EMN - Earnings call transcript Q3 2019 | Eastman Chemical Company

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Operator

Good day, everyone and welcome to the Eastman Chemical Company Third Quarter 2019 Conference Call. Today’s conference is being recorded. This call is being broadcast live on the Eastman’s website www.eastman.com.

We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company Investor Relations. sir. ahead, go Please

Greg Riddle

and everyone Matt joining thanks us. good you, and morning for Thank

with Mark CFO; today and the me On call are Manager, Relations. Espeland, Vice LaRoe, CEO; Executive Costa, President Jake and and Investor Curt Chair Board

two Before items. we will I begin, cover

XXXX will this company’s will to hear results future Actual financial plans expectations. statements our certain related third presentation, you during Certain or factors results forward-looking be expectations events and the could First, detailed quarter news with Exchange the filed our or the release in concerning for and and are differ slides accompanying filed quarter in XX-Q be XXXX third during this the call XXXX. the and in to Form for Form Commission, filings second quarter and XX-Q materially. Securities including

exclude directly referenced tax non-core non-core and in measures GAAP are use the full in Projections items, and found be or tax tax presentation results financial and release, most an year and forecasted of associated full including earnings the unusual comparable this as to a and adjusted news description www.eastman.com items rate disclosures, the quarter financial exclude excluded other XXXX Reconciliations items forecasted rate. the certain can adjusted our earnings any future the rate. non-recurring Investors which website of assume in section. a on third unusual year available Second,

will over it to I turn that, With Mark.

Mark Costa

which the Slide especially strategic this in the morning, teams actions discretionary local accelerate remain a manage X deteriorated quarter, focusing macroeconomic Thanks, performance. We EPS some solid Longview actions electrical better, are half which challenging led will costs quarter to solid among volumes, on similar shutdown to quarter on our second was of with our as the the at spending environment Greg. Good the third results a took to and disciplined third innovation our for outage a with they to what control despite second everyone. decline start the that can I in considering had offset other We highlights. year. in site. caused has programs

strength for led has the we is – business XXXX and challenge that markets, started Materials. weakness next testament they Despite challenges, to are progress although $XXX This to by in initiatives revenue years. exposure on couple heads-up resilience million number the new with across strategy products decade. specialty Advanced paint from are the closes approximately of will Tritan, innovative OEM And leading innovation and I’m to the later, in segment our programs remain for the protection innovation environment. a in tremendous a showing this film, interlayers auto acoustics strong of offsetting growth products Even over a AMs like economic close were substantial of make AFP in innovation business. display been the resilience heads-up confident core we’ve track

disciplined capital dividends through and to continue we our combination we As discussed $XXX nine cost to own before allocation environment, business where months our challenging the strategy, on reduction a targets create in through growth. Consistent million our innovation to we first stay of stockholders share we achieve XXXX, of focused this repurchases. with returned

cash of are finally, And our million by billion. expect $X.X year. to also on the we improving focused strength flow for $XXX full We free the balance de-levering approach sheet our

have which week, I form technology a chemical is no achieved this ocean. or a will in circular we here am number end in in degradation of. game our provides operated especially recycle CRT recycling, have CRT, of a of textiles, our advantage solution of care highlights, that or from many go This proud plastic can to we are plastic make including we a additional is end up and carbon of of CRT, landfill and recycling. Earlier ophthalmics. cosmetics, already of so CRT the of times economy. waste through recycling. efforts the take in in for our an CRT this largest participating, a alternative into life we personal This mechanical be sources operation Kingsport because used use products plastics to forward is help solve significant for integration the without can unlike recycled that and happen. full Two changer waste commercial is problem with renewal quality accelerate And step infinite announced manufacturing markets it waste means plastic at of site, we our variety

plastic In certified sustainable for significantly expect us. waste XXXX, we of based of technology the operations. our to products been CRT bio which in pounds XX This of about have and million changes cellulosic value our XX% to proposition use

in markets in Now these of within upside the there CRT sensitivity creates a serve. significant we the million in $XXX other from increase XX% very many the will content, be that several with $XXX from and compelling dramatic recycled with a be the specialty will range And next to products. environmental our offer revenue years, which expect we million

milestone. very we’re So about excited this

commercial polyester. for technology In recycling addition, expect end year of for we be another by the the also scale to chemical

accelerating you the recycling and advancements, more the area economy. many from can in expect of Eastman waste circular plastic of One

luxury our leadership the were PACK, for Second, cosmetic for in event premier recently the we sustainability area brands. of LUXE packaging recognized by

and Cristal economy. new Green for PACK circular Revel Eastman introduced recycled Treva, LUXE a Eastman others. economy ahead many LUXE Eastman has XXXX the the of leader copolyesters, These be a Award commercial scale of in showcased Eastman polyesters. cellulosic next generation to PACK of activate show us line in accelerating investments At content compounded the enable is won engineering circular the proprietary consumer a bioplastics which

to will the over that, discuss and Curt financial corporate results. With I to segment turn it

Curt Espeland

shut new downs this in you the would a challenging with volume unfavorable prices, mix comparison. quarter. production sales the decelerated, the revenue impact due and stronger worsened Mark the was selling the well to lower revenue due with and of as specialties. lower corporate the the Intermediates with and the to primarily biggest morning significant which lower of good declined this selling mostly and planned industrial value with mix from during to these The This lower year-over-year contributor factors as Thanks raw to climate Chemical energy Sales unplanned impact dollar. partially deceleration again X Slide economic volume lower and following high on had prices, offset lower is beginning material Starting everyone. growth prices volumes as review innovation. expect. prices, and as due quarter was business We and

efforts. due maintenance the unfavorable costs EBIT to the product somewhat by sales of stronger declined volume, lower cost combination reduction mix, offset and increased dollar

slightly that including escalation our number Looking are dispute July. sequentially, production in have prices. EBIT due since of lower U.S. trade due was China Industrial maintenance somewhat, revenue selling decelerated, global changed mostly a down to factors the the the declined call to costs. trade There related issues has in higher in further by driven August.

economic including in key in also As electronics. see occurring you is consumer see particular, U.S. transportation, impact can can In German market discretionary it of and we believe slowing, China. end data, durables the we consumer the and and

on like expected, lower generating revenue, control an we in has cash free we volume remain turn in focused we costs in business come closing capacity what flow. now, utilization. resulted has which strong are lower new than in reducing result, can a environment As In and

year-over-year cost including mostly growth delivered stable raw on Now Materials products material and film. protection increased. increase the EBIT management. a raw higher the turning global product due of acoustic paint segment challenges the mix EBIT costs, Advanced Triton X lower we in costs by caused favorable decreased automotive as strong trade largely Saflex about cost to market, primarily reduced and Tritan disruptions Slide quarter Copolyester, demand premium to Sequentially, material In review offset was despite a record revenue is to flow-through by was modestly management. our revenue the basis, The driven increased more volumes, global EBIT disputes, success exposed of and to sales. had the which of innovation in and lower automotive benefit and particular interlayers continued one-third sales

balance benefit expect markets help more to product of in strong our offset think from transportation. will growth which in the as general some end the we we of premium to the year, the continue such about lines, some to of As weakness

growth cost Also actions. the benefits Putting comments, All-in, in be model customers. will consistent challenging and and corporate single-digits together our Advanced think These create grow demand deceleration raw for up demonstrate own XXXX. our we the with my expect Materials normal year-over-year. in a innovation-driven of we which the EBIT quarter value the all year of to with costs results in defend the we significantly low it material lower strength our this will EBIT quarter fourth economic from climate expect in seasonal growth fourth to offset full

to Additives Functional costs by for global due material lower site trade in – increased selling remainder increase pressure, Care XX% But and maintenance favorable stronger markets. and a other pass-through pressures prices, attributed related EBIT was contracts decreased discretionary Lower a X revenue planned that prices tire solid product treatment lower formic several adhesives the due than growth decreased markets. offset lower particularly to primarily to primarily the Turning to demand serves growth fluids. continuing sales volume, were sales to and and with Slide mix particularly of prices lower and Products, due from less weaker and in raw end favorable about sales transportation stronger competitive resulting market decline acid cost consumer XX% end mix, manufacturing year-over-year dollar. more from dollar. in resins, that additives and We less realized product volume Chemicals, & specialty water selling

spreads were flat. Excluding currency,

pass-through mix products. growth EBIT Turning higher prices Care increased shutdown as for lower prices, higher by comparison, offset was than as to maintenance by particularly sequential volume due formic well and better to Chemical and volume more mostly mix costs the offset and additives cost product the sales decreased contracts. and being tire lower improvement as acid

quarter, the moderate markets to a the normal slower weighing expect due the uncertain earnings from is environment on to AFP. fourth end to to for base, economy. due seasonality, Looking lower albeit we This

risk in that seeing be to their We similar decided may shutdowns. down last mind, to AFPs the we With EBIT quarter signs customers this have out quarter longer year. fourth coming expect of to stay in fourth some are

on, Additives more year a Functional & this discuss in to moment the let Products little Before performance take and a add moving me color.

specialty and Although hard coatings were of and about well growth as treatment, by revenue and third expanding lower difficult water additives been resins we volumes as segment the these in see formic in business businesses Strong in fluids year-to-date, to specialty in Chemicals, two-thirds These Care this Earnings areas environment. acid to there currency in China of only parts headwinds models, due and it performing cost where pressure the nutrition. reduction tire of remaining Chemicals, most has modestly and have water treatment lower had were Care the the actions offset animal is spreads results, businesses. fever. fixed businesses well has fluids coatings declined combined demand additives, value high in this specifically been auto in animal swine adhesives nutrition

So you three most in in in just seeing business but mentioned. is I this rather businesses the segment not pressure are those

raw sales to lower selling material prices sales activity. X. volume. Now The Slide and selling lower sales to and revenue agricultural competitive Intermediates a prices due impact as to due weaker and on volume The Year-over-year decreased other markets lower Chemical prices local of decreased due intermediate a increased were due manufacturing lower due and to was lower weather shutdown wet activity. site. disruption for in competitive end result particularly costs increased to the Texas demand Longview, plant power EBIT for products the

Chemical Olefins these were benefits sales Taken to revenue normal refinery decreased decreased seasonality. the management. grade primarily and the which $XX due spreads. planned to cost and sales unplanned power partially amine to due sequential EBIT continued Intermediates million about and $XX spread lower continued due sales costs recent quarter, volume, by in These the outage. due were outages, million the and due functional amines was acetyl particularly propylene a volume a decreased for to EBIT volume headwinds functional offset also lower the to seasonality. decline of On basis, for investment unplanned headwind together, from lower in and

us. Looking are to quarter, the headwinds of ahead there few fourth front in

in turnaround to as largest Longview, and due Also Texas lower but global of also is markets pressure the environment, increased the are – cracker our increasingly volume the quarters. of both First, weak competitive outside United the remember challenged third of demand States is trade in cost fourth by issues. in

be And of capacity the normal volumes in then on So shutdown pressure customer the could a management inventory and seasonality quarter. will year-end cost our finally, rates. that potentially that at fourth of put beyond planned amount our utilization similar

quarter. and quarter less sales basis, results sequential Finishing of coal incident gas products. volume revenue sales product of due XXXX impact Fibers X, increased stable Slide up innovation joint of with decline third segment were On revenue to by sales acetate due year the acetate reviews the third decreased inventory business year-over-year or recovery textile China flake yarn decreased cellulosic patterns. with EBIT tow second acquired due was venture customer in to of attributed sales on to the the from a last primarily and in the mix. offset The sales to the quarter the lower recently partially buying favorable the from our

the we made as this the rate at in last stabilizing be two run progress to have fourth earnings we of expect with quarter, results the consistent business. good Looking quarters

Lastly, the in in progress a initiatives renewal focus With the more is collections. aligned of in already brands particular In slower within with leading that is materials our sustainability somewhat these demand that our adding decline and we been bio-based. particular, accelerate in our as we about how business on traditional in quick Naia offset to growth slower very suit great making within confident our with and track applications we I linings to carbon excited remain that are as by incorporated update long-term. into am some due Fibers, textiles recycled tow continued are areas content Naia we can such economic we said, on are the tapes has This with growth. demand expected textiles to a product technology offset customers, textiles

financial continue billion. Switching Slide expect X, on highlights to free cash we the $X.X approaching to flow

of result million returned to we flow to record, with solid our this track I’m a and ability And up is this of working business confident Through our investment $XX months, a and fourth nine to third our challenging combination in about cash hard our Consistent free share million stockholders committed XXXX. Our quarter through teams remain grade results. $XXX to deliver in repurchases quarter. credit are we’ve rating. to quarter deliver compared dividends

in In by and we the de-lever year, years, we full through capital the allocation to For still and our expect combination pay last few about share $XXX a disciplined remain debt million. of repurchases increasing dividend down.

continue combination into As we use our we in in XXXX. de-levering will three, cash progress all XXXX, of further to a including

year we above will to is rate still million be approximately year. million corporate little XX%. tax Capital a cost net full to expect expenditures expected for and effective $XXX to $XXX full Our other $XX the be million for XXXX, be

that, With I Mark. it will to turn back

Mark Costa

will I our an On Thanks, on Slide XX, Kurt. provide XXXX outlook. update

initiatives. world, But meaningful and new here the and focused China industrial trade of making in market control. dispute including a now development in U.S. closing the has Asia the innovation deceleration uncertainty that including business from continue U.S. caused In things increased the progress from We in are economic kind activity environment, this can and on we Europe resolutely the we trade around

this mentioned, progress excellent new Advanced we’ve Materials. I business on from in made in particularly innovation environment As increasing

the to the this across and flow environment. to company aggressively strong expect free challenging generate cash costs In we continue despite to addition, manage we continue year

turnarounds demand some However, of this of in de-stocking previously There in was year the U.S. maintenance related downtimes second seeing into extend due we the to continuing pockets leading we is inventory expected. fourth manage the some the in deceleration as to customers to transportation expected volumes And market context are the Europe this lower to such than lower shift had is not quarter that also and and summer. half

capacity year. resulting had managing what fixed also our we and inventory the are cost the volumes in with These are line than hit quarter, of in from We are the our utilization lower altogether, in we the lower seeing customers. expected, utilization to $X.XX. this cost full $X and are the of EPS in of savings first year adjusted Putting updating the a actions we our productivity is half range took offsetting guidance from mostly we our

based on normal Our from current conditions is here. guidance economic and seasonality

maintaining predict very lower can’t and a to environment flow choose be in if our cash macroeconomic December. we could And extent priority you the present at strength customers conditions flow remains given management end inventory will approaching will orders result to billion and and the we of I will we the cash of are face However, attractive can this we or October give unusually great $X.X which where inventory which conversion. manage free be higher year. of a guidance scenarios free high the

can we our what to same next. continue earnings uncertain this Earlier and I true of robustness we sustainable control our to to creation for some we me steadfast mentioned, committed to take gives for me we commitment results. focus value want execute performance thank will growth every this our can managing Eastman remain owners what it’s are picture, future and today. people drive them continuing on At time, Big while all looking environment as manage and challenges with long-term And stakeholders. that on at confidence the in our I our to to Even remains we of costs. in through remain from strategy for the our unprecedented incredibly face increase action aggressively attractive we year

that have especially sustainability in seek to areas environment. revenue providing favorable the our this of closes, resilience business new trends in grow and markets with customers innovation, Focusing in on this growth fuels engaging resources in who

take record line for to look strong we of makes how deploy on where continue generation bottom we management, sense. to growth productivity flow top will planning additional disciplined we free our to free accelerate are opportunities be will track actions we portfolio the disciplined line. be optimization to Building manage focused working We on Continue in as and capital flow. cash cash to

for earnings new industrial we improve becomes a growth again well, as we solutions today life vector with In know another we we once growth our That’s deceleration And this even are in enable circular technologies our future. chemical own will quality and big our way. of going the am a innovate meaningful creating recovery. reverses with be to in the the we favorable fixed innovation-driven from addition, as leverage mix production to material why accelerate of economy poised I win cost create of to as more and the model growth to are growth and comfortable recycling into

With back I it turn Greg. will that, to

Greg Riddle

Okay. Thanks Mark.

we on possible. questions would usual, get many of morning to to people as As this have line the like a as lot and we

ready I for So to one we Matt, With you please one limit questions. ask follow-up. and are to yourself question that,

Operator

you. Instructions] to we David Thank First [Operator go Bank. Deutsche Begleiter will with

David Begleiter

to morning. you. Mark, ahead looking Thank Good XXXX...

Mark Costa

morning David. Good

David Begleiter

good, But you past this I in you know long-term it’s you, XXXX to can for thank know achieve early it’s growth think EPS year? still versus XXXX. but – I XX% X% your early

Mark Costa

for to Thanks from your question, David. It’s good you. hear

So sort are walk from about stage but we we going it environment, today. in let we at of me not through you bridge are this where how quantitative a provide to this think

of growth assumption. do current the ‘XX year, versus in of know earnings breaks into conditions We deliver three sort if core will to we sort and into we So it going make we into that. really that I down have ’XX guess continue economic how buckets next believe all

seen it’s to also AFP it’s as Advanced It’s some as in demonstration even Materials strategy much has heart markets value contribute you across we for innovation remember First, innovation we as in driving there always this at important more AFP, to traction of continuing stages of us to have continue though well created and great do of in early Materials, that as a get like textiles. it on at that’s AFP CI the have how in our growth favorable well lot Advanced and is year going that growth a and places. some have

it’s a there places Care more going lot So water normal growth, we medical of seasonal to have back where whether applications. Chemicals, and treatment is demand, good a

quite just consumer important growth do but So, exposure good have there is to that around is going It’s discretionary we in actually XX% keep etcetera. stable in mind that’s in XX%. consumables to help,

will the not vast should that’s be help part majority year. de-stocking, going end the out other if of the The to by have on the played demand all of side this

can there So, of at year a least amount relative de-stocking is this we occur that we on that see again basis, year. the next no seeing are way

you relief and in that So some demand gives growth. additional

on should be of So fronts. a variety better volume different

course what taking as to know have And as your The this in for XX we actions to that second structure. additional last drag the out, continues that recession is can on you as start been we’ve of control well industrial more months cost we productivity. to also X

we’ve as year, looking have taken than we’ve going if start or year $XX we year, in this we’ll build a and through and that’s the done flow down we at million So manufacturing what to start to this next better be volume how on benefit. a cost that of to annualizes year equal net this in out

are footprint chunks We asset are of out costs. footprint optimize to whether our there is and and asset to our take at looking opportunities going

had be we well other investing set to both cash and next to continue in But benefits continue a year there some giving at going and in look and those this as is in we’ll the to and a on lot we’re with broad more to continue and more seeing next are to We’ve making, get that year, there execution productivity increase investments. much digital this the productive in year lot around manufacturing benefits commercial start of to will benefits year initiatives invest investments is we of how choices that going net maintenance productivity benefits a going and activities. this doing basis as we already And earnings paying investments We’re seeing to digital the that clear, for success on a made that’s innovation. we’re are that’s year

than So we more innovation will this on spend next year. did year, we

and AFP, we have to and to many innovation close the business We commercial in that of AM with have going investments. those so in benefits resources the huge ensure programs especially we provide get customers

So that’s the second bucket.

flow. very rate free this is a we we bucket flow every conversion at strong third we cash environment, high in The Even and generating strong cash are can it the dividends, to in next will thing repayment be do same makes disciplined we where how we that repurchases, in year, sense. and and deploy cash bolt-ons have share incredibly expectation continue debt tough free

of on some and there So if to still is keep conditions. months. pull we we current relative to still trade lot X we have upside war And leverage the the have if will a to that’s innovation on that. seen sort de-stocking than behind economic do demand there manage think more If in will a the is is where levers offset last settlement, additional challenges create The is the there we obviously in the downside a can thing I costs. equal that better those is And recovery, challenged, mind growth is, is the to us. the a leverage recession,

in provide substantial utilization image upside. there what we asset could – volume been mirror mixed So come will back through have of could a

David Begleiter

to the put recent watch both on Thank can and thinking Very rather more just stock? debt keep helpful. this are you action remove focused just you. on for reduction reduction on you Moody’s buybacks from and on one back buying Would you than you to comment thing negative completely the And you you. Thank how debt more Curt, about versus table year? be issue next maybe

Curt Espeland

we rating as open we they which of with speak and very our with. to our The doesn’t understand, a important negative about change expect, really again that would watch Yes. our investors to rating, I our change is us, allocation recent not remain dialog credit grade you our committed significantly many – have but agent philosophy, to plans expectations, capital agencies investment only

I to the the do, we minimum. that externally next challenging, will approach disciplined do be as and de-leveraging. includes at to So David go our continues will into to amount couple probably your of of others of internally environment debates which months we and $XXX be similar be If of few remain a we will capital XXXX, the there million forward de-levering what on with a amount ‘XX and allocation a look imagine opinion, I should over topic. around de-levering you the A EBITDA path remain our everyone and even But recessionary of debt have generate overall sheet. we know We and further David ratios and our these improving of couple what flows liquidity. regardless access well in debt I of know to would and things on and have cash no is, material other of balance just couple the of maturities environment next years. great a over we then we strengthen also remind will plenty we I

environment. are we So this economic well positioned to uncertain manage through

capital cash disciplined bolt-on very whether shareholders. also reminder value debt putting allocation to of a ways share acquisitions approach or a repurchases, And that that’s feel creating pay-down are all good even I that. So for our about viable

remain are our committed investment we to going to So, rating. grade

around reasonable with the our pathway that’s disciplined philosophy. allocation credit commitment to a We to have metrics our consistent and then capital continue improve

David Begleiter

you. Thank

Operator

question come Citi. Juvekar our will with from And next P.J.

P.J. Juvekar

business. Yes, additives I question good morning. hi, on quick had tire a

You trade those the duties tires. in had your Chinese flow How business? an on benefit Europe there the U.S. offsetting and is impacting business? And China is

Mark Costa

Europe impact lot happened was and that really customer they they What and shipping a demand in in at a tire level AFP. and U.S. were found is this tires on in it real the had were So, of both U.S. is Europe dumping the the in tire duties

trade companies and So, so all there pretty too but those has tires got many aggressive fight backed there, in tire up and into China been is rebalance. there China a flows

have So also these built Chinese plants Southeast Asia. companies in

in their see that tire and created the multinational by their to all lot efforts production very did they China have create to the moves the is the shift are from some to the both we for there companies. U.S. ultimately Europe and for taking company But some degree. predominantly so can in overall just into they big among volume into in pressure it’s and business We we go additive tires us globe about and that that of pressure that situation had structure. of felt the a cost impact which pricing, why a in So improve competitive recently actions across and suppliers tire it announcement

P.J. Juvekar

you And the but XXXX that looks the remains through you. capital some you get just M&A Thank Curt, remains down growth. potential know would valuations de-leveraging, if Curt, talked you. given more get come growth to and in for economy if as question choices, would and I weak, doesn’t If you attractive? about allocate try de-leveraging stick weak. well Thank well some inorganic the how economy M&A

Curt Espeland

Sure.

we a and a way always about way our after own acquisition smart that have pursue investment we we’ll we’ll M&A. While finance finance rating. in find that’s our great a I have the to opportunities the way. growth through love a cash that always consistent or attractive find would organic it in you We do it to find with I’ve they teams credit business bolt-on of general, opportunity – and that have that to if to told still bolt-on funded acquisition considered, growth. acquisitions already think strategic think just And we we grade

P.J. Juvekar

you. Thank

Operator

will come question next Stanley. with Vincent Morgan Andrews from Your

Vincent Andrews

Chemical we to you channel that the Thank down Intermediates, played the or this be before Good all the on do season on going do is U.S., issue middle of through out? an meaning, impact drawn its through year question A you way morning obviously sell in lapse so inventory are to amines, agriculture we need sort the of you. it already everyone. back the could next need to tough the be know that

Mark Costa

what having can we of half our their inventory is the customers us one the are there this to given take we volume weak and this challenges what the of efforts year. From Vincent. had back their are Hey, we year see down season telling

back the sort is is a and sort year belief goals normal see those and will strategy what we Our they of achieve benefits of next get demand. of production to that will

Vincent Andrews

how there should costs And we for lot reason corporate can and think ask appear the to next year? a and that you about be other also number quarter, the was I in that a up Okay.

Mark Costa

Yes.

pension impact has the or think year-over-year you most that And of segment about, $X.XX other the about driver any primary million we been impact. talked if So of the that’s roughly assets that $XX costs that cost lower as is delta rate really – well great driven started which discount the the innovation higher what management programs. of our as really the by year, drove we the and

it’s the the cost. pension really other so areas, So

that could seen As holds little I you coming will so as out next rates pension true think costs but about XXXX, early, see have the we down, well year. improve already that a our the if finish year, we very discount

Vincent Andrews

Thanks Okay. guys.

Operator

Zekauskas with we hear JPMorgan. will Next Jeff from

Jeff Zekauskas

other that some On net. Can very there Thanks much. you your year for cash What items in months elaboration? provide nine statement, been does positive next reverse swing is million or continue? has first flow the $XXX that and

Mark Costa

Sure. Really kind cash there and main this is that an other Jeff, of year. two drivers items, are anomaly that

collected then that secondly, that’s million the receivable of restructuring million. and last a insurance And First, this last the year kind because this have year, that place accrual, of year events took a Obviously, higher have the ‘XX, of don’t we $XX we we actually had third following that this than month. and $XX we early year the receivable a end of higher roughly quarter year. in

those note. are main the two drivers So of

of just miscellaneous things The payables-receivables. other from tax payments, other you things resulting are timing normal the see

next things of shouldn’t this So see you year magnitude two just those because I just of change mentioned.

Jeff Zekauskas

and position about your conference demand to and will activity new. activity difficulties. tie on seem you businesses sounds Can your intensified? at that increased to least businesses And number has case you of AFP it competitive that think ears a call, you it and where my to in trade maintain in seems Chemical you to listening of the in spoke competitive how your talk why In slowdown in you about competitive long number Okay. Intermediates the Can and it do elaborate itself? the that’s and segment,

Mark Costa

question to love Sure, Jeff. it. It’s a and address good

deliver is pricing. raw is think a through defend I Demand value competition, challenges about your of you So market growth, spend the to as specialty business, there consumer obviously first Advanced offset exactly those but in as challenges, great the allowing strong benefit got. high it’s can looking the when material and all from and Materials sort especially innovation think you flow it of is discretionary

the are Curt about just bunch you strong currency year-over-year closer it end mentioned out So the the if It’s It’s revenue that as back in even with just to good business earnings AM should. the it looks and it markets, is got in of looks on right. remarks automotive. spreads a AFP flat. And, track macro offsetting economy, though have of prepared it does and even in expanding headwinds the two-thirds in especially like growth like market

And So part have where doing we in places. few well. there the of then one-third, competitive that quite goes a in of is that And increased to CI is that your got that question, you’ve some activity. obviously this business in portfolio

bit On each we dynamic The that and the a AFP have the identified acid different areas front, formic three tires, is in business. adhesives little dynamic.

earlier, as So course, you’ve of is it competitive where I activity really and we demand. have in demand It’s drop launched. tires, we’ve Crystex in event a mentioned a next-generation driven our increasing new got

We have of to new but it’s launch innovation too offset of resins it. that tire etc some offset Crystex stage on that early in pressure, sort the other just

the been when some to a a in down in which volume for narrow well talking not there great amorphous which this just that you’ve in no offset we’ve launching, in had that is was resin, inventions both about came XX% back populations is a And a it innovation new we’ve got problem. you’ve been which launch or and not well to in in pure to ultra as or XX% as bit demand Similar, for supply, you’ve adhesives, off more swine new fine was offset driven swine consume is stable capacity, China going the while. But of the in more Formex low pressure. true the non-emissive got a demand to odor polyolefins there. little story would it is shut competitor but this but that a sufficient that pressure of The got we’re environment but And if more earnings, of mitigated odor supply spreads. China in event. so Same in macro with

kind that what you’ve AFP this of performing not recognize we the got is we’d overall, situation deliver. the way that this where we So to one-third a wanted like. stability overall is in is And not

start of options to mind So portfolio that to how or into at go be have looking a is potential Those we’re of keep options to with businesses divestment. on all in these important this. could some like restructure to how goanna or considerations how make how lot we decisions them What’s partner address this. you

So you’ve not got to to short-term you’re of make sort overreacting sure macroeconomic problems.

improvement innovation what of you to is But opportunities vertical of have timing pursue, to and critical we’re going kind the that. make think You integration. sure these start or other course, CI could really potential of about you is doing decisions. you assess

to quite else And going example try an do. reduced changed we’re made We been optimization about year improve it, more haven’t view to be our to opportunities our our of and that’s a the we’re last this we is we that look of year. investment at on what ability but exposure asset stable. value beneficial can think there of to going sort RGP great ethylene

volatility. things. sort we The is still, not we’ve So, in improve recognize do acetyls and take some to and CI we action olefins, we pressures to pressure are I in competitive covered think can well going are standing of but do we got what see

Jeffrey Zekauskas

Thank great. Okay, much. so you

Operator

America. from DeYoe come Matthew Bank will question Next of with

Matthew DeYoe

Good morning.

Mark Costa

Good morning.

Matthew DeYoe

to of to stated shifting one like just headlines just uncertainty on least that the pointing is to due at backdrop you’re actually the Volume key seeing the or was continues worsen [indiscernible]. You general drivers. trade

to the sensitive mention and maybe line discussions possible top you is there then, a traction picked that your trying when in would with gauge But just briefly. trade So I’m is or orders that had one-off? how up October be consistent

Mark Costa

have my and learned macro about what the predicting I order exactly to one interpret economy pattern year any first in from Well, lesson this month.

war of and sort progress of impacted I back and consumer an just Especially that’s in China and lot dependent a where of U.S. effect now how and lot Europe that business of think go like October Asia, uncertainty uncertainty activity. out in that’s and there’s volatility there that so there. economy their there, industrial exporting can between impacting even Southeast sort confidence on it see and trade as debatable global is that’s is a China, forth impacting Phase where August there to X you places out escalation you and and in

to volume and the at Curt Obviously came this quarter relative in off were going to plus to would hard I it’s expecting look the we and Where were you guidance we second to So it’s but as as the the actually – but stable a now XQ – that’s this decline volume things forecast trend, we escalated leads normal is as through it our little all tell into seasonality said. to mix activity as that a impacted has XQ, slower our a and is interpret. off that volume, with hard go this to mentioned had why were in bit we July, be performance story. we predict year entirely in economy how

Matthew DeYoe

if like Give poor are clients. volumetric much to And bps is on there? rates actually XXX clarity to XXX down due and price versus competition me at XQ. margins AFP, XQ, I versus look in How Okay. of this EBIT bps some utilization

Mark Costa

So the the AFP of mix a entire utilization asset and – is total hit story. volume for in the entirety

there So altogether year. are but if the Obviously the of it’s you more of currency in about a look second flat segment total at half a spreads year-over-year. moderate much is bit hit, the

story. as one-thirds said, some on of out to as have is improving it margin flat. That’s mix on the that has margin others it’s variable netting impact we utilization. sort as spreads it a well So story places But compressing and two-thirds, where the impact has in the I totally volume asset in spreads on hit not and

Operator

hear SunTrust. with will James from we Sheehan Next

James Sheehan

morning. Good you. Thank

the not So have referenced would you a what business business also the just way as that well? falls into you performing in of category was liked. proportion you makeover third AFP assess Could of the about

Mark Costa

is So that’s make the formic in one to of only part acid. the third

platform integrated of of bought Taminco that about acid end platform us. but very wide the into deal attractive, and had very small at didn’t to value to year business Alkylamines a That a markets. for accept. that part the actually acquired in we’d buying about we looked range a was we So ahead business formic were the is a They of had we when of and excited Taminco which find

So just but challenges, some part it’s very that competitive of a has small business income. it’s a

Curt Espeland

two of parts And Taminco acquisition. to two-thirds could positives of the referenced the in were Mark some I add also if that meaningful

Mark Costa

and water And a we tremendous Care business as we’ve in great well in ag it’s CI treatment. acquisition. Taminco, long-term, the from Yes, been growth side Chemicals growth have over in great had the

James Sheehan

And long-term comment returns product those or on about to returns, How chemical segment you to we referenced see commercial expected of the just if other more several ultimately. of And revenue results? if start What revenues lower compare traditional recycling recycling those the could higher, project the quickly were million could same? you you innovations, to you initiatives that? $XXX on projects, the would from report ROI is

Mark Costa

Sure.

we about we’re So on excited economy. incredibly can circular do what the

as impact For are last sustainability others its who those in issues XX the landfill months, use sensitivity to paid etc. about and for a disruptive trends plastics. as of industry, it’s ocean I’ve the in either macro especially one seen opportunity challenge is might Eastman environment, plastics of be in in XX we with environmental the And having are the heavily great single this for the biggest been it the in with who’ve attention you or a to decade.

us, we XXXX. got for Fortunately in PT

not defend single and existing doing we’re plastics. to So business circular our economy use

growth. competitive recycle our adding All by to applications durable it deliver are offerings specialty investments our and improve more to into applications more net in content of

that products the polymers into go. we year this of next with excited be the Customers high us sunglasses world, announced for driving And quarter the we polyester cosmetic ophthalmic one revenue incorporating fourth one growth as will in as And where end well in both especially technologies, in first our this quarter. year commercial be week think are packaging luxury said the incredibly the of we’ll the the so year. by as and so

bio loop, phenomenal highly of lot though is fashion. even to Our textiles, textile fashion valued women’s are up amount close the wear of a especially end fast in business textiles industries the content on with by landfill a extremely focused how customers, our

unique textiles, us so loop recycle want waste use actually can to they them, just our the allows technology plastic. back garments, And CRT We take to in single back. close even and not carpet

real serious can lot problems can’t do. that other So of a we technologies solve

above really clear. we’re but just These already and incremental project. do the So great do more just existing capitals, excited drop-in waste of look It’s leveraging investment the recycle to cellulosic this when capital with are those be a are a is than going content. extremely step, I we’re we about replacement. the this now just we high. There to sell are markets, It’s well and products can to returns it’s make has Because at lot make into are already typical a first bigger investments we’re modifying – beginning gas-fire with into two even it. to it’s a and opportunity sort first very CRT polyester, fairly instead step first of the modest. The products. take turn Same thing coal, plastic our and that into ROIs is steps

don’t do we to qualification. have So

James Sheehan

Thank you.

Operator

The from UBS. next come Roberts with John question will

John Roberts

would Thank you. Why like from sounded concluding that up comments it Mark orders in your have on September. been? you’re October actually scenarios, picked

Mark Costa

off trending What September seasonally. to I’d say start is they actually where October orders are holding similar normally

October than the but So I had bit it’s don’t we want order in certainly a coming better to forecasted. claim, overstate

managing this can there growing where it’s December plays out with you really either way. just are reason to can we have to in this And year uncertainty, specific with point reasonably is I more could and say watch well. we’re I this and – optimism customers stage. little any go at holding it a out for think I

John Roberts

an have expect do chemical secondly, propylene between refinery grade IMO and you then grade impact And to XXXX on spreads propylene?

Mark Costa

RGP of we’re and written know lot opinions think it, a more at event. it. there’s As about it helps flexibility a as and seeing gives that significant look bit about us us that Actually investment I scenario. lot a a we I not on

John Roberts

you. Thank

Operator

hear McCarthy Vertical with from Partners. Next will Research we Kevin

Kevin McCarthy

across portfolio, understandably, like sounds pressure your Yes, for environment. Mark, you good opportunities the It utilization assets. look related, of see given you rationalization the quite some of margin when is morning. do

are to the when consolidate there the again So, capacity a because opportunities cooperate that the future? start you’ll need mistake in to would plants or macros be

Mark Costa

Hey Kevin.

opportunities So we are for that. looking like

your about investigation We’re environment, is the But options not can talk of to on you being our always we reason. this kind position productivity asset going in at compete. thing. call, innovation to look improve this focus but you for to cost to it have lever several on and that under But have every core

Kevin McCarthy

secondly there could can all budget looking have Curt, what seems what and views has the be you and XXXX about beyond? it you Okay. trajectory degree, capital And as then changed for to put talk though into of the some preliminary your maybe

Curt Espeland

Sure.

our those front, already adjustments not investments, We’ve capital added been the a making sure and large to to doing the investments are just clause, what of On we is portion that quite mostly some growth and year going when we’re are of year. the we’ve this this capacity. last we growth to need environment we’re make support of new capacity because

kind on now. support things this there And then move of just environment. amount out run kind a capital things needed company of right we team that’s this the tweak because of that’s being can environment great we’ve the not disciplined just to in is because got capital also demand we’ve So

of it going a pick might it it our up if is. more. deteriorates, little depend keep we it’s the in down on economic to now we environment we improve, capital today. it’s Looking same the slow bit, at bit If at But to a still year, next starting I right a what little may range lot are

Kevin McCarthy

Okay. Thanks, gentlemen.

Operator

will from Frank question with Mitsch Your come Fermium next Research.

Frank Mitsch

gentlemen. morning good Hey,

Mark Costa

Good morning.

Frank Mitsch

want EPS quarter mix you’ve going volume And that. like there that a lowest big implied ex-CGI and years. your it’s I in the about to guidance it’s because fourth obviously, looking to five done be think is of the the last part

are QX, think in you to has this past X% down baking quarter. to your trying level What what improving the the volume I’m get low down QX, this XQ? And it mix range, X% so for to was I X% mean throughout down been year,

Mark Costa

through we’re third we So, coming lower from forecast base. part – of is economic always some current that’s constructed. do is macroeconomically mean where seasonality and this mean how the that to normal adding then our we’re the moderated on basis forecast, I said obviously got we And Frank. the quarter. activity the in for the assume to so degree I

that last you’ve capacity this because for be the got than year to going lower utilization, In year addition lower second to volumes are half.

But of competitive part So those to you’ve of really and in pressure fourth on that headwind some got CI a a on from to the but spreads utilization. part are some story story small mix that’s third asset and little well, bit the the mean, – utilization adds quarter I that’s there’s decline relative to serve asset of the of increased as volume quarter.

Frank Mitsch

guidance? your should of volume mix in about So in we in be terms of I embedded thinking double-digits mean, decline or what’s single-digits terms low a low in

Curt Espeland

on then of really some we start It’s you’ve in effect, And say really the utilization in that as Frank are those quarter. the mix last in volume demand would respond quarter two our margins we’ll of expecting. what depending I how XXXX. seen hurt that that see is the environment fourth to kind

Mark Costa

Yes.

think that front there front in seeing what industrial I’d Something one we’re how in an I’d add I on that, is us. is is is what of you’re don’t recession Frank. performing say

in that’s you continuing think we’ve where in turned lot of quarter of really painful. US down. year, some cost of one quarter that we’re of ‘XX of last third quarter lot now de-stocking, in been I already in put is of the of that where high-cost over to always slow and all inventory some starting enduring of the low us. middle started We the its to fourth A volume fourth already to from demand, is that’s a the sort the inventory that behind drop in primary

So all this us point. behind of that’s at

a of you’re look lot as of but sort of these and that we’re bit course year And all now. a to next recession finishing environment goes to going at So adjustment you about still actions demand take. of – out you you’re more got sort primary where

resilient at portfolio we at of in new when be did XXXX Another reference would only Day down is XX% a look the ‘XX what more and you said if point lot that Innovation you our sort recession.

had a in of were what versus we portfolio that current ratio out the we down was on what playing ‘XX basis sort With now. XX%, versus

how you if of the performance our So diversified of commodity, and nine earnings declined. companies we’re months for look of we’ve at first half sort the sort about

So performing the portfolio better. is

address We’re our portfolio happy we’re in to going think to quite at this and parts it, doing I obviously of environment. not look but well we’re ways about

Frank Mitsch

Alright. That’s helpful. Thank you.

Operator

question from will next come Koort The Bob Sachs. Goldman with

Anthony Walker

Hi, Earlier expect referenced you Bob. that good through year. bridge It’s in buckets would not you one-time that next Anthony on providing the call impacting that you’re to us understand walk several morning. I results. year? the could several guys next XXXX for items impact a Walker you And repeat XXXX would not the results hoping was maybe to I

Curt Espeland

lower. this unplanned think pension, one-time other mentioned this about don’t today, year you will year year. should One Pension be only currency talked next where cost be expect. could that and can pension be that lower things earlier, is so we’ve items that sit stable. the the already And So outage, I then in I versus

are So year. those different I three that or are of are items help can next other major that than year this they the think two that

Mark Costa

actions attractive year. asset next of of a way better will, with I mind flow to we important there in to will reduction And into believe are to it’s are be if and through benefit next volume lot year, keep utilization. that get sort which a annualize we we’ve taken But going flow cost

Anthony Walker

a in big cash I you’re working you the maintained to from pretty despite XXXX you bridge in just can free And Thanks. reduction anticipating EPS, tailwind assume the flow in help us capital? which

Curt Espeland

Yes, sure.

free have our you’ve record flow. through flow of we’ve year. than do $XXX we generated cash What $XX million months. last nine higher cash million free seen a So already, managing great of That’s track

just If flow last $XXX quarter. we generated year, you look cash at that of million and free quarter in fourth

Now mentioned. that did receivable include that $XX I insurance had million

So $XXX million it’s that. kind excluding of

capital that primarily release, year, in working cash flow million we quarter So expect I of had roughly given and the last the what cash then you think we’re going we $XXX despite same environment $XX result fourth mentioned, earnings as roughly that million that’s this to implementing free achieve higher did then amount generate year lower working us been throughout the well capital expenditures we’ve expecting as $XX year. helped of of capital million the see, this various to you current as kind also And lower this initiatives tough are environment. in as we’re to of

Operator

Next we will hear Jefferies. Alexander Laurence from from

Laurence Alexander

the the that it flush is if comments Could you’ve more a de-stocking you or out Hi. a call through cumulative extended concerned spread about? you different concerned just is auto and a about kind industrial it any are And between what shutdowns which effect angle, are and customers, broader year-end at degree you impact of QX de-stock QX, made you as of cycle? from or look

Mark Costa

adjust rate of half, the of would first quarter to saw has not than as quarter, first say the – that it seen beyond mean, the of the of we significant significantly in was year. half lower of I even that, but will that but it half the primary materials of the sort an degree inventories access at first we that pulling cost in raw are less look then de-stocking more and some uncertain that this demand de-stocking people about decreased the year, their event. and we’ve de-stocking the have I the seasonality the as environment in third clearly to to dramatic quarter normal concerns So in that some were this have fourth de-stocking, where fourth you and down, available goes amount way year point, through trying are was

Curt Espeland

Laurence I production back add from customers work get their year these I’m inventory to normal trying could just to a our businesses, hearing then and you if the levels this to year. that are And more our next area to finish targets that

of about carrying the So quarter is next rather first into this more quarter year. something a than fourth

Laurence Alexander

Thank you.

Operator

Fargo. hear next Sison from Mike And with will Wells we

Mike Sison

Hey guys.

about down you’ve volume you potentially if XXXX, is you improvement out upside XXXX portfolio? would of and because little taken in get or get quick share bit leverage that in $X – about – a some for question, per the think similar mix higher cost earnings of $X.XX guidance one Just meaning maybe a is if ‘XX, you your it kind improved productivity the the

Curt Espeland

And that’s improvement just early material next just out EPS about. call. really year, in Well, we talked But with and Mike, a that Mark back different welcome about could see different restock But could different we back, could and there it down is pace models really scenarios and it’s scenarios. next too year. yes, play event a what excited get it’s to bounce if

Mark Costa

substantial when I of the settlement But will get be a trade happen believe you of Mike a can that think you and sort war. we

Greg Riddle

the last next the Let’s make one, please. question

Operator

will question from final your Barclays. And Fischer Duffy with Certainly. come

Duffy Fischer

how bit have raw of walk A and guys. cross where numbers you’re they’ve demand a market customers What market? been do coatings some think that little there there into, your then faring coatings that the your selling products through some about and Can gone material morning, portfolio? Good number moderating a doing little weaker. you you have your is already currents in are stronger, on talked bit and is materials raw

Mark Costa

Yes.

I So just volume our our AFP. when downstream of we that look at situation part Duffy, customers coatings reflects think

make that a some differences the go point It’s for have So what real would will big into automotive us. all I from lines that a they’re overall about. be their pretty only and Only, the of dramatically. we again produce on off pretty view, value did local in mix just confident to that’s down be XX% the made cars everything EVs overall year-over-year China But OEMs to thing an coating else sort make market exception story with sort worried part will than besides that hit all paint local and is for we at you’re and by of why story. that been coatings of be really the short-term similar of – expected high the these so issue. into predominantly Chinese one pretty a of cars I’m a that part is to probably It’s them. additives some we’re don’t OEMs any and see is benefit product. largely real hearing volume It’s these and that’s very any The and not sort proprietary of

Duffy Fischer

hurts is Okay, And through thought the than Curt cash next you might be you for why a this me gap just to would have But one can discount me? and start for can put with year would flow the actually we rate pensions. more have move then to dropping year, pension much interest so benefit maybe more walk have would great. so to costs into pension that expected. and that One rates lastly, explain that up

Curt Espeland

There is dynamics Sure. two there.

First determination interest of just discount think discount is because that on year rate the end of pension then gets liability and is you pension we your based about, this readjusted that the and our discount cost. liability at to rate that new need mark-to-market rate

rate And are performance with liability fourth our we a you on secondly, because obviously – this market. discount decline a of next lower year. have interest pension lower last year in quarter The dramatic overall performing had assets, So lower assets a year. our with the pension your better interest much expense then in

you those total expense then better would contributor year also That’s assets, the you start our assuming a that a of amount on return year-over-year So if basis. pension with the pension get another on help – assets.

cost talking So pension faced about could what we I’m like in normal to more versus the were return levels headwind they ‘XX. in ‘XX

Duffy Fischer

you. Thank Great.

Greg Riddle

again of I day. us. Thanks be great call on hope you today. have joining this replay A everyone for Thanks. And website later our a Okay. will available

Operator

your for call today. does conclude for that participation. again, Thank you our Once

You may now disconnect.

Eastman Chemical (EMN) 25 Oct 192019 Q3 Earnings call transcript