To your point, we’ve flagged nylon and polyethylene as being segments that are being impacted by the consumer demand and kind of the global macroeconomic outlook right now. Other sections of our business are largely performing very well, right? With strong regeneration pricing, strong pricing across the Catalyst Technologies segment in total. Good deal less volumes that are outperforming. So really, if you balance these two down segments versus the up segments that we have and those would have really washed each other out. So — our guide really is based — we view it as we’re almost down about $25 million due to these operational issues. Going back to the winter storm that hit us in January and then dovetail with our Houston outage that we had also in the first quarter and now these Dominguez issues.
So outside of those operational issues, the two down markets would have largely been balanced out by the positivity we’re seeing elsewhere.
John McNulty: Got it. Thanks very much for the color.
Operator: Our next question comes from David Begleiter, Deutsche Bank.
David Begleiter: Hi, this is David Begleiter here. I guess you talked about nylon and polyethylene being at the bottom of the cycle. Do you expect any sequential improvement? And are you baking in a sequential improvement to your guidance?
Kurt Bitting: Yes. So we’re — again, we’re not — we’re really kind of — as we gave our guidance, we’re looking at our customer orders as we see their outlook and their nominations really through the end of the year. We see — again, we feel this is a really down cycle period that were going on right now. As mentioned earlier in the call, that it started earlier, we started the year thinking that it was going to be a soft this year for polyethylene, and it’s kind of gotten a little softer than we expected. So that’s leading us to adjust or partially adjust our guidance — partial of our guidance adjustment. So the other side of our adjustment, obviously, is on the nylon side, which is probably the other half of really the market segment where we’re seeing a downturn, again, related to consumer and like slower recovery in China.
So looking forward, again, we feel that both nylon and the polyethylene markets will recover nicely. We have very good customer partnerships where we’re linked to the largest global scale producers that will benefit long-term, both from where they’re located geographically and their scale. And those markets will grow over time because they’re linked to, obviously, things like, again, light weighting and packaging and so forth.
David Begleiter: Okay, thanks. And then second, I guess, on capital allocation. Are you comfortable with your leverage levels right now? And if you think about capital allocation in the second half in 2024, do you expect any share buybacks in the near future?
Michael Feehan: Yes David, I think for — in our current capital allocation strategy, we’ve talked before of having a balanced approach. We certainly have share repurchases as a component of our capital allocation strategy and you’ve seen us participate in share repurchases during some of the recent secondary offerings, and we’ll continue to do so as we see that the price makes sense from a low value standpoint, we still believe that our stock price is undervalued. However, we also recognize that leveraging and deleveraging is a very important component, and we are very focused on that. We do and have said that we are targeting to have a leverage ratio in the low 2s, somewhere between 2 times and 2.5 times. So our focus is certainly going to be on that as we finish this year and go into next year.
David Begleiter: Okay, thank you.
Operator: Our next question comes from Hamed Khorsand, BWS Financial.
Hamed Khorsand: Hi, good morning. So the first question I had was — in regards to your Catalyst business, how do you describe your outlook as far as your order book is concerned, given that your customers usually order 6 to 12 months ahead of time?
Kurt Bitting: Thanks Hamed. So when you look across all the Catalyst Technologies segment, there’s — we’re having a good year in that segment overall, right? So if you look at the ZI Joint Venture, hydrocracking is expected to be up over 20% renewable fuels is up mid-teens. So we’re seeing really good volume in sales in the ZI Joint Venture. And then strong pricing, as I mentioned, across the whole Catalyst Technologies segment. So we do see — as you mentioned, there is an outlook of orders where customers give us a little bit of a longer time — lead time to that. So we still see that order book as strong. I mean, again, we’re not guiding here for 2024, but we feel confident about that business going forward. We’ve got great products; particularly on the hydrocracking side where we’ve got our next-generation hydrocracking catalyst is having a lot of success in the marketplace being adopted by refineries.
