Operator: Thank you. And we’ll next go to Joel Jackson from BMO Capital Markets.
Joel Jackson: Hi, good morning. Thanks for taking my question. I’m looking at your crop chem’s manufacturing rationalization plan, can you maybe highlight some of the major changes? You did highlight a high level on the slide last night. Maybe talk about some of the low-hanging fruit, which molecules are you moving externally? Which one did you want to make sure you’re keeping internally. Maybe just some really good, maybe a few anecdotes or low-hanging fruit you could talk about that’s really driving this plan? Thank you.
Chuck Magro: Yes, good morning Joel. let me start with sort of the genesis of the program and the framework and the objectives, and then I’ll turn it over to Robert to give you a bit more specifics. So, as you well know, I hired Robert about year and a half ago to run the Global Chemical business. And the program started almost immediately thereafter. So, we’ve been on this journey for well over a year when it comes to looking at CP ops. And really what we did, and Robert led the charge here for the organization is, we went out and we looked at sort of chemical operation best practices from literally around the world. . So it’s been a very comprehensive review. It’s been underway for a very long time. And it’s a multi-program kind of programs that we’re thinking about that will take us through, I’d say, the next couple of years and the benefits that you’re going to see, we laid out some of the benefits for 2025 on a run rate basis of about $100 million.
That was some of the work that we accelerated. But the real benefit for the program won’t really bite until kind of post 2025. We’re thinking that there’s going to be very significant benefits between 2025 and 2030. And really, the objectives are — if you think about our vision is, we want to bring our CP ops into kind of the modern operating world of chemicals. Safety is one of our core values. It’s very important to our company, and that would be at the first and the top of the list when it comes to the objectives that we’re trying to implement here. We also want to improve our supply reliability. We think we handled COVID pretty well. I think our performance was very good, but we — but there’s always room for improvement there. And then, of course, cost competitiveness.
This industry is shifting. It’s quite dynamic, and we want to maintain our global cost competitiveness. So, what you’re going to see is that we’re going to shift the model to sort of more asset-light and use really some third-party manufacturing, but really drive supply redundancies. That’s going to be critical. And then some of the key technology that we own, and as you know, our portfolio is increasing in this area, those are assets that we’re going to manufacture molecules from ourselves and really invest in modernization, driving advanced control technologies and in some cases, and this is important, we’re going to be moving to sort of the next generation of CP manufacturing, which is modular or flexible type technology because. In today’s world, the next generation of CP, we don’t require big volumes in massive plants anymore.
These — and then, of course, you know the IP footprint is accelerating. So, when you think about what’s needed in the next generation of CP, we need smaller, more nimble facilities that we can produce these plants relatively cheap products relatively cheaply, and that will move us into sort of that modular manufacturing mode. So, that’s kind of the vision that we had for CP. And then, Robert, maybe you can just give a little bit specific in terms of the announcement that we made yesterday.
Robert King: Yes, the announcement yesterday is one that will be a big step forward for us. It’s — when you look at the pieces that Chuck laid out there, really focused on what can we control. And this one is a big part of the strategy that we laid out at Investor Day, where we’re — our journey is to become excellent in operations, and we don’t take that lightly. It really underscores the approach of shifting more to an external supply balance with asset-light capital. That’s going to improve our cost competitiveness and our network flexibility to be able to respond and change with the ever-changing markets that we’re in. . The thing about this is that this is something that we started on about a year ago, I think, as Chuck said.
But we’ve been able to do some acceleration. The environment has allowed us to do some acceleration, but we’ve been working on this for some time. So, the execution of these actions is going to allow us to not only drive profitability. But we’re going to be much more competitive in the market from a cost standpoint, and it puts us much further down the road.
Operator: Thank you. And we’ll next go to Kevin McCarthy with Vertical Research Partners.
Kevin McCarthy: Yes, good morning everyone. A question on cash flow and deployment. If I consider your updated guidance on free cash flow as well as the remainder on your share repurchase commitment for 2023. It seems like you could end the year with more or less zero net leverage. So two questions would be, is that fair or not? And more broadly, Chuck, what are you thinking about deployment for 2024 and beyond?
Chuck Magro: Why don’t, Dave, you talk about the numbers and then I’ll answer the deployment question.
Dave Anderson: Yes. Kevin, so yes, thank you, Chuck. So Kevin, exactly. I think you’re right. Just to refresh, we’ve updated the free cash flow guide as of today to that $600 million to $1 billion for the full year. Really, the difference as we pointed out in the prepared remarks really has to do with some higher inventory levels as a result of reduced volume outlook as well as lower payables, which goes with what Robert also stated just in terms of managing our current production capacity in light of the market demand or overall volume. So, your estimate about essentially being zero net debt, I think that’s a reasonable forecast at this stage when you think about where we are in translating that cash flow. And it does include, as we mentioned, the $750 million of share buyback for this year. Chuck, do you want to comment a little bit about 2024?
Chuck Magro: Yes, sure. So, Kevin, the way we’re thinking about it, the $800 million at the midpoint that Dave provided and then the strength of this balance sheet, we have a lot of financial flexibility as an organization. We also have an A- credit rating. So, when you put all that together, and we’ve made very good progress, I think, on managing our working capital. It’s been challenging because of the destocking that went through the global industry. But we don’t think that next year will require, Dave, a significant investment in working capital. In fact, it could be a source of cash.
Dave Anderson: Yes, definitely.
Chuck Magro: When you put all that together, we think that there will be incremental free cash flow in 2024. So, your question is a good question, how are we thinking about it? And the way we’re thinking about it is we think that the formula that we’ve got right now works. We prioritize organic growth in the organization. And as you know, we’re increasing investment in R&D. We’re absolutely committed to that. We think it’s the right thing to do longer term. But we also are now returning a significant capital to shareholders, which we have been a very good track record of doing that. And this year, 750 is a testament to that. And I would expect these decisions are obviously Board decisions, but I would expect that that formula that has served us well, I think, is something that we will certainly have a very good look at going into 2024.
