Operator: Next question is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.
Kevin McCarthy: Lori, I think in your prepared remarks, it mentioned that you ceased production at certain Engineered Materials facilities in Brazil, Argentina and Germany beyond the nylon shutdown that you discussed previously, can you just put that into context for us fairly clear on whether these are temporary idlings or more permanent structural changes. Maybe you could talk through kind of where you are in that asset rationalization process today.
Lori Ryerkerk: Yes. I would say for the majority of the ones that we have named, so the ones in Argentina and Brazil and Europe, these are more permanent shutdowns. Now we are taking temporary actions in things like VAM in Frankfurt and others. We are really – we are using that as flex capacity to meet the current demands on the network, which is lower than normal, but where we will need that capacity when we come up again. But the ones we have announced recently, I would consider those structural changes to really redefine where we are on the cost curve by taking out our highest cost producers.
Kevin McCarthy: Okay. That is helpful. And then I wanted to follow up on synergies. Can you tell us what the synergy-related benefit was in 3Q and what you are expecting in 4Q? And then when we look at the targeted tailwind of $150 million next year, would you describe that as ratable or ramping throughout the course of 2024?
Lori Ryerkerk: Yes. So Q3 was actually a little bit lower than we anticipated because some of our – I would say, at the lower end of the kind of 10% to 15% sequential uplift we had expected on synergies. Because with our volumes a little bit lower, some of our synergies are volume related. Again, we expect a sequential synergy increase in the fourth quarter. But the real synergies will start to come in after we do the completion of our cut over to SAP next year in the first quarter. And after we take some of the shutdowns that we announced, for example, the shutdowns and new growth that will happen in January and February. So the synergies will definitely ramp across 2024, but I would say starting more into the second quarter and through the end of the year.
Scott Richardson: Yes, Kevin. In the third quarter, synergies were around $30 million in total, which was incrementally up about 10% 11% off of Q2. .
Operator: Next question today is coming from Hassan Ahmed from Alembic Global. Your line is now live.
Hassan Ahmed: Already in your prepared remarks, you guys talked about maximizing the make versus buy flexibility. I mean to me, the legacy sort of Celanese portfolio, you pretty much optimized that side of things. So is it fair to assume that a lot of this sort of optimization work will be on the EM side of it? So that is part one of the question. And the second part is that it seems that right now, there is a fair bit of idling or permanent shuttering going on. Could this also mean in the future some Greenfield build-outs happening as well?
Lori Ryerkerk: Yes. Thanks for the question, Hassan. So what I would say is we are really focused on building the flexibility across all of our products. And so we are not just looking at make versus buy flexibility, but we are also looking at sourcing flexibility for raw material, regional flexibility, flexibility and contract commitments much as we did with tow. More multisourcing versus single sourcing. Specifically for PA66, yes, we want the flexibility to make versus buy, especially in this low demand period where we can often buy cheaper than we can make in Europe, in particular, because of higher energy costs and higher fixed costs, higher raws there. But I would say this has been a consistent theme in Celanese and one we are just now applying to the Heritage portfolio.
So I think – but I would say we have also applied this and asked TILs some of our contracting around raw materials and others. I mean it is a way we continue to deliver value uplift year-on-year even without a large amount of volume growth. So I think we expect that to continue. And I think as a result of that, you will continue to see some footprint optimization continuing over the next few years. And I would say in terms of Greenfield, I wouldn’t anticipate any sign in the next many years, a lot of Greenfield builds. I think what you will continue to see us take advantage of the footprint we have and the opportunities to do no and low-cost debottlenecks around the world, much like the Clear Lake expansion, where we are basically doubling the size of our unit for $400 million.
So we think we have a lot of opportunity already on the ground to significantly expand our footprint without major investments.
Hassan Ahmed: Very fair. And just switching gears a little bit. Look, I completely sort of understand that visibility is extremely low right now. But just thinking beyond sort of the near term, I mean with some sort of historical context as well, I mean, this destock has been unprecedented, both in terms of absolute volume declines, as well as the ongoing duration of it. So just as you sort of sit there and look at the legacy Celanese portfolio as well as the history of living through these destocks with the acquired businesses, I mean what could a potential eventual restock look like?
Lori Ryerkerk: Yes. Look, at some point, I think there will be some restocking when that happens, I would say, highly uncertain. Right now, we are just happy to see people starting to return to normal order patterns in some polymers in particular. I think as TILs we are seeing more I think I would think about restocking as being a few percent. But again, I think that could be spread across a pretty significant period as I think people will be nervous to rapidly raise stock after what we have been through the last year.
Operator: Next question is coming from Alex Yefremov from KeyBanc Capital Markets. Your line is now live.
Aleksey Yefremov: I wanted to return to the M&Ms synergies in your 2024 bridge. The $150 million improvement, does it depend on volume improvement or demand improvement or is it independent of it?
Lori Ryerkerk: So the $150 million, what I would say is, look, initially, I would say there was some volume improvement in that because some of the synergies are volume related. I think that is why you see us continuing to accelerate some of our manufacturing footprint work to better align current demand with our supply, and we will get synergies from there. So I would say we are fully committed to delivering well over the $150 million this year. The blend may be slightly different than we had set out, say, a year ago at the time of the deal. But we think we have sufficient activities underway to deliver that.
Aleksey Yefremov: Thanks, Lori. And then staying with EM, you just announced shutdown of some assets. Have you seen the industry and your peers either idle or announced permanent shutdown on some maybe significant polymer chains?
Lori Ryerkerk: Yes. I think if we look at the industry, probably specifically PA66 is where we have seen the most activity. We have seen some additional capacity being built out in Asia, particularly in China for nylon Polymer, which has increased market length in a period of lower demand. And therefore, we have had some increased competition, depressed pricing you have seen all those impacts. I think what you see, though, is much like our shutdown, we start to see other industry participants take action. So we have seen a nylon intermediate producer announced a shutdown of one of their largest assets here in the last month, which represents about 10% of the intermediate production. So I think you see the intermediate using this as an opportunity to take out some of the legacy higher-cost assets and different parts of the world that have become quite high cost and work towards rebalancing.
