Q2 2024 Eastman Chemical Co Earnings Call

Good day everyone and welcome to the second quarter 2024 Eastman conference call. Today's conference is being recorded. This call is being broadcast live on the Eastman website www.eastman.com. We'll now turn the call over to Mr Greg Riddle of Eastman Investor Relations.

Operator: conference call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com. We'll now turn the call over to Mr. Greg Riddle of Eastman Investor Relations. Please go ahead, sir.

Gregory A. Riddle: Okay, thank you, Chet. Good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, board chair and CEO, Willie McLain, executive vice president and CFO, Jake Leroux, manager of investor relations, and a new member of our IR team, Emily Edwards. Yesterday, after the market closed, we posted our second quarter 2024 financial results news release and SEC AK filing, our slides and the related prepared remarks in the investor section of our website, Eastman.com.

Gregory A. Riddle: Before we begin, I'll cover three items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations. Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in our second quarter 2024 financial results news release, during this call, in the preceding slides and prepared remarks, and in our filings with the Securities and Exchange Commission, including the Form 10-K, filed for four-year 2023, and the Form 10-Q to be filed for second quarter 2024. Second, earnings referenced in this presentation exclude certain non-core and unusual items.

Gregory A. Riddle: Reconciliations to the most directly comparable gap financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the second quarter 2024 financial results news release. And one more item. After we posted our materials last night, I became aware that there is a conflict on the date we chose, Tuesday, November 19th, for our Circular Economy Deep Dive here in Kingsport, Tennessee. We are currently working through alternatives, and we'll let you know when we've decided on a path forward. With that, we are now ready for questions. Josh, please start with our first question. Thank you. We'll now take our first question from Patrick Cunningham of Citigroup. Please go ahead. Hi, good morning.

Speaker Change: First during this presentation you will hear certain forward looking statements concerning our plans and expectations actual events or results could differ materially certain factors related to future expectations are or will be detailed in our second quarter 2024 financial results news release during this call and the preceding slides and prepared remarks and in our filings with the securities.

Speaker Change: And exchange Commission, including the Form 10-K filed for full year 2023, and the Form 10-Q to be filed for second quarter of 2024.

Speaker Change: Second earnings referenced in this presentation exclude certain noncore and unusual items reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items are available in the second quarter 2024 financial results news release.

Speaker Change: And one more item.

After we posted our materials last night I became aware that there is a conflict on the date, we chose Tuesday November 19th.

Speaker Change: Our circular economy deep dive here in Kingsport, Tennessee.

We are currently working through alternatives and we'll let you know when we've decided on a path forward.

Speaker Change: With that we are now ready for questions such please start with our first question.

Speaker Change: Yeah.

Speaker Change: Thank you well now take our first question from Patrick Cunningham of Citigroup. Please go ahead.

Speaker Change: Okay.

Patrick David Cunningham: Thanks for taking my question. Well, maybe just with, you know, just some questions on methanolysis. Maybe first, just clarification on the feedstock preparation issues. Can you give a little more detail there? You know, what sort of equipment modifications did you have to take? How much downtime was there in 2Q and any expected downtime in 3Q? Sure, and good morning, everyone.

Patrick David Cunningham: Hi, Good morning, Thanks for taking my question, maybe just with just some questions on methanol assets, maybe one just clarification feedstock preparation issues can you give a little more detail there what sort of equipment modifications that you have to take and how much downtime was there in <unk>.

Patrick David Cunningham: <unk>.

Speaker Change: Sure and good morning, everyone.

Mark J. Costa: I would love to talk about where we are with the methanolysis plant. I'm going to give a little context of the journey we've been on and then answer that specific feedstock question. We're very excited to be operational with the world's largest chemical recycling facility, and we've made tremendous project progress on this project, really showing the world what's possible in the world when it comes to recycling content and dealing with this challenge that we face. We are very excited that we're making on-spec plastic from the output of this facility. We've actually produced on-spec food-grade Tretin with 75% RDMT, and that's the most difficult product we have to make.

Speaker Change: Well, if you talk about sort of where we are with methanol plant.

Speaker Change: Can you give a little context of the journey, we've been on and then answer that specific feedstock question, we're very excited.

Speaker Change: The operation with the worlds largest chemical recycling facility and we've made tremendous project progress on this project and really showing what the world what's possible in the world when it comes to recycled content in dealing with this challenge that we face.

Speaker Change: We are very excited that we were making.

Speaker Change: On spec plastic from the output of this facility.

Speaker Change: Actually produced on spec food grade Triton was 75% our DMT.

Speaker Change: And that's the most difficult product, we have to make the highest standards on clarity.

Mark J. Costa: The highest standards for clarity, a wide range of performance specifications, and we're making these products with no materials of concern getting through the purification process, so a very safe product from waste. And that's an incredible accomplishment and a great job by our team in operating this plant and overcoming a series of challenges. We have had a lot of successes. As I said, we're making on-spec products now. We are doing all of this with hard-to-recycle waste. Mechanical recyclers can't take back the food grade and send it to landfills.

Speaker Change: A wide range of performance specs and we're making these products with no materials of concern getting through the purification process. So a very safe product.

Speaker Change: From garbage.

Speaker Change: And that's an incredible accomplishment and a great job by our team and operating this plant in overcoming a series of challenges. We have had a lot of successes as I said, we're making on spec product now.

Speaker Change: We are doing all of this with hard to recycle wasted mechanical recyclers can't take back to food grade and send to landfill.

Mark J. Costa: We validated all of the unit operations, and they can run at very high rates. We've had, as I mentioned, sustained rates in our prepared remarks of around 70 percent when you're running all the units together. And there's been one sort of small mechanical thing limiting us getting to 100 percent, and we just recently made the change this week, actually, in fixing that one mechanical issue, and we're ramping up to full rate. We have made a lot of progress in improving the mechanical reliability issues that we were facing in the start-up of the process that we shared with you in the first quarter call.

Speaker Change: We validated all of the unit ops.

Speaker Change: They can run at very high rates.

As I've mentioned sustained rates in our prepared remarks of around 70% when you're running all the units together.

Speaker Change: And theres been one sort of small mechanical thing looming limiting us getting to a 100% and we just recently made the change this week actually and fixing that one mechanical issue and we're ramping up to full rates.

Speaker Change: We have made a lot of progress on improving the mechanical reliability issues that we are.

Speaker Change: We're facing in the in the startup of the process that we shared with you in the first quarter call. So when we took a variety of corrective actions on the early failures around instrumentation valves routine equipments, especially pumps.

Mark J. Costa: So when we took a variety of corrective actions on the early failures around instrumentation, valves, rotating equipment, especially pumps, that has been effective, and we've seen much higher reliability across the plant. But as you said, the next step, as we're now moving to higher rates and a broader set of hard-to-recycle feedstock, we encountered some plugging issues. So to be clear, from the beginning of this process, we've been using hard-to-recycle material that can't be made back into food-grade bottles mechanically, true to our strategy of dealing with this waste that doesn't have an alternative life.

Speaker Change: That has been effective and we've seen much higher reliability across the plant. So as you said. The next step is were now moving to higher rates and a broader set of hardware recycled feedstock.

Speaker Change: <unk> encountered some plugging issues so to be clear from the beginning of this process, we've been using hardware recycled material.

Speaker Change: That can't be made back into food grade bottles mechanically.

Speaker Change: True to our strategy of dealing with this waste that doesn't have an alternative life.

Mark J. Costa: But we've been broadening that spectrum of different types of HTR recently, and we encountered some plugging issues in the front of the plant. But I want to be clear that this is not about chemical impurities. It's not about process chemistry. It took us a few weeks to really understand what was going on, but we realized that it was in the feedstock preparation and some of the fitness-for-use aspects of a few sources of material.

Speaker Change: But we've been broadening that spectrum of different types of H T. R recently, and we encountered some plugging issues in the front of the plant.

Speaker Change: I want to be clear that this is not about chemical impurities, it's not about process chemistry.

Speaker Change: It took us a few weeks to really understand what was going on but we realized that it was in the feedstock preparation and some of the fitness for use aspects of a few.

Speaker Change: Sources of material.

Mark J. Costa: Fortunately, the issues were relatively straightforward to address once we understood them, which just involved sort of optimizing the feedstock form that we're using and dealing with some of the non-polymer waste that was in a few select sources of feedstock. So we've now implemented all those changes.

Speaker Change: Actually.

Speaker Change: The issues were relatively straightforward to address once we're interested.

Speaker Change: Which just involve sort of optimizing sort of the feedstock form that we're using.

Speaker Change: And dealing with some of the non polymer waste that was in a few select sources of feedstock.

Mark J. Costa: We're ramping up, as I said, with the change to also run at full rates, and we are confident all these changes will be effective, and we'll be running very hard with the facility as we go through Q3 and Q4. The thing I would note is, you know, this has been a journey; this is an incredibly complex plant to take garbage and turn it into, you know, a clear on-spec polymer that doesn't have any materials of concern that can exist in that waste feedstock.

Speaker Change: So we're now implemented all of those changes were ramping up as I said with the changed also run at full rates.

Speaker Change: And our confident all of these changes will be effective and will be running running very hard with the facility as we go through Q3.

Speaker Change: In Q4.

Speaker Change: The thing I would note as this has been a journey. This is incredibly complex plant to take garbage and turn it into.

Speaker Change: Clear on spec a polymer that doesn't have any materials of concern that can exist in that waste feedstocks. So we've made a lot of investments in purification and how to manage all these different feedstocks.

Mark J. Costa: So we've made a lot of investments in purification and how to manage all these different feedstocks, and we've learned a lot over the last five months, six months of startup that I think is a huge competitive advantage for us. And frankly, there's a lot of strategic intellectual property we're gathering through this process. As I look back on it, I just can't emphasize enough the power and success of our team in enabling us to have this kind of success.

Speaker Change: And we've learned a lot over the last.

Five months six months a startup.

Speaker Change: That I think is a huge competitive advantage for us and frankly, there's a lot of strategic intellectual property, we're gathering through this process.

Speaker Change: As I look back on it I just can't reinforce enough.

Speaker Change: The power and success of our team at.

Speaker Change: And enabling us to have this kind of success I can't even imagine trying to build these kind of technologies in plants without the depth of technical expertise and the scale we have to throw at these kind of challenges. So a great shout out to the team in overcoming these things we're feeling very good about how we're moving forward.

Mark J. Costa: I can't even imagine trying to build these kinds of technologies and plants without the depth of technical expertise and the scale we have to throw at these kinds of challenges. So a great shout out to the team for overcoming these things.

Mark Costa: I can't even imagine trying to build these kind of technologies and plans without the depth of technical expertise in the scale we have to throw at these kind of challenges. So, a great shout out to the team and overcoming these things. We're feeling very good about how it's moving forward. And, and excited to serve customers as we ramp up volumes in the back after the year.

Mark J. Costa: We're feeling very good about how we're moving forward and excited to serve customers as we ramp up volumes in the back half of the year. Great, thank you so much for the detail there. And then maybe just one quick one, you know, just squaring the current macro environment and maybe some of the comments you made on inflationary pressures leading to a slower ramp-up of renewable energy, why is now the right time to move forward with the trade? Yeah, good question.

Speaker Change: And and excited to serve customers as we ramp up volumes in the back half of the year.

Joshua David Spector: Great, thank you so much for the detail there, and then maybe just one quick one, you know, just slurring the current macro environment and maybe some other comments you made on inflation rate pressures, leading to slower ramp up of renew.

Speaker Change: Great. Thank you so much for the detail there and then maybe just one quick one just squaring the current macro environment and maybe some of the comments you made on inflationary pressures leading to slower ramp up of the new why is now the right time to move forward with the expansion.

Unknown Executive: Why is now the right time to move forward with the trade and expansion?

Mark J. Costa: Yeah, good question. So, when you look at, sir, where we are with the market, a lot of that goes in consumer durables as everyone, I think, in the industry has called out that market and markets been weak. Continues to be weak, but we did see a significant amount of return and volume with the end of destocking. So, a huge amount of the hit that we took. You know, in 23, what's associated with destocking, that volumes come back and the very high margins are going with it are certainly very helpful this year will be going forward.

Mark J. Costa: So when you look at sort of where we are with the Triton market, a lot of that goes into consumer durables, as everyone, I think, in the industry is called out that that market's been weak. It continues to be weak, but we did see a significant amount of return in volume with the end of destocking, so a huge amount of the hit that we took, you know, and 23 was associated with stocking volumes to come back.

Speaker Change: Yes, good question so.

Speaker Change: When you look at sort of where we are with our with the Triton market a lot of that goes in consumer durables as everyone. I think in the industry has called out that market end market has been weak.

Speaker Change: It continues to be weak.

Speaker Change: But we did see a significant amount of return in volume with the end of Destocking. So a huge amount of the hit that we took.

Speaker Change: You know in 'twenty three.

Mark J. Costa: And, and the very high margins that go with it are certainly very helpful this year and will be going forward. We're also going to continue to have a lot of wins just on the traditional value proposition of Triton. So when you look at the compelling attributes of its heat resistance, its chemical resistance, and its clarity as a safe product that's BPA-free, we've always had a lot of volume wins in applications that have driven tremendous growth in this product area for over a decade. And that engine's back in gear this year.

Speaker Change: Whereas associated the destocking that volumes come back.

And the very high margins that go with it.

Speaker Change: There are certainly very helpful. This year and will be going forward. We're also continuing to have a lot of wins just on the traditional value proposition of Triton. So when you look at.

Mark Costa: We're also continue to have a lot of wins just on the traditional value proposition of driving. So, when you look at the compelling attributes of its heat resistance, its chemical resistance, and its clarity. It being a safe product that's BPA-free, we've always had a lot of volume wins and applications as driven, you know, tremendous growth in this product area for over a decade. And that engine's backing gear this year. We're winning, you know, on those value propositions, you know, a variety of places on top of an industry stocking that's giving us good momentum. And then on top of that, we're now, you know, layering on, you know, recycled content, and for a lot of brands, you know, that's really important.

Speaker Change: The compelling attributes of its heat resistance is chemical resistance, it's clarity it being it's a safe product. That's BPA free we've always had a lot of volume wins and applications has driven tremendous growth in this product area for over a decade and that engines back in gear. This year, we're winning.

Mark J. Costa: We're winning on those value propositions in a variety of places on top of an NFT stocking that's giving us good momentum. And then, on top of that, we're now layering on, you know, recycling content. And for a lot of brands, you know, that's really important. We have a lot of customers that have been with us for a long time that are using this recycling content claim as a way to enhance their product offering or drive new volume growth, like P&G, Nalgene, Countback, LVMH, L'Oreal, Estee Lauder, etc.

On those value propositions, a variety of places on top of an end of Destocking thats, giving us good momentum.

Speaker Change: And then on top of that we're now layering on.

Speaker Change: Recycled content and for a lot of brands.

Speaker Change: That's really important we have a lot of customers that have been with us for a long time that are using this recycle content claim as a way to enhance their product offering or drive new volume growth like P&G Nalgene Camelback LTM made some l'oreal Este Lauder et cetera, you've seen the icon chart of all the customers. We've had we were using in one form or.

Mark J. Costa: You know, we have a lot of customers that have been with us for a long time, that are using this recycled content claim as a way to enhance their product offering or drive new volume growth like P&G, Now Gene, Cow Back, Healthy and Major, more y'all. That's a lot of etc. You've seen the icons are out of all the customers we've had who are using in one form or another. And then we, you know, what's really saying is also opening up new markets for us to serve that, you know, wouldn't have originally been available for our value proposition.

Speaker Change: And another.

Mark J. Costa: You've seen the icon chart of all the customers we've had, who are using it in one form or another. And then we've, you know, what's really exciting is also opening up new markets for us to serve that, you know, wouldn't have originally been available for our value proposition. This is not a, you know, cheap polymer.

Speaker Change: And then.

Speaker Change: What's really exciting is also opening up new markets for us to serve.

Speaker Change: Is that.

Speaker Change: Has originally been available for our value proposition. This is not a cheap polymer. So you really have to have a compelling value proposition and now you have people like black <unk> Decker.

Mark J. Costa: This is not a, you know, cheap polymer, so you really have to have a compelling value proposition, and now you have people like Black and Decker, you know, doing a trial run. As we told you about in tools and seeing that go very well with recycled content and expanding to a broader product line or seester, which is the leading supplier of housewares for food service type products for airlines and food service and, you know, them, you know, going to this product with the recycled content claim. So lots of volume engagement; customers are paying the premiums that we expect to make a return on this investment that we've made here in Kingsport.

Speaker Change: Doing a trial run as we told you about in tools and seeing that go very well with recycled content and expanding to a broader product line or Easter, which is the leading supplier of housewares floor or foodservice type products for airlines and foodservice.

Mark J. Costa: So you really have to have a compelling value proposition. And now you have people like Black & Decker, you know, doing a trial run, as we told you about in tools, and seeing that go very well with recycled content and expanding to a broader product line, or Feaster, which is the leading supplier of housewares for food service type products for airlines and food service, and you know, them going to this product with the recycled content claim.

Speaker Change: Yes.

Speaker Change: Go into this product with the recycled content claims so lots of volume engagement customers are paying the premiums that we expect to make a return on this investment that we've made here in kingsport.

Mark Costa: And so, as we looked at the volume bill this year, and as we're going to next year, you know, we see the needs of this additional capacity. So we don't, you know, stroke the market, right?

Mark J. Costa: So lots of volume engagement; customers are paying the premiums that we expect to make a return on this investment that we've made here in Kingsport. And so, as we looked at the volume bill this year and as we go into next year, you know, we see the need for this additional capacity. So we don't, you know, short the market, right? So we're moving to get that product, that line online in the sort of third quarters of next year as a way to keep on growing that business. So we feel good about it.

Speaker Change: And so as we looked at the volume build this year and as we go into next year, we see the need for this additional capacity.

So we don't.

Speaker Change: Short term market right. So we're moving to get that product at that line.

Joshua David Spector: You know, certainly it's a tough economic time, but when the market recovers, that'll just be additional volume we have to serve. So we feel like this is the right time. Great, thank you so much, Mark. Thank you. The next question is from Josh Spector of UBS. Please go ahead. Hey, good morning.

Mark Costa: So we're moving to get that product, that line online in the sort of third quarters of next year. As a way to keep on growing that business. So we feel good about it, you know. Certainly, it's a tough economic time, but we, in the market, recover; that will just be additional volume we have to serve. So we feel like this is the right time.

Speaker Change: Online in the third quarters of next year.

Speaker Change: As a way to keep on growing that business. So we feel good about it.

Speaker Change: Certainly, it's a tough economic time, but.

Speaker Change: When the market recovers that will just be additional volume we have to serve so we feel like this is the right time.

Joshua Spector: Great, thank you so much, Mark. Thank you. The next question is from Josh Spector of UBS, please go ahead. Yeah, good morning. Quick follow-up on the prior set of questions. Did you say that you're now running back at higher rates at methanolces, so the issue is resolved, or is that yet to be determined? We're actually in the process of ramping back up to higher rates. We have that sort of small mechanical change we made in the middle of the plant that was limiting rates. We just implemented and we're ramping up towards those higher rates right now, so we're not there yet.

Mark: Great. Thank you so much mark.

Speaker Change: Thank you. The next question is from Josh Spector of UBS. Please go ahead.

Mark: Okay.

Mark J. Costa: Quick follow-up on the prior set of questions. Did you say that you're now running back at higher rates at methanolysis? So the issue is resolved, or is that yet to be determined?

Joshua David Spector: Yeah, Hey, good morning quick follow up on the prior set of questions did you say that you are now running back at higher rates and ethanol office. So the issue is resolved or is that yet to be determined.

Mark J. Costa: We're actually in the process of ramping back up to higher rates. That sort of small mechanical change we made in the middle of the plant that was limiting rates, we just implemented, and we're ramping up towards those higher rates right now, so we're not there yet. Okay.

Speaker Change: We're actually in the process of ramping.

Joshua David Spector: Back up to higher rates.

Speaker Change: Is that sort of small mechanical change we made in the middle of the plant.

Speaker Change: That was limiting rates, we just implemented and we're ramping up is going towards those higher rates right. Now so we're not it's not there yet.

Unknown Executive: Okay, thanks to that, and just another point around methanolces and specifically, your comment around right and renew and slower adoption, you know, you referred to inflation being a factor of the curious. Is that at the customer level, you're talking about consumer buying of higher price goods, or is that on their spending, and perhaps any comments or read through on a willingness to buy higher price feed stock for their applications. Yeah, so in the, and I'm not going to repeat all the answer I just gave you, but we have a lot of customers obviously out there in the durable space, as well as packaging cosmetics that are very interested in committed to using, right, and they were buying it last year, it's certain premiums are continuing to buy it this year and we're accessing new markets, so the demand out there is real.

Mark J. Costa: And just another point around methanolysis, and specifically, your comment around trite and renew and some slower adoption. You know, you referred to inflation being a factor. I was curious, is that at the customer level? You're talking about consumer buying of higher priced goods, or is that on their spending and perhaps any comments or read through unwillingness to buy a higher priced feedstock for their app? And so in the end, I'm not gonna repeat all the answers I just gave you, but we have a lot of customers, obviously, out there in the durable space, as well as packaging, and cosmetics, that are very interested and committed to using Triton.

Speaker Change: Okay. Thanks for that and just another point around that.

Alastair: Alastair and specifically your comment around try and renewing some slower adoption you referred to inflation being a factor I was curious is that at the customer level and youre talking about consumer buying of higher price goods or is that on their spending and perhaps any comments or read through and willingness to buy <unk>.

Speaker Change: Your price feedstock for their applications.

Speaker Change: Yes so.

Speaker Change: I'm not going to repeat all the answer I just gave you, but we have a lot of customers obviously out there in the durable space as.

Speaker Change: As well as packaging cosmetics.

Speaker Change: That are very interested and committed to using Triton they were buying it last year at certain premiums are continuing to buy it this year.

Mark J. Costa: They were buying it last year at certain premiums. They're continuing to buy it this year, and we're accessing new markets. So the demand out there is real. The issue we face that I think everyone in the industry faces right now is that it's a really tough economic environment. We have some version of stagflation, right? You have inflation still impacting consumers, demand being quite weak, and many sort of discretionary markets. And Durables is very connected to BNC, so when you see all that challenge, you know, that's very real, and it's duration.

Speaker Change: We're accessing new markets. So the demand out there is real.

Mark Costa: The, you know, issue we face that I think everyone in the industry faces right now is that it's a really tough economic environment. We have some version of stipulation, right? You have inflation still impacting consumers and demand being quite weak in many sort of discretionary markets. And, you know, and durable is very connected to B&C, so when you see all that challenge, you know, that's very real, and it's inspiration; it's not just demands weak, it's been weak for over two years now. And so that weighs on companies and their economic, so while they're very committed, we haven't seen any one sort of cancel a program.

Speaker Change: The issue, we face that I think everyone in the industry faces right now is that it's really tough economic environment and we have some version of stagflation right you have inflation still impacting consumers.

Speaker Change: And demand.

Speaker Change: Demand is being quite weak in many sort of discretionary markets.

Speaker Change: And.

Mark J. Costa: It's not just demand that's weak; it's been weak for over two years now. And so that weighs on companies and their economics. So while they're very committed, we haven't seen anyone sort of cancel a program.

Speaker Change: And durables is very connected to <unk>. So when you see all that challenge, that's very real and advance its duration such as demands week. It's.

Speaker Change: Been weak for over two years now.

Speaker Change: So that weighs on companies and their economics, so while theyre very committed we haven't seen any one sort of a cancel a program.

Mark Costa: You know, they're also focused on managing their cost structure like everyone is right now, and so the rate at which they're ramping a volume on some of the programs that we've, you know, one with these customers is going a bit slower than we thought.

Speaker Change: They're also focused on managing their cost structure like everyone is right now.

Mark J. Costa: You know, they're also focused on managing their cost structure like everyone is right now, and so the rate at which they're ramping up volume on some of the programs that we have with these customers is going a bit slower than we thought. To be clear, that's a modest part of the overall adjustment we made in the $75 million of EBITDA incremental to last year down to 50. But more than two-thirds of that adjustment is the cost of the conversation we just had about sort of run rates in the second quarter as we work through, you know, some different issues. But there is a sort of modest adjustment we've made in our expectations around the sort of volume ramp, but I don't think it will have any impact on next year.

Speaker Change: And so the rate at which they are ramping up volume on some of the programs that we've won with these customers is going a bit slower than we thought.

Mark J. Costa: To be clear, that's a modest part of the overall adjustment we made in the $75 million of EBITDA incremental to last year, down to 50. More than two thirds of that adjustment is the cost conversation we just had about sort of run rates in the second quarter as we worked through, you know, some different issues. But there is a sort of modest adjustment we've made in our expectations around sort of volume ramp.

Speaker Change: To be clear that's a modest part of the overall adjustment we made in the $75 million of EBITDA incremental to last year down to 50.

More than two thirds of that adjustment is the cost conversation. We just had about sort of run rates in the second quarter as we worked through some different issues.

Speaker Change: But there is a sort of a modest adjustment we've made in our expectations around sort of volume ramp I don't think it has any impact on next year.

Mark J. Costa: I don't think it has any impact on next year when we look at the number of wins we're having in different applications. You know, the fact that at least the market is now stable and the stocking is behind us. The company are now looking for ways to grow and create their own growth just like we are trying to create our own growth with better value proposition for the marketplace. You know, the brands are now switching to thinking about how did they do that as well. And so I think those collaborations will be there, so we still feel like we're on track to fill from our incremental 50 million of EBITDA this year to a run rate of $1500 EBITDA, you know, by the end of next year.

Mark J. Costa: When we look at the number of wins we're having in different applications, you know, the fact that at least the end market is now stable and the stocking is behind us, companies are now looking for ways to grow and create their own growth, just like we are trying to create our own growth with better value propositions in the marketplace. You know, the brands are now switching to thinking about how they can do that as well. And so I think those collaborations will be there.

Speaker Change: When we look at the.

Speaker Change: A number of wins, we're having in different applications.

Speaker Change: That at least.

Speaker Change: The end market is now stable and Destocking is behind us.

Speaker Change: Companies are now looking for ways to grow and create their own growth just like we are trying to create our own growth with better value propositions in the marketplace. The brands are now switching to thinking about how did they do that as well.

Speaker Change: And so I think those collaborations will be there. So we still feel like we're on track to Joe from our incremental $50 million of EBITDA. This year.

Frank Joseph Mitsch: So we still feel like we're on track to go from our incremental $50 million of EBITDA this year to a run rate of $150 million of EBITDA, you know, by the end of next year. Otherwise, we wouldn't be starting to... completing the Triton line if we didn't see that in volume. Thank you, Mark. Thank you. The next question is from Frank Mitsch from Fermion Research.

Speaker Change: To a run rate of $150 million of EBITDA by the end of next year, otherwise, we wouldn't be starting to complete.

Mark Costa: Otherwise, we wouldn't be starting to completing the trident line; we didn't see that, you know, falling.

Speaker Change: Completing the trading line, if we didn't see that volume coming.

Frank Mitsch: And this is. Thank you, Mark. Thank you. The next question is from Frank Misch from Sermian Research. Please go ahead. Good morning and congrats on the on a 2QB, which Mark does beg the question. You narrowed the range for 2024, but maintained the midpoint of the guide.

Mike: Thank you Mike.

Speaker Change: Thank you. The next question is from Frank Mitsch from Fermium.

Speaker Change: <unk> research. Please go ahead.

Speaker Change: Okay.

William Thomas McLain: Please go ahead. Good morning and congrats on the 2QB, which Mark does beg the question, you narrowed the range for 2024 but maintained the midpoint of the guide. I was just curious, given the given the upside in 2Q, was there a thought to possibly raising the midpoint and and what may have been arguing against that? Thank you. Frank, good morning.

Frank Joseph Mitsch: Good morning.

Speaker Change: Congrats on the on the <unk> beat.

Speaker Change: Which which mark does beg the question you narrowed the range for 2024.

Speaker Change: But maintained the midpoint of the guide I was just curious given the given the upside in <unk> was there a thought to possibly raising.

Frank Mitsch: It was just curious given the, given the upside in 2Q, it was just a was there a thought to possibly raising the raising the midpoint and what may have been arguing against that. Thank you.

Speaker Change: We are raising the mid point and what may have been arguing against that thank you.

William Thomas McLain: And thank you. As we think about the guidance, obviously, we focused on keeping the midpoint at the level of where we had it to start the year. Also, at the segment level, you saw some modest improvements in the AFP midpoint as well as the midpoint decline in AM, as Mark's already highlighted around our view of the benefits of methanolysis and the ramp there. So as we think about it, you know, we're driving strong growth year over year, 20 percent, narrowing the range we think was appropriate at this point in time.

William McLain: Jeff Frank. Good morning and thank you. As we think about the guide, obviously we focused on keeping the midpoint at the guide of where we had to start the year. Also at the segment level, you saw some modest improvements in the AFP midpoint, as well as the midpoint decline in AM, as Mark told already highlighted our view of the benefit of the metanoluses and the ramp there.

Speaker Change: Frank Good morning, and thank you.

Speaker Change: As we think about the guidance, obviously, we focused on keeping the midpoint at.

Speaker Change: The guide of where we had to start the year also.

Speaker Change: At the segment level, you saw some modest improvement.

Speaker Change: The midpoint as well as.

Speaker Change: The mid.

Speaker Change: Pinpoint decline in AAM as Mark already highlighted around.

Speaker Change: Our view of the benefits of methanol as us.

Speaker Change: The ramp there so as we think about it we're driving strong growth year over year of 20%.

William McLain: So as we think about it, you know, we're driving strong growth year over year, 20% Mayoring the range we think was appropriate at this point in time. As we started the year, there's no significant pondering demand increasing in the second year. We're doing well with driving our own growth. And we think again, as we enter the second half, we're doing it from this wrong position. And it's the factors of the 15% in the Q2 being all set by the reduction in our metanoluses expectations.

Speaker Change: Narrowing that range, we think was appropriate at this point in time as we started the year. There is no significant primary demand increasing in the second year, we're doing well with driving our own growth.

William Thomas McLain: As we started the year, there was no significant primary demand increase in the second year. We're doing well driving our own growth. And we think, again, as we enter the second half, we're doing it from a strong position. And it's the factors of the 15-cent beat in Q2 being offset by the reduction in our methanolysis expectations. Thanks so much for that, Willie.

And we think again as we enter the second half we're doing it from a strong position and the factors of the 15th.

<unk>.

Speaker Change: In Q2.

Speaker Change: Being offset by.

Speaker Change: Production in our methanol since expectations.

Unknown Executive: Thanks so much for that, Willie.

William Thomas McLain: Can you talk about the factors that will drive you towards the low end or versus the high end of the full year guide? So when you think about the variables in that, Frank, the biggest factor is demand. That's true for the impacts we had last year, as we had good results in 21, 22. And so it's a macroeconomic question around just where demand is trending, I think. We went out at the beginning of the year with a very sort of neutral approach about in markets being sort of similar to last year, from an in market point of view, but benefiting from de-stocking, that seems to be playing out as we expected, you know, at this stage.

Willy: Thanks, so much for that Willy can you talk about the factors that will drive you towards the low end versus the high end of the.

Frank Mitsch: Can you talk about the factors that will drive you towards the low end or versus the high end of the full year guide? Yeah. So when you think about the variables on that, Frank, the biggest factor is demand; that's true for the impacts we had last year. I mean, I could result in 2021, and so it's a macroeconomic question around just words of demand trend. I think we went out at the beginning of the year with a very sort of neutral approach about in markets being sort similar to last year from an in market point of view, but benefiting from destocking.

Willy: The full year guide.

Willy: Yeah. So when you think about the variables on that Frank.

Willy: The biggest factor is demand thats true for the impacts we had last year.

Speaker Change: <unk> had good results in 'twenty, one 'twenty two.

William Thomas McLain: So if the economy gets better, that'll be an upside if the economy, you know, gets worse. Obviously, there'll be some risk, you know, within the range that we've given you. But I think that's the main factor.

Speaker Change: And so it's a macroeconomic question around just where does demand trend I think we went out at the beginning of the year with a very sort of neutral approach about end markets being sort of similar to last year from an end market point of view, but benefiting from destocking.

William Thomas McLain: That seems to be playing out as we expected, you know, at this stage. So if the economy gets better, that'll be upside to the economy. You know, it gets worse. Obviously, there'll be some risk, you know, within the range that we've given you. So they've got the main factor. I mean, we feel good about our price management and feel, you know, confident in our commercial excellence to maintain our sort of price-cost relationships across our specialties. Obviously, there's, you know, a certain amount of, you know, spread in predictability and all the things, and as it heals where you get some volatility, that's in the CI sector.

Speaker Change: Seems to be playing out as we expected.

Speaker Change: At this stage.

Speaker Change: If the economy gets better that'll be upside as economy.

Speaker Change: It gets worse, obviously there'll be some risk within the range that we've given you.

William Thomas McLain: I mean, we feel good about our price management and feel, you know, confident in our commercial excellence to maintain our sort of price-cost relationships across our specialties. Obviously, there's, you know, a certain amount of spread and predictability in olefins and acetyls where you could get some volatility that's in the CI sector. Cost structure, you know; we're very much on track to manage our costs. So the element that's material is really about the economy, and I feel good about how we're creating a lot of our own growth this year with all the application wins that we've had in the sort of traditional specialty model plus the, you know, the growth we expect in the circuit platform. Great

Speaker Change: But I think thats the main factor I mean, we feel good about our price management and.

Phil.

Phil: I'm confident our commercial excellence to maintain our price cost relationships across our specialties.

Phil: Obviously there is.

Phil: A certain amount of.

Phil: Spread and predictability and olefins and asset heals, where you could get some volatility that's in the C&I sector.

William Thomas McLain: The cost structure, you know, we're very much on track manager costs. So the element that material is really about the economy. If you'll get about how we're creating a lot of our own growth this year with all the application wins that we've had in the sort of traditional special model plus the, you know, the growth we expect in the circular plot.

Phil: Cost structure, we're very much on track to manage our costs. So the element.

Phil: That's material is really about the economy.

We feel good about how we're creating a lot of our own growth. This year with all the application wins that we've had and the sort of traditional specialty model plus the.

Phil: The growth we expect in the Stricker platform.

William McLain: Great, so just to be quick, the minute point of the guide assumes absolutely no change from the economic activity as you stay here today. That's correct; we're assuming, to be clear, in consumer discretionary markets, whether it's Otto's B&C durables, we're assuming that there's no improvement in the market demand relative to last year, and that's been true how we built our forecast every quarter. The stable markets, we do have a little bit of modest growth, about two, three percent in there, that we've already seen in the first half of the year, and we expect that to continue in the second half year.

William Thomas McLain: So just to be clear, the midpoint of the guide assumes absolutely no change from the level of economic activity as we stand here today. That's right. We're assuming, to be clear, in consumer discretionary markets, whether it's autos, BNC, durables, we're assuming that there's no improvement in market demand relative to last year. And that's been true how we've built our forecast every quarter. Stable markets, we do have a little bit of modest growth, call it 2-3% in there, that we've already seen in the first half of the year, and we expect that to continue in the second half of the year.

Speaker Change: Great. So just to be clear the mid.

Speaker Change: Point of the guide assumes absolutely no change from the economic activity as we stand here today.

Speaker Change: That's correct we're assuming.

Speaker Change: To be clear in consumer discretionary markets, whether it's autos BMC durables, we're assuming that there's no improvement in the end market demand relative to last year and that's been true how we built our forecast every quarter.

The stable.

Speaker Change: Stable markets, we do have a little bit of modest growth call. It two 3% in there that we've already seen in the first half of the year and we expect that to continue in the second half here that those markets are like peg.

William McLain: Those markets are like ag, you know, in its normal sort of cycle and pattern, you know, personal care and water treatment, those kind of more special, you know, sort of stable markets, which is about half of our revenue. So, half a revenue has, you know, modest growth and half our revenue has, you know, no-in market growth, but, you know, we have completely confirmed that the theory of a lack of destocking adds a lot of volume back is very true, right? We told you that we had a $450 million hit in variable margin last year from 22 to 23 when volume and mix decline.

William Thomas McLain: Those markets are like ag, you know, in its normal sort of cycle and pattern, you know, personal care, water treatment, those kind of more special, you know, sort of stable markets, which is about half of our revenue. So half our revenue has, you know, modest growth in it; half our revenue has, you know, no growth in market. But the, you know, we have completely confirmed that the theory of a lack of destocking adds a lot of volume back is very true, right?

Speaker Change: AG and its normal sort of cycle and pattern.

Speaker Change: Personal care and water treatment those kind of more special sort of stable markets, which is about half of our revenue.

Frank Joseph Mitsch: We told you that we had a $450 million hit in variable margin last year from 22 to 23 when volume and mix declined. And part of our guidance, as we said, about 150 of that, call it a third, you know, would come back when, you know, as a lack of destocking, and we very much have seen that in the first half and see that in the order of Brooks and 3Q. So that sort of logic is playing out, and that's sort of where we've built our midpoint of our guidance. Terrific. Thank you so much.

Speaker Change: So half of revenue has modest growth half of our revenue has no end market growth but.

Speaker Change: We have completely confirmed that the theory of a lack of destocking adds a lot of volume back is very true right.

Speaker Change: We told you that we had a $450 million hit in variable margin.

Speaker Change: Last year from 'twenty to 'twenty, three win volume and mix decline.

Speaker Change: And part of our guidance as we said about 150 of that call. It a third would come back when there's a lack of destocking and we very much have seen that in the first half and see that in the order books and <unk>.

William Thomas McLain: And part of our guidance, as we said, about 150 that called a third, you know, would come back when, you know, as a lack of destocking, and we very much have seen that in the first half, and see that in the order books and, and three queue. So, that sort of logic is playing out, and that's sort of where we've built our midpoint of our guide.

Speaker Change: That sort of logic is playing out.

Speaker Change: That's sort of where we built our midpoint of our guidance.

Unknown Executive: Terrific, thank you so much.

Speaker Change: Terrific. Thank you so much.

Unknown Executive: Yeah.

Speaker Change: Yes.

Jessica Skar: The next question is from Jessica Skar from JP Morgan. Please go ahead. Thanks very much. I was hoping you could clarify what's going on in the acetyl chain, and that you talked about higher plan maintenance of 50 million related to a shutdown in the acetyl chain. And half of that is the acetyl, which is 25 million. Is that in the third quarter, or the fourth quarter?

Jeffrey John Zekauskas: (inaudible) The next question is from Jeff Zekauskas from JP Morgan. Please go ahead. Thanks for, I was hoping you could clarify what's going on in the acetyl chain in that talked about higher plan maintenance. 50 million related to a shutdown in the acetyl chain. Half of that is the acetyl, which is 25 million. It's not in the third quarter, or fourth quarter, when we talked about the unfavorable price cost of acetyls. What's that about? Does that have to do with the domestic? Or not.

Speaker Change: The next question is from Jeff Zekauskas from Jpmorgan. Please go ahead.

Jeffrey John Zekauskas: Thanks very much.

Jeffrey John Zekauskas: I was hoping you could clarify what's going on in the acetyl chain.

Jeffrey John Zekauskas: And Matt you talked about higher plan maintenance 50 million related to a shutdown in the acetyl chain.

Speaker Change: Half of that is <unk>, which is $25 million is that in the third quarter or the fourth quarter.

Jessica Skar: You talked about untaparable price cost in the Seatles. What's that about? Does that have to do with the divestiture or not? And, and forgive me, is the divestiture already done, or, or when does the divestiture close?

Speaker Change: You talked about unfavorable price cost and settles whats that about does that have to do with the divestiture or not.

William Thomas McLain: And, and forgive me, is the divestiture already done? Or when does the best Jeff? Happy to clarify. So as we think about the second half versus the first half, higher plan shutdown, Q3 is primarily our acetyl cellulose extreme, which is about half, and then in Q3 and then in Q4 would be our polymer turnaround. And again, that represents about half. Yes, the transaction closed last year.

Speaker Change: And forgive me, if the divestiture already done or windows.

Speaker Change: And then just the divestiture close.

Unknown Executive: That's just happy to clarify.

Jeffrey John Zekauskas: Yes, Jeff.

Happy to clarify so as we think about the second half versus first half higher planned shutdowns.

Unknown Executive: So, as we think about the second half versus first half, a higher plan shutdown. Two, three is primarily our acetyl cellulose extreme, which is about half, and then two, three, and then a Q4 would be our polymer turnaround. And again, that represents about half.

Speaker Change: Q3 is primarily our acetyl cellulosic stream.

Speaker Change: Which is about half and then.

Speaker Change: In Q3, and then in Q4 would be our polymer.

Speaker Change: Turnaround and again that represents about half.

Unknown Executive: Yes, the transaction has closed last year. And also, you know, so that impact is not in our context, that the headwind, as we think about them, our chemical intermediates business, the combination of. I'll call it the Texas City divestiture, as well as the key customer shutdown that we've highlighted was roughly 30 million headwinds on a year-over-year basis. So, that's sort of on the cost side and the vester side, Jeff, on the market side.

Speaker Change: Yes, the transaction has closed last year also.

William Thomas McLain: Also, that impact is not in our guidance. That's a headwind, as we think about in our chemical intermediates business. The combination of, I'll call it, the Texas City divestiture, as well as the key customer shutdown that we've highlighted was roughly $30 million in headwinds on a year-over-year basis. So that's sort of on the cost side and the investor side, Jeff. On the market side, there are two dynamics going on. One is, acetyl margins are just lower this year and continue to be challenged from a market point of view.

Speaker Change: So that impact is not in our guidance.

Speaker Change: Headwind as we think about in our chemical intermediates business.

Speaker Change: The combination of.

Speaker Change: I'll call it the Texas city divestiture as well as the key customer shutdown at least highlighted was roughly $30 million headwind.

Speaker Change: On a year over year basis.

Speaker Change: So that's on the cost side and the investors side, Jeff on the on the market side.

Jeffrey John Zekauskas: There is two dynamics going on one is.

Unknown Executive: There's two dynamics going on.

Mark Costa: One is. Thanks for having been on the marketing side, but you've been selling Trident Renewing mostly to customers who were already buying Trident or have just brought on a pure customer base for Trident using a recyclable version. It's a mix of both, so we certainly have loyal customers who've been buying Trident for a long time that see a lot of value in the recycled content value proposition, but there's also, you know, we've been actually surprised by the number of application wins we're having with new customers and new in markets.

As steel margins are just slower this year.

Speaker Change: <unk> continued to be challenged from a market point of view.

William Thomas McLain: And then the second part is, as we divested the acetyl business, we had to shift our business model a bit in how we were taking our acid product to market. And so there's just some readjustments in logistics costs and how we manage our acetyl output out of Kingsport when we no longer have that plant down in Texas and how we work in the market. So those two things are sort of some hits to the economy.

Jeffrey John Zekauskas: And then the second part is.

Jeffrey John Zekauskas: As we've divested the <unk> business.

Jeffrey John Zekauskas: <unk> share to shift our business model, a bit and how we're taking our acid product to market.

Jeffrey John Zekauskas: And so there's just some readjustments and logistics costs and how we manage our acetyl output out of Kingsport, when we no longer have that plant down in Texas and how we're working in the market. So those two things.

Jeffrey John Zekauskas: Or sort of some hits to the economics.

Mark J. Costa: The spread will obviously come back one day, and a lot of these sort of one-time logistics costs and reconfiguring supply chains to serve customers will also sort of be a bit of a modest tailwind for next year, too, as we sort them out. So those are sort of the combined factors that are going on in that acetyl business. I would note that we are predominantly using acetic acid, or, I'm sorry, acetic anhydride, in our production.

Jeffrey John Zekauskas: The spread will obviously come back one day.

Jeffrey John Zekauskas: And the a lot of these sort of onetime logistics costs.

Jeffrey John Zekauskas: Reconfiguring supply chains to serve customers.

Jeffrey John Zekauskas: We're also sort of be a bit of a modest tailwind for next year or two as we line them out. So those are sort of the combined factors that's going on in the acetyl business I would note that we are predominantly acetic acid acetic and hydride in our production.

Mark J. Costa: So that's the market you should be paying more attention to for us relative to the acetic acid market that some other companies produce into. And, you know, and we feel good about how that market will sort of be a tailwind next year relative to this. In your other, now. You know, losing a couple of hundred million a year, roughly. And that line used to lose 50.

Jeffrey John Zekauskas: So that's the market you should be paying more attention to for us relative to the acetic acid market that some other companies produce into.

Jeffrey John Zekauskas: And.

Jeffrey John Zekauskas: And we feel good about how that market will sort of be a tailwind next year relative to this year.

Okay.

You happen other segment that's now.

Jeffrey John Zekauskas: Hum.

Jeffrey John Zekauskas: Losing a couple of hundred million dollars a year roughly.

Jeffrey John Zekauskas: And that line used to lose $50 million a year.

Jeffrey John Zekauskas: 200, you know, can you talk about the difference? 50 in the old days, 200 in the new days. And does that just extend out in time?

Jeffrey John Zekauskas: Is two <unk>.

Jeffrey John Zekauskas: Can you talk about the difference between <unk>.

Jeffrey John Zekauskas: <unk> in the old days 200, and the new days and does that just extend out and time is the normal run rate.

William Thomas McLain: The normal run rate is 200. And then going back to acetyls, what's the total acetyl year over? Okay, Jeff. On your question and others, obviously, As we talked about from 22 to 23, one of the major resets in that was with regard to pensions, and that being roughly $100 million headwind. So I would highlight that as one of the accounting outcomes of higher interest rates. Also, as we've increased in the back half of 23, the pre-production and startup costs regarding our methanolysis and circular platform.

Jeffrey John Zekauskas: 200, and then going back to <unk> whats the total seasonal year over year penalty.

Jeffrey John Zekauskas: Okay, Jeff on your question and other.

Jeffrey John Zekauskas: Obviously.

Jeffrey John Zekauskas: As we've talked about from 22 to 23, one of the major resets and that was.

Jeffrey John Zekauskas: With regards to pension and that being roughly 100 million headwind.

Jeffrey John Zekauskas: So I would highlight that as one of the accounting outcomes at higher interest rates.

Jeffrey John Zekauskas: As we've increased in the back half of.

Jeffrey John Zekauskas: 'twenty three the pre production and the startup costs regarding our methanol assists in circular platforms.

William Thomas McLain: You saw that increase, and that's more connected to, I'll call it, the project timing and our progression through those. As you saw here in Q2, you saw roughly an almost $30 million reduction in expenditures and other, and that is with our Kingsport Methanolysis plant coming online and going from pre-production into producing inventory. So, as I think about it over time, obviously, the factors matter, and as we see interest rates decline, that could be a tailwind into the future. So, I wouldn't say $200 million is the run rate.

Jeffrey John Zekauskas: You saw that increase and thats more connected to.

Jeffrey John Zekauskas: What the project timing in our progression through those as you saw here in Q2, you saw roughly almost $30 million reduction.

Jeffrey John Zekauskas: And the expenditures and other and that is with our Kingsport methodologies this plant coming online and going from preproduction and producing inventory.

Jeffrey John Zekauskas: Think about it over time, obviously the factors matter.

Jeffrey John Zekauskas: And as we see interest rates decline that could be a tailwind into the future. So I wouldn't say $200 million is the run rate. It's just with the current.

Jeffrey John Zekauskas: But macro situation as well as us progressing successfully projects through.

William Thomas McLain: It's just with the current, I'll call it macro situation, as well as us progressing successfully projects through the pipeline, and now you'll see those results in advanced materials. And that's also how you will see some of our cellulosic products, as well. And if we continue to invest there, those will then turn into businesses in the future. But I would say $200 million or less in the current macro environment.

Jeffrey John Zekauskas: The pipeline and how Youll see those results in advanced materials and that's also how you will see some of our cellulosic products as well and we continue to invest there. Those will then turn into the businesses in the future now lets say $200 million or less in the current macro environment.

William Thomas McLain: And so, in addition to just the pre-production expense and efforts around the first plant, the engineering expense and project development expense around the France project and the Texas project are in that segment. So, that's sort of been driving it. I would also note the pension costs are non-cash, so it's a headwind, but it's not a cash headwind. Jeff, I didn't understand your ask your question.

Jeffrey John Zekauskas: In addition to just the preproduction expenses and efforts around the first plant.

Jeffrey John Zekauskas: The engineering expense and project development expense around <unk>.

Jeffrey John Zekauskas: <unk> project in Texas project those costs are in that segment. So that's sort of been driving it but we'd also note. The pension costs are noncash so it's a headwind, but it's not a cash item.

Jeffrey John Zekauskas: Could you expand on your question just a bit? In other words, you've got some pressure on unfavorable price costs, you've got some shutdown costs. So if you look at the year over year penalty that you're experiencing, and you've summed it all up, what would that be?

Speaker Change: Jeff I didn't understand you ask your question could you expand on your question just a bit.

Speaker Change: In other words, you've got some pressure and unfavorable price cost you've got some.

Shutdown costs.

Jeffrey John Zekauskas: So if you look at year over year penalty that you're experiencing from the acetyl business and you summed it all up.

Speaker Change: That penalty.

Speaker Change: If you can do that.

Speaker Change: This year.

William Thomas McLain: Jeff, you know, I would highlight, as we think about acetyls as a whole, I think it's the $30 million plus the increased logistics cost that Mark has highlighted. We're not going to be more specific on that at this point. Thank you. The next question is from Aleksey Yefremov from Key Corp. Please go ahead. Good morning, everyone.

Jeffrey John Zekauskas: Jeff Hi.

Jeffrey John Zekauskas: Highlights as we think about asset sales in whole.

Speaker Change: It's the $30 million plus the increased logistics cost that market has highlighted.

Speaker Change: That'd be more specific than that at this point.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. The next question is from our next CEO.

Speaker Change: Please go ahead.

Aleksey V. Yefremov: In your prepared remarks, you said that you demonstrated the ability to run methanolysis at around 70% using a diverse feedstock slate. So, I wanted to ask you, what are your expectations for operating rates on average for the second half of this year? And also, that 70% utilization, was it achieved on a feedstock slate that's representative of what you're going to be using for this plant in the long run? Yeah, great questions.

Speaker Change: Good morning, everyone.

Speaker Change: Our remarks in saying that.

Speaker Change: Devastated ability to Iran, methanol assess at around 70% using a diverse feedstock slate.

Speaker Change: So.

Speaker Change: I wanted to ask.

Speaker Change: What is your expectations for operating rates on average for the second half of this year and also that 70% utilization wasn't achieved on our feedstock slate. That's representative of what you are going to be.

Speaker Change: Using this plan in the long run.

Mark J. Costa: So we're not going to get into our specific operating strategy, but we certainly intend to run above 70%. You know, this is a new plan, new technology. And as we just discussed, you know, a new set of feedstocks that vary significantly from one source to another, right? That's the significant difference in sort of the circular economy versus linear economy that's making products out of very consistent feedstocks when you think about fossil feedstocks every day. So, you know, we have been using a wide range of different sources of hard to recycle material. Some are of better quality than others.

Speaker Change: Yeah, great questions. So we're not going to get into our specific operating strategy, but we certainly intend to run above above 70%.

This is a new plant, a new technology and as.

Speaker Change: As we just discussed a new set of feedstocks that vary significantly from one source to another that's the.

Speaker Change: Significant difference in sort of the circular economy versus linear economy, that's making.

Alex: Alex out of very consistent feedstock when you.

Alex: Thinking about fossil feedstocks.

Alex: Everyday so.

Speaker Change: We have been using a wide range of different sources of hard recycled material.

Speaker Change: Some are better quality than others.

Mark J. Costa: When I talked about the 70%, that was, you know, running, you know, representative feedstock in what we think of as what we call HTR, hard to recycle material. The limitations in run rate through really the first half of the year have been more mechanically related, or these sort of feedstock processing-related issues about what we're putting in the plant that were sort of easily addressed, but when the plant isn't having some mechanical issues that we have to resolve, it runs really stably, right?

Speaker Change: When I talked about the 70% that was.

Speaker Change: Running representative feedstock.

Speaker Change: And what we think of what we call HDR hardware recycled materials.

Speaker Change: The.

<unk> in run rate.

Speaker Change: Through the through really the first half of the year have been more mechanically related or are these sort of feedstock processing related issues about what we're putting in the plant that we're sort of easily addressed but when the plant.

We've been having some mechanical issues that we had to resolve it runs really stayed away right. We had this one issue about once again, how to how to move.

Mark J. Costa: We had this one issue about, once again, how to move some of the product from the middle of the plant to the back of the plant mechanically, that took several improvements to address the last final improvement we implemented this week. And that should get us, you know, into the sort of 90 plus percent range in how we can run the plant. But it's, you know, there are going to be times it's down for another issue that pops up, and you know, and we have a plan shut down for some sort of normal maintenance.

Speaker Change: Some of the product from the middle of the plant to the back of the plant.

Speaker Change: Candidly.

Speaker Change: It took several improvements to address the last final improvement we implemented this week.

Speaker Change: And that should get us into the sort of 90 plus percent range and how we can run the plant.

Speaker Change: But it's you know theyre going to be times, it's down for another issue that pops up in and we have a planned shutdown for some sort of normal maintenance.

Mark J. Costa: But we feel like the forecast that we've built, you know, has us running much better in the back half than in the first half, well in excess of customer demand. So we're confident we can serve customers with the ramp-up in volumes with the actions that we've taken. Thanks, Mark.

Speaker Change: But we feel like the forecast that we built and it has is running much better in the back half than the first half.

Speaker Change: Well in excess of customer demand.

Speaker Change: So we're confident we can serve customers with the ramp up in the volumes with the actions that we've taken.

Mark J. Costa: And on the marketing side, have you been selling Triton Renew mostly to customers who are already buying Triton? Or has this broadened your customer base for Triton by using the recycler? It's a mix of both.

Thanks, Mark on the marketing side have you been selling trying to renew mostly to customers who are already buying strengthened or how does this broaden out and fewer customer base for.

Mark: Using the recycled version.

Mark J. Costa: So we certainly have, you know, loyal customers who have been buying Triton for a long time that see a lot of value in the recycling content value proposition. But there's also, you know, we've actually been surprised by the number of application wins we're having with new customers and new in the market. So, if you ask me, from where our plan was in January to where we are today, we're actually growing volume with new wins and new customers more than I thought, and the upgrade of recycled content on some existing volumes is a bit slower for the economic reasons I mentioned. But we feel good about how we're broadening our customer base and our actual market base and where we can sell as we go into next year. Thanks a lot, Mark.

Mark: Yeah, it's a mix of both so we certainly have loyal customers who've been buying Triton for a long time that see a lot of value in the recycle content value proposition.

Speaker Change: But there's also you know we've been actually surprised by the number of application wins, we're having with new customers and new end markets.

Mark Costa: So if you ask me from where our plan was in January to where we are today, we're actually growing volume in new wins at new customers more than I thought, and the, you know, and to upgrade the recycled content on some existing volumes is a bit slower for the economic reasons I mentioned. So if you're good about how we're broadening our customer base, our actual market base and where we can sell as we go into next year.

Speaker Change: So if you ask me from where our plan was in January to where we are today.

Speaker Change: We're actually growing volume and new wins, new customers more than I thought and Andy to upgrade.

Andy: Upgrade of recycled content on some existing volumes is a bit slower for the economic reasons I mentioned.

Andy: So we feel good about how we're broadening our customer base and our actual market base and where we can sell as we go into next year.

Unknown Executive: Thanks a lot, Eric.

Mark: Thanks, a lot mark.

David L. Begleiter: Thank you. The next question is from David Begleiter from Deutsche Bank. Please go ahead. Thank you. Good morning.

David L. Begleiter: Thank you. The next question is from David Beglitzer from Deutsche Bank. Please go ahead. Thank you, good morning. In March, just on the maintenance, do you notice that this is a normal year for plan maintenance and has looked for 25 to 25 be lower. Maintenance expenses versus 24.

Thank you. The next question is from David Begleiter from Deutsche Bank. Please go ahead.

David L. Begleiter: Thank you good morning.

Mark J. Costa: Hey Mark, just on the maintenance, can you remind us if this is a normal year for plan, and we'll have to look for 25. Could 25 be lower? Maintenance Expense. 24. Morning, David.

David L. Begleiter: Mark just on the maintenance can you remind us is this is a normal year for planned maintenance and has looked for 25 to 25 B B lower.

Speaker Change: Maintenance expenses versus 24.

William Thomas McLain: Yes, I would say that this year is a normal level of maintenance. Obviously, we go through each of our streams. We talked about the polymers turnaround and acetyls. And then, and next year, we will also have an olefins turnaround, in addition to that with our crackers. But at an overall expense level, I would say this year is normal; there could be a little bit of favorability on a year over year basis. Additionally, in the fourth quarter,

David L. Begleiter: Good morning, David. Yes, I would say that this year is a normal level of maintenance. Obviously, we go through each of our streams. We talked about the polymers turn around the asset hills, and then next year we will also have an open turnaround. And in addition to that, with our crackers, but at an overall expense level, I would say this year is a normal; there could be a little bit of favorability on a year of your basis. Additionally, and just go to court order. And then I would say, as we have the polymers turn around, hearing people, we've got the additional.

Mark: Good morning, David.

Mark: Yes, I would say that this year is as a normal level of maintenance.

Mark: Obviously.

Speaker Change: We go through each of our streams, we talked about the polymers turnaround the asset sales and then.

Speaker Change: Next year, we will also have an olefins turnaround in addition to that with our crackers, but at an overall expense level I would say this year is as normal there could be a little bit of favorability on a year over year basis.

Speaker Change: Additionally.

Speaker Change: In the fourth quarter.

William Thomas McLain: David, I would say, as we have the polymer shutdown here in Q4, we've got the additional, So, David, as you think about methanolysis, the cost this year from a maintenance point of view is extraordinarily high, right, as we're starting up the plant. So I'd say, with the normal assets, maintenance will be similar to this year. But when it comes to sort of methanolysis, we'll have a tailwind next year because we don't have all the extraordinary pre-production expenses, all the sort of maintenance and fixing all the things, you know, in the plant as we're starting it up. So that'll be a tailwind. I mean, that's all embedded in our sort of incrementally, conversational when we talk about circular, but for sure, that part's going to be a tailwind next year. The rest, I'd call it.

David: Hey, David.

David: And David I would say as we have.

David: Polymer shutdown here in Q4, we've got the additional.

David Begleiter: So, so David, as you think about myth analysis, the cost this year from a maintenance point of view is extraordinarily high, right, as we're starting at the plant. So I'd say in the normal assets maintenance will be similar to next year to this year. But when it comes to sort of myth analysis, we'll have a tailwind next year because we don't have all the extraordinary production expenses, all the sort of maintenance and fixing all the things, you know, in the plant as we're starting it up. So that'll be a tailwind, and then that's all embedded in our sort of incrementally.

David: So David as you think about methanol Sis.

Speaker Change: The cost this year from a maintenance point of view is extraordinarily high brightness were starting up the plant. So I'd say the normal assets maintenance will be similar to next year to this year, but when it comes to sort of methanol. So this will have a tailwind next year, because we don't have all the extraordinary preproduction expenses, all those sort of maintenance and fixing all the things.

Speaker Change: And the plan is we're starting it up so that'll be a tailwind I mean, that's all embedded in our sort of incremental EBITDA comments conversation when we talk about circular but.

David Begleiter: But dog conversation when we talk about circular, but for sure that part's going to be a tailwind next year. The rest I call it control. Got it.

Speaker Change: For sure that part is going to be a tailwind next year.

Speaker Change: Rest I'd call control.

Mark J. Costa: You got it. And just two things, Mark, on methanolysis. The $50 million this year, can you break it out between advanced materials and others, and just my France project, reading the prepared comments? Much progress has been made in the last three quarters in providing more color. David, on the $50 million of incremental EBITDA, what I would say is in Q1, you saw we missed our guidance by about $10 million. So the $10 million of the decline was in other, and then $15 of the remainder was in advanced materials. When it comes to the next two projects, first, we feel great about the Texas project.

Speaker Change: Got it and just see things Mark and methodologies the $50 million. This year of EBITDA can you break out between advanced materials.

David L. Begleiter: And just two things more. Can you explain more color and what's happy with that project? David, all the 50 million of incremental EBITDA.

Speaker Change: And other than just in the France project reading the prepared comments does it seem like there was much progress. The last three months can you provide any more color on what's happening with that project.

Speaker Change: David on the $50 million of incremental EBITDA, what I would say is in Q1, so we missed our guidance by about $10 million. So.

William Thomas McLain: What I would say is, thank you one yourself. We missed our guidance about 10 million. So the 10 million of myth decline was in other. And then 15 remainder was in Advanced materials.

David: $10 million of the decline was in other and then 15 and the remainder was in advanced materials.

Mark J. Costa: Yeah, when it comes to the next two projects, first we feel great about the Texas Project. We're really proud to have Pepsi as such a large contracted and committed partner with that project, and that combined with the DOE grant, helping us to capital inflation, makes us feel great about that project. We really think that project is going to be a great example of scalability of this platform where we can solve a plastic waste problem. We use green technologies on the energy side to get the carbon footprint down, sort of up to 90%, and so we're really helping customers with scope to read as well as on their mission, as well as solving this plastic waste problem.

Mark J. Costa: We're really proud to have Pepsi as such a large, contracted, and committed partner with that project. And that, combined with the DOE grant helping offset capital inflation, makes us feel great about that project. And we really think that project is going to be a great example of the scalability of this platform, where we can, you know, solve a plastic waste problem, and use green technologies on the energy side to get the carbon footprint down, sort of up to 90%.

Speaker Change: When it comes to the next few projects first we feel great about the Texas project.

Speaker Change: We're really proud to have Pepsi is such a large.

Speaker Change: <unk> and committed partner with that project and that combined with the deal.

Speaker Change: Grant, helping offset capital inflation.

Speaker Change: It makes us feel great about that project and we really think that project is going to be a great example of scalability of this platform.

Speaker Change: We can.

Speaker Change: Solve of plastic waste problem.

Speaker Change: <unk>.

Speaker Change: Green technologies on the energy side to get the carbon footprint down.

Speaker Change: Up to 90%.

Mark J. Costa: And so we're really helping customers with Scope 3, as well as on their emissions, as well as solving this plastic waste problem. The Friends project, as we said before in the first quarter call, is moving along a bit slower than we originally expected.

Speaker Change: And.

Speaker Change: So we're really helping customers have scope III as well as.

Speaker Change: On their emissions as well as.

Mark J. Costa: It's predominantly due to these customer contract conversations that we've had being slower than we had expected originally. And then, of course, we're still working on capital inflation on that project too, and trying to lower the capital costs. We do have incentives in Europe, too, but not quite at the same size as the IRA.

Speaker Change: Solving this plastic waste problem.

Mark Costa: The French Project, as we said before in the first quarter call, is moving along a bit slower than we originally expected. It's predominantly due to these customer contract conversations that we've had being slower than what we had expected originally, and then, of course, we're still working on the capital inflation on that project too and trying to lower the capital costs. We do have incentives in Europe too, but not quite the same size as the IRA, so it's really about those customer contract discussions, and it's similar to the conversation we just had. All the brands are very committed to recycling content goals and dealing with the plastic waste crisis, as well as we're a significant contributor helping them lower their scope two carbon emissions in Europe.

Speaker Change: <unk> project as we said before in the first quarter call.

Speaker Change: Is moving along a bit slower than we originally expected predominantly due to these customer contract conversations that we've had being.

Speaker Change: Being slower than what we had had expected originally.

Speaker Change: And then of course, we're still working on the capital inflation on that project to and trying to lower the capital cost and we do have incentives in Europe, too, but not quite at the same size.

Mark J. Costa: So it's really about those customer contract discussions, and it's similar to the conversation we just had. You know, all the brands are very committed to, you know, recycling content goals, right, and dealing with the plastic waste crisis, as well as, you know, we are a significant contributor helping them lower their scope 3 carbon emissions. And in Europe, that's, you know, equally, if not more important when, in most conversations with brands, when you come down to this, they, you know, continue to have very high recyclability goals, which So they also have to deliver high recycling content goals in order to deliver that value. So that's, you know, I don't think it has changed.

Speaker Change: As the IRA.

Speaker Change: So it's really about those those customer contract discussions and it's similar to the conversation we just had.

Speaker Change: All the brands are very committed to.

Speaker Change: Recycling content goal right and dealing with the plastic waste crisis as well as we are a significant contributor in helping them lower their scope three.

Speaker Change: Carbon emissions and in Europe, that's equally if not more important win and most conversations with brands. When you come down to the states continue to have very high recyclability goals, which by the way. It means the product is recyclable, but you can't actually keep that status for your product unless it's actually recycled.

Mark J. Costa: That's equally not more important in most conversations with brands when you come down to this. You know, continue to have very high recyclability goals, which by the way means the product is recyclable, but you can't actually keep that status for your product unless it's actually recycled. So they also have to deliver high recycled content goals in order to deliver that value. So that's, you know, I don't think change. They're not on track to hit their targets for 2025, partly because the economic situation has been moving a little bit slower, just like I explained with the, especially customers, whether they're trying to manage costs in a difficult environment.

Speaker Change: So they also have to deliver high recycled content goals.

Speaker Change: In order to deliver that value. So that's you know I don't think change they are not on track to hit their targets for 2025.

Mark J. Costa: They're not on track to hit their targets for 2025, partly because the economic situation has them moving a little bit slower, just like I explained with the specialty customers, where they're trying to manage costs in a difficult environment. Partly because, you know, mechanical recycling isn't available to solve the problems, there isn't enough capacity to get to the targets that they have, especially in Europe, which starts with beverage bottles at 25% next year.

Speaker Change: Partly because the economic situation has been moving a little bit slower just like I explained with the specialty customers.

Speaker Change: We're trying to manage costs in a difficult environment.

Mark Costa: Partly because, you know, the economic recycling isn't available to solve the problems, there's enough capacity to get to the targets that they have, especially in Europe, which starts for beverage bottles at 25% next year. And there's a lot of products and packages that they make that's not a clear water bottle, and those opaque colored trays, et cetera, different forms of PT. You can't, in many of those, you cannot actually use mechanical recycling to actually make those products, so you know, so they've got a challenge on how they're going to actually get recycled content into some of those products.

Speaker Change: Partly because mechanical recycling isn't available to solve the problems or is there enough capacity to get to the targets that they have especially in Europe, which starts for beverage bottles at 25% next year.

Mark J. Costa: And there's a lot of products and packages that they make that aren't clear water bottles and those opaque colored trays, etc., different forms of PET. You can't, in many of those, you cannot actually use mechanical recycling to actually make those products. So, you know, they've got a challenge on how they're going to actually get there., and Mark Cunningham.

Speaker Change: And Theres a lot of products and packages that they make that's not a clear water bottle and those opaque colored trays et cetera different forms of PT.

Speaker Change: You can't in many of those you cannot actually use mechanical recycling to actually make those products. So so.

Speaker Change: They've got a challenge on how theyre going to actually get.

Speaker Change: Recycled content into some of those products. So all of that context is still very much intact and the conversations are still going on with all the customers.

Mark Costa: So all that context is still very much intact in the conversations are still going on with all the customers, but you've got to market, you know, the PT market is at the bottom of the cycle right now, prices are incredibly low. The economic times are tough, and so the regulations are a little unclear in Europe right now on how what counts as recycled content and how that's going to work; that's causing the conversations to go slowly. But, you know, we, we fortunately don't see, you know, anyone dropping their engagement with us; it's just become, you know, slower and getting the contracts done.

Mark J. Costa: We're going to be talking about the process of getting recycled content into some of those products. So all that context is still very much intact, and the conversations are still going on with all the customers. But you have a market, you know. The PET market is at the bottom of the cycle right now. Prices are incredibly low.

Speaker Change: But you've got a market.

Speaker Change: The PT markets at the bottom of the cycle right now prices are incredibly low.

Speaker Change: Economic times are tough and so and the regulations are a little unclear in Europe, right now and how it what counts is recycled content and how that's going to work that's causing the conversations go slowly but.

Mark J. Costa: Economic times are tough, and so the regulations are a little unclear in Europe right now on what counts as recycled content. But fortunately, we don't see anyone dropping their engagement with us. It's just become, you know, slower to get the contracts done. The next question is from Michael Leithead from Barclays. Please go ahead. Great, thanks. Good morning, guys.

Speaker Change: Yes.

Speaker Change: Unfortunately don't see anyone dropping their engagement with us it's just become slower in getting the contracts done.

Speaker Change: Thank you.

Michael James Leithead: The next question is from Michael <unk> from Barclays. Please go ahead.

Michael James Leithead: Can you just speak to the reduction of capex a bit? I would have thought directionally that that's still ramping up, not coming down as you move forward with Triton, the Texas project. So is it a timing dynamic?

Michael James Leithead: Great. Thanks, Good morning, guys.

Michael James Leithead: Can you just speak to the reduction of Capex in beta I would've thought directionally that that's still ramping up not coming down as you move.

Michael James Leithead: Move forward with Triton, Texas projects. So is it a timing dynamic or can you just help refine that a bit.

William Thomas McLain: Or can you just help refine that a bit? Yes, Mike, as Mark just highlighted, we're still working towards milestones on our circular projects, both in Longview and France, and France specifically, you know, that's pushing the timelines out. So as we think about, you know, the capex required to achieve growth, we've got the Kingsport project behind us here in the first quarter of the year as we transitioned. Also, as we highlighted, we're starting some of our other growth projects back up as we see the end of destocking and look forward with our innovation lens.

Mike: Yes, Mike.

Mark: As Mark just highlighted.

Speaker Change: We're still working towards milestones.

Speaker Change: Sure.

Sorts of projects, both in long view in France, and sprint, France, specifically.

That's pushing the timelines out so as we think about the capex required.

Speaker Change: Yeah.

Speaker Change: Chief.

Speaker Change: The growth we've got the Kingsport project behind us here and there.

Speaker Change: First quarter of the year as we transitioned also as we highlighted we're starting some of our other growth projects back up as we see the end of Destocking.

Speaker Change: We look forward with our innovation lens, so as we balance both of those out $650 to $700 million.

William Thomas McLain: So as we balance both of those out, $650 to $700 million, we think is appropriate to achieve what we need to this year. And obviously, with that, we're not going to let cash sit on our balance sheet, and we have increased our expectations for share repurchases for the full year to $300 million. Great, that's helpful.

Think as appropriate to achieve what we need to this year.

Speaker Change: And obviously with that.

Speaker Change: I'll, let cash sit on our balance sheet, and we increased our expectations for share repurchases for the full year to $300 million.

William Thomas McLain: And then can you speak more to what you're seeing in advanced interlayers today? I think you covered that in the prepared remarks and slides a bit. Just remind us how big that is relative to advanced materials, and how you think about the growth rate there. And is it fair to assume that that business is, on average, a bit higher-margin than the overall sector? So the interlayer business is having a good year and delivering meaningful earnings growth relative to last year in a flat, slightly down auto market. So it's a great testament to our innovation strategy and it is delivering results as well as operational excellence and running our plans well. So the interlayer business is about a third of the revenue of the segment.

Speaker Change: Great. That's helpful. And then can you speak more to what Youre seeing in inner layers. Today I think you highlighted in the prepared remarks in the slides a bit.

Speaker Change: Remind us how big that is relative to advanced material. How do you think about the growth rate there.

Speaker Change: Fair to assume that that business is on average a bit higher margin than the overall segment there.

Speaker Change: So the analytics business is having a good year and delivering.

Speaker Change: Meaningful earnings growth relative to last year in a flat to slightly down auto market. So it's a great Testament to our innovation strategy and it's delivering results as well as operational excellence in running our plants well.

Speaker Change: So the earlier business about a third of the revenue of the segment.

Mark J. Costa: And it's predominantly focused on auto, but it also has BNC in it, which is sort of flat to last year, but on the auto side, we're seeing a lot of earnings growth as we're creating our own growth. We're very much leveraged to human markets, you know, the luxury car market, and the EV market, you know, is still growing better than the overall average auto build. So we're getting leverage out of that by being in the right market segments.

Speaker Change: And it's.

Speaker Change: It's predominantly focused on auto but it also has b and C. In it which is E U.

Speaker Change: Flat to last year, but on the auto side.

Speaker Change: We're seeing a lot of earnings growth is recruiting our own growth, we're very much leverage to two end markets you know the <unk>.

Speaker Change: <unk> market in the EV market.

Speaker Change: <unk> is still growing better than the overall average auto build so we're getting leverage out of that.

Mark J. Costa: And then within that, you know, we're selling more and more premium products. As we highlighted in the prepared remarks, we've had a great story around HUD and multiple generations of that product that we've been offering to the marketplace in the future we're building for it. So there, you know, that's being adopted for better security and safe driving reasons in the car. And so that has a lot of market upside. Also, when you get to the EVs, as we said, there's about three times as much square meters of inner layer of laminated glass in an EV relative to an ICE car.

Speaker Change: By being in the right market segments.

Speaker Change: And then within that.

Speaker Change: We're selling more and more premium products. So as we highlight in the prepared remarks, we've got a great story around HUD.

Speaker Change: Multiple generations of that product that we've been offering to the marketplace in the future. We're building for it so that's being adopted for better security and safety driving <unk>.

Speaker Change: Reasons.

Speaker Change: In the car and so that has a lot of market upside.

Speaker Change: Also when you get to the Evs as we've said Theres about three times as much square meters of.

Speaker Change: Interlayer of laminated glass in a in a EV relative to a nice car.

Mark J. Costa: And they're buying very high-performance products. They want to have a very technology-forward car in most EVs, especially in the luxury segment where we're focused. And so they want HUD, they've got solar control that they need to have.

And they are buying very high performance products. They want to have a very technology forward card, most tvs, especially in the luxury and the market where we're focused.

Speaker Change: And so they want HUD, they've got solar control.

Speaker Change: That they need to have.

Speaker Change: And so all of that is driving.

Mark J. Costa: And, and so all of that is driving high value in times a lot more square meters. And even though EVs are not growing as much as I think many people expect them to, they're still growing better than the ice market and giving us leverage. So you've had, for example, HUD 20% up year-over-year in volume at very high margins, and we've had solar control up about 12% year-over-year. So these markets are growing fast in a market that's, you know, challenged. So it's a great story.

Speaker Change: High value at times, a lot more square meters and even though evs are not growing as much as I think many people expected still growing better than me.

Speaker Change: Ice market and giving us leverage so you've had for example, HUD, 20% up year over year.

Speaker Change: And volume at very high margins, and we've had sort of control up about 12% year over year. So these markets are growing fast in a market. That's challenged it's great story.

Speaker Change: Okay.

Speaker Change: Yeah.

Patrick Duffy Fischer: Thank you. The next question is from Duffy Fisher from Goldman Sachs. Please go ahead. Yeah, good morning, guys. First question is around methanolysis. So my understanding was the long pole in the tent has always been the cleanup on the back end and getting the impurities out. So were you able to do that when you were running at 70%?

Speaker Change: The next question is from Duffy Fischer from Goldman Sachs. Please go ahead.

Mark J. Costa: Were you able to prove out that technology so that that no longer is an issue? Or you still have to push it harder, or get the max complexity of the H2R feedstock higher before you can kind of check that box and say that that's a done, Yeah, Duffy, that's been the big, huge, pleasant surprise to this whole project is You're correct, you know, unzipping the polymer is pretty straightforward on the front of the process, purification of all this variable set of impurities from garbage, to make sure you had a high purity, you know, DMT output on the back end, you know, is where there's a lot of complexity.

Patrick Duffy Fischer: Yeah, Good morning, guys.

Patrick Duffy Fischer: First question is just again around methodologies. So my understanding was the long pole in the tent has always been the cleanup on the backend.

Speaker Change #100: And getting the impurities out so.

Speaker Change #101: Were you able to when you were running at 70%, where you're able to prove out that technology, so that that no longer.

Speaker Change #101: As an issue or are you still have to push it harder.

Speaker Change #102: Or get the Max complexity of the H two our feedstock higher before you can kind of check that box and say that that's a done deal.

Speaker Change #102: Yes, Duffy that's been the big huge pleasant surprise to this whole project.

Speaker Change #102: As.

Mark J. Costa: And that's worked incredibly well, from the very beginning; process technology and, you know, separating, isolating out, you know, the monomers that we want to use again, and stripping out all the other impurities have worked really well across all the different HTRs. You know, the frustrating part is a lot of construction errors and sort of, you know, vendor, vendor equipment quality problems that we talked about that sort of really caused a lot of mechanical sort of startup delays. [inaudible] But, you know, the broad spectrum HCR we intend to use and the changes we've already made on how to prepare that material before we put it in the plant have sort of, you know, addressed the recent plugging issues.

Speaker Change #103: Youre correct.

Speaker Change #104: And zip into polymers pretty straightforward on the front of the process purification of all of this variable set of impurities from garbage.

Patrick Duffy Fischer: Make sure you had a high purity.

Speaker Change #103: Yeah.

Speaker Change #103: Output on the backend.

Speaker Change #103: It was where theres a lot of complexity and that's worked incredibly well right from the very beginning.

Speaker Change #103: <unk> technology in <unk>.

Speaker Change #103: Separating isolating out the monomers that we want to use.

Speaker Change #103: Again.

Speaker Change #103: And stripping out all the other impurities has worked really well across all the different HDR.

Speaker Change #105: The frustrating part is a lot of construction errors and sort of vendor vendor equipment quality problems that we talked about.

Speaker Change #105: That sort of really call. It caused a lot of mechanical sort of startup delays for us.

Speaker Change #105: That had nothing to do with the process chemistry.

They're easy to fix once you have the pump breaks you put a new pump.

Speaker Change #105: This feedstock issue that we've had recently.

Speaker Change #105: Again, it was about form factor it was about a couple of suppliers, having impurities that were really not supposed to be there.

Speaker Change #105: We've now identified.

Speaker Change #105: The broad spectrum HCR, we intend to use.

And the changes we've already made on how to prepare that material before we put it in the plant.

Speaker Change #105: Is sort of.

Speaker Change #105: Dressed.

Speaker Change #105: The recent plugging issues so.

Mark J. Costa: So, you know, we actually feel great about the process chemistry. We just need to, you know, line out the sort of mechanical operation of the plant, which is, you know, this is a very big plant. It's got a lot of complexity to it, and, you know, we probably should have expected more of this, and that would build our guide as we work through these challenges in this sort of construction. Great, thanks.

Speaker Change #105: We actually feel great about the process chemistry.

Scott: Just need to line out the sort of the mechanical operation of the plant, which is this is a very big player Scott a lot of complexity to it.

Speaker Change #107: And we probably should have expected more of this and that was built her guide as we work through these challenges and this sort of construction environment.

Patrick Duffy Fischer: And then just on the base business, the two end markets you called out as kind of doing better, one coding, and the other one ag. So on ag, where are you now kind of on a run rate relative to when it started to fall off? Are you still well below kind of that normalized level?

Speaker Change #108: Great. Thanks, and then just on the base business two end markets you called out as kind of doing better one coatings.

Speaker Change #109: And the other one AG. So on AG, where are you now kind of on a run rate relative to when it started to fall off or you're still well below kind of that normalized level in an on coatings. What are you seeing there in volumes because your customers still seem to be putting up pretty weak numbers.

Speaker Change #110: But your volumes seem to be stronger than that.

Mark J. Costa: And then on code coding, what are you seeing there in volumes, because your customers still seem to be putting up pretty weak numbers, but your volume seems to be stronger. Yeah, I don't know if our volumes are a lot stronger than that. I mean, you gotta remember there are two components. There's this in-market demand discussion that we're all having. And I think you know, we see the in-market demand situation similar to our customers in coatings. But you got to remember, there was a lot of destocking that those coatings customers did with us, right?

Speaker Change #111: I don't know if our volumes are a lot stronger than that I mean, you got to remember there's two components. There is this end market demand discussion that that we're all having and I think.

Speaker Change #111: And we see the end market demand situations similar to our customers on coatings.

Speaker Change #111: But you got to remember there was a there was a lot of destocking that those coatings customers did with us right and they completed that destocking and so we've benefited from that volume recovery in coatings, just like durables and everything else.

Mark J. Costa: And they completed that destocking, and so we've benefited from that volume recovery in coatings, just like durables and everything else. You know, so when you look at, you know, that, you know, we're probably up high single digits in volume in B and C, but I would attribute most of that to just a lack of destocking relative to last year. On the ag side of things, what I'd say is, you know, there was a huge amount of destocking, as was well documented by all the ag companies that certainly had an impact on us through last year.

Speaker Change #111: So when you when you look at.

Speaker Change #111: That were probably up high single digits in volume in B and C, but I would attribute most of that.

Speaker Change #111: Just a lack of destocking relative to last year.

Speaker Change #112: The AG.

Speaker Change #112: AG side of things what I'd say is there was a <unk>.

Speaker Change #112: Huge amount of Destocking as was well documented by other companies.

Speaker Change #112: That certainly had an impact on us through last year.

Speaker Change #112: They resolved most of that Destocking.

Speaker Change #112: As we went through the first quarter.

Mark J. Costa: They resolved most of that destocking, you know, as we went through the first quarter. And by the time we were in the second quarter, I'd say we were sort of at normal, you know, sort of... demand conditions and reconnected to demand, I think is the phrase with the stocking behind us, and we're having a normal ag season this year. So far, there's sort of a put and take on that. But for the products that we make, it's called a normal agricultural season. So, you know, Q2 is good, and Q3 will be softer.

Speaker Change #112: And by the time, we were in the second quarter I'd say, we were sort of the normal.

Speaker Change #112: Sort of.

Speaker Change #112: Demand conditions reconnected to demand I think is sort of the phrase.

Speaker Change #112: With Destocking behind Us and we are having a normal AG season. This year. So far they are sort of puts and takes to that the products that we make it's I'll call. It a normal AG season. So.

Mark J. Costa: We do not expect much inventory building in Q4 from our customers. I think they're still being a bit cautious on how to manage inventory. So we expect we'll see a big build of ag demand for us in the first quarter of next year, which will be a nice tailwind for next year versus this year. Great. Thank you, guys.

Speaker Change #113: Q2 was good Q3 will be softer we do not expect much inventory building in Q4 from our customers I think they are still being a bit cautious on how to manage inventory. So.

Speaker Change #113: We expect to see a big build of AR.

Speaker Change #113: Of demand for us in the first quarter of next year, which will be a nice tailwind for next year versus this year.

Vincent Stephen Andrews: Yep. The next question is from Vincent Andrews from Morgan Stanley. Please go ahead.

Great. Thank you guys.

Speaker Change #113: Yep.

Speaker Change #114: The next question is from Vincent Andrews from Morgan Stanley. Please go ahead.

Mark J. Costa: Mark, is there sort of a go-no-go date for France, or is there a plan B in case, you know, we're sitting here a couple quarters from now and, you know, you still haven't made any progress on either of the gating issues to move forward? When it comes to the French project, I mean, Vince, I really hope we have clear insight by the end of the year about where that project's headed.

Vincent Stephen Andrews: Thank you.

Vincent Stephen Andrews: Mark is there is there sort of a go no go date in terms of France or is there a plan b in case.

Here are a couple of quarters from now.

You still have you made any progress on either of the gating issues to move forward.

Vincent Stephen Andrews: Yeah, when it comes to the French project I mean, Vince I really hope we have clear insight by the end of the where that project is headed.

Mark J. Costa: I wouldn't say it's necessarily a formal go-no-go decision, but we'll have, you know, good insight as we go through the fall with customer contract discussions and finish the engineering work. You know, the reality is that we have a lot of sort of portfolio options, you know, how we manage these three plants, and what products we put into each of them, and what pace we build them. So we're very excited about the first plant, very excited about getting Texas built. Texas will have the capability to make specialty products, as well as PET.

Vince: I wouldn't say, it's necessarily a formal that go no go decision, but we will have.

Vince: Good insight as we go through the fall with customer contract discussions and finished the engineering works.

Speaker Change #117: The reality is.

Speaker Change #118: We have a lot of sort of portfolio options and how we manage these three plants.

Speaker Change #118: And what products, we put into each of them.

Speaker Change #118: What pace, we built them. So we're very excited about the first plant very excited about getting Texas built Texas will have the capability to make specialty products as well as P. T. So you've got flex and how you serve and support specialty growth and PT growth from the Texas project is we didn't go into the French project, but hopefully have this sort of.

Mark J. Costa: So you've got Flex, and how you serve and support specialty growth and PET growth from the Texas project as we then go into the French project, but hopefully, we'll have this sorted out. We still think that, you know, that $450 million of EBITDA across these three projects is very much intact as a long-term value creation target across these projects. And depending on how you go forward, you can still get a lot of that value by shifting where you make the specialties in the first two projects.

Speaker Change #118: We still think that.

Speaker Change #118: That $450 million of EBITDA across these three projects is very much intact as a as a long term value creation target across these projects.

Mark J. Costa: So there's a lot of sort of robustness in this plan, but we're very committed to wanting to build all three of these projects. But to be very clear, you know, we're sticking to our model, which is on the PT side. If we don't get, you know, these long-term ticker pay contracts, as we did get with Pepsi, we will not build the French project. So we were being very clear to the customers that, you know, we need to get these contract commitments in place to produce products that they very much need if they want to get the high recycling content targets in Europe. There's no way you can do it with machinery alone.

Speaker Change #118: And depending on how you go forward.

Speaker Change #118: You can still get a lot of that value.

Speaker Change #118: By shifting where he makes a specialist in the first few projects. So there's a lot of sort of robustness in this plan, but we're very commit.

Speaker Change #118: Committed to wanting to build all three of these projects, but to be very clear, we're sticking to our model.

Speaker Change #118: Which is on the PT side, if we don't get.

Speaker Change #118: These long term take or pay contracts as we did get with Pepsi.

Speaker Change #118: You know, we will not build the French project.

Speaker Change #118: So we're being very clear of the customers that we need to get these these contract commitments in place to produce product that they very much need if they want to get to high recycling content targets in Europe. There is no way you can do it with mechanical alone can't be done.

Speaker Change #118: So if they want to stay committed to their goals, they're going to have to support these kinds of investments.

Vincent Stephen Andrews: Can't be done. So if they want to stay committed to their goals, you know, they're going to have to support these kinds of investments. Okay, good to hear. And if I could just get your thoughts on, you know, obviously, I don't know what's going to happen with the election, but on one side of it, we could be entering, you know, back into a world with tariffs and things like that. And so maybe you could just help us understand what your view on that would be and what sort of the learnings for Eastman was from, you know, sort of that original tariff period of 2017, 2018.

Speaker Change #119: Okay, good to hear and if I could just get your thoughts on.

Speaker Change #120: Obviously, you don't know what's going to happen with the election, but on one side of it we could be entering.

Speaker Change #121: Back into a world with tariffs and things like that and so maybe you could just help us understand what your what's your view on that would be and what sort of the learnings for Eastman was from sort of that original tariff period of 2017 2018.

Speaker Change #121: And what what the impact could be this time around.

Vincent Stephen Andrews: And you know what the impact could be this time around. I'm glad you didn't ask me who's going to win the election in November, because I wouldn't have that question, but I actually think tariffs are an issue no matter who wins, which is because the Chinese government has a very explicit and public policy of exporting their excess capacity to the world, and that's going to have an impact on markets.

Speaker Change #122: Well I'm glad you didn't ask me who's going to win the election in November because I wouldn't have.

Speaker Change #121: But.

Speaker Change #121:

Speaker Change #121: But but but I actually think tariffs are an issue no matter what.

Which.

Speaker Change #123: Personally we have as a president of this country.

Speaker Change #123: It's the Chinese government has a very explicit and public policy of exporting.

Speaker Change #123: Their excess capacity to the world.

Speaker Change #123: And that's going to have an impact on markets.

Mark J. Costa: You know, it's, they're basically exporting unemployment to the world. And for us, fortunately, we're not that exposed to those exports from China. We do have some exposure when it comes to the CI business, you know, has some exposure. But, you know, really, most of the exports from China are going to impact Europe and Latin America. We don't have that many sales; over 70% of our sales are in North America with CI, so our exposure there is somewhat limited.

Speaker Change #123: No.

Speaker Change #124: They're basically exporting on unemployment to the world.

Speaker Change #125: And for Us Fortunately, we're not that exposed.

Speaker Change #125: To those exports from China.

Speaker Change #125: Yeah.

Speaker Change #126: We do have some exposure when it comes to the Ci business.

Speaker Change #126: <unk>.

Speaker Change #126: It has some exposure but.

Speaker Change #126: Really most of the exports from China.

Going to impact Europe, and Latin America, we don't have that many sales over 70% of our sales are in North America with Ci. So our exposure there is somewhat limited.

Mark J. Costa: And AFP has a little bit of exposure. So from a direct import point of view, in step one, which is where we are now, our exposure on the Chinese side is not that great, which is a good thing.

And <unk> is a little bit of exposure. So from a direct import point of view in step one which is where we are now.

Speaker Change #126: Our exposure on the Chinese side is not that great.

Speaker Change #126: Which is good thing the bad thing is theres going to be reactions, but that you're already seeing in Europe and the U S.

Mark J. Costa: The bad thing is there's going to be, you know, reactions, but that you're already seeing in Europe and the US, putting tariffs in place for products being exported at exceptionally low costs out of China. And then there will be a counter response in China. So we do expect that, you know, there's some degree of tariff tension coming our way. This is not a new issue for us.

Speaker Change #126: Putting tariffs in place for products are being.

Speaker Change #126: Exported at exceptionally low cost out of China.

Operator: You know, China is about 10% of our revenue, and about half of that is goes into China and then re-exported back out of China. Typically, you know, think of appliances, electronics, and things like that, durables. And that's mostly, especially plastics, doing a round trip through China being made into something. The other half are products locally consumed, like some performance films and laminates for cars, windows, or a few coating specialties out of AFP.

Speaker Change #126: And then that will be counter response in China. So we do expect that.

Speaker Change #126: There is some degree of tariff tension coming our way this is not a new issue for us.

Speaker Change #126: China is about 10% of our revenue.

Speaker Change #126: Half of that is as it goes into China, and then REO exported back out of China typically.

Speaker Change #126: A appliances electronics and things like that variables in that.

Speaker Change #126: It's mostly specialty plastics doing a round trip through China being made into something.

Speaker Change #126: Half of our products locally consumed like some performance films and laminates.

Speaker Change #126: Were cars windows or a few coding specialties out of AFP.

Operator: We do have a playbook on how to manage through that that we developed in the 2018-19 timeframe. That playbook was relatively effective, and so we're just, you know, updating it and being prepared if that scenario plays out. Thanks so much.

Speaker Change #126: We do have a playbook on how to manage through that.

That we developed in 2018 19 timeframe that playbook was relatively effective.

Speaker Change #126: And so we're just updating it and being prepared to that scenario plays out.

Speaker Change #127: Thanks, so much.

John Roberts: We're ready for the next question. Thank you. The next question is from John Roberts from Mizuho. Please go ahead. Thank you, Mark. In fibers, could you provide some color on SIGTO versus textile fiber?

Speaker Change #128: We're ready for the next question.

Speaker Change #127: Yeah.

Speaker Change #127: Thank you. The next question is from John Roberts from Mizuho. Please go ahead.

John Roberts: Thank you Mark and fibers could you provide some color on cig tow versus textile fiber.

Mark J. Costa: And now that textile is as profitable as SIGTO, what's the constraint on how quickly you can shift volume from SIGTO to textile fiber? So, you know, 80% of our revenue is tow. And obviously, that market has changed pretty substantially over the last two years, as utilization rates have become very high, and customers have been focused on security supply. So we expect that market You know, to continue to be stable, as we've mentioned, 100% of business sort of contracted this year, 90% next year, and 70% in 26.

Speaker Change #130: And now that textile is as profitable as cig tow, what's the constraint on how quickly you can shift volume from cig tow to fibers to textile fibers.

Speaker Change #132: So 80% of our revenue is toe.

And obviously that market has changed pretty substantially over the last two years is the utilization rates have become very high and customers have been focused on security of supply.

Speaker Change #130: So we expect that market.

Speaker Change #131: You too.

Speaker Change #131: Continue to be stable as we've mentioned we have.

100% of business sort of contracted this year, 90% next year and 70% in 2006 so.

Mark J. Costa: So, I feel pretty good about, you know, the contracts in place; there obviously are provisions for natural market decline in the volume of those contracts because it is still a modestly declining industry when it comes to tow. And it does have pricing structures in there to adjust for changes, substantial changes in raw material costs.

Speaker Change #131: I feel pretty good about the contracts in place there obviously, our provisions for natural market decline in the volume in those contracts because it is still modestly.

Speaker Change #133: Cleaning industry when it comes to toe.

Speaker Change #131: <unk>.

Speaker Change #131: And it does have pricing structures in there to adjust for changes substantial changes in raw material costs. So we're providing stability to both our customers as well as to us.

Mark J. Costa: So we're providing stability to both our customers as well as to us. So, that part of the market, I think we feel pretty good about. When it comes to the textile business, it's been great. We've seen tremendous growth in the textile market. This is also another very challenging in-market. If you go look at the fashion industry, it's not exactly growing, but yet, our volumes have grown materially relative to that underlying market. The Naya fabric is just a great story.

So that part of the market I think we feel pretty good about.

Speaker Change #131: When it comes to the textile business, it's been great we've seen tremendous growth.

Speaker Change #131: In the textile market. This is also another very challenged end market. If you go look at the fashion industry, it's not exactly growing.

Speaker Change #131: But yet our volumes have grown materially relative to that underlying market.

Speaker Change #134: Fabric is just a great story, its got half bio content and now with replacing coal with waste plastic we can make the other half of the sic and hydride to make the til from wood pulp.

Mark J. Costa: You know, it's got half its bio-content, and now, by replacing coal with waste plastic, we can make the other half of the secant hydride to make the tow from wood pulp with waste plastic. So, you've got a very strong beginning to the life story, and then this is going to become increasingly important: the microfibers that break off of clothing in the washing machine that end up in the ocean as microplastics. If it's a synthetic garment, you know, ours will fully biodegrade. So we have plenty of certifications and studies that prove that our fibers will just naturally degrade at the same pace as cotton and have no sort of, you know, life in the environment.

Speaker Change #134: With waste plastic so you got a very strong beginning of life story.

Speaker Change #134: And then this is going to become increasingly important.

Speaker Change #134: As a micro fibers that break off of clothing in the washing machine that ended up in the ocean is micro plastics.

Speaker Change #136: If it's a synthetic garment.

Speaker Change #135: Ours will fully biodegrade.

Speaker Change #139: We have plenty of certifications and studies approved that are.

Speaker Change #135: Our fibers will just naturally the grid at the same pace as cotton.

Speaker Change #138: And have no sort of.

Speaker Change #137: Life in the environment.

Mark J. Costa: So that's exceptionally important, and that's going to become a bigger and bigger value proposition because textiles are by far the number one source of microplastics in the ocean or waterways, and having a product that biodegrades, I think is going to increasingly have a significant value proposition at that end of life, not just the beginning of life. So, we feel great about that business and expect it to continue to grow. Let's move to the next question, please. Thank you. The next question is from Kevin McCarthy from VRP. Please go ahead. Yes, thank you. And good morning.

Speaker Change #137: So thats exceptionally important that's going to become a bigger and bigger value proposition because textiles.

Speaker Change #140: It's by far than the number one source of micro plastics.

Speaker Change #140: The ocean or waterways.

Speaker Change #140: And having a product that biodegrade I think is going to increasingly have a significant value proposition on that end of life proposition not just the beginning of life. So we feel great about that business and expect it to continue to grow.

Speaker Change #141: Let's move to the next question please.

Speaker Change #142: Thank you. The next question is from Kevin Mccarthy from VR P. Please go ahead.

Speaker Change #141: Okay.

Kevin William McCarthy: Mark, maybe sticking with microplastics in a sense, can you provide an update on the Aventa business? How are the early days going there with sealed air and any other customers that you may be working with? More broadly, can you just talk about things like market opportunity, growth rate, and margin profile there? Do you think it could be bigger than NIAA over time or smaller than NIAA? How would you frame that? Yeah, Aventa is going really well.

Kevin William McCarthy: Yes, Thank you and good morning.

Kevin William McCarthy: Mark maybe sticking with micro plastics in a sense can you provide an update on the event business.

Kevin William McCarthy: Business, how are the early days going there with sealed air and any other customers that you may be working with more broadly can you just talk about things like market opportunity growth rate margin profile, there or do you think it could be bigger than nine up over time or smaller than how would you frame that out.

Mark J. Costa: We've had a great successful launch with sealed air in the marketplace. And, and we're now in a large grocery store that's doing a lot of trials where the product performance at the counter, if you will, is going really well. For those who are not familiar with Aventa, we can replace polystyrene, expanded polystyrene, whether it's trays or clamshells, in this case, trays for protein, like your chicken and pork and everything else that goes in the grocery store.

Speaker Change #144: Yes, and then just going really well.

Speaker Change #145: Had a great successful launch with sealed air in the marketplace.

Speaker Change #144: And.

Speaker Change #144: We're now in a.

Speaker Change #144: Large grocery store, that's doing a lot of trials.

Speaker Change #144: Where the product performance in the in the counter if you will is going really well for those who are not familiar with event.

Speaker Change #144: We can replace polystyrene expanded polystyrene, whether its trays or clam shells and this case trays for protein like your chicken and pork and everything else that goes in the grocery store.

Mark J. Costa: We replace all that as a drop-in replacement for the existing polystyrene equipment with our, our cellulosic polymer. And it will get to the same, you know, low density as polystyrene. And it is fully certified to biodegrade in home or industrial composting. And even if it ends up in a landfill, it can biodegrade pretty much similarly to paper. So it's a great story about the end of life. It's got the same beginning of life story I just told you about, and Naya and how we can make it. But this compostability, where all these different food service products can just be thrown away with food and biodegrade, is exceptionally important. There are a number of states that are now banning it, probably starting from when it's used.

Speaker Change #144: You can place all of that is a drop in replacement to the existing policy started in equipment with our our cellulosic polymer.

Speaker Change #144: And it will get to the same.

Speaker Change #144: Low density as polystyrene.

Speaker Change #144: And it is fully certified to biodegrade.

In home or industrial composting, and even if it ends up in landfill.

Speaker Change #144: You can buy a degrade pretty much similar to paper.

Speaker Change #146: So it's a great story of end of life. It's got the same beginning of life story I just told you from <unk>.

Speaker Change #146: And how we can make it but.

Speaker Change #146: But there's a complete stability, where all these different foodservice products can just be thrown away with food and biodegrade.

Speaker Change #146: Is exceptionally important theres number of states are now banning it.

Speaker Change #146: Probably starting from being used other states or companies willing just to have a natural sort of national position. It also makes by the way a phenomenally good straw, which is also.

Mark J. Costa: Other states or companies wanting just to have a national position. It also makes, by the way, a phenomenally good straw, which is also compostable and is rolling out in some major food chains right now as we speak. So the program is going well. The volume is ramping up. We have meaningful commercial sales this year and expect a step up next year as we prove out this value proposition in these early, early trials. To answer your question about size, it can definitely be bigger than the Naya business.

Speaker Change #146: Compostable and rolling out in some major food change right now as we speak.

So so the program is going well the volume is ramping up we have meaningful sort of commercial sales. This year and expect a step up next year as we prove out this value proposition in these early trials.

Speaker Change #147: To answer your question about size it can definitely be.

Speaker Change #146: Bigger.

And then deny a business there's a significant amount of volume potential in this space as you can imagine.

Mark J. Costa: There's a significant amount of volume potential in this space, as you can imagine, and the margins of this product are better than the company average. So as it grows, it's an upgrade for corporate earnings. It's an alternative market because it's made from the same exact so-so assay flake that we make, you know, tow out of or nearly out of, and this uses the same polymer.

Speaker Change #148: And the margins of this.

Speaker Change #148: Product or better than the company average so.

As it grows its and upgrades for corporate earnings.

Speaker Change #148: It's an alternative market because it's made from the same exact so this assay flight that we make tow out of or not out of this uses the same policy. So you've got flexibility to optimize value across the toe and event.

Mark J. Costa: So you've got flexibility to optimize value across tow, night, and venta off the same sort of fixed asset base. And when we look at it all together, you know, we think that the growth curve of this will allow us and support us in expanding our solar diastate flake business over time. We look forward to telling you a lot more about this in the sort of circular day that Greg's scheduling because it's, you know, we'll cover the whole cellulosic stream as well as the polyester circular stream, as we hope you better understand that when we bring you down here to Kingsport.

Speaker Change #148: Off the same sort of fixed asset base and when we look at it altogether.

Speaker Change #148: We think that the the growth curve of this will allow us and support us in expanding.

Speaker Change #148: So that's a flake business over time.

Speaker Change #148: Look forward to telling you a lot more about this in.

Speaker Change #148: In the sort of circular day that Greg scheduled.

Speaker Change #148: Because it will cover the wholesalers extreme as well as the polyester circular stream as we help you better understand that when we break it down here at Kingsport.

Mark J. Costa: We're very much looking forward to getting all of you down here in Kingsport to see all these different products and assets. Actually, Great. Then, as a follow-up, if I may, Mark, can you speak to the forward volume trajectory in advanced materials? We posted 12% there.

Speaker Change #148: We're very much looking forward to getting all of your down here in Kingsport to see all these different products and assets in action.

Speaker Change #148: Great and then as a follow up if I may Mark can you speak to the forward volume trajectory in advanced materials.

Kevin William McCarthy: But if I look at the two-year stack, it's still down. So do you see additional runway to grow at a double-digit pace? third quarter, for example, and we can kind of talk through what you're baking into the guide. Yeah, so our guide is basically, from an earnings point of view, a similar quarter in Q3 to Q2. And, you know, we've got methanolysis coming online, as we said, where the volume is now ramping up into 3Q and in 4Q.

Speaker Change #149: Posted 12% there, but if I look at the two year stack, it's still down so do you see additional runway to grow at double digit pace in the third quarter. For example, maybe you could kind of talk through.

Speaker Change #150: What you're baking into the guide there.

Yes. So our guide is basically a similar from an earnings point of view a similar quarter.

Speaker Change #151: Quarter in Q3 to Q2.

Speaker Change #152: And we've got.

Speaker Change #153: Methanol is coming online as we said where the volume is now ramping up into <unk> and into <unk>.

Kevin William McCarthy: So you'll see that pick up on the advanced materials side. We will continue to have innovation driving growth above underlying markets in the automotive sector. And you win sort of applications across the portfolio on our innovation like we do every year in our past, in the more traditional sense, if you will. So we see all that sort of volume helping us as we go into the back half of the year. You will obviously see some normal seasonality drop in demand in the fourth quarter.

Speaker Change #153: Youll see that pick up on the advanced materials side.

Speaker Change #153: We will continue to have innovation driving growth above underlying markets in the automotive sector.

Speaker Change #153: When sort of applications across the portfolio on our innovation like we do every year in our past.

Speaker Change #153: And the more traditional sense, if you will so.

Speaker Change #153: So we see all of that sort of volume, helping us as we go into the back half of the year you will.

Obviously see some normal seasonality drop in demand in the fourth quarter.

Mark J. Costa: We expect that to be not as much as you would normally see net because of the ramp up in methanolysis and everything else. So the fourth quarter will be better than typical because of methanolysis and some of these other in-market ramp-ups of innovation sales. So I think that all that will sort of come together to sort of help. There's also a tailwind that helps in the back half of the year.

Speaker Change #153: We expect that to be not as much as you would normally see net because of the ramp up and ethanol CIS everything else. So the fourth quarter will be better than typical.

Speaker Change #153: Because of methanol is this in some of these other end market ramp up.

Speaker Change #153: Of innovation sales. So I think that you know all of that will sort of come together to sort of help theres also.

Speaker Change #153: Spread tailwind that helps in the back half of the year.

Operator: When you look at some of the trends in energy costs that are still, the lower energy costs from the beginning of the year are still flowing through inventory, and PX is a bit lower now than where it was in the first half of the year. So those are all tailwinds, you know, then the headwind is about $25 million higher in shutdown costs in the back half of the year, but that's mostly in Q4 than in the first half, right? That nets off some of that volume growth. Let's make the next question the last one, please. Thank you. So the final question we have today is from Lawrence Alexander of Jeffrey. Please go ahead. Good morning, just two quick ones on heat transfer fluids.

Speaker Change #153: When you look at.

Speaker Change #153: Some of the trends in energy costs that are still the lower energy costs in the beginning of the year still flowing through inventory.

Speaker Change #153: And <unk> is a bit lower now than than where it was in the first half of the year. So those are all <unk>.

Speaker Change #153: Then the headwind is about $25 million higher shutdown costs in the back half of the year, but that's mostly in Q4.

Speaker Change #153: In the first half where that nets off some of that volume growth.

Speaker Change #153: Let's make the next question the last one please.

Laurence Alexander: Is that $30 million expected to recur in the first half of 2025? And secondly, the $50 million increase in your new project and growth project investment. Are those new platforms you're working on?

Speaker Change #154: Thank you.

Speaker Change #155: The final question, we have today is from Laurence Alexander from Jefferies. Please go ahead.

Laurence Alexander: Good morning, two quick ones just on the heat transfer fluids is that.

Speaker Change #157: $30 million expected to recur in the first half of 'twenty five.

Speaker Change #158: And secondly, the $50 million increase in your.

Speaker Change #161: And your new project growth project investments.

Laurence Alexander: Or is that just inflation in your cost base? And how should we think about that going forward? So the first question I'm going to answer, and the second question, I'm just not sure I understand the question.

Speaker Change #159: Is that new platforms youre working on or is that just inflation in your cost base and how should we think about that going forward.

Speaker Change #158: Okay.

Speaker Change #160: Yeah. So the first question I'm going to answer the second question I'm, just not sure I understood. The question. So the first question on heat transfer fluids.

Mark J. Costa: So the first question on heat transfer fluids: timing is everything in that business, and it's very hard to predict by quarter. So, you know, we had a great year last year, $3 million lower this year. But a lot of that $30 million will come back next year, specifically in the LNG space, which are very high-value fills for us. But I would just think about it on an annual basis.

Speaker Change #162: Timing is everything in that business and it's very hard to predict by quarter. So.

Speaker Change #163: We had a great year last year.

Speaker Change #163: <unk> million dollars lower this year.

Speaker Change #163: Lot of that 30 will come back next year, specifically in the LNG space that are very high value film for us.

Speaker Change #163: But I would just think about it on an annual basis, it's very difficult to.

Speaker Change #163: Sort of predict exactly when it feels occur quarter by quarter.

William Thomas McLain: On the second question, I apologize, but Yeah, so, Mark, I think you're talking about our growth, our increase in spend, and our capabilities, as well as continued investments and growth. And as you think about what Mark just outlined for Aventa and the increased expenditures there that I referenced in our other segment. That's where, again, this year we're increasing those. We expect to see the ramp-up of revenue that Mark just referenced in the cellulosics and including the Aventa product line. So we're also making investments to be efficient with working capital, etc., and expect returns on those as we go into 2025.

Speaker Change #163: On the second question I apologize, but.

Mark: Yeah, So mark.

Mark: I think youre talking about our growth or increase in spend.

Speaker Change #164: Our capabilities are.

Mark: As well as continued investments in growth.

Speaker Change #166: As you think about what Mark just outlined an event and the increased expenditures there that I referenced in our other.

Segment, that's where again this year, we're increasing those we expect to see.

Mark: The ramp up of revenue that Mark just referenced and the Cellulosic.

Mark: And then including the <unk> product line, so we're making that investment.

Mark: Investments also to be efficient.

With the working capital et cetera, and expect returns on those as we go and at one point in time.

Speaker Change #165: Thank you.

Operator: Thanks, everyone, for joining us. We appreciate you being on this call with us. As Mark mentioned, we look forward to also having you in Kingsport later this year, as we do a deep dive on our circular economy platform. Everybody have a great day. This concludes today's call. Thank you for your participation.

Speaker Change #167: Thanks, everyone for joining us we appreciate you being on this call with US as Mark mentioned, we will look forward to also having you in Kingsport later this year.

Speaker Change #165: As we do a deep dive on our circular economy platform.

Speaker Change #165: Everybody have a great day.

Speaker Change #168: This concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change #168: Yeah.

Speaker Change #168: [music].