Jeffrey Zekauskas

Jeffrey Zekauskas from JPMorgan Chase & Co. asked if Chinese tariffs were impacting the tow business and inquired about the profitability of VAM and acetic acid in China, as well as whether any Asian sales are supplied from the United States.

Answer

CEO & President Scott A. Richardson clarified that tariffs do not impact the China tow business as it operates through a joint venture. He confirmed that VAM and acetic acid operations in China are above breakeven, noting a strategic pivot towards downstream products. He also stated that some US-produced material is sold into Asia, either directly or through swaps.

Jeffrey Zekauskas from JPMorgan Chase & Co. questioned if U.S. tariffs were affecting the tow business in China and asked about the profitability of VAM and acetic acid in the region, including the sourcing of these products.

Answer

CEO & President Scott A. Richardson stated that tariffs are not impacting the China tow business as it's handled through a joint venture. He confirmed that VAM and acetic acid operations in China are still above breakeven, noting a strategic pivot towards downstream products like emulsions. Richardson also mentioned that some U.S. material, either directly or through swaps, is sold into certain regions in Asia.

Jeffrey Zekauskas of JPMorgan Chase & Co. questioned whether Chinese tariffs were affecting the tow business, the profitability of VAM and acetic acid in China, and if any Asian sales of these products originated from the U.S.

Answer

CEO Scott A. Richardson stated that tariffs do not impact their China tow business, as it operates through a joint venture. He confirmed that VAM and acetic acid operations in China remain above breakeven, though the company is pivoting more to downstream products. He also affirmed that some U.S.-produced material is sold into Asia, either through direct shipment or virtual swaps.

Jeffrey Zekauskas asked whether falling oil prices are beneficial or detrimental to Celanese and questioned if the company is observing a normal seasonal volume pickup for the second quarter.

Answer

CEO Scott Richardson explained that Celanese is relatively agnostic to oil prices due to its flexible operating model, where feedstock benefits are offset by other factors like lower dividends. He noted the primary concern tied to lower oil prices is potentially weaker demand. Regarding volumes, Richardson reported a strong March and April in Engineered Materials but a less-than-normal seasonal pickup in acetyls, with the notable exception of acetate tow, which saw a significant rebound.

Jeffrey Zekauskas asked about CEO Scott Richardson's role in bringing Scott Sutton to the Board and questioned the current EBITDA status of the M&M acquisition, asking if price degradation has offset cost synergies.

Answer

CEO Scott Richardson stated he has known Scott Sutton for a long time and is thrilled he joined the Board, citing his track record in accelerating cash generation and deleveraging. Regarding the M&M acquisition, Richardson confirmed that EBITDA has increased since the transaction, as synergies have outweighed margin degradation. He acknowledged margin compression in some product lines but noted it's a critical focus area to reverse this trend in the second half of the year.

Jeffrey Zekauskas of JPMorgan Chase & Co. questioned the rationale behind the dividend cut, asking if it signaled lower long-term expectations, and inquired about 2025 restructuring costs.

Answer

CEO Lori Ryerkerk asserted that long-term business expectations remain strong and the dividend cut was a prudent, cost-effective measure to accelerate deleveraging. CFO Chuck Kyrish projected that 2025 cash costs for restructuring and new cost actions would be similar to 2024 levels.

Jeff Zekauskas questioned Nutrien's share repurchase strategy, asking if it would be a mistake to continue repurchasing shares if the company's stock price remained flat at $57 over a five-year period.

Answer

Ken Seitz, President and CEO, stated that while Nutrien aims for stable and growing dividends and ratable share repurchases, the company always assesses the value of repurchases based on its outlook and current market conditions. He emphasized that the approach is not blind but considers value when deploying share buyback programs.

Jeff Zekauskas questioned the long-term efficacy of share repurchases if Nutrien's stock price were to remain flat over a five-year period, given the historical average price.

Answer

Ken Seitz, President and CEO, stated that Nutrien's strategy for returning cash to shareholders includes a stable and growing dividend and ratable share repurchases. He clarified that the company continuously assesses value and outlook when deploying buyback programs, indicating that repurchases are not conducted with 'blinders on' but with consideration for value.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the performance of the retail segment, noting that gross profits per ton for crop nutrients in North America appeared flat and questioning the dynamics behind gross margins versus SG&A progress.

Answer

EVP & President - Global Retail Jeff Tarsi addressed the question, explaining that global fertilizer margins were flat year-over-year, partly due to a strategic reduction in lower-margin volumes in Brazil. He expressed satisfaction with the performance in a competitive environment and noted that crop protection margins were better than expected. He anticipates margin improvement in the second half from a better mix of proprietary nutritionals.

Jeffrey Zekauskas asked about the performance disparity between proprietary and non-proprietary crop protection products, the status of potash negotiations with India and China, and details on nitrogen exports and tariff impacts.

Answer

Executive Jeff Tarsi attributed the Q1 crop protection performance difference to timing and mix, expecting it to normalize in Q2. Executive Christopher Reynolds stated that Canpotex has begun engagement with China and India against a backdrop of strong market fundamentals and no inventory buildup. CFO Mark Thompson clarified that the retail business is not directly impacted by nitrogen tariffs due to its robust supply chain, which sources from its upstream business and other domestic producers.

Jeffrey Zekauskas noted that the number of retail selling locations has been declining and asked for the reason, the target growth rate for locations, and for commentary on the 2025 U.S. crop chemical market outlook.

Answer

CEO Kenneth Seitz explained the decline in locations is a strategic 'network optimization' effort, not a sign of shrinking business. The company is consolidating smaller, less productive storefronts into modern, high-throughput facilities to better serve larger, consolidated farm operations. Executive Jeff Tarsi added that for crop protection in 2025, they expect to claw back some business lost to weather last year and have penciled in historical margin levels. He noted they are in a strong inventory position after driving down stock levels year-over-year.

Jeffrey Zekauskas asked for a breakdown of the $150 million reduction in the retail guidance, specifically how much was attributable to U.S. weather versus South American operational issues.

Answer

CEO Kenneth Seitz provided a direct breakdown, stating that the majority of the guidance change was related to the ongoing challenges in Brazil. He specified that the impact from the wet spring in North America contributed to approximately one-third of the total adjustment.

Jeff Zekauskas with JPMorgan Chase & Co. inquired about the potential divestment of the Carbon Capture component of the Louisiana project and its implications for the project's future, as well as the rationale for continuing the Alberta project despite significant cost overruns and potential EPS impact.

Answer

CEO Eduardo Menezes clarified that Air Products is evaluating proposals to divest the CO2 sequestration pore space for the Louisiana project, which could be monetized independently or integrated with a partner providing sequestration services. Regarding the Alberta project, Menezes emphasized the company's serious contractual commitment to a major customer for nearly 50% of the volume, necessitating its completion, and highlighted efforts to place additional volume using existing infrastructure.

Jeff Zekauskas asked about the potential divestment of the carbon capture component of the Louisiana project and its connection to the overall project's future, as well as the rationale for continuing the Alberta project despite significant cost overruns.

Answer

Eduardo Menezes, CEO, explained that Air Products is evaluating proposals to sell the CO2 sequestration pore space for the Louisiana project, aiming to transform it into a standard hydrogen and air separation project. He confirmed this is linked to the overall project but the asset could be monetized independently. Regarding Alberta, Mr. Menezes stated that contractual commitments with a major customer necessitate completing the project, and they are working to place additional volume using existing infrastructure.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked a two-part question regarding the company's pricing power excluding helium and the technical viability of its ammonia-to-hydrogen dissociation process.

Answer

CEO Eduardo Menezes confirmed the company is still targeting a 10% loss rate for ammonia dissociation, noting it's a balance of capital and efficiency, with project timing in Europe dependent on final regulations. CFO Melissa Schaeffer addressed the helium impact, stating it created a 55-60 cent EPS headwind for the full year, equivalent to a 4-5% impact, and that teams are actively managing pricing and volume.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the strategic purpose of the scaled-down Louisiana project for Air Products and the volume of hydrogen involved. He also sought clarification on whether the cost savings from headcount reductions implied that most of the associated costs were previously capitalized.

Answer

CEO Eduardo Menezes explained that the remaining hydrogen production from the Louisiana project is equivalent to one standard SMR, a volume the company can readily absorb into its extensive Gulf Coast pipeline system. Executive Melissa Schaeffer clarified that the $100 million in savings is a direct P&L impact, with an additional ~$40 million in savings from capitalized engineering resources that will reduce future capital costs rather than appearing on the income statement.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked for the EPS benefit from the nonrecurring helium sale in the Americas and inquired about the current state of the global helium market, including pricing trends.

Answer

Chief Financial Officer Melissa Schaeffer quantified the nonrecurring helium sale's benefit as a $0.10 contribution to total company EPS for the quarter. She described the current helium market as "long," particularly in Asia due to new Russian supply, and noted the company is managing its network to ensure reliable supply.

Jeffrey Zekauskas asked for management's reflection on the involvement of activist investors and whether their input leads to changes in company behavior. He also sought clarification on the NEOM project's loading timeline, questioning if it would be fully loaded by 2027 or 2030.

Answer

Chairman, President and CEO Seifi Ghasemi responded that the company listens to all investors and that their feedback is consistent: focus on the core business and invest responsibly in clean hydrogen, which he affirmed the company is doing. He confirmed that Air Products is working to have the NEOM facility fully loaded with customer contracts in 2027, ahead of the 2030 start for the TotalEnergies agreement.

Jeffrey Zekauskas asked about the current lithium prices in China relative to the $9 reference point and whether Albemarle is considering restarting any paused or mothballed production plants.

Answer

Kent Masters, CEO, indicated that current prices in China are closer to $10, but the full-year average is around $9-$9.50. He also confirmed that there are no current plans to restart paused or mothballed plants, as it would take longer than the remaining two months of the year.

Jeffrey Zekauskas asked about the current lithium prices in China relative to the $9 reference point and whether Albemarle is considering restarting any paused or mothballed plants.

Answer

CEO Kent Masters indicated that current lithium prices in China are closer to $10, with a full-year average around $9-$9.50. He stated there are no current plans to restart paused or mothballed plants, as it would take longer than the remaining two months of the year, and it's not part of the 2026 plan.

Jeffrey Zekauskas from JPMorgan Chase & Co. sought clarification on the Energy Storage EBITDA scenarios and questioned the assumption of spodumene pricing at 10% of LCE, asking if full Talison sales volumes are currently being achieved.

Answer

CFO Neal Sheorey clarified that the EBITDA ranges are derived by applying the observed market prices to Albemarle's specific book of business. He acknowledged the spodumene price percentage can fluctuate but 10% was a recent observation. He also confirmed that 'full Talison sales volumes' assumes all partners take their full allocation, which is the current situation.

Jeff Zekauskas asked about the impact of falling diamide and overall insecticide pricing on Corteva's Spinosad franchise, specifically whether Spinosad experienced volume growth this year and if it's the area of most concern for price pressure in crop chemicals next year.

Answer

EVP of Crop Protection Business Unit Robert King explained that while Corteva's premium products are not immune to pricing pressures, volumes continue to grow. He highlighted Spinosad's expected revenue near $900 million this year, representing 5% organic growth in a flat market, and its role as a crucial rotation partner due to resistance issues. CEO Chuck Magro added that diamides and Spinosad are complementary, not competitive, and that Spinosad's microbial nature makes it difficult to replicate, allowing it to command a premium despite being off-patent. He confirmed Spinosad is growing and its trajectory is positive.

Jeff Zekauskas inquired about the impact of falling diamide pricing on Corteva's insecticide pricing and volumes, specifically asking how it affects Spinosad, whether Spinosad grew in volume this year, and if it's the area of most concern for price pressure in crop chemicals next year.

Answer

EVP of Crop Protection Business Unit Robert King explained that while Corteva's premium products are not immune to pricing pressures, Spinosad is expected to reach nearly $900 million in revenue this year with 5% organic growth, serving as a crucial rotation partner due to resistance issues. He also highlighted strong growth in new products like Exalt and Reklemel. CEO Chuck Magro added that diamides and Spinosad are complementary, not competitive, and Spinosad's microbial nature makes it difficult to replicate, allowing it to command a premium despite being off-patent.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked how tariffs have impacted Corteva's supply chain and whether year-end inventory levels are expected to be significantly lower than the prior year.

Answer

EVP Robert King explained that the impact from tariffs has been minimal due to a multi-year strategy of increasing multi-sourcing to improve supply chain resiliency. EVP & CFO David Johnson stated that year-end inventories are expected to be around flat to slightly down compared to the prior year.

Jeffrey Zekauskas asked what percentage of U.S. corn hybrids are imported and subject to tariffs, and why the free cash flow guidance range is significantly wider than the EBITDA range.

Answer

Judd O'Connor, EVP, Seed business unit, stated that essentially zero commercial corn hybrids sold in the U.S. are imported, as over 90% of production is local, making tariffs on them insignificant. CFO David Johnson explained the wider cash flow range is due to the high variability of Q4 collections, which depend heavily on the cash-credit mix determined late in the year. He noted Q1 cash flow was strong, providing confidence in their full-year target.

Jeffrey Zekauskas asked about the $500 million year-over-year increase in inventories, inquiring if it's primarily due to higher aluminum costs and if inventories are expected to continue rising into the fourth quarter. He also asked for clarification on a $47 million investment linked to the common stock of ORG Technology, including what ORG Technology is, why Ball owns it, and the nature of the ownership.

Answer

Daniel Fisher, CEO, explained that the inventory increase is a combination of improved inventory mix (adding 2-3 days of unit volume for customer needs) and increased aluminum value/costs, with approximately two-thirds attributed to aluminum. Daniel Rabbitt, SVP and Interim CFO, clarified that ORG Technology acquired the controlling stake in Ball's Saudi Arabian Joint Beverage Can Venture, and Ball has a long-standing strategic relationship with them, holding a small stake in their publicly traded company, which is the largest beverage can producer in China. Mr. Fisher added that there are strategic elements to this investment.

Jeffrey Zekauskas of JPMorgan Chase & Co. requested details on volume trends for consumer soft drinks versus beer across geographies. He also asked if North American profitability is expected to improve significantly, given that recent cost pressures appear to be transitory.

Answer

CEO Daniel Fisher outlined that beer growth is slow in South America and flattish in Europe, while CSD/energy is strong in Europe. In North America, beer is challenged. Regarding North American profitability, he expressed optimism for the 18-month outlook once a new plant is operational but remained cautious for the next 6-9 months due to uncertainties around sustained high growth rates and tariff impacts on supply chain efficiency.

Jeffrey Zekauskas asked for details on volume change rates for consumer soft drinks and beer across geographies. He also questioned if North American profitability should increase given that the recent cost headwinds appear transitory.

Answer

CEO Daniel Fisher provided a qualitative overview, noting slower beer growth in South America, flattish beer but faster CSD/energy growth in Europe, and challenged beer volumes in North America. Regarding profitability, he expressed optimism for the 18-month outlook once a new plant is operational, but noted uncertainty in the next 6-9 months due to high volume rates and tariff-related supply chain issues.

Jeffrey Zekauskas requested details on volume changes by beverage category across geographies and questioned if North American profitability should improve given transitory costs.

Answer

Chairman & CEO Daniel Fisher provided color on category performance, noting CSD/energy strength in Europe and energy drink strength in North America, which is offsetting softness in beer. Regarding North American profitability, he expressed optimism for the 18-month trajectory but cited near-term uncertainty due to sustained high growth rates, product mix, and tariff-related supply chain challenges.

Jeff Zekauskas asked why Q1 capital expenditures were low and how they would ramp to the full-year target, and also inquired about the reason for the sequential increase in inventory.

Answer

CFO Howard Yu explained that the CapEx ramp is tied to the timing of the new Northwest facility, with spending expected to increase in the second half of the year. CEO Daniel Fisher added that the inventory increase was a normal seasonal build after a soft end to the prior year, positioning the company for stronger expected volumes.

Jeffrey Zekauskas asked for clarification on the components of the quarter's restructuring charges beyond known plant closures and questioned the key reasons why the aluminum cup initiative has underperformed expectations.

Answer

CFO Howard Yu and CEO Daniel Fisher clarified that the restructuring charges included plant closures in Brazil and Washington, a closure in Europe, and severance costs related to corporate rightsizing after the aerospace business sale. Fisher attributed the cup business's struggles to two main factors: high inflation weakening consumer demand for a premium-priced sustainable product and complexities in the downstream recycling infrastructure.

Jeff Zekauskas questioned why Silgan's full-year free cash flow guidance remained unchanged despite a lower Q4 outlook, asking about compensatory mechanisms. He also inquired about the impact of declining propylene values on the dispensing business and whether it presents an opportunity to build inventories.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, explained that unchanged free cash flow guidance is due to proactive cost reductions and inventory management in Q4, leading to working capital improvements. He confirmed that propylene value changes significantly impact the Dispensing and Specialty Closures business, which uses polypropylene as its largest resin component. He noted that while pass-through lags exist, the recent resin price change has been included as a couple hundred thousand dollars of upside in the Q4 forecast, with Custom Containers and food/beverage closures less affected.

Jeff Zekauskas asked about the potential base case impact of the food can customer bankruptcy on 2026 earnings. He also questioned if the $20 million reduction in free cash flow guidance was attributable to factors beyond the two disclosed $10 million EBIT headwinds.

Answer

President & CEO Adam Greenlee stated that speculating on 2026 would be premature as the bankruptcy process is ongoing, but the current base case assumes the second-half 2025 impact continues. He and SVP & CFO Kim Ulmer confirmed the $20 million free cash flow reduction is directly attributed to the two discrete EBIT items, with foreign currency impacts netting out to zero.

Jeffrey Zekauskas asked if falling propylene prices provide a benefit to the Dispensing and Specialty Closure business and inquired about the pro forma performance of the Weener acquisition in Q1 compared to the prior year.

Answer

CEO Adam Greenlee explained that while the company works to minimize resin price pass-through lags, a slight lag does exist in the DSC segment, meaning falling propylene prices would be a small benefit. He stated that the Weener business performed very well on a pro forma basis, growing both volume and profit versus the prior year and coming in slightly ahead of Silgan's internal expectations.

Jeffrey Zekauskas asked for the rationale behind the $17.5 million restructuring charge in Custom Containers and inquired about the pro forma performance of the recently acquired Weener business during the fourth quarter.

Answer

CEO Adam Greenlee explained the restructuring charge was part of the company's multiyear $50 million cost-savings program and related to the closure of two plants. He and EVP Bob Lewis confirmed that Weener's Q4 performance was slightly ahead of their acquisition model on volume and profit, with free cash flow slightly lower due to immediate growth investments.

Jeffrey Zekauskas inquired about the contractual terms of the renewed agreement with Silgan's largest metal container customer and asked what the tax rate would have been without the reversal of tax reserves in the quarter.

Answer

President and CEO Adam Greenlee stated that while he could not disclose specific details, the contract renewal is a long-term (7-10 year) exclusive supply relationship with economics very similar to the prior agreement, primarily focused on supporting the customer's growth in pet food. SVP and CFO Kimberly Ulmer confirmed that without the reserve reversal, the tax rate would have been in the normal 25% range.

Jeff Zekauskas from JPMorgan Chase & Co. asked if the more than $500 million in aerospace capital expenditures implies annual CapEx will remain around $650-$700 million for the next couple of years, and if cash flows from operations are expected to increase to $2 billion in out years due to reduced working capital drag.

Answer

Chairman and CEO Tim Knavish clarified that aerospace CapEx will peak in 2026-2027, but overall CapEx is expected to trend down from its 2025 peak towards the long-term objective of 3% of sales. He explained that the aerospace investment is a temporary spike to capture significant growth. Knavish also mentioned pre-buying raw materials due to tariff uncertainty, expecting inventory to normalize by year-end. CFO Vince Morales confirmed that working capital had a transitory step-up in 2025 and expects operating cash flow to grow faster than EBITDA in future years due to better inventory leverage.

Jeff Zekauskas asked if the more than $500 million in Aerospace capital expenditures implies that PPG's annual CapEx will remain around $650-700 million for the next couple of years. He also asked CFO Vince Morales if cash flows from operations, around $1.6 billion this year, are expected to step up to closer to $2 billion in future years due to less working capital drag.

Answer

Chairman and CEO Tim Knavish clarified that Aerospace CapEx will peak in 2026-2027, but overall CapEx is expected to trend down towards 3% of sales, making this a temporary spike. CFO Vince Morales stated that working capital, which saw a transitory step-up this year, is expected to normalize. He anticipates operating cash flow to grow at a faster clip than EBITDA in future years due to better inventory leverage.

Jeffrey Zekauskas of JPMorgan Chase & Co. posed a two-part question: whether cash flow from operations would be higher or lower than the prior year, and whether management was satisfied with the margin conversion in the high-growth Performance Coatings segment.

Answer

CFO Vince Morales confirmed that cash from operations is tracking ahead of the prior year and is expected to show year-over-year growth for the full year. Chairman & CEO Timothy Knavish addressed the margin question by explaining that the company made a 'conscious decision' to increase growth-focused OpEx investments in Aerospace, Protective & Marine, and Refinish to sustain their strong momentum, which tempered the immediate margin drop-through.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked a two-part question: whether cash flow from operations would grow year-over-year, and if management was satisfied with Performance Coatings' profit conversion given its strong top-line growth.

Answer

CFO Vince Morales confirmed that PPG expects cash from operations to grow year-over-year. CEO Timothy Knavish addressed the profit question by explaining that the company made a "conscious decision" to increase growth-focused OpEx in the Performance Coatings segment to invest in its future, which tempered short-term profit drop-through but is intended to sustain long-term momentum.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the Protective & Marine business, inquiring about its split, the impact of China shipbuilding trends, and PPG's exposure in that specific market.

Answer

CEO Timothy Knavish stated that a strong majority of the business is Protective. He noted that while PPG participates in and has seen strength in China shipbuilding, the company's biggest strength in Marine has been in aftermarket dry docks. CFO Vince Morales added that PPG also has a strong presence in Korea, providing a hedge if shipbuilding activity shifts from China.

Jeffrey Zekauskas asked for the net cash proceeds from the architectural business sale, the Performance Coatings segment's volume growth excluding that business, and when auto OEM pricing is expected to stop declining.

Answer

Chairman and CEO Timothy Knavish estimated cash proceeds at approximately $450 million. He explained that auto OEM price declines are tied to index contracts with 6-12 month lags and will flatten as they lap prior raw material cost changes. SVP and CFO Vince Morales added that Performance Coatings' volume growth for the quarter would have been almost identical without the divested business.

Jeff Zekauskas asked if volume grew in the water business this quarter and whether volume growth in Basic Industries and Paper was negative high single digits, representing a deceleration from previous quarters.

Answer

Christophe Beck, Ecolab's Chairman and CEO, stated that Ecolab does not disclose volumes by business segment. However, he confirmed that every reported segment had positive growth. He noted that the Paper segment within water was not positive, experiencing low to mid-single-digit declines, but is improving. Beck expressed optimism for the next few quarters regarding the 'underperforming' Basic Industries and Paper businesses, stating they are doing the right things despite challenging markets.

Jeff Zekauskas asked whether volume grew in the water business this quarter and if volume growth in Basic Industries and Paper was negative high single digits, representing a deceleration from previous quarters.

Answer

Christophe Beck, Chairman and CEO of Ecolab, stated that Ecolab does not disclose volumes by business segment. However, he confirmed that every reported segment had positive growth. He noted that while Paper within the water segment was not positive, it was in the low to mid-single digits and improving, leading to optimism for the 'underperforming businesses' (Paper and Basic Industries) in the coming quarters.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked about pricing in the Water division, suggesting it was below the company average, and whether improving it in weaker areas like paper and heavy industry is a key challenge.

Answer

Christophe Beck, Chairman & CEO, stated that improving pricing in Water is not a challenge, as the division is historically strong in value pricing. He clarified the segment's overall growth was muted by cyclical weakness in Paper and Basic Industries, which constitute only 15% of the division. The remaining 85%, including high-growth areas like high-tech, is performing very well.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked why the Global Water segment's operating income declined year-over-year despite revenue growth, and questioned how customers react to a surcharge when some underlying chemical costs are falling.

Answer

Christophe Beck, Chairman and CEO, attributed the Water OI decline to a difficult year-over-year comparison in Europe, which had a 200% OI increase in the prior year. Regarding costs, he corrected the premise, stating that Ecolab's overall basket of 10,000 raw materials is up, not down. He explained that while procurement efficiencies provided a net benefit previously, delivered product cost is now trending towards a low-to-mid-single-digit increase, which is part of the value-based discussion with customers.

Jeffrey Zekauskas posed a three-part question regarding relative volume growth between segments, the composition of the 20% margin target, and details on the Pest Elimination accidents.

Answer

Christophe Beck, Chairman and CEO, addressed the questions by stating that while segment-specific volumes are not disclosed, both Industrial and Institutional performance was good. He clarified the 20% OI margin target for 2027 does *not* include the future benefit from lower amortization, which will be additive. He described the Pest Elimination issue as unfortunate, insurance-cost-related accidents involving employees.

Jeffrey Zekauskas asked two questions: for a clarification on Q3 volume growth between the Industrial and Institutional segments, and whether achieving the 20% margin target requires being at the high end of the 5-7% sales growth range.

Answer

CEO Christophe Beck clarified that Q3 volume growth was just over 3% for Institutional & Specialty and just over 1% for Industrial. Regarding the margin target, he stated that the company can reach 20% OI margin in the next three years even with its current 4-5% growth trajectory, driven by the powerful 12-15% annual EPS growth model which includes pricing, productivity, and initiatives like One Ecolab.

Jeff Zekauskas asked for a preliminary estimate of 2026 turnaround costs, specifically for the large VCM turnaround, compared to the forecasted $125 million for 2025.

Answer

Ken Lane, President and CEO, acknowledged the significant VCM turnaround in 2026 but stated that the final schedule and total turnaround costs for the year are still being finalized. He committed to providing a new outlook for 2026 at the Q4 earnings call early next year.

Jeff Zekauskas asked about the large VCM turnaround planned for 2026, seeking confirmation on whether an increase of $50 million (to $175 million) in forecasted turnaround costs for next year is a reasonable preliminary estimate.

Answer

President and CEO Ken Lane acknowledged the VCM turnaround is very large and occurs every three years. He stated that Olin is finalizing its 2026 turnaround schedule and will provide an updated outlook, including specific cost figures, during the Q4 earnings call at the beginning of next year.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the mechanics of Brazilian tariffs on caustic soda and sought clarification on the interplay between working capital benefits and cash tax payments.

Answer

President and CEO Ken Lane distinguished between a general import tariff, which is typically passed on to the domestic market price, and a targeted retaliatory tariff against the U.S., which would be more disruptive. CFO Todd Slater clarified the cash tax outlook, stating Olin expects to pay approximately $175 million for the full year 2025, with about $30 million remaining to be paid in the second half of the year.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked if Olin would be interested in Dow's assets for sale in Europe and inquired about the importance and demand trends of the wind turbine market for epoxies.

Answer

CFO Todd Slater, on behalf of the team, declined to comment on specific M&A but reiterated that Olin's investment focus is on water treatment and PVC. He noted a positive future development in Europe is a new cost structure agreement with Dow that will benefit the Epoxy business starting in Q1. Regarding wind, he confirmed it's an important and growing business for Olin, with low double-digit year-over-year growth expected, fitting well with the strategy to expand in formulated solutions.

Jeffrey Zekauskas asked CEO Ken Lane to compare his leadership direction and actions during his first year to that of his predecessor, Scott Sutton.

Answer

CEO Kenneth Lane outlined his forward-looking strategy, focusing on optimizing Olin's core businesses to achieve over $250 million in cost reductions by streamlining the asset footprint. He affirmed the continuation of a value-first commercial approach and disciplined operating rates, highlighting the company's 'coiled spring' potential for a market recovery and growth options in PVC, bleach, and Winchester.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked if Olin came close to any sizable acquisitions in 2024 and requested details on sequential price changes in the Chlor Alkali and Winchester segments during Q3.

Answer

President and CEO Kenneth Lane declined to comment on specific M&A activities but reiterated that the focus is on small, accretive bolt-on acquisitions like White Flyer. For Q3 pricing, Lane stated the slight decline in the PCI index was due to mix effects from Hurricane Beryl, with caustic pricing firming and chlorine stable. He clarified that the Winchester weakness was volume-related, not price-related, and a price increase is planned for January.

Jeff Zekauskas asked about the factors determining Axalta's plan to purchase up to $250 million in shares in Q4, and how much has been bought so far this quarter.

Answer

Carl Anderson, SVP and CFO, stated that Axalta repurchased $100 million in Q3 and $65 million in Q2, totaling $165 million year-to-date. He emphasized that the $250 million target for Q4 reflects a strong belief in the company's future earnings and revenue potential, making share repurchases at current trading multiples a prudent use of capital. He indicated Axalta would be a significant buyer of its stock in Q4.

Jeffrey Zekauskas questioned the magnitude of the Q2 EBITDA step-up from Q1 and inquired about recent demand trends in the Light Vehicle market.

Answer

CFO Carl Anderson confirmed a sequential EBITDA increase is guided for Q2, but noted it is tempered by tariff cost headwinds that will be more fully mitigated in the second half. CEO Chrishan Anthon Villavarayan added that the Mobility segment continues to perform well, with outperformance in China and Brazil driving an expected full-year margin north of 16%, despite broader market challenges.

Jeffrey Zekauskas from JPMorgan Chase & Co. questioned how Axalta would achieve the significant increase in cash from operations needed for its 2025 free cash flow target, specifically asking about accounts payable. He also asked about the potential impact of 25% tariffs on US-made car prices and production.

Answer

CFO Carl Anderson confirmed that improving working capital is key, with a normalization of the abnormally low Days Payables Outstanding (DPO) from Q4 being a significant piece of the story. CEO Chris Villavarayan estimated that such tariffs would impact about 5-6% of Axalta's revenue and add roughly $3,000 to the cost of a car, but noted that OEMs have been planning mitigation strategies for months.

Jeff Zekauskas asked about the timing of share repurchases within Q3, if any shares were issued, and whether the strong European volume trend has continued into Q4.

Answer

SVP and CFO Kevin Clothier confirmed that approximately 1.1 million shares were repurchased later in Q3, and President and CEO Tim Donahue added that no shares were issued in the quarter. Donahue stated that Europe is expected to be very firm in Q4, but reiterated that a 12% growth rate should not be expected every quarter, with a long-term compound annual growth rate of 4-5% being a reasonable expectation.

Jeff Zekauskas inquired about the details of share repurchases, including the pace through the quarter, the sequential change in share count, and any share issuance. He also asked if the strong European volume trend is expected to continue into the fourth quarter.

Answer

SVP and CFO Kevin Clothier and President and CEO Tim Donahue confirmed no shares were issued, and approximately 1.1 million shares were repurchased later in Q3 over a couple of weeks. Tim Donahue stated that Europe is expected to be 'very firm' in the fourth quarter, reiterating a long-term compound annual growth rate of 4-5% for the region.

Jeffrey Zekauskas inquired about the significant sequential increase in payables and accrued liabilities and whether that level would be sustained. He also asked for a breakdown of the first-half restructuring charges into cash versus non-cash components and the outlook for further charges in 2025.

Answer

President & CEO Timothy Donahue clarified that when viewed in context with receivables and inventory, trade working capital was roughly flat, with the increase largely related to aluminum inflation. Regarding restructuring, SVP & CFO Kevin Clothier noted the cash portion of the H1 charge was about $10-15 million and is baked into projections. Donahue added that the company has no knowledge of any further considerable restructuring needs at this time.

Jeffrey Zekauskas asked whether Crown's customers should be building inventory given raw material patterns and questioned if the strong Q1 margins were unrepresentatively high due to temporary factors or if they represent a new steady state.

Answer

CEO Timothy Donahue advised that beverage can customers would not build inventory due to their optimized just-in-time systems. On margins, he noted the food can business benefited from the absence of a metal repricing headwind that existed last year. For beverage cans, he expressed hope the margins are sustainable, pointing out that they expanded despite higher aluminum costs, driven by high utilization and strong operational performance. He highlighted the significant year-over-year margin improvement in the Americas Beverage segment.

Jeffrey Zekauskas asked about the seemingly worsening decremental margins in the Transit segment and questioned the sequential volume change in the beverage can business from Q2 to Q3.

Answer

President and CEO Timothy Donahue suggested taking the detailed margin question offline, but noted that Q3 margins were better than 9-month margins, indicating improvement with expanding volume. Regarding beverage can volumes, he confirmed that absolute volumes were higher in Q3 than in Q2, which is typical seasonality. He also pointed out that the Q3 2024 North American growth of 5% was against a very strong comparison of 12-13% growth in Q3 2023.

Jeff Zekauskas asked about The Pink Stuff's performance on a pro forma basis and whether demand for roofing is accelerating or decelerating. He later inquired about the significant jump in SG&A expense, even excluding healthcare costs, and its expected growth in fiscal year 2026.

Answer

Matt Schlarb, VP of Investor Relations & Sustainability, stated that The Pink Stuff's integration is proceeding as expected, contributing accretive margins, with increased marketing. Frank Sullivan, Chairman and CEO, noted high revenue growth in roofing, including ancillary products like PureAir refurbishment, and mentioned internal reorganization to focus on the broader cleaning category. He attributed higher SG&A to acquisitions (Pink Stuff, ReadySeal), healthcare costs, and $10 million in growth investments, contrasting RPM's strategy with peers cutting costs.

Jeffrey John Zekauskas asked about The Pink Stuff's pro forma performance and whether demand for the roofing business is accelerating or decelerating, also inquiring about the significant jump in SG&A expense and its expected growth in 2026.

Answer

Matt Schlarb, VP of Investor Relations & Sustainability, stated The Pink Stuff has been accretive to margins, with increased marketing and leveraging new channels, leading to a new internal cleaning group. Frank Sullivan, Chairman and CEO, noted high revenue growth in roofing, driven by ancillary products like PureAir HVAC refurbishment. He attributed the higher SG&A to acquisitions (which have higher gross margins and SG&A), healthcare costs, and $10 million in growth investments, contrasting RPM's approach with peers cutting costs.

Jeff Zekauskas from JPMorgan asked for a breakdown of the ~10% EBIT growth outlook between acquisitions and organic factors, and how the company achieved a lower rate of COGS growth relative to revenue growth in Q4.

Answer

Chairman & CEO Frank Sullivan estimated that revenue growth would be about half from acquisitions and half organic, suggesting EBIT could follow a similar split. He explained that lower COGS growth was driven by improved conversion costs from MAP initiatives and a favorable product mix. He gave an example of how a shift between material sales and contracting services in the roofing business can significantly impact gross margin.

Jeffrey Zekauskas of JPMorgan asked for clarification on using fiscal 2023 as a comparison base for weather and whether Chinese tariffs could lead to product shortages or longer lead times for building products.

Answer

Chairman and CEO Frank Sullivan explained that fiscal 2024's winter was unusually mild, making the more normal winter of fiscal 2025 a difficult comparison. He stated that while tariffs on items like fasteners from China are an issue of price and negotiation, not yet shortages, U.S. steel manufacturers have been 'predatory' in raising prices ahead of tariffs, causing inflation.

Jeffrey Zekauskas asked why the gross profit margin declined year-over-year despite sales growth and questioned if the long-term goal of the MAP program is to manage SG&A growth.

Answer

CEO Frank Sullivan attributed the lower gross margin principally to an unfavorable business mix, specifically the growth of the lower-gross-margin services business within the Construction Products Group. He clarified that while MAP focuses on operational efficiency, SG&A is managed separately with a strategic focus on investing for growth where appropriate.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked for clarification on how tariffs have impacted the cost of phosphate imports into the United States, on a percentage or per-ton basis.

Answer

Bruce Bodine, CEO, and Jenny Wang, EVP of Commercial, explained that a general 10% tariff on most phosphate origins has reduced U.S. imports by about 20% year-to-date, supporting the domestic market. Wang further clarified that the direct cost impact on Mosaic's raw materials is minimal, as its sulfur and ammonia are primarily sourced domestically or from tariff-exempt regions like Canada.

Jeffrey Zekauskas inquired whether U.S. tariffs were increasing ammonia costs and how the company was managing this potential headwind.

Answer

President and CEO Bruce Bodine clarified that Mosaic's ammonia purchases have not incurred tariff impacts. He explained this is due to ammonia's exempt status in the U.S., strategic supply contracts, and the company's own tariff-free production, which limits market exposure to less than 20% of its needs.

Jeffrey Zekauskas highlighted that Mosaic's 2024 operating cash flow was low relative to EBITDA and did not cover CapEx and dividends. He asked if currency events were a major factor and if coverage is expected in the upcoming year.

Answer

Luciano Pires, EVP and CFO, acknowledged that shortfalls in production volume and sales led to the cash flow deficit in 2024. He affirmed that for the upcoming year, the company expects operating cash flow to be sufficient to cover the minimum dividend and CapEx, with some excess cash anticipated.

Jeffrey Zekauskas asked if there was any evidence of Russia or Belarus curtailing potash shipments, as suggested by President Lukashenko, and whether total phosphate production in China has risen or fallen since its peak export years.

Answer

President and CEO Bruce Bodine stated there is no evidence of Russia or Belarus curtailing potash shipments; in fact, data shows Belarusian shipments have been consistent. Regarding China, Jenny Wang, EVP of Commercial, explained that total P2O5 production is increasing. This growth is being consumed domestically for industrial uses like LFP batteries and glyphosate, as well as for increased local fertilizer consumption, which is why exports have fallen despite higher overall production.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the Donaldsonville CCS project, inquiring about the cash flow timing and accounting for the 45Q tax credits. He also asked for an explanation of the theoretical ratio of CO2 captured to ammonia produced.

Answer

EVP & CFO Greg Cameron explained that the 45Q credits will be accrued in EBITDA starting in Q3, with cash benefits realized almost immediately through reduced estimated tax payments. CEO W. Anthony Will clarified that with conventional SMR technology, only process-related CO2 (about two-thirds of the total) can be captured, and much of that is used downstream to make urea, explaining the near 1-to-1 capture ratio for available CO2.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the sequential impact of higher gas costs on Q1 results, future capital expenditure estimates, and the storage plan for CO2 from the Donaldsonville facility.

Answer

CEO Tony Will acknowledged the gas cost headwind but highlighted strong pricing and operational performance. He estimated CF's own CapEx would be around $750-$800 million in 2026. Regarding CO2, he stated they are in active dialogue with partner ExxonMobil on storage solutions, with plans to begin sequestration in the second half of 2025.

Jeffrey Zekauskas questioned the feasibility of sequestering CO2 from Donaldsonville in 2025 given the status of Class 6 permits. He also asked if a more peaceful global environment would be negative for long-term profitability.

Answer

EVP & COO Christopher Bohn expressed confidence in their partner Exxon's ability to secure permits for sequestration in H2 2025. Regarding geopolitics, management argued that Russian product is already flowing and curtailed European plants are unlikely to restart, making a peace resolution less impactful on supply dynamics. CEO W. Will added that resulting stock volatility creates opportunities for share repurchases.

Jeffrey Zekauskas of JPMorgan Chase & Co. questioned the basis for the 45Q credits at Donaldsonville, challenging the 2025 timeline for CCS permits, and asked about the cost difference between ATR and SMR technologies for a new blue ammonia plant.

Answer

EVP & COO Christopher Bohn clarified the project is for CCS (Class VI permit), not EOR, and reiterated confidence in the 2025 timeline based on partner ExxonMobil's multiple pathways. CEO Tony Will explained that while ATR and SMR have comparable capital costs, ATR technology yields significantly more tonnage and captures more CO2, making its return profile more attractive.

Jeffrey Zekauskas questioned the commentary on negative currency impacts given recent FX trends, and also asked if Food Ingredients is more capital intensive and how much might be retained post-review.

Answer

CFO Michael Deveau explained that while major currencies like the Euro are favorable, headwinds from certain emerging market currencies create a net negative impact. CEO J. Erik Fyrwald confirmed Food Ingredients is more capital intensive but does not foresee carving it up significantly, viewing it as a standalone entity where collaboration with IFF would continue regardless of the strategic outcome.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked about the strategic future of the Food Ingredients business, including the potential for a separation, and also requested an update on full-year expectations for cash flow and CapEx.

Answer

CEO Erik Fyrwald responded that with the Pharma divestiture complete, the focus is on executing the transformation of the Food Ingredients business to improve profitable growth. He confirmed that strategic options for the segment will be evaluated later this year and into next. CFO Michael DeVeau reiterated full-year guidance for CapEx at ~6% of sales and free cash flow of ~$500 million, which includes a ~$350 million tax impact from the divestiture.

Jeff Zekauskas of JPMorgan Chase & Co. asked for clarification on October volume trends, questioning if they were up mid-single digits. He also inquired about the profitability of the Functional Ingredients business, asking if its EBITDA was growing this year.

Answer

CFO Glenn Richter confirmed that October volumes were up mid-single digits, consistent with the pattern of recent quarters. For Functional Ingredients, he stated that while currency-neutral sales are flattish due to price givebacks, gross margins are up nicely and EBITDA is up 'very strongly.' He noted the segment's EBITDA margin will likely finish the year north of 12%, up from circa 8-9% last year, on its way to a mid-teens target.

Jeffrey Zekauskas of JPMorgan Chase & Co. sought clarification on the New Jersey settlement figures, asking how the large remediation and reserve funds mentioned in press accounts relate to Chemours' stated liability. He also asked about the normalized level for capital expenditures in future years, given the relatively low 2025 forecast.

Answer

SVP & CFO Shane Hostetter explained that the large figures in the state's announcement, like the $1.2 billion remediation fund, are backstops for future work, much of which is already covered in ongoing operational cash flow. President & CEO Denise Dignam added that these figures represent a high-end range established to finalize the settlement. Regarding CapEx, Shane Hostetter noted the current $250 million is lower than recent history and, while not providing a specific range, suggested future spending may be slightly higher but will remain strategically focused.

Jeffrey Zekauskas questioned the significant sequential and year-over-year increase in inventory levels to $1.47 billion despite lower sales. He also sought clarification on 2025 cash flow expectations, asking if the aspiration was simply to cover CapEx and dividends.

Answer

CFO Shane Hostetter attributed the high inventory to a confluence of factors, including building stock ahead of planned maintenance, TSS quota-related items, and select purchases in TT. He affirmed a focus on optimizing working capital in 2025. Regarding cash flow, he confirmed the expectation is to at least cover CapEx and dividends to provide confidence in balancing growth and shareholder returns, but did not provide a specific quantitative target.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked why the full-year adjusted EBITDA guidance range remains wide with only two quarters left, and requested clarification on reported issues with procuring specialty resins.

Answer

President, CEO & Director Dustin Semach explained the wide guidance range reflects conservatism due to low visibility and market volatility, particularly around tariffs. On the second point, he clarified there are no procurement difficulties; rather, certain specialty resins sourced from tariff-impacted regions cannot be easily substituted, requiring mitigation through limited pricing actions.

Jeffrey Zekauskas asked for the reason behind the company's significant gross margin expansion despite a year-over-year decline in sales.

Answer

President and CEO Dustin Semach attributed the margin improvement directly to the success of ongoing productivity and cost takeout initiatives. He highlighted that the company is on track for its $90 million cost takeout target for the year, with a significant portion of these savings impacting cost of goods sold through production optimization, better scheduling, and supplier negotiations.

An analyst on behalf of Jeff Zekauskas asked for a breakdown of the Protective segment's 2024 performance, including the growth rates for its industrial and e-commerce sides and the current revenue split. A second question asked for the drivers behind the year-over-year decrease in cost of goods sold, questioning if it was due to raw materials or cost reductions.

Answer

CEO Dustin Semach stated the Protective segment is roughly 60% industrial and 40% fulfillment. In 2024, the industrial portfolio's volume was down low-to-mid single digits, while fulfillment was down mid-to-high single digits. Interim CFO Veronika Johnson addressed the COGS question, explaining the decrease correlated with lower sales but was also aided by favorable raw material pricing. Semach added that a significant portion of the company's cost takeout actions also benefited COGS.

Jeff Zekauskas asked for a breakdown of the Protective segment's 2024 performance, specifically the growth rates for its industrial and e-commerce sides and the current revenue split. He also asked for an explanation of the year-over-year decrease in cost of goods sold.

Answer

CEO Dustin Semach stated the Protective segment is roughly 60% industrial and 40% fulfillment. In 2024, the industrial portfolio volume was down low-to-mid single digits, while fulfillment was down mid-to-high single digits. Interim CFO Veronika Johnson explained the reduction in COGS correlated with the overall sales decline but was also aided by favorability in raw material pricing. Semach added that cost takeout actions and productivity also contributed significantly to the COGS reduction.

Jeffrey Zekauskas asked about several topics, including volume differences between North and South America, business conditions in Altamira, the status of carbon black price negotiations, the reason for lower corporate costs, and the cause of multi-year volume weakness in the Americas.

Answer

President, CEO & Director Sean Keohane and EVP & CFO Erica McLaughlin addressed the questions. Keohane attributed the 9% YoY volume decline in the Americas to tariff uncertainty and macro weakness, with South America being weaker due to prior contract losses. He confirmed the Altamira acquisition is attractive, with no change to its tariff-free status under USMCA. On corporate costs, McLaughlin cited successful cost reduction initiatives, a mix of structural and timing-based savings. Keohane explained that the multi-year volume weakness in the Americas was primarily driven by elevated tire imports, but noted that the situation is starting to stabilize.

Jeffrey Zekauskas of JPMorgan Chase & Co. inquired about the volume split between North and South America in the Reinforcement Materials segment, the outlook for South American volumes, underlying pricing dynamics in the segment, and the expected impact on energy center revenues.

Answer

CEO and President Sean Keohane estimated a rough 60/40 volume split between North and South America, respectively, noting that the sharp decline in South America is expected to persist due to tire imports. He stated that pricing is largely flat under annual contracts in the West, while Asia Pacific spot market pricing is holding steady. Regarding energy centers, Keohane mentioned the impact was flat year-over-year in Q2 but anticipates a mid-single-digit million-dollar headwind in the second half due to lower energy price forecasts.

Jeffrey Zekauskas of JPMorgan Chase & Co. questioned the reasons behind the multi-quarter contraction in U.S. Reinforcement Materials demand, the status of upcoming U.S. price negotiations, the performance of the Battery Materials business, and whether Cabot is realizing energy benefits in Europe from higher gas prices.

Answer

CEO and President Sean Keohane attributed the U.S. demand weakness to accelerating Asian tire imports but noted the region remains competitive for tire manufacturing long-term. While not commenting on specific contract outcomes, he stated the company's guidance assumes margin improvement in Reinforcement Materials. For Battery Materials, 2024 volumes and profits (ex-investment) were up, with future growth expected as the market bifurcates between the West and China. Regarding European energy, he noted that while cogen can benefit from high gas prices, a downward trend in the oil forward curve may pressure profits in 2025.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the significant decline in cash flow from operations in the first half of the year and inquired about the outlook for cash generation in 2025 and the prospects for the July polyethylene price increase.

Answer

CFO Agustin Izquierdo attributed the weak first-half cash flow to a working capital build and specific tax payments, noting that Q2 was positive and that cash generation is typically stronger in the second half. He reaffirmed the full-year 80% cash conversion target. EVP Kim Foley reiterated that consecutive monthly price increases are historically uncommon without a major supply event.

Jeffrey Zekauskas of JPMorgan asked about the financial impact of divesting the five European assets under review, specifically how their removal would affect European EBITDA and when an announcement is expected.

Answer

CEO Peter Vanacker stated that good progress is being made on the review, with an update expected by mid-year. He described the process as a 'portfolio upgrade' aimed at creating a more focused and profitable European business centered on circular and low-carbon solutions. He reiterated a previous comment that after all global portfolio actions are complete, the company's mid-cycle EBITDA margin is expected to improve from a historical 18% to over 21%.

Jeffrey Zekauskas inquired about the sustainability of LyondellBasell's long-standing practice of dividend increases, asking if another increase could be expected in 2025 despite pressure on EBITDA.

Answer

CEO Peter Vanacker and CFO Michael McMurray both expressed confidence in the company's ability to continue growing its dividend. Vanacker cited 'fantastic cash flow generation' and a focused portfolio. McMurray highlighted the 'phenomenal shape' of the balance sheet, disciplined capital allocation, and a recent reduction in planned CapEx, stating the company is confident in its ability to 'responsibly grow our dividend in the future.'

Jeffrey Zekauskas of JPMorgan asked if the normalized EBITDA for the combined U.S. and European Olefins & Polyolefins business is still the $7 billion figure cited at the 2023 Analyst Day, considering recent market changes.

Answer

CFO Michael McMurray indicated the North American outlook is largely unchanged, but Europe's earnings power is likely lower due to energy costs and regulations. EVP Kim Foley added that variables like China's stimulus and EU rationalization are critical. CEO Peter Vanacker stressed the company's portfolio is transforming to be more cost-advantaged, shifting from 60% to 70% advantaged assets post-restructuring.

Jeffrey Zekauskas of JPMorgan Chase & Co. followed up on polyurethane utilization rates, seeking specific figures for Huntsman's own operations, particularly in Europe.

Answer

Chairman, President & CEO Peter Huntsman confirmed Huntsman's rates are not dissimilar to the industry's low to mid-80s average. He specified that North American plants are running in the mid-80s, while European facilities are operating at approximately 80% utilization.

Jeffrey Zekauskas questioned the status of MDI pricing in North America following announced price increases. He also asked about the sequential increase in inventory and whether working capital is expected to be a source or use of cash for the year.

Answer

CEO Peter Huntsman explained that while Huntsman is still pushing for price increases, the primary goal is margin expansion, which can also be achieved through falling raw material costs. He noted that weak volumes have made implementing price hikes more difficult. CFO Phil Lister addressed the inventory build, attributing it to planned turnarounds and stating that levels should decrease in Q2. For the full year, Lister hopes working capital will be a use of cash, as that would imply a booming economy, but the focus remains on improving the cash conversion cycle.

Jeffrey Zekauskas questioned the reasons for the projected 30% year-over-year EBITDA decline in Performance Products for Q1 and asked for the expected volume growth in Polyurethanes for the same period.

Answer

CEO Peter Huntsman explained the Performance Products decline is primarily due to lower profitability at the European maleic facility, a situation he does not expect to continue. For Polyurethanes, he projected low single-digit volume growth, around 5% YoY for Q1, driven by market recovery. CFO Phil Lister added this growth is consistent with the trend seen in 2024.

Jeffrey Zekauskas asked for clarification on a $35 million dividend from the SLIC China JV acquisition, its impact on cash flow, and if more dividends were expected. He also inquired about MDI volume expectations for the fourth quarter by region.

Answer

EVP and CFO Phil Lister confirmed the $35 million dividend impacted free cash flow and stated that while RMB 300 million remains to be liquidated in 2025, it will not be recorded as a dividend. Chairman, CEO and President Peter Huntsman addressed MDI volumes, anticipating a typical seasonal decline of 10-15% globally for Q4, contingent on year-end inventory destocking.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the drivers of strong double-digit EBIT growth in Europe and questioned if Linde's experience with helium pricing pressure was comparable to a competitor's.

Answer

CFO Matt White attributed the strong European EBIT growth to a combination of favorable currency effects (FX), continued pricing opportunities, and productivity initiatives, which offset negative volumes. Regarding helium, CEO Sanjiv Lamba noted Linde's exposure is much smaller than its competitor's, with flat volumes and high single-digit price declines, which he does not see as a significant concern.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked for the 2025 outlook for 'other income' after a high 2024, and for an explanation of the 9% year-over-year decline in SG&A expense.

Answer

Matt White, CFO, explained that 2024 'other income' was elevated by a large insurance claim and that 2025 should be more aligned with historical levels. He attributed the SG&A decline to currency effects (about 25%), benefits from the Q4 restructuring, and a significant year-over-year reduction in incentive compensation accruals due to performance against targets.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked about the disparity between 10% EPS growth and 1% operating cash flow growth in 2024, the cash flow outlook for 2025, and whether Linde is gaining market share.

Answer

CFO Matt White explained that the cash flow was impacted by the unwinding of the engineering portfolio, which created a large non-cash-generative outflow; he expects OCF and EBITDA growth to align more closely in 2025. CEO Sanjiv Lamba stated that the record $7B+ sale of gas backlog demonstrates market share gains in large projects, while in other areas, network density is a more critical metric of leadership than market share.

Jeffrey Zekauskas questioned the flat sequential pricing, asking if negative pricing in the on-site business offset gains elsewhere, or if merchant and packaged gas pricing was also flat.

Answer

CFO Matt White clarified that the environment is disinflationary, not deflationary, and that pricing remains positive year-over-year and sequentially in the base merchant and packaged gas businesses. He attributed the overall flat sequential result to timing effects of contract anniversaries and slightly declining prices for helium, which is priced on global supply/demand.

Jeffrey Zekauskas asked about the source of the 4% price increase in the Additives & Functional Products (AFP) segment and the impact of tariffs on the Fibers business. He also questioned the cash flow implications of the planned $400 million working capital reduction.

Answer

Chairman and CEO Mark Costa attributed the AFP price increase to cost pass-through contracts in the Care Chemicals business. For Fibers, he identified a ~$20 million headwind from tariffs impacting the Naya textile business. CFO and EVP William McLain addressed cash flow, explaining that working capital is a net headwind for the full year. He views the ~$1 billion cash from operations as a solid platform to build from in 2026, with potential for higher cash earnings and further working capital optimization.

Jeffrey Zekauskas questioned the decision to withdraw annual earnings guidance while maintaining the cash flow forecast, asking why cash flow is more predictable. He also requested a breakdown of the $30 million Q2 tariff impact, asking if it was from lost sales or duties paid.

Answer

EVP and CFO William McLain responded that the company has more direct control over cash flow levers like working capital, providing a narrower range of outcomes versus the accounting complexities of an earnings estimate amid high uncertainty. Board Chair and CEO Mark Costa clarified the $30 million Q2 impact is primarily from lost volume, as customers with sufficient inventory delay purchases to await a potential resolution on tariffs.

Jeffrey Zekauskas from JPMorgan Chase & Co. questioned why operating cash flow is projected to be flat in 2025 despite higher earnings and asked about the historical correlation between the Chemical Intermediates (CI) and specialty products segments.

Answer

Executive Vice President and CFO William McLain explained that the flat operating cash flow forecast is due to higher cash taxes largely offsetting expected EBITDA growth. Board Chair and CEO Mark Costa clarified that, contrary to the question's premise, the CI and specialty segments often move in opposite directions, creating a natural hedge in the portfolio where commodity strength can balance periods of margin pressure in specialties and vice versa.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked to quantify the EBIT drag from the methanolysis plant in 2024. He also inquired about the product's pricing relative to conventional materials, its primary applications, and the key customer drivers for adoption.

Answer

CFO Willie McLain clarified that the incremental EBIT from the methanolysis plant is neutral on a year-over-year basis in 2024. CEO Mark Costa described the pricing as a premium over existing products like Triton and PET. He noted that customers are diverse and fragmented, spanning applications from reusable water bottles and appliances to cosmetics and power tools, driven by corporate sustainability goals and the opportunity to create new, more sustainable products.

Jeffrey Zekauskas asked for the expected quarterly increase in depreciation post-OCI acquisition and for an explanation of the pro forma income calculation in the earnings release.

Answer

CFO & SVP - Finance Dean Richardson estimated a quarterly depreciation increase of approximately $25 million. He advised against using the GAAP-required pro forma disclosure, as it is based on OCI's historical data and does not reflect the current business reality.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked how Tronox plans to achieve its H2 EBITDA guidance, which implies a sequential increase from Q2, and requested details on volume and pricing dynamics in India versus Brazil.

Answer

CEO John Romano explained that while Q3 EBITDA is expected to be relatively flat, a significant lift in Q4 is anticipated from a high-margin 'other product' sales opportunity. CFO John Srivisal added that cost improvements will also contribute. Romano highlighted competitive pricing in Europe while noting volume growth opportunities in India due to favorable duties.

Jeffrey Zekauskas questioned the rationale for building inventory in Q1 given already high levels and asked for a breakdown of which geographic regions are experiencing price increases versus decreases.

Answer

CFO John Srivisal clarified that the primary Q1 working capital use will be accounts receivable due to higher sales, and inventory is expected to be a source of cash for the full year. CEO John Romano described a mixed pricing environment, with some ongoing competitive pressure but also upward price traction in Brazil and parts of Europe due to duties. He reiterated an expected 1-2% overall price decline in Q1 before a recovery in the second half.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about European TiO2 price movements, the volume of Chinese TiO2 exports to Brazil, the cause of zircon price pressure, and the overall growth of the global TiO2 market in 2024.

Answer

CEO John Romano stated European prices were relatively flat from Q2 to Q3 despite some mix shifts and competitive activity. He specified that China exports about 100,000 tons annually to Brazil's 180,000-ton market. Zircon price pressure stems from a mix shift to lower grades, weaker demand in China, and resulting competitive activity. He estimated the global TiO2 market is 'slightly up to flattish' for the year.

Jeffrey Zekauskas of JPMorgan Chase & Co. inquired about the future of the Alberta project, asking if it would be canceled or if the dividend would be cut further if the operating environment doesn't improve by mid-2026. He also asked for the full-year outlook on working capital.

Answer

CEO Jim Fitterling stated that a decision on the Alberta project will be made later in the year, with affordability and a return to core earnings growth being key prerequisites. CFO Jeff Tate addressed working capital, explaining that the first-half use was due to heavy maintenance and new project startups, and he expects the working capital position to improve in the second half of the year.

Jeffrey Zekauskas asked a series of questions regarding the discrepancy in corporate expense guidance, the outlook for Q2 cash flow after a low Q1, and whether Dow would incur a charge for delaying its project with Linde.

Answer

Chair and CEO James Fitterling stated he does not expect to take a charge related to the Linde contract for the project delay. CFO Jeff Tate explained that Q1 corporate expense was unusually low due to non-recurring credits and the full-year guide is more accurate. He also noted that Q2 cash from operations would see similar working capital use as Q1 due to turnarounds.

Jeffrey Zekauskas from JPMorgan Chase & Co. posed two questions: first, whether Dow's significant polyethylene capacity additions will be offset by European closures, and second, the reason for the large year-over-year decline in cash flow despite flat EBITDA.

Answer

CEO James Fitterling addressed the capacity question by highlighting that the new Alberta facility will produce differentiated Zero Scope 1 and 2 emissions products, for which there is customer demand. He conceded that industry-wide capacity reductions in high-cost Europe are likely. CFO Jeff Tate explained the cash flow variance was partly due to an intentional inventory build in Q4 to prepare for heavy Q1 turnaround activity.

Jeffrey Zekauskas asked two questions: first, how the production cost at the Fort Saskatchewan project will compare to Freeport, and second, for confirmation that 600,000 tons of new polyethylene capacity is still on track for H2 2025.

Answer

James Fitterling, Chair and CEO, confirmed that the new polyethylene capacity is on track for 2025. Regarding the Fort Saskatchewan project, he stated that advantaged ethane costs will make its ethylene cost among the best in the world. While the hydrogen production process has higher costs, these are offset by CO2 sequestration benefits and the premium for selling zero-emission products, resulting in expected returns equal to or higher than Dow's best U.S. asset.

Jeffrey Zekauskas from JPMorgan Chase & Co. inquired about the drivers behind the high single-digit volume growth in Graphics and Reflective solutions and whether this trend is sustainable. He also asked for an explanation for the year-over-year decrease in SG&A expenses.

Answer

President & CEO Deon Stander attributed the strong Graphics and Reflectives growth to new customer wins in Asia for paint protection films and robust demand in North America for automotive color-change films, a trend he expects to continue. SVP & CFO Greg Lovins explained that the lower SG&A was a result of restructuring benefits, discretionary cost controls like reduced travel, and lower incentive compensation accruals this year compared to above-average accruals in the first half of last year.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked about the drivers behind the high single-digit volume growth in the Graphics and Reflective solutions business and whether this trend is sustainable. He also questioned the reasons for the year-over-year decrease in SG&A expenses.

Answer

President & CEO Deon Stander attributed the strong growth in Graphics and Reflectives to new customer acquisition and traction with paint protection and color change films in Asia and North America, expecting the trend to continue. SVP & CFO Greg Lovins explained that the lower SG&A was a result of restructuring benefits, discretionary cost controls, and lower incentive compensation accruals compared to the prior year's above-target performance.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked about the drivers behind the sustained high single-digit growth in Graphics and Reflectives and sought an explanation for the year-over-year decrease in SG&A expenses.

Answer

President & CEO Deon Stander attributed the strong Graphics and Reflectives performance primarily to the Graphics business, with strength in Asia and North America driven by new customer wins in paint protection films and strong demand for auto customization films. SVP & CFO Greg Lovins explained the SG&A decline was due to a combination of restructuring benefits, discretionary cost controls, and lower incentive compensation accruals this year compared to above-target accruals in the prior year.

Jeffrey Zekauskas questioned the drivers behind the sharp reversal in apparel demand from positive to negative mid-single digits for Q2, asking if it was a China-specific tariff issue or a broader economic event. He also asked for the rationale behind the significant Q1 share buyback given the cloudy outlook and withdrawal of full-year guidance.

Answer

An executive, likely CEO Deon Stander, attributed the apparel demand shift primarily to the China tariff issue, noting the company is helping customers adjust sourcing. CFO Gregory Lovins addressed the buyback, stating it was a disciplined response to a share price decline relative to the company's view of its intrinsic value and that the increased uncertainty from tariffs emerged more recently.

Jeffrey Zekauskas asked for the outlook on raw material cost inflation or deflation for the full year 2025.

Answer

SVP & Interim CFO Danny Allouche described the raw material environment as stable, with slight deflation expected to continue from Q4 into Q1. However, he noted that due to a 1-2 quarter lag in passing through price changes, the company's model still reflects a negative year-over-year price/raw material impact in the first half of 2025 before stabilizing.

Jeffrey Zekauskas presented a calculation suggesting that high-value solutions must have shrunk based on overall segment growth and strong base solutions growth. He also attempted to estimate the potential annual revenue from the Kroger bakery deal.

Answer

CFO Gregory Lovins corrected the calculation, stating that high-value solutions were up low single digits ex-currency. He clarified that Intelligent Labels growth is split between both the Solutions and Materials segments and noted softness in embellishments. CEO Deon Stander declined to comment on the specific size of the Kroger program but emphasized its strategic importance as a catalyst for RFID adoption in the food and grocery sector.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked what specifically makes this a "once in a career opportunity" and inquired about the reasons for the decline in store count and pricing within the Consumer Brands Group.

Answer

Chair, President & CEO Heidi Petz attributed the opportunity to Sherwin-Williams' stable, differentiated strategy amidst significant competitive turbulence. SVP of Investor Relations Jim Jaye explained the store count reduction was a strategic shift from company-owned stores to dealers in Brazil, and the price decline was due to unfavorable price/mix shifts, particularly in Latin America.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked what specifically makes the current environment a "once in a career opportunity" and questioned the reasons for the decline in both store count and pricing within the Consumer Brands Group.

Answer

CEO Heidi Petz attributed the opportunity to Sherwin-Williams' differentiated and stable strategy amidst competitive turbulence. SVP of Investor Relations James Jaye explained the Consumer Brands store count reduction was due to a strategic shift from company-owned stores to dealers in Brazil, and the price decline was a result of unfavorable geographic and product mix.

Jeffrey Zekauskas asked for an assessment of building cost inflation and its impact on the housing market, and also requested a specific directional indication for April sales.

Answer

Executive Heidi Petz addressed the builder perspective, noting their primary tariff concerns are steel and aluminum for items like HVAC and garage doors. Executive Allen Mistysyn declined to give a directional comment on April sales but reiterated that demand drivers like household formation persist despite high mortgage rates. He emphasized that 'life goes on,' supporting underlying housing needs.

Jeffrey Zekauskas asked about the impact of adverse weather in Q1 and the reason for the significantly lower margin improvement in the Consumer Brands Group in Q4 compared to the first three quarters of the year.

Answer

SVP & CFO Allen Mistysyn stated that Q1 weather impacts are expected and within guidance. Regarding Consumer Brands, he explained that the large margin gains in the first three quarters were due to fixed cost absorption adjustments that were annualized in Q4. The smaller Q4 margin increase was driven by good cost control on lower sales volumes.

Jeffrey Zekauskas asked a two-part question: why SG&A was elevated in Q3 but will decrease in Q4, and what drove the significant margin expansion in Consumer Brands while Paint Stores margins were flat.

Answer

Executive Allen Mistysyn explained the SG&A timing reflected a second-half view and that Consumer Brands' margin benefited from improved fixed cost absorption and operational efficiencies in the Global Supply Chain unit. Executive Heidi Petz added that the Q3 SG&A spend was an opportunistic acceleration of investments, enabled by stronger-than-expected gross margins.

Jeff Zekauskas asked several housekeeping questions regarding the source of acquisition project costs in the quarter and the amount of pension income. He also sought clarification on whether raw material costs were declining sequentially and if overall business demand was steady outside of the noted weakness in residential construction.

Answer

EVP & CFO John Corcoran clarified that the acquisition costs were lingering from the flooring divestiture and provided the quarterly pension income figure. President & CEO Celeste Mastin confirmed that raw materials are declining sequentially, though still up year-over-year, and that demand outside of U.S. residential construction was generally stable and consistent, with particular strength in roofing.

Jeffrey Zekauskas asked about the timeline for lapping weakness in the solar business, the associated EBITDA impact, and which specific raw materials were experiencing inflation. He also inquired about the outlook for full-year nonrecurring charges and the economic trajectory in Europe and the U.S.

Answer

President and CEO Celeste Mastin explained that solar revenue will remain weak for the year due to a strategic repositioning toward higher-margin applications, which will improve profitability. EVP and CFO John Corkrean estimated the solar EBITDA drag from a ~$20M revenue decline. Mastin noted about 20% of the raw material portfolio is inflationary, largely impacting HHC. Corkrean added that costs are flat sequentially and estimated full-year nonrecurring charges at $40M-$50M. Mastin described the U.S. economy as slowing, while Europe's HHC segment was strong due to share gains and easier comps, offsetting weakness in construction.

Jeffrey Zekauskas asked about the planned acquisition spending for 2025, the specific raw materials that experienced inflation, the end-markets driving packaging weakness, and whether a large deferred tax outflow was a one-time event. He also inquired about the number of warehouses in Europe.

Answer

CEO Celeste Mastin indicated that more M&A is likely in 2025, consistent with their typical $250-$300 million annual allocation. She identified waxes, oils, and hydrogenated hydrocarbon resins as key inflationary raw materials. The packaging weakness was most notable in 'case and carton seal' applications. CFO John Corkrean confirmed the deferred tax outflow was a one-time item related to a China dividend. The question on European warehouses was deferred.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked for the reasons behind the $15 million reduction in the midpoint of the full-year EBITDA guidance. He also questioned the contribution of acquisitions to EBITDA growth and the drivers of sequential gross margin changes, including the outlook for Q4 and details on solar comparisons.

Answer

CEO Celeste Mastin and CFO John Corkrean explained the guidance reduction was entirely due to lower-than-expected volume, which slowed down in the second half of Q3. Corkrean detailed that acquisitions contributed about $7 million to EBITDA in Q3. He clarified that the sequential gross margin change was due to the price/raw material dynamic shifting from a tailwind to a headwind, as previously forecast. He expects Q4 gross margin to tick up slightly on higher seasonal volume. For solar, he noted volumes were flat in Q1, down mid-teens in Q2, and down over 35% in Q3.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked for details on the PVC industry's performance in Q1, questioned the reported sequential price declines in PVC and chlor-alkali given market trends, and sought clarification on whether the chlor-alkali weakness was in chlorine, caustic, or both.

Answer

M. Bender, EVP and CFO, stated that industry PVC operating rates were in the 80s as inventory built for the construction season. He clarified that while PVC prices rose in February and March, price resets at the end of the prior year impacted the quarterly average. He also noted that chlorine demand remained strong, and caustic soda saw some price increases in Q1.

Jeffrey Zekauskas requested the full-year volume and price changes for both the HIP and PEM segments and asked which specific businesses within PEM experienced negative EBIT.

Answer

EVP and CFO Steve Bender provided the 2024 vs. 2023 figures: PEM volume was up 6% while price was down 12%; HIP volume was up 8% while price was down 6%. Bender specified that within PEM, the primary pressure on EBIT came from the chlorovinyls chain, particularly on the vinyls side, rather than the chlor-alkali (ECU) side.

Jeffrey Zekauskas of JPMorgan Chase & Co. asked for the company's full-year free cash flow expectation, the status of pricing actions in the Intermediates business, and whether current inventory levels are appropriate for the sales environment.

Answer

CFO John Willis projected full-year free cash flow in the $150 million to $200 million range, noting uncertainty from tariffs and working capital needs. General Manager Alessandra Faccin confirmed a price increase for Intermediates was announced in March, but the environment remains challenging. Willis and CEO Guillermo Novo explained that inventory is intentionally elevated to manage tariff risks and support manufacturing optimizations, with levels expected to normalize in coming quarters.

Jeffrey Zekauskas asked for details on the Q1 turnaround costs by segment, the pricing and EBITDA outlook for Intermediates, and whether cost savings would exceed stranded costs in fiscal 2025.

Answer

CEO Guillermo Novo clarified the total turnaround impact was about $25 million, with a $5 million overrun primarily affecting the VP&D plants, which impacts Life Sciences and Personal Care. He noted Intermediates pricing is stable but faces volume headwinds. He also explained the $30 million restructuring program is designed to offset lost gross profit from divestitures, not just stranded costs, and they are on track to achieve it.

Jeffrey Zekauskas asked for clarification on the accounts receivable balance, inventory reduction targets, and whether the $25 million reduction in CapEx was a deferral or a cancellation of projects.

Answer

Executive Brent Collins explained the accounts receivable balance was elevated due to strong December sales and a $35 million gross-up for an insured product recall. CEO Edward Dowling and CSO Ben Nichols confirmed that inventory levels are being drawn down significantly, aided by curtailed production. Dowling clarified the CapEx reduction is a deferral of lower-risk projects into 2026, exercising planned flexibility in the capital program.

Jeffrey Zekauskas from JPMorgan Chase & Co. asked if higher tariffs on Asian imports would be a net positive for Orion and inquired about the specific market impact of anti-dumping duties on Thai truck tires. He also challenged the basis for Orion's pricing power in the U.S. rubber market, given that domestic tire production has been declining for two years.

Answer

CEO Corning Painter asserted that higher tariffs would be a net positive for Orion because its local-for-local production model would benefit from reduced tire imports. He characterized the Thai duties as an incremental step toward normalizing import levels. To explain pricing leverage despite weak demand, Mr. Painter cited global factors, such as customer dissatisfaction with imported carbon black in Europe, supply chain reliability concerns, and a successful change in Orion's commercial negotiation strategy for 2025.

Jeff Zekauskas of JPMorgan Chase & Co. asked about the sharp price decline of a generic diamide active ingredient (CTPR) in China, its analytical significance, and the performance of FMC's diamide business in Asia.

Answer

Ronaldo Pereira, President, suggested that referenced prices in China are below production costs, indicating inventory dumping. Pierre Brondeau, Chairman and CEO, added that FMC's China diamide business is small and he is not overly concerned, promising a full strategy update next quarter. He clarified that overall diamide sales are up ~10%, with strong growth in Exirel offsetting a mid-single-digit decline in Rynaxypyr driven by Asia.