Greetings, and welcome to the Celanese first quarter 2022 earnings conference call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Brandon Ayache, Vice President of Investor Relations. Thank you. You may begin. Thank you, Daryl. Welcome to the Celanese Corporation first quarter 2022 earnings conference call. My name is Brandon Ayache, Vice President of Investor Relations, and with me today on the call are Lori Ryerkerk, Chairman of the Board and Chief Executive Officer, and Scott Richardson, Chief Financial Officer. Celanese Corporation distributed its first quarter earnings release via Business Wire and posted prepared comments about the quarter on our investor relations website yesterday afternoon. As a reminder, we will discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of the press release, as well as prepared comments. Form 8-K reports containing all these materials have also been submitted to the SEC. Because we published our prepared comments yesterday, we'll now open the line directly for your questions. Daryl, please go ahead and open the line for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up question. One moment, please, while we poll for your questions. Our first questions come from the line of Josh Spector with UBS. Please proceed with your questions. Hi. Thanks for taking my question. I was just curious on the engineered materials, EBIT guidance. I was wondering what's baked in there in terms of volumes sequentially. I mean, you're pretty clear about the auto pull forward, but wondering if there's any other puts and takes around that, assuming you're getting incremental pricing, but assuming you're assuming some volume moderation for 2Q. Similarly for the rest of the year, thinking about how you're kind of framing up volume expectations for auto end markets and otherwise. Thanks. Yeah. Thanks, Josh. As we look at full year, if we look at 2021 to 2022, we are assuming some volume in there. Some of that is for Santoprene, but there's a couple% growth in base business as well. That really comes about as we see improvements in 2022 versus 2021 in the availability of a lot of our raw materials. Things like glass fiber, things like flame retardants, even some resins that we called out last year, now that we are getting better supplies of those, we're able to increase our volumes, and that really accounts for the base volume increase. As I said, you know, we do have volume increase in there as well for Santoprene. I would say, you know, we called out auto to be flat, year-over-year, so we're not assuming a large increase in volume to auto, although we do continue to see margin growth in materials into auto as we continue to high-grade the materials we sell into auto. I would say really strength across all sectors, all of them growing a little bit in that volume. I guess just specifically on 2Q and that sequential volume move, are you thinking that volumes are up or down into 2Q given some of the macro headwinds? Yeah. I think in Q2, we're expecting a little less volume. Again, we called out that we had about what we think was 10-15 million of volume pull forward from Q2 to Q1. Again, I think we called it out in our notes. Really, that was driven by you know, demand being down in Q1 in terms of auto builds, but people wanting to go ahead and rebuild inventory. You might recall that we had said fourth quarter, we saw a lot of inventory reduction as people went to end the year. We think people were just rebuilding inventory in Q1. Unless we see a rapid demand, which we're not forecasting for auto in 2Q, then we would expect to have, see, you know, that 10-15 million not show up in second quarter, if you will. Okay. Thank you. Thank you. Our next question has come from the line of PJ Juvekar with Citi. Please proceed with your questions. Yes. Hi, good morning, Lori and Scott. Does DuPont's M&M business improve your ESG profile or keep it the same? Can you explain, can you maybe talk a little bit about nylon recycling, especially at the end of life in applications like autos, and what role will Celanese play? Thank you. Thanks, PJ. On DuPont, our assessment so far and, you know, obviously we have more learning to do, but our sense on DuPont is their ESG profile is similar to ours. They've had similar efforts in place to reduce the footprint of their facilities. They have similar efforts in place to purchase renewable energy for their electricity needs. We know they've also worked on, you know, recycling and making available recycled materials to those customers that want them. I would say, you know, I don't think they're necessarily far ahead of where we were in Celanese, but I also don't think they're behind. I think we have a good common platform to work from. Obviously, there's gonna be some things we find they're doing better, there's gonna be some things we were doing better. I think, you know, it will really just help accelerate our journey. When it comes to recycled nylon, the challenge has always been, you know, how do you find high enough quality nylon so that the material you provide can meet the customer's specifications? In Celanese, we've done that by securing airbag scrappage, which is pretty consistent quality. We use that in Europe to make a recycled nylon. In India, we recycle fishing nets from the ocean and clean those, and we make that into a recycled nylon. You know, for other uses, say, in auto, the challenge is really how do you collect it and how do you separate it? Because, you know, collection itself is an issue as it is with all recycled materials. The issue is in auto and other applications, a lot of times, you know, they're put together with other materials or difficult to separate. I think it's a challenge we have as an industry and one we're just starting to look at. You know, some of our more recent discussions around that is we've been talking to customers, not necessarily in auto, but also in some other applications saying, you know, "Hey, if you could do this entire component out of one material, it may cost you a few cents more, but it would make it more recyclable." I think that's what we're gonna have to look at going forward, is how do we work with our customers to, you know, maybe simplify the amount of polymer, the types of polymers being used inside an application to make it easier to recover and recycle those materials. Great. Thank you. One quick question on VAM. You mentioned that, you know, things were really tight with three out of five plants down in North America, I believe. You know, how does this VAM situation normalize in 2Q and second half? Thank you. Yeah. We expect that to normalize in the second quarter. Two of those VAM plants were ours, so one turnaround in Clear Lake as well as the turnaround in Bay City. We know those are coming back up, and we should expect them to be back to full rates in second quarter. We expect that to improve. What that should do, though, is increase demand then for acetic acid, which provide a little bit of support for acetic acid pricing going forward, especially with China acetic acid pricing. VAM price continues to be high, partly because of that, but also just because of a big demand for VAM. I think you can see that in other people's reports that are really calling out strong second quarters as well as strong second half in some of the big VAM consumers. You know, I would expect the supply-demand situation to normalize second quarter, which really just should help us with acetic acid, you know, holding up acetic acid pricing. Thank you. Thank you. Our next question has come from the line of Jeffrey Zekauskas with JPMorgan. Please proceed with your question. Thanks very much. I think you used to say that your financing costs for the mobility acquisition were about 3%. How much higher are they now, or how much higher do you foresee them being? Yeah, Jeff, I think we're still working through that, obviously. I mean, benchmark rates have moved up. A lot's gonna depend upon, you know, where things are at when we go to market. It also is we're working on things in terms of how we want to optimally structure in terms of a regional debt mix. We're gonna look at maturities, and kinda optimize that as well. I think while we do expect to be higher than the 3% if we were to go to market right now, you know, I think the overall interest cost, we believe, is not gonna be materially different. You know, with the higher cash flow, we do expect to come in with lower debt at closing is the current expectation. With bringing the synergies forward a bit in year one, you know, we ultimately believe, you know, from an accretion perspective, we're gonna be at or above what we had originally signaled earlier this year. Thank you for that. You have a big acetyl chain expansion, you know, coming on in the United States next year. Are you taking steps now or beginning to take steps to think about the curtailment of your offshore capacity? How do you think about that? The answer is we're not thinking about taking steps on our offshore capacity. We really like having the footprint where we have, you know, three different raw material providers, so coal in China, oil in Singapore, and gas in the U.S. We think having that global flexibility is very helpful. We really saw the benefit of that during the freeze in 2021. Currently, we do not have any plans to alter our footprint consistent with the expansion of Clear Lake. Great. Thank you so much. Thank you. Our next question has come from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions. Thank you, and good morning, everyone. Scott, I wanted to ask you, your prepared comments talk about, you're looking at incremental ways to improve your own free cash flow, which is already, you know, kind of best in class in terms of conversion. I'm then wondering, you know, as you look at the M&M acquisition, what did you think of their cash conversion? And have you already identified, you know, kind of pre-close that there's gonna be opportunities to improve, the free cash flow generation of that asset as well? Yeah. I mean, I think one of the big differences between the asset portfolios obviously is the M&M business, having a really strong localized presence in Asia, particularly outside of China. You know, when we put the networks together, we think that's gonna be a really good opportunity over time to optimize the supply chain. That should give us a really nice inventory benefit over time. I think that's probably the number one focus area, I would say, Vincent, as we get the businesses integrated, is focusing really on optimizing of the manufacturing footprint between regions, which, you know, hopefully will allow us to have less product on the water. You know, we've had our own organic investments at Celanese going into Asia to help with that. We do think the combined portfolio should give us some ample opportunity there. Okay. Maybe just in terms of Santoprene, it sounds like, you know, the synergy is going very well there, but I don't think I read that you were increasing them. Is it possible you'll wind up increasing the synergies there? I think that's a good possibility. I think we're kind of running at double the rate of synergy capture here early on in the integration. That's good because that pulls forward, you know, cash flow earlier, which is good from an NPV value. But I think, as with all of these acquisitions, as we get into them and as we really learn the details, you know, not everything plays out the way we think, but in general, we always find more to go after and more opportunities that we didn't identify at the time of the deal. I don't have an updated number for you at this time. you know, I would say we're definitely, one, optimistic about the timing in which we can deliver the already identified synergies, as well as being optimistic about being able to deliver even more synergies over time. Okay. Sounds great. Thanks very much. Thank you. Our next question has come from the line of Michael Sison with Wells Fargo. Please proceed with your questions. Hey, good morning. You know, really nice start to the year and raised outlook. Just curious in terms of the acetyl chain, I've always been impressed of how well your team can figure out where to make the most money. Just curious, when you think about what they've done in April and where they're sort of allocating their volume heading into 2Q, can you give us a little bit of color on what's driving your EBIT outlook near term? Yeah. I think if we look at second quarter, industry dynamics probably look fairly similar to first quarter in that, you know, China is still a little congested, because the COVID and inability of ships and things to move out in China. You know, we see inventories continue to be high there. So, you know, pricing probably, you know, you can see where it is today. So we see that continuing. We do see some help for acetic acid pricing with the VAM returning into operation, which we had called out for first quarter. But that, you know, that counteracted with everything else. Again, you know, you can see where the pricing is today. But we do continue to see really good demand and really good pricing in the Western Hemisphere. That hasn't changed. The congestion in China obviously keeps some material flowing out. There continues to be high demand in the Western Hemisphere, and we continue to see high demand for VAM and the downstream derivatives. We're going into the summer season, which is typically an even higher period for those molecules. You know, I'd say, you know, on average, you know, what we saw in the first quarter, you know, probably similar profile into where things go. We do have moderating prices in China, which will also drive second quarter outlook. Got it. I apologize if I missed this. Scott, did you mention when you think you will close the financing? Is there some flexibility to do it earlier versus later? Yeah, we'll have flexibility, Mike. I mean, right now, you know, we're gonna look at where the market is at and when we think it's gonna be the most opportunistic time to go. You know, right now, we're still planning on sometime this summer. Okay, great. Thank you. Thank you. Our next question has come from the line of Ghansham Panjabi with Baird. Please proceed with your questions. Thank you. Good morning, everybody. Lori, welcome back. Thank you. Would you sort of take us through what's going on in China? You know, obviously a lot going on with the curtailments last year that affected acetic acid and then the Olympics and so on, and now China COVID. How do you sort of see the market evolving in context of some, you know, chatter about Chinese stimulus, et cetera? I guess, what are you seeing on a real-time basis? Yeah. You know, let me start with COVID. You know, we haven't seen any, I would say, any significant direct impact from COVID. Obviously, some of our folks have been locked down in Shanghai. They've had to go back to working from home. We have an RDP plant near Shanghai that's been shut down for a few weeks. We've been able to cover that in our network. So I'd say the direct impacts have been pretty small. I would say we've had more impacts due to the issues around warehouses and logistics. If you see the pictures of Shanghai Harbor, just materials not getting in and getting out. Now, Nanjing, where we're basically located, that's been fine. We've been able to get things in and out. I'd say, you know, it's a secondary impact. It's our customers' inventories are building. They can't get product to export. In some cases, they can't get products imported in that they need. So it's just slowed things down a bit in China. You know, that said, you know, we are monitoring the impact on our operations. They have been really minimal to date, any impact that we've had. So we've not built anything into our guidance, assuming, you know, further slowdown in China. That's supported right now by our order books, which continue to be very strong, as we look into the second quarter. Gotcha. Then on the EM segment, you know, I think you're guiding towards the EBIT at the higher end of the original guidance. Really one Q was a partial pull forward from two Q as well. I guess what's driving that upgraded view specific to EM, you know, operating profit for the year? Yeah, I think, I mean, if you look at it, you call it a $10 million pull forward, that would have said we would have had a $200 million 1Q, which means then we'd have a $200 million second quarter if that involves the second quarter. Eight hundred is kinda just, you know, we're not seeing a lot of seasonality these days in EM. It's pretty, you know, everything's pretty full. Demand is high. We're expecting that to continue through the second half. Obviously, there's a lot of uncertainty in the second half around COVID, around China, what's gonna happen there. We're not seeing that impact yet, so we're not building that into our outlook. A lot of uncertainty around Europe. No direct impact that we're seeing yet. Obviously, if consumer confidence goes down or, you know, energy prices continue to rise, we may see changes in our customer profile. There is some uncertainty in the second half, but I would also say generally, you know, third quarter tends to be a good quarter for that. That's on the other side. You know, we have forecast automotive flat, and IHS still expects to see automotive growth in the second half. If we get any growth, that's, like, you know, a counteraction to some of that other uncertainty. Just looking at given all that uncertainty in the second half, we're basically saying second half looks like first half, and that gets us to $800. Okay, perfect. Thank you so much. Thank you. Our next question has come from the line of Mike Leithead with Barclays. Please proceed with your question. Great. Thanks. Good morning, guys. Lori, could you maybe just, staying on EM for a minute, can you maybe just talk a little bit more about your ability to outgrow the auto OEM market? Just when you look out over, say, the next year or so, just given your customer mix or even where channel inventory levels are, how would you size or think about your auto volume growth relative to sort of, kind of that industry growth rate of auto new builds? Yeah, look, it's a great question. You know, let me just start with a few numbers for first quarter because I think it will help with things in perspective. You know, if you look at global auto builds for the first quarter, they were actually down 7% from Q4, and this is industry data. But a lot of that was in China, like 20% of that was in China, again, reflecting the COVID lockdown situation there. If you look at where our biggest customers are, they tend to be in the U.S., which actually grew from Q4 to Q1, and in Germany, which also grew. You know, that if you kind of have to look at the various regions and the specific customers to really make sense. I would say, although we're even outgrowing, in this case, we outgrew even those segments that we're in, again, we do think a portion of that is pull forward from second quarter into first quarter, just given everybody having low inventories and expecting, kinda outsized demand going forward. There is certainly pent-up demand for auto going forward. Having said that, though, we generally have been able to outgrow automotive builds as, you know, our folks have worked really hard to develop new products, high margin products for customers, for light weighting, you know, for EVs has been a big push for us in the last few years, and really making sure, you know, we're getting into those customers that are growing and that are, you know, as they are developing new designs, new generations of automobiles, that we have a large content in that. I'd say, you know, we do have the ability to grow faster than global auto builds, grow faster even than the segment auto builds. It's really down to, you know, our great folks in EM and their ability to innovate and work with our customers to really provide unique solutions. Great. That's super helpful. Then maybe just secondly, in the prepared remarks, there's a line about your internal initiatives to unlock incremental cash to help with deleveraging. I think one area touched on was opportunistic divestitures. I appreciate you probably don't wanna front run anything, but any context around size or scale of what you would be looking at would be helpful. Would you consider making another go at potentially monetizing the acetate tow business as part of that? Yeah. Look, what I would say, it's called opportunistic because that's what it is. I would think about it in terms of the same way we did Polyplastics a few years ago. Someone, you know, it was an asset we liked. It was an asset that, you know, we thought was strategic to our portfolio. On the other hand, someone offered us a good bit of money for more than it was valued to us. You know, we're in the same situation with some other parts of our portfolio. Most of them have good returns, but if there is someone out there that values them more highly, of course, you know, we would consider, and I would say it can be small, it could be larger. You know, those are the sorts of things that we are looking at. Yeah, we're putting most of our energy really towards, you know, small, what I would call cash harvesting projects. I mean, it could be on the surface, a $5 million project doesn't seem like a lot on, you know, time lock working capital, et cetera. When you start adding up a number of these, very quickly you can get to a material number. Our team is working a pretty robust list of things, and we're gonna continue to do everything we can to unlock cash and take on less debt at close. Maybe if I can come back to tow. You know, we've talked in the past about tow, and we've talked about why we think it will be hard to divest tow for all the reasons it was hard a few years ago. You know, that said, you know, we clearly are not satisfied with the way the business is performing financially right now. Specifically, you know, we're not happy with the kind of financial exposure we have with what have historically been three-year contracts and what that gives us in terms of lack of agility and lack of ability to pass pricing on in high inflation environments like we're seeing now. you know, while, of course, we would consider a divestiture just like we would anything, actually what we're really looking at is how do we develop more optionality in our tow business, similar to what we've developed over the years in our acetyl chain, and do that in a way to really help us improve profitability of the tow business as we move on in the coming years. Great. Thank you. Thank you. Our next question has come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions. Morning, Lori and Scott. Lori, in the prepared remarks, there was a line about how the bump up in your full year guidance is sort of predicated, among other things, on a degree of easing of raw material constraints. I just wanted to sort of get your views on that. Were you guys seeing constraints on the raw material side? Were you being conservative in, you know, your earlier outlook in terms of availability? Did this have some sort of a higher raw material price baked in? Just any clarity around that. Yeah. Thanks, Hassan, for the question. Really it referred to, and I mentioned it just a few minutes ago, but it probably wasn't clear, you know, we did have significant raw material constraints last year in engineered materials specifically. It wasn't. It was a little bit around resin, some of the resins, PBT things that we purchased. But more importantly, it was around things we used to not worry much about, like glass fiber and flame retardants, where we just couldn't get enough to make the products that our customers demanded. We saw that starting to ease last year. I would say, you know, if I look kind of the lower end of our range, we assume that those continued. What we saw in the first quarter is those constraints have been largely mitigated. You know, great work by our procurement team and others to really find alternative sourcing. You know, so we've largely mitigated that, which then means we can produce more volumes of materials that our customers want, which then moves us to the higher end of our range in engineered materials. Understood. A bit more of a macro question. Look, I mean, you know, obviously a very impressive sort of bump up in your full year guidance. At least the verbiage of your prepared remarks, you know, sounds like you're pretty confident in achieving that. Now, I mean, as I sit there and sort of hear, you know, some of the pundits out there talking about recessions and, you know, maybe a potential recession in Europe and slowing down in China. I mean, look, you guys are in all these sort of important markets, be it China, be it Germany, you know, which obviously is impacted by geopolitics. I mean, what are you guys seeing relative to these sort of recessionary fears pundits out there that gives you more confidence? Yeah. I'll start off by just reiterating, you know, we have not assumed any significant demand destruction in our guidance that we've given. We haven't assumed any demand destruction from inflation or, you know, from our customers being impacted by inflation. That's really based on what we're seeing right now, which is, yes, there's a little bit of bumpiness. You know, we're seeing more issue, though, from logistics constraints, especially maritime constraints, especially in China, than we are kinda in the inflationary pressure at this point in time. That's our assumption. Obviously, we're gonna continue to monitor in all regions, but we continue to believe, you know, unless something changes significantly, through the remainder of the year, that, you know, logistics will continue to be a bigger issue for us than inflation. Very helpful, Lori. Thank you so much. Thank you. Our next question has come from the line of David Begleiter with Deutsche Bank. Please proceed with your questions. Thank you. Good morning. Lori, just on EM, you mentioned surcharges in the quarter. How much of the price in the quarter was surcharges versus more permanent or structural? How do you decide whether to put in place a more structural or more of a surcharge type increase? Great question, David. Look, I would say for the quarter, you know, the price increases have really been to cover the additional costs just to offset the raws and energy. You know, we typically pass through price increases with raws because those tend to go up more slowly and come down more slowly. We have a surcharge for energy. What I would tell you right now is between our our pricing movement to cover raws and the surcharge, we're fully covering those increases. That's what you're seeing in the pricing. Now, what we see on the other side is, you know, when energy comes down, that's gonna go back to our customers within a month. That's how we designed it to give our customers assurance that, you know, they could get back to normal. As raws goes down, as we always have, pricing will eventually go down with it, but there tends to be a little bit of a lag. I would say, you know, right now, we're just trying to maintain margin. Our customers have worked really well with us in, you know, working around the constraints we've had in terms of logistics, in terms of raw material, working with us on pricing. We wanna continue to be able to serve those customers going forward. There may be some lag in pricing, but again, our objective has been to just maintain margins during this period, not necessarily to grow them. Got it. Scott, just on the M&M synergies, you mentioned an acceleration of year one synergies. What’s driving that? Could you actually quantify what that could be, for us going forward? Yeah, I mean, I think some of the things we talked about early on was that we hadn't baked in a lot of tax synergies, particularly early in the deal, David, and we've been working on those types of things early days, and we think we'll be able to bring those forward. You know, some of those what I would call kinda backend things tend to be able to happen faster, and we're more confident in that now than we were. I also think, you know, we've done some pre-integration work, both internally here, and we've had some contact, you know, with the M&M team, largely focused on business continuity in day one. In those interactions, we are extremely excited. There's a lot of energy with the teams. It's a great group of people coming over from M&M. We're really excited about the combined portfolio and being able to really partner with customers and accelerate some of the things we talked about on both the cost and revenue side of things as we go forward. Just such a great complementary businesses with, you know, people that are really excited to get after it. Thank you. Thank you. Our next question has come from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your questions. Good morning. Scott, it looks like your cash flow is trending roughly $300 million for the better on an apples-to-apples basis, allowing you to absorb your deal-related and transaction fees. Can you speak to what you're embedding in that number these days for working capital this year and other swing factors aside from earnings variances? Yeah. Kevin, we're not changing really the working capital assumptions materially versus what we assumed at the beginning of the year. You know, assume kind of the same type of inflationary environment that we've been in. Now, if that were to turn a bit and we get relief there, then we will have a fairly sizable working capital pickup that we have not baked in to that number. I mean, that increase that we put out there is really driven by two things, higher earnings as well as the reduction of CapEx by about $50 million. Okay. Thank you very much. Thank you. Our next question has come from the line of Matthew DeYoe with Bank of America. Please proceed with your question. Morning. I just wanted to hash out a little bit, the performance in EM EBITDA. You know, I know JV income increased certainly, and I know price was up 7% sequentially, and you had Santoprene, but it seemed like you got all the tailwinds without any, you know, raw material headwinds or anything that we've kind of discussed. Is there something that we're missing from or that I'm missing from an operating leverage standpoint? Was lower acid a tailwind actually to raws? Yeah. You know, again, if we look at, Matthew, I'm sorry. I'm assuming your question was kinda fourth quarter to first quarter. Yes, exactly. Sorry. Okay. Yeah, I think look, we had record revenues for the quarter. We saw demand remaining strong. We had the growth, especially in auto. Again, some of that being pulled forward from second quarter. Our volumes were up two-thirds of it Santoprene, but about a third of it everything else. You know, our price was up, but actually I would say our price was up, but it was offset by the rising raws and rising energy. You know, we saw energy going up, continuing to go up in Europe for the quarter. We saw raw materials going up for the quarter. Ethylene costs were up globally, which certainly has a big impact in engineered materials. You know, I would say we actually continued to see increases in all of those areas, and that's really so price kinda got netted out with raw materials. Affiliates were up in the first quarter, kinda typical with seasonality, but also good performance at KEPCO and Infraserv in particular. Yeah, I wanted to ask you about that. I mean, I used to think of KEPCO as something like $27 million contribution annually, I think. One, is that still right? You know, two, because I know that moves into the line item by 3Q. I just wanna make sure I have that number right. As we move into 2Q, you know, what do you expect on the direction from for JV income? Yeah, let me handle the KEPCO question first. I think if you look at what we said is on an incremental run rate basis, once we get the synergies fully realized, we'd expect to have about $25 million-$40 million incremental, Matthew. Now, Q2, Q3 are going to be what I would call transition quarters. Really Q4 is when you're gonna start to see that kind of things really flow through with the new flows as we expect. I think, you know, we'll start to get in that first year of those synergies. We'll probably get about half of that number, would be my guess. You can kinda there'd be $ a few million, maybe incremental, in the fourth quarter and then into Q1. For affiliates in Q2, we expect that to be, you know, roughly flat with Q1. Thank you. Thank you. Our next questions come from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your questions. Great. Thanks for taking my question. I guess, you know, first off, just when you think about the Q2 guidance for AC, the $425 in the full year at $1.6, obviously it assumes a moderation that, you know, in second half and then Q2. In Q1, I think you went into the quarter seeing a, you know, potentially forecasting some moderation, which didn't necessarily materialize, and that's been the case for a number of, you know, prior quarters as well. When you think about the rest of the year, maybe if you could just lay out some of the drivers that you see that drives that moderation. Obviously, you know, there's some issues around China, and there's some issues with feedstock costs coming down. What else, I guess, would you cite as to, you know, some of those drivers? Yeah. Look, I would say in Q1, we did see moderation. I mean, from peak to trough, the peak in Q4 to the trough in Q1, we saw, you know, about $600 per ton reduction in acid price in China. Even average to average was about $300. I think we are seeing moderation in China acid. What I would say is that has been, you know, roughly, you know, pretty much an Eastern phenomena. We've been able to take volumes and pivot to the West, where we saw margins maintained in the Western Hemisphere, and we've been able to pivot to the downstream and, you know, with strong demand for VAM continuing. But also we noticed especially emulsions products, redispersible powders, EVA. I mean, I think we called it out in the comments, but, you know, for the first time ever, you know, 25% of our earnings in acetic acid were really were due to just RDP and emulsions products. So it's pretty amazing if, you know, if you think about it. So I mean, that's the power of our model, as we look at it. I mean, you know, another way to think about this, I mean, we refer a lot to 2018, you know, in 2018, 78% of our earnings in the acetyl chain came from acetic acid. In this quarter, 50% of our earnings came from acetic acid. So I think what we've called out, which is a moderating acetic acid, is absolutely true. The numbers support it for first quarter. We expect that to further moderate as we move into the second quarter. You know, in time, you know, Western Hemisphere prices will start to trend down and margins trending down as well. Ethylene price is gonna continue to increase in second quarter, so that's gonna cause a little bit of further margin compression. That will continue, we believe, as we go through the year. Now, you know, we've said that for a while. Fortunately, the moderation has started later and gone slower than we anticipated in our original outlooks, which is why we've been able to raise our outlooks on acetyl chain. You know, I would also say, you know, we talk a lot about foundational earnings, and I think previously we had called out getting to a foundational level of earnings in the second half of this year. I think, you know, we've typically called foundational earnings. We have been saying $1 billion or, you know, or slightly above. I think as we're seeing the industry fundamentals change, the supply-demand continue to be tight, even with the addition of a little bit of extra capacity in China, we've really seen the strengths of our molecules continue to develop, especially our ability to generate good margins and income out of our downstream derivatives. The stronger Western demand we've seen are very bullish outlook by our customers. You know, plus we have investments coming on, Clear Lake early next year, other VAM/VAE expansions towards the end of next year. All that additional optionality we're getting, clearly, we think those foundational earnings are, level of earnings are growing, you know, something well above that $1 billion. Altogether, you know, I'd say while we are starting to moderate and returning to a more foundational level of earnings, that foundational level of earnings has increased measurably versus where we used to be. Great. Thanks. Similarly for EM, would you say that the foundational level of earnings has also increased, when most of your markets, including elective surgery come back? Thanks. Yeah. Look, I think what we're seeing in EM is the really great work by our folks over all of the many last years to really grow our pipeline model, grow our programs, move more of our molecules into value applications, higher margin applications, where we are maybe one of two people who can provide that material, which gives us more pricing power, the ability to work with our customers to pass through, you know, the higher raws that we're seeing moving into higher end markets. I think you're seeing really kind of all the results of that work that's been going on for several years really coming to fruition and getting us to a level of earnings that we think we can maintain going forward through a wide variety of economic scenarios. Yeah. That model continues to Thanks. Evolve with the acquisitions coming in. I mean, the Santoprene acquisition has proven to be additive to the model. The team is bringing different ideas. The synergies are coming in strongly there. We would expect to replicate that with M&M as well as a way to continue to hone and take the best of these acquired businesses and continue to really grow that model there in EM and elevate those foundational earnings to a much higher level. Thanks. Thank you. Our next question has come from the line of Laurence Alexander with Jefferies. Please proceed with your questions. Good morning. A question on the comments around, like appreciating the regional mix. You know, as you think longer term, sort of after the Clear Lake expansion, what would be kind of the minimum levels of coal and oil-based vertical integration you would like to keep in the portfolio? Can you also tie that to how you're thinking about the next few rounds of technology, you know, the innovation cycle? My impression is you've been making faster progress reducing CapEx and OpEx on the natural gas-based projects. Is that true, or are you getting the same progress on all three platforms? Yeah. Let me answer your first question. On the regional mix, look, as we bring Clear Lake in, we think it's great because it's based on natural gas, which even with the increases in natural gas, continues to be, we believe, the lowest cost producer of acetic acid in the world today. That's great optionality for us to have. But we get the credits for that project even if we run at the same rates as today and take it in the form of productivity, which is catalyst and other chemical savings. We like the optionality that Clear Lake brings, but we also like the optionality of having material in China and material in Singapore. Remember, a big portion of our value proposition to our customers is the fact that we produce what we need in a region, in that region. The fact that we can produce in China for China and surrounding areas, in Singapore for kind of Asia outside of China, India, and other areas, really has helped us, especially as we've gone through these issues around logistics and everything else, because, you know, we're not having to put everything we make on a boat and take it somewhere else. A lot of stuff can stay within the region, where we've had a lot less logistics challenge. Now obviously we still ship to Europe, and so there's still an element of that, but it's very different than someone who has one plant in one place and is trying to serve the world from there. We like having the regional mix. You know, we believe our technology makes us one of the cheapest producers from coal. In China, coal-based acetic acid is gonna continue to be the marginal producer in the world today, even at these high oil prices, because we're also at higher coal prices. Singapore continues to be an attractive place to produce acetic acid. We think all three of our plants continue to be well positioned to be competitive, to make acetic acid going forward. Again, we like the optionality that having three different facilities in kind of three unique places in the world brings us. Yeah, on the innovation front, Laurence, I would say our focus really is on aggressively looking at energy reduction projects across the globe. You know, as gas prices, oil prices, coal have all moved up, you know, our energy costs have moved up, and we're looking at ways at which we can lower that. In this environment, those paybacks become more attractive, and so our team's doing a great job of bringing those projects forward. Does the Carbon Border Adjustment Mechanism program, is that a net benefit or headwind for Celanese once it's implemented? Yeah, I'm not sure if it's. I don't know how we would be relative to our competition. I mean, what I would say is, you know, our facilities in Europe tend to be highly energy efficient. If you look at our European facilities, they produce only 20% of our scope one and two greenhouse gas emissions, but they represent about 40% of our sales. I can't tell you exactly how that works out with the border adjustment, but I can tell you know, we think when you look at all of the proposals under that Fit for 55, that we're pretty well positioned given that we have a pretty efficient footprint already in Europe to start from. Thank you. Thank you. Thank you. Our next question has come from the line of Aleksey Yefremov with KeyBanc Capital Markets. Please proceed with your questions. Thanks. Good morning, everyone. In your prepared remarks, you're talking about improved product mix in engineered materials, for as one of the reasons for raising guidance. Could you maybe elaborate on this? Yeah. It's a little bit in line with what I said earlier, that you know, we've really focused on the years of adjusting our portfolio into higher margin, higher value end applications. So maybe a specific example is, you know, say last year versus this year is, you know, last year we call out about a lot of the time how medical, but really specifically implants because we weren't seeing elective surgery recover as quickly, you know, was a drag on our earnings last year. Now if we look at 2022, we really see, not in first quarter, that's a seasonal thing with implants. People wait till they meet their deductible. You know, we're seeing second quarter and beyond implants coming back to their pre-COVID levels of demand. Therefore, you know, that's a positive product mix impact because that's a higher margin application than maybe other GUR applications that those go into. You know, and we're seeing that in multiple places where we're seeing demand for our higher margin materials come up. We also have got new business which is coming on that are higher margin and higher end-use applications. For the same volume, we achieve a higher margin, and that's reflected in our comments in product mix. Thank you, Lori. A follow-up for Scott. What kind of discussions you had with rating agencies and what's your level of confidence? If you're kind of playing out different scenarios for the back half of the year, that you'll retain the investment-grade rating. Yeah, I mean, look, we've had very open discussions with the rating agencies, you know, when we first announced the deal and, you know, we feel good about that. You know, ultimately, we're focusing on what we can control. The raise of earnings guidance, you know, we've got upside in kinda where things are coming out right now. You know, we also have added Fitch. They launched here a couple of weeks ago. You know, as we kinda looked at it, and given the size that the company is getting to, and we looked at peer companies, you know, like most companies have three rating agencies, so bringing Fitch on. Those conversations were very good as well just recently. They issued a first time credit rating of BBB- with a stable outlook. We feel good about where things are, and we feel really good about kinda where we're going to be at close, you know, really driven by the increased free cash flow and the improved earnings. Thank you. Thank you. Our next question has come from the line of Matthew Blair with Tudor, Pickering, Holt. Please proceed with your questions. Hey, good morning. Lori, you mentioned the two outages that Celanese had in the first quarter in your acetyl chain. Is there like a lost profit number that we can put on that? Or do you think, you know, the lower volumes were simply made up with higher pricing? Yeah. The majority of the outages in first quarter were outages that we were anticipating, so they were planned turnarounds and clearances for VAM, for methanol, for acid. Some of them we pulled forward from second quarter due to some unanticipated issues. Because we knew the outages were coming up, we, you know, were able to buy material from others. We store inventory. We make sure that we're covered for our customers, that we can provide them what they need during those periods of time. You really don't see, you know, a really big impact from that. Even from a cost standpoint, turnaround cost standpoint, you know, last year we spent about $40 million on turnaround. We'll spend about the same this year. About half of that was in the first quarter. Again, with our average level of spending, it's not something that's really gonna show up in any given quarter in a meaningful way. I think because of the planned nature of these events, you know, they're really covered within our guidance and within the outlooks and kind of our ability to predict in a quarter. Great. I'll leave it there. Thanks. Thanks. Darryl, we'll take one more question, please. Thank you. Our final question has come from the line of Stephen Richardson with Evercore ISI. Please proceed with your questions. Hello, hi. This is Krishna on for Steve. Lori, it was interesting to see your CapEx guidance kind of reduce to $550. I was wondering if you could speak a little bit more to that just in terms of was it due to cost savings or a push of some CapEx into 2023? I know it's a bit early to speak on that, but whatever insight you can provide would be great. Thank you. Sure. You know, look, on CapEx, we've called it out before. We think organic growth through CapEx is really our best use of cash. We get high, you know, 20%+ returns on our CapEx. We're very deliberate about how we spend that money, very disciplined. It's also something we manage real time. Scott and I meet every quarter with the businesses and really go through where we are in CapEx, what new projects have emerged, you know, where do we need to reconsider. I would say what you're seeing, the $50 million reduction that we called out was really an outcome of that disciplined process, adding on the layer of the DuPont M&M acquisition. With DuPont M&M, for example, we're getting a significant amount of compounding in Asia. Some of our CapEx we had earmarked this year was to expand compounding in Asia. Clearly, you know, we don't wanna go build something if we've just bought something that will meet our needs and we think there's some extra capacity there. What I would say is we've deferred any decision on some of the CapEx where we believe there may be overlap with DuPont, so we don't spend money that we might regret later. I would say, you know, it's a living thing. We may come back in another quarter and have a further reduction, or we may have an add because, again, we believe CapEx is a really good use of our money. We get really high returns, and so we'll continue to manage it as we always have done in a very disciplined way. Great. Thank you. Just in terms of a quick follow-up, you mentioned targeting cash harvesting projects. With the recent restructuring of the JV, could you speak on the process of the JV actually unlocking that additional value? Should we expect to see additional announcements moving forward for other JVs? I'll ask Scott to specifically comment on the KEPCO JV there. What I would say is, you know, we took a big step last year already with the sale of Polyplastics, you know, Fortron, some of our other JVs. I would say we like the way they're structured. We believe we get good value out of those JVs. You know, I wouldn't think that's the only target. I mean, we're really looking at all of our businesses, as I said, opportunistically. If something emerges where it makes more sense to sell to somebody, we would consider it. But our first focus, of course, is just continuing to grow earnings and continue to grow cash flow on a very robust and healthy base business. We've talked openly for, you know, a number of years about unlocking more value here. You know, Polyplastics was a sale a few years ago. It felt like that was the most opportunistic plan we had to be able to really unlock a lot of value there. For Kep, as we looked at that and worked with the partner, it was restructuring that venture. You know, we'll continue to look and be opportunistic if we can find ways with our partners to add more value for the Celanese shareholders. Great. Thank you. That is all the time we have for questions today. I would now like to turn the call back over to Brandon Ayache for any closing comments. Thank you. We'd like to thank everybody for listening in today. As usual, we're available after the call for any follow-up questions. Darryl, please go ahead and close out the call. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.