Luis Rojo: Great question, David. What I will say is that we are very proud of the free cash flow and the cash from operations that we are delivering this year, right? I mean, if you think about the first nine months of 2023, our cash from operation is up 41% versus last year. Last year was a record year in net income, right and EBITDA. This year we have redoubled our efforts on working capital and inventory and cash management. And our cash from operation is up 41% as a result of all this excellent work done by the organization, okay. We will continue that effort in 2024. It’s not only the $50 million that Scott mentioned it, but it’s also cash management into next year. And as you know, things like Pasadena will provide a lot of help on cash because you apply bonus depreciation and your taxes goes lower on a cash basis.
So, those are the benefits that we’re going to see in term of cash in 2024. And we put a footnote in the slides, I know you just got the slides a few hours ago, but we are estimating depreciation for next year between $130 million to $132 million is in the slide in the guidance that we provide is a bullet point there. So you can use that for your modeling in 2024.
David Silver: Yes, on that last point, I apologize. I literally just saw it here on slide 13. So, apologies there. All right, thank you very much. I’ll go back in the queue. Great.
Operator: One moment for our next question. Our next question comes from Mike Harrison with Seaport Research Partners. Your line is open. Just make sure your line is unmuted. One moment for our next question.
Luis Rojo: Abby, can we have Mike jump back in the queue?
Operator: Yes, one moment. Our next question comes from Dave Storms with Stonegate. Your line is open.
Dave Storms: Hey [Technical Difficulty] questioned earlier that the Pasadena plant is expecting 90% of the cost for the year and not expected to be up and running until the middle of next year. Should we expect that to be running at full capacity, or should we expect there to be a couple of quarters worth of ramp up as Pasadena gets fully operational?
Luis Rojo: Yes, Dave. The latter statement is more accurate. So when we think about starting up an asset of this size, there’s a lot of unit operations that have to go through commissioning, and more importantly, the product mix that we’ll be putting through there, some of it is highly specialized and there’s customer qualification periods, and protocols that we have to follow. So it’ll be a ramp-up in the second-half of the year for sure.
Dave Storms: Okay. And that’s more just based on the logistics, though. It’s not a question of getting contracts in the door. The demand is there, the contracts are there. It’s just the nature of the business.
Scott Behrens: Yes. starting up new assets, there’s a customer qualification protocol that has to be followed to get customers to approve production from new sites.
Dave Storms: Understood. Thank you very much.
Operator: One moment for our next question. Our next question comes from Mike Harrison with Seaport Research Partners. Your line is open.
Luis Rojo: Mike, we cannot hear you.
Operator: Mike, please make sure your line is unmuted. One moment for our next question. Our next question comes from David Silver with CL King and Associates. Your line is open.
David Silver: Yes, thanks. This question would be just for Scott, and I’d just like to ask him to reflect. If you could, Scott, on your long experience in the surfactants industry and what if anything, would you call out right about now that maybe deviates from, I think, the three decades that you’ve been managing that business and now the whole company here? But I don’t know, this is my opinion, not yours. But for a long time I would say, surfactants was not one of the more volatile or trickier subsectors within the chemical industry. And I would contrast that maybe with the past 3.5, four years, where first to me there was the very unusual demand boost from the pandemic, the issues surrounding supply chain reliability, and maybe some of your new product development and customer development efforts.
But you know, as you stand here right now, you’ve coming off a few consecutive record years, and then this year maybe some a pullback. But as you look ahead, I mean, do you think that the next year or two are going to be a reversion to the mean, something of a catch-up for demand that might have been deferred or delayed this year? We might see a comeback over the next 12-months or something. But from your perspective, managing this business over a very long period of time, what sticks out to you as maybe the transitional points versus the secular growth points that you might care to call out?
Scott Behrens: Thanks for the question, David. Let me say that I think what not just the surfactant industry, but what the chemical industry has experienced in the last 18 months has been unprecedented in my career within the industry. To see volume reductions of 10% to 20% in a calendar year is, I think, unprecedented definitely in the surfactant market. It was really driven, in my opinion, by the supply chain constraints and the call-it hoarding of the material in 2022 as economies opened up around the world after the pandemic and the supply chain constraints caused a really strong year of demand in 2022. And we’re paying the price for it this year as there’s a lot of inventory reconciliation happening. You know, combine that with the fact that step-in is finishing the end of our largest historical investment cycle in CapEx over the last three years, those two things don’t marry up too well together.
