Kofi Bruce: The only other thing I would add is just there might be a modest mix of business headwind from production just a little bit less wet obviously, given the macro trends that Jeff referenced in. So as you take that into account, that would be a put.
Matthew Smith: Thank you. I can leave it there and pass it on.
Operator: Thank you. The next question is from the line of Bryan Spillane with Bank of America. Please go ahead. Your line is open.
Bryan Spillane: Hi, thanks operator. Good morning everyone.
Kofi Bruce: Hi, Bryan.
Bryan Spillane: Kofi, I just had two questions related to the cash flow outlook for 2024. The first one is just free cash conversion back to 95% versus 80%. Is that mostly just working capital that will drive that improvement?
Kofi Bruce: Yes. That is the primary driver, and that was also the primary driver of the miss that we had this year relative to our long-term target. So challenge, obviously, the other side of the inventory reduction in the retail trade was unexpected inventory build as we went into the last two weeks of the year. So as we step into next year, supply chain environment is more stable gives us the capacity and the ability, frankly to have more visibility and manage our inventory levels lower. We continue to make progress on our overall core working capital on our Pet business. So those things should help us drive a more significant provision of cash from working capital next year.
Bryan Spillane: Okay. So the bulk of it is inventory, right? Is that kind of the way to look at it the majority of the improvement?
Kofi Bruce: Yes, year-over-year on a cash flow basis, that is a fair way to look at it.
Bryan Spillane: Okay. And then the second one is just — I know you’ve given the interest rate guide – the interest expense guidance, I’m sorry. And you called out having refinanced some debt at a higher rate. Kofi, is there any opportunity with like some of the shorter term whether it’s commercial paper or just shorter term debt? Is there any possibility to just apply some free cash flow to take some of that short-term debt in order to relieve a little bit more of the interest expense pressure?
Kofi Bruce: Yes. We do expect to be able to run with lower commercial paper balances. But I mean, candidly, commercial paper rates and long-term debt rates in the – at least in the middle of the curve were somewhat adverted for periods of time as we looked at the Tier 2 market in, which we issue commercial paper. So we actually could issue term debt more cheaply and did that here as we came out of the fourth quarter.
Bryan Spillane: Okay. But – so it doesn’t sound like there’s a lot that you can do to chip away at that guide?
Kofi Bruce: It’s not a median arbitrage. I expect – look, this will be an adjustment factor as we see some of our term debt roll off as long as we’re in this higher interest rate environment, that will be a modest headwind. It is manageable, and we happen to have a fair amount of maturity concentration in this, call it, two to three quarter window that – which is driving our outlook for next year. .
Bryan Spillane: Okay, all right. Thanks Kofi. Thanks guys.
Kofi Bruce: You bet.
Operator: Thank you. Our next question is from the line of Chris Carey with Wells Fargo. Please go ahead. Your line is open.
