Laurence Alexander

Laurence Alexander requested an update on the progress of the Saudi JV with Maaden and MP Materials' capacity for similar JVs in Europe or South America. He also asked about the approach to hiring formulation engineers and the strategy for offering a narrower or broader range of SKUs to customers.

Answer

CEO James Litinsky explained that the Maaden JV requires finalizing formal documents and detailed cost/process flow estimations, describing it as a significant project that will be built methodically. He stated MP Materials is opportunistic regarding other JVs but currently has many projects underway. CFO Ryan Corbett added that customers are pushing for heavy rare earth-free formulations, and 10X is designed for significant flexibility in magnet specifications and grades.

Laurence Alexander asked for an update on the progress of the Saudi JV with Maaden and MP Materials' capacity for similar JVs in Europe or South America, and inquired about the company's strategy for hiring formulation engineers and managing the number of SKUs offered to customers.

Answer

CEO James Litinsky detailed the two tracks for the Maaden JV: finalizing formal documents with partners and working on process flow and facility design, emphasizing a methodical approach. He stated that MP Materials remains opportunistic for future JVs, leveraging its expanded organizational depth. CFO Ryan Corbett added that the company is seeing a customer push for heavy rare earth-free formulations, has significantly reduced heavy rare earth content in its EV magnet formula, and is building out 10X with flexibility for various magnet specifications and SKUs.

Laurence Alexander asked about the impact of the 10-year DoD support program on MP Materials' cost of capital, balance sheet strategy, and potential cyclical risk after the 10-year period, questioning if the strategy is to double down on vertical integration or if government support extension or a second plank is needed.

Answer

Jim Litinsky (Founder, Chairman and CEO) countered that physical AI will drive explosive growth in rare earth magnetics, mitigating demand concerns in 10 years. He views the DoD deal as ensuring a successful national champion in the short term, paving the way for broader supply. He expects MP Materials to have grown and moved further downstream, making the DoD support a less material portion of their business by then.

Laurence Alexander asked about the implications of the 10-year Department of War support program on MP Materials' strategy, cost of capital, and balance sheet, specifically concerning potential cyclical risk or glut at the end of the period. He questioned if the strategy is to double down on vertical integration to ride through the transition or if the government needs to extend support, or if MP Materials needs to add a second plank to smooth volatility post-support.

Answer

Jim Litinsky (Founder, Chairman and Chief Executive Officer) countered that he believes the future holds explosive growth in rare earth magnetics due to physical AI, making demand in 5-10 years not a concern. He views the 10-year DoW deal as a short-term measure to ensure a thriving domestic industry and pave the way for broader supply, rather than a long-term dependency. He expects MP Materials to have grown and moved further downstream, making the DoW support a less material portion of their business by the end of the term.

Laurence Alexander questioned the implications of being a 'US national champion,' asking about sales to Europe, the status of the Saudi Arabia MOU, and the company's return on capital hurdles for new projects given the high visibility from recent deals.

Answer

CEO James Litinsky stated there are no restrictions on selling to Europe, only to hostile states. He confirmed the primary focus for capital and execution is on domestic projects for GM, Apple, and the DoD. Future international opportunities, like the one in Saudi Arabia, will be pursued in a more 'capital-light' manner, which he believes could accelerate returns for MP shareholders.

Laurence Alexander questioned the company's working capital needs for the remainder of the year and its view on a minimum cash balance. He also asked about the status of discussions with other automakers and the company's priorities in negotiations, such as return on capital versus securing funding for a ramp-up.

Answer

CFO Ryan Corbett explained that the company is entering a 'harvesting mode' from its investments and that the working capital impact from stockpiling concentrate is minor and manageable given their strong balance sheet. He and CEO Jim Litinsky stated that the priority in partner discussions is capitalizing on a 'generational opportunity' to scale the business, expecting significant commitments from industry and government to support acceleration, which must be rewarding for shareholders.

Laurence Alexander asked if all target SKUs for the GM contract have been qualified, what constitutes a high-quality contract for MP now, and the company's philosophy on the timeline for expanding engineering talent to pursue adjacent markets.

Answer

CFO Ryan Corbett clarified that while magnet quality is high, the full automotive qualification (PPAP) process is lengthy and requires production runs on full-scale equipment later in the year. CEO James Litinsky emphasized that the primary focus is flawless execution for GM. He noted future growth will be methodical and likely target the physical AI sector, where a non-China supply chain is critical, and that they will not rush expansion but act as thoughtful stewards of capital.

Laurence Alexander from Jefferies sought a higher-level view on Ecovyst's M&A opportunity set within the sulfuric acid landscape. He asked if there's a qualitative titration of assets, distinguishing between addressable market segments and those assets Ecovyst would have no interest in, or if virtually all sulfuric acid-producing assets are potentially of interest.

Answer

CEO Kurt Bitting indicated that Ecovyst has broad interest in sulfuric acid assets, as they are a leader in both regeneration and virgin sulfuric acid production, and would have use for both types. He added that this interest extends to other sulfur chemistries (e.g., sulfur derivatives for water treatment) and high-value service businesses like regeneration services, hazardous waste services, and Chem32, where expanding further would also be of interest.

Laurence Alexander asked for a higher-level view on Ecovyst's M&A opportunity set within the sulfuric acid landscape, specifically inquiring if there's a significant portion of the market that Ecovyst would have no interest in due to asset quality or other factors, or if potentially all assets are of interest.

Answer

CEO Kurt Bitting stated that Ecovyst has a broad interest in sulfuric acid assets due to its leadership in both regeneration and virgin sulfuric acid production, servicing a wide swath of the market. He added that this interest extends to other sulfur chemistries (e.g., sulfur derivatives for water treatment) and high-value service businesses like regeneration services, hazardous waste services, and Chem32, indicating a desire to expand further into these spaces.

Laurence Alexander asked for the sales contribution from heavy-duty and sustainable fuels, the strategic trade-offs of the Zeolyst JV, and whether the guidance range assumes normal timing lumpiness or continued negative timing.

Answer

CFO Michael Feehan noted that sustainable fuels were previously around 10% of AM&C sales and are now likely a bit below that, with hydrocracking being the largest component. CEO Kurt Bitting described the Zeolyst JV as a successful, multi-dimensional partnership that has expanded beyond its original scope. Feehan confirmed the guidance assumes a typical level of order timing volatility, not a continuation of negative timing.

Laurence Alexander asked for perspective on how the competitive market for power generation has changed since the last cycle and the capacity expansion needed to keep up with announced order books. He also inquired about the time frame for the Facet acquisition to achieve an acceptable return on capital.

Answer

Rich Lewis, Incoming President and CEO, noted that power generation demand is very high, with a different dynamic now involving more balanced commercial deals. He stated that Donaldson is significantly increasing capacity at its Mexico facility and feels well-aligned with customer build capabilities. Brad Pogalz, Chief Financial Officer, explained that Facet is a strategic acquisition, not a synergy play, and is expected to reach its cost of capital return within a 5-year horizon, generating immediate cash flow and achieving earnings accretion rapidly, with a goal of year two.

Laurence Alexander asked for perspective on how the competitive market in power generation has changed since the last cycle and how much more capacity expansion would be needed to keep up with announced equipment maker order books. He also inquired about the time frame for the Facet acquisition to achieve an acceptable return on capital.

Answer

Rich Lewis, Incoming President and CEO, stated that the current power generation dynamic shows more interest in balanced commercial deals, and Donaldson is increasing capacity in Mexico, feeling well-aligned with customer build capabilities. Brad Pogalz, Chief Financial Officer, indicated that Facet, being a strategic acquisition, would likely reach its cost of capital return in a 5-year time horizon, with earnings accretion expected rapidly, by year 2.

Laurence Alexander asked for clarification on the overall rate of share gains and their impact on Q1 sales or the full-year outlook, to understand how much Donaldson is outperforming end markets. He also questioned if PowerGen acceleration would increase the net contribution from share gains and the company's view on future capacity needs for data center build-out over the next four to five years.

Answer

CEO Tod E. Carpenter stated that share gains in mature markets typically contribute low single-digit annual growth, while immature or project-based businesses can be lumpy. He confirmed that PowerGen acceleration would increase the net contribution from share gains, noting the business is at full capacity for the balance of the fiscal year. Regarding future capacity, CEO Tod E. Carpenter expressed confidence in Donaldson's strong position due to past investments, expecting to handle future needs through normal cadence without typical rushes.

Laurence Alexander of Jefferies Financial Group asked for an update on near-term demand trends in China and how current backlogs compare to typical levels. He also posed a long-term question about whether overall company margins could reach the low 20s in a scenario of sustained, decent end-market demand.

Answer

Chairman, CEO & President Tod Carpenter stated that while China's orders are up against easy comps, the company remains cautiously optimistic. He confirmed that current backlogs support the fiscal 2026 guide and that late backlogs are below pre-pandemic levels. On long-term margins, CFO Brad Pogalz acknowledged that a rebound in lower-margin OE businesses would create mix pressure, but structural cost improvements provide a path for continued operating margin expansion, calling the goal 'absolutely alive and well.'

Laurence Alexander asked about the dynamics in the off-road market, specifically whether potential tariffs might trigger a destock or pre-buy cycle, and whether the softer near-term outlook represents lost demand or pent-up demand for fiscal 2026.

Answer

CEO Tod Carpenter stated that they have not seen any pre-buying or destocking from off-road customers related to tariff discussions, noting the only behavioral change has been more inquiries about their manufacturing capabilities outside the U.S. He added that it is too difficult to determine if the current softness is lost or deferred demand, as it's being driven by end-market conditions rather than customer inventory strategies.

Laurence Alexander asked for a characterization of the M&A pipeline, including its regional mix. He also inquired about the regional distribution of the company's share gains, asking if they are evenly distributed or tied to specific customer end markets or competitor exposures.

Answer

Joseph Berquist, President and CEO, stated that Q4 M&A activity involved multiple multi-regional or global opportunities that are not anticipated to lead to transactions, but the overall pipeline remains healthy, balancing bolt-on and transformational opportunities. He noted that share gains are broad-based across all three regions, with Asia-Pacific experiencing almost double the rate of gains compared to EMEA and the Americas, driven by growth in markets like India and new plant openings.

Laurence Alexander asked for clarification on the expected performance cadence for 2025, questioning if Q1 is anticipated to run above or below the full-year trend, especially given that easier year-over-year comparisons are expected in the second half.

Answer

CFO Tom Coler clarified that the company anticipates the year will build as it progresses. He stated that Q1 is expected to be the lowest quarter of the year, notwithstanding typical Q4 seasonality, with performance building through Q2 and Q3, which are seasonally the strongest periods.

Laurence Alexander asked about IFF's assumptions for destocking risk in 2026 compared to previous years and when the bottom end of the outlook range should see material improvement from mix shifts, innovation capabilities, and sales force reinvigoration.

Answer

CEO Erik Fyrwald stated that the 1%-4% guidance range for 2026 includes Food Ingredients and accounts for potential reasonable destocking towards year-end. He expects the second half of 2026 to improve as innovation kicks in, building into 2027, and anticipates better market dynamics.

Lawrence Alexander inquired about the assumptions for destocking risk in IFF's 2026 outlook, particularly at the lower end of the guidance range, and when the benefits from mix shift, innovation, and sales force reinvigoration are expected to materially improve the bottom end of the range.

Answer

CEO Erik Fyrwald stated that the 1%-4% outlook includes food ingredients and accounts for a tough macroeconomic environment in H1 2026, with improvement expected in H2 as innovation kicks in. He confirmed that any reasonable destocking risk towards year-end is built into the guidance, expressing confidence in delivering within the stated range.

Laurence Alexander asked about customer feedback regarding inventory levels and their patience with reformulations. He questioned if customers are seeing significant organic growth acceleration from reformulations, or if they might switch to other strategies to protect earnings and cash flow in a slow-growth environment.

Answer

CFO Michael DeVeau noted that some markets, particularly North America, have higher inventory levels, which is factored into IFF's forecast deceleration for that market. Broadly, global inventories feel good. Regarding reformulations, he believes innovation remains a key differentiator in a challenging pricing market, and customers will continue to prioritize it. CEO Erik Fyrwald added that customers are operating with lower inventory due to uncertainty, and IFF is focused on managing its own inventory better while ensuring delivery reliability.

Laurence Alexander asked about customer feedback on inventory levels and their patience with reformulations, specifically whether reformulations are driving significant organic growth acceleration and how long customers will continue this strategy before switching to other ways to protect earnings and cash flow.

Answer

CFO Michael DeVeau noted that some markets, like North America, have slightly higher inventory levels, leading to a slight deceleration in IFF's forecast for that market, but broadly, global inventories are in a good spot. He stated that innovation remains a key driver for customers to differentiate themselves in a challenging pricing environment, and they will continue to prioritize it. CEO Erik Fyrwald added that customers are trying to operate with lower inventory levels due to uncertainty, and IFF is working to manage its own inventories while ensuring delivery reliability.

Laurence Alexander requested more granularity on sequential end-market trends in Taste and Scent, confidence into 2026, and the timing of contributions from innovation investments.

Answer

CEO J. Erik Fyrwald noted a slowdown in Taste in the U.S. and Asia but strength in Europe and Latin America. In Scent, he expects Fine Fragrance to remain strong while Consumer Fragrance sees low single-digit growth. He anticipates Fragrance Ingredients will remain negative in H2 due to commodity pressures, but should flatten in 2026 and grow in 2027 as the specialty portfolio expands.

Laurence Alexander of Jefferies asked for IFF's perspective on the inventory cycle, how it might affect the company, and how management is preparing for potential supply chain adjustments.

Answer

CFO Michael DeVeau addressed the question, noting that while customer weakness can create a lag, the industry recently experienced a significant and lengthy destocking period. He believes customer inventories are not highly elevated, which should mitigate the risk of another major destocking wave. However, he stressed that the company's cautious outlook and focus on productivity are designed to prepare for any scenario.

Dan Rowan, on behalf of Laurence Alexander, asked what customers are saying about the near-term impact of tariff issues on order patterns and how to think about IFF's margin and ROIC targets in the next 3 to 5 years.

Answer

CEO Jon Erik Fyrwald responded that customers are generally conservative about volume growth due to economic uncertainty, which drives them to seek innovation—an opportunity for IFF. CFO Michael DeVeau addressed the long-term targets, stating that both margins and ROIC are expected to be 'higher.' He emphasized a concentrated effort on improving Return on Invested Capital in 2025 through disciplined spending, with more formal targets to be provided later in the year.

Laurence Alexander inquired about any material differences in contract structures developing between stationary storage and automotive lithium markets regarding supply reliability, quality control, or product formulation, and Albemarle's perspective on lessons learned in balance sheet management, as well as the potential competitive threats from solid-state and sodium-ion batteries.

Answer

Kent Masters, Chairman and CEO, and Eric Norris, Chief Commercial Officer, explained that the material flows through the same supply chain. The main difference is that stationary storage primarily uses carbonate (LFP, mostly China, spot market), while automotive uses a combination, with hydroxide (Western, long-term contracts) having more stringent quality requirements. On balance sheet management, Kent Masters emphasized learning from market cycles. Regarding new battery technologies, he sees solid-state as positive for lithium demand due to higher lithium intensity, but not mass market immediately. For sodium-ion, he expects it to be a relevant technical player in fixed storage, but it needs technical development and scale, with limited EV penetration due to volumetric energy density constraints. Eric Norris added that LFP is currently more cost-competitive than sodium-ion at current prices.

Laurence Alexander asked about evolving contract structures between stationary storage and automotive markets, and Albemarle's perspective on solid-state and sodium-ion batteries as potential competitive threats.

Answer

Kent Masters, Chairman and CEO, and Eric Norris, Chief Commercial Officer, Albemarle, clarified that material flows through the same supply chain, but product mix differs: stationary storage primarily uses carbonate (LFP, China, spot market), while automotive uses hydroxide (Western, long-term contracts) with more stringent quality. They view solid-state as positive for lithium demand (2x lithium intensity) but not yet mass market. Sodium-ion is considered relevant but requires technical development and scale, limited by volumetric energy density to specific storage applications, with an estimated 10-15% penetration in fixed storage by decade-end.

Laurence Alexander asked about Albemarle's appropriate return hurdles for new projects, given policy shifts, and whether the current cost structure would allow for positive free cash flow in 2026 if prices do not improve.

Answer

Kent Masters, CEO, stated that the company's return criteria have not changed, but current market pricing does not justify new investments. He emphasized a focus on balance sheet, cash, and cost reduction to compete at lower price levels. He declined to forecast 2026 free cash flow but affirmed the ongoing commitment to cost discipline to navigate market volatility.

Laurence Alexander asked about the appropriate return hurdles for new projects (vs. existing assets/Kings Mountain) given policy shifts in Latin America and the U.S., and if the cost structure allows for positive free cash flow next year if prices don't improve.

Answer

CEO Kent Masters stated that their return criteria haven't changed, but current market pricing doesn't meet those hurdles, hence the focus on balance sheet, cash, and cost reduction to compete at lower levels. He emphasized planning for the bottom of the cycle while remaining agile for investment opportunities, leveraging resources like Kings Mountain. He declined to forecast 2026 free cash flow but affirmed continuous focus on cost reduction to navigate market volatility.

Laurence Alexander of Jefferies Financial Group questioned whether Albemarle could sustain positive free cash flow through 2028 if lithium prices remained low at $9/kg and what incremental adjustments would be necessary.

Answer

CFO Neal Sheorey affirmed that maintaining positive free cash flow is the goal. He outlined several levers, including the full-year benefit of 2025's cost savings, increased production from owned facilities reducing tolling costs, lower JV capital expenditures potentially increasing dividends, and continued discipline on Albemarle's own CapEx.

Dan Resonance, on for Laurence Alexander of Jefferies, asked how Albemarle's strategy would shift if government subsidies kept lithium prices depressed.

Answer

CEO Jerry Masters responded that the core strategy would not change. He emphasized that Albemarle's focus is on leveraging its world-class, low-cost resources and maintaining cost efficiency to ensure it remains competitive and profitable even at the bottom of the price cycle.

Laurence Alexander from Jefferies asked what portion of Energy Storage volumes are under long-term contract and sought clarity on how the $350 million prepayment impacts EBITDA recognition versus cash flow.

Answer

CEO Jerry Masters and CCO Eric Norris clarified that about 50% of lithium salts volumes are under long-term agreements with price floors. CFO Neal Sheorey explained that the $350 million cash prepayment was received upfront, while the corresponding EBITDA will be recognized incrementally over the next five years as the product is delivered at market-indexed prices.

Laurence Alexander inquired about the interplay between Ecolab's M&A targets and its margin targets, specifically asking if the 20% margin goal might be pushed back by certain types of M&A or if such a scenario is structurally unnecessary given the company's acquisition strategy.

Answer

Chairman and CEO Christophe Beck clarified that Ecolab is not trying to push back any margin targets, reiterating the 20% operating income margin goal by 2027. He emphasized that M&A must be value-accretive, growth and margin accretive, and never destroy shareholder value. Beck highlighted Ecolab's disciplined approach to M&A, with extensive experience and a successful track record.

Laurence Alexander asked about the interplay between Ecolab's M&A targets and its margin targets, specifically if any M&A would structurally delay the 20% margin goal and how the company views M&A in relation to achieving or exceeding this target.

Answer

Christophe Beck, Ecolab's Chairman and CEO, affirmed that the 20% margin target by 2027 remains unchanged, with plans to exceed it thereafter. He emphasized that M&A must be growth and margin accretive, never destroying shareholder value. Beck highlighted Ecolab's disciplined approach and successful track record with over 100 deals in the last decade, ensuring that acquisitions contribute positively to the company's financial goals without pushing back margin targets.

Lawrence Alexander observed that Ecolab's organic growth is meeting or exceeding expectations, while FX tailwinds have doubled. He asked about the 'gives and takes' and what levers Ecolab has to manage if currency movements become unfavorable next year.

Answer

Scott Kirkland, Ecolab's CFO, confirmed that underlying performance remains strong, with double-digit EPS growth even with FX impacts. He noted that in Q3, FX was in line with expectations, but the year-over-year SG&A comparison offset some of the FX benefit. Kirkland expects SG&A to normalize in Q4 and mentioned overcoming low to mid-single-digit commodity cost growth. Christophe Beck, Chairman and CEO, added that while 2025 saw unexpected FX headwinds and product cost benefits, the company delivered on its promises. He expressed confidence in 2026's trajectory, expecting 3-4% top-line growth, positive volume, and 2-3% pricing to drive 12-15% EPS growth and at least 100 basis points of operating income margin expansion.

Lawrence Alexander asked about the factors contributing to Ecolab's operating results, noting that organic growth is meeting or exceeding expectations while FX provides a double tailwind compared to last year, and inquired about levers available if currency trends reverse next year.

Answer

Scott Kirkland, CFO of Ecolab, confirmed that underlying performance remains strong, with double-digit EPS growth even with FX. He explained that in Q3, the FX tailwind was offset by the year-over-year SG&A comp and rising commodity costs (low to mid-single digits). Kirkland noted that SG&A is normalizing, and the underlying growth is robust.

Laurence Alexander from Jefferies asked how the IRRs and payback periods for investments in new growth areas compare to Ecolab's more traditional investments.

Answer

Christophe Beck, Chairman & CEO, did not provide specific IRR figures but stated that because the new growth engines are growing at double-digit rates with margins approaching 30%—well above the company average—the returns on these investments are expected to be higher than average. He emphasized the massive market opportunities in areas like AI data center cooling and biopharma justify the focused investment.

Laurence Alexander from Jefferies inquired about how a potential shift to aggressive deregulation in the U.S. could create secular opportunities or headwinds for Ecolab's Institutional and Pest businesses.

Answer

Christophe Beck, Chairman and CEO, provided a concise answer, stating that Ecolab has not yet seen any impact from deregulation on any of its businesses. While he remains hopeful that such changes could help U.S. industry in the future, particularly in the downstream business, there have been no positive signs in the numbers so far.

Laurence Alexander requested Ecolab's key financial assumptions for 2025, including SG&A leverage, taxes, and capital allocation priorities like buybacks.

Answer

Scott Kirkland, CFO, provided guidance for 20-30 basis points of SG&A leverage (at the lower end), an adjusted tax rate of 20-21%, and a continued disciplined capital allocation strategy. He indicated that with net leverage at a healthy 1.7x, the company will prioritize organic and inorganic investments, with buybacks expected at 'normal levels' depending on M&A opportunities.

Laurence Alexander asked about the benefits of AI-related productivity, specifically whether they accrue to the on-site business or are passed through to customers via contracts, and how competitive dynamics in the local market affect merchant products.

Answer

Eduardo Menezes, Chief Executive Officer, explained that AI benefits depend on usage: if AI lowers power costs and contracts have pass-through, benefits are shared; if AI reduces power consumption below guaranteed maximums, Air Products captures it. He noted that AI used for internal administration, SG&A, and engineering reduces internal costs, making them more competitive, which indirectly benefits customers in the long run.

Laurence Alexander asked how AI-related productivity benefits accrue to Air Products, specifically whether they primarily benefit the on-site business or are passed through to customers via contracts, and how competitive dynamics in the local market influence benefits for the merchant business.

Answer

Eduardo Menezes, Chief Executive Officer, explained that the accrual of AI benefits depends on its application. If AI lowers power costs in negotiations, benefits might be shared with customers through pass-through agreements. If AI reduces power consumption, Air Products typically captures those benefits as it guarantees maximum power consumption to customers. For administrative and engineering activities, AI reduces internal costs, which are not contractually passed through but contribute to overall competitiveness, indirectly benefiting customers in the long run.

Laurence Alexander from Jefferies inquired about the specific assumptions regarding the NEOM project, such as realized prices or IRR, that were embedded in Air Products' long-term 6-9% growth target through 2029.

Answer

CEO Eduardo Menezes clarified that the 6-9% growth guidance through 2029 includes only a minimum contribution from the NEOM project, primarily from the joint venture perspective, with significant product sales contributions not yet factored in as they are still being evaluated.

Laurence Alexander inquired about the specific assumptions regarding the NEOM project, such as realized prices or internal rate of return (IRR), that were embedded in Air Products' earlier target of 6-9% growth through 2029.

Answer

Eduardo Menezes, CEO, clarified that the 6-9% growth guidance through 2029 includes only a minimum contribution from the NEOM project, primarily from the joint venture's perspective, rather than a large contribution from product sales.

Laurence Alexander from Jefferies inquired about the return hurdles for the merchant business and whether they have changed. He also asked about the degree of market concentration and density across the company's operational footprint.

Answer

CEO Eduardo Menezes stated that return hurdles are double-digit and adjusted for country, customer, and regulatory risks, but did not comment on changes. He noted that most merchant business is integrated with large on-site plants. He believes the company has good operational density in its key geographies, such as China, Korea, and Taiwan, and does not consider a lack of density to be a major issue.

Laurence Alexander inquired about the merchant pricing outlook for North America in 2025 and asked for specific examples of how being a first-mover in clean hydrogen translates into better contract terms.

Answer

Chairman, President and CEO Seifi Ghasemi declined to provide forward-looking statements on pricing. To illustrate the first-mover advantage, he explained that being the only company with commercial-scale green hydrogen available to meet 2030 regulatory deadlines provides significant negotiating leverage over competitors who can only offer hypothetical future projects.

Laurence Alexander requested an update on the expected net price tailwind for 2026 and how it compares to trend pricing in the absence of a sharp cyclical improvement.

Answer

VP of Investor Relations Ben Meisenzahl stated that the company has annualized last year's price increase, and the timing of the new January 1st increase aligns well. He reiterated the focus on managing high effectiveness in pricing throughout 2026. Chair, President, and CEO Heidi G. Petz added that the company is in a unique position with industry inflection, confident in its strategy and leadership. Head of Investor Relations and Communications Jim Jaye concluded by noting the guidance includes low single-digit positive price mix in all three segments, resulting in a consolidated low single-digit positive price mix for the full year.

Laurence Alexander requested an update on the net price tailwind expected for 2026 and how it compares to trend pricing without a sharp cyclical improvement.

Answer

Ben Meisenzahl, VP of Investor Relations, confirmed that last year's price increase has been annualized, and the new price increase timing coincides. Heidi G. Petz, Chair, President, and CEO, reiterated expectations for price realization in the historic range, possibly at the low end, due to the competitive environment. Jim Jaye, Head of Investor Relations and Communications, stated that consolidated full-year 2026 guidance includes a low single-digit positive price mix across all three segments.

Laurence Alexander referenced Sherwin-Williams' past expectation of an 'amplification effect' on share gains during a market recovery. He asked if the current strategy of aggressively pursuing share gains in a 'softer for longer' environment is pulling forward future gains, and whether the amplification effect is still expected or might even be larger due to current actions.

Answer

Heidi Petz, President and CEO, stated, 'No, we do not believe it's a pull forward on market share.' She expects the company to outperform the market by 'a minimum of 1.5x-2x' regardless of market conditions. She also pointed to 'exclusive contracts' being quietly secured, which she believes will create a 'structural competitive advantage' and lead to an amplification effect when the market eventually improves.

Laurence Alexander asked if the company's current share gains in a downturn are pulling forward future gains, or if the expected amplification effect during a recovery will be even larger due to taking more share now.

Answer

President and CEO Heidi Petz clarified that the company does not believe current share gains are a pull-forward. She stated that the expectation is to outperform the market by a minimum of 1.5 to 2 times, regardless of market conditions. She believes that the company is creating a structural competitive advantage through current wins, including exclusive contracts, which will lead to an even larger amplification effect when the market eventually moves.

Laurence Alexander of Jefferies asked for an update on the Auto Refinish market, the year-end run rate for cost savings, and how quickly CapEx would need to increase in a recovery.

Answer

CEO Heidi Petz stated that while the core refinish market is challenged, Sherwin-Williams is offsetting this with record new account wins. CFO Al Mestyshin projected ~$80M in annual savings from restructuring, with less than half realized in 2025. He expressed confidence that the current CapEx target of ~2% of sales is sufficient to support future growth due to recent capacity expansions.

Laurence Alexander from Jefferies Financial Group asked about trends in the Auto Refinish business, the year-end run rate for cost savings, and how quickly CapEx would need to increase in a demand recovery.

Answer

CEO Heidi Petz noted that in Auto Refinish, strong new account growth is offsetting core market weakness tied to the insurance claims environment. CFO Allen Mistysyn stated the restructuring will yield $80 million in annual savings and that the long-term CapEx target of 2% of sales is maintainable due to recently completed capacity expansions.

Laurence Alexander asked for details on labor availability by channel, the ease of recruiting salespeople from competitors, and the implications for labor inflation.

Answer

Executive Heidi Petz stated there are 'nothing significant' in terms of labor challenges. She emphasized the company's focus on being an 'employer of choice' through strong recruiting, retention, and internal mobility programs like 'Create Your Possible.' She noted that talent and culture is a key enterprise priority, enabling the company to achieve its goals.

Carol Zhang, on behalf of Laurence Alexander, asked what factors need to go right for the company to hit the high end of its 2025 guidance, and what risks could lead to the low end.

Answer

SVP & CFO Allen Mistysyn explained that the company's performance within its guidance range will be primarily dictated by the volume performance of the Paint Stores Group. As the fastest-growing and most profitable segment, its results will be the key determinant of the final EPS outcome.

Laurence Alexander asked two questions: first, if PPG has enough data to assess paybacks on incremental AI investments, and second, whether industrial share gains are expected to be pro- or contracyclical, accelerating with demand.

Answer

Chairman and CEO Tim Knavish stated that while it's early days for AI, initial results have delivered millions to the bottom line, indicating a very favorable ROI for investments made, with a large pipeline of future optimizations and developments. Senior Vice President and CFO Vince Morales confirmed that industrial share gains are expected to be additive if a cyclical recovery occurs, noting that industrial is an early warning business and that PPG's technology offerings would further enhance gains during an upturn.

Laurence Alexander asked two questions: first, if PPG has enough data to assess the paybacks on incremental AI investments, and second, if the share gains in industrial are expected to be pro- or contracyclical, accelerating with demand.

Answer

Chairman and CEO Tim Knavish confirmed that while it's early days for AI investments, initial projects have delivered 'millions to the bottom line,' indicating a very favorable ROI, with materiality expected to increase. Senior Vice President and CFO Vince Morales stated that industrial share gains are expected to be additive during a cyclical recovery, with technology offerings further enhancing growth if demand accelerates.

Laurence Alexander from Jefferies asked about the growth rate of PPG's aerospace content per plane, traditionally 1-2% faster than inflation, and what adjacencies or innovation platforms could accelerate this growth.

Answer

Chairman and CEO Tim Knavish clarified that PPG is growing 'much more than 1-2% per year' in content, driven by price capture and significant physical content growth. He highlighted the sealant business, where technology differentiation and value-added services (specialty packaging, frozen end cap format, 3D printing) increase content per build. Knavish also mentioned the transparency business (canopies, windshields) where content per canopy grows with new aircraft designs, and other value-added services. He emphasized that PPG is an 'aerospace solutions provider,' not just coatings, and will provide more visibility into this growing business.

Laurence Alexander asked about the content per plane growth in aerospace, specifically if it still grows 1-2% faster than inflation, and what PPG is doing through adjacencies or innovation to accelerate this growth.

Answer

Chairman and CEO Tim Knavish clarified that content per plane is growing significantly more than 1-2% faster than inflation. He attributed this to strong technology differentiation in sealants (including specialty packaging, frozen end-cap formats, and 3D printing), growing content per canopy in transparencies with new aircraft designs, and other value-added services. He emphasized that PPG is an 'aerospace solutions provider,' not just coatings, and will provide more visibility into this outstanding business.

Laurence Alexander of Jefferies sought to clarify comments on accelerating momentum in the Industrial segment, asking if this referred to underlying end markets or share gains, and requested details on the wood and heavy-duty markets.

Answer

CEO Timothy Knavish confirmed the momentum is driven by both factors: slight upticks in industrial production in key segments and the launch of previously booked share gains. He noted that PPG is not a big player in wood and that heavy-duty remains down, but pointed to strength in general finishes, coil, and broad-based growth in China and India.

Laurence Alexander's team asked about the incremental margins for the newly formed architectural segment during a recovery and how they compare to other segments.

Answer

CEO Tim Knavish explained that in Europe, where capacity is underutilized, even volume stabilization would provide significant incremental leverage due to recent cost actions. In Mexico, which is highly utilized, incrementals would approximate the gross margin. CFO Vince Morales added that architectural gross margins are high (mid-40s to mid-50s), so any volume recovery in Europe would drop through at very attractive rates.

Laurence Alexander asked about the extent of reshoring of appliance capacity in the U.S. as a potential catalyst for 2027-2028, and for an initial read on the Chinese five-year plan regarding its emphasis on innovation versus profit sharing.

Answer

Mark Costa, Board Chair and CEO, expects to see benefits from reshoring to the U.S. and Mexico, following customers moving out of China, but noted that building plants takes time. Regarding the Chinese five-year plan, he admitted not being an expert but observed China's unique challenges with weak consumer demand, excess manufacturing capacity, and aggressive exporting, which is causing global strain and leading to tariffs.

Lawrence Alexander asked about the extent of reshoring of appliance capacity in the U.S. as a potential catalyst for 2027-2028. He also sought Eastman's initial read on the latest Chinese five-year plan, specifically if its emphasis on innovation and formulated products is a net positive, or if profit sharing and consumption incentives imply lower returns for the chemical industry.

Answer

Board Chair and CEO Mark Costa expects to see benefits from reshoring to the U.S. and Mexico, following customers like Whirlpool and Newell, especially after pre-bought inventory is exhausted. However, building plants takes time. Regarding the Chinese five-year plan, Mark Costa admitted he is not an expert but noted China's unique challenges with collapsing housing markets, excess manufacturing capacity, and aggressive exports leading to global strain and tariffs. He hopes China rationalizes capacity and stimulates consumer demand.

Laurence Alexander asked how economic uncertainty is affecting customer innovation, specifically whether customers are delaying, canceling, or accelerating the evaluation of new products.

Answer

Chairman and CEO Mark Costa responded that customers remain highly engaged on innovation projects across the portfolio, including next-generation automotive HUDs, EV solutions, and sustainable materials like Aventa. He noted that while engagement on future growth platforms is strong, the actual rate of adoption for new products is currently constrained by the difficult economic environment and customers' short-term focus on managing costs and tariff impacts. However, the innovation pipeline itself has not paused.

Laurence Alexander of Jefferies inquired about the specific sources of demand pull for products addressing microplastic concerns. He also asked for examples of innovation-driven, above-market growth drivers in end markets like construction and appliances, similar to those seen in automotive.

Answer

CEO Mark Costa explained that demand for biodegradable solutions like Aventa is driven by policies banning certain materials (e.g., polystyrene) and the need for alternatives for non-recyclable packaging, addressing the broader plastic waste problem. For other markets, he highlighted the Specialty Plastics business, where products like BPA-free Triton have consistently delivered above-market growth by replacing materials like polycarbonate in appliances and consumer goods.

Lawrence Alexander asked for an update on packaged gases demand trends, particularly in welding applications, and the status of regional consolidation in Europe versus the U.S., including how much farther Linde can go in consolidating the U.S. market. He also inquired about pushback or pricing fatigue on cylinder rental price increases over the last 5-7 years.

Answer

Sanjiv Lamba, CEO, reported mid-single-digit organic growth in the U.S. packaged gas business, with hard goods and automation/equipment sales indicating a stronger welding end of the manufacturing cycle, driven by large construction projects. He noted global consolidation opportunities, with the biggest in the U.S., where Linde still sees many tuck-in acquisition opportunities (18 deals globally last year, 1% of sales from acquisitions this year). He stated there has been no pushback or pricing fatigue on cylinder rentals, as the robust process and customer value have allowed rental growth to match globally weighted CPI.

Lawrence Alexander from Jefferies Financial Group Inc. asked for an update on packaged gases, specifically regarding demand trends in welding applications, regional consolidation in Europe versus the U.S., and the potential for further U.S. market consolidation. He also inquired about pushback or pricing fatigue on cylinder rental price increases.

Answer

CEO Sanjiv Lamba reported mid-single-digit organic growth in the U.S. packaged gas business, with hard goods sales up and automation/equipment sales indicating a stronger welding end of the manufacturing cycle. He confirmed global opportunities for tuck-in acquisitions, with the biggest in the U.S., where Linde closed 18 deals globally last year. He stated that there has been no material pushback or pricing fatigue on cylinder rentals, with growth matching globally weighted CPI.

Laurence Alexander asked about the expected evolution of Axalta's working capital days when end markets recover, and whether the H2 2025 SG&A run rate can be annualized for 2026 or if a reset is anticipated.

Answer

Carl Anderson, SVP and CFO, expects Q4 SG&A performance to be similar to Q3, with a slight increase in 2026 as a percentage of sales due to merits. For working capital, he anticipates a significant free cash flow increase in Q4 due to inventory reduction. He emphasized targeted inventory management in 2026 to maintain strong free cash flow capability in an increasing revenue environment.

Laurence Alexander asked about the clean sugar technology (CST) project, requesting a timeline for when investors could expect disclosures on volumes, margins, and returns.

Answer

EVP, Operations & Technology Chris Osowski explained that while the CST technology is proven, the asset is currently running as a standard ethanol plant due to strong margins. A decision on the additional capital investment required to fully utilize the CST asset will be revisited in 2026, with the current focus being on maximizing value from 45Z tax credits.

Laurence Alexander asked about the clean sugar technology (CST) project, inquiring about the expected future disclosures on metrics like volumes, margins, and returns as capacity ramps up.

Answer

EVP, Operations & Technology, Chris Osowski explained that while the technology is proven, the associated plant is currently maximizing value from strong ethanol margins. A decision on the additional capital investment needed to fully utilize the CST asset will be revisited in 2026, aligning with the company's disciplined capital allocation strategy. The immediate focus is on capitalizing on the 45Z tax credit opportunity.

Laurence Alexander of Jefferies asked about the cash impact of the restructuring charges and the company's view on the long-term equilibrium return on capital for its protein and Clean Sugar businesses.

Answer

Todd Becker, President and CEO, indicated the Q1 restructuring charge would be minimal (under $10 million) with a non-material cash flow impact. He stated the return on capital for protein is currently 4-8%, below target due to market pressures, but the assets are cash-flow positive. He acknowledged the return on the sugar investment is taking longer to realize due to operational bottlenecks.

Laurence Alexander asked for clarity on Cabot's network optimization initiatives and how they might affect operating leverage and incremental margins when demand accelerates.

Answer

President, CEO & Director Sean Keohane described network optimization as a broad effort involving product mix improvements and matching demand with the most cost-effective assets. EVP & CFO Erica McLaughlin added that the company is ahead of its $30 million cost-saving target for the year. She noted that some savings are structural and will persist, while others are timing-related. She concluded that these initiatives would be favorable to operating leverage and would not be a negative factor during a recovery.

Laurence Alexander from Jefferies Financial Group asked if new, longer lead-time products, particularly in healthcare, have higher incremental margins and sought to quantify this margin uplift compared to the existing portfolio.

Answer

President, CEO & Chairman Ashish Khandpur confirmed that these specialized products are indeed margin-accretive, which is a key reason healthcare was chosen as a strategic growth vector. He highlighted the "stickiness" of the business once specified. While declining to provide specific percentages, Khandpur affirmed that the company's strategy is to develop margin-accretive products and that this innovation, along with operational leverage, is the primary driver for future margin expansion.

Laurence Alexander asked about current trends in Avient's raw material basket. He also inquired about the percentage of sales coming from markets growing over 10% and whether that growth was sustainable or a temporary pricing effect.

Answer

SVP and CFO Jamie Beggs stated that Avient expects 1-2% raw material inflation for the full year, with Q1 seeing a net $4 million impact from mixed trends. President and CEO Dr. Ashish Khandpur noted that while only healthcare grew double-digits in Q1, defense is also considered a high-growth market despite a tough comp, and this growth is viewed as sustainable and not driven by pricing.

Laurence Alexander requested a granular breakdown of growth drivers in Asia and Europe and Avient's positioning for cyclical versus secular trends. He also asked about the long-term impact of the cultural shift on growth and margins, considering potential business cannibalization.

Answer

President and CEO Dr. Ashish Khandpur explained that Asia's 11% growth was driven by consumer, healthcare, and industrial sectors, while Europe's 5% growth came from market share gains in healthcare, defense, and packaging. He stated the cultural shift is designed to drive differentiated growth and margin expansion through innovation and a solutions-based approach to high-growth markets, rather than just incremental gains, aiming to build new platforms for growth.

Laurence Alexander of Jefferies Financial Group asked about the potential for front-loading SG&A and technical support costs to support new innovation platforms, and whether this could create a lag between the sales ramp and the corresponding EBITDA contribution.

Answer

CEO Guillermo Novo responded that the approach will vary by technology. For many platforms, Ashland is repurposing existing assets, minimizing upfront investment. For newer platforms like TBO and novel cellulosics, there will be an investment phase, but the company will add technical and R&D resources in line with specific customer commitments rather than pre-emptively. This approach is designed to align spending with validated commercial opportunities and manage the impact on profitability during the ramp-up phase.

Laurence Alexander of Jefferies Financial Group Inc. asked how the 'metering' of investments might affect operating leverage if demand improves, and sought clarity on the legal strategy for ring-fencing PFAS-related property damage liabilities.

Answer

CFO Anurag Maheshwari stated that operating leverage should be 35% or higher if volume accelerates, as growth investments remain significant despite the metering. CEO William Brown clarified that PFAS property damage claims are largely encompassed within the ongoing state attorneys general cases, which are being managed as they progress through the legal system.

Laurence Alexander asked about the Q1 cash burn and increased SG&A, the expected timeline for the EU's trilogue regulatory discussions, the working capital impact of commercial trait launches, and the potential scale and ramp-up of the biofragrance business.

Answer

Executive Carlo Broos clarified that the quarterly cash burn is down to approximately $4.4 million and the Q1 SG&A increase was due to a $3 million litigation accrual. Interim CEO Peter Beetham detailed the EU's trilogue process, expecting a final text within six months, and noted that for trait commercialization, partners handle inventory, minimizing Cibus's working capital needs. Beetham and CSO Gregory Gocal added that the biofragrance business could ramp quickly from 2026-2028 after seeing nominal revenues in late 2025.

Laurence Alexander asked about the specific impact of the recent EU regulatory decision on commercial timelines in Europe and how the evolving regulatory landscape has influenced customer interest and potential revenue structures. He also inquired about the patentability of genetic modifications under the proposed EU law.

Answer

Interim CEO Peter Beetham and CSO Greg Gocal explained that the EU's progress is a critical step toward harmonizing the global regulatory landscape, which they expect will accelerate customer programs worldwide. They noted that the new legislation treats their non-GMO products as 'conventional-like,' which is highly favorable. Regarding patents, Peter Beetham stated that the EU Council's proposed amendments focus on transparency, requiring disclosure of underlying patents, a position Cibus views as strong and positive for the industry.

Laurence Alexander of Jefferies inquired about the global regulatory landscape for gene editing, the commercial revenue timeline for rice and soy traits, and the specifics of the company's partnership business model, including cost-sharing for field trials.

Answer

CEO Rory Riggs and COO Peter Beetham explained that regulatory frameworks are harmonizing, with approvals in place for initial rice launch markets and positive momentum expected in Europe in early 2025. They detailed commercial launch timelines for rice ('27-'28 in the U.S.) and canola ('26), noting the soybean platform is a key near-term milestone. Riggs clarified that while initial edits are to prove capability, the model will shift to a profitable, for-profit service where partners pay for edits, with this flip expected around 2026.

Laurence Alexander from Jefferies questioned the scale and timing of effective TiO2 capacity shutdowns in Asia. He also asked about the company's positioning for the next generation of Opteon refrigerants in light of evolving regulatory trends.

Answer

President and CEO Denise Dignam stated that current intelligence suggests a couple of hundred thousand tons of TiO2 capacity are coming out of the Asian market, a trend expected to continue as more fair trade zones are established. Regarding refrigerants, she affirmed that the U.S. AIM Act transition is proceeding as planned and that Chemours is actively innovating on next-generation, lower GWP products.

Laurence Alexander asked for more detail on the downside regulatory risks for the APM segment mentioned in the 2025 outlook, including potential timing and impact. He also inquired about the broader regulatory challenges APM might face over the next three to five years.

Answer

CFO Shane Hostetter clarified that the downside risk in the guidance relates to potential operational pressures if discussions with the EPA on science-based regulations do not proceed favorably. He reiterated the company's commitment to optimizing the APM portfolio through strategic actions like the recent SPS business exit and putting the hydrogen expansion on hold, as part of the Pathway to Thrive strategy.

Laurence Alexander asked about the potential impact of a recent FERC ruling on nuclear power on the demand for Chemours' immersion cooling solutions. He also requested a specific example of how the company's return-focused asset review has shifted capital priorities compared to previous years.

Answer

CEO Denise Dignam stated that while positive for the long term, the nuclear power ruling doesn't change the immediate demand picture for immersion cooling, as its value is driven by superior performance in high-wattage applications that current technologies cannot match. CFO Shane Hostetter explained that the disciplined capital review ensures investments are balanced against the company's leverage, liquidity needs, and litigation settlement goals, providing a clear framework for prioritizing capital allocation.

Laurence Alexander asked about the visible carryover of improvements into 2026, whether the pool of high-impact projects is growing, and the potential earnings lift from a full volume recovery in a strong global environment.

Answer

CEO Scott Richardson stated it was too early to speculate on 2026 but reiterated the $2/share quarterly run rate as a potential baseline. He confirmed they are focused on growing the high-impact project pipeline faster than before. On a volume recovery, he did not provide a specific number but highlighted significant upside potential in both acetyls (from historically low demand in paints/coatings) and EM (from cost-outs and leveraging their global compounding network).

Laurence Alexander asked if potential divestitures are strategic exits or opportunistic, and inquired about the nature of the 'execution issues' in the acetyls business during the second half of last year.

Answer

CEO Scott Richardson clarified that the issues in acetyls were not execution-related but rather a result of a lengthy supply/demand imbalance driven by a demand decline late in the year. On divestitures, he stated that the company has identified non-critical assets and is having conversations, but emphasized they are not 'fire selling' assets. The focus is on divesting to drive deleveraging and they will remain principled in a tough M&A market.

Laurence Alexander from Jefferies asked if the strategy to reduce channel inventories involves giving significant rebates or discounts to customers, or writing off FMC's own inventory.

Answer

CEO Pierre Brondeau stated that the inventory reduction is not being driven by rebates or discounts. Instead, FMC has shifted its commercial teams to focus on creating demand directly with growers. This 'pull' strategy encourages growers to purchase products from retailers, thereby clearing the channel without FMC intervening in the final price transaction.

Laurence Alexander from Jefferies inquired about FMC's production capacity, asking if it is well-positioned to meet a potential demand increase from a channel restock without being constrained.

Answer

Pierre Brondeau, Chairman and CEO, confirmed that FMC has adequate production capacity to meet rising demand. He noted that while manufacturing is significantly busier than a year ago, the company is not concerned about its ability to ramp up and has secured the necessary raw materials.

Laurence Alexander asked about the severity of trough scenarios considered for the OCI merger and the key liquidity metrics Methanex focused on. He also requested an update on the shipping pipeline for methanol dual-fuel vessels and whether proposed U.S. fees on China-made ships could create arbitrage opportunities.

Answer

Executive Rich Sumner explained that the company plans its balance sheet around a trough price of $250 per tonne, ensuring assets are cash-positive and liquidity is maintained via its credit facility and other levers. On marine fuel, he noted over 350 dual-fuel ships are on order, but a demand forecast is difficult. He does not believe the proposed U.S. fees on Chinese ships would create arbitrage opportunities for Methanex.

Laurence Alexander from Jefferies requested an update on the expected ramp-up of marine fuel demand for methanol over the next few years and the nature of supply discussions with shipping companies in a tight market.

Answer

President and CEO Rich Sumner outlined a growing demand potential from over 300 ships on order, reaching nearly 10 million tonnes by 2028-29. He noted that discussions with shipping companies often begin with low-carbon methanol but shift to securing conventional methanol supply due to the high cost and limited availability of green alternatives.

Laurence Alexander of Jefferies asked for perspective on supply additions and competitive dynamics in Specialty Blacks. He also inquired about end markets where carbon black intensity might be changing, potentially creating an outsized benefit for Orion upon a demand recovery.

Answer

CEO Corning Painter identified conductivity as the most significant changing end market within the Specialty segment, driven by EV batteries, energy storage systems, and high-voltage wire and cable. He noted that while EV growth has moderated, it remains an attractive growth vector. Painter also mentioned that the company has debottlenecked some advanced materials for coatings, such as for automotive topcoats, which represents another, albeit smaller, opportunity for higher-value mix improvement.

Laurence Alexander of Jefferies asked for Orion's perspective on the global carbon black capacity addition outlook over the next 3-5 years and whether any regions are approaching reinvestment-level economics. He also questioned if the forecasted soft December was typical year-end destocking or a broader pause driven by customer uncertainty about 2025.

Answer

CEO Corning Painter stated that he does not anticipate significant new greenfield or brownfield capacity additions in North America or Europe due to economic uncertainty and risk. He suggested future capacity gains would likely come from reliability and maintenance improvements. Regarding the soft December, Mr. Painter attributed it to customers planning longer holiday shutdowns for inventory management, a trend seen across both Rubber and Specialty segments, rather than a signal of a broader strategic pause for 2025.

Laurence Alexander asked about the potential ceiling for U.S. MDI margins before substitution or imports become a factor, and inquired about capital allocation priorities if free cash flow recovers.

Answer

CEO Peter Huntsman outlined three constraints on MDI margins: MDI content in the end-use application, competition from substitute materials, and the price point that attracts imports. CFO Phil Lister detailed capital priorities as maintaining debt levels, normalizing CapEx, supporting the dividend, and then weighing share buybacks against M&A to grow the Advanced Materials business.

Laurence Alexander asked about the size and margin profile of the circular recycling platform, future CapEx needs for scaling it, and customer feedback on further destocking.

Answer

CEO Frank Bozich reported that recycled products accounted for 4% of total variable margin in 2024, with sales growing 47% and commanding significant margin premiums. He noted future CapEx would be for modular units costing high-single to low-double-digit millions each. On inventory, Bozich stated that value chains are tight and he does not see further destocking, citing pent-up demand in construction and an aging auto fleet.

Laurence Alexander of Jefferies LLC asked about customer sentiment and demand expectations for the first half of 2025, questioning if there were signs of pent-up demand or innovation cycles that could drive growth after the year-end seasonal slowdown.

Answer

CEO Frank Bozich reported that customers are generally not building inventory in Q4 but expect a stronger Q1 with modest improvement, particularly in the building and construction sector, driven by anticipated interest rate cuts. Bozich expressed confidence for 2025, citing tailwinds from restructuring, secured new business wins, and a full-year contribution from AmSty, which should result in an adjusted EBITDA of over $300 million for the year.

Laurence Alexander asked for the company's specific assumptions for remodeling activity and foreign exchange (FX) impact in 2025.

Answer

CEO Lori Koch stated that the guidance assumes remodeling activity within the Shelter business will be relatively flat year-over-year. She also specified the expected FX headwind is about 1.5% in Q1 and 1% for the full year 2025.

Laurence Alexander questioned the company's bandwidth to manage the Houston Ship Channel project and El Dorado ramp-up simultaneously without impacting existing operational productivity. He also asked if LSB would consider a deal structure for the Houston project that locks in a return while another party assumes commodity risk.

Answer

Chairman and CEO Mark Behrman assured that the company manages resource constraints by supplementing internal teams with contracted technical experts, ensuring existing operations are not compromised. He confirmed their strategy for the Houston project is to de-risk it by securing long-term, take-or-pay style offtake agreements for 75-85% of production before a final investment decision, thereby locking in returns and avoiding direct commodity exposure.

Laurence Alexander asked about the long-term pipeline for 'unique to Dow' cash levers, looking beyond the near-term items to the period out to 2030.

Answer

Jeffrey Tate, CFO, responded that it is too early to provide definitive details on the pipeline out to 2030. He explained that such opportunities are identified through ongoing annual reviews. While reaffirming the commitment to generate over $1 billion annually from these levers, he focused his comments on the more near-term initiatives already disclosed.

Asked about the potential demand from the 85-customer pipeline, customer churn rates, pricing expectations after the greenfield plant is operational, the market prospects for Novomer technology, and its associated capital requirements.

Answer

The 85-customer pipeline represents demand at least three times the capacity of the Kentucky and greenfield plants combined. Customer churn is virtually nonexistent for customers at full run rate. No specific price drops have been offered post-greenfield, though long-term pricing models have been shared with large customers. The Novomer technology is considered a 'killer app' with superior barrier properties, and the company is pursuing a capital-light co-location model for its commercialization, which has 1/5th the CapEx cost of a Nodax plant.

Laurence Alexander requested details on the regional split of the company's biogas contracts and asked about the expected cadence of green hydrogen and carbon capture projects over the next three to five years.

Answer

CFO & Executive VP Fabienne Lecorvaisier said that biogas projects are primarily located in the U.S. and Europe, with the strongest growth currently in the U.S. She deferred providing a detailed cadence for hydrogen and CCS projects, promising to share quantified objectives at the company's sustainability day in March 2021.