Arun Viswanathan: And then just lastly, how do you think about working capital and cash flow within Quaker itself? I think, again, there’s been a lot of volatility in the supply chain. There’s been inventory restocking or destocking regional differences. So is working capital likely to be a greater use next year? Do you see the need to maybe build a little bit of inventory? And so how — and what would that kind of pretend for free cash flow?
Shane Hostetter: Yes. Thanks, Arun. As you imagine, we were carrying a little bit more inventory given to safety stock and just security of supply over the last couple of years. Coming into this year, it was in a focus to improving working capital and you see on our cash flow that some of those efficiencies have come. As we’ve done a good job this year and really continuing to focus on improving inventory and receivables for the rest of this year and into next year. So as I think about our working capital percentage at roughly 27% now, we’ll continue to improve that into historical levels.
Arun Viswanathan: Thanks.
Operator: Thank you. Our next question is from David Begleiter with Deutsche Bank. Please proceed with your question.
David Begleiter: Thank you. On raw materials, I believe you said they were down low single digits in Q3 quarter over quarter. Would you expect a similar decline in Q4? And I think you mentioned maybe not a big impact next year, but should they be down next year as well?
Andy Tometich: Hi, David. I did highlight that in the third quarter, there was kind of a low single-digit deflation in raw materials. We’ve continued, as we move forward, though. We continue to see a mixed bag. There are some of the many raw materials and the 3,000 that we buy that are moving up while others are a little more stable. So we’re — as we see it at the moment, we’re seeing — we expect fourth quarter to be relatively stable without any significant shift. Beyond that, there’s just not clear visibility, but there’s nothing right now to suggest that there will be a major deviation.
David Begleiter: Andy, which areas are you seeing being up sequentially right now?
Andy Tometich: Yes, for sure, some of the oil-based products and derivative products related to that are the ones that have the pressure at the moment. And the whole basket is incredibly high versus where it’s been historically.
David Begleiter: Understood. And next year on pricing. Would you expect pricing to be still be up next year, year-over-year?
Andy Tometich: So I think we’re going to focus in on what value we’re providing to customers and understanding what’s happening on our cost to serve, which will influence exactly what that looks like. So we’re not necessarily forecasting any significant movements. But I think value-based pricing has always been part of the model at Quaker Houghton and we’ll continue where we are adding value to share in that value with our customers.
David Begleiter: Thank you.
Andy Tometich: Thank you.
Operator: Thank you. Our next question is from Mike Harrison with Seaport Research Partner. Please proceed with your question.
Mike Harrison: Hi, good morning again. A couple more for me. First of all, Andy, you talked in your prepared remarks about one of the areas that you’re looking at for efficiency is optimization of your direct and indirect channel strategy. Can you give us a little more color on what you’re looking to do there and what that might entail?
Shane Hostetter: Yes. Thanks, Mike. For sure, when we do talk about channel, we’re referencing both the direct and indirect channel partners that we work with. It’s really about the customer journey and fully understanding on an intimate level, each of our customers’ different journeys, how they’re choosing, using and repeating their purchase and use of our products. We’re working to align the organization to be able to match that exactly with the right service levels and deploy digital capabilities to support that on an efficient basis. And really, I mean, the goal here is we want to make sure we’re servicing our customers exactly the way they need to be serviced, not over serving them and not underserving them.
Mike Harrison: All right, thank you. And then a quick one for Shane. You mentioned that the blended interest rate right now is 6%. Can you tell us what the fixed versus floating mix of your debt looks like today? And I guess what that means for expectations about your cost of debt into next year?
Shane Hostetter: Yes, sure. We have roughly 30 — third is fixed and the rest is variable. At the moment, like you mentioned, our cost of debt is roughly 6% Obviously, this depends on where the Fed goes from an increase or decrease in the future. But for now, it seems to be steady on that side as I think about the next quarter. However, as we continue to focus on debt paydown, that will obviously impact our interest expense as well going for the fourth quarter as well as into 2024.
Mike Harrison: Is it fair to say that your debt pay down focus is going to be on the variable portion.
Shane Hostetter: It’s fair, Mike, yes.
Mike Harrison: Thank you very much.
Shane Hostetter: Thank you.
Operator: Thank you. There are no further questions at this time. I’d like to hand the floor back over to Andy Tometich for closing comments.
Andy Tometich: Yes. Thanks very much. I just want to extend my appreciation for everybody and their interest in Quaker Houghton. I think we’re well positioned with the performance and execution and, really looking forward to the opportunities that we have in front of us. Thanks for your continued interest, and we look forward to the next opportunity of talking.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
