Josh Spector: Yeah. Hi. Good morning. So I wanted to ask on Performance and specifically margins. So, margins step down sequentially and you’re kind of back to levels in the first half of next last year. And Erica, when you talked about the forward guidance, you were talking about price offsetting costs. So, I guess, what needs to happen for margins in that segment to get back to the low- to mid-teens and is there a scenario where that happens this year or is that more of a further out prospect?
Erica McLaughlin: Yeah. Thanks, Josh, for the question. So, I think, if you recall, last quarter we talked about this quarter had some higher maintenance and reduction of inventory, which impacted the margins. And so that did happen, and I’d say, the business performed as expected. I think as we go forward, as we talked about, we expect some improvement in volume, a modest improvement from this Q2 level and then we wouldn’t expect the same level of the inventory impact. So, I think that you would see the margin return a bit to maybe what you saw in the Q1 levels. I think to get to higher, it’s going to be the leverage on the volumes. I think our pricing is holding up quite well and so as we see changing raw material costs, energy inputs, et cetera, we were able to hold those margins. And we just as volumes improve, I think you would see the overall EBITDA margins of the business improve.
Josh Spector: Thanks. That’s helpful. And I guess, in terms of your innovations, the comments on the carbon catalyst, and I guess, the grants you got for that, that’s maybe an opportunity we haven’t talked about much. Is that sizable? I guess, can you talk about that a little bit?
Sean Keohane: Yeah. Josh, I think, the right way to think about it is, certainly, most people view fuel cells as being part of the energy transition and there’s quite a bit of investment across the U.S. and Europe, although it’s very early days, building out, quote, hydrogen hubs. And so, I think, there will be a place for hydrogen in the overall long-term transition here. Certainly, batteries are — lithium-ion batteries are much further ahead and I — are the clear and established technology for the electrification of mobility in the passenger and sort of light vehicle space. But as people look forward to alternative fuels and energy to drive long-haul trucking, for example, the view is that hydrogen is probably a better fit there.
I think the weight of batteries certainly would be a more challenging in that space. So people tend to view hydrogen fitting well in that space. So, but there are a number of factors that have to get built out. I mean, these hydrogen hubs have to get built out and infrastructure for refueling has to happen. So, it’s definitely a longer term, but one that I think is pretty clear will be part of the mix. And so as that is developing here, we continue to be recognized as an innovation leader in this space and partnered with some established players in the fuel cell space and so our work will be with our partners jointly developing a carbon support for the catalyst in this fuel cell application. So something that I think is quite important for the long-term and I think the award of the research and development grant, I think, is reflective of our position as an innovation leader in this space.
Josh Spector: Got it. Thank you.
Operator: Thank you. One moment for our next question. And it comes from the line of Jeff Zekauskas with JPMorgan. Please proceed.
Jeff Zekauskas: Thanks very much. I think your American carbon black volumes have decreased year-on-year for six quarters in a row, I think. And you were down 8% in the March quarter. But you have a positive pricing dynamic in North America. Can you explain what’s going on in that region?
Sean Keohane: Yeah. Sure, Jeff. Good morning. So, the decline in the Americas, which is what you see, so that’s both North and South America, was largely driven by the impact of economic conditions in South America, as well as the replacement tire imports from China, particularly in South America, where that has been impacted more to a lesser extent in North America. So, I think the decline in volumes in the Americas region that we reported is definitely skewed towards South America, and again, given the economic conditions there, as we — as well as the tire imports that impact that region. As we look forward, we are expecting that we’ll see stronger volumes in the second half of the year, such that full year volumes for the Americas, I think, will be more consistent with market expectations for the year, if we look at what forecasters like LNC would say.
And then, with respect to Europe, we saw volumes up 4%, driven by higher contractual volumes, as customers in the region continue to value local supply. But hopefully that gives you a sense for the picture in the Americas region.
Jeff Zekauskas: Right. So for my follow-up, if you can say, how much you grew in North America last year and in the first half, that would be good. But in terms of your cost of goods sold, your cost of goods sold is down about $50 million in the quarter, and for the half, it’s down about $100 million, and your revenues are flat. Can you explain why the cost of goods sold, what’s the dynamic that’s pulling down the cost of goods sold? And maybe if someone could comment on what the energy penalty has been, in that you’re not getting co-product credits. What was that penalty last year and what’s been the penalty so far this year?
Erica McLaughlin: Sure. Hi, Jeff. So, the cost of goods sold decline is really because of lower raw material costs, and I think, as you know, through our pricing mechanisms, we pass that through in the revenue line. So the reason you see cost of goods sold going down is because the raw materials are down. We pass that through in the revenue, but we also have price increases in the revenue and higher volumes in the revenue. So they’re offsetting what the pass-through amount, so that’s why the revenue looks a bit more flat and that’s the driver of why, then, the EBIT is higher, because you’re seeing the pricing come through and drop to the EBIT line. Does that help?
Jeff Zekauskas: Yes. And what about the energy co-product credit?
Erica McLaughlin: Yeah.
Jeff Zekauskas: Sort of what was…
Erica McLaughlin: So the energy was…
Jeff Zekauskas: … going on in there?
