Greetings and welcome to the Celanese First Quarter 2024 Earnings Call and Webcast. This conference is being recorded. It is now my pleasure to introduce your host, Bill Cunningham, Vice President of Investor Relations. Thank you. You may begin.

Thanks, Diego. Welcome to the Celanese Corporation First Quarter 2024 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Lori Ryerkerk, Chairman of the Board and Chief Executive Officer; Scott Richardson, Chief Operating Officer; and Chuck Kyrish, Chief Financial Officer. Celanese distributed its first quarter earnings release via Business Wire and posted prepared comments on our Investor Relations website yesterday afternoon. As a reminder, we'll 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 the press release and prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Diego, let's please go ahead and open it up for questions.

Our first question comes from Ghansham Panjabi with Baird.

I guess, Lori, just first off, just given all the various moving parts globally and so on and so forth. Maybe you can just share with us your updated view on just the macroeconomic construct globally. You mentioned the U.S., Europe, and China in context from the previous headwinds of destocking and just weaker growth, etc.?

Ghansham, on the macro, what I would say is, it’s generally unchanged from what we've been saying in the past few quarters. I would say we haven't seen any big positives or negatives this quarter from what we had expected. We called out last quarter that we really thought we were at the end of destocking. I think the movements this year and the stability of the order book has proven that to be true. In China, specifically, I'd say China for China is pretty steady. It's okay. It's the exports that are lagging primarily to Europe, but also other regions of the world, and we're not seeing some of the pull-through of material because of that lag in exports. The U.S. remains pretty steady across all the sectors, and Europe, although we did see a little improvement since the middle of last year, I would still say it remains lackluster and below normal levels. As we move forward, we're really not seeing some of the seasonal uplift we would have expected at the end of the first quarter and into the second quarter. Overall, I’d say all the sectors are pretty steady. The notable sector in terms of poor demand continues to be construction, paints and coatings, etc. However, I do think there, as we move into the second half, we may start to see a recovery. I think PPG called out this quarter that they've had 11 quarters of flat to down, and in the second quarter, they expect to see low single-digit growth and further growth in the second half. So we hope that's true. If so, we should see some recovery as we move into the second half. I would characterize it much like we did a year ago, which is we still think people are spending. They're spending on experiences, on travel; airlines are doing well, but they're not spending on goods yet. It will normalize at some point, but we're not seeing that normalization yet.

That's comprehensive, Lori. And just in terms of the related question as to what would actually kickstart demand from your perspective? Would it just be as simple as interest rates being reduced on a global basis? And then related to that, you had called out new capacity over the last 6 months, specific to the comments on Chinese acetic acid, etc. Is that capacity more disruptive than you thought? Or is it just that demand was weaker than you thought initially?

Yes. Look, I think in terms of kickstarting, it's really just about when people get confident in the environment again, when we see a shift back to normalized spending on durable goods. Clearly, we could use some recovery in Europe, which would be really helpful. But it's nothing more than that. Consumers are spending; we just need them to start spending on durable goods again. And again, I do think that will happen in time. I think your question on China, what I would say is, the new capacity has been more disruptive than we thought because the demand for that, which was being planned to come in, has not developed. There were some downstream consumers that were being built simultaneously, and they've been delayed due to the demand for those products. So it is ultimately a demand issue. The good news is we are seeing some acetic acid flowing into new applications, like caprolactam and others. So again, I think it's a temporary phenomenon. Even with what has been added and what's to come, this is not such a large number that I think we are back where we were 20 years ago. It's just a question of demand normalizing and catching up with the current supply.

And our next question comes from Mike Leithead with Barclays.

Great. I wanted to dovetail and ask about full year guidance. Lori, it seems like from your remarks just now the macro conditions are maybe still a bit uninspiring. So the bridge from sort of the $5 in the EPS in the first half to about $6.50 at the midpoint in the second half. Is that all controllable Celanese action? Or do you need the world to get a bit better from here to hit those numbers?

Thanks, Mike. I would characterize it as we will hit those numbers with just controllable actions. If you think about it, the M&M synergies are heavily loaded and compounding as we go through the year. Now that we have full visibility into the data, everything due to our S/4HANA upgrade for the M&M assets, as well as the results of the Uentrop shutdown and some of the footprint actions we took last year, we are really starting to see those synergies grow and compound as we move through the year. That’s a major impact. The Clear Lake expansion, while we did have a little bit of help in the first quarter from that, will also continue to grow as we move through the year. Debt service is another factor, which is more heavily loaded into the second half of the year, and I would also say our turnaround costs in the first half are about double what they're going to be in the second half. So we get some tailwind there as well. I would say everything we know now says we're well within that range based on what we know. We haven't built in any recovery other than the end of destocking, so I still feel confident that we will be within that range for the full year.

Great. So that's helpful. And just as a follow-up question on Engineered Materials. I think in the prepared remarks, you talked about continued pricing pressure. I was hoping you could unpack that somewhat. Just where exactly are you seeing the most pricing pressure today? And was that a nylon-specific comment or more broad-based across the portfolio?

I would think about that, Mike, in terms of continued pricing pressure. That pressure has been ongoing since the fourth quarter of last year. There have been no significant changes there. Raws have come down as well. We’ve been mismatched in Engineered Materials for more than a year on where pricing for standard-grade materials was versus the cost structure. As you saw with some of the margin expansion we alluded to in the prepared comments, we're definitely catching up there. But we are not seeing a lot of ability to move pricing in those spaces. The team is focused on continuing to move the pipeline and work on upgrading the mix as we progress through this year and into 2025.

Our next question comes from Jeff Zekauskas with JPMorgan.

When you look at your Engineered Materials volumes year-on-year, they're down 12%. Maybe global auto production is down 1%. And when you look at the demand for the coatings companies, maybe it's down low single digits. Why does Engineered Materials have a larger volume decrement?

Yes, Jeff. I would really point to some of the standard spaces we participated in last year, really to start moving some of the inventory levels we had as we finished 2022. That’s a key driver. We also saw a little more seasonality in the medical sector this year compared to what we experienced last year. So those are the main drivers.

Okay. And then sort of the reverse is the Acetyl Chain, where volumes are up year-on-year, 11%. And I take it that what you want to do is run your Clear Lake expansion more or less full out? Is that part of the reason why volumes are up? And do you expect, as a base case, for your volumes to be up 10% or more this year? And maybe could you comment on filter tow? We saw really strong numbers out of Eastman, but your Acetyl Chain doesn't seem to be growing its adjusted EBIT very much.

Jeff, let me just make a few comments and then I'll let Scott add more detail. I mean, what I would say is we don't have a strategy to run at still necessarily at higher volume. The justification for the Clear Lake expansion was really about productivity—energy, catalyst, shipping by shipping more out of the U.S., aiming for less out of Asia. So that's not the strategy. Now having said that, we will run all of our assets where it makes sense from a demand standpoint and from an economic standpoint. So I wouldn't say that's the biggest factor. What I would add on tow is we did see a significant uplift in tow this year, and that uplift is continuing into this year. If you look at our first quarter volumes, I think some people have noted more seasonality. We really saw first quarter within the typical seasonality for tow, which is minor, we're talking 1% or 2%. So I think we are enjoying the same markets for tow that our competitors are. But of course, it is now in our Acetyl Chain, and we have more decision points around it to maximize the value of the chain.

Yes. Let me just add. I think as Lori mentioned, for tow, 2024 will look very similar to 2023—not a continued lift, very stable there. On a year-over-year basis, Q1 to Q1, the main driver volumetrically is really about where the industry stands. If you recall where we were in Q1 of last year, we were coming off very high energy prices in Europe from Q4 of 2022. European demand was relatively soft, and we were still seeing China dealing with COVID at the start of the year, which impacted volumes. So that’s the main driver on a quarter-over-quarter basis here in the acetyl business.

And our next question comes from Michael Sison with Wells Fargo.

Nice start to the year. For 2Q, will EM volumes appear to be down year-over-year? But for the third and fourth quarter for EM, do you need volumes to improve year-over-year to sort of hit the outlook? And how much, if at all?

I think as we work into Q2, my volumes will move up a little over where they were in Q1. On a year-over-year basis, it will be relatively flat. Any differences are more mix related, as I discussed earlier, with moving nylon last year to reduce our inventory levels. We will see an expectation that volumes move up, driven by two things in the second half. One, just as destocking has ended, we expect slightly higher levels of volume coming from that in the second half. But more importantly, the commercialization of our pipeline. We switched to an integrated commercial model in Engineered Materials in April of last year. The average length of time projects in our pipeline takes is about 18 months. We expect the efforts from the commercial team over the last year to start to deliver value towards the end of the year.

And then more of a longer-term question. Sales in EM running about $6 billion, maybe a little bit better. But longer term, when demand does recover—China, goods, etc.—does this become a $7 billion business? And what would the operating leverage look like on that growth?

Yes. Look, I don’t know the exact number where that could end up. I mean the way I would characterize it is we expect over the next year or so that EM basically starts contributing at the same level as acetyls from a margin standpoint. After that, while acetyls will continue to grow at GDP, GDP plus a little bit, we expect margin growth for EM to maintain that roughly 10% range that we've had in the past. So ultimately, it's not a fixed number. The number continues to grow, but that’s the growth rate we expect.

Our next question comes from Vincent Andrews with Morgan Stanley.

Starting to read a bit that some of the trade complexities in the Red Sea area are starting to resolve themselves. Would you agree with that? And if that's the case and if the shipping channels become a little less challenged, how would that impact your businesses, good, bad, or indifferent?

Vincent, thank you. I would say we've been pretty indifferent so far. We have found that shipping channels can experience temporary disruptions, but they tend to renormalize quickly in a new way. So we haven’t seen an impact thus far, and I wouldn’t expect a big impact if we see some of those issues resolved. I think the market is quick to correct itself.

Okay. And then if I could just ask a follow-up on the nylon business. In the prepared remarks, there was a comment about higher variable costs for higher velocity products. Could you unpack that for me?

Yes, Vincent, that relates more to the Palm business, and that's the flow-through of methanol since we weren’t producing as much methanol in the first quarter. It's the flow-through of that higher-cost product into Palm that will be sold here in the second quarter. That’s the main impact.

And our next question comes from Josh Spector with UBS.

You talked in your prepared remarks about the price-to-cost benefit in the first half. Are you expecting much flow-through into the second half? Or does lower pricing erode that?

I wouldn't expect lower pricing to erode that, James. A lot will depend on what happens with the raw material complex. We kind of know for the first half what the flow-through will be. It depends on how raws develop in the second half to see how much of that continues.

Okay. So just as a follow-up to that. If I look back a quarter or two, you mentioned in your prepared remarks that price/cost may potentially be the highest part of the year-over-year bridge. Is that still possible? Or given where we stand, is that maybe a bit more in question?

It's definitely still possible based on what we're seeing for the first half, but again, we'll have to see how raws develop in the middle of the year to see what then gets expensed towards the back half.

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

In your prepared remarks, you talked about two key synergy drivers for Engineered Materials, namely the shutdown of nylon 66 in Germany and the SAP ramp. Can you address those and maybe translate it to how much earnings uplift you might be anticipating in the second quarter through the fourth quarter? It didn't sound like there was much in the first quarter from those items.

Yes. I would characterize it as for the footprint actions we've taken, and there have been several smaller actions as well, not including Mechelen, which we've just announced. We expect about a $50 million synergy lift on a full-year basis from those. You’re right; we are just now starting to see the benefit of Uentrop, which is the largest piece of that. On the SAP side, the direct impact—we get rid of the TSA, but we’ve had to add our own people. That’s a smaller number than you might think, although it is significant. The real benefit is that we now have one view of the data, and it is really helping us with our planning, scheduling, and forecasting of demand in Engineered Materials. So again, that gets rolled into our synergy number, and that full-year number should be a $150 million lift from last year.

And then secondly, for Chuck, can you talk about how your free cash flow outlook has evolved? And specifically, I'm interested in any guidance you might be able to provide on cash taxes or the expectation for 2024. It sounded like maybe there are some timing issues around taxes we should be considering.

Yes. Good question, Kevin. Let me walk you through how we're thinking about 2024 cash flow. I would say we do expect the same cadence as we saw last year where our cash flow will be second half weighted. The teams are working hard to generate a total result for the year that’s roughly consistent with last year, subject to a few timing elements. Outside of EBITDA growth, I would point to these drivers. We are working hard to produce a working capital benefit to free cash flow this year, driven by further inventory reductions. Right now, we've assumed a $100 million working capital benefit for the year. It will depend on a few factors, but working capital will be back-end loaded. It should be a use in the first half, particularly as we're preparing for some of these footprint actions, and then a source in the second half. That’s a significant headwind to free cash flow compared to 2023 as we had a tremendous year in working capital benefit last year, driven by about $400 million positive cash from reducing our inventory. You're right, cash tax—this year will be unusual for us at about $300 million, which is higher year-over-year by about $75 million. One unusual item hitting us in the second quarter involves nearly all of a roughly $90 million transfer tax related to previously announced debt redomiciliation projects key to our cash repatriation plans. We’ll pay this one-time tax in the second quarter but expect to recoup it in future years through associated foreign tax credits. It’s a big payment in the first half, so I wanted to point that out. Of the $300 million cash tax, 75% will be in the first half. Secondly, cash cost of synergies should be $100 million to $150 million this year, which is higher year-over-year by $25 million to $75 million, depending on the final number and timing. Positive offsets to free cash flow include lower cash interest by about $50 million and benefits of $100 million to $150 million in lower CapEx versus last year.

And our next question comes from Aleksey Yefremov with KeyBanc Capital Markets.

Now that Clear Lake is up and running, is rationalization of your acetyls assets firmly off the table? Or is that an option to be considered because of this tough supply-demand environment?

Aleksey, thank you. I would say we're pretty satisfied with where we are with our footprint for acetyls. Everything we have is specifically designed to serve a certain region and set of customers, and we appreciate having the optionality and flexibility we have. We've also continued to build out our downstream. You saw the announcement about a new VAE in China; some of the RDP debottlenecks we’re doing. That’s about continuing to build the foundational earnings in acetyls and stabilizing our earnings from it. If you look at acetic acid, for example, Clear Lake, we believe is the lowest cost and lowest carbon footprint producer to meet our needs in the U.S. and now into Europe. China serves China due to our technology, and we believe we're one of the lowest-cost producers there. In Singapore, we meet the needs for the rest of Asia, particularly India and some other areas, and remain very competitive. I would say our footprint is good for purpose right now. We’re always looking at our footprint to see what we need to add, debottleneck, and rationalize, but currently, we feel good about it.

As a follow-up, you used to be fairly transparent to investors regarding outgrowth in Engineered Materials versus end markets. It's been harder to judge through the last few quarters. Are there any metrics, such as wins or the size of your pipeline, that you can point to in order to demonstrate that you continue outperforming your end markets or that outperformance might resume in the future?

I would say our pipeline is our winning factor for Engineered Materials that allows us to outperform in our sector. That continues true, especially now that we’re a year into our common system for both our heritage assets and our acquisition of M&M. We continue to monitor it closely. I’ll tell you the number of projects being generated is consistent. More importantly, the value of those projects generated is strong. But maybe I'll ask Scott if he has more details to add.

Yes. Last quarter, we noted that we created about 20% more revenue opportunity per sales employee in the second half of last year compared to the second half of 2022. That’s a strong proof point of momentum. Additionally, we have been cleaning up this integrated business for the last 18 months, and that should stabilize as we roll out our footprint actions and align our inventories with the market. As a result, we expect greater visibility of outperformance versus various end markets by the end of this year and into next year.

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

I guess first off, just curious about your comments around volume. It sounded like the activity in Q1 was slightly better at the beginning of the quarter, and then maybe it slowed down in March. Are you seeing a similar pattern here in Q2? How would you characterize Q2 thus far versus your comments and what you saw in Q1?

Yes. I would say from a volume standpoint, both for acetic acid and EM, it was as expected in Q1 throughout the quarter.

In Q2, the order book is in line with the guidance we put together right now, Arun. We are through the month of April and have good visibility into May. We feel comfortable with the comments in our prepared remarks.

Okay. And then just a question about the second half and as you look into 2025. It looks like you'll be ending the year on a roughly $6.60 rate for EPS for the second half. If you were to annualize that maybe you're around $13.25 or so. If you add some volume and maybe some deleveraging, it seems like you could get close to $14. Is that kind of how you're thinking about '25? I know it's a way off, but I wanted to get your initial thoughts.

Yes. Look, we've had so much variability in the last few years that I hesitate to project out much further than a quarter at this point. But I think if you look at the run rate in the second half and considering it's built on controllable actions, it’s not an unreasonable place to start when thinking about '25.

Our next question comes from David Begleiter with Deutsche Bank.

Lori, there was a competitor outage in acetyl starting, I think, late February. I believe it’s still on allocation of VAM and acid. Did you benefit? And are you still benefiting from that competitor situation?

I would say while there was some temporary run-up in pricing, it was relatively small and short-lived. I wouldn’t say we're seeing any ongoing benefits from that incident, and it was quite small during the quarter. This reflects really the lower demand we’ve been experiencing globally, meaning that an outage of that size really didn't move the market much. The question is less about supply and more about the demand not yet returning to normalized levels, particularly in the Western Hemisphere.

Understood. And just on M&M synergies, what were they in Q1? What will they be in Q2? And what should be the cadence in the back half of the year?

I don’t have an exact number right in front of me. Q1 was definitely the lightest, and they continue to build and compound as we move through the year.

Our next question comes from John McNulty with BMO Capital Markets.

So I guess the first one is on raw materials. For EM, you were expecting as much as $150 million benefit from lower costs rolling through the system. You mentioned there would be $20 million in the second quarter, comparable to what you saw in the first. So is that still a reasonable outlook that you could see $100 million or $110 million of benefit in the back half? And have things gotten better or worse? Can you help us think about that?

Yes, John. As I mentioned earlier, we are on track to see benefits in that range for the first half. A lot will depend on how things move in the middle part of the year to see how our cost structure develops in the second half.

Okay. And then I guess the second question would just be in the Acetyl Chain business. Obviously, there’s some new capacity in the markets beyond just yours impacting the business. If we don’t see much of an improvement in demand overall, are there other levers you can pull in your Acetyl Chain business to drive incremental profitability? Or are we now at a point where it’s really about the market improving and developing from a demand perspective?

Yes. Looking at this year, there were two significant world-scale capacities added in acetic acid in China. These impacted us more than expected due to some delayed downstream consumers that were meant to come online at the same time but have been delayed due to overall market demand. Next year, there’s really only one small unit coming online in acetic acid. While there’s some capacity in VAM, it’s not enough to have a significant effect. But we still have opportunities to maximize earnings based on our flexibility and our integrated value creation model in this space. We also have the opportunity to provide sustainable products into the market through the CCU project we implemented at Clear Lake. We now have ISCC certification for methanol as a low-carbon material and can offer that to our customers. There is interest in that, and we also have a sustainability advantage in VAE, which customers seek for its low odor and low VOC emissions. These opportunities are unique to us and could grow significantly.

Our next question comes from John Roberts with Mizuho.

It sounded like the sequential change in EM earnings was nylon up sequentially and other plastic earnings down sequentially. Was the decline in the sequential earnings of other plastics due to a downturn, price pressure, or what drove that?

I would focus on the turnaround costs, John. That was the largest driver offsetting nylon.

I wasn’t thinking the medical sector was that seasonal. What’s driving the seasonality in medical?

It’s consistent with our historical pattern, John. Some years it’s more acute than others. We saw it come down more than what we had last year from Q4 to Q1, and it's primarily the timing of our customers' inventory build for the new year. Q4 usually ends up being one of our strongest quarters, while Q1 tends to be weaker, contrary to other business segments.

Our next question comes from Daniel Rizzo with Jefferies.

We talked a lot about the Clear Lake expansion. I was wondering if an expansion in Singapore or some place like that would be necessary given the potential growth in India over the next few years?

Yes. We don’t see that on the horizon. If demand increased significantly, it might not make sense to expand the Singapore plant. For the current demand in India, Singapore is sufficient, and we have options to bring material into Singapore, should we see demand increase.

The VAE expansion we completed is intended to serve growth in Southeast Asia and India just as much as it is for China. There is a VAE plant in Singapore. That plant has supplied some demand in China and now enables us to shift to service our growing customers in VAE demand sectors like paints, coatings, mortars, and adhesives.

That's really helpful. And with costs, we discussed a lot about price cost regarding raw materials, but I was wondering what's happening with labor and transportation costs? Are they elevated or rising, potentially impacting the second half of the year negatively?

We’ve seen pressure on labor costs over the last few years, as has everyone, but that’s managed and baked in. I’m not seeing any significant pressure for the second half of the year.

On transportation, we’ve seen a common industry theme impacting product movements around the globe. We don’t expect any different dynamics in the second half than what we've been experiencing.

And our next question comes from Eric Zhang with Citi.

On the incremental excess supply in China acetic acid, do you have an outlook on when the delayed downstream startups will be resolved? And once that is resolved, do you expect to see a meaningful uplift in acetic acid pricing in China?

Yes. The projects that we know of are a quarter or two delayed. The real question is that demand for those products must be driven by more general consumer spending and the economy. How long that takes to resolve is tied to confidence in buying goods. While we do expect that capacity to come online, whether fully or just replacing other capacity remains uncertain. I would emphasize again that there are new uses for acetic acid in China, like caprolactam, which may begin to absorb this capacity.

And our next question comes from Salvator Tiano with Bank of America.

I want to ask about Engineered Materials and specifically your auto exposure. As we see more automakers delay their EV plans and stick with ICE engines, how does this change versus your plans and potential margin uplift? Also, are you seeing consumers trading down to lower-priced models?

Let me answer the first part, and then I’ll let Scott take the second part. I would say, as long as consumers are buying vehicles, we’re happy. EVs have about a 10% higher content available to us than ICEs, but we still maintain a large position in ICE vehicles. The extent to which people are converting to hybrids means hybrids typically provide around 20% more content available to us than ICE. Though there are shifts, as long as consumers are purchasing vehicles, that’s a positive for us.

We must continue to work our pipeline to cover all three areas—battery electric, hybrid, or ICE—since each market develops a little differently. In China, over 20% of the market is EV. We've not seen significant changes in vehicle types or customer buying patterns that impacted our business at all. In fact, on a year-over-year basis, auto builds globally were up about 2%, while our volumes in auto were up around 4%. That indicates that our project pipeline continues to yield value for us.

Great. I also want to revisit the China acetyls capacity expansion. I assume some of these downstream projects meant to absorb acid demand are on the polyester chain. As they come online, will that be good for you? Or could it create margin pressure for your downstream business?

I would simplify it: any additional demand for acetic acid, regardless of the end market, is good for us because we sell a lot of acid to various customers.

I would add that when new capacities start up, whether acetic acid, VAM, etc., they will have a near-term impact. These dynamics stabilize over subsequent quarters. Our business focuses on leveraging our global and value chain flexibility, enabling us to adjust and generate earnings across different quarters.

Diego, we will make the next question our last one, please.

And that final question comes from Hassan Ahmed with Alembic Global.

I wanted to revisit the Acetyl Chain, particularly in China. It just seemed like Q1 was a tale of two cities. It started strong, but then pricing weakened in February. What caused that change in the first half of Q1 versus the second half?

Hassan, you may recall, Q1 in China is typically a lower-demand quarter due to the Chinese New Year. If you look at total acetic acid prices in China, we saw the lowest prices since the fourth quarter of 2020, which was not unexpected and was consistent with our expectations based on lower demand. Although that new capacity may have launched two quarters ago, it takes time for them to ramp up. All of this aligns with our expectations. There may be minor disruptions when these new capacities launch, but things tend to settle down over time.

It's important to remember that we navigated the single largest turnaround in the history of the corporation during Q1, largely affecting the Acetyl Chain business. Despite these dynamics in China, our business still generated a 28% EBITDA margin. It’s a resilient business that finds ways to deliver value even amid market disruptions or heightened turnaround costs.

Very helpful. As a follow-up, I wanted to touch on the 2024 guidance, particularly in EBITDA terms. You mentioned M&M synergies worth approximately $150 million, Clear Lake expansion around $100 million, and understood there are some offsets due to outages last year. How are these controllables and new capacity additions trending year-on-year?

Yes. Looking at 2023, those items you called out—the M&M synergies of $150 million, the Clear Lake expansion contributing $100 million—while we anticipate around a $100 million offset for higher turnaround-related expenses and some nonrecurring impacts from last year. Be aware that two factors are unaccounted for: Continuing lower debt service costs, as we've paid down over $1.5 billion of net debt, and we're expecting about $50 million savings there. Additionally, as we flush out higher-cost inventory from last year, that may be a significant factor this year as well.

And there are no further questions at this time. I'll hand the floor over to Bill Cunningham for closing comments.

Thank you. We'd like to thank everyone for listening in today. As always, we're available after the call for any follow-up questions. Diego, please go ahead and close out the call.

Thank you. With that, we conclude today's conference. All parties may disconnect. Have a good day.