Eastman Chemical (EMN) 30 Oct 202020 Q3 Earnings call transcript

Company Profile

Participants

Gregory Riddle	Vice President of Investor Relations & Communications
Mark Costa	Chairman & Chief Executive Officer
William McLain	Senior Vice President & Chief Financial Officer
Jake LaRoe	Manager, Investor Relations
Jeff Zekauskas	JPMorgan
Bob Koort	Goldman Sachs
Matthew DeYoe	Bank of America
P.J. Juvekar	Citigroup
Alex Yefremov	Keybank
David Begleiter	Deutsche Bank
Vincent Andrews	Morgan Stanley
Frank Mitsch	Fermium Research
Kevin McCarthy	Vertical Research Partners
Mike Sison	Wells Fargo
John Roberts	UBS
Matthew Blair	Tudor Pickering Holt & Co
Arun Viswanathan	RBC Capital Markets

Call transcript

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Operator

Good day. And welcome to the Eastman Chemical Third Quarter 2020 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. Chemical Relations. Eastman of Riddle Company, Investor Greg Please sir. go ahead,

Gregory Riddle

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

section CFO; in Senior On filing, and the Chair President Investor McLain, Board third after to X-K market XXXX Mark are www.eastman.com. the LaRoe, closed, prepared of and Relations. related Vice in Yesterday call with SEC our and financial slides me CEO; news we today and and Investor posted Manager, Jake website, remarks our addition Costa, quarter Willie release

we begin, I'll Before cover two items.

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

the tax earnings rate using comparable Second, this certain effective exclude and in turn the items the other in third GAAP and year. I'll adjusted an quarter forecasted presentation unusual tax Reconciliations including full measures for excluded use news over a directly available With the disclosures, non-core to referenced items, rate most associated that, are the financial and financial and description to of adjusted the release. Mark. results call

Mark Costa

Thanks, Greg.

the the with had months the to questions, a to of solid performance nine make We’ve through comments. COVID-XX. few third XXXX, your a and want minutes Before answer despite associated I quarter we strong challenges recovery in first some take

fully continue resurgence remain to taking more especially and necessary build to a and as we We the Our a a see contribute employees keep job so and coworkers at safe the inclusive done to healthy. of in actions work. themselves can this steadfast their world teams of be great COVID-XX, committed everyone have around effort,

As we the of innovation-driven win. strength about our on of continues business, at be how from of our impact pandemic growth the we think we model, to a heart leading are which position with the

we third our most markets. other for auto, impacted quarter, the moved some As improved, and building, through particularly across COVID-XX, consumer businesses demand by durables markets construction, especially

Our XX% improvement these earnings from second almost were work the market and and and Eastman navigate environment. as of strong, a by driven unprecedented quarter, development, the they employees with innovation outstanding challenging

technology quarter progress QX above to within mix expanding planned top about We've by or the potentially basis, the COVID-XX. flat Eastman's resilient we of positions in Eastman our underlying end product in innovation-driven impacted our engagement the most due fourth maintenance that in innovation volume molecular is in we Performance million strength mixed that mitigate our markets. continue team approach end diverse is in $XX through our nine-month impacts than markets. to This whether customer and recycling paint become we of enjoyed technologies. which black is our resilient impacted We a In a improvement our will a the market million a in opaque, create to on quarter. with done of next benefit earnings and growth performance one In and our performing strong driving robust has launching among today, own volume said, potential you, markets, excited realized to we we model, innovations. third project our in to revolutionary portfolio early our reflected coatings Films, million Specialty of improvement. strong world how $XX our our said, work with the generate October, of saw architectural we the great tremendous end from our based and space, know growth A strong number the as to for behaviour, of a momentum is first a resilient through sequential of of see platforms. well continue the I first expanded to volume what the has the remarks nine of Additionally, part position in market the moderated into X%, quarter year-over-year across product limited its resiliency All made growth. on ’XX. volume few development. better and we months. approximately that leverage our year markets mix our from on year, new to and a was are in We testament portfolio we've is we’re as recovering sustainability PPF, with which November, and the three growth We expected. and X% That the third had offering sustainable Eastman innovative shutdowns us Across control. the our are architectural we market plans of with licensing earnings portfolio, Prepared CI. years, wins markets. where mix End-markets over a that $XX clear others, recovering a down consumer in Plastics to I'm back which leading shared the of XX% levels products way last focused can recovery got what by protection our On are

and uncertainty, managing through and, of an particular, could done on we EPS above expect adjusted the our but If capital, December quarter provide in they as we’ve given inventory. volume the the made strength in the Assuming prior to October great of be adjusted to Obviously, fourth the quarter we’ve a mix priority of the job economic impact fourth XXXX continues our cash, the of conditions QX COVID $X.XX. [ph] uncertainty we be will in of quarter, EBIT similar remain remainder there's expect year. update are, currently a resurgence, Finally, which working EPS

confidence it is cash value gives me for history, first for stakeholders. continue greater free I'll the positioned our of the are free in owners track to be attractive billion well and months and nine company’s a result, for we than cash on for of flow. to All our environment, year flow to this growth term manage sustainable long- $X our our consecutive that, and Greg. all deliver With we turn over uncertain of As and fourth a this earnings creation highlight

Gregory Riddle

ready are we Maria, Mark. Thanks, now for questions.

Operator

JPMorgan. come Zekauskas first ahead. of Our you. will Please Thank go from [Operator Jeff Instructions] today question

now line open. is Your

Jeff Zekauskas

And last lot what in last to if the year. a also million earn they so the In capacity say million penalty think much. second be $XX third the fourth fourth I utilization very script, wouldn't earnings volumes And have also quarter? then $XX the fourth, But were that quarter in that quarter said flat impact you year. you just quarter. in away in more Thanks in million year-over-year the your that said the relative you go your quarter should you and of seems a you the third different to was would you be versus $XXX that thought than lower in

William McLain

Jeff, is, this Willie. So,

start me the let So response. with

sequentially you've year-over-year while would I a million. our actually $XX a basis And highlight, of as what QX roughly So, inventories was increasing in highlighted on we about QX, in XX%. volume we reduced headwind had X%,

quarter expect think point years our approaching and about level, we have this capacity see we we last we where at levels while As sit higher utilization. slightly [ph] volume time, in being similar to

in recall QX basis, down should $XX million So substantially we as have quite volume but was performance we it a it's and to have on year-over-year not impact, you'll or a the slight that year-over-year think coming will back. tailwind, a be because whereas about sequentially, full

the So that component you million. the that, to offsets volume of $XX have take partially

Mark Costa

we took are good ‘XX And so the Jeff, to there. back as well you to going all approach morning, the get going Jeff, as said help certainly We quarter. cost look, way volumes levels improving and utilization the is know, - not actions

aviation, auto the recovering. and [ph] you have the China, markets they're - cetera. And of in in like still recovery BMC markets specific additives great some seeing off, some et in we're also are process that So but coating

we that of the are off recovering markets ones off a few some markets, are and have the netting value. And out very so high mix

go of number. go into you great we momentum all So not back on into as as but as got mix ‘XX, way a well strong of sort side. And QX volume know, you spread pressure the the quite recovery, the you've bit

of their quarter, the and problem that not know, contracts lag pressures in got raw over that entire. costs, that, you how up With we've call improvement in catch a you some a materials, some to and and price lag could you just energy time, competitive increase

to up that We ‘XX see holds net to with we see And, a we're together. et strength to how going way back levels So earnings. in better cetera, potentially plays definitely lockdowns it that all know, have if get you out. in the Europe, COVID obviously

Jeff Zekauskas

million you licensing reported And million in a $XX goal you Okay. - million. have $XX to I nine revenues. of first revenue $XX And the in you licensing said, through months, think

million Or $X bottom the number. is of kind that does So end? go XX XX? on annual Some to there's this mean to

William McLain

our Jeff, million ‘XX just between the was and January to ‘XX. to million back $XX to call, $XX refer

we're that of we're progress what So this front. at is what should by next you is range, the confidence in over delivering I great the that. of can probably have middle and of on years, the we on deliver would the say top is we're that least team, expect And the couple

Mark Costa

it's Yeah, program, Jeff. great a multi-year

want of developed on for some incredibly lot our some valuable we've we're doesn't time, that over we We with growing of which fit go. have is specialties where of really a very technology, and much strategy to which

an allows current gasification you the to making in which gasification is coal into China high this quality successfully do. energy convert So through - does technology technology not product, energy a that

the strong license of the other are interested So seen in in sort China. to who engagement, there business do very in is Obviously, companies are and first being this. this energy we've

the on to value a the have, then it get there's up, one. some in know, licenses shows more activity these a you we but technologies a great when of our years. in expect other bit again coming the building this other little little are we and of would you It's expect in that this in first example. license, is chunky we So licensing you one know, lower again normal know, to per but repeat future is And

Jeff Zekauskas

very much. Thanks Okay.

Operator

Thank you.

Please from will Sachs. Our next go from Bob question ahead. Goldman Koort come

Bob Koort

Thank Mark, you about, quarter. October the prevail conditions you the for talk very much. know, you

or may than from of it a would level? Trying October just quarter? not sort of in, better baked presume mean fourth typical may mean what that to November, from standpoint, or seasonality a are months December in usually you've terms that seasonality what does weaker when this So be does typical I typical gauge

Mark Costa

is Yeah, in Bob. the a-typical this category,

we slow degree, but showing even primary like other things, On down, the delays really off BMC normally in So still of primary in we know, know, of all than second basis, will a for things quarter, into strength things, construction, And destock, occurred - and summer. customers people fourth slow have know, that markets down, that is demand quarter demand reasons. as and a the more trail and you that's strong sort some cash like know, building well quarter some some normal normal. our because as the the some you as you then you third to

have of can of a the in I why we're better aggressively destocked bit the the significant normal our driver demand better all us, So, performance see came is customers we and the back much primary seems third we than a summer, quarter think pattern demand to number stronger, expected. little we're a like acknowledge than through going but seasonal inventory more

back. on So way inventory, true a BMC very people the in tight, that's obviously companies of bunch really really consumer come automotive relative are markets. And are tight other is to tight. durables, and the demands

you to the demand, know, don't is trying they're people - back they're what better And to something get normal build trying the just and to expected to so in then natural trying build quarter. the now to second inventory inventory you probably support think levels I to excessive, see back we stable, levels, to

this see. we levels got sort that's instead, So you've got you've to can restocking going back this of all normally, normal on, sort good But that news. of destocking

Did of a So as in give mean, we're that lot seeing both action demand but your running Bob? answer running stability, as also product us the we're else. quarter. CI, - flat out some utilization question that's everywhere auto a flat I to out support were in this the and in to number in true building this going a side, especially durables, more well the true

Bob Koort

be sounds fourth typically pretty like mean, ramifications the negative. Yeah, this reverse it can absolutely. just quarter year. But obviously destock I the

If has look flow to cash your you very next been year, impressive.

to working that for rebuild year? of could with you having sort cash flow in capital that As that reconciled kind Have year. be contemplate might be on franchise your you next for own of next drag

William McLain

Bob, this is Willie.

me highlight know, we're planning to inventory gains call progress in mitigate have have factored, to it made increased Let changing also this business any headwinds year making business it a on level, we, structurally a business investments I'll such pathway and I'd on highlight, ultimately on, preserve activity. we've our you end levels and integrated But enhanced significant activity. we this call an I'll you that the [ph] with the that year

our accounts and accounts that would leverage programs. I receivable Additionally, we payable to continue will highlight

here see to $X free cash I a pathway in to today, fifth greater as a a flow. sit I than year billion So consecutive

Mark Costa

a Some each other, you've is know, right. and naturally really than some will of earnings the because improving hedge inventory, natural investments got it maybe those where come lesser of [indiscernible] sort you to past degree and up

balances you grows, bit know, cost the will be the of than comes, EBITDA value too. of each CapEx EBITDA the little a And that the of inventory greater is out. inventory. other So higher, the sort

similar some our it's in investments, it sort a of start roughly to As ramping going be year. this out. modeled We we but we've a lot up netted and circular this think to of

Bob Koort

the help. for Thanks

Operator

Thank you.

of come DeYoe from America. of question go Please ahead. Bank Matthew will next Our

Matthew DeYoe

Hi, yes.

Films seemed of much some lockdowns? there Is a obvious Or that expected back wouldn't quarters. so to the we of trend somewhat of Performance demand necessarily Why all demand seeing of continue? pent-up this for blowout on Window So be have Tinting? are to the kind is sort

Mark Costa

Films first year. couple had Yeah, Performance blowout years blowout and nine a of of with months - well, let's start a the a

volume in So you know, is up that's third mix down And first XX%. the - only they're on X%, months market they're nine the in down their year-over-year a quarter.

And a Paint growing. things. it's fast are So combination One, growing solid they're year. business a Two, high at Film always values. great very our Window of very Protection tremendously having is Films and the

off as is which As give black next new and that and to you marketplace, know, taken whole go years expanding addressable about into market. clear into we're or a has we've now a opaque just talked the over just even us products we that to you year, – from going

service So is that, lot not potential there. of a channel growth it's But and excellent an just the bigger a frankly, strategy model. part,

model these programs at that, the big We have always team they're for, sort rest these there, China, here car, you them dealership a how can auto America, both the huge far with and in especially has well doing superior aftermarket as Asia, we support know, US, instituted out in the And the we that support building but where as top two key have markets, chains dealers, now auto the North relationships an value of chains and also where we develop, the a they sell train, like incredible serve auto China. the in with as which auto the of in up looking in dealerships. products

that's whole And combination to now And product great as that the service and durability. speak. the improves model markets with we us to that’s So products, we're launching but a installers. attractive as new growing, it's that getting new install gives of also tool win add very ability a multiple an dramatically the on excellent things of great going digital

Matthew DeYoe

bit I was I soft new mean, more heat or clearly aero ANS businesses a I of to the think AFP. in one market margin the on higher the brain pretty fluids. from the little That’s pick transfer that's And for And expectations helpful. interested, your side. are

talk maybe margin the you with growth? there can So profile that and growth about associated

Mark Costa

Sure.

But market, fluids like That primarily go the very lots X, dramatically plants predominant ago consuming source, growth So businesses, back, really was China polyester and has chemical plants, and end cetera. if heat was you diversified. years it. know, transfer what the the et you attractive markets business, say XX of for

The first new solar. market big was

you got panels, and the turbine desert, to that. does the – heat have these fluid transferred engine, in reflective when to you to So panels these you the get up our use heat out

growth a us So market, driver few us solar has taken new last LNG. off a over of been for huge few the - years. it's And really for as

whole added products that's another a So those also in and consume these dimension. on And use they facilities.

some seeing markets have capital more forward to going are enable stability chemical while to and a well this growth the obviously, different So of other markets slowing bit, down as us we these traditional are deliver cycles, business. lot a with

Matthew DeYoe

you. it. Got Thank

Operator

you. Thank

Our will Please Citigroup. from come ahead. next question from go Juvekar P.J.

P.J. Juvekar

In propylene, you quarter? morning. CI, in good propylene are using did had that what mentioned Yes, spreads? have Ag to how And year, then stability out, the guess year play propane all you Thank you're that And you. also, more guess that running you tough do? just know, flat you're you some last in this Ag comps, out that refinery How CI, more some business? have business. I smaller a also in I did should

William McLain

Good morning, P.J.

come we I'll and that RGB quarter, provided on Obviously, about increasing that than during return first opportunity we we bit how derivatives, spreads. just here facility, compression. call little our positive a thing a of higher to it's integrated highlight is some us materials so on very at QX, and think with in know, out paid will our give some volumes as turnaround. olefins. we're plan again, still plan had those raw had - it the like turnarounds Obviously, lag, we had compression pricing little thought key spreads our for the is, the some investment, also I given like there Singapore more our off us was, stability. And within You as a But the the on

Mark Costa

Ag. in And

for in products quarter, seasonally there's the a lot you the farmers. declines quarter takeover. built to the of And know, the customers, always us know, Ag third third to the You get you know, P.J., by find

So, was one you there shutdown always headwind a in normal, But of long that the very year a largest our know, us. of than for had turns also customers because more quarter. this off

attractive is And and CI, to some volume some the It's so mixed means business that impact. a on on volume feel because just value mix, real has you a it so unique the quarter. in that both not of CI, high very impact and was of business this compared normal,

P.J. Juvekar

when Great. know you comments in talked something today, quality? you what’s the talk become Clearly And world recycling? you you yarn fiber. molecular prepared and that product happening in you. Thank this there Can needs your are you what talked about know, know, the about inputs to You economical? does molecular Naia [ph] the it about Tryen And, the is recycling. and

Mark Costa

Sure.

economy. So we're about circular the excited incredibly

sustainability be [ph] The true of making us if environment decade. a those much crisis. should that very A outside you've recycling, that are been for we is feeding sustainable, for in the excited Its new You the essential been role it a of also and way them, when to and we infrastructure we're efficiency, The renovation And know, product world, In trends the in happen. we've we why something XXXX, resource about innovation really back development how critical launching the Obviously that durable. circular critical and waste which it's a a require, over is talk prove driver Tritan, that waste environment, effectively. mechanical done can in we today. is it's to energy But dimension lot We program in ago, all reprocess, a and just we're reused, going the every to last change our can it. decade That's to of around connected and into carbon scope is health of get all natural to be that new economy play all core is about heard saw it. goes whole our that It's focused a be reusing industry. and on that. to wellness, that in efficient. lot to of be reality us. it capturing keeping company, plastic growth ridiculous need a

it, quality, extremely feedstock So clean wherever can should times well and you on mechanically. can reuse is do as its requires has it you how you do Problem limitations as it. many it

So while solving very to important, limited the plastic problem. total

not that economic solve our It's that now, are required. required excited an is and are to do going waste we're it's returns technologies because so. plastic have recycling prove the to And we that to molecular problem. shareholders two and commercial for it's option, So both commercial scalable actually

to And reforming so so the we you're those technologies, our gasifier. around the first mentioning do is what with cellulosic, ability have

gas because waste our of So up mined our we well is were as wear certified on bio at reform is we for plastics. into us. markets And these it's that us, a to lot the cellulosic - we yarn the That in FSC grown mean, huge you for picking last know, sell, last return XX% year instead a products volume yarns, feedstock lot was relative driving sustainability Naia our already down forests. making this sustainably includes look momentum I growth if can XX%. you and for women's coal, especially where of from plastics. flat thermoplastics plastic, of and you year alone content That the as opportunity, a know,

in markets, that largest that And you with plastic the have of the will know, that in our [indiscernible], using to player high in launched that part end thermoplastics, there already so are success recycled tremendous were by those fire eyewear, content seeing we're go goes frames, also offer. for So us the key the that into sunglasses, Marchon market. leaders are

grow cellulosic opportunity in use of lot an toys, opportunities a plastics plastics, even see is to we electronics, even the So we a that see. opportunities in single market

new the existing Camelback, application not and comes to And lot and where polyester tried grow we're A is it brands opaque orders that same applications, already like getting opportunity. We've us to allows of tremendous and the applications, product side thing new grow higher today that at in on growth electronics a our So technology got like us Nalgene. iconic two [ph] our margin. - P.J. from allows

number with use as well us single customers, in plastics. customers durables, a have cosmetics of working as We as hydration atomics in well more

across look two those we markets. So

we get now XXX of we already these can As the better premium. better markets all have us Virgin volumes, trawling We're getting as it important premium we a in now. as And how grow recycled doing And customers around if going about across technologies a well you two know Europe, opportunities and and look serve at to to get premium. this its the a better at broader market different with PET food-grade substantial PET. these is,

are So and this the problem. markets to solve support willing to investment necessary pay

So everyone. a for on investment great return

this. know, think a defend great really our excited to businesses, that about So the real a we to grow you resolve. world our We existing it's we're business, need in way challenge and solve

P.J. Juvekar

you. thank Great,

Operator

you. Thank

Please come Keybank. Yefremov will go Alex of question ahead. next from Our

Alex Yefremov

closer the Good subject, the you you. making aiming any to everyone. business? project, investment you on your analysis progress or morning, Thank made on methanol are Mark, for have defining decision economics just to that continue in

Mark Costa

Yeah.

it's when to we're the we're refining to exactly committed, of We are know, So this making It The a close right you is know, thing one finalizing build our meaningful very believe attractive. the We're methanol key CI. as And, it. plants. investment. going do. those to is of details build strategy, to economics analysis you advancement to and to

the we’ll in the call, fourth details, reasons provide in January mentioned, I all timing know, just as just scope, the et cetera. quarter you final we're you For analysis finishing up, more of the and capital call

Alex Yefremov

decision to follow that, year it that, are methanol methanol parameters was billion to cash there you're still free outline next $X is you make project, was say just of CapEx? flow analysis Mark, what analysis And of on plus potentially that fair up regardless for kind that you

Mark Costa

you go about were year. reason for the you a built the up, free already That's cash - includes know, we'd include. the know, lot, that earlier, CapEx, that Yeah, methanol free When we flow next capacity. especially cash talking We've analysis. capital

quarter got great in tremendous different growth, recovery we you lot back specialty to fourth get remember in to and built products, of ‘XX we the other ‘XX, of So plants, of lot Ketones, year, right, we'll And levels. believe Tritan, seeing almost plants and to cetera. have already a this back work a et support a growth number of in

well-positioned we're to growth. so structure cost in support our And

one we You is are exception films in which its capacity And this economy, is the year, our of new. to circular growth. know, the support relatively completing expansion performance an tremendous

in model we're the we capital. how our operate And operating business good I on more make and a our we're production. is how we're the a of company, a We've and position continuing So to more ability managing in testament operational efficient this on to our that. It's do that, our investments test team's in all systems investments think to on working really to excellence. in be made lot much

transfer capital. can growth So improvement we that into know, you

Alex Yefremov

Thank you.

Operator

comes Please David question go next ahead. Bank. Begleiter from Our from Deutsche

David Begleiter

back temporary how think these million in morning. Good into you. How in base about of believe cost I Mark, savings. XXXX? should flow the we they cost Thank XXX cost somewhere just $XXX about savings, are term

Mark Costa

David. Willie to morning, am let that take I Good going one.

William McLain

Sure. Good morning, Thanks. David.

XXX we to the as activity. on discretionary. trying And match leveraging discretionary site that million of about as shutdowns, of are as going that level actions we as approach we're cost and and those as think business you that thirds we year. how of structural highlight we've We're know, do the the over actions would year, this actions, technologies taking fundamentally, cost You are as well become we're that that we would think spend long-term labor about highlighted the as do business. that of with about actions taking think we But well includes XXXX, about $XXX have million. we to some think of expect this those, two those I

to capacity go So and cost you to about business invest as to not will savings we're this we actually flowing in integrated digitization, us that's in other with planning, confidence, growth actually generate much network think gross about any into progress XXXX, making $XXX the through only optimizations actions $XXX million as of offset And that going we give expect and that capabilities. strong that play. the back, million discretionary net, we're XXXX. are year. already it's And we And deliver those of

those start place XXXX. in as that actions So are we structural

As and expect we to grow $XXX total of XXXX, think about that a net to million we beyond.

David Begleiter

into And sense But the spend - been actions business you poorly a the able businesses [ph] have over one you. head during these the a now one you eastern that ’XX, Mark, it this role the helpful. thinking half S&P further to Thank as the of in pandemic. you has forward years - third third just in cost Very the on actions first about the - of different going performed and portfolio? improve and through

Mark Costa

Thanks, David.

COVID. portfolio the of know, you're look, started we've significant in the our great specialty a sold of It been always portfolio and let's in manager. a not businesses of portfolio revenue with trade war you successful stability the lot underperforming So, had transformation, had but just ago give and seeing our very not this off we've was we and to strength, a we businesses that disciplined acquisitions the while history, year, forget, when we've

the Over the tremendous I also years, resilience value with the this but flow acquisitions. we've shown in the think, with of good last two line top portfolio, cash

tires, two disciplined. was especially we and strategy, that. of you developing adhesives, said, our needed we're AFP, think businesses, being address we as And inconsistent that at were that as part with instability, good to know, So I saw

a going I on great plants way. its we've especially cost think improve where structures, in we're meaningful structure in managing out to and tires, a cost the made couple take progress

- put at created, innovation you you know, tires. company as plant And coming that the into that huge also much plant, off as in level you in business. trade that food this allows the tires level, cost And back know, lower see, China at us China, reality with in dynamics. the and you China tariffs competitive our and our the got tire as capacity As shoving is tires new up really demand, created, Trump can and well by competitors a at going The in just really with kicked fight to level, businesses. just well competitive in well online. our broader then while a know, ADT is the war then But challenged, is business is, both place drop

half So, it's be volume year. better the has great and a the much competitive in half. tires the But headwind know, that's of recovery to environment back the still first will a relative And you ‘XX. been - earnings, the half of back than this

IPOs X%, ’XX, business, the price actually a options. everything volumes it's the with so we're the portfolio. half XXXX, way. up giving to relatively are relative - to above premiums that's innovation competitors, less really getting better costs to about back great improve and business is to when can holding in And resin. are the hopefully, like well a to with marketplace going ’XX, you our dealing That Adhesives either of you ability divestiture is our lose in going able to stable the stable, with sustain meaningful managing where, us to to do get we is But traction, business But we'll everywhere actually continue point to superior else. committed environmental sort winning for of know, be and well COVID as JV here in pursue or we're we're allows lot is as ability up And a at to innovations looking footprint, superior of stability some that.

of a to we've you our great talked that low So about growth launched. we've Great resins there. times VOC growth, number

still stabilizing, how can, through we to we continue it's that partnership So we're its opportunities improve and to performance if for improve looking but business. also

as beginning COVID. not the of at we still with as the going we're liked year it's fast working, So

David Begleiter

much. you very Thank

Operator

Morgan Our comes Vincent Stanley. go Andrews next of Please from question ahead.

Vincent Andrews

Thank you. you could what Mark, maybe you're on just seeing construction. and in building touch

remarks, benefiting the prepared market. in about know, the You DIY from talked you

some bit, as portfolio? for impact So, offset into a come innovation, year, you year, that? back to how in sort do into how's we you that as things next but have the other see sort the going that to next if deck, softens big you of little Or you regular think know, go DIY will have you know, Optifilm I of, we the versus I And construction. is know about that going

Mark Costa

Vince. good How doing? morning, So you

Vincent Andrews

thank Good, you.

Mark Costa

half is weighted BMC side, on coatings business which And refinished. positions is and half again, build more from are OEM, residential BMC. in for So, roughly. remember, of up. roughly our on half the benefiting business, transportation our side, coatings the commercial, But half auto we And towards us well DIY the demand

certainly we So benefit. the seeing are

architectural consistent the quite – sort well, heard are of doing adhesives what with companies know, from are paint, in the third you've architectural coating did quarter. You

And combined is part tracking revenue, well. we've revenue the of is it AFP, some to in headwinds, huge too, total heat the helpful, about the stability chemicals, we're I should offset great say, we the in but we're in that aviation had transfer growth with the a care story or Innovation film. and headwinds, with helping off So fairly getting talked performance fluids as the fluids. of run that's of

portfolio focus resiliency that example sort recovery, market of sort with the other parts some our we - might and while where of winners that things it's know, stability And balances provides nicely. it's be good positions on. do of in great well, So how always of you out the and marketplace the challenged, it a

Vincent Andrews

be see goes? to But into actually she as performance been and Okay. kind to continues all in of materials, just you it it obviously, lot on strong. know, has year what's a its we are the innovation, recovery some seems have as of that is you about think the that this And challenging But steady volume compound. that just a obviously, we portfolio know, struggled of parts very there year? been advanced next year, innovation-driven. next presumably like year, going And going year, Or will

Mark Costa

it I doing and but [indiscernible] in obviously transportation well. town wouldn't year. demand this really call struggling,

certainly took customers we their in advanced when shut accordingly down know, you So plants an down especially our we and plants our shut second Interlayers. impact in the in materials, quarter,

while But durables plastics in all some into some for of we there. know, faced we're the down I this hit challenges still performance been year-over-year, had and second a great. growth off mean, main of steady tremendous year took sort elements across COVID-driven doing shrink the driving portfolio like innovation, films got it's well is three even was did we there, So obviously overall, I'd the say but it, in and, incredibly where goes things you strength grocery packaging stores. especially through that quarter, has

polymers make sneeze chemical resistance - you for we guards, Our the is that has great cleaning. great know,

So the restaurants, and of materials, growth last for year. The or first seen guards earnings some already, good relative success. It's of the are a quarter you it's And in better offsetting weakness third sneeze in the right. stability seeing raw delivering stores than know, that and et very price are all you you've popular snapback cetera. these to good the quarter

great the getting performance level, the had back with So performance great I talked earlier. films rebound we've snapback, in almost year's automotive last about to volumes in and

business results this think great I to result track on year, continued So a but next it with really this on deliver is build great year.

our by of We've even You products. on acoustics a for wins in next superior We've out We've lot about, product great enjoyed had tour all EV we iconic fronts. sound launched acoustic on been talk their and just one a the we've you, there three in gen number premium sort working OEMs gen of of selected had know, and next models. those with a didn't products. dampening, told success we've display on with gets all leading we've much head-up Interlayers, new of which

You of issue sound EVs engine. in the a lost know, because is you've combustion huge the noise

dampening critical sound is you is in window. coming we - and the in of a biggest and the actually sound the get places variety car place into a car So where

It's Japanese going of be reality OEM much a HUD working more multifunctional addressing know, been and just rejection, competitors difficult we've on. for a German play all in to HUD. acoustic had market gen now been had part HUD And right continue that success of that's role and some by leading augmented trials also that one. OEM we product, do, solar next critical leading will on building great those our we've combine to they're in with and We've it's you So issues. that in, a That adopted is grow. to their a

doing top of a of Tritan’s they've So growth this, fronts. success it and many great. different lot delivering stability. the as earlier, there. of the gave lot And got is economy portfolio a piling And mentioned on on diverse I circular

about that. good feel we So

Vincent Andrews

Thanks much. Great. so

Mark Costa

Yeah.

Operator

Please next Fermium will Our ahead. of question Research. Mitsch come from go Frank

Frank Mitsch

paint - you the know, there? protection hiring guess, OEM I talk head-up kind geared reason the just I know, that about got the you're you due follow segmentation and about sec growth of towards some auto to auto remarks. Good Hey, more morning, was folks. you guess, displays, cetera. market Can nice side, outperforming was my you part I builds there, know, airplay in you Mark, to of know, of But your et kind prospects just in up thought you guess, vehicle. that is talked know, you the that why because the acoustics on, a

out roll describing there? or you that a able to that that being the two you're Can as you to spend mainstream on moment more the So of early growth might base. suggest know, prospects innings in product, move, you

Mark Costa

the segment opportunities. within tremendous Yeah, as growth well it's been as got growth it opportunities, a that's category. both it's geographically, And Frank, growing.

normal in really this in in the markets. end, number their very of it's So addressable people It's protect It's high in to mature know, with where you're to front car, sort protecting market a a them are in in cars, China, significant America, North market people interested China. and started market, out already it lot you right, want in us expensive in and for the and, hypercars, luxury the amazing, of so even, this them. which that on who Europe. move in starting very while is of we're And, stages there's into well, of growing And growth of early especially investment. growing very

a of of So category. growth whole top growing that's the region another on us for

rates the very growth for believe time. sort some double-digit we strong So will of quite continue

Frank Mitsch

auto be should EMA OEM near for in the dialing than we So near greater future? and future, growth midterm for

Mark Costa

coatings, Absolutely, with that's say shows you true automotive we're the market. I which in advance tracking know, and more and

Frank Mitsch

quarter. about and cash net the talked ‘XX, about $XXX should down in How prior paid Willie, pay for And here you XXX Okay, then of a in in the thinking plus Great. in or ‘XX million debt on uses expectations debt so terms in question start great. we of debt, to fourth down implying ‘XX?

William McLain

Good Frank. morning. Yes,

increased depend our at as investment closer offsetting priorities also, times, if changed. net mechanism to times On Also, continue will consecutive be, But the we know, three credit grade our debt-to-EBIT point, rating. that, our about ratio pace and is of obviously, capital we beyond dividend about you really EBIDA committed And in for our to And, pace dilution our and on XX recovery. stay focused we're getting the know, on you’re right allocating that's We've important an you know, economic you QX, And, to your debt X.X end the growth to will have leverage, XXXX. to that economic years. our think to we're cash stockholders. the allocation front, not XXXX committed returning the us of for will now.

Frank Mitsch

Got you. Thank you.

Operator

question next Research Our Vertical ahead. Partners. Please Kevin will from go McCarthy come of

Kevin McCarthy

products, And on hear morning. know, be thinking I new innovation would way broadly, Optifilm, the highlighted tremendous from either But in in down a up? remarks. I'm across there more three could about perhaps anticipate done a amount to more the quantify about bottom front what or a basis to top like portfolio, prepared tempted two the contributors the Mark, recent good years? You you the you you've years. in ask, to or that you benefit top on as Yes, know, is coming

Mark Costa

a So from - do new good morning, you gave revenue we innovation. on We Kevin. metric business

And you in comes have to product year, lots year, trade know, this and But wins a even We we were out innovation we're across new million had this the things virtually, we like And continue $XXX at well you target our from of war. customers. all engagement, in to is with revenue, we there's year So on portfolio. what even that. told track of about we great market of We've having $XX kinds last isolate million. share which know, you platforms. - winning business getting

about we so but we at that level for. be aim feel good And it, to the going it's not

business know you you to that know, that know, think target So we'll year that level, and always And build to new can give we back get XXXX. that we you. will in I innovation, next

put growth the of So we I about there. really for I And can where think sort attractive with it XXXX. we’re delivering that good we're headed very fits together feel a

quite inventory told management from all be this $XXX the you, you to utilization aggressive because fixed getting any don't to So, we to, because you company, million growth about average year, we're margins that next and The going year, this because inverts, got above XX%, XX these level, out, talking recovery, how flat, next here. you costs cash, year generate for inventory basically actions And probably innovation done, it's for in you in know, all ‘XX, incremental then know, million above happy management costs we're we plays market actions we've inventory of business know, that create we COVID we've new to and, did the to on you that. the year know, the some everything And growth you we're fixed taken there And go know, we've becomes we growth that you have beyond the just depending this of at innovations as volumes. margins that. have might, we've demand headwinds. that tailwind the asset Willie are ‘XX right, that flat And year, were know, told relative tailwind have $XXX took just you versus volumes flat incremental XX%.

margins, flows bottom levels. and attractive growth on we out that line together back $X.XX flat growth very cost know, flat volume and that utilization, up to you and put and so just ‘XX - then the goes for So

Kevin McCarthy

auto as where function in Do things? restocking? you to gaining want Or the those share ask would you And helpful. be situation displays. about Or though you about you're of volumes business? that's market any in How perhaps sales could a Okay, secondly, is films? feel talked as Mark, and that acoustic I exceeding more films films, of a market both you dynamics it interlayer heads-up interlayer know, characterize the

Mark Costa

that more great and production films volume. than heads-up obviously, a with goes this down, and business. and directly market still performance better expanding, same it is production to overall year extent so but our that early tied so films, market Interlayer We up display, in as OEM It's not the performance to is its acoustic Kevin serves. benefited did because

next the I us well, gen we this set go just and into give HUD year. products going as doing it's tailwind to doing mentioned well, of so next additional are And acoustic

basis, it mind especially do. that will volume to AM, mix a So margins important and selling company, or on incredibly acoustic, we’re same the Tritan The window in circular we keep in way will feel continue about so it is mix this, AM, films films average when including in or display, selling you're economy a-protection parts that's the above thing. heads-up segment entire

it's So mix all volume, a those just growing, isn't upgrade.

Kevin McCarthy

you very thank much. Okay,

Operator

Our next question will come from Mike Sison of Wells Please ahead. Fargo. go

is line Your now open.

Mike Sison

quarter. nice Hey, guys,

I I've down, quarter apologize, fourth EBIT Just right? right. I sales quarter. curious, would math, up versus imply and is third like And EBIT But the I this. be is right, think Looks done guidance why your - sequentially, missed

am I anything flow a thought missing, would basis? have you'd through-up EBIT have if So on maybe I

William McLain

Mike. morning, good So,

question. So the thanks for

materials quite increasing, somewhat we we some potentially continue ASC continuing one expect mix, of have some potentially about, expect think we chemical and it volume QX spread prior the the as third, to think slight about would levels as to tires. compression, on approaching raw to be So year, to intermediates of it we our be

of benefit. of actions we'll cost So less also as the little the balance about a have think we that,

roughly $XX remind we'll roughly increase. have So in I'll you QX, activity QX the to continues million, $XX had as we million,

So some well key that's as you year-over-year. as know, a on know, a view, in, sequential you of the all inputs

is we being through as look prior similar think that. it as to where we we about out come year So,

Mark Costa

mean, drop less, a normal. we said bit some of There's have demand still always you some space things I seasonality I with while or products normal little in don't earlier, seasonality. we be the to know,

year's tremendous So back get to earnings. and strength levels to last

than third quarter. little we but as at So I a think a less it, that's bit accomplishment, great look

Mike Sison

I in where agree. half then of Right, level you second then third quarter some or of rate CI stay think have your terms but, level, closer around guidance, to above ‘XX? - give a know, too just the And the maybe maybe levels? should ‘XX, if given Or lay of saving no of out of me you give if sense these for ‘XX? tracking? demand level, where maybe to you it's earnings know, is do specific at are sort you're And cost run I early you earnings stay level things Just and

William McLain

growth the trying flat, flat get fixed assume Yeah, of so ago, utilization a I costs question tailwind the - cents $X.XX and a a volumes. was share at you of asset to assume know, around moment

highest COVID, build were So mixed incredible a about our by you the as I volume growth, that is of driver, then headwind as value was such with volume, power talking this markets. mix on it just that is a was improvement, impacted that the big mix as that markets were was year,

of And seeing them know, expect But cost, quarter, way that you're leverage back in So, XX% you'd then know, the more third get there XX% the sort you value the in coming the mix. you that on margins. you'll year, progress fixed back quarter. of all incremental fourth asset see the with next to that to

have think still together, you economy. because up we to be increasing to improving with catching pricing put spread going there's you're when assume year res will res, an with that I headwinds all some next

and a competitive some little a and success. as have deals of pressure bit that and you offsetting So headwind asset growth tires some in of that

all get think get on through can you parts we could impact. obviously XXXX selection, there's better, it some we et to got China of levels, COVID amount is moving we this lot a crisis, a put how going So tensions, to know, which cetera. be around there's that. together, of see, have but there's We trade bit And back to the

So a give in will things refine factor in and lot there is you which of that January. to outlook,

Mike Sison

you. it. Thank Got

Operator

question ahead. will come from UBS. Roberts next John go Please from Our

John Roberts

Thank you.

that big this ESG it do fit does How out initiatives? carve point? into you can that to ESG great at have the Tow as these ramp some business mosaic? initiatives? Or up all other coexist have And you You

Mark Costa

back out out considered obviously, into especially carving we've John, number Unfortunately be it's so can't So the portfolio the carved a XXXX. in Kingsport Tow of of times, site. integrated

would and AFP, interdependent and growth in with and shared assets recycle the AM use it, can't so it all a And cellulosic disaster. be we have separate

out grow to it. of we're And what have you So that's doing, right.

applications question, going you is, the know, to you go strategy textiles long other with know, time. and our some the that and our up our But have So replace enough, to that if the success. in support take with when growth you and ultimately, obviously, company all comes maintain we of to Tow the that's growth and to through, strategy is, economic it term answer integrity invest

and was So, Tow possibly the grow Tow to is can part work over of business going grow as to but that as as hard we're margins, also time. that, business in declines we as textiles attractive

incremental of right have know, answer that question, to great we and a that sort and leverage margins will grow also capacity now it's So excess way lot has of the the textile that's to against zero. you a Tow

John Roberts

as go bit paint all the maybe windows rear protection parameters, the secondly, for OEM, opaque the then to us the profitability is give films little opaque Okay. windows. and of can on business content is x one Interlayer go the in just Interlayer a the if OEM side is performance films, car, And back films or almost well?. And

got then and what the on to the films much of paint Interlayers So the the and are and the be protection then than than be us got and films, protection one opaque to even area darkening kind surface goes larger are so give that's a and higher x paint what x bigger film? much the one that's

Mark Costa

Yeah.

you So little that, of sort film what can't I a paint question. don’t bit have I is. What the answer quick a refine easy protection that about tell john, to

the a versions. protection One - is lot just wrapped front, film the of in on of put film side, vulnerable cetera. car, full So the wrap parts et vulnerable of people the comes car, the just the the the paint two but handles, the door

car you And it certainly in comes because presence different it on when car, versions on much how sell think additive. per is When as PPF. you've is proposition. a the So films noted, doing about are, our you on and two do interlayers windows big one solar the tinting, not just it's thing it's value acoustics actually HUD, is so and the the rejection you

a ago. proposition tinting, less it solar since the the value So lot we sell XX more efficiency years air hot today isn't they films locations, you big more of And rejects much than in better advanced are than actually actually fuel heat were the a that locations tremendous use cool just gives because you conditioning. amount

more that's, look luxury sometimes cars, now presence don't auto of you do, doing lot should basis in choice it, in our with it's we collaboration the business do at a we And as it really so to upsell And you're know, each sell is we're these and - it car programs NPF. take a is what is where be at you've of buying PPF. you it. mentioned, A interested you know on of as we're car, break pre-installed got aftermarket But used point have a a sold. But that. It about sort we very And a of an getting on growth of the lot after are it the sale. much an a getting lot dealers, the dealers, upsell don't it, in additive. like when they right. ratio sort we'll on of something then so that. the And It's down probably with

to grow. lot of different a So ways

John Roberts

you. Thank

Operator

from comes Matthew of Please question ahead. Blair & Tudor next Co. Pickering Holt go Our

Matthew Blair

tire in demand improvement additives. America want tire that I and data year-over-year pretty both The up North to replacement China everyone. circle morning, QX, to back showed in good September. Hey, rapid through think X% I Michelin

to see, want know, does more that just any with much your you I there? what you comments I match is know commercial. But tire So have? market

Mark Costa

We've same talking and rapid tires seen quarter about. with third what the good the you're recovering and in has been quite demand consistent

Matthew Blair

these either fibers lumber other business? on having pretty I guess or your shortage, all parts forest then, any know, big have And of good. wood impact caused that fires a Sounds shortage, any you is

Mark Costa

regenerated different those occurring West purposely wood. Coast, of pulp it these be fires Brazil, are and forests. only where They're grown getting wood occurring our than the and where No, not in taken are would to different care be get we grown East are We sustainably from in locations locations where fires very Coast.

Matthew Blair

Got it. Thanks.

Mark Costa

Yeah.

Gregory Riddle

If the we question, next make could please. the last one,

Operator

today last ahead. come Markets. Arun Capital Please Viswanathan from RBC question Our will go of

Arun Viswanathan

Great, my for thanks. question. Thanks Good morning. taking

ones. quick two Just

what of portfolio just And maybe us percent if Thanks. address So there's benefit first charges? was a QX sequentially positively would that? Eastman how remind could potential to you that's infrastructure then secondly, to by idle from if potentially there. a bill, from lower guess I benefits QX. Eastman the weighted you facility impacted your you just be could know, off, the maybe And

William McLain

Sure, Arun.

became period went away is question, I throughout our answer facilities So fully saw basically back margins and go incremental about answer be I'll you XX%, decremental which QX, our operational a roughly to as basis, ways. in I if quarter. the with sequential plants QX our the would on it the so of two quarter our our down XX% associated came One, is from and say costs XX% over

Mark Costa

What's infrastructure the we cars, go than about construction, durables, focused of what infrastructure large is. kind just projects benefit nature into building that more creates really the in of bridges. depends we materials will it is tend a the And, so not broader to it on on then the on consumer it great but leveraged. and commercial more economic were highly us, infrastructure and we're which growth, question, make, And

trucks which be of macroeconomic people So, you work having certainly directly for more while going construction, some know, projects, it are may tied in us, demand to is good to - the infrastructure pickup we et have not participating in and cetera.

economy, by does like benefit So, driven the we'll from everyone certainly improving it.

Arun Viswanathan

Thanks.

Gregory Riddle

I this Thanks, look We Have again, dialing and great everyone you to you soon. again forward for day. joining a in us morning. with appreciate talking

Operator

call. your Thank today's you This all conclude conference participation. will for

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