I think another, another important point is that we use the word converging, and that's truly what it is.

Speaker Change: What's happening kind of on an ongoing basis, and we will work to do that.

Speaker Change: But again very little of that has happened yet we will start seeing that in Q3, and then and then obviously.

Speaker Change: Lee.

Speaker Change: Presumably we get the nutraceutical sale closed, which we're confident we will do then.

Speaker Change: There'll be a there'll be a more pronounced impact from that but again, we can we can call those things out I think another another important point is we use the word convergence and that's truly what it is our customers volumes too.

John Kevin Willis: Our customers' volumes to the outside world that they sell to have been kind of flat, and obviously, we saw a big, big decline last year with the stocking. While that convergence has started and is ongoing, we're not there yet, and our expectation, anyway, is that we will continue to see that ramp throughout the fiscal year. The absolute timing of when we can put a stake in the ground and call that done remains to be seen. I mean, timing is what it is.

Speaker Change: To the outside world that they sell to have have been kind of flat and obviously, we saw a big decline last year with Destocking.

Speaker Change: While that convergence has started and is ongoing we're not there yet and we're going to continue our expectation anyway is.

Speaker Change: We will continue to see that ramp throughout the fiscal year, the absolute timing of when we.

John Kevin Willis: Pace has been pretty much what we expected so far, and we're staying really close to our customers. But again, as Guillermo said, things are a little choppy still, and so we expect to continue to see those lines get closer and closer together, our volumes matching what our customers expect, and have been selling to their customers. And then as that happens, to the extent they grow, we should grow with them.

Speaker Change: We can put a stake in the ground and call that done.

Speaker Change: <unk> to be seen.

Speaker Change: Timing is what it is pace has been pretty much what we expected so far and we're staying really close to our customers but.

Speaker Change: Again.

Speaker Change: <unk> things are all choppy still and so we expect to continue to see those lines get closer and closer together our volumes matching what our customers.

Speaker Change: Had been selling have been selling to their customers and then as that happens to the extent they grow we should grow with them.

John Kevin Willis: But that's, you know, that's the timing thing. It's continuing to happen, and we expect that to continue, hopefully, by the end of the fiscal year, we will be pretty much at convergence, but timing is still, you know, still. Is there still a question?

Speaker Change: But that's that's a timing thing.

Speaker Change: It's continuing to happen and we expect that to continue.

Speaker Change: Hopefully by the end of the fiscal year will be pretty much at convergence, but the timing is still so.

Speaker Change: It's still a question.

Joshua David Spector: Thanks, that's helpful. I appreciate that. I guess I can kind of build on that more simply. So if we're getting near convergence by the end of the year, it seems like you think things should be normalish rather than looking at 24. Your slide 11, again, 2021, you're presenting as normal. Would you expect EBITDA dollars to be above 2021 levels when you normalize thinking about growth, some of the actions you're taking, etc.

Speaker Change: Thanks, that's helpful. I appreciate that I guess, if I kind of built on that more simply as opposed to so if we're getting near convergence by at the end of the year. It seems like you take things should be normal ish, then looking at 'twenty four yes slide 11 again in 2021, you are presenting as normal would you expect EBITDA dollars.

Speaker Change: To be above 2021 levels when you normalize thinking about growth some of the actions you are taking et cetera.

John Kevin Willis: Yes, I mean, once we normalize, you know, and that normalization, not just in demand but also in our production volumes, we should see that revenue and EBITDA normalization happens, obviously, with taking out some of the portfolio actions that we're doing, which affect the revenue side more than the EBITDA. Yeah. Right. Fiscal 21 EBITDA was $495 million.

Speaker Change: Yes, I mean, we should be once we normalize.

Speaker Change: And that normalization not just in demand and normalize our production volumes, we should see that.

Speaker Change: Revenue and EBITDA normalization happened obviously with.

Speaker Change: Taking out some of the the portfolio actions that we're doing which impact the revenue side more than the EBITDA.

Speaker Change: Yes.

John Kevin Willis: The midpoint of our outlook is $485. So, assuming we hit the outlook for the full year, things will continue as they have been and as we expect. Yeah, for sure. I would expect. Fiscal 25 Eda Dodd, Unknown... 24N

Speaker Change: Right. So fiscal 'twenty, one EBITDA was $495 million midpoint of our outlook is $4 85.

Speaker Change: So.

Kevin Willis: Assuming we have the outlook for the full year things continue as they have been in as we expect.

John Kevin Willis: Then.

Speaker Change: Yes for sure I would expect fiscal.

Guillermo Novo: Fiscal 'twenty five EBITDA too.

Speaker Change: Accretive to.

John Kevin Willis: Both 2020 one.

Joshua David Spector: Okay, thank you. Thank you. One moment for our next question. Our next question comes from John Roberts with Mizuho. Your line is now open.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

John Ezekiel Roberts: Moment for our next question.

John Ezekiel Roberts: Our next question comes from.

Joshua David Spector: John Roberts with Mizuho. Your line is now open.

John Ezekiel Roberts: Thank you. I'll ask just one question here. Thanks for the update on the new products, Guillermo. Are you ready to give us a vitality index or something to track new products as a percent of sales as a baseline and kind of how we can watch that ramp up over the next couple of years? Yeah, we are working on it, John, thanks for the question. We're working on an updated date for our innovation update. And at that event, we'll start, the intent would be to start setting up a tracking mechanism that's clear. So for pharma, you know, what's our pipeline and, you know, more the traditional pharma type presentation of where we are in the different areas.

John Ezekiel Roberts: Thank you I'll ask just one here.

John Ezekiel Roberts: Okay. Thanks for the update on the new products. Guillermo are you ready to give us a vitality index or something to track new products as a percent of sales as a baseline and kind of how we can watch that ramp over the next couple of years.

Guillermo Novo: Yes, we are working.

Guillermo Novo: John Thanks for the question, we're working on doing an updated date.

Guillermo Novo: For our innovation update.

Guillermo Novo: And at that event, we will start.

Guillermo Novo: It would be to start setting up a tracking mechanism that's clear so for pharma.

Guillermo Novo: Our pipeline in more of the traditional pharma type type presentation of where we are in the different areas.

Guillermo Novo: And probably what we're going to do is look at the technologies that we're launching, where are they versus the technologies that we're developing? Because to be honest, some of the newer things, so what we're launching, we know the markets, you know, like we're saying ag or in personal care. It's pretty clear where we're going, and we can do that. I think there's some other areas that we're just, this technology is really moving fast in our ability to develop new things, and it's opening up a lot of new markets.

Guillermo Novo: And probably what we're going to do is look at.

Guillermo Novo: Technology that we're launching where are they versus technologies that we're developing.

Guillermo Novo: To be honest some of the newer things so what we're launching we know the markets like we're seeing anger.

Guillermo Novo: Or personal care some of the it's pretty clear, where we're going and we can do that I think there's some other areas that we're just this technology, it's really moving fast in our ability to develop new things and it's opening up a lot of new market. So those will give you probably more updates on the technology, where we're looking why we're excited on the performance of <unk>.

Guillermo Novo: So those will probably give you more updates on the technology, where we're looking, why we're excited about the performance. So you're probably going to see different types of metrics that we're going to show so that you can gauge commercial momentum versus, you know, long-term opportunity and how you want to gauge some of these things. So an example for me would be, you know, things we launch a super weather week, we should be able to give you more of the momentum that we're getting there. In TBO, we're developing things for coatings, as an example, that are more multifunctional binder. You know, [inaudible] Thank you.

Guillermo Novo: You're going to see probably different types of Av.

Guillermo Novo: Of of metrics that we're going to show. So that you can gauge commercial momentum versus long term opportunity and how you want to gauge some of these things. So in the example for me would be.

Guillermo Novo: Things, which launches super whether we should be able to give you more of the momentum that we're getting there.

Guillermo Novo: TVO, we're developing things for coatings as an example that are more multi functional <unk>.

Guillermo Novo: Binder.

Guillermo Novo: <unk> disbursements and things of that nature those are big markets. So.

Guillermo Novo: We're very excited what we're seeing but it was going to be a little bit longer we're going to work with our with our customers are a little bit more detail there will present, where we are.

Guillermo Novo: Because I do think those are important perspective to keep but but it's going to be a little bit longer term side, but so will prevent present that spectrum.

Guillermo Novo: Probably by by the end of this fiscal year.

Speaker Change: We'll do that.

Speaker Change: Alright, thank you.

Speaker Change: Thank you.

Speaker Change: For our next question.

Guillermo Novo: Yeah.

Speaker Change: Our next question comes from.

Operator: One moment for our next question. Our next question comes from Mike Harrison with Seaport Research Partners. Your line is open. Hi, good morning.

Guillermo Novo: Mike Harrison with Seaport Research partners. Your line is open.

Michael Joseph Harrison: Guillermo, I was wondering if you could talk a little bit about the recent changes in segment leadership. It seems like maybe it's kind of a tricky time for both an external as well as internal standpoint. You guys have a lot going on. So what are you doing to help reduce the distraction that might come from a leadership change, again, basically in every segment right now?

Michael Joseph Harrison: Hi, good morning.

Michael Joseph Harrison: I was wondering if you could talk a little bit about the recent changes in segment leadership.

Michael Joseph Harrison: It seems like maybe it's kind of a tricky time for bolt on external as well as internal standpoint, you guys have a lot going on so what are you doing to help reduce the distraction that might come from a leadership change again basically.

Guillermo Novo: Right. So thanks for the question, Mike, because I do have gotten some notes on that asking what's happening. So two different things.

Michael Joseph Harrison: Segment right now.

Michael Joseph Harrison: Right.

Guillermo Novo: So thanks for the question, Mike because I do have gotten.

Guillermo Novo: Some some notes on that asking what's happening so two different things.

Guillermo Novo: The prior changes were purposeful. We were looking, as I said, We're moving in a very different direction. If you look at everything I'm talking about, it's about new technologies, new areas. The company has been focused on certain profiles, certain segments. If you're going to go beyond, as an example, beyond rheology, we need experience in other technologies that go into coding, as an example.

Guillermo Novo: The prior changes were purposeful we were looking as I said.

Guillermo Novo: We're moving in a very different direction. If you look at everything I'm talking is about new technologies new areas.

Guillermo Novo: The company has been focused with certain profile of certain segments, if youre going to be as an example beyond rheology.

Guillermo Novo: We need experience in other technologies that go into coatings as an example.

Guillermo Novo: So we, you know, it is about growth, and it's just a realization. Hey, where we're going, we need to bring in different experiences and talents. That's what we're doing. We've been purposeful about it. You've seen the higher-level leadership changes that have been public, but we've been bringing in, you know, two new R&D heads for two of our businesses. We're bringing in a lot of scientists.

Guillermo Novo: So we it is about growth and it's just a realization hey, where we're going we need to bring in different experiences talent. So that's what we're doing we've been purposeful about that you've seen the higher level leadership changes that have been public, but we've been bringing in.

Guillermo Novo: Two new R&D heads for two of our businesses, we're bringing a lot of scientists were bringing in new marketing people. There's a lot of other changes behind the scenes that are going and this is really about the future and where we're going I'll be very direct on the recent announcement with our life science that wasn't planned.

Guillermo Novo: We're bringing in new marketing people. There are a lot of other changes behind the scenes that are going on. And this is really about the future and where we're going. I'll be very direct about the recent announcement with our life science business. That wasn't planned. The person got a shock, got an offer to become CEO of a private equity company. They probably will announce soon where he's going to go.

Guillermo Novo: Person got a stroke got on offer to become the CEO of a private equity company.

Guillermo Novo: I should probably will announce soon wherever he is going to go.

Guillermo Novo: It's a good opportunity for him, and we wish him all the best. But that was not planned.

Guillermo Novo: It's a good opportunity for him and we wish him all the best that was not a plan we're already in the process of hiring.

Guillermo Novo: We're already in the process of hiring, but that has, you know, this kind of stuff. We hired people. You know, this happens. I've I've been involved in these kinds of changes. So this is just part of life.

Guillermo Novo: But that has this kind of stuff we hired people.

Guillermo Novo: This happens.

Guillermo Novo: I've been involved in these kinds of changes. So this is just part of life and we need to to roll with with these with these changes, but the business is in very life science business very well position. They have a clear strategy. If you could hear from my comments, they know where they are going they are expanding into a lot of new areas. So the physician.

Guillermo Novo: And we need to roll with these changes. But we're businesses, and every life science business is very well positioned. They have a clear strategy.

Guillermo Novo: If you could hear from my comments, they know where they're going. They're expanding to a lot of new areas. So the position, the business is very well positioned. And it's really about bringing in the new leader, and that's already in progress.

Guillermo Novo: The business is very well positioned and it's really about bringing in.

Guillermo Novo: The new leader and that's already in progress.

Michael Joseph Harrison: All right. And then the other thing I wanted to ask about is the biofunctionals business. You talk a little bit about some of the opportunities for geographic expansion, but it sounds like, at least in this quarter, that business was relatively weak. Can you talk about what was driving that weakness and whether you expect improvement in the second half of the year? Well, so biofunctions to be direct is significantly up, improving sequentially.

Speaker Change: Alright, and then the other thing I wanted to ask about is the bio functional business.

Michael Joseph Harrison: Talk a little bit about some of the opportunities for geographic expansion, but it sounds like at least in this quarter.

Michael Joseph Harrison: That business was relatively weak can you talk about what was driving that weakness.

Michael Joseph Harrison: Whether you expect improvement in the second half of the year.

Guillermo Novo: And in Q2, we're starting to see that recovery. Some of our major customers, you know, are picking up momentum. Recent announcements, people seeing greater Asia travel, you know, these are going into more high-end cosmetics.

Michael Joseph Harrison: So <unk> to be direct is significantly up.

Guillermo Novo: Improving sequentially.

Guillermo Novo: In Q2, we're starting to see that recovery some of our major customers.

Guillermo Novo: Or are picking up momentum.

Guillermo Novo: Recent announcements people.

Guillermo Novo: <unk>.

Guillermo Novo: Greater Asia travel these are going into more high end cosmetics.

Guillermo Novo: So definitely we're seeing that with our core customers, China, we have a very good position in China, we're starting to see the recovery there which comes at a perfect time. When we're just we're not granted our biopharmaceuticals biopharma functional plant.

Guillermo Novo: Our Nanjing plant.

Guillermo Novo: So that business is very well positioned.

Guillermo Novo: Our new leader.

Guillermo Novo: I'm Gonna Coochie, he's already working with this team we.

Guillermo Novo: We have very focused teams now in both fire functional and the <unk>.

Guillermo Novo: Reserved a business that we want to drive and that globalization. So we have some some new resources that we're adding in terms of leadership in terms of.

Guillermo Novo: Sales and marketing capabilities that we're augmenting and regionalize it.

Guillermo Novo: So a lot of investment, and I think, you know, this is part of the recovery, like all the other segments. I think the issue there is volumes are not the drivers, the dollars, given the value per kilo in these areas is much different from some of the other businesses that we have. All right, thanks very much. Thanks, Mike. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Guillermo Novo: So a lot of investment and I think this is.

Guillermo Novo: Part of the recovery like all the other segments I think.

Guillermo Novo: The issue there is the volumes are not the driver. It's the dollars given the value per kilo in these areas are much different from from some of the other businesses that we have.

Speaker Change: Alright, thanks very much.

Speaker Change: Thanks, Mike.

Speaker Change: Thank you.

Guillermo Novo: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Operator: Our next question comes from John McNulty with BMO. Your line is, Yeah, thanks for taking my question. Maybe one for Kevin.

Guillermo Novo: Our next question comes from John Mcnulty with BMO. Your line is open.

John Patrick McNulty: So on the cash flow side, you started out the year at a pretty solid level. And yet, it sounds like the cash conversion, I think you were calling for 50%, which is which you're clearly starting at a better, better rate than that. So I guess what may be different this time, you know, in 24 in terms of how cash runs through the year? Is it something about the restructuring? Or is it just early harvesting? In the first half, as you kind of dialed back production? Or are you just being cautious?

John Patrick McNulty: Yes. Thanks for taking my question, maybe one for for Kevin. So on the cash flow side, you started out the year at a pretty solid level and yet it sounds like the cash conversion I think you were calling for 50% which is which.

John Patrick McNulty: Clearly starting at a better better rate than that so I guess, what maybe different this time in 'twenty four in terms of how cash runs through the year is it something about the restructuring or is it just the early harvesting in the first half.

John Patrick McNulty: As you kind of dialed back production or are you just being conservative I guess, how should we be thinking about.

John Patrick McNulty: Free cash flow and cash conversion.

John Kevin Willis: I guess, how should we be thinking about pre-cash flow and cash conversion? Yeah, for the first half of the year in total, so the March quarter was weaker than the prior year. For the first half of the year, we were at about a 36% conversion rate.

John Patrick McNulty: Yes for sort of the first half of the year in total so the March the March quarter was weaker than the prior year first half of the year.

John Kevin Willis: We're at about 36% conversion rate, we expect full year to be 50% or so so.

John Kevin Willis: On a weighted average basis. So the second half should be stronger relatively speaking than the first half for cash conversion.

John Kevin Willis: We expect the full year to be 50% or so, on a weighted average basis. So the second half should be stronger, relatively speaking, than the first half for cash conversion. Cash taxes are a little higher this year than last year.

John Kevin Willis: Cash.

John Kevin Willis: Cash taxes are a little higher this year than prior year, that's that's part of the number.

John Kevin Willis: That's part of the number. But, by and large, we're pretty comfortable with the cash conversion. And again, the second half tends to be the stronger part of the year, normally anyway. I think that the first quarter was somewhat stronger because of the very, very poor incentive payout that we had for fiscal 23 results. We pay those incentives out in the December quarter, and that number was probably 25 million lower than the target, let's say, I mean, that's what the reset was around 25 million.

John Kevin Willis: But by and large we're pretty comfortable with.

John Kevin Willis: The with the cash conversion.

John Kevin Willis: And again second half tends to be the stronger part of the year normally anyway.

John Kevin Willis: The first quarter was somewhat stronger.

John Kevin Willis: Cause of the very very core incentive payouts that we had for fiscal 'twenty three results, we pay those incentives out in the December quarter and that was.

John Kevin Willis: That number was probably $25 million lower than in <unk>.

John Kevin Willis: Let's say I mean, that's what the reset was around 27 million. So that's part of the driver for that is for that as well.

John Patrick McNulty: So that's, that's part of the driver for that. Got it. Okay, now that's helpful. And then, just one last one on the raw material front. I mean, it sounds like, at this point, things are benign, but you've got your eye on a couple things. You know, BDO, obviously, you're fully integrated through, so shouldn't be a concern there. I guess what are the other raw materials that you're looking at where maybe there is some risk of inflation because it still seems like it's a relatively benign environment?

Speaker Change: Got it okay.

John Patrick McNulty: That's helpful. And then just one last one on the raw material front I mean, it sounds like at least at this point things are benign, but you've got your eye on a couple of things BDO, obviously youre fully integrated through so shouldnt be a concern there.

John Patrick McNulty: What are the other raw materials that you are looking at where maybe there is some risk of inflation because it still seems like it's a relatively benign environment. So I guess, how should we be thinking about that.

John Patrick McNulty: So I guess how should we be thinking about that? So let me comment, and Kevin, you can add some color, but just to be clear, BDO, we're not tracking it. I mean, for us, butane is more of an issue for the back integration that we have, but we do track it because it affects a lot of other players in the market, especially in the PVP and in other downstream NMP and other areas.

Speaker Change: So let me comment in.

John Patrick McNulty: Kevin you can add some color, but just to be BDO were not tracking it I mean for us its butane as more of the issue for four.

John Patrick McNulty: The back integration that we have but we do track it because it impacts a lot of other players in the market, especially in <unk>.

John Patrick McNulty: Pvp and then.

John Patrick McNulty: And other downstream.

Guillermo Novo: So I think picking up, we expect that those costs, market costs, and expectations will start to trend up, which is, for us, a good thing overall, especially in our intermediate business. So that's where we've seen the biggest impact. For other areas, obviously, cellulose, cotton, and wood pulp are the other big raw materials.

John Patrick McNulty: And MP and other other areas. So I think picking up we expect that that those cost market costs.

Guillermo Novo: Expectations is that we'll start to trend up.

Guillermo Novo: Which is for us.

Guillermo Novo: A good thing.

Guillermo Novo: Overall, especially in our intermediates business, so that's where we've seen the biggest impact for us.

Guillermo Novo: Other areas, obviously cellulose cotton.

Guillermo Novo: Wood pulp as the other other big raw materials that have been sort of stable.

Guillermo Novo: We've been sort of stable in our expectations that they'll soften up a little bit more over time, but it's, you know, these products go into hygiene and other uses, although it's not, you know, our business isn't the only user of these materials, but that one, you know, it hasn't been the biggest driver yet, a little bit of improvement year on year in terms of costs. The rest, you really start getting down into petrochemicals, you know, the process chemicals that we use, EO, PO, solvents, you know, things of that nature, none of them is a significant cost per se, acetylenics, so it'll vary by business, but we're monitoring those types of products that we use in our production for the high volume products. Climes in some areas.

Guillermo Novo: And our expectations that will soften up.

Guillermo Novo: A little bit more.

Guillermo Novo: Overtime, but but it's these products go into hygiene and other although its not our business isn't deal and end user of these materials.

Guillermo Novo: About one.

Guillermo Novo: It hasn't been the biggest driver yet.

Guillermo Novo: A little bit of improvement year on year.

Guillermo Novo: And in terms of cost the rest you really start getting down into Patrick.

Guillermo Novo: The process chemicals that we use.

Guillermo Novo: Po.

Guillermo Novo: Solvents things things of that nature, none of them is a significant cost per se a set of Olympics. So it'll vary by business, but we are monitoring those those those type of.

Guillermo Novo: Products.

Guillermo Novo: We use in our in our production.

Guillermo Novo: For the high volume products.

Speaker Change: Got it.

Guillermo Novo: Overall, yeah on an overall basis, our raw material forecast has remained pretty stable in terms of.

Guillermo Novo: Raw material cost forecast has remained pretty stable throughout the year first half of the year, we have seen declines in.

Guillermo Novo: But generally, it's been a pretty, pretty stable environment overall. Okay, got it. No, that's helpful, caller. Thanks very much. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Guillermo Novo for closing remarks. Thank you, Daniel. Thank you, everyone, for your time today. As you heard, I think things are normalizing, we're focusing, we're going to manage. We still have work to do during 2024 to make sure that we optimize as the, you know, the normalization dynamics play out, and we'll stay on point with that.

Guillermo Novo: Some areas, but generally it's been a pretty pretty stable environment on an overall basis.

Guillermo Novo: Okay got it that's helpful color, thanks very much.

Speaker Change: Thank you.

Guillermo Novo: I'm showing no further questions at this time I would now like to turn it back to Guillermo Novo for closing remarks.

Guillermo Novo: But really, the issue now is also to focus on the future, refining our portfolio, honing in on those high-value markets that we want to participate in, and that we want to lead in, and driving our innovation portfolio that can really transform the company in the coming decades. So thank you for your time and look forward to connecting with all of you in the coming weeks. This concludes today's conference. Thank you for participating. You may now disconnect.

Guillermo Novo: Thank you Daniel Thank you everyone for your time today.

Speaker Change: As you heard I think things are normalizing, we're focusing we're going to manage we still have work to do during 2024 to make sure we optimize as the.

Guillermo Novo: The normalization dynamics play out.

Guillermo Novo: We'll stay on point on that.

Guillermo Novo: But really the issue now is also to focus on the future and the future is refining our portfolio of honing in on those high value markets that we're that we want to participate in and that we want to lead in and and driving our innovation portfolio that really can transform the company in the coming decades.

Guillermo Novo: Thank you for your time and look forward to connecting with all of you in the coming weeks.

Guillermo Novo: This concludes today's conference call. Thank you for participating you may now disconnect.

Guillermo Novo: Okay.

Guillermo Novo: [music].

Guillermo Novo: Okay.

Guillermo Novo: [music].