Mark Costa: They don’t have price increases embedded in them for next year versus this year, David, if that’s your question. Obviously, prices have gone up considerably from last year. But the idea of these contracts is to prove our margins and profitability to a level where we can continue to reinvest in this business to be a reliable supplier to our customers. And we’ve achieved that type of pricing with our customers in these contracts. We’ve also put formulas in them to adjust for changes in energy cost to give stability for us and for our customers, which we have not had in the past. So, we feel great about what we’ve achieved in improving our sort of ability to support our customers and our current profitability. And these contracts are now in place, where about 75% is fully contracted now through next 2024.
Many of those are multiyear contracts. Hopefully, by the end of the year, we’ll have that number up to 90%. So great improvement in this business from its performance last year, and we’re very focused on stabilizing it on the tow side to provide very attractive cash flow to support our growth investments across the company. I would also note the textile business continues to do great on top of that. Where, even in a 20% down market that we have this year in textiles, we’re growing that business. So, we’re winning a lot of market share versus other materials because the value proposition of Naia is very compelling. It’s a great beginning of life story being based on biocontent and recycled plastic. And importantly, and a bigger issue going forward now is microplastics, which are the fibers breaking up and getting into the ocean.
And our fibers are fully certified to biodegrade when they do end up in the environment. And so that’s a very significant positive, as the world is becoming more concerned about that as well. So, it’s just a great business.
David Begleiter: Thank you very much.
Operator: Our next question comes from John Roberts with Credit Suisse. Your line is open.
John Roberts: Thank you. On the second US PET project, are you going more slowly on that?
Mark Costa: We’re nothing more slowly in any significant way, John. I mean right now, what we’re doing is really focusing. We haven’t made a site announcement, so you could ask that question, too. Because we’re really looking at the incentives across several states. We’ve got three the sites that are all very attractive, and the engineering work is continuing for whichever site we pick. And so we’re just trying to get those incentives in place. We feel great about our partnership with Pepsi as a significant baseload customer in that project, and we are sort of moving forward with that project to make sure we can serve the needs and put that together with the French project in Kingsport to get that $450 million value for our owners, which is a great return on the capital required across those three projects.
John Roberts: And then on the fibers business, assuming raw materials are sequentially stable, is all of the earnings step down in the third quarter? Just remind us of the frequency of the reset on the price versus cost?
Mark Costa: The contracts are quarterly. So, a little bit of a step-down from Q2 to Q3 is just the prices adjusting for a lower energy environment.
John Roberts: Thank you.
Operator: Our next question comes from Kevin McCarthy with Vertical Research Partners. Your line is open.
Kevin McCarthy: Yes. Good morning. Mark, with regard to Advanced Materials, do you have a sense today as to whether your third quarter earnings are likely to be flat, up or down sequentially versus the $99 million that you posted in the second quarter? The reason I ask is reading the prepared remarks last night, it looks like you have a $40 million inventory-related hit in the third quarter, but you also say the second half should be better than the first half. So, it seems like there’s some countervailing trends there. So, any comments on the seasonal cadence would be helpful.
