Operator: Thank you. Your next question comes from the line of Aleksey Yefremov of KeyBanc. Your line is open.
Aleksey Yefremov: Thanks. Good morning. And Howard, congratulations. Just wanted to follow-up on PMC. I would say a pretty healthy number – is this a good level that we can use for thinking about next year? It sounded just in the previous answer, there was some opportunistic sales. So that’s sort of where the question is coming from. Is this a real sustainable number to think about going forward earnings in the segment?
Jim Fitterling: Yes. I think as a lot saying improve, you can see some positive uptick in Consumer Solutions and silicones. The downstream demand has continued to be strong. So that hasn’t been the primary issue. And we’re seeing still continued good positive signs in the downstream demand sector, things like EVs and battery production. We’ll have to watch – the commercial construction markets. I think residential will start to improve somewhat, but household and personal care, consumer products, health and beauty, I would say, are going to continue to be positive in that space. Coatings has been slow due to construction. I think there are some signs starting that applications for permits are starting to pick up on construction.
That’s kind of a U.S.-centric view. And in China, we’ll have to watch, if there’s any stimulus to get the construction markets going there. Automotive, I would say, is a bright spot globally, even Europe in spite of a slow GDP has seen pretty strong automotive builds through the year. And I would say, once we get the strikes resolved here with the UAW and the big automakers. I think you’ll see a step-up in demand, because they’ll start to be competing again for that market share.
Operator: Thank you. Your next question comes from the line of Laurence Alexander of Jefferies. Your line is open.
Laurence Alexander: So, good morning. I just want to revisit the inventory level. If you think about lessons learned from this cycle, where do you see inventory days and working capital days shaking out at the next mid-cycle? And separately, Howard, just thank you for your help getting ramped up on Dow?
Jim Fitterling: Yes. Maybe Howard, do you want to touch inventories. You got the working capital team and there’s been pretty focused on this all throughout.
Howard Ungerleider: Yes. Sure, Jim. And Laurence, thanks and I appreciate everything you’ve done to cover Dow over time, and hopefully, we’ll continue. Yes, we’ve been – look, I’ve been very proud of the whole organization and how we’ve really – if you think about one of the big changes that we’ve made, I think as a leadership team as an organization in the last five or six years is really a big step change on cash. And managing cash, just as well as we’re managing margins and EBITDA and operating rate in EU. We have structurally taken out about eight days. When you think about it on a cash conversion cycle since spin, eight days has been structural and the other improvements have been more around the cycle. So obviously, that will continue, as we’ve headed into this down cycle period.
Probably we’ve taken out about $1 billion of cash, just on the releasing revenue from working capital, as we head into a normalized macro and eventually a cyclical peak out into the future, you could expect $1 billion use of cash. But overall, eight days out, cycle-to-cycle, I think, is a good target so far. And I would expect that under Jeff’s leadership, together with Jim and the leadership team. I would expect at least another day maybe another two days in the next year or two will come out structurally. So, I think a nice target is 10 days cycle-to-cycle from a structural standpoint. We’ve been really – we’ve implemented OMP, or in the process of implementing OMP in almost all of our businesses now and really thinking about it end-to-end from the customer back, and the team is still working on it, but that’s – that gives you a good range.
Jim Fitterling: Jeff is going to make me cut you off, before you set any more to targets for him.
Howard Ungerleider: Just one more day. Maybe two. That’s it.
Operator: Thank you. Your last question comes from the line of Mike Leithead of Barclays. Your line is open.
Mike Leithead: Great. Thanks. Appreciate you squeezing me in here. Just briefly on packaging. I think sequentially, EBIT was down about $440 million on $480 million lower sales, almost 100% drop through. Can you help us better understand the moving pieces in the quarter there?
Jim Fitterling: Sure. The lower sales were primarily due to being out of the merchant ethylene market – and so that obviously had an impact. We had the cost of the turnaround in the third quarter for the St. Charles cracker. And that was a drag that drag, becomes a positive as we go into the fourth quarter. We had some stronger equity earnings, which were up from the previous quarter. But then pricing and the impact of really a surge in feedstock and energy costs that happened in the third quarter were the big delta. Prices ran up on us in the third quarter. And then the pricing came in September, which kind of lagged the increase in the feedstock and the energy cost. And so, you saw that margin squeeze. I think we’re back to even with that, and we’ll get a little bit ahead of that. And like I said, I expect about $0.02 integrated margin improvement, as we go into the fourth quarter.
Operator: Thank you. There are no further question at this time. I will now turn the call over to Mr. Gupta for closing remarks.
Pankaj Gupta: Yes. Thanks, Jay. Thank you, everyone, for joining our call today, and we appreciate your interest in Dow. For your reference, a copy of our transcript will be posted on Dow’s website within approximately 48 hours. This concludes our call. Thank you very much.
Operator: You may now disconnect.
