And then as you go forward, that just balances itself out into a more normal flow. But we would expect much better absorption in the second half of the year for sure than we saw last year in the second half, and also, frankly, much better than what we expect in the first half of this year.
Joshua Spector: Thanks and I appreciate that. And just thinking about the range of outcomes from a sales perspective and what that means. So you made some interesting comments about demand reconnection and your customer’s demand flat or a couple years, you’re maybe run rating down 10% to 15% volumes. I guess if you go through the bridge of where things could be at, you talked about maybe 1% to 2% lower volumes because of your exits of certain businesses. I guess, is there anything else that limits that reconnection? So customers holding less inventory, any share shifts, or what’s the potential volume regain you could see if you actually see further sequential improvements either this year or just longer term.
Guillermo Novo: So let me comment, and Kevin, you can add some color, but if you look at the volume drivers for us in terms of share and reconnect, so our first step is just reconnecting to our customers. We have a lot of contracts with customers, so it’s really about them not destocking and now that our alignment goes with their volumes. And I think this is where we don’t have perfect clarity and the models that we have are showing improvement, but we’re not showing that we’re going to necessarily reach where their flat volumes are, but we are showing significant improvement. So we’re closing our gap between them and us. So there could be some upside there if things pick up a little bit more. Other than that, I think we’d really now get into share gains, innovation growth, what’s going to drive those volume activities, and that’s really where we’re focusing on our core businesses, HEC, Aquaflow, Benecel, [inaudible], PPP, those kinds of products, and I think those, if they grow, they’re higher margins for us.
And where we’re taking the sales reductions are more in businesses that don’t generate a lot. So we’re taking off the absorption noise of those low-end businesses. So the mix, I think, as we look forward, is not just are we hitting the volume growth, is are we hitting them in the higher value segments or are we hitting them in the segments that have the more absorption upside in terms of that recovery impact? And that would be mostly in our cellulosics and specialty items, as well as our intermediates.
Kevin Willis : I’d say that’s very, very fair now. And let me just add in terms of the outlook, we do not anticipate any major share shift pro or con. There’s always some of that that happens, but we don’t anticipate big share gains or anything like that in terms of supporting the outlook. So this is just kind of normal operations that we expect to see a nice pickup in the second half in terms of what we’re projecting versus what we see from our customers. Say where the outlook would presume that we close that gap, but not completely. I mean, there’s play in there. I would say at the upper end of the outlook, it’s a more complete closure, at the lower end it’s less. And in the middle, I think is frankly, just where we’re comfortable with based upon how we see order pattern flowing, how we see demand flowing through as well, et cetera.
So said another way, there’s nothing extreme in those numbers. There’s nothing heroic that has to happen. There’s also no presumption that anything particularly negative is going to occur. We’re using the facts as we currently have them and see them.
Operator: Our next question comes from Mike Harrison with Seaport Research Partners.
Mike Harrison: Hi, good morning. You mentioned this consolidation that’s going on with your CMC production at Alizay in France and closing some CMC capacity in Hopewell. Can you give a little bit more detail on the timing of those actions? And then is the benefit there just that you have better operating rates in Alizay or is there some near term plan to repurpose those assets in Hopewell?
Guillermo Novo: Okay. I think there’s several benefits that we’re going to get. One is we will be reducing our exposure on a low margin business that has a high capital intensity and high absorption intensity. So it creates a lot of volatility with very little upside. And as we said in other calls, 2022 was really one of the best years we’ve had. And we still had returns on those businesses that were not, they were below our cost of capital. So they’re not sustainable long term. So we remove some of that noise. The second thing is that, as you said, we load Alizay, we can improve our mix, we can take some actions that asset and the returns that we get will be much better. And those will be parts of the business that we can actually invest in and grow for the future.
So it stabilizes the core parts of CMC that we like, that we want to grow and maintain. And then the last thing is, yes, we are looking at how we can repurpose the purpose. We didn’t, in the depreciation number, so depreciation number that Kevin mentioned, that’s not all the assets we are planning to see how we can repurpose. There is other some of the advanced, the new cellulosic technologies, we need a plan to make those. We could make it in parts of that plan. We can restructure the CMC plan to do other cellulosic products. And we’re looking at how we can better manage our mix. That’s — those are all activities that we’re looking at this point in time. So all three of those areas would be part of the improvements. And what we’ll see is improve margins, improve return on capital.
And really our ability to use the capital we have to focus on the better, higher quality businesses. So we’ll allocate that capital better than to sustain these older businesses that really aren’t, haven’t improved and they’re not going to improve significantly in the future.
Kevin Willis : And Mike, we would expect to close that CMC unit down by the end of this quarter. The inventory sell-through will take longer as we work with our customers on closing that part out. We also have processes underway to transfer materials into Alizay and ramp that up, which is a process in and of itself. As Guillermo indicated, over time, we’ll figure out what makes sense in terms of the current CMC assets. I mean, suffice it to say, we won’t be making CMC in those units and potentially they can be repurposed down the road for something else. And we’re — we have a work stream focused on that as well.
