With us today is Mark Costa, Board Chair and CEO of Leastling Chemical. I'm going to lead you off with some questions for Mark, and we'll go from there. So, Mark, welcome to our conference. Great to be here. Looking forward to the conversation. Maybe you can walk us around the world from a demand perspective, by region, by business, by end market, how are things progressing through the second quarter?

So I'll start with end markets first, and then I'll come back to regions. On an end market basis, if you look at sort of roughly half our revenue, it is exposed to what we call consumer discretionary. So that's autos, which is the largest in market, and then building construction and consumer durables. And consumer durable parts, which includes a lot of appliances, TVs, things like that, are obviously connected to the state of the housing market because that's a big trigger for purchases of those kind of products. And in that world, what I'd say is there isn't anything dramatic in its change relative to last year. So the building construction market, we expect to be similar to last year. There's obviously the hope for interest rates dropping and stimulating demand. That's obviously not happening. The auto market, I think, is a bit softer this year. And that's been the one change, I think, for the whole industry from what people thought in January to where we sit today, where that global market will be off low single digits. It's not a significant change, but it is going to be a bit weaker this year from what we can see so far. And I'd say on consumer durables, it's a little bit better than last year, but similar. So you can see demand getting a bit better sequentially out of Q4 into Q1. We're seeing seasonal demand, you know, that you would expect, you know, on those kind of products being purchased to be made into things that show up for Christmas, et cetera, things like that. So put it all together, you know, it's sort of stable when you look at it. On the what we call the more stable markets, so that's personal care, consumer packaged goods, medical, ag, you know, all those kind of more stable markets. It's, I'd say, we're seeing modest, you know, sort of low single-digit kind of, you know, growth in the market for this year versus last year. We're not seeing any headwinds. We're certainly not seeing any snapback, and that's the whole point of those markets is it's relatively stable. So, you know, that is sort of the way it's playing out. Ag, I'd say, is so far looking like a normal year. Lots of conversation about what ag will look like next year given the straight disruption, but this year I think it's in the normal category. Geographically, I think it's what you all know. I mean, Europe and China are certainly worse off economically than here. The economy here is obviously not strong. And even though affordability is a big issue, I think what's defied everyone's logic, including mine, is that demand is held up relatively well compared to consumer confidence. And the biggest way to explain that, I think, is just employment is still really good. So while people are worried about what's going to afford, they still have a job. And so they're still, you know, buying things. You know, they're certainly stretched and we're worried about that as a back half kind of question around where consumer demand goes. But right now, we're seeing demand hold up well in this quarter across the portfolio. We're not seeing any signs yet of demand destruction associated with what's going on with the Gulf and the impact it's having on prices. But it takes a while for those impacts actually to show up in the final price of a consumer product. So, you know, we're just going to have to see how this plays out.

So relative to your guidance of $1.70 to $1.90 for the second quarter, are we tracking a lot of those expectations?

Yeah, we feel good about where we are on our guidance. So on the specialty side and advancement trails, we're seeing, you know, the sort of sequential improvement in demand that we expected. If anything, it's a little bit stronger than we expected on the consumer durable side, a little softer on the auto side from the comments I just made. But overall, I would say demand is on track, and the quality of the demand is good. So the mixed value of what we're selling are some of the higher margin products, so that's good stability there. On the price-cost side of it, and the innovation is coming through as we expected. So the ramp-up of the recycled PET, ramp-up of some conservatorables using our new content is on track. So we still feel good about that 4% to 5% revenue growth this year versus last year for the advanced materials segment driven by the circular economy. And it's not just that, right? You've got the heads-up display interlayers that are very high value that are growing faster than the underlying auto market. You've got some good, solid growth in the performance films business. But I'd say that's more in line with the market than growing faster than it, because aftermarket products are not exactly a priority. When people can't afford a car, they're not going to put film on it, right? So, you know, that's a bit more challenged. But overall, I think it's in good shape. On the price-cost side, you've got the benefits of price increases we've put in place. We've got them all in place, as we said we would do. I'm feeling confident about that. Because of the speculation that maybe this trade will open and oil prices come off, raw material headwind is probably not quite as strong as we expected. And things like PX, which have moderated a bit, so helpful. And then when you look at that volume increase and you put it together with operations running hard to keep up with demand relative to relatively low utilization we had in the first quarter in advanced materials, as we were still managing inventory and uncertain about demand. So we've got a pretty helpful utilization tailwind going from Q1 to Q2 in advanced materials. So that segment's on track as a functional product is just rolling along, demands holding up in solid. They have a lot of cost-pass-through contracts. Two-thirds of their demands in stable markets, so it's stable. And then the cost-pass-through contracts are working as it should to keep up with raw materials, energy, distribution costs. So that business is on track for a good quarter. um chemical intermediates is obviously doing fine um sure we'll come back to that in a more detailed question so i'll just keep it short here it's doing fine um and its earnings are probably going to be a bit better than 50 million dollars which is what we originally sort of estimated with the tightness in the market and then i'd say fibers is going to be potentially a little bit light um it's as we told you mid-east demand you know how to get cheerle in and more importantly cigarettes out is the bigger issue. They're solving, but it just takes time to sort of work their way through it, right? That's about 10% of the fiber's demand revenue is the Mideast in tow, and so that was a bit of the challenge. But overall, the customers are committed to their contracts on a full-year basis. We're not seeing any divergence there. We'll come back to that, I'm sure, in another question and what that means for the back half.

Would you say the bias is to the upper half of the guidance range?

Well, I would say where I sit today, you know, you could see, you know, potentially we're in that zone. But June is an extremely important month. And you just don't know on how demand will play out in June. The order books and investment trails are solid through July right now, which is good and not typical. Right. But, you know, at some point, if the trade opens, people are going to say, oh, well, maybe if I just hold off buying, the price will get cheaper, right? There's going to be a month like that at some point. I don't know which month that's going to be. Clearly, none of us do. But I don't think it's going to be June at this point. So I feel good about sort of how volume should be trending. But, you know, it's, you know, we've got war on multiple continents.

I mean, there's a lot going on.

And just in that pre-buy question, there has been some pre-buying across the portfolio. um i don't think there's been much pre-buying in chemical intermediates just to start off the easy thing we can sell whatever we can make because other people can't make it right so you you know the everyone focuses on oil but naphtas and and methanol and things like that is what you should really be focusing on for this industry at the moment and it's short right you know a lot 15 20 percent of the naphtha for the oil comes out of the gulf it's not coming out and then there isn't a bunch of refineries sitting around empty outside of the gulf and to be ready for this scenario so when you're dumping all the strategic reserves into the world you're depressing you know oil prices because there's no refineries to use it right and so that's the part i think people are missing is you know you got to do the supply demand balance at every step in the chain and you've got an artificially depressed price in oil i think and it's partly because demand's coming off on fuel so partly because there's no refineries to turn into um and so that nap the situation is going to drag on for a long time we were just talking about last meeting i met with the ceo of one of the biggest chemical tanker companies you know and they're like look there's a clear priority of what's coming out of the gulf and it starts with avgas and urea and sulfur because we need transportation and people not starve next year right so that gets prioritized then oil then chemicals but we are not in the priority rank of getting things out of the gulf so when you open this thing you know if they have i don't understand how they do this but apparently they can prioritize what goes through it i'm told um and if that's true you know it's going to take a while to re-establish naphtha and other refined chemical products for very good reasons for the state of civilization right um so i think things are going to stay tight certainly the people who are far more qualified like the dallas and lyondells can you know give you a better detailed explanation of it but i've had the conversations with those guys and they're they're they're of this view without doubt china's adding some capacity how it plays out but maybe some pre-buying am is that fair or at least some on the am side um there could be a little bit of pre-buying um and there could be a little bit of pre-buying in afp certainly not we have the opposite going on in fibers um you have to keep in mind that the back half of last year which was brutal as you all know involved a huge amount of de-stocking you know the good news is we saw that stock de-stocking come to an end because we saw a very substantial recovery right sequentially our volumes in am and afp came back 10 right from q4 to q1 which was encouraging but the underlying demand hasn't improved a lot january february relatively weak so no one was ramming up plan expectation of growth this year people were being cautious so suddenly you get to the war where now people can't make things as easily as they used to you know people may want to buy forward but they can't because it's not there to buy so i think that there's there's just constraints on what's out there uh to be pre-bought um on because you know we certainly had stockouts in places you know as we got to the end of march concerning what we could actually allow people to build you know and we're still running hard just to keep up with demand right now um so i think that uh That inventory situation is quite a bit different than, obviously, when we were in 22 or even in 25. Because in 25, everyone thought the economy was going to get better, Trump's present, this is all good. People like us were building inventory for growth for the year in the first quarter. That did not happen this year. Back to the conflict, how long do you think it will take for supply chains to normalize once a conflict ends and it straight reopens? there's two different camps on that um out there um and i'm guessing the answer is in the middle so one camp is china is going to make everything and ramp up their coal assets and this and the other but 70 percent snap to you know 15 to 20 percent coal is it can't ramp up the coal that much um and they certainly have plenty of reserves but again they didn't have a bunch of idle refineries sitting around they're all running relatively hard so they don't have a lot of swing up in what they can do right to solve the gap in the world so i think i'm in the camp that things are going to be constrained it's going to take a while re-establish the supply chain just like shipping explanation you got to fix the things that are damaged and in the mid-east you've got to you know re-establish you know just starting these plants are not like light switches right it takes a while to start them up and there's some we know got shut down hard which never come back well um and so there's all of that that's going to sort of drag this out at least six to nine months and really getting back to the back end of last year and the beginning of this year you know that whether it's oil or naphtha or everything else um but it's not going to stay as extreme as it is here right so you know our expectations are some moderation spreads in the back half of the year um and we'll see how it plays out and you were just at acc the american chemistry council's annual meeting what's the mood what was the mood in colorado and maybe what's the divergence of opinions if you mention them a little bit on the street reopening what i just said is you know there's things will remain tight you know versus it's going to loosen up faster than people think um and normally at acc by the way you have all these meetings like this right back-to-back meetings and by the time you get to the end of yesterday everyone has the exact same point of view about the world. And that is not the case right now. People have very divergent views about how this is all going to play out. And as I said a moment ago, I think the answer will typically end up being somewhere in the middle of the extreme views. I would say uniformly, the opinion is what I said, demand's holding up. We're not seeing any signs of demand destruction. I think that's sort of a consistent point of view out there. Everyone's worried about inflation impact on consumer demand in the back half of the year is only rational. But the consumer continues to defy that concern every year. And to be clear, it's not like markets are good. Let's not overstate it, right? In-market demand is bad, but it hasn't gotten worse. But housing is 20% lower than 2019, right? Same in Europe, 20% lower, China, total disaster. There's nothing good about that. It's just not getting worse. But there's a huge amount of pent-up demand when you think about just how many housing transactions have not happened now for four years, right? The age of a car is getting 14 to 15 years old on average, right? That's a lot of really old cars that are just going to start hitting into life. Appliances, right? They were massively bought in 2020 and 21. Now they last five, seven years and then you got to replace them, right? So you're getting to replacement cycles at a minimum, let alone maybe some demand recovery you know so the area under that curve is significant you know it needs to be unlocked which it is you know in my opinion not probably going to get it unlocked this year right unless interest rates come down you know you're not going to start unlock the housing consumer durable side of things i'd say demand wise everyone's nervous about the future but not seeing it yet in their orders people aren't seeing a lot of pull forward um you know consistent with the comments i made earlier so there's maybe a little bit of that going on but i'm not significant for the reasons i've already mentioned um and you know the big question about china and what they're going to do i think is they're just going to keep doing what they've been doing right which is have capacity and take global market share on the commodity side of the world um where it's just about price and and subsidies they have to go do it on the specialty side you know we still don't have a lot of direct Chinese competition yet. I mean, we always assume we're going to have it. That's why we have an innovation-driven company to innovate and stay ahead of that challenge. Circular economy should be a regional business. And so that's another way to sort of disconnect from Asia if we're going to have actual circular economy. You know, so we're always looking for all the boats that we can build, you know, around that threat. And so far, everything is holding up reasonably well.

And longer term, you're thinking, the group's thinking about benefits to U.S. suppliers, you're a heavy U.S. asset base. Is there a premium on U.S. supply, security supply? Is there less dependence on urgent golf supply? Are there long-term benefits beyond 6 to 12 months of this conflict to you and your U.S.-based peers?

Yeah, without a doubt, that's true. You know, on the Khmer side, we can sell whatever we make, right? So that's clear as markets are shorted from what I said earlier about NAPA and everything else around the planet. On the specialty side, I think for sure part of the reason orders are holding up as they have is we're viewed as a much more secure supply. Most of our competition is not in China, but it is in Asia. It's typically Japanese or Korean competitors who are about in the best spot right now on the specialty side of things. And so that's holding up reasonably well. They're under more cost pressure than we are when it comes to pricing. I think that being a North American asset-based company, 80% of our volume is made in the U.S. 60% of our revenue is outside the U.S. We're highly leveraged. North America always have been. And now it's a really good thing, right? So our energy costs are advantaged. Our office here, our elephant cost structure with propane are advantaged. And we're viewed as having a much better position to be secure in our supply and reliable supply to customers. And that's always a good thing. North American chemical assets will be winners in this long term. The Mideast is going to be hard to recover straight being safe at this stage because the Iranians now know they have a huge leverage point. And while the Chinese are certainly adding massive amounts of capacity and massively subsidizing it and getting discounted oil to run it, one, they're not getting the discounts anymore, and, two, all their assets from a cost position point of view are in the third quartile. So they can add it, but they're not cost-advantaged in doing it, right? So if they want to subsidize it forever, then, you know, that's a long-term problem for the industry. But, you know, there's also just a limit on how long you can do that.

Segue into chemical intermediates, which has been the biggest beneficiary for you guys with conflict.

Where are spreads today versus where they were pre-conflict? expectations are back half the year and longer term the role of this asset in your portfolio and the company so there's two elements of what's going on at chemical intermediates before you get to the war right there's a structural element there's a cyclical element you know to what's going on the cyclical side is north american markets are far more attractive than the export markets for anyone who makes you know these kind of products whether it's acetyl or olefin demand came off because that also goes into housing because consumer durables and cars and everything else you know for the intermediates that we make um so that has that same certain market exposure so we had a mix hit you know when that demand is lower than normal um and so those and those margins are much better than export right and then on the export side is where the structural part showed up because that's you know the chinese aren't really penetrating our market because we tariffs and things like that. And logistically, it's easier to go to Latin America and Europe for them or Southeast Asia than it is to come here. So that export market got crushed, you know, in 24 and 25, right? So those values basically got down to, you know, very low values. That benefit on the export side of the thing is obviously helping us. So while that comes off, if there's stability that comes back in the North American market, you can offset some of the decline in export values with higher value mix in North America and some demand recovery. So those can stabilize out a little bit. That would be helpful. But the margins right now are certainly higher than what I would call normalized in the world that we now live in, given the structural dynamics out of China. But I also think, because of everything I've already said, it's not going back to where we were last year, somewhere in the middle. I mean, anyone guess somewhere that is.

And long-term, it's important to enroll in the Eastern portfolio?

Look, the Olfem business, first of all, Acetyles is part of the integrated complex in Tennessee. That's not going anywhere. It's all a big pile of spaghetti there, right? So you can't disassemble anything with cellulose or polyester from that side. But when it comes to the Texas side, we've been clear that's not a strategic asset to us. It carries a lot of costs. You know, a lot of costs are spread by revenue, and it has a lot of revenue. So it carries a lot of cost structure. So you've got to keep that in mind when you're trying to think about its role in the portfolio or its absence. Half of the output does go into our specialties. That gives us a nice, secure raw material position that's made in America. So that's a good thing to have. Does it fit in the portfolio as we're growing the specialties and building up the circular economy? Probably not. But right now, it's providing some earning stability. The nice thing is it's a small percentage of the portfolio. But when ROs go really up, like 21 or now, where you have pricing trying to chase it on the specialty side, the margin expansion here actually offsets that. It gives you a bit of a stability hedge. But you don't want to be too big. Otherwise, you're going up and down with it. But it's small enough where it just helps offset some of that and gives you more stable margins. So there's this thing going on with our stock where people don't know how to trade us, right? Don't want to trade on the commodity side. Don't want to trade on the specialty side. So you can see that or debate in the investment community going on daily. The reality is it provides stability, which is a good thing in this world right now. Stable cash, stable growth. You know, that's what you get out of this portfolio.

So much stability. Fiber is out of state tow. We have seen some de-stocking the last few quarters. Where are we staying on that journey? And where are we staying on that de-stocking journey in tow?

So the de-stocking is not a few quarters. We are unfortunate to think about this in years. So critical part of a cigarette. It's about 5% to 10% of the price of a cigarette. If you run out of tow, that is uber bad when you have 65% gross margins. So security supply is always the priority in history for this industry. When we had all the shortages and we had some operational problems in the beginning of 2022 with our site, the customers became, especially the big multinationals, because they wanted to secure supply. They built it in 21, they built it in 22, they built it in 23. you know a little bit every year because we have these volume band contracts that they stay in they don't buy a lot extra each year but they bought a bit extra each year so they accumulated a lot by the time they got to the end of 2024 and of course no one ever tells you when they're building inventory you know they're worried you'll put them on allocation and not give it so you you just don't know what's happening that's what happened across so many you know marketplaces in 21 not just but they didn't you know everyone else started to do stock right away in the end of 22 these guys you know because they're so worried about secure reply didn't start destocking anything until last year and they're all under contracts especially the big ones you know that have a min and max so they went to their minimum commitment which allows them to chip away at the destocking but they can't solve it in a year because we hold them to these minimum contract you know to keep stability in the business on the volume side So it just – it started last year. It's going through this year. It's going to keep on going to some degree into next year. By then, it will be done. I mean, there's an age limit on this toe. So they – it will – it's a journey. But that's the primary drop in demand. I mean, why it got enabled was a Chinese player came on with some capacity that made it available to the Western world. Historically, they'd just been selling into, like, Russia and Venezuela and Iran, places that we can't sell. But they added some capacity so they could actually take some of the risk out of the marketplace about the plot, which is what enabled the destocking. The asset that's being shut down by Saline's is pretty much equivalent to what they added. So that helps on the balance side. But there's still a lot to go. And the margins are very high. People get tempted into chasing volume because the value is so high. So that's why you get these dynamics where prices come off. And we had really high prices. And so it was not a surprise.

Underlying decline rates still the same 1% to 2%?

It was 0% to 1% between 2014 and 2024. It's moved more into that 1% to 2% range. There's some more excise taxes in places like India and this, that, and the other. That's going to impact demand to some degree. But historically, demand, despite all the drama around cigarettes, has just not changed a lot over time. but it will definitely decline a little bit more than the last decade. And the non-toe portion of fiber, is that still progressing? So the textile business was a great opportunity to keep the assets running full, and the margins were actually pretty good. I mean, not exactly toe margins, but not that far off. So as that business was growing, it offset some of that toe market decline. As we told you, about 40% of the earnings decline has nothing to do with toe, And this was about a $30 million decline in 25 relative to 24 with all the drama of the trade war, the retaliation tariffs on our products going into China that slows our demand for us. And I'd say that we thought demand would be coming back meaningfully this year, at the beginning of the year. It's a lot slower than we thought because of all the economic drama going on right now. So there's still that $30 million recovery out there, but it's more in the future than it is this year at this stage. I mean, it's coming back a little bit, but not a lot.

I want to touch on M&A. It's been picking up in the space here and there. You've been one of the least acquisitive companies in chemicals. I think you've earned a right to do something, but you've chosen to focus organically internally. What role does M&A play in the growth of yeast in the chemical?

Yeah, so historically, by the way, we're one of the more acquisitive companies in a different time frame. So, you know, we went through this huge portfolio optimization, if you know our history, from 2006 to 2011, where we got rid of a lot of commodities by the portfolio through a series of divestitures. And then we flipped around in 20, we did $9 billion of acquisitions, right? So we were very acquisitive, right? So we bought Slucia, we bought Tomenko, we bought a bunch of bolt-on businesses, all of which have delivered great returns. and very successfully integrated into our company. But, yeah, when we hit 2014, after we bought all this stuff, we went into an organic phase. You know, we have all these products, all these specialty businesses. The ones that we bought had a lot of potential but had not been properly invested in from an R&D point of view, so we were working on that and ramped that up successfully and built a pretty good business. And through all that, and we had a lot of leverage that came with it, you know, and the economy wasn't exactly great. So the rate of delevering wasn't quite as fast as we'd like. And so it took us a while, you know, to get to the balance sheet back to where we wanted to be. And then, you know, you had COVID hit. And then you had supply chain growth. And then you had, you know, complete and utter drop of, you know, manufacturing consumer-related demand, right? So it's been a little chaotic in the last week. Liberation day, wars. Yeah, it just never stops. You know, and by the way, I joked a year ago that we're running out of terrestrial problems. So, you know, we'll have an alien invasion. And apparently that's true, too. So, you know, who knew? But the good news is they've been walking among us for decades. And so they must be peaceful. So maybe we don't have to worry about the disruption, but maybe he'll he'll tax other galaxies as well for reports. You know, you know, have to think about, you know, all that chaos and being responsible, your balance sheet, your cash flow and being stable and reliable. So running around doing M&A didn't seem like a great idea. But the real choice that we made, I'm getting to your question, but I think history is important. The real choice we made in 2021, which is we could go really aggressive with the strength of our balance sheet at that point and the strength of earnings right back then on the M&A side. And we decided that the certain economy had far more upside and organic growth gets a far better valuation if done well, that that was the right choice. because we're unique in what we could do in something at that scale of platform level relative to anyone else in the industry, you know, and we still believe, you know, there's a lot of value there, right? Go look at PureCycle, right? Negative $140 million EBITDA, $2 billion valuation, right? And, you know, we've got very significant revenue. We're, you know, we actually have significant profit, and it's not in our stock at all because people are worried about the core. You know, you stabilize a core, and you start getting that valuation on top of the portfolio creates a lot of value. So we still believe our organic strategy has a lot of value despite all the chaos. Having said that, you know, the world is going to speed up on M&A, as you said. The world is definitely going to, you know, I think in our industry consolidate to some degree. Certainly that seems to be the golden theory. And so we're looking at all options at this point, but there's nothing just to be clear going on at the moment. But you have to, you know, realize the world's changing and change with it, right? So, you know, M&A probably, you know, play a role in our portfolio too, both ways, you know, both, you know, things you could divest or things that you could buy or et cetera. So we're, you know, starting to consider those things, but there's nothing, nothing on, you know, imminent.

The pipeline filling small bolt-ons at least, or how's the pipeline today?

The pipeline, I mean, there's always the bolt-ons out there, but the thing about bolt-ons is they take a lot of effort relative to the value they bring. And so if you've got a machine going like Roman Haas did a long time ago where they're rolling up like competitors and codings, it's really compelling. And we've done that well in performance films. We've rolled up competitors and built that business to be more robust than what it was. And we're always open to doing it, but it's not as any of us would like it to be.

You mentioned methanolysis, organic growth. Where do we stand on that journey today?

Well, certainly it's a little slower than what we've done in 2021. So the current status is the plant's running great. The yields are fantastic. We've got clear insight on how we can develop that to at least 130% of design rate, right, to stretch the asset and give us time before we have to have the next big capital spend. But on the specialty side, the volumes are growing, you know, with some of the recovery of the market. But you're going into blenders. You're going into reusable water bottles. You're going into those products that are discretionary, right, where that market conditions aren't great. So it's going to grow with the rate of the market. People don't want to just add RecycleCon to an existing product. They want to put it in a new product launch, right, where they get people paying attention. You get the value for it, et cetera. So if you're not launching products, then you're not growing a lot of renews. So we are seeing half our revenue growth, which would be that 4% to 5% I mentioned on AM, is in the specialty, where they are starting to launch some products. They are picking up some volume there. The other half, which is the RPET, demand has improved considerably for that side of the business in the last nine months, as we've talked about on the calls, In principle, because the mechanical is degrading faster than they thought, and then we blended with the mechanical to make it look good again. So there's more recognition of our value proposition on how our product is identical to Virgin, where mechanical really is not, and going to be less so every year. So that's creating a lot of opportunity for us. At the moment, we're capacity-limited, not demand-limited. So our assets are flexible, but they're not that flexible, right? You have to take some effort to sort of swing them back to making PET, which is what they originally did before we turned them into specialty assets. And so we're in the middle of sort of making some of those adjustments. We told you about one line we're switching over, and we're looking at another one right now. So things are good on the demand side. Premiums are holding.

What's Pepsi? Pepsi's a big customer for you guys. What's been their feedback on the material and what do they want from you going forward?

They've been extremely happy with the product. They actually have a whole thing on their website around Eastman and how we're enabling them to sort of address the environmental challenges of packaging. So they've been great. And a few other big package companies are engaged as well. So, you know, they're pulling forward their volume, you know, even in this economic environment. And you think about the stress test and the value proposition, things are not good if you're in the consumer package world, right? You know, they have, you know, significant demand challenges because pricing got so high. They're lowering pricing right now to rebuild volume, and they're still buying our material in the value proposition test in this context, right? They could easily just say, you know, I really care about the environment. I want to care a lot more about it in 2027 than 26. And a number of the brands are doing that, right? That's, you know, that is certainly happening. But the ones who really take the environment seriously, like Pepsi, like P&G as two examples, you know, are very much sticking with their plans.

Then you have your homestead, California, putting in place recycling laws. That can only help matters, I presume?

Depends on how the rules get written. You know, so there's always two camps out there in the environmental community. One is they really want to solve the problem, which is recycling and supporting, you know, all those types of initiatives, whether it's recycling or the biodegradable cellulosic polymers we have that we're taking to food service now. But there's also a contingency that just wants the world to have no oil on it ever, right? And so the only way to get rid of oil is you have to get rid of combustion engines and you have to get rid of plastic. So that group, the more extreme NGOs, just want to ban everything, right? So there's that war going on, you know, which is totally unrealistic. You know, it sounds good, raises money, but they can't actually ever accomplish their goal. So that creates a lot of policy volatility. But, yes, in general, the recycling rates being required, EPRs, which are enhanced producer responsibility, also known as a tax, on packaging waste, you know, those drive behavior. Colorado, I would say, is the best example of a pretty thoughtful design, you know, that I wish more countries, or not countries, but states would adopt. It's going to be more extreme about everything, so we'll see how it plays out.

So what's next here for methanalysis? Texas has obviously been working out initially, but what's next from a capacity standpoint?

So the Texas project was, you know, a very capital-intensive design because we're building everything new, right? armor line knew, methanolysis knew, all the infrastructure around it knew. And that's led to what the capital cost was so high and also helped us when we got that DOE grant of $375 million to bring the number back down to more. So when we lost that grant, it actually forced us to step back and say, well, is there a different way we can approach this to be a lot more capital efficient? And at the same time, you know, you have so much stress in the commodity markets, including PET, a lot of assets being effectively abandoned, that creates the opportunity to leverage existing facilities and infrastructure and focus really the capital down to the methanolysis unit, right? So we've been looking at multiple options of how to do that. I believe we have a couple of different pathways. But we haven't finalized exactly what we're going to do, and so we're not going to talk about the details until we've got it all sorted out. But there is a capital-efficient way to go forward. Could we hear about that in 2026? Because we're not starting CapEx in 2026, but a pathway with more clarity and precision in 2026.

Would that be only U.S., or could that be Europe as well?

We both. The issue, we're in a tough environment. We're going to be very disciplined about our capital allocation, and we're not going to be ramping CapEx up a lot until we feel like the economy is stable, which is certainly not the moment. And because we can develop the first plan that buys us, let's say, two years of grace, in how we want to sort of build out this facility and stretch its capacity and then add on the next plan. And that allows us to be capital efficient, allows us to be disciplined about the market demand, making sure it's building as strong as we believe it will, and therefore higher confidence around a good return on investment for the second plan.

My last question is, you've always been hard to value, you peg what is Eastman Chemical? And I think people either fall to a lower valuation so they can't really figure out what you are and where you're going. How do you address those concerns and issues? You have Greg here as well. The age-old question, what is Eastman and how do you value Eastman Chemical?

Well, look, the core of Eastman is it is a specially chemical company, right? It is not a commodity company. Yes, it has a little commodity tail on it, which actually stabilizes earnings and cash, you know, and we can debate, you know, how it impacts the valuation. But the reality is the advanced materials as a functional products business are the sort of the core of where all the capital goes and where the where the growth happens or where the acquisitions will occur or whatever else. So your economy is completely not valued in the current stock price. Right. I think zero. Zero. Yes. I agree. But we have a company that can't make any profit that has a two billion dollar value. So as a reference point, I'm feeling pretty good that we're worth a lot more than that on the circular economy since we've got the largest asset in the world that's doing chemical recycling. It's up and running. It's up and running at high yields, right? You know, so the technology is totally proven. We have an established customer base with a reasonable, serious amount of revenue now who are paying premiums in the worst economic environment, you know, we could imagine. I think that platform has value. So I think that what's being missed is the margin challenges, the earnings challenges are all volume driven. It's not about, you know, some sort of collapse in margins and the specialties. It's just acid utilization, right, because demand's low. So you've got all this pent-up demand on the upside of the core business. You've got circular, you know, not just on the polyester side but on the cellulistic side. So we've got the Aventa products and things like that coming on fruit service. Obviously, we've got to stabilize fibers and take that uncertainty off, you know, because I think that's a bit of a hang-up. But we're in an earnings-known range now where it's going to, you know, start stabilizing. I mean, it's not stabilized yet, but we're working on it. And then I think CI gets back to a more stable level, right? So call it $150, $200 million, EBIT, you know, on a normalized basis. And you've got the E2P investment that adds $50 to $150 million of earnings, depending on the market conditions on the ethylene propylene investment that will be online in the summer of 28. Further strengthens that, which is just great cash flow. Now, whether it's safe in Portugal or not is debatable based on how we're growing, you know, the specialties. But I think that people are missing about the quality of the portfolio and how well it's holding up in this context because, you know, so much of our demand is exposed to discretionary consumers. So that is the issue, right? We are going to have exposure to discretionary demand. That is the one – demand volatility on that side is real. But we're at the bottom of the market, you know, when it comes to consumer discretionary demand. And so there's never a better time to get into the stock because the incremental margins are at least 30% to 40% of advanced materials when that volume comes back, if not higher. So it really hurts on the way down. It's really good on the way back, not just on the earnings, but on the cash flow because the margins on those products are high. And AFP is really holding up well through this thing. So you've got a nice stable base there, and then you've got all the upside in the end. on that so i just i think they obsess too much on the tail risk which is a very small part of the company do we get a circular segment at some point to highlight its value relative to the company you mentioned your own circular segment all right we've had that debate i mean with the first plant that's not going to happen because it's so integrated into making all the specialties you know as you scale up to a second and third plant that's more standalone if if there's a But if we perceive value to making sure that's called out as a separate segment, we'll do that. But that's a problem for a different year. But then our time is up. Mark, Greg, thank you very much.

Thank you.