Jay Royalty: Hey, Phil. This is Jay Royalty. Your math is good that’s how the math works but we are in a transitional situation and I think you’ve heard both Tom and I talk about the improving demand trajectory so obviously with this move it still leaves us some flexibility, it still leaves us some room. We won’t change anything about how we’re operating to make the cost of that flexibility to minimize the cost of that flexibility but as we get our commercial analysis and we work very closely together on this in terms of the outlook. We’re very comfortable that our commercial plans and our commercial execution of what we’re doing, what Tom’s doing in the box business and what we’re doing in the containerboard business, that we need that flexibility and we need that capacity for how we see the future. So, that’s where we are.
Phil Ng: But Jay, am I interpreting correctly any improvement in economic downtime would be added to that $140 million in cost savings and any way to size up how much of the EBITDA impact it’s been this year so far?
Jay Royalty: The $140 million is the number that we’ve put out there in terms of the EBITDA impact, but yes, there would be further benefit from taking up that economic downtime or eliminating that economic downtime.
Operator: And your final question today comes from the line of Matthew McKellar from RBC Capital Markets.
Matthew McKellar: Hi, good morning. Thanks for taking my questions. It sounds like you’re looking at opportunities to further optimize your cost structure in global cellulose fibers. Are you able to provide a bit more detail on what opportunities still exist there and whether you’re maybe looking to either further capacity actions or capital investments that could drive stronger cost performance? And then when you think about what can drive you from your current run rate in that business to achieving above cost of capital returns, how do you think about the relative importance of optimizing that cost structure versus other factors like achieving more favorable production mix or driving stronger pricing? Thanks.
Clay Ellis: Yes, thank you, Matthew. This is Clay. It’s a great question. Part of the moves that we made with Pensacola and Riegelwood has a cost structure implication. Pensacola machine was a high cost machine. So that’s part of it. We talked about Riegelwood, although it has fluff capacity over the past couple years the majority of that machine was used for not fluff, but for market pull, softwood market pulls. So that has a cost implication as well as a mix implication. So the benefits there are both in cost and in mix. If you think about going forward, what are the opportunities in the business? I think as we would, as I would prioritize our cost opportunities, it’s first in supply chain with last year, 2022. A lot of things were put in place as we export 90% of our volume globally to get that volume out to serve our customers between warehousing and container freight stations and various methods.
It increased our supply chain costs. We are unwinding those warehousing in different modes. Of course costs are coming down in freight rates, om ocean carrier rates. So that’s very helpful, but also the things that we did uniquely that we can unwind uniquely. That’s probably been a big driver, been a biggest driver and will continue to be a very big driver. We have more to optimize there. I think capacity, I think again, as we see the growth of fluff in the kind of historical ranges, we want to continue to — we want to optimize our machines on fluff. I think mix is the biggest opportunity, as you mentioned, what is it cost, is it prices? Mix is an opportunity and then price are bigger opportunities then. We don’t feel like we’re disadvantaged in a cost of manufacturing or even a supply chain cost.
So there’s obviously benefit there, there’s opportunity there, but mix and price would be, after we’re optimizing this move, mix and prices is clearly the driver.
Matthew McKellar: Great, that’s helpful, thanks very much. If you’re sticking with Pensacola, I think you also produce containerboard at that site. How does taking capacity down in the pulp side affect the cost profile of that mill, if at all? Thanks.
