Q2 2026 Eastman Chemical Co Earnings Call

July 31, 2026

Operator: Good day everyone. Welcome to the Second Quarter 2026 Eastman Conference 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.

Speaker #1: Good day, everyone, and welcome to the second quarter 2026 EASTMAN Conference Call. Today's conference is being recorded. This call is being broadcast live on the EASTMAN website at www.eastman.com.

Speaker #1: I will now turn the call over to Mr. Greg Riddle, Eastman Investor Relations. Please go ahead, sir.

Speaker #2: Thank you, Lucy, and good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, Board Chair and CEO; and William McClain, Executive Vice President and CFO. Yesterday, after market close, we posted our second quarter 2026 financial results news release and SEC 8-K filing.

Greg A. Riddle: Thank you, Lucy. Good morning everyone, thanks for joining us. On the call with me today are Mark Costa, Board Chair and Chief Executive Officer, William McLain, Executive Vice President and Chief Financial Officer. Yesterday after market close, we posted our Q2 2026 financial results news release and SEC 8-K filing. Our slides and the related prepared remarks in the investor section of our website, eastman.com. Before we begin, I'll cover two items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations. Actual events or results could differ materially.

Greg Riddle: Thank you, Lucy. Good morning everyone, thanks for joining us. On the call with me today are Mark Costa, Board Chair and Chief Executive Officer, William McLain, Executive Vice President and Chief Financial Officer. Yesterday after market close, we posted our Q2 2026 financial results news release and SEC 8-K filing. Our slides and the related prepared remarks in the investor section of our website, eastman.com. Before we begin, I'll cover two items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations. Actual events or results could differ materially.

Speaker #2: Our slides and the related prepared remarks in the investor section of our website eastman.com. Before we begin, I'll cover two items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations.

Speaker #2: Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in our second quarter 2026 financial results news release.

Greg A. Riddle: Certain factors related to future expectations are or will be detailed in our Q2 2026 financial results news release, during this call, in the proceeding slides and prepared remarks, and in our filings with the SEC, including the Form 10-Q to be filed for Q2 2026, and the Form 10-K filed for 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 Q2 2026 financial results news release. We posted the slides and accompanying prepared remarks on our website last night, we will go now straight into Q&A. Lucy, please let's get started with our first question.

Greg Riddle: Certain factors related to future expectations are or will be detailed in our Q2 2026 financial results news release, during this call, in the proceeding slides and prepared remarks, and in our filings with the SEC, including the Form 10-Q to be filed for Q2 2026, and the Form 10-K filed for full year 2025. Second, earnings referenced in this presentation excludes certain non-core and unusual items.

Speaker #2: During this call, in the preceding slides and prepared remarks, and in our filings with the SEC, including the Form 10-Q to be filed for the second quarter 2026, and the Form 10-K filed for the full year 2025.

Speaker #2: Second, earnings referenced in this presentation exclude 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 second quarter 2026 financial results news release.

Greg Riddle: 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 Q2 2026 financial results news release. We posted the slides and accompanying prepared remarks on our website last night, we will go now straight into Q&A. Lucy, please let's get started with our first question.

Speaker #2: As we posted the slides and accompanying prepared remarks on our website last night, we will now go straight into Q&A. Lucy, please, let's get started with our first question.

Speaker #1: Of course. The first question is from Patrick Cunningham of Citigroup. Your line is now open. Please go ahead.

Operator: Of course. The first question is from Patrick Cunningham of Citigroup. Your line is now open. Please go ahead.

Speaker #3: Hi, good morning. Just to advance materials—you know, pretty solid volume and mixed growth in the second quarter. You mentioned some offsets from lower OEM production.

Patrick Cunningham: Hi, good morning. Just on Advanced Materials, pretty solid volume and mix growth in Q2. You mentioned some offsets from lower OEM production, weak aftermarket durables. I guess how should we think about the recovery trajectory of these weaker end markets heading into 2026, and the sustainability of this volume growth and confidence in ultimately a stronger H2?

Speaker #3: Weak aftermarket durables, I guess. How should we think about the recovery trajectory of these weaker end markets heading into '26, and the sustainability of this volume growth? And, how confident are you in seeing an ultimately stronger second half?

Mark J. Costa: Sure, Patrick, good morning. I have to say, I'm really incredibly excited to be talking about the company today and the tremendous execution our teams are doing across all businesses. It's really been a great result in Q2. Now we're looking at how we move forward in Q3 in the H2, I think is an important conversation. What I'd say when you think about the H2 of the year, we're not expecting any improvement in the end markets when it comes to sort of the weak discretionary markets, auto, B&C, consumer durables. We're certainly benefiting from modest growth in what we call our stable markets across the entire portfolio.

Mark Costa: Sure, Patrick, good morning. I have to say, I'm really incredibly excited to be talking about the company today and the tremendous execution our teams are doing across all businesses. It's really been a great result in Q2. Now we're looking at how we move forward in Q3 in the H2, I think is an important conversation. What I'd say when you think about the H2 of the year, we're not expecting any improvement in the end markets when it comes to sort of the weak discretionary markets, auto, B&C, consumer durables. We're certainly benefiting from modest growth in what we call our stable markets across the entire portfolio.

Speaker #4: Sure, Patrick. And good morning, and I have to say I'm really incredibly excited to be talking about the company today. And the tremendous execution our teams are doing across all businesses has really been a great result in Q2.

Speaker #4: And now we're looking at how we move forward in Q3 in the back half, I think, is, is an important conversation. when I say when you think about the back half of the year, we're not expecting any improvement in the end markets when it comes to sort of the week discretionary markets, you know, auto, B and C, consumer durables.

Speaker #4: We're certainly benefiting from modest growth in what we call our stable markets across the entire portfolio. and so we're not really seeing any sort of changes there, and we're not seeing any impact in the the Mid East War yet.

Mark J. Costa: We're not really seeing any sort of changes there. We're not seeing any impact of the Middle East war yet on sort of hurting end market demand in a material way across the world as far as we can see it right now. In that context, I think we're really well positioned to grow earnings not just for Advanced Materials, but for the corporation as we look at the H2 of the year. Starting with Advanced Materials, what you can certainly see is the volume growth has been strong into Q2, which is driven by a lot of wins in the marketplace, innovation-driven wins. The growth that we're having in the circular business is still somewhat modest and will ramp up into the H2 of the year. You'll see the Renew volumes continue to ramp up.

Mark Costa: We're not really seeing any sort of changes there. We're not seeing any impact of the Middle East war yet on sort of hurting end market demand in a material way across the world as far as we can see it right now. In that context, I think we're really well positioned to grow earnings not just for Advanced Materials, but for the corporation as we look at the H2 of the year. Starting with Advanced Materials, what you can certainly see is the volume growth has been strong into Q2, which is driven by a lot of wins in the marketplace, innovation-driven wins. The growth that we're having in the circular business is still somewhat modest and will ramp up into the H2 of the year. You'll see the Renew volumes continue to ramp up.

Speaker #4: ...on sort of hurting end market demand in a material way across the world, as far as we can see it right now.

Speaker #4: So, in that context, I think we're really well-positioned to grow earnings—not just for Advanced Materials, but for the corporation as we look at the back half of the year.

Speaker #4: you know, starting, you know, with advanced materials, you know, what you can certainly see is, you know, the volume growth has been, you know, strong into Q2, which is driven by a lot of wins in the marketplace, innovation-driven wins, and the growth that we're having in the circular business.

Speaker #4: Still somewhat modest and will ramp up into the back half of the year. So you'll see the, you know, renewed volumes continue to ramp up.

Speaker #4: You'll see, we'll continue to win in marketplaces through innovation, which would offset what is a normal volume decline in the back half for AM.

Mark J. Costa: You'll see we'll continue to win in marketplaces through innovation, which would offset what is a normal volume decline in the H2 for AM. We won't see that. Volumes are more likely to be similar to the H1. That's actually a good solid base to build from. On top of that, with Advanced Materials, you've got asset utilization head and tailwinds that are coming from all the actions we took. We mentioned the prepared remarks, where we reduced finished goods in the H1 to offset some of the raw materials we were buying, like paraxylene, to make sure we had secure supply. That created a bit of a utilization headwind in the H1. That will sort of flip around to being a tailwind, as these markets remain solid and we have to ramp up production.

Mark Costa: You'll see we'll continue to win in marketplaces through innovation, which would offset what is a normal volume decline in the H2 for AM. We won't see that. Volumes are more likely to be similar to the H1. That's actually a good solid base to build from. On top of that, with Advanced Materials, you've got asset utilization head and tailwinds that are coming from all the actions we took. We mentioned the prepared remarks, where we reduced finished goods in the H1 to offset some of the raw materials we were buying, like paraxylene, to make sure we had secure supply. That created a bit of a utilization headwind in the H1. That will sort of flip around to being a tailwind, as these markets remain solid and we have to ramp up production.

Speaker #4: we, we won't see that. Volumes are more likely to be, you know, similar, to the to the first half. So that's actually a good solid base to build from.

Speaker #4: And then on top of that, with advanced materials, you've got, asset utilization head and tailwinds that are coming, from all the actions we took and we mentioned the prepared remarks.

Speaker #4: We reduced finished goods in the front half to offset some of the raw materials we were buying, like paraxylene, to make sure we had supply security.

Speaker #4: That created a bit of a utilization headwind in the first half. That will sort of flip around to being a tailwind, you know, as these markets, you know, remain solid and we have to ramp up production, in fact.

Mark J. Costa: In fact, we're really excited that the Tritan line is coming online now because we were pretty limited on capacity, with Tritan, with the volumes we had in Q2 and how we've switched one of our Tritan lines to serve the PET growth. That's coming on just at the right time, and now we're taking our paraxylene that we bought in advance for supply reasons and converting it to finished goods in H2. It gives you a tailwind on utilization, but not a headwind on cash. That's all going well, and then on the price cost side, team's done a phenomenal job of getting prices up with raw materials.

Mark Costa: In fact, we're really excited that the Tritan line is coming online now because we were pretty limited on capacity, with Tritan, with the volumes we had in Q2 and how we've switched one of our Tritan lines to serve the PET growth. That's coming on just at the right time, and now we're taking our paraxylene that we bought in advance for supply reasons and converting it to finished goods in H2. It gives you a tailwind on utilization, but not a headwind on cash. That's all going well, and then on the price cost side, team's done a phenomenal job of getting prices up with raw materials.

Speaker #4: We're really excited that Freightonline is coming online now because we were pretty limited on capacity with Freight, with the volumes we had in Q2, and how we've switched one of our Freightonlines to serve the PET growth.

Speaker #4: So that's coming on just at the right time, and now we're taking our paraxylene that we bought in advance, for supply reasons, and converting it into finished goods in the back half of the year.

Speaker #4: So it gives you a tailwind on utilization, but not a headwind on cash. So that's all going well. And then, on the price-cost side, the team's done a phenomenal job of getting prices up.

Speaker #4: With raw materials, and as they've caught up, that will now flip into a tailwind in the back half of the year. Also helping AM have, you know, solid earnings growth into the back half of the year, which is not our typical pattern.

Mark J. Costa: As they've caught up, that will now flip into a tailwind in H2, also helping AM have solid earnings growth into H2, which is not our typical pattern. That's great to see that strength build. The second driver I would just mention to finish off the story is fibers. The tow volumes will increase in H2 materially as customers are increasing their orders to meet their annual minimum volume commitments with us. That's coming through, and there'll be some textile recovery we see as well, because volumes are quite low in H1, and some of the wins we're having will start bringing us back to sort of full volumes relative to last year.

Mark Costa: As they've caught up, that will now flip into a tailwind in H2, also helping AM have solid earnings growth into H2, which is not our typical pattern. That's great to see that strength build. The second driver I would just mention to finish off the story is fibers. The tow volumes will increase in H2 materially as customers are increasing their orders to meet their annual minimum volume commitments with us. That's coming through, and there'll be some textile recovery we see as well, because volumes are quite low in H1, and some of the wins we're having will start bringing us back to sort of full volumes relative to last year.

Speaker #4: So that's great to see that strength build. the second driver I would just mention to finish off the story is fibers. you know, the tow volumes will increase in the back half of the year, materially, as con customers, are increasing their orders to meet their annual, minimum volume commitments with us.

Speaker #4: So that's coming through, and there'll be some textile recovery we see as well, because volumes are quite low in the first half of the year, and some of the wins we're having will start bringing us back to sort of full volumes relative to last year.

Speaker #4: There'll be some offsets, obviously, in chemical intermediates and how those margins may moderate with, you know, the state of the Mid East conflict.

Mark J. Costa: There'll be some offsets, obviously, in Chemical Intermediates and how those margins may moderate with the state of the Mideast conflict. What I'd say on that front, though, is it's pretty uncertain what's going to play out right now, but right now we're expecting some moderation. As for propylene, we'll have some seasonal decline like normal. When you put it all together, we're really in a good position to deliver a good, strong earnings improvement relative to last year. We basically had a strong beat in Q2. We're talking about a very solid Q3. When I think about our view on earnings for the full year today, I would say that it's better than where we were in April, and certainly feel like we're on a good track to very strong earnings growth in this context.

Mark Costa: There'll be some offsets, obviously, in Chemical Intermediates and how those margins may moderate with the state of the Mideast conflict. What I'd say on that front, though, is it's pretty uncertain what's going to play out right now, but right now we're expecting some moderation. As for propylene, we'll have some seasonal decline like normal. When you put it all together, we're really in a good position to deliver a good, strong earnings improvement relative to last year. We basically had a strong beat in Q2. We're talking about a very solid Q3. When I think about our view on earnings for the full year today, I would say that it's better than where we were in April, and certainly feel like we're on a good track to very strong earnings growth in this context.

Speaker #4: What I'd say on that front, though, is it's pretty uncertain what's going to play out right now. But right now, we're expecting some moderation.

Speaker #4: And then, as we flip to approximately, I have some seasonal decline like normal. So, when you put it all together, we're really in a good position to deliver, you know, a good, strong earnings improvement relative to last year.

Speaker #4: You know, we basically had such a strong beat in Q2. We're talking about a very solid Q3. And so, when I think about our view on earnings for the full year today, I would say that it's better than where we were in April.

Speaker #4: And certainly feel like we're on a good track to, you know, very strong earnings growth in this context.

Speaker #3: Got it. Thank you so much. And then maybe just to follow up on chemical intermediates, you know, I think that, you know, direction and magnitude of spread changes is, is anyone's guess at this point, but you had a pretty robust volume increase in the quarter.

Patrick Cunningham: Got it. Thank you so much. Maybe just a follow-up on Chemical Intermediates. I think the direction and magnitude spread changes is anyone's guess at this point. You had a pretty robust volume increase in the quarter. I guess, what sort of dynamics drove this volume surge, and how much of it was realizing some of those durable share gains you alluded to last quarter versus maybe some temporary pull forward there?

Speaker #3: I guess, you know, what sort of dynamics drove this volume surge, and how much of it was realizing some of those durable share gains you alluded to last quarter versus maybe some temporary pull-forward there?

Speaker #4: Yeah. So on, on chemical intermediates and volumes, the vast majority of the volume increase was driven by, you know, on a year-over-year basis, lack of, significant shutdowns this year relative to what we had last year.

Mark J. Costa: On Chemical Intermediates and volumes, the vast majority of the volume increase was driven by, on a year-over-year basis, a lack of significant shutdowns this year relative to what we had last year. Last year, we had planned shutdowns and some unplanned shutdowns. We lost a lot of capacity to sell to the market. This year, the volumes are running at normal capacity, which is a lot better than where we were. That does include some pickup in share due to the supply tightness in the marketplace. That's a quality of earnings comment, which is we're always going to sell the volume, it's just where do we sell and what the margins are. In North America, we picked up some share, where the margins are much more attractive than the export markets. Obviously, at the moment, the export markets are also very attractive.

Mark Costa: On Chemical Intermediates and volumes, the vast majority of the volume increase was driven by, on a year-over-year basis, a lack of significant shutdowns this year relative to what we had last year. Last year, we had planned shutdowns and some unplanned shutdowns. We lost a lot of capacity to sell to the market. This year, the volumes are running at normal capacity, which is a lot better than where we were. That does include some pickup in share due to the supply tightness in the marketplace. That's a quality of earnings comment, which is we're always going to sell the volume, it's just where do we sell and what the margins are. In North America, we picked up some share, where the margins are much more attractive than the export markets. Obviously, at the moment, the export markets are also very attractive.

Speaker #4: Last year, we had planned shutdowns and some unplanned shutdowns, and so we lost a lot of capacity to sell to the market. This year, the volumes are running at normal capacity, which is a lot better than where we were.

Speaker #4: That does include some pickup in share due to the supply tightness in the marketplace. That's a quality of earnings comment, which is we're always going to sell the volume.

Speaker #4: It's just a matter of where we sell it and what the margins are. In North America, we picked up some share, where the margins are much more attractive than in the export markets.

Speaker #4: Obviously, at the moment, the export markets are also very attractive. And we've picked up some volumes and some attractive spots around the world where we saw opportunity.

Mark J. Costa: We picked up some volumes in some attractive spots around the world where we saw opportunity to capture that value given the disruptions in the marketplace. The volumes were very good, but it's more about mix quality, and the tightness, and the spreads that stack on top of that. We also emptied out the cavern on ethylene at very attractive prices. We had some stored up ethylene that we sold off from the marketplace.

Mark Costa: We picked up some volumes in some attractive spots around the world where we saw opportunity to capture that value given the disruptions in the marketplace. The volumes were very good, but it's more about mix quality, and the tightness, and the spreads that stack on top of that. We also emptied out the cavern on ethylene at very attractive prices. We had some stored up ethylene that we sold off from the marketplace.

Speaker #4: to capture that value given the disruptions in the marketplace. So the, the volumes are very good, but it's more about mixed quality, and the tightness in the spreads that, you know, stacked on top of that.

Speaker #4: We also you know, emptied out the, the cavern on, on, on E-Ethylene at very attractive prices. So we had some stored-up Ethylene that we d you know, you know, sold off in the marketplace.

Speaker #3: Great. Thank you so much.

Patrick Cunningham: Great. Thank you so much.

Speaker #2: Thank you. The next question comes from Josh Spector of UBS. Your line is now open. Please go ahead.

Operator: Thank you. The next question comes from Josh Spector of UBS. Your line is now open. Please go ahead.

Speaker #5: Yeah. Hi, good morning. I wanted to follow up on Advanced Materials volumes. Obviously, a solid quarter this quarter with the 5% growth you had.

Josh Spector: Yeah. Hi, good morning. I wanted to follow up on Advanced Materials volumes. Obviously a solid quarter this quarter with the 5% growth you had. I'm wondering, one, can you split that between what you call the base business versus the methanolysis rPET contribution? In your comments on Q3, it seems like you're talking about volumes flat, but the comp is really easy. I'm not sure what you're baking in there versus a year ago and why volumes wouldn't be up. I'm obviously missing something. If you can help me there. Thanks.

Speaker #5: I'm wondering, you know, can you split that between what you call the base business versus the methanolysis PRT contribution? And then in your comments on Q3, it seems like you're talking about volumes being flat, but the comp is really easy.

Speaker #5: So, I'm not sure what you're baking in there, you know, versus a year ago. And why, you know, volumes wouldn't be up.

Speaker #5: I'm obviously missing something, so if you could help me there. Thanks.

Speaker #4: Yeah. Well, let me just start by clarifying what I said. Volume flat is a sequential comment, Josh. It’ll be substantially higher than last year. So we were just talking about volumes, you know, will be similar to Q2.

Mark J. Costa: Yeah, let me just start clarifying what I said. Volumes flat is a sequential comment, Josh. It'll be substantially higher than last year. We were just talking about volumes will be similar to Q2 in Q3. In that context, which is much higher than last year, the volumes, a lot of it is wins we've had. On the Renew side, it's important to note that the growth we're seeing is greater than $100 million, which is incredibly strong in the H1, double revenue compared to last year. It is evenly split, roughly, between specialty growth and rPET. We are seeing continued wins and growth in the specialty side of the house. We are also seeing the PET wins happening as well and ramping up. I would say more of the H1 is on the specialty side.

Mark Costa: Yeah, let me just start clarifying what I said. Volumes flat is a sequential comment, Josh. It'll be substantially higher than last year. We were just talking about volumes will be similar to Q2 in Q3. In that context, which is much higher than last year, the volumes, a lot of it is wins we've had. On the Renew side, it's important to note that the growth we're seeing is greater than $100 million, which is incredibly strong in the H1, double revenue compared to last year. It is evenly split, roughly, between specialty growth and rPET. We are seeing continued wins and growth in the specialty side of the house. We are also seeing the PET wins happening as well and ramping up. I would say more of the H1 is on the specialty side.

Speaker #4: in Q3. So in that context, which is much higher than last year, the, the volumes, you know, a lot of it is wins we've had on the on the renew side, it's important to note that the growth we're seeing, this greater than $100 million which is incredibly strong in the first half, double revenue compared to last year, is evenly split, roughly.

Speaker #4: between specialty growth and, and RPET. So we are seeing, you know, continued wins and growth in the specialty side of the house. And we are also seeing, you know, the, the PET wins happening as well.

Speaker #4: And ramping up. I would say more of the front half is on the specialty side; the back half is more on the PET side, as we're ramping up those capacities to serve the market.

Mark J. Costa: The H2 is more on the PET side as we're ramping up those capacities to serve the market. We've been a bit challenged on some of the production capability and getting it fully lined out, which is part of why we reduced the revenue outlook is capacity constraints and a little bit of slowness in the market, but still incredibly strong growth relative to last year. We don't really break out in detail by quarter what is going to be Renew versus the rest of our business. What I can tell you is when you look at the full year, about half the revenue growth in the Advanced Materials segment is going to be from Renew and about half is going to be from specialty growth. That also says, great that circular is kicking in, great that it's delivering additional growth with that growth platform.

Mark Costa: The H2 is more on the PET side as we're ramping up those capacities to serve the market. We've been a bit challenged on some of the production capability and getting it fully lined out, which is part of why we reduced the revenue outlook is capacity constraints and a little bit of slowness in the market, but still incredibly strong growth relative to last year. We don't really break out in detail by quarter what is going to be Renew versus the rest of our business. What I can tell you is when you look at the full year, about half the revenue growth in the Advanced Materials segment is going to be from Renew and about half is going to be from specialty growth. That also says, great that circular is kicking in, great that it's delivering additional growth with that growth platform.

Speaker #4: We've been a bit challenged on some of the production capability and getting it fully lined out, which is part of why we reduced the revenue outlook—capacity constraints and a little bit of slowness in the market—but still incredibly strong growth relative to last year.

Speaker #4: So, we don't really break out in detail by quarter, you know, what is going to be renew versus, you know, the rest of our business.

Speaker #4: But what I can tell you is, when you look at the full year, about half the revenue growth in the Advanced Materials segment is going to be from Renew, and about half is going to be from specialty growth.

Speaker #4: So that also says, you know, great that circular is kicking in, great that it's delivering additional growth, you know, with that growth platform. But also, the specialty businesses are healthy, you know, and through innovation, not in-market demand, we're creating our own growth.

Mark J. Costa: Also the specialty businesses are healthy, and through innovation, not in market demand, we're creating our own growth and success across the marketplace. One of the great stories in that is actually performance films. The Q1 earnings were quite challenged from the segment level. That was mostly due to films and in particular performance films. We took a series of actions that were very successful. We launched a better, broader market strategy to win share in China that's been incredibly successful as we moved from Q1 to Q2. We took out and optimized a bunch of capacity to optimize what we make in North America and ramp up our asset in China, which is much lower cost asset. Big improvement in cost structure. That led to a big part of the improvement in earnings from Q1 to Q2.

Mark Costa: Also the specialty businesses are healthy, and through innovation, not in market demand, we're creating our own growth and success across the marketplace. One of the great stories in that is actually performance films. The Q1 earnings were quite challenged from the segment level. That was mostly due to films and in particular performance films. We took a series of actions that were very successful. We launched a better, broader market strategy to win share in China that's been incredibly successful as we moved from Q1 to Q2. We took out and optimized a bunch of capacity to optimize what we make in North America and ramp up our asset in China, which is much lower cost asset. Big improvement in cost structure. That led to a big part of the improvement in earnings from Q1 to Q2.

Speaker #4: And success across the marketplace. One of the great stories in that is actually Performance Film. So, in the first quarter, earnings were quite challenged at the segment level.

Speaker #4: That was mostly due to films, and in particular, performance films. We took a series of actions that were very successful. So, we launched a better, broader market strategy to win share in China that's been incredibly successful as we moved from Q1 to Q2.

Speaker #4: And also, we, you know, took out and optimized you know, a bunch of, capacity to optimize what we make in North America and ramp up our asset in China, which is a much lower cost asset.

Speaker #4: So, big improvement in cost structure, so that led to, you know, a pretty big part of the improvement in earnings from Q1 to Q2. But it also means when you get to 2027, we're gonna have an easy comp and probably do $25 to $30 million better in Q1 next year relative to this year.

Mark J. Costa: It also means when you get to 2027, we're going to have an easy comp and probably do $25 to $30 million better in Q1 next year relative to this year. Good adder for next year as well.

Mark Costa: It also means when you get to 2027, we're going to have an easy comp and probably do $25 to $30 million better in Q1 next year relative to this year. Good adder for next year as well.

Speaker #4: So, good—a good adder for next year as well.

Speaker #5: Okay, thanks. Yeah, that's helpful. And yeah, I apologize for the sequential versus year-on-year here. I guess you made an interesting comment on the PRT side, or some of the RPET wins you're trying to go for.

Josh Spector: Okay, thanks. Yeah, that's helpful. Yeah, I apologize on the sequential versus year-on-year here. I guess you made an interesting comment on the rPET side or some of the RPET wins you're trying to go for. You talked about it being more capacity and ramp up. I guess in your comments or your prepared remarks when you updated on the circular growth, you seem to talk more about consumer demand. I guess, which is the bigger factor to your adjustment of your growth? Is it the consumer demand or was it your ability to supply?

Speaker #5: You talked about it being more capacity and ramp up. I guess when, in your comments or your prepared remarks, when you updated on the circular growth, you seemed to talk more about consumer demand.

Speaker #5: I guess, which is the bigger factor to your adjustment of your growth? Is it the consumer demand, or was it your ability to supply?

Speaker #4: I'd say it's a bit half and half. So, there were some limitations on production on the RPET side. You know, we're not changing the outlook that much.

Mark J. Costa: I'd say it's a bit half and half. There was some limitations on production on the RPET side. We're not changing the outlook that much. We've just brought the revenue outlook to be a bit below the range we gave you earlier. Then I would just say it's a little bit of slowness everywhere about the rate at which customers are ramping up on specialty and some of the RPET purchases. Economy is incredibly weak right now. We're not seeing anyone back away from their commitments to recycled content and seeing the value of it. All of our brands, as you guys know from earnings calls, are struggling out there. Whether it's on the consumer durable side or on the consumer packaging side, the economy is tough. People are very focused on managing costs, so they're being extremely disciplined on what premiums they pay.

Mark Costa: I'd say it's a bit half and half. There was some limitations on production on the RPET side. We're not changing the outlook that much. We've just brought the revenue outlook to be a bit below the range we gave you earlier. Then I would just say it's a little bit of slowness everywhere about the rate at which customers are ramping up on specialty and some of the RPET purchases. Economy is incredibly weak right now. We're not seeing anyone back away from their commitments to recycled content and seeing the value of it. All of our brands, as you guys know from earnings calls, are struggling out there. Whether it's on the consumer durable side or on the consumer packaging side, the economy is tough. People are very focused on managing costs, so they're being extremely disciplined on what premiums they pay.

Speaker #4: We've just brought the revenue outlook to be a bit below the range we gave you earlier. And then I would just say there's a little bit of slowness everywhere about the rate at which customers are ramping up on specialty and some of the RPET purchases.

Speaker #4: I mean, the economy is incredibly weak right now. We're not seeing anyone back away from their commitments to recycle content or seeing the value of it.

Speaker #4: But all of our brands, as you guys know from earnings calls, are struggling out there, whether it's on the consumer durables side or on the consumer packaging side.

Speaker #4: You know, the economy's tough. People are very focused on managing cost, so they're being extremely disciplined on what premiums they pay. And I find it incredibly encouraging that we've held onto our specialty customers, who are paying premiums in this marketplace, and that we're still growing it.

Mark J. Costa: I find it incredibly encouraging that we've held onto our specialty customers who are paying premiums in this marketplace and that we're still growing it. I feel very good that we see a ramp up in RPET in this kind of market context, which says people really see the value and the need of it because we have a superior product and quality and clarity. That's incredibly important for durables always, but also important for these consumer packaged goods companies. We're very encouraged about confirmation of our value proposition, and we're all just stuck in a weak economy waiting to find ways to keep growing.

Mark Costa: I find it incredibly encouraging that we've held onto our specialty customers who are paying premiums in this marketplace and that we're still growing it. I feel very good that we see a ramp up in RPET in this kind of market context, which says people really see the value and the need of it because we have a superior product and quality and clarity. That's incredibly important for durables always, but also important for these consumer packaged goods companies. We're very encouraged about confirmation of our value proposition, and we're all just stuck in a weak economy waiting to find ways to keep growing.

Speaker #4: I feel very, you know, very good that, you know, we see a ramp-up in RPET in this kind of market context, which says people really see the value and the need for it because we have a superior product, and quality, and clarity. And, you know, that's incredibly important for durables always, but also important for these consumer packaged goods companies.

Speaker #4: So, you know, we're very encouraged about confirmation of our value proposition, and we're all just stuck in a weak economy, waiting to, you know, find ways to keep growing.

Speaker #5: Understood. Thank you.

Josh Spector: Understood. Thank you.

Speaker #2: Thank you. The next question comes from David Begleiter of Deutsche Bank. Your line is now open. Please go ahead.

Operator: Thank you. The next question comes from David Begleiter of Deutsche Bank. Your line is now open. Please go ahead.

Speaker #1: Thank you. Good morning. Mark, just an added and functional products, you know, very resilient margins in the face of really challenging in-markets. Can you talk to what's underpinning those resilient margins and, maybe views on the back half of the year for those margins?

David Begleiter: Thank you. Good morning. Mark, just on Additives & Functional Products, very resilient margins in the face of really challenging end markets. Can you talk to what's underpinning those resilient margins and maybe views on the back half of the year for those margins? Thank you.

Speaker #1: Thank you.

Speaker #4: Sure. Yeah. So, advanced—you know, adding some functional products—has been a phenomenal success story for us. And it's a tribute to a phenomenal team, a great set of products, and markets.

Mark J. Costa: Sure. Yeah. Additives & Functional Products has been a phenomenal success story for us. It's a tribute to a phenomenal team, a great set of products and markets, and just great execution every day. The benefit that Additives & Functional Products has versus AM is the stable markets that we serve are two-thirds of our revenue. With stability, it becomes much calmer behavior by everyone involved. In that sense, whether it's in pharma, whether it's in water treatment, ag, personal care, these series of very stable markets, aviation, we've got great industry structures. We've got very strong competitive positions and a lot of cost passer contracts associated with some of these businesses that give you a lot of margin stability. The CPT will fluctuate quarter to quarter on headwinds and tailwinds to some degree.

Mark Costa: Sure. Yeah. Additives & Functional Products has been a phenomenal success story for us. It's a tribute to a phenomenal team, a great set of products and markets, and just great execution every day. The benefit that Additives & Functional Products has versus AM is the stable markets that we serve are two-thirds of our revenue. With stability, it becomes much calmer behavior by everyone involved. In that sense, whether it's in pharma, whether it's in water treatment, ag, personal care, these series of very stable markets, aviation, we've got great industry structures. We've got very strong competitive positions and a lot of cost passer contracts associated with some of these businesses that give you a lot of margin stability. The CPT will fluctuate quarter to quarter on headwinds and tailwinds to some degree.

Speaker #4: And just great execution every day. So, you know, the benefit that, as a functional product, has versus AM is, you know, the stable markets that we serve are two-thirds of our revenue.

Speaker #4: so with, with stability, i-it becomes much calmer behavior by everyone involved. and so in that sense, you know, whether it's in pharma, you know, whether it's in water treatment, ag, personal care, you know, these, these series of very stable markets, aviation, we've got great industry structures.

Speaker #4: We've got very strong, you know, competitive positions, and a lot of cost pass-through contracts, you know, associated with some of these businesses that give you a lot of margin stability.

Speaker #4: So, the CPTs will fluctuate quarter to quarter on headwinds and tailwinds to some degree, but on an annual basis, it provides a lot of margin stability.

Mark J. Costa: On an annual basis, it provides a lot of margin stability. You've got these businesses that have solid moderate growth. You've got great industry structures in the products we have in this business and their stability. CPT is adding to that margin stability on top of it. Where we don't have CPT, teams have done very good work in raising prices consistent with raws and materials as well in this environment as we went into sort of Q2 and holding those margins in the back half of the year. It's just been a great solid business.

Mark Costa: On an annual basis, it provides a lot of margin stability. You've got these businesses that have solid moderate growth. You've got great industry structures in the products we have in this business and their stability. CPT is adding to that margin stability on top of it. Where we don't have CPT, teams have done very good work in raising prices consistent with raws and materials as well in this environment as we went into sort of Q2 and holding those margins in the back half of the year. It's just been a great solid business.

Speaker #4: So you've got these businesses that have, you know, solid, you know, moderate growth. you've got, great industry structures and the products we have in this business in, in their stability.

Speaker #4: CPTs adding to that, that margin stability on, on top of it. and, and where we don't have CPTs, teams have done, you know, very good work in raising prices consistent with ROS and, and, and materials as well.

Speaker #4: You know, in this environment as we went into sort of Q2 and, and, and holding those margins in the back half of the year.

Speaker #4: So, it's just been a great, solid business.

Speaker #1: Very good. And just on Kingsport methanolysis, do you have an early view on revenue growth in 2027 from that plant and product line?

David Begleiter: Very good. Just on Kingsport Methanolysis, do you have an early view on revenue growth in 2027 from that plant and pipeline?

Speaker #4: Well, I'm not going to give you a specific number, Josh—I mean, David, sorry—but what I would say is, you know, we're building up revenue through the year.

Mark J. Costa: Well, I'm not going to give you a specific number, David. What I would say is, we're building up revenue momentum through the year. Q4 will be the strongest revenue quarter. When you think about that $100 million this year, of course, that was then annualized into next year, then we will build on it. I would expect the same kind of build next year on the specialty side of the revenue, as we continue to win business in this environment. The PET side, I think, is well positioned for strong growth next year. We need to see how that all plays out as we go through the back half of the year. I would expect it's another strong performance next year on top of this year.

Mark Costa: Well, I'm not going to give you a specific number, David. What I would say is, we're building up revenue momentum through the year. Q4 will be the strongest revenue quarter. When you think about that $100 million this year, of course, that was then annualized into next year, then we will build on it. I would expect the same kind of build next year on the specialty side of the revenue, as we continue to win business in this environment. The PET side, I think, is well positioned for strong growth next year. We need to see how that all plays out as we go through the back half of the year. I would expect it's another strong performance next year on top of this year.

Speaker #4: So Q4 will be the strongest revenue quarter. when you think about that 100 million this year, that, of course, that was an annualized into next year.

Speaker #4: And then we will build on it. And I would expect the same kind of build next year on this on the specialty side of the revenue, as we continue to win business in that i-i in this environment.

Speaker #4: And, and the PT side, I think, is well positioned for, for, for, you know, strong growth next year, but we need to see how that all plays out, as it goes through the back half of the year.

Speaker #4: But, you know, I would expect it's another strong performance next year, on top of this year.

Speaker #1: Thank you.

David Begleiter: Thank you.

Speaker #2: Thank you. The next question comes from Frank Mitch of Ferrium Research LLC. Your line is now open. Please go ahead.

Operator: Thank you. The next question comes from Frank Mitsch of Fermium Research LLC. Your line is now open. Please go ahead.

Speaker #5: Thank you. Good morning. You know, Mark, one of the more impressive things about the quarter is what you've done on price/cost in the specialties businesses.

Frank Mitsch: Thank you. Good morning. Mark, one of the more impressive things about the quarter is what you've done on price costs in the specialties businesses. Typically, we think of those as being priced for value and use and so forth, but obviously, this is a somewhat unusual environment. Can you talk about what's been going on the cost side in the specialties business and how you're able to get price ahead of that?

Speaker #5: I mean, typically, we think of those as being priced for value and use and so forth, but obviously, this is a somewhat unusual environment.

Speaker #5: Can you talk about, you know, what’s been going on on the cost side in the specialties business, and, you know, how you’re able to get price ahead of that?

Speaker #4: Well, Frank, thanks for the question. And I think one of the strengths Eastman has had for a very long time is our discipline around price-cost management.

Mark J. Costa: Well, Frank, thanks for the question. I think one of the strengths Eastman's had for a very long time is our discipline around price cost management. I think we've done an excellent job through the years, whether it was catching up to raw material increases in 2021 or maintaining great price discipline when markets are softening and holding onto value in those contexts. I'm incredibly proud of our teams and how they did it, as always, once the war started, they moved immediately into action into taking the price increases necessary across the markets in both of the specialty businesses. What I'd say is that we succeeded in getting the prices in. We weren't greedy.

Mark Costa: Well, Frank, thanks for the question. I think one of the strengths Eastman's had for a very long time is our discipline around price cost management. I think we've done an excellent job through the years, whether it was catching up to raw material increases in 2021 or maintaining great price discipline when markets are softening and holding onto value in those contexts. I'm incredibly proud of our teams and how they did it, as always, once the war started, they moved immediately into action into taking the price increases necessary across the markets in both of the specialty businesses. What I'd say is that we succeeded in getting the prices in. We weren't greedy.

Speaker #4: I think we've done an excellent job, you know, through the years—whether it was, you know, catching up to raw material increases in '21 or maintaining great price discipline when markets are softening and holding onto value in those contexts.

Speaker #4: I'm incredibly proud of our teams and how they did it. And, as always, once the war started, they moved immediately into action and took the price increases necessary across the markets in both of the specialty businesses.

Speaker #4: What I'd say is that we succeeded in getting the prices in. We weren't greedy. We just, you know, put in price increases to cover our raw material, energy, and distribution costs, 'cause we want to be fair and reasonable to our customers.

Mark J. Costa: We just put in price increases to cover our raw material and energy and distribution costs because we want to be fair and reasonable to our customers, and we're not going to sort of eat those costs, but we're also not going to try and take advantage of a lot of other companies, I think, get aggressive in these times. We had some feedback where we were being disciplined in how we did that. That gives us a lot more credibility and durability in those price increases, not just in getting them increased, but into holding onto them. The business is centered around driving value through volume growth and mix uplift in our innovation. We do a very good job of keeping our variable margin per KG pretty consistent and attractive. In fact, through all this chaos, that's been relatively stable since 2019 to now.

Mark Costa: We just put in price increases to cover our raw material and energy and distribution costs because we want to be fair and reasonable to our customers, and we're not going to sort of eat those costs, but we're also not going to try and take advantage of a lot of other companies, I think, get aggressive in these times. We had some feedback where we were being disciplined in how we did that. That gives us a lot more credibility and durability in those price increases, not just in getting them increased, but into holding onto them. The business is centered around driving value through volume growth and mix uplift in our innovation. We do a very good job of keeping our variable margin per KG pretty consistent and attractive. In fact, through all this chaos, that's been relatively stable since 2019 to now.

Speaker #4: And we're not going to sort of eat those costs, but we're also not going to try and take advantage, as a lot of other companies, I think, get aggressive in these times.

Speaker #4: We had some feedback where we were being, you know, disciplined in how we did that. It gives us a lot more credibility and durability.

Speaker #4: And those price increases, not just in getting them increased, but in holding them—holding onto them. You know, the business is centered around driving value through volume growth and mix uplift, you know, in our innovation.

Speaker #4: and, you know, but we do a very good job of keeping our variable margin per KG pretty consistent and attractive. In fact, you know, through all this chaos, you know, that's been relatively stable since 2019 to now.

Speaker #4: And it's a testament to the quality of the products and the innovation that we have in the marketplace. You can only do that if the value of your products is meaningful to your customers.

Mark J. Costa: It's a testament just to the quality of the products and the innovation that we have in the marketplace. You can only do that if the value of your products are meaningful to your customers. When we can increase prices like this, it's a good proof point around these are specialty products that have value, that customers will pay a higher price because they need them, because of what we do in their products and how we create value for them. I think that's a great way to test your portfolio, and I think we are passing that test really well in Advanced Materials and ASP.

Mark Costa: It's a testament just to the quality of the products and the innovation that we have in the marketplace. You can only do that if the value of your products are meaningful to your customers. When we can increase prices like this, it's a good proof point around these are specialty products that have value, that customers will pay a higher price because they need them, because of what we do in their products and how we create value for them. I think that's a great way to test your portfolio, and I think we are passing that test really well in Advanced Materials and ASP.

Speaker #4: And so, when we can increase prices like this, it's a good proof point around, you know, these are specialty products that have value, that customers will pay a higher price, you know, because they need them, because of what we do in their products and how we create value for them.

Speaker #4: And so, I think that's a great way to test your portfolio, and I think we are passing that test really well in Advanced Materials.

Speaker #4: And, and, and AST.

Speaker #5: So, you know, so there so certainly, ROS had been fairly volatile, and, you know, every time there's a peace proclamation, you know, y-y-you tend to see it go down.

Frank Mitsch: Certainly, the raw materials have been fairly volatile, and every time there's a peace proclamation, you tend to see it go down, and then it reverses the other way. Can you talk about the sustainability of that price cost into Q3? Probably said another way, how'd you compare your July margins with the Q2 average? If you could offer us that.

Speaker #5: And then it reverses the other way. Can you, you know, talk about the sustainability of that price-cost into the third quarter? Or, probably said another way, how would you compare your July margins with the second quarter average?

Speaker #5: If you could, offer us that.

Speaker #4: Sure. And Frank, you're asking about the specialties, just to clarify.

Mark J. Costa: Sure. Frank, you're asking about the specialties, just to clarify.

Mark Costa: Sure. Frank, you're asking about the specialties, just to clarify.

Speaker #5: Yes, that's exactly the specialties, yes.

Frank Mitsch: Yes. That's exactly it. Specialties, yes.

Mark J. Costa: Yeah. Well, Chemical Intermediates is a very different conversation. On the specialties, our intention is to keep the prices in place. The raw material costs and energy costs, as well as distribution costs, are still flowing through, and we would maintain good price discipline in these businesses as those higher costs flow through. What will happen is prices will hold. The raw material costs are probably a little bit less than they were in March at this point, obviously, if you go look at things like paraxylene. We still have a lot of flow through. On a H1, H2 basis, the price discipline we have in July and expect to continue as we go forward will give us a tailwind on price costs in H2 relative to H1.

Mark Costa: Yeah. Well, Chemical Intermediates is a very different conversation. On the specialties, our intention is to keep the prices in place. The raw material costs and energy costs, as well as distribution costs, are still flowing through, and we would maintain good price discipline in these businesses as those higher costs flow through. What will happen is prices will hold. The raw material costs are probably a little bit less than they were in March at this point, obviously, if you go look at things like paraxylene. We still have a lot of flow through. On a H1, H2 basis, the price discipline we have in July and expect to continue as we go forward will give us a tailwind on price costs in H2 relative to H1.

Speaker #4: Yeah. Chemicals and meats is a very different conversation. So, on the specialties, you know, our intention is to keep the prices in place.

Speaker #4: The raw material cost and energy costs, as well as distribution costs, are still flowing through and, and, so we would maintain, you know, good price discipline in these businesses as we, you know, as those higher costs, you know, flow through.

Speaker #4: So what will happen is, prices will hold. The raw material costs are probably a little bit less than they were in March at this point. Obviously, if you go look at things like paraxylene, but we still have a lot of flow through.

Speaker #4: But on a year I mean, on a first half, second half basis, the price discipline we, we in you know, have in, in J in July and expect to continue as we go forward, will give us a tailwind, you know, on, price cost in the second half relative to the first half.

Speaker #5: Terrific. That's what I was looking for. Thank you.

Frank Mitsch: Terrific. That's what I was looking for. Thank you.

Speaker #4: Yep.

Mark J. Costa: Yep.

Mark Costa: Yep.

Speaker #2: Thank you. Thank you. The next question is from Jessica of JPMorgan. Your line is now open. Please go ahead.

Operator: Thank you. The next question is from Jeff Zekauskas of J.P. Morgan. Your line is now open. Please go ahead.

Operator: Thank you. The next question is from Jeff Zekauskas of JPMorgan. Your line is now open. Please go ahead.

Speaker #5: Thanks very much. Mark, over time, Eastman has really been focused on investing in methanolysis—in Kingsport, Texas, in Europe. And, you know, those plans have altered.

Jeff Zekauskas: Thanks very much. Mark, over time, Eastman has really been focused on investing in methanolysis in Kingsport, Tennessee, and Europe. Those plans have altered in part because of what customers want, what the government wants, what capital costs are like. When you look at the trajectory of your capital expenditures, your R&D, your investments, I would imagine that those have really shifted because of the delays or obstacles that have been put in place that have inhibited investment in methanolysis over a longer period of time. Maybe if you could sort of briefly talk about the redirection of Eastman over a longer period of time.

Speaker #5: In part because of what customers want, what the government wants, what capital costs are like. And so, when you look at the trajectory of your capital expenditure, your R&D, your investments, I would imagine that those have really shifted.

Speaker #5: Because of the delays or obstacles that have been put in place, that have inhibited investment in methanolysis over a longer period of time.

Speaker #5: So, maybe if you could sort of briefly talk about the redirection of Eastman over a longer period of time.

Mark J. Costa: Hi, Jeff, thank you for the question. Yeah. I actually wouldn't support your characterization. The way we look at it is-

Mark Costa: Hi, Jeff, thank you for the question. Yeah. I actually wouldn't support your characterization. The way we look at it is-

Speaker #4: I, I—Jeff—and thank you for the question. Yeah, so I actually wouldn't support your characterization. The way we look at it is, you know.

Jeff Zekauskas: Okay

Speaker #4: I think, considerably different—methanolysis, I think, has been a great platform and a great investment. We see a lot of long-term potential for the platform.

Mark J. Costa: I think considerably different. Methanolysis, I think, has been a great platform and a great investment. We see a lot of long-term potential for the platform. Without a doubt, when you start a platform like this in a very strong economy, like we had in 2021, in the beginning of 2022, and then you get to a much weaker economy, it's easy to sort of look back and sort of review, did we make the right set of choices? At the same time, you can't just sit here and look at the world you live in at this moment. You also have to look at the future. I think we believe that at some point, the economy will be healthy again.

Mark Costa: I think considerably different. Methanolysis, I think, has been a great platform and a great investment. We see a lot of long-term potential for the platform. Without a doubt, when you start a platform like this in a very strong economy, like we had in 2021, in the beginning of 2022, and then you get to a much weaker economy, it's easy to sort of look back and sort of review, did we make the right set of choices? At the same time, you can't just sit here and look at the world you live in at this moment. You also have to look at the future. I think we believe that at some point, the economy will be healthy again.

Speaker #4: without a doubt, when you start a platform like this, in a very strong economy, like we had, you know, in '21, in the beginning of '22, and then you get to a much weaker economy, it's easy to sort of look back and sort of review, did we make the right set of choices?

Speaker #4: At the same time, you can't just sit here and look at the world you live in at this moment; you also have to look at the future.

Speaker #4: And, y-you know, I think, we believe that at some point, the economy will be healthy again. and in that context, you know, where there's some health in the economy and everyone's not just focused on cost reduction, we'll see, you know, pretty significant acceleration in demand for renewa you know, products when it comes to, the revenue side of this question.

Mark J. Costa: In that context, where there's some health in the economy and everyone's not just focused on cost reduction, we'll see pretty significant acceleration in demand for Renew products when it comes to the revenue side of this question. Both recovery in the consumer durable market will naturally give a huge lift to Renew, as well as Like I said earlier, we're not seeing anyone back off on the value of recycled content. I mean, plastic waste as an issue in the world is not going away. It's not a bipartisan issue for the Democrats versus Republicans. Everyone hates plastic waste. No one likes it. No one wants it in the environment. People are worried about its impact on their health. This issue is not at all going away, and every brand knows it.

Mark Costa: In that context, where there's some health in the economy and everyone's not just focused on cost reduction, we'll see pretty significant acceleration in demand for Renew products when it comes to the revenue side of this question. Both recovery in the consumer durable market will naturally give a huge lift to Renew, as well as Like I said earlier, we're not seeing anyone back off on the value of recycled content. I mean, plastic waste as an issue in the world is not going away. It's not a bipartisan issue for the Democrats versus Republicans. Everyone hates plastic waste. No one likes it. No one wants it in the environment. People are worried about its impact on their health. This issue is not at all going away, and every brand knows it.

Speaker #4: Both recovery and the consumer durable market will naturally give a huge lift to renew, as well as com. You know, like I said earlier, we're not seeing anyone back off on the value of recycled content.

Speaker #4: I mean, plastic waste is an issue in the world that's not going away, and it's not a bipartisan issue for the Democrats versus the Republicans.

Speaker #4: Everyone hates plastic waste. No one likes it. No one wants it in the environment. People are worried about its impact on their health. This issue is not at all going away, and every brand knows it.

Speaker #4: They're just trying to figure out how they manage, you know, taking responsibility for the polymers that they put in their products, relative to cost management here in the short term.

Mark J. Costa: They're just trying to figure out how they manage taking responsibility for the polymers that they put in their products relative to cost management here in the short term. Our confidence in revenue here, both on the specialty side and on the rPET side, is great, even greater on the rPET side because we're proving that we have superior quality and clarity to mechanical every day in a pretty significant way that's being recognized in the marketplace. Actually, my point of view about the value proposition on the rPET side is much stronger today than it was a year ago in what we're seeing in our relative value recognition in the marketplace. I mean, think about how much rPET increases are going on this year with our key customers in this market context. Revenue-wise, we feel good.

Mark Costa: They're just trying to figure out how they manage taking responsibility for the polymers that they put in their products relative to cost management here in the short term. Our confidence in revenue here, both on the specialty side and on the rPET side, is great, even greater on the rPET side because we're proving that we have superior quality and clarity to mechanical every day in a pretty significant way that's being recognized in the marketplace. Actually, my point of view about the value proposition on the rPET side is much stronger today than it was a year ago in what we're seeing in our relative value recognition in the marketplace. I mean, think about how much rPET increases are going on this year with our key customers in this market context. Revenue-wise, we feel good.

Speaker #4: So our confidence in revenue here, both on the specialty side and on the RPET side, is great. Even greater on the RPET side, because we're proving that we have superior quality and clarity to mechanical every day, in a pretty significant way that's being recognized in the marketplace.

Speaker #4: So actually, my point of view about the value proposition on the RPET side is much stronger today than it was a year ago. And what we're seeing in our relative value, you know, recognition, in, in the marketplace.

Speaker #4: I mean, think about how much RPET increases are going on this year, you know, with our key customers, in this market context. So, revenue-wise, we feel good.

Speaker #4: It's frustrating to be in this current economy for everything. And, the chemical industry, but it doesn't question the value proposition of why we got into this.

Mark J. Costa: It's frustrating to be in this current economy for everything in the chemical industry. It doesn't question the value proposition of why we got into this. When it comes to the capital side of the equation, first of all, the technical side of the equation, the plant's running phenomenally well. We've got a technology running that no one else on the planet can do as well as we can. I mean, with our yields above 90%, with the operations running reliably now, with our ability to see that we can debottleneck the plant by 30% to get more volume out of this plant and improve ROIC, says that we have an operational and technical advantage to anyone in this world. On the capital efficient side, without a doubt, capital costs have gone up a lot.

Mark Costa: It's frustrating to be in this current economy for everything in the chemical industry. It doesn't question the value proposition of why we got into this. When it comes to the capital side of the equation, first of all, the technical side of the equation, the plant's running phenomenally well. We've got a technology running that no one else on the planet can do as well as we can. I mean, with our yields above 90%, with the operations running reliably now, with our ability to see that we can debottleneck the plant by 30% to get more volume out of this plant and improve ROIC, says that we have an operational and technical advantage to anyone in this world. On the capital efficient side, without a doubt, capital costs have gone up a lot.

Speaker #4: And then, when it comes to the capital side of the equation—first of all, on the technical side of the equation—the plant's running phenomenally well.

Speaker #4: So we've got a technology running that no one else on the planet can do as well as we can. I mean, with our yields above 90%, with the operations running reliably now, with our ability to see that we can de-bottleneck the plant by 30%—you know, to get more volume out of this plant and improve ROIC—you know, so that we have an operational and technical advantage over anyone in this world.

Speaker #4: And then on the capital-efficient side, without a doubt, capital costs have gone up a lot. You know, that's what we were sort of facing as we looked at the project in Texas.

Mark J. Costa: That's what we were sort of facing as we looked at the project in Texas. With the loss of DOE grant and us having to rethink how to approach the marketplace, we started developing a much more capital efficient option about how to go forward. We're getting close to talking to all of you about how that looks like in specifics, but we're not quite there yet. We feel like we have a great path forward on a much more capital efficient option in doing this. Because we can develop that Kingsport, it allows us to push out the need to spend that next chunk of capital until 2028 so that we have time for the market to recover and align with that investment.

Mark Costa: That's what we were sort of facing as we looked at the project in Texas. With the loss of DOE grant and us having to rethink how to approach the marketplace, we started developing a much more capital efficient option about how to go forward. We're getting close to talking to all of you about how that looks like in specifics, but we're not quite there yet. We feel like we have a great path forward on a much more capital efficient option in doing this. Because we can develop that Kingsport, it allows us to push out the need to spend that next chunk of capital until 2028 so that we have time for the market to recover and align with that investment.

Speaker #4: And, you know, we, with the loss of the DOE grant and us having to rethink how to approach the marketplace, we started developing a much more capital-efficient option for how to go forward.

Speaker #4: And, you know, we're getting close to talking to all of you about, you know, how that looks in specifics, but we're not quite there yet.

Speaker #4: but we feel like we have a, , a great path forward on a much more capital efficient option. and, and doing this and because we can de-bottleneck Kingsport, it allows us to, push out, you know, the need to spend that next chunk of capital, you know, you know, until '28 so that we have time for the market to recover and align with that investment.

Jeff Zekauskas: Thanks for that. For Willie, receivables, I think, for the H1 have been a use of cash of $370 million. Why is there a ballooning of receivables? What might be the penalty this year? How much of that can you get back next year?

Speaker #5: Thanks for that. And for Willie—receivables, I think, for the first six months, have been a use of cash of $370 million. Why is there a ballooning of receivables?

Speaker #5: What might be the penalty this year? And how much of that can you get back next year?

William McLain: Thanks, Jeff, for the question. I think as Mark has already highlighted, our commercial teams have done a tremendous job on both managing price and price cost as well as the volume. Our revenue is expected to be $500 million higher due to the pricing actions that we're taking this year. Ultimately, we're focused on delivering earnings and solid cash and strong cash flows in any environment. As we look at it and as we highlighted and when we talked in Q1, we expected the pathways to be narrowing. Actually on an overall working capital, we're actually consumed a little less here in the H1 than we did last year.

Speaker #2: Thanks, Jeff, for the question. Yes, I think, as Mark has already highlighted, our commercial teams have done a tremendous job on both managing price and price cost, as well as the buy-in.

Speaker #2: You know, our revenue is expected to be $500 million higher due to the pricing actions that we're taking this year. And, you know, ultimately, we're focused on delivering earnings and solid cash, and strong cash flows in any environment.

Speaker #2: So, as we look at it, and as we highlighted, you know, and when we talked in Q1, we expected, you know, the pathways to be narrowing.

Speaker #2: You know, actually, on overall working capital, we've actually consumed a little less here in the first half than we did last year. You've heard us being disciplined on inventory, as Mark also highlighted.

William McLain: You've heard us being disciplined on inventory, as Mark also highlighted. As we look at that, and having a stronger H2, we actually will not get as much working capital back this year as we did last year. That's where we're seeing around, call it roughly $75 million reduction on a year-over-year basis in our, I'll call it multiple scenarios that we're looking at. Going from $970 to approaching the $900, and we feel confident that we can do that.

Speaker #2: But as we've looked at that, you know, and having a stronger back half, we actually will not get as much working capital back this year as we did last year.

Speaker #2: So, you know, that's where we're, you know, seeing around, you know, roughly the, the call it roughly 75 million reduction on a year-over-year basis, and our I'll call it multiple scenarios that we're looking at.

Speaker #2: So, going from 970 to approaching the 900, we feel confident that we can do that.

Speaker #5: Okay. Thank you.

Jeff Zekauskas: Okay. Thank you.

Speaker #1: Thank you. The next question comes from Vincent Andrews of Morgan Stanley. Your line is now open. Please go ahead.

Operator: Thank you. The next question comes from Vincent Andrews of Morgan Stanley. Your line is now open. Please go ahead.

Speaker #3: Thank you, and good morning, Mark. You know, some moving parts in both fibers and both tow and textiles for the back half of the year.

Vincent Andrews: Thank you, and good morning. Mark, some moving parts in fibers in both tow and textiles for H2 of the year. Wonder if you'd just unpack those a little bit and help us understand how much of that we need to follow through into 2027. Thanks.

Speaker #3: I wonder if you could just unpack those a little bit and help us understand how much of that we need to follow through into 2027.

Speaker #3: Thanks.

Speaker #4: sure. So when it when it comes to, the back half of the year for fibers, there's, as we've talked about, I think, extensively on the tow side, the we have these annual contracts with customers, but they have the right to vary what they buy quarter to quarter.

Mark J. Costa: Sure. When it comes to the H2 of the year for fibers, as we've talked about, I think extensively on the tow side, we have these annual contracts with customers, but they have the right to vary what they buy quarter to quarter. They're not that good at rate ability. We had, in the H1, customers on the tow side not buying that much. Now to hit their minimums, they're going to step up their purchases in the H2 of the year to hit what we consider sort of the low end of the volume bands that they have in their annual contract. That's what's happening on that front. There, of course, is a little bit of risk around the Middle East.

William McLain: Sure. When it comes to the H2 of the year for fibers, as we've talked about, I think extensively on the tow side, we have these annual contracts with customers, but they have the right to vary what they buy quarter to quarter. They're not that good at rate ability. We had, in the H1, customers on the tow side not buying that much. Now to hit their minimums, they're going to step up their purchases in the H2 of the year to hit what we consider sort of the low end of the volume bands that they have in their annual contract. That's what's happening on that front. There, of course, is a little bit of risk around the Middle East.

Speaker #4: So we they're not that good at rate ability. so we had in the front half, customers, on the tow side, not buying that much, but now to hit their minimums, they're gonna step up their purchases in the back half of the year to hit their, their the what we, you know, consider sort of the low end of the volume bands that they have.

Speaker #4: And they're annual contracts. So, I mean, that's what's, you know, happening on that front. There, of course, is a little bit of risk around the Middle East.

Speaker #4: You know, that was an area that our customers thought they were going to grow last year, but they didn't have that much success, as we explained.

William McLain: That was an area that our customers thought they were going to grow last year, didn't have that much success, as we explained. They thought they were going to grow this year, not having as much success with all the Middle East disruption. Highly determined to keep growing and do what it takes. There's a little variability on that front. I would say the tow volumes on an annual basis will turn out, by the time we're done, to be sort of relatively stable to last year. That is a meaningful increase in tow purchase in the H2 of the year, which we'll see a benefit of. On the textile side, it's a bit of the same thing. We thought that this year would be recovering from a very difficult year last year.

Speaker #4: They thought they were going to grow this year, you know, but they're not having as much success with all the Middle East disruption. They're highly determined, you know, to keep growing and do what it takes.

Speaker #4: so there's a little variability, you know, on that front. But, you know, I would say the tow volumes on an annual basis will turn out by the, the time we're done to be sort of relatively stable.

Speaker #4: Compared to last year, that is a meaningful increase in tow purchases in the back half of the year, which we'll see the benefit of.

Speaker #4: On the textile side, it's a bit of the same thing. We thought that this year would be about recovering from a very difficult year last year.

Speaker #4: We told you that we had about a $30 million headwind last year, relative to '24 with the drop in the textile business, which was a combination of a weak market, maybe even weaker by tariffs, impacting, in demand and our and our price point going into, into China.

William McLain: We told you that we had about a $30 million headwind last year relative to 2024 with the drop in the textile business, which was a combination of a weak market, made even weaker by tariffs, impacting demand and our price point going into China. That created a lot of headwind for us into 2025. We had a bunch of actions we were taking to improve it this year. They have not so far been successful because the market just continues to be weak. The H1 was pretty challenging. The volumes were relatively low and a very tough comp to last year because volumes in textiles were high in the H1 of last year. Really came off in the H2 of last year with the tariffs. Tough comp to last year.

Speaker #4: and so that, you know, created, you know, a lot of, you know, sort of headwind for us, into '25. We had a bunch of actions we were taking to improve it this year, but they have not, so far been successful 'cause the market just continues to be weak.

Speaker #4: So the first half was pretty challenging. The volumes were relatively low and a and a very tough comp the last year 'cause volumes in, in textiles were high in the first half of last year.

Speaker #4: And then really came off in the back half of last year with the tariffs. So, tough comp to last year, but we are seeing some success, and we believe we’ll build volume growth back in the back half of the year, which really would just get us to be even with last year.

William McLain: We are seeing some success, and we believe we'll build volume growth back in the H2 of the year, which really would just get us to be even with last year. We were thinking we were going to get a $15 million tailwind this year, and it turned out to be pretty much nothing relative to last year. It is good momentum on textiles into next year, in the winds that we're starting to sort of build on in the H2 of this year. That's a playout from this year on sort of what's going on there. Prices are not changing. They're pretty much consistent with what we thought from the beginning of the year. Energy costs are a headwind, so there's that spread compression there.

Speaker #4: So we were thinking we were gonna get a $15 million tailwind this year and it turns out to be pr-pretty much you know, nothing, relative to last year.

Speaker #4: But it is good momentum on textiles into next year. that we're in the winds that we're starting to sort of build on in, in the back half of this year.

Speaker #4: So, that's a playout, you know, from this year on sort of what's going on there. Prices, you know, are not changing. They're pretty much consistent, you know, with what we fought from the beginning of the year energy costs are a headwind, so there's that spread compression there.

Speaker #4: And utilizations are a headwind, you know, as we manage our inventory and capacity relative to sort of this demand environment this year.

William McLain: Utilizations are a headwind as we manage our inventory and capacity relative to this demand environment this year. Those are all sort of factored into our point of view right now. When you get to next year, it's important to remember that a lot of this earnings decline from 2024 to now is not actually tow, it's textiles. Utilization hits about slow demand across the copolyester stream that sort of flows into fibers on the cellulosic stream, higher energy costs. What we do think is plausible as we look at next year, is there's a set of actions that we can take that are in our control to try and stabilize this business. The demand drop isn't market related. The market's declining 1% this year, in a range of a typical 1% to 2%.

Speaker #4: so those are all sort of, you know, factored into sort of our point of view right now. When you get to next year, you know, it's important to remember that, you know, a lot of this earnings decline from '24 to now is not actually tow.

Speaker #4: It's textiles. It's, you know, utilization hits about slow demand across the corporate stream. That sort of flows into fibers. On the cellulose extreme, higher energy costs.

Speaker #4: But what we do think is plausible, as we look at next year, is there's a set of actions that we can take, you know, that are in our control to try and sort of stabilize this business.

Speaker #4: You know, the demand drop isn't market related. It's, you know, the market's declining 1% this year, you know, in a range of a typical 1% to 2%.

Speaker #4: You know, the drops in demand have been destocking, have been some share shifts, you know, that were principally in '25. And as we look at where we are right now, you know, we have by far the lowest cost position in this industry, in the tow business, in the cellulosic business.

William McLain: The drops in demand have been destocking, have been some share shifts that were principally in 2025. As we look at where we are right now, we have by far the lowest cost position in this industry, in the tow business, in the cellulosic business, and it's a very integrated advantage cost structure at our Kingsport site. Something about this stream is that it needs to run really full to have a positive effect on economics and overall site stability. We do see us recovering some of our market share that was sort of lost in balancing the stream in that sense. We have all these growth programs that start kicking in. It's recovering textiles, I just mentioned. There's things like Aventa that are moving slowly, but picking up momentum. There'll be some additional volume for next year.

Speaker #4: And, and it's a very integrated advantage cost structure at our Kingsport site. And something about this stream is that it, it needs to run really full, you know, to, to have a positive effect on economics and overall site stability.

Speaker #4: So we do, you know, see, us recovering some of our market share, that was sort of lost, you know, i-in balancing the stream in that sense.

Speaker #4: And we have all these growth programs that start kicking in. So it's recovering textiles I just mentioned. There's things like Aventa that are moving slowly but picking up momentum.

Speaker #4: You know, there will be some additional volume for next year. There's some oth-other programs we're working on that we can't really talk about right now that could be quite material to the stream.

William McLain: There's some other programs we're working on that we can't really talk about right now that could be quite material to the stream. There's a lot going on right now on actions that we're taking to make sure that the business is as stable as possible next year relative to this year.

Speaker #4: so there's a lot of a lot going on right now, on actions that we're taking. To make sure that the business is as stable as possible next year relative to this year.

Speaker #1: Okay. Thanks for that. if I could just ask you, I think an AFP may be a little more so than the other segments, but there's been some share gains, that have come, on account of maybe some competitor dislocation given the Middle East situation.

Vincent Andrews: Thanks for that. If I could just ask you, I think in AFP maybe a little more so than the other segments, but there's been some share gains that have come on account of maybe some competitor dislocation given the Middle East situation. What's your assumption in terms of the durability of those gains? Whether it's for the back half of the year or into next?

Speaker #1: What’s your assumption in terms of the durability of those gains, whether it's for the back half of the year or into next year?

Speaker #4: I just want to clarify your question. Were you asking a volume question or a spread question?

Mark J. Costa: I just want to clarify your question. Were you asking a volume question or a spread question?

Mark Costa: I just want to clarify your question. Were you asking a volume question or a spread question?

Vincent Andrews: A volume question in terms of market share. You've had some volume share gains. I think some competitors maybe didn't have the ability to produce to the same extent, you've picked up a little bit of share that way. I guess, is that correct? If so, what's your assumption on the durability of that?

Speaker #1: volu-volume question in terms of market share. You know, you've had some volume share gains, you know, I think some competitors maybe, you know, didn't, didn't have the ability to produce to the same extent and, and so you've picked up a little bit of share that way.

Speaker #1: So I guess is that correct? And then if so, what's your assumption on, on the durability of that?

Speaker #4: Sure. So, in chemical and reagents, I think our assumption—where we've had some share gains—is that it'll be relatively durable volume gains in the back half of the year.

Mark J. Costa: Sure. In Chemical Intermediates, I think our assumption where we've had some share gains is that it'll be relatively durable volume gains in H2. I mean, not gains, we'll hold on to it in H2. There may be a few places where in our export markets we see some change of positions in where we're selling our material, our volumes overall will hold up. It's just a question of spread. Obviously there's a question around just how H2 may moderate in spreads and Chemical Intermediates relative to H1 with all the dynamics going on, it's anyone's guess at this point. It's truly a box of chocolates out there where every day it's a different story.

Mark Costa: Sure. In Chemical Intermediates, I think our assumption where we've had some share gains is that it'll be relatively durable volume gains in H2. I mean, not gains, we'll hold on to it in H2. There may be a few places where in our export markets we see some change of positions in where we're selling our material, our volumes overall will hold up. It's just a question of spread. Obviously there's a question around just how H2 may moderate in spreads and Chemical Intermediates relative to H1 with all the dynamics going on, it's anyone's guess at this point. It's truly a box of chocolates out there where every day it's a different story.

Speaker #4: I mean, not gains, but we'll hold onto it in the back half of the year. I mean, there may be a few places where, in our export markets, we see some change of positions and where we're selling our material.

Speaker #4: But our volumes, you know, overall will hold up. It's just a question of spread. So, obviously, there's a question around just how the back half of the year may moderate, you know, in spreads in chemical intermediates relative to the first half, with all the dynamics going on.

Speaker #4: And it's anyone's guess at this point. It's really a box of chocolates out there, where every day it's a different story, and we could see things soften or, frankly, we could see things stay tight depending on what happens.

Mark J. Costa: We could see things soften or we frankly could see things stay tight depending on what happens, especially in the next couple of weeks. When it comes to the specialty side of the question, we expect to hold our market shares. We didn't see any market share losses in H1 as we increased prices. We're not expecting any market share losses in H2 with how we're managing our positions in our markets. That's being disciplined and holding our price relatively well in that context. The places where we picked up share on the specialty side is pretty modest in Q2. When we look at where we thought we could get a lot of share from companies being disrupted, that hasn't played out that much yet.

Mark Costa: We could see things soften or we frankly could see things stay tight depending on what happens, especially in the next couple of weeks. When it comes to the specialty side of the question, we expect to hold our market shares. We didn't see any market share losses in H1 as we increased prices. We're not expecting any market share losses in H2 with how we're managing our positions in our markets. That's being disciplined and holding our price relatively well in that context. The places where we picked up share on the specialty side is pretty modest in Q2. When we look at where we thought we could get a lot of share from companies being disrupted, that hasn't played out that much yet.

Speaker #4: And especially in the next couple of weeks, when it comes to this, especially this side of the question, you know, we expect to hold our market shares.

Speaker #4: We didn't see any market share losses in the first half of the year as we increased prices. We're not expecting any market share losses in the back half of the year.

Speaker #4: with how we're managing our positions in our markets, and that's being disciplined in holding our price relatively well in that context. The places where we picked up share on the specialty side is pretty modest in Q2.

Speaker #4: You know, when we look at where we thought we could get a lot of share from—you know, companies being disrupted—that hasn't played out that much yet.

Speaker #4: you know, companies are really holding out and using whatever inventory they have, to try and hope for lower prices in the future, both on the commodity and the specialty side.

Mark J. Costa: Companies are really holding out and using whatever inventory they have to try and hope for lower prices in the future, both on the commodity and the specialty side. That's a big part of why markets on the commodity side are weakened, is everyone's leaning on inventory. China is dumping inventory that they've built up over the last two years. Customers are using inventory to hold out for better market conditions. At some point, all that inventory is going to run out. If it hasn't been replaced by a lot of stability in the world, in the Middle East in particular, things could get pretty tight here in the back H2 of the year. There's a wide spectrum of how this may play out. Right now, I'd say the teams are doing a phenomenal job of holding share, phenomenal job, great job of holding price.

Mark Costa: Companies are really holding out and using whatever inventory they have to try and hope for lower prices in the future, both on the commodity and the specialty side. That's a big part of why markets on the commodity side are weakened, is everyone's leaning on inventory. China is dumping inventory that they've built up over the last two years. Customers are using inventory to hold out for better market conditions. At some point, all that inventory is going to run out. If it hasn't been replaced by a lot of stability in the world, in the Middle East in particular, things could get pretty tight here in the back H2 of the year. There's a wide spectrum of how this may play out. Right now, I'd say the teams are doing a phenomenal job of holding share, phenomenal job, great job of holding price.

Speaker #4: That's a big part of why markets, you know, on the commodity side are weakened is everyone's, you know, leaning on inventory. China is dumping inventory that they've built up over the last two years.

Speaker #4: Customers are holding, you know, using inventory to hold out for, you know, better market conditions. At some point, all that inventory's gonna run out.

Speaker #4: And if it hasn't been replaced by a lot of stability in the world, in the Middle East in particular, you know, things could get pretty tight here in the back half of the year.

Speaker #4: So there's a wide spectrum of how this may play out. But right now, I'd say the teams are doing a phenomenal job of holding share—a phenomenal job, a great job of holding price.

Speaker #4: but we're not in the specialty side picking up a lot of market share yet.

Mark J. Costa: We're not, in the specialty side, picking up a lot of market share yet.

Mark Costa: We're not, in the specialty side, picking up a lot of market share yet.

Speaker #1: Okay. Thank you very much.

Vincent Andrews: Okay. Thank you very much.

Speaker #2: Thank you. The next question is from Abigail Eberts of Wells Fargo. Your line is now open. Please go ahead.

Operator: Thank you. The next question is from Abigail Eberts of Wells Fargo. Your line is now open. Please go ahead.

Speaker #5: Thanks for taking my question. just quick question on your, cost reduction targets of 125 to 150 million. Can you just remind us how we should be thinking about that weighted across your segments?

Abigail Eberts: Thanks for taking my question. Just a quick question on your cost reduction targets of $125 to $150 million. Can you just remind us how we should be thinking about that weighted across your segments? Thanks.

Speaker #5: Thanks.

Speaker #6: thanks for the question, Abigail. And, the Eastman team has done a tremendous job, you know, delivering on 125 to 150, net of inflation. I would also say, I'm confident with what we've delivered, here in the first half and actions implemented.

William McLain: Thanks for the question, Abigail. The Eastman team has done a tremendous job delivering on $125 to $150 net of inflation. I would also say I'm confident with what we've delivered here in H1 and actions implemented that we will deliver H2, and also shift our focus into 2027, and focused on, at a minimum, offsetting the inflation. As we think about the split across the businesses, I would highlight Advanced Materials, as well as Chemical Intermediates as being the two largest benefactors and to a lesser extent, Fibers and Additives and Functional Products.

Speaker #6: That, we will deliver the second half, and also shift our focus into 2027. and focused on, at a minimum offsetting the inflation. As we think about the split across the, the businesses, I would highlight, you know, ad-advanced materials, as well as chemical intermediates as being, the two largest benefactors.

Speaker #6: And, to a lesser extent, fibers and additives and functional products.

Speaker #5: Got it. Thank you.

Abigail Eberts: Got it. Thank you.

Speaker #6: Go ahead, Abigail.

William McLain: Go ahead, Abby. Yep.

Operator: Go ahead, Abby.

Speaker #5: Yep.

Abigail Eberts: Yep.

Speaker #6: Lucy, let's move on to the next question, please.

Operator: Lucy, let's move on to the next question, please.

Greg Riddle: Lucy, let's move on to the next question, please.

Speaker #2: The next question comes from John Roberts of Mizuho. Your line is now open. Please go ahead.

Operator: The next question comes from John Roberts of Mizuho. Your line is now open. Please go ahead.

Speaker #4: thank you. L-lots of, new product, discussion in the prepared remarks. Could you back it up to an overall company level? Where are you on your innovation index, new products as a percent of sales, however you want to define it?

Mark J. Costa: Thank you. Lots of new product discussion in the prepared remarks. Could you back it up to an overall company level? Where are you on your innovation index, new products as a percent of sales, however you want to define it? First of all, good morning, John. It's good to talk to you. We're incredibly proud of our innovation growth model. At times like this when markets are weak, I think we've proven we can create growth above underlying markets across the portfolio. In particular in the Advanced Materials segment where we've made the most investments. Overall we see, as you've noted, great growth in Tritan. We're picking up new growth in Tritan because Europe's put a ban on BPA that's driving more conversion into our product, which is great.

John Roberts: Thank you. Lots of new product discussion in the prepared remarks. Could you back it up to an overall company level? Where are you on your innovation index, new products as a percent of sales, however you want to define it?

Speaker #7: So, hey, first of all, good morning, John. Good to talk to you. We're incredibly proud of our innovation growth model, and at times like this, when markets are weak, I think we've proven we can create growth above underlying markets across the portfolio.

Mark Costa: First of all, good morning, John. It's good to talk to you. We're incredibly proud of our innovation growth model. At times like this when markets are weak, I think we've proven we can create growth above underlying markets across the portfolio. In particular in the Advanced Materials segment where we've made the most investments. Overall we see, as you've noted, great growth in Tritan. We're picking up new growth in Tritan because Europe's put a ban on BPA that's driving more conversion into our product, which is great.

Speaker #7: And in particular, in the Advanced Materials segment, where we've made the most investments. So, you know, overall, we see, as you've noted, great growth in Tritan.

Speaker #7: We're picking up new growth in Tritan because Europe has put a ban on BPA that's driving more conversion into our product, which is great. You know, we've launched a new cosmetic product that's recycled, code one.

Mark J. Costa: We launched a new cosmetic product that's a recycle code one, that's a big deal for the cosmetic industry. We're seeing great growth there, including Renew content being in it. You've got the HUD growth, you've got this new performance films strategy we just talked about in China that's given us significant broader addressable market growth that's been incredibly helpful. There's a lot of things going on there. AFP is not as significant, but still meaningful when it's ultrahigh purity solvents for semiconductors, which is growing very high rates right now with the market at good margins. You've got aviation continuing to roll, we've got some new products coming out soon that are a big deal for the industry. Solus cellulosic for biodegradable polymer coatings on paper for cups and packaging and things like that. There's a lot going on.

Mark Costa: We launched a new cosmetic product that's a recycle code one, that's a big deal for the cosmetic industry. We're seeing great growth there, including Renew content being in it. You've got the HUD growth, you've got this new performance films strategy we just talked about in China that's given us significant broader addressable market growth that's been incredibly helpful. There's a lot of things going on there. AFP is not as significant, but still meaningful when it's ultrahigh purity solvents for semiconductors, which is growing very high rates right now with the market at good margins. You've got aviation continuing to roll, we've got some new products coming out soon that are a big deal for the industry. Solus cellulosic for biodegradable polymer coatings on paper for cups and packaging and things like that. There's a lot going on.

Speaker #7: a-a-and that's a big deal for the cosmetic industry. so we're seeing great growth there, including where new content being in it. We've got the HUD growth.

Speaker #7: You've got this new performance film strategy we just talked about in China, that's given us significant, broader industrial market growth. That's been incredibly helpful.

Speaker #7: So there's a lot of things going on there. And, you know, AFP's not a significant but still meaningful when it's, ultra-high purity solvents for semiconductors, which is, you know, growing, very high rates right now with the market.

Speaker #7: Good margins. You've got aviation continuing to roll, and they've got some new INT products coming out soon that are a big deal for the industry.

Speaker #7: Solus Salo6, you know, for biodegradable, poly—you know, polymer coatings on paper for cups and packaging and things like that. So there's a lot going on.

Speaker #7: we don't really provide a, a revenue, percent, of innovation, you know, as a as a public statistic. But, you know, it's I would s you know, it's roughly in the sort of mid-teen to 20% range when I look at it from in, in the specialty bo world.

Mark J. Costa: We don't really provide a revenue percent of innovation as a public statistic. It's roughly in the sort of mid-teen to 20% range when I look at it in the specialty world. We feel very good about the innovation curve that we're on. We have a lot of metrics in which we measure it. It's just we don't make those all public.

Mark Costa: We don't really provide a revenue percent of innovation as a public statistic. It's roughly in the sort of mid-teen to 20% range when I look at it in the specialty world. We feel very good about the innovation curve that we're on. We have a lot of metrics in which we measure it. It's just we don't make those all public.

Speaker #7: So we feel very good about the innovation curve that we're on, and we have a lot of metrics in which we measure it.

Speaker #7: It's just that we don't make those all public.

Speaker #4: Okay. And then the Kingsport coal gasifier has been a pretty valuable asset here in this high oil price environment. When is the next major planned maintenance downtime for that unit?

John Roberts: Okay. The Kingsport coal gasifier has been a pretty valuable asset here in this high oil price environment. When is the next major planned maintenance downtime for that unit?

Speaker #7: So we just did it. so it you know, we had a, a massive, shutdown, of, of the, of that stream in Q2, which was a big headwind.

Mark J. Costa: We just did it. We had a massive shutdown of that stream in Q2, which was a big headwind from Q1 to Q2 for fibers as well as Chemical Intermediates in that sequential result. What I'd say is it was a very large cost, so it will not repeat next year. There'll be a tailwind next year relative to this year with that significant shutdown helping the whole cellulose stream.

Mark Costa: We just did it. We had a massive shutdown of that stream in Q2, which was a big headwind from Q1 to Q2 for fibers as well as Chemical Intermediates in that sequential result. What I'd say is it was a very large cost, so it will not repeat next year. There'll be a tailwind next year relative to this year with that significant shutdown helping the whole cellulose stream.

Speaker #7: from Q1 to Q2 for fibers as well as, chemical intermediates, in, in, in the in that sequential, result. and, what I'd say is it's it was a very large cost.

Speaker #7: So it will not repeat next year, so there will be a tailwind next year relative to this year with that significant shutdown, helping the whole cellular stream.

Speaker #2: Thank you. The next question comes from Matthew Deo of Bank of America. Your line is now open. Please go ahead.

Operator: Thank you.

Mark J. Costa: Thank you for the question.

Mark Costa: Thank you for the question.

Operator: The next question comes from Matthew DeYoe of Bank of America. Your line is now open. Please go ahead.

Speaker #6: Good morning, everyone. I’ve— I’ve too, but I’ll start with: can you just bridge us a bit on some of this shift from Q2 to Q3 with all these outages, and then, like, strategic inventory management decisions?

Matthew DeYoe: Good morning, everyone. I have two, but I'll start with, can you just bridge us a bit on some of this shift from Q2 to Q3 with all these outages and then strategic inventory management decisions? I guess I'll call it that. In general, it seems like you're able to de-stock your raw mats and then conceptually it seems like you're restocking at levels in Q3 that doesn't net penalize you versus gains from better utilization rates. Is that right? How much outage headwind was there ultimately in Q2?

Speaker #6: I guess I'll call it that. And, in general, it seems like you're able to destock your raw materials, and then conceptually, it seems like you're restocking at levels in Q3 that don't net penalize you versus the gains from better utilization rates.

Speaker #6: Is that right? And, like, how much outage headwind was there ultimately in Q2?

Speaker #7: So, Matt, thanks for the for the question. you know, I think what Mark highlighted in the beginning, advanced materials is obviously, we were making, trade-offs with the, the timing of, you know, plants coming online, the Triton facility that we highlighted.

William McLain: Matt, thanks for the question. I think what Mark highlighted in the beginning, Advanced Materials is obviously we were making trade-offs with the timing of plants coming online, the Tritan facility that we highlighted, as well as the escalation of the impacts in the Middle East. Ultimately we're able to bring down some finished goods inventory within our Advanced Materials business. That created a utilization headwind as we did that. We did that to ultimately secure key feedstocks to enable us to deliver with confidence into the H2. Mark just highlighted that we had major turnarounds in Q2. As we think about from Q1 to Q2, that was around $40 to $45 million headwind sequentially.

Speaker #7: As well as the escalation, you know, of the impacts in the Middle East. So, we, you know, ultimately were able to bring down some finished goods inventory within our Advanced Materials business.

Speaker #7: That created a utilization headwind as we did that. And we did that to ultimately secure, you know, key feedstocks, to enable us to deliver, you know, with confidence into the second half.

Speaker #7: Mark just highlighted that we had major turnarounds in Q2. You know, as we think about it from Q1 to Q2, that was around a $40 to $45 million headwind sequentially.

Speaker #7: you know, our original guidance was we expected to benefit, you know, about 30 million sequentially, but with the advanced materials pulling some, turnarounds into Q3, we've now expect that to be, I'll call it, closer to the 10 to 20 million for the overall company.

William McLain: Our original guidance was we expected to benefit about $30 million sequentially, but with the Advanced Materials pulling some turnarounds into Q3, we now expect that to be, I'll call it, closer to $10 to $20 million for the overall company. Those are the big shifts as you think about shutdowns and turnarounds. I would also say on a year-over-year basis, we will have substantial utilization benefits in H2 compared to last year as we had inventory corrections in Advanced Materials and across the company in the back half of last year. You've heard Mark today talk about the strong demand outlook that we see here in Q3. We'll continue to update you on that. I think the big drivers are the turnarounds that I just described sequentially.

Speaker #7: So those are the big shifts as you think about shutdowns and turnarounds. I would also say, on a year-over-year basis, we will have substantial utilization benefits in the second half compared to last year.

Speaker #7: As we had inventory corrections in Advanced Materials and across the company in the back half of last year. And you've heard Mark today talk about the strong demand outlook that we see here in Q3.

Speaker #7: And, you know, we'll continue to update you on that. But I think the big drivers are the turnarounds that I just described sequentially. Yeah.

Mark J. Costa: Yeah. Just when you want to locate it from a segment point of view, there's two different things that Willie McLain described. There was the finished good impact on Advanced Materials, the cellulosic shutdown that we just talked about that was very significant and actually a couple other smaller shutdowns. The big impact there was in fibers and in Chemical Intermediates. It shows up in different places depending on which stock.

Mark Costa: Yeah. Just when you want to locate it from a segment point of view, there's two different things that Willie McLain described. There was the finished good impact on Advanced Materials, the cellulosic shutdown that we just talked about that was very significant and actually a couple other smaller shutdowns. The big impact there was in fibers and in Chemical Intermediates. It shows up in different places depending on which stock.

Speaker #7: Just when you want to locate it from a segment point of view, you know, there are two different things that Willie described. There was the finished goods impact on advanced materials, the Salo6 shutdown that we just talked about, that was very significant.

Speaker #7: And actually, there were a couple of other smaller shutdowns. But the big impact there was in fibers and in chemical intermediates. So it shows up in different places.

Speaker #7: Depending on which topic.

Speaker #6: That's helpful. And, I guess, can you talk a little bit about volume through the quarter? And really, even just, like, if you want to bridge March into this, right?

Matthew DeYoe: That's helpful. I guess, can you talk a little bit about volumes through the quarter? Really even just if you want to bridge March into this, right? There's a lot of discussions around panic buying downstream, not how that might have ebbed and flowed into June. Obviously, when we talk to investors, there's just concerns around customer destock in H2, given what's happened more recently over the last few years. How do you get confidence around this H2 volume profile? Were things trending better as you exited Q2?

Speaker #6: There's a lot of discussion around panic buying downstream, and how that might have ebbed and flowed into June. And obviously, when we talk to investors, there are concerns around customer destocking in the second half, given what's happened more recently over the last few years.

Speaker #6: So how do you get confidence around this 2H volume profile, and where things are trending better as you exited Q2?

Speaker #7: so great question. And certainly, volumes trended, you know, well through the quarter in, in, in Q2. So, you know, and almost like a normal way, which is it sort of built from April's, you know, through, through June.

Mark J. Costa: Great question, and certainly volumes trended well through the quarter in Q2. Almost like a normal way, which is it sort of built from April through June. In that sense, things actually felt quite normal despite all the chaos that surrounded us and what was going on. It is a very fair question, and one that we constantly are debating internally around demand, especially after last year where you saw that build to get ahead of tariffs and then the decline in volumes in the back half. So far, we're not seeing that same dynamic. July orders are holding up well and on track to what we would expect and consistent with what you would expect relative to Q2. That's a good sign.

Mark Costa: Great question, and certainly volumes trended well through the quarter in Q2. Almost like a normal way, which is it sort of built from April through June. In that sense, things actually felt quite normal despite all the chaos that surrounded us and what was going on. It is a very fair question, and one that we constantly are debating internally around demand, especially after last year where you saw that build to get ahead of tariffs and then the decline in volumes in the back half. So far, we're not seeing that same dynamic. July orders are holding up well and on track to what we would expect and consistent with what you would expect relative to Q2. That's a good sign.

Speaker #7: and, and in that sense, you know, things actually felt quite normal in despite all the chaos that surrounded us and what was going on.

Speaker #7: It is a very fair question and one that we are constantly debating internally, around demand—especially after last year, where you saw that build to get ahead of tariffs, and then the decline in volumes in the back half.

Speaker #7: so far, you know, we're not seeing that same dynamic. so July orders are holding up, you know, well and on track to what we would expect in, in consistent, y-you know, with, with what you would expect relative to Q2.

Speaker #7: So, that's a good sign. When it comes to a lot of the, sort of, you know, buying and CI, it's a more dynamic question.

Mark J. Costa: When it comes to a lot of the buying in CI, it's a more dynamic question, so with whatever's going on in the Strait. When it comes to the specialties, which I think is really where your question is centered, we're not seeing any end market demand declines or customers talking to us about that as a main concern. The customers are balancing two things at the same time, which I think is different than last year. Right now, because of what happened last year, they're very bit disciplined through February of this year in destocking inventory and getting inventories to be really low. Right? When you got to March, obviously, there was concerns about access to raw materials, you saw some pickup in demand.

Mark Costa: When it comes to a lot of the buying in CI, it's a more dynamic question, so with whatever's going on in the Strait. When it comes to the specialties, which I think is really where your question is centered, we're not seeing any end market demand declines or customers talking to us about that as a main concern. The customers are balancing two things at the same time, which I think is different than last year. Right now, because of what happened last year, they're very bit disciplined through February of this year in destocking inventory and getting inventories to be really low. Right? When you got to March, obviously, there was concerns about access to raw materials, you saw some pickup in demand.

Speaker #7: So, you know, with whatever's going on in the strait. But when it comes to the specialties, which I think is really where your question is centered, we're not seeing any in-market demand declines or customers talking to us about, you know, that as a main concern.

Speaker #7: The customers are balancing two things at the same time, which I think is different than last year. Right now, they're very, you know, because of what happened last year, they're very disciplined, you know, through February of this year, in destocking inventory and getting inventories to be really low.

Speaker #7: Right? So when you got to March, obviously, you know, there was concerns about, you know, access to, you know, raw materials. And so you saw some pickup in demand.

Speaker #7: But at the same time, you know, worries and concerns around, you know, what could happen to the in-market demand in the back half of the year, I think, has kept a lot of discipline in everyone's mind about just how much inventory they want to build.

Mark J. Costa: At the same time, worries and concerns around what could happen to the end market demand the back H2 of the year, I think, has kept a lot of discipline in everyone's mind about just how much inventory they want to build. You can debate whether they're building inventory right now or using up inventory right now, hoping for lower prices. There's a lot of mixture going on that's very different than last year so far where they want to have inventory, but they also want to hold out for lower prices, maybe if the Strait normalizes and everything gets more stable. You've got a lot of opposing forces where we don't think that people are sitting on significant inventories right now in this dynamic.

Mark Costa: At the same time, worries and concerns around what could happen to the end market demand the back H2 of the year, I think, has kept a lot of discipline in everyone's mind about just how much inventory they want to build. You can debate whether they're building inventory right now or using up inventory right now, hoping for lower prices. There's a lot of mixture going on that's very different than last year so far where they want to have inventory, but they also want to hold out for lower prices, maybe if the Strait normalizes and everything gets more stable. You've got a lot of opposing forces where we don't think that people are sitting on significant inventories right now in this dynamic.

Speaker #7: And, you know, you can debate whether they're building inventory right now or using up inventory right now, hoping for lower prices. So, there's a lot of mixture going on that's very different than last year.

Speaker #7: So far, from what you know, they want to have inventory, but they also want to hold out for lower prices, and maybe if the strait normalizes and everything gets more stable.

Speaker #7: So you've got a lot of opposing forces, you know, where we don't think that people are sitting on significant inventories right now.

Speaker #7: In this dynamic, if they were going to really destock, it could have started, frankly, in June, when people were really optimistic in May about the strait opening.

Mark J. Costa: If they were going to really destock, it could have started, frankly, in June, when people were really optimistic in May about the Strait opening. We didn't see that happen in June. I think things are better positioned to be more stable. The wild card here, of course, is if things really get out of control in the Middle East, oil prices go up dramatically, you can have a global impact on consumer demand. That's not in our forecast, that sort of extreme scenario.

Mark Costa: If they were going to really destock, it could have started, frankly, in June, when people were really optimistic in May about the Strait opening. We didn't see that happen in June. I think things are better positioned to be more stable. The wild card here, of course, is if things really get out of control in the Middle East, oil prices go up dramatically, you can have a global impact on consumer demand. That's not in our forecast, that sort of extreme scenario.

Speaker #7: And we didn't see that happen in June. So, you know, I think things are better positioned to be more stable. The wild card here, of course, is if things really get out of control in the Middle East, oil prices go up dramatically—then you can have a global impact on consumer demand.

Speaker #7: That's not in our forecast, you know, that sort of extreme scenario.

Speaker #6: Thanks for that.

Matthew DeYoe: Thanks for that.

Speaker #2: The next question comes from Kevin McCarthy of VRP. Your line is now open. Please go ahead.

Operator: The next question comes from Kevin McCarthy of VRP. Your line is now open. Please go ahead.

Speaker #1: Yeah, thank you, and good morning. Mark, I have a question or two on your circular platform. I think you indicated in the prepared remarks that you expect sales to grow by $100 million or more this year.

Kevin McCarthy: Yes, thank you. Good morning. Mark, a question or two on your circular platform. I think you indicated in the prepared remarks that you expect sales to grow by $100 million or more this year. Can you comment on what a good contribution margin would be against that sales growth?

Speaker #1: Can you comment on, you know, what a good contribution margin would be against that sales growth?

Speaker #7: We're not going to talk about contribution margins on this business. What I can tell you is, the revenue growth is attractive. The margins are certainly above company average.

Mark J. Costa: We're not going to talk about contribution margins on this business. What I can tell you is the revenue growth is attractive. The margins are certainly above company average when you think about this business. It's a value and a mix upgrade to the company and to AM when you think about variable margins. When I think about the business and its long-term EBITDA potential, we still very much feel we're on track for this first asset to get to $200 million EBITDA. We're not seeing any reasons why that's not going to happen. It's going to take longer than we'd like with the state of the current economy, the value proposition, the contribution margins we see is still very attractive.

Mark Costa: We're not going to talk about contribution margins on this business. What I can tell you is the revenue growth is attractive. The margins are certainly above company average when you think about this business. It's a value and a mix upgrade to the company and to AM when you think about variable margins. When I think about the business and its long-term EBITDA potential, we still very much feel we're on track for this first asset to get to $200 million EBITDA. We're not seeing any reasons why that's not going to happen. It's going to take longer than we'd like with the state of the current economy, the value proposition, the contribution margins we see is still very attractive.

Speaker #7: when you think about this business, so it's a value and a mi-mix upgrade, to the company and, and to and to AM when you think about variable margins.

Speaker #7: when I when I think about the business and its and its long-term EBITDA potential, you know, we still very much feel we're on track for this first asset to get to 200 million dollars EBITDA.

Speaker #7: You know, we're not seeing any reasons why that's not going to happen. It's just going to take longer than we'd like with the state of the current economy.

Speaker #7: But, you know, the, the value proposition and the contribution margins, you know, we, we see is still very attractive.

Speaker #1: Okay. maybe related to that, you know, my, my general impression is that the engineering team has done a great job and, and, you know, if anything, you've proven out the capacity to be higher than originally expected.

Kevin McCarthy: Okay. Maybe related to that, my general impression is that the engineering team has done a great job, if anything, you've proven out the capacity to be higher than originally expected. Obviously, the demand has trended as previously discussed. Is there a way to give us a sense of what the capacity utilization is? I'm thinking back to your deal with PepsiCo as well. How much headroom do you have to load that asset moving forward?

Speaker #1: you know, obviously, the, the demand, has trended as, as previously discussed. But i-i-is there a way, to give us a sense of, you know, what, what the capacity utilization is and, you know, I'm thinking back to your, your deal with, with Pepsi as, as well.

Speaker #1: You know, how much headroom, do you have to, to kinda load that asset moving forward?

Speaker #7: So I think with what we've shared with you last year, as we were around 50% utilization on the asset and we've stepped that utilization up, you know, with the improvement in demand this year, we've also run tests, you know, to run the plant as hard as possible to understand what we think the effective capacity of the plant is and feeling very confident we can get up to, to 100%, you know, in running the plant, you know, to support demand growth as it comes.

Mark J. Costa: I think with what we've shared with you last year is we were around 50% utilization on the asset, and we've stepped that utilization up with the improvement in demand this year. We've also run tests to run the plant as hard as possible to understand what we think the effective capacity of the plant is, and feeling very confident we can get up to 100% in running the plant to support demand growth as it comes. Of course, as we said, there are sort of targeted incremental capital projects to do in the plant to sort of bottleneck it up to 130% of design capacity or 130,000 tons. In that sense, I think we feel really good about where we're at and continue to gain more insights about how to optimize the performance of the plant and its cost structure.

Mark Costa: I think with what we've shared with you last year is we were around 50% utilization on the asset, and we've stepped that utilization up with the improvement in demand this year. We've also run tests to run the plant as hard as possible to understand what we think the effective capacity of the plant is, and feeling very confident we can get up to 100% in running the plant to support demand growth as it comes. Of course, as we said, there are sort of targeted incremental capital projects to do in the plant to sort of bottleneck it up to 130% of design capacity or 130,000 tons. In that sense, I think we feel really good about where we're at and continue to gain more insights about how to optimize the performance of the plant and its cost structure.

Speaker #7: And then, of course, you know, as we said, there are sort of targeted incremental capital projects to do on the plant to sort of ultimately get it up to 130% of design capacity, or 130,000 tons.

Speaker #7: So in that sense, I think we feel really good about where we're at and continue to gain more insight about how to, you know, optimize the performance of the plant and its cost structure.

Speaker #7: when it comes to polymer, that's where the constraint is on the on the, RPET side. 'cause this plant was originally built for specialties. and as, as the market sort of weakened on the growth in specialties, we obviously flexed our, our la our polymer lines, which is a great advantage we have is this flexibility to flex them from Triton to Copolyester to PET.

Mark J. Costa: When it comes to polymer, that's where the constraint is on the RPET side, because this plant was originally built for specialties. As the market sort of weakened on the growth in specialties, we obviously flexed our polymer lines, which is a great advantage we have is this flexibility to flex them from Tritan to copolyester to PET. We took a Tritan line and flexed it to PET because we knew a new big line of Tritan was about to come on to serve the market that we were building. That was a great way to balance it out. There's still limits to what that PET capacity is, we're now looking at some other polymer lines that we can optimize to continue making our PET, that have some additional capacity in this current market conditions.

Mark Costa: When it comes to polymer, that's where the constraint is on the RPET side, because this plant was originally built for specialties. As the market sort of weakened on the growth in specialties, we obviously flexed our polymer lines, which is a great advantage we have is this flexibility to flex them from Tritan to copolyester to PET. We took a Tritan line and flexed it to PET because we knew a new big line of Tritan was about to come on to serve the market that we were building. That was a great way to balance it out. There's still limits to what that PET capacity is, we're now looking at some other polymer lines that we can optimize to continue making our PET, that have some additional capacity in this current market conditions.

Speaker #7: We took a Tritan line, you know, and flexed it to PET 'cause we knew a new big line of Tritan was about to come on, you know, to serve the market that we were building.

Speaker #7: And so, that was a great way to balance it out. But there are still limits to what that PET capacity is, and so we're now looking at some other polymer lines that we can optimize, you know, to continue making RPET.

Speaker #7: that have some additional capacity in this current market environment. And so, you know, that work is going on right now to enable us to keep growing the PET in a significant way next year.

Mark J. Costa: That work is going on right now to enable us to keep growing the PET in a significant way next year. There's other things we're doing about our capital-efficient model we'll talk about in future calls about how that can support more polymer growth.

Mark Costa: That work is going on right now to enable us to keep growing the PET in a significant way next year. There's other things we're doing about our capital-efficient model we'll talk about in future calls about how that can support more polymer growth.

Speaker #7: And then there are other things we're doing with our capital-efficient model. We'll talk more in future calls about how that can support more polymer growth.

Speaker #1: Great. I, I appreciate the update.

Kevin McCarthy: Great. I appreciate the update.

Greg A. Riddle: Thanks. Let's make the next question the last one, please.

Greg Riddle: Thanks. Let's make the next question the last one, please.

Speaker #7: Thanks.

Speaker #6: Let's make the next question the last one, please.

Speaker #2: Thank you. The last question today is from Lawrence Alexander of Jefferies. Your line is not open. Please go ahead.

Operator: Thank you. The last question today is from Laurence Alexander of Jefferies. Your line is now open. Please go ahead.

Speaker #5: Good morning. Can you touch on, or give some detail on, how you're thinking now about your M&A pipeline? You know, how active is it?

Laurence Alexander: Good morning. Can you touch on, or give some detail on how you're thinking now about your M&A pipeline? How active is it? What are you seeing in terms of valuations? Are there strategic directions that you'd be open to considering? Just what's your positioning on that?

Speaker #5: What are you seeing in terms of valuations? Are there strategic directions that you'd be open to considering—just, you know, what's your positioning on that?

Speaker #7: Well, first, what I'd say is, I think Eastman has had a great, disciplined history when it comes to portfolio management. So, there are times where we divested a bunch of underperforming businesses.

Mark J. Costa: Well, first, what I'd say is, I think Eastman's had a great disciplined history when it comes to portfolio management. There are times where we divested a bunch of underperforming businesses if you go far back in time. There was a period of time where we got out of these underperforming businesses and did large acquisitions like Solutia, Taminco, and bolt-ons that have been incredibly successful, and we did them in times when valuations were actually rational. Those big acquisitions we paid roughly nine times EBITDA for, and have been huge value contributors to the company. We've been in a phase of optimizing and growing organic growth through innovation, which I think has been successful and proven itself in good times and bad. We've also shown we're willing to continue to be very disciplined on divestments.

Mark Costa: Well, first, what I'd say is, I think Eastman's had a great disciplined history when it comes to portfolio management. There are times where we divested a bunch of underperforming businesses if you go far back in time. There was a period of time where we got out of these underperforming businesses and did large acquisitions like Solutia, Taminco, and bolt-ons that have been incredibly successful, and we did them in times when valuations were actually rational. Those big acquisitions we paid roughly nine times EBITDA for, and have been huge value contributors to the company. We've been in a phase of optimizing and growing organic growth through innovation, which I think has been successful and proven itself in good times and bad. We've also shown we're willing to continue to be very disciplined on divestments.

Speaker #7: If you go far back in time, then there was a period of time where we, you know, got out of these underperforming businesses and did large acquisitions, like Solutia, TenCate, and Boltons, that have been incredibly successful.

Speaker #7: And we did them at times when valuations were actually rational. So, you know, those big acquisitions—we paid, you know, roughly 9 times EBITDA for—and have been huge value contributors to the company.

Speaker #7: And then we've, you know, been in a phase of optimizing and growing organic growth through innovation, which I think has been successful and proven itself in good times and bad.

Speaker #7: And we've also shown we're willing to continue to be very disciplined on divestments, right? So when we had some other businesses underperforming, like Tires and Adhesives, we divested them, as well as optimized our acetic acid footprint.

Mark J. Costa: When we had some other businesses underperforming, like tires and adhesives, we divested them as well as optimize our acetic acid footprint. Great discipline there in divesting things when it made sense, 10x EBITDA. I think we've got a good track record in M&A of being very successful with it, being very disciplined when things are not working well. We definitely believe our company is at minimum scale to be effective in our innovation and our balance sheet to support all the growth potential the company has. As we look forward, we'll always be disciplined about businesses that are not performing, and dealing with it. We're always looking at M&A and considering it. Clearly, that M&A market has picked up activity this year.

Mark Costa: When we had some other businesses underperforming, like tires and adhesives, we divested them as well as optimize our acetic acid footprint. Great discipline there in divesting things when it made sense, 10x EBITDA. I think we've got a good track record in M&A of being very successful with it, being very disciplined when things are not working well. We definitely believe our company is at minimum scale to be effective in our innovation and our balance sheet to support all the growth potential the company has. As we look forward, we'll always be disciplined about businesses that are not performing, and dealing with it. We're always looking at M&A and considering it. Clearly, that M&A market has picked up activity this year.

Speaker #7: So, you know, great discipline there, in divesting things when it made made sense. ti 10 times EBITDA. So, y-you know, I think we've got a good track record, you know, in M&A of being very successful with it, being very disciplined when things are not working well.

Speaker #7: we definitely believe our company is at sort of minimum scale to be effective in our innovation and our, balance sheet to support all the growth potential the company has.

Speaker #7: you know, so as we look forward, you know, we'll always be disciplined about, you know, businesses that are not performing, and dealing with it.

Speaker #7: And we're always looking at M&A and considering it. Clearly, the M&A market has picked up activity this year, as you would expect in this market condition.

Mark J. Costa: As you would expect in this market condition, valuations have improved to being more rational than they have been for quite some time. We're out there considering all of our options, like I think every company in the industry is doing today. As I think we can all acknowledge that we're probably going to see a lot of change over the next several years in this industry with all the dynamics that we face. I'm incredibly confident that we'll remain disciplined, and make good choices on both sides of the fence as those opportunities come up, but I'm not going to get into details on it.

Mark Costa: As you would expect in this market condition, valuations have improved to being more rational than they have been for quite some time. We're out there considering all of our options, like I think every company in the industry is doing today. As I think we can all acknowledge that we're probably going to see a lot of change over the next several years in this industry with all the dynamics that we face. I'm incredibly confident that we'll remain disciplined, and make good choices on both sides of the fence as those opportunities come up, but I'm not going to get into details on it.

Speaker #7: Valuations have improved to being more rational than they have been for quite some time. So we're out there, you know, considering all of our options.

Speaker #7: Like I think every company in the industry is doing today. You know, I think we can all acknowledge that we're probably going to see a lot of change over the next several years in this industry, with all the dynamics that we face.

Speaker #7: You know, but I'm incredibly confident that we'll remain disciplined and make good choices on both sides of the fence, you know, as those opportunities come up.

Speaker #7: But I'm not gonna get into details on it.

Speaker #5: Thank you.

Laurence Alexander: Thank you.

Speaker #6: Okay, thanks again, everyone, for joining us. We appreciate you taking the time to talk about Eastman this morning. Please have a great day.

Greg A. Riddle: Thanks again, everyone, for joining us. We appreciate you taking time to talk about Eastman this morning. Please have a great day.

Greg Riddle: Thanks again, everyone, for joining us. We appreciate you taking time to talk about Eastman this morning. Please have a great day.

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

Q2 2026 Eastman Chemical Co Earnings Call

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