Lori Ryerkerk: Yes, we’ve had so much variability in the last few years I hesitate to go much further out than a quarter of these days. But look, I think if you look at the run rate in the second half because it’s built on controllable actions, not built on market, that not an unreasonable place to start as you start thinking about ’25.
Arun Viswanathan: Thanks.
Operator: Our next question comes from David Begleiter with Deutsche Bank. Please state your question.
David Begleiter: Thank you. Good morning. Lori there was a competitor outage in Acetyl yield starting, I think, late, late February. I believe it’s built on allocation of VAM and acetyl. Or did you benefit and are you still benefiting from that competitor situation?
Lori Ryerkerk: I would say, while there was some temporary run up in pricing, it was pretty small and barely short lived. So I would not say we’re seeing any benefit from it continuing. And the benefit was pretty small during the quarter. I think that just is reflective of really the lower demand that we’ve been seeing globally that an outage of that magnitude really didn’t move the market very much. And again, I think it’s not as much a question supply, but just demand is really still not back at normalized levels, particularly even in the western hemisphere.
David Begleiter: Understood. And just on M&M synergies, what were they in Q1? What will they be in Q2? And what should be the cadence in the back half of the year?
Lori Ryerkerk: I don’t have an exact number here in front of me. I mean, I would tell you Q1 is definitely the lightest and they continue to build and compound as we move through the year.
David Begleiter: Thank you.
Operator: Our next question comes from John McNulty with BMO Capital Market. Please state your question.
John McNulty: Yes, thanks for taking my question. So I guess the first one is on raw materials. So I believe for EM, you were expecting as much as $150 million benefit as kind of lower costs rolled through the system. It looks like you got, you’re going to have 20 in the second quarter and it’s comparable to what you saw maybe in the first. So is that still a reasonable outlook just based on where raws are right now that you could see 100 million, 110 million of benefit in the back half of the year or have things gotten better or worse? I guess, can you help us to think about that?
Scott Richardson: Yes, John, as I said earlier, definitely in line to be in that range based upon what we’re seeing for the first half. And again, a lot just depends upon how things move in the middle part of the year to see how our cost structure will develop as we get into the second half.
John McNulty: Okay. And then I guess the second question would just be in the Acetyl chain business. Obviously, there’s some new capacity in the markets beyond just yours that are impacting the business. It looks like there’s more capacity coming on next year potentially as well. So I guess if we don’t see much of an improvement in the overall demand environment, are there other levers that you can pull in your Acetyl chain business to drive incremental profitability or are we at a point now where it’s really going to be about the market improving and developing from a demand perspective?
Lori Ryerkerk: Yes. So let me make a few comments on that. John, if we look at this year, there were two large, I’d say world scale capacities added in acetic acid in China. And again, the impact of those has been a bit more than we thought because some of the companion downstream consumers that were supposed to come on at the same time have been delayed due to just overall demand in the market. Next year, there’s really only one smaller unit coming on that we’re aware of in acetic acid, some other capacity a little bit in VAM. Again, it’s not enough that it should have a major impact. But we’re still not at the whim of the market. I mean, we still find opportunities to use both our global and our chain flexibility to really maximize our earnings in this market and try to maintain that level of foundational earnings.
I’d say the other good opportunity which is developing for us is our ability now to provide sustainable products into the market based upon the CCU project that we’ve put in at Clear Lake. Now that we have our ISCC certification from methanol as low carbon material, we’re able to offer that to all of our customers in kind of whatever acetic acid product they desire. And we are seeing a lot of interest in that. We also have a sustainability advantage for VAE, which customers are interested in for kind of its low odor, low VOC emissions. So I think there are some opportunities we have that are unique to us that others do not currently have at this period in time. And we see that demand starting to grow and hope that will become a more significant part of our portfolio.
John McNulty: Great. Thanks very much for the call.
Operator: Our next question comes from John Roberts with Mizuho. Please state your question.
John Roberts: Thank you. It sounded like the sequential change in EM earnings was nylon up sequentially and other plastic earnings down sequentially. Was the decline and the sequential decline in the other plastics due to the downturn or price pressure or what drove that?
Scott Richardson: I would focus on the turnaround cost, John. I mean, that was really the largest driver is really offsetting the nylon.
John Roberts: And then I wasn’t thinking that medical was that seasonal. What’s driving the seasonality in medical?
Scott Richardson: Honestly, John, it’s kind of what we always see. In some years, it’s more acute than others. And we saw it come down a little more than what we saw last year from Q4 into Q1. And it’s really just the timing of how our customers build inventory for the New Year. And Q4 ends up usually being one of our strongest quarters. And Q1 tends to be weaker, which kind of goes counter to how everything else moves. But that’s kind of been the historical seasonality really in most of our medical business.
John Roberts: Okay. Thank you.
Operator: Our next question comes from Laurence Alexander with Jefferies. Please state your question.
Dan Rizzo: Hi, this is Dan Rizzo from Laurence. Thanks for getting me in. We talked a lot about the Clear Lake expansion. I was wondering if an expansion in Singapore or some place like that would be necessary given the growth that’s potentially there in India over the next, I don’t know, few years to decade?
Lori Ryerkerk: Yes, we don’t see that on the horizon. It probably wouldn’t, if there were more of an increase in demand, it probably wouldn’t necessarily make sense to expand the Singapore plant. But for what we have right now and for that developing market in India, Singapore is sufficient. And we have options to bring material into Singapore from other parts of the world. Should we see that demand increase?
Scott Richardson: Dan, the only thing I’d add is on a downstream basis, the VAE expansion that we’ve just done is as much for growth in Southeast Asia and India as it is for China, honestly. We already have a VAE plant in Singapore. That plant was actually supplying some demand in China. We’re now able to kind of shift that network really to service growing customers in our VAE demand, such as paints and coatings, mortars and adhesives.
Dan Rizzo: Thanks. That’s really helpful. And then, with costs, we talked again a lot about price costs with raw materials, but I was just wondering what’s happening with labor and potentially transportation costs if they’re kind of elevated and going higher, and that could have a kind of a negative impact towards the second half of the year?
Lori Ryerkerk: Look, I think we’ve seen over the last several years, pressures on labor costs, as has everybody, but I would say, through productivity steps and others, that’s managed, that’s baked in, and I’m not seeing any significant pressure there for the second half of the year.
Scott Richardson: Yes, and on transportation, I mean, this is a common theme we’ve seen now for a while, and I think that has impacted product movements around the globe for the industry broadly. So really nothing is different now or in the second half than what we’ve been seeing here for a while.
Dan Rizzo: Thank you very much.
Operator: Thank you, and our next question comes from Patrick Cunningham with Citi. Please state your question.
Eric Zhang: Hi, good morning. This is Eric Zhang on Patrick. On the incremental excess supply in China, acetic acids, do you have an outlook on when the delayed downstream startups will be resolved? And once that is resolved, do you expect to have a meaningful uplift in acetic acid pricing in China?
Lori Ryerkerk: Yes, well, the projects that we were aware of, I think are a quarter or two delayed. I mean, the real question, of course, is that demand for those products has to be driven by more demand for exports, quite frankly. And so, how long that takes to resolve is really tied to consumer spending, general view of the economy, people’s confidence in buying goods again. So I would say while we do expect that capacity to start up, whether it will run full or whether it will just replace other capacity, remains to be seen. The other thing that I said earlier, which I’d emphasize again, is there are some new uses in China of acetic acid that should start taking some of this capacity like caprolactam. So, I can’t give you a number now, but I would say, I think we’re still several quarters away from starting to see any significant movement in that.
Eric Zhang: Okay, got it. Thank you.
Operator: Our next question comes from Salvator Tiano with Bank of America. Please state your question.
Salvator Tiano: Yes, thank you very much. So firstly, I want to ask a little bit on engineered materials and specifically your auto’s exposure. As we’re seeing more and more automakers delay their EV plants and sitting with ICE engines even just a few months ago, how does this change against your plan and your potential marginal uplift? And also, are you seeing any impacts for consumers trading down to lower priced models as well?
Lori Ryerkerk: Well, let me try to answer the first part and then I’ll let Scott take the second part. I would say, look, as long as consumers are buying vehicles, we’re happy. EVs do have about a 10% higher content available to us than ICEs, but we still have a very large position in ICE vehicles. As to the extent people are converting to hybrids, hybrids are about 25% — 20% more content available to us than ICEs. So, while there are some shifts and shifts in which products, as long as people are buying vehicles, like I said, we’re happy.
