Eastman Chemical Q4 2025 Eastman Chemical Co Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Eastman Chemical Co Earnings Call
Today's conference is being recorded, this call is being broadcast live on the Eastman website at www. Eastman.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.
William McLean, Executive Vice President and CFO and Jake Lao senior manager, investor relations.
Yesterday after market closed, we posted our fourth quarter and full year 2025 Financial results news release and SEC 8K filing.
Our slides and the related prepared remarks in the investor section of our website eastman.com.
Before we begin, I'll cover 2 items.
First during this presentation, you will hear certain forward-looking statements concerning our plans and expectations.
Factual events or results could differ, materially certain factors related to Future? Expectations are or will be detailed in our fourth quarter and full year 2025 Financial results news release
During this call and the preceding slides and prepared remarks. And in our filings with the Securities Exchange Commission, including the form, 10 K filed for 4 year 2024 and the Forum 10K to be filed for a full year 2025
Second earnings referenced in this presentation, excludes, certain non-core, and unusual items. Reconciliations to the most directly comparable. Gaap Financial, measures and other Associated disclosures, including a description of the excluded and adjusted items are available in the fourth quarter and full year 2024 Financial results news release
As we posted the slides, and accompanying report prepared remarks on our website. Last night, we will now go straight into Q&A Becky, please. Let's start with our first question.
Thank you. Our first question comes from Josh Spectre from UBS. Your line is now open. Please go ahead.
Yeah. Hey good morning. Um I wanted to ask 2 things on fibers here to start first, you know, can you talk a bit more about the actions you're taking how the shut down impacts earnings through the year and second, if you could talk about cellulose a little bit and your ability to pass through costs there, if prices go up due to changes in Supply Behavior,
Sure, and good morning Josh. Um, so fibers obviously is a top priority for us as we've been focusing on how we manage that business and stabilize it after what happened last year. Uh, before I get into some of the actions we're taking in context of matters and so I'm going to just remind you something we said before we're Co is certainly the largest driver in the drop in the volume.
Um and we held prices actually relatively well and spreads last year. Um but that about 40% of the ebit drop is actually not toe, right? So you've got about a thirty million dollar decline that was Terror driven in the textile business where normally that's growing to offset market decline in toe and said It reversed in in the in the negative Direction. With all the
Tariff pressure and consumer pressure. Uh, the second was the overall stream, you know, slowed down uh because of, you know, reduced demand across the country using cellulose and that was about a 20 million headwind and utilization and energy cost for about 15 million dollars higher. So there are multiple levers toe plus everything else in this portfolio that matter. Um, when it comes to the toe side of things,
Um we feel good that we've stabilized, the volume situation this year relative to last year in our contracts with our customers. I did include a bit of a modest price decline to make that happen. Um and what what that price decline really is about, is there were some customers um, that had higher prices in the marketplace and they pulled in to be more in line with the broader Market. Um, and and to where we are today. So stable and the volume. We're assuming when we say stable is assuming, um, our customers are at their contract minimums because we do expect, the stocking will continue through this year.
Um, like it did last year as a reminder, you know, we uh have contracts last year too.
Mark Costa: This year relative to last year in our contracts with our customers. It did include a bit of a modest price decline to make that happen. And what, what that price decline really is about is, there were some customers, that had higher prices in the marketplace, and they pulled into being more in line with the broader market, and, and to where we are today. So stable, and the volume we're assuming when we say stable, is assuming, our customers are at their contract minimums, because we do expect destocking will continue through this year, like it did last year. As a reminder, you know, we, have contracts last year, too.
Mark Costa: This year relative to last year in our contracts with our customers. It did include a bit of a modest price decline to make that happen. And what, what that price decline really is about is, there were some customers, that had higher prices in the marketplace, and they pulled into being more in line with the broader market, and, and to where we are today. So stable, and the volume we're assuming when we say stable, is assuming, our customers are at their contract minimums, because we do expect destocking will continue through this year, like it did last year. As a reminder, you know, we, have contracts last year, too.
Um, and we started the year thinking people would be buying in their normal range of the contract. And then, as we told you, through the year, they moved to their contract minimums. Um, but we held them to that. That's why they have to continue destocking this year, uh, to get to where they want to be. Um, and so, and q1 is starting out a little bit like the contract commitments and our annual contracts. Um, so but they have some readability, uh, flexibility around the quarters. And we expect the first quarter to start off a little soft,
And this year, relative to last year, in our contracts with our customers, I did include a bit of a modest price decline to make that happen. Um, and what that price decline really is about is there were some customers, um, that had higher prices in the marketplace, and they pulled in to be more in line with the broader market—um, and to where we are today. So, stable on the volume. We're assuming when we say stable, it's assuming, um, our customers are at their contract minimums because we do expect the stocking will continue through this year.
Um since our guide is um and then they will ramp up as you go through the year and normally the back half is a Little Bit Stronger. Anyway, as they both channels ahead of the tax increases, that normally happen every January,
So, we feel good about that. Um, obviously
Mark Costa: And we started the year thinking people would be buying in their normal range of the contract, and then as we told you through the year, they moved to their contract minimums, but we held them to that. That's why they have to continue destocking this year, to get to where they want to be. And Q1 is starting out a little bit light. The contract commitments are annual contracts, but they have some ratability, flexibility around the quarters, and we expect the first quarter to start off a little soft, hence our guidance. And then they will ramp up as you go through the year, and normally the back half is a little bit stronger anyway as they load channels ahead of the tax increases that normally happen every January. So we feel good about that.
And we started the year thinking people would be buying in their normal range of the contract, and then as we told you through the year, they moved to their contract minimums, but we held them to that. That's why they have to continue destocking this year, to get to where they want to be. And Q1 is starting out a little bit light. The contract commitments are annual contracts, but they have some ratability, flexibility around the quarters, and we expect the first quarter to start off a little soft, hence our guidance. And then they will ramp up as you go through the year, and normally the back half is a little bit stronger anyway as they load channels ahead of the tax increases that normally happen every January. So we feel good about that.
Um, like I did last year, because—a reminder, you know—we, uh, have contracts last year too.
There are a bunch of actions in addition to stabilizing that business, directly that, you know, we're taking so cost reduction actions across the company uh, that significant cost reduction goal that we have this in the 125 to 150 range to build on a hundred million dollars last year. Decent portion of that goes towards fibers uh with some of the actions we're taking specifically on how to optimize
How we operate our assets, more efficiently.
Um, and we started the year thinking people would be buying in their normal range of the contract. And then, as we told you through the year, they moved to their contract minimums. Um, but we held them to that. That's why they have to continue destocking this year to get to where they want to be. Um, and so Q1 is starting out a little bit like with contract commitments and our annual contracts. Um, so, but they have some readability, uh, flexibility around the quarters. And we expect the first quarter to start off a little soft since our guidance. Um, and then they will ramp up as you go through the year, and normally the back half is a little bit stronger anyway, as it road channels ahead of the tax increases that normally happen every January.
Mark Costa: Obviously, there are a bunch of actions in addition to stabilizing that business directly that, you know, we're taking. So the cost reduction actions across the company, that significant cost reduction goal that we have, that's in the $125 to 150 million range to build on $100 million last year. Decent portion of that goes towards fibers, with some of the actions we're taking specifically on how to optimize how we operate our assets more efficiently. The growth in textiles, we're seeing, you know, growth start to come back slowly, but it's coming back. We expect that to build through the year. We are expanding our efforts. So today, we've mostly focused on selling Naia filament, which is a very high-value product in the textile market. There is another product, which is staple. It's short fibers that you use.
Obviously, there are a bunch of actions in addition to stabilizing that business directly that, you know, we're taking. So the cost reduction actions across the company, that significant cost reduction goal that we have, that's in the $125 to 150 million range to build on $100 million last year. Decent portion of that goes towards fibers, with some of the actions we're taking specifically on how to optimize how we operate our assets more efficiently. The growth in textiles, we're seeing, you know, growth start to come back slowly, but it's coming back. We expect that to build through the year. We are expanding our efforts. So today, we've mostly focused on selling Naia filament, which is a very high-value product in the textile market. There is another product, which is staple. It's short fibers that you use.
Um, so we feel good about that. Um, obviously,
Um, the growth in textiles we're seeing, you know, growth start to come back slowly but it's coming back. We expect that to build through the year. Um, we are expanding our efforts. So today, we've mostly focused on selling Nia filament, which is a very high value product in the textile Market. Um, there is another product which is staple, it's short fibers that you use. Um, it's a more economic product, typically goes into things like Denim and fleece and it's a huge Market.
Um, and so the margins are not as good, but they're still reasonably attractive. And so we're ramping up our effort already, got sales, uh, you know, for this year and we're going to try and wrap that up as another way to drive asset utilization.
And then on the broader stream, question around cellulose.
There are a bunch of actions in addition to stabilizing that business directly that, you know, we're taking. So, the cost reduction actions across the company—uh, that significant cost reduction goal that we have is in the $125 to $150 million range, to build on $100 million last year. A decent portion of that goes towards fibers, uh, with some of the actions we're taking specifically on how to optimize.
How we operate our assets, more efficiently.
You know, we have the event of product currently lives in corporate other, but, you know, that product is moving forward. Um, we're going through a lot of product, qualifications last year and we expect volumes, uh, to build this year, especially in food phrase, and Cutlery and straws, um, and so that'll drive stream visualization as well. So a lot of different actions that we're taking, uh, they will build through the
Mark Costa: It's a more economic product, typically goes into things like denim and fleece, and it's a huge market. So the margins are not as good, but they're still reasonably attractive, and so we're ramping up our effort. Already got sales, you know, for this year, and we're gonna try and ramp that up as another way to drive asset utilization. Then on the broader segment question around cellulosics, you know, we have the Aventa product, currently lives in corporate other, but you know, that product is moving forward. We're going through a lot of product qualifications last year, and we expect volumes to build this year, especially in food trays and cutlery and straws. So that'll drive segment utilization as well. So a lot of different actions that we're taking, they will build through the year.
It's a more economic product, typically goes into things like denim and fleece, and it's a huge market. So the margins are not as good, but they're still reasonably attractive, and so we're ramping up our effort. Already got sales, you know, for this year, and we're gonna try and ramp that up as another way to drive asset utilization. Then on the broader segment question around cellulosics, you know, we have the Aventa product, currently lives in corporate other, but you know, that product is moving forward. We're going through a lot of product qualifications last year, and we expect volumes to build this year, especially in food trays and cutlery and straws. So that'll drive segment utilization as well. So a lot of different actions that we're taking, they will build through the year.
Year, so how we get to uh the number this year, um, and and stabilize it.
Um, the growth in textiles were seeing, you know, growth, start to come back slowly but it's coming back. We expect that to build through the year. Um, we are expanding our efforts. So today, we've mostly focused on selling Nia filament, which is a very high value product in the textile Market. Um, there is another product which is staple, it's short fibers that you use. Um, it's a more economic product, typically goes into things like Denim and fleece and it's a huge Market.
Um, and so the margins are not as good, but they're still reasonably attractive. And so we're ramping up our effort already, got sales, uh, you know, for this year, and we're going to try and wrap that up as another way to drive asset utilization.
And then, on the broader stream, a question around cellulose.
We'll we'll sort of build through the year as we as we build on all the different actions we're taking when it comes to price, you know, and the toe business, most some of the prices do have cpts in them, um, and allow for adjustment for, you know, changes in raw material and energy costs. So, a number of those contracts will adjust if you won't um and the textile prices are Market based so you know, we can raise prices. Um, but in this weak environment I would not assume we're raising prices a lot outside of the cpt's, you know, managing some of the headwind.
You know, we have the event of product currently lives in corporate other, but, you know, that product is moving forward. Um, we're going through a lot of product, qualifications last year and we expect volumes, uh, to build this year, especially in food trays and Cutlery and straws. Um, and so that'll drive stream of utilization as well. So a lot of different actions that we're taking, uh, they will
Mark Costa: So how we get to the number this year and stabilize it will sort of build through the year as we build on all the different actions we're taking. When it comes to price, you know, on the tow business, some of the prices do have CPTs in them and allow for adjustment for, you know, changes in raw material and energy costs. So a number of those contracts will adjust, a few won't, and the textile prices are market-based, so, you know, we can raise prices. But in this weak environment, I would not assume we're raising prices a lot outside of the CPTs, you know, managing some of the headwind. So that's sort of where we're at. You know, we're pulling every lever we've got.
So how we get to the number this year and stabilize it will sort of build through the year as we build on all the different actions we're taking. When it comes to price, you know, on the tow business, some of the prices do have CPTs in them and allow for adjustment for, you know, changes in raw material and energy costs. So a number of those contracts will adjust, a few won't, and the textile prices are market-based, so, you know, we can raise prices. But in this weak environment, I would not assume we're raising prices a lot outside of the CPTs, you know, managing some of the headwind. So that's sort of where we're at. You know, we're pulling every lever we've got.
Um, so that's sort of where we're at. You know, we're pulling over level. We've got um, this is incredibly important source of earnings in even more important source of cash flow and we take this business very seriously and what we're going to do,
Build through the year, so how we get to the number this year, and stabilize.
Okay, that thank you.
Our next question, comes from David begler from Deutsche Bank. Your line is now open. Please go ahead.
Thank you. Good morning.
Mark looking at a chemical. Intermediates are there. Other actions or options you're looking at to
We do see earnings volatility of this business.
It. We'll, we'll sort of build through the year as we as we build on all the different actions we're taking when it comes to price, you know, and the toe business, most some of the prices do have cpts in them, um, and allow for adjustment for, you know, changes in raw material and energy costs. So, a number of those contracts will adjust if you won't um and the textile prices are Market based so you know, we can raise prices. Um, but in this weak environment I would not assume we're raising prices a lot outside of the cpt's, you know, managing some of the headwind.
Absolutely David. And um, first of all, you know, the biggest action we're taking we've already told you about, which is
Mark Costa: This is incredibly important source of earnings and even more important source of cash flow, and we take this business very seriously in what we're gonna do.
This is incredibly important source of earnings and even more important source of cash flow, and we take this business very seriously in what we're gonna do.
Uh the ETP project. Uh so we have a project to take our bulk offline which is the biggest driver of earnings challenge in the segment.
Um, so that's sort of where we're at. You know, we're pulling over level. We've got, um, this is an incredibly important source of earnings, an even more important source of cash flow, and we take this business very seriously. And what we're going to do,
[Analyst] (Deutsche Bank): Okay, thanks.
David Begleiter: Okay, thanks.
Operator: Thank you. Our next question comes from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.
Okay, that thank you.
Our next question comes from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.
[Analyst] (Deutsche Bank): Thank you. Good morning. Mark, looking at Chemical Intermediates, are there other actions or options you're looking at to reduce the earnings volatility of this business?
David Begleiter: Thank you. Good morning. Mark, looking at Chemical Intermediates, are there other actions or options you're looking at to reduce the earnings volatility of this business?
Thank you. Good morning.
Given how the that ethylene Market is challenged. And that's not a new topic. It's been a topic for us for a long time. Uh, we have a project where, you know, we can take the ethylene, turn it properly, um, and that dramatically improves the earnings in the segments. Um, it allows us to, you know, not so bulk. Ethylene allows us to replace, you know, higher costs of purchased uh uh propane. I'm sorry propane. Um,
Mark, looking at acetic intermediates, are there other actions or options you're looking at too? We—
Do your earnings volatility of this business.
Mark Costa: Absolutely, David. First of all, you know, the biggest action we're taking, we've already told you about, which is the E2P project. So we have a project to take our bulk ethylene, which is the biggest driver of earnings challenge in the segment, given how that ethylene market is challenged. That's not a new topic. It's been a topic for us for a long time. We have a project where, you know, we can take the ethylene and turn it into propylene, and that dramatically improves the earnings in the segments. It allows us to, you know, not sell bulk ethylene, allows us to replace higher cost purchased propane, I'm sorry, propylene.
Mark Costa: Absolutely, David. First of all, you know, the biggest action we're taking, we've already told you about, which is the E2P project. So we have a project to take our bulk ethylene, which is the biggest driver of earnings challenge in the segment, given how that ethylene market is challenged. That's not a new topic. It's been a topic for us for a long time. We have a project where, you know, we can take the ethylene and turn it into propylene, and that dramatically improves the earnings in the segments. It allows us to, you know, not sell bulk ethylene, allows us to replace higher cost purchased propane, I'm sorry, propylene.
Absolutely David. And um, first of all, you know, the biggest action we're taking we've already told you about, which is
Uh the ETP project. Uh so we have a project to take our bulk offline which is the biggest driver of earnings challenge in the segment.
Mark Costa: And so we improve, you know, a loss as well as, you know, reduce the, and eliminate the loss on the bulk ethylene, and we also improve the margins on the propylene side of the equation at the same time. So that's worth, if you look at all the different ranges and scenarios of, of how the industry spreads can change, it's somewhere to $50 to 100 million dollar improvement in earnings, and the payback on that's less than two years, from a capital point of view. So that project we're driving forward, as, as one that will definitely structurally improve the business. When it comes to how the business also it thrives and improves, frankly, is, you know, there, there's a cyclical nature of this, which is more demand-driven, in the business.
And so we improve, you know, a loss as well as a, you know, reduce the and eliminate the loss on the bulk ethene and we also approved the margins on the profiling side of the equation at the same time. So that's worth. If you look at all the different ranges and scenarios of of how the industry spreads can change and some are to 50 to 100 million dollar Improvement in earnings um and the payback on that, that's less than 2 years from a capital point of view, so that project we're driving forward uh, as as 1 that will definitely structurally improve the business. Um when it comes to how the business also, it thrives and improves. Frankly is, you know, there's a cyclical nature of this which is more demand driven uh, in the business. So the North American Market is much more profitable than the export Market, especially with all.
And so we improve, you know, a loss as well as, you know, reduce the, and eliminate the loss on the bulk ethylene, and we also improve the margins on the propylene side of the equation at the same time. So that's worth, if you look at all the different ranges and scenarios of, of how the industry spreads can change, it's somewhere to $50 to 100 million dollar improvement in earnings, and the payback on that's less than two years, from a capital point of view. So that project we're driving forward, as, as one that will definitely structurally improve the business. When it comes to how the business also it thrives and improves, frankly, is, you know, there, there's a cyclical nature of this, which is more demand-driven, in the business.
Given how the that ethylene Market is challenged. And that's not a new topic. It's been a topic for us for a long time. Uh, we have a project where, you know, we can take the ethylene, turn it appropriately, um and that dramatically improves the earnings in the segments. Um, it allows us to, you know, not so bulk. Ethylene allows us to replace, you know, higher costs of purchased uh uh propane. I'm sorry propane. Um,
The Chinese dumping going on, that's really impacting.
The markets outside. The US, the tariffs are helping to some degree, protect the North American markets.
Mark Costa: So the North American market is much more profitable than the export market, especially with all the Chinese dumping going on that's really impacting the markets outside the US. The tariffs are helping, to some degree, protect the North American markets. So as demand comes back within the segment, you know, in North American, building construction, durables, et cetera, you know, that's a big mix upgrade. Also, remember, more than half of the product we make in this segment goes into our specialties. So as demand recovers there, you know, you're replacing very low-value exports, you know, on the margin, with much higher value specialty sales. So that also helps it improve the, you know, stability in the earnings when we get back to a more normal demand situation in the core CI business.
So the North American market is much more profitable than the export market, especially with all the Chinese dumping going on that's really impacting the markets outside the US. The tariffs are helping, to some degree, protect the North American markets. So as demand comes back within the segment, you know, in North American, building construction, durables, et cetera, you know, that's a big mix upgrade. Also, remember, more than half of the product we make in this segment goes into our specialties. So as demand recovers there, you know, you're replacing very low-value exports, you know, on the margin, with much higher value specialty sales. So that also helps it improve the, you know, stability in the earnings when we get back to a more normal demand situation in the core CI business.
Reduce the eliminate the loss, on that bulk ethylene. And we also improve the margins on the profiling side of the equation at the same time. So that's worth. If you look at all the different ranges and scenarios of of how the industry spreads can change and somewhere to 50 to 100 million dollar Improvement in earnings um and the payback on that lesson, 2 years from a capital point of view, so that project we're driving forward uh, as as 1 that will definitely structurally improve the business. Um, when it comes to how the business also it thrives in improves, frankly is you know, there's a cyclical nature of this which is more demand driven uh, in the business. So the North American Market is much more profitable than the export Market, especially with all the Chinese dumping going on. That's really impacting.
The markets outside. The US, the terrorists are helping to some degree, protect the North American markets.
Of course you know there's the broader question around the the overall market and how it gets better with the current pricing and a lot of the products out coming out of China right now and the cost models we have, they're at their variable cash costs.
Mark Costa: Of course, you know, there's the broader question around the overall market and how it gets better. You know, with the current pricing and a lot of the products out, coming out of China right now, and the cost models we have, they're at their variable cash costs. We don't know how long that's sustainable, and it's certainly impacting the high-cost assets around the world, especially in Europe, South Korea, Japan. So you see, you know, assets are gonna get rationalized. You know, I'm not about to guess, you know, what the timeframe is on that relative to how China's adding capacity. But I do think the market structure around the world will continue to get better over the next few years.
Of course, you know, there's the broader question around the overall market and how it gets better. You know, with the current pricing and a lot of the products out, coming out of China right now, and the cost models we have, they're at their variable cash costs. We don't know how long that's sustainable, and it's certainly impacting the high-cost assets around the world, especially in Europe, South Korea, Japan. So you see, you know, assets are gonna get rationalized. You know, I'm not about to guess, you know, what the timeframe is on that relative to how China's adding capacity. But I do think the market structure around the world will continue to get better over the next few years.
Margin with much higher value, especially sales. So, that also helps it improve the stability and the earnings, and we get back to a more normal demand situation in the core CI business.
Um, we don't know how long that sustainable and it's certainly impacting high cost assets around the world, especially in Europe, South Korea, Japan. So you see you know, assets are going to get rationalized, you know, I'm not about the guests. You know what the time frame is on that relative to how China is adding capacity. Um, but I do think the the market structure around the world will continue to get better over the next few years. Not we're not banking on any of that this year to be clear, um, you know, with the uncertainty. Uh, that's that's in the current market situation, but there are a lot of actions we're taking to prove. This was a long term.
No, very helpful. Thank you. And just on, q1. Can you help us with the bridge versus the prior year to get to that decline in your forecasting on EPS basis?
Of course, you know there's the broader question around the overall market and how it gets better with the current pricing, and a lot of the products coming out of China right now. From the cost models we have, they're at their variable cash costs.
All right. Could you repeat? That question again? You were just broken up a little bit. Could you help us with the with an earnings in Epps Bridge?
From uh q1 last year at the q1 this year for that decline that you are forecasting.
Mark Costa: You know, we're not banking on any of that this year, to be clear, you know, with the uncertainty, that's in the current market situation. But there are a lot of actions we're taking to improve this business long term.
You know, we're not banking on any of that this year, to be clear, you know, with the uncertainty, that's in the current market situation. But there are a lot of actions we're taking to improve this business long term.
Um we don't know how long that's sustainable and that's certainly impacting high cost assets around the world, especially in Europe, South Korea, Japan. So you see you know, assets are going to get rationalized, you know, I'm not about the guests. You know what the time frame is on that relative to how China is adding capacity. Um, but I do think the the market structure around the world will continue to get better over the next few years. You know, we're not banking on any of that this year to be clear, um, you know, with the uncertainty. Uh, that's that's in the current market situation, but there are a lot of actions we're taking to prove this business long term.
[Analyst] (Deutsche Bank): No, very helpful. Thank you. Just on Q1, can you help us, help us with the bridge versus the prior year to get to that decline you're forecasting on an EPS basis?
David Begleiter: No, very helpful. Thank you. Just on Q1, can you help us, help us with the bridge versus the prior year to get to that decline you're forecasting on an EPS basis?
Oh year-over-year decline. Sorry I just want to make sure understood the question correctly. Um, so as we look at where we are today, obviously, we went on a journey through last year, write q1, was relatively strong, and, and then it evolved over time to where we, you know, finish Q4. Um, and q1 is important to remember, as we told you in the third quarter call, um, you know, that was actually a year-over-year growth scenario, right? So, you know, the, the in markets and the consumer discretionary, for example, we're up 2 to 4%,
No, very helpful. Thank you. And just on Q1—can you help us with the bridge versus the prior year to get to that decline in your forecasting on an EPS basis?
Mark Costa: Sorry, could you repeat that question again? You were just broken up a little bit.
Mark Costa: Sorry, could you repeat that question again? You were just broken up a little bit.
[Analyst] (Deutsche Bank): Could you help us with an earnings EPS bridge from Q1 last year to Q1 this year for that decline that you are forecasting?
David Begleiter: Could you help us with an earnings EPS bridge from Q1 last year to Q1 this year for that decline that you are forecasting?
Um so you know if we had that year we would have had you know growth you know normal seasonality for the rest of year would have had growth of the year.
Could you, repeat that question again? You were just broken up a little bit. Could you help us with the with an earnings in in Epps Bridge?
Um, so the the evolution of the market after the, you know, April Liberation day.
Mark Costa: Oh, year-over-year decline. Sorry.
Mark Costa: Oh, year-over-year decline. Sorry.
From uh q1 last year at the q1 this year for that decline that you are forecasting.
[Analyst] (Deutsche Bank): Yes.
David Begleiter: Yes.
Mark Costa: I just wanna make sure I understood the question correctly. So as we look at where we are today, obviously, we went on a journey through last year, right? Q1 was relatively strong, and then it evolved over time to where we, you know, finished Q4. In Q1, it's important to remember, as we told you in the third quarter call, you know, that was actually a year-over-year growth scenario, right? So, you know, the end markets and the consumer discretionary, for example, were up 2% to 4%. So you know, if we had that year, we would have had, you know, growth, you know, normal seasonality for the rest of the year, we would've had growth for the year.
Mark Costa: I just wanna make sure I understood the question correctly. So as we look at where we are today, obviously, we went on a journey through last year, right? Q1 was relatively strong, and then it evolved over time to where we, you know, finished Q4. In Q1, it's important to remember, as we told you in the third quarter call, you know, that was actually a year-over-year growth scenario, right? So, you know, the end markets and the consumer discretionary, for example, were up 2% to 4%. So you know, if we had that year, we would have had, you know, growth, you know, normal seasonality for the rest of the year, we would've had growth for the year.
Causing markets to sort of, you know go from being modestly up to down and and meaningful ways. Um you know, changed and altered the rest of the year. So you know, q1 is is a tough comp because it was actually a growth quarter.
Um, now where we are today?
I think it's much more important to think about the progression of.
Oh, year-over-year decline. Sorry, I just want to make sure I understood the question correctly. Um, so as we look at where we are today, obviously, we went on a journey through last year, right? Q1 was relatively strong, and then it evolved over time to where we, you know, finished Q4. Um, and Q1 is important to remember, as we told you in the third quarter call. Um, you know, that was actually a year-over-year growth scenario, right? So, you know, the end markets and the consumer discretionary, for example, were up 2% to 4%.
Mark Costa: So the evolution of the market after the, you know, April Liberation Day, causing markets to sort of, you know, go from being modestly up to down in meaningful ways, you know, changed and altered the rest of the year. So, you know, Q1 is a tough comp because it was actually a growth quarter. Now, where we are today, I think it's much more important to think about the progression of, you know, how we've, you know, gone through the year and how we come out of the back half of this year, you know, into Q1 and build from Q1 through this year. And so when I look at where we are now, we feel good about how Q1 is progressing.
Um, so you know, if we had had that year, we would have had, you know, growth. You know, normal seasonality for the rest of the year would have had growth for the year.
So the evolution of the market after the, you know, April Liberation Day, causing markets to sort of, you know, go from being modestly up to down in meaningful ways, you know, changed and altered the rest of the year. So, you know, Q1 is a tough comp because it was actually a growth quarter. Now, where we are today, I think it's much more important to think about the progression of, you know, how we've, you know, gone through the year and how we come out of the back half of this year, you know, into Q1 and build from Q1 through this year. And so when I look at where we are now, we feel good about how Q1 is progressing.
Uh, you know how we've, you know, gone through the year and how we come out of the back half of this year, you know, into q1 and build from q1 through this year. Um, and so when, when I look at where we are now, um, we feel good about how q1 is progressing. Um, you know, I think that we, uh, you know, wanted to and, and are seeing, uh, return in volume, uh, for
Um, so the the evolution of the market after the, you know, April Liberation day.
Uh, you know from fourth quarter to first quarter. So you're seeing strong Improvement in volumes in am um with seasonality uh sort of coming back to some degree. Although I'd say customers are still being cautious.
Causing markets to sort of, you know, go from being modestly up to down in meaningful ways. Um, you know, changed and altered the rest of the year. So, you know, Q1 is a tough comp because it was actually a growth quarter.
we're definitely seeing, um,
Um, now where we are today?
I think it's much more important to think about the progression of.
Mark Costa: You know, I think that we wanted to, and are seeing a return in volume, you know, from Q4 to Q1. So you're seeing strong improvement in volumes in AM, with seasonality sort of coming back to some degree, although I'd say customers are still being cautious. We're definitely seeing, you know, the lack of destocking of pre-tariff inventory that we told you about in the Q3 call, you know, which obviously was a big driver of the volume decline in Q4 relative to Q3. I think most of that's abated. So you know, we're seeing good recovery in the volumes there, seeing good recovery in the volumes seasonally and AFP, you know, as you would normally expect.
You know, I think that we wanted to, and are seeing a return in volume, you know, from Q4 to Q1. So you're seeing strong improvement in volumes in AM, with seasonality sort of coming back to some degree, although I'd say customers are still being cautious. We're definitely seeing, you know, the lack of destocking of pre-tariff inventory that we told you about in the Q3 call, you know, which obviously was a big driver of the volume decline in Q4 relative to Q3. I think most of that's abated. So you know, we're seeing good recovery in the volumes there, seeing good recovery in the volumes seasonally and AFP, you know, as you would normally expect.
Uh, you know how we've, you know, gone through the year and how we've come out of the back half of this year, you know, into Q1 and built from Q1 through this year. Um, and so when I look at where we are now, um, we feel good about how Q1 is progressing. Um, you know, I think that we, uh, you know, wanted to and, and are seeing, uh, return in volume, uh, for
Uh, you know, from fourth quarter to first quarter. So you're seeing strong improvement in volumes in—mm.
The uh, you know, lack of these stocking uh, of pre tariff inventory that we told you about in the third quarter, call you know, which obviously was a big driver of the volume decline in Q4 relative to Q3. We think most of that debate is so, you know, we're seeing good recovery in the volumes there. Seeing good recovery in the volume to seasonally and, and AFP. And as you would normally expect, um, we've already talked about, you know, line coverage being a bit modest and fibers and we'll build through the rest of the year. Um, and even CI is going to have volume recovery uh as a function of just less shut down. So more volume to sell as well as
Um, with seasonality sort of coming back to some degree, although I'd say customers are still being cautious.
we're definitely seeing, um,
Um, you know, some of the seasonality In Stocking that was pretty aggressive and CI abating. So overall we feel like we've got a meaningful amount of volume recovery. You know, coming our way. Um, I wouldn't it's by no means taking us back the last year day, um, but it's making, uh, good progress from where we were, you know, in Q4, on top of that.
Mark Costa: We've already talked about, you know, volume recovery being a bit modest in fibers, and we'll build through the rest of the year. And even CI is gonna have volume recovery, as a function of just less shutdowns, so more volume to sell, as well as, you know, some of the seasonality and destocking that was pretty aggressive in CI abating. So overall, we feel like we've got a meaningful amount of volume recovery, you know, coming our way. I wouldn't-- It's by no means taking us back to last year, Dave, but it's making good progress from where we were, you know, in Q4.
We've already talked about, you know, volume recovery being a bit modest in fibers, and we'll build through the rest of the year. And even CI is gonna have volume recovery, as a function of just less shutdowns, so more volume to sell, as well as, you know, some of the seasonality and destocking that was pretty aggressive in CI abating. So overall, we feel like we've got a meaningful amount of volume recovery, you know, coming our way. I wouldn't-- It's by no means taking us back to last year, Dave, but it's making good progress from where we were, you know, in Q4.
Tina, you've got utilization benefits that come with the volume um, and some of the cost benefits and actions, we're taking, you know, that, you know, continue to build as we we go from the fourth quarter, to the, to the first. Um, there will be some offsets. Uh, obviously energy costs are higher even in a normal period. Before we get to the winter storms, uh, we, we expected energy headwinds in, in our guidance. Um, and we expect
The, uh, you know, lack of this stocking, uh, of pre-tariff inventory that we told you about in the third quarter call, you know, which obviously was a big driver of the volume decline in Q4 relative to Q3. We think most of that abated. So, you know, we're seeing good recovery in the volumes there, seeing good recovery in the volume seasonally, and AFP, you know, as you would normally expect. Um, we've already talked about, you know, Vancouver being a bit modest in fibers, and then we'll build for the rest of the year. Um, and even CI is going to have volume recovery, uh, as a function of just less shut down. So, more volume to sell as well as...
Prices to be a bit off, NCI, uh, with uh, some contracts we setting.
And then 5 years, as we already told you, we'll have a modest decline in price. So when you put it all together,
Mark Costa: On top of that, you know, you've got utilization benefits that come with the volume, and some of the cost benefits and actions we're taking, you know, that, you know, continue to build as we, we go from Q4 to Q1. There will be some offsets. Obviously, energy costs are higher. Even in a normal period, before we get to the winter storms, we, we expected energy headwinds in our, in our guidance. And we expect prices to be a, a bit off in CI, with some contracts resetting. And then fibers, as we already told you, will have a modest decline in price. So when you put it all together, we feel good about that guidance and, and, and starting the road to recovery.
On top of that, you know, you've got utilization benefits that come with the volume, and some of the cost benefits and actions we're taking, you know, that, you know, continue to build as we, we go from Q4 to Q1. There will be some offsets. Obviously, energy costs are higher. Even in a normal period, before we get to the winter storms, we, we expected energy headwinds in our, in our guidance. And we expect prices to be a, a bit off in CI, with some contracts resetting. And then fibers, as we already told you, will have a modest decline in price. So when you put it all together, we feel good about that guidance and, and, and starting the road to recovery.
Um, you know, some of the seasonality in the stocking that was pretty aggressive, and CI abating. So overall, we feel like we've got a meaningful amount of volume recovery, you know, coming our way. Um, I wouldn't—it's by no means taking us back to last year, Dave, um, but it's making good progress from where we were, you know, in Q4. On top of that.
You feel good about that guidance and and and starting the road to recovery. But all the things we're doing that, we've talked to you about build over time, right? The Innovation builds over time, circular builds over time cost reductions build over time. You know we're assuming we get back to normal seasonality which will certainly help Q2. And Q3. So, you know, while it's, you know, q1 is not.
Where we want to be, you know relative, what we think is possible for the full year but really encouraged to see the strength of recovery, you know, out of out of Q4. Um and we see a lot of levers on how we can build and improve and deliver a strong meaningful earnings growth for the year.
You know, you've got a utilization benefits that come with the volume um, and some of the cost benefits and actions, we're taking, you know, that, you know, continue to build as we we go from the fourth quarter of the, the first, um, there will be some offsets, obviously energy costs are higher even in the normal period before we get to the winter storms. Uh, we, we expect the energy headwinds in, in our guidance, um, and we expect prices to be a bit off, in CI, uh, with, uh, some contract resetting
And then fibers, as we already told you, will have a modest decline in price. So, when you put it all together,
Thank you. Our next question. Comes from Patrick Cunningham from City Group. Your line is now open. Please go ahead.
Mark Costa: But all the things we're doing that we've talked to you about build over time, right? The innovation builds over time, circular builds over time, cost reductions build over time. We, you know, we're assuming we get back to normal seasonality, which will certainly help Q2 and Q3. So you know, while it's... You know, Q1 is not, you know, where we wanna be, you know, relative to what we think is possible for the full year, we're really encouraged to see the strength of recovery, you know, out of, out of Q4. And we see a lot of levers on how we can build and improve and deliver a strong, meaningful earnings growth for the year. Thank you. Our next question comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead.
But all the things we're doing that we've talked to you about build over time, right? The innovation builds over time, circular builds over time, cost reductions build over time. We, you know, we're assuming we get back to normal seasonality, which will certainly help Q2 and Q3. So you know, while it's... You know, Q1 is not, you know, where we wanna be, you know, relative to what we think is possible for the full year, we're really encouraged to see the strength of recovery, you know, out of, out of Q4. And we see a lot of levers on how we can build and improve and deliver a strong, meaningful earnings growth for the year.
Hi, good morning. This is Rachel. We offer Patrick.
Time, circular builds over time; cost reductions build over time. You know, we're assuming we get back to normal seasonality, which will certainly help Q2 and Q3. So, you know, while it's, you know, Q1 is not.
So the earnings contribution from methanolysis seems to imply maybe less than 25% incremental margins on additional volume this year. So is this the right way to think about incremental for some of these non-core applications? Or is there any additional fixed cost or mixed drag impacting 2026?
You know where we want to be, you know relative, what we think is possible for the full year but really encouraged to see the strength of recovery, you know, out of out of Q4. Um and we see a lot of levers on how we can build and improve and deliver a strong meaningful earnings growth for the year.
Operator: Thank you. Our next question comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead.
Well thanks for the question. Uh you know what I would highlight is obviously um as we think about the benefits of uh our circular solution for the packaging model as well as the combination of
Thank you. On the next question, it comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead.
[Analyst] (Citigroup): Hi, good morning. This is Rachel Li on for Patrick. So the earnings contribution from methanol seems to imply maybe less than 25% incremental margins on additional volumes this year. So is this the right way to think about incrementals for some of these non-core applications, or is there any additional fixed cost or mix drag impacting 2026?
Rachel Leon: Hi, good morning. This is Rachel Li on for Patrick. So the earnings contribution from methanol seems to imply maybe less than 25% incremental margins on additional volumes this year. So is this the right way to think about incrementals for some of these non-core applications, or is there any additional fixed cost or mix drag impacting 2026?
Hi, good morning. This is Rachel. We offer Patrick.
Um, the Specialties with tritan renew and the in markets that we're going to in the end of those applications to your point. Rachel, there's a I'll call it a a spectrum of drop through margins. As we think about, 2025 to 2026 volume. Growth is a key aspect of that, and we've highlighted that uh, with the contracts that
we have, uh, across the spectrum of, uh, you know,
So, the earnings contribution from methanolysis seems to imply maybe less than 25% incremental margins on additional volume this year. So, is this the right way to think about incrementals for some of these non-core applications? Or is there any additional fixed costs or mix drag impacting 2026?
William McLain: Well, thanks for the question. You know, what I would highlight is, obviously, as we think about the benefits of our circular solution for the packaging model, as well as the combination of the specialties with Triton Renew and the end markets that we're going to and the into those applications, to your point, Rachel, there's a, I'll call it a spectrum of drop-through margins. As we think about 2025 to 2026, volume growth is a key aspect of that, and we've highlighted that with the contracts that we have across the spectrum of, you know, key brands that we're growing with in the packaging space, and that being the substantial driver.
William McLain: Well, thanks for the question. You know, what I would highlight is, obviously, as we think about the benefits of our circular solution for the packaging model, as well as the combination of the specialties with Triton Renew and the end markets that we're going to and the into those applications, to your point, Rachel, there's a, I'll call it a spectrum of drop-through margins. As we think about 2025 to 2026, volume growth is a key aspect of that, and we've highlighted that with the contracts that we have across the spectrum of, you know, key brands that we're growing with in the packaging space, and that being the substantial driver.
key brands that were growing within the packaging space and that being the substantial driver.
um, so as you think about that, that growth rate, I what I would say is for the fixed uh, or I'll call it the
The.
Well thanks for the question. Uh you know what I would highlight is obviously um as we think about the benefits of our circular solution for the packaging model as well as the combination of
Um, the Specialties with tritan renew and the in markets that we're going to in the end of those applications to your point. Rachel, there's a I'll call it a a spectrum of drop through margins. As we think about, 2025 to 2026 volume. Growth is a key aspect of that, and we've highlighted that, uh, with the contracts that we have, uh, across the spectrum of, uh, you know,
The model that we've talked about for packaging, where we have, you know, volume commitments, uh, as well as cost passed through, we believe that that is reasonable, uh, outcomes and delivers, and returns that we've been talking about what we will also have is upside to that as we have additional mix upgrade and sell into our specialty markets. Uh, and as we get momentum and the consumer discretionary markets, um, over the long term, to drive those, uh, returns that we've committed to previously and, uh, and the circular economy.
William McLain: So as you think about that, that growth rate, what I would say is for the fixed, or I'll call it the model that we've talked about for packaging, where we have, you know, volume commitments, as well as cost pass-through, we believe that that is reasonable outcomes and delivers the returns that we've been talking about. What we will also have as upside to that, is we have additional mix upgrade and sell into our specialty markets, and as we get momentum in the consumer discretionary markets, over the long term to drive those, returns that we've committed to previously in the circular economy.
So as you think about that, that growth rate, what I would say is for the fixed, or I'll call it the model that we've talked about for packaging, where we have, you know, volume commitments, as well as cost pass-through, we believe that that is reasonable outcomes and delivers the returns that we've been talking about. What we will also have as upside to that, is we have additional mix upgrade and sell into our specialty markets, and as we get momentum in the consumer discretionary markets, over the long term to drive those, returns that we've committed to previously in the circular economy.
Key brands that were growing within the packaging space, and that being the substantial driver.
um, so as you think about that, that growth rate, I what I would say is for the fixed uh, or I'll call it the
The.
The model that we've talked about for packaging, where we have, you know, volume commitments.
Great, thank you so much for that and I know you haven't got to the school 2026 for the full year, but given your expected growth across and and stable and ft. And we have helped fiser latest to you on price cost trend for your specialty, businesses and 2026. And um, 1 follow up there, you often talk about defunding your value of your products, but now seems like you're giving some price back in am. So I guess what's driving that
Uh, as well as cost pass through, we believe that that is reasonable, uh, outcomes and delivers the returns that we've been talking about what we will also have is upside to that as we have additional mix upgrade and sell into our specialty markets. Uh, and as we get momentum and the consumer discretionary markets, um, over the long term, to drive those, uh, returns that we've committed to previously and, uh, and the circular economy.
[Analyst] (Citigroup): Great. Thank you so much for that. I know you haven't guided to this goal 2026 for the full year, but given your expected growth across AM and stable in FP, can you help size it related to price-cost trends for your specialty businesses in 2026? Just one follow-up there. You often talk about defending the value of your products, but now it seems like you're giving some price back in AM, so I guess, what's driving that?
Rachel Leon: Great. Thank you so much for that. I know you haven't guided to this goal 2026 for the full year, but given your expected growth across AM and stable in FP, can you help size it related to price-cost trends for your specialty businesses in 2026? Just one follow-up there. You often talk about defending the value of your products, but now it seems like you're giving some price back in AM, so I guess, what's driving that?
Sure. So that's um, there's a lot of that question, right? So I'm going to try and answer as best I can, you know, just to start off with, you know, around sort of how we look at 2026 and think about it. You know, we're very clear that the macroeconomic, uh, scenario is highly uncertain. I think everyone's pretty much the same bucket.
And so we're not trying to call the the the macroeconomy the biggest driver of our comp our company and earnings and performance and cash is volume.
Uh and uh you know, that's been true for the last 4 years and it'll be true for this year. But right now, we're assuming the markets in our planning scenario are relatively stable to last year.
And then what are all the different things that we can do to drive value.
Great, thank you so much for that and I know you haven't got it to the school 2026 for the full year, but given your expected growth across am and stable and ft. And we had helped fiser latest through on price cost trend for your specialty businesses in 2026. And um 1 follow up there, you often talk about defunding your value of your products but now seems like you're giving some price back in am. So I guess what's driving that
Mark Costa: Sure. So that's, there's a lot of that question, right? So I'm gonna try and answer as best I can. You know, just to start off with, you know, around sort of how we look at 2026 and think about it, you know, we're very clear that the macroeconomic scenario is highly uncertain. I think everyone's pretty much in the same bucket, and so we're not trying to call the macroeconomy. The biggest driver of our company in earnings and performance and cash is volume. And, you know, that's been true for the last four years, and it'll be true for this year. But right now, we're assuming the markets in our planning scenario are relatively stable last year. And then what are all the different things that we can do to drive value?
Mark Costa: Sure. So that's, there's a lot of that question, right? So I'm gonna try and answer as best I can. You know, just to start off with, you know, around sort of how we look at 2026 and think about it, you know, we're very clear that the macroeconomic scenario is highly uncertain. I think everyone's pretty much in the same bucket, and so we're not trying to call the macroeconomy. The biggest driver of our company in earnings and performance and cash is volume. And, you know, that's been true for the last four years, and it'll be true for this year. But right now, we're assuming the markets in our planning scenario are relatively stable last year. And then what are all the different things that we can do to drive value?
Sure. So that's, um, there's a lot to that question, right? So I'm going to try and answer as best I can. You know, just to start off with, you know, around sort of how we look at 2026.
And think about it. You know, we're very clear that the macroeconomic uh, scenario is highly uncertain. I think everyone's pretty much the same bucket.
And so our, we start with a fork, go on cost reduction since that's immediately in our control. And as you seen the delivered 100 million dollars, which was, you know, 25 over our Target, uh, last year, great momentum. And that we think we can get another 125 to 150 million dollars on top of that. That's 225 to 250 uh, in 2 years, which for our size of company is pretty significant and really de demonstrates, our accountability to our shareholders. It's a great value and challenging times.
And so we're not trying to call the macroeconomy the biggest driver of our company and earnings and performance and cash is volume.
Uh and uh you know, that's been true for the last 4 years and it'll be true for this year. But right now, we're assuming the markets in our planning scenario are relatively stable to last year.
Mark Costa: We start with a forecast on cost reduction, since that's immediately in our control, and as you've seen, we delivered $100 million, which is, you know, 25 over our target last year. Great momentum, and that we think we can get another $125 to 150 million on top of that. That's $225 to 250 in two years, which for our size of company is pretty significant, and really demonstrates our accountability to our shareholders with great value in challenging times. But the biggest thing is around growth, right? So we have lower costs, you know, and a lot of that cost will flow into advanced materials. Then it's how do we grow volume?
And then, what are all the different things that we can do to drive value?
But the biggest thing is around growth, right? So we have lower costs, you know, and a lot of that cost will flow into Advanced Materials. Um, then it's, how do we grow volume, and on the volume front, there are several things that we're doing, you know, where are more in our control than waiting for the macroeconomy to get better.
We start with a forecast on cost reduction, since that's immediately in our control, and as you've seen, we delivered $100 million, which is, you know, 25 over our target last year. Great momentum, and that we think we can get another $125 to 150 million on top of that. That's $225 to 250 in two years, which for our size of company is pretty significant, and really demonstrates our accountability to our shareholders with great value in challenging times. But the biggest thing is around growth, right? So we have lower costs, you know, and a lot of that cost will flow into advanced materials. Then it's how do we grow volume?
First and foremost is always Innovation to create growth above your underlying markets, you know, the cellulosic, I'm sorry, the circular economy and polyesters is a key example of that that incremental, 30 million dollars of improvement over
uh,
And so, we start with a fork, go on cost reduction since that's immediately in our control. And as you've seen, they delivered $100 million, which was, you know, $25 million over our target last year—great momentum. And we think we can get another $125 to $150 million on top of that. That's $225 to $250 million in two years, which for our size of company is pretty significant and really demonstrates our accountability to our shareholders of great value in challenging times.
Mark Costa: On the volume front, there are several things that we're doing, you know, where are more in our control than waiting for the macroeconomy to get better. First and foremost, there's always innovation to create growth above your underlying markets. You know, the cellulosic-- I'm sorry, the circular economy and polyesters is a key example of that, that incremental $30 million of improvement over 25 is significant, with a revenue growth of, you know, 4 to 5%. A lot of it being driven by the RPET customers that we talked about in the third quarter, that are already ordering and ramping up with us in the quarter. So we feel very good about that and building-- you know, starting to build in Q1 will create more value as we go into the rest of the year.
On the volume front, there are several things that we're doing, you know, where are more in our control than waiting for the macroeconomy to get better. First and foremost, there's always innovation to create growth above your underlying markets. You know, the cellulosic-- I'm sorry, the circular economy and polyesters is a key example of that, that incremental $30 million of improvement over 25 is significant, with a revenue growth of, you know, 4 to 5%. A lot of it being driven by the RPET customers that we talked about in the third quarter, that are already ordering and ramping up with us in the quarter. So we feel very good about that and building-- you know, starting to build in Q1 will create more value as we go into the rest of the year.
Building, you know, starting to build in in q1 will create more value as we go into the rest of the year. Uh you've got the classic, you know, innovation in the film's business with HUD and luxury cars and EVS, you know, growing in in around the world.
But the biggest thing is around growth, right? So we have lower costs, you know, and a lot of that cost will flow into Advanced Materials. Um, then it's, how do we grow volume, and on the volume front, there are several things that we're doing, you know, where our more in our control than waiting for the macroeconomy to get better.
You've got the, um, you know, east of pure ultra high Purity solvents and semiconductors, and AFP. We have all the cellulosic growth. I just talked about and how we're trying to drive growth in, in, in the fibers business.
First and foremost is always innovation to create growth above your underlying markets. You know, the cellulosic—I'm sorry, the circular economy and polyesters is a key example of that—that incremental $30 million of improvement over, um,
We're also expanding our aperture and how we think about volume growth, you know, across the company but especially in Advanced Materials. Um, and in fibers is how do we target these applications? Um, that are outside of our normal, normal core specialty businesses. You know, you don't really want to aggressively go after market share and your high value products because
Mark Costa: You've got the classic, you know, innovation in the films business with HUD and luxury cars and EVs, and growing in, in around the world. You've got the, you know, EastaPure, ultra-high purity solvents and semiconductors in AFP. We have all the cellulosic growth I just talked about, and how we're trying to drive growth in, in, in the fibers business. We're also expanding our aperture and how we think about volume growth, you know, across the company, but especially in advanced materials, and in fibers, is how do we target these applications, that are outside of our normal core specialty businesses? You know, you don't really want to aggressively go after market share in your high-value products because you just erode your value in those applications. In a, in a weak market, that's a bad choice.
You've got the classic, you know, innovation in the films business with HUD and luxury cars and EVs, and growing in, in around the world. You've got the, you know, EastaPure, ultra-high purity solvents and semiconductors in AFP. We have all the cellulosic growth I just talked about, and how we're trying to drive growth in, in, in the fibers business. We're also expanding our aperture and how we think about volume growth, you know, across the company, but especially in advanced materials, and in fibers, is how do we target these applications, that are outside of our normal core specialty businesses? You know, you don't really want to aggressively go after market share in your high-value products because you just erode your value in those applications. In a, in a weak market, that's a bad choice.
The significant was the revenue growth of, you know, 45% a lot of it being driven by the RPC customers that we talked about in the third quarter that are already ordering and ramping up with us in the quarter. So we feel very good about that and building, you know, starting to build in in q1 will create more value as we go into the rest of the year. Uh you've got the classic, you know, innovation in the films business with HUD and luxury cars and EVS, you know, growing in in around the world.
You just erode your value and those applications in a weak Market. That's a bad choice. You want to win on your value proposition? You want to maintain your margin. So for targeting areas where we can grow, um, that adds volume and utilization to to the overall cost structure of the company.
He's got the, um, you know, east of pure ultra high Purity solvents and semiconductors, and AFP. We have all the cellulosic growth. I just talked about and how we're trying to drive growth in, in, in the fibers business.
We're also expanding our aperture and how we think about volume growth, you know, across a company but especially in Advanced Materials. Um, and in fibers is how do we target these applications? Um, that are outside of our normal, normal core specialty businesses. You know, you don't really want to aggressively go after market share and your high value products because
Mark Costa: You want to win on your value proposition, you want to maintain your margin. So for targeting areas where we can grow, that adds volume and utilization to the overall cost structure of the company. One we've already done, which is regaining some of our architectural interlayers, where we lost some share last year. As I talked about, we're doing the staple product in fibers to drive growth. We have the Aventa. We also in polyester, you know, just with the actions we're taking in our core business, have a lot of volume growth already, but there's still space to look for more volume, so we're expanding some efforts in some markets like heavy gauge sheet and shrink packaging, where the margins are not as high as Triton, but they're still attractive and allow us to drive asset utilization.
You want to win on your value proposition, you want to maintain your margin. So for targeting areas where we can grow, that adds volume and utilization to the overall cost structure of the company. One we've already done, which is regaining some of our architectural interlayers, where we lost some share last year. As I talked about, we're doing the staple product in fibers to drive growth. We have the Aventa. We also in polyester, you know, just with the actions we're taking in our core business, have a lot of volume growth already, but there's still space to look for more volume, so we're expanding some efforts in some markets like heavy gauge sheet and shrink packaging, where the margins are not as high as Triton, but they're still attractive and allow us to drive asset utilization.
Um, as I talked about, we're doing the staple, um, product. Um, in fibers to drive growth, we have the event. Um, we also in polyester, you know, just with the actions we're taking in our Core Business. Have a lot of volume growth already but there's still space to look for more volume. So we're expanding some efforts and some uh markets, like, heavy gauge sheet and Shrink packaging where the margins are not as high as Triton, but they're still attractive and allow us to drive acid utilization. So how do we really ramped up volume and utilization and leverage that cost reduction all together and the segment? That'll for sure benefit the most from these actions.
You just erode your value and those applications in a weak Market. That's a bad choice. You want to win on your value proposition? You want to maintain your margin. So for targeting areas where we can grow, um, that adds volume and utilization to to the overall cost structure of the company.
Is in a now to your question around prices. You know, there, there are some price declines, we already mentioned fibers and CI, uh, in Advanced Materials we do expect some, you know, modesty coins there too. As we share our raw material costs,
Um, uh, advantages. We can't offset energy headwinds in this market condition and our competitors are outside the US.
Mark Costa: So how do we really ramp up volume and utilization and leverage that cost reduction altogether? And the segment that'll for sure benefit the most from these actions is in AM. Now, to your question around prices, you know, there are some price declines. We already mentioned fibers and CI. In advanced materials, we do expect some, you know, modest declines there, too, as we share our raw material cost advantages. We can't offset energy headwinds in this market condition, and our competitors are outside the US. But we certainly have done a phenomenal job of managing our price relative to our costs over the last four years. But after you get it in four years of doing a great job, you have to start sharing some of that raw material benefit with your customers, and so we're, we're doing that.
So how do we really ramp up volume and utilization and leverage that cost reduction altogether? And the segment that'll for sure benefit the most from these actions is in AM. Now, to your question around prices, you know, there are some price declines. We already mentioned fibers and CI. In advanced materials, we do expect some, you know, modest declines there, too, as we share our raw material cost advantages. We can't offset energy headwinds in this market condition, and our competitors are outside the US. But we certainly have done a phenomenal job of managing our price relative to our costs over the last four years. But after you get it in four years of doing a great job, you have to start sharing some of that raw material benefit with your customers, and so we're, we're doing that.
1 we've already done which is regaining some of our architectural inner layers, where we lost some share last year. Um, as I talked about, we're doing the staple, um, product. Um, in fibers to drive growth, we have the event. Um, we also in polyester, you know, just with the actions we're taking in our Core Business. Have a lot of volume growth already but there's still space to look for more volume. So we're expanding some efforts and some uh markets, like, heavy gauge sheet and Shrink packaging where the margins are not as high as Triton, but they're still attractive and allow us to drive asset utilization. So, how do we really ramped up volume and utilization and leverage that cost reduction all together and the segment? That'll for sure benefit the most from these actions.
But we certainly have done a phenomenal job of managing our price relative to our costs over the last 4 years. Um, but after you get it in 4 years of doing a great job, you have to start sharing some of that, uh, raw material benefit, uh, with your customers. And so, we're, we're doing that. But, you know, in in the context of the volume growth, we're getting the overall variable margin is is increasing. Um, so those are all the actions that we're taking you know, to try and drive value um, and and create you know, very meaningful earnings growth for the year.
Is in a now to your question around prices. You know, there, there are some price declines, we already mentioned fibers and CI, uh, in Advanced Materials we do expect some, you know, Mazda clients there too. As we share our raw material costs.
Thank you. Our next question comes from Vincent. Andrew from Morgan Stanley. Your line is now open. Please go ahead.
Um, uh, advantages. We can't offset energy headwinds in this market condition and our competitors are outside the US.
Mark Costa: But, you know, in the context of the volume growth we're getting, the overall variable margin is increasing. So those are all the actions that we're taking, you know, to try and drive value, and create, you know, very meaningful earnings growth for the year.
But, you know, in the context of the volume growth we're getting, the overall variable margin is increasing. So those are all the actions that we're taking, you know, to try and drive value, and create, you know, very meaningful earnings growth for the year.
But we certainly have done a phenomenal job of managing our price relative to our costs over the last four years. Um, but after you get in four years of doing a great job, you have to start sharing some of that, uh, raw material benefit, uh, with your customers. And so, we're doing that. But, you know, in the context of the volume growth we're getting, the overall variable margin is increasing. Um, so those are all the actions that we're taking, you know, to try and drive.
Hi. This is John Hendricks on for Vincent Andrews. Um, I'm just wondering if you could help with some of the bridge items for Advanced Materials X methanolysis, um, I believe that you've commented that Innovation reversal of the asset utilization headwind from last year and FX or Tailwind, while you should see some price cost. Headwinds, um, curious. If you could provide some more color or help put a finer point on what you might see on a year-over-year basis in that segment.
I value, um, and create, you know, very meaningful earnings growth for the year.
Gregory Riddle: Thank you. Our next question comes from Vincent Andrews from Morgan Stanley. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Vincent Andrews from Morgan Stanley. Your line is now open. Please go ahead.
Thank you.
Yeah, I I think I just hit on a lot of it just in the last answer. But you know the great thing about Advanced Materials this year is it's got a lot of Leverage to work with, right. So um to grow earnings this year relative to last year.
[Analyst] (Morgan Stanley): Hi, this is Turner Hendricks on for Vincent Andrews. I'm just wondering if you could help with some of the bridge items for advanced materials, ex methanolysis. I believe that you've commented that innovation, reversal of the asset utilization, headwind from last year, and FX or tailwinds, while you should see some price cost headwinds. I'm curious if you could provide some more color or help put a finer point on what you might see on a year-over-year basis in that segment.
Turner Hinrichs: Hi, this is Turner Hendricks on for Vincent Andrews. I'm just wondering if you could help with some of the bridge items for advanced materials, ex methanolysis. I believe that you've commented that innovation, reversal of the asset utilization, headwind from last year, and FX or tailwinds, while you should see some price cost headwinds. I'm curious if you could provide some more color or help put a finer point on what you might see on a year-over-year basis in that segment.
Our next question comes from Vincent. Andrew from Morgan Stanley, your line is now open. Please go ahead.
Hi, this is Turner Hendricks on for Vincent Andrews. Um, I'm just wondering if you could
Help with some.
Um the first and foremost is is that volume growth, right? It's volume growth delivered by circular which is 1 of the bigger drivers.
it's finding volume growth, you know, in Weak markets, through our Innovation, you know, and the levers that we're trying to pull their
Um so you've got some core recovery and you got circular on top of that, you have a good portion of the cost reduction flowing into am, you know that it is part of that overall corporate program.
Bridge items for Advanced Materials X methanolysis. Um, I believe that you've commented that innovation, reversal of the asset utilization headwind from last year, and FX are a tailwind, while you should see some price/cost headwinds. I'm curious if you could provide some more color, or help put a finer point on what you might see on a year-over-year basis in that segment.
Mark Costa: Yeah, I think I just hit on a lot of it just in the last answer. But, you know, the great thing about advanced materials this year is it's got a lot of leverage to work with, right? So, to grow earnings this year relative to last year, the first and foremost is that volume growth, right? It's volume growth delivered by circular, which is one of the bigger drivers. It's finding volume growth, you know, in weak markets through our innovation, you know, and the levers that we're trying to pull there. So you've got some core recovery, and you got circular. On top of that, you have a good portion of the cost reduction flowing into AM, you know, that it is part of that overall corporate program.
Mark Costa: Yeah, I think I just hit on a lot of it just in the last answer. But, you know, the great thing about advanced materials this year is it's got a lot of leverage to work with, right? So, to grow earnings this year relative to last year, the first and foremost is that volume growth, right? It's volume growth delivered by circular, which is one of the bigger drivers. It's finding volume growth, you know, in weak markets through our innovation, you know, and the levers that we're trying to pull there. So you've got some core recovery, and you got circular. On top of that, you have a good portion of the cost reduction flowing into AM, you know, that it is part of that overall corporate program.
You've got the largest amount of utilization headwind last year was the aggressive inventory actions, we took in managing Advanced Materials and so as these volumes come back, we start getting a meaningful Tailwind on utilization in this segment.
Yeah, I think I just hit on a lot of it in the last answer. But you know, the great thing about Advanced Materials this year is it's got a lot of leverage to work with, right? So, to grow earnings this year relative to last year.
Um the first and foremost is is that volume growth, right? It's volume growth delivered by circular which is 1 of the bigger drivers.
Um, and then you do have some FX tailwind and benefits as well. So when you put all those 4 levers together, you know they're quite material. Now, there are some offsets like a bit of higher energy costs this year that modest price decline. I just mentioned
Um, you know, relative to the energy costs.
It's finding volume growth, you know, in weak markets, through our innovation, you know, and the levers that we're trying to pull there.
and then um, you've got, uh, the um,
The, uh, I just forgot what the other part was. Um,
Mark Costa: You've got the largest amount of utilization headwind last year, was the aggressive inventory actions we took in managing advanced materials, and so as these volumes come back, we start getting a meaningful tailwind on utilization in this segment. And then you do have some FX tailwinds and benefits as well. So when you put all those four levers together, you know, they're quite material. Now, there are some offsets, like a bit of higher energy costs this year, that modest price decline I just mentioned, you know, relative to the energy costs. And then, you've got, the, the... I just forgot what the other part was. The other, the other headwind is, that's it. I don't think there's another headwind. Oh, variable comp. That was it. Variable comp's the other headwind.
You've got the largest amount of utilization headwind last year, was the aggressive inventory actions we took in managing advanced materials, and so as these volumes come back, we start getting a meaningful tailwind on utilization in this segment. And then you do have some FX tailwinds and benefits as well. So when you put all those four levers together, you know, they're quite material. Now, there are some offsets, like a bit of higher energy costs this year, that modest price decline I just mentioned, you know, relative to the energy costs. And then, you've got, the, the... I just forgot what the other part was. The other, the other headwind is, that's it. I don't think there's another headwind. Oh, variable comp. That was it. Variable comp's the other headwind.
Um, so you've got some core recovery and you've got Circular on top of that. You have a good portion of the cost reduction flowing into AM. You know that it is part of that overall corporate program.
The other the other head 1 is um and that's it I don't think there's another head 1 oh variable cost that was it variable comp the other head?
All right. Thank you.
You've got the largest amount of utilization headwind last year was the aggressive inventory actions we took in managing Advanced Materials, and so as these volumes come back, we start getting a meaningful tailwind on utilization in this segment.
Thank you. Our next question comes from Alexi. Yes. From Rob from Key Corp. Your line is now open. Please go ahead.
Um, and then you do have some FX tailwind and benefits as well. So when you put all those four levers together, you know they're quite material. Now, there are some offsets, like a bit of higher energy costs this year, and that modest price decline I just mentioned.
Um, you know, relative to the energy costs.
And then, um, you’ve got, uh, the, um,
Uh thanks. Good morning everyone. Uh, just looking at various uh Bridge items. You provided for this year was sort of crudely. Came up was about 55026 dollars in EPS. I wonder if you if you could uh comment that range is close to what you were thinking.
with the other part was, um,
The other, the other head 1 is, um, that's it. I don't think there's another head 1—oh, variable comp. That was it. Variable comp, the other head?
[Analyst] (Morgan Stanley): All right.
Turner Hinrichs: All right.
Mark Costa: So-
Mark Costa: So-
all right, so
Gregory Riddle: Thank you. Our next question comes from Aleksey Yefremov from KeyCorp. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Aleksey Yefremov from KeyCorp. Your line is now open. Please go ahead.
Thank you. Our next question comes from Alexi. Yes, Rob from KeyOp, your line is now open. Please go ahead.
Aleksey Yefremov: Thanks. Good morning, everyone. Just looking at various bridge items you provided for this year, which sort of crudely came up as about $5.50 to 6 dollars in EPS. I wonder if you could comment if that range is close to what you were thinking?
Aleksey Yefremov: Thanks. Good morning, everyone. Just looking at various bridge items you provided for this year, which sort of crudely came up as about $5.50 to 6 dollars in EPS. I wonder if you could comment if that range is close to what you were thinking?
Uh, so um, I never imagined getting that question. Um, so uh, look as I already said, the macroeconomy is incredibly complicated right now. There's a lot of uncertainty in that context, we're taking a huge amount of actions that are in our control from cost to trying to create our own volume. Um, leveraging asset utilization and certain things like FX at the tail end. So there there's a lot that helps um clearly there's there's a few headwinds
and, you know, the rate at which, you know,
Uh, thanks. Good morning, everyone. Um, just looking at various, uh, Bridge items you provided for this year, I sort of crudely came up with about 5,526 in UPS. I wonder if you, if you could, uh, comment if that range is close to what you were thinking.
We moderate, you know, and and stabilize the the fibers business as well as you know, things like variable comp point, you know back um, you know to 1x.
Mark Costa: So, I never imagined getting that question. So, look, as I already said, the macroeconomy is incredibly complicated right now, and there's a lot of uncertainty. In that context, we're taking a huge amount of actions that are in our control, from cost to trying to create our own volume, leveraging asset utilization and certain things like FX as a tailwind. So there's a lot that helps. Clearly, there's a few headwinds in, you know, the rate at which, you know, CI recovers from last year, and how we moderate, you know, and stabilize the fibers business, as well as, you know, things like variable comp going, you know, back, you know, to 1x.
Mark Costa: So, I never imagined getting that question. So, look, as I already said, the macroeconomy is incredibly complicated right now, and there's a lot of uncertainty. In that context, we're taking a huge amount of actions that are in our control, from cost to trying to create our own volume, leveraging asset utilization and certain things like FX as a tailwind. So there's a lot that helps. Clearly, there's a few headwinds in, you know, the rate at which, you know, CI recovers from last year, and how we moderate, you know, and stabilize the fibers business, as well as, you know, things like variable comp going, you know, back, you know, to 1x.
So when you put it all together, you know we we've said, you know, there's a meaningful Improvement in earnings that's possible.
um, you know what I would say is, you know, when you, when you think about the sort of upper end of what you're talking about, around $6 a share,
Uh, so um, I never imagined getting that question. Um, so uh, look, as I already said, the macroeconomy is incredibly complicated right now. There's a lot of uncertainty. In that context, we're taking a huge amount of actions that are in our control—from cost to trying to create our own volume, um, leveraging asset utilization and certain things like FX at the tail end. So there's a lot that helps. Um, clearly, there's a few headwinds.
Um you know that's very much in the range of what we're thinking is possible but I have to emphasize there's a wide range here around what could happen, you know. And it is macroeconomic that we're talking about, you know, where the uncertainty is. You know, if you look at GDP and everyone's talking about how great GDP is and and his growth last year were expectations of this year. You know, if you back out data centers, AI Healthcare, you know, GDP sort of flat.
Mark Costa: So when you put it all together, you know, we've said, you know, there's a meaningful improvement in earnings that's possible. What I would say is, you know, when you, when you think about the sort of upper end of what you're talking about, around $6 a share, you know, that's very much in the range of what we're thinking is possible. But I have to emphasize, there's a wide range here around what could happen, you know, and it is macroeconomic that we're talking about, you know, where the uncertainty is. You know, if you look at GDP, and everyone's talking about how great GDP is, and its growth last year were expectations of this year. You know, if you back out data centers, AI, healthcare, you know, GDP is sort of flat.
So when you put it all together, you know, we've said, you know, there's a meaningful improvement in earnings that's possible. What I would say is, you know, when you, when you think about the sort of upper end of what you're talking about, around $6 a share, you know, that's very much in the range of what we're thinking is possible. But I have to emphasize, there's a wide range here around what could happen, you know, and it is macroeconomic that we're talking about, you know, where the uncertainty is. You know, if you look at GDP, and everyone's talking about how great GDP is, and its growth last year were expectations of this year. You know, if you back out data centers, AI, healthcare, you know, GDP is sort of flat.
And, you know, the rate at which, you know, CI recovers from last year, um, and how we moderate, you know, and and stabilize the the fibers business, as well as, you know, things like variable comp point, you know back um, you know to 1x.
um, and the consumers, you know, as I think has been well understood through last year, especially the 80%
So when you put it all together, you know we we've said, you know, there's a meaningful Improvement in earnings that's possible.
Um, you know, what I would say is, you know, when you think about the sort of upper end of what you're talking about, around $6 a share,
You know, um, uh, of of our, of our consumers out there are really struggling, um, with, you know, the economic challenges. They have and affordability. Uh, the fear of what tariffs are going to do, um, fear about, you know, can I get a new job if I lose mine? Etc. So there's a lot of caution out there. You know, that's been there for the year all last year. I don't think it's materially changed. That's why we think the economy can be stable, but it's challenging out there and you know, there's any number of things geopolitical Wars, Etc, that can make things worse on the flip side.
You know, there's a lot of potential upside here too.
Mark Costa: And the consumers, you know, as I think it's been well understood through last year, especially the 80%, you know, of our consumers out there, are really struggling with, you know, the economic challenges they have and affordability, the fear of what tariffs are gonna do, fear about, you know, can I get a new job if I lose mine, et cetera. So there's a lot of caution out there, you know, that's been there for the year or last year. I don't think it's materially changed. That's why we think the economy could be stable, but it's challenging out there. And, you know, there's any number of things, geopolitical wars, et cetera, that could make things worse.
And the consumers, you know, as I think it's been well understood through last year, especially the 80%, you know, of our consumers out there, are really struggling with, you know, the economic challenges they have and affordability, the fear of what tariffs are gonna do, fear about, you know, can I get a new job if I lose mine, et cetera. So there's a lot of caution out there, you know, that's been there for the year or last year. I don't think it's materially changed. That's why we think the economy could be stable, but it's challenging out there. And, you know, there's any number of things, geopolitical wars, et cetera, that could make things worse.
As you know, GDP was sort of flat.
Um, you know, relative to to sort of that 6, you know, right now, demand has been incredibly weak since 2019 and we've told you housing and you all know, total home sales down, 20% not just here, but in Europe, China's worse, we've got consumer, durables down, 5 to 15%, you've got cars, barely getting back to 2019 levels. Um, but a lot of pressure and accessories in the auto market, because people can barely afford the car, um, there's a lot of pent-up demand um, since 2019 to now not to mention normal market growth being missing.
um, that
Mark Costa: On the flip side, you know, there's a lot of potential upside here, too, you know, relative to, to sort of that six. You know, right now, demand has been incredibly weak since 2019, and we've told you, housing, and you all know it, total home sales down 20%, not just here, but in Europe. China's worse. You've got consumer durables down 5% to 15%. You've got cars barely getting back to 2019 levels. A lot of pressure in accessories in the auto market 'cause people can barely afford the car. There's a lot of pent-up demand since 2019 to now, not to mention normal market growth being missing, that can recover at some point when consumers get confident and stable....
On the flip side, you know, there's a lot of potential upside here, too, you know, relative to, to sort of that six. You know, right now, demand has been incredibly weak since 2019, and we've told you, housing, and you all know it, total home sales down 20%, not just here, but in Europe. China's worse. You've got consumer durables down 5% to 15%. You've got cars barely getting back to 2019 levels. A lot of pressure in accessories in the auto market 'cause people can barely afford the car. There's a lot of pent-up demand since 2019 to now, not to mention normal market growth being missing, that can recover at some point when consumers get confident and stable....
Um, and the consumers, you know, as I think has been well understood through last year, especially the 80%, you know, um, of of our, of our consumers out there are really struggling, um, with, you know, the economic challenges. They have and affordability. Uh, the fear of what tariffs are going to do, um, fear about, you know, can I get a new job if I lose mine? Etc. So there's a lot of caution out there. You know, that's been there for the year all last year. I don't think it's materially changed. That's why we think the economy can be stable, but it's challenging out there and you know, there's any number of things geopolitical Wars, Etc, that can make things worse on the flip side.
You know, there's a lot of potential upside here, too.
Can recover at some point when consumers, get confident and stable, um, and the especially for the US economy more than China and Europe. I think the current Administration is very focused on getting the economy to grow for the consumers, not just data centers and Healthcare, you know? Because the midterms are coming up. And so, you know, lower interest rates, obviously will help a lot of the tax policy, may get more money into the pockets of that 80%
There are a bunch of housing policies uh that they're considering that could be helpful. Um, so I'm very hopeful that they take those actions and the consumers get healthier.
Um, you know, relative to sort of that 6, you know right now demand has been incredibly weak since 2019, and we've told you—housing, and you all know total home sales are down 20%, not just here but in Europe; China is worse. You've got consumer durables down 5 to 15%, you've got cars barely getting back to 2019 levels. Um, but a lot of pressure in accessories in the auto market because people can barely afford the car. Um, there's a lot of pent-up demand, um, since 2019 to now, not to mention normal market growth being missing.
Um, and and, and buy more and that would be upside. So, you know, we're very focused on on controlling, what we can control.
Mark Costa: Especially for the US economy, more than China and Europe, I think the current administration is very focused on getting the economy to grow for the consumers, not just data centers and healthcare, you know, because the midterms are coming up, and so, you know, lower interest rates obviously will help. A lot of the tax policy may get more money into the pockets of that 80%. There are a bunch of housing policies that they're considering that could be helpful. So I'm very hopeful that they take those actions and the consumers get healthier, and buy more, and that would be upside.
Especially for the US economy, more than China and Europe, I think the current administration is very focused on getting the economy to grow for the consumers, not just data centers and healthcare, you know, because the midterms are coming up, and so, you know, lower interest rates obviously will help. A lot of the tax policy may get more money into the pockets of that 80%. There are a bunch of housing policies that they're considering that could be helpful. So I'm very hopeful that they take those actions and the consumers get healthier, and buy more, and that would be upside.
Um, very aware that in the comic could go any direction. So we're not going to keep our, take our eye off the ball, and everything that we can control.
Um, but there's just a lot of uncertainty and right now we're just focused on making sure we get a good start to q1, um, and build from there.
Thanks a lot.
Um, that can recover at some point when consumers get confident and stable, um, and especially for the U.S. economy more than China and Europe. I think the current administration is very focused on getting the economy to grow for the consumers, not just data centers and healthcare, you know? Because the midterms are coming up. And so, you know, lower interest rates obviously will help. A lot of the tax policy may get more money into the pockets of that 80%.
Thank you on. Next question, comes from John Roberts from me. The Line is now open. Please go ahead.
There are a bunch of housing policies, uh, that they're considering that could be helpful. Um, so I'm very hopeful that they take those actions and the consumers get healthier.
Thank you. Um, it wasn't very long ago that you had a young Chick featured on the cover of your slides. Um, what's going on with the egg products? You just continuing
Mark Costa: So, you know, we're very focused on controlling what we can control, very aware that, you know, the economy could go any direction, so we're not gonna keep our-- take our eye off the ball on everything that we can control. But there's just a lot of uncertainty, and right now we're just focused on making sure we get a good start to Q1, and build from there.
So, you know, we're very focused on controlling what we can control, very aware that, you know, the economy could go any direction, so we're not gonna keep our-- take our eye off the ball on everything that we can control. But there's just a lot of uncertainty, and right now we're just focused on making sure we get a good start to Q1, and build from there.
Um, and, and buy more, and that would be upside. So, you know, we're very focused on controlling what we can control.
I'm very aware that in the comments, it could go any direction. So we're not going to take our eye off the ball, and we'll focus on everything that we can control.
Um, but there's just a lot of uncertainty, and right now we're just focused on making sure we get a good start to Q1, um, and build from there.
[Analyst] (Deutsche Bank): Thanks a lot.
Aleksey Yefremov: Thanks a lot.
Oh, uh, we had a couple of uh, crop protection products, um, in the Europe that uh, had a regulatory ban going for us since we had to stop selling them. Uh, so that's that's what happened. It's just a European specific thing. But they were, you know, profitable products and we felt the impact. We will feel the impact this year, okay?
Thanks a lot.
Gregory Riddle: Thank you. Our next question comes from John Roberts from Mizuho. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from John Roberts from Mizuho. Your line is now open. Please go ahead.
Maybe I could get a second 1. Then what's what's going on with the decline that you cited in our pet from mechanical recycling?
John Roberts: Thank you. It wasn't very long ago that you had a young chick featured on the cover of your slides. What's going on with the ag products you're discontinuing?
Thank you. Our next question comes from John Roberts from ME. The line is now open. Please go ahead.
John Roberts: Thank you. It wasn't very long ago that you had a young chick featured on the cover of your slides. What's going on with the ag products you're discontinuing?
A decline in quality. I think you decided that the quality of our pet.
Yeah. Yeah, absolutely. John um,
Um, thank you. Um, it wasn't very long ago that you had a young chick featured on the cover of your slides. Um, what's going on with the egg products? You just continuing
Mark Costa: Oh, we had a couple of crop protection products in Europe that had a regulatory ban go in force, and so we had to stop selling them. So that's what happened. It's just a European specific thing, but they were, you know, profitable products, and we felt the impact. We will feel the impact this year.
Mark Costa: Oh, we had a couple of crop protection products in Europe that had a regulatory ban go in force, and so we had to stop selling them. So that's what happened. It's just a European specific thing, but they were, you know, profitable products, and we felt the impact. We will feel the impact this year.
John Roberts: Okay. Maybe I could get a second one then. What's going on with the decline that you cited in rPET from mechanical recycling?
John Roberts: Okay. Maybe I could get a second one then. What's going on with the decline that you cited in rPET from mechanical recycling?
Oh, we had a couple of, uh, crop protection products, um, in Europe that, uh, had a regulatory ban going for us, since we had to stop selling them. Uh, so that's what happened. It's just a European-specific thing. But they were, you know, profitable products, and we thought the impact—we will feel the impact this year, okay?
We get a second one, then what's going on with the decline that you cited in RPET from mechanical recycling?
Mark Costa: Decline?
Mark Costa: Decline?
Clients.
John Roberts: A decline in quality. I think you cited the decline-
John Roberts: A decline in quality. I think you cited the decline-
Mark Costa: Oh, sorry.
Mark Costa: Oh, sorry.
John Roberts: -in quality of rPET.
John Roberts: -in quality of rPET.
Mark Costa: Yeah, yeah, absolutely, John. So the decline in mechanical recycling quality, what happens is, and we've known this from the beginning of our platform and why we're so excited about chemical recycling, is mechanical recycling has a major flaw, which is when you melt plastic, you break down the bonds of the polymer chain every time. And as you do that over cycles, the polymer integrity chains get worse and worse, and so the quality of material degrades, and you get impurities also in the polymer. 'Cause you have to remember, mechanical recycling has no purification.
Mark Costa: Yeah, yeah, absolutely, John. So the decline in mechanical recycling quality, what happens is, and we've known this from the beginning of our platform and why we're so excited about chemical recycling, is mechanical recycling has a major flaw, which is when you melt plastic, you break down the bonds of the polymer chain every time. And as you do that over cycles, the polymer integrity chains get worse and worse, and so the quality of material degrades, and you get impurities also in the polymer. 'Cause you have to remember, mechanical recycling has no purification.
A decline in quality. I think you decided that the quality of our PET.
Yeah. Yeah, absolutely. John um,
You can find in, in, in the plastic waist stream, and then you wash them and then you chop them up, um, and then you melt them back into pellets.
Mark Costa: So you know, you take waste plastic, you select the cleanest, clearest bottles you can find in the plastic waste stream, and then you wash them, and then you chop them up, and then you melt them back into pellets. So there's no purification. So also, if there's any, you know, contaminants in that bottle, it doesn't necessarily get removed from the polymer. So the polymer starts to get yellow, it starts to get gray. You'll see that on the bottles on the shelf, you know, that it's already starting to show up. You also have some integrity issues around the strength of the polymer. So if you're stacking, you know, cases, you know, the bottles start to collapse a little bit.
So you know, you take waste plastic, you select the cleanest, clearest bottles you can find in the plastic waste stream, and then you wash them, and then you chop them up, and then you melt them back into pellets. So there's no purification. So also, if there's any, you know, contaminants in that bottle, it doesn't necessarily get removed from the polymer. So the polymer starts to get yellow, it starts to get gray. You'll see that on the bottles on the shelf, you know, that it's already starting to show up. You also have some integrity issues around the strength of the polymer. So if you're stacking, you know, cases, you know, the bottles start to collapse a little bit.
So there's no purification. So also if there's any, you know, contaminants in that bottle, it doesn't necessarily get removed, uh, from from the polymer. So the polymer starts to get yellow. It starts to get gray. You will see that on the balls on the Shelf, um, uh, you know, that it's already starting to show up. Uh, you also have some Integrity issues around the strength of the polymer. So if you're stacking, you know, cases, you know, the bottles will start to collapse a little bit. Um and you know, so there was always the belief that an understanding that the mechanical Integrity would would degrade with mechanical recycling.
So the decline in in mechanical recycling quality, um, what happens is and we've been, we've known this from the beginning of our platform and why we're so excited about chemical recycling is mechanical recycling. Has a major flaw, which is when you melt plastic, you break down the bonds of the polymer chain, um, every time. Um, and as you do that over Cycles, the polymer Integrity change, get worse and worse and so the quality of material to grades, um, and you get impurities also in the polymer, because you have to remember mechanical recycling has no purification. So, you know, you
Take waste plastic, you select the cleanest, clearest bottles you can find in the plastic waste stream, and then you wash them, and then you chop them up, um, and then you melt them back into pellets.
Mark Costa: And so there was always the belief that, and understanding that the mechanical integrity would degrade with mechanical recycling. But they thought it would take, you know, many years before that impact would actually show up in the polymer, and it's showing up a lot faster. It's already showing up. And that really confirms our value proposition because we have none of those problems, right? Chemical recycling, we, as we've told you before, we unzip the polymer back to the building blocks. We have a big purification step. So, you know, the intermediates that we produce out of it, that we then turn back into a polymer, are perfect. They're exactly the same as virgin. In some cases, we're finding it actually has a little bit better clarity than a virgin polymer.
And, uh, but they thought it would take, you know, many years before that impact would actually show up uh, in in in the polymer. Uh, and it's showing up a lot faster, it's already showing up, um, and that really confirms our value proposition because we have none of those problems right? Chemical recycling. We because we've told you before, we unzip the polymer back to the building blocks. We have a big purification step. So you know the intermediates that we produce out of it that we then turn back into a polymer are perfect. They're exactly the same as virgin. In some cases, we're finding, it's actually has a little bit better Clarity, um, than a virgin polymer.
And so there was always the belief that, and understanding that the mechanical integrity would degrade with mechanical recycling. But they thought it would take, you know, many years before that impact would actually show up in the polymer, and it's showing up a lot faster. It's already showing up. And that really confirms our value proposition because we have none of those problems, right? Chemical recycling, we, as we've told you before, we unzip the polymer back to the building blocks. We have a big purification step. So, you know, the intermediates that we produce out of it, that we then turn back into a polymer, are perfect. They're exactly the same as virgin. In some cases, we're finding it actually has a little bit better clarity than a virgin polymer.
So there's no purification. So also if there's any, you know, contaminants in that bottle, it doesn't necessarily get removed, uh, from from the polymer. So the polymer starts to get yellow. It starts to get gray. You will see that on the balls on the Shelf, um, uh, you know, that it's already starting to show up. You also have some Integrity issues around the strength of the polymer. So if you're stacking, you know, cases you know, the bottles will start to collapse a little bit. Um and and so there was always the belief that an understanding that the mechanical Integrity would would degrade with mechanical recycling.
Um, so you know, and we can do this infinitely, like aluminum. So we are really the long-term solution to chemical recycling. Mechanical is a good thing to do and it's, you know, energy efficient. But it's yield is incredibly low because they can only clean up 25 to 35% of the B. Really clear bottles, the rest of it gets downgraded into low-end markets or or landfill, um that's why long term, we're very confident about the value of this, you know. So whole platform having a lot more demand and it's already being confirmed with our customers now recognizing you know, how much our quality is better and that's why you see some volume being pulled forward.
Mark Costa: So, you know, and we can do this infinitely like aluminum. So we are really the long-term solution to chemical recycling. Mechanical is a good thing to do, and it's, you know, energy efficient, but its yield is incredibly low because they can only clean up 25% to 35% of the really clear bottles. The rest of it gets downgraded into low-end markets or landfills. That's why long term, we're very confident about the value of this, you know, this whole platform, having a lot more demand, and it's already being confirmed with our customers now recognizing, you know, how much our quality is better.
So, you know, and we can do this infinitely like aluminum. So we are really the long-term solution to chemical recycling. Mechanical is a good thing to do, and it's, you know, energy efficient, but its yield is incredibly low because they can only clean up 25% to 35% of the really clear bottles. The rest of it gets downgraded into low-end markets or landfills. That's why long term, we're very confident about the value of this, you know, this whole platform, having a lot more demand, and it's already being confirmed with our customers now recognizing, you know, how much our quality is better.
Uh, in the polymer, uh, and it's showing up a lot faster. It's already showing up, um, and that really confirms our value proposition because we have none of those problems, right? Chemical recycling—we, because we've told you before, we unzip the polymer back to the building blocks. We have a big purification step, so you know the intermediates that we produce out of it, that we then turn back into a polymer, are perfect. They're exactly the same as virgin. In some cases, we're finding it actually has a little bit better clarity, um, than a virgin polymer.
With Pepsi and some other brands, you know, into buying our pet from as next year. And not this year, you know, relative to, you know, when the second plant was going to come online.
Um, so you know, and we can do this infinitely, like aluminum. So we are really the long-term solution to chemical recycling, mechanical.
Thank you. Our next question comes from Frank, Mitch from Furman and research. Your line is now open. Please go ahead.
Uh, thank you and good morning. Um, Mark, I wanted to get a sense. I wanted to get your sense of where you think inventory levels are, uh, at your customers. Um, you know, obviously,
Mark Costa: That's why you see some volume being pulled forward with Pepsi and some other brands, you know, into buying rPET from us next year, not next, this year, you know, relative to, you know, when the second plant was gonna come online.
That's why you see some volume being pulled forward with Pepsi and some other brands, you know, into buying rPET from us next year, not next, this year, you know, relative to, you know, when the second plant was gonna come online.
Is a good thing to do. And it's, you know, energy efficient, but it's yield is incredibly low because they can only clean up 25 to 35% of the bot. Really clear bottles, the rest of it gets downgraded into low-end markets or or landfill um that's why long term, we're very confident about the value of this, you know. So whole platform having a lot more demand and it's already being confirmed with our customers now recognizing you know, how much our quality is better and that's why you see some volume being pulled forward.
You know, you you spoke a little bit about, you know, the the volume decline uh, that we saw in 4 q kind of reminiscent of the great dto, you know, back in 2223. So I mean, you, you, you might make the case that inventory levels have to be, you know, bone dry at your your customers. But I, you know, I'm, I'm curious as to what your thoughts are.
With Pepsi and some other brands, you know, into buying our bit from us next year—if not this year—you know, relative to, you know, when the second plant was going to come online.
John Roberts: Great. Thank you.
John Roberts: Great. Thank you.
Thank you.
Gregory Riddle: Thank you. Our next question comes from Frank Mitsch from Fermium Research. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Frank Mitsch from Fermium Research. Your line is now open. Please go ahead.
Frank Mitsch: Thank you and good morning. Mark, I wanted to get a sense, I wanted to get your sense of where you think inventory levels are, at your customers. You know, obviously, you know, you spoke a little bit about, you know, the volume decline, that we saw in Q4, kind of reminiscent of the great destock, you know, back in 2022, 2023.
Frank Mitsch: Thank you and good morning. Mark, I wanted to get a sense, I wanted to get your sense of where you think inventory levels are, at your customers. You know, obviously, you know, you spoke a little bit about, you know, the volume decline, that we saw in Q4, kind of reminiscent of the great destock, you know, back in 2022, 2023.
Thank you. Our next question comes from Frank Mitch from Fermion Research. Your line is now open. Please go ahead.
Uh, thank you and good morning. Um, Mark, I wanted to get a sense. I wanted to get your sense of where you think inventory levels are, uh, at your customers. Um, you know, obviously,
Mark Costa: Yeah.
Mark Costa: Yeah.
Frank Mitsch: So, I mean, you might make the case that inventory levels have to be, you know, bone dry at your, your customers, but I... You know, I'm, I'm curious as to what your thoughts are.
Frank Mitsch: So, I mean, you might make the case that inventory levels have to be, you know, bone dry at your, your customers, but I... You know, I'm, I'm curious as to what your thoughts are.
You know, you you spoke a little bit about, you know, the the volume decline uh that we saw in 4 q kind of reminiscent of the great D stock, you know, back in 2223. So, I mean you, you, you, you might make the case that inventory levels have to be, you know, bone dry at your your customers. But I, you know, I'm, I'm curious as to what your thoughts are.
Mark Costa: So I think that, you know, a lot of very painful lessons were learned back in 2021 and 2022, when customers and the retail channel massively overbuilt inventory, and then demand corrected, obviously, with inflation, interest rates, et cetera. People got caught holding on a lot of inventory that took a very long time to destock. I would say this year is very different, or 2025 was very different, than 2023. First of all, people learned their lesson, and we're not building, you know, inventory, you know, for some expected high growth scenario. Everyone was at the beginning of 2025 pretty cautious about the economic scenario for the year. So customers and retailers were being disciplined on that. Now, what was different was, you know, April changed everything, right?
Mark Costa: So I think that, you know, a lot of very painful lessons were learned back in 2021 and 2022, when customers and the retail channel massively overbuilt inventory, and then demand corrected, obviously, with inflation, interest rates, et cetera. People got caught holding on a lot of inventory that took a very long time to destock. I would say this year is very different, or 2025 was very different, than 2023. First of all, people learned their lesson, and we're not building, you know, inventory, you know, for some expected high growth scenario. Everyone was at the beginning of 2025 pretty cautious about the economic scenario for the year. So customers and retailers were being disciplined on that. Now, what was different was, you know, April changed everything, right?
So, I think that, you know, a lot of very painful lessons were learned back in 21 and 22, uh, when customers and the retail Channel, massively over built inventory. Um, and then demand corrected obviously with uh, inflation interest rates, Etc. Um, and people got caught holding on a lot of inventory that took a very long time to do stock. Um, I would say this year is very different, or, or 2025 was very different, um, than than 23. Um, first of all, people learned their lesson and were not building, you know, inventory. Uh, you know, for, for some expected high growth scenario, everyone was at the beginning of 25 pretty cautious about the economic scenario for the year. So customers and retailers were being disciplined on that.
Now, what got what was different was, you know? April changed everything, right? So when the Tariff,
Trade sort of situation escalated, uh, you know that caused everyone to go into action mode to try and mitigate their exposure and they, you know, bought more than they needed for the moment. Um, where, you know, they were trying to get ahead of those tariffs and then demand slowed down a bit as we described, you know, from q1 to Q2, uh, with the consumer. So you ended up with some excess inventory, not just for us, you know, because we were doing the same thing, building some volume.
So, I think that, you know, a lot of very painful lessons were learned back in 21 and 22, uh, when customers and the retail Channel massively overbuilt inventory. Um, and then, you know, demand corrected obviously with uh, inflation interest rates, Etc. Um, and people got caught holding on a lot of inventory that took a very long time to do stock. Um, I would say this year is very different, or, or 2025 was very different, um, than than 23. Um, first of all, people have learned their lesson and we're not building, you know, inventory, uh, you know, for, for some expected high growth scenario, everyone was at the beginning of 25 pretty cautious about the economic scenario for the
Here. So customers and retailers were being disciplined on that.
Mark Costa: So when the tariff trade sort of situation escalated, you know, that caused everyone to go into action mode to try and mitigate their exposure, and they, you know, bought more than they needed for the moment, where, you know, they were trying to get ahead of those tariffs. And then demand slowed down a bit, as we described, you know, from Q1 to Q2, with the consumer. So you ended up with some excess inventory, not just for us, you know, because we were doing the same thing, building some volume with the expectation of, you know, modestly improving sales in the back half of the year, and, you know, obviously, that didn't happen. So we had to do our own destocking in Q3. Same was true of our customers, right?
So when the tariff trade sort of situation escalated, you know, that caused everyone to go into action mode to try and mitigate their exposure, and they, you know, bought more than they needed for the moment, where, you know, they were trying to get ahead of those tariffs. And then demand slowed down a bit, as we described, you know, from Q1 to Q2, with the consumer. So you ended up with some excess inventory, not just for us, you know, because we were doing the same thing, building some volume with the expectation of, you know, modestly improving sales in the back half of the year, and, you know, obviously, that didn't happen. So we had to do our own destocking in Q3. Same was true of our customers, right?
With the expectation of, you know, modestly, improving sales in the back half of the year. And, you know, obviously that didn't happen. So we had to do our own desktop in Q3, um, same with group of our customers, right? They they were sitting on more inventory, uh, than they needed with the, you know, consumer demand not improving.
Now, what? What was different was, you know, April changed everything, right? So when the Tariff,
The materially, uh, and had to sort of take action on reducing that inventory. But the inventory levels, they started with were much lower
Trade sort of situation escalated, uh, you know that caused everyone to go into action mode to try and mitigate their exposure and they, you know, bought more than they needed for the moment. Um, where, you know, they were trying to get ahead of those tariffs and then demand slowed down a bit as we described, you know, from q1 to Q2, uh, with the consumer. So you end up with some excess inventory, not just for us, you know, because we were doing the same thing, building some volume.
1023, I think the other tests of it Frank is back then, you know we had a huge and difficult Q4 where volume really dropped.
And then it dropped even more in q1 of 23.
Mark Costa: They were sitting on more inventory than they needed with the, you know, consumer demand not improving materially, and had to sort of take action on reducing that inventory. But the inventory levels they started with were much lower than you know, where we were back in 2023. And the change in the market demand is not significant, right? The market demand is moderated a bit, but it didn't sort of collapse, you know, like it did in the back half of 2022 and 2023. I think the other test of it, Frank, is back then, you know, we had a huge and difficult Q4, where volume really dropped, and then it dropped even more-
They were sitting on more inventory than they needed with the, you know, consumer demand not improving materially, and had to sort of take action on reducing that inventory. But the inventory levels they started with were much lower than you know, where we were back in 2023. And the change in the market demand is not significant, right? The market demand is moderated a bit, but it didn't sort of collapse, you know, like it did in the back half of 2022 and 2023. I think the other test of it, Frank, is back then, you know, we had a huge and difficult Q4, where volume really dropped, and then it dropped even more-
With the expectation of, you know, modestly, improving sales in the back half of the year. And, you know, obviously that didn't happen. So we had to do our own de stocking in Q3, um, same with 2 of our customers, right? They they were sitting on more inventory, uh, than they needed with the, you know, consumer demand not improving.
Right. Whereas now, we see orders picking up in in, in January February relative to, you know, last fourth quarter, right? So that that also gives me that comfort that
You know, they they they wouldn't be ordering more right now if they hadn't managed their inventory.
The materially, uh, and had to sort of take action on reducing that inventory. But the inventory levels, they started with were much lower
Uh, okay, gotcha, uh, okay. And so that that feeds into my next question.
Frank Mitsch: Mm-hmm
Frank Mitsch: Mm-hmm
Mark Costa: ... in Q1 of 2023, right? Whereas now we see orders picking up in January, February, relative to, you know, last fourth quarter, right? So that also gives me that comfort that, you know, they wouldn't be ordering more right now if they hadn't managed their inventory.
Mark Costa: ... in Q1 of 2023, right? Whereas now we see orders picking up in January, February, relative to, you know, last fourth quarter, right? So that also gives me that comfort that, you know, they wouldn't be ordering more right now if they hadn't managed their inventory.
Um, than um, you know, where we were back in '23. Uh, and the change in the market demand is not significant, right? The market demand has moderated a bit, um, but it didn't sort of collapse, you know, like it did in the back half of '22 and '23. I think the other test of it, Frank, is back then, you know, we had a huge and difficult Q4, where volume really dropped.
And then it dropped even more in q1 of 23.
Right. Whereas now, we see orders picking up in in, in January February relative to, you know, last fourth quarter, right? So that that also gives me that comfort that, you know, they, they, they wouldn't be ordering more right now if they hadn't managed their inventory.
Frank Mitsch: Okay, gotcha. Okay, and so that feeds into my next question. I'm trying to just reconcile a couple of different items related to this. You know, the asset utilization headwind in 2025 was $100 million, you know, running your plants lower because you want to meet demand. So that's $100 million negative in 2025. Now, for 2026, you're guiding 25 to 50 benefit from utilization, lower shutdowns and volume growth. So that's 25 to 50 for that. Is that directly comparable to that $100 million negative for 2025? And then part of that is also the $20 million benefit from lower maintenance in 2026 versus 2025. So can you reconcile those numbers? That'd be very helpful.
Frank Mitsch: Okay, gotcha. Okay, and so that feeds into my next question. I'm trying to just reconcile a couple of different items related to this. You know, the asset utilization headwind in 2025 was $100 million, you know, running your plants lower because you want to meet demand. So that's $100 million negative in 2025. Now, for 2026, you're guiding 25 to 50 benefit from utilization, lower shutdowns and volume growth. So that's 25 to 50 for that. Is that directly comparable to that $100 million negative for 2025? And then part of that is also the $20 million benefit from lower maintenance in 2026 versus 2025. So can you reconcile those numbers? That'd be very helpful.
Uh, okay, gotcha, uh, okay. And so that that feeds into my next question.
Uh I'm trying to just reconcile a couple of different items uh related to uh related to this. You know, the asset utilization headwind in 2025, was 100 million, you know, running your plants lower, uh, because of, uh, uh, you know, because you want to meet meet demand. So that's 100 million negative in 25. Um, now for 26, you're guiding 25 to 50, um, uh, uh, benefit from, uh, at utilization lower shutdowns and volume growth. So that's 25 to 50 for that is, that is that directly comparable to that 100 million negative for 20. And then part of that is also the 20 million benefit from lower maintenance in 26 versus 25. So can you if you can reconcile those numbers, that'd be very helpful.
All right, Frank. Uh, just at a high level, what I would highlight for you is, um, as Mark. Uh, just highlighted, we had to do some of our own, uh, destocking. So first half the second half. We basically had, um, a 100 million headwind as we look at, you know,
William McLain: All right, Frank, just at a high level, what I would highlight for you is, as Mark just highlighted, we had to do some of our own destocking. So first half to second half, we basically had $100 million headwind, as we look at, you know, the way we ran our plants, the demand that we had in the first half, and with the tariff, I'll call it, initiated pre-buying, ultimately in the back half, as things got more cautious, we turned our plants down to deliver, you know, the billion-dollar commitment that we made on cash flow.
William McLain: All right, Frank, just at a high level, what I would highlight for you is, as Mark just highlighted, we had to do some of our own destocking. So first half to second half, we basically had $100 million headwind, as we look at, you know, the way we ran our plants, the demand that we had in the first half, and with the tariff, I'll call it, initiated pre-buying, ultimately in the back half, as things got more cautious, we turned our plants down to deliver, you know, the billion-dollar commitment that we made on cash flow.
Uh, because of, uh, uh, you know, because you want to meet demand. So that's $100 million negative in '25. Um, now for '26, you're guiding $25 to $50 million, um, uh, benefit from, uh, at utilization, lower shutdowns, and buying growth. So it's $25 to $50 million for that—is that directly comparable to that $100 million negative for '25? And then part of that is also the $20 million benefit from lower maintenance in '26 versus '25. So if you can reconcile those numbers, that'd be very helpful.
All right, Frank. Uh, just at a high level, what I would highlight for you is, um, as Mark, uh, just highlighted, we had to do some of our own, uh, destocking. So, first half to second half, we basically had, um, a $100 million headwind as we look at, you know,
the way we ran our plants, the demand that we had in the first half and with the Tariff um I'll call it initiated pre-b, buying ultimately in the back, half as things got more cautious. We turned our plants down to deliver, uh, you know, the billion dollar commitment that we made on cash flow. As you think about on a year-over-year basis, we highlighted in 24, we actually built inventory, as we were planning for. Uh, you know, the Strategic transitions to serve, you know, our circular economy footprint, uh, including, uh, you know, the RP and, uh, we built inventory in advance of the transition. Um, I would say, our Advanced Materials business did a great job of bringing that inventory back down, but it was, you know, really the build of inventory in 24, uh, and the implications. So that's why there's a more modest, uh, utilization Tailwind as we go into 26. From 25 is, it's really those, uh, lower.
William McLain: As you think about on a year-over-year basis, we highlighted in 2024, we actually built inventory as we were planning for, you know, the strategic transitions, to serve, you know, our circular economy footprint, including, you know, the RPET, and, we built inventory in advance of the transition. I would say our advanced materials business did a great job of bringing that inventory back down, but it was, you know, really the build of inventory in 2024, and the implications. So that's why there's a more modest, utilization tailwind as we go into 2026 from 2025, is it's really those, lower plan turnarounds as well as, the benefit of, you know, not planning to build or deplete inventory. We expect to hold it pretty stable, in our baseline assumptions, starting the year.
As you think about on a year-over-year basis, we highlighted in 2024, we actually built inventory as we were planning for, you know, the strategic transitions, to serve, you know, our circular economy footprint, including, you know, the RPET, and, we built inventory in advance of the transition. I would say our advanced materials business did a great job of bringing that inventory back down, but it was, you know, really the build of inventory in 2024, and the implications. So that's why there's a more modest, utilization tailwind as we go into 2026 from 2025, is it's really those, lower plan turnarounds as well as, the benefit of, you know, not planning to build or deplete inventory. We expect to hold it pretty stable, in our baseline assumptions, starting the year.
and turn arounds as well as, um, the benefit of, uh, you know,
stop planning to build or deplete inventory. We expect to hold it pretty stable. Uh, in our Baseline assumptions, uh, starting the year.
the other thing I'd add is,
The way we ran our plants, the demand that we had in the first half and with the Tariff, um, I thought initiated pre-b, buying ultimately in the back half as things got more cost cautious. We turned our plants down to deliver, uh, you know, the billion dollar commitment that we made on cash flow. As you think about on a year-over-year basis, we highlighted in 24, we actually built inventory, as we were planning for. Uh, you know, the Strategic transitions to serve, you know, our circular economy footprint, uh, including, uh, you know, the
you know we have plans to drive a lot of volume growth in the things that we can't control or you know appropriately cautious like everyone else in the industry right now but with underlying market demand is going to be
R-PET. And, uh, we built inventory in advance of the transition. Um, I would say our Advanced Materials business did a great job of bringing that inventory back down, but it was, you know, really the build of inventory in '24, uh, and the implications. So that's why there's a more modest, uh, utilization tailwind as we go into '26 from '25—it's really those.
Advanced stable, we get, you know, we can deliver on all the volume that we're trying to achieve either, the Tailwind is going to be more than 25 to 50 million dollars of utilization benefit for this year. But you know, we need to prove all that, right? So, we're going to be a little conservative on how we think about that number until until we, you know, see all the volume come together and also just as we highlighted on Advanced Materials and why we, the reason to believe, obviously a large portion of the benefit will show up in Advanced Materials for utilization.
Mark Costa: The other thing I'd add is, you know, we have plans to drive a lot of volume growth in the things that we can control. We're, you know, appropriately cautious, like everyone else in the industry right now, about what the underlying market demand is gonna be. If demand's stable, we get, you know, we can deliver on all the volume that we're trying to achieve, you know, the tailwind is gonna be more than $25 to 50 million of utilization benefit for this year. But, you know, we need to prove all that, right? So we're gonna be a little conservative on how we think about that number until, until we, you know, see all the volume come together.
Mark Costa: The other thing I'd add is, you know, we have plans to drive a lot of volume growth in the things that we can control. We're, you know, appropriately cautious, like everyone else in the industry right now, about what the underlying market demand is gonna be. If demand's stable, we get, you know, we can deliver on all the volume that we're trying to achieve, you know, the tailwind is gonna be more than $25 to 50 million of utilization benefit for this year. But, you know, we need to prove all that, right? So we're gonna be a little conservative on how we think about that number until, until we, you know, see all the volume come together.
Uh, lower plan turnarounds, as well as the benefit of, uh, you know, stopping planning to build or deplete inventory. We expect to hold it pretty stable in our baseline assumptions, uh, starting the year.
The other thing I’d add is,
Coffee from vrp. Your line is now open clear. Please go ahead.
you know we have plans to drive a lot of volume growth in the things that we can't control or you know appropriately cautious like everyone else in the industry right now but with the underlying market demand is going to be
Hi. Yeah, this is Matt on for Kevin McCarthy.
Um, could you size the opportunity for your high Purity solvents in the semiconductor semiconductor and Market within additives and functional products?
Uh what is that growth rate look like and and how do the margins compared to the rest of the segment?
William McLain: And also, just as we highlighted, on advanced materials and why we... The reason to believe, obviously, a large portion of the benefit will show up in advanced materials from utilization.
William McLain: And also, just as we highlighted, on advanced materials and why we... The reason to believe, obviously, a large portion of the benefit will show up in advanced materials from utilization.
The high period solvents is a great business. Uh, the margins are definitely above segment average in that business um and it's always great to be connected to septic sectors right now and being on that growth.
The advanced stable, we get, you know, we can deliver on all the volume that we're trying to achieve. You know, the Tailwind is going to be more than $25 to $50 million of utilization benefit for this year. But, you know, we need to prove all that, right? So, we're going to be a little conservative on how we think about that number until, you know, we see all the volume come together, and also, just as we highlighted on Advanced Materials and why we—the reason to believe—obviously, a large portion of the benefit will show up in Advanced Materials for utilization.
Gregory Riddle: Thank you. Our next question comes from Kevin McCarthy from VRP. Your line is now open. Please, please go ahead.
Operator: Thank you. Our next question comes from Kevin McCarthy from VRP. Your line is now open. Please, please go ahead.
Thank you. Our next question comes from Kevin McCarthy from VRP. Your line is now open. Please go ahead.
Frank Mitsch: Hi, this is Matt on for Kevin McCarthy. Could you size the opportunity for your high purity solvents in the semiconductor end market within additives and functional products? What does that growth rate look like, and, and how do the margins compare to the rest of the segment?
Matt Hettwer: Hi, this is Matt on for Kevin McCarthy. Could you size the opportunity for your high purity solvents in the semiconductor end market within additives and functional products? What does that growth rate look like, and, and how do the margins compare to the rest of the segment?
Hi. This is Matt on for Kevin McCarthy. Um, could you size the opportunity for your high Purity solvents, in the semiconductor semiconductor and Market with an additives and functional products?
you know, as we think about, um,
Uh what is that growth rate look like and and how do the margins compared to the rest of the segment?
Mark Costa: So the high purity solvents, it's a great business. The margins are definitely above segment average in that business, and it's always great to be connected to semiconductors right now and being on that growth. It's not a huge product line, and we don't break out, you know, those kind of numbers in our portfolio. But it is a meaningful contributor to, to sort of, you know, how to, you know, drive earnings growth, how to offset, you know, some of these discontinued products as we think about how we keep AFP stable this year. And the growth rates are high. They're in the 20 to 30 percent range in how we're growing it, but it's not a huge number when you apply that 20 to 30 percent, so don't go overboard in how you think about it.
Mark Costa: So the high purity solvents, it's a great business. The margins are definitely above segment average in that business, and it's always great to be connected to semiconductors right now and being on that growth. It's not a huge product line, and we don't break out, you know, those kind of numbers in our portfolio. But it is a meaningful contributor to, to sort of, you know, how to, you know, drive earnings growth, how to offset, you know, some of these discontinued products as we think about how we keep AFP stable this year. And the growth rates are high. They're in the 20 to 30 percent range in how we're growing it, but it's not a huge number when you apply that 20 to 30 percent, so don't go overboard in how you think about it.
That lower HTF sales and a couple of discontinued products being a headwind this year in a um, I'm sorry, an AFP and how we offset it.
Thank you. And then uh in your prepared remarks, you mentioned that the EPS guidance you gave for 1 Q does not include the impact from winter storms, uh and I appreciate that, it's hard to predict but could you maybe give us an idea of how you're thinking about that. Given how the winner has that progressed so far?
Mark Costa: But it definitely is helpful, you know, as we think about that lower HTF sales and a couple of discontinued products being a headwind this year in AM-- I'm sorry, in AFP, and how we offset it.
But it definitely is helpful, you know, as we think about that lower HTF sales and a couple of discontinued products being a headwind this year in AM-- I'm sorry, in AFP, and how we offset it.
The high period solvent is a great business. Uh, the margins are definitely both segments average and that business, um, and is always great to be connected to sound like sectors right now. And being on that growth, it's not a huge product line. Um, and we don't break out, you know, that those kind of numbers in our portfolio, um, but it is a meaningful contributor to, to sort of, you know, how to, you know, Drive earnings growth. How to offset, you know, some of these discontinued products as we think about how we keep AFP stable this year, um and the growth rates are higher than the 230% range and how we're growing it, but it's not a huge number when you apply that 20 to 30%. So don't go overboard and and how you think about it. But it, it definitely uh is is is helpful. You know, as we think about um,
That lower HTF sales and a couple of discontinued products being a headwind this year. In am, I'm sorry in ASP and how we offset it.
[Analyst] (VRP): Thank you. And then, in your prepared remarks, you mentioned that EPS guidance you gave for Q1 does not include the impact from winter storms. And I appreciate that's hard to predict, but could you maybe give us an idea of how you're thinking about that, given how the winter has progressed so far?
Matt Hettwer: Thank you. And then, in your prepared remarks, you mentioned that EPS guidance you gave for Q1 does not include the impact from winter storms. And I appreciate that's hard to predict, but could you maybe give us an idea of how you're thinking about that, given how the winter has progressed so far?
What's your point? It's uh, it's too early at this point. Uh, we still have um, you know, freezing temperatures here in Tennessee as well as our site in Long Beach Texas. Um, and there's more snow that's getting ready to come. You know, we've seen limited impact on our facility so far. Um, as you might expect, I'm sure you've been watching the natural gas markets. So, the main impact is on the energy and natural gas and where does that actually play out and influence as Mark. Highlighted, we expected the higher natural gas in q1, uh, but this could also be an additional Tailwind, you know, ultimately we're taking actions to ensure the safety of
William McLain: To your point, it's too early at this point. We still have, you know, freezing temperatures here in Tennessee, as well as at our site in Longview, Texas. There's more snow that's getting ready to come. You know, we've seen limited impact on our facilities so far. As you might expect, I'm sure you've been watching the natural gas markets. So the main impact is on the energy and natural gas, and where does that actually play out and influence? As Mark highlighted, we expected to higher natural gas in Q1, but this could also be an additional tailwind. You know, ultimately, we're taking actions to ensure the safety as a headwind, in addition to what we had already forecasted.
William McLain: To your point, it's too early at this point. We still have, you know, freezing temperatures here in Tennessee, as well as at our site in Longview, Texas. There's more snow that's getting ready to come. You know, we've seen limited impact on our facilities so far. As you might expect, I'm sure you've been watching the natural gas markets. So the main impact is on the energy and natural gas, and where does that actually play out and influence? As Mark highlighted, we expected to higher natural gas in Q1, but this could also be an additional tailwind. You know, ultimately, we're taking actions to ensure the safety as a headwind, in addition to what we had already forecasted.
Thank you. And then uh in your prepared remarks, you mentioned that the EPS guidance you gave for 1 Q does not include the impact from winter storms, uh and I appreciate that, it's hard to predict but could you maybe give us an idea of how you're thinking about that. Given how the winner has that progressed so far?
Uh, as a headwind, uh, in addition, uh, to what we had already forecasted. Uh, we're taking actions to ensure the safety of our team members and reducing rates, uh, to also limit the amount of the natural gas headwind that would come from this event. Uh, and, uh, obviously, um, we have a, a hedging program. Um, and we're, you know, about half of that is hedged as we go. Uh, you know, go through the quarter, we will provide, uh, I'll call it more information as uh, as we talked, uh, to you throughout the quarter.
Thank you. Our next question, comes from Salvatore Tiana, from Bank of America. Your line is now open. Please go ahead.
Impact on our facility so far—um, as you might expect, I'm sure you've been watching the natural gas markets. So, the main impact is on the energy and natural gas, and where does that actually play out in influence? As Mark highlighted, we expected our natural gas in Q1. Uh, but this could also be an additional tailwind. You know, ultimately, we're taking actions to ensure the safety of—
William McLain: We're taking actions to ensure the safety of our team members and reducing rates to also limit the amount of natural gas headwind that would come from this event. And obviously, we have a hedging program, and we're, you know, about half of that is hedged as we go, you know, go through the quarter. We will provide, I'll call it, more information as we talk to you throughout the quarter.
We're taking actions to ensure the safety of our team members and reducing rates to also limit the amount of natural gas headwind that would come from this event. And obviously, we have a hedging program, and we're, you know, about half of that is hedged as we go, you know, go through the quarter. We will provide, I'll call it, more information as we talk to you throughout the quarter.
Um, yes, uh, good morning. So uh, firstly, I wanted to go back to the fibers volume. I know it's been a a, a pretty long discussion, but I still do not really understand, you know, I getting that obviously the textile part was down a lot. How even the volume balance in toe? The volume was down, 19% setting, aside, maybe that you addressed in the first question of the call.
As a headwind. Uh, in addition, uh, to what we had already forecasted. Uh, we're taking actions to ensure the safety of our team members and reducing rates to also limit the amount of the natural gas headwind that would come from this event. Uh, and, uh, obviously, uh, we have a, a hedging program. Um, and we're, you know, about half of that is hedged as we go. Uh, you know, go through the quarter, we will provide, uh, I'll call it more information as, uh, as we talked, uh, to you throughout the quarter.
Gregory Riddle: Thank you. Our next question comes from Salvatore Tiano from Bank of America. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Salvatore Tiano from Bank of America. Your line is now open. Please go ahead.
Thank you. Our next question comes from Salvatore Tiana from Bank of America. Your line is now open. Please go ahead.
Salvatore Tiano: Yes, good morning. So, firstly, I wanted to go back to the fibers volume. I know it's been a pretty long discussion, but I still do not really understand, you know, getting that obviously the textile part was down a lot, how, given the volume bounce in tow, the volume was down 19%, setting aside the AD that you addressed in the first question of the call. So what are typically the volume bounds in your contracts? Like, is the minimum actually 20% below, for example, the normal level? And secondly, as we think about this year's volume, you do mention the call that you secured flat volumes year-over-year, but there will be continued destocking. So I, I don't really understand what that leaves us on a net basis for the fibers volume year-over-year.
Salvatore Tiano: Yes, good morning. So, firstly, I wanted to go back to the fibers volume. I know it's been a pretty long discussion, but I still do not really understand, you know, getting that obviously the textile part was down a lot, how, given the volume bounce in tow, the volume was down 19%, setting aside the AD that you addressed in the first question of the call. So what are typically the volume bounds in your contracts? Like, is the minimum actually 20% below, for example, the normal level? And secondly, as we think about this year's volume, you do mention the call that you secured flat volumes year-over-year, but there will be continued destocking. So I, I don't really understand what that leaves us on a net basis for the fibers volume year-over-year.
So what are typically, the volume balance in your contracts like is the minimum actually 20% below, for example, the normal level. And secondly, uh, as we think about this year's volume, you do mention the call that you secured flat volumes year on year, but there will be continued stocking. So, I'm I don't really understand what that leaves us on a net basis for the fibers volume year on year. Should we just assume flat or
um, or does this mean there is a downside
Um, yes, uh, good morning. So, uh, firstly, I wanted to go back to the fibers volume. I know it's been a, a pretty long discussion, but I still do not really understand. You know, I get that obviously the textile part was down a lot. How did even the volume balance in total? The volume was down.
Found 19%, setting aside 'baby,' that you addressed in the first question of the call.
So um, on a full year basis, you should assume that the toe volumes are, you know, stable the last year. Um, so that just to get that question on the table and then we have some volume growth, we're pursuing in textiles. Um you know, on top of that, sort of stable volume situation. Uh the way you you you you think about the contracts last year relative to the, you know, contracts. We have this year, we started the year last year, you know, with volumes that were obviously better in q1 and then they were, you know, you know became less each quarter.
Salvatore Tiano: Should we just assume flat, or does this mean there is a risk to the downside?
Should we just assume flat, or does this mean there is a risk to the downside?
So what are the typically the volume bounds in your contracts like is the minimum actually 20% below, for example, the normal level. And secondly, uh, as we think about this year's volume, you do mention the call that you secured flat volumes year on year, but there will be continued stocking. So I'm I don't really understand what that leaves us on a net basis for the fibers volume here on year. Should we just assume flat or
Q1 started, you know, largely with customers buying um, in their, in their contract ranges, but not all at the bottom of the ranges.
Mark Costa: So, on a full year basis, you should assume that the tow volumes are, you know, stable to last year. So that, just to get that question on the table, and then we have some volume growth we're pursuing in textiles, you know, on top of that sort of stable volume situation. The way you think about the contracts last year relative to the, you know, contracts we have this year, we started the year last year, you know, with volumes that were obviously better in Q1, and then they were, you know, became less each quarter. Q1 started, you know, largely with customers buying in their contract ranges, but not all at the bottom of their ranges.
Mark Costa: So, on a full year basis, you should assume that the tow volumes are, you know, stable to last year. So that, just to get that question on the table, and then we have some volume growth we're pursuing in textiles, you know, on top of that sort of stable volume situation. The way you think about the contracts last year relative to the, you know, contracts we have this year, we started the year last year, you know, with volumes that were obviously better in Q1, and then they were, you know, became less each quarter. Q1 started, you know, largely with customers buying in their contract ranges, but not all at the bottom of their ranges.
Um, or does this mean there is a risk to the downside?
Um, and that's where the volume sort of was sort of normal. Um, in that sense outside of, you know, uh, you know, a couple of things, you know, that we started the year with on the docking, but a lot of customers were normal.
And then as the year went on more and more people started taking actions and going to their contract minimums.
So um, on a full year basis, you should assume that the toe volumes are, you know, stable last year. Um, so that just to get that question on the table and then we have some volume growth, we're pursuing in textiles. Um you know, on top of that, sort of stable volume situation. Uh the way you you you you think about the contracts last year relative to the you know contracts. We have this year. So we started the year last year, you know, with volumes that were obviously better in q1 and then they were you know, you know became less each quarter.
Mark Costa: That's where the volume sort of was sort of normal in that sense, outside of, you know, a couple of things, you know, that we started the year with on the destocking, but a lot of customers were normal. And then as the year went on, more and more people started taking actions and going to their contract minimums to, you know, try and destock. And we had also had some growth commitments from a couple of customers last year. That was, you know, that they had plans on assets in the ground, you know, were buying the volume for their growth, that they thought they were gonna have in winning some share from some competitors. And, you know, that growth didn't materialize for them.
That's where the volume sort of was sort of normal in that sense, outside of, you know, a couple of things, you know, that we started the year with on the destocking, but a lot of customers were normal. And then as the year went on, more and more people started taking actions and going to their contract minimums to, you know, try and destock. And we had also had some growth commitments from a couple of customers last year. That was, you know, that they had plans on assets in the ground, you know, were buying the volume for their growth, that they thought they were gonna have in winning some share from some competitors. And, you know, that growth didn't materialize for them.
’21 started, you know, largely with customers buying, um, in their contract ranges, but not all at the bottom of the ranges.
Um, and that's where the volume sort of was sort of normal. Um, in that sense outside of, you know, uh, you know, a couple of things, you know, that we started the year with, on the desktop and but a lot of customers were normal.
To, uh, you know, trying to stock. And we had also had some growth commitments from a couple of customers. Uh, last year that was, you know, we that they had plans on assets, and in, in the ground, you know, you know, we're buying the volume for their growth, uh, that they thought they were going to have in, in, in, in, in winning some share from some competitors. Um, and, uh, you know that growth did materialize for them. So suddenly they're sitting on more material, they needed, and started, you know, materially reducing, you know, their their demand too. Um, and that's sort of how the volume volume evolved, you know, to, you know, where we were where most people were focused on on ding, at the end of the year.
um, so in that context,
Um, you know, within sort of pursued and achieved a bunch of contracts.
Actions that we've taken, um, you know, we believe on an annual basis. Uh, the volumes, you know, when they're at their minimum, uh, will be, you know, stable to the volumes. We realized last year,
Mark Costa: So suddenly they're sitting on more material they needed and started, you know, materially reducing, you know, their demand, too. And that's sort of how the Naia volume evolved, you know, to where we were, where most people were focused on destocking at the end of the year. So in that context, even though we then sort of pursued and achieved a bunch of contracts, you know, that have volume ranges to them, and you know, when we look at those contracts that we have in place now and the actions that we've taken, you know, we believe on an annual basis the volumes, you know, when they're at their minimum, will be stable to the volumes we realized last year.
So suddenly they're sitting on more material they needed and started, you know, materially reducing, you know, their demand, too. And that's sort of how the Naia volume evolved, you know, to where we were, where most people were focused on destocking at the end of the year. So in that context, even though we then sort of pursued and achieved a bunch of contracts, you know, that have volume ranges to them, and you know, when we look at those contracts that we have in place now and the actions that we've taken, you know, we believe on an annual basis the volumes, you know, when they're at their minimum, will be stable to the volumes we realized last year.
Um okay but you know those contracts, you know, while they're volume commands on annual basis, they're not you know, they have flexibility quarter by quarter and how much they buy.
And then, as the year went on more and more people started taking actions and going to their contract minimums to, uh, you know, try and stop. And we had also had some growth commitments from a couple of customers. Uh, last year that was, you know, we that they had plans on assets in, in, in the ground. You know, you know, we're buying the volume for their growth, uh, that they thought they were going to have in, in, in in winning some share from some competitors, um, and, uh, you know that growth did materialize for them. So suddenly they're sitting on more material, they needed. And started, you know, materially reducing, you know, their their demand too. Um, and that's sort of how the mo volume evolved. You know to, you know, where we were where most people were focused on on D stocking, at the end of the year.
In the annual commitment. And so, you know, they're they're modestly lower in q1 on their, uh, commitments.
um, so in that context,
Um, you know, within sort of pursued and achieved a bunch of contracts.
You know, that that so they have to buy a bit more to stay in their contact Zone as we go through the year, you know, which also coincides with. I think less destocking that they need to have to accomplish this year relative to the last year.
You know, to have volume ranges to them. And, you know, when we look at those contracts that we have in place now and the actions that we've taken, you know, we believe on an annual basis, the volumes, you know, when they're at their minimum, will be, you know, stable to the volumes we realized last year.
Salvatore Tiano: Okay.
Salvatore Tiano: Okay.
Mark Costa: But, you know, those contracts, you know, while their volume commits on an annual basis, they're not, you know, they have flexibility quarter by quarter in how much they buy in the annual commitment. And so, you know, they're, they're modestly lower in Q1 on their commitments, you know, so they have to buy a bit more to stay in their contract zone as we go through the year, you know, which also coincides with, I think, less destocking that they need to accomplish this year relative to last year.
Mark Costa: But, you know, those contracts, you know, while their volume commits on an annual basis, they're not, you know, they have flexibility quarter by quarter in how much they buy in the annual commitment. And so, you know, they're, they're modestly lower in Q1 on their commitments, you know, so they have to buy a bit more to stay in their contract zone as we go through the year, you know, which also coincides with, I think, less destocking that they need to accomplish this year relative to last year.
Um, okay, but you know, those contracts, you know, whether volume commits on annual basis, they're not, you know, they have flexibility quarter by quarter and how much they buy.
In the annual commitment. And so, you know, they're modestly lower in Q1 on their commitments.
I mean, you are working a very thyro, you know, trying to make sure that earnings will grow this year. As, as we said in the guide, um, in in the Outlook. So, and and your padding calls by, I believe over 300 million in terms of the gross cost reductions, right? So in this context, why would the variable send a compensation would be such a big headwind? Then I guess if if you do not deliver on earnings growth because of whatever happens in the macro environment how should we think the head like will the value will come be a headwind or could it actually be end up being neutral year on year?
Salvatore Tiano: ... Okay, perfect. That, that's very helpful. The other thing is a little bit on the variable compensation. I mean, you are walking a very tightrope, you know, trying to make sure that earnings will grow this year, as you said in the guidance, in the outlook. So, you're cutting costs by, I believe, over $300 million in terms of the gross cost reductions, right? So in this context, why would the variable incentive compensation be such a big headwind then? I guess, if you do not deliver on earnings growth because of whatever happens in the macro environment, how should we think the headwind, like, will the variable comp be a headwind, or could it actually end up being neutral year-on-year?
Salvatore Tiano: ... Okay, perfect. That, that's very helpful. The other thing is a little bit on the variable compensation. I mean, you are walking a very tightrope, you know, trying to make sure that earnings will grow this year, as you said in the guidance, in the outlook. So, you're cutting costs by, I believe, over $300 million in terms of the gross cost reductions, right? So in this context, why would the variable incentive compensation be such a big headwind then? I guess, if you do not deliver on earnings growth because of whatever happens in the macro environment, how should we think the headwind, like, will the variable comp be a headwind, or could it actually end up being neutral year-on-year?
You know, that that so they have to buy a bit more to stay in their contact Zone as we go through the year, you know, which also coincides with. I think less destocking that they need to have to accomplish this year relative to the last year.
The other thing is a little bit on the variable compensation. I mean, you are working a very tight rope, you know, trying to make sure that earnings will grow this year as you said, in the guidance in the Outlook. So, and and your cutting costs by, I believe over 300 million in terms of the gross cost reductions, right? So in this context, why would the variable send a compensation? Be such a big headwind and I just if you do not deliver on earnings growth because of whatever happens in the macro environment, as should we think the head? Like will the variable come be a headwind or could it actually be end up being neutral year on year?
William McLain: So what I would highlight is, obviously, as we, you know, set out with our business plans in 2025, the expectations at the start of the year were much higher than what was realized. Obviously, we reset commitments, but the plan was in place, and, you know, we're accountable to shareholders for that plan. As a result, you're gonna see, you know, lower. There's lower variable comp expense in our P&L in 2025, and there will be lower cash payments here in 2026 for those plans. As we're resetting the business scenarios that Mark outlined today, we expect to deliver on those.
William McLain: So what I would highlight is, obviously, as we, you know, set out with our business plans in 2025, the expectations at the start of the year were much higher than what was realized. Obviously, we reset commitments, but the plan was in place, and, you know, we're accountable to shareholders for that plan. As a result, you're gonna see, you know, lower. There's lower variable comp expense in our P&L in 2025, and there will be lower cash payments here in 2026 for those plans. As we're resetting the business scenarios that Mark outlined today, we expect to deliver on those.
So what I would highlight is obviously, as we, you know, set out with our business plans and 2025 the expectations at the start of the year uh, were much higher than what was realized. Um, obviously we reset commitments but the plan was in place and uh, you know, we're accountable to shareholders for that plan. As a result you're going to see uh, you know, lower um, there's lower variable comp expense in our p&l and 2025 uh and uh there will be lower cash payments here in 26 for those plans, as we're resetting uh the business scenarios that marks outline today uh we expect to to deliver on those. Uh and if we deliver that uh stable cash and also uh deliver on all the actions uh in net of the some of the headwinds uh we would expect uh that the variable comp would reset. Uh and would be a headwind uh year-over-year of about 50 to 75 million. The
Depending on where we see those scenarios play out.
Okay, perfect. Thank you very much.
Thank you. Our next question comes from Jeff Sakowski from JP Morgan. Your line is now open. Please go ahead.
William McLain: If we deliver that stable cash and also deliver on all the actions, you know, net of some of the headwinds, we would expect that the variable comp would reset and would be a headwind year-over-year of about $50 to 75 million, depending on where we see those scenarios play out.
If we deliver that stable cash and also deliver on all the actions, you know, net of some of the headwinds, we would expect that the variable comp would reset and would be a headwind year-over-year of about $50 to 75 million, depending on where we see those scenarios play out.
Hi, this is Lydia Fong on for Jeff. How much have you spent on the second methanolysis project and what would help you make a go or no-go decision? And are you looking for another base load contract? Given Pepsi has been pulled forward.
So what I would highlight is obviously, as we, you know, set out with our business plans and 2025 the expectations at the start of the year uh were much higher than what was realized. Um, obviously we reset commitments. But uh, the plan was in place and uh, you know, we're accountable to shareholders for that plan. As a result you're going to see uh, you know, lower um, there's lower variable comp extents in our p&l and 2025 uh and uh there will be lower cash payments here in 26 for those plans, as we're resetting uh the business scenarios that marks outline today uh we expect to to deliver on those. Uh and if we deliver that uh stable cash and also uh deliver on all the actions, uh, you know, net.
Some of the headwinds—we would expect that the variable comp would reset and would be a headwind year-over-year of about $50 to $75 million, depending on where we see those scenarios play out.
Salvatore Tiano: Okay, perfect. Thank you very much.
Salvatore Tiano: Okay, perfect. Thank you very much.
Okay, perfect. Thank you very much.
Gregory Riddle: Thank you. Our next question comes from Jeffrey Zekauskas from J.P. Morgan. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Jeffrey Zekauskas from J.P. Morgan. Your line is now open. Please go ahead.
Thank you. Our next question comes from Jeff Sakowski from J.P. Morgan. Your line is now open. Please go ahead.
[Analyst] (J.P. Morgan): Hi, this is Lydia Huang in for Jeff. How much have you spent on the second methanolysis project, and what would help you make a go or no-go decision? And are you looking for another baseload contract, given Pepsi has been pulled forward?
Lydia Huang: Hi, this is Lydia Huang in for Jeff. How much have you spent on the second methanolysis project, and what would help you make a go or no-go decision? And are you looking for another baseload contract, given Pepsi has been pulled forward?
So um, as far as the second Project's concerned and expense, obviously we've already done some engineering expense um around building the facility in Texas. Uh and then we lost a doe Grant and we put all that work on hold. Um so we're not spending any money um on engineering at this stage until we've lined out and developed a compelling project, to be a lot more Capital efficient and how we're approaching it to, you know, restart the project and go forward. So right now, you know, we we don't have
Hi, this is Lydia Fong on for Jeff. How much have you spent on the second methodology project, and what would help you make a go or no-go decision? And are you looking for another base load contract, given Pepsi has been pulled forward?
Mark Costa: So, as far as the second project is concerned and expense, obviously, we've already done some engineering expense around building the facility in Texas, and then we lost the DOE grant, and we put all that work on hold. So we're not spending any money on engineering at this stage until we've lined out and developed a compelling project to be a lot more capital efficient in how we're approaching it to, you know, restart the project and go forward. So right now, you know, we don't have any engineering expense, you know, or headwind from a capital expense point of view.
Mark Costa: So, as far as the second project is concerned and expense, obviously, we've already done some engineering expense around building the facility in Texas, and then we lost the DOE grant, and we put all that work on hold. So we're not spending any money on engineering at this stage until we've lined out and developed a compelling project to be a lot more capital efficient in how we're approaching it to, you know, restart the project and go forward. So right now, you know, we don't have any engineering expense, you know, or headwind from a capital expense point of view.
Any engineering expense, you know, or headwind from a capital expense point of view. Obviously there's a team working on the circular economy, you know um across all platforms around the globe and we're taking that cost down to some degree too you know as we adjust the rate at which we're progressing. Um, but so that's where we're at but I would say though around the second project, um, you know, 1 we're really excited that Kingsport can be do do ball next by 130%. Uh, which allows us to grow more from the first plant, have better Roc from the first plant, um, before we get to the second plant and it and that's what
Enabling us to be.
So uh, as far as the second Project's concerned and expense, obviously we've already done some engineering expense um around building the facility in Texas. Uh and then we lost a doe Grant and we put all that work on hold. Um so we're not spending any money um on engineering at this stage until we've lined out and developed a compelling project, to be a lot more Capital efficient and how we're approaching it to, you know, restart the project and go forward. So right now, you know, we we don't have
Mark Costa: Obviously, there's a team working on the circular economy, you know, across all platforms around the globe, and we're taking that cost down to some degree, too, you know, as we adjust the rate at which we're progressing. But so that's where we're at. But I would say, though, around the second project, you know, one, we're really excited that Kingsport can be debottlenecked by 130%, which allows us to grow more from the first plant, have better ROIC from the first plant, before we get to the second plant.
Obviously, there's a team working on the circular economy, you know, across all platforms around the globe, and we're taking that cost down to some degree, too, you know, as we adjust the rate at which we're progressing. But so that's where we're at. But I would say, though, around the second project, you know, one, we're really excited that Kingsport can be debottlenecked by 130%, which allows us to grow more from the first plant, have better ROIC from the first plant, before we get to the second plant.
Confident that we can grow, especially, economic recovery and serve the, our pet Market with some of our customers who are coming back, you know, and wanting to buy from us a lot. Sooner as I described earlier due to the degradation of mechanical material that they can buy
So, that's all really good. It all and it gives us time.
Any engineering expense, you know, or headwind from a capital expense point of view. Obviously, there's a team working on the circular economy, you know, across all platforms around the globe, and we're taking that cost down to some degree too, you know, as we adjust the rate at which we're progressing. But so that's where we're at. But I would say though, around the second project—
Mark Costa: And that's what's enabling us to be confident that we can grow, especially economic recovery, and serve the rPET market with some of our customers who are coming back, you know, and wanting to buy from us a lot sooner, as I described earlier, due to the degradation of mechanical material that they can buy. So that's all really good, it all and it gives us time to work on this, you know, idea of a more capital-efficient second plant, which we very much, you know, want to build. And so we've got three different options going on there, where we're looking at you know, different locations and assets we could leverage that already exist, that, you know, we feel very good that at least one of them, you know, will be you know, quite viable to move forward.
And that's what's enabling us to be confident that we can grow, especially economic recovery, and serve the rPET market with some of our customers who are coming back, you know, and wanting to buy from us a lot sooner, as I described earlier, due to the degradation of mechanical material that they can buy. So that's all really good, it all and it gives us time to work on this, you know, idea of a more capital-efficient second plant, which we very much, you know, want to build. And so we've got three different options going on there, where we're looking at you know, different locations and assets we could leverage that already exist, that, you know, we feel very good that at least one of them, you know, will be you know, quite viable to move forward.
Um, you know, one, we're really excited that Kingsport can be do-do-ball next by 130%, uh, which allows us to grow more from the first plant, have better ROI from the first plant, um, before we get to the second plant, and it—and that's what's enabling us to be.
Confident that we can grow, especially, economic recovery and serve the, our pet Market with some of our customers who are coming back, you know, and wanting to buy from us a lot. Sooner as I described earlier due to the degradation of mechanical material that they can buy
Good, that at least 1 of them, you know, um, will be, uh, you know, quite viable to move forward, but because of the debal necking, that means we can avoid ramping up significant capex around this platform, um, this year. And next, um, so it's a great solution to moderate our capital in a very difficult economic environment and make sure we have good strong, free cash flow right now.
Mark Costa: But because of the debottlenecking, that means we can avoid ramping up significant CapEx around this platform, this year and next. So it's a great solution to moderate our capital in a very difficult economic environment, and make sure we have good, strong, free cash flow right now. But you know, but keep on track with the circular platform, which we believe is still gonna be incredibly successful over time. I mean, without a doubt, people are buying a little bit slower, and especially right now, because, you know, not because of, you know, recycling, just because there's a lack of demand, you know, for their products, right? The consumer durable guys are under a lot of stress.
But because of the debottlenecking, that means we can avoid ramping up significant CapEx around this platform, this year and next. So it's a great solution to moderate our capital in a very difficult economic environment, and make sure we have good, strong, free cash flow right now. But you know, but keep on track with the circular platform, which we believe is still gonna be incredibly successful over time. I mean, without a doubt, people are buying a little bit slower, and especially right now, because, you know, not because of, you know, recycling, just because there's a lack of demand, you know, for their products, right? The consumer durable guys are under a lot of stress.
But the, you know, but keep on track with the circular platform which we believe is still going to be incredibly successful over time. I mean without a doubt people are buying a little bit slower and especially right now because, you know, not because of, you know, recycling just because there's a lack of demand, you know, for their products right. The consumer durable guys are under a lot of stress, so you know, so you know, this all lines up and works out, you know, quite well to have a great platform managed cache in the short term.
Be responsible to our shareholders on return on investment.
So that's all really good it all and it it gives us time, um, to work on this. You know, idea of more Capital efficient second plant, which we very much you want to build. Um, and so we've got 3 different options going on there where we're looking at uh, you know, different locations and assets. We could leverage that already exists, um, that, you know, we feel very good that at least 1 of them, you know, um, will be, uh, you know, quite viable to move forward but because of the debal necking, that means we can avoid ramping up significant capex around this platform.
Um, this year and next, um, so it's a great solution to moderate our capital in a very difficult economic environment and make sure we have good, strong, free cash flow right now.
Thank you. And is the Pepsi contract, the main contributor. And this is for the Kings for project is that the main contributor to the 30 million incremental earnings in 26, or is that later in the, in the year
Mark Costa: So, you know, this all lines up and works out, you know, quite well to have a great platform, manage cash in the short term, be responsible to our shareholders on return on investment.
So, you know, this all lines up and works out, you know, quite well to have a great platform, manage cash in the short term, be responsible to our shareholders on return on investment.
But, you know, keep on track with the circular platform, which we believe is still going to be incredibly successful over time. I mean, without a doubt, people are buying a little bit slower, and the special is right now because, you know, not because of, you know, recycling—just because there's a lack of demand, you know, for their products, right? The consumer durable guys are under a lot of stress.
It works out, you know, quite well to have a great platform to manage cash in the short term, and to be responsible to our shareholders on return on investment.
[Analyst] (J.P. Morgan): Thank you. And is the Pepsi contract the main contributor? And this is for the Kingsport project. Is that the main contributor to the $30 million incremental earnings in 2026, or is that later in the year?
Lydia Huang: Thank you. And is the Pepsi contract the main contributor? And this is for the Kingsport project. Is that the main contributor to the $30 million incremental earnings in 2026, or is that later in the year?
Mark Costa: So the revenue growth for the Kingsport project in 2026, running 2025, you know, certainly there is a significant amount of revenue coming in from RPET. Pepsi is one of the contracts that we have in place. We also have several other strategic leading brands, you know, ramping up volumes with us on RPET as well. So that is a big part of the 4 to 5% revenue increase. You know, to what degree the specialties play a role in the final outcome for the year, goes back to the macroeconomic question we talked about. You know, if the world stays stable, you know, we expect some growth in the specialties.
Mark Costa: So the revenue growth for the Kingsport project in 2026, running 2025, you know, certainly there is a significant amount of revenue coming in from RPET. Pepsi is one of the contracts that we have in place. We also have several other strategic leading brands, you know, ramping up volumes with us on RPET as well. So that is a big part of the 4 to 5% revenue increase. You know, to what degree the specialties play a role in the final outcome for the year, goes back to the macroeconomic question we talked about. You know, if the world stays stable, you know, we expect some growth in the specialties.
Thank you. And is the Pepsi contract the main contributor. And this is for the Kingsport project is that the main contributor to the 30 million incremental earnings in 26, or is that later in the, in the year
So the revenue growth for the Kingsport project in 2625, you know, certainly there is a significant amount of Revenue coming in from our pet. Um, Pepsi is 1 of the contracts uh, that we have in place, we also have uh, several other strategic leading Brands, you know, ramping up volumes with us on on our pet as well. So that that is a big part of the 4 to 5% Revenue increase. Um, you know, to what degree the Specialties play a role in the final outcome, for the year, goes back to the macroeconomic question, we talked about, you know, if if the world stays stable, you know, we expect some growth in the Specialties, uh, you know, especially in consumer durables, um, where we're new content, we involved, we still have a 100 customers committed and buying, you know, uh, specialty, tritan renew and some cosmetic renew products. Etc.
Um, they're just not ramping volumes up as much as we'd like because the economy is so challenged. Um, once they start, once you have stable economy that starts, you know, they start launching new products to try and accelerate their growth and our volumes will grow with them. Uh, so as a year, it plays out, you know, we expect some of that specialty business. Uh, hopefully we'll we'll start coming in and being a bigger part of the mix but but a very good portion of those are but it's not just Pepsi, it's several other customers.
Mark Costa: You know, especially in consumer durables, where Renew content we're involved, we still have 100 customers committed and buying, you know, specialty Triton Renew and some cosmetic Renew products, et cetera. They're just not ramping volumes up as much as we'd like because the economy is so challenged. Once they start—once you have stable economy, that starts, you know, they start launching new products to try and accelerate their growth, and our volumes will grow with them. So as the year plays out, you know, we expect some of that specialty business, hopefully, will start coming in and being a bigger part of the mix. But a very good portion is rPET, but it's not just Pepsi, it's several other customers.
You know, especially in consumer durables, where Renew content we're involved, we still have 100 customers committed and buying, you know, specialty Triton Renew and some cosmetic Renew products, et cetera. They're just not ramping volumes up as much as we'd like because the economy is so challenged. Once they start—once you have stable economy, that starts, you know, they start launching new products to try and accelerate their growth, and our volumes will grow with them. So as the year plays out, you know, we expect some of that specialty business, hopefully, will start coming in and being a bigger part of the mix. But a very good portion is rPET, but it's not just Pepsi, it's several other customers.
Thank you. Our next question. Comes from Mike. Susan from Wells. Fargo, your line is now open. Please go ahead.
So the revenue growth for the Kingsport project in 26, running 25, you know, certainly there is a significant amount of Revenue coming in from our pet. Um, Pepsi is 1 of the contracts uh, that we have in place, we also have uh, several other strategic leading Brands, you know, ramping up volumes with us on on our pet as well. So that that is a big part of the 4 to 5% Revenue increase. Um, you know, to what degree the Specialties play a role in the final outcome, for the year, goes back to the macroeconomic question, we talked about, you know, if if the world stays stable, you know, we expect some growth in the Specialties, uh, you know, especially in consumer durables, um, where we're new content, we involved, we still have a 100 customers committed and buying, you know, uh, specialty, tritan renew and some cosmetic renew products. Etc.
Um they're just not ramping volumes up as much as we'd like because the economy is so challenged. Um, once they start, once you have stable economy that starts you know they start launching new products to try and accelerate their growth in our volumes will grow with them. Uh so as a year plays out, you know, we expect some of that specialty business. Uh hopefully we'll we'll start coming in and being a bigger part of the mix but but a very good portion of those are but it's not just Pepsi, it's several other customers.
Gregory Riddle: Thank you. Our next question comes from Mike Sison from Wells Fargo. Your line is now open. Please go ahead.
Operator: Thank you. Our next question comes from Mike Sison from Wells Fargo. Your line is now open. Please go ahead.
Hey, good morning. Um, Mark, when you think about sort of restoring earnings, uh, Ethan's earnings power, you know, back to where it used to be is, is there any structural do you think and either the end markets or, you know, competition or China or something? That that could prevent that or and then just a quick 1 on your outlook for am and AFP, um, for, you know, sort of underpinning. The the, the, uh, uh, significant earnings growth. What, what is kind of the range of volumes that you need? I know you have a lot of that volume with new products and and, you know, within your control. But what sort of the variable on on the the volume growth that you need to get that sort of significant?
Thank you. Our next question comes from Mike. Your line is now open. Please go ahead.
Mike Sison: Hey, good morning. Mark, when you think about sort of restoring earnings, Eastman's earnings power, you know, back to where it used to be, is there anything structural, do you think, in either the end markets or, you know, competition or China or something that could prevent that or? And then just a quick one on your outlook for AM and AFP, for, you know, sort of underpinning the significant earnings growth. What is kind of the range of volumes that you need? I know you have a lot of that volume with new products and, you know, within your control. What's sort of the variable on the volume growth that you need to get that sort of significant EBIT growth? Thank you.
Mike Sison: Hey, good morning. Mark, when you think about sort of restoring earnings, Eastman's earnings power, you know, back to where it used to be, is there anything structural, do you think, in either the end markets or, you know, competition or China or something that could prevent that or? And then just a quick one on your outlook for AM and AFP, for, you know, sort of underpinning the significant earnings growth. What is kind of the range of volumes that you need? I know you have a lot of that volume with new products and, you know, within your control. What's sort of the variable on the volume growth that you need to get that sort of significant EBIT growth? Thank you.
Debit growth. Thank you.
Thanks, Mike. And yeah, we spent a lot of time on this question and and we talked a bit about it at the Deep dive and how we thought about getting back to what we said was normalized earnings. Um, and and you can go back and look at some of that material because I think most of it is still true in what we said then, uh, to where we are now, um, without a doubt.
Hey, good morning. Um, Mark when you think about sort of restoring earnings uh, Ethan's earnings power, you know, back to where it used to be did is, is there any structural do you think and either they had markets or, you know, competition or China or something? That that could prevent that or and then just a quick 1 on your outlook for am and AFP, um, for, you know, sort of underpinning. The the, the, uh, uh, significant earnings growth. What, what is kind of the range of volumes that you need? I know you have a lot of that volume with new products and and, you know, within your control. But what sort of the variable on on the the volume growth that you need to get that sort of significant?
Mark Costa: Thanks, Mike. And yeah, we spent a lot of time on this question, and we talked a bit about it at the deep dive and how we thought about getting back to what we said was normalized earnings. And you can go back and look at some of that material, 'cause I think most of it is still true in what we said then, to where we are now. Without a doubt, you know, when you think about, you know, the driver of where our earnings are today, it is primarily due to lower volume from economic demand that's, you know, impacting, you know, AM and AFP to some degree, as well as CI.
Mark Costa: Thanks, Mike. And yeah, we spent a lot of time on this question, and we talked a bit about it at the deep dive and how we thought about getting back to what we said was normalized earnings. And you can go back and look at some of that material, 'cause I think most of it is still true in what we said then, to where we are now. Without a doubt, you know, when you think about, you know, the driver of where our earnings are today, it is primarily due to lower volume from economic demand that's, you know, impacting, you know, AM and AFP to some degree, as well as CI.
Gross, thank you.
You know, when you think about, uh, you know, the driver of where our earnings are today, it is primarily due to lower volume from economic demand. That's, you know, impacting, you know, mmm and AFP to some degree, uh, as well as CI. Um, so it's, you know, that that demand, um, whether it's, you know, high value, especially growth in am very attractive growth in in AFP or even just North America and high value relative to exports and CI, um, is all been impacted by, by the economy. Um, and it's been weak as we all know for over 4 years, which is pretty unprecedented. Um,
Thanks, Mike. And yeah, we spent a lot of time on this question and and we talked a bit about it at the Deep dive and how we thought about getting back to what we said was normalized earnings. Um, and and you can, you can go back and look at some of that material. Because I think most of it is still true in what we said then, uh, to where we are now, um, without a doubt.
In that in that in that kind of a time frame, you know, like 2009 2020, where, you know, short flips, really steep down and snap back.
You know, when you think about, uh, you know, the driver of where earnings are today,
Mark Costa: So it's, you know, that demand, whether it's, you know, high value, especially growth in AM, very attractive growth in AFP or even just North America and high value relative to exports in CI, has all been impacted by the economy. And it's been weak, as we all know, for over four years, which is pretty unprecedented, in that kind of a timeframe. You know, like 2009, 2020 were, you know, short blips, really steep down and snapback. You know, this is a long duration. So as we look at all that, and I said this earlier, there's a huge amount of potential pent-up demand to recover. You know, cars are 15 years old, appliances are getting to their end of life when they bought them back in 2020.
So it's, you know, that demand, whether it's, you know, high value, especially growth in AM, very attractive growth in AFP or even just North America and high value relative to exports in CI, has all been impacted by the economy. And it's been weak, as we all know, for over four years, which is pretty unprecedented, in that kind of a timeframe. You know, like 2009, 2020 were, you know, short blips, really steep down and snapback. You know, this is a long duration. So as we look at all that, and I said this earlier, there's a huge amount of potential pent-up demand to recover. You know, cars are 15 years old, appliances are getting to their end of life when they bought them back in 2020.
And I'm being 20% down and, and, and for us, total housing is what matters, not new bills to be clear, the total housing, you know, which is now down 20% starts to recover. That's a lot of paint. That's a lot of appliances that, you know, go with, you know, people moving into a new or an existing home.
It is primarily due to lower volume from economic demand that, you know, impacting, you know, mmm and AFP to some degree, uh, as well as CI. Um, so it's, you know, that that demand, um, whether it's, you know, high value, especially growth in am very attractive growth in, in AFP or even just North America and high value relative to exports in CI, um, has all been impacted by, by the economy, um, and it's been weak as we all know for over 4 years, which is pretty unprecedented. Um,
In that, in that kind of a time frame, you know, like 2009-2020, were, you know, short blips—really steep down and snap back.
Mark Costa: You know, the housing market, you know, being 20% down, and for us, total housing is what matters, not new builds, to be clear. But total housing, you know, which is now down 20%, starts to recover. That's a lot of paint. That's a lot of appliances that, you know, go with, you know, people moving into a new or an existing home. And so there's a lot of upside in demand that can recover a lot of our earnings. So, you know, that's sort of the key, is that innovation, you know, you've got the circular platform driving a lot of growth on top of the core market recovery.
Um, and uh and so there's a lot of upside in demand that can recover a lot of our earnings. So, you know, that's sort of the key. Is that Innovation, you know, you've got the circular platform, driving a lot of growth on top of core Market recovery and what's been impressive over the last few years. We've done a phenomenally, good job of man, maintaining our price and our variable margins, while defending our share because of our Innovation. Um you know, giving us differentiation
You know, the housing market, you know, being 20% down, and for us, total housing is what matters, not new builds, to be clear. But total housing, you know, which is now down 20%, starts to recover. That's a lot of paint. That's a lot of appliances that, you know, go with, you know, people moving into a new or an existing home. And so there's a lot of upside in demand that can recover a lot of our earnings. So, you know, that's sort of the key, is that innovation, you know, you've got the circular platform driving a lot of growth on top of the core market recovery.
So a volume comes back, incremental margins, that volume recovery and the utilization benefits that go with it.
You know, this is a long duration. So as we look at all that—and I said this earlier—there's a huge amount of potential pent-up demand to recover. Uh, you know, cars are 15 years old, appliances are getting to their end of life when they bought them back in 2020. Um, you know, the housing market, you know, being 20% down, and, and, and for us totally—
I think are, you know, quite significant to bring earnings, you know, in mm and uh, to some degree AFP, you know, back in the meaningful way and even help CI recover and and and their earnings.
So I think that's all really good.
Total housing is what matters, not new builds, to be clear. The total housing, you know, which is now down 20%, starts to recover. That's a lot of paint, that's a lot of appliances that, you know, go with, you know, people moving into a new or an existing home.
Mark Costa: And what's been impressive over the last three years, we've done a phenomenally good job of maintaining our price and our variable margins while defending our share because of our innovation, you know, giving us differentiation. So if volume comes back, incremental margins, that volume recovery and the utilization benefits that go with it, I think are, you know, quite significant to bring earnings, you know, in AM and, to some degree, AFP, you know, back in a meaningful way and even help CI recover in, in their earnings. So I think that's all really good. Now, obviously, you know, the structural, so I don't think we have a structural problem in AM and AFP. We have a cyclical market demand problem, you know, that has been our challenge. And to some degree, that's also true in CI.
And what's been impressive over the last three years, we've done a phenomenally good job of maintaining our price and our variable margins while defending our share because of our innovation, you know, giving us differentiation. So if volume comes back, incremental margins, that volume recovery and the utilization benefits that go with it, I think are, you know, quite significant to bring earnings, you know, in AM and, to some degree, AFP, you know, back in a meaningful way and even help CI recover in, in their earnings. So I think that's all really good. Now, obviously, you know, the structural, so I don't think we have a structural problem in AM and AFP. We have a cyclical market demand problem, you know, that has been our challenge. And to some degree, that's also true in CI.
Um, now obviously, you know, the structural, so I don't think we have a structural problem in. Mm, and AFP. We have a cyclical market demand problem. You know, that has been our challenge, um, and to some degree that's also true in CI. Now, there are structural challenges in the, in the old world and the osito world from excess capacity in China impacting some of the chemical and immediate margins. And there's, you know, debate obviously going on the industry around to what degree does that? Structural pressure change.
Um and uh and so there's a lot of upside in demand that can recover a lot of our earnings. So, you know, that's sort of the key. Is that Innovation, you know, you've got the circular platform, driving a lot of growth on top of the core Market recovery and what's been impressive over the last few years. We've done a phenomenally good job of maintaining our price and our variable margins, while defending our share because of our Innovation. Um you know, giving us differentiation
I mean right now, we are for sure at the bottom of the market when the prices are at the variable cash cost of the Chinese.
You know, so I don't think that's sustainable but to what degree it fully recovers is unclear.
on CI, you know, now with CI
Benefits that go with it, I think, are, you know, quite significant to bring earnings, you know, in MM and, uh, to some degree AFP, you know, back in a meaningful way and even help CI recover and their earnings.
So I think that's all really good.
You know that when you think about it, um, you know, the actions we're taking on each of P provide a big lift.
Mark Costa: Now, there are structural challenges in the olefins world, in the acetyl world, from excess capacity in China, impacting some of the chemical intermediate margins. There's a, you know, debate obviously going on in the industry around, to what degree does that structural pressure change? I mean, right now, we are for sure at the bottom of the market, and the prices are at the variable cash costs of the Chinese. You know, so I don't think that's sustainable, but to what degree it fully recovers is unclear on CI. You know, now with CI, you know, the when you think about it, you know, the actions we're taking on E2P provide a big lift. The margin recovery and demand recovery in North America will provide a lift.
Now, there are structural challenges in the olefins world, in the acetyl world, from excess capacity in China, impacting some of the chemical intermediate margins. There's a, you know, debate obviously going on in the industry around, to what degree does that structural pressure change? I mean, right now, we are for sure at the bottom of the market, and the prices are at the variable cash costs of the Chinese. You know, so I don't think that's sustainable, but to what degree it fully recovers is unclear on CI. You know, now with CI, you know, the when you think about it, you know, the actions we're taking on E2P provide a big lift. The margin recovery and demand recovery in North America will provide a lift.
The margin recovery and demand recovery in North America will provide a lift. So there's a way to get the earnings, you know, back from where they are today to, you know, probably 150, 200 million dollars in a normalized place. Now that's probably below where we were in the past trying to reflect some of the structural challenges that we expect but significant improvement from where we are today.
Fibers as we've already covered, I think, you know we're trying to stabilize, you know, in this year. Um what's interesting is if you look at the IBA
Um, now obviously, you know, the structural, so I don't think we have a structural problem in. Mm, and AFP. We have a cyclical market demand problem. You know, that has been our challenge, um, and to some degree that's also true in CI. Now, there are structural challenges in the in the whole offense world and the acetil world from excess capacity in China impacting some of the chemical or immediate margins and there's you know debate obviously going on the industry around to what degree does that structural pressure change? I mean right now we are for sure at the bottom of the market when the prices are the variable cash costs of the Chinese.
In 2020, and 2019 for CI and fibers together. It's around 520 million dollars.
You know, so I don't think that's sustainable, but to what degree it fully recovers is unclear on CI. You know, now with CI—
Um, if you look at last year and put Thea together, it's about hund million dollars. Less
You know, when you think about it, the actions we're taking on each of P provide a big lift.
Mark Costa: So there's a way to get the earnings, you know, back from where they are today to, you know, probably $150 to 200 million in a normalized place. Now, that's probably below where we were in the past, trying to reflect some of the structural challenges that we expect, but significant improvement from where we are today. Fibers, as we've already covered, I think, you know, we're trying to stabilize, you know, in this year. What's interesting is, if you look at the EBITDA in 2020 - in 2019 for CI and Fibers together, it's around $520 million. If you look at last year and put the EBITDA together, it's about $100 million less.
So there's a way to get the earnings, you know, back from where they are today to, you know, probably $150 to 200 million in a normalized place. Now, that's probably below where we were in the past, trying to reflect some of the structural challenges that we expect, but significant improvement from where we are today. Fibers, as we've already covered, I think, you know, we're trying to stabilize, you know, in this year. What's interesting is, if you look at the EBITDA in 2020 - in 2019 for CI and Fibers together, it's around $520 million. If you look at last year and put the EBITDA together, it's about $100 million less.
With, you know, so from a structural question, which is more of a fiber CI question. Just need to peek and get you back to where we were in 2019 and then we have the Specialties building on that.
And we're taking a lot of cost out to, you know, 225 million to 250 million of cost, is also coming out to offset, structural challenges to enable us to get back to normalize earnings.
So we still think it's possible to get back to that 2 billion kind of number.
Great. Thank you.
The margin recovery and demand recovery in North America will provide lift. So there's a way to get the earnings, you know, back from where they are today to, you know, probably 150, 200 million dollars in a normalized place. Now, that's probably below where we were in the past trying to reflect some of the structural challenges that we expect but significant improvement from where we are today fibers as we've already covered, I think you know we're trying to stabilize, you know, in this year um Within
Let's make the next question. The last 1, please.
Interesting is if you look at the EBA.
In 2020, and in 2019 for CI and Fibers together, it's around $520 million.
No problem. Our last question comes from Lawrence Alexander. From Jeffrey's. Your line is now open. Please go ahead.
Mark Costa: You know, so from a structural question, which is more a fiber CI question, just E2P can get you back to where we were in 2019, and then we have the specialties building on that. And we're taking a lot of cost out to, you know, $225 million to $250 million of cost is also coming out to offset structural challenges to enable us to get back to normalized earnings. So we still think it's possible to get back to that $2 billion kind of number.
You know, so from a structural question, which is more a fiber CI question, just E2P can get you back to where we were in 2019, and then we have the specialties building on that. And we're taking a lot of cost out to, you know, $225 million to $250 million of cost is also coming out to offset structural challenges to enable us to get back to normalized earnings. So we still think it's possible to get back to that $2 billion kind of number.
Um, if you look at last year and put Diva doll together, it's about a hundred million dollars. Less
It's are you still there?
With, you know, so from a structural question—which is more of a Fibers CI question—just eat to peak and get you back to where we were in 2019, and then we have the Specialties building on that.
Becky.
And we're taking a lot of cost out to, you know, 225 million to 250 million dollars of cost, is also coming out to offset, structural challenges to enable us to get back to normalized earnings.
Maybe we can go on to the next 1 from now just fine.
okay, so uh, I think that's
So we still think it's possible to get back to that 2 billion kind of number.
Go ahead. Go ahead Becky.
Mike Sison: Great. Thank you.
Mike Sison: Great. Thank you.
Mark Costa: Let's make the next question the last one, please.
Gregory Riddle: Let's make the next question the last one, please.
Great. Thank you.
No, that's okay. Sorry. I was just going to say that was our last question.
Perfect.
Let's make the next question and the last 1, please.
Gregory Riddle: No problem. Our last question comes from Laurence Alexander from Jefferies. Your line is now open. Please go ahead.
Operator: No problem. Our last question comes from Laurence Alexander from Jefferies. Your line is now open. Please go ahead.
So, thank you everyone for joining us today. We appreciate your time and hope you have a great rest of your day.
No problem. Our last question comes from Lawrence Alexander from Jeffrey's. Your line is now open. Please go ahead.
This concludes today's call, thank you for your participation. You may now disconnect
Mark Costa: Laurence, are you still there? Becky, maybe we go on to the next one.
Mark Costa: Laurence, are you still there? Becky, maybe we go on to the next one.
Lawrence, are you still there?
Becky.
Gregory Riddle: We have no response from Laurence's line.
Operator: We have no response from Laurence's line.
Maybe we go on to the next one from now. Just mine.
Mark Costa: Okay.
Mark Costa: Okay.
Gregory Riddle: We-
Gregory Riddle: We-
Mark Costa: So, I think that's... Go ahead. Go ahead, Becky.
Mark Costa: So, I think that's... Go ahead. Go ahead, Becky.
Okay, so, uh, I think that's—
Go ahead. Go ahead Becky.
Gregory Riddle: No, that's okay. Sorry, I was just gonna say that was our last question.
Gregory Riddle: No, that's okay. Sorry, I was just gonna say that was our last question.
Mark Costa: Perfect. So thank you, everyone, for joining us today. We appreciate your time and hope you have a great rest of your day.
Mark Costa: Perfect. So thank you, everyone, for joining us today. We appreciate your time and hope you have a great rest of your day.
No, that's okay. Sorry. I was just gonna say that was our last question.
Perfect. So, thank you everyone for joining us today. We appreciate your time and hope you have a great rest of your day.
Gregory Riddle: This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
This concludes today's call, thank you for your participation. You may now disconnect
