Kevin Willis: Sure. Just the impact is a little counterintuitive on the surface. As you look at it, our manufacturing footprint is pretty U.S. centric, especially for our higher margin products. So not only do you have a lower selling price on a translation basis outside the U.S. because of the strong dollar, we also have higher COGS, and because we’re U.S. dollar based manufacturing for a lot of those products. So you kind of get hit on both sides of the equation. So you have an outsized impact on the gross profit and ultimately, the EBITDA piece of the equation. That’s why the numbers don’t necessarily on the surface make as much sense. I don’t know if that answers your question or not, but it has to do with the fact that we’re more U.S. centric on the manufacturing side.
Jeffrey Zekauskas: And then lastly, you said your planned maintenance cost in the quarter was $12 million. Is that a lot or a little? What are your planned maintenance costs on an annual basis? Is this a year of larger planned maintenance costs or smaller planned maintenance costs?
Kevin Willis: From a plan perspective, it’s pretty consistent year-to-year. What can differ, what can vary is the timing. So this year versus last year, we’re heavier — we’re much heavier in Q1, especially in the Specialty Additives area than we were prior year. But on an overall basis, it’s pretty consistent. The impact typically is around $40 million a year in total, give or take.
Jeffrey Zekauskas: Okay. Thank you so much.
Kevin Willis: The big variable with that one, Jeff, would be the Lima, Ohio BDO plant. We do that one about every three years, and that one brings some number up whenever we have to do. But otherwise, it’s very consistent from one year to the next in total.
Jeffrey Zekauskas: Thank you.
Operator: Thank you. One moment for our next question. Our next question will come from Michael Sison of Wells Fargo. Your line is open.
Michael Sison: Hi. Good morning. Just one question. You talked about adding a lot of capacity this year. How much how much growth does that provide you over the next couple of years in either sales growth or EBITDA? And depending how quickly that fills up, when will you need to add more?
Guillermo Novo: And so we’re adding capacity in our core segments. So HEC, which is very tight globally not just for us, but for the industry. So that will come on. We’re expanding in hope well, and that will be significant capacity increase. Of course, we probably won’t need new capacity there for several years. We’re expanding capacity in our Benecel lines and that’s more targeting our mix towards pharma and nutrition, a lot of the plant-based protein type applications. Klucel, which is pharma driven and Aquaflow on the coating. So we need the material, the capacity. The next tranche will vary by each of the product lines, but this will cover us for several years. So it’s a significant number of important projects. There are other areas where we’re not investing where we believe we have plenty of capacity. And as our mix changes and focus changes, we’re going to be focusing on strategic areas that are higher growth, higher value, higher differentiation areas.
Michael Sison: So if demand is there, you’d be able to grow your mid-single digit type of growth for several years.
Guillermo Novo: Yeah. Like we said, last year and this year, volume is not the growth driver. We don’t have any more product to sell. I mean any hiccup and we’re short again. I mean even with the softness, HEC as an example, the capacity utilizations for the industry will remain pretty high. So I don’t think the reset — again, a lot of what we’re looking at is what’s going on the core demand, is that behaving per historic levels on resilience and things of that nature. We haven’t seen any data that changes that. Even if we dig into our numbers, the core businesses have actually been resilient. We cannot make a statement based on what happened in Q1. We cannot say, these segments are falling abnormally versus history. So really, it’s about this reset, and I think this is why the next two months are very important, and we’ve really — having a few months, a month or 1.5 months of the China reopening is very important.
Also the Europe post winter to see how the energy situation and supply-demand dynamics in Europe will turn up. Those are big issues because they impact this reset notion that is different. If you look at historic recessions, you went from a normal demand supply into a recessionary environment. We’re not coming from a normal position, we’re coming from a very tight supply demand where people were behaving in a certain way. So this reset probably is not something we’ve seen. So it’s not normal versus history and that’s where we’re getting the noise. But as we put that behind, we do believe it’s transitory. We should see then the underlying performance of the markets, and the capacity we’re adding should put us in a good position starting 2024 to really drive volume growth, which is — has to be our number one priority.
Michael Sison: Okay. Thank you.
Operator: Thank you. One moment for our next question. And our next question will come from Laurence Alexander of Jefferies. Your line is open.
Laurence Alexander: So good morning. So just to expand on that notion of the reset. I guess, first of all, is it right that the volume in most of the business lines were down more than 10% in the quarter outside Personal Care and Oral Care. And what do you think — given that the inventory just — given what you’ve seen with the European Nation inventory adjustment, what is your benchmark based on your historical analysis for what this portfolio should do if there actually is a U.S. recession? And then I guess just lastly, after 2024, when you have ample capacity, what do you see as a reasonable range of lumpiness quarter-to-quarter given the kind of swings we’re seeing in inventory positions?
Guillermo Novo: I think just to go through in the order that you mentioned, we still see demand holding up. If we look at underlying historic demand, we’re not immune. There is — when you start a recession, you could get some slowdown, but in general, we are in Personal Care. We’re not in home care in our markets. Those tend to be resilient. You could see markets go down single digits to stay up in the middle-digits. So that’s really where we see a lot of the history. We’re selling — we’re tracking right now absolute versus relative. We want to make sure that in the absolute that we’re staying flat to our longer-term goal of 200 basis points to 300 basis points over market, which would put you in the middle single digits, and you’re going to vary in that level of range.
And relative, we’re looking at our peer group. And many of you have coming in, you know the companies that we’re trying to compare to, which is our the additive ingredients company and that tend to be very resilient. And I think we’re seeing our performance pretty much in line with what many others in this area. Again, if we both sell a different ingredient into the same product, we should both feel the same relative performance relative to demand. So I would say, pharma, Personal care, obviously, is the more resilient. Architectural coatings, there’s a little bit more reset. It’s higher volumes at the beginning of the transition, but our history has been that, that recovers very quickly because of just it’s much more of a consumer driven type portfolio.
And I think so far, we’re seeing that in the recovery in January. I think, as I said in the numbers, pharma continues strong. We’re seeing demand — underlying demand in Personal Care normalized. And in the Specialty Additives, where coatings is our biggest market, it is not…
Operator: Mr. Novo has left the call for a second. Mr. Willis, will you be able to take over?
Seth Mrozek: Go ahead, Kevin. Why don’t you finish up? I think we lost Guillermo.
