Richard White: And John, if I could add to that. This is Rich. That Charleston plant has a north and a south plant, on the one side is the refinery, the other side of derivatization. So out of the refinery, we’re making products that feed our pavement business and also within our paper size business and some of our multiheteas well as some of our rubber business. Those businesses are providing us the margin today that we need to sustain the business going forward. But as John mentioned, we have the flexibility to ramp up that refinery to produce even more products as the market detects or demand. So right now, the market has been in a low state many of you can see and have heard from Mary and John’s comments on our risen drag in specific business, but the flexibility that we’ll have in Charleston will allow us to toggle as the market demand increase and/or decrease.
Jonathan Tanwanteng: Great. Does DeRidder have the capacity to convert to ASA if the demand is there eventually if you don’t sell that?
John Fortson: Well, we’re exiting DeRidder, but DeRidder is a refinery that is not — it’s — we did it and cross it. It could be done by us or someone else, but we are exiting DeRidder.
Mary Hall: So I think it’s important Well, John, I think — let me say this, and then if it doesn’t get at your question, let us know. Sometimes people think of our plants as just clones of each other, but in fact, they each have unique capabilities. And that DeRidder plant, the legacy was printing inks originally. And then when printing inks as an industry began to die out a couple of decades ago, the pivot was made to oilfield and adhesives. As markets have evolved over time, those are the end markets that are lower margin for us and sometimes high volume but lower margin. And so that’s why the decision was made to exit that DeRidder site. The Charleston site does derivatization. And as Rich mentioned, as we grow the higher-value, more specialty products, we do have the capability to expand and ramp up and then expand Charleston.
John Fortson: Well, and as we mentioned when we were together for Investor Day, I mean, we have the ability today to double the volume output at cross it, right? So we feel comfortable we have the volume, we have the volume ability to, as I said, capture the recovery in our markets but also grow the business.
Richard White: If you’re asking why — this is Rich again, John, you’re asking why with regard to DeRidder and the markets that we play in, when you think about the CTO and the fractionation associated there with an adhesive product or inks product is more than 90% based on Rosin, which is CTO heavy. So as we see the inflation on CTO, it drags down the profitability significantly on those markets for us.
Operator: The next question comes from John McNulty from BMO Capital Markets.
John McNulty: So one thing I just wanted to clarify. So the $65 million to $75 million of annual savings beginning in ’24, is that the run rate at the end of ’24? Or is that what you expect in ’24? And then actually, the run rate would presumably be higher as you end the year? Like how should we be thinking about that?
Mary Hall: We expect those savings to be realized in 2024, fully realized. We’re taking the actions now. We expect some amount of the savings to begin here in the last couple of months of the year…
John Fortson: It’s pretty de minimis.
Mary Hall: It’s a total with the actions we took earlier this year of about $25 million. But then the $65 million to $75 million, John, will be fully realized in 2024 and going forward.
John McNulty: Okay. So if the — if some of these fixes don’t happen until the end of the first half of ’24, is there the presumption that things could be even bigger in terms of savings as you look to ’25? Is that — and things kind of normalize? Or is that maybe being too optimistic?
Mary Hall: That is possible. We’ve laid out internally the time lines and the expectations to the best of our ability and feel comfortable with the $65 million to $75 million number if market dynamics and other factors go our way, could the savings be greater if that’s possible, but not — we’re not willing to commit to that today.
John Fortson: None of this is tied to a…
John McNulty: Fair enough.
John Fortson: Economic — these are what I would characterize as sort of fixed cost saves
Mary Hall: Controllable costs
John Fortson: Controllable costs that we are…
Mary Hall: Committed to…
John Fortson: Committed to and sort of permanently restructuring out of…
John McNulty: Okay. Now, that makes sense. And then just taking kind of a step back and maybe at a higher level, look at it. So you spoke to — I think it was on slide Slide 13 about how the repositioning basically takes out, whatever, call it, $300 million of revenue out of Performance Chemicals. So if we use, whether it’s ”22 or ’23 as a base, that basically says the revenue — the kind of normalized business is about $800 million or so of revenue. And you’re looking for now once kind of the dust settles on the cost saves, you’re looking for a 15% to 20% EBITDA margin. So is it fair to think that, again, when the dust settles, you generated all the savings that you’re expecting that the EBITDA run rate for this business is $120 million to $160 million. I mean I know that’s a little overly simplistic, but is that the right way to think about it at this point going forward?
