Eastman Chemical Company (NYSE:EMN) Q4 2022 Earnings Call Transcript

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Willie McLain : Kevin, thanks for the question. Yes, I would highlight here in 2022, we already invested approximately $300 million as we think about our circular investments that we highlighted in the prepared comments. So as you think about approaching $2 billion over the next three to four years. In 2022, ’23, we’re increasing our CapEx budget to $700 million to $800 million. That includes a step-up on a year-over-year basis. And yes, as you think about a normal, I’ll call it, a large capital curve, it will definitely be over $800 million through that time horizon and probably will peak around $1 billion to $1.2 billion.

Kevin McCarthy : Okay. And then Mark…

Willie McLain : As I think about broader capital allocation…

Mark Costa : Sorry, go ahead. You’re talking about the assurance, we didn’t answer your question.

Kevin McCarthy : Yes, I was just going to follow up on that. I think in the past, you talked about 12% plus.

Mark Costa : Yes. So on the return front, to be clear, what we announced in the prepared remarks today around the design of the facilities is the same as what we had in our economics back in 2021 innovation phase. So the first phase was always going to be the — around this 110,000 tons of waste being processed. And so the $450 million EBITDA has not changed, and we feel more confident in as we’re actually securing prices with contracts and securing feedstock, both attainability as well as what it’s going to cost supporting those economics. The capital costs being a little bit higher than what we had talked about that sort of 10% increase that we discussed in our prepared remarks don’t affect the returns. We said where our returns are above 12% for the second, third project, above 15% for the first project.

We said greater than — or we have room to absorb some of these challenges you always expect them to happen, frankly, when you’re doing these kinds of capital construction projects, and we always want to make sure we have robust plans for the economics to deliver returns.

Operator: Our next question comes from Matthew DeYoe with Bank of America Merrill Lynch.

Matthew DeYoe : One, I have missed this, but if we’re looking at the Kingsport methanolysis unit, can we just walk through the progression from cost to profit how much commissioning costs in 2023 numbers? What do we think for how that moves to profit in 2024 and getting that full run rate earnings on that facility?

Willie McLain : Yes. So I would highlight as you think about the start-up, we’re talking about roughly $35 million, including, I’ll call it, the depreciation as it starts up in the back half of the year. So as we think about the first project, you should be getting to a more normalized run rate of growth in 2024. And by the end of ’25, we would expect to be close to the full run rate of the plants, which we’ve highlighted could approach roughly $150 million per project.

Matthew DeYoe : All right. On that end, would that mean that 2024 is just neutral? Or would you see EBITDA? And then I guess just a question, you don’t really talk much about buyback for next year. And I know CapEx is going up, but it still seems like maybe you have $200 million, $250 million of after dividend cash flow. Do we assume that goes to buyback or I mean your leverage is fine. Can you do in excess of that?

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