Patrick Cunningham

Patrick Cunningham from Citi asked about the specific factors or applications contributing to Ecovyst's cautious outlook on industrial applications and nylon demand, given recent positive economic indicators. He also questioned the comparative economics of greenfield projects versus debottlenecking existing facilities versus acquiring existing virgin sulfuric acid plants to meet long-term mining demand.

Answer

CEO Kurt Bitting stated there were no specific call-outs for caution, attributing it to the wide and diverse basket of industrial uses for sulfuric acid, which could be impacted by global factors like tariffs or chemical market downturns. He reiterated that nylon sales are expected to be flat in 2026 compared to 2025. Regarding mining demand, Mr. Bitting explained that Ecovyst has historically met rising demand through debottlenecking production and logistics, and will continue this pattern, leveraging Waggaman's production and making Houston-based logistics and storage investments.

Patrick Cunningham inquired about specific factors contributing to the cited weakness in industrial applications and nylon, despite promising U.S. PMI indicators. He also asked about the economics of greenfield versus debottlenecking investments compared to current acquisition multiples for existing virgin sulfuric acid facilities, particularly for meeting long-term mining demand.

Answer

CEO Kurt Bitting stated there were no specific call-outs for caution in industrial uses beyond a general sense due to the wide range of applications impacted by global factors. He noted nylon, the largest industrial exposure, is expected to be flat with 2025. Regarding investments, Kurt Bitting explained Ecovyst has historically met rising mining demand through debottlenecking production and logistics at existing sites, including the Waggaman acquisition, and plans to continue this pattern.

Patrick Cunningham inquired about the potential impact of new EPA guidelines on renewable fuel volumes for 2026 and the outlook for polyethylene catalyst sales amidst trade uncertainties and global overcapacity.

Answer

CEO Kurt Bitting stated that while the proposed renewable fuel volume increase is encouraging and expected to drive higher catalyst utilization in 2026, it's still in draft form. Regarding polyethylene, he acknowledged global market softness but confirmed Ecovyst still anticipates year-over-year sales growth, driven by existing customer run rates rather than new unit start-ups in 2025.

Patrick Cunningham of Citi inquired about the impact of new EPA guidelines on renewable fuel volumes for 2026 and the outlook for polyethylene sales amid trade uncertainties and potential project delays.

Answer

CEO Kurt Bitting explained that while it's early, the proposed 67% increase in the Renewable Volume Obligation (RVO) for 2026 is encouraging and expected to drive higher catalyst utilization. Regarding polyethylene, he acknowledged global utilization challenges but stated Ecovyst still expects year-over-year sales growth, supported by existing customers, with the Kansas City expansion poised to meet new capacity demands in 2026.

Patrick Cunningham of Citi inquired about the potential impact of new EPA renewable fuel volume (RVO) guidelines on 2026 demand and the outlook for polyethylene catalyst sales amidst global trade uncertainties.

Answer

CEO Kurt Bitting stated that while it's still early, the proposed 67% RVO increase is encouraging and should drive higher industry utilization in 2026, leading to more catalyst demand. He also noted that while polyethylene sales are expected to grow year-over-year, they are impacted by global macro softness, but this is being offset by strength in hydrocracking catalysts.

Patrick Cunningham from Citi asked about the potential impact of new EPA renewable fuel volume guidelines on 2026 demand and sought clarity on the polyethylene sales outlook amidst global trade uncertainties and potential project delays.

Answer

CEO Kurt Bitting responded that while it's still early, the proposed 67% increase in renewable fuel volumes for 2026 is encouraging and expected to drive higher catalyst utilization. Regarding polyethylene, Bitting acknowledged global headwinds but stated Ecovyst's sales are still projected to grow year-over-year, supported by existing customers, with the Kansas City expansion on track for new projects in 2026.

Patrick Cunningham of Citi inquired about the potential impact of new EPA guidelines on renewable fuel volumes for 2026 and the outlook for polyethylene sales amid trade uncertainties and new project startups.

Answer

CEO Kurt Bitting explained that while the proposed 67% increase in renewable fuel volume obligations is encouraging and should drive higher catalyst utilization in 2026, it is still a draft. Regarding polyethylene, he noted that despite global macroeconomic challenges, Ecovyst's sales are still expected to grow year-over-year, supported by the Kansas City expansion which will serve new customer capacity coming online in 2026.

Patrick Cunningham from Citi asked for insights into the structural price environment for sulfuric acid in Q1 and the outlook for virgin pricing. He also inquired about the potential EBITDA contribution from the Cornerstone acquisition in 2026 and how the asset enhances the company's network.

Answer

CEO Kurt Bitting explained that recent sulfuric acid price increases were primarily driven by higher sulfur costs from refinery turnarounds, which are passed through to customers. He noted that over 90% of the Ecoservices business is under contract, limiting spot price exposure, but the overall market demand appears healthy. Regarding the Cornerstone acquisition, Bitting declined to provide specific 2026 EBITDA guidance but emphasized its strategic value, describing it as a '1 plus 1 equals 3' scenario that significantly enhances their Gulf Coast network and capacity to serve customers and capture new opportunities.

Patrick Cunningham of Citigroup inquired about the preliminary outlook for 2025 end markets and internal growth drivers, as well as the factors contributing to the guided step-up in performance for Q4 2024.

Answer

CEO Kurt Bitting stated that for 2025, Ecovyst expects continued high utilization in regeneration services, potential price increases for virgin sulfuric acid, and strong demand for its customized polyethylene catalysts. For Q4, Bitting noted the implied guidance for Ecoservices represents a 10% year-over-year increase, a strong result for a seasonally weaker quarter. He added that growth in polyethylene and custom catalyst sales is expected to offset lower year-over-year hydrocracking sales.

Patrick Cunningham inquired about Westlake's outlook for the chlorovinyls and PVC chain in 2026, specifically regarding supply and demand dynamics, and the expected direction for price and margin. He also sought clarification on the HIP segment's lower margin guidance, asking if it was primarily due to the ACI acquisition or other mix impacts.

Answer

Steve Bender, Executive Vice President and Chief Financial Officer, Westlake Corporation, indicated cautious optimism for chlorovinyls, citing restocking and price action in PVC resin, alongside rising export market prices due to China's duty drawback reduction. For HIP, he clarified the lower margin guidance was not from ACI (which closed in January and will contribute all year) but rather from potential product mix impacts based on housing start projections similar to 2025.

Patrick Cunningham inquired about the 2026 outlook for chlorovinyls and the PVC chain, asking for a framework on supply/demand and the direction of price and margin. He also sought clarification on the HIP segment's guidance, specifically if the slightly lower margin was due to the ACI acquisition or other mix impacts.

Answer

Steve Bender, Executive Vice President and Chief Financial Officer, indicated cautious optimism for chlorovinyls, citing restocking, PVC resin price action, and inventory rebuilding. He noted that export market prices were trending higher due to reduced duty drawbacks in markets like China. For HIP, Mr. Bender clarified that the ACI acquisition, closed in January, would contribute all year, and the margin guide reflects product mix impacts given housing starts similar to 2025, not ACI's dilutive effect.

Patrick Cunningham inquired about Westlake's acquisition pipeline, specifically whether there are more opportunities in PVC compounding or other material sectors compared to the building product space, given current valuation differences.

Answer

Steve Bender (EVP and CFO) stated that Westlake sees opportunities to expand the HIP footprint across various areas, including compounding, pipe and fittings, and exterior building products. He noted ongoing dialogues with potential sellers and emphasized the focus on synergistic fits that add value to the overall portfolio.

Patrick Cunningham asked a general question about the ACI acquisition, inquiring if Westlake sees more opportunities in PVC compounding or other material sectors compared to the building product space, given valuation differences, and what the general M&A pipeline looks like. He also asked about the sequential weakness in PVC, specifically if the shift to export markets represents a reversion to normal levels or an abnormal increase.

Answer

Steven Bender, EVP and CFO, indicated that opportunities exist across HIP, including compounding, pipe and fittings, and exterior building products, with ongoing dialogue for synergistic fits. Regarding PVC exports, Mr. Bender explained that the shift was due to improved plant reliability in Q3, allowing Westlake to place extra production into historic market levels, which are typically below the industry average of 40%.

Patrick Cunningham of Citi inquired about Westlake's Housing and Infrastructure Products (HIP) segment guidance, questioning why the margin outlook remains stable despite a lower sales forecast. He also asked about the potential risks to chlorovinyls and caustic soda exports to Brazil due to recent tariff changes.

Answer

EVP & CFO Steven Bender responded that the HIP margin guidance of 20% to 22% remains appropriate, reflecting the realities of the residential construction market and strong Q2 performance. Regarding Brazil, Bender explained that Westlake's direct sales to customers in the alumina and paper markets, which are export-oriented, allow them to access duty drawbacks, mitigating the impact of tariffs.

Patrick Cunningham of Citigroup Inc. inquired about the pricing dynamics in the Housing and Infrastructure Products (HIP) segment, specifically the timeline for price realization and the ability to pass on inflation. He also asked about the potential impact of retaliatory tariffs from China on polyethylene (PE) operating rates and domestic prices.

Answer

M. Bender, Executive Vice President and CFO, explained that HIP pricing is much more stable than in the Performance and Essential Materials (PEM) segment, allowing for better price stability despite input cost changes. Regarding tariffs, Bender noted it's hard to predict indirect impacts but stated Westlake's direct exposure is limited as its specialty PE products are not primarily targeted at Asian markets.

Patrick Cunningham asked if a tougher outlook from homebuilders could lead to volume pressure for Westlake and questioned the impact of PVC tariffs on global trade flows and the potential for retaliatory tariffs.

Answer

EVP and CFO Steve Bender expressed confidence in Westlake's ability to grow market penetration despite a flat housing start forecast of 1.3 million units. He acknowledged that some margin compression could occur from product mix shifts. On tariffs, Bender stated that Westlake is watchful and has already observed shifts in trade patterns, expecting further changes if new tariffs are implemented.

Patrick Cunningham of Citi inquired about the operational status of the plants that recently returned to service, asking if they are at full capacity, and if any additional maintenance is scheduled for the year.

Answer

EVP and CFO Steve Bender clarified that the mothballed units in Pernis are separate from the facilities that experienced maintenance outages. He confirmed that the LACC ethylene unit and the Plaquemine chlorovinyls site, which had the extended outages, are both back in service.

Patrick Cunningham asked about further opportunities for Huntsman or the industry to rightsize cost structures and footprints in Europe, and if recent policy shifts offer any encouragement. He also inquired about growth expectations for Advanced Materials in 2026, including potential upside and target margin levels.

Answer

Peter Huntsman (Chairman, CEO and President) expressed hope for European policymakers but noted a lack of action, believing Huntsman has largely completed its cost-cutting in Europe. He expects Advanced Materials to be stable, with growth and margin improvement primarily in the Americas due to reindustrialization and PMI recovery.

Patrick Cunningham asked about further cost structure and footprint rightsizing in Europe, the impact of recent policy shifts, and the growth and margin outlook for Advanced Materials in 2026.

Answer

Peter Huntsman, Chairman, CEO, and President, expressed hope for European policymakers to address energy and industrial competitiveness, but noted a lack of action. He highlighted a structural issue with small, uncompetitive facilities in Europe. For Advanced Materials, he expects stability with growth and margin improvement primarily in the Americas, driven by reindustrialization and building recovery.

Patrick Cunningham from Citi asked for an update on July order book trends and customer conversations in auto and construction following recent tariff implementations. He also questioned the optimism on Chinese supply rationalization given MDI capacity build expectations.

Answer

Chairman, President & CEO Peter Huntsman described the current market as 'stable,' noting thin supply chains and just-in-time ordering. Regarding China, he stated it remains Huntsman's most profitable MDI market and is performing well, with Chinese imports to North America having virtually stopped, although imports from Europe have unexpectedly increased.

Patrick Cunningham asked about Huntsman's long-term growth potential and how it might reposition its asset footprint in a more protectionist world. He also requested an update on the spray foam business, including whether it's seeing a similar demand disconnect and if further pressure is expected.

Answer

CEO Peter Huntsman stated that Huntsman is well-positioned for a protectionist environment as the vast majority of its sales in North America and Asia are from domestically produced products, reducing the need for a major footprint change. He identified a pickup in North American construction as the biggest potential earnings driver. Regarding spray foam, Huntsman confirmed it is impacted by the slowdown in both new home construction and remodeling. CFO Phil Lister added that the company is rightsizing its spray foam footprint by closing a Canadian facility and consolidating in Texas.

Patrick Cunningham inquired about the scope of Huntsman's restructuring actions, particularly in the downstream business, and the drivers behind the expected margin improvement in the Performance Products segment.

Answer

CEO Peter Huntsman explained that restructuring is focused on calibrating the business to customer demand and relocating manufacturing to follow customers out of Europe. He noted that Performance Products' improvement will be driven by a recovery in construction (maleic) and new demand for amines from the semiconductor and agriculture industries, with contributions from the new Conroe, Texas expansion expected later in the year.

Patrick Cunningham questioned the outlook for MDI prices by region in Q4, given that recent price increases were rebuffed, and asked about the impact of raw material declines. He also sought to understand if volume increases in Performance Products were in line with expectations or due to other factors.

Answer

Chairman, CEO and President Peter Huntsman stated that Q4 MDI pricing is expected to be flat, with some benefit from lower benzene costs being partially offset by higher natural gas prices. Regarding Performance Products, he noted that while per-pound margins are strong, the main challenge is demand, and he expects typical seasonality to continue.

Patrick Cunningham inquired about sequential improvements in engineering materials, specifically identifying stabilizing end markets and broader macro assumptions for 2026, and sought an update on the timing and potential assets for Celanese's $1 billion divestiture target.

Answer

President and CEO Scott Richardson highlighted electronics as a global bright spot due to AI and data centers, while automotive markets were mixed. He confirmed being halfway to the $1 billion divestiture target by end of 2027, expecting another deal this year, with a focus on non-core joint ventures.

Patrick Cunningham from Citi asked about the sequential improvement in Engineered Materials, seeking clarification on stabilizing end markets and broader macro assumptions for 2026. He also inquired about the timing and types of assets Celanese plans to divest to reach its $1 billion target by 2027.

Answer

Scott Richardson, President and CEO of Celanese, identified electronics as a global "bright spot" for Engineered Materials due to AI and data center growth, while automotive markets are mixed, with softness in China and stability in Europe/US. Regarding divestitures, Mr. Richardson confirmed being halfway to the $1 billion target by 2027, anticipating another deal this year, primarily focusing on non-core joint ventures.

Patrick Cunningham questioned the rationale behind the Lanaken enclosure decision, asking if the forward view on demand or supply changed, and if other facilities like Frankfurt are targets for future Acetyl Chain measures. He also asked about the percentage of SKUs made-to-order versus made-to-stock.

Answer

President and CEO Scott Richardson explained the Lanaken closure was due to declining acetate tow demand and its status as the highest-cost asset, yielding $20M-$30M in productivity savings by 2027, with no specific asset targets for future actions. CFO Chuck Kyrish did not provide specific SKU percentages but noted it's an ongoing effort to improve inventory efficiency through various levers.

Patrick Cunningham questioned if the decision to close the Narco facility reflected a change in Celanese's forward view on demand or supply, and whether future targeted measures in the acetyl chain would focus on Frankfurt or a broader collection of savings. He also asked about the percentage of made-to-order versus made-to-stock SKUs in Engineered Materials and the target goal.

Answer

Scott Richardson, President and CEO, explained that the Narco closure was due to declining acetate tow demand and Narco being the highest-cost asset, allowing Celanese to meet customer needs from its network and drive $20 million-$30 million in productivity savings by 2027. He stated that Celanese would continue to seek similar opportunities across its footprint without targeting a specific asset. Chuck Kyrish, CFO, noted that inventory reduction in EM is an ongoing effort involving multiple levers like logistics and warehousing, but did not provide specific made-to-stock SKU percentages.

Patrick Cunningham of Citigroup Inc. questioned if acetyl chain price declines were primarily from China oversupply and asked about the success of the downstream sales model. He also sought clarity on the confidence in the free cash flow outlook amid potential further demand weakness.

Answer

CEO & President Scott A. Richardson attributed some margin compression in China to oversupply but noted the Western Hemisphere story was more about volume than margin. He said downstream success has been more about volume than pricing. SVP & CFO Chuck Kyrish and Richardson both affirmed strong confidence in the $700-800 million free cash flow range, stating they are prepared to take further inventory actions if needed.

Patrick Cunningham of Citigroup questioned the drivers of consistent price declines in the Acetyl chain and the success of the downstream optionality model. He also asked for drivers behind the reiterated free cash flow outlook.

Answer

CEO & President Scott A. Richardson explained that Acetyls pricing pressure has been more about volume in the West and some margin compression in China, while getting price downstream has been difficult. SVP & CFO Chuck Kyrish and Richardson both affirmed confidence in the $700-$800 million free cash flow guidance, stating it was planned for various demand scenarios. Richardson emphasized that Q2 cash flow was driven by strong operations, not just working capital, and that the inventory reduction journey is sustainable.

Patrick Cunningham from Citigroup Inc. asked about the drivers of price declines in the acetyl chain and the success of the downstream sales model. He also questioned the confidence in the reiterated free cash flow outlook.

Answer

CEO Scott A. Richardson explained that downstream success has been more about volume than price, with some margin compression in China, while the Western Hemisphere has been more of a volume story. Both Richardson and CFO Chuck Kyrish expressed high confidence in the $700-800 million free cash flow guide, noting that Q2 cash generation was strong from operations and that they are prepared to take further working capital actions if needed.

Patrick Cunningham inquired about the success of recent pricing actions across the Engineered Materials portfolio and how the company is balancing significant headcount reductions with the resource needs for its high-impact growth pipeline.

Answer

CEO Scott Richardson stated that while some price was achieved in Q1, the sequential price improvement was more related to mix, with further increases expected in Q2. On resource allocation, he affirmed an aggressive approach to cost reduction but emphasized that resources are being strategically focused on high-impact programs to 'major in the majors,' ensuring alignment to support the growth pipeline.

Patrick Cunningham asked for Celanese's view on the impact of significant new acetyl capacity coming online in 2025 and inquired about incremental benefits from the Clear Lake expansion.

Answer

CEO Scott Richardson stated he doesn't see a big change coming in the supply-demand landscape, as the acetyl industry is already operating at an unsustainable level below the cost curve. He noted the team is finding growth in areas like redispersible powders outside of China. Regarding Clear Lake, he confirmed it is at its full run rate, though there have been some offsets from contract resets and a near-term headwind from higher U.S. natural gas costs, which are expected to wane.

Patrick Cunningham of Citigroup inquired about key growth areas within the project pipeline and asked about the company's commitment to its investment-grade rating, including whether an equity issuance would be considered.

Answer

COO Scott Richardson and CEO Lori Ryerkerk identified EVs, Chinese OEMs, and electrical infrastructure as key growth drivers. Regarding the balance sheet, Richardson reaffirmed the commitment to a 3x leverage target, stating the dividend cut was deemed the most prudent path after a review of all options.

Patrick Cunningham asked for comments on early interest in the Food Ingredients sale, any prior inbounds, and details on the timing and deployment of proceeds.

Answer

CEO Erik Fyrwald confirmed early interest from strategics and private equity firms, which continues, with additional firms expressing interest since the formal launch. He stated proceeds would be used for share buybacks to offset dilution and debt reduction to maintain a net debt to credit-adjusted EBITDA ratio below 3.0x.

Patrick Cunningham asked about early interest in the sale of the food ingredients business, any prior inbounds before the formal process, and details regarding the timing and deployment of potential proceeds.

Answer

CEO Erik Fyrwald confirmed early interest from strategics and private equity firms, which has continued since the formal sale process launched two weeks prior. He stated that proceeds would be used for share buybacks to offset dilution and debt reduction to maintain a net debt-to-EBITDA ratio below 3.0.

Patrick Cunningham inquired about the strategic rationale behind the divestiture of the soy crush business to Bunge, asking about potential dis-synergies and the margin profile of the sold assets.

Answer

CEO J. Erik Fyrwald explained that the divested businesses were highly commoditized with low single-digit EBITDA margins, making them a better fit for Bunge. He stated the sale allows IFF to focus on its differentiated, higher-margin isolated soy protein business, which will significantly improve the Food Ingredients segment's margins and help achieve its mid-teens EBITDA margin goal.

Patrick Cunningham of Citigroup asked about the reasons for lower volumes in Protein Solutions and the outlook for the overall Food Ingredients segment's volumes and progress toward its 15% margin target.

Answer

CEO Erik Fyrwald confirmed the Food Ingredients turnaround is progressing well, with EBITDA margins improving from high single-digits in 2023 to 13.9% in Q1 2025. He explained that the Q1 volume decline was due to a strategic shift away from low-margin business and temporary production issues in high-value proteins, which are now being resolved. He expects full-year volumes to be flattish to slightly down as this portfolio optimization continues.

Eric Zhang, on behalf of Patrick Cunningham, asked if IFF is on track to achieve its 15%+ margin target for the Functional Ingredients business and inquired about the cost and productivity savings that support this goal.

Answer

CEO Jon Erik Fyrwald confirmed that IFF is on track toward its mid-teens margin target for the Food Ingredients business. He highlighted the significant progress made, with EBITDA margins improving from high single-digits in 2023 to solid low double-digits in 2024. Fyrwald expressed confidence in the new leadership team's plan to achieve this goal through a dual strategy of growing the business with attractive margins and implementing aggressive productivity plans.

Patrick Cunningham of Citi inquired about the full-year adjusted free cash flow guidance, asking if the previously stated $600 million target would trend higher given the raised EBITDA outlook, or if it would be offset by working capital or other items.

Answer

CFO Glenn Richter stated that the full-year free cash flow forecast remains largely unchanged. He explained that while the earnings trajectory is higher, it is being offset by increased working capital, primarily higher receivables resulting from stronger sales. This results in a net-neutral position for the full-year cash flow forecast.

Patrick Cunningham asked for an update on Ecolab's digital sales, specifically how the ability to monetize these technologies evolved in 2025, where it's headed, and where the company is seeing the best customer traction.

Answer

Chairman and CEO Christophe Beck explained that Ecolab Digital, a new business started two years ago, is generating nearly $400 million in sales from connected hardware and software, growing over 20%. He outlined the '100, 100, 100' vision: 100% connected customer locations, 100% connected applications, and 100% billable offering. Beck noted that penetration is currently in the low single digits, indicating significant future growth potential.

Patrick Cunningham requested an update on Ecolab's digital sales, specifically how monetization of these technologies evolved in 2025, future potential, and where the company is seeing the best customer traction.

Answer

Christophe Beck, Ecolab's Chairman and CEO, explained that Ecolab Digital, a new business started two years ago, is already generating nearly $400 million in sales from connected hardware and software, growing over 20% (expected 25% in 2026) with high margins. He outlined the '100, 100, 100' vision: 100% connected customer locations, 100% connected applications, and 100% billable offerings. Beck noted that penetration is currently in the low single digits, indicating significant untapped potential as digital sales improve margins and are integrated into traditional segments.

Patrick Cunningham asked about the expected SG&A leverage for Pest Elimination and Life Sciences in the upcoming year, considering the lapping of prior growth investments, and whether the path to 2027 targets is linear or involves continued stepped-up investments.

Answer

Scott Kirkland, CFO of Ecolab, highlighted significant SG&A productivity improvements since 2019, with an expected 20-30 basis point improvement for full-year 2025. He anticipates continued broad-based SG&A leverage of 25-50 basis points annually beyond 2025, driven by One Ecolab savings and technology deployment, even with ongoing investments in growth businesses. Christophe Beck, Chairman and CEO, added that leveraging digital technology and AI is key to achieving more with less, and the company is still early in this journey.

Patrick Cunningham asked about SG&A leverage, particularly in the Pest and Life Sciences segments for the next year, considering the impact of lapping growth investments. He questioned whether the path to 2027 targets is linear or if continued step-up in growth investments is expected.

Answer

Scott Kirkland, Ecolab's CFO, highlighted that SG&A leverage has improved 150 basis points since 2019 and is expected to improve another 20-30 basis points for full-year 2025. He anticipates continued broad-based leverage of 25-50 basis points annually beyond 2025, benefiting from the One Ecolab program and technology deployment, even with ongoing investments. Christophe Beck, Chairman and CEO, added that this leverage is driven by digital technology and AI, allowing the company to do 'more with less' and is still early in its journey.

Patrick Cunningham of Citi questioned the modest operating income growth in the Water segment, asking for the source of the 'unfavorable mix' that was cited as a headwind.

Answer

Scott Kirkland, CFO, directly attributed the muted OI growth in the Water segment to weakness in the Paper and Basic Industries end markets. He clarified that excluding these two areas, the rest of the Water business saw sales grow 4% and operating income increase by strong double digits.

Patrick Cunningham of Citi asked for details on the new Ecolab Digital sales disclosure, including anticipated growth rates, margin accretion, and the expected growth mix between software subscriptions and hardware sales.

Answer

Christophe Beck, Chairman and CEO, explained that Ecolab Digital, currently a $320 million annualized business, is expected to see accelerating growth. He noted that while margins are not yet disclosed, they are very high. Software subscription revenue is growing much faster than hardware revenue. Beck highlighted the immense opportunity, with over 1 million customer locations and 100,000 connected devices today, most of which are not yet monetized, positioning Ecolab Digital to become a multi-billion dollar business in the mid-term.

Patrick Cunningham's office asked about the drivers behind the improved performance and positive outlook for Ecolab's Life Sciences business.

Answer

Christophe Beck, Chairman and CEO, attributed the momentum to strong long-term market fundamentals in pharma and biotech. He noted that during the recent industry transition, Ecolab gained share by continuing to grow while competitors declined. Beck highlighted that significant investments in new plants, systems, and team capabilities are now yielding positive results, positioning the business for future growth, though the trajectory may not be linear.

Patrick Cunningham asked for an update on the 'One Ecolab' initiative, specifically regarding commercial buy-in, value pricing impact, and feedback from the initial focus on the largest 35 customers.

Answer

CFO Scott Kirkland explained the program is focused on accelerating sales growth by better penetrating the largest customers, with cost savings being incidental. CEO Christophe Beck added that the customer reception has been very positive. The new sales approach shows clients the total value they could achieve if all their locations performed like their best one, which directly addresses customer requests for such a partnership model.

Patrick Cunningham asked for details on the 90 new customer wins in oxy-fuel combustion, including the specific customer base, regional concentration, and their contribution to the backlog and overall growth algorithm.

Answer

Sanjiv Lamba, CEO, highlighted oxy-fuel combustion as a 'win-win' technology for customers, reducing emissions, natural gas consumption, and increasing throughput. He noted that these wins are global, with a concentration in China, but also significant activity in the Americas and EMEA, reflecting strong business development momentum.

Patrick Cunningham inquired about the 90 new customer wins in oxy-fuel combustion, seeking clarification on the specific customer base, regional concentration, and their contribution to the backlog and overall growth algorithm.

Answer

Sanjiv Lamba, CEO, highlighted that oxy-fuel wins are global, with a notable concentration in China, but also significant activity across the Americas and EMEA. He emphasized the technology's benefits in reducing emissions, natural gas consumption, and increasing throughput, noting that these wins are currently under execution.

Patrick Cunningham from Citi asked about the market risk in U.S. manufacturing, contrasting near-term improvements with customer sentiment on new projects and CapEx plans, and the level of certainty on forward growth expectations.

Answer

CEO Sanjiv Lamba explained that the U.S. packaged gas business saw mid-single-digit organic growth, with hard goods sales up and automation/equipment sales indicating customer preparation for future pickups. He noted that while tariff concerns have lapsed, a degree of caution remains among customers regarding major expansion projects, though manufacturing volumes are resilient. CFO Matt White added that commercial space, included in manufacturing, is also driving growth.

Patrick Cunningham asked about framing the market risk in the U.S., contrasting the near-term improvement with customer sentiment regarding new projects, CapEx plans, and certainty on forward growth expectations, given the increase in U.S. manufacturing.

Answer

Sanjiv Lamba, CEO, noted mid-single-digit organic growth in the U.S. packaged gas business, which serves as a proxy for manufacturing, with hard goods and automation/equipment sales indicating customer preparation. He observed continued caution in customer sentiment for larger CapEx projects despite tariff concerns having largely passed, expecting resilient volumes into Q4 and project pickups in H1/mid-2026.

Patrick Cunningham of Citigroup asked for the outlook on the Electronics end market, the reason for its apparent decline, and the expected cadence of new project starts.

Answer

CEO Sanjiv Lamba clarified that industrial gas sales to electronics actually grew, and the decline seen in the presentation slide was driven entirely by destocking in the Advanced Materials business, which he expects to correct. He affirmed that the outlook for new electronics projects and start-ups remains healthy and on track with the backlog.

Patrick Cunningham of Citigroup asked about the healthcare business, specifically the extent of remaining portfolio rationalization, the timeline to return to long-term growth, and the potential impact of U.S. healthcare deregulation.

Answer

Sanjiv Lamba, CEO, noted that the hospital care business maintains steady low-to-mid-single-digit growth. For the U.S. Home Care business, he confirmed that portfolio trimming and technology-driven efficiency improvements are ongoing. He emphasized that portfolio review is a continuous process across all businesses, not a discrete event.

Patrick Cunningham of Citigroup asked if the step-up in 2025 CapEx is primarily driven by two large clean energy projects and whether that spending would increase further in 2026.

Answer

CEO Sanjiv Lamba confirmed the higher CapEx is a direct result of executing the record $7.1 billion sale of gas backlog. This backlog includes the two large clean energy projects as well as a number of electronics projects, which are collectively driving the increased spending. He did not provide specific guidance for 2026.

Patrick Cunningham asked if Linde's capital allocation split would change in the coming years due to larger projects in the backlog, specifically focusing on the outlook for share repurchases.

Answer

CFO Matt White stated there will be 'absolutely no change' to the company's long-term capital allocation policy. The priority remains investing in high-quality projects that meet their criteria, with all leftover cash returned via buybacks. Despite higher project CapEx, he expects buybacks to remain consistent next year due to robust excess free cash flow generation.

Patrick Cunningham asked about the Latin American Crop Protection market for 2026, specifically if current channel inventory supports normalized purchasing patterns or if volatility is expected, and if there's any improvement in farmer credit and liquidity concerns.

Answer

EVP Robert King expects continued pricing pressures but volume growth in Latin America CP for 2026 due to increased land and pest pressures. He noted channel inventories are about normal for the time of year. He acknowledged farmer stress due to high interest rates and suppressed commodity prices but highlighted Corteva's barter program (nearly $1 billion in revenue) as a mitigation strategy, positioning the company well for 2026.

Patrick Cunningham inquired about the Latin American Crop Protection (CP) market for 2026, specifically regarding channel inventory supporting normalized purchasing, anticipated volatility in order timing, and the impact/improvement of credit and liquidity concerns for farmers.

Answer

Robert King (EVP, Crop Protection Business Unit, Corteva) expects continued pricing pressures but volume growth in LatAm CP for 2026 due to increased land and pest pressures, noting channel inventories are about normal. He acknowledged farmer stress from high interest rates and suppressed commodity prices but stated they are largely still profitable, with Corteva mitigating risk through programs like the nearly $1 billion barter program.

Patrick Cunningham requested an update on Corteva's hybrid wheat technology, including progress in commercialization, expanded pilot programs, and key milestones to monitor over the next 18 months.

Answer

CEO Chuck Magro expressed excitement for hybrid wheat as a potential 'third leg' to Corteva's business, projecting it as a billion-dollar revenue opportunity within the next decade. He confirmed that plant trials are on track for a 2027 launch, consistently showing 10-15% yield improvement. He noted that initial hybrids would be the 'worst' ones, implying future improvements, and expects a similar margin profile to corn and soybeans by the mid-next decade, emphasizing its importance for global food security.

Patrick Cunningham requested an update on Corteva's hybrid wheat technology, including progress in commercialization, expanded pilot programs, and any key milestones to monitor over the next 18 months.

Answer

CEO Chuck Magro expressed excitement about hybrid wheat as a potential 'third leg' to Corteva's business, projecting it as a billion-dollar revenue opportunity within the next decade. He confirmed that plant trials are in their third year, with all systems on track for a 2027 launch, consistently showing 10-15% yield improvement for farmers. Magro noted that initial hybrids would be the 'worst' ones, implying future improvements, and expects a similar margin profile to corn and soybeans by the middle of the next decade, highlighting its importance for global food security.

Patrick Cunningham of Citi asked about the magnitude of the benefit from seed commodity cost deflation in the first half and whether it will remain a significant tailwind into 2026.

Answer

EVP & CFO David Johnson confirmed that commodity cost deflation was a positive factor in the first half, putting them ahead of their cost improvement plan. He noted the benefit flows through the P&L over a multi-year period due to hedging and inventory accounting, giving them confidence in their long-term savings plan.

Patrick Cunningham asked for a breakdown of the drivers behind lower seed production costs, specifically the split between commodity deflation and productivity, and the impact of new trait launch costs.

Answer

Judd O'Connor, EVP, Seed business unit, confirmed the Q1 cost reduction was a mix of both lower commodity costs and productivity execution, plus benefits from lower soy licensing fees. CFO David Johnson added that for the full year, Corteva expects $400 million in cost savings ($200M Seed, $200M CP). He noted the Seed savings were front-loaded in Q1, with some offsetting costs for new trait introductions expected later in the year.

Patrick Cunningham asked for a quantification of the year-to-date performance of new products and biologicals and their expected contribution in 2025.

Answer

EVP Robert King stated that for 2024, biologicals are expected to deliver double-digit EBITDA growth, and new products saw approximately 20% organic growth in Q3. CEO Chuck Magro added that these categories are the primary growth engines for the Crop Protection business, expected to lead volume growth and maintain a price premium in 2025 and beyond.

Patrick Cunningham inquired about Olin's updated strategy regarding additional downstream participation in chlorovinyls, including potential expanded tolling arrangements or investments in Olin's own PVC assets, following recent PVC tolling and Braskem EDC agreements.

Answer

Ken Lane, Olin's President and CEO, stated that Olin continues to participate in the PVC market at a low volume to gain insights and is exploring all options for potential expansion into PVC, including joint ventures, partnerships, and technology providers. He expressed long-term optimism for the PVC market, anticipating a recovery by 2030-2031, and confirmed that no options, including the current fence-line customer relationship, are off the table.

Patrick Cunningham asked for an update on Olin's thinking regarding additional downstream participation in chlorovinyls, such as expanded tolling arrangements or investing in proprietary PVC assets, given existing PVC tolling and the new Braskem EDC agreement.

Answer

Ken Lane, Olin's President and CEO, confirmed that vinyls remain a crucial market, and Olin continues to participate in the PVC market at a low volume to gain insights. He stated that all options for PVC expansion, including joint ventures, partnerships, and technology providers, are under consideration, with no final decisions made. Lane expressed long-term optimism for the PVC market, anticipating corrections to current overcapacity by 2030-2031.

Patrick Cunningham asked about the epoxy business's earnings outlook for next year, considering challenges from Asian imports, the new Stade supply agreement savings, and European volume opportunities from capacity rationalizations.

Answer

Ken Lane, President and CEO, expressed optimism for the epoxy business in 2026, citing Olin's right-sized cost base, integrated operations, industry capacity rationalization, cost reductions in Europe and the U.S., and tariff tailwinds. He anticipates a significant improvement from current low levels.

Patrick Cunningham asked about the earnings outlook for Olin's epoxy business into next year, considering ongoing challenges from Asian imports, anticipated savings from the new Stade supply agreement, and potential volume gains from European capacity rationalizations.

Answer

President and CEO Ken Lane expressed optimism for the epoxy business over the next year and a half, citing Olin's cost base right-sizing, integrated operations, and industry capacity rationalizations. He expects significant improvement from current low levels, driven by cost reductions in Europe and the U.S., tariff tailwinds, and higher glycerin costs in Asia supporting pricing.

Patrick Cunningham from Citi asked about the significant drop in EDC pricing, which fell below a previously suggested floor, and what provides confidence that a new floor has been established.

Answer

President and CEO Ken Lane explained that softer oil prices extended a lifeline to higher-cost Asian producers, allowing them to operate at lower price points than anticipated. He expressed confidence that a floor has now been reached due to stabilizing oil prices and some production curtailments in Asia. However, he cautioned that a meaningful recovery in EDC pricing is contingent on a rebound in global demand, particularly from the housing and real estate sectors.

Patrick Cunningham of Citigroup Inc. inquired about the sequential volume and price outlook for Olin's Chlor Alkali Products and Vinyls segment, specifically asking for an update on pricing across major derivatives like EDC.

Answer

President and CEO Kenneth Lane responded that while EDC pricing remains weak, it is unlikely to fall further as even Asian producers are operating at a loss. He highlighted positive pricing trends for caustic soda heading into Q2, supported by seasonal improvements in both caustic and bleach demand, leading to a positive overall outlook for Chlor Alkali price development.

Patrick Cunningham requested more detail on the sources of the $40 million in synergies expected from the acquisition of AMMO, Inc.'s assets.

Answer

CEO Kenneth Lane detailed that the synergies will come from three main areas: SG&A reductions, significant procurement savings due to Winchester's scale, and manufacturing efficiencies gained by moving niche, high-margin caliber production to the newly acquired, flexible facility. He expressed high confidence in achieving these synergies, especially in procurement.

Patrick Cunningham of Citigroup asked if the decline in Winchester's Q3 EBITDA meant core commercial business was down more than reported, given the ramp-up of government projects. He also inquired about the 2025 implications of current Winchester headwinds.

Answer

President and CEO Kenneth Lane clarified that the Q3 decline was primarily driven by lower commercial ammunition volumes due to retailer destocking. He noted the Next-Generation Squad Weapon facility project is just now ramping up in Q4. For 2025, Lane indicated that headwinds from higher metal and propellant costs persist, and a recovery in Winchester's earnings depends on a return of consumer demand and retailers working through their excess inventory.

Patrick Cunningham asked if there's any dependency between the NEOM project and the relationship with Yara at Darrow, and if these go/no-go decisions are separate. He also inquired about potential CBAM-related risks for Yara's appetite for NEOM offtake and the anticipated run rate contribution of the NEOM JV from an equity affiliates perspective, including initial loss expectations.

Answer

Eduardo Menezes, Chief Executive Officer, confirmed there are no dependencies between the two projects/contracts and that NEOM's green products would have zero CBAM effect. He reiterated that CBAM's impact is indirect and uncertain. He stated that the NEOM JV is not expected to run at a loss, but specific expected results for joint ventures cannot be disclosed.

Patrick Cunningham asked if there is any dependency between the NEOM and Darrow projects, whether their go/no-go decisions are being viewed separately, and if the same CBAM-related risks for Yara's appetite apply to the NEOM offtake. He also inquired about the anticipated run rate contribution of the NEOM JV from an equity affiliates perspective and whether it is expected to operate at a loss during its initial ramp-up phase.

Answer

Eduardo Menezes, Chief Executive Officer, confirmed there are no dependencies between the NEOM and Darrow projects, and their decisions are separate. He reiterated that NEOM's green products would have zero CBAM effect, and any indirect impact on the overall market is highly uncertain. He stated that Air Products cannot disclose expected results for joint ventures but affirmed that NEOM is not expected to operate at a loss during ramp-up.

Patrick Cunningham inquired about the commercial options for the NEOM project if downstream investment is foregone due to an unfavorable regulatory environment, and the expected EPS contribution in 2027 if ammonia is sold exclusively. He also asked about the drivers of growth in Americas equity affiliates income and expectations for next year.

Answer

Eduardo Menezes, CEO, stated that Air Products will initially commercialize NEOM's product as ammonia, noting the developing market for low-carbon ammonia. He expects to provide more guidance by the end of 2026 and cannot forecast 2027 EPS contribution yet. Melissa Schaeffer, CFO, attributed Americas equity affiliate growth to the Mexican joint venture's strong performance, expecting it to be flat in FY2026, while anticipating a pickup in the Jazan joint venture's contribution in 2026, influenced by interest rates.

Patrick Cunningham from Citi asked about Air Products' commercial alternatives and potential EPS contribution in 2027 if downstream investments for the NEOM project are foregone, necessitating exclusive ammonia sales. He also sought clarification on the drivers behind the significant growth in Americas equity affiliates income this quarter and expectations for regional equity income trends in the next fiscal year.

Answer

CEO Eduardo Menezes explained that the company is actively evaluating commercial options for NEOM, expecting to initially sell ammonia into a developing low-carbon market, with further guidance on 2027 EPS by late 2026. CFO Melissa Schaeffer attributed the Americas equity affiliates income growth primarily to the Mexican joint venture's strong performance, projecting it to be flat in FY2026, while anticipating a pickup in the Jazan joint venture's contribution in 2026 after a 2025 decline, influenced by interest rates.

Patrick Cunningham from Citigroup questioned whether recent blue ammonia project announcements by competitors in the Gulf Coast alter the market dynamics or the pool of potential equity partners for Air Products.

Answer

CEO Eduardo Menezes responded that the ammonia market is large enough to accommodate multiple projects. He pointed to growing demand for clean ammonia from the Far East and reiterated his belief that blue ammonia from the U.S. Gulf Coast will be highly competitive in Europe, ensuring there is sufficient room for Air Products' project and others.

Patrick Cunningham from Citigroup inquired about the implications of delaying downstream investment at Neom for the agreement with Total. He also asked about the potential for productivity and price optimization within the core industrial gas business.

Answer

CEO Eduardo Menezes clarified that the agreement with Total is for 2030, and the current pause allows time for regulatory frameworks in Europe to develop. In the interim (2027-2030), Air Products will sell the ammonia FOB Saudi Arabia. Regarding the core business, Menezes expressed confidence in raising operating margins from 24% toward 30% through disciplined execution, productivity improvements, and fostering a 'business owner' culture.

Patrick Cunningham from Citigroup Inc. inquired about the potential impact of tariffs on customer production and asked about the drivers for the sequential decline in interest expense.

Answer

Chief Financial Officer Melissa Schaeffer explained that the direct impact of tariffs is likely minimal due to the localized nature of the industrial gas business, but the company is monitoring the macro impact on its customers. She attributed the lower interest expense to the timing of debt draws and capitalized interest, primarily from the NEOM project.

Patrick Cunningham asked about the expected financial impact on the corporate cost line for 2025 following the divestiture of the LNG business. He also requested an update on the World Energy sustainable aviation fuel (SAF) project, specifically regarding the cause of the permitting delays.

Answer

CFO Melissa Schaeffer quantified the LNG divestiture as a 4% or $0.49 per share headwind for FY2025. Chairman, President and CEO Seifi Ghasemi added that productivity actions and growth from other projects would help offset this. Regarding the World Energy project, Mr. Ghasemi explained that permits were challenged by environmental groups, prompting the company to put the project on hold until all permits are fully secured. He noted the relationship with the partner remains excellent, but Air Products is exploring alternatives.

Patrick Cunningham asked about the opportunity set arising from a recent 'mega-merger announcement' and potential disruption in industrial-facing businesses.

Answer

Heidi G. Petz, Chair, President, and CEO, acknowledged the 'disruption' impacting several divisions and stated that teams would be aggressive. She emphasized the stability of Sherwin-Williams' strategy, playbook, and management team, viewing market volatility and competitive shifts as opportunities to strengthen customer relationships and win.

Patrick Cunningham asked about the opportunity set, particularly within industrial-facing businesses, given recent 'mega-merger' announcements and potential fresh disruption in the industry.

Answer

Chair, President, and CEO Heidi G. Petz acknowledged the disruption impacting several divisions and stated that teams will remain aggressive. She emphasized the stability of Sherwin-Williams' rock-solid strategy, playbook, and management team, which allows them to view volatility and competitive shifts as opportunities. She affirmed the company's focus on staying close to customers, solving challenges, and winning.

Patrick Cunningham asked to understand the negative operating leverage in Performance Coatings despite positive sales, seeking color on mixed drag and higher costs, and if similar margin declines are expected for Q4 2025.

Answer

SVP of Finance and CFO Al Mistysyn attributed the adjusted segment margin decrease to unfavorable mix by region and business, with lower growth in mature North America and differing operating margins in Europe (higher growth) and Latin America (decreases). He expects moderation in unfavorable mix for Q4 2025, leading to some gross margin expansion from sales volume, SG&A leverage, and improved segment profit margin. President and CEO Heidi Petz highlighted bright spots like mid-single-digit growth in auto-refinish, driven by share gains, and emphasized the team's focus on volume growth and cost controls.

Patrick Cunningham asked for an explanation of the negative operating leverage in the Performance Coatings Group despite positive sales, specifically seeking color on the mixed drag and higher costs. He also inquired whether similar margin declines should be expected in the fourth quarter given similar mixed dynamics.

Answer

Al Mistysyn, SVP of Finance and CFO, attributed the third-quarter margin decrease to an unfavorable mix by region and business, citing lower growth in the mature North American market, higher growth in lower-margin Europe (due to acquisitions), and declines in Latin America. He expects moderation in this unfavorable mix in the fourth quarter, leading to some gross margin expansion from sales volume, SG&A leverage from cost control, and an improved segment profit margin. Heidi Petz, President and CEO, added that while no strong market recovery catalyst is expected, they are gaining market share in areas like auto-refinish and maintaining a strong focus on cost controls.

Patrick Cunningham of Citigroup asked for an update on the residential repaint market, specifically how underlying contractor backlogs and activity levels evolved throughout the second quarter and into July.

Answer

Chair, President & CEO Heidi Petz characterized contractor backlogs as stable, with a marginal increase in bid activity. She noted a caveat that project sizes may be getting smaller. While pleased with continued market share gains, she stated the overall market volume remains a challenge and the company is actively helping contractors find new opportunities.

Patrick Cunningham from Citigroup asked for an update on the residential repaint market, specifically how underlying contractor backlogs and activity levels evolved through the second quarter and into July.

Answer

CEO Heidi Petz described contractor backlogs as stable, with a marginal increase in bid activity. However, she noted that project sizes may be getting smaller. She reiterated that while the overall market remains soft, Sherwin-Williams is pleased with its ability to continue gaining market share in this environment.

Patrick Cunningham asked about the drivers of continued strength in residential repaint, including underlying market trends, contractor backlogs, and the impacts of consumer pressure and immigration.

Answer

Executive Heidi Petz acknowledged the market is 'flat and certainly choppy' but noted Sherwin-Williams is gaining share due to prior investments. She described contractor backlogs as positive, though for smaller projects. The company's core value proposition addresses labor challenges by providing solutions that help contractors improve productivity and get on and off job sites faster.

Patrick Cunningham asked for the latest thoughts on the M&A pipeline and whether to expect a different focus in 2025, given elevated capital spending and challenging end markets.

Answer

CEO Heidi Petz described the company's M&A approach as consistent and disciplined, always evaluating opportunities that could accelerate strategy through technology, brand, or geography. She stressed that while Sherwin-Williams does not need M&A to grow, it will assess attractive opportunities that fit its capital allocation policy.

Patrick Cunningham requested quantification of the hurricane impact in Q3 and sensitivity for Q4, and asked if potential holiday shutdowns in the industrial business were broad-based or concentrated.

Answer

Executive Allen Mistysyn stated the Q3 hurricane impact was less than one point on sales and about $0.05 on EPS, noting the Q4 outlook is uncertain due to the timing of recovery. Executive Heidi Petz said industrial shutdowns have been temporary and not widespread so far, though they are monitoring the situation, particularly in heavy equipment and transportation.

Patrick Cunningham inquired about Protective and Marine Coatings (PMC) normalizing to industry growth rates, asking if any share losses are offsetting gains in 2026 and what the expected overall industry growth rate for the platform is.

Answer

Senior Vice President and CFO Vince Morales noted that PMC faces difficult comparables after eleven consecutive quarters of volume growth and that it's a project-oriented business requiring new project wins. Chairman and CEO Tim Knavish highlighted marine as a particular strength, with disproportionate wins in aftermarket, dry docks (SIGMAGLIDE technology), and Asia new builds, alongside strong performance in specialty fireproofing products on the protective side.

Patrick Cunningham inquired about the Protective and Marine Coatings (PMC) business, specifically regarding the normalization to industry growth rates, potential share losses offsetting gains in 2026, and the expected overall industry growth rate for the platform.

Answer

Senior Vice President and CFO Vince Morales explained that the PMC business faces difficult comparables due to eleven consecutive quarters of volume growth and its project-oriented nature. Chairman and CEO Tim Knavish highlighted marine as a particular area of strength, with disproportionate wins in aftermarket, dry docks (due to SigmaGlide technology), and Asia new builds. He also noted strength in specialty fireproofing products on the protective side.

Patrick Cunningham from Citigroup asked for an update on the previously quantified $100 million in industrial share gains, inquiring if it's still on track and about the ability to price and the margin profile of this new automotive OEM and packaging business.

Answer

CFO Vince Morales highlighted the significant leverage on the bottom line in the industrial segment due to volume growth and fixed cost base leverage. Chairman and CEO Tim Knavish confirmed that the $100 million in share gains quoted a year ago is now flowing through, with additional wins throughout the year. He noted that while these gains won't fully offset macro headwinds and refinish comps in 1H26, they position PPG well for the midterm once transitory pressures ease.

Patrick Cunningham followed up on industrial share gains, asking if the previously quantified $100 million is still on track and about the ability to price and the margin profile of new automotive OEM and packaging business.

Answer

CFO Vince Morales highlighted the significant leverage on the bottom line from volume growth in the industrial segment. Chairman and CEO Tim Knavish confirmed that the $100 million in share gains quoted a year ago is now flowing through, with additional wins throughout the year. He noted that these gains, while positive, will not fully offset macro headwinds and refinish comp issues in early 2026, which are considered transitory.

Patrick Cunningham of Citi asked about the long-term growth outlook for the Aerospace business, considering its strong multi-year performance, pricing actions, and new capacity investments.

Answer

CEO Timothy Knavish stated that PPG anticipates "high single digits and double digit" growth for the foreseeable future, supported by extremely strong demand forecasts across commercial, military, and general aviation. He emphasized that PPG is investing heavily in both OpEx and CapEx, including a new $380 million U.S. factory, to capture this sustained growth.

Patrick Cunningham of Citi asked about the growth outlook for the Aerospace business over the next few years, considering pricing actions and new capacity additions.

Answer

Chairman & CEO Timothy Knavish expressed strong optimism, stating that PPG anticipates 'high single-digit and double-digit growth for the foreseeable future.' This confidence is based on extremely strong forecasts from customers across commercial, military, and general aviation. He highlighted that PPG is investing heavily in both OpEx and CapEx, including a new $380 million factory, to support this sustained demand.

Patrick Cunningham of Citigroup asked about the Industrial Coatings subsegment, inquiring how much of the positive volume was due to share gains and if there was any pre-buying that might mute Q2 sales.

Answer

CEO Timothy Knavish confirmed momentum in Industrial Coatings, driven by both delivered share gains from 2024 and some improvement in industrial production in key regions and segments. He highlighted growth in China and India, as well as in the U.S. general finishes market, and described the overall trend as positive momentum going forward.

Patrick Cunningham asked about the drivers of performance in the EMEA Architectural Coatings business and the potential catalysts for a recovery in consumer confidence.

Answer

CEO Tim Knavish noted that while Q4 was weak, full-year performance was strong in Poland, the U.K., and Ireland, driven by both price and share gains. He is not expecting a sharp recovery in Europe but rather stabilization fueled by easing inflation and potential central bank actions. CFO Vince Morales added that a normalization of the maintenance cycle, which was pulled forward during COVID, should also provide a volume benefit.

Patrick Cunningham inquired about the current M&A pipeline, specific target regions or technologies, and whether the recent divestiture means Architectural Coatings M&A is no longer a consideration.

Answer

Chairman and CEO Timothy Knavish described the M&A pipeline as having been 'thinner than normal' but noted recent activity. He clarified that while Architectural Coatings M&A is not off the table, PPG would only be interested in acquiring #1 or strong #2 positions, likely not in Europe. He stressed that the primary focus is on organic growth, supplemented by highly targeted, value-accretive acquisitions.

Patrick Cunningham asked about H.B. Fuller's confidence in EA volume growth for 2026, excluding solar, and whether the strong outperformance in automotive and electronics seen in 2025 is expected to normalize. He also inquired about the long-term free cash flow conversion, given recent years below historic averages, and the anticipated peak working capital and CapEx drag associated with the Quantum Leap initiative.

Answer

President and CEO Celeste Mastin expressed high confidence in EA's volume growth, highlighting the segment's strong Q4 organic growth (7% ex-solar, 5% volume) and the successful integration of ND Industries. She acknowledged the $30 million solar de-emphasis but emphasized continued strong growth in electronics, aerospace, and automotive markets, particularly in Asia. EVP and CFO John Corkrean stated that operating cash flow would remain somewhat muted for the next couple of years due to higher working capital from Quantum Leap, with working capital expected to stay above the 15% target. He noted that after Quantum Leap and SAP implementation, maintenance CapEx (currently $50 million annually) could be reduced by a third, and SAP-related CapEx ($20 million annually) would dramatically decrease, leading to a significant step-up in free cash flow.

Patrick Cunningham from Citigroup asked about H.B. Fuller's confidence in EA volume growth for 2026, excluding solar, and whether they anticipate any normalization of the strong outperformance seen in automotive and electronics in 2025, or if there's clear line of sight for market growth and new business. He also inquired about long-term free cash flow conversion and the expected peak working capital and CapEx drag associated with the Quantum Leap initiative.

Answer

President and CEO Celeste Mastin expressed high confidence in EA's continued performance, noting 7% organic growth (excluding solar) and 5% volume growth in Q4 2025. She highlighted the success of the ND Industries acquisition (8% organic growth in 2025) and strong growth in automotive (interior/exterior trim, lighting, EV powertrain in Asia), electronics, and aerospace, driven by innovation and strong customer partnerships. EVP and CFO John Corkrean reiterated that operating cash flow would remain muted for the next couple of years due to higher working capital (above 15% of revenue) associated with Quantum Leap. He explained that while CapEx is in line, the initiative will lead to slightly elevated CapEx and working capital in the near term, with improvements expected after Quantum Leap and SAP implementation are complete, including reduced maintenance capital and inventory days on hand.

Patrick Cunningham asked for more details on the unexpected weakness in the electronics end-market, which had previously been a strong category. He also questioned how to think about the progression of price-cost dynamics and the margin profile for the HHC segment, particularly if the volume environment remains stable.

Answer

President & CEO Celeste Mastin explained the electronics slowdown was a temporary pause in Asia Pacific exports, but highlighted continued strength in the U.S. and new design wins expected to drive a second-half recovery. Regarding HHC, she confirmed that significant year-over-year margin expansion is expected, driven by back-half loaded benefits from raw material cost reductions, pricing actions, and a favorable mix shift from the growing Medical Adhesives business.

Patrick Cunningham asked for details on the price-cost dynamic, including the magnitude of Q4 raw material inflation and the company's ability to push price in a weak HHC volume environment. He also inquired about the drivers of the strong performance in Construction Adhesives and the volume outlook for the newly formed BAS segment.

Answer

CFO John Corkrean quantified the Q4 raw material headwind as a ~$10 million unfavorable surprise versus Q3. CEO Celeste Mastin explained that index pricing lags, and the company expects a ~$55 million net benefit from price/raws in 2025. She attributed strong Construction Adhesives performance to innovation, share gains, and focus on data centers. CFO John Corkrean noted the new BAS segment's growth will be slower as it now includes more cyclical markets like wood and composites.

Patrick Cunningham inquired about the drivers behind lower clean energy sales in the Engineering Adhesives (EA) segment and asked about expectations for the auto and electronics growth rates. He also sought clarification on actions taken to reposition the EA portfolio.

Answer

CEO Celeste Mastin explained that the solar business weakness is due to global overcapacity of solar panels, though H.B. Fuller is focusing on new HJT technology. She noted that while auto and electronics growth has slowed from double-digits to solid single-digits, most EA segments still saw positive volume. Mastin confirmed they are strategically retrenching from some parts of the solar market while doubling down on high-value technology partnerships.

Patrick Cunningham inquired about additional productivity savings programs for next year, incremental carryover, and bromine supply/demand trends and Q4 outlook.

Answer

CEO Kent Masters stated that productivity programs are ongoing across the business, with operations being most mature and supply chain/back office less so, aiming for continuous improvement. CFO Neal Sheorey confirmed a $450 million run rate for 2025 savings, with some rolling into 2026, and highlighted asset sweating (e.g., Meishan ahead of schedule) as a key productivity theme. Chief Commercial Officer Eric Norris noted mixed bromine demand (strong in electronics/pharma, weaker in building/oil & gas), with supply/demand balanced after some mid-year tightness, and expects a fairly balanced market into year-end despite seasonal production shutdowns.

Patrick Cunningham inquired about additional productivity savings programs for next year and the incremental carryover, as well as the trends in bromine supply and demand, including the outlook for Q4.

Answer

Kent Masters, CEO, stated that productivity programs are ongoing across the business, with operations being the most mature and supply chain/back office less so. Neal Sheorey, CFO, confirmed a $450 million run rate for cost and productivity savings this year, with some continuing into 2026, citing asset optimization like Meishan's ramp-up. Eric Norris, Chief Commercial Officer, described the bromine market as mixed, with strong demand in electronics/pharma offset by weaker oil & gas. He noted that elemental bromine prices rose mid-year but are now balanced, with seasonal production declines expected to maintain balance into year-end.

Rachel, on behalf of Patrick Cunningham from Citi, asked whether strong year-to-date demand was driven by tariff pre-buying and inquired about where future supply curtailments might occur.

Answer

CEO Jerry Masters attributed the strong start more to regulatory-driven volume shifts from late 2024 in Europe rather than tariff pre-buying. He suggested future supply curtailments are most likely to come from non-integrated, high-cost hard rock conversion assets, potentially impacting Western players more than Chinese ones.

Patrick Cunningham from Citigroup inquired about Albemarle's contract mix, specifically the 50% of volumes not under long-term agreements with floors, and asked about the nature of recent capital expenditure reductions.

Answer

CEO Jerry Masters confirmed the 50% of volumes not on floored contracts are largely indexed to spot prices and clarified that the definition of 'contracted' was narrowed to only include agreements with floors. He added that CapEx cuts were initially focused on conversion capacity and have now expanded to resources and sustaining capital to align with market conditions.

Patrick Cunningham inquired about the Pepsi contract, asking for details on the initial agreement and what prompted its restructuring.

Answer

Mark Costa, Board Chair and CEO, stated that the Pepsi contract was a foundational baseload agreement for the second plant, providing confidence in revenue through price stability and committed volume. The restructuring involves pulling forward the start of that contract to next year, as Pepsi is interested in securing rPET volume sooner.

Patrick Cunningham asked for details on the initial Pepsi contract agreement and the reasons for its restructuring. He also inquired about the outlook for Chemical Intermediates (CI) earnings next year, considering asset utilization tailwinds, cost reduction, and potential impacts from trade regulations or asset rationalization.

Answer

Board Chair and CEO Mark Costa stated the Pepsi contract was a foundational baseload for a second plant, with undisclosed volumes sufficient for a 100,000-ton facility, offering price stability and committed volume. Restructuring involves pulling forward volume to start in 2026, with supply from Kingsport and bottlenecked capacity. For CI, Mark Costa noted the segment is in a manufacturing recession with excess Chinese capacity. He expects CI earnings to improve next year due to more volume to sell, aggressive cost reductions, and potential recovery in North American housing demand, which would improve mix and margins.

Patrick Cunningham asked about the implications of reduced capital spending and cost savings for trough earnings levels, and whether the company's view on mid-cycle earnings power has changed given the macroeconomic environment. He also inquired about the ethylene-to-propylene (E2P) investment.

Answer

Chairman and CEO Mark Costa explained that the second half of 2025 is not representative of a trough due to significant distortions from the trade situation, which has created demand chaos and pre-buying. He noted that a $75-100 million utilization headwind from inventory reduction also distorts the outlook. For the E2P investment, Mr. Costa detailed that converting an existing cracker to prioritize propylene will structurally improve the Chemical Intermediates business, adding $50-100 million in EBIT over the cycle and reducing earnings volatility.

Patrick Cunningham asked about the lower sales guidance for the Renew platform, inquiring about its Q1 contribution, management's confidence in the new forecast, and order book visibility. He also questioned the expected duration of destocking in the Fibers segment and its impact on future contracts.

Answer

Mark Costa, Board Chair and CEO, clarified that the Renew guidance reduction stems from tariff-related uncertainty impacting consumer durables markets, not from operational issues or a lack of customer engagement. He stated that the methanolysis operations are performing well and are on track for their cost-related EBITDA goals. For the Fibers segment, Costa attributed the volume decline to prolonged customer destocking as market supply has loosened, but emphasized that underlying market fundamentals and contract pricing remain solid.

Patrick Cunningham of Citigroup questioned the impact of consumer weakness on the 2025 methanolysis EBITDA outlook and inquired about the Fibers business, specifically regarding new industry capacity, contract negotiations, and asset repurposing plans.

Answer

CEO Mark Costa explained that the slower methanolysis ramp is tied to brands prioritizing cost management over new product launches in a weak economy, but he expects this to reverse as markets stabilize. For the Fibers segment, Costa stated that new Chinese capacity is not a major threat and that Eastman is actively repurposing assets for higher-growth products like Naia and Aventa. He attributed the expected 2025 softness to minor market decline and customer inventory adjustments, not competitive pressure, with utilization rates remaining strong.

Patrick Cunningham asked about the low single-digit price mix declines in refinish, specifically if it's primarily due to the shift into mainstream and economy segments, and Axalta's outlook on underlying structural pricing for 2026.

Answer

Chris Villavarayan, CEO and President, confirmed that negative mix is partly due to growth in mainstream and economy segments, which have lower margins than premium but are accretive to overall Axalta margins. He also noted that destocking, primarily a North American issue, impacted the highest margin business, contributing to negative mix. He expects this to be mitigated next year as destocking abates.

Patrick Cunningham questioned the outlook for second-half growth in the Industrials segment, given negative housing sentiment and tariff impacts.

Answer

CFO Carl Anderson clarified that the expected sequential growth is modest. The outlook is supported by continued outperformance in Asia Pacific and stabilization in Europe, which are offsetting weakness in North America. CEO Chrishan Anthon Villavarayan specifically highlighted strong growth in China, driven by the company's Voltatex product line for EVs and other electrical systems.

Patrick Cunningham requested quantification of the run-rate earnings contribution from Dow's new growth investments in the U.S. Gulf Coast (Poly7 and Alcoxolation). He also asked about any other incremental investments or tailwinds expected for the next year.

Answer

Chair and CEO Jim Fitterling and COO Karen S. Carter clarified that the Poly7 and Alcoxolation units are the two new growth assets. Karen S. Carter stated that these units are expected to deliver $100 to $200 million on a full run-rate annualized basis, contributing approximately $40 million in Q3 and expected to continue into Q4. Jim Fitterling added that these investments allow Dow to capture the full integrated margin on ethylene, rather than selling merchant ethylene.

Patrick Cunningham requested quantification of the run-rate earnings contribution from Dow's new growth investments in the U.S. Gulf Coast and inquired about any other incremental investments or tailwinds anticipated for the next year.

Answer

Karen S. Carter, Chief Operating Officer, clarified that the two operational growth assets are the Poly7 unit and the Alcoxolation capacity in the U.S. Gulf Coast. She stated that these are expected to deliver an annualized full run-rate contribution of $100 million-$200 million, with approximately $40 million contributed in Q3 and expected for Q4. Jim Fitterling, Chair and Chief Executive Officer, added that achieving ethylene balance in the market allows Dow to capture the full integrated margin, rather than selling merchant ethylene.

Patrick Cunningham of Citigroup Inc. questioned if lower equity earnings necessitate further JV restructuring. He specifically asked about the Sadara JV and whether its debt would need reprofiling or a cash infusion from Dow when its principal grace period ends in 2026.

Answer

CEO Jim Fitterling acknowledged that JV earnings are down with the market but stated the Kuwait and Thailand JVs have solid balance sheets. Regarding Sadara, he confirmed that a dedicated team is actively working with partner Aramco on refinancing the debt well ahead of the 2026 deadline to mitigate any potential issues, expressing confidence in their current approach.

Patrick Cunningham of Citigroup Inc. asked about the silicones market, questioning if the oversupply from China is improving and whether Dow anticipates taking further actions on its upstream assets.

Answer

CEO James Fitterling stated the situation is improving, but slowly. COO Karen S. Carter elaborated that while upstream capacity additions in China have slowed, an oversupply situation persists. She emphasized that Dow's focus remains on its downstream specialties, where demand in markets like electronics and personal care continues to grow significantly above GDP, which should help the market rebalance over time.

Patrick Cunningham asked what policy changes would be needed in Europe for Dow to maintain its assets there, and how the company is positioning itself with governments regarding the UN Global Plastics Treaty and potential production caps.

Answer

James Fitterling, Chair and CEO, called for European policy to focus on energy competitiveness and adopt a more practical approach to hydrogen, similar to Canada's. Regarding the plastics treaty, he stated there is no global alignment on production caps and that Dow continues to advocate for solutions focused on circularity and pollution control, arguing that plastics offer a superior sustainability footprint.

Patrick Cunningham inquired about the impact of strategic inventory purchases on working capital this quarter, asking what was stocked up and why, and later about the expected shape of price realization in the Consumer Group versus other businesses.

Answer

Frank Sullivan, Chairman and CEO, explained that inventory was stocked up in construction products, particularly Tremco Sealants, due to the transition of the Toronto plant to U.S. facilities. Additionally, consumer new products and raw materials like epoxy were purchased ahead of tariff price increases. He anticipates Q2 price realization to be around 2% on a consolidated basis, with the Consumer Group benefiting from price increases related to packaging costs.

Patrick Cunningham from Citi asked for an analysis of the price-cost dynamic, especially for Q1, and questioned the health of project backlogs in the non-residential construction and performance coatings sectors.

Answer

Chairman & CEO Frank Sullivan identified the main Q1 challenge as being in the Consumer segment, citing inflation in metal packaging, propellants, and pigments. He stated that price increases are planned for late summer and early fall to address this. Sullivan confirmed that backlogs for the Construction and Performance Coatings businesses remain 'really strong,' though they face difficult year-over-year comparisons.

Patrick Cunningham of Citi asked about the drivers of strong margin performance in the Industrials segment and the outlook for pricing trends in the second half of the year.

Answer

CFO Antonella Franzen attributed the robust margins to strong productivity focus, which is driving underlying expansion of about 100 basis points for the year. She also confirmed that the negative pricing impact, concentrated in diversified industrials, is expected to lessen in the second half.

Patrick Cunningham of Citigroup Inc. inquired about the margin outlook for the Industrials segment for the second half and sought clarity on future pricing trends within the business.

Answer

CFO Antonella Franzen stated that strong productivity is driving better-than-expected margins and that this focus will continue. She confirmed the pricing headwind should lessen in the second half, as the pressure was mainly in diversified industrials related to normalizing prior price hikes.

Patrick Cunningham asked if tariff uncertainty and market normalization are creating pressure on DuPont's ability to achieve share gains in Electronics, and inquired about the risk of retaliatory trade restrictions from China.

Answer

Jon Kemp, CEO-elect of Qnity, expressed confidence in their competitive position, stating that increasing technological complexity favors their high-quality offerings and deep customer integration. Regarding trade risks, he acknowledged the dynamic environment but noted the company has a strong track record of navigating such challenges.

Patrick Cunningham asked about the EBITDA margin profile of the businesses being moved from Corporate into IndustrialsCo and requested an update on the performance and destocking status of the Kalrez business.

Answer

CEO Lori Koch confirmed the businesses moving into the new DuPont have a lower margin profile, in the high-teens to low-20s, resulting in a blended margin of 23-24% for IndustrialsCo in 2024. She also noted that the destocking in the Kalrez business is expected to be complete by mid-2025.

Patrick Cunningham of Citigroup inquired about the outlook for price givebacks in the Shelter business and the growth dynamic between commercial and residential construction. He also asked about the drivers of the sequential EBITDA decline in W&P.

Answer

CFO Antonella Franzen stated that some price giveback carry-forward into 2025 is expected in Shelter, pending a review of input costs. She noted construction activity was weaker than anticipated due to the timing of rate cuts. CEO Lori Koch clarified the sequential W&P EBITDA decline is due to typical seasonality, primarily in the Shelter business, and confirmed a $25 million one-time benefit from last year would not repeat.

Patrick Cunningham from Citi inquired about the potential sequential earnings lift for the O&P Americas segment in Q3, considering reduced downtime and recent price increases, and asked about the likelihood of further polyethylene price hikes.

Answer

CEO Peter Vanacker confirmed an expected $85 million improvement from less downtime. EVP of Global Olefins & Polyolefins, Kim Foley, added that while back-to-back price increases are rare without a major supply disruption, positive market indicators like strong demand and low inventories create potential for a Q3 increase if tariff uncertainties are resolved.

Patrick Cunningham of Citi questioned the timing of the Flex 2 metathesis unit project, asking why now is the right time to proceed with its significant CapEx given market uncertainty, and if it could be delayed.

Answer

CEO Peter Vanacker affirmed that the project aligns with the company's strategy to grow and upgrade its core, enabled by cost-saving programs. He highlighted the project's attractive IRR of around 15-16%. He stressed that LYB has a history of navigating cycles by managing CapEx and that the 2026 spending plan will be similarly managed, with total CapEx not expected to be substantially higher than the current year's guidance.

Patrick Cunningham questioned if the current environment of supply overhang and sluggish demand represents a 'new normal' rather than a temporary downturn, and asked if LyondellBasell could be more aggressive with strategic pivots.

Answer

CEO Peter Vanacker acknowledged the challenges but pointed to early signs of demand recovery, citing year-over-year demand growth in North American polyethylene and global Propylene Oxide & Derivatives. He emphasized that significant new industry capacity is not expected in the near term and that LYB is well-positioned with its new, efficient assets to capture upside from a recovery.

Patrick Cunningham from Citi inquired about the performance of the Propylene Oxide (PO) & derivatives business, asking for a breakdown of the quarterly decline between unplanned downtime versus weaker margins, the overall operating rate, and the expected impact of Q4 maintenance.

Answer

EVP Aaron Ledet stated that despite challenges, global sales volumes were up 4% year-over-year. He noted that higher US propylene prices limited exports, impacting operating rates, which are guided to 75% for Q4. This Q4 rate is also affected by a planned turnaround at the Bayport facility, which was completed in late October. He expressed long-term optimism for demand recovery but did not expect it in the remainder of the year.

Patrick Cunningham of Citigroup asked for more details on customer order patterns, noting that cautious behavior had heavily impacted North American volumes.

Answer

CEO Pierre Brondeau confirmed that customers bought closer to the time of use in Q1, slowing order velocity. However, he sees the dynamic improving in Q2, citing Europe as an example where over half the quarter's orders were booked in the first month. He stressed that the overall dynamic is positive, despite FMC's own deliberate actions to manage its channel inventory.

Patrick Cunningham of Citigroup asked about the pricing challenges in Latin America and the outlook for incremental incentives to maintain or gain market share in Q4 and into 2025.

Answer

Pierre Brondeau, Chairman and CEO, stated that a mid-single-digit price decline is factored into the Q4 forecast for the region. He and Ronaldo Pereira, President, explained the pricing actions are a deliberate strategy to regain market share on traditional products to pre-downturn levels, driven by peer competition rather than new generic pressure.