Mike Sisson

Mike Sisson inquired if there are any structural issues preventing Eastman from restoring its earnings power to previous levels, and asked about the range of volumes needed in Advanced Materials (AM) and Additives and Functional Products (AFP) to achieve significant earnings growth.

Answer

Mark Costa (Board Chair and CEO) stated that the primary driver of current earnings is lower volume from economic demand, not structural problems in AM and AFP, which face cyclical market demand. He sees significant potential for pent-up demand recovery in cars, appliances, and housing. He emphasized innovation, the circular platform, and maintaining price/variable margins as key. For CI, he acknowledged structural challenges from China but noted E2P and North American demand recovery could bring earnings to $150M-$200M. He believes $225M-$250M in cost reductions will help offset structural challenges, making a return to $2 billion in earnings possible.

Mike Sisson asked about structural factors that could prevent Eastman from restoring its earnings power and the range of volumes needed in AM and AFP to underpin significant earnings growth.

Answer

Mark Costa (Board Chair and CEO, Eastman Chemical Company) attributed current lower earnings primarily to weak economic demand impacting AM, AFP, and CI for over four years. He sees significant potential from pent-up demand recovery in cars, appliances, and housing, combined with innovation (circular platform) and maintained variable margins. He believes there's no structural problem in AM and AFP, only cyclical demand. For CI, structural challenges exist in olefins/acetyls from Chinese overcapacity, but E2P and North American demand recovery can bring earnings to $150M-$200M. Overall, with $225M-$250M in cost reductions, he believes returning to $2B normalized earnings is possible.

Mike Sisson asked about potential policies or proposals to boost affordability and supply to spark paint demand, and the performance of Protective and Marine, specifically regarding data centers.

Answer

Heidi G. Petz, Chair, President, and CEO, stated that recovery requires a combination of household income, rates, and affordability, noting builder hesitation. She confirmed Protective and Marine's strength in the protective side, particularly with the AI infrastructure boom and data centers, where Sherwin-Williams is well-positioned with comprehensive solutions. Ben Meisenzahl, VP of Investor Relations, added that the company's guidance allows for capturing tailwinds if policies improve.