And look, again, we know there’s an EV transition and this transition is underway and there’s a lot going on, but there is a consumer buying pattern that plays a big role in this when it comes to absolute sales and what volumes produce.
Daniel Rizzo: Okay. Okay. Thank you very much.
Operator: Thank you. [Operator Instructions] Our next question comes from Jon Tanwanteng CJS Securities. Your line is now open. Please go ahead.
John Fortson: Welcome back, Jon.
Jon Tanwanteng: Hi. Thanks, John. Just for my follow-up and then following on that hybrid comment, I mean, I think it’s great that hybrids and ICE engines are seeing a little longer lifetime or older than I guess others had expected. But does that reduce the urgency or push out the expectations for your alternative carbon efforts and especially as it pertains to the next year under the battery adjustments there?
John Fortson: Liten, it’s not going to change, John, our overall strategy, right? We intend to be a participant in the auto industry selling activated carbon, and we want to get ourselves to a point where we are to some extent agnostic as to consumer choice, right? Because we want to provide what our customers need and their needs are driven by what consumers do, right? So we have ample capacity and ample capability to service hybrid needs while concurrently work on our other initiatives predominantly or the one that has the most public focus right now is Nexion, but that’s not the only one we’re looking at, right? So we’re looking at other things as well, but we are going to be a participant and help the auto OEMs affect this transition.
Jon Tanwanteng: Got it. Thank you. And then could you just remind us what the competitive dynamics in APT are like in Asia? I just know there’s a competitor there. It derives its product and kind of what happens when, you know, the macro improves.
John Fortson: Yeah. So there are four producers of caprolactones, two of whom, BASF and Dicell, predominantly sell captive. They do sell excess monomer into the marketplace, and then there’s also a Chinese company called Jurin that sells into the marketplace as well, right? So on one level we actually like having a depth. One of caprolactones’ historical problems with adoption has been the scarcity of its supply, right? So a lot of large chemical formulators have been skittish or somewhat apprehensive about formulating with caprolactones because there just wasn’t a whole lot of it out there and frankly, there was one source that was sort of non-captive or being sold predominantly to third parties, and that was in Warrington, and we own it now, right?
So we think this actually bodes well for the broader market because we think that people will uptake or be more prone, more likely to adapt to technology once they know there’s a lot of it, right? Like ourselves, everyone who is selling in China and in Asia writ large is suffering from the broader economic environment over there, right? So it’s not unique to us. We can see it in everybody else’s numbers, too. We are optimistic that that economy will begin to improve and pick up, but we just got to be patient on that.
Jon Tanwanteng: Understood. And then finally for me, I was wondering if you could break out how much revenue you expect to generate in Q1 and Q2 from the lines of business that were closed and kind of what the tail looks like as you sell off this inventory that we’ve been counting on?
John Fortson: Yeah, we don’t… look, we don’t really guide by quarter, right? But I think you can look at our numbers and directionally understand that Derrida was a couple hundred million dollar business, right? Approaching 300 in peak cycle and lower than that and softer periods, right? So that should give you some sense. It also did not have the seasonality because it was not selling to pavement, right? But it has been running at relatively reduced rates for the last year or two, the last year anyway. So just be cognizant of that as you think your way through it. Look, I want to be also clear because I’m a little — we’re talking a lot about Q1. We have factored that into our guidance for the year, right? So there’s nothing here that is untoward or unanticipated.
We just wanted to be very clear with everyone just like we’ve always been about as that the Industrial Specialties business in particular moves through this period. But there are some challenges in that business. It will get better particularly for PC as the payment season gets going. It’s going to look a lot like what happened last year, and so that Q4 is going to be somewhat. I think Q1 will be a little bit better than Q4 but it’s going to be a challenge for them. And then it should kind of get a little bit better. The other thing I would tell you that as we think about the year, we’ve made as I mentioned in my remarks some pretty conservative assumptions around the price of CTO. So the price of CTO really ran up on us and from a year-on-year perspective is going to look elevated this year, but it’s going to come down, we expect over the course of the year particularly in the back half.
So I think you’ve got to think your way through as you do the calendarization, all the puts and takes of that.
Mary Hall: And John I’d like to add, maybe I missed the comment, but John Fortson did call out in the guidance discussion that with respect to the unwind of the commercial part of that operation in DeRidder and exiting certain product lines, we quantified that as roughly $10 million to $15 million of underlying costs and expect most of that in the first half of the year related to those selling of the inventory and exiting certain commercial contract, commercial agreements et cetera. So I think that might be the number you’re looking for in your modeling.
Jon Tanwanteng: Got it. And is that incremental to the cost you detailed last quarter?
Mary Hall: No, that is – well, it’s in our guidance.
Jon Tanwanteng: Okay. Fair enough. Thanks guys. Appreciate it.
Operator: Thank you. At this time we currently have no further questions. So I’ll hand back to John Nypaver for any further remarks.
John Nypaver: Great. Thanks. That concludes our call today. Thank you for your interest in Ingevity and we’ll talk to you again next quarter.
Operator: Thank you for joining today’s call. You may now disconnect your lines.
