Mike Harrison: And sorry, Kevin, just to clarify…
Kevin Willis: The Calvert plant, specific — Mike, for the Calvert plant specifically, we typically do a kind of a June turnaround there that often typically last several weeks. And so part of what we’re working on right now that Guillermo just mentioned is, what can we avoid later in the year as a result of what we’ve been doing at the Calvert City plant to make these repairs not only these repairs, but also some of the things we would have done in June as well. I’m sorry, go ahead, you got another question?
Mike Harrison: Yeah, sorry. I just wanted to clarify on the insurance recovery. Are you saying that the deductible is so high that you’re not going to get any recovery or it will just be very modest compared to the $15 million?
Kevin Willis: Yeah. There’s no expectation of recovery. There are multiple categories of deductible involved in an event like this. So you’ve got the property piece, and you’ve got business interruption and you’ve got to hit those limits on both. It’s not an either or kind of thing. So we don’t expect any insurance recovery from this event.
Mike Harrison: Okay. Understood. All right. Thanks very much gentlemen.
Kevin Willis: Thank you.
Operator: Thank you. One moment for our next question. And our next question will come from John Roberts of Credit Suisse. Your line is open.
John Roberts: Thank you. Well, most of the business saw destocking, do you think pharma ingredients saw any restocking activity? I know you had some logistic issues last year, and do you think there was any timing issues that help pharma? Because sometimes — I know sometimes the shipment falls one quarter or the other, and these are large high-value shipments that occur.
Guillermo Novo: If we look at just January, I mean, we continue to see strong demand. I think it’s more of that share gain was the bigger impact. I don’t think there was overstocking. It was more ensuring our customers ensuring that they have the stock in the right place. I think between COVID and the European situation, there is a lot of uncertainty around supply in some of these areas, and for this type of industry, their risk management has been a top priority. I think in the last call, I mentioned that when I was in Europe in November at one of the big events for the pharma industry, it was very clear that most customers were very focused on for 2023 risk management in terms of supply, given all the uncertainty that existed then, and I think still remains now with some of the developments. But we’re monitoring that closely, and we haven’t seen any change in January.
John Roberts: On Slide 5, under the resilient U.S. demand, you listed architectural paint additives. I believe most of the paint companies reporting so far have had weak architectural volumes. So how do we reconcile that?
Guillermo Novo: Again, it’s several things. We did see weakness in the DIY space. I think the contractor space remained more resilient, and we don’t necessarily follow 100% dynamics with additives. When you see a lot of destocking, we’re not the main ingredients to drive inventory levels and things of that nature. So there’s just unique situations. And again, we’re working with a lot of our customers. Supply remains tight around the world even with the softening. So we’re working to make sure this is not just about a quarter, it’s for the whole year of how we work to ensure that they have the right products. The issue without it is, if you don’t have them, it doesn’t matter what you have with the other raw materials, you can’t produce. So they are very focused to make sure that they don’t have the same problems they had last year.
John Roberts: Thank you.
Operator: Thank you. And one moment for our next question. Our next question will come from Jeff Zekauskas of JPMorgan. Your line is open.
Jeffrey Zekauskas: Thanks very much. In your press release, you said that currency negatively affected your EBITDA by $14 million, and I think your current — the effect on sales was about $24 million, $25 million. Why wouldn’t the effect on EBITDA just be $4 million or $5 million consistent with your EBITDA margin? Why would it be so large relative to the sales impact? And second, can you comment on the trends in your — in the margins of your Intermediates and Solvents business? Is that business getting weaker or stronger or staying the same?
Guillermo Novo: Okay. Well, let me comment on the intermediates and then Kevin, you can comment on the currency. So Intermediates has held up — a reminder, most of our Intermediate business is the downstream products, NMP BLO, BDO, we have the captive, and we have a use and maybe of our merchant business, maybe 20% of — it varies 20%, 25% of our merchant business is BDO. So I would say, in BDO, clearly, the markets are long. Prices have been coming down. Internally, for us, our Pharma business has been strong and the Personal — even in Personal Care, our core business with customers versus distributors continues to hold up. So volumes — internal captive volumes were good, although transfer pricing not so much in this quarter, but we are forecasting them to be coming down just because markets are longer.
That will be a negative for Intermediates, but a positive for our downstream businesses as we go through the year. We don’t see that BDO dynamics are going to change that much in the near term. I think it really will require markets to start picking up probably in the second half of the year for things like fibers, polyurethane. There’s a lot of these other bigger markets that will drive that part, but that’s not the biggest part. But on the margin, we’ll see some impact in the next quarter. If you look at NMP and BLO, there are different products driven by different markets. We are not pricing as maybe the markets were in the past. Just assume it’s all a commodity and move it, these downstream products are very valuable. NMP is going into semiconductors and to the EV market for battery production.
Huge investments going in in the U.S. and in Europe. We’re focusing our portfolio more in the U.S. and Europe, less on Asia. Demand is going up. There is not enough product. So we are working with all our customers and people that are investing in both regions to make sure that we have the product they need as they ramp up the construction of their plants and increase production. So the pricing and supply-demand dynamics are a bit different. And similarly, in the BLO market, these are going into active ingredient production for pharma, for Personal Care, very specialized applications in the semi and the electronics industry too. We’re the only Western merchant player, and again, the dynamics there are different. Markets have been tight, and we’re pricing each product on their own, not just trying to move BDO.
In the past, remember, we were a big BDO house, and it was just moved like most commodity companies. You want to load the asset and just move it through across. We’re not a big BDO house anymore. Most of our production is for captive use and to support our downstream. So we have a very different strategy. And so far, precedent has been holding up what we’re trying to see is more of that demand. I think on the margin, we will see softness in BDO, and the other ones, I think we’ll have to see how markets develop, especially in Europe. And I think also with the China opening up, a lot of excess product that may be just trying to find homes outside of China now that there’s no demand, all that will be pulling back into China as China reopens. Kevin, if you want to talk about FX.
