Eastman Chemical Co (EMN)

Methanolysis Plant Issues
Q: Can you detail the methanolysis plant's feedstock issues?
A: Mark Costa explained that during the ramp-up of the methanolysis plant, they encountered plugging issues due to feedstock preparation, specifically impurities in the hard-to-recycle feedstock. These issues were addressed by optimizing the feedstock form and dealing with non-polymer waste from a few suppliers. The plant has been running at sustained rates of around 70%, and they are implementing changes to ramp up to full rates. Costa emphasized that they are making on-spec product and are excited to serve customers as volumes increase in the back half of the year. -

Tritan Expansion Timing
Q: Why proceed with Tritan expansion now despite macro pressures?
A: Mark Costa stated that despite weakness in consumer durables, they have seen significant volume return due to the end of destocking and continued wins with Tritan's value proposition, including recycled content. Customers are paying the expected premiums, and new markets are opening up. They see the need for additional capacity to avoid shorting the market and believe this is the right time to proceed, anticipating market recovery. -

Full Year Guidance
Q: Given the Q2 beat, why is full-year guidance midpoint unchanged?
A: William McLain explained that while they beat Q2 expectations by $0.15, they maintained the midpoint of the full-year guidance due to adjustments, including a reduction in methanolysis expectations. They are driving strong year-over-year growth of 20%, and narrowing the guidance range was appropriate. Mark Costa added that demand remains the biggest variable, and they are assuming no end-market growth for consumer discretionary markets, with modest growth in stable markets. -

Acetyl Chain Shutdown Impact
Q: Can you clarify the acetyl chain shutdown and price/cost issues?
A: William McLain noted that higher planned shutdowns in the acetyl cellulosic stream will occur in Q3, representing about half of the $50 million maintenance expense, with the other half in Q4. The divestiture of the Texas City acetyl operations has closed and represents a $30 million headwind year-over-year. Mark Costa added that unfavorable price/cost in acetyls is due to lower margins and adjustments in logistics costs after the divestiture. -

Customer Adoption of Renew Products
Q: What factors are affecting Tritan Renew's slower adoption?
A: Mark Costa mentioned that while customers are committed to Tritan Renew, the tough economic environment and inflation have led to a slower ramp-up of some programs. Companies are focused on managing costs, affecting the rate of volume growth. However, he expects no impact on next year's growth, aiming for a run rate of $150 million of EBITDA by the end of next year from the circular platform. -

Other Segment Losses
Q: Why is the 'Other' segment now losing $200 million annually?
A: William McLain explained that the increase from $50 million to $200 million in losses is primarily due to a $100 million headwind from pension accounting impacts related to higher interest rates. Additionally, increased preproduction and start-up costs for methanolysis and circular platforms contribute to the losses. As projects come online, these expenses should decrease, and interest rate changes could provide future tailwinds. -

Capital Expenditure Reduction
Q: Why has CapEx guidance been reduced despite new projects?
A: William McLain stated that CapEx guidance has been lowered to $650 million to $700 million due to timing shifts in the France and Texas methanolysis projects. They are balancing growth investments with current project timelines and have increased share repurchases to $300 million to avoid excess cash on the balance sheet. -

Interlayers Business Growth
Q: How is the interlayers business performing?
A: Mark Costa reported that the interlayers business, about one-third of Advanced Materials revenue, is delivering meaningful earnings growth despite flat auto markets. Growth is driven by innovation, with products like head-up displays (HUD) and solar control interlayers seeing volume increases of 20% and 12% year-over-year, respectively. The business benefits from exposure to luxury and electric vehicles, which have higher content per vehicle. -

Advanced Materials Volume Trajectory
Q: What's the outlook for Advanced Materials volume growth?
A: Mark Costa expects volume growth in Advanced Materials due to the ramp-up of methanolysis in Q3 and Q4, continued innovation, and application wins. While some seasonality is expected in Q4, overall volume should improve. Spread tailwinds from lower energy costs are anticipated, though higher shutdown costs of about $25 million in the back half will partially offset gains. -

French Methanolysis Project Status
Q: What's the status of the methanolysis project in France?
A: Mark Costa indicated that progress on the France project has been slower due to extended customer contract discussions and capital cost inflation. They insist on securing long-term take-or-pay contracts before proceeding. They hope to have clarity by the end of the year and remain committed to their long-term EBITDA target of $450 million across their circular economy projects. -