Good morning, and welcome to the AdvanSix Third Quarter 2023 Earnings Conference Call. This event is being recorded. I would like to turn the conference over to Mr. Adam Kressel, VP of Investor Relations and Treasurer. Please proceed.

Thank you, Alan. Good morning, and welcome to AdvanSix's Third Quarter 2023 Earnings Conference Call. With me here today are President and CEO, Erin Kane; and Senior Vice President and CFO, Michael Preston. This call and webcast, including any non-GAAP reconciliations, are available on our website at investors.advansix.com. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our business as we see it today. Those elements can change, and the actual results could differ materially from those projected, and we ask that you consider them in that light. We refer you to the forward-looking statements included in our press release and earnings presentation. In addition, we identify the principal risks and uncertainties that affect our performance in our SEC filings, including our annual report on Form 10-K as further updated in subsequent filings with the SEC. This morning, we'll review our financial results for the third quarter of 2023 and share our outlook for our key product lines and end-markets. Finally, we'll leave time for your questions at the end. So with that, I'll turn the call over to AdvanSix's President and CEO, Erin Kane.

Thanks, Adam, and good morning, everyone. Thank you for joining us and for your continued interest in AdvanSix. As you saw in our press release, AdvanSix navigated continued challenging market conditions in Nylon solutions in the third quarter while executing our larger planned multi-site turnaround for the year as expected. These factors overshadowed resilient performance within our acetone portfolio and solid results from our Plant Nutrients business in the seasonally slowest quarter of the year and amid lower nitrogen nutrient values and raw material input costs. The nylon environment has been pressured by unfavorable global industry supply and demand conditions for several quarters now and has approached trough industry spreads. In a global macro environment like this, our advantaged integrated business model, efficiency, and diversification serve us well. We have a demonstrated playbook to navigate these dynamics while maintaining our focus on smart, disciplined investments, and a healthy balance sheet which we have established to weather these conditions as reflected in our ongoing repurchases and an increased dividend. In the past quarter, we had three one-time transactions. As highlighted in our press release, supporting our portfolio simplification and execution of our long-term strategies. First, we accelerated our exit from the alliance with Oben, a third-party producer of films for the flexible packaging industry, under previously negotiated terms. This move provides both meaningful economic value and reduces business and operating model complexity while enabling us to focus on our capabilities in resin production and sales. Second, we had a non-cash asset write-down associated with the licensee of certain legacy ammonium sulfate technology, operated at their fertilizer manufacturing facility. The licensee announced its intent to close its entire facility no later than August 31, 2024. And lastly, we made the strategic decision to exit certain low-margin oximes products, namely AAO and MEKO, underscoring our focus on profitability and sustainability. We expect a net neutral impact to 2024 earnings as a result of this exit. Through these actions, we are reducing complexity to ensure our investments and resources are aligned with supporting our customer success in areas of highest impact. This is core to our strategic approach to focus on accelerating profitable growth. We've begun executing to our multi-year expansion in granular ammonium sulfate production through our SUSTAIN program. We also continue to progress on grant funding from the USDA, through the fertilizer production expansion program, which is in the midst of a public comment period to partner with farmers on innovative domestic fertilizer production. We have a proven track record of performance through a multitude of environments. We remain focused on what is in our control, including driving superior operational and commercial performance to meet the evolving needs of our customers, building capabilities to strengthen our innovation and portfolio resiliency, and executing against a balanced and disciplined capital deployment framework. Our organization's collective efforts are centered around driving the best possible outcomes in the current set of dynamics. We believe that the underlying improvements we have made and smart investments we continue to make support long-term sustainable performance and returns for AdvanSix and our key stakeholders. Now let me turn the call over to Mike.

Okay. Thanks, Erin, and good morning, everyone. I'm now on Slide 4, where I'll provide a summary of the third quarter 2023 financial results. Sales of $323 million decreased approximately 33% in the third quarter. Pricing was unfavorable by 32% overall. Now, to break that down, market-based pricing was unfavorable by 24%. This primarily reflects reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen supply environment as well as lower nylon pricing due to unfavorable global supply and demand conditions. Raw material pass-through pricing was also a headwind, down 8% as a result of a net cost decrease in benzene and propylene. Sales volume declined approximately 1% in the quarter. Adjusted EBITDA was approximately $7 million. I will highlight the key year-over-year variances on the next slide. However, I would note that the net favorable $4.5 million pre-tax income impact of the three one-time transactions that Erin mentioned earlier have been excluded from our adjusted EBITDA results as well as adjusted EPS. Included in the appendix of the earnings presentation are the reconciliation and financial details associated with these transactions. Adjusted earnings per share was a loss of $0.36, the effective tax rate was 20.7% in the quarter. We now expect our full year 2023 effective tax rate to be approximately 23%. And finally, free cash flow was negative $4 million in the quarter. Cash flow from operations of $21 million decreased roughly $38 million versus the prior year. Now this was primarily due to lower net income and the impact of changes in working capital, with less cash generated from working capital in the third quarter of '23 compared to the prior year period. Capital expenditures of $25 million in the quarter increased $3 million versus the prior year. Now let me turn to Slide 5. Here, we highlight the key drivers of our third quarter adjusted EBITDA performance year-over-year. We saw an approximately $17 million favorable benefit from planned plant turnarounds year-over-year. As a reminder, this year's multi-site turnaround was primarily centered around our sulfuric acid plant, while last year's larger turnaround was focused primarily on our ammonia operations. In 2024, we'll rotate back to our turnaround centered around our ammonia plant. In addition, plant and SG&A costs were a $6 million tailwind in the quarter year-over-year, driven primarily by lower natural gas utility costs and lower functional spend. In the current environment, we're executing levers in our control, including an increased focus on cost controls. Pricing of raw materials was a roughly $45 million headwind and was the primary driver of the earnings decline compared to last year. Tracking our key variable margin drivers, performance across our caprolactam and nylon portfolio over our key raws was a significant headwind year-over-year. Chemical Intermediates price over raw spread was roughly flat year-over-year as an increase in assets on margin over propylene costs was largely offset by performance across the remainder of our Intermediates portfolio. And lastly, ammonium sulfate on a net price over natural gas and sulfur basis was up year-over-year as the lower pricing was more than offset by a reduction in raw material input costs. Finally, volume and sales mix were approximately $4 million unfavorable in the quarter largely reflecting higher nylon export sales this year compared to last. With softness seen across our key nylon end-markets in North America, we continue to leverage various sales channels to meet demand where it exists, including a higher share of exports. Now let me turn the call back to Erin.

Thanks, Mike. I'm now on Slide 6 to discuss each of our key product lines. We'll dive into Nylon Solutions further in a moment. But the key takeaway here is that the declines we've been experiencing have continued. Global composite caprolactam-over-benzene spreads were down nearly 20% on a sequential basis in the third quarter and are now approaching prior trough levels. In the fertilizer space, we saw seasonal nitrogen fertilizer pricing declines in the third quarter. I would note that ammonium sulfate prices were much more stable than urea prices earlier in the year. So when urea was falling significantly, we didn't see a sharp decline in ammonium sulfate pricing and conversely haven't seen a sharp rebound either. Overall, fertilizer demand remained stable. While global value chains continue to be more cautious in buying forward, our order position is very much in line with historical levels, and we remain confident in solid ammonium sulfate demand as we approach the 2024 spring application. Underlying agricultural fundamentals also remain favorable. From a crop perspective, corn prices have seen some fluctuations with changes in projections of estimated planted acres, but remain healthy relative to historical levels. Pharma profitability expectations have also remained resilient. And while raw material input costs have seen reductions recently, costs remain relatively high in other regions, steepening the industry cost curve and supporting higher overall nitrogen fertilizer prices. So as we've navigated through a multi-quarter reset here and through the third quarter seasonal dynamics in North America, the underlying fundamentals continue to support firm fertilizer demand moving forward. Lastly, in Chemical Intermediates, industry realized acetone prices over refinery grade propylene costs continued to improve year-over-year in the third quarter. While acetone demand has seen softness, particularly into the large buyer end applications, we see supply is generally balanced. This has been supported by stable acetone imports into the U.S. and persistent lower global phenol operating rates on reduced demand into value chains, serving building construction and other industrial applications. We also continue to monitor propylene costs, which declined again in the third quarter on weaker supply and demand. Our integrated operating model continues to serve us well in industry dynamics like these. Now across the rest of our intermediate portfolio, demand has remained soft. For our U.S. amines business, which largely serves the space. We've continued to face destocking headwinds as retailers and growers work through higher inventory. Let's turn to the next slide. We thought it would be helpful to spend a moment and take a deeper dive on the nylon industry given the significant change we've seen over the past few months and the impact it has had on our business. Overall, we continue to see global demand declines across most key end markets, leading to further margin compression in the industry. Here in North America, the higher interest rate environment has unfavorably impacted building and construction markets, as well as consumer spending impacting packaging applications like bone-in meat and protective packaging. In Engineered Plastics, Auto has been a more resilient end market for us. However, the recent auto workers' strike has reduced demand modestly. We continue to leverage various sales channels to meet demand where it exists. It does include a higher share of exports, both Caprolactam and Nylon resin, which does come from a mixed consideration for our performance. Exports represented approximately 13% of our total Nylon solutions volume in the first half of this year and are anticipated to reach approximately 30% in the fourth quarter. This is in line with the progression of the cycles as experienced previously, which have historically lasted 18 to 20 months. Amid the soft end-market demand, increased competitive intensity is impacting global trade flows and pricing dynamics. We've seen China's global nylon exports reach all-time highs as their slower growth economy is leading to increased exports to the rest of the world, including Europe and North America at lower prices. In these regions, both nylon imports and domestic supply have been competing for market share, with regional price premiums experiencing downward pressure from these low-priced import offerings. As you can see from the chart on the bottom left side of the page, the Asia Industry caprolactam-over-benzene spreads are well below cycle averages and are approaching prior trough levels as seen in both the 2015, 2016 and 2019, 2020 timeframe. They averaged roughly $650 per ton in the third quarter. Nylon resin pricing, which tracks as a spread to caprolactam has followed suit. Given the pressure on pricing, we are highly focused on driving productivity to improve unit profitability. We also continue to promote and sell the value proposition of our differentiated nylon products, including our new post-industrial and post-consumer recycled offerings. Let's turn to Slide 8. While future cycles may not be predicted by historical ones, we wanted to give some context and perspective to the industry performance for our key product lines over the last decade. As you may recall, we first presented this view at our 2021 Investor Day and the presentation of these charts is slightly different than our typical quarterly pricing charts. Here, we are sharing industry spreads. Those key spreads that connect to our core variable margin equation for the business. The caprolactam chart represents the Asia import Taiwan caprolactam price less Korea benzene, the ammonium sulfate chart represents Corn Belt ammonium sulfate price less natural gas and sulfur, and the acetone chart is a weighted average margin, assuming the split of acetone large buyer by 2/3 and a small medium buyer by 1/3 over refinery-grade propylene. The cycles predominantly move with supply and demand dynamics and are inherently linked to underlying marginal producer cost curve economics. To note, there have been some structural changes in the market over this period. These include caprolactam and nylon capacity expansions in China and U.S. ammonium sulfate and acetone anti-dumping import duties. As you can see, we have both short- and long-cycle considerations and all cycles do not move in sync. So what does this mean for our business? Despite the near-term challenges we're facing in nylon, we continue to focus our resources and investments in areas of the business with high value and opportunity. We're seeing that play out across our plant nutrients and chemical intermediates product lines, which don't have the same cyclicality profile as nylon. The March of 2019, when our markets were facing a downturn, we continued to make smart investments to position our business for long-term sustainable performance. And we're doing that again now with investments across our IT platforms to support digital transformation, driving further improvements in operational performance and supporting long-term growth through projects like our SUSTAIN program. Now let me turn the call back to Mike.

Okay. Thanks, Erin, and I'm now on Slide 9. We continue to execute to a set of focused priorities to drive long-term shareholder returns by concentrating our resources and efforts around higher-value components of our portfolio. The simplification of our portfolio supports our customers' success in areas of highest impact. As mentioned earlier, we made the decision to accelerate the exit of our alliance with Oben, recording a gain of $11.4 million in the third quarter. Going forward, we will continue to supply resin to Oben while further developing our largest and most strategic customer relationships for growth across the product line. We also made the strategic decision to no longer supply specific low-margin oximes products, namely AAO used for crop protection and MEKO used as a legacy anti-skinning agent for paints. Revenue and profit of these products are immaterial on an enterprise-wide basis, and the market outlook was challenged, particularly given investments required for future environmental compliance and other regulatory pressure. This exit will enable us to leverage a capacity release of caprolactam and maintain a focus on our higher-value EZ-BLOX product, which is a drop-in replacement for MEKO and alkylate paints. We expect a net neutral impact to 2024 earnings as a result of this exit. Simplification enables us to focus our resources in the most profitable areas of our business. A great example of this is in our plant nutrients business. Our plant nutrients portfolio is a market leader and continues to support overall company performance and results. With sulfur demand remaining robust as a key nutrient supporting crop yields, we are committed to growing in this space through our multi-year sustained program. We anticipate reaching a first milestone of 68% to 69% granular ammonium sulfate conversion level by the end of 2024. Now let's turn to Slide 10 to wrap up before moving to Q&A. As we look forward, we are operating in a challenging macro environment, particularly as it relates to our Nylon Solutions business. Global PMIs remain in contraction. Building and construction indicators remain subdued. Higher interest rates have impacted a number of consumer-oriented end-markets and geopolitical risks have heightened uncertainty around the world. Now more than ever, the strength of our business model and our position as a diversified chemistry company will serve us well as we navigate the current set of dynamics. We've been here before and have proven that we can successfully deliver for our key stakeholders, including customers and shareholders. While we expect nylon industry margins to remain at prior trough levels through year-end, we do expect more favorable fundamentals for plant nutrients and North American acetone to continue. CapEx for the full year 2023 is tracking to approximately $115 million, which reflects increased spend due to critical infrastructure, other maintenance, and growth in cost savings projects. We're committed to driving the best possible outcomes in the current set of industry conditions and executing levers in our control, including a rigorous commitment to operational excellence, remaining disciplined on cost, optimizing working capital, and making smart investments to drive higher returns. Now with that, Adam, let's move to Q&A.

Great. Thanks, Mike. Alan, can you please open the line for questions?

Our first question comes from Vincent Anderson of Stifel.

On the open partnership or alliance as you call it, just wanted to get into the specifics on that because it sounds like you exited the partnership, but you're recording a gain. And then what specifically is the plan right now for maintaining your footprint in films given that, that alliance was entered into to cover the closure of your Pottsville operation?

Yes. We're certainly happy to add some more color here and clarity. So what we are essentially doing here, Vincent, is transitioning the sales and distribution aspects of our alliance to Oben, right? They are peers in the film packaging business here, we will maintain our supply of resin to them, but it's really that. So if you think about the alliance, we were producing resins, they were producing the films, and then we were bringing back and providing the sales and distribution in North America. So it's really that last piece that we are transitioning. And as a result, this was a potential contemplated exit in our original alliance agreement. And so we've moved forward on that transition, maintaining our partnership with them on resin supply. That's where our core capabilities are, and still maintaining access into that BOPA market. If you think about packaging for nylon 6, it's about 10% of demand; our profile of sales would mirror that sort of rate. And so again, here, it's really just that end piece of the alliance being transitioned and fully over the next two years, we will fully transition out.

Okay. All right. That helps a lot.

I would also like to point out that we are collaborating with them to continue exploring opportunities in PCR and PIR, as well as co-branding. It's important to consider how the mechanics of the alliance are functioning compared to moving away from a significant market that is crucial for us.

And that actually kind of leads into my next question. So that's helpful. So as I think about this down cycle in Nylon and Capro, how it might look relative to past cycles, I was hoping you could comment specifically on that new recycled content product with regards to whether you think that can be commercialized in a way that helps keep your mix of nylon versus probably your lowest margin product being flake Capro exports, keeping that mix meaningfully higher than in past downturns.

Certainly, we are utilizing every strategy at our disposal during this downturn. I want to emphasize that we are focused on the 18- to 20-month timeframe as we approach the mid-cycle range, and we are currently about 12 months into that period. Our PCIR, PCR, and PIR initiatives are gaining traction; we have the potential to sell 10% of our total resin capacity, which is certified. We are actively working on the launch and customer interest is growing. Additionally, there are positive signs for our packaging customers as well. Overall, this sector is seeing increased attention as various companies evaluate the value proposition throughout the supply chain, and we are certainly giving it significant focus.

Okay. So progress, but maybe next cycle to see a full benefit?

I think, yes. I mean, I think we are pushing it. And again, we have that 10% opportunity. We have interest from customers. It's really now moving forward to get adoption and being able to sell that value proposition all the way through. And we can see up to a 20% premium, though not across all end markets just yet, but we're moving in the right direction here.

And then just last one. I wanted to ask about the low-margin oximes. If I'm remembering the correct collection of pipes and valves that hold well, I think you said you were pretty footprint limited with regards to your ability to further expand your EZ-Blox capacity. So I'm curious if this exit maybe frees up some space longer-term to consider additional capacity of EZ-Blox?

Yes. We are not capacity constrained at this time on EZ-Blox and so we have continued runway to allow that particular product to continue to progress. So again, these others in the portfolio, obviously, EZ-Blox is a drop-in replacement for MEKO which had a challenged outlook as did AAO. So it was the right time and intersection of sort of market considerations and decision points to go ahead and just pull the trigger on that exit for us.

The next question comes from David Silver of CL King.

Thank you for the additional detail on the nylon and caprolactam fundamentals; I appreciate it. I've noticed the ongoing decline in the caprolactam benzene spread. My assumption is that AdvanSix's advantage over the typical global benchmark producer has likely widened over the past nine months. Although the spreads have narrowed in absolute terms, the gap between AdvanSix and the average global producer may have increased due to your greater exposure to fertilizer and a more favorable raw material position. Is that accurate? Also, have we seen any reactions beyond the competitor that reduced some capacity in Europe earlier this year? Have we reached a point where more increments are being taken offline or are there other visible signs of distress?

To provide some broad context for operating rates and explore the dynamics, North American producers are indeed in a stronger position, and we continue to hold our leading cost position in caprolactam. When considering global operating rates, the Americas are estimated at about 84%, Europe is struggling around 40%, China is operating near 70%, and the rest of Asia is between 55% and 60%. In these downturns, we've seen sub-scale capacity and smaller plants on the higher end of the cost curve close down, including operations in Mexico and under-pressure plants in Japan. Europe is significantly feeling the impact as well. Since the start of the year, there has indeed been a flattening of the value chain. Additionally, in these cycles and downturns, trade flows have shifted notably, with exports from China leading to a loss of a disciplined approach to marginal producer economics, which creates additional pressure. The global composite may hold steady for a while, but as these factors come into play, shifting trade flows and lower-priced imports lead to compressed premiums, which we have witnessed throughout this year. I hope this gives a clearer understanding of how these dynamics are evolving.

I'd like to maybe just shift over to the fertilizer side of things. I did take note of the earnings release for one of your major competitors in nitrogen fertilizer here. And I would say that the tone of their release was pretty upbeat, all things considered. And in particular, they talked about a very busy order book for this period of the year. So I was just wondering if you could maybe comment on how you see the order book for your next quarter post-harvest and maybe early spring, if that's relevant. But how is your order book developing on the ammonium sulfate side here?

Yes. I can reiterate that our current order book is robust. It would be consistent with historical levels. Certainly, we think about where we've been over the last couple of quarters, we're getting this reset off of very high nutrient values kind of resetting as we had said, as we come through, the supply chain was in a good spot post the spring season. We've progressed through that reset into fall fill based on the new sort of environmental context. And so we are happy with our order position and I think have continued to set a good order rate through fall. And we believe that as we head into spring, things will continue to be robust. And I would note as in our public postings that we have continued to take prices up several times from our fill levels. So we're progressing through the new season as expected.

Okay. Very good. And then maybe one last question. More broadly about your Chemical Intermediates portfolio. I'd like to discuss not the acetone, but the rest of the products in that category. In particular, I’m interested in the products you have taken control of through the U.S. Amines acquisition. Generally speaking, the specialty nature of many products tends to be most evident in softer economic conditions. This means it is easier to maintain prices and margins when the market fundamentals are reasonably balanced and tight, especially given the current prolonged softer industrial environment. How would you assess the overall demand and margin resilience of your broader chemical intermediates portfolio right now? How sturdy or resilient would you say the broader chemical intermediates portfolio, including U.S. Amines, has been?

Sure. If we think about the areas of intermediates, certainly in the higher-value applications and higher-value end products. We think of things like Nadone going into electronics and specialty solvents. And as you mentioned, we think of the U.S. Amines portfolio like you also called out. And certainly, I would say there, the dynamic is just as you would say, the pricing and the margins are resilient and do hold up because the value proposition of the chemistries is such as that. What we are seeing is more of the demand decline impact here. And so we think about the Ag chemical space for U.S. Amines, selling through into that chain. Volumes are down about 30% from the 5-year average cycle. So that does have an impact, and it's mostly the destocking associated with last year's season that continues to play forward. Whereas in a product like Nadone, that's just more general, sort of consumer and demand considerations and cycles there. So I think you're right here where our overall results, you see a large pricing and not so much of a volume consideration on our large-scale product lines, these more specialty ones, the pricing holds, the margin holds, and we're seeing more of that demand impact.

Our final question comes from Charles Neivert of Piper Sandler.

I have a quick question. When examining the earnings distribution across the different segments, it seems that the nylon/Capro area has had the most significant impact, while the other two segments have remained relatively stable. If we consider approximately $35 million of EBITDA excluding the turnaround, how do you assess the current distribution compared to a time when performance was significantly better? If I take that $35 million and divide it evenly among the four major segments you report, that would be around $8 million or $9 million each. How does the current situation look in terms of segment distribution, and how does it compare to a more typical situation regarding profitability?

Yes. I think the themes are quite consistent. We shared the year-over-year details, highlighting that price pressures for nylon are the largest year-over-year challenge. In contrast, the price pressures for ammonium sulfate, when accounting for natural gas and sulfur, are actually positive year-over-year, while the intermediates have remained relatively stable. So, it's primarily a nylon issue. Compared to a more typical performance, nylon's contribution is a bit lower due to these pressures, compared to other product lines. On the other hand, acetone has been performing well, contributing a significant margin, even with the adjustments we've observed from the first half to the second half of the year and experiencing more pronounced seasonal effects. Nonetheless, it continues to deliver solid returns and strong income performance for the business.

Then when I look at ammonium sulfate now, sales going forward into next year, those are largely going to be U.S.-based sales as opposed to Lat Am, which is sort of the off-season sales. So we've now sort of shifted over to predominantly U.S. and therefore, more granular in the mix?

Yes. I mean certainly, when you think about the first half sales, right? It does have that geographical consideration of more sales into North America because that's the primary season and as you say, the granular piece, which is an important view as we continue to grow our granular conversion from 65% upwards to another 3% to 5% targets here for the year.

Regarding sales, there is a premium for granular products compared to standard grade, and you are starting to sell more granular products in non-U.S. markets. Is that still maintaining a similar premium over standard grade? The price points might be lower, but is the premium still present in non-U.S. sales?

Correct. It's important for us to consider this. Most of our additional sales from the expanded granular conversion programs focus on targeting growth in the U.S. Sulfur nutrients continue to see growth here. This is primarily aimed at supporting U.S. farmers and enhancing U.S. productivity. Therefore, we expect that the main market will be located here.

And then two more quick things. Can you give me some indication about your operating rates globally? Are you in line with the U.S. operating rate, or are you a little bit better? In the Capro area, are you performing a bit better than the operating rates in the U.S. or a little bit worse? Where do you stand?

Yes. On Caprolactam rates, we continue to progress at or slightly above, depending on how we're running. But that's always been our opportunity set, Charles, as you know, that we have that opportunity set given the global cost position. It can fluctuate, like I said, with the planned turnarounds and other considerations, but that's always our target, and we're holding in there.

Got it. My last question is about the Nylon side. With all the exports from China, do these products compete directly with the nylon versions we produce? Are they mostly at the commodity level, affecting prices across the board and impacting our volume? How are they competing in the market? I doubt they can match the higher-end grades typical North American producers achieve. How do you perceive their products in the marketplace? Are they just commodity grades that are driving prices down, or are they taking market share from others? What’s the situation there?

So we do see the exports from China and broader Asia, right? As the trade flows have shifted here, I would say that their offerings are primarily looking to compete strongly in Engineered Plastics, right? So these are compounding resin offerings. And so if you think about just with the trade flows, just with where they're willing to offer, again, and losing a bit of the discipline to the marginal producer cost dynamic in a stronger market, that just kind of pulls pricing down across the board creating that pressure to regional premiums. And that's mostly the dynamic that we have on packaging and fiber and filament; we do have an edge in quality, and that helps a bit. But certainly, just overall pressure on the pricing side just exists with this dynamic.

Once again, we have David Silver from CL King.

Okay. Just one last question. I'm interested in your thoughts on M&A opportunities. In your release, you mentioned portfolio simplification in the current weaker environment, and it seems like many other companies are doing similar things. In such an environment, a business that isn't a perfect fit for a larger organization might align well with what you're doing in specialty intermediates or other areas. You've kept a strong balance sheet during this time. How do you view the potential for acquiring additional products or product lines that could enhance your breadth, geographic positioning, or production assets? Are you planning to continue refining your own portfolio, or do you see potential opportunities in the market?

Certainly. I might start with contextually, right? Our capital allocation approach and priorities remain consistent, right? And we're committed to leveraging and using the disciplined approach to allocation to deliver strong and sustainable CSR over the long term. So as noted in our action, certainly, we want to make sure that first, we are making smart decisions on our portfolio, and there are opportunities to continue to reflect and refresh those views. Our base CapEx is important in that run and maintain HS&E capital to sustain the business. Our growth and cost savings CapEx investing in ourselves is always a great place, and you see that in our commitment to the SUSTAIN program and plant nutrients overall, given its profile will continue to be an area where we look to accelerate our profitable growth opportunities. We have a return of cash to shareholders as you say. Accretive M&A has always been part of our framework. And certainly, it is an area where we continue to evaluate opportunities this is an interesting time relative to that. But I think certainly, we are not the only company, right? Who reflects on their long-term view what's right in the fit of the portfolio and where the opportunity sits. So we have a framework; we continue to look at opportunities again for value chain integration, where we can drive profitable growth in molecule and product upgrades. Again, broader expansions with bolt-ons, things that will leverage our core strengths and expertise to strengthen our core geographic positions. And so these are things, but certainly making sure things are free cash flow accretive and fitting our financial profile of the future is important as well. So we continue to look, but certainly navigating and pulling through and investing in ourselves is core through this down cycle and ensuring that as we come out of it, that we have continued to build a stronger business that will perform with higher through-cycle profitability and a larger base to grow from.

This concludes our question-and-answer session. I would like now to turn the conference back over to Erin Kane for any closing remarks.

Thank you all again for your time and interest this morning. While there are puts and takes across our end markets and broader macro uncertainty, we are focusing on executing what is in our control. We have a demonstrated playbook and track record as well as a healthy balance sheet to navigate these dynamics, and we'll continue to position our business for long-term sustainable performance. With that, we look forward to speaking with you again next quarter. Stay safe and be well.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.