Mark Costa: So, first of all, Naia is a great business. The margins are very good. Obviously, recent improvements until margins are better. But the reality is, while we’re really excited about the improvement in the tow business, it is a stable business that’s still going to decline in volume about 1% a year. It’s not a growth business. So, we continue to be very focused on serving our customers. These heat-not-burn products are certainly growing at 15% even more filter tow, but that’s just offsetting some underlying natural decline of cigarettes to get you to that sort of net 1% decline. So, we’re not conflicted, capacity-wise, between this and growing our Naia business. But we are getting to the point where we are going to start using up the available capacity, and we’re looking at capacity expansion options to continue to support the growth, right?
Because our goal here with cellulosics is not to optimize the stream because they turned it into a grow stream, right? Our goal here is to win in a variety of applications. So, like polyester being a very high growth stream for environmental reasons and providing sustainable products, our strategy, as we laid out Innovation Day, is to get $200 million of EBITDA growth the stream on top of the tow business, right? So, when we talked to you in 2021, we weren’t including improvements in tow, right? Tow is a new base, and we’re still aiming to grow $200 million EBITDA on top of that new base. That’s a very significant change from where we were in 2021. We’ve got growth in Naia, which we’re really excited about, as I explained the value proposition a moment ago.
We have great growth prospects and some early wins in Aventa, this is our foam cellulosic that can replace polystyrene and packaging. Clearly, polystyrene is being banned in many places for packaging whether it’s food packaging in sort of protein trays for meat or the clamshells, et cetera. And we validated that our Aventa product will biodegrade both in not just industrial, but in residential composting, which is sort of the equivalent of landfill. So it really is a true end-of-life solution. So customers are super interested in that, huge market. Lots of volume growth opportunity there. Then you got micro beads, which is a super high-value opportunity in cosmetics. We’ve got success in recycled content in the ophthalmics business, with how we’re recycling the eyewear back into the product.
So, there’s a lot of growth going on across the cellulosic stream. And so we’re going to be looking at incremental capacity expansion to support all these growth opportunities as we move forward. Fortunately, we have a very large and solid asset base. So it’s not like building methanolysis plants. We can really leverage the capability we have here, but there’ll still be capacity we’re adding for Naia and all these other products between flake and fiber.
Greg Riddle: Matt, are you good?
Operator: Our next question comes from Patrick Cunningham with Citigroup. Your line is open.
Patrick Cunningham: Hi, good morning. Thanks for taking my questions. I know you have no expectations for any sort of restocking embedded in the full year guide. But which end markets do you think are potentially best set up for restocking, whether it be in 4Q or into 2024? And how should we think about this in the context of upside to earnings from the specialty businesses?
Mark Costa: Well, I think that it doesn’t matter what end market we’re in right now, there’s a lot of destocking going on as everyone focuses on generating cash. And so I think there’s probably opportunities for restocking pretty much across the markets. Building construction might be the one exception, where I think there’s a lot of destocking still to be done from what we’ve seen from our customers in that space. But everywhere else, I think there’s some degree. And then it just gets into proportions, right? So where the destocking numbers are bigger, like consumer durables, then the potential for restocking is higher. In more stable markets like personal care and water treatment and medical, I think the restocking opportunity is still there, but muted because they’re just not doing as much. As far as earnings opportunity for next year relative to this year, we’re not going to sort of get into that yet, it’s a little early.
