Good day, everyone, and welcome to the fourth quarter and full year 2024 Eastman Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com. We will now turn the call over to Mr. Greg Riddle, Eastman Investor Relations. Please go ahead, sir.

Thank you, Harry, and good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, board chair and CEO, William McLean, executive vice president and CFO, and Jake LaRoe and Emily Alexander from the investor relations team yesterday after market closed we posted our fourth quarter and full year 2024 financial results news release and sec or in secak filing our slides and the related prepared remarks in the investor section of our website eastman.com before we begin i'll cover two items first during this presentation you will hear certain forward-looking statements concerning our plans and expectations actual events or results could differ materially certain factors related to our future expectations are or will be detailed in our fourth quarter and full year 2024 financial results news release during this call in the preceding slides and prepared remarks and in our filings with the securities exchange commission including the form 10k filed for full year 2023 and the form 10k to be filed for full year 2024. second earnings referenced in this presentation excludes certain non-core and unusual items Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the fourth quarter and full year 2024 financial results news release. As we posted the slides and accompanying prepared remarks on our website last night, we will now go straight into Q&A. Harry, please let's start with our first question.

Our first question will come from the line of Josh Spector with UBS. Please go ahead, your line is open.

Hey, guys. This is James Cannon. I'm for Josh. Thanks to take my question. I just wanted to jump in on the AM guidance. I think between the overall segment and what you're assuming for the Kingsport contribution, it seems like you're assuming a decline in the base business. And I just was wondering if you could unpack some of the moving pieces there.

Yeah, sure. First of all, AM's had a great success in recovering earnings from a challenging environment in 23 through 24. And it really is an impressive recovery of the actual core business and advanced materials in 24. As we fell short on sort of our circular earnings goals in that year. So the macroeconomy is certainly challenging right now, as we all know. and lack of de-stocking certainly helped last year. As we move into this year, you really got a more stable flat market without that tailwind. So you have to create all of your own growth this year, which we're doing. So when you look at the growth that we're going to deliver in the circular platform is pretty substantial with that $75 to $100 million guide for the company with 50 of it being in advanced materials. when you look at the innovation that we're creating that drove growth last year and will continue to grow drive growth this year through innovation our core business in a very flat market I think is is again a testament to the power of our strategy and the value of this segment but there are headwinds in the core business that sort of mitigate some of that volume growth within the core to your question so we've got increasing natural gas prices across the company and a good portion of that shows up in advanced materials. You've got currency being a headwind and a good portion of that shows up in advanced materials. That's a good portion of the 50 in natural gas and the 30 in currency. So that offsets some of that volume and mixed growth and sort of levels out the core earnings. But we still expect the segment overall to have very strong performance. And I think it's really well positioned when you think about the strength of that stability in the core building with innovation on top of it and then and how that then levers into more growth in 2026 I would also say that costing I know management is gonna you know help this segment as well and so it's it's a combination of things that you know sort of flatten out the earnings growth in the core do these new headwinds but I don't think it's anything to be concerned about long term okay got it and then could you just frame for us what what the Kingsport contribution looked like in 4Q and maybe what you're assuming in 1Q?

Yes, so as we look at how we ended the year, we came in modestly below the low end of the range that we gave for 2024. We continued to work through the higher cost associated with reduced uptime from earlier in the year. But in the fourth quarter, we demonstrated continual operational improvement, and we've run well since we saw each of you in November. We're at 85% DMT yield since our fall turnaround and uptime continues to improve. We continue setting new production levels since that last shutdown and we're well positioned for strong operating leverage in 2025 from both higher production and reduced operational spend.

I would add that all the success in this plant is a tremendous testament to the teams, the operators, the engineers, everyone who's surrounded and built this plant and got it up and running. It's just an extraordinary amount of effort that this team has invested to get such a complicated plant to do something so extraordinary to take basically garbage and turn it into high-quality virgin polymer is a real proof point for how Eastman can build extraordinarily advantaged technologies and build a long-term competitive advantage that I think will be very difficult for anyone to replicate. And the only reason that happens is all the people who've done such great work.

Great. Thank you.

Our next question today will be from the line of David Begleiter with Deutsche Bank. Please go ahead. Your line is open.

Thank you. Good morning. Mark, a couple of questions related to the new administration. First, on the Texas project, any concerns or thoughts on the DOE funding going forward? Could that be at risk here?

Sure, David. Thanks for the question. Obviously, we're paying very close attention to the new administration. First, our project's under contract with the DOE, and we've already received our first funds from the program. And so we feel like we're on a good track there. To back up for a moment, I want to recognize and say I really appreciate President Trump's focus on growing U.S. manufacturing. I think it's incredibly important. I think a lot of us forget that you don't really actually have an economy without an industrial base, and that includes vertical integration to key raw materials and that's really both not just for an economic reason but also for security national security reason and so if we reflect on where we are today in america we're really at you know risk of losing american competitiveness that we've built over the last 80 years you know while sort of u.s consumption's gone up a lot over the last two decades u.s manufacturing has declined so the idea of driving and supporting u.s manufacturing I think is an incredibly important priority and when you think about our circular economy project I think it fits perfectly with his agenda and what he's trying to accomplish on three different reasons. First a circular investment is about you know building infrastructure in America and reshoring jobs you know and building supply chain resiliency you know when you think about the products that come off of this facility for food packaging medical and a variety of other vital consumer durables you know we need to have that sort of resiliency in this country and we're on showing jobs basically from Asia to Texas we're also going to create a lot of jobs downstream of this as people sort of want to lever you know into reshoring manufacturing and supplying raw materials to them and importantly upstream of us so as we make this investment we create jobs and revenue or recycling infrastructure that feeds into this kind of facility and the others that need to be built in this country and that you know creates a sustainable growth not just in Texas but across the country the second factor is it actually creates you know energy independence you know plastic waste is basically oil sitting above ground and landfill so you're using it as feedstock with a world scale advantage process and we have an advantage cost position you know if oil is above $60 so it's value creating in a meaningful way and the third factor of course is the circular economy will create a long-term U.S. competitive advantage because the circular economy is by definition defined as taking local plastic waste as feedstock from the local environment. You know, imports obviously shouldn't count as recycled content because that's solving someone else's waste problem, not ours. And whether you're a Republican or a Democrat, no one likes plastic waste. They all want it solved. Even Trump signed Save Our Seas Act in the first term showing that marine debris and impacts to the environment are important to him on this topic. So I think that it fits his agenda well. We're very excited to be sort of doing this. I think Eastman, frankly, as a company fits his agenda well, given how large we are of a U.S. manufacturer.

No, very good. And just on a similar point, you are a large U.S. exporter. What are your thoughts and concerns over potential, as Trump raises tariffs potentially, potentially retaliatory tariffs on U.S. exports.

Yeah, so I'm just building on, I guess, the last answer, David. You know, I do think that, you know, trade is an important topic. Back to that U.S. manufacturing point I just made, I think, you know, strategic trade actions, along with addressing sort of overwhelming regulations, having pro-growth tax policy, workforce development, et cetera, are all critical to sort of driving and growing U.S. manufacturing, which will certainly benefit Eastman in the long term and many other companies. When I look back at the last time there was a sort of trade event in 2019, Eastman actually managed that from a direct impact really quite well. And the only impact we really had was there was a slowdown in the short term there for economic activity, and sort of we felt that. And when I reflect back on that time frame, you know we don't really face that much Chinese competition in North America so it didn't you know have a lot of relevance to us to see the trade benefits but obviously a lot of US manufacturing did and that helped you know stabilize the economy and some other areas that sort of helps as we sort of go through that trade friction you know today is different though so when you look at where we are today versus then the economy was actually relatively strong going into that event the economy and global manufacturing now is incredibly weak you know across the globe so i think the the rate at which people can get aggressive if they're focused on stabilizing and growing their economy will be limited uh given those weaker positions that many countries have um and and we're also in a pretty challenged economic time so it's not clear to me how much more negative impact tariffs can have you know on top of the manufacturing recession we're already in um so i think that you know this while it sounds really dramatic because there's so many different countries being discussed around what might have some tariff actions in it, you know, and that is certainly a wider factor than 2019, I think that, you know, there's pros and cons to this. And I think so far we have seen some careful thought being deployed by the administration about what's appropriate and not acting yet until they have a clear plan. So we'll see. There's no way for me to estimate the impacts at this stage, you know, given everything I just said, you know, we're going to need to see specific actions to really have an informed point of view. But I will say that our forecast does not include any significant impact from the trade actions. Thank you.

Our next question will be from the line of Mike Sisson with Wells Fargo. Please go ahead. Your line is open.

Hey, guys. Nice end of the year. I had a question on AFP. The, you know, just to Eve, it came in a lot stronger in the fourth quarter versus the third quarter relative to your guidance. You talked about a couple of things in the transcript, but can you give us a little bit of color on why that segment did so well sequentially when normally it takes a little bit of a dip?

Yeah. So first, AFP had a great year as well as a great quarter. And frankly, the whole company had a great year. We're really excited about it, both on the earnings we delivered and the strength of cash flow uh that we generated so and and afp was a strong contributor to both the earnings and the cash flow so it was great um when it came to sort of how it came in better than expected um it was on both fronts so volume mix came in a bit more it came in a bit better than we expected um you know we expected a certain amount of de-stocking that might have gone beyond normal de-stocking um and uh we came in you know a little bit better than our original thought on that side. And then raw material flow through was also better across a number of different products. And that combination of those two things helped. We even got some more fills in HTF than we expected as part of that. And all those came together in a way that made the outcome better. And I would say that's sort of the story for the year for AM and for the company. We didn't have a market that gave us a lot of tailwinds outside of a lack of destacking. So the 23% earnings growth, ASP's contribution in it is about pulling every lever we got, defending every bit of volume we had with customers, finding innovation everywhere we can, spending price incredibly well, which is a true testament to the sustainability of our value propositions through our innovation and good management on costs, et cetera. So this was a tough year that was delivered by actions, small little actions taken by everyone across the company to deliver it.

Got it. And then just a quick one on fibers. It looks like this will be the third year in a row of really good margins, pricing. The guidance looks pretty good in that 400 plus level. When you think about that business going forward, how sustainable do you think these pricing levels are? You saw some de-stocking here. I think there's some new capacity coming on as well. And just given that it's been such a big improvement from 2002, 2021 levels.

So certainly Fibris has improved significantly back to where it was, you know, back in the 2013-14 timeframe. So it's not like these are new levels. We were at them, you know, in our history. in the short term what I'd say is based on everything customers are telling us you've got a set of actions that are happening that are causing earnings to sort of normalize inventory management is is certainly that the key driver of the volume being adjusted you have to remember that you know tow is 2% of the price of a cigarette and the cigarette margins for our customers are greater than 60% in gross margin. So they really don't want to miss a sale. So security supply is phenomenally important to them when the markets are very tight. And so they built a lot of safety stock as a result of the 21-22 timeframe to make sure that they were never shorting a customer. So I think that is what's going on right now. And we still have, as we look through 2026, greater than 80% of our customers under volume commitments. But there's a band of volume that they can hit inside these contracts and so that the stocking is showing up with some customers. And we do expect the prices to be higher. But the bigger overall question is just what's the supply-demand dynamics in this context? And first, demand is not changing. So when it comes to volume adjustments here, we're not seeing any sort of material change in the demand from the in-market. We still expect it to be a modest 1% to 2% decline. Cigarettes are declining faster than that, but it's being offset by the high growth of the heat-not-burn products that still use tow and, in some cases, more tow than a cigarette. So in-market stability, I think, still is in place there. There is some new capacity that's been added in China, which is roughly sort of 5% of market demand. So when you compare this back to 2015, the amount of change in demand in 2015 was significantly higher than this kind of modest market decline because the Chinese have massively overbuilt inventory through their retail channel and were de-stocking it in a pretty aggressive way.

And the capacity that was added in China also back in that time frame was significant. significant.

It makes this current capacity ads look very small in comparison to the backward integration that they did in that 2014 timeframe. So, you know, these conditions now are a lot more modest. And when you put them together for now, you know, we're going from a very tight market condition to probably utilization in the low 90s. So while, you know, we certainly see some adjustments going on, we think of, you know, this sort of current dynamic being a lot more stable than what occurred in the past. And also historically, we've seen companies in this industry adjust high cost capacity to align their low cost capacity to serve the existing market as it adjusts in volume. And there's still high cost assets out there. So we'll see how this plays out. But we think this business is still going to normalize at a very attractive level for the company and for investors um of course we're also not just sitting around waiting for the market we're taking uh cost reduction actions uh you know across the company and significant amount of that also applies into this area over the next couple years and as a way to continue to manage our cost competitiveness and we haven't been sitting on our laurels on this one either right we've known that a diverse portfolio of ways to grow from the cellulosic chain as we talked about the deep dive is incredibly important so So a lot of growth opportunities in Naya, a lot of growth opportunities in Aventa, and some other products to drive the stream and keep it growing. So we feel good about where we're at and all the consistent innovation investments we've made to make this whole stream vital going forward.

Great. Thank you.

The next question will be from the line of Alexey Yefremov with KeyBank Capital Markets. Please go ahead. Your line is open.

Thanks. Good morning, everyone. Reading about your Rapid Brewer last night was quite a blessing. I wanted to ask you a question about advanced materials outlook this year. You're discussing that there's higher costs in the first half that could pinch your margins, and then you'll be raising your prices with a lag. So should we think of that dynamic as your first half earnings in advanced materials are somewhat under the run rate at which they'll be exiting the year?

Yeah, so look, there's a lot of dynamics going on, and it's a little more complicated this year than most. So, in the first quarter, you've got, you know, roughly $25 million of costs that's moving out of corporate other and going into advanced materials in Q1. So, on a year-over-year basis, obviously, you know, that's a headwind. And it's impressive that, you know, we're delivering the earnings in our forecast for Q1, offsetting that with, you know, volume mixed growth as well as, you know, maintaining, you know, good price discipline. and starting to lay some cost reduction actions for the year, which we started in December and November headed into this year. So you're gonna see some of that benefit, but that will definitely build through the year. So as you look through the year, you've got the cost benefits coming in through the year that are helpful. You've got the circular economy that's gonna definitely be back half loaded and how it helps earnings in the back half. Well, to the first half of sales ramp up and utilization ramps up, you know, offsetting that you've got, you know, natural gas energy costs, you know, that, you know, they're good, a good portion of that 50 million I mentioned earlier flows into segment and that flows in as a headwind as, you know, through the year, you know, as those costs, you know, go into inventory and then flow out of inventory, you know, with increasing energy costs. So there are a lot of moving parts. I think the segment overall is well positioned to deliver very attractive results for the year, but there's a lot of pluses and minuses as you look for staff backup.

Thanks, Mark. And I also wanted to follow up on the filtered tow. So in the past, you used to go through your annual contract negotiations right about now. So I wanted to ask you if you gained any visibility in your portfolio of contracts here beyond 2026 in terms of prices, margins, volumes, et cetera?

Yeah, so we switched from an annual contracting process to a multi-year process with a number of customers, not all, but a number of them, especially the big ones. And to provide that stability, we've talked a lot about that to all of you over the past quarters. And that process is still in place where we have, you know, as I said, about 80% of the volume contracted in 2026. You know, we probably have 60% contracted in 2027. You know, probably it's actually higher than that, but, you know, it's closer to 70%. So we feel good about sort of this multi-year contracting that we have in place and how that adds a certain amount of volume stability and price stability to this business. But we also have to respect that our customers have to manage their inventory and make sure it's at the right level to demand and working with them on how to make those adjustments this year.

Thanks, Mark.

The next question will be from the line of Vincent Andrews with Morgan Stanley. Please go ahead. Your line is now open. Thank you. Good morning, everyone.

It sounds like the methanolysis plan is running well still, which is great. So maybe you could talk a little bit about the volume sales side of the equation. I think last year, the sales were a little bit below what you expected. And I think some of it had to do with just sort of not being able to run the plant as well as you wanted to early in the year when the consumer products companies tend to introduce innovation and maybe you miss some opportunities to be in those lines. So could you talk about how you're seeing the order book at this point in the year from that perspective, as well as sort of high profile backing off from some of the consumer brands on some of their, you know, recycled plastic targets. So just where are we with all that and your view on sales for this year?

That's a great question, Vince. And as you might guess, I spent a lot of my personal time with the team on this topic and all things circular. First of all, you know, I think that we covered this topic fairly well at the deep dive and our perspective on sort of the market conditions both this year and beyond have not changed so nothing substantially changed um but to re-hit the sort of key points that we discussed back then i mean first we have to recognize um that you know the macroeconomic conditions that we're in right now you know are not helpful right so when you've got an economy that is challenged and weak demand combined with inflation at the same time uh that that our customers are trying to manage through you know in what they're buying as well as you know consumers um you know attitude about all these brands and the prices. They're having to make choices. And so I think that has reduced the pace at which some of the brands are converting to ramp up their orders. But we see a solid funnel that has developed and I believe we're sort of on track across all the different markets we're serving. It's a bit different depending on which market you look at. When you look at the durable side, we already have over 100 customers who have committed to renew, and they're already paying premiums for those products. So there's not a lack of interest in the product, but there's a moderated pace. They want to really focus their efforts around product new launches where they can sort of do something in the market and see a way to grow, share, and create their own growth in a weak underlying market just like we are doing. and where we can help them do that, but less interest in cannibalizing something that's been on the shelf where they don't necessarily see an immediate improvement in their demand and that kind of upgrade because they need the splash of a new product. So I think that's pretty aligned and pretty sensible, and we still see a lot of growth happening for us as a result of that. On the consumer packaging side, you have to remember that the first plant we built here is not really aimed at recycled PET. We are converting a line over to be able to make recycled PET by the summer, where we will sell some PET in the back half of the year with a number of different customers, and we believe that will be successful. I think that on the broader question that you asked, Benson, are people sort of changing their sort of commitment to recycled content? And I don't think there's any signs from a long-term point of view where we see people backing off at the brand level on the need to change. I mean, the reality is the brands are very focused on their brand equity and consumers' engagement around their products. And consumers really don't like plastic waste. You know, it's an invisible, tangible issue to them in their lives every day. I can't tell you how much it comes up in every cocktail session or dinner party I go to. and you know everyone's debating climate right now including President Trump but I'm not sure anyone's really debating plastic waste I'm not seeing that you know and it's an issue that people feel like they can do something about now that doesn't have a big sacrifice for them in what products they want to support you compare to some of the climate implied choices they have to make and it's bipartisan I mean as I said you know President Trump even you know signed Save Your Seeds Act. So I think that there's economic reasons brands are moving a bit slower, but I'm not sure that, you know, I don't think it's a lack of issue. You know, the NGOs, the media are still very much going after plastic waste. I'd say in many states, you know, they're more committed post-election to driving this agenda with what choices they can make at the state level. And regulations are certainly coming out in Europe that are driving and forcing change, as well as in multiple states in the U.S. So I don't think that context is changing. I think it's moderated to be reasonable in the economic environment we're in.

And if I could just follow up separately, the prepared remarks talked about there being some volume in the fourth quarter that, you know, was customers sort of preparing around tariffs and things like that. But it doesn't look like that's coming out of your first quarter or is having a negative impact on your guidance. So was that particularly material in any of the segments, the sort of loading? And I guess it sort of correlated to that question is just, you know, if it's not coming back out in the first quarter, is that just a function of customers? They just don't have a lot of inventory.

Thanks for the question. And yes, definitely agree. It was a modest impact on our volume mix beat, you know, here in Q4. And, you know, we're entering the year with, you know, order books that are strong, that fully support the year-over-year growth that we see in Q1. We're expecting, you know, volume mix growth as well as price, cost, and the specialties in Q1. And, you know, along with the absence of the startup cost, you know, that's be more than offsetting the fibers inventory we stopped. So right now we're good visibility.

Thank you. And the next question will be from the line of Frank Mitch with Fermium Research. Please go ahead. Your line is open.

Hi, guys. Good morning. It's Aziza on for Frank. My first question was on the $50 million of net cost reduction for 2025. Can you elaborate on the regions or segments where the majority of that is expected to occur?

Thanks, Aziza. we are definitely focused on improving our cost structure, and this is to compete in the challenging environment. Our comprehensive plan to improve operating costs goes beyond our usual focus on offsetting inflation. I would highlight that success and innovation has driven complexity in our operations, and we're optimizing our products and operations to maximize gross margin realization, and that's key to success long-term. this was going to be meaningful yield improvements uh optimizing our contractors and the usage of those and right now also there's significant mro purchasing opportunities in this weak manufacturing environment we also have some opportunities to optimize our global asset base and we did some of that in 2024 with the shutdown of our interlayers resin operations line and with rising natural gas prices as you would expect you know the drive on energy efficiency will be key as we think about operating segments it will be across all four operating segments to stay competitive in this global environment that 50 million will be key and you know we're not standing still we're moving forward aggressively on this plan thank you and And in your conversations with your auto customers, you know, I was curious, what are their expectations in terms of a recovery on auto builds in the U.S. and Europe?

So on the auto sector, I think our expectations are pretty in line with what I've been hearing in the marketplace so far, where automotive demand in the 25 versus 24 are probably going to be, you know, globally sort of slightly, you know, down. I think it's likely that Europe might be up a bit given how low it already is, North America being more flattish and China maybe being a bit lower, especially given the strong sales they had in the Q4. I would note that this business has been very successful in creating its own growth. So if you look at 2024, we delivered high single-digit growth in a market that was slightly down, largely for mix improvement as opposed to just absolute volume. We have quite a wide range of products here, from our standard interlayers to our acoustic interlayers to our heads-up display or our color and special gradient, solar rejection, all kinds of different features. The price points are quite vastly different, as well as the margins, product slate. So as we're dramatically growing in the upper end of the market in this functionality, there's a huge mix lift from these sales. And our adjustable market is actually growing before you even layer on that mix growth. So there's a lot of things where we're seeing more territory growth per car, right? so they're moving from windshields to side lamination with evs even the sunroof has to be laminated because the sunroof is so big um uh to you know help the the drivers not feel so claustrophobic as they're sitting on six inches of battery um so there's a lot of territory we're getting and it's not limited evs it's including ice cars that are moving to the side lamps and and bigger sunroofs um we also are just getting more value per product as i said you know with these higher value products are being installed in these windows. So you got levered volume growth as well as mix upgrade associated with basically a flat market. So we continue finding ways to sort of create our own growth.

Thank you.

The next question will be from the line of Jeff Sikorskas with JP Morgan. Please go ahead. Your line is open.

Thanks very much. I think your forecast for operating cash flow in 2025 is 1.3 billion, which is flat with 24. Why isn't operating cash flow growing?

Good morning, Jeff. Thanks for the question. Obviously, the largest driver for operating cash improvement this year is EBITDA growth. That's largely being offset in our base plan due to higher cash taxes. Right now, our baseline expectation is that our cash conversion cycle for working capital will stay flat with the last couple of years, which is around 85 days. Obviously, at Eastman, the entire global team is focused on delivering cash and cash flow, and our challenge is to deliver that, and then as the environment unfolds, deliver as much upside to that as possible. So, we're focused on cash. There's no change in that commitment but there will be higher cash taxes in 2025.

Secondly, historically, chemical intermediates tended to move in operating income with advanced materials and AFP. In other words, you'd make a lot in chemical intermediates and then you'd make a lot in advanced materials and AFP and then conversely, you know, they would move together, not perfectly, but in general. Whereas in 2024, chemical intermediates went down and the other two businesses went up. And you see that in the fourth quarter. And I get it. There have been divestitures and chemical intermediates. In general, should those income levels be correlated? Should we expect the three divisions to move in the same direction? Or has something changed about Eastman that they don't move in the same direction.

Hey Jeff good to hear from you and no it's actually the opposite so they tend to move in opposite directions so if you look at if you go back to 21-22 when inflation was really tight and demand was really high you saw you know a blowout in commodity margins in the in the whole you know industry including us where the those earnings went up pretty dramatically we were certainly benefiting the specialties by strong volume mixed growth in that timeframe, but a lot of that value was being offset by prices chasing the increasing pace of raw materials going up. And so when you have very strong demand, you certainly have the volume growth, but it's mitigated by sort of chasing the prices. So there's actually a bit of a natural hedge between how the CI segment operates versus the specialties. And, you know, in addition to innovation being the center of our strategy and how we create a lot of growth and stability in our portfolio, you know, compared to the market, this portfolio diversity does the same thing. where, you know, a small part of chemical intermediaries relative to a big part, especially products, actually sort of balances out some of the volatility. Great.

Thanks so much.

The next question today will be from the line of Patrick Cunningham with City Group. Please go ahead. Your line is open.

Hi, good morning. This is Eric Zangoff with Patrick. In AM, the prepared remarks mentioned a higher RM cost base on 4Q life for inventory benefit. in CI, the 1Q25 guides for higher raw material and energy costs. Which raw materials do you anticipate to be inflationary in 1Q?

I would say as we think about transitioning between years, obviously we've had the NGLs, so the propane has been higher. Also, we've got the forecast for natural gas. Those are the key things. As it relates to Q4, it was primarily the benefit of ferrozylene, that declined as we went through the quarter and that decline was a little bit better than we expected.

Got it. Thank you. And then in A and FP, the prepared comments mentioned new business winds and cost reductions mitigated a projected $30 million headwind. Could you provide some more insight on the strategy and execution?

Sure. So on the growth side, the great thing about the afp businesses it serves a lot of very stable markets um that went back to sort of having modest growth last year versus 23 and expected that sort of stable modest growth to continue uh this year and so that gives it a nice core foundation when you're you know you've got you know ag um you've got pharma applications uh water treatment aviation there's a certain amount of stability that you get that you've seen in that and and you know the volume growth this year is going to moderate relative to last year because we don't have to begin to de-stocking, but, you know, those drivers will continue. And then on top of that, you know, they have innovation driving their own growth too. So we've got some great high purity solvents that are experiencing growth in semiconductors, for example. We have progress we're making in winning a whole new set of applications in LNG that, you know, helps provide some stability for e-transfer fluids, which is more of a 26 benefit than 25. But, you know, we continue to make some sort of wins on that front. We've got a series of cellulistic products that we're driving forward that we talked to you about at the deep dive. So there's innovation there. It's not quite as big as advanced materials, but it, you know, it has the benefit of not facing as much discretionary market exposure that advanced material has. We've also just done a phenomenally good job managing commercial excellence and price and the value of the products and and benefiting from some you know spread expansion last year and i'd say more stability this year as we go and go into this year and of course they get their benefit of the cost reduction program um that we're rolling across the segment to also help it up um so that's why you get that uh you know continued uh earnings improvement this year on top of um what was an extraordinary performance last year thank you The next question today will be from the line of Salvatore Tiano with Bank of America.

Please go ahead. Your line is now open.

So firstly, I want to go back a little bit to Kingsport math analysis. And you did mention that most of the improvement in AM earnings will come the second half. But I'm wondering how much of that is something that's already happening and you have or you have already line of sight, meaning that you have already found the customers that they may need the volume in the second half, or how much of your targeted operating range have you reached right now as of January? So essentially, what's already in the books of that 50-75 million?

Yeah, so there's a lot of detail that we provide in the deep dive that you can reference in answering this question, and it's still pretty much the same view today as it was back then. But there is quite a bit, as you'll see in those charts, that's existing business, that 100-plus customers I mentioned, that are continuing to grow and launch products this year. And so that's a good portion of the demand. And then there is a lot of business. We're still closing. It's what we do every year. It's not just unique to the circular platform of closing business through the year and getting orders. The good news about this business is the orders show up pretty fast in a lot of these applications where the product's already well-established and how to use it. And so call it half-half in what is building on existing business versus business that we're closing.

Okay, thank you. And I just wanted to go a little bit to capital allocation. Out of the 7 to 800 million in CapEx, how much is the long-view expansion? And with regard to the buybacks that you mentioned, despite making more money, you are allocating less. So is this a number that has upside? Are you thinking about leaving some capital free for both on M&A, or is there no way that you would go above $200 million in 2025 buybacks?

What I would say on CapEx first is, just as a reminder, our base CapEx is around that $350 mark. So as you think about ultimately keeping our plants running and running reliably, as we think about growth programs, Yes, you would expect our commitments in Texas to ramp up through the year, but there's also other growth projects like our Triton expansions, et cetera, that we will be including as well. I would expect the Longview, Texas site to be the single largest growth project for the year in that $700 million to $800 million range, And that range is net of our expected DOE grant receipts. On the capital allocation front, as I think about, you know, again, we've increased our dividend for the 15th year. On top of that, you know, we went to the high end of share repurchases in 2024. And what I would say is we're not going to let cash sit idle. So, we're going to use cash, and our net debt to EBITDA is in a great situation. So, we have financial flexibility, and we'll leverage that to maximize value for shareholders.

Okay, perfect. So, you just mentioned the DOE grant that's essentially included in CAPEX. How much is that? Thank you very much.

We're not going to be specific to the amount, but I'll just highlight that we received $10 million in 2024.

Thank you. The next question today will be from the line of Michael Lighthead with Barclays. Please go ahead. Your line is open.

Good morning, guys. First, in fibers, it seems like you had a fairly profitable product or some EBIT that you're now not selling in 25. So can you just provide a bit more context there?

So we, in this particular case, we can't talk about this customer's product and the details of what it is. But it was a good high-value product. They made a design change in their offering to the marketplace, and the need for this was discontinued. We just provide that detail so you understand there are multiple drivers of how we're normalizing. Part of it is de-stocking, part of it is product, part of it is energy, being a headwind in this segment as CPTs catch up, and part of it is currency. So there's multiple levels of sort of what's in that guide from what was a very strong performance in 2024 to a very, very good performance in 2025.

Great. That's helpful. And then, Mark, post-election, it seems like there's been a bit of a pause or a view on a lot of the green spending.

I know you mentioned earlier your comfort in receiving your DOE funding, but just has the broader regulatory and funding uncertainty created any pause or delay just in your broader customer conversations about taking recycled product or committing to such a contract? we've not seen any impact at this stage as i said we're certainly seeing the impact of a weak economic environment and inflation causing companies to be you know careful in what they spend money on and you know as everyone is trying to drive cost reduction programs to improve earnings in a weak environment right so that's just sort of natural economic behavior um but i don't see any sort of change with customers where they're like you know you know we don't think plastic waste is is something i need to manage in my consumer packaging uh that's just you know no longer matters i you know climate is a you know it's a very different topic uh than you know everyone doesn't like waste in their environment um you know and the impact it's having um so i i don't think that you know we've seen any sort of significant shift um on that front i mean i do think um there's a lot of confusion right now uh with all the different activity going on the administration and everyone's trying to interpret what it means, but we feel good about the long-term value circular platform. Great. Thank you.

The next question will be from the line of Arun Viswanathan with RBC. Please go ahead. Your line is now open.

We can't hear you.

Arun Viswanathan of RBC, your line is now open if you'd like to check. Oh, my apologies. Please go ahead.

Great. Thanks for taking my question. Congrats on the results here. So I guess maybe be just two questions. So first off, what are you hearing from your customers as far as the circular efforts go? I know that you've had maybe some, you know, still some higher costs there, maybe some diminished interest. And then secondly, one, it doesn't seem that you're being impacted as much by the slowdown or winter weather or anything like that.

But, you know, your outlook appears a little bit stronger than some of your peers so maybe you can just comment on those two items thanks uh sure so i think i've already addressed the first question um you know in a couple of other answers you know where we're seeing economic moderation of pace of volume build but not a lack of engagement um when it comes to the uh second question um around sort of chemical intermediates um i think is where you were going with that question um you know we We certainly see the challenges in the competitive environment right now in chemical intermediates in both acetyls and olefin products and feel some of that competitive pressure. Our outlook for the year on that front is relative stability because while we recognize that's going to impact our business, we have made a lot of great reliability investments in our facilities last year, so we're on track to have a lot more volume to sell this year. A lot of that will be export sales, so it's moderate in its value because we're still waiting for local markets to grow, but certainly helping offset the spread. Again, they get a slice of the cost benefits in the cost reduction plan that we have in place, and they don't have much currency exposure at all in CI. That's more in AM and fibers is where all the currency exposure sits. So that's not a headwind here or an AFP for that matter. So that helps it have some stability in how it moves forward is having that additional volume and the cost actions.

I just wanted to clarify, apologies if I missed this before, but was there a pull forward in Q4 and does that kind of impact your Q1 outlook as well as it relates to whether pre-buying ahead of tariffs or any other dynamics? Thanks.

Yeah, we addressed that question earlier and it was modest part of the volume B. I think the next question is our last, please.

Yes, of course. The next question is from the line of John Roberts with Mizuho. Please go ahead. Your line is open.

Thank you. Is the solar heat transfer fluid, the thermal fluid opportunity, now dead? We've had several delays on projects, and I would guess the current administration is not helpful to that business.

Hey, John, how are you doing? I didn't see the solar question coming. So we don't do that much in the solar business anymore, to your point, John. we've actually made a phenomenally you know good progress on diversifying our application based on heat transfer fluid so it used to be very tied to PET and solar as two businesses which in today's current economic environment you know are pretty challenged especially PET but we've really diversified pretty significantly into energy especially LNG so these LNG facilities actually require quite a bit of heat transfer fluid and in many cases it's a very high value version of heat transfer fluid for those facilities um and and that's been a great diversification and as we because the capital delays we're not expecting much of a tailwind this year relative to last year in fills because projects are just getting delayed um but uh certainly in 26 and beyond there's a number of these big sort of lng fills that we've won that will help build earnings as we go forward thank you thanks again everyone for joining us we appreciate your interest in Eastman and I hope everybody has a great weekend thanks again this concludes today's call thank you for your participation you may now disconnect