Again, when demand returns, I think we will be in a much better position, but I do think you have seen a number of commercial actions going on across the industry to address that.
Operator: Next question is coming from Frank Mitsch from him Fermium Research. Your line is now live.
Frank Mitsch: Maybe if I could ask the destock question a little differently. You mentioned in the release the prepared remarks that you are seeing it end here in the fourth quarter in the Americas and Asia, that will continue in Europe. What gives you the confidence that we are going to be finally done in the Americas and Asia and such that 2024, we are going to see underlying demand growth in those regions?
Lori Ryerkerk: Yes. Look, I think our confidence really comes from, obviously, conversations with our distributors and our direct customers as well. but also just the buying patterns we are seeing in the U.S. I mean, we don’t have a lot of visibility into future purchasing because what we are finding is when now, especially in the Americas, when people want to buy, they want it now. Would suggest to us that they are fully destocked because they don’t have inventory in their chain that they can pull on. . And I think in the U.S. at least, we are starting to see some recovery, especially in those areas that have been weak like consumer durables, electronics, to maybe more normal demand patterns. So I think it is the customer buying patterns that I would trigger off of to say we feel pretty confident that we are at the end of destocking in the U.S. I would say less so in China.
China, I would describe as consumer demand in China for China is – come back to, I would say, near normal levels. But obviously, China export volumes are still very weak, which is a significant portion of the China demand. And then in Europe, I would just say, outside of auto, we really just don’t see any improvement in Europe as I think consumer confidence remains very low in light of the War in the Ukraine and higher energy prices and higher inflation. We are just not seeing that behavior start to pick up in Europe, yes.
Frank Mitsch: Got you. That is very helpful. And then the early look at 2024 suggests that there is a bunch of onetime cost actions that you took in 2023 that will not be repeated, so that should set up an easier comp. I’m just curious if you could kind of quantify or provide an order of magnitude of that and perhaps if plant turnarounds also play a role in some expectations for 2024 to be better than 2023. Any color there would be very helpful.
Lori Ryerkerk: Yes. I think we had called out a couple of quarters ago, $60 million to $80 million of onetime actions that we were taking this year to really offset some of the softness we were seeing in the second quarter. And we are achieving those across third quarter and fourth quarter. What I would say is those are really related to actions we have taken to idle lines to cut costs out of facilities that aren’t running full. . If demand does not pick up. Obviously, we will continue to realize those benefits next year as well. if demand picks up, we will be more than happy to spend that money again in order to capture the margin that will come from the increased demand. So I don’t see that as a big factor either way in our bridge from 2023 to 2024 because we will either get it in earnings or we will continue to see it as cost savings.
Scott Richardson: Yes, Frank, and I would say our focus is really on now actioning other things that are going to be more permanent in nature, given some of the things we called out in the prepared comments, so we can make kind of more sustainable cost reductions and really the lower the overall fixed cost base of the company. And that then gives us an ability to withstand lower demand environment in the future and get much greater leverage on the fixed cost that we have.
Operator: Next question is coming from the Arun Viswanathan from RBC Capital Markets. Your line is now live.
Arun Viswanathan: So I’m just looking at the bridge for 2024 and again, obviously, [indiscernible] Never questions have been asked here. But if we think about Q3 EBITDA around $625 million in Q4, looking a little bit similar from your segment commentary makeup. You are exiting the year at maybe like a $2.5 billion run rate you have maybe $100 million coming from the AC uplift and then $150 million from incremental synergies and then maybe a couple of other items, including the lack of an inventory hit. So that puts us at maybe $2.8 billion or between $2.8 billion and $3 billion. Are we thinking about that correctly as far as EBITDA goes. And is volume the main driver that would push you above that range?
Lori Ryerkerk: Yes. We have called out what those factors are, I would say, the big unknown at this point remains demand and pricing, particularly raw material, which, as we have seen this year, can cause quite a lot of volatility. Hopefully, we will be able to give a better guidance next quarter.
Arun Viswanathan: Okay. I appreciate that. And maybe I can just ask one on the balance sheet. So obviously, a lot of progress there as well as restructuring the debt profile and redomiciling. Do you expect any other further opportunities there? And I guess, could you just reiterate what your target leverage level is maybe as you exit 2024?
Scott Richardson: Yes, Arun, I mean our focus right now has continued to accelerate cash generation and aggressively repay debt. We have obviously moved the maturities out since we last talked a quarter ago. But certainly, now our focus is on bringing down overall net debt. We are going to be focused on repatriating cash and using that cash to reduce debt. And then with the cash generation, we should – next year, between repatriation, cash gen, we should be able to reduce debt by almost $2 billion net debt reduction, certainly well north of $1 billion. So I think from that standpoint, that is where the focus is today. We don’t have a need really to adjust maturities or refinance. Certainly, if markets change, we will be opportunistic around that. But we are going to continue to focus on every single quarter marching down and bringing our leverage levels down with a target to get to three times as quickly as possible.
Operator: Next question is coming from Laurence Alexander from Jefferies. Your line is now live.
Laurence Alexander: When you think about kind of the improving the productivity in the Acetyls through shrinking capacity and I guess, also it is parts of EM. If you think about the next three, four-years, if there is no significant surge in demand. How much of your capacity could be optimized or rationalized through shifting through process improvements at your larger facilities and debottlenecking and upgrading the network? In other words, how far are we in this upgrading process? And at what point would you need to start considering just sort of new Greenfield projects?
Lori Ryerkerk: Yes. Let me take them as two separate. I would say on Acetyls, we have done a lot of work over many years now to really reduce the number of facilities that we have. And really have larger, very efficient facilities strategically located regionally. And our activities, including the big expansion at Clear Lake, but we have also had many, many small expansions in many of our downstream derivatives to basically keep us at the same or greater volumes and certainly much higher margins as a result. I would say we have also done that work in the Heritage EM portfolio over the last, call it, 10-years as we adopted the new models and the project pipeline models and you have seen a lot of those actions in the announcements we have made over the last 10-years.
