Eastman Chemical (EMN) 2 Feb 242023 Q4 Earnings call transcript

Company Profile

Participants

Greg Riddle	executive
Mark Costa	executive
Joshua Spector	analyst
David Begleiter	analyst
Frank Mitsch	analyst
Patrick Cunningham	analyst
William McLain	executive
Vincent Andrews	analyst
Michael Leithead	analyst
Jeffrey Zekauskas	analyst
John Roberts	analyst
Michael Sison	analyst
Aleksey Yefremov	analyst
Kevin McCarthy	analyst
Laurence Alexander	analyst
Salvator Tiano	analyst

Call transcript

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Operator

Good day, everyone, and welcome to the Fourth Quarter Full Year 2023 Eastman 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. Investor Eastman of Riddle Relations. Greg Please go ahead.

Greg Riddle

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

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

we and section Yesterday release remarks quarter and results X-K in related of prepared filing, www.eastman.com. our the our full after posted fourth Relations XXXX our year website, market financial the Investor closed, SEC news slides and

items. Before we X begin, cover I'll

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

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

now I'd some for like turn to the call Mark over remarks. to

Mark Costa

real to methanolysis the feedstock. working that's the do we're call this you facility since up take there opportunity to get our And remarkable the tremendously on us the this There's look team I when introducing in frame. over that's and to the start want I Q&A, where been accomplishment into time working October Before last jump to that's a recognize a commission been point team and out plant. huge

to the circular and dedication through testament that the the belief a in every owner it's stage. they've sacrifice, personal and company hard lot company has got and They've real economy. to the made They've their building of of this this holidays. us And incredibly worked a excitement around

real a has of also of enabled vast swing to allowed of site. parts this have we power resources of such it's example integration literally significant Because difference. process this and us go people Its well. start-up great set quickly the really plant of and Tennessee And our start-up make capabilities, to from huge those a process a and it the lot into this a and scale different

that to lot the appreciate tremendous wanted and just I express a been all this who've involved program So and to they people one in been did thanks we really make of process. it. It's deeply a sacrifice my of

open With that, it to up Q&A. we'll

Operator

first Spector [Operator today of comes question for Instructions] UBS. from Our Josh

Joshua Spector

on methanol actually facility the to I wanted follow the first facility. methanolysis up --

could the if But getting So you you're out. wondering milestones was year. on-spec near go through you I kind of through this as product talk

So operational point are in say structure long-term can the expectations? when with EBITDA do you becomes full and get therefore, where the capacity and the line yields you cost you you Do as to get think to your the expected?

Mark Costa

focused at very very be stage excited the at we right on. we're question It's we're And one a are now. to

bit start the said plant all the system to do we going completed feedstock, a that, the we've of facility, properly through get commissioning, the up starting And to As then the that starts and plant. we're end of where our the front time at in the and been point will introducing be charged comments, takes it to little processed.

right now. product customers And in mean soon, eager to days in say sit process be we're from good of I to who very and when here with weeks us. recognizing shape that we on material get spec or soon going that revenue our sort and So feel getting where serving are we I

on So the to and $XX with customer feel serving up like we million. track relative we're that plant demand starting

don't a plants make facility, this, its as line plant of side months from sure go out scale overnight. the is the it takes properly few It and about producing optimize you to full up. that operations on-spec talk working the as Now you everything ramp-up material rates you the

we'll get ramping getting we so be And we works to way start be content and way the doing production. out, revenue the soon. the that But should up recycled plant able and can this relatively the

way, are things we're -- a to When now, structure to time. demand operating steady pre-production just of the out when phase. in higher than are it comes Expenses the bit the line state. pulling you will cost and of back Right sort side by still over that resources

So front little loaded cost as is point a end a of expect. would of view you this from

The demand is say, actually side, quite I'd good.

So it most when plants situation a than what's we content plant in we started over start this different ago. starts, recycled didn't is the selling year

our existing assets. We it's we where have called technology a technology use a glycolysis, can bridging

what sort bottles, have to to is then You recycled clear glycolysis you clean, with can of which make use content. have

number great using long not supply assets. term, bottles to content a what did it do But a your brands. those it's us not So existing it's clean recycled efficient buy to because very allow cost high to it's very of is and polymer strategy process a in

that can from have marketplace. recycled technology in In already see presentation fact, you that provided content slide the the into the our been brands selling that we on

to trying in into year. of build not from us ramp go market sort volume them anxious very we're to the up. They're already this accelerate to get to and material So ready

really know that the buy customers well our helps both of have to of out we price that plant. us the we number a going product to coming sort support have we as of are can that want moment get as the So premiums economics we

we are up. are there qualifying product, to ramping be working year in didn't then very been And interested we've brands bunch of the and serve a so the and have last capacity that other also on just them we'll them that

of where difference big second will of half in this see the first ramp-up but to situation start a make to really a relative is the to QX have the half incremental you what you EBITDA. help So sort where relative QX,

have is when would specialty on up. cost huge the plant, really by they a sort you plant. I of operating But of mention The last have mentioned. certainly in And you start a for pre-production are cost you normally, we year glycolysis side, this as offset costs headwind build higher of big expense the I this costs the just last and process operating point

costs are neutral. the So relatively

will. be pretty revenue the helps sort through sort that EBITDA steady you so of of flow fast to if that -- cost structure, year-over-year And

the right now. sort earlier, conditions, key going get just And cetera, We're the who teamwork it. that's just I a weather this said very freezing et there as plant of this of doing components So through keeping and example it's winter are to running. of focused tremendous on process out

Joshua Spector

this there. I'm about we're at looking with that fine, maybe some just Because we're the project? until is just so you that is factor through I wouldn't second that yield next at production is soon, metric the some And some quickly, you're so to pretty like say plant Or seem commitments to guess, as you plant that other good, the or wondering what's going point, comments there you customer limiting you getting product? bullish just is design there's that, FID done. go made ahead move plant all on-spec the --

Mark Costa

the plant you factors. limiting up And running. we comfortable yields of obviously, a One, we I couple Kingsport that's is and months to are see There want that expect And couple technology of them Yes. in the want the about we and that said, sort efficiency are of this well. to what the to next to insights of see as be, feel the plant. said, plants get quality those running knowledge operationally we'll and as

design, same that this But build in keep we that improvements third -- really a that to better risk and learning in the plant. all minimize there's we're this leveraging second Because it's the going we'll process. job learn second and plants. construction leverage the plant, build capital risk, right, through And we've how in important the through so same obviously in to do to mind and gone to plant scale, same France in

right are for The So that, the is -- part. and of component that project of decision, talking point time think, the from getting finalized of I contracts second that the about now we're incentives the the what FID making view. customer third obviously of in frame an is

bit all several little When speak. good side next as about in position of than kind We're again, that completing we We have a And months, we we the those. have in different still to building starts the environmental same feel to be do FID. the construction frame, the in we is ongoing think, on permitting FID. a permitting declaring and should is time engineering,

that sure right believe -- the until soon of that So starting summer us gives dirt talking we're the on operating probably and turning construction start we how And with second we're is path about time that third actual on not to plant before make you as the late plants. all in now.

Operator

Begleiter question Bank. Deutsche next from Our comes David from

David Begleiter

or and your your in Are markets, have peers modest season markets? earnings underlying seeing this geographies customers certain in some some of of that key any any improvement you Mark, noted demand. stabilization, of

Mark Costa

we is I'd stabilization, What seeing absolutely. I David. are Certainly, -- stable say mean

et personal And built guidance markets going cetera, would we last year treatment, modest in the sort expect thinking to of this be consumer demand that is year in water So care, last stable on growth packaging, markets. our discretionary year. to like similar primary is sort of from the

it's sort demand we was year, through be low. flattish What in automotive, we any -- think last are year. those this to from predicting Now we was from an say and going last of I meaningful at would primary -- last -- year's to were -- more way low levels clear, is growing improvement demand and not be actually We're year.

in to that guys. of of slide that's the demand the we as sort are supplied showed we where So we on primary sort you

mix us October, year, of driver of significant in think driving true. it's earnings volume is sort think sort pretty for And about year key increase year we still lack said down last versus for destocking impact the this last I about what of the you when volume million. of really $XXX The

That's the in like You evidence lack last out that headwind some that, year assume X/X probably we of see of we'll that fourth playing can a And already than a easy into but about of year. demand the quarter X/X. the this certainly markets It's safe, it bit and of it destocking, relative million $XXX more in first. a call to comp. from an play it's to is

one example, demand which -- drop year. the was that impacted last for durables business, So most which is the consumer durables from business, a

of first the in XX% half year second higher year. half last volumes last than The was of

the a that's there. into of -- So seen lot destocking occurring you've already

it's but over. Destocking We're still tentative want occurred like year. a clear market of course, true we already treatment, we're the be, half destocking the the water is to right? growth. a view, the some is of the in market that half back personal where in year, things of modest in demand lot stable to care, getting of of very from markets, not point sort Same first of By

was some the overall for 'XX So those demand relatively of in flat markets. to year,

get the has The still pieces still that parts of and And be think and lift there most be in think, the out. construction, -- into Building is challenged. of By in and across most end the to destocking primary even tough the going that I is little expectation year, fourth market interlayers again, may slightly was played of demand. I lack first so down It year. AM. probably AFP quarter, the maybe quarter, you coatings this in tough destocking it's but last

sort say, of that, X/X it of think And it. basis, at is look is Advanced note quarter through that And the looking Materials. on $XXX I a progression, destocking, how of sort of of I of full lack that would I the So would in good. million we year

January, can had orders a is soft and we this we see. point looks stronger what So to January, at March already February start with in good

there's see you in the in a as slow keep move as first the guide. you quarter But lot can So into that's quarter of upside a our from mind to clearly start, is point second another seasonal is build. pretty

expect normal do pattern we to So seasonal year. demand a this

going is So lot even better. demand be though primary a -- we're not saying to

quarter always is First softer.

that stronger us. around comes quarter, pattern that. normal And built third forecast we've a quarter how Second, for fourth off in our is obviously

helps that things quarter. get why lot better So the second in a for

Fibers Fibers in in some And low -- we've timing especially where Fluids then there's issues particularly for identified buying as heat is fluids. customer pattern transfer and And fluids a thing. orders then

a second quarter. So those orders get better in lot

a quarter look some with along together make better because lot I'm of that come you people improvements questions a things that better have as several at our there's spread on sure than So second forecast. quarter, first lot

David Begleiter

AFP. briefly on just And

in XXXX. negative You pricing mentioned in are the pressure see price you expecting some cost Where AFP? to

Mark Costa

the last So spread first was year all, management of AFP. great in

do cost have pass-through of sort give very us price contracts business we So on to lot stable a of margins.

So kept track. materials the it raw 'XX raw shooting last off a And prices there's came contracts then came our lag. were but follow, as off, in as very helpful was prices prices upward, material year, price

So we improving for AFP had year an last year. for spread the

so that And in offset to a helpful that some headwinds volume had the segment. tailwind was of we

at there's that of again. bit lag look year, a When just this you problem

So off. stabilizing now got you've prices sort of

cost sort this be of you year going a at headwind contracts in bit work. way look of just those And to to if spreads a so there's relative year, pass-through last the

of this driver modest last on to the of year relative the primary we So year sort spread expect compression AFP. that's

Operator

question Frank next Research. Fermium comes of Mitsch from Our

Frank Mitsch

And in general if on up could pricing. follow I

of you bit pass-through in terms we're good And a contracts, the hit. pricing ending of here, 'XX, a As through, the indicated taking very a been as cost has year. 'XX was

So XXXX the in ability for are you Eastman's overall enterprise? pricing how about thinking overall

Mark Costa

Yes.

little all, it's So important impressive of to really it is history pretty think around pricing because have a a first story. I

So if $X.X company of inflation. billion XXXX to 'XX, you think our about had

end CPTs creates was the we prices keep up a lag of XXXX. it, catching to And of But specialties but prices it up the but chasing that by and in getting create of compression did that so the in in had there increases. a XXXX, all headwind job to inflation trying still in compression did catch excellent the to up an it we overall, sort to particular, a to

how a moved So doing that's high we and job. was inflation. phenomenally entered really 'XX to pretty 'XX is The we that at elevation of accomplice sort a compression into good with

and proposition really of and our pass-through outside just contracts great were the Specialties. cost real specialty commercial holding of value teams of -- demonstrated products strength excellence Our the the the in prices

we Not dramatically Fibers. in to mention pricing improved our

that price that economic difficult of able in currency, environment price about very $XX improvements think to in of to and cost. variable volume in you 'XX we in when $XXX offset to we relative 'XX were So million a had in headwind million manage entirely

of And structural. it a lot is

raw around Materials portion the we and lot well were held, as in business. So business about $XXX had million given industry we've that margins back of that extraordinarily high dropped normal where Advanced at material based in raw in that all that descriptions prices is recovery materials the in is is of in 'XX Fibers, prices or we that as where got a you able to interlayer good of we on just -- those to a off

of $XXX we means feel managing. expansion So about good you're basically and really of spread that sort the there's million beyond sort that, interlayers of that Fibers,

the on is year Fibers this expectation our specialties, fully is So contracted.

bit 'XX. better do the little a So said, there earnings locked. in as we are will And business prices versus

modest what reductions the In and we will AM year. raw has we -- energy similar how is that some spreads overall, environment and reflecting the say in specialties, I'd improved. last be expect price to say But is AFP would material the

far, on with So a see certainly so believe tailwind of hold going But margins the Maybe what across X we're we our in we'll slight not businesses. get quarter. compression really it. there's we to first to out those a will

million and drivers the you, have utilization tailwind for of recovery this key to then are gave destocking pretty and earnings pretty And I which significant be just recovery of we year. drivers number asset The volume substantial. expect capacity are utilization $XXX

Frank Mitsch

of entered anything of the year what you less you just position? have that Europe actually then of any there world? could or a took perhaps that in can look And a Is part worse in terms talk is Or in States. right. I Europe of -- is the green sort the United function declined about if -- year-over-year, really a All it. shoots that perhaps than you Got that

Mark Costa

of is in of reason America America sits was, it North North down Chemical much So the it's just as Intermediates predominantly. part all as

revenue look say the When off globe of and really we Chemical as came off at the that demand it across you globe. country. all rest sort the in the portfolio, in we're globally especially more almost Intermediates, So comes the it's I'd this saw and diverse, all the to of of well as come across sort when destocking

the the bit So than little that was stronger China U.S., evenly its dispersed. probably more does Europe other and and in two. so got economy the a has challenges,

we But -- right from our of I focus is now. which a -- view, wouldn't green into a primary from this shoots have destocking, point Frank,

to I consumer think discretionary call in early it's world. the too markets recovering way

cars, but of think I may electronics. be declaration. building don't have make There I enough construction, So that some consumer sort durables, improvement to data there,

Medical grow care, But still I sector markets is quarter, destocking lot X%. X%. is to the the price growing, are stable in are probably lot to grow as we'll definitely market going packaging that. growing. personal X% the but Ag benefit treatment. to the the from a underlying going mean first brands volume, A consumer water of pivoting from recovering to is now there's of

you in half revenue about that modest stable. of growth these markets are that's sort where So more of our that get

Operator

Patrick of comes next Citigroup. from Our Cunningham question

Patrick Cunningham

million utilization there the million a to the extremity of XXXX, positive more, in headwinds, the to even million get is guide first on that? $XXX a decline, environment you just guiding maybe path or modestly just $XXX there, the given and from I first demand for help degree quarter. of And think here? Kingsport demand destocking us upside the from million Advanced just And Can and Materials. understand $XX you $XXX beyond of maybe you're

Mark Costa

fourth pretty 'XX earning we've and Materials in starting and in working 'XX, year than Advanced sort had our that. then we're quarter the the demand our make to better it way with in back given of first, above million full So rough $XXX getting and recovery the challenges of with

But tailwinds of driver of just that Advanced much is pretty is an to corporate as AM give story you the key mix, The I volume sort Materials recovery the sort pointed biggest for go with the it, story. out. and level,

of of for sort has the significant of I of segment. that told durables you this million destocking already had lack X/X a outlook in recovery. $XXX So is

the in lot a it the destocking but Medical then underlying a still had be see year. here, have lot half finishing quarter first and the growth. the has out that's we in great can in we'll itself just It of chain from the caution of crisis back of less growth the in will supply just second that quarter,

that markets of lack or destocking got have Then seasonality. a you've got destocking So the to done in lot helping. you've the stabilizing of return

So to first in to when this you the got the even recovery you've is seasonality quarter this to though still and quarter return mode, normal segment. beyond, look second

stronger, very QX better. about, QX, order So expect Advanced you is getting much through see that and there. is be pattern always that progression in about I February, that And to Materials January, March we can talking where was

of the methanolysis You've also ramp-up plant, the got as you noted.

going that in $XX that's up just So Advanced incremental Materials. EBITDA mentioned of that get you you that to million shows

the last for have is be is just million a year clear other, of $XX other where The to sitting. corporate benefit been pre-production expenses which

into growing acoustics, with market And it's in great premium cetera. great a have you've HUD going strength market cars, the of of got be and we more more record above even automotive the track our to then tremendous that flat, going et products, other that though strength

that that of hoped, amount there's own a there's in ICE cars. drive the we they're than so innovation EV maybe products though through not -- an will it. sell destocking car, goes square where automotive functionality get as fast ICE to then Xx in everyone we do that still beyond meters an even there lot because of of just than a our as products circular in those in lot them creating high-value we EV and importantly, very faster we're And And growth much leverage growing growing is over

last of price year. we as the somewhat to And cost earlier, said be expect sort relationship neutral I to

headwind that but But right? tailwind $XXX be we all that, get you've and year, significant be up, million tailwind, then million with a got don't So with source $XX this really of you a asset shows it this won't last to utilization, for managing that headwind either. utilization year a that segment. expect inventory becomes volume So a

you So be also driver will a above how get for $XXX that million.

you I'd could So put start can recovering the market But all than and if spring is get proof getting ramps the in up into we get million, that together, something greater before to math you you see like to that. how beyond that. $XXX

William McLain

about Materials the expense, will is, Advanced Mark, add the as we And only of increase and the our think year-over-year depreciation substantial would that segment. I portion go thing a to

Patrick Cunningham

very follow-up And potential in do That's mix some XXXX? outperformance much mix impact? is from the market outperformance And decelerating given EV EVs, you helpful. a relative see weakness, maybe headline EVs you volume did consumer see and on seen to that, into how of and maybe that that sort improvement, just premium of looming deceleration that we've

Mark Costa

Well, growth or 'XX around think we're sort year-over-year But still it EV right? rate improvement 'XX of to in significant, 'XX of certainly, you're don't the applications There's rate. I of citing think winning. less a data be I for the will it's 'XX than was lot in

ICE slowing to a issue cars. all So these there's to EV share just -- and demand also down, standard accounts but okay, interlayers starting we're primary and there's relative penetrate that's win

get leverage helps. segment So market, this itself the within the EV you within that

these with we products don't overall us meaningful helping oversell mean consistent can So think above an is of sort premium everyone the else want which is saying flat market. get to that I very market, growth in but grow I in production what is expect we it. I

Operator

comes Stanley. Morgan question of next Our Andrews from Vincent

Vincent Andrews

prepared of and just of stay CapEx they the remarks bit remarks, about curious a talk to inflation. can the in prepared you're There I'm the working Mark, in plants. could the some estimates X? were comments feeling teams about ahead kind how for little those make about plant sort And X plant of talking about sure you obviously, methanolysis

are environment. it's projects know an overruns We've that other inflationary some at cost all folks doing. seen We obviously non-related large-scale

are you terms how is of be price can you to the have it product? So that to something technically? it that? to you're stay do going how top Is on going of in to going you Or do something

Mark Costa

Yes.

you're absolutely an Vincent, up, right, the XXXX, which So as Day back that's you there and chemical Certainly, for project have well Kingsport we environment. projects inflation I've of go capital both every the gone December construction probably in in estimates else. as industry these had Investor if to is true everywhere for seen

So dealing inflation. we're all managing that and with

contractor lot the what having was a a So in of biggest issue faced. And -- happened that inflation, went right? we issue the normal issue we and properly labor, just skilled skilled had productivity we saw huge with Kingsport beyond not

of We also severe way. events weather endless had just along series an the

of product And allowed why the were but outing the there in which of ahead design lot of a it, ideal, get market building was to is engineering doing project, the to how the getting years and of us online. work we're that we optimize probably never X project, in

here from a one. where incorporating So learnings on we're build more France have first lot very we efficiently this clear and how than them projects, we're into second, methanolysis lot a of the U.S. project to that

for in of even materials, materials Labor CapEx are sort inflation a -- I'd slow deflation industry. contractor. is, cycle point contracts some of there decline us is that's view, They'll There as help recessionary offset that's is that or we what occurred. the sort from in or now of more this down in of say improving, availability inflation. is front maybe of even of some sort So

same building We the again. are plant

learnings number incorporate capital into new, and when it. build same number lot Kingsport, we'll X serial we building we're earlier, you And the a same Obviously, said in scale, same. you're plant. I efficiency same just to get building whatever at As But something of design. serial trying not have we're the X

got be locked set And that. start projects. just there be that I from we're excellent CapEx and and to capital, So of they've will us firms, contractors this both Scopes to And the this. up the will an completely controlling using -- these relative we what predictability in help will for Kingsport. described before cost Fluor, control great to Technip, in building, access do benefits

both we So more in why of the certainly that's France and higher. part good the about we're a pursuing be bit feel U.S. They capital controlling as projects. will the also in cost. And incentives

So that. I What and I talked we with about other is room returns we good economics these feel say we encounter. think ourselves challenges for the original would we came some when might we on and inflation when gave up projects, about

is project despite return Kingsport the So XX% still increases. at on capital the capital

And proper incentives, are customer still above these capital. on contracts and with projects the return XX%

earlier, we incentives inflation, we've number. capital the and feel get to to still X customers, requirements I good hit So those returns that on even we assuming and feel things, X about finalize mentioned that the with got year, we're track get these projects our this started

Operator

question next from Our comes Leithead Barclays. Mike from

Michael Leithead

wanted question, outlook. to on First circle EPS I the back

of of maybe the XX% year XQ first years, quarter year so, think the full XX% last year, to is the number guide. turns out EPS what I This Eastman's roughly full be. or is

through mainly So it the XQ why destocking you lingering this you talk bit different? year's can Is into a a that is XQ bit gets better there?

William McLain

Yes.

as expect are QX. decline QX curve, as the growing has And quarters. QX in seasonal Also, a right? through and there's think Traditionally, Mark QX. best traditional outlined, earnings We're I we then the benefit as where we've pick the up methanolysis highlighted on expect as our of is utilization we we'll well most from basis, benefits a half year-over-year also facility. second the Kingsport and

are us order key seeing books, 'XX. So impact in the traditional the seasonality there's that in pace items specific the a in that well Those of the are Mark? items. as tailwinds into combination turning of we're factors 'XX as that

Mark Costa

pattern add, got QX, they I there's the a in Fibers customers. of just on seasonal you've oddly risk volume elements QX. from where QX No as QX orders will unique much contract. would the as beyond just do low couple in buying of They're just not

is Same we more in pressure true fills, that's QX. going sort that's some of much QX just all at so And sort but in of on on in timing there seasonality. have beyond not fluid putting of

few beyond aspects the that's the and there's a out QX. normal medical, ag just continued So destocking of in seasonal beyond sort in sort of that just mostly impacting will play pattern

Michael Leithead

But And methanolysis briefly X goes If commentary I say on fair fair it of it efficiency take helpful. of is Mark. your point? a some obviously, mid-XXXX bit as something this a by and -- about plants ground, gains plants to all little running I to X efficiency of hopefully, be a lot plan, these or later That's from in to think, say like would just starting that first plants, is if commercially then you'll the year, plant. breaking these have again, rebuilding

Mark Costa

schedule our time. infrastructure We've efficiently, with lot greenfield and we're lines know more a all projects side we're in plants timing a also building these got 'XX building. we're start, not same back but Because efficiency you our these that build will I just now, than to point when if will more we're We're also building for case, polymer sort pursuing us go allow original There's it's -- in on we're of into building at to the 'XX on more the France. certainly right? this estimates. methanolysis plants that

together, to all time put So a it of certain when it you takes just it done. amount get

to have that the in key product. hit. markets certainly the have is the very they deadlines They significant eager are very But XXXX for

So up we make everything well we're get their within we sure ramping making start to we've want construction. learned them we to But targets. Kingsport really before we're can from certainly the helping and that sure

that's we sort originally sort occurred of thinking. that what that's so And of from delay X-month were X-,

Operator

of Zekauskas question Jeff comes next from JPMorgan. Our

Jeffrey Zekauskas

the fourth strong production in Materials especially And fourth in some very discussion, auto Asian quarter's there Advanced of is I weak noting think EV production. was always amount. the quarter,

So is case your in than that it rather the Materials exposure more domestic companies? companies Chinese in with is European Advanced with EV

Mark Costa

segment to a So a in parts Jeff, AM when there quarter, as for moving was lot involved of fourth it comes the that.

the quarter. as to have side, as of Western relationships sort with auto with we positions on That has So nothing the EV makers Chinese the of some EV do good do makers. well and the

better. was demand Auto

You've on as our is key remember, films well cars interlayers, both protection EVs got not performance we're of part a ICE paint where just going film. as and to that,

only interlayer OEM around from an your of to interlayer the of And applies really so the view. question it's that manufacturers part sort point

just factor. projecting factors a medical difference. Plastics little bit longer significant we the entirety side destocking That than packaging we and be caused were of the were on think a was The that's than in what expected October. I in it's bigger continued So mix not the Specialty to less volume that

market from is bit, you overall, growing total. this data in has still I continue we QX, impact, year grow but the the that sort year. automotive see moderating mean that market above we'll a to That all production of above an in can as and market were

Jeffrey Zekauskas

$XXX project I idea don't going were you piece, was non-Titan think in project, all. know you Tritan Tritan. And to built partly itself the for methanolysis built the spend? I original million. Kingsport million additional plant spend $XXX at idea million original for with plant the did an if the the or But in $XXX Tritan in the you What the wasn't for

$XXX return the a what to is capital to customer plans, negotiate Or capital? the what on on you estimate believe was the work order you think that now, base? of out you the can with expectation is say I And in capital. million What the a to in in are customer an a expenditures you return that level But your -- million. have that good estimate $XXX future you have good of need

was all this What's the supposed So help I think to now? $X.X us? billion. number originally, you of Can cost

William McLain

last the -- on project also time billion. Obviously, $X.XX inflation highlighted And estimate was Mark there bit I since ours facilities saying frame, that reflective level. approximately all that is at X was start we over that XXXX. of would programs including quite let's And methanolysis a update has the this that the that. every be gave of is Jeff, think

And ago methanolysis and and is had to capital we've expense that was within above the Also, Kingsport our that facility. into budgets substantial the earlier that I years. our we've the would and 'XX you few say, of expenditures the to increases incorporated directionally related a magnitude. spend. estimate to been handle $XX years portion 'XX CapEx able XXXX increased going our from referenced over of million fully I from That depreciation we gives roughly It couple 'XX, of had last that been a outlined

our generating also and forward, disciplined we facility to We're our customers. to both by going but accelerated will we with renewed move this return fund to be having these, brands growth Materials, from be about methanolysis flow as believe we And returns. as cash think the the on the that Advance

Mark Costa

to some there's But We're numbers. capital numbers the lot question that -- the are numbers sorry, I'm those up. pursuing also a incentives more capital offset capital of just -- no

don't updating So that all just until finalized, we I numbers. get to want keep

the total So and premiums, on it. to as what once we can as fund with we the on achieved well pricing get have we them customers economics clarity

We to clear sort able you more a questions. be give will on of your answer

work depreciation, but incremental portion a guys Kingsport mean you if the project good costs. $XX all, a good is that out I portion, million of plants, can of not so what the

you something, sorry, were saying I'm Jeff?

Jeffrey Zekauskas

the partly build facility and the Tritan Yes. you Tritan Did expansion...

Mark Costa

We construction yes, Sorry, Tritan is that align to the with the early our outlook started construction going paused yes. improving we're early started it, this of line restart and -- part And the it. on we demand we as Jeff, a which it the quarter. lot Tritan of then

the the get we'll sure market. see quarter So make short again we demand going Tritan when that to or we don't in this judge next we need how to

Operator

John from comes question next Mizuho. of Our Roberts

John Roberts

a do has Fibers overall the the new to that the so Are as And the where offset products point volume? decline flat contracts volume by expected tow in in is think sig in working segment to you XXXX? you get tow up sig

Mark Costa

they're days, John. on value I'm it these profit allow market to in provide very was And rough us time. this us of to supply where and a fan structural very lot the customers. the have tow stream Great a reliability. our to patch through quite on reliably We've and placed stable levels It's to question. back for big they focused gone the a that some security, great business supply of that. And at cellulosic of able industry the being being

price. we're So and contracted for year XXX% our contracts, volume this

XX% feel for have last This it be said, place earnings year, 'XX of will we the as in to got we And business. we'll in so better 'XX. our close somewhat in and stability XX% contracts year. good And about than then that we've

have and we provide So to you of feel is utilization a that's push part good in and to that, going cash of a about sort as just how cash, top business. earnings you Fibers business And stable of tow the then lot value. that assets noted this this allows that on out of growth now equation of on business and us our

is which great Aventa, something is pork This foam, to it's spring to is replacement the more talk cetera. then in probably chicken that in it, the about other a our to and we take protein really how grocery out figured in sort you drop foam all where clamshells, store polystyrene And path. or the see you a for on -- we'll and time trays et cellulose where acetate of

issue about a getting that industry serious And polystyrene. has of out

settings, certified landfill. proposition biodegrade to in a just their in drop is settings, to where value which but existing equipment is have to material We a not also a home with great it's equivalent industrial cellulosic in and

recycled. to else all sort a the of stuff have that's and everything [indiscernible] biodegradable solution with really you with So that throw it away this can't be

think grow and lot next year. opportunity, year build be and something will good So of a very we this something margins big into commercial market, and meaningful that

lot So have go it. about a the once customer announcements more we'll that with we to you tell

volume stream when along polyester all huge turn growth. does the you a and together, But stream both trends cellulosic tied put to the growth presenting sustainability a economy are that with that it stream, into can circular replacing amount we're replacing underlying the replacing a much us products growth higher polystyrene rate levered of we than markets as we're give that have can or plastics the growth. polycarbonate BPA, of lot Like other Tritan recycled-content-made of

thing one cost you sides lot know of Materials about the there's And is leverage. a both fixed Advanced on

of and but fourth sort the in the that seen same you've quarter exactly up. it looks the So 'XX, way on pain of the of 'XX

it of some coming high-margin is you as which of volume also attractive. the very get fixed these and back, now products leverage So cellulosics, across lot plastics has cost inside specialty fixed of cost a very

Operator

Our Mike next question Fargo. Sison of comes from Wells

Michael Sison

Nice so for outlook far. 'XX

growth to your hit the of Mark, you businesses some midpoint think type generate do the growth. do been down we've And think curious, volumes your It's the the Just volume mid-single quarter? will seen fourth. volume in you turn AFP quite AM need of sort When time guide? since digits were what and to of

Mark Costa

question. it's Yes, a great

year. still back unique quarter and degree. certainly those buying timing have the And and these and medical, to call in going These I a are of in things talked some QX It's think in weighed much of customer Fibers closer bumpy. on overall. the weigh destocking turn fills some that QX, on this ag about I've and will of is because that some certainly of bit you QX we'll kind and on on half a QX things

in construction, durables, all sort earlier, it's that of ones especially building improve are started core seeing we volumes consumer et But destocking cetera. the ones, the the businesses, are -- whether

is It it. that We about You happy can everything be done when I'll think to see extraordinary is over. have topic. see just destocking that you don't it. definitely with

in of and had X like sort XXXX quarter quarters destocking. X of We're the had like quarters. sixth XXXX

all thing, production coming So recovery give we are destocking to we own see can unchartered markets. in us territory we're that to need on end, connected But and back you an that. volumes and it's to nice year. And our definitely this to a this get happy will

Michael Sison

But been improvement to then AM, margins can those it. 'XX versus there get to AFP been in XX%. on you see think have just a of that Looks historically, for and And have 'XX. -- quick EBIT both adjusted time? follow-up margins where it. sort Is like some closer of you'll over Got

William McLain

this is Willie. Mike,

benefits to the well believe our upgrades of solution. fixed can get We the cost we both those type circular as leverage definitely AM highlighted, get and grow with mix margins. Mark as and the As XX% back AFP towards those we as

Operator

Our next of KeyBanc Yefremov comes question Aleksey from Markets. Capital

Aleksey Yefremov

confidence build and capital you position this and in a enough of in two business strong you're Are X methanolysis number you X? likely simultaneously? to the stagger Or think construction number do to

William McLain

to breaking ground And highlight, a project be after late look they would would these, will be on second would Aleksey. we in significant to start I not make project. we shortly to Mark France we difference, then would our progress that, but definitely with is summer. the that There as going then that said, staggered we expect as stagger U.S.

Aleksey Yefremov

plant to And up, fence the the you start for like to there the more significant up right number have topic, see other two? might lot any works you on and the could now willing a that staying customers same sign Kingsport well, of who on be be telling do customers if they'd then

Mark Costa

a we mean it's of successful so. examples of having industry whether environmental have carbon and lot this I think efficiency. doesn't content solutions, inventing No, definitely recycled technology or

much sign they cautious prices it's they that So customers reliably available buy want about up going really them. proof to be at are sense and have how to to that until make

that specialties expectations think with in the I already fortunately, selling. contract, confirming we're Pepsi price already so our with market, And the the we're

load the assumption Obviously, us I million this year that. $XX to running our that help demand certainly The will plant. downside, validated, good course, give EBITDA of and this feel and that of But it. is is and once up of we So think lot of there about pent-up upside potential plant the that's weak. a markets part is will around incremental help are

the market. launch at a products And rate in which going at to just are weak there's a so limitation customers

in then so to 'XX million continue we've 'XX. And this the to up have those significant that to first $XX with to a attempted plant with together and appropriate to relative for ramp the you guide which tailwind And net trying do come up in year. this EBITDA will obviously, be for forecast,

Operator

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

Kevin McCarthy

that smoothly Mark, indicated, the such in as million you've you $XX earnings earn level EBITDA, ramp that if XXXX? startup could goes in methanolysis and what become

William McLain

would That's million $XX roughly come Advanced about, in talked highlight What we've Willie. I is Materials segment. Kevin, EBITDA as second will of in half. primarily the this is the

EBITDA think be, a $XX at be than we'll business. greater run we'll rate that So I million as effectively about within where

run connect annual And to strong ultimately, be XXXX exit from EBITDA million think We've $XXX being in to will this got rate we roughly pathway greater then at to as and of able 'XX. an on expect than about even we as exiting them basis. a launches we $XXX 'XX. That brands a brand million facility more

Kevin McCarthy

to if secondly, want Mark, I And back Fibers that. to appreciate I the may, I discussion. come Perfect.

which output that I speak contract, to volume under much so the a Or 'XX. kind is XXXX. through sense you for can a you the get When to lot the confidence of got mean degree under to pricing you've can committed? interesting Just cost? got into the speak think just visibility of it's we being -- and intervals contract you've about that both through around talk trying to the does economics

Mark Costa

Yes.

of sort cost. in the It covers the 'XX both So both. commitments on we have market and is 'XX price and the with

formula, have and and pricing But on energy will in which most the in ranges material. adjust volume. these changes max cases prices then volume they a in include so raw the there's min on right, based -- side, Now a

it's to some if of cost sort So will, you degree. pass-through,

of margins, the of the if If most a formulaically. of all, these some our contracts, nature with we get go costs but it customers. most up, have prices But share a the that of CPT. is raise not we'll So these it, lot we'll tailwind, includes that version pricing

them. to have -- but there's a market bit that's volume accommodate decline in little no, always we the So of that potential with

for part market has that So sort of demand. changes room in

Operator

Alexander Laurence comes Our next of question Jefferies. from

Laurence Alexander

how expected receive this side, is -- had landscape shifts Can plant discuss to that policy you broader policy third what may second incentives might terms of for be you renewable compared the in potential you shifting or and the initially can the incentivizing customers? you on

Mark Costa

Sure.

sets there. different topics two of So

the higher incentives, European impacted Union are the the European that, governments so Union. are the the working CapEx how get what's in has cost. right within prescribed now. about the But the end improvements can't it to We're to talk in of as there we certain have incentives, methodologies and do they around allowed and On it get of some environment finalizing expect the we I inflationary middle

we're about that. good feel at on we where So

there. U.S., When Inflation Act to out the it comes the is Reduction

in discussed call, in do we think quarter we to them. application I As have an the third

that yet plant reward it which We be. notified of investments would not and level the or around will we'll to about amount be allow extremely environmental reward very that capital impressive get for the support be because have the of attractive. what been plant substantial asked that neutral some would a not whether We've carbon

want as because There want They anything that are carbon customers to or don't to XXX% now, a content. want they to close want claim. have And possible. neutral right be bold things as they two less, recycled

being third content. and and neutral, second delivering are plants the of both capable they recycled capable XXX% are so And carbon obviously of

guess sure and the But a So get I there's know are. just what I of politics they attraction We'll it's and political built. kind a lot of to what do. see making interest wait process, to until never and plants want incentives these

European that is it the in attractive the When to for of rules policy comes product. we the policy they're very circular the place as economy, for driving demand finalizing speak, the on

probably a by it's certain XX% capacity industry has that. like targets beverages, mechanically in requires percentage serve So only for circularity to next -- And half the the of it year.

lot need market that demand in a So there's space. of and

And needs be XX% all by content. then recycled packaging to

XX% one no wants I we're every or XXX%. earlier, customer mentioned wants talking As XX%, to

to place the content. that but the definitely to made start requirements, of demand recycle also force requires European people content excess the market. regulatory will the So is probably be from in packaging in there's getting requirements It

a So it allows business. that circular regional to be

of finalized, to this that's point where understand all we still as we're of it. at So be it's but sort headed that for waiting

a U.S. patchwork. The is

point a want economy all language. developing is economy different that state more passing. circular every they is to favorable it of conservative They're states the Half of country So and are sort how circle view the out. very around play

it's everything fits definitions half, the But so the of plastic seen, we've other within waste far, a being a our technology patchwork. The crisis. to solution

Laurence Alexander

that forward over towards as extent productivity what sort incremental next then make and the XXXX, few XXXX start we have to And get productivity would to just difficult looking it you pulled of more years? gains

Mark Costa

-- just general the understand I company sure I'm or... question. about in productivity total I'm -- just sort not Are talking product company talking I the you or Are sorry, about you of

Laurence Alexander

the of recent kind up productivity I in the Yes, been structural you've ramps effort of delivering kind fairly gains period. my is guess that consistently. more impression

we there's so story? to have I'm the of Or curious forward? couple years? another about next piece leg should over Just that thinking next of And you the structural just be productivity things as of getting what's pulled

Mark Costa

Yes.

So we us our 'XX, company extraordinary I productivity else say is through every and we way and think to had and is lost working company, I'd what including inflation that us, COVID and in every 'XX at work happened and everything I through. think home

we just last above you productivity $XXX should cost So inflation start that after we of structure productivity year, inflation This our inflation. went getting year, to extraordinary it get sort some and of we're got million be. where addressing it aggressively offset as of saw, enough to where

million total $XXX spend. offsetting productivity of external So labor of inflation and

more I'd normal say. And so that's what is

in the ability same to invest have that growth to earnings we the deliver every growth, productivity have offsetting have where we're We inflation shareholders and to all the time. year, so at cash

sort we're so of where And at. that's

And volume the where recovery, in The company forward continued so than expect step-up, leverage much going right company should you in more right? than now inflation but category product it's additional productivity, is higher offsetting the for some our is specialties especially value big the per average. the

get success year you get this to in a which is going we're our how lift, leveraging and be cost into leverage, the with So on we've year you certainly, innovation. strategy demonstrated mix you fixed next get lot and volume, of past

Greg Riddle

next question Alex? the make Let's the last please. one,

Operator

from comes for from Tiano question Bank of today final Our Salvator America.

Salvator Tiano

are M&A look it you for here? improving, out specific I are about to landscape. go that now to like the just ask want incentivized What targets? are you things more looks seeing And and finally

William McLain

highlight this Salvator, would with our I think portfolio that What disciplined is we're Yes, Willie. I is, we've shown overall.

your point, business looking a we're space execute priorities As our better always is But standpoint continuing that within be from program. growth our have think the right there's Additives those about bolt-ons, we to coming & rate key would and Materials recovery our probably both and we Products which a changing. for Advanced environment is there's now as segment. deal focus for to on Functional bolt-ons, But organic

Greg Riddle

All us. hope great a right. Thank you you, I have day. everybody, for joining

Operator

today's joining you for call. Thank

lines. may now You your disconnect

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