Q3 2025 Eastman Chemical Co Earnings Call

At Www Dot Eastman Dot com.

I will now turn the call over to Mr. Greg Riddle Eastman Investor Relations. Please go ahead Sir.

Thank you Becky and good morning, everyone and thanks for joining us on the call with me today are Mark Costa Board Chair and CEO, Willie Mcclain, Executive Vice President and CFO, and Jake Laroe and Emily Alexander from the Investor Relations team.

Yesterday after market closed we posted our third quarter 2025 financial results news release, and SEC 8-K filing our slides and the related prepared remarks and this is in the investors section of our website <unk> Dot com.

Before we begin I'll cover two items.

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

Actual events or results could differ materially certain factors related to future expectations are or will be detailed in our third quarter 2025 financial results news release during this call in the preceding slides and prepared remarks and in our filings with the SEC, including the Form 10-K filed for full year 2024, and the Form 10-Q.

To be filed for third quarter 2025.

Second earnings referenced in this presentation exclude certain noncore 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 third quarter 2025 financial results news release.

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

Thank you we will now take off first question from Vincent Andrews from Morgan Stanley Your line.

Line is now open. Please go ahead.

Thank you and good morning, everyone Mark could you help us with the bridge to 2026.

And in particular is it just as simple as taking your full year EBIT from this year, adding $100 million of cost savings and the $50 million to $75 million of asset utilization.

Reversal, but then I'm I'm wondering you are talking about.

<unk> being a good news story next year, but you kind of just mentioned there'll be a revenue lift so not clear whether that revenue lift is being offset by weakness somewhere else in the portfolio or if there are other puts and takes that we need to to put in that bridge to get to sort of what you're expecting at this point for 2026.

First good morning, and thank you for the question, obviously, you've sort of extremely important question for us as we think about working through the back half of this year and building.

Earnings growth for next year, and I think you named a lot of the components.

The way I would start this conversation first is which you said you got to look at a full year number when you look at the back half of this year.

You can't annualize the back half for three reasons. One is there is always normal seasonality from the back half of the year, especially in <unk>.

<unk> through the back half and advanced materials, having a normal material drop from Q3 to Q4 second reason, obviously as we've discussed in the prepared remarks. The trade disputes are exaggerated this dynamic with all the pull forward of material that happened.

The first half of the year to get ahead of tariff risk and now with consumer demand being weaker than than was expected.

The first half.

For the back half.

We're taking a lot longer to unwind that inventory. So that's exaggerating the sequential decline in <unk>.

Third of course, as we started the year, believing we have volume and growth and stability in the first quarter, which we did have and then what changed obviously through the second quarter.

So we had volume.

That was built for that scenario that was no longer needed as demand was softening more than expected and we have that.

About $100 million asset utilization headwind in the back half of the year.

Relative to the first half so those three things really distort the back half of this year. So you are right. The best way to think about and build a base case scenario for next year is you have to look at the full year volume numbers, especially.

In advanced materials, and AFP, which would be AAM being down around 4% in AFP being down around 2% on a full year basis.

Can you sort of start there.

We didn't look underneath of that we think about the stable markets, which is about a third and two thirds in AFP.

Going to have sort of low single digit growth that is just normal from these kind of stable markets and it's coming from a bit of a softer year. So I think it's even more credible that there'll be some recovery in growth in those products. The discretionary markets are where the sensitivity and the impact the.

The trade war is really felt.

But for now we're just going to assume let's just say the baseline volume is stable now with lower interest rates and tax legislation et cetera, you could believe there'll be upside to that and Thats, where every investor to make their decision.

On Ci I would say, we will have more volume.

It's really due to less shut downtime.

That we expect next year versus this year. So we'll have more volume to sell and then fibers, we intend to.

Thank you Pat volumes stable to this year, so you've got a baseline that stable or some sort of modest growth throughout the portfolio and then it gets too okay. That's the underlying assumptions what can we do with that scenario and how do we create earnings growth above that.

Starts with the cost reduction right. So we spent $75 million of cost reduction this year a lot of that in the back half so that annualized isn't helps.

The $100 million cost reduction target. We told you we have for next year on top of this year. So really focus on that a lot of action going on with that with the volume scenario I gave you the utilization tailwind for next year relative to this year somewhere in the $50 million to $75 million range, depending on what happens in the volumes right. So volumes were flat for more towards a 50 volt.

<unk> have the modest growth that we're talking about here are more towards the $75 million.

And then you've got innovation that is the center of our strategy and it couldn't be more value valuable in this market environment.

We actually expect a meaningful increase in revenue.

The circular polyester methanol plant as we've discussed in the prepared remarks, and we will have a tailwind with better utilization and cost. So youll have a meaningful impact on EBITDA from this year.

Speaker #1: Where there's innovation growing. And then we're going to be focusing on how we can win share in the number of markets. There's some where we're already regaining some share that we lost in architectural and coalescence in architectural markets.

The normal innovation that we always have and HUD growing in cars as well as Evs and the interlayer business are events is gaining traction <unk> textiles recovering.

Speaker #1: And in layers, and then there's also some places in tariffs helping us, like in especially polyesters and ARPA in the US. The tariff is significant for our competitors to compete in the US.

Easter pure semiconductor solvents lot of places, where theres innovation growing and then we're going to be focusing on how we can win share in a number of markets or somewhere where already regaining some share that we lost.

Speaker #1: And we're following our customers around the world as they're moving out of China. Underneath all this is our commercial excellence to defend and keep prices steady.

In architectural and coalescence and architectural markets.

<unk>.

Speaker #1: And stable, only slight declines will probably be expected. And that preserves a lot of cash flow. So we continue to be focused on cash.

And then there is also some places in tariffs, helping us like especially probably ushers in ARPA in the U S. But tariffs is significant for our competitors to compete in the U S.

Speaker #1: We continue to be focused on innovation. We're adding on aggressive cost management at the same time. All that comes together for a meaningful earnings increase under this scenario.

And we're following our customers around the world as they are moving out of China.

Underneath all of this is our commercial excellence to defend and keep price steady.

And stable, maybe slight decline declines probably expected.

And that preserves a lot of cash flow. So we continue to be focused on cash we continue to be focused on innovation for adding on aggressive cost management at the same time all of that comes together for a meaningful earnings increase under this scenario.

Speaker #1: Vincent?

Speaker #2: Thank you. We will move on to our next question from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.

Speaker #3: Thank you. Good morning. Mark, a lot of good things happening at Kingsport. Can you discuss two things? The conversion to the ARPA capacity? How much is being converted?

Thank you.

We will move onto our next question from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.

Speaker #3: What does it mean for next year? The bottlenecking? How much will it cost? When will it be on stream? And what are your plans for this second plant?

Thank you good morning.

Speaker #3: You mentioned three locations. Where do we stand on that? Is Longview now off the table? So thank you.

Mark a lot of good things happening in Kingsport his kind of two things.

The conversion to the RP capacity, how much is being converted wasn't me for next year.

Speaker #1: Those are all great questions. I'm a little limited on how I can answer some of them. But to start with Kingsport, first the plant, it continues to run well.

<unk>, how much will cost more won't be onstream and your plans for this the second plant you mentioned three locations, where do we stay on that.

Speaker #1: We're still on track to hit our production target. We've had great confidence built about our ability to bottleneck the plant as well as our yields are turning out to be better than expected.

And at long view now off the table.

<unk>.

Those are all great questions I'm, a little limited on how I can answer some of them.

But to start with Kingsport first the plant continues to run well, we're still on track to hit our production target we've had.

Great confidence built about our ability to bottleneck the plant as well as our yields are turning out to be better than expected, we've hit 90% yields which is extraordinary when youre, taking garbage and turning it into first quality perfectly clear high quality polymer.

So we're really really excited about what we're learning what we're doing on that project and we believe.

That that 30% expansion of the capacity.

As a very feasible the capital to do that which would be done over a series of our normal shutdowns as relatively modest capital. So we're not disclosing that number at this stage, but it's not significant.

So excited about stretching that plan is getting a lot more value out of it.

And that giving us more continuous earnings growth, while we work on the second project.

When it comes to revenue for the project obviously.

In this market environment, especially in consumer durables, where a lot of the renewable content goes in our.

Specialty Triton products.

It hasn't been growing as fast as we wanted and the end market, which means probably launches arent that fast, but as we can.

We look towards next year, two things, we continue to get more wins on the specialty side and continue to build confidence there where customers are committing in buying and paying premiums.

But to our pet is a significant step up so.

So we told you last year that we were adding.

Adding 80000 tons of.

Do try and capacity, we could take an existing trading line and switch it back over to making our pet along with a couple of other lines that we have that are able to do that so it gave us a decent amount of capacity.

To make our pet.

And we've been really encouraged by several customers.

Very interested and committed to.

Growing there our pet in different applications and the commitment and the strength of their interest is really driven by the challenges are having in mechanical recycled content, where the colors not great.

Parents on the shelf is not what they want for their high end products on the shelf that need to look pristine.

And so our product sensus identical basically through the chemical recycling and the purification allows us to provide virgin quality.

Product on the shelf. So we expect a very significant step up in volume.

To go a good distance and filling up that capacity.

That revenue, which is also at attractive margins.

Combined, especially will give us a big step up in revenue versus where we are this year and those commitments are close to complete so we feel very good about where we're where we are on that.

And then when it comes to building the second plant the great thing about the Debottleneck is it gives us time.

To work on a much more capital efficient way of building that plant.

And it also allows us to do a step up in <unk>.

Capital right now in this economic environment, but we are making great progress.

On three different options of where we could.

Leverage existing assets very effectively in combination with their methanol CIS technology to build a plant and a much more affordable manner.

The value of vertical integration, which we do in Kingsport with everything we do and that applies when you're building something new to.

So we're excited about that we're not going to get much more of the details on that hopefully we'll have more to say in January.

Perfect and then Mark just on Q1 looking to next year, how should earnings ramp from Q4 to Q1 I assume most of the.

Asset utilization.

Headwinds should be gone by then is that fair.

Yes, the asset utilization.

Headwind turns into a tailwind as you look at Q1.

It's one of several factors you have the normal seasonality of Q4, where demand is just always low, especially in advanced materials and AFP.

So that snaps back seasonal paint lots of things being made for holiday season, just you don't get orders for that in the fourth quarter, but they start doing that in the first quarter in fact in our specialty plastics business. We have a number of our customers are already talking to us about their plans on buying more volume relative to where they are today.

Thats encouraging.

There you have that you also have this exaggeration of.

Of.

This demand as inventory that was built the first half of the year being used up in the second half of the year.

Perfect and Mark just on q1 looking to next year. How should earnings ran from Q4 to q1? I assume most of the uh asset had usually had 1 should be gone by then, is that fair?

Which is also artificially pushing demand down in the fourth quarter.

Beyond normal seasonality.

And our belief is that there's a good probability that we will be fully depleted.

Hopefully by the end of the year, it's very hard to know we've learned our lesson about guessing on what happens with inventory deplete.

Depletions back.

Back in 2023.

But there's a big difference this time, which is in 'twenty. One 'twenty two there's a huge amount of inventory built on the expectation of a lot of growth. This year no one expected a lot of growth.

And you can see in the retailer daily or data, where the consumer brand data they can build that much inventory.

They moved around the planet a lot to get it in the right places to avoid tariff risks, including our products into China, and Europe, but they didn't build a lot of inventory. So they don't have that much actually to unwind.

Uh, yeah, the asset utilization, uh, headwind turns into a Tailwind, as you look at q1. Um, that's 1 of several factors. Uh, you have the normal seasonality of Q4, where demand is just always low especially in Advanced, Materials, and AFP. Um, so that snaps back, you know, seasonal paint, you know, lots of things being made for holiday season. Just you don't get orders for that in the fourth quarter but they start doing that in the first quarter. In fact, in our specialy Plastics business, we have a number of our customers are already. You know, talking to us about their plans on buying more volume relative to where they are today so that's encouraging. Um, so I think there you have that. Um, you also have this exaggeration of

Of um, you know this demand, this inventory that was built the first half of the year, is being used up in the second half of the year.

So we should get some relief on that as well, we hope and then of course the revenue we just talked about methanol so starting to kick in in the ARPA. It really ramps up in Q1 cover normal innovation Thats always driving some growth.

And then the cost actions as the last part that should also help.

As you have ramped up the cost actions through this year that should annualize into an advantage for Q1.

Thank you.

Which is also, you know artificially pushing demand down in the fourth quarter, you know, beyond normal seasonality. Um and our belief is that there's a good probability of that will be, you know, fully depleted. Um hopefully by the end of the year, it's very hard to know. We've learned our lesson about guessing on what happens with imagery. Um, you know, depletions you know, back in 2023. Um but there's a big difference this time. Um, which is in 2122, there was a huge amount of inventory, built on the expectation of a lot of growth.

Thank you. Our next question comes from Alexia <unk> from <unk>. Your line is now Aitken. Please go ahead.

Thank you good morning, Mark could you just discuss this dynamic was.

<unk> renew.

Customers seem to be interested in the specialty applications.

Polymer.

We're not actually buying the volumes. So how do you gauge their real interest in terms of ability to pay for the price that you are charging for you.

It's a great question has come up a number of times.

The value of renewable is to put it in our products as a way to differentiate their product and being different on the shelf right and they do that to get a better price point to get some volume growth. So that's how any of these especially on the consumer durable side of things to think about the value of this content.

This year, no, 1 expected a lot of growth, um, and and but you can see in the retailer data or the consumer brand data, they even build that much inventory. Um, they moved around the planet a lot, um, to get it in the right place to avoid tariff risks, including our products into China and Europe, but they didn't build a lot of inventory. Um, so they don't have that much actually to unwind. Um, so, you know, we should get some relief on that as well. We hope. And then, of course, the revenue we just talked about in methanolysis starting to kick in and, you know, the ARP that really ramps up in q1. We have our normal Innovation, that's always driving some growth. Um, and then the cost actions is the last part that should also help. Um, as you, uh, have ramped up the cost of action through this year, that should annualize into an advantage for q1.

Thank you.

Thank you. Our next question. Comes from Alexia from keycorp. Your line is now open. Please go ahead.

No.

There was extreme strong interest in this 'twenty one into 'twenty into 'twenty four.

And they saw this opportunity but.

The economic determinant of seeing the value in realizing the value depends on the end market and consumer actually being there to buy it.

And when you have consumer durable markets being soft.

And not growing very much last year.

Uh, thank you. Good morning. Uh, Mark could you just discuss this Dynamic? It was renew. Um, your customers seem to be interested in the specialty applications for the polymer but they're not actually buying the volumes. So how do you gauge their their real interests and and sort of ability to pay for for for the price that you charging for renew?

On how much they wanted to try and launch new products in that soft environment, you have to remember that.

The building construction demand I'm sorry.

Consumer durable demand in 'twenty, four is probably 5% to 15% below 2019, depending on the product and its connected to homes can't remember home sales.

All home sales are triggering event for durables, right and Thats down 20%.

That's a great question. It's it's come up a number of times you know the the value of renew is to put it in a product as a way to differentiate their product and being different on the shelf, right? And and they do that to get a better price point to get some volume growth. So, that's how any of these, especially on the consumer durable side of things. Think about the the value of this content

so,

In 24 versus <unk> 19 in the U S and Europe, and China is even worse, so the underlying market.

Triggering events to buy new products is weak.

So in that context, well, it's great to see we still have over 100 customers. We only have one cancel their commitment to renew the rate in which they're launching that renew into new products and getting volume from the consumers is just limited by the end market constraints.

There was extreme strong interest in this, you know, in 21 and the 20 into 24 uh as they saw this opportunity. Um but you know the economic determinant of seeing the value and realizing the value depends on the you know, in market and consumer actually being there to buy it.

Um, and when you have consumer durable, markets being soft.

The good news is the pent up demand is accumulating these appliances are all getting really old for one bought in Covid.

Um, and not growing, uh, very much, uh, last year, you know, they're a little hesitant on how much they, you know, wanted to try and launch new products in that soft environment you have to remember that.

And so you expect that at some point with some stability in the economy.

Youre going to see pretty significant resurgence in demand.

Because it's adding up under the curve from 'twenty two to now the trade War of course has made the challenge even worse this year as I described earlier.

So it doesn't change our confidence barring any difference if they're really not interested they cut the cut the orders and theyre not doing that.

Makes sense.

And second question on fibers.

Why are volumes just stable next year in terms of your expectations I thought we had some weaker tax styles. This year and also you had some customer destock could you just talk about these dynamics, how do you see them evolving next year.

Building construction demand, I mean, sorry. Um, consumer durable, demand in 24, is probably 5 to 15% below, 2019, depending on the product, and it's connected to home sales. You remember, home sales, all home sales are triggering event for durables, right? And that's down 20%, um, in in 24, versus 19 in the US and Europe, and China is even worse. So, the underlying Market, you know, a triggering events to buy new products is, is weak. Um, so in that context, while it's great to see, we still have over 100 customers. We only have 1 cancel, their commitment to renew the rate at which they're launching that renew into new products and getting volume from the consumers is just limited by the in Market constraints.

Yes, Theres a lot of moving parts inside the fibers business.

And as I mentioned in the second quarter call.

So you you expect that at some point with some stability in the economy?

About 40% of the challenges in fibers.

It is not associated the tow business right. So to your point textiles, which was a source of growth to offset.

So market decline up through 24, and then it nicely.

You're going to see a pretty significant Resurgence in demand uh because it's, you know, adding up uh under the curve from 22 to now and the trade war. Of course, just made the challenge even worse this year as I described earlier,

Suddenly flipped in this whole tariff issue that we've run into where we had modest growth year over year in the first quarter that then flips to a mid single digit headwind, whether it's housewares our textiles.

so it doesn't change our confidence. If they're really not interested, they cut the, you know, cut the orders and they're not doing that.

Or appliances.

In may after the tariffs announced in April created a headwind there.

And it's turning out to be a bit more than we thought. So we told you $20 million headwind, we think it's more closer to 30 million headwind for the back half of this year.

Makes sense. Uh and the second question on fibers, uh why are volumes uh, just stable next year, in terms of your expectations, I thought we had some weaker textiles this year and also you have some customer dto. Could you just talk about these Dynamics? How you see them evolving next year?

As we sort of go through the back half so.

That is a real headwind in textiles now the good news about textiles. This is a cyclical demand change it's not structural.

Yeah, there's a lot of moving parts inside the fibers business. Um, and as I mentioned in the second quarter call.

About 40% of the challenges in fibers.

So when we think about.

In recovery you know, we already can see some places where we're gaining some share we're trying to move outside of China for the reciprocal tariffs are hurting us into China with their product.

Two other markets and so we were confident we can rebuild that business and we'll start doing some of that next year.

The whole stream had less demand. So we had a 20 million dollar headwind out of asset utilization across the stream.

Is not associated with the toe business, right? So to your point textiles, which was a source of growth to offset Toe to Toe, market, decline up through 24 and has done it nicely. You know, something flipped in this whole tariff issue that we've run into where we had, you know, modest growth here over here in the first quarter that then flips to a good single digit headwind. Whether it's housewares or textiles or you know, appliances

In the back half of the year. This impacting that's the part that's impacting fibers.

Some higher energy costs.

Probably doesn't become a tailwind, but the textiles and the utilization can reverse and become a tailwind as we go into <unk> into next year and the following years. So that takes you new to the remainder which is tow. Obviously there was a pretty significant step down in tow volume. This year that was driven by the destocking.

The more we dig into it the more we learn about inventory.

Our customers built in tow was pretty significant.

Due to all the concerns they had about reliability supply when the market was so tight.

And now that the market's a bit looser.

They're feeling because of that capacity out in China.

Feeling they can take that inventory down and that's the vast majority of what the drop is.

In the in May after the Tariff announced in April created a headwind there. Um, so and it's turning out to be a bit more than we thought. So we told you 20 million headwind. We think it's more closer to 30 million headwind for the back half of this year, uh, as we sort of go go through the back half. Um, so, you know, that is a real headwind in textiles. Now, the good news about textiles. This is a cyclical demand change, it's not structural. Um, so when we think about um, in recovery, you know, we already can see some places where we're gaining some Cher. We're trying to move out outside of China where the reciprocal tariffs are are hurting us, uh, into China with our product, um, 2 other markets and so we we we're confident, you know, we can rebuild that business and we'll we'll start doing some of that next year, you know, the whole stream had less demand so we had a 20 million dollar head 1 out of asset utilization across the stream.

I mean, we don't expect it to get worse next year, but we do expect it to continue into next year and to some degree lesson, but it's a little hard to call. It's a bit like what we've been going through with the medical Destocking, it's not a single year.

In the back, half of the year that's, you know, impacting that's the part that's impacting fibers. We had some higher energy costs that

Destock.

And then there was some share.

That was.

<unk> by the industry to the new entrants and so we're adjusting to that dynamic from China.

And as we look at that we think that the share situation stabilizing destocking will continue but not get worse and when you put that together, if we manage our positions correctly in the marketplace.

Probably doesn't become a Tailwind, but the textiles and the asset utilization can reverse and become a Tailwind as we go into into next year and the following years, so that takes you to, you know, to the remainder, which is toe. Um, obviously there is a pretty significant step down in toe volume this year. Uh, that was driven by the, the stocking. Uh, you know, the more we dig into it. The more we learn the amount of inventory. Um,

Our customers built in toe is pretty significant. Um, due to all the concerns, they had about reliability Supply, when the market was so tight.

We should have stable volume.

Thanks Mark.

Thank you next.

Our next question comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead.

Hi, good morning, apologies, if I missed it but on the Pepsi contract can you remind us in rough terms, what the initial agreement looks like and what is prompting restructuring of that agreement.

Yeah.

So the Pepsi contract was was a very important foundational baseload contract to give us confidence in building the second plant.

So the volumes, which we have not disclosed due to the confidentiality with Pepsi.

You know is sufficient to baseload.

Second plant at 100000 tons of scale.

She is similar to the one we currently have built here, which will now be 30% greater than that with our debottlenecking capability.

Um, and, uh, and now that the Market's a bit looser. You know, they're, they're feeling because of the acid in China, um, they're feeling, they can take that inventory down and that's the vast majority of what the drop is. Um, I mean, we don't expect it to get worse next year, but we do expect it to continue into next year into some degree, less lessen, but a little hard to call. It's a bit like what we've been going through with the medical ding. It's not a single year, uh, dto. Um, and then there was some share, um, you know that was you know, lost by the industry to the new entrance. And so we're adjusting to that Dynamic um, from China. Um, and as we so as we look at that, we think that the the share situation, stabilizing destocking will continue, but not get worse. And when you put that together, you know, if we manage our positions correctly in the marketplace, um, you know, we should have stable volume.

Thanks Mark.

Thank you.

So that contract provided provisions to give us confidence in the revenue that would come from it both in.

Patrick Cunningham from 60 Group. Your line is now open. Please go ahead.

Price stability.

That would move.

With the changes in our key variable costs on feedstock and energy.

Hi, good morning. I apologize if I missed this, but on the Pepsi contract. Can you remind us? It's been rough terms with the initial agreement looks like and and what is prompting restructuring of that agreement.

And it would give us.

Committed volumes.

In that contract and that contract is obviously designed around when that second plant would start.

Uh, so the Pepsi contract was was a very important foundational base. Load contract to give us confidence in building the second plant.

Which is obviously even back then a couple of years out.

The <unk>.

Change when we say restructuring is we've been very successfully working with them.

Um, so the volumes which we've not disclosed, um, due to confidentiality with, with Pepsi, um, you know, is sufficient to base load a second plan at a 100,000 tons of scale.

On how to move that volume into next year start the volume next year.

So you know, they're one of the companies that certainly see a lot of value in.

Which is similar to the 1. We currently have built here, which will now be 30% greater than that, with our development capability. Um,

Our pet in and recycling content, one have high quality products on the shelf.

And that's.

So they're interested in volume next year.

And that's the restructuring is pulling forward the start of that contract.

Great and then just at a high level, how should we think about Ci earnings next year, you had some asset utilization tailwind cost reduction and is there anything encouraging youre seeing from either trade regulations or perhaps planned asset rationalization that may be helpful. Paul.

Changes in our key variable costs on feed stock and energy. Um, and it would give us, um, you know, committed volume, uh, in in that contract and in that contract was obviously designed around when that second plant would start,

you know, which is obviously even back, then a couple years out, um, the

Where that inflection point there.

Yes, it's a good question. So first of all obviously we're in.

We're in a manufacturing recession across the entire business that started in 'twenty two and we're now in our third actually going into our fourth year of being in a recession and there is no precedent in the history of this right I know nine or 2020.

Change. When we say restructuring is, you know, we've been very successfully working with them on how to move that volume into the next year. Start the volume next year.

So you know, they're 1 of the companies that certainly see a lot of value and and our pet and the and recycling content want to have high quality products on the Shelf.

Do you have a sharp drop and then a sharp recovery in everyone's sort of goes and move.

Moves on.

So it's hard to look at the current situation for a precedent and you also have a lot more capacity out of China being dumped on the planet.

Um, and uh, and so they're interested in in in, in volume next year. Um, and that's the, the restructuring is pulling forward, the start of that contract.

At very low prices, so the ci dynamic in the whole commodity industry.

Large is going through a fairly unique situation.

To answer your question I do think.

There is.

A lot of rationalization of capacity going on in Europe, and it's expected that will continue I think the Chinese government is trying to make some impacts on rationalization, but it's unclear how much.

Great. And then just at a high level, you know, how should we think about CI earnings next year or you have some apps that utilization Tailwind cost reductions? And is there anything encouraging you're seeing from, you know, either trade regulations, or perhaps plans at that, you rationalization that maybe helpful forward and inflection points. There

You know how far they will go on that but.

But without a doubt capacity is coming out of the marketplace.

But the market's loose so its little hard to know exactly when that's going to tighten the market's up and get back to some more stable conditions.

So that's one dynamic and it's a little hard to call I can I can definitely tell you the back half of this year is definitely at the bottom.

From a competitive cash cost point of view with.

The Chinese are pricing into the into these markets.

Outside the U S. The tariffs are providing a bit of protection to the margins to us in North America. So the second challenge we have.

Is that the North American market, which is where we predominantly sell everything we make if we can.

Yeah, it's a good question. I mean. So first of all, obviously we're we're in we're in a manufacturing recession, uh, across the entire business. You know, that started in 22 and we're now in our third actually going into our fourth year of being in a recession and there's no precedent in history of this right in 09 or 2020. You know, you have a you have a sharp drop and then a sharp recovery and everyone sort of goes and and moves on. Um, so it's it's hard to look at the current situation for a precent and and you also have a lot more capacity out of China being sort of dumped them on the planet. Um, at very low prices. So the CI Dynamic, and the whole commodity industry, and in in large is going through a fairly unique situation. Um, to answer your question. I do think,

Always has higher margins.

And.

And as an attractive market. So when the trade war impacted demand in building construction and in consumer durables.

We didn't get a lift in recovery in housing that everyone expected at the beginning of this year.

You know the the demand of those products in this market came down and that's a mix hit because.

Uh, there is um, a lot of rationalization of capacity going on in Europe and and it's expected that will continue. I think the Chinese government is trying to make some impacts on rationalization but it's unclear how much and how you know how far they will go on that. Um but without a doubt capacity is coming out of the marketplace um but the Market's loose so it's a little hard to know exactly when that's going to tighten the markets up and get back to some more stable conditions.

Margins here, a lot better than the export markets, which have become very challenged with the Chinese.

Capacity being sort of put a put on the global market.

So recovery in demand on housing interest rates, causing housing recover and durables recover well.

And immediately started improving the mix and earnings value of Ci. So that I believe will help next year, because I think odds are that some of that demand will get better than where we are right now.

Uh, so that's 1 Dynamic and it's a little hard to call. I can I can definitely tell you the back half of this year is definitely at the bottom. Um, from a competitive cash cost point of view with with how the Chinese are pricing into the into these markets. Um, from a outside, the US, the tariffs are providing a bit of protection to the margins to us in North America. So the Second Challenge we have, um, is that the North American Market? Which is where we predominantly want to sell everything we make. If we can, uh, always has higher margins.

We also as I mentioned just have a lot more volume to sell next year. So we'll have that benefit and then we have a lot of aggressive cost structure as you know going on in reducing the costs here in this year as well as next year in Ci picks up a good portion of that cost. So there are a number of reasons CRE earnings can get better.

But at this stage I think you would be cautious on just how much spreads would improve until we see more insight.

Um, and, uh, as an attractive market, so when the trade war impacted demand in building and construction, in consumer durables, um, or we didn't get a lift in recovery in housing that everyone expected at the beginning of this year, um, you know, the demand for those products in this market came down, and that's a mix hit because.

On the sort of broader market dynamics.

Margins here, a lot better than the export markets which have become very challenged with the Chinese. Um, capacity. Being sort of put up put on the global market. Um,

Thank you.

Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Please go ahead.

so, you know, recovery and demand on housing, interest rates causing housing recovery and durables recover will

Yes, thank you very much.

So firstly I wanted to ask you broke up fiber sounds as.

The business that has that's facing cyclical and not structural headwinds and I'm just wondering in the past few quarters. We've been hearing you know whether it's from a yield that you lost some share.

In China, it's been coating teams or from other players about inter layers et cetera that there has been competitive pressure in China and I'm wondering are there any chemical change where you are actually seeing.

You know, start improving the mix and earnings value of CI so that I believe will help next year because I think odds are, you know, some of that demand will get better than where we are right now. Um, we also, as I mentioned just have a lot more volume to sell next year. So you know, we'll have that that benefit. Um, and then we have a lot of aggressive cost structure as, you know, going on and reducing the cost here. Um, in this year, as well as next year and CI, picks up a good portion of that cost. So there are a number of reasons CI earnings can get better. Um, but at this stage I think you you would be cautious on just how much spreads would improve until we see more insight uh on on the sort of broader market dynamics.

More structural supply coming in China, where earnings and volumes could go lower in the next few years.

And in the case of field. So coating additives is they shouldn't have been having this year more cyclical or structural.

Yeah.

Thank you. Our next question, comes from Salvatore Tiana, from Bank of America. Your line is now open. Please go ahead.

And there's a lot of questions buried in that question, so I'm going to try to hit them.

First I just want to clarify when we talked about what's going on in fibers.

The cyclical part as textiles.

Where that demand in a lot of it is sold into China.

Come off we don't really have much competition in that product and a direct like a product that we make in our <unk>.

But obviously theres constant substitution going on across different.

Chemistries of textiles, which is where we're winning all of our share because our product is so much more sustainable.

Then the other markets that we sell into and that's why we're confident long term in that product I mean, when you have a 60% biopolymer with reset.

Recycled plastic is the other feedstock and it's to me.

Macro fibers are entirely biodegradable environment, you have a lot of growth opportunity. So we're feeling great about that market and our ability to grow in it.

Has been competitive pressure in China and I'm wondering, are there any chemical change where you are actually seeing um more structural Supply coming in China and where earnings and volumes could go lower in the next few years. Um and in the case of films or coding additives is the issue you've been having this year, more cyclical or structural.

When you asked the question around where we are.

Losing some share there is the lower value partner of inner layers is the architectural business and we lost a bit of share more.

Yeah, there's there's a lot of questions, you know, buried in that question. So I'm going to try and hit hit them. Um, first I just want to clarify when we talked about what's going on in fibers. Um, the cyclical part is textiles.

More than we expected this year, which we are regaining back in contracts for next year.

And then coalescence as a competitive product where the Chinese have.

Equal coalescence, and so competition within China is pretty intense and so we've walked away for some <unk> walked away from some share there.

Um where that demand? And a lot of it is sold into China, uh has come off, we don't really have much competition in that product in a direct like product that we make in our na yarn. But obviously there's constant substitution going on across different for, you know, different chemistries of textiles, uh, which is where we're winning all of our share because our product is so much more sustainable.

They're now starting to pick up some share in some other parts of the world. So those dynamics exist, but for the vast majority of what's in <unk>.

Uh, than the other markets that we sell into. And that's why we're confident long-term in that product. I mean, when you have a...

60% biopolymer with

Am and AFP, we are fortunate where innovation is strong and our competitive positions are strong we don't really face that much direct competition.

From from China capacity at this point.

recycled plastic as the other feed stock and it's, um, the microfibers are entirely biodegradable. You have a lot of growth opportunities. So we're feeling great about that market and our ability to grow in it. Um, when you ask the question around where we're

And the dynamics by far and whats going on.

From 'twenty two through 'twenty five is more about end market volume demand that's associated first with out of control inflation that led to out of controlling interest rate hikes to the trade war just to make things more interesting so.

Those are the key things that are driving the situation up to this point.

We don't have any signs of significant capacity being built in our specialties.

That would be coming online.

We can see at this stage.

Perfect.

One quick one on buybacks I think.

May have missed it but I think last quarter. There was a comment about committing to more buybacks next year alone each year easily still the case.

So I would say is obviously, we're always disciplined when it comes to capital allocation.

Closing some share. There is, you know, the lower value part of inner layers is the architectural business and uh, we we lost a bit of share, more than we expected this year. Um, which we are regaining back in contracts for next year. Um, and then coalescence is a competitive product where the Chinese have, you know, equal coalescence. And so competition within China is is pretty intense. And so we've walked away for some walked away from some share. Their, they're now starting to pick up some, share some other parts of the world. So, you know, those Dynamics exist, but for the vast majority of what's in, um, am and AFP, we are fortunate where Innovation is strong and our competitive positions are strong. We don't really face that much direct competition, uh, from from China capacity at this point. Um,

Bought another $50 million in addition to our dividend in Q3.

We've completed the buybacks that we expect to do this year with keeping our net debt flat on a year over year basis.

What I would tell you is as we think about the scenarios that Mark described.

Obviously, we're confident in our dividend in 2006 and going forward.

And the Dynamics by far in what's going on in new from 22, through 25 is more about in-market volume, demand that's associated first with out of control inflation, that led to out of control, interest rate hikes to then a trade War just to make things more interesting. So um, you know, those are the key things that are driving the situation up to this point. Um, and we don't have any signs of significant capacity being built in our specialties

Obviously, we don't let the cash sit on the balance sheet, but making sure net debt is aligned with and.

Um that would be coming online, you know uh that we can see at this stage.

Moving back towards our two five times the goal will put the rest of the cash to use but we'll update you in January on what are the range of buybacks can look like.

Perfect. Then uh, 1 quick 1 on BuyBacks, I think there I may have missed it, but I think last quarter, there was a comment about committing to more BuyBacks next year than this year. Is this still the case?

Okay. Thank you very much.

Thank you. Our next question comes from Josh Spector from UBS.

Your line is now open. Please go ahead.

Yes, hi, good morning, I wanted to go back to the initial questions around the bridge to 'twenty six.

Really clarify the basis for when Youre thinking about what we should be breaking off of because I think in your comments you were adding back inventory actions in the second half, but we know you over produced in the first half.

Should we be thinking about that additive to the full year or is that additive to the second half I think that's kind of the difference between getting to $5 50 versus something like 650, and Etfs as a base expectation for 2026.

So, what I would say is obviously, we're always disciplined when it comes to Capital allocation, uh, We've bought another 50 million. Uh, in addition to our dividend and Q3, uh, we've completed the BuyBacks that we expected to do this year, uh, with, uh, keeping our net debt flat, uh, on a year-over-year basis. And what I would say is, as we think about, uh, you know, the scenario is that Mark described, uh, obviously uh, we're confident in our dividend and 26 and going forward, uh, and obviously, we don't, but, uh, cash sit on the balance sheet, uh, but making sure that debt is aligned with, uh, and, you know, moving back towards our 2 and a half times the goal. We'll put the rest of the cash to use, but, uh, we'll update you in January on what the the range of BuyBacks could look like,

Hoping you can clarify that.

Yes, Josh this is really so on the utilization front, obviously, we've been talking about a first half second half as you also look at.

Perfect, thank you very much.

Thank you. Our next question, comes from Josh Spectre from UBS

The Line is now open. Please go ahead.

Yeah.

The volume and the demand outlook that Mark described we've more than offset the inventory build that we had in the first half and expect to do that by the end of the year and that should give us utilization benefits as we're going through a more normalized year of stable demand that that's growing.

On a year over year basis, so as we think about utilization you're at a minimum have 50 million a day.

Yeah. Hey, good morning. Um, I want to go back to the initial questions around the bridge to 26 and just really clarify the basis for when you're thinking about what we should be bridging off of. Because I think in your comments, you know, you were adding back inventory actions from the second half, but we know you overproduced in the first half.

Due to the absence of inventory depletion on a year over year basis.

And that ultimately upside comes from there to the 75, depending on how much other demand drops to the bottom line.

so you know, should we be thinking about that additive to the full year or that additive to the second half? I think that's kind of the difference between getting to 550 versus something like 650, an EPS as a base expectation for 2026 so hoping you can clarify that thanks.

Yeah, and I think that just on the underlying volume scenario.

Volumes were down.

Tried to be clear about is.

Don't use the first half or don't use the second half to put them together and that is a better assumption about what the volume.

Yes, Josh, uh, this is Willie. So, you know, on the utilization front, the obviously we've been talking about, uh, first half second half, as you also look at, uh, you know,

<unk> decline for this year is because of all these dynamics going on.

It would be around a 4% decline of eminent as I sat around the 2% decline in AFP.

From a volume point of view building off of that volume base into next year.

And then you have the overlay of all the things like the first question on where things might grow.

Yeah.

Yes, no I appreciate that that makes sense and I guess related point I guess on combining the volumes I mean, your first half volumes were down low single in the second half was may be down high single I guess, when you look at customer order patterns and what they are talking about do you expect that to grow over the first half basis.

Here and that should give us utilization benefits, as we're going through a more normalized year of stable demand. That's that's growing, uh, on a year-over-year basis. So, as we think about utilization, you had a minimum at 50 million, uh, due to the absence of inventory depletion uh on a year-over-year basis. Um and that, you know, ultimately upside comes from there to the 75 depending on how much other demand drops to the bottom line.

Yeah, I think that just on the underlying volume scenario just for the volumes. Um, what I tried to be clear about is

Or because of the exit rate are volumes actually down in first half and came here thinking and then its easy comps in the second half.

Well for sure the back half is going to be easy comps. So we can answer that question on the front half.

don't use the first half or don't use the second half, but put them together and and that's a better assumption about what the volume, you know, decline for this year is because of all these Dynamics going on,

It's a little complicated, though exactly how we entered the front half of this year.

How that plays out, especially Q1 right because you got remember in Q1.

Um, it would be around a 4% decline am. And as I said around the 2%, decline in AFP and so, you're you're from a volume point of view. You're Building off of that volume bass into next year.

Our view of the economy, along with everyone else in the industry and our customers was pretty positive right. They thought demand was gonna be relatively stable theres got to be some modest growth here and there that it would be lower interest rates at some point.

And then, you know, you have the overlay of all things like, first question on, for things micro.

And so our volume underlying market volume was up about low.

Low single digits when.

When we look at some of the places that we sell into especially in advanced materials.

And our whole strategy in volume build manufacturers built around that will continue for the rest of the year, that's why things flip so much on destocking so in the back half.

Yeah. No, I appreciate that. That makes makes sense. And I guess, I mean, related point, I guess on combining the volumes, I mean your first half volumes were down low single. Your second half is maybe down 5 single. I guess when you look at customer order patterns and what they're talking about, do you expect that to grow over the first half basis or because of the exit rate or volumes actually down in first half

In terms of your base thinking and then it's easy comps in the second half.

So when you think about.

That change and.

And exactly how much of all the inventory is depleted.

From all of this pre buy in the first half and some of that drag into the first quarter. We just don't know.

Well for sure the back app's going to be easy comp so we can answer that question. Um on the front half, um I think it's a little complicated to know exactly how we entered, the front half of this year um and how that plays out, especially q1, right? Because government q1.

We are confident in Q1 will be better than Q4.

It's a little hard to say exactly how it will compare to Q1 of last year, where you have to just wait till we get to January to answer that question.

Thank you.

You know, our view of the economy along with everyone else in the industry and our customers was pretty positive, right? They thought demand was going to be relatively stable. There's not be some modest growth here and there about that would be lowering interest rates at some point. Um, and so our volume, the underlying Market volume was up about

Thank you. Our next question comes from Kevin Mccarthy from vertical Research partners. Your line is now open. Please go ahead.

Yes, Thank you and good morning, Mark with regard to your Pepsi contract is there any downside financial risk to Eastman now that Youre rethinking the second plant or is it the case that there's really no downside risk because you either protected contracts.

Those single digits, uh, when we look at some of the places, you know, that we sell into especially in Advanced Materials, um, and our whole strategy, and, and volume build and Manufacturing, it's built around. That would continue for the rest of the year, that's why things, you know, flip so much on decking. So, in the back half,

<unk> or you can perform against the contract through supply from Kingsport.

When you think about, you know, that that change you know and how exactly how much of all the inventories depleted, you know, for all from all those pre-b Buy in the first half and you know, it says some of that dragged into the first quarter, we just don't know.

Well first of all we feel great about having them as a partner we feel great about them seeing the value of recycled content and the importance of recycling their packaging in the market and creating a closed loop.

Um you know we're confident in q1 will be better than Q4. Um it's a little hard to say exactly how it'll compare to you know q1 of last year we're going to have to just wait till we get to January to answer that question.

Understood, thank you.

And they've been a true leader in the industry on this front.

Thank you. Our next question, comes.

And we're proud to have them as our baseload.

Research partners.

When it comes to the contract.

The Line is now open. Please go ahead.

We believe the way the contracts structured we can reliably supply them from Kingsport and the Debottleneck that we're doing to get that extra 30%.

And the different ways, we can configure polymer lines to support what they need.

So clearly we want that baseload contract to support a second plant.

But with the actions that we've taken we're in a position to support them from.

The different existing lines and how they can be configured.

Yes, thank you and good morning. Uh Mark with regard to your Pepsi contract. Is there any downside Financial Risk to Eastman now that you're rethinking the second plan? Or is it the case that there's really no downside risk because you're either protected contractually, or you can perform against the contract through Supply from Kingsport?

And the margins are attractive.

Give us a good return on investment around and it renews. So we're happy to support support them.

Great and then.

Question I think you've raised your dividend every year since 2010.

And with the actions you've taken it looks like you've really.

Well, first of all we feel great about having them as a partner. We feel great about them, seeing the value of recycled content, the importance of recycling, their packaging in the market and creating a closed loop. Um, and uh, and they've been a true leader in the industry on this front. Um, and, and we're proud to, to have them as our base load. But when it comes to the contracts,

Supported the cash flow I think you said approaching $1 billion. So given that's the case would it be reasonable to expect that streak of annual dividend increases too.

<unk> I realize it's a board decision but.

It does seem like you're generating enough cash to do that any thoughts along those lines Mark.

um, you know, we believe the way the contract structured, you know, we can reliably Supply them from Kingsport and the dubal neck that we're doing to get that extra 30% and and the, and the different ways we can configure polymer lines, uh, to support what they need. Um, so, you know, clearly we want that base load contract to support our second plant, um, but with the actions that we've taken, we're in a position to, uh, support them from the

Well first thanks for the question and bringing up how solid and attractive our dividend is.

Which is well covered by our cash flow as you also recognized.

The different existing lines and how they can be configured in the margins are attractive and give us a good return on investment around, you know, renew. So we're happy to support them.

Yeah to your point it is a board decision and we're not going to get in front of me that process, but we do have a record of 15 consecutive years and I think that speaks for itself.

Great. And then as a second question, I I think you've raised your dividend every year.

Also as you've seen our most recent dividend.

They haven't really significantly impacted the cash flows that are required to ultimately fund the dividend going forward and we do have a strong cash flow that we would expect in 2026.

Thanks.

Thank you.

Our next question comes from Frank Mitsch from Fermium Research. Your line is now open. Please go ahead.

To expect that streak of annual dividend increases to uh perpetuate. You know, I realize it's a board decision but, uh, it, it does seem like you're generating enough cash to do that. Any thoughts along those lines, mark?

Thank you so much and if I could get a little more granular on the outlook question gone back.

Beginning of August the expectation was <unk> would be in line, if not better than <unk> and then in September we indicated that <unk> might be a little bit weaker than <unk>, and obviously with last nights guide things Scott even weaker so I'm wondering if you can speak to the pace of activity.

That you've seen in the past couple of months and what are your what are your order books are suggesting here for November in.

How confident can you be that that this is the bottom.

That's a good question, Frank and as you may exist.

Well, first, uh, thanks for the question and bringing up, uh, how solid and attractive our dividend is, um, which is well covered by our cash flow as you also recognized, uh, you know, to your point. It is a board decision and we're not going to get in front of that process, but we do have a, a record of 15 consecutive years. And I think that speaks for itself. Um, also, as you've seen our most recent dividends, uh, they haven't really significantly impacted, uh, you know, the cash flows that are required to ultimately fund the dividend going forward and, uh, we do have a strong, uh, cash flow that we would expect in 2026.

Thanks.

We spent a lot of time.

I'm trying to understand how the market dynamics that we're in right now and it is a very chaotic time, it's hard to even get high quality data to know what's going on in the marketplace and so we're doing everything we can to understand it.

Thank you. Our next question comes from Frank Mitch from famine and research. Your line is now open. Please go ahead.

The dynamic we're seeing from the Q2 call to September to now.

Thank you so much. Um and if I could get a little more granular on the Outlook question, you know, going back.

And what's changed is as demands nothing else has changed our cost plans are on track in fact, we're probably being a bit more aggressive in cost management.

The challenges that we face.

Yeah.

Price cost relationships on spreads and everything else are holding up as we expected.

Uh, at the beginning of August, the expectation was Q4 would be, you know, in line, if not better than Q3. Then in September, we indicated that Q4 might be a little bit weaker than Q3, and then obviously last night's guidance showed that things got even weaker. So I'm wondering if you can speak to the pace of activity.

So it really is just a question of end market demand and how it's trending.

And it really connects back to this question, which is just where exactly is consumer demand right now.

Uh, that you've seen uh, in the past couple months and you know, what are your what are your order books suggesting here for November and you know how confident can you be that that that this is the bottom?

How it's changed after April.

That's a good question, Frank. And as you may exist, you know, we we spent a lot of time.

As well as.

This is just how much inventory is out there that was what was built in warehouses all over the country in the U S or warehouses with our Triton another cellulosic et cetera in China that was bought ahead of potential risk on those retaliatory tariffs getting worse or et cetera.

So we don't know exactly how long that's going to take clearly with the way the order patterns have evolved where we thought it was going to be relatively short.

In July.

It was dragging out through the back half of the year.

But it's you know the thing that gives us comfort is.

We just haven't build that much inventory as I said earlier in total from what we can see from all the public companies that we sell to where the retailers.

Trying to understand all the the market dynamics that we're in right now and it is a very chaotic time. It's hard to even get high quality data to know what's going on in the marketplace. And so we're doing uh, everything we can to, to understand it. Um, the dynamic, whether it get from the Q2 call to September to now. Uh, and what's changed is is demand, nothing else has changed or it costs plans are on track. In fact, we're probably being a bit more aggressive in the cost management with the the challenges that we face. Um, the, you know, price cost relationships on spreads and everything else are holding up as we expected. Um, so it really is just a question of in market demand and how it's trending.

So theres a limit on just how much they can do this but it depends on where consumer demand goes so all of those dynamics are in play.

Um, and it really connects back to this question, which is just where exactly is consumer Demand right now. Um, you know, and how it's changed, you know, after April, uh, as well as um,

In the fourth quarter is always a wildcard.

Especially as you go through the quarter.

October is.

<unk> so.

So we feel good about that.

And we're just going have to see how things trend. We are encouraged for example in especially plastics with these customers that are very long supply chain to make consumer durables talking to us already about planning for higher orders in Q1, So that's that's encouraging but.

Way too early to call exactly how this is going to play out from a precise timing point of view.

Okay understood and you did mentioned that you are becoming a little bit more aggressive on the cost reduction front and you announced a 7% head count reduction can you talk to the.

You know, this, you know, just how much inventory is out there that was was built in warehouses all over the country in the US or warehouses with our Triton and other you know, cello 6 Etc in China that was you know bought ahead of you know, potential risk on on those retaliatory. Tariffs getting worse or or Etc. Um, so we don't know exactly how long that's going to take clearly with the way, the order patterns have evolved, where we thought it was going to be relatively short back and, and July, you know, is dragging out through the back half of the year. Um, but it's, you know, the thing that gives us Comfort is

To the locations and geographies.

And how much of that is embedded in that $175 million and cost cuts that you're that you're expecting between 25 and 26.

We just haven't built that, much inventory. As I said earlier, uh, in total from what we can see, from all the public companies that we sell to, uh, where the retailers. So there's a limit on just how much they can do this this, but it depends on where consumer demand goes. So, all those Dynamics are in play

Frank.

On the cost cost discipline, it's fundamental part of the Eastman is and our strategy.

I would also say that the cost reductions that we set out and thats, a very aggressive level of cost reductions for both 25 and 26.

Both to offset some of the declines in fibers and chemical intermediates that may not be recovered and its also been foundational to our ability to basically support our growth and our gross spend for innovation.

And you know, the fourth quarter is always a wild card, uh, you know, especially as you go through the quarter um, October uh, Revenue in as expected. Uh, so we feel good about that, um, and we're just going to have to see how things, you know, friend. We are encouraged for example, and especially Plastics, with these customers that are on a very long supply chain to make consumer, durables talking to us already about, you know, planning for higher orders in q1. So that's that's encouraging. But

Way too early to sort of call exactly how this is going to play out. You know, from a precise timing point of view.

As I think about this year.

Okay, understood and you did mention that you're becoming a little bit more aggressive on the on the cost reduction front. You, you announced the 7% headcount reduction. Can you talk to the

Our net savings.

Savings is going to exceed the $75 million.

<unk> that we set out at the beginning of the year and the momentum that we've gained in the back half gives us confidence now that we can raise next year's net number to $100 million on top of that.

Uh, to the locations, the geographies. Um, um, and and you know how much of that is, uh, embedded in that 175 million in Cost Cuts that you're that you're expecting between 25 and and 26.

As you think about gross numbers, that's in excess of $300 million of cost reduction actions.

It's really driven by three core areas.

<unk> productivity.

It's also being competitive on both the manufacturing and functional standpoints and now with the acceleration in AI, how do we bring that to scale within Eastman.

Both in our commercial as well as our manufacturing areas.

Our ability to basically support our growth and our growth spend for Innovation. Um,

As you talked about 7% to 7% as our head count that we started at the beginning of the year, what we expect to be at the end of the year. So.

you know, as I think about this year,

We've been doing that effectively across our enterprise.

Both in response to the environment that we're in.

But also as we think about how do we compete in a world that's only going to continue to raise the bar as we think about excellent.

Our net uh savings is going to exceed the 75 million uh Target that we set out as a beginning of the year and the momentum that we've gained in the back half, gives us confidence now that we can raise next year's, net number to uh 100 million on top of that. You know, as you think about gross numbers that's uh an excess of 3 million dollars of cost reduction actions.

So as we think about reclaiming productivity I think there's been studies post COVID-19 that demonstrated a loss of productivity.

At least 8%.

And that also was compounded with the impact of retirements that both happened at Eastman as well as across the chemical sector of a lot of knowledge. So this is not just a normal productivity offsetting labor, it's going above and beyond to recapture productivity more.

It's really driven by by 3 core areas, it's effectively productivity. Uh it's also being competitive on, both the manufacturing and functional standpoints and now with the acceleration of AI, how do we bring that to scale within Eastman, uh, both in our commercial as well as our manufacturing areas?

Broadly and the only way that you get that we've been investing in capability training structure.

And how we get work done.

As you think about areas beyond just productivity.

Part of this we just announced optimizing our footprint. We've continued like we have in the past to look at how we should manage the supply chain supply chains have all client put an inordinate amount of cost both through tariffs and logistics over the past several years and the example that.

As you talked about uh, the 7%, the 7% is, you know, our headcount uh, that we started at the beginning of the year where we expect to be at the end of the year. So uh, you know, we've been doing that effectively across our Enterprise um, both in response to the environment that we're in. Uh but also as we think about, how do we compete uh, in a world that's only going to continue uh, to raise the bar as we think about excellence.

So, as we think about reclaiming productivity, uh, I think there's been studies postco that have demonstrated a loss of productivity of at least 8%. Uh,

We optimized here in Q3 with the announcements around how we're going to run our films business basically from a regional asset footprint, which is resulting in some restructuring here in the U S of our assets. So we will continue to transform how we do.

You know, and that also was compounded with the impacts of retirements uh that both happen at Eastman as well as across the chemical sector of a lot of knowledge.

Maintenance.

Also how we think about reliability and you've got to have the right partners. So we've gone through transformations this year of changing out partners across.

So this is not just normal productivity in all setting labor, it's going above and beyond uh, to recapture productivity more broadly. And the only way that you get that we've been investing in capability training structure, uh, and how we get work done,

A couple of our large assets both here in Tennessee, and Texas and as you think about we're getting that benefit run rate here in the back half that gives me confidence that we're going to deliver the $100 million as well as we go into next year and from there it's AI.

This is where it gets really exciting as you think about in our technology space right. This is where we can ultimately.

To reduce the cost of innovation the speed to market as we look at a predictor.

Predicting what formulations are going to be the right formulations to take to market and also as we think about.

Uh as you think about areas Beyond uh just productivity, you know, part of this, we just announced uh optimizing our footprint. We've continued uh like we have in the past to look at how we should manage these Supply. Chains Supply, chains have soft put an inordinate amount of cost, both through terrorists through Logistics over the past several years. And the example that uh, we optimized your in Q3 was the announcement around. How we're going to run our films business. Basically, from a regional asset footprint which is resulting in some restructuring here in the US of our assets.

The capacity.

That we need and where we need that.

Finally, I would just give the example on the commercial front right.

Ultimately as we think about commercial commercial excellence that Mark has highlighted on pricing.

We're using AI when it comes to <unk>.

Setting up compelling offers how we generate returns off of those offers and also how.

So we will continue to transform how we do maintenance. Uh, also how we think about, uh, reliability. And you've got to have the right partners. So we've gone through transformations this year, changing out partners across uh, a couple of our large assets, both here in Tennessee and Texas. As you think about it, we're getting that benefit run right here in the back half.

We build off of that and win new business. So those are our spectrum right sizing the cost so that we can invest in innovation for the long term and we're on track to deliver both here in 'twenty five 'twenty six.

That gives me confidence that we're going to deliver the 100 million as well as we go into next year. And from there, it's AI. Uh, you know, this is where it gets really exciting as you think about, in our technology space, right? This is where we can ultimately

Thanks, so much Willie.

reduce the cost of innovation, the speed to Market, as we look at

Yeah.

Thank you.

Our next question comes from Mike Sison from Wells Fargo. Your line is now open. Please go ahead.

Hey, good morning.

When you think about the portfolio that you have now.

I think the hope over the last decade was to move it to more specialty type areas. Your multiples compressed a lot. When you think about what to do for the next five years or so do you think you didn't make any changes the results granted unprecedented times.

It has been difficult. So when you think about things to do to improve the portfolio any thoughts there.

Predicting, what formulations are going to be the right formulations to take to Market and also, as we think about the, the capacity, uh, that we need. Um, and where we need that? Uh, finally, I would just give the example on the commercial front, right? We're ultimately, as we think about commercial commercial, Excellence, that Mark has highlighted on pricing, we're using AI when it comes to, you know, setting up compelling offers how we generate returns off of those offers and also how, um, we build off of that and and win new business. So those are a spectrum. We're right sizing the cost so that we can invest in Innovation for the long term and

Hi, Mike. Thanks for the question. So you know, we're always thinking about our portfolio and we're always thinking about you know where we want to go in the future I want to emphasize that the core strategy. We've put in place that really goes back over a decade to be an innovation centric company is absolutely.

Contract to deliver both here in 2025 and in 2026.

Thanks so much Willie.

Our next question comes from Mike. Susan from Wells. Fargo, your line is now open. Please go ahead.

The correct strategy, especially as one to get through through all this chaos defend valued market share because you have differentiated products in the market the customers need right you find a way to launch new products you create your own growth. So we fundamentally believe that strategy is the correct strategy and we've now added on a much more aggressive cost management program.

To go with it right. So it used to be pre COVID-19, we had productivity that offset inflation, we're clearly going way beyond that now because we realized that we have to be more competitive.

The results. Granted the precedent times um, has has been difficult. So when you think about things to do to improve the portfolio, any thoughts there?

And these are market situations.

No.

Yeah that concept that strategy allows us to get our normalized EBITDA back.

Towards the what we talked about since the deep dive in November and we're still operating on a strategy but.

And portfolio has been important for US right. We've shown a lot of discipline to sell parts of our portfolio when it didn't make sense like tires adhesives, the Texas acetic acid plant, but if you go back even further.

We demonstrated a willing to really convert our portfolio to be especially so we sold off a huge amount of commodities about $3 5 billion, leading up to 2012. We then did a series of acquisitions that were quite large like salute solution to <unk> and some bolt ons.

Really change the quality of our portfolio in a pretty dramatic fashion.

So we know how to do M&A, we know how to do integrations, we know how to buy assets at a rational price.

Hey Mike, and thanks for the question. Um, so you know, we're always thinking about our portfolio and we're always thinking about, you know, where we want to go in the future, I want to emphasize that the core strategy we put in place that really goes back over a decade to be an innovation Centric company is absolutely um the correct strategy especially as 1 to get through through all this chaos. So you defend value and market share because you have differentiate products in the market, the customers need, right? You find a way, you know, to launch new products, you create your own growth. So we fundamentally believe that strategy is the correct strategy. And we've now added on a much more aggressive, cost Management program to go with it, right? So it used to be free Co, we had productivity that offset inflation. We're clearly going way beyond that now, because we realize that we have to be more competitive, um, in in these, uh, Market situations. Um, so,

So we're always thinking about these kind of opportunities without a doubt.

The industry is going to be going through a lot of significant change right now.

With all that you see going on across the peer set.

So.

And of course, we are thinking about how our portfolio should evolve in this context.

I mean, we're not going to say more than that.

Uh, you know, that concept that strategy allows us to get our normalized evida back, you know, to towards uh what we talked about since the Deep dive in November and we're still operating on that strategy but you and and portfolio is is been important for us, right? We've shown a lot of discipline to sell parts of our portfolio when they didn't make sense like tires adhesives, you know the Texas acetic acid plant.

Yes, and then in terms of the as a quick follow up when you think about the normalized EBITDA.

but if you go back, even further,

When you're talking about a year ago, a little over $2 billion or so is it less volume to get there now given your cost savings is there any major changes to the walk or is it still fairly similar in many we need some volume to get there.

Well I think that.

Without a doubt volume as the story and the challenge that we've had since 2022.

You know we demonstrated a willing to really you know, convert our portfolio to be specially. So we sold off a huge amount of Commodities about 3 and a half billion leading up to 2012. We then did a series of Acquisitions that were quite large like sole solution to Minco and some bolt-ons to really change the quality of our portfolio in a pretty dramatic fashion. Um, so we know how to do m&a, we know how to do Integrations, we know how to buy assets at a rational price. Um, so you know, we're always thinking about these kind of opportunities, you know, without a doubt.

We need volumes stabilize we just need economy stabilizing volume to get a bit better in that context innovation accelerates when customers are confident and think there's a stable environment. They want to launch new products or try and gain share and win.

Um, the industry is going to be going through a lot of significant change right now um with all that you see going on uh across uh the pure set. Um so

So volume not just from the market, but from innovation accelerates.

You know, of course we're thinking about how how, you know our portfolio should evolve in this context.

But I mean, we're not going to say more than that.

The cost reductions that we're doing.

We discussed our significant and lower our cost structure in a material way a lot of that is being masked this year because of the dollar.

Sequential headwind of utilization that we've encountered in managing our inventory because the world didn't grow as expected.

And so you can't really see the cost benefits this year, but as you move into next year with the volumes. If we're in a scenario where volumes are stable this year economy as stable.

Yeah. And then, in terms of the fee in terms of the quick follow-up, but you think about the normalized ebit? Uh um, you talked about a year ago, a little over 2 billion or so is it less volume to get there? Now, given your cost savings is, is there any major changes to the walk? Or is it? It's still fairly similar and we need, we need some volume to get there.

You get the acceleration of all of that cost cutting as well as that utilization tailwind kicking in.

So you do get a benefit from volume, but you also get a benefit from leveraging a much more competitive cost structure.

And it's important to keep in mind that a lot of that headwind.

We've encountered with volume this year, because we had these large sites like Tennessee has a lot of vertical integration and fixed cost it's painful when the volume goes down like you've seen it's also extremely attractive when the volume comes back the incremental margins will be very attractive.

Thank you.

Well, I I think that, um, without a doubt volume is the story and, and the challenge that we've had since 2022. Um, and we need volume stabilized. We just need economy stabilized and volume to get a bit better in that context. Innovation accelerates when customers are confident and think there's a stable environment they want to launch new products to try and gain, share and win. Um, so volume not just from the market, but but from Innovation accelerates, um, the cost reductions that we're doing that. That Willie discussed our significant and lower our cost structure in the material way. A lot of that is being masked this year because of the million dollar sequential headwind of utilization that we've encountered in managing our inventory, because the world didn't grow as expected. Um,

Thank you.

Next question comes from our investment from RBC capital markets. Your line is now open. Please go ahead.

And uh and so you can't really see the cost benefits this year. But as you move into next year with the volumes, you you know, if we're in a scenario where volumes are stable this year, economy is stable

Right.

Great. Thanks for taking my question most of my questions have been answered I guess just wanted to maybe you can elaborate on some of the choices, you're making between giving up some maybe lower value business and the market share losses, and what that kind of means for the future. As you look into 2026 does that set you up for maybe some improved margin performance or how should we think.

About that thanks.

So we're always optimizing our asset base. This has been a core part of our strategy.

You know we started on this right. If you think about just the simple idea that Eastman <unk> got got competitive we moved into a whole set of co polyesters that we've made with some proprietary monomers that upgrade that value. Then we came out with Triton, which really upgraded the value in a very proprietary product.

Um, you know, you get the acceleration of all that cost cutting as well as that utilization tail, when you know kicking in. Um, so you do get a benefit from volume but you also get benefit from the leveraging a much more competitive cost structure. Um, and it's important to keep in mind that a lot of that headwind that, you know, we've you know, encountered with volume this year because we are have these large sites like Tennessee that has a lot of vertical integration and fixed cost. You know, it's painful when the volume goes down, like you've seen it's also extremely attractive when the volume comes back. The incremental margins will be very attractive.

Ive.

Thank you.

Thank you. Our next question comes from our investment Athen. From RBC Capital markets, your line is now open. Please go ahead.

How it has been so successful.

<unk> P T assets that we started with in fact the trade in line, we are adding right now.

That is how the <unk> lines first PT line, we've added in decades, because we're constantly valuing up the asset basis. We have same is true in <unk>, where theres a standard interlayer to one that had acoustics. That's the one that has HUD et cetera.

So this idea of optimizing our asset base to drive returns.

Great. Thank you for taking my question. Um, most of my questions have been answered, I guess just wanted to maybe because elaborate on some of the choices you're making between um giving up some, maybe lower value business and the market share losses and what that um kind of means for the future. As you look into 2026, is that set you up for maybe some uh improved uh, margin performance or how should we think about that? Thanks.

And move to higher ground is embedded in our strategy forever.

So, you know, we're always optimizing our asset base. This is a been a core part of our strategy since

So theres always choices you're making.

When you look at some of the lower value.

Products.

And.

Replacing them with higher value products and upgrading mix, we have lots of charts. We've shown you in past investor days on how that's worked and we're always doing that but right now with the market being soft and the other value some low value applications as asset utilization and running the assets full so you want to make sure you're always keeping that balance in place.

And with all the drama we've been through in the end markets. We freed up some capacity just because demand is off and so we're trying to reassert.

Some of the lower value applications back into the mix to drive asset utilization then as the economy recovers, we will value up that mix again like we always do.

You know we we started on this, right? If you think about just the simple idea that Eastman May P that got competitive, we moved into a whole set of copolyesters that we made with some proprietary monomers, that upgraded that value. Then we came out with Triton, which really upgraded the value, um, in a very proprietary product, um, and how it's been so successful, you know, on the same PT assets that we started with, in fact, the Triton line we're adding right now um that that that 80,000 lines, the first PT line we've added in decades because we're constantly valuing up the asset basis, we have same as true and inner layers, where there's a standard in layer to 1 that had acoustic that the 1 that has HUD Etc,

Um, so this idea of optimizing our asset base to drive, you know, returns, um, and move to Higher Ground is in our strategy forever.

Thanks.

Okay.

Thank you.

Our next question comes from John Roberts from Mizuho. Your line is now open. Please go ahead.

Um, so there's always choices you're making, you know, you know, where where you look at some of the lower value, you know, products, um, and um,

Thank you.

Bottles, you expect renewed to be used in a consistent way or is it going to be maybe blended at different levels do you expect any differentiated marketing around renew and bottles.

We do John I think different brands, both on the specialty side by the way as well as on our pet packaging.

Replacing them with higher value, products, and upgrading and mix. We have lots of charts. We've shown you in past investor days on how that's worked, and we're always doing that. Um, but right now with the market being soft, the other value of some low value applications is actually utilization and running the assets full so you want to make sure you're always keeping that balance in place. Um, and you know, with all the drama we've been through in the in markets, you know, we've freed up some capacity just because the

Making different choices about what percentage of recycled content they want to put in a bottle.

Demand is off and so we're trying to reassert and and add some of the lower value applications back into the mix to drive acid utilization. Then, as a con recovers will value of that mix again. Like we always do.

It can be 50% recycled content in some places it can be 100 and another place.

It ties to what they want to do on marketing on the label and it ties to what they want to do in achieving corporate goals.

Thanks.

Thank you.

Of recycled content.

The company overall versus what they put on a package. So it's a full spectrum out there on how companies are doing that we provide you know because of the way we can flex our assets we can.

Our next question comes from John Roberts from mizuho. Your line is now open. Please go ahead.

Put whatever level of recycled content they want.

The product.

I am very seamlessly so we.

Um, thank you in pet bottles. Do you expect renew to be used in a consistent way? Or is it going to be uh, maybe Blended at different levels and do you expect any differentiated marketing around? Renewing bottles.

No, we flex or whatever is most valuable to the consumers and we have good prices for the different levels of value.

Is there an average level in your plan.

I would say that at the moment our expectation is when you look at the specialties in the ARPA combined together, it's probably going to be around 50% for a while.

You'll have products that are going 100% you'll have some there are 50% and then you have products that.

We do John. I think different brands. Um, both on the specially side, by the way, as well. As on on our pet packaging are making different choices about what percentage of recycled content. They want to put in the bottle and it's going to be 50% recycled content. Some places it can be 100 and another place. Um, you know, it ties to what they want to do on marketing on the label and it ties to what they want to do in achieving corporate goals.

<unk> debt.

Some cases might be lower but.

Somewhere on average I'd say when you look at sort of that 50% to 75% range is sort of where the recycle content.

Land, but.

It's really evolving what I expect to see happen as people go with.

Lower level of recycled content when the economy is as stressed as it is because there's a premium they are paying for it but they want to make progress on their goals. They wanted to demonstrate commitment to the consumers and then as the economy stabilizes it will start ramping up to a higher level of recycled content.

Of recycled content, you know, for for the company overall versus, you know, what? They put on a package so it's a full spectrum out there on how companies are doing that we provide, you know, because of the way we can, you know, Flex uh our assets we can, you know, put whatever level of recycled content they want uh into the product.

I'm very seamlessly. So um, you know, we Flex whatever is most valuable to the consumers and we have, you know, good prices, you know, for the for the different levels of value.

Is, is there an average level in your plan?

You know when they have better economics to afford it.

Thank you.

Thank you. Our next question comes from Duffy Fischer from Goldman Sachs. Your line is now open. Please go ahead.

Yeah, Good morning Fellows.

We've had a number of announcements from your AG Chem customers about.

These are having in the market a number of consultants you are talking about pretty big structural changes there with the Chinese pushing harder into those markets. When you look through the view of your intermediates chemicals into the AG Chem industry. Do you think you have the right position or do you see changes, which can affect you and cause you would have to change your business model there.

I I would say that at the moment, our expectation is, when you look at the Specialties in the rpe combined together, it's probably going to be around 50% for a while, uh, you'll have products that are going 100%, you'll have some that are 50%, and then you have products, you know that that, uh, you know, some cases might be lower. But, you know, somewhere on average, I'd say when you look at somewhere than 50 to 75%, range is sort of where the recycle content, uh, you know, will will land. But, you know, it's really evolving. What I expect to see happen is people go with a, you know, a lower level recycled content. When the economy is as stressed as it is, because there's a premium, they're paying for it, but they want to make progress on their goals. They want to demonstrate commitment to the consumers.

Okay.

Yeah, we're very fortunate to have a very strong relationship with a lot of the top companies.

And then, as the economy stabilizes, they'll start ramping up to a higher level of recycled content. Um, you know, when they have better economics to afford it,

And the vast majority of our businesses in North America, where.

thank you.

Where we make these intermediates in there and they are sold.

Here.

We're also very fortunately aligned with winners in the marketplace like Cortez when were providing the sort of key ingredients have been unless product. So.

Thank you. Our next question comes from Duffy Fischer from Goldman Sachs. Your line is now open. Please go ahead.

Yes.

We're in a better position because we are just not as exposed to all the competition in the battle that's going on in South America, which I think is what you're probably getting at.

And the tariffs of course.

To get in the U S are sort of helping them.

Manage some of the pressure here.

So I think we feel relatively good we're not having any conversations with our customers at this point at least.

Yeah, good morning fellas. Um, we've had a number of announcements from your egg cam customers about uh, difficulties are having in the market. A number of Consultants were talking about pretty big. Structural changes there with the Chinese pushing harder into those markets. When you look through the view of your intermediate chemicals into the egg chemistry. Do you think you have the right position or do you see changes? It's going to affect you and you know cause you to have to change your business model there.

They are concerned about.

About <unk>.

They are positioned in North America.

Great.

And then.

As you've seen some weakness in your downstream.

Toll business and textiles business, there does that mean youre going to run your kind of acid Teal has changed at lower operating rates or will you have to push into more acid kills derivatives upstream from those markets.

That is the beauty of having an innovation driven company. So you know a long time ago, we knew that.

The demand would not be.

Are there for tow we've been lucky that it's declined at a relatively slow rate.

A very strong relationship with a lot of the top a companies. Um, and the vast majority of our businesses in North America, uh, where we make these intermediates and, and they're and they're sold, you know here. Um, we're also very fortunate to be aligned with winners in the marketplace like corteva when we're providing the sort of key ingredients of the list products. So, you know, we're in a better position, you know, because we're just not as exposed to all the competition and battle that's going on in South America, which I think is what you're probably getting at, um, and the tariffs, of course, you know, you know, to get in the US or sort of helping, um, manage some of the pressure here.

But we've been building a whole innovation portfolio as we discussed at the deep dive last November around how to.

Take cellulosic.

Polymer into a wide range of new applications right. So textiles was one of those applications, which was doing its job you know to sort of offset that so as I said earlier.

So, I think, you know, we feel relatively good, we're not having any conversations, uh, with our customers at this point, at least, uh, you know, where they their concerned, you know, about their position in North America.

But the events of program is still having great progress going forward. This is the foamed silos.

Polymer that can replace expanded polystyrene food trays, you knew go into straws et cetera. All this foodservice areas, where you can't really do recycling because of the way the product is contaminated and it completely biodegrade. So we have a lot of growth opportunity in huge markets and events that we can serve and we've got some great IP positions are.

Great. And then um, as you've seen some weakness in your Downstream um you know, toe business and the the textiles business there, does that mean you're going to run your kind of asset to change at lower operating rates or will you

To push into more acetil derivatives Upstream from those markets.

Some of those products and we also have some specialties that are very high value micro beads that are made out of nylon acrylic being replaced by a biodegradable cellulosic for cosmetic formulations that we can replace polyethylene coating on paper Cups, and paper wrappers around candy bars or whatever it was.

That is the beauty of having an innovation-driven company. Um, so you know, a long time ago, we knew that, you know, the demand would not be, you know, forever there for for toe. We've been lucky that it's declined at a relatively slow rate.

The biodegradable polymer so our whole portfolio is an action obviously the volumes are still relatively low and building, but we have great traction with our customers. So that's how you drive overall company Xtreme utilization because this team has always gone into specialties in am and AFP as well as toe.

Generally a lot of value in those segments.

And we're going to keep growing and expanding.

Through those to keep the whole stream vital.

Great. Thanks Fellas.

Let's make the next question the last one please.

Last question comes from Laurence Alexander from Jefferies. Your line is now open. Please go ahead.

Good morning, Thanks for squeezing me in just a very quickly can you give a sense for how much.

Um, but we've been building a whole Innovation portfolio as we discussed at the Deep dive last November around how to take um, cellulosic, you know, polymer into a wide range of new applications, right? So textiles was 1 of those applications which was doing its job, you know, to sort of offset that tows, I said earlier. Um, but the event to program is still having great progress going forward. This is the foamed cellulose. Um polymer that can replace expanded poly, starving food trays, you know, going to straws Etc and all this food service areas where you can't really do recycling, because of the way, the product, um, is contaminated and it completely biodegrade. So we have a lot of growth. Uh opportunity, huge markets, uh, in Aventa that we can serve. And we've got some great IP positions around some of those products. And we also have some Specialties that are very high value. Uh, micro beads that are made out of nylon acrylic being replaced by a biodegradable cellulosic for cosmetic formulations that we can replace Polly.

The shift is happening in terms of re shoring of appliance capacity.

In the U S. Maybe as a possible catalyst for 27% 28, I'm just thinking about like GE Louisville at announcement and things like that and.

And secondly, with the Chinese five year plan as your initial read on the kind of first drafts being circulated that it's a net positive because they need their emphasizing innovation in <unk>.

Gasoline coding on paper cups and and paper wrappers around candy bars, whatever. Um the biodegradable polymer. So our whole portfolio is in action. Obviously, the volumes are still relatively low and building but we have great traction with our customers. So that's how you drive overall company stream utilization because this stream has always gone into Specialties and am and AFP as well as toe. Um, and generate a lot of value in those segments.

More formulated products or is it a negative in the sense that they were emphasizing profit sharing to encourage and incentivize consumption. So lower return on capital for the chemical industry, there and everything that entail.

And we're going to keep growing and expanding, you know, through those to keep the whole stream vital.

Great. Thanks, fellas.

Let's make the next question. The last 1, please.

So on the re shoring question.

Perfect. The last question comes from Lawrence Alexander. From Jeffrey's, the Line is now open. Please go ahead.

I think that you will see people reassuring to the U S.

And we'll see the benefit of that you know there are companies that have been leaders in doing that like whirlpool in New Orleans I think after all this pre bought inventory.

Good morning. Thank you for squeezing me in. Just very quickly, can you give us a sense of how much...

Of a shift is happening in terms of reshoring of Appliance capacity.

But having the first half gets exhausted.

In the US maybe as a possible Catalyst for 27 and 28. I'm just thinking about like the G, Louie Phillip announcement, and things like that.

They'll see benefits to their position in the U S and we will see more of that if U S. MCA gets preserved I think you'll see it not just in the U S. But also in places like Mexico.

That will continue to be built as well as people still moving to other places like southeast Asia, where the tariffs are still quite a bit lower than than doing it in China. These days. So we're following our customers wherever they go.

And secondly, with the Chinese 5-year plan, as your initial read on the kind of first drafts being circulated that it's in that positive because they need, you know, their emphasizing Innovation and, and, and more formulated products, or is it a negative in the sense that they're emphasizing profit sharing to encourage and incentivize consumption? So,

But it takes a oilfield plants so it doesn't happen overnight.

Lower return on capital for the chemical industry there and everything that entails.

So we'll see how that plays out over time.

So on the reassuring question,

Regarding the latest Chinese five year plan.

I have to admit I'm not an expert on that plan. So I don't want to get into territory of details I don't really know.

What I would say as you know from what we see in the China market is uniquely chat.

Challenge, that's part of the global challenge, where they don't have consumer demand growing very much there because of the stress of the collapse of the housing market.

And they're adding a lot of manufacturing capacity and aggressively exploring it and that's creating strained in the country and it's also creating extreme around the world, which is leading to these tariffs that you start seeing happening not just here, but you're going to see them in other countries. So.

The China government has got a lot of complexity manage there.

And their excess capacity is not helping their local economy or the for the world's economy and.

Hopefully some of the actions, we're talking about to sort of rationalize capacity to.

To be more appropriate that they actually do but we're just going have to wait and see what they what they do on that front and hopefully they stimulate some consumer demand in China, which would certainly help their economy a lot.

Thank you.

Thanks again, everyone for joining us. We appreciate you taking time with us and I hope that you have a great day and great rest of your week. Thanks again.

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

Over time, I regarding that, the latest Chinese 5-year plan, uh, I have to admit, I'm not an expert on that plan. Um, so I don't want to get into territory, uh, of details. I don't really know. Um, what I would say is, you know, from what we see in the China Market is uniquely challenged, that's part of the global challenge where they don't have consumer demand growing very much there because of the stress of the collapse of the housing market, um, and they're adding a lot of manufacturing capacity and aggressively exporting it and that's creating strain in the country and it's also creating strain around the world, which is leading to these tariffs that you start seeing happen. Not just here, but you're going to see them in other countries. So I think the China government's got a lot of complexity to manage their um and their excess capacity is not helping their local economy or the or the world's economy and

Hopefully, some of the actions they're talking about to sort of rationalize capacity to be more appropriate that they actually do, but we're just going to have to wait and see what they what they do on that front and hopefully they stimulate some consumer demand in China, which would certainly help their economy a lot.

Thank you.

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