Mark Costa : Sure. So both very relevant important questions for us. The consumer durable business is incredibly important markets where we sell our Tritan at very high margins and have had tremendous growth over the last decade. What I can tell you, and we’ve been doing a very deep dive on what’s going on in the fourth quarter, as you would expect, it’s entirely market-driven. When you look at some of what’s going on in the specific parts of the market we’re in, which is small appliances, housewares, electronics, that part of the durables world, it’s just been declining really for quite a long time, right? So the underlying market started declining in the second quarter of last year modestly. And then as people started switching to travel, leisure versus buying a lot of durable goods, you saw that in the announcements from Walmart and Target, if you go back to May.
And what we didn’t really fully appreciate is just how much overstocking the retail sector was doing in ordering from everyone who could supply them because they were so short of material and then suddenly it all showed up and they had a lot more inventory to get to get out. And with inflation being so high, the consumer durable sector is the first thing people stop buying. And you can see that in the semiconductor data, you can see that in the electronics where they’re dramatically down. So when we look at what’s going on in the end market, you can see a lot of evidence at the primary demand level of demand being off, but not nearly as much as us, right? So the retail sales data will show our direct end markets might be off 10%, 15%. And we’re off 40%.
So the rest of that is, by definition, destocking. And that’s because of these retail inventory channels that are so overstuffed, and it just took a while to get that momentum to try and pull down production through the entire chain. So it’s challenged. And it’s continuing into the first quarter, and we expect it to be equally challenging this quarter as the fourth. But at some point, it’s going to end. And from what we can see so far, we think they will get this under control mostly by the end of this first quarter, and then you’ve got a big step up in demand when the destocking is over to sort of lower demand than what is normal but still a lot better than 40% down, and that’s part of the step-up in earnings for Advanced Materials as you move into the second quarter.
On the auto side, demand, we’re being, I think, conservative probably a little bit more conservative than what the consultants would say about demand being slightly down in the fourth quarter — in the first quarter and not improving much for the year. So if we’re wrong about that and production improves more, that’s a lot of upside because those are very high-value markets that we serve in our earnings. But the shift in the market, to get at your question, Vince, is really important. That shift is very favorable to us. So we now got about 10% of our sales going into at very high margins. You have to remember that EV is about 3.5x more value for us than an ICE car. There’s a lot more glass in an EV car and a lot more functionality. They’re putting in it from acoustics to solar rejection, to heads-up display, et cetera.
