Matthew Blair: Great. Thank you.
Operator: Your next question comes from the line of Hassan Ahmed from Alembic Global Advisors. Your line is open.
Hassan Ahmed: Good morning, Frank and Dave. I know it’s early days and some positive sort of demand signs in emerging and I understand the sort of sensitivities around maybe not really sort of divulging a 2024 guidance. But, I mean, look, you guys did around $154 million in EBITDA in 2023, right? And from the sounds of it, the restructuring benefits certainly seem to be run rating at levels above $100 million, right? So, I mean, straight up, that’s north of $250 million for 2024 EBITDA without even sort of factoring in some of these demand improvements that you guys are talking about and seeing. Am I sort of thinking about things the right way as it pertains to ‘24?
Frank Bozich: Yes, so thanks, Hasan. Look, I think what we’ve assumed is that year-over-year volume growth is going to be in the low single-digit range for the remainder of the year, and our volume will be similar – the volume dynamic will be similar to 2023, but we are confident we’ll deliver the $100 million in year-over-year improvement that we anticipated. Will we get it exactly in the same buckets that we thought we would? Probably not, but I think, we’re confident in the $100 million and we’re encouraged by the start of the year, but very difficult to anticipate how the second half of the year and the market demand will develop during the second half of the year. So I would just leave it at that.
David Stasse: Hassan, let me add a couple of things to that, if you will, please. So in Q1, we clearly had a step up in volume. Our volumes were up sequentially about 12% in the first quarter versus the fourth quarter. And that was very broad-based and in all segments. But on a year-over-year basis, it’s up about 1%. So I’d attribute most of the Q4 to Q1 transition to seasonality. So as Frank said, I think we’re very comfortable with delivering the $100 million. Even in a low-growth environment like we’ve assumed, we’re managing the business based on the assumption that we continue to have constrained growth and low single-digit year-over-year growth. And we’re clearly not going to build any inventory for growth unless we see clear signs in the order book that that growth is there.
So I just wanted to give you that color, the – everything kind of we’re talking about here for Q2 numbers is continues, it’s not really a demand recovery we’re seeing yet, it’s more of a margin recovery.
Hassan Ahmed: Very helpful. And as a follow-up, on the MMA side of things, can you talk a bit about what you guys are seeing in terms of trade patterns over there? Because I know, a couple of quarters ago we were all sort of seeing that arbitrage opportunity between sort of MMA out in Asia and Europe, and you guys were sort of talking about more and more Asian products that are going into Europe. So if you could just talk a bit about whether sort of those trade patterns have normalized and that arbitrage opportunity is closed.
Frank Bozich: So it’s certainly reduced and the Red Sea and the crisis as well as the extended lead times from Asia into Europe have reduced the ability to ship this reactive monomer from Asia. But more importantly, the weakness in epoxy, polycarbonate, and nylon demand in China really constrains phenol production, which the byproduct of phenol production is acetone, which is a key building block for MMA via the C3 route, and it also affects hydrogen cyanide. HCN is the byproduct for – in that, one of the byproducts in the nylon chain. So, that availability is reduced. We also are seeing butadiene C4 production significantly reduced in Asia because of the slowness in that market. So, these factors are constraining the ability of the Chinese MMA production.
And so they are actually running at greatly reduced rates. So, the combination of those two things are creating the current dynamic. Now, while things are better and we see slight improvements or signals of improvement in China broadly, those specific value chains we see is currently still challenged. And so we don’t anticipate a significant change in that. If you look at Europe and North America, those markets for MMA are net short currently. You see a recovery in architectural coatings that have tightened the market up. So, those factors combined have made it a much more a higher margin MMA market. And we have obviously benefited from that. So, I hope that’s helpful.
Hassan Ahmed: Thank you so much, Frank and thanks again, Dave.
Frank Bozich: Thanks Hassan.
Operator: Your next question comes from the line of Kevin Estok from Jefferies. Your line is open.
Kevin Estok: Hey. Thank you for taking my questions. I guess my first question just has to do with mix. I guess curious how you would characterize that as volumes sort of rise, would your mix improve and would you benefit from basically higher margin product sales or would you expect there to be a drag on mix? Just wanted to get some sense of how it would evolve in Q2 and Q3. Thank you.
Frank Bozich: Sure. So, yes, great question. And so while we anticipate a low-single digit volume improvement year-over-year in 2024, we do see a much – a more favorable mix. And so EM growth will be better than the broader portfolio. And so that, EM resins are rigid compounds in the engineered materials that go into consumer electronics, as well as our surfaces business, which are our highest margin applications in the company will grow faster than low-single digits. And our lowest growth area, actually, we are seeing negative growth in polystyrene, which would be one of the lower margin applications. So, we will enjoy a favorable mix during the course of the year if based on the current assumptions that we have. The other thing I did want to point out that in Q1, as Dave said, we had a 12% sequential improvement in volume compared to Q4, but also we did see a lot of volume growth, 15% volume growth in the Asia Pacific, but all of that was concentrated in paper and board for latex in Asia, which we don’t see that as – that was really driven by some unique industry events that we don’t see continuing.
