Eastman Chemical (EMN) 28 Oct 222022 Q3 Earnings call transcript

Company Profile

Participants

Greg Riddle	Investor Relations
Mark Costa	Board Chair & Chief Executive Officer
Willie McLain	Senior Vice President & Chief Financial Officer
Jake LaRoe	Manager, Investor Relations
Vincent Andrews	Morgan Stanley
David Begleiter	Deutsche Bank
Jeff Zekauskas	JPMorgan Chase
Duffy Fischer	Goldman Sachs
Frank Mitsch	Fermium Research
Matthew DeYoe	Bank of America
Aleksey Yefremov	KeyBanc Capital Markets
P.J. Juvekar	Citi
Laurence Alexander	Jefferies
Kevin McCarthy	VRP
John Roberts	Credit Suisse

Call transcript

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Operator

Good day, everyone and welcome to the Third Quarter 2022 Eastman Chemical Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com.

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

Greg Riddle

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

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

Before items. we I'll cover begin, two

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

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

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

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

Operator

you. Thank

go Our Andrews today Please Morgan ahead. question first comes Vincent from Stanley. from

open. now is line Your

Vincent Andrews

just contracted to how they name this facility. could or know similarly It’s any are of talk of and good balance left I or sort exciting tell and of about and us they Thank you, the can you customers many there? with on morning, everyone, just don't at what's the very if announcement at congratulations point, news. are do Maybe the the other Pepsi. you the ones

Mark Costa

that you, contract it plant and a significant really about their and for So hear incredibly volume is load the base Vincent, we're for excited And commitment. great plant. from as to the the Pepsi

the but do we're point of agreement, believe, have going We we active attempting a this point conversations talk we're value great very we in the is a plastic at sort with discussions. not several other what about about But bring achieve crisis economic our those PET the to the proof can the proposition Pepsi value position time. and shareholders customers, endorsement with consistent to waste same that at on and create for market with solving to

them excited about forward. going So, working we're with

Vincent Andrews

view Like all I going ask thought on If just could get the by that's the do comments, what prepared over? you it are other it's the just on. But will I from destocking a think being know that regard? of point are of from we'll that end some your you looking that customers signposts you year. for? exactly question And end than in the hopefully hearing over how there's know what

Mark Costa

I market. everyone on question. a it's think So, on the in market And you to relative what's it's and to great demand difficult going in to that, call as it it's know knows, a you moment destocking. got take one by little And

that significance just services inflation could in back really don't sort I probably consumer turn on leisure combined to how all I of But the buying the the the into COVID What the have be spend discretionary it's of moving think think people understood much Europe in we and in you So place extreme with there shift more the planet, well to knew pivot around was the where greatest a been from headwind from anyone goods situation. had we is being. is, documented especially retail US. happened and going

our extreme to stay airlines. inflation was life, the constrained. this from very we else with But in know committed all everything travel as people affordability So, for

some to it at sales but the Unfortunately, announcements And you so Whirlpool now. the you the et can second amount caught that the customers all the that's or And you cut in still of saw Walmart, these of quarter level. have Electrolux retail of have that a retail all loaded an and destocking you back ocean, to all see have with flowing wholesale have on showed spend. like Buy, and Target, continues consumer then that much problem occurring huge they've through that kinds anything a discretionary Best cetera supplying a and had really inventory chain doesn't there. ships goods inventory, and caught out huge And they on up ports it in impacting on our of

set sort So hard you destocking event that that's combined the are itself that's I'd the at broader a impacting both say, get when the little significant a call say, of It's a one fourth to we pretty factors as part of the out. quarter. and other are demand on, going that's occurring, And situation the look what's market. of significant in to there the destocking When you market. demand plays decline,

stagflation drop but costs are costs staying energy in consumer is and high. in Europe where inflation high demand, got energy you've high So driving a

got well in You've for a see policy, is data you that's year. market GDP the housing either the been construction number. a quarter coming constraining the third recently doing all US as China not can behavior a B&C trouble that's even consumer in over industry been building out no-COVID with and And in

momentum of there, forward, And next then, inventory but the but end market the as and P&G appliances they're painted going inventory our are -- The North and generate year being off It's looking coming in cash off future. there's in high-cost and you brought to that So, demand -- year. doing that for of stable and not prices go lot houses a markets portfolio. as you the at is and into quite that completed have who lot sort of being of position even still you that can themselves see in across B&C out a lower even other markets to America. for destock like well, their much still especially impacts a of

in modest stable So, play markets by the got the on out end destocking I think of itself you've will year. that going

You've got has think and on China a itself so been largely destocking earlier of destocking challenged going the the in by phase marketplace. playing while, which I end The the what's has out Europe is the in of for that that more and change for year. US

see world. automotive positives, trends those it the sort way are So good. got then, we the the right? And So, you've around of are

quarter. as sequential and got that the benefit seeing quarter improvements third a in You've we're recovery the already fourth into

we an car amount large relative money as make exceptionally three much times You've to ICE of an got where the EV X.X, trends, value.

you've of those mix that of in got -- some So, more are relatively balances mix becoming consumers of consumers a financial in the another that healthy, sort a out gives us system still still are as these financial upgrade. part are And trends. that

good the we that the end greater think of quarter. of So, XX% than itself fourth a out amount, through destocking plays

of means, year. from recession you a then And at on and get And returning being look the past fourth you mild as quarter we're a improves next meaningful of about demand destocking with year, to as point way in view. more thinking top what terms, as so market that the the this demand lot sort the happening look of us our that primary across as of behind of us $XXX to below us drive we you've market mix by a we got And that, get marketplace well next put year that's demand we this of missed lack had growth. at innovation volume year, that going outages about hit if million that

available capacity shutdown us more So, planned there's schedule way that a that next and in year volume sell. a upside a lot meaningful in to of lower gives

quarter, of volume that this next better, lot destocking through get mild will recession. this even a in as some year that behind So, we there's a be of reasons us,

Vincent Andrews

Thanks, so Sounds much. good.

Operator

Deutsche from Our from next comes question Bank. David Begleiter

Your now go line open. is ahead. Please

David Begleiter

the of the next year? costs on you've cost versus how shutdown that or is million costs lower include year Mark, much how morning. Good temporary? structural targeted this much $XXX next is Does and somewhat turnaround for year,

Willie McLain

Willie. morning, This the Thanks Good for David. is question.

the the I look factor, buckets. be about a think to had half first $XXX XXXX we you the the we've $XXX talked about at that think that in a we about of key you on about as time. it million, as being front. obviously, we million, component driven the be level with about that's manufacturing inflation As lot expect as Roughly in expect outages, a to along large think would two the demand And And you we over inefficiency. think as of contractors,

of million back I we'll structural, a be planned of view a environment will amount turnarounds. portion call as of will There that as in smaller type I'll be, to controlled that manufacturing taking that system. of the a significant our it we a operating a be, So, call space. amount lower that $XXX out we that see demand it do cost I'll it call more get in That of

As comes to actions we would would more highlighted. environment to what that's current is, programs, say the in of in spend in about see. discretionary, we that invest of nonmanufacturing as of to expect one-third, level I was the it say so the continue as the that's many structural cases growth And I variable the consulting just versus

can investments. the ensure gaining that momentum balance those to investments, out structural/discretionary will of our circular we With with million third project we $XXX that continue

David Begleiter

guidance just perhaps. perhaps, And Is looks good. in Slide Very looking ballpark? It that maybe like a XXXX that you're EPS at modest at initial X%-type Mark growth year-over-year. looking XX,

Mark Costa

in the to cetera. the inflation And or that and short of good we what's a would Ukraine to look say et Dave. question, the goes giving pandemic XXXX. this China, we're good will be and a XXXX which play to as the the happen time the what think market to It's war to uncertainty out. that year, term challenged lot is, of manufacturing now trade a we environment, recessionary is I destocking have Well, think, obviously, lot right world in certainly recessionary But about we We're whether out. a dynamic in and the not a is do guidance finish quantitative back we war environment position. in in the I it's tailwinds XXXX very know at There's What going I mild versus itself still headwinds going just a said in seems be entering. around a

product I innovation. Tetrashield So, can portfolio and continuing And coating million growth a of and on a the with closes high-purity beverage lot we're on control. for even in $XXX growing EVs, good and is it's the things, focused in side tremendous what in growth tailwinds cetera. success and multifunctional revenue our semiconductor new the we're volume growth, whether of got of layers a business our there the over really cans. We've films paint lot as in we're position think we the seeing protection environment, sustainable having food et in we seeing solvents, items, Really expand of

innovative year, meaningful So outages, outages planned growth I year of going. and that obviously that comes a And unplanned out tailwind lack well. less there's think of a of helps do this had the we then lot next as

So, we right billion you had that's spread half right? still when one through the of place component, XXXX some most pricing had we've what So last in caught compression about been spread XXXX. it, improvement, about of is the important that in but $X.X equally inflation component. years, back in think of specialties the and An had we in you in two

million we're that $XXX So year. we view we a this when going to inflation have started year, of had this

done of place through improvement the rest the on We gave you of in have significant of have what we kept plan of $XXX the specialties. million that going year, value a another didn't a in $X.X of while half of of $XXX billion. Chemical the we it's the here, a pace strength done first XXXX. with million much the didn't spread pricing keep the Intermediates spreads deliver of the to all with a and good the greater to our we view recover inflation. And job But fourth than in well When We pricing of were And so in teams to sort inflation phenomenally take has quarter total from keeping of headwind. year. propositions, our course, having back the of specialties up we sort the of that aiming pace, get half of

greater in levels, And to will getting So as there's now, opportunity because as material tailwind chaos before us. high fall and going it year, spread and to all we're committed front with started. have next of discipline to opportunity to in our that be very back what inflation as this continue XXXX are margins much raw in that the we costs strong could still pricing, is being is inflation that's how distribution

pretty upside. that's think a I significant So

significant equally think real change in I a business. an Fibers upside, the is

to will a already you've And this year. succeeded lot in a And you, significant told be that costs recognition, and of recovered this as allow business with to us those covered locking to in and already goes. relative to it's and pushed and a this down improve year, was a our us operating to in XXXX seen faced a customers us of recovery significantly. a them. that And our portion sustainable we've inflation with far As significantly that increasing price only we've costs XXXX lot have our needed of portion our but Fibers reliable for supplier year of pretty increases we there already customers earnings prices that's as the margins inflation with be contracts the in

In our about we've we Chemical normalization believe fact, of what said remarks it Intermediates. offset prepared that much would so so the in

a in discussed improvement that's cash-driven then back So just $XXX business. we of earnings got years much profitable, we significant will million into sit be more cost that reductions. And and where sustainable, more many more business us as taking

headwinds of interest currency a spend So that have – expense. lot offset so and tailwinds and and costs those pension with that we gross

think to greater in how be I not net-net mild So I'm year recession than much. but a will this quantify about

David Begleiter

Thank you. helpful. Very

Operator

Thank you.

go comes Jeff JPMorgan Our from ahead. next from Chase. question Zekauskas Please

open. Your line now is

Jeff Zekauskas

you do material them, the to agreement much. buy of do very it your How financial terms Pepsi? you? or from how price Thanks they with the What's

Mark Costa

Thanks Jeff.

this both we investors with What strategy case view don't discuss with this for advantage. an economy the about align agreements can terms with past. contracting sort is excited very part the is competitive specific our collaboration in the and brands Pepsi the of really in this most they I of in that contract meet our recycling from see recycling you our that we're this point with value of view And solving commitment So the circular in And world one Pepsi. we is doing strategy. demonstrates economically in the which that plastic mechanical view when we have circular we've contract these what an we approach really tell terms of crisis most the platform successful any And demonstrate we waste in significant environmental essential contracting also it did we're an in particular, commitment, a industry. contract with and as molecular of These the discussed that customers. viable

product this load will structured and relative to third plant. a marketplace. contracts principles So stability have types contract sold and case when it's of on how about these the you this commit think goes strategy long-term have to for behind them we the margin contracts, what in the And is in in to these will this sufficient a that base us be are to for

see this. flow to we on cash clear a So necessary return appropriate on provide the investment can vision of

And who really a in. back of it's there's to that situation find we excited. would companies lot I are exciting out a So question say Vince's there ourselves

circular an point on we really for we this products. partner well to have to a that marketplace over Plastic XXXX have essential the as specialty pathway mechanical brand our economy there recyclers. brands. if we Europe back SSOs up carbon-efficient hard-to-recycle when out of We lower by that be moving the solving already alternative part truly to don't that's many aluminum applications grade product minimal importantly, strong going that food we And plant. going this carbon significant that we sure most have impact in as for to And there in. a in the plastic impact as sort proof wide at is to going in work climate, can We're and products. of contract, is well to problem it's negatively spring range with It's an a as going that has specialty of to move to in material The do a think for in make materials there this materials. communities And footprint, a both to far next PET. we're of sure a need we first very applications. that start for be then incredibly year to I engagement the make other have on starting we on get operate a we just huge frankly use these if other don't isn't in we're glass And

of this the Pepsi an working is we think big economy anchor great a feel we as us circular about part with for client. So and

Jeff Zekauskas

Okay. look your with are your that my propylene closure? closing in follow-up, And to smaller –propane/propylene you it money year can of the during the now doesn't you are taking quarters? time? people going relative to dynamic crackers propylene for And Eastman like discuss or with at you year then what one to Chemical can affected this what's in in or is doing permanently, particular Intermediates, on How spreads previous point propane make last relative

Willie McLain

Okay. think the Willie. the answer our part question I'll as first we this Jeff, operations. about of is

that earlier, seeing in the highlighted QX see and we've in and we're seen -- the seen in of -- the late materials, working we've we've concert expect with QX. amount here this year we that through given that capital inflation we're as So that raw destocking highlighted in demand the looking one and we at have

and that ensure front through cost supply inventories So and move our so XXXX that through this raw Longview energy it chain also operation as year our that back bring working material site, one year of at we the and in turnaround to the stream capital we're keep to get we're we in from Texas both crackers both we're opportunity in some that down our of our taking olefin for in that better a of positioned the planned that and an from an higher line standpoint. and remainder

about see what operations. optimize our highlight continuing also economic well That is to as current in think we quite propylene play We've off propylene. margins, this refinery-grade again, again, environment. as And to I have is second part And derivatives propylene first we propylene the would As continue some we and investment made the the strongly our in strong had is and Intermediates the cash we half. expected, Chemical margins the to delivering are half for a in still those continued very normalizing of company. perform the while is the

Mark Costa

I'd Jeff add job teams commercial side of pricing that Yeah. our the doing on discipline. also an just are excellent

that are right? through sell those So quarter. those cost some the and sequentially will we in flat transition customer there prices propylene, There see But coming be destocking to tied quarter. you'll derivatives. able is off We don't starting to contracts fourth were prices is certainly not anyway. to who QX because pricing we down -- hold our they're propylene that's contracts of sell to incredibly And times prices chasing the pass-through like or this important so sort these prices of demand of frankly economic view versus in come third discipline

in we're long of as to value as and trade-off really primary and managing from on to So waiting between we're where earnings we cash can. demand price settles an a where view, point see a holding and market volume

Jeff Zekauskas

much. Thanks so Great. Okay.

Operator

Fischer Goldman comes from question go next Our Please Sachs. Duffy from ahead.

is now open. line Your

Duffy Fischer

Good morning. Yes.

quarter budget your at you build operating what don't you sales you are look with down you the fourth expected you'll did your planned? enough the hit or think bring look what that throughout planned for will inventory, numbers the inventory when rates First if your at are, have what do quarter rates question and operating you fourth Mark,

Willie McLain

demand take that. expecting we've taking -- we the is and down point, Duffy, into is is quantities top what here a within and sequential adjusting decline from order expectation with Obviously, streams, for but also our on of The our we're managing volume an highlighted portfolio. guidance. utilization expecting looking on and across this our our rates XX% and we've is somewhere in rates revenue we're to steps are not outlined. baked that in we're our numbers. that, but from At I impact between operating basically what as inventory only olefin and We're Willie, that highlight the X% P&L see the enterprise pattern the we this our that in would we're October line

Mark Costa

on material proposition. when see decision is for and inflation in sort as run here raw quarter Yeah. next very trying for But and going certainly that cash to marketplace the a to as comes even cash and And plants company ourselves coming year value any of We quarter for that flowing we drive we priority all first already us and to that of already year we're an the the that through as next forward taking do position our materials in part well; obviously in well trends that in raw position made we our purchasing; in important better cash focused January. fourth are we'll necessary how generating off believe lower-cost to and of now well how the see that and incredibly be capital in working with positions that manage. the the actions we it it's our challenging we're to

Duffy Fischer

to port time? As that's what's half to doing Coast, outside year, we routes you Okay. headwind maybe is better the you have of other resolution again to found a solutions you've ports getting get something for Thanks. over be of out but the hopefully continue to or of get you -- first shipping the And themselves that ports? alternate do just then to trucking into guys, next the with the or Have the going had expensive rail issues East that? ones issues, more

Mark Costa

in of ports a better. with economies, those has demand lot lowered well themselves itself. the other we the in ports were of containers as the what US, all, in getting of in reduction And out First occurring amount trade on shipping are the as of

are quarter we constraints and in next fourth year. a logistic not don't it factor expect major the the So

as a next to for to was use sure expect reasons, as our customers. to different we cost had we customers honored commitments supplied, the tight our relative tailwind distribution of we fact, to year lot a two for modes challenges In of see in we it expensive all demand with significant this make year and transportation us keeping one

And modes higher rates year so but us passed products of And those were we're up a and down. a not to next some to pricing, position course, of some of in going is pick distribution cheaper then, view. on cost use we transport are from which something a of point which coming in how we mode

it see like can You and on costs dramatic routes China container in major between the here. drop

logistics do really significant think a very this year our and high a year modes our was couldn't and that demand constraint volume we a serve as environment. distribution to goes and even this limitations rates there, meaningful on we tailwind softer So to next though from optimize we operations

Duffy Fischer

guys. you Thank Great.

Operator

you. Thank

Please Mitsch comes question ahead. Research. next from Fermium from Frank Our go

Your now line is open.

Frank Mitsch

Hey, good folks. morning

that step business? And expansions be you Are perhaps could such XXXX terms we're why would come want signed to because that going to for in I One us this back the also the levels. other a change fibers we you're in to impressive the indicating profit see prepared that that next of thing, to growth the remarks, drive you seeing it's it more in might year. investment surprising able color XXXX, to for capacity helpful. for already up seems levels said much any bring And back contracts give sustainable that of

Mark Costa

Yeah.

So intending we're to add tow capacity. be not to clear

X% down tow When So view declining look at thought X% let's reliable important market and situation just make declining market you a we and equally to sustainable we're being isn't year-over-year be the as about to because supplier. clear the now is just phenomenally a flat growing about to talked market margin we people fast. that. much the changed had sure levels the as to getting in heat-not-burn it's of partly X%, When it's overall

brands the these and a tow. So they had companies heat-not-burn like other still successful Philip very bit use and Morris of products, quite

hadn't offset the in And included products. the decline so it would thinking that how traditional tow

you've I put much stable expected. think than what you got all more when So people market a it situation together, end

it's Second strong a Eastman been product. and this growth half forest certified is is and the made -- interest recycled sustainably we certified you pulp being and in unique product from our now has that's to see continue wood life. When on think just other And to textile are certified beginning from proposition the seeing value the biodegrade about plastic, ocean a the textiles great engagement up of just marketplace proposition life in strong on for concerns brand create in we're fantastic to that's and ending value very microfibers to half about that.

So in offsetting than that's the see. more that tow that you've got we growth in decline

to making is combine supply assets of tow then repurposed you our textiles. those our with actually So two because tight. assets are facts And done less being available, what some have we

some marketplace. Ukraine several optimized their whether supply in companies out less existed the it's Other or now because than in Mexico capacity of war Russia, you've the took capacity got that ago. So have of years

want very right meet level better to case really to we at need to their customers for a And than the a be to be our to conversation, now. that them reliable we're that needs. in going where make highly supplier margins So they're sure at

So we're to for get margins add next increases this able year on to get increases appropriate price price this more meaningful business. back to pretty us and year

And so it's...

Frank Mitsch

Well, like they business. tow say, there's no business

Mark Costa

Yeah.

the wanted which thing to contracts in adjust for have cost, variable provisions So past. in mention is include didn't I just that, we changes also one the to

too going little more a them how predictable makes to that they're So perform. bit on

Frank Mitsch

Europe. very assets have got to over an U.S. in the But helpful skews you. asset you, And environment of Got lot that I have than also a this wanted are about world. ask wondering in assets companies footprint more towards part you rationalizing to long-term the still Europe. I'm capacity And starting some your of what in on part We're that the thoughts of of to see the that your in talk world. viability other about over it's

Mark Costa

So, comes volume in from for a that's States production view first of when advantage an is of right? point our to Eastman, the energy about So on a us competitive XX% it significant United of are U.S. cost sell to China, to And you specialties. in the that have outside our remember Europe basis and of what in particular revenue XX% markets. other we is most relative And

When we is strong we Obviously moment. long-term, going is I very are adhesives in sold position So assets position. it a to we energy-intensive our But Europe, lot be to at and and than is strong helping Europe in the business think used after Europe. comes that assets how base the our energy a not advantage. in markets tires in it cost currency global significant asset smaller which to competitive be a serve has

Interlayers left our what's not are we small intensive. electricity Performance energy a with plant which driven more and So plants Films and now, have that

Our our most Belgium. facility asset in Amines energy-intensive is

the XX% that's high costs, AFP comes impacted based it to most is by when for in Europe. segment is segment energy of production that about where So us their as

And seeing pretty a energy so significant they're headwind.

get in we have costs we them shut feel a so are about winter. probably a $XX just you If the million natural the were we year segment. sort to especially headwind where quarter are none very And high. plan for a it's were facing at these we'll where place just feel in ago, gas that in But they're look assets being a the fourth because to position relative basis of that Belgium that good concerned that we through year-over-year in of economically on supply they need the a

has don't top place, So get supply of in make of viability rationed. working the don't impact we it lot a so economic teams got have assets. agreements a on we everything sure to around from a concern And the of

Frank Mitsch

you Thank you. much. so Got

Mark Costa

Yeah.

Operator

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

now is open. Your line

Matthew DeYoe

Good morning everyone.

have some you does it are of how buyback? make as well about commitment shift your morning with with euro-denominated that the USD this I you are the all kind guess Does sense implications debt this this? interest And out believe to expense term-loan? debt? year's approaching. the to take I next thinking maturities what for So And

Willie McLain

manage next that. looking we've €XXX of I got would is how I -- coming is team will in million we due treasury What roughly May point, €XXX highlight Okay. proactively at a to year. would say your million

us in early expect probably to finish some QX. QX put here off can place in You things and things in

roughly that headwind a to basis we've seen based we the now. compared million to on that rates a move see As year-over-year call million $XX it's $XX probably rates it on

I $X and As we the what that And we as flow cash on $XXX million outlined as we're our with this higher the think flow also with outlined share for also committed normalized potentially increase operating think of we million about $XXX and cash earnings available environment flow see to ability into to operating basis. still XXXX to look cash working the capital in a buyback, year. an we being cash about cash billion Mark strategic

our that believe So, $X you growth well operating billion bolt-on got above absent in flow. us dividend or puts as with of we're in to to our billion strategy at that share repurchases cash for strategic organic that And XXXX. cash back less plus that and $X.X XXXX as

Matthew DeYoe

in locked facility Willie. Thanks or now And guess is or Interzero contracted of your percent France following what feedstock I with secured? agreement the

Mark Costa

contract Interzero and We've XX,XXX building XXX,XXX-ton two worth we're phases in plant. said tons the about

making. that it's on plants where plastic about timeframe there's you huge So, what crisis. can have amount are would well grade. what and progress plant. energy coming the cannot to you but textile mechanical waste about for have that be easily is food a these a carpet solve they footprint. It's can good as recycled food percent when low under the limitations there waste mechanically start back I'm do of other to great to mechanical pretty in say happen. that There's back is the back about waste viewpoint in and I close out not I'm and the feel a is for importantly, get mechanically recyclers grade. step, we it's XXXX-XXXX recycling fact to They need these when as a into And to should in of real recycling take packaging vital out when and waste that that start-up these now Mechanical and what to we're what Unfortunately, talking especially that And most about the locking these agreements together. that's with remarkable collaborate we going we we're commitments. need applications getting huge most think discussion excited conversations would contracts very a good right us

our polymer really that bring circular they to after back become life viability and we and issues high-value question partnership it a over take we an through can to because see polymer time with performance degrades And create degraded a the economy and heat really some there's packaging in so quality of has cycles. facility. sort recycling essential that sort long-term Also several And of market that. mechanical

recycling And the so carbon little have have lower to process. allows much allows partnership a long-term life how infinite it future really it's plastic at can than be current footprint to a a recycled in an mechanical companies that

they the a the to year and before announcements bring of way see material system that carbon-efficient sees other end couple requires Interzero in -- the the collaboration is acknowledgment you'll really environment. of -- that a hopefully So, see most the keep in that use impact an doesn't

Matthew DeYoe

Understood. Thank you.

Operator

Please comes from question KeyBanc next ahead, line go Aleksey is Yefremov Markets. Our your Capital open. now from

Aleksey Yefremov

ground? everyone. third what Good Pepsi planning covered agreement? of FID? for you to you so share are break morning enough Could And when facility you make is to by the this Thanks. the methanolysis Is if discuss

Mark Costa

to So, we're not volume. going the disclose

US. engineering feel contract could needed I with before, in In this As forward the construct sort what and move this case, economics to we was we you said to starting to in milestone discuss the can confidence of our plant the we achieve work in to the key specific the tell don't in commitment this customers. I have is planning terms

the of in of length the confidence give forward moving and plant. terms, the contract, construction aggressively both to the So, the us contract third this size of start the contract

where would about So, also this other we're are I that's partnership. to needed And and this of interested there's capacity. very we excited be lot a in customers who that note

sort So, that customer be now of position get got accelerating additional announcements. you load those some we've the base to we'll set conversations

Aleksey Yefremov

potential it materials change recycled conditions? like so that market in as customers of virgin with does staying and looks the your Thanks also are feedstock and your the basically any prices plastics mechanical for recycling discussions with feedstock Mark with way and falling suppliers current for recycling, potential in many cases

Mark Costa

consumer the think significantly. to and steady There's anything with packaging obviously going supply more changing don't to ebbs I industry durables and industry. which flows far it's compared Yes. a is demand in be

a and sort coming about. They those So, build about all But what my It's commitments. to our when what just more is what I it. especially how in also not the like XXXX that's right, they about it how of the upgrade volatility in That's think from rPET markets these roadway they're lot XXXX XXXX about But revenue about had the I customers XXXX discussions economic nice then right? they is, chaos virgin trade-offs for are to not platform it And which hitting composition in cheaper for from in demand of comes it's brands, a prices in is can't our end inflation think to trends need short hit to our point stable a term we've of they're short-term buying in make Europe future commitments. portfolio. the I'm much of on mandate view now a a of not to how back do a to the improves prices they by money, legislation. the and of going because -- It's but going at little off what save that see if extreme government getting see in commitments we don't choice distracted a their today I'm any of right? it companies hoping looking in not you're I versus circular

you solving hit in some content coming targets recycling and recycling to paying it bad up solving significant for your if starting and look not Europe real their tax a the in targets. So, you're by pretty a pay short don't taxes that's brands of

So, very the solve reasons stay that's to that shows in structural enough industries, material capable recycling going of to how is not have committed value sort infrastructure got Mechanical they're to to proposition recycled our problem. they Europe providing up. where you've of remotely this packaging

Aleksey Yefremov

Mark. Thanks

Operator

question next comes from go Citi. P.J. Juvekar from ahead. Please The

open. now is line Your

P.J. Juvekar

as question to Mark, a I another question it -- inventories cash have flows. on relates

XX%. down Your than more cash is flow operation from

from million hit the $XXX hit. capital being You pointed out working

So, So days question. up? where terms actual first your I my inventories of guess that can cost you my that is level going is inventories where And this describe do of that's how question from you materials? of -- got and for is to raw go? from of how when much And up much think going will in

Willie McLain

turnarounds the and as into the highlighted would as QX Thanks highlight both went P.J. we QX. of here for second half we the had question. year, large we've some I What in

going half there entire material roughly the through point QX of that quantities expecting half building raw would highlight material the we raw inflation. We and down back was at So, quantity. by and I that year-end energy were brought energy into inventories probably and second those effectively we'll half. is inflation be increase

year-end. inline DQO/DIO the our with numbers bringing back prior So,

Mark Costa

it in you about things of I serving mean first can eight are we as months, August. to trying think through fast make the we market if as most ship demand, really

outage pretty dramatically just markets. was served. constraint that in it or But to constrained getting interlayers great. our It demand availability-related destocking. market a shifted raw this through related ability quarter and supply obviously logistics But has a the material was Some of and that September in was all in production

P.J. Juvekar

comments. in And you. prepared Thank discussion appreciate your I of your recession a mild

plasticizers You of mentioned have decline. cyclical and up kind Amines in past. acetic if plasticizers and amines hold the olefins anhydride been to even

they'll So recession why a Thank up hold you do mild in here? think you.

Mark Costa

sure. Yes,

all next year, phenomenally to attractive a a but to business year to is ag, an obviously CI, expect you and functional growth we in in So of of almost this When cost so of year amines. that the business ag and demand, are margins and year -- one that tied at has contracts. most look very the things tied pass-through is that's, have important good because our stable good having evolution which been in portfolio is

not that driving going didn't in down have market last tightness CPTs. market because they're years, spreads and two have So looseness business the driving spreads up to it's

Acetic a acetyls just So acetyls, anhydride, When business in chemical great got stable like and actually quite business other it business. relative comes care you've to very its to a is that's just margin. and the really AFP. attractive,

shutdowns. basis. run off year this But but of bit well. and not markets decrease It's rates big acetyl So then, margin had with production margins We than happens certainly in didn't the XXXX there, and margins And in volume. some are impacted going on because it's at in applications higher margins the those a them to we soften. significant pharma volume what a as a have in had the a stable, offset has end planned come have market again, it just much like be on when restraints production nature more more will significant by they fly-up XXXX, will food their outage

in right? XX% the of you other plasticizers when margins, case DOTP, half as is of as EBITDA the to the second the So quarter. when the it cash cost benzoic as And in see part, you volatility bulk weren't the comes that reliable. as from three sort to ethylene without derivatives. most operations, reduced year. derivative And to of products incredibly the half. back ethylene, ethylene planned production. upside we that And again, are that stable you of the the and bulk historically low. relatively as are But said, margins shutdowns the and in using already minimize we're the one plasticizers, stable sort and to a So the place specialty better usually of sort and do can at have are RGP opposed very that segment, of much derivatives the other that's the as we year in those this Willie look together, go acetyls marketplace put all great math We've possible the volume sort And of in confident, our have which sort a general olefin significant of then can be well

XXXX headwind a XXXX to in XXXX, -- meaningful So, any sequential to looking in at year not next that's way.

coming now us, very are good in you're when derivatives businesses The earnings large extent. is half -- bulk very that these stable. is But think it's headwind ethylene So to behind to pricing little down a a about that, the olefin off. you

normalized in us significant can it you decline of allows it's $XXX about. amount at we if million talked have the that that the to be So olefin sort still of rate derivatives, even

of, that. of So that's sort sort look we all through how

portfolio, And in that's be earnings total offset drive in a it to by And economic mild allows the this business. will recession actually so which performance fibers feel our great specialties so growth. we for

P.J. Juvekar

Great. Thanks the color. for

Operator

Thank you.

Our next from go question Please comes Laurence. Jefferies. ahead, from Laurence Alexander

now is open. line Your

Laurence Alexander

Good morning..

the I guess Europe, sort the to Are out So the you on wanted discussion the initiatives most? flesh particularly to initiative-driven slowdown has been seeing in just volume where on pricing, expansions. price spread in I and any change response in of the of elasticity demand price going

Mark Costa

get you Frankly, specific to losing have you small. to demand the I destruction what and sort have end is of destocking marketplace, demand the our market quite demand examine our is price not clear every of competitors component or to destroying the think it's to question. the on any seeing Well, at product in because get of the really in customer's price shelf, cost when We're level. about consumer what where then structure the you whether almost pricing, of may primary driven share is pricing, what be by

around share keeping pricing commodities of share as pricing close we're So, our loss it any and a the to not on really they that loss, go we're driver we're that. not shelf comes where seeing consumers. a When very the on the of comes it on any matter, for to driving when especially eye

hard little see when a through to it's you've destocking got that going Now, on.

that down or quarters of It to right never share? we But a shifting few So it sort just see can is inventory figure all takes pulling quite, what know out. you then based destocking. now, retailers are -- at in our and what what have with seeing aligns we in demand on end is, we're market the the the market what's information happening drop doing

wait we price we cover to $X.X us holding very market being feel is right have And year. clarity of this disciplined value allowed prices very strategy. that we inflation on while to the on firm increase So strong billion and propositions for that

to our more relative So year appropriate we back costs distribution can prices next and to decline hold improve material we're spreads confident to how our levels. raw

about the just raw year costs. next happening So, declines feeling we're that. same into distribution to already seeing the and the need also good material on continue we're We

You'll notice, where on think less I'm not certain tailwind, that's saying a goes. energy lot a because as energy I

tailwind assuming next world. dynamics a around And with so the on in year all going we're the energy not

Laurence Alexander

Okay. just was or ago, be? facilities their the to And the up going like on of renewable And the characterize resilient? you that brought realize the premium increasing or how it If Premium like compress. -- then would right, a bring aim Green that recycled of how can you Premium Green CPG that larger around debates sound one years as doesn't happening. is companies tight supply product that's to the anything couple as is Is --

Mark Costa

Yes.

to footprint. don't first, to plastic thought Green compress we've the decade, because Premium next So time over waste was needed the lower at over least think I at the solve ever not infrastructure supply the going and crisis a carbon

making climate time. to macroeconomics lot add we're simple beyond It's right? better. what So solve for and both a that, significantly So, quite to demand going we some can waste just and supply be than greater others is

future what of here the uniquely sort Sure. people lot it is value when point, that's true it polymer of recycled the for out a possible in the way some that product of exceeding add content period starts marketplace. capacity? proposition specialty for time of So, to in that At some a But brings demand. is in

Laurence Alexander

Thank you.

Operator

ahead. Kevin next Please Our question VRP. from from McCarthy comes go

now is open. line Your

Kevin McCarthy

discuss of out next? any everyone. XXXX? though projects that Are $XXX environment, that year morning, timing there is you it Good year. for whereby took profile issue of capital this a in into the more million looks Would shift this this plan you and as rethinking It would your Yes. budget you're for or

Willie McLain

Thanks Kevin. question. morning, for the Good

evaluated about capital portfolio actions as cash and fronts. taken progression, of we've flow both So, our we've think obviously, you on

timing this So both year. earlier as highlighted there's we've

are of were XXXX. out those of some a falling resulting supply chain result in now into pushed as cash getting Some projects issues. Those flows

circular continue and our time two, core Additionally, to plants specialties; we portfolio. again, today talking our we focused ensure use We're spent that we've grow one, that; to and maintain I'll that as expectation. well; our and about in three, then the that reduced we safety XXXX to platform. our And the bridge investing

or a say million make could progress $XXX scenario, is of be projects. it a three recession all million are higher our of $XXX as currently would I we million in much as range where what as $XXX or at we So, mild on

US completing highlighted, Mark quarter that facility the our our complete that we'll of Kingsport the end the at as So methanolysis we're confident that mechanically capital. cash -- significant the third we're going to portion will innovation-driven be circular of project of flow strategic level the France here and on growth in first our here make we fact that increase as and both generate that platform. to project the and progress cash allocating will in our And and be model the a of

Mark Costa

for yourself the of staying other positioning how winner. And winning long-term economic going create the value to key side focused this the correction like to an making at on to times and is you're sure you're be

we're some So demand adjust we losing not timing costs economy to construction relative necessary. of make cheaper. will projects when frankly the the softening sight that. We may the expect And of

of costs. actually will us in help of it CapEx So element some inflationary this out

Kevin McCarthy

attached then to P&L to a of issue? referenced And helpful. inject, What that? Willie headwind $XXX in is or That's million. terms slide strictly you have And any Okay. and for you secondly it pension it of may on XX, what cash driving a there is is OPEB

Willie McLain

requirements first no expect. plans me pension our start we there's let well-funded. So, would Two, are that cash with near-term

here Our key rates day, up. large of The gone about the factors US end interest pension rates and plans are the really At have still today roughly the discount XXX%-plus are funded. accounting.

a as have higher in interest a of we'll mark-to-market. our at in the So That gain comes XXXX. end back year cost in the

this performance ultimately will in result asset Additionally lower with asset. investment the year base deteriorated. on return But has that

and from volatility that are a So we're to issues. in would attribute mark-to-market funding just both cash a and accounting XXXX. standpoint here interest no in and seeing I assets there bottom-line this from the is

Kevin McCarthy

very much. you Thank Got it.

Greg Riddle

Let one this last please. question, the take

Operator

you. Thank

John question Suisse. final comes go today Credit Please ahead. Roberts Our from from

is Your open. now line

John Roberts

heard you. you Europe in quick going you're is just you've yet. going I up. plastic here. XXXX waste? ones over talking is are pay the for Interzero costs guidance think about in Two get actually to And got higher pension waste secondly, going your I've then something that pension since Thank anyone value costs in XXXX fuel to of don't One burning

maybe that's So tell could how you us coming about.

Mark Costa

are economics. things the we're very price that park So the going that going material, our price to to some whole benches there's things supports not Interzero, is it paying modestly go And for we're down-cycled higher spectrum a to that attractive to from applications. a waste disclose but

a so portfolio And on comes three projects EBITDA it's of out. $XXX on these sort million all managing very average these of make the track the we're sure up economics delivering of And they're running. that to much when platforms seeing with across and price

as set. on And good as then that I'll feel pricing we're So the the price where let... well pension about feedstock getting is

Greg Riddle

John, last the pension. was Yes, I thought on the question

been has So answered. it

John Roberts

Thank it. Got you.

Greg Riddle

Go ahead, Jake.

Jake LaRoe

Q&A End Yes. of

Jake LaRoe

and day. time of you us morning. for our for much this concludes in rest Have This great for Okay. Eastman. very your joining Thank a your your call and interest

Operator

your This Thank concludes participation. today's for call. you

disconnect. may You now

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