Josh Spector

Josh Spector asked about Linde's space opportunity, specifically its contribution to the projected 2026 CAPEX increase, the company's view on the market size, its share, expected growth, and how this is factored into the 2026 guidance.

Answer

Matt White, CFO, clarified that the CAPEX in the backlog does not include approximately $500 million invested in space projects, with continued investments planned for 2026. He described it as a secular growth opportunity where Linde is well-positioned, supplying 65-75% of launches (189 in 2025). While factored into guidance with double-digit growth expected, it's not yet large enough to significantly move the overall company's needle, though it's anticipated to become a billion-dollar business in a few years.

Josh Spector asked about the space opportunity, specifically if it contributes to the projected 2026 CAPEX increase, Linde's view on its size, market share, and expected growth, and how it's factored into the 2026 guidance.

Answer

Matt White, CFO, confirmed that the CAPEX in the backlog section does not include approximately $500 million for space projects, with continued investments planned for 2026. He described it as a secular growth opportunity where Linde is well-positioned, supplying 65%-75% of launches, primarily from hubs in Texas and Florida. While factored into guidance with expected double-digit growth, it is not yet large enough to significantly impact Linde's overall results, though it is anticipated to become a billion-dollar business in a few years.

Josh Spector from UBS followed up on manufacturing comments, asking for more detail on market wins and how Linde is outperforming PMI metrics, particularly contrasting declines in Europe with growth in the U.S./Americas.

Answer

CEO Sanjiv Lamba explained that U.S. manufacturing is rebasing due to lapsing tariff concerns, with the packaged gas business showing mid-single-digit organic growth and automation/equipment sales indicating customer preparation. He noted mixed results globally, with China seeing growth in EVs/batteries, but Europe remaining a struggle. CFO Matt White added that commercial space, included in manufacturing, is also a significant growth driver.

Josh Spector asked for more detail on Linde's manufacturing comments, specifically how U.S. growth and European declines are leading to outperformance compared to PMI metrics, and what specific markets or wins are driving this.

Answer

Sanjiv Lamba, CEO, attributed U.S. manufacturing growth to lapped tariff concerns and increased clarity, citing the mid-single-digit organic growth in the U.S. packaged gas business as a proxy. He noted growth in selective subparts like EVs and batteries in China, while Europe continues to struggle, with potential for Germany's infrastructure spend to spur activity by mid-2026. Matt White, CFO, added that commercial space, which is part of manufacturing, is experiencing double-digit growth and does not correlate with PMI.

Josh Spector of UBS Group AG questioned the guidance assumptions, noting the forecast for contracting volumes seems more pessimistic than current trends and asked if this was due to recent weakening or added conservatism.

Answer

CFO Matt White clarified that the guidance is based on a -2% trend for base volumes (excluding the project backlog). He acknowledged that while the year-over-year comp gets easier, the guidance implies some sequential worsening. He explained that given currency volatility and general economic uncertainty, they chose to offset the FX benefit with a more conservative economic assumption, but will strive to outperform.

Josh Spector asked about Corteva's free cash flow conversion into 2026, specifically if 2025's strong performance had one-off benefits or if it serves as a base for future growth.

Answer

David Johnson (EVP and CFO, Corteva) attributed 2025's strong free cash flow to a favorable cash-credit mix and exceptional working capital management, with net working capital 300-400 basis points lower than typical. He noted that 2026 free cash flow would be impacted by the Bayer agreement payment and separation costs, but absent these, it would align with the 45%-50% conversion target from the investor day, with some normalization of working capital.

Josh Spector inquired about Corteva's free cash flow conversion outlook for 2026, asking if 2025's strong performance included one-off benefits and how working capital management would impact future conversion.

Answer

EVP and CFO David Johnson attributed 2025's strong free cash flow partly to a favorable cash-credit mix and significant working capital management, with net working capital as a percentage of sales being 300-400 basis points lower than typical. He noted that 2026 free cash flow would be impacted by the Bayer agreement and separation costs, but absent these, it would align with the 45%-50% long-term target, with working capital normalizing.

Josh Spector asked for confirmation on Corteva's crop chemical pricing expectations for the second half of the year, noting it differs from peers, and questioned the confidence in projecting low single-digit growth for the crop protection industry in 2026.

Answer

EVP of Crop Protection Business Unit Robert King confirmed expectations for crop protection pricing to finish down low single digits for the year, driven by Brazil's mid-single-digit decline, which is an improvement from last year. CEO Chuck Magro acknowledged it's early for 2026 but projected low single-digit growth for the global crop protection industry, driven by volume and stabilizing prices outside Brazil. He cited strong on-farm applications, healthy channel inventories, and stable generic prices from China as reasons for confidence, while noting Brazil pricing remains an area of less certainty.

Josh Spector inquired about Corteva's crop chemical pricing expectations for the second half of the year, seeking confirmation on whether they remain unchanged relative to peers. He also questioned the confidence in projecting low single-digit growth for crop chemicals in 2026, asking if it's too early for such a call.

Answer

EVP of Crop Protection Business Unit Robert King stated that second-half pricing is expected to finish down low single digits, primarily driven by Brazil, which is showing improvement compared to the previous year. CEO Chuck Magro acknowledged it's early for 2026 but projected low single-digit growth for the global crop protection industry, driven by volume and stabilizing pricing outside of Brazil. He cited strong on-farm applications, healthy channel inventories, and stable generic product prices from China as reasons for confidence, while noting Brazil pricing remains an area of less certainty.

Josh Spector from UBS inquired about re-leveling the fiscal 2025 earnings for the battery materials business, given past pricing pressures, and whether conductive carbons offer the same value proposition in battery energy storage systems (BESS) as in space-constrained EV batteries.

Answer

Sean Keohane, CEO and President, acknowledged that the company has not disclosed a more recent specific earnings number for the battery materials business, noting a prolonged destocking cycle in 2023-2024 made it difficult to ascertain a current run rate. He confirmed that while EV and BESS applications have differences (e.g., space constraints), both require high-value conductive additives and blends to optimize performance, leading to good profitability in both areas. Keohane highlighted Cabot's strong position with a broad range of conductive additives and a global footprint.

Josh Spector asked for an updated perspective on the earnings of the battery materials business for fiscal 2025, given prior sizing and subsequent market pressures, and questioned the value proposition of conductive carbons in battery energy storage systems (ESS) compared to EVs, where space constraints differ.

Answer

CEO Sean Keohane stated that a more recent profitability number for the battery materials business has not been disclosed, acknowledging past destocking cycles. He highlighted strong growth and attractive EBITDA margins (22% trailing twelve months). For ESS versus EV applications, Mr. Keohane explained that while EVs prioritize energy density due to space, both applications require high-value conductive additives and blends to optimize performance, with both offering good profitability.

Josh Spector asked about the impact of customer outages on Personal Care demand, inquiring if it's an ongoing issue, resolved, or recoverable. He also sought more color on Guillermo Novo's optimism regarding demand building in the second quarter and any increased visibility.

Answer

Guillermo Novo, Chair and CEO, noted a demand pickup in December and January, broad-based in Life Sciences and Personal Care, with coatings stable. Jim Minicucci, SVP, Personal Care, clarified that customer outages were unplanned, occurred in Q1, are resolved, and most of the impact is expected to be recovered in Q2 and the balance of the year.

Josh Spector with UBS inquired about the impact of customer outages on Personal Care demand, asking if the issue is resolved, ongoing, or if a catch-up is expected. He also sought more color on the demand optimism for the second quarter and its visibility.

Answer

Chair and CEO Guillermo Novo noted a pickup in demand in December and January, broad-based in Life Sciences and Personal Care, with coatings stable. SVP, Personal Care, Jim Minicucci clarified that the unplanned customer outages in North America occurred in Q1, were not demand-driven, and are now resolved, with most impact expected to be recovered in Q2 and through the balance of the year.

Josh Spector of UBS Group questioned the drivers behind the implied sequential sales increase in the Q4 guidance, given the commentary on market stability. He also asked if the strong 33% EBITDA margins in Life Sciences were sustainable or if mix shifts could negatively impact them in the future.

Answer

CEO Guillermo Novo attributed the expected Q4 sales lift to company-specific factors, including a strong order book for oral care and volume pickups from new product scale-ups in pharma cellulosics. CFO William Whitaker added that the company is lapping prior-year headwinds in biofunctional actives. Regarding Life Sciences margins, SVP & General Manager Alessandra Faccin Assis stated that growth is being driven by high-margin innovation and globalized initiatives, and the company is focused on maintaining healthy profitability with EBITDA margins above 30%.

Josh Spector inquired about the specific impact of extended downtime, third-party outages, and Olin's inventory actions on the chlor-alkali business in Q4 and the baked-in impact for Q1.

Answer

Ken Lane, Olin's President and CEO, stated that the most significant impact was ending the year with very low wet tank bottoms on caustic inventories. This situation is now creating a volume issue for Olin in Q1, despite strong demand, which reinforces confidence in caustic pricing momentum. He emphasized that the market is tighter than many perceive.

Josh Spector asked about the impact of extended downtime, third-party outages, and Olin's own inventory actions on the chloralkali business in Q4 and Q1.

Answer

Ken Lane, Olin's President and CEO, stated that the biggest impact was ending Q4 with very low caustic inventories, which is now causing a volume issue in Q1 for meeting demand. He expressed confidence in the momentum around caustic pricing due to market tightness, despite the volume constraint.

Josh Spector asked for clarification on the $32 million Section 45V Clean Hydrogen Production tax credit in Q3, specifically how much was a catch-up and what the ongoing benefit should be for future modeling.

Answer

Todd Slater, CFO, confirmed that the $32 million was a catch-up, realized after receiving CO2 emissions information from the Department of Energy. He stated that the ongoing adjusted EBITDA benefit is expected to be in the $15 million-$20 million range annually for 2026 through 2028.

Josh Spector inquired about the Section 45V Clean Hydrogen Production tax credit, specifically how much of the $32 million recognized in Q3 was a catch-up and what the expected ongoing annual benefit would be for Olin.

Answer

CFO Todd Slater confirmed that the $32 million benefit in Q3 was a catch-up, realized after receiving final CO2 emissions information from the Department of Energy. He projected an ongoing annual adjusted EBITDA benefit of $15 million to $20 million for the years 2026 through 2028.

Josh Spector from UBS asked for more details on the 'Beyond 250' cost savings program, including the timing of the $70-90 million in savings and how the Freeport site's structure impacts these efforts.

Answer

President and CEO Ken Lane clarified that the program extends beyond Freeport to other sites like McIntosh and focuses on right-sizing infrastructure and reducing reliance on contractors. CFO Todd Slater added that Olin expects to realize $50-70 million of these savings in 2025, with an improved run-rate exiting the year. He also highlighted the separate structural cost reductions in the Epoxy business set to begin in 2026.

Josh Spector asked about the specific actions Eastman is taking in its fibers business, how the shutdown impacts earnings throughout the year, and the company's ability to pass through cellulose costs if supply prices increase.

Answer

Mark Costa (Board Chair and CEO, Eastman Chemical Company) explained that fibers are a top priority, with tow being the largest volume driver. He detailed actions including stabilizing tow volume with modest price declines, company-wide cost reduction efforts targeting $125M-$150M, expanding Naia staple product sales, and building Aventa product volumes. He noted that some tow prices have CPTs for raw material and energy cost adjustments, but textile prices are market-based.

Josh Spector inquired about the specific actions Eastman is taking in its Fibers segment, how the shutdown impacts earnings throughout the year, and the company's ability to pass through cellulose costs if prices increase due to supply changes.

Answer

Mark Costa (Board Chair and CEO) explained that Fibers is a top priority, noting that 40% of the EBIT drop was not tow-related, but due to tariffs, reduced cellulosics demand, and higher utilization/energy costs. He detailed stabilizing tow volumes with modest price declines, ongoing destocking, cost reduction actions, and expanding textile efforts (Naia filament, staple). He also mentioned the Aventa product for segment utilization and confirmed that some tow contracts include CPTs for raw material and energy cost adjustments.

Josh Spector sought clarification on the basis for bridging to 2026, specifically regarding inventory actions and whether the additive should be considered for the full year or just the second half, given overproduction in the first half of 2025.

Answer

William Thomas McLain, EVP and CFO, explained that the inventory build from the first half of 2025 is expected to be more than offset by year-end, leading to utilization benefits in a more normalized 2026. He noted a minimum $50 million utilization benefit from the absence of inventory depletion. Mark Costa, Board Chair and CEO, emphasized using full-year 2025 volume declines (4% in AM, 2% in AFP) as the base for 2026, rather than first-half or second-half figures.

Josh Spector sought clarification on the basis for bridging to 2026 earnings, specifically how inventory actions and first-half overproduction factor into the calculation. He also asked about customer order patterns and expectations for Q1 2026 volumes compared to Q1 2025.

Answer

EVP and CFO William Thomas McLain explained that the inventory build from the first half of 2025 is expected to be more than offset by year-end, leading to utilization benefits of at least $50 million in 2026. Board Chair and CEO Mark Costa advised using full-year 2025 volume declines (AM down 4%, AFP down 2%) as the base. Mark Costa noted that while Q1 2025 had positive economic views, the subsequent demand flip led to destocking. He expects Q1 2026 to be better than Q4 2025 due to seasonal snapback and inventory depletion, but comparison to Q1 2025 is complex.

Josh Spector inquired about the Methanolysis investment strategy, asking for clarification on the decision to delay the Longview facility, the potential to expand the Kingsport plant, and the impact on the offtake agreement with PepsiCo.

Answer

Chairman and CEO Mark Costa highlighted that the existing Kingsport Methanolysis plant is running exceptionally well, above nameplate capacity. He revealed that targeted, low-capital debottlenecking investments could increase its capacity to 130% or more. This success allows Eastman to delay the second plant, providing time to engineer a more capital-efficient project while still meeting customer demand and pulling forward EBITDA. Mr. Costa confirmed the contract with PepsiCo remains intact.

Josh Spector asked to reconcile his estimate of the Paint Stores Group market being down 1-2% with the company's guidance (flat, plus 1% from stores), implying in-line performance rather than outperformance.

Answer

Heidi G. Petz, Chair, President, and CEO, disagreed with the market being down only 1-2%, believing it's down more. She highlighted the company's base case guidance of down single to up single, driven by controllables like Residential Repaint share gains, new store additions, dedicated reps, and innovation. Ben Meisenzahl, VP of Investor Relations, added that the Paint Stores Group achieved almost a 50% incremental margin in Q4 despite low single-digit volume decline.

Josh Spector analyzed the macro assumptions and Paint Stores Group guidance, suggesting the market might be down 1-2% next year, and with flat guidance and 1% store additions, this implies performance closer to in line with the market rather than outperforming by 1-2%, asking for clarification on this framing.

Answer

Chair, President, and CEO Heidi G. Petz disagreed with the framing, stating the market is likely down more than 1-2%. She emphasized the company's base case guidance of down single to up single digits for Paint Stores Group, highlighting continued share gains in Residential Repaint, investments in new stores and reps, and innovation. VP of Investor Relations Ben Meisenzahl pointed to the segment's ability to grow incremental margins (nearly 50% in Q4, almost 40% for the full year) even in a challenged volume market, through good cost control.

Josh Spector asked about the Paint Stores volume outlook for 2026, comparing the first-half 2025 organic volumes (down 3-4%) to the second-half guide (closer to flat), and if flattish volume is the base case for 2026.

Answer

SVP of Finance and CFO Al Mistysyn stated he couldn't give a firm 2026 outlook but noted that Q3's better exterior sales provided a volume tailwind. He suggested an initial consideration for 2026 volumes is probably up or down low single digits, depending on factors like commercial and property maintenance recovery. He emphasized efforts to accelerate share gains through new accounts and share of wallet, aiming for sustainable low single-digit volume growth while controlling SG&A costs and investing in stores and reps.

Josh Spector asked for clarity on the expected volume environment for 2026 in the Paint Stores Group. Given that organic volumes were down 3-4% in the first half and the second-half guidance is closer to flat, he questioned whether a flattish volume environment should be the base case for 2026, or if the previous expectation of down low single digits still holds.

Answer

Al Mistysyn, SVP of Finance and CFO, refrained from providing a firm 2026 outlook but noted that stronger exterior sales in the third quarter provided a tailwind. He suggested that initial considerations for 2026 volumes are 'up or down low single digits' until more clarity emerges from the year-end planning process. He emphasized ongoing efforts to accelerate share gains, new account activity, and share of wallet to achieve 'sustainable up low single digit volumes,' supported by SG&A leverage despite continued investments in stores and sales representatives.

Josh Spector of UBS Group AG asked a series of follow-up questions regarding SG&A, seeking to clarify the basis for guidance, the recovery of one-time costs, and the quantifiable EBIT impact from production inefficiencies in the second half.

Answer

SVP of Finance & CFO Al Mestyshin clarified that the low single-digit SG&A growth guidance for the second half includes the new building costs, which add about 1.5%. He also quantified the impact of lower production, stating that it accounts for roughly 20% of the gross profit reduction in the revised full-year outlook, with the other 80% due to lower sales volumes.

Josh Spector from UBS Group AG asked for several clarifications, including the basis for SG&A growth guidance, the amount of one-time costs that will reverse next year, and the size of the EBIT impact from lower production volumes.

Answer

CFO Allen Mistysyn clarified the SG&A figures, noting the new building adds about 1.5% to second-half growth. He quantified the gross profit reduction for the year, stating that approximately 80% is due to lower sales volumes and 20% is from the unfavorable impact of lower production on the global supply chain.

Josh Spector asked for clarification on Mexico's volume performance, specifically how Q4 2025 volumes compare to a year ago, given the easier comparables in the first half of 2025 due to Liberation Day disruptions.

Answer

Chairman and CEO Tim Knavish outlined Mexico's sequential improvement: Q1 down mid-single digits, Q2 up low single digits, Q3 up mid-single digits, and Q4 up high single digits. Senior Vice President and CFO Vince Morales added that Q4 2025 volumes, encompassing both retail and project segments, were approximately mid-single digits higher year-over-year, with good volume expected in Q1 2026 due to easier comparables.

Josh Spector inquired about Mexico's volume performance, asking for an index of Q4 2025 volumes versus a year ago, to understand if performance is now above pre-disruption levels.

Answer

Chairman and CEO Tim Knavish provided a sequential volume trend for Mexico: down mid-single digits in Q1, up low single digits in Q2, up mid-single digits in Q3, and up high single digits in Q4. Senior Vice President and CFO Vince Morales clarified that Q4 volumes were around mid-single digits higher year-over-year, reflecting recovery, and good Q1 2026 volumes are expected due to easier comparables.

Josh Spector asked about PPG's capital allocation strategy, specifically why share buybacks were lower in the second half of the year compared to last year, despite a lower stock price and positive comments on organic investments.

Answer

Chairman and CEO Tim Knavish reiterated his commitment to deploying cash to maximize shareholder value, citing 8 consecutive quarters of buybacks, a dividend, and temporary investments for future growth. He explained that higher buybacks in late 2024/early 2025 were partly due to proceeds from business sales. He affirmed that the stock is undervalued, making buybacks a good use of cash. CFO Vince Morales clarified that the current cash balance reflects an upcoming debt payment.

Josh Spector from UBS questioned PPG's capital allocation strategy, specifically why the company is buying back less stock in the second half of the year despite a lower stock price and positive comments on organic investments.

Answer

Chairman and CEO Tim Knavish reiterated his commitment to not letting cash grow on the balance sheet, citing 11 straight quarters of deployment (debt paydown or share buybacks). He noted that PPG has bought back shares for eight consecutive quarters and will continue to deploy cash to maximize shareholder value, considering dividends, transitory growth investments, and opportunistic M&A. Knavish acknowledged the stock is undervalued, making buybacks a good use of cash. CFO Vince Morales clarified that a grossed-up cash balance reflects an upcoming debt payment in Q4.

Josh Spector from UBS Group followed up on architectural margins, asking for a more detailed breakdown of the factors causing the high negative decremental margin and whether this trend would persist.

Answer

CFO Vince Morales reiterated the key drivers: an unfavorable sales mix due to lower B2B volumes in high-margin Mexico, an FX impact that is expected to normalize in the second half, and a transitory supply chain issue in Australia that negatively impacted volumes by 50 basis points in Q2. He stated that he expects the segment to return to a normal incremental margin profile in the second half of the year.

Josh Spector from UBS Group followed up on architectural margins, asking for a more detailed breakdown of the cost headwinds and whether the high negative decremental margin would normalize in the second half.

Answer

CFO Vince Morales reiterated the main drivers: an unfavorable sales mix in Mexico, a transitory supply chain issue in Australia that impacted volume by 50 basis points, and FX headwinds. He confirmed that he expects a return to normal incremental margins in the second half of the year as these one-time and currency-related issues subside.

Josh Spector's team asked for a breakdown of recent pricing performance between the new Architectural and Performance segments and the pricing assumptions for 2025.

Answer

CFO Vince Morales did not provide specific quantitative splits but offered a qualitative ranking of pricing power. He stated that the Performance segment typically achieves the best pricing due to its high impact on customer productivity. Global Architectural pricing is steady and good, while Industrial pricing is more dependent on the raw material environment and technology differentiation.

Josh Spector sought clarification on Celanese's acetates utilization rates, specifically regarding U.S. assets running 'full out' despite prior understanding of lower Western market rates, and whether U.S. demand improvement or other regions are needed to increase utilization.

Answer

Scott Richardson, President and CEO, clarified that U.S. assets have historically run at high rates with some room for increase. He emphasized that Western Hemisphere demand improvement leads to significantly higher net back, directly benefiting the bottom line. Mr. Richardson noted that U.S. acetic acid plants operate at historical combined capacity levels with the ability to ramp up, following debottlenecking efforts over the past five years.

Josh Spector asked about Celanese's acetates utilization rates, specifically for U.S. assets, and whether U.S. demand improvement or other regional improvements are needed to increase utilization rates.

Answer

President and CEO Scott Richardson clarified that U.S. assets, particularly acetic acid, have historically run at high rates with some room for uplift. He noted that Western Hemisphere improvement yields significantly higher net back, and U.S. demand flows directly to the bottom line, with debottlenecking providing capacity to ramp up.

Josh Spector from UBS questioned the firm commitment to a year-end decision on the Louisiana project, asking about the range of potential outcomes (go/no-go or delay). He also sought clarification on the "minimal volume growth" assumption in the 2026 guidance, asking for quantification and whether the current macroeconomic environment is fully factored in or poses a risk.

Answer

CEO Eduardo Menezes explained that the year-end commitment for the Louisiana project reflects advanced negotiations, acknowledging favorable project economics but expressing concern over the volatile U.S. construction market impacting capital estimates. He noted the application for a gray mode air permit, which will influence construction timelines. CFO Melissa Schaeffer clarified that 2026 volume growth is primarily from new assets ramping up in the latter half of the year, with no significant market growth factored into the guidance due to macroeconomic headwinds, implying upside if conditions improve.

Josh Spector asked about the decision timeline for the Louisiana project, specifically if the commitment to communicate by year-end implies a go/no-go decision or if a push-out is possible. He also sought quantification of 'minimal volume growth' in the 2026 guidance and whether the current macroeconomic environment is fully baked in.

Answer

Eduardo Menezes, CEO, indicated advanced negotiations for the Louisiana project suggest a reasonable chance to communicate by year-end, but highlighted the complexity and concerns about the hot U.S. construction market affecting capital estimates. Melissa Schaeffer, CFO, clarified that 2026 volume growth is primarily from new assets ramping in the second half, with no significant market growth forecasted due to macroeconomic headwinds, though an improved macro would boost results.

Josh Spector from UBS Group AG followed up on the Americas volume, asking for the specific impact of the World Energy project exit and whether this would be a recurring headwind.

Answer

CFO Melissa Schaeffer specified that the World Energy project contributed approximately $24 million in the prior-year quarter. She emphasized that this was a one-time item and the company does not expect this headwind to continue in future quarters.

Josh Spector sought clarification on the cash and balance sheet comments, specifically reconciling the Q3 cash position to year-end expectations before and after buybacks, and asked about the margin improvement plan's dependence on macro demand versus productivity.

Answer

CFO Antonella Franzen clarified that the $1 billion pro forma cash target is for the new DuPont after CUNY separation, before the ASR, and noted potential commercial paper by year-end due to separation costs. She explained that margin expansion comes from revenue growth, stranded cost removal (40 bps over three years), and productivity greater than inflation (up to 50 bps), with healthcare and water providing consistent mid-single-digit growth.

Josh Spector sought clarification on the cash and balance sheet comments, specifically bridging the expected $1 billion cash position with his own higher estimates, considering Q4 free cash flow and buybacks. He also asked if a softer macro next year would allow for pulling forward productivity for margin expansion, or if margin improvement is more volume-dependent.

Answer

Antonella Franzen, Chief Financial Officer, clarified that the $1 billion cash target is for the new DuPont pro forma, after CUNY's cash allocation and before the ASR and separation costs, with Aramidz proceeds expected in Q1 2026. She explained that margin expansion is partly volume-dependent but also driven by stranded cost removal (100% in control, targeted by end of year two) and productivity greater than inflation (up to 50 basis points), with healthcare and water expected to maintain mid-single-digit growth.

Josh Spector of UBS Group questioned the future Qunity's high exposure to China relative to peers and asked about the status of a potential divestment of the Aramid business ahead of the Investor Day.

Answer

Jon Kemp, President of the Electronics division, clarified that over half of the China exposure is in the PCB/ICS business, reflecting industry concentration there, and he expects the overall mix to normalize. CEO Lori Koch declined to comment on divestiture rumors but reiterated the strategic focus on shifting the portfolio to healthcare and water.

Josh Spector inquired about IFF's ability to respond to a persistent 1% growth environment in 2026, specifically asking what actions and levers IFF has to deliver earnings growth higher than that, through self-help or other initiatives.

Answer

CFO Michael DeVeau acknowledged the importance of growth for incremental margins but emphasized that if the market remains in the 1-2% range, IFF is fully focused on its cost structure to generate profitability improvement. He highlighted ongoing productivity efforts, including streamlining corporate functions, leveraging automation, and redesigning processes, as key levers. He also mentioned contingency planning to maximize profitability in a lower growth environment.

Josh Spector inquired about IFF's ability to deliver earnings growth higher than a potential 1% consumer growth environment in 2026, asking if there are self-help actions or other levers in flight to achieve this.

Answer

CFO Michael DeVeau acknowledged the importance of growth for incremental margins but emphasized the need to prepare for a 1-2% market growth scenario by working on the cost structure to generate profitability improvement. He stated that IFF is fully focused on driving productivity through streamlining corporate functions, leveraging automation, and redesigning processes, believing there are still opportunities. He confirmed contingency planning is in place to accelerate these areas and maximize profitability even in a lower growth environment.

Josh Spector asked for the Scent segment's outlook for Q3 and Q4, focusing on the divergent trends between Fine/Consumer Fragrance and the drag from Fragrance Ingredients.

Answer

CFO Michael Deveau projected continued strong performance in Fine Fragrance and low single-digit growth in Consumer Fragrance. He identified Fragrance Ingredients as the primary pressure point, expecting it to be down at levels similar to Q2 for the rest of the year due to weakness in commodities. He added that IFF is reinvesting in new molecules to strengthen its specialty portfolio.

Josh Spector asked if the Novelis outage and aluminum supply had any impact on Ball Corporation's Q3 or Q4 volumes or cost expectations. He also inquired more broadly about consumer elasticities and the sensitivity of consumers to higher prices for carbonated soft drinks and beer in the coming year.

Answer

Daniel Fisher, CEO, confirmed that the Novelis outage had no impact on Ball's Q3 or Q4 volumes or cost expectations. Regarding consumer elasticities, Mr. Fisher expressed encouragement, noting that while consumers have been facing smaller grocery baskets for three years, they are now prioritizing spending on food and beverages over travel or large capital purchases. He believes this shift in consumer focus positions Ball well, as it indicates a necessity to focus on essential items.

Josh Spector asked for details on the $20 million of period-related expenses in the HIP segment, specifically what they entailed and if they were a one-quarter cost or likely to linger. He also inquired if more integration costs are expected in Q4 and if these numbers are included in the $200 million reliability bucket or are entirely separate.

Answer

Steven Bender, EVP and CFO, clarified that the $20 million in period-related expenses were administrative, transition, and integration related, and are non-recurring in nature. He does not expect similar integration costs in Q4 or in the near term, and they are separate from the reliability initiatives.

Josh Spector asked for details on the $20 million of period-related expenses in the HIP segment, specifically whether they were a one-quarter cost or likely to linger.

Answer

Steve Bender (EVP and CFO) clarified that the $20 million in period-related expenses for HIP were administrative, transition, and integration-related. He stated that these costs are considered non-recurring and are not expected to be present in Q4 2025 or to repeat in the near term.

Josh Spector of UBS asked for clarification on the HIP segment's outlook, which implies a sales acceleration from down 3% year-over-year in the first half to up 3% in the second half. He also questioned the timing of the financial benefit from the Pernis epoxy site shutdown, asking if it would impact the second half of 2025 or be a 2026 event.

Answer

EVP & CFO Steven Bender attributed the HIP outlook to the diverse product mix and particular strength in the water infrastructure business, which is benefiting from the Infrastructure Act. He clarified that the financial benefit from the Pernis shutdown is largely a 2026 impact, with only a minor benefit expected as the plant winds down later in 2025.

Josh Spector from UBS asked for more details on Micromax's top and bottom-line growth over the past couple of years, whether it would have been accretive to Element Solutions Inc's growth, and if it improves the stability of overall Element Solutions Inc growth. He followed up by asking about Element Solutions Inc's capital flexibility, pro forma leverage post-deal, and willingness to increase leverage for larger opportunities.

Answer

President and CEO Benjamin Gliklich explained that Micromax's revenue, excluding metals, has been roughly in line with Element Solutions Inc's assembly business, possibly a little faster, over the past couple of years, with very stable profits. He noted the business fared better than Element Solutions Inc's electronics segment during the 2022-2023 electronics drawdown, enhancing stability. Mr. Gliklich clarified that the 2.5x pro forma net leverage at year-end accounts for Micromax's expected contribution and full purchase price. He reiterated the long-term target ceiling for leverage is 3.5x, indicating ample capacity for incremental capital deployment.

Josh Spector asked for more color on Micromax's top and bottom-line growth over the past couple of years, whether it would have been accretive to ESI's growth, and if it improves the stability of ESI's overall growth. He also followed up on Element Solutions Inc's capital flexibility, the pro forma leverage of 2.5 times after the deal, and the willingness to increase leverage for future opportunities, including stock buybacks.

Answer

President and CEO Benjamin Gliklich explained that Micromax's revenue, excluding metals, has stable profits and fared better than ESI's electronics business during the 2022-2023 drawdown, enhancing stability. He noted its growth was roughly in line with ESI's assembly business, with opportunities for acceleration in specialized applications like aerospace, defense, healthcare, and data centers. Regarding leverage, Mr. Gliklich clarified the 2.5x is pro forma, expecting it to return closer to 2 by end of 2026 without further deployment, well below the 3.5x long-term target ceiling, indicating ample capacity for incremental capital deployment.

Josh Spector from UBS Group asked for more detail on the composition of the electronics portfolio's growth, seeking to understand the contribution from high-growth areas versus legacy businesses, and followed up on the outlook for incremental margins.

Answer

CFO Carey Dorman detailed that outgrowth is driven by emerging vectors like high-performance computing, Chinese EVs, and satellites, which are growing at high rates and increasing their mix in the portfolio. President and CEO Benjamin Gliklich added that recent margin headwinds were transient and reiterated that the historical 30-40% incremental margin expectation is a conservative view going forward.

Josh Spector from UBS Group requested more detail on the growth composition within the electronics portfolio, contrasting high-end compute with legacy markets, and asked about the future outlook for incremental margins given ongoing investments.

Answer

EVP & CFO Carey Dorman explained that growth is coming from emerging vectors like data centers and Chinese EVs, which are growing at high rates and blending the overall growth rate higher. President & CEO Benjamin Gliklich stated that recent margin pressure was transient due to one-time effects like corporate allocations and pre-revenue Cuprion investments, and the historical expectation of 30-40% incremental margins remains a conservative outlook.

Josh Spector asked about Ecolab's confidence in achieving low to mid-teens EPS growth in 2026, specifically whether the company still believes it can reach this target with 0-1% volume growth, relying on the price-cost equation, or if an acceleration in volume would represent upside.

Answer

Christophe Beck, Ecolab's Chairman and CEO, affirmed that he sees the situation similarly to how Josh Spector described it. He expressed confidence in a strong 2026, comparable to 2025, with 3-4% top-line growth, positive volume, and 2-3% pricing to drive 12-15% EPS growth. Beck also expects at least 100 basis points of operating income margin expansion, bringing the company closer to its 20% target for 2027. He noted that if market conditions improve and end markets are more receptive, it would represent upside to these projections.

Josh Spector asked if Ecolab maintains its confidence in achieving low to mid-teens EPS growth in 2026 with 0-1% volume growth, similar to previous statements, or if the outlook has changed.

Answer

Christophe Beck, Chairman and CEO of Ecolab, affirmed that he sees the situation similarly to how Josh Spector described it. He expects 2026 to be a strong year, comparable to 2025, with 3-4% top-line growth, positive volume, and 2-3% pricing to drive 12-15% EPS growth. Beck also anticipates at least 100 basis points of operating income margin expansion, bringing the company closer to its 20% target for 2027. He noted that while FX might be a headwind and inflation a slight headwind, any market improvements would represent upside.

Josh Spector of UBS asked for quantification of the current reinvestment rate versus prior plans, where the investment is going given that SG&A is down, and the expected payback timeline.

Answer

Christophe Beck, Chairman & CEO, estimated the incremental investment at roughly one percentage point in CapEx and half a point in SG&A, focused on sales firepower, digital tech, and the One Ecolab platform. He used Life Sciences as an example of the payback strategy, where the underlying margin (mid-20s) is higher than the reported margin (mid-teens), with the difference being reinvested for long-term growth.

Josh Spector's office asked for clarification on the financial impact of moving a portion of the Healthcare business to the Institutional segment and the profile of the remaining Life Sciences business.

Answer

Christophe Beck, Chairman and CEO, clarified that moving the ~$0.5B, low-margin Healthcare business will impact the Institutional segment's top line and margin by about one percentage point. The remaining standalone Life Sciences business has sales between $500M-$1B and a strong underlying OI margin in the mid-20s, though heavy investment currently brings the reported margin to the low-to-mid-teens.

Josh Spector asked about the 'less input cost recovery' in Europe, assuming it was non-metals related, and if it could be recovered. He also sought to size the impact of North America's temporary network issues and whether they were resolved or indicative of persistent inefficiencies in a tighter market.

Answer

CEO Oliver Graham clarified that Europe's input cost issue was related to European aluminum prices, a legacy of the Ukraine war and energy spike, which eventually translated into price rises. He stated that North America's network issues were resolved going into Q4, having cost 1-2% growth in Q3, and were a consequence of strong H1 growth pushing shortages.

Josh Spector inquired about the nature of the 'less input cost recovery' in Europe, assuming it's non-metals related, and its recoverability. He also asked for details on the North America temporary network issues, including their size, resolution status, and whether they indicate persistent inefficiencies in a tighter market.

Answer

Oliver Graham (CEO) confirmed that North America's network issues, which contributed to 1-2% lost growth in Q3, are resolved for Q4, with current focus on metal supply. He clarified that the European input cost recovery issue stems from European aluminum prices, a legacy of the Ukraine war and energy spike, and is not a new development.

Josh Spector of UBS questioned the financial impact of the aluminum pricing lag in Europe during Q2 and its potential for recovery. He also pointed out the conservative implied Q4 guidance, which suggests a significant year-over-year decline in EBITDA.

Answer

CEO Oliver Graham and CFO Stefan Schellinger explained the aluminum timing impact was due to price and currency movements and is not expected to reverse in the near term. Regarding the Q4 outlook, Schellinger cited ongoing cost headwinds in Europe, a strong prior-year comparison, and an anticipated slowdown in Brazil's outsized volume growth as key reasons for the cautious guidance.

Josh Spector inquired about the potential range for Dow's capital expenditures (CapEx) in 2026, specifically asking for a low-end estimate if the Alberta project is not pursued and a high-end estimate if its ramp-up continues.

Answer

Jim Fitterling, Chair and Chief Executive Officer, indicated that if current CapEx trends continue, 2026 CapEx could be around $2.5 billion, including approximately $1 billion for maintenance. He noted that the Texas and Alcoxolation units are now operational, and some downstream silicones projects are planned. He reiterated that no new projects will commence until there is clearer visibility on demand, with the decision on Alberta's construction start to be announced in January based on market triggers and value creation.

Josh Spector inquired about the potential range for Dow's capital expenditure (CapEx) in 2026, specifically asking for a low-end estimate if the Alberta project is not pursued and a high-end estimate if its ramp-up continues.

Answer

Chair and CEO Jim Fitterling indicated that if Dow continued its current CapEx trajectory, 2026 could see another $2.5 billion, including about $1 billion for maintenance. He noted that some projects, like the recently started Texas units, would come off the docket, while downstream silicones projects would be added. Fitterling reiterated that the Alberta project is delayed, not canceled, and a decision on its timeline would be provided in January, factoring in market demand and value creation.

Josh Spector from UBS Group AG asked about Dow's polyethylene operating rates, inquiring if lower rates contributed to the Q2 EBITDA weakness and whether a significant improvement is assumed in the Q3 guidance.

Answer

COO Karen Carter acknowledged that industry operating rates dropped in Q2, particularly in April, due to tariff-related export disruptions. She stated that North American industry rates are now above 90%. For Q3, she confirmed Dow expects earnings improvement driven by both anticipated price increases and volume uplift from the new, fully sold-out PolySeven train, leading to higher operating rates for Dow.

Josh Spector asked about free cash flow deployment, specifically the strategy of paying off debt versus refinancing and buybacks, and whether there's a need to reduce gross debt levels. He also inquired about the direct and indirect impact of the Novelis fire on Crown's volumes and the broader industry.

Answer

SVP and CFO Kevin Clothier and President and CEO Tim Donahue clarified that cash on the balance sheet is intended to cover 2026 debt maturities, maintaining the 2.5x net leverage target without needing to increase gross debt. Tim Donahue stated the direct impact of the Novelis fire on Crown is not large, but the company is monitoring indirect impacts on customers, expecting no negative impact to Crown in the coming months.

Josh Spector asked for clarification on free cash flow deployment, specifically if Crown Holdings intends to reduce gross debt levels or if the plan is to refinance and prioritize buybacks. He also inquired about the impact of the Novelis fire on Crown's volumes and the broader industry.

Answer

SVP and CFO Kevin Clothier clarified that the cash on the balance sheet is intended to pay off debt coming due, maintaining the net leverage ratio around 2.5x without needing to 'lever up.' President and CEO Tim Donahue added that the company expects to remain around the 2.5x target even after dividends and buybacks. Regarding the Novelis fire, Donahue stated that the direct impact on Crown is not as large as on others, but they are monitoring indirect impacts, such as Novelis potentially shifting production to can sheet, and do not foresee a negative impact on Crown over the next several months.

Josh Spector of UBS Group AG questioned the sustainability of the high Q2 Fire Safety margins, asked for a breakdown of the Specialty Products segment's EBITDA growth drivers, sought details on the $20 million Compass Minerals settlement, and inquired about changes to government contract structures.

Answer

CEO Haitham Khouri affirmed that the Q2 Fire Safety performance is a sustainable baseline the company will build upon. He attributed Specialty Products' strength to the incremental, high-performing IMS acquisition and a solid base business, which offset headwinds from the Flexus-operated Saje plant. CFO Kyle Sabol clarified the Compass settlement included ~$5 million in tangible assets. Khouri also confirmed the company is actively working to 'de-variabilize' revenue through mutually beneficial contract changes with customers.

Josh Spector from UBS Group revisited the Thermal & Specialized Solutions (TSS) segment's performance, asking if the current high margins and top-line growth represent a new sustainable base or if some giveback is expected. He also asked if the insurance proceeds from the New Jersey settlement could be applied to other PFAS litigation, such as in North Carolina.

Answer

SVP & CFO Shane Hostetter acknowledged the strong TSS margins but noted some raw material cost increases could have a slight impact, though he reiterated confidence in margins remaining above 30%. He stated that while the business has strong prospects, future competitive dynamics are a factor. Regarding insurance, he clarified the current focus is on applying the proceeds to the New Jersey settlement but the company will continue to explore other avenues.

Josh Spector of UBS Group AG asked for clarification on the volume assumptions for the non-red meat portions of the Food business for the second half, given the significant headwinds in red meat.

Answer

President, CEO & Director Dustin Semach explained that the broader volume weakness is not isolated to red meat. He noted that overall global protein production is down about one percent, with markets including dairy, poultry, and smoked/processed meats all experiencing slight declines. He attributed this to current market demand conditions rather than a structural, long-term issue.

Josh Spector from UBS asked about the potential impact of new European frameworks for energy support and reduced regulation on the chemical industry and on LyondellBasell's reshaped portfolio.

Answer

CEO Peter Vanacker acknowledged positive momentum in European regulations for the circular market, such as PPWR and mass balancing rules. While he sees general support for the chemical industry as a positive sign, he noted 'the devil is in the details' and confirmed these developments do not change LYB's strategy, including the planned sale of four European assets.

Josh Spector of UBS Group AG asked if the improvement in Advanced Materials, driven by Power and Industrial markets, was structural. He also inquired about a specific benefit in the Performance Products segment.

Answer

Chairman, President & CEO Peter Huntsman described the Q2 Advanced Materials performance as a 'more normalized run rate' rather than a one-time event. EVP & CFO Phil Lister clarified the Performance Products benefit was a reversal of a loss contingency accrual, which was offset by other items and is not expected to have a significant net impact in Q3.

Josh Spector from UBS Group questioned the strategy for managing free cash flow and working capital, specifically asking about the trade-off between reducing mining production to manage inventory versus preserving EBITDA.

Answer

CEO John Romano stated that while current production cuts are focused on TiO2, the company is evaluating all levers, including flexing mining and smelter operations, to balance cash and EBITDA. CFO John Srivisal added that they expect to generate cash from working capital in the second half, aided by production cuts and the cost improvement program.

Josh Spector from UBS Group asked for a detailed breakdown of the cost savings drivers in Q2 and the outlook for these components in the second half of the year.

Answer

EVP and CFO Andrew Sandifer explained that Q2 cost savings were driven by three main factors: lower raw material costs, improved fixed cost absorption from normalized plant capacity, and benefits from restructuring actions. He noted that while these three drivers will persist in Q3 and Q4, the overall cost tailwind will be stronger in Q3, largely due to a more significant benefit from the absence of fixed cost absorption challenges compared to Q4.

Josh Spector of UBS sought clarification on the second-half EBITDA bridge, specifically questioning the components of the $100 million price/FX headwind given current foreign exchange rates.

Answer

CFO Andrew Sandifer explained that price and FX are shown together due to their interconnection in many markets. He clarified that the H2 pricing headwind will be slightly less than the full-year guidance, but the drop-through of FX headwinds to EBITDA will be 'a bit heavier' than the historical 50% rate this year, which accounts for the combined negative impact.

Josh Spector from UBS sought clarification on the one-time nature of the pricing true-up in Mobility and asked for the rationale behind the expected year-over-year sales growth in Performance Coatings in Q4, given the soft Refinish outlook.

Answer

CFO Carl Anderson clarified that while some Mobility pricing actions were one-time, others are sustainable, such as new business wins in Brazil. He expressed confidence in delivering full-year Mobility margins well above 17%. For Q4 Performance Coatings, Anderson explained that while year-over-year Refinish comps are tough, the business has shown sequential stability from Q1 through the Q3 guide, and they expect a pickup in Q4 based on channel and EMEA trends.

Josh Spector questioned the drivers behind the strong incremental margin implied in the Q3 guidance, which appears higher than the recent trend, asking if it was due to mix, cost savings, or other factors.

Answer

EVP & CFO Ed Schlesinger and Chairman & CEO Wendell Weeks both affirmed that strong incremental margins are a core element of the SpringBoard plan. With significant manufacturing capacity and technical capabilities already in place, higher sales translate directly into enhanced profitability, and the company is simply making faster progress than initially planned.

Josh Spector asked for the drivers behind the strong incremental pre-tax EBIT margin of approximately 50% implied in the Q3 guidance, which is significantly higher than the recent run rate.

Answer

CFO Ed Schlesinger attributed the strong incremental margin to sales growth leveraging an existing cost structure and disciplined opex management. CEO Wendell Weeks added that this is a core tenet of the SpringBoard plan, as the company is now benefiting from prior investments in manufacturing and technical capabilities, leading to enhanced profitability as sales grow.

Josh Spector of UBS followed up on raw material inflation, asking for the latest view for the year and clarification on whether the current 1-2% inflation rate is a mitigated figure or expected to increase.

Answer

Chairman & CEO Frank Sullivan clarified that the 1-2% inflation figure is what the company is currently seeing in Q1, with the impact disproportionately weighted towards the Consumer business due to packaging, propellants, and some pigments. He noted the unmitigated impact of tariffs could be 4-5% for the year, but the future trajectory remains uncertain.

Josh Spector from UBS Group AG asked about the financial impact of tariffs in Q2 and Q3, specifically questioning whether the company was able to fully offset the increased costs within the quarter through pricing and sourcing adjustments or if there is a timing lag.

Answer

SVP & CFO Greg Lovins stated that the tariff impact, which began mid-Q2, was a very low single-digit inflationary effect that was largely offset within the quarter by a combination of strategic surcharges and sourcing shifts. He anticipates a full-quarter impact in Q3 but expects to continue offsetting it with the same measures, pending any new tariff announcements.

Josh Spector from UBS Group AG asked about the financial impact of tariffs in Q2 and Q3, specifically questioning whether the company was fully offsetting the increased costs within the quarter or if there was a timing lag.

Answer

SVP & CFO Greg Lovins clarified that the tariff-related inflation began mid-Q2 and was largely offset within the quarter through a combination of pricing surcharges and strategic sourcing shifts. He anticipates a further sequential cost increase in Q3 due to the full-quarter impact but expects to manage it similarly, pending potential new tariff actions.

Josh Spector from UBS Group inquired about the tariff cost impact, asking if the company was fully offsetting the costs within Q2 and Q3 through pricing and sourcing shifts, or if there was a lag in recovery.

Answer

SVP & CFO Greg Lovins explained that the tariff inflation began mid-Q2 and was largely offset within the quarter through a combination of strategic sourcing adjustments and tariff-related pricing surcharges. He noted that there will be a sequential increase in the cost impact in Q3 due to a full quarter's effect, but the company expects to continue offsetting it with the same measures.

An analyst on behalf of Josh Spector from UBS asked about the negative price/mix trend in the Texture and Healthful Solutions (THS) segment and the outlook for this metric. He also inquired about the strength of customer reformulation conversations.

Answer

CFO Jim Gray explained that the negative price/mix in THS is a result of lapping high single-digit increases in 2024 and passing through lower corn costs. He expects this impact to become 'very de minimis' for the rest of the year. CEO Jim Zallie added that this follows two years of robust price/mix growth and that the company is now seeing strong volume growth and price stability. Both executives reiterated that customer engagement on innovation remains high.

Chris Perrella, on for Josh Spector of UBS, asked for clarification on the Energy Storage margin trajectory for 2025 and inquired about the company's long-term maintenance capital expenditure level.

Answer

CFO Neal Sheorey explained that Q2 margins will be lower than Q1 due to a sales mix shift towards more spot-priced volumes as overall volumes ramp up. CEO Jerry Masters and CFO Neal Sheorey clarified that while the long-term CapEx target is ~6% of revenue, the current sustaining capital run-rate is in the $400-$500 million range.