Scott Davis: Yes. That’s great color and makes a lot of sense. I want to ask about price. And I know the two segments are just way different. E&I, you manage price versus cost, and W&P maybe there’s a little bit of a different price strategy. But when you think about like this new normal of higher inflation, wages, other costs, not explicitly material costs, but other costs, how do you think about price in a future construct, meaning maybe entering into 2024? It’s probably more of a valid question for W&P, but maybe you can address for both segments and give us a little bit of sense of what you think happen there?
Ed Breen: Yes. Scott, I don’t think 2024 will be what you’d consider a normal year. In a normal environment, a few years in a row just normal things, which we haven’t had in four years for anybody, I would – we would always get like 1.5% to 2% price lift in the W&P business. Our goal in 2024 is to hold on to as much pricing as we can. And you, obviously, see us and others were getting benefit from price/cost spread that we saw in the third quarter, which helped us out. We’ll obviously see it in the fourth quarter. So our goal is to really manage that well for 2024 because there’s still quite a bit there. Now we’re not going to get all the costs back by renegotiating contracts. Everyone’s trying to hold price of our vendors are trying to hold it too.
But we’re still up to about $225 million that we’ve gotten back that we – so I mean, that’s pretty significant for us. And so we’re hoping to hold that for next year. My gut is we’re going to give up some pricing in the shelter business, because we don’t want to lose market share. But a lot of the other businesses will really be managing that tightly. But then if we ever get – we get back to normal time, hopefully, 2025, we would look at that 1.5% to 2% price increase. And then electronics, we just try to hold about flat. And usually, we’re flat to down 1%, but you get nice volume lift.
Scott Davis: Good color. Thank you. I’ll pass it on. Appreciate it.
Ed Breen: Yes, Scott. Happy talking to you. Thank you.
Operator: Your next question comes from the line of Steve Tusa of JPMorgan. Your line is open.
Steve Tusa: Hi, good morning.
Ed Breen: Good morning.
Steve Tusa: Can you just update us on what you actually expect for – what was the price/cost spread this quarter and what you expect now for the year?
Lori Koch: Yes. So our full year number, we ticked up to $225 million versus the last quarter, we had expected about $140 million. So we’re seeing that deflation benefit come through in the back half. So in the third quarter, we saw net about $75 million benefit. We’ll see that tick up to around $100 million in the fourth quarter.
Steve Tusa: And so does some of that carry into next year?
Lori Koch: Yes.
Steve Tusa: Okay. And then I guess…
Lori Koch: We will continue into next year with the caveat that we don’t place not as an earlier comment what the price is going to do. But we do expect the deflation benefit to continue because it took its time to get through inventory this year.
Steve Tusa: Got it. And then just kind of a philosophical question on how you think about next year. I mean, your exit rate now on some of these businesses just from a revenue perspective, is more negative, you’re taking revenue down. You talked about some of it being destock, which is effectively an easier comp next year in the second half of the year. I mean, do you think with this profile that you guys can still grow revenues next year?
Ed Breen: Yes, yes. I think the first quarter, Steve, to your comment, will be light, more similar to the fourth quarter because I don’t think the destock will end, but back quick, but the distributors will move very fast. They stop ordering it for a while. They literally – we’ve talked directly to them and they’re like, just don’t ship me something for a few months, and then we’ll be back on track. So yes, I think the first quarter will be on the light side, but I think after that, we’ll see some nice lift. I would certainly by then, the electronics part of our business, which you know is highly profitable, I think will be back to a really nice lift. Just on the semi side, the fabs are running a little below 70% utilization.
I think if you do the math on what the industry is thinking, they’re going to kind of get up as the year goes more to 80% utilization the following year, more like the 90% where you would run at. So you’ll start to see some – on a percentage basis, some pretty nice lift. And then we’ve had two quarters in a row of ICS lifting. So it’s clearly off the bottom. That will, I think, continue to grow as we go through next year. So I think you’re kind of through the electronics one, although we’re kind of now doing a destock on the W&P side. And remember, we’re mostly short cycle, so we’ll see it first. And then, I think, by the second quarter, you’ll see a lot of that destock over with, and you’ll see the volume lift.
Steve Tusa: One last one for you. I mean, you’ve been through a few cycles, DuPont having, I guess, high-single-digit to even double-digit organic volume declines. I mean, are we already in a recession here in your mind?
Ed Breen: I’m trying to – one foot in, yes. I’ve been there for a while, by the way. I track a lot of economic indicators, as I said earlier, when you see the yield curve where it’s been and all, there’s always been a recession. So, I like to manage, I guess, conservatively. So, I’ve been telling the team for a long time, just prepare for a softer environment. And if we’re wrong, great, we’ll have done all the right actions to position ourselves. But yes, I think there was this quarter just reading all the results from companies I saw, they were pretty mixed.
Steve Tusa: Right. Great. Thanks a lot.
Ed Breen: And people are mostly missing on the volume not on their EBITDA.
Steve Tusa: Right. Yes, thanks a lot.
Ed Breen: Okay Steve.
Operator: Your next question comes from the line of Michael Leithead of Barclays. Your line is open.
Mike Leithead: Great. Thanks. Good morning guys.
Ed Breen: Good morning.
Mike Leithead: Ed just on the Delrin sale, can you maybe speak to why this monetization structure was sort of the best ultimate outcome? And then relatedly, maybe for Lori, when should we expect the note receivable to accrue? Or I guess, when do you get that $350 million in cash?
Ed Breen: Yes. So, we liked it. Look, we sold Delrin in a tougher environment than when we sold the rest of M&M. So, this optimized what we could get for the asset over a few year period. We’re getting $1.2 some billion upfront. We’re writing 20% equity in it. TJC has a phenomenal track record. So, my gut is we have some nice upside coming from the retained interest that we have in the business, that’s to be proved out, but I’m highly confident in that. It is a good business. It should do well over the next few years. So, we think that optimizes our position. So, we sold it at $1.8 billion in value. My gut is we can end up nicely above that with the equity that we have. So, – and by the way, it just goes to our whole capital allocation strategy.
