We are leveraging existing assets in Calvert City that we’re going to use there. And as I said, with the novel cellulosics that progresses, we can repurpose some of the assets that we’re addressing now with CMC and maybe utilize and bring them for more higher value. So on the capital side, I think that’s one of the, it’s not just the capital dollars, the time wise, we can support some of these growth initiatives much faster than you would normally be able to support it if you’re required building new plants. So I think there’s a lot of things, this first step of normalization of demand is the critical step for us and we’re not controlling that, that’s more the market recovering, market normalizing. And I think we’re starting to see that. The rest then is the actions that we take, all these portfolio actions, driving, sticking to our strategy.
I think that’s why we’re making the point of, look, once things stabilize, it’s what we do that’s going to make a difference. It’s not now just recovery, it’s the hard work of where we’re putting our efforts, our resources and our capabilities to drive growth.
Operator: Our next question comes from John Roberts with Mizuho.
John Roberts: Thank you. On the cellulosic restructuring, if you look gross profit for specialty additives and intermediates were both down 60 percent-ish, the gross margins are actually lower in specialty additives than they are in intermediates. Any thought to merging those two segments or even just pulling the cellulosic plants out of specialty additives, putting them in intermediates and having them sell to the other segments, the same way you sell BDO from the intermediate segment to the other segments.
Guillermo Novo: I think it’s a little bit more critical strategic for us to keep it in line with our businesses. I mean, one, what you’re seeing in specialty additives is all of the absorption issues of selling of the HEC as an example and CMC are captured in specialty additives. So the land, they’re the landlords, so they’re getting all the hit. It’s not just, I mean, they’re the biggest volume in HEC, but in CMC, they’re not the biggest volume. But it’s in their site. So there’s a little bit more of a distortion that some of the products are that are down or are in life science and personal care and we’re exiting it. So we’ll resolve those issues moving forward. But if you look at HEC with the recovery and all that, I think that is a core business.
This is sort of the model that we have on how do we build scale with additives. We have to have one or two applications that give it more scale for manufacturing production and then we’re able to sell them out. It’s a little bit different than intermediates where it’s just BDO that we’re making it is a true, true commodity. There are many producers. We are a very small producer. It just gives us back integration. We’re the largest a HEC player. So I think there we need to make sure that we’re controlling it and driving it per our core business, which is our specialty additives.
John Roberts: And since you’re just back from China, we had an extended, I think, Chinese New Year shutdown period last year as the Chinese economy was reopening. What are your thoughts on how this Chinese New Year plays out.
Guillermo Novo: So I think not just the new year, but I think in general, things have slowed down in terms of our plant in China, specifically, HEC, a lot of it is coatings and it stays in China. We don’t export much. So, it’s still operating well, but the volumes are down. We are well aligned with some of the big players and they’ve done well in the last year because of just their own share and commercial activities. But in general, the property market and all that, we are seeing a general slowdown in China. Like the big question is going to be not so much the Chinese New Year, it’s what actions do we see in support of the real estate, the construction market over the coming months. And there’s some indication that that’s — that is something that it’s at play at this point in time. But clearly for us, China for 2024 is going to be stable, but it’s not going to recover. We’re not expecting it to just recover very quickly at this point in time.
Operator: Thank you. That concludes the question and answer session. At this time, I would like to turn the call back to Guillermo Nova for closing remarks.
Guillermo Novo: Okay. Thank you, Abigail. And thank you, everyone, for your questions and participation. And we look forward to engaging all of you in the coming weeks and get into more discussions. But I hope as the big takeaways, one, that we are seeing some improvement in the overall market dynamics. Number one, two, that we’re focused on our strategy and our actions. And we’re going to continue to drive them as we move forward and that we, there’s a great future ahead in a lot of these new technologies and for Ashland. So thank you very much for your time and look forward to talking to you soon.
Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
