Eastman Chemical (EMN) 29 Apr 222022 Q1 Earnings call transcript

Company Profile

Participants

Greg Riddle	Investor Relations
Mark Costa	Board Chair and Chief Executive Officer
Willie McLain	Senior Vice President and Chief Financial Officer
Jake LaRoe	Manager, Investor Relations
Vincent Andrews	Morgan Stanley
Kevin McCarthy	Vertical Research Partners
Josh Spector	UBS
Mike Leithead	Barclays
Aleksey Yefremov	KeyBanc
David Begleiter	Deutsche Bank
P.J. Juvekar	Citi
Matthew DeYoe	Bank of America
Jeff Zekauskas	JPMorgan
Mike Sison	Wells Fargo
Arun Viswanathan	RBC Capital Markets
Jaideep Pandya	On-Field Research

Call transcript

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Operator

Good day, everyone and welcome to the First Quarter 2022 Eastman Chemical 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

Hello, thanks Keith. joining everyone you, for and us. Thank

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

items. two cover will I begin, we Before

First, will Actual financial concerning or Cautionary during you future our or be plans and results materially. expectations statements this certain forward-looking to will information detailed presentation, hear differ factors news forward-looking and events statements XXXX in results release. related are quarter certain our expectations. regarding could first

in and preceding in first filed XX-Q Commission, including for prepared remarks call, with Securities for this filed the quarter XXXX XX-K XXXX. and the full and and the slides year Form the Exchange filings our be During to Form

earnings and in Second, most financial financial items excluded available presentation GAAP adjusted and quarter non-core first including comparable directly to certain measures items. and exclude Reconciliations results associated description unusual news of the disclosures are a the in XXXX release. the other referenced this

with and first website prepared now start our Keith, question. we will posted As the slides night, our last Q&A. let’s accompanying please we remarks on go into straight

Operator

with Vincent you. Stanley. take Thank from first go Andrews Morgan will ahead. [Operator Instructions] We Please question our

Vincent Andrews

Thank you and morning good everyone.

Mark Costa

Good morning.

Vincent Andrews

have as, we expected scale year formalized about here size, this and something said I might that in you am are the you as well anything May. almost little is molecular mentioning you and several how wondering second in the or of could now recycling talking I first the of Wondering of you brands. had to a see U.S. I talk originally half bit if about are think if changing sort the just scope global you initiative developing. in project are

for just curious there? an update So,

Mark Costa

Vincent. Sure,

going the projects, economy, excited really been across all we well it’s on So, right. circuit are about how

project starting and to the fronts. going then be have we lot at in those project on France of you got next the Kingsport in months. So momentum the that’s And the have so got – X going looking up two

content, they be look U.S. need you So, the to the be it as we tremendous grade really scope just in play When specialty about at And of you France. to When we into and we that from have doing size the need because expect similar nice back off-takers at Kingsport have in to would projects the at sort of has food in see limitations can look focused about set it and loop they project, packaging, only do really be for packaging think it since several look in targets that recycling. in on truly we a have wanting are when we the was XX% would project. you textiles of on bottles. already creating engagement a XX%, side. significant circular it economy, for these It to brands the predominantly XXXX, recycling, molecular endorse brands be mechanical what and just recycled

in of or the is going shortness And so landfill get benches get in part scrapping XX% they this to to France. in have are the recycled right. or real U.S. incinerated cycled content, how they or going down

linear and So, from that’s disconnecting feedstocks. just perpetuating the economy fossil-based

efficient, insufficient, but it’s energy mention is also over mechanical completely great not and degrades it to time. So, its

this is support to that I be solution, waste quality our of all be and molecular actually mean, eliminate to to So, to recycling recycled. they packaging realize still or and high around packaging to are reduce of should solution going long-term that to much in their enable required textile, all was position possible, but of waste. and we story. be much the same you reuse And has the to the as packaging maintain needed as a

they much more a aluminum. glass get They that They understand and also it. plastic that. understand So, than energy-efficient is product

So, should if aluminum, energy to you the first that’s planet, assume energy energy-efficient most want make is more limited the product, Xx in to energy plastic. more then glass green than you or use not Xx

engagement. this. And of what of very pass-through I we the trying do. So sort such got are are mean, focused that’s we cost on contract they they why nature have understand good to

know to where work you with we But these details. out are we commitments, at. very really it about of long-term the So kind as complicated good feel time takes

Vincent Andrews

in Sure. committed just buybacks And maybe no $X still doing you billion I the but year. the were noticed are follow-up, there to in at quarter, as least a

So, how think at cadence that get to billion during least the year we to of should about the balance the goal? $X

Willie McLain

we that in Thanks, December year. $X or Sure. the here billion We for the wrap completing March, launched up $X from did last Vincent, early the billion in ASR question.

We say, cash have $X transaction. I in. had of would also, the We in the April on closed billion here

wish So the as transition year. transition. success on here transactions partner to also, they of adhesives our I both complement And want we end services are to through providing teams our and also continuing team’s the

pace of started million the can of month rest QX, how of April you you that we to already we XXX think shares purchased here through have similar expect the and the in quarter. If about

or basically of as we again, about year, the $X QX. greater we basis full $X.XX QX that’s growing second be the million the the in that and from For that into a commitments on year about say $X.XX the would complete roughly half made you expect, I as first I $XXX can the share providing look here purchases as half at deliver at to divestitures. in on offset impact the we to the a and full billion

Vincent Andrews

Thanks Great. much. Appreciate very it.

Operator

go from We Research ahead. next question will Partners. take our McCarthy Vertical with Kevin Please

Kevin McCarthy

morning. good Mark, Yes.

half as you you at and chemical was see EPS For you operationally the quarters? in fourth recovering I annual range. coming of the year. the the unfolding to year, a in you wondering speak turnaround Kingsport then intermediates that versus through speak you think got could the You XQ the plant mentioned later I if do are to XQ How affirmed in back the in seasonality quarter? seasonality example,

Mark Costa

around the of quarter, we the the the sort together for the first and second Kevin had add and a be at looks quarter think year. very what year spent you gave Thanks, look through in you of how that time the first trying and important we creation question. cadence about with that We earnings quarter think goes this guidance When results a about and X.XX%. to of lot our value to

you our If cadence. second use the at – look midpoint of quarter

talking get sequential $X.XX to which share about full a on the to to question year back half, a a you $X the guidance, our of about So are share or year-over-year is half X% basis. your higher in our midpoint first than

the question is it a back past, that’s a a many in are we we we share is going events year-over-year quarter that what So, look easiest recognize really of that because or in a you to think what at have second half way the to year, And stronger a deliver event floated year. down streamline obviously, first on CI can it relative think that’s first that normal. bit to the occurs, And when significant us. sort the if of about to we normalization back quarter, little to the first had for XXXX comes in of a can half in We basis. because it to of strong to the some half had on now. talk really delivering the setback I $X than the don’t AM half look you have really normal different that But about

million So, means you the on have be basically to guidance half year. of midpoint and math AM $XXX the of back year over it the of look at when $XXX for that million, million to the of full last sort we of about the our do $XXX

from Now will greater we – probably are that of managing than actually roughly that half of half spreads. come how

year in So segment occurred that compression of the was year. this in almost of last back the all last half spread

– are is incredibly spreads have the in improvement quarter that get discussed sequential we been increases to price the quarter. in the We we get still that in in expected and spreads the to begin and and successful aiming January that first implementing second

momentum that pricing we So, the a lot actions price great of additional the in quarter. cover in taken, including the first implementing we whole this month increases have occurred through a have set of to inflation

you last really will. – the compression to in – back this half $XXX back million that $XXX recovering in got year, half of half So, So, greater compression, than of the spread the that if relative of year the of million you right? improvement in back occurred last have

So, the you it bit the volume got And volume growth different. more that’s little have half a strong that. of than half back then or in growth. would be And

First have serve especially of able market. are incredibly not that how to need, we you all, specialty in plastics, unmet got given

So, markets inventory. strong. are No has incredibly one

So fourth because quarter is less is there nothing in the much destock. likelihood destocking of the to

ease, production market, we expect You of bigger to it assuming, of and right. demand. ability to which starts the got sort the get serve of in have better we are then half constraints back the up, And really limiters relative have the automotive got logistics you our first the to is one to half catch

think $XX the just days, roughly that with of recognize third bit that the is through the and of fourth to quarter, because challenge. we in all million about and So quarter in occur is getting be But we up half logistics we going of door that will a production going of ramping out volume year. recovered the and second to these And a first most are quarter. that recovery be lost

that factors a a So, of better. to lot volume be drive lot

assuming to we And at And gross what’s point. weigh in higher our standard we in there that going expecting So, of the you and CI year half some normalization. going that have approach is are spend. for think now, against it’s I back happen some the to to taken then normalize

last you come all meaningful then the you earnings. relative way. got put going repurchase a net share that with you And you in to $X.XX share we the are a together, are So up have divested EBIT positive from replace to out doing to year

the that very about dynamics X% half. think sequential improvement a in get and to So, versus when improvement you $X reasonable first you of it is that gets sort those

Kevin McCarthy

Great. in forecasts updated I Thank as any order are color. books that seeing production thoughts then your that from And bottomed a Mark, expectations end-use have you on point for follow-up, of at market? what you particular this terms for appreciate perspective? auto and

Mark Costa

softer year bit on expect the quarter slowdowns some due of impact are the relative half we our But European year quarter on to to And the Obviously, back as forecast. the LMC situation gets to and and loaded our the we demand something base little production to down our we we supply lower being out a bit. an the COVID first that’s But based – turned we improve. quarter, stabilize year be we of their under is had using market, number than of to first in current using be first clear, in the on improve the in at a forecast auto start and control COVID chain I’d in started our we as lower with, then well Ukrainian forecast year. the do quarter seeing its European the to China that what’s into year as expectation in quarter war bit be the the not stable back in is improving little to are second situation relatively what the bit So annual an but expectations. a second still just looking below we the half and still last of principally modestly and are situation we starts that a so lockdown in it above are assumption China. expect to say auto than last

reasonable estimating we taking and seeing approach we marketplace. are in what are the what think are I a to we

Kevin McCarthy

lot. a Thanks Perfect.

Operator

with Spector Please We will go ahead. Josh UBS. our next take question from

Josh Spector

the pretty Thanks are versus guys. AFP that right it AFP, versus trajectory? a of perspective? you you way in specifically in perhaps new what I not or strong second that how longer have also, open-ended leaves the that on taking business, you then be Yes, half be growth half now a if could first half second you And curious about or is of that metric relatively half. I’d in whatever just guidance just where earnings terms in comment couple on restructured in wondering to the first a for from your term things. business And things portfolio, would Thanks. my about lower drives GDP think look at thinking hi, guess that question. on One,

Mark Costa

Yes.

It’s are has we animal market aviation for business nutrition BNC in about excited a rates incredibly both personal care, a automotive end very So and and also growth things strong. great has new AFP. places of that’s that like and really been recovery accelerated the stable focused. like opportunities has growth are and lot It

are So Like our really is end AM, great. innovation to traction. starting markets gain

but upside So just it’s faster opportunity, not microbead nutrition look at going significant look the the are higher markets. relevant future. moving ability creating the really acids, versus to show the at in we a underlying you to how year, than value grow in the you into into organic formulations Tetra packaging, selling this When

be lot us the a similar is underlying And is this then well. year than business spread inflation better It’s there as there to grow that’s the up that programs there growth prices to still last are to side, some last going year, to year. spread out recovery on in path catching allows of were market. AM, So quite accelerated as this but as not of that relative AM, in large

to the the So, see and come and a for the quarter did that energy great those getting off cover that But of true aggressive cost sort it sorry, be contracts see am of to material, just CPTs distribution to improve takes implementation price in the sequentially, headwinds prices in in will for in you will second being cover a we year little a bit, very – second continue and we catch takes business because I quarter. the the year-over-year AFP to it raw quarter cost up. quarter first spreads up pass-through job all a

volume spread improvement. will strong that a mix strong volume the half first XX% So overall, very into both by continue that quarter and second

B soften of there are look we to last back demand of we will like and spreads will how half is to we C the half, of to and and just think As in in bit a the business off the back seasonality relative some assuming ag industries some comes And that where we see year. second improve that up continue year. the the these half

quite as very as half. So good second but half, to it’s the going a still first be strong not

Josh Spector

Great. Thank you.

Operator

question ahead. Barclays. our go next from We with will take Mike Leithead Please

Mike Leithead

three Thanks. hitters quick the Tennessee. morning, on Good facility Great. Maybe in just methanolysis guys.

So with slight first, it looks like maybe a delay supply chain.

full moving ‘XX it is capital So get finally, Second, we sort maybe kind can facility? timeline, you it’s the mechanical labor? XQ completion investors of just And there? whether or anticipate flesh million if when $XXX in cost out right the the the operations of what’s still for do reaching commercial equipment number should

Mark Costa

Sure.

just the before we in delay. still for we right when So an identified The we plant labor inflation just when capital, a realistic – it the to comes those this production. equipment but of not supplied, equipment to your started the have do to it capital. It’s of you quarter down parts the like sort to completion. locking to actually issue. environment. securing, all easiest components industry, we quarter were chain go extraordinary related about team the being now, back just delay, the one automotive when of being started issue. track the are environment the When getting We isn’t on all side we in mechanical build It’s and the expect a a job lot securing a this has are done the especially supply on did when comes we It’s

along in get keep in that we then bumps always position there think and in good startup the that half that manage startup, a it when be for around will to – comes to we the we aiming year. next some We to of road And going are assume we how first number. always a So, there. are that

we serving to of So, be in the going the customers. for delay a think startup is there significant facility don’t

and market So, get of as building full you run-rates get are the recycled by you effect and of making to the a facility will and by you end off the this XXXX. into year supplying content summertime, full year

and You will it the and specialty fills than a the pretty to remember, out in specialties then ran relative this excess as operations those light got monomer markets all up how and different up normally have while just as grow mix the plant. And full from PET grow in ability switch upgrade the the those methanolysis we serving specialties market plant take like plant out, full and we textiles for how this to in to we do and from make markets. come the to plant is this or packaging of the ramps plant, because quickly fill they sort a be not you levels closing the

faster ROIC specialty get with this So, facility normally in would what in kind you flex than that plant. the of much

Mike Leithead

Great. Thank you.

Operator

question next from our take ahead. will with Please Aleksey Yefremov go We KeyBanc.

Aleksey Yefremov

morning, Good you. Thank everyone.

As we was of trying the Mark, understand to startup economics might methanolysis this work to world. how real I get plant, closer the just in

or methanolysis have tailwind Would For or jumped a not year-to-date. headwind crude a example, factor. for it your been margins

words, if promptly your of you is feedstock the And on So, cost oil of so, moves prices? changing? able in raise other this, are to when kind

Mark Costa

Yes.

So, higher prices good for is oil very methanolysis, alright.

PT-based the in material which those on is feedstocks competitive fossil oil. connected the Virgin in marketplace, So

with for up the those everyday products So, of the pretty price goes price oil. marketplace that’s in consistently the

PET market is we reality and product is product are both the and this feedstock anymore, connected really prices holding alternate are final And than fossil-based of virgin price because their on sort recycled they substantially be raises on polymer. seeing are higher that it its both our the up and So not – of in is The marketplace. proposition its right our environment the content. to those what value to though now, that buying the historically

about at a for look roughly premium proposition linear content of Europe, XX% creating economy. value versus you If fossil-based perpetuating that a circular recycled economy

our where value market’s reality right? the But to When landfill So structurally in comes the with of It’s isn’t changed oil. into landfill, be this of changing benches of is upcycle or can’t recyclers feedstock, sort this of dramatically applications not it’s so. price – going is that sort really incinerated, prices. changing scrapping price same going and to applications. the the increase park thing, product mechanical low-value the modest may the these like waste of and The it feedstock a being there and

we’re not is increase So a in significant seeing the oil just up. feedstocks price because of

Aleksey Yefremov

Mark. Thanks

Operator

Begleiter We David will from Deutsche take Bank. next our ahead. Please go with question

David Begleiter

you. the XX%. from and Thank in? just look bridge, XXX offsets QX you from Good a Mark, layered $X.XX terms on earnings incident QX with to the guidance the the of are QX what the in Kingsport How the to of midpoint Kingsport morning. about guidance impact think to that – of incident sort base, do the QX at you you bridge

Mark Costa

exactly is that the in million those shown how easily quarter. we in demand Unfortunately, up $XXX the we We the Yes. a quarter just phenomenally there, when first success, you event strong back January had event Great products look $XXX happened. which for that’s tremendous question, quarter. well And it. at It’s first the at Dave. guided But the how above hit very out much million. streamline for

rate at event the saying, and which So, we us, relative second in is do what’s $XXX and to quarter. now run behind number from the is the okay, the up of looking down that start million,

continued our first in through strong and with significant specialties. the with doing are comes pricing that. – actions that So on that good and story the inflation of part we demand expect That’s the our of pace the time improvement a quarter. the continue saw first The quarter phenomenally real we keeping job mix that upside, occurred

and So stronger quarter then will is to fibers. than expected. being spread sequentially And second holding improve and first from CI AM up quarter in

sequentially be stable will first quarter. from quite to that So second

number. than a so a higher where So what bit little leads guiding less first something to all And quarter. we that are to of right? then

accounting doesn’t repeat. of $XX million the First accelerated all, of cost

So pure that event $XX doesn’t quarter. related the a that’s but million to QX, line tailwind a in the QX steam to production, that’s catch in up

have to it make much time and up, quarter, capacity excess there production it on delivered takes that and back this get production. is So to trains it lost so to that some get up only through get ships we

take sort we’re to year And going recover to half that’s whole of only recover about So through that. it expecting of year. the to the

a connected X. the the The bit We is to event AFP of from Then of cost contracts those their got had an first portion – work, side. a contracts. production up So got remember, of pass-through really the you’ve way good in doesn’t pricing quarter. headwind you’ve a a lot until inflation catch July on it

is lag just catched in prices They will. and So, AFP of it that up. there a how part

up benefit the the quarter You as happen in saw raw fourth materials, to the first go third quarter quarter. based of we that catching will this on into and

a So from bit a there is of headwind that.

got will start AFP circular then And we’ve you’ve step up outlook. there in macro just spend And the So growth first a down we quarter. as right? then our uncertainty, relative slightly be adjusted ramping to is up investments. So

certainly and product lockdowns. delivered some how films As having I into a it softer of and Avra COVID on to all in with bit get various the the our is bring businesses an as sequentially China earlier, well said lockdowns country impact is we little the like as performance different being general, about

that is some how to trying we’re uncertain to estimate, highly for sort quarter. there going there out headwind but play on of the So that’s

David Begleiter

Very, Thank very you. helpful.

Mark Costa

it’s it increase a year-over-year. together, Put still XX%

our So building year momentum to towards guidance. full it’s great

David Begleiter

demand-driven? or the just for year, particular, which And the at that looking of more are CI Got back spread it. you spreads to in normalization the in half normalize products, And is the supply-driven on first?

Mark Costa

Yes.

has in obviously first the benefited the very tight holding is the like incredibly the strong serving quarter since market of many from demand-driven. remain we’re beginning those markets normalization, or that the And really intermediates. in spread of we’ve the second in So conditions first customers these And and of year that’s products CI other for been tight, quarter since Demand intermediates. and obviously in with in that second the up last up all the that’s acetyls see now across hold there is that’s still as that up creating are the olefins quarter. announcements U.S. to just thinking of we’re also the And the supply-driven third both across many Asia. relative issue to expected now through And a operational you is issues can quarter, constraints issues and in Europe the cost that in planet. new structure has energy picked advantaged the and costs new companies

cost So, back year into to probably of the But our looking that that forecast. structural years to improvement to we’re going an yet how at for continues is out it would of upside call that’s sort true be if how factored not play half that’s I the or ahead.

their little of to right? there, slow that really down get a softened We the issues, combination assume So the bit. more the around people assuming so economy with start a Ukraine-Russia to reliably. all both, a We’re it’s bit market issues, the Chinese plants run will inflation out

supply it’s So will call this going occur. start that I we that know creates improve and But when some to hard softness. to normalization all is think to

to we’ve margins. when occur. actually going any call. frankly, us there make to sort of But of normalization normal some guess call what data is something so estimate to sort specific There that that is in And to no that’s we put of back it’s, anyone’s have

David Begleiter

much. very you Understood. Thank

Operator

next Please our Citi. with from go question Juvekar ahead. P.J. take will We

P.J. Juvekar

morning, Mark. Good

Mark Costa

Good morning.

P.J. Juvekar

your you inflation think the from at all all was that you do the economy Where Or and trucking, peaked you higher? lot your logistics, XQ think about and go that. second Inflation will materials, of sit, in inflation to your a vantage stuff. do be to drivers, inflation? you own Or do businesses when peak has There look raw you could is people? you derivative continue inflation think talk discussion truck point, the

Mark Costa

prices inflation When the going go increases certainly to going the up costs. the inflation to you higher you going flowing that at to the customers. quarter into are that raw had which to third as to second energy those catch have their in will quarter April, implement into are think through all And it into our go look I quarter they through Well, prices price higher quarter. now first higher is second just we and in quarter. our occurred materials that’s the take in to all they and products, this into the flow

our going I to all think this think to inflation the downstream on is to don’t us we’re quarters you be peak got to costs, through inflation in peaking quarter are we into doesn’t now materials get is the energy what When has right raw we’re second as assuming of we fourth of steps of about and out quarter. third sort get go how and the worse So close quarter and that multiple the multiple to consumer. because it passed the

half second stabilize of little in bit from the quarter. the materials a and fact, year raw off maybe the back In come

our what’s value system. far forecast part So the think, the industry because of downstream, we’ve all But that’s our we’re I asking happening cost just our if what’s multiple embedded consumer, up in quarters you’re on inflation before side. so to reaches of the got,

P.J. Juvekar

Right.

So saying? of quarters second question… consumer next the couple is you. Thank inflation continue what you’re for my would And

Mark Costa

yes. and consumers, For customers

we us, is second For think guide. in quarter peak our

P.J. Juvekar

you it lower it And – price carbon Right. fixed how thing these with footprint. would methanolysis together sell because or just Is would mentioned the buy premium on a putting to energy? the they structured? How do these price on the are materials. you’re goes raw contracts contracts your has that And sell the product, I other presume you side, up you at when same

you you give us Thank the sort so are structured? terms just like? look how of these those contracts and contracts And Can does how

Mark Costa

Sure.

we’re feedstock the based there So on of material. is it when a spectrum to source that securing comes the contracts of

are value So what alternative said, some exactly where are contracts is the there are going landfill. to you – that they

other a set park down. And in so up where products drive that long-term And getting of alternative source that a value are scrapping. or on we’re stable very that or contracts manner. have waste doesn’t the an bench front. pricing with against material to competing maybe That and is There price you’re value the

that and how applications the those applications alternative the have down-cycled to linear look and we So, economy might of change. that so at perpetuate values

So, secure price to goes, our connection where of where values be to some go sort oil will have that. to there that compare alternative of we market pricing

So price-based either index. some cost it to will be or connected

market. So drives relatively price different up that there the compared are in on feedstock-based goes they every of all day of look when have two there you the our is stable – lot customer is on keep where And a you side sources. of them actually what to models down, oil mind fossil sort But pricing. then at the we of or things, in have of them to

specialty in as always going is pricing So our on business, be value. based to

earlier, As recycled is a of not speculation. high, I value So it’s content right? said quite the

can application look specialties for packaging, to is for a XX% is to value trading on low PT average, at the premium just relatively fossil-based which You compared feedstocks. our

there think impact and our So the their the customers and to footprint. the economy about plenty X operations of the create circular Scope waste carbon lower premium improving get when footprint carbon environment our of they and of out of overall

applications, value the the like the them costs to speculation. the But a that based taking us remember But said, just between That’s on applications, paying today. want we’re we model for and and pricing are So be market pricing that fact. to a PET as we’re to speculate and difference contracts they that that in specialty pass-through don’t you will will to it premium we won’t textile these go not because the textile That’s risk not packaging caught predictable feedstock and taking the just price, where cost on – trying are have do stable doing costs That’s relative already. for plants our do we prices. those and we build margins. going feedstock to Otherwise, that market Airgas get for applications. give I invest the and we’re

high-volume not baseload spread and we’re that risk exploit plants. a So those contraction or to third take expansion the spread trying applications second the on

P.J. Juvekar

Great. Thank you.

Operator

Matthew with Bank America. question ahead. will take Please next from our We DeYoe of go

Matthew DeYoe

Thanks.

point. side seems like – starting it XXXX, like $XX AM, bridge it’s maybe particularly said of the that back million the of back year-over-year half So maybe look to million it additional, the also but $XXX the But won’t but of for as maybe million accounting you $XX on year. maybe through think seems you the going we the I full is the at course a so recover add to get early, or you’re

So I start we think do should – next guess – a what about where bridge building for year? where we

Mark Costa

year. AM, with that the you think it occurs bridge with I every start

we are, as segment, when with So its look value look automotive, prediction volume I have The strong get the medical, at those growth we we will year markets creation that all durables, we and hope, you medical. think year. I continued when in forward, at have Advanced Materials a supply that it odds like serve, starts good the automotive be than this issues demand better end next resolved going chain that especially other strength markets see

markets. our creates have we the So be the innovation end own that decade. strong. markets, over the We’ve we to that relatively proven extensively end last expect above growth these Then

even production realize we’re is end And we’re a to economy, growth going the though certain to the even So not right? demand markets. streamline then because it. got catch-up, production over there event, going amount for you’ve still in this There those year, create of softer is volume

cost the year. comes upside of it’s tailwind isn’t next So it a really is accounting if headwind to issue back, sort the a that you year-over-year year, quarter, will, will rest there be first because, the volume the in well, and of

importantly, company something in the So we’re average all million certainly segment across relative but talking very the to I value that and would above include upgrade amount that’s high have volumes or then that and in about not AM for well tremendous high average. these growth volume $XX mix of bridge

So that always. creates a as lot of mix leverage

margins circular are So then you’ve on another that’s there on attractive to top got going all going start up gives those relative success. increase whole the that you to you’ve value to are ‘XX. in mix And growth got all that to and of sort plant because occur that, drivers XXXX of the a driver

year next this create not levels spreads, is headwind or my control we’re tailwind So we cost a to drive and margins pre-pandemic our how year getting back structure, source every year. that’s volume because guess, value our mix of are

to attractive tremendous $XXX in number volume attractive it’s mix growth this $XXX a it about deliver That’s ‘XX. think always relative to is to going very year to as year. ‘XX growth a So been be pretty when has million. story versus last to year you This million relative growth

Matthew DeYoe

that and corporate rate you flow XQ, more for like rest that Thank a expense was that. in look into the do XQ? of we stuff zero of like year? And Or see XQ part any normal it I cost insurance or of corporate Does that. the guess like proceeds of for looked

Willie McLain

question. for the Thanks

about QX. other level we Obviously, of For the the was in focused Also, stayed the I’ll year, still and see of the rest line pace earnings we adhesives roughly during Eastman we part or growth were business remind I’ll and had with incident, call investment projects. it that million $XX and – of the an steam it, you the part of expense.

we completion the and methanolysis we those first look to of related the as facility. paced incurred So The initiatives as ramp back be of the up the and at also through will the circular, cost year. half startup

Operator

will ahead. our Please go JPMorgan. with from question We Jeff Zekauskas take next

Jeff Zekauskas

Thanks very much.

you’re referring it? is disposable route that’s of So material, PET what essentially that project essence methanolysis is words, Is the talk a to circular other you and the bottles bottles. when producing – have packaging In and more about PET bottles. you making the water to what

Mark Costa

it. that’s Jeff,

to disposable in plant, over is specialties. or Both Obviously plant not we it’s problem, right? phenomenal of feedstocks. significant France all for XXXX portfolio, those polyester landfill talking Both we’re out, in now issues to specialties. PET. go got second going you business in PET all are So away. we as sort the circular act – want textile waste, going were is those linear be into a feeding textiles. But of client where across second first in after waste the bring of we competitive economy it’s packaging thrown how need this to why to markets second And But just the about economy to versus U.S., That’s the know, be to plant product we of have right in the and get model the the when planet. and in Jeff end or waste taking The with is hugest ways. plant it’s different the incineration the we’re back building our were in very we’re largest bringing back solved frankly, being bottles, making if So because the eliminate became fossil-based the problem making back to circular clear, before. into it bottles, we it, be water incredibly bottles water

this give the market So relative market-based have plant compete every it we’re pricing. In margins China unless traditional us of the we PET wherever pass-through building not transactions, it long-term to was feedstock traditional in connecting to costs day not against a stable contracts cost sort whatsoever business, and business. go that PET

So more investments. predictable returns these we get reliable on much and

than past. to sure different what in the So in of heart we what it’s the that’s model make trying do to did the basically we’re

Jeff Zekauskas

get I Okay. that.

that’s use, applications, And know, what PET making rather in you’re of intensive more I than you’re who a people end so specialized polypropylene. don’t recycled more capital doing is non-packaging the in terms the

about use material? customers they it to want that than buy there and your specialty applications more polypropylene? have Is the expensive they got so less a that want cheaper engineering is capital-intensive what the for some makes to So PET rather that PET specialty characteristic

Mark Costa

keeping to Yes. are make clear. of different Jeff, want just conversation sure we sort I

specialty, are you or talking when are saying you copolyesters talking So, and our specialty about you our are Triton, about…

Jeff Zekauskas

about. that’s Yes, Yes. I talking what am

Mark Costa

Yes.

first at it’s other going So, same right. look Triton our and issue, into the you plant of that’s if our sort copolyesters,

right. that Black want the reusable the as impact their & to whether to sector economy, is be But base of to of the make marketing part a it’s want So, they a X drill. for they premium are a using Innovation Day, their – their want part product we told they emissions how on you a bottle they their supply be out getting you of that throw in want hydration a It’s to a occurring they Scope environment, are Decker, great right. bottle story emissions, on to Triton PT that address water climate their about It’s are sort and away, improve of something they ball using products waste right. getting and

the to on phone the branding we using premiums out about final case their the that in improve impact the polymer for are reuse way price, recycled all XRs want or price products. these again, as a content. get above or brands are it’s make above getting where well well as they it’s they So, And way, their charging positioning a meaningful content to drill recycled climate in it of the

so cases just or So, automotive applications, getting as a we electronic like there where not for water reasonable better like in, been phone is versus accelerated we weren’t them we have applications into applications it’s recycled new a that also so other are and we for value but for bottles, in water applications. up growth, significant And we before. current there and price products this us our spread is get better content, this sell

that well. up, as opening we it’s accelerated So, can growth market tap into

Jeff Zekauskas

you Okay. much. Thank so Great.

Mark Costa

well it’s expectations. interest our and as It’s of scope in exceeded actually strength been because exciting this the

So, we up get are can we plant this running. rushing as as to hard and

Operator

Please will next ahead. our We with go take Mike from question Sison Fargo. Wells

Mike Sison

Materials, in of the Advanced $XXX And largely the the you outlook? shutdown? if a outlook, you In the in guys. the it in Kingsport million. – this first is, gave EBITDA – maybe lower that EBIT part quarter, million sort what’s a impact $XXX you Hey that to range XQ added and in of Is or related January quarter,

Willie McLain

million million. yes, $XXX Willie. would What – I call is adding is for it this lower of component Mike, range it of So a $XXX the a to key highlight is, I end will

line some the steam approximately highlighted, Advanced have it that have Materials incident we QX to in for highlighted we As Also related time. is the us take impact will million. $XXX

is for get We about mix Materials, half impact, Advanced volume of expect the to $XX roughly million. which

So, as pacing you the the half about year. into of back that think

of back go and as into pace spreads the more levels, us million back we in So, the our of Mark to this year-over-year ultimately, it on recover mix half which year ‘XX. for on a highlighted, in and normalized strong as confident business, up has as sets get more will a $XXX basis we we put us volume growth remain

Mark Costa

Yes.

Willie obviously to where it There described. where think we about of just of line impact the this versus of greater to beginning were the be one million. the going Just in had three of steam year than add that. that incident we were We we thing really the to are $XXX said as sort parts we

also were have actually We realizing January. is China in have relative we to risk we very that underlying expectations the are And improvement market to here COVID in automotive we weaker. moment. – in But are the spreads the being on kind the the spread then of bit little a track relative year much last

in that So, consistent with January. held up, has believe and were we where we

So, went headwinds. adjusted to we greater than this these of sort XXX range from to now reflect

Mike Sison

million $XXX you I I And are EBIT. sort then have quick model the is the this second had below of And all talk year. the a second the sort chemical think if you half. But the be stays would good. would I of about quarters intermediates, think commodity out folks, seeing plays a half that segment, high, don’t oil of out, that I when just stays five think stay just it. because in I you mean lot the now in Got in demand follow-up above million, above normalization the of event them in $XXX I in

Mark Costa

Yes.

think you have lower in about half factors the when mind, to three cause the be half, So second you sort right. that keep CI, of than to first are there

volume normal market. we the ag means seasonal functional in just and one, have off So trend

that year, some is certainly year and we believe. every happen this of occurs will there So, that,

Second is shutdown schedules. just

big in the sort fourth a schedule the shutdown quarter. of back This year, turnaround the into loaded loaded into half. So is half was schedule with cracker last front year, shutdown the

So, there in going sort is expense shift to occur. just that’s that of maintenance

moderate will spreads stayed first year second half. if half of the the two front half same half, back to the in than even the lower those So, the the to the be

more and softening the get into today. So, sort are markets versus then this of you where about margins back going question towards normal

headwinds a the you in that do can already math, the second see headwind bit there are of If seeing spreads creates go you cracking a quarter. here in that start you some the can

don’t So, tight. we be sell or and we to But to those really is again, some propylene and sell ethylene continue happen. of this likely derivatives markets

how of way all of we we the when will spreads and into So, stays wrong guessing and into to second think we normalization And this stronger to see said that eventually to out will not to expect going of second from and quarter are some in be on much the and see. be of what cracker I been start are its it to the half have as it’s into earlier, going sort But get if going a finding upside. about have much an occur. we or the market we can amount impact But we half, is as I normalize second going the we that occur. say turn approach taken reasonable we conservative to

Operator

our from ahead. Alexander take We question will next with Please Jefferies. Laurence go

Unidentified Analyst

question had it Good you expect see ago. the these morning. Maria mentioned after impact China COVID on of earnings a Melina This lockdown that Alexander. you I for couple out? lockdowns, recapture the is to or Laurence a minutes you do and Hi. Do of playing how

Mark Costa

question. good a That’s

biggest uncertainty second is lockdowns in at China that this say of especially we would stage, quarter. I can think So, the probably the

continuing this that month assumed are May. start get resolved through the to lockdowns will in and have We

that’s but of assumed forecast. us our lot into Advanced to where of a One, ability is which sort who have important what’s happen, couple a for of our into China, our to just impacting else from that we buying Triton what our you our and ways. impact all and And It’s where including appliances you in knows So, on in then Materials, segments, just the import got of products from business going cars world. are point of made direct it has demand then the the everything a country have people have impact got around the and and impact demand on shipped products view.

an paint keeping factors. for market for seems are that this it on those point is and Automotive Europe protection demand, stage, what most films. think films films impacted we the business the overall, the eye export sale business in pent-up on still So, and to at the I strong at think those still especially be especially of performance underlying window is that and is we all But U.S.

demand rebound to anyone how COVID there when managing sort that could they impact. we that it’s going China go past expect of COVID, how pace and do on but of the a in breadth is in are and we get managing So, guess be

Unidentified Analyst

Thank you. Okay.

Operator

Arun America. is our And We Please with our next from Please Steve, Markets. open. of take RBC Byron from your with ahead. ahead. Capital go take Viswanathan will next line will question question go Steve Bank we

Arun Viswanathan

Great. Thanks. wanted ‘XX. guess I to revisit I for outlook the

You out earlier. kind laid of

if should look that? But that so, see you well? out will guess, you still about then to of the X% you would into think And you there? a do as expect be it in $X.XX buyback we maybe year, and will about moderating or Would see So, peaking look potentially some of get think you still QX drivers of EPS Thanks. how XX% next feedstock you growth you in what that noted. a if own opportunity, just into the your inflation like X% you kind year, potentially increase. When you environment, I the laid rest the as

Mark Costa

Yes.

earnings for earlier, strong me year. production move it Then in materials to got relative normalization I disruptions of this a volume So, year because if we I CI. going but – tailwind to come in year as this raw think to that’s next first a quarter that sort demand and the XXXX where the year, relative for capacity correct. bridge, growth to that’s for AFP call. said also AM look I have inflation off, year when – ‘XX will that we tailwind recovery look, that a at have next growth to have But deliver next of be we to year. will will this create you for pricing of a relative had first predict are enable spreads tailwind little in to be next if a hard that year specialties, It’s And the

relative out net this corporate year. level to the two tailwind those how be, So, degree, neutralized could a some to as at

the a volume drivers. mix So, key as really story

As to headwind make a gross always, some we structure there is will manage not sure spend. of our there outside cost

said, up, that are flow investments as have in way. continue our we over on to well And Obviously, as to repurchases as through EBITDA still and next cash EPS this a And growth on set meaningful year very for strong we create top circular a for EBITDA year. to will be in Day, will the top in that relative of money that we I Vision think are share growth be as that reinvested we so improving there of for doing a both we speciality plants. go organic left

numbers. the the about XX%, a it’s but to good feel little we see to So, calling start X% early

Arun Viswanathan

or guys XX% ask out how some as just roll commoditized have wanted to to this and more the back I of think you strategy of guess It methanolysis. like do is sounds XX% you see I then really then kind applications specialties company about towards as longer plan follow-up, applications, strategy And and replacing you enough. as of maybe the more progress to more replace items circular Fair a specialty commoditized term, initially, and squaring the more and the on Okay. time with with the following the bottles. that for of pursue, strategy to been some specialty to these wants that needs maybe Eastman that that to many water do trying circular downstream years go you potentially Is said, over of of some solutions. strategy the, replacing these

Mark Costa

Yes.

focused creating are as is much that So, point applications of and biopolymers like as microbeads food company our and obviously, and from very specialties for AFP on differentiated our service biopolymers AM, total very view, well packaging, the strategy etcetera. a with we textiles new

have clear create It’s at are we and into stable level. by a costs additives very because quickly power spread our in when by or additives Triton mix at or value over margins, our circular PET not that to and growing pass-through deploy the be to we right. care bringing high significant just That’s capital attractive to that’s but to circular manage platform, because about upgrade time, that or sort think translates margins. for relative copolyesters or where or is attractive high specialty good margin material are of cost of textiles especially time of value category we our corporate stable growth, Over we the specialty raw going are in where start So, marketplace are plants. expanding energy spreads the that all attractive And our very these think margins off And you the very coating billion we you high contracts. attractive in creating to because us. products first and means of have whether $X the circular three with, very personal across told already volume shareholders, pricing pricing specialty, what let’s

and it, of billion will And on $XXX into specialty. But Circular $X PET predominantly textiles. France being of one I EBITDA. specialty Polymers. first with, a translates textiles being million the The specialty that hybrid and third call focused being packaging

So, from it when you value call creation look special. those at the projects, I three ROIC and the

Operator

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

final Please ahead. with Jaideep is Research. Our go On-Field from question Pandya

Jaideep Pandya

lot. a Thanks

your for you KT you have, as And an plant. point. Your question you plastic circular to is if first $X around example, to want XXX projects the take billion France really that invest

that So, the the need virgin of – versus numbers there the recycled almost a envelope, I like go feels Xx you sort if be polymer returns back polymer. will just of would of else mean you it I sort all price said, by of equal,

returns is And and that question. polymer. then advantages the virgin ridiculously make prices not is if cash first cost what second which So, just my the attractive the question inherent the different That’s is structure, not cost flow. in around from case,

to something but is cash as this, really the inflation flow, your ask why you I just material changed there have a to on Sorry is raw lot. it suppose, or else it a Thanks wording well?

Willie McLain

Yes.

the question with start first. flow me Let cash

significant expect and in quarter Mark we yes, highlighted, inflation second to first So in obviously, that have as the quarter. we pretty a seen the peak here

we about first was are that think highlighting we we pretty compared million as what that’s to cash headwind say that, guidance. change normal in a least at I flow would So, And of is quarter pre-COVID. see. $XXX our probably

a QX, year one combining than the divested call will you it, If higher compensation is headwinds the our for which couple had the look a EBITDA representative. this as $XXX back variable pretty is at incident to payout ‘XX We million. the and impact as timeframe, in of ‘XX I year-over-year normal, of steam QX line about well

the So, it half as go all will we back the And we year, will be of into the traditional. levers. use more

We and accounts have as again, inventories integrated as efficiently terms we and look at made planning well effectively the programs manage well and our as, investments other avenues business as net accounts on in to our XX payable receivable side.

and several and multiple demonstrate flow confident cash this cash again, to last the remain flow So, and able over we year. robust have deliver environments been years in

Mark Costa

how I question, quite first but it’s So, wrong. did sure not the am the math,

all, to you France, billion. So, to is said the in the have at of look plant be when $X this of $XXX million going million, not that plant $XXX First first we phase

where we $X more adding phase second specialty The the billion. is are to you down capability road the gets what

lower So, what you capital number than assumed. is bit a

we right. the relative cost our It’s marketplace of price the to pricing, we are when capturing the remember the right. Second, look two-step a investment, in the that is at value you got to feedstock,

million $XXX to $XXX We building PET PET the are and are right. we selling plant. and million building methanolysis PET is revenue, methanolysis and the build to That

cost the marketplace. the the in more get are lot to to substantial quite going weight you a waste, which low relative the margins you the So, you are pricing are way generating all is when of plastic

you when is reliability do I what premiums and feedstock. exist the And our do for material grade premium not remember, of okay, it’s that mechanical feedstock to the today get clarity, quality than that safety, say, all it’s feedstock. market, that much different and fossil-based and grade in the So, it’s math higher mechanical have above sort market performance, the

us because product don’t through labs does. makes the it solution because of long-term stream a we recycle is five a we complement it long-term, the high-value to So, grading is revitalize necessary way, degrade viable also can we a a it is waste, can keep and mechanical after By that in infinitely plastic sort to like technology. what mechanical our

without of we enabling not exist in not lot will recycling. the mechanical do what it which just provide, in a value So, bring recycling we to future, the to but marketplace, molecular

to approach we returns. $X so capital, and billion taking there of So, generating to a value is of EBITDA sort pretty are can get, $XXX good of reasonable but the pricing a we the market lot million relative

Greg Riddle

Alright. Thanks, that. This call. everyone, I for hope concludes day. joining have our us much you And appreciate great a today. Very

Operator

appreciate conference. and this Ladies participation. gentlemen, today’s conclude We does your

disconnect. now may You

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