Earnings call transcript Q2 2023

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Operator

Good day everyone and welcome to the Second Quarter 2023 Eastman Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com.

I'll now turn the call over to Mr. Greg Riddle of Eastman Investor Relations. sir. ahead, go Please

Greg Riddle

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

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

our in we news SEC of website, the our Investors market filing, XXXX the and and quarter www.aspen.com. posted section after financial second Yesterday related X-K slides closed, results release prepared remarks our

begin, I'll items. cover we Before two

plans our expectations. hear certain First, or forward-looking could Actual during this you results concerning events presentation, will statements and differ materially.

and expectations XX-Q XXXX. related to news XX-K Form or factors to quarter in in with Form prepared Certain full Exchange detailed for this in second filed Securities our during quarter future the XXXX be Commission, results are financial including and and will and for the slides, filings remarks XXXX the be filed year preceding call, second our release, the

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

and night, remarks straight accompanying the our website on last As posted Q&A. we we slides go now will prepared into

question. Elliot, first let's please, start with our

Operator

Thank you. today first Our comes question from [Operator UBS. Instructions] Josh Spector with

is line Your open.

Josh Spector

earnings the talking of guess, of I you're just Yes, number adjustments cadence you in half. question. talk for first, XQ. I inventory was hi. about my a taking Thanks wondering if the about could impacting Obviously, here second

that for it's like, Thanks. here? that, the towards longer-term steady If beyond earnings more looks implies thinking CAGR what maybe or talk of you could and XQ whether what you're state

Mark Costa

for Good the morning Josh and thanks question.

where in embedded go back question we how lot into indicates that half of a the year. next the year and there's about So, that

second principally thought half in an going So, the year, with better we demand was back the all, by which of on being the destocking April, first I'd really start of in obviously, -- complete quarter. be the assumption based was of to end

and different point of think the getting I everyone suggest has that primary haven't Obviously, demand heard come perspective, level, else I sector don't in and we worse that. in not It's our view much. while the at is anyone that, to else changing a

We lot are impact there's expecting has to really end a the year. which go destocking more in the that to continues the in that our markets, on outlook half of been back some

quarter. year have next So, some automotive, areas, example, it's for whether year, in growth or this this we solid

there's to the the expect back would solid continue to XXXX, demand. I it to about of to through year. year. this We pent-up relative that And half a be you next expect year to be And so when continue much think

that good story market, very in same shape. So aviation,

end off of you companies all look of goods lot a volume demand way that if there material being recognizing they're X% of X%, accepting X%, that the price. much wouldn't has probably in stable at out sort the tailwinds, and consumer fully holding been have You they sort where and markets range. When very they with expand price to their that margins raw gain disciplined reduce that fast-moving

like specialties. disciplined, frankly, So, in maintaining, we're our

that, to too. addition in cash managing But they're

expect quarter, demand lessening we go additional and XX% on as in the fortunately, X% water that destocking sort first on an destocking top fourth stable of like much packaging, destocking that saw we personal of treatment. quarter, those So, But kind less to of the care, quarter. into markets in second

-- you would just stable consumer the with as continue in right actually, moving to deal markets discretionary other the look into take second and I it's direction like we feels half markets them. go also the would of When to course, that So, that XXXX. two at

additional destocking which in that couple also in was Advanced a segment. and medical packaging So, there's in some the extreme QX, negatives took of Materials sort

wasn't as carrying Demand And last from were year. safety that's a expected. they of they bunch stock improving --

predominantly really have the second they issues to so quarter. the started And destocking in in they also second but their addressed quarter, seem

to into the the go quarter by a to So, and expected half bit fourth. course that its better third that's as reduces as get year, certainly the run also have we of the through seems destocking back in

tailwind. think year, especially amount won't relative in improvement destocking again, that's that of had So, these all to a XXXX, about next when certain you a repeat markets

in a area building the of for of view, a point drive like impact had value consumer most is construction. profitability automotive huge demand bigger So, well, amount of discretionary as two the markets us like and the that sort on that durables

chain you destocking of market, extensive May to through the really gone it at most last they durable way got were the because the of of that's XX prices, any destocking over they sort then year that's back the the they last retailer buying think the they all look because needed months When Xx supply And to of -- of amount goes and when market. one ago. inventory could started of everything

fourth when was us only XX% to down quarter knocked underlying year, us XX%. the finally really of down market in the last bullet That hit about XX%,

a So, the even worse, lot worse destocking. first XX% quarter. Got of into

to the start And first quarter. in saw fortunately, XX% quarter then in we the Got second that the abate better quarter. versus destocking second

So, we there. saw momentum

that results the the see and because occurred. medical in packaging destocking You it just don't of

that and go into destocking continue as So to go half tailwind into lessen you the be of another it. year will the we back as

of maybe to & some half, first taken. help more more expect is been also There's Construction, home be then, And market of action doing builds. that's first sort Building course, some with one that still Demand the has year. because I'd destocking to this we And down. flat say, that is

forecast the when really that's it's to there's much need to for spectrum our the cash. So, sort with But actions combine a which inventory hoped things them to destocking. make lower each of of when add outlook hit the we demand volume it, of as had $X.X -- April, of take how we up of entirety but billion at you came earnings this on the going of less you in that is not sure reduction as down, look for predominance it's and our

So, year a have feed all you don't going destocking on, normal into seasonality look And got markets, hit this year. When next back some all huge for for almost, to that's highest those next recovery improve the mix right? right? of volume have been going that's which sort down help and year markets to a this of are then things. value you going us to you've better, our it's year into this So all assuming XXXX, coming demand outlook we're the

as these our structure. and in a bottom the the little drops if And fixed bit mix significantly, value of past we've pretty when line shown especially restocking, out the the to cost high markets recessions, with of costs comes taken of back we've there's

building So half which is momentum the it having year together, in better to comes a much all XXXX. second in

Josh Spector

Thanks. it ask If Okay. quickly just very could I then.

volumes in on baked-in the those your down the together? your What's second first XX% assumption half. So, were all things half, put

Mark Costa

a what relative is Is we've what the half? got as the second combined to saying for question forecast company that volume first is? that your half our You're specific

Josh Spector

XX% trying of get X%? down considering. assuming I'm the of quantum kind to XX%? a for just you're you are majority? what Yes, Down Down

Mark Costa

bit you year provide altogether, when in little think basically So, year, a than don't going down I are the half the bit number quantitative we're volumes be the it. a the to as put half to think of -- to just of but we going less look at, all back together. I it's the first it's it a

-- a The earnings decline real half, view, back the the first sequential of the from right? year management, point is inventory entirety of the in headwinds half half, is the second of our

aligns sort has additional now of where sort headwind sort million $XX our moved. outlook with that of So, of earnings

volumes up view. some stability the sort you relatively of volume point when So, Fibers a So, number and a in AM, CI, in right? AFP, downs, put down in from and are stability some of flat sequential in stable ups all

William McLain

outlined, would the Mark should our say mix durables Josh, favorable, markets be the also as more in But half. back I recovering has with

Greg Riddle

in which third quarter, mix more would comp the a bit is on basis, meaningful. add little When quarter a one the just seen fourth still you I year-over-year, less again, to first but different. if be point, you've year-over-year the get And decline than the what is volume half,

even you get so And still than half decline is was in less a it of in to the first mix volume point where that year. the

Josh Spector

Okay, understood. you. Thank

Operator

Vincent Our Andrews from Morgan next question comes with Stanley.

Your line open is

Vincent Andrews

to? customers have Thank volumetrically, on Materials in good might inventories morning. get when talk in they what's what basis you your and the about desire Advanced going on to want indicating where they back of a AFP, terms and things go-forward you and to where are In

is is now temporary to And time. understand manage business I they're for what's a their of terms whether just reset of -- long to going going just snaps right guess in structural just I'm how something versus is sort trying It's a it's that been on maybe back. going own on that what

has it's a to starting rates to is and it's chain So, reset. else supply whether feel happened, entire starting whatever like it's like or just interest feel -- the doing

medium just I'm intentions of in So, sort in to you holding telling terms what curious regards inventory? long-term your to their customers of are

Mark Costa

what's I'll stable they're But of my a demand since That's going different of right? it's these stability to trying by do keep it's answer And then long. underlying a great fine-tuning, what the try on Vincent. right? very was mean destocking, and lot on rather markets. market I question, more simple, So, and last it on, in end

generate perspectives safety on They and last they're XXXX to to adjust trying end and -- levels everyone built inventory XXXX, those year markets. different through stocks and cash

the may a care in you're they're these stable They stable. be markets if are very So, but bit, at medical little down world, the personal world, end.

supply entirety get the incredibly other those making to that to products of get to markets, there. some is we're of When end made things like destocking US. to that many going of is sort where markets. China, Europe chain or you back the come So, what's the durables, go on of long, and clearly In these

exactly out difficult that demand these more little markets. is markets, entire how more think, chain bit just Really everyone on is end much I difficult is there market understand to for through discretionary these in a is inventory judge. And where

March. So I'd And the realization the But bit about in was was better what of destocking economy. quarter. there's a what's a that cycles, nervous lot we've Got through January. a in is got crisis, couple right? the really there broader going in people then low of say fourth seen Demand on banking a

of went into level they a destocking demand a for do durables point to or quarter. a And destocking the little so probably less started in through then low And bit which less in was -- April, really lot second low year. the the

the assuming back to back half into with year, the think ones. of half our get especially in more customers time the is we in this maybe I happened better the customers bit as downstream everyone going June a was across markets, So, be frame sensitive what most

stabilize, Demand would they your more months, which XX to things in have getting course things in have going destocking to plans, collective not mode months. to would that's all they assumption its and to that they destocking of in who point, said all be played of June better. That after to is sort their built our is And happen. is everyone -- relative flat, that going after XX back now realized assumption

But just they'd worse. And a I to, worse for I they're it's make opposed and get level. are as it's worse, They're think, are -- things primary would growth expected don't it's in demand getting the important see that bit the things are it's little getting markets correcting sense? not things better. that. anyone the Vincent, of that Does because of at lack saying sort not getting assumed a

Vincent Andrews

so much. Thanks Yes.

Operator

Mitsch comes Fermium Frank question with Research. next Our from

Your line is open.

Frank Mitsch

first how go idea further where be actions, where in much inventory? drawing an just morning. yet, that hasn't good inventory quarter? of Q give expectations quarter you much us levels But through so are regarding forth, own you management inventory as what X.XX the the when the will your the down they so come And don't can discussion know we your to was you relative curious, these I'm to are. obviously, the are Hey, With second and out

William McLain

inventories Frank, are morning. Good so Willie. think I'll flat. as inventory call about it levels, it's from to QX, Yes, about we QX

we Mark So the would in chains the we the inventory expect half decline about level that think about to we have just and demands the million as $XXX outlined, of of year. back that the has supply

and that us getting to million we full And supply we've working to That's from place also on deliver our activated that essential already business roughly a confident $XXX a I'm basis. to have year teams in generating that chain execute capital plan flow. and that cash

Frank Mitsch

provide Thank any raw Thank you're you terms wondering of the in way there? you. was is that your your And of are businesses, I seeing what of and order material could you benefits can Terrific. sort what specialty you to benefits Mark, in you. if talk magnitude outlook some seeing

Mark Costa

Yes.

So, Frank. certainly material Advanced Materials, seeing we're I some think benefits, raw in meaningful pretty

last in upward now a remember of price that headwind dropped year, you VAM we have versus collapsed If a and and Interlace that's created a us significant there. part Those prices to our margins in prices the seen business. for spike PVOH last translated year, and had tremendous recover pretty significantly pretty for into tailwind that

a up of have not bunch Those outages has tailwind. as been There's industry. much been to been holding prices that PX year. of in a relative last

all explanations value, those trouble PX. plants New fuel Alternative having typical with starting up.

flow there, million well but us obviously spread good to a into that tailwind still in go of a fixed how margins that very segment I -- position back comes So, that as leverage. will the some we're of year. building think those through tailwind not that into next margin line challenges helping through bottom And is when -- in we cost the flows much and demand our for how $XXX year as over and mix with of the

got again, we is well. raw really that especially business cost tailwinds But in significant we've pass-through of business. a the contracts, lot as improvement good spread AFP, means not have In the in as because material

stable be by year nature the they're very stable had those of also to contracts. we last That going this year. means So, margins

But think olefin-related also and coming of you ammonia, when are products good those about type the relatively some going into spreads ethane in specialty. methanol propane, the

well -- helping as So, full into overall, margin course, year as comes volume go we momentum next year will, better and there a basis, as with spreads better back year. as build on are of this

Frank Mitsch

much. so Thanks you. Got

Operator

Aleksey turn with KeyCorp. now to Yefremov We

open. Your line is

Aleksey Yefremov

and Thanks everyone. good morning

on discussed Can as you it there? or well? US that? is happening the just related conversions France. just is in France You What's of agreements in plant it plastics second lower demand markets? elaborate the your or to volatility MoUs to in price definitive to And Is related really uncertainty this in

Mark Costa

I -- broke just make want to a the understood you I to just Aleksey, want question. sure up little bit, I

market conditions? pace the You're Was what's contracting the with asking happening that of the question? in given France current

Aleksey Yefremov

Apologies. was. it Yes,

there? elaborate conversions Could definitive talking You're what's about on to agreements. MoU just you going on

Mark Costa

sure. Yes,

and So, first desire products very commitment get of and to all, remains recycled strong. content the

just So, the but now our you for in got recycled of very where prepared saw packaging, you durables, for committed, the specialty content, look when and which in cosmetics, are very at we're world businesses global, across commitment, the customers XX% demand right from North as America our strong. not remains output, We've plant, the is potential in products Kingsport remarks.

to comes structures are kind sort it textile Pepsi or contract. that of When these take-or-pay of contracts for PET markets, the the like those long-term

of about number discussions a having with those companies great good and We are engagement contracts.

long current to would little conditions, very are the sort those market negotiate these. a down takes discussions it of I complicated a contracts. Pepsi, They're And bit. slowing Like say, time

market looking and RPET, VPET A material. So, which you're come are also off have it's purely significant where down the -- XX%. everything in in people of textiles market, into is water have is the and cheaper if or goes prices bottles at is just a macro, PET lot Demand less current that the right? RPET that downscaling to beverages whether sort else pretty of story demand of off way, those carpet

thing. temporary a just that's So,

targeting work. The recycling in where really doesn't is key brands these applications to these in mind within are mechanical contracts thing keep we

use technical to a of have actually performance to to in in if want content variety mechanical the is those So, recycling not the work. because requirements different applications, aspects, they're recycled chemical going they just going

that's key because win. And going going get to competitive that given there, I that's I'm to not out deep a we're definitely how expertise of our but into to us other a advantage think of for companies polyester part details relative

that the is of second is mechanically part in to recycled becoming content. clear get polymer XXX% The you some already degradation can't markets,

only lot going be XX% mechanical. that brands key requirements be have XXX% regulatory to some to in quality, XXXX, And they're while to able be applications targets set recycled for not may with do to a content. So maintain of

these content. will in feel require very And them get especially we to resolved, going to So, in going place. we're confident engagement contracts get are that Europe, recycled is high. regulatory have requirements, people and to The the

about number XXXX the there, XX% now double content look that does not of situation you that market only packages when put PET when sort the between and And you or can't be is right to on needs have at of the Mechanical now ability recycled capacity shelf. the recycled. XX.X% to industry

good year. like customers aiming working those to end So, feel a our contracts done have with productively in by position, we're we we're the and and really the of

Aleksey Yefremov

Mark. Thanks

Operator

Our next question Fargo. comes from Mike Sison with Wells

is open. line Your

Mike Sison

a guys. the trough to million. you morning still Advanced closer longer-term date EBIT hopefully, the between sustainable Do years you the of do was good that to pointed year, Hey you that's bridge of you maybe adjusted about for Not I of little couple sort had thinking EBIT. It this upside? levels? get gap $XXX segment And to how maybe these feels obviously, had the from like bit. Materials a there adjusted sort two think the ago,

Mark Costa

been destination pandemic to time Mike. crisis from yes, volatile And supply we think over pretty Obviously, business. chain years, for the Sure, it's this the still recession. few a that's a the last to

people can everything I happened just in from said constraint the COVID of how and this very high afford interest of the how when and prices to short-term live people life as And spend has created maximize their a in comes experiences a life and an impact to switch extremity at a bit afford what's costs, they're and to goods everyday earlier, afford can to it goods. hotels experiences else, on inflation, when trying

And that is a an consumer is one the most of example, they places bought lot during COVID. durables, as especially after discretionary

So on product. huge top of then demands below durables, in this it a and you've consumer got very are normal destocking anything amount of mix on way high-value

add if So, headwinds. build the out the inventory those content, underlying an year, into from next add some And on substantial that of we'll of you'll applications. new year recycled from and market momentum of as to in view. recovery volume market you coming back incremental half especially point utilization good the then stabilizes, us And back that value allowing see you top additional

it's said, we started, next million the for to Advanced just getting As in a year $XX adder Materials EPS segment.

that So is business, as XX obviously years, this the in fixed The leverage we've significantly be significant, helpful. demonstrated in right? going to cost last is

and This for win because digits so are product because X% growing just recycled the you're performance safety. typically because growing proposition markets many to further content underlying And that of world double applications better is product always we adding accelerate on value now of and us, curve.

a in new to business. half we're lot ramp of the up year that's win But launching new is, like for really launches, back right? things and when year now on of Even a top they of in start But going new we've this, lot won help the products. they'll problem continuing market just stabilize volume product destocking, applications. there's a of The next not waiting to

in that all value of from So, side. that better sort brings

our we're really finally recovering this has of couple it. to high. space. in trying But the up keep margins now last been inflation been the course, of then, And We've years, with

to you've better volume earnings. lever better you to So, recovery of on top of got margins this sort

is much that to XXXX, driving through go expect very you as we do. towards what So million $XXX XXXX,

Mike Sison

sort in look that's XXXX, would maybe quick will But volume growth low you long just they the if along customers' XXXX just case, event overall is occur? do you XXXX, And you just to I volume way here. restocking some if do think your single-digit and And is when growth which to follow-up replenish? of need in at And think not, possible or a plug you XXXX, restock? to they don't it. inventory, it need of when from for Got a kind know

Mark Costa

to Well, have first right? there's bad all assumption that way us managing the everyone think occur. what that much all, rest acting to the to But industry, in going how whole April under context. And now, pulling a limit is I think be the of year, for happened down, inventory group of to that destocking to retailers, the from and gone down from can it's

for a year, go And really there's this At but where it's year. empty, right? warehouses amount a it's demand like bad talking out especially markets, some of a in these time, point, of being pent-up about from durables, some we're been better because demand right? huge last long emptied level automotive,

on there's homes. demand year, and of plenty pent-up going about upside dynamics when of this production pent-up construction view. plenty you of a whole there demand still constraining think to what's and with point across of there's lot a building be So, the both There's the of and of demand both demand going corporation, from it,

the And that underlying destocking more if even goes all some that at underlying point, improve. volume recovery away, these levels So, than if you And that's are three doesn't the got two destocking demand. market times is right? demand huge, or

inventories it's what is see at It's to going And driving think environment. can your -- and I very taking people an around more everyone then that levels. they're to not in that taking, likely else below demand low go with the actions improving you -- they we're question inventory, than

be will amount restocking. there so And of some

we Now, you. our in back that half, just guide assumed to gave restocking has the be no clear,

That's year, headwind happens. eventually, destocking course as a XXXX run for you that so if and But got you next that look and have to don't at has So, upside. say I its you next get volume demand, much just to year. then of to a better serve of think can some picture than year -- get a little this just bit restocking levels to that that

Mike Sison

you. Thank

Operator

with from comes Deutsche question Bank. next Begleiter Our David

Your line is open.

David Begleiter

morning. on Mark, the update thanks for you, good Thank Kingsport.

do for cost project? do any forecast an up? And you of estimated Thank have project, Kingsport ramp year have the On losses you. you this the updated you as

William McLain

David. Thanks

be a the that are just neutral on I'd basis. operating costs year-over-year to highlight approximately going First,

as start-up a with think the well that's bridge that to this glycolysis market, higher preproduction the our as also as we're to you we're year, at cost technology and If expenses, using incurring the bridge. about seed

on within a So, million And of revenue to roughly on on our of EBITDA basis, EBITDA. accretive of preproduction $XX our costs we in that way other. absence think guidance basis, is year-over-year this year-over-year will growth and and the Advanced as the million I the about a the is actually outlined be corporate Materials, start-up in $XX

as where see So, getting the $XX we're it, roughly million. I that's

Also, if I $XXX think the project. $XXX for about our million at took started up roughly CapEx the this We we year that year, million. million to $XXX to

the think CapEx the in can You increases how year project managing the this for Kingsport of overall about combination and the that we're project. of our as

David Begleiter

apologize. itself total project meant ask company the that the cost to and capital I was what updated CapEx? I for

Greg Riddle

think don't capital project. the I Yes, for time the giving cost at we're Kingsport this

not this we're going So, to provide time, that at David.

David Begleiter

price contracts Understood. in year next have and increases tow, Mark, the And on embedded just them? do just, for fibers

Mark Costa

idea if year, price to reliable customers. gone in to we can this this have a your question. be from and They them these our to year. David, to don't embedded increases year to contracts the next reinvest considerably But have for level that's our up where is last profitability in prove continue of prices margins supplier business versus Obviously, a

past. to cost the which not of in have pricing type achieved put give and adjust had our in stability we've that these customers, our customers for in we us for formulas in contracts. for with energy also them We've And changes to

contracts of great our fully contracts. of contracted is those So, what customers XXXX. we've in our about place, next now our where these now we and to support multiyear achieved ability are And sort current XX% through profitability. Many about are improving feel in

we'll the number that Hopefully, to XX%. up have of by the end year,

So year, great flow very very company. last cash investments attractive focused it support its our tow side on provide from growth to performance on to the across the this improvement business stabilizing in and we're

this in also the down note continues we XX% market year business. do top Where, would a that to textiles, on even we're textile have growing of great in that. I business that

on is proposition winning we're of because So, of share being of a plastic. value lot versus very other It's based a market Naia beginning story materials and recycled great compelling. life the biocontent

bigger fully they and now fibers the into the are environment. forward and to up getting issue certified And up going do a in breaking our end importantly, fibers microplastics, And are ocean. is biodegrade which the when

And more concerned is so significant positive, the becoming as as about well. a that's that very world

great So, just a business. it's

David Begleiter

Thank much. very you

Operator

John next comes Credit Our question from Suisse. with Roberts

open. is line Your

John Roberts

Thank you.

second the are that? project, more On US going PET you on slowly

Mark Costa

more nothing focusing. right way, now, I doing is We're any in John. slowly significant mean what really we're

We you could the at several question, ask looking we're haven't site made really announcement, a Because across states. too. so that incentives

got are attractive, for We've that we three the site pick. continuing sites engineering work whichever all is very and the

get in And so place. those we're just trying to incentives

that can serve with project return get Pepsi that as to that million sure great three for that feel Kingsport with make the those our French significant customer forward value in owners, which partnership is projects. the our We $XXX we baseload we with a about moving the on in capital required great put together across and project, needs and are project of to sort a

John Roberts

materials sequentially stable, are of the of us all raw assuming quarter? third Just price the the frequency earnings the of the step down reset on fibers the then And in business, is remind versus on cost?

Mark Costa

The quarterly. contracts are

from So, environment. the is energy QX a little a a adjusting bit for just of QX step-down to lower prices

John Roberts

you. Thank

Operator

McCarthy with from Research Kevin Our next Vertical comes Partners. question

is open. line Your

Kevin McCarthy

sequentially be that Yes. the have you likely $XX down to to earnings or million up Good third versus Materials, Advanced whether your second morning. posted as Mark, a sense today quarter? are with in the to you quarter flat, do regard

the have first be The $XX half. inventory-related also you second a third reason hit I ask like the is than the reading million say the better looks prepared night, remarks it in quarter, but half last should you

seems it there. some countervailing there's So, trends like

would any helpful. comments on be the seasonal So, cadence

William McLain

the headwind highlighted rate on So, most we of $XX million QX. think be in Kevin, I utilization that the earlier will

result, a would as and similar be slightly expect I Advanced down it in So, to sequentially Materials.

Kevin McCarthy

Slightly down versus XQ, Willie?

William McLain

Correct.

Mark Costa

Yes, up. lack spread and pop improving where that there volume the QX to sequentially QX, course, will from of back of that

the of of QX of So, -- you in than really seasonality are AFP, inventory think much more most the half year AM can't so more or actions reduction happening back normal for the because either QX. around

the But continuing is momentum thing, actions XQ, you QX of customers margin we're the and XQ the in oddly living of about it, and just odd taking less QX, in and now? inventory because think inventory not right year right? our down also in volume are same They're when into through in improvement doing because more but our sort

Kevin McCarthy

it? it helpful. is odd, Yes, isn't That's very

ask wanted about A&FP. to Secondly, I

transfer fluid Can think into referenced second a project you and translating you're on that what cost swing? quarter. be I earnings pulled heat a you doing just that the is to to there elaborate meaningful million how $XX

Mark Costa

sure. Yes,

So, the these heat in Because need project. with very up, chunky charge And right? end business the to transfer then plant. is of they shows to of they And fluids some projects. completion, the bit the large at point, volume at have fluid that up start the how sort a complete you plant

the the to third was thought We to charge this happened sooner this project construction system been actually we they so a in second years, going that an was to quarter bit forward in and case, for be turned out their it little be LNG And with in and wanting volume. extremely several shipped under large expected and than quarter. that had moved that completion

this But great overall is business. a business

accomplished is diversifying And end really markets. something our a business to different this in market I'd exposure say we've that lot

of sort going in of fluid in know huge plants, and fluid. growth few transfer and those there's use it's Europe, well, polyester the historically, Ukraine transfer on too. a a seen other chemical lot a with by we've heat But LNG, facilities driven that geopolitical right you dynamics lot a the with heat been So, of as in very now industry

So, that And business. a this we're diversifying of into of creates very lot applications, like projects. for China value this other out project they're high-value

do lot when to So, up, a bottom-line. they show drop they of the earnings

a it just then as you from so means And to get to be which million go you in happened $XX QX, in earnings. swing QX, QX

Kevin McCarthy

much. you Thank perfect. Okay, so

Operator

America. comes question Matthew from of DeYoe next Our with Bank

is line Your open.

Matthew DeYoe

in cigarette a filter to tonnage thinking, bit growth? think the textiles. from margin if does the to next we Talking opportunity mean make sense I'm in just EBIT everyone. What's little fibers? filters tow, recovery even Naia in it rotate given about Morning I for year about

you your into Or growing still capacity filter now Naia excess textiles? to capacity? transitioning is And are

Mark Costa

recent all, improvement business. is, are The business, year. a the great we're excited a very going reality of first growth really good. not business. while decline until margins It's is are the about it X% But stable a Obviously, business So, margins tow Naia improvements the a volume about in still is better. that's in to

underlying products decline to continue our of at net filter on certainly even very to we are that's customers. some more decline. just cigarettes XX% get These of you be to X% serving sort but So, tow, that offsetting natural heat-not-burn growing focused

where So, options between and a at variety is continue to win are to optimize we're up with capacity start and support But our right? not conflicted, they the goal right? to capacity-wise, getting applications. stream to here expansion this business. grow Our our is going Naia the capacity, it available point turned to we're looking growth, we into in the we of are growing Because here cellulosics the to goal stream, because a not using

products, growth on sustainable is being $XXX of environmental EBITDA reasons like tow stream business, providing the stream out right? we as and the So, Innovation for high strategy, growth our million Day, top very get of laid polyester to a

improvements is a still grow talked XXXX. that a weren't aiming we're in tow, EBITDA significant base, we new very and to $XXX change in to when new from XXXX, on you of million So, were where right? we including in base. top That's we Tow

really Naia, we're the value excited got We've in about, a I explained proposition growth ago. which moment as

and some foam this for banned in being sort packaging it's have many whether great wins of et prospects protein the is packaging. meat trays is and that our cetera. can Clearly, in in food replace packaging Aventa, cellulosic places early polystyrene polystyrene for growth or We clamshells,

And but not which we residential industrial, composting, equivalent our will the product of both validated is of in in landfill. biodegrade that Aventa just sort

it solution. So really a end-of-life is true

So customers interested super are huge in that, market.

we're a is opportunity super eyewear Then in growth the got high-value beads, recycling in there. volume We've how recycled got opportunity product. cosmetics. into of with Lots you content which back the success ophthalmics business, in the micro

a there's across stream. growth the cellulosic So, of lot on going

we all And so expansion forward. as looking incremental at capacity to growth be move these we're opportunities to going support

solid large a very asset base. we Fortunately, have and

and have but flake building products not like here, be these it's capability leverage and for the Naia other fiber. So capacity there'll between We can plants. all we methanolysis really still adding we're

Greg Riddle

Matt, are you good?

Operator

comes Cunningham from next Our Citigroup. question Patrick with

open. Your line is

Patrick Cunningham

be for you think the end this no Thanks how are from for which And markets Hi, expectations potentially businesses? the think in upside or morning. good you I context questions. know should up guide. taking embedded in do specialty of have best the my of we earnings XXXX? to restocking any whether XQ sort about full in But set it year into restocking, for

Mark Costa

end now, Well, I doesn't as focuses cash. on in it of matter that going what everyone there's on destocking think we're a market lot generating right

opportunities of for be markets. the pretty from so from in think much we've destocking the think restocking exception, still across what probably to one And where customers done Building our that might I lot construction space. seen a be there's I there's

like And proportions, think it I destocking degree. there's numbers for are higher. So else, is then everywhere where bigger, restocking the then right? But into some consumer just potential durables, the gets

like more and just muted think they're the markets opportunity water doing medical, much. stable In treatment as and because there, still is care I not but personal restocking

to for early. this to it's year As year, sort going as a yet, we're that opportunity earnings little next get relative far into of not

Patrick Cunningham

spreads given referenced makes acetyls? That declining strength have And in end weakness market some expected your of anhydride, in acetic commentary? Yes. would what's I some sense. resilience overall think driving and I you in

Mark Costa

applications goes that type it anhydride, food, acetic really where for into -- the more demand Well, is feed pharma, stable. actually

a and textiles. economically lot into where in it's goes polyester bunch of acetic a sensitive VAM other down demand acid So goes coatings applications. more not is into

acetic acetyl markets. what's applications, than anhydride security large be more When on place tend of you think they lot that to just the those stable value derivatives, best of so for focused has kind more of customers much price. a in just product supply on different And about of that supply

in mean be So to plasticizer have these olefins, not we still as relatively business stable. story. our CI of occurring of derivatives is olefin we're pressure which where price but allows just bigger sort it's much is portfolio as the some I -- spread nearly an of in and more that is really compression that part and some or there, other of price pressure the

Patrick Cunningham

Very you. helpful. Thank

Operator

with Laurence [Operator Instructions] to We turn Jefferies. Alexander now

is line open. Your

Laurence Alexander

I guess just two ones. quick

dynamics some will XX%? you over be around into think As about and doing think inventories the fixed the margins above of do now next inventory Or you're QX? reduction cost spill absorption, year efforts should incremental you

William McLain

various point, Willie. we deliver environments, that demonstrated on your we've To think strong focused cash flow, one, doing I is this what can through that's Laurence, and we're now.

be about As we're don't actions XXXX. that fixed the expect year. into I cost taking we think complete The utilization, this will any spillovers

The to equally on levels incrementals, will think the upgrade And to the I that we get be more specialty as high-value the Materials about. incrementals you're we're seen on add about decrementals would talking nature the your our that mix that, about, the Also you've the to I talking products and positive. includes to and that Advanced point, think there.

Laurence Alexander

underinvesting spot are from changed? more seem around kind Has M&A characterize peers how of your -- to the engineering. facing pressure secondly, kind of in are that the M&A you're cycle, opportunities? a of who you actively And in you can your Or people sweet finding always pipeline on now kind at looking have credit

William McLain

Films right strategy now bolt-on our great in more focused growth on this did the platforms. earlier on bolt-on year in the with We three circular We're We're Yes. focused investment a pipeline. our business. our Performance organic

in We bolt-ons focused and we're are disciplined Products. it well. Additives Materials going mostly and be in smaller stay is strategy & executing in -- looking and with Functional our executing to And that Advanced on focused pipeline

Mark Costa

a Films incredibly in how Yes. China this acquisition domestically year. that to last this market in we And high-margin Performance It's business. wants auto allows is in restate a is did example. us year, this of the acquisition support to go definitely China. be a performing market manufacturing business customers made well which in we The auto where in China, very on great government site is has been based China things

And and circular of economy, story this creating cellulosic. we're on are in highly great our real Very now, the right a acquisitions. sort accretive. things focused Those is tuck-in and organic-driven both of kind being are dividend growth priority our those growing around because polyester the leader

Laurence Alexander

a the bit And of then little going just guess severity what of you flat-footed. or you on inventories. timing on a detail and more think lastly, the chain can a give to the -- little industry I agriculture adjustments bit is with the characterize lot the

it hearing end, what will think have of about in curious I in because accelerating it the a about into just So, Christmas? think remarks comment people you terms you're when

Mark Costa

Yes.

necessarily. say wouldn't Christmas the I So, accelerating it's

products but with Ukraine and were -- things around events year, really. pretty up well players up And make stock. safety warehouses, cetera. the Corteva, supply are et their Syngenta, I stocking ammonia all other discussed So think, Last the what Two safety the around stocking on is happened, distributors world the way on stocking farmers the us chain, there. back uncertainties the around like were All out and big Their retailers stock. that to on stock. safety

so And really good. demand was

started to rely the chains quite supply because of middle like And as kicked season downstream going the dry now much weather that quarter. of product QX quite the were as safe us. meeting That in was wasn't first looking need to through in chain and it this true feeling of much, sort not of at significant as on, and destocking

we go destocking to to So, second some of quarter. fourth some it third destocking that feel quarter our from the customers in up quarter. and, And into the we started the in ramped direct to as full degree,

be year. have the year. next season start ramping when in-demand is debate realize they of meet just when destocking up it to It's important good about expect end and and lot growing farmers a There's that for to that I'd to this production final good next does on going say, the year on, the to

we're in. this So really inventory cycle a management is whole

of have season. fourth growing they'll make next for the or supply into quarter. kick next back to gear -- the around enough point, to year, the they beginning first whether to the for inventory the first have in then happen It won't have sometime has some quarter enough at or that's And sure they

Operator

Capital Markets. Arun with comes RBC from question next Our Viswanathan

open. is line Your

Arun Viswanathan

AM strength stronger you'd I side AFP. that guess wanted your markets maybe maybe I through How some some markets? we're you to of -- the on markets, well? questions. as the are are notably just in, aerospace my seeing go seeing the to There taking half? for expect you and some that Thanks which Great. some which and comment those to of what food stronger side. you're Is Thanks. persist And second seeing would

Mark Costa

it year. because improved in I it's has really strong, comes to view pretty when So, of year the been was will grow way. to first but back year, the wouldn't relative -- of say through the strong market half aviation, to stay half half will it and that the but stay the it the our first is -- going still the will not it's of

we'll airlines with obviously build now, and The viewpoint demand are view track that's their wherever goes. And very we're about forward. confident their demand their using to Right our going their forecast.

Arun Viswanathan

then And just a follow-up. as quick

markets the notably on other are side. Some weaker

were are the already, on reiterate areas, of call those would some weaker going to in areas the side. Thanks. amines some addressed than And of the the you've that destocking You in out but if a that's be? expected? on What what maybe other some couple turned addressed the you ag of worse you

Mark Costa

changed point in -- all has much view, end point end a I'd view end markets. I our say market-wise, the view, from of our an of From think across market QX growth of don't

end different discretionary get We Auto are is markets under strong. markets Obviously, pressure. better. worse seen haven't or

focusing of The result, of markets, having and water as kind volume. that off that those bit customers pricing little everything the goods personal X% a discipline, on downstream see reporting and care, can a are treatment, else those ours they're as less to X% you fast-moving all in

out It's the the half quarter, of It's packaging of it's -- more some of and ag back about changed for medical year, surprises dragging second into like the entire really. inventory management. that's anything right? negative story the all the think don't and in destocking I been

degree a the following being down, think built of lot any that in longer demand the more COVID I to taking, when obviously, and think inventory really to chain and some every soft understood. world just then than the just extremity the it throughout a especially crisis I market. us lot And has of is it's stimulus pull led supply to

Greg Riddle

last believe I Okay. our question. was that

So for morning. has interest joining thanks everybody this hope and us Eastman a very great much I for in day. your

Operator

This joining. you call. concludes for today's Thank

lines. disconnect may your You now

Eastman Chemical (EMN) 28 Jul 232023 Q2 Earnings call transcript