Thank you, Kevin. Welcome to the Celanese Corporation fourth quarter 2022 earnings conference call. My name is Brandon Ayache, Vice President of Investor Relations. And with me today on the call are Lori Ryerkerk, Chair of the Board and Chief Executive Officer; and Scott Richardson, Chief Financial Officer. Celanese Corporation distributed its fourth quarter earnings release via Business Wire and posted prepared comments on our Investor Relations website yesterday afternoon. As a reminder, we will discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both press release as well as prepared comments. Form 8-K reports containing all these materials have also been submitted to the SEC. Since we've published our prepared comments yesterday, we'll go directly to your questions. Kevin, let's go ahead and please the line of questions.

Yes, good morning, Lori. Thanks for taking my questions. So, look, obviously a lot of moving pieces out there, but the tough first quarter outlook for a $1.50 to $1.75 of EPS makes the full year call for $12 to $13 look like a pretty chunky jump. I guess, can you help us to bridge that jump in earnings and help us to understand what some of the big buckets are that you expect to turn up or take a noticeable step-up?

Thanks, John. Yes, we recognize that it appears to be a significant increase. However, let's break down the numbers. We need to achieve around 350 over the final three quarters of the year to meet the $12 to $13 guidance. While that may seem like a large leap, it's familiar ground for us, as we've reached that level in every quarter over the past two years, except for this one. Looking specifically at the jump from Q1 to Q2, starting with Acetyls, I anticipate a $50 million to $100 million increase in Q2 compared to Q1. Regarding natural gas, prices have notably decreased toward the end of Q4 and in Q1, particularly in the U.S., which benefits our Acetyls segment. Our largest plant in Clear Lake and other facilities in the U.S. are advantageous due to this lower pricing. With the high costs of coal in China and stable crude oil prices, our U.S. production margins are positively impacted. If natural gas pricing remains steady through Q2, it could contribute more than $20 million to our second-quarter earnings. Additionally, we have the Frankfurt VAM restart occurring earlier than expected due to favorable trends starting in March. In construction and paints and coatings in Europe, we are seeing a quicker recovery than initially anticipated, contributing another $10 million. Moreover, we expect standard favorable economics in Q2. We believe destocking is largely complete, and with improvements in global construction activities post-Chinese New Year, we anticipate a volume rebound. We experienced high productivity levels last year, and we expect to maintain similar productivity rates this year, boosted further by M&M on the Emerging Markets side. We feel confident about our position with current energy pricing, suggesting we may be at the higher end of the anticipated Acetyl increase for Q2. Turning to Engineered Materials, Q2 typically sees stronger performance too. Similar to Acetyls, we've experienced a significant drop in raw material costs in Q1, extending into Q2. This decrease in costs allows us to replace higher-cost inventory with lower-cost options, resulting in a projected $40 million lift for the combined EM and M&M portfolio in Q2. We've also seen destocking come to an end at the conclusion of Q1, with strong improvements in our order books evident in March. Orders that typically would have stopped are still coming in for February deliveries, which is unusual for this time in the month. Our March order book for both legacy EM and M&M businesses has filled up similarly to March 2022, signaling a demand recovery as we transition through February into March and indicating continued growth into Q2. We are witnessing slight improvements in automotive production, where order patterns are normalizing and destocking has ceased. We are optimistic about an increase in EM ranging from $50 million to $100 million and expect further synergies from the M&M acquisition, potentially providing an additional uplift of $10 million to $20 million in Q2, alongside ongoing productivity improvements. Consequently, we feel confident in the Q2 guidance we provided, taking into account current material costs, energy pricing, and market recovery as reflected in our March order books.

Got it. That's hugely helpful color. And then I guess just as the follow-up, just maybe a quick one on the debt redomiciling, it sounds like you're kind of part of the way there now, I guess. Can we think about all of this being done by the first half of the year? Is that the right way to think about it? Or you guys waiting for something in particular to maybe change in the markets like, I guess, how should we think about that because it does seem like the rates are lower as you're starting to refinance some of this debt out?

Yes, thanks, John. I believe we’re going to be strategic here. We are looking for the right opportunities as currencies are trending positively. We preferred not to make changes when the dollar was at its peak strength, as that would have worked against us from a debt standpoint. We will continue to pursue the right chances and are aiming to complete this in the first half of the year. However, depending on currency movements and the dollar's status, it might carry over into the early part of the second half.

Thank you. Good morning, everybody. Lori, in your prepared comments you talked about some of the competitiveness on the EM side. I think it was specific upon imports from or exports from Asia into Europe, et cetera. How do you see that dynamic playing out, you know, as the rest of the year unfolds, is it as simple as China reopens and there's more localized demand and so that takes care of that or what are you thinking about at this point on that?

Yes. Thanks, Ghansham. Yes, look, you're exactly right. I think there's two factors and we're really starting to see. Early in first quarter, we still had some material moving over from Asia, we expect that will be mostly done in the second quarter and for the two factors, one, that you called out. As we see demand picking-up in Asia, there's less incentive to put things on a boat, move it to Europe. But secondly with these low-energy prices that we're seeing and the ability to replace our higher-cost inventory with lower-cost inventory, that's resulting in better pricing for our European customers and so the arbitrage we expect will be closing here at the end of the first quarter and into the second quarter. And so that I think really helps restore the supply demand dynamics. That of course, we are seeing much higher demand now starting to really seeing demand pickup in Europe here in March in particular and we expect that to continue into the second quarter. So with higher demand, lower pricing for the customers because of energy and raw material costing and then higher demand in China making it less attractive to ship across. We think those three factors actually combined should resolve the situation in the second quarter.

Okay. Great. And then in terms of the sort of the macroeconomic construct, so China you touched on in terms of momentum, just given the sequence of events there. Europe, you just touched on that as well. What about North America as an offset as it relates to slow down sequentially, how do you see that evolving in '23?

Yes. So I would say, North America has been a bit sluggish in the first quarter. So far we've seen more recovery in Europe as we go into March than we have so far in North America. But we don't have any reasons to think North America also isn't going to get there in the second quarter. I mean, auto builds are strong, we see signs that the destocking is over. Again, natural gas pricing in the U.S. and raw material pricing should expect North America to come back strongly as well.

Thanks very much. Can you tell us what the EBITDA of the M&M business was in 2022? And in the old days I think you guys thought it was $900 million in EBITDA. And plainly, it's operating at a much, much lower level. Can you diagnose what happened that is through these structural problems or raw material problems? And how much of the nylon is sold at monthly contract price and you know right now of that M&M business?

In 2022, we initially anticipated that EBITDA for the M&M business would reach around $500 million, but due to various challenges at the end of the year, that figure ended up being somewhat lower. We had originally expected M&M to return to $800 million, a more typical level, but now we project it to be around $700 million for next year. Several factors contributed to our results in 2022. For instance, despite a decline in demand, they continued production under a take-or-pay contract for raw materials, which resulted in excess inventory. High raw material costs also compressed margins for nylon in the M&M assets. Additionally, we observed significant demand reduction, particularly in Asia for standard grades. As we discussed last quarter, M&M aimed to maintain margins but ended up sacrificing volume on standard grades by holding prices steady while others were lowering them. They also missed opportunities to increase prices on premium grades despite rising raw material costs. We have been addressing these issues over the past three months, focusing on enhancing pricing for different grades and increasing volume on standard grades. Our team has put considerable effort into the product pipeline and cross-selling strategies. We believe that with these efforts, we can return to an EBITDA run rate of $800 million by the end of 2023. However, it will take some quarters to gain traction. As for the contracts, I'm not certain about the exact percentage of M&M contracts that are monthly versus those with longer durations.

To achieve the $700 million in EBITDA this year, you'll need to average around $200 million for the second, third, and fourth quarters. How do we increase profitability from 80 to 90 to that $200 level? How can this be accomplished, particularly considering that consultants indicate overcapacity and margin pressure in the Nylon 66 market? Is the environment becoming more challenging, or is it your own innovation and business changes that are driving improvement? What dynamics are contributing to this growth despite a potentially adverse environment?

Yes. A significant part of it is capturing synergies. Currently, our outlook is at the upper end of the $100 million to $135 million range for synergies, and we have achieved about $10 million of that. We anticipate gaining another $10 million in the first quarter, which leaves us with $120 million to achieve over the next three quarters, averaging about $40 million per quarter. While it may skew towards the latter part of the year, we are looking at an average of $40 million from synergy uplift. That positions us in the $120 million to $130 million range. Additionally, we are experiencing a recovery in volume. As I mentioned, our March order book for M&M is back to the levels seen in March '22, which was a stronger period. We've seen volume recovery from Vital, especially in Asia. Auto builds remain consistent, though not yet back to 2019 levels, but they are steady. We are managing to push pricing on differentiated products alongside this volume recovery. Moreover, in terms of regular productivity at our M&M plant—not synergies—we expect to contribute another $40 million to $50 million this year. Considering all these factors, particularly the volume recovery, M&M faced similar challenges in the fourth quarter and early first quarter due to destocking and seasonal slowdowns, but we are seeing them rebound as we move into March and the second quarter.

Thanks so much.

Hi, thanks for taking my question. I guess, first, I wanted to ask on the joint venture. Can you talk about how much cash you'll be getting into from that combination? A bit confused by the comments in the release about 0.7x leverage reduction, 12 months post close, if that's related with that or not? It seems like a big number, if it is. So can you clarify?

Yes, we expect to net $400 million to $450 million for debt reduction from the food ingredients deal. We are very excited about this agreement and the joint venture structure we’ve established with Mitsui. Additionally, we announced the extension of our joint venture for the Fairway Methanol project, which has been valuable for us. Mitsui has been an excellent partner, and this relationship has been beneficial both financially and strategically. The food ingredients deal adds to the strong relationship we've built over the years. Although the product isn't a core part of our portfolio, it is integral to our operations in Frankfurt. Through this joint venture, we will benefit from Mitsui's expertise in food and nutrition, enhancing our marketing efforts. We will also integrate into our acetyl chain, contributing acetic acid and crotonaldehyde to the Fairway joint venture. The continued operation of the joint venture will create manufacturing synergies and strengthen our partnership. We anticipate significant growth in the food ingredients market, particularly in sweeteners. Given that we are one of the few Western companies producing this type of sweetener, we foresee positive trends in volume, demand, and pricing. In summary, we expect to pay down another $400 million to $450 million of debt due to this joint venture.

Yes. And then, Josh, with regards to the covenants, the way our covenants are structured is gain on sale of assets is included in EBITDA. And so because this has a very low book basis, and while it's an efficient transaction, that $450 million will be largely gained. So you get the gain that goes into the EBITDA piece, using then the cash proceeds to pay down debt at the same time. And there's a partial offset, obviously, in EBITDA from the 70% that would go to Mitsui. But that math then works out to be because it's in EBITDA, about a 0.7% reduction for the debt covenant purposes.

I appreciate that. Could you clarify whether you will exclude that gain from your adjusted EBITDA? Is it considered in the debt accounted for EBITDA? Additionally, in your comments regarding free cash flow, you reiterated the $1 billion plus. Can you provide an estimate for the core free cash flow you expect at this point, including some details on the movements in working capital, restructuring, and other factors?

Yes. So for adjusted EPS, we will go ahead and exclude that gain as we do have past transactions. And then on free cash flow, we had previously said $1.5 billion of free cash flow, which included about a $200 million improvement overall in working capital. If we see that same $200 million improvement in working capital and we saw inventories move up a little bit just with the lower demand in the fourth quarter, then we would see free cash flow likely a little lower than that 1.5 billion just because of the lower earnings that we have. So we're still working through kind of exactly how the working capital will play out this year. But if we see something in that range, we would expect to be a little bit lighter than the $1.5 billion.

Great. Thanks. Good morning, guys. First question on pension. Your $12 to $13 a share EPS guide, I believe, includes $100 million hit year-over-year on pension. When you talked last quarter about $13 to $14 a share, how much pension were you impact are you expecting at that time?

Yes. Thanks, Mike. So I'm actually going to kind of put some of the other buckets in here that change from our previous $13 to $14 guidance. D&A actually came in about $75 million better than we expected, but it was eaten up by a pretty good chunk by that pension. So kind of approach that amount. It's a little lower than that 75%, but it was approaching that. And so I think when you kind of largely neutral those two things together, but it was in that range.

Got it. Okay. That's helpful. And then maybe just more of a segmentation or clarification question, but it seems like M&M EBITDA, if I'm reading correctly, is sort of allocated between earnings and EM and from centralized or other costs and other. So if you do deliver, say, 7.25 EBITDA from the M&M business this year, is it correct to interpret that we'll actually see it reported at something like 8.25 or so higher in EM EBITDA, but also, I don't know, $100 million or so higher other costs to offset that. Is that the correct interpretation?

Yes. I think that's right, Mike. It's certainly in that range. I mean, at the end of the day, we need to get no matter what bucket it's falling in, we need to go deliver the EBITDA over time that we said this business would deliver. So it is about getting the base business back up into those ranges that we had originally set at the time of the deal in that $800 million EBITDA, including the other costs in there and then driving synergies on top of that. So this year with where demand is at, given some of the higher cost inventory that had to be worked off at the beginning of the year, it's going to be a little bit lower. But then building that back and then putting synergies on top of that is exactly what Tom Kelly and the team are focused on.

Hi, good morning, everyone. Just a quick clarification around the subject made on the prior question. For M&M in the fourth quarter, you had guided to $50 million to $60 million of EBITDA. And then there are kind of two numbers discussed in the prepared remarks, one is 56, one is 39, which is the actual apples-to-apples comparison, the 39 or the 56?

It's a 39.

It's a 39.

Okay. And then if I could ask this is the first quarter I can remember and I don't know how long where your volume in automotive was below build, and that takes us through a variety of good batter and different auto environment. So I just if you have any further color on sort of why that happened, because like I remember other times where things were tough, but your team found a way to your innovation or your activations or what have you. So what happened this time that was different?

So actually, Vincent, the fourth quarter of 2021 was very similar to this. We faced the same issue, coming in lower than expected builds due to destocking. Several factors contributed to this situation. As the year ended, people aimed to improve their working capital metrics, leading to increased destocking. Prices were declining due to lower raw material costs and falling natural gas prices, which boosted confidence in future pricing. Consequently, people anticipated lower prices and opted to reduce their inventory. Supply chain issues were largely resolved globally, contributing to greater confidence in material availability. As a result, there was significant inventory buildup in 2022 because of concerns over resin supply. Looking ahead, people seem to feel that supply chain problems have largely been addressed. Thus, the situation at the end of 2022 mirrored that of the end of 2021. However, one difference was that the fourth quarter of 2022 was somewhat more significant in scale, mainly due to Asia. Typically, we see a strong performance in Asia during the fourth quarter leading up to the Chinese New Year, but this year was slowed down by a resurgence of COVID. Additionally, Europe experienced a slowdown due to ongoing economic challenges. Nevertheless, the underlying dynamics were quite similar, and the reasons behind destocking were akin to what we experienced at the end of 2021. January started slowly, but we have observed improvements as we've progressed through late February, with order books looking consistent with March 2022 levels for March 2023. Overall, we believe we've moved past these challenges and are now following a more stable path, where we expect to meet or exceed our targets, as we typically do. Our teams are skilled at pushing more volume into the market at high margins, and we feel we're back on that track as of March.

Okay, thank you for all the detail. I appreciate it.

Hi, good morning. If I did the math for '23 for adjusted EBIT for EM, it looks like you need to be between $12 and $13 and an acetyl chain, $13 to $14. But I guess my question is, if we think about where they could be longer term, maybe '25, '26, where do you think EM should be able to get to? And then if the $13 to $14 is the new foundational, what would the mid-cycle acetyl chain potential be couple years out?

That's quite a few questions. Let me try to break it down. Looking at 2023, there are several paths to achieving the $12 to $13 range, influenced by energy pricing and other factors. Moving forward, including 2023, we expect equal contributions from EM and acetyls over the next few years. This year might see acetyls perform slightly better than EM as we work on restoring M&M-based earnings and capturing synergies. However, I anticipate that over the next several years, their contributions will be roughly equal, especially with the Clear Lake project coming online this year, which will add another $100 million to acetyls, along with VAM expansions and other initiatives. At a foundational level, we estimate earnings to be around $1 billion to $1.1 billion. This estimate predates Tow, which we expect to be at or above the $2.50 target mentioned during our Investor Day in 2021. This suggests a range of $12.5 to $13.5, consistent with the figures you've seen. Additionally, the Clear Lake contribution will add about $100 million on a fullyear basis. Thus, that's our foundational earnings level. We continue to operate with high-capacity utilization in acetyls despite market softness. In the fourth quarter, our utilization was 70% in China and 90% globally, which is still quite robust. However, we might experience some volatility in acetyls as the market quickly reacts to outages, whether planned or unplanned, and fluctuations in raw material pricing. I cannot specify the mid-range, but in acetyls, we've observed that prices can spike significantly in a short time in response to changes in the market.

Good morning Lori. Lori, obviously in the prepared remarks, a lot of commentary around destocking, restocking and the like, I was hoping you could give us some historical context as you look at your portfolio. In terms of destocking, historically, how long you have your destocking cycles lasted? What did the restock look like once the destocking was over and the like? I'm just trying to get some sort of perspective in terms of where inventory levels are right now, what the bounce back could look like and the like?

Yes, so I would say, historically, we've seen destocking last kind of a quarter, especially in EM, maybe a little bit less in acetyls because they don't have as much inventory. And I would say - I wouldn't even say we're necessarily seeing restocking at this point. I would say we're seeing a return to normal levels of demand. Typically, when we see restocking is when prices start to go up and people start getting worried that prices in the future are going to be higher than they are today. So they take the opportunity to build inventory in advance of an anticipated price increase. Again, as I said earlier, I think with where we are today, where raws are down, natural gas is low, the anticipation in the market is that prices are going to go lower or stay low. And so, I don't think we'll really see restocking until we see a turn up. But we do see a return to normal levels of demand starting now in March.

Understood, understood. And as a follow-up, on the acetyl chain side, you guys talked about how pricing through the quarter was Chinese pricing at cost curve levels. Yet despite that, you guys, obviously, idled some facilities, yet you generated around 25%, 26% EBITDA margins. So I'm just trying to get a better sense of Celanese's cost curve positioning as it sits right now?

Yes, so I think there's, a couple of components to that. I think, in China, specifically, while I believe throughout the end of the fourth quarter and into the beginning of the first quarter, we were at the cost curve in China in terms of the industry, our cost position is a bit better than that. And it has to do with the scale of our operations, the technology that we have and therefore, improved cost bases we have versus the vast majority of the producers in China. So, we continued even when the rest of the industry was at the cost curve to make even a small amount of margin in China. And then, of course, we're benefited by the fact that we have a very large facility in the U.S. Gulf Coast. So when we saw natural gas prices coming off in - towards the second half of the fourth quarter and as we've gone into the first quarter with low natural gas prices. That is a, big margin uplift for us versus people who are producing out of coal or even crude at these kind of prices, and that opens up windows for us to move material to Europe and other parts of the world out of the Gulf Coast. And so, I think it is that global optionality that we have, that global footprint as well as the optionality we have to move things up and down the chain that really allow us to continuously deliver high level of margins from what some might consider commodity business. It certainly does not give commodity returns.

Yes hi, good morning Lori and Scott. Lori, do you have a long-term view on the competitiveness of your European assets? And what I mean by that is European VAM capacity was shutdown. Is that the marginal capacity that goes in and out with the market, like what Singapore plant used to do in acetic acid? Can you just take a step back and explain to us sort of the marginal capacity in Europe and your plans there?

Thank you for the question, P.J. To clarify, the decrease in VAM production in Frankfurt was due to a significant drop in demand at the end of the year, not because it was unprofitable there. In December, VAM demand was more than 50% lower compared to the third quarter, resulting in considerable demand destruction during the fourth quarter due to pricing issues, weather impacts, destocking, and other factors. However, we could have produced VAM profitably since it is usually not one of our more expensive production facilities. Given the high pricing in Europe last year and the reduced global capacity, it made sense to temporarily shut down that facility, which faced challenges due to energy costs, and shift production to locations with lower energy expenses. We are now restarting production, and the March order book for VAM in Europe is the strongest we’ve seen in six months. Currently, the order book is around 85% of what it was in the third quarter, which justifies resuming VAM production. With lower energy prices, Frankfurt is no longer the highest-cost option. This flexibility of our global network allows us to adjust production based on cost competitiveness and demand, which favored Frankfurt last year, though this could change in the future. This optionality globally is something we value greatly.

Great, thank you. And then on M&M, it seems like it was really under managed in the last one year of ownership. Do most of M&M's issues are residing more on nylon area? And can you upgrade the M&M portfolio? Because I think you had more EV exposure than them. And so is there a natural upgrade there? Thank you.

Yes, so I would say if you look at the portfolio from M&M, certainly, nylon was the most challenged. I think elastomers was more robust then. And even within the nylon portfolio, high-temperature nylons and some others didn't see the impact. It was more, I would say, in Zytel and the PA66 line. And as we've called out before, I mean, there were many issues around decisions being made around pricing, both positive and negative, maintaining volume in standard grades and those sorts of things. And there were very high raw material costs and a take-or-pay contract that requires them to take us. So, I think there's just a lot that went into that underperformance in 2022. But the good news is these are things that are fixable. And this is what Tom and his team have been working very hard on in the last three months is moving the pricing, getting the inventory down in the fourth quarter, which certainly hurt us in the fourth quarter that will help us now as we go forward in 2023 and are able to sell lower cost basis inventory, more in line with pricing. So, I think the good news is going forward, this is all stuff that is fixable, and we are working rapidly to do so.

Yes, the earnings power of this combined portfolio hasn't changed from when we announced the deal a year ago. If anything, I think it's - we're even more convicted around that going forward. There is, near-term challenges. And we've been, over the last several quarters, very clear about the disappointment and the performance. And it is requiring a big lift in the near term, but the long-term earnings power of these combined portfolios and combined with the acetyl chain, as you look out three to four years, is very substantial.

Yes, good morning. Lori, can you elaborate on the 1.3 million ton expansion of acetyl capacity at Clear Lake. What are you baking into your numbers with regard to timing of the start-up and operating rate given the current market conditions? And then any thoughts on how you would see that earnings trajectory evolving through this year and into 2024 would be helpful?

The project is progressing well, and we still expect it to start on time and within budget by mid-year. We anticipate it will operate for about half of the year. Initially, we aimed for an additional capacity of 1.3 million tons primarily as a productivity initiative. The savings we expect stem from transporting volumes directly to Europe, in addition to savings from catalysts and energy. Out of the anticipated $100 million annual benefit, we expect to see roughly $25 million this year due to start-up costs and ramp-up time. Next year, we plan to achieve the full $100 million. However, if demand continues to grow strongly and energy prices remain favorable in the Gulf Coast, it may be beneficial to increase production volume as well. I can't specify when that will happen, as it will depend on demand, raw material availability, and energy costs. If it does occur, it would certainly provide a higher return than the basic productivity gains originally considered for the project.

I see, that's helpful. And then secondly, if I may, a couple of financial questions for Scott, would you comment on your '23 capital expenditure budget? And with regard to the first quarter, what level of interest expense are you baking into your EPS guide?

Yes. We still anticipate our capital expenditures to be in the range of $550 million to $600 million. The exact figure will largely depend on the recovery in demand and the expectations for future years as we work on integrating the EM and M&M portfolios. Regarding interest expenses, we are also expecting them to be in the range of $550 million to $600 million for the year, with about a quarter of that expected in the first quarter.

Hi, good morning, and congrats, Mark Murray, if you're listening. Lori, I wanted to ask about the level of auto builds that you have embedded in the guide for the year and where you think Celanese can perform relative to that level of industry auto builds?

Yes, so we're assuming our 2023 forecast is basically assumes flat in '23 to the second half of 2022. So that's kind of like at an $85 million range, which really aligns pretty well with the IHS outlook this year, which they're forecasting an increase of 3.6%. That is almost exactly the same number. And that really is assuming U.S. and Europe, about 5% up; Asia, up about 2%, with China being the weakest point at 1%. Still I would say we're still about 5% lower than 2019. But we do believe that, that we're pretty consistent with IHS in this. We believe auto builds are going to be constrained by chip availability, not by demand. We think the pent-up demand is still there. And so to the extent chips would be more available, I think autos will build - other years as we've seen sometimes they're not as available and - but we're assuming kind of flat to second half 2022. I would say our - we would expect our contribution ourselves into auto to be maybe a couple of percent above that. And that's based upon a few things. One is the locations where we're stronger. So historically, we've been stronger in the U.S. and EU. Now with M&M, they've always been a bit stronger in Asia. But even having said that, I think we think we'd be a few percent above that. The other thing is the presence that we have in electric vehicles. I mean, we - over 10% of our sales by volume go into electric vehicles from the Heritage EM portfolio. And we continue to see that EVs are growing at a faster rate than ICE if you look at the forecast going forward so based on that, I would assume a couple of percent kind of low single-digit percent that we would expect to be over the build rate in terms of our auto growth.

Thank you. I understand that the M&M inventory levels were quite high, with the take-or-pay contracts ending the year at $2.8 billion in inventory. How should we consider the potential impact of inventory reduction on working capital in 2023?

Yes as I said earlier, Frank, on the free cash flow question, we'd like to see at least a $200 million reduction, which will largely come out of inventory as we work through the year. I mean, that's going to largely be dependent on a few things: one, being able to bring absolute volumes down; two, depending on what were to transpire with raw materials. And I think with energy and gas already coming down, that will give us some wind at our back. But we really would like to see the volumetric reduction kind of contribute to that $200 million in total and then any pricing reduction be on top of that. So we're kind of hoping and planning for that $200 million reduction right now.

Good morning, everyone. I know you adjusted term loan covenants, but do you still have to hit the 3x net debt to EBITDA by year-end 2024 that was stipulated by the rating agencies? And look, can I just use consensus EBITDA and hand up for well be wrong, But like you gave yourself some cumulative cash flow generation, which over the next two years, but that consensus EBITDA puts you like 3.5, 3.3. So is there a concern internally about this? And do you start thinking about other asset sales? Is that necessary?

Look, I don't think there is a concern internally. As we've said since the time we did the deal, I mean, there are always levers that we can do. I mean from an asset sale standpoint, again, we don't feel we're in a position we have to do an asset sale. I mean we did food ingredients because we have the right partner with the structure we wanted that would give us both benefits and allow us both to participate in the growth in that business. And so the timing was right to do that. And I would say we will continue to be opportunistic with our businesses, both our legacy businesses as well as our acquired businesses. If and when we have the right buyer at what we think is a fair price, of course, we would consider it. But we believe that although this year has started slow, the recovery we expect to see this year, our ability to generate cash from working capital and others that we will be able to meet the expectations of the rating agencies this year as well as next year and into the future. Scott?

Yes. I mean, look, we viewed this as a near-term challenge that required a near-term solution, and that was to amend the covenants. We're still pushing to get to that 3x levered at the end of 2024. And it really starts with, as Lori talked about, generating cash. Generating cash to pay down debt, lower that interest cost. I talked about the M&M incremental interest of $550 million to $600 million. We have legacy interest of $60 million to $70 million, lower that by paying down debt. And then also find ways at which to lower that interest cost through redomiciling some of that debt as we talked about earlier on the call. So it is really just about systematically bringing the debt down through cash generation.

Okay. I know I appreciate that. And then on the VAM and EVA side. So I know acetic acid is pretty stable from a supply perspective outside of yourself and what you're doing. But it sounds a call for like decent VAM and EVA capacity growth over the next two years. Does that impact your spreads? I know demand growth there has been pretty good. Does that get absorbed? How do we think about that?

Yes. There are some developments taking place, and we anticipate a start-up in acetic acid by late 2023. Additionally, in China, we expect several VAM start-ups between 2023 and 2024. Typically, for the acetyl chain, we need a full plan roughly every other year, so I believe the current growth rate aligns with global growth. Our utilization remains quite high, and this high level is likely to keep volatility somewhat elevated. As we observed in the fourth quarter, during times of low demand and seasonality, we may adjust to the cost curve, but recovery can happen quickly. Overall, I don’t expect significant long-term effects on our margins for the year.

Thank you. Lori, in the comments, you mentioned some destocking in the Americas in paints and coatings and construction applications. Can you give a little more color on what you're seeing there and where we are in that process?

Yes. Typically, we experience seasonality because when it's cold and snowy, people aren't painting outside. This year, we're also coming off a period of high prices for many materials due to increased raw material and energy costs during 2022. Many businesses, similar to what we did in Emerging Markets, took the chance to reduce their inventory towards the end of the year and get rid of higher-cost stock to prepare for lower-cost inventory, anticipating reduced energy and raw material costs and prices. This is the primary dynamic we've observed this year. In the U.S., we haven't noticed the same recovery yet as we have in Europe, but I believe it will happen. There is no structural reason to expect that paints, coatings, and construction will decline in 2023 compared to 2022. Yes. Look, I think it's a number of things. We've continued to invest in our acetyl assets, both foundationally, so investing in reliability and quality, energy savings, productivity. So we've continued to improve our cost basis. From that, we've improved our contracts in many of our areas for raw materials for the acetyl chain. I think that's probably the primary improvement we've seen in our sales over the last few years. The operating model we use in acetyls taking advantage of that end-to-end as well as geographic optionality is really strong. It's running really well. But I would say it's really the improvement in productivity, the improvement in contracting, as well as some of the minor kind of capacity adds, that capacity creep that we've had across our facilities, which gives us additional optionality and the addition of Elotex, which gives us further optionality down into the chain, which is especially helpful as we move into these kind of slower winter months.

Kevin, we'll take one more question, please.

Hi, thanks a lot for taking my question. Just basically wanted to understand in the context of capacity shutdowns in the upstream side in nylon chain. How do you see yourself with regards to positioning in the value chain? Is this fundamentally more positive for you? Or is it fundamentally more negative for you in this context? Thank you.

Well, prior to the acquisition of M&M, obviously, we were a big buyer of nylon and would have been unhappy to see shutdowns in the upstream because that would lower price. But now that we both polymerize as well as compound nylon, I would say, generally, I would consider this a help for us as it tightens up the amount of nylon being produced and should raise value across the chain.

Thank you. I'd like to thank everyone for calling in today. As always, we're around if you have any follow-up questions. Kevin, please go ahead and close up the call.

Certainly. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.