Greetings, and welcome to the Celanese second quarter 2022 earnings call and webcast. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal remarks. If you 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 second quarter 2022 earnings conference call. My name is Brandon Ayache, Vice President of Investor Relations. 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 second 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 of these materials have also been submitted to the SEC. Because we have published our prepared comments yesterday, we'll now turn the call over to Lori for some introductory comments. Thanks, Brandon, and thanks to everyone joining us on the call today. Given the macro uncertainty of the world right now, I wanted to take a few minutes to set the tone for this call and re-emphasize the priorities we have as a company. As we prepared the earnings materials we put out yesterday, I tried to emphasize two longtime qualities of Celanese and its employees, and I want to re-emphasize them today. Number one, we are fully committed to our objectives. Number two, we are focused on executing on those things that we can control. To these points, we are committed to executing our business models to maximize earnings and cash generation. We are committed to rapidly integrating and synergizing our Santoprene and M&M acquisitions, and we are committed to swiftly executing our deleveraging plan after closing the M&M acquisition. Above all else, we remain committed to these objectives even in the most challenging of environments. Clearly, the recent macro dynamics have done little to help us. This is nothing new. We have not and will not use them as excuses. Over the last few years, our teams have delivered exceptional, even record performance while dealing with the global pandemic, severe constraints on raw materials and global logistics, record levels of cost inflation, and now add to that list a rapid rise in interest rates. We know how to respond to external challenges by executing against that which we can control. Our engineered materials and acetyl chain teams each delivered record earnings across the first half of 2022. Their operational excellence and commercial agility has driven record adjusted earnings per share performance across the first half of 2022 and a very strong full year outlook, even without the benefit of share repurchases this year. Our finance team successfully secured permanent financing for the M&M acquisition in a very challenging market and are taking controllable actions to ensure the resiliency of our deleveraging plan. Our integration teams are rapidly synergizing Santoprene and making significant progress in M&M's pre-integration work. We cannot predict what the world will present us with in the future. Right now, we see very little firsthand indications in our order books that warrant the severity of market headlines that we are all reading and the market response we have experienced. I don't want to spend our time on this call today speculating on the things our team cannot control, whether that's business performance outside of Celanese or uncertain macroeconomic conditions in the future. While we do not expect the worst, I want to be clear that we will be positioned and prepared for it. We are eager to close the M&M acquisition, which we are targeting for the fourth quarter of this year. I've had the chance to meet many M&M employees over the last few months. I have been very impressed by their capability, their passion for the business, and their excitement about the new company we are forming. They will be an important part of our success, and I am excited to welcome them to Celanese. We are excited about the opportunity we will have as one team to drive growth and value creation in engineered materials going forward. Above all else, I am confident in the momentum Celanese is building to deliver long-term growth and value for shareholders. With that, I'd like to ask Daryl to go ahead and open up the session for Q&A. 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 question. Our first question has come from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions. Thank you, and good morning, everyone. Lori, just reading the prepared remarks, I may have misunderstood it, but it doesn't seem like you're assuming below plan EBITDA for M&M next year, but just that you're gonna have the higher interest expense. Is that correct? Or is it just that you think some of the work you can do can allow you to have cash flow that's on plan, in which case, you know, EBITDA kind of becomes less relevant? Or what is it that your latest thinking is on that right now? Yeah. Thanks for the question, Vincent. Look, our real focus has been on really focusing on cash flow and steps that we can take to offset the additional pretax interest of about $250 million that we're anticipating. You know, I'd have to say I'm really pleased with our team for having completed this financing in what's been a very difficult environment to do that. We are really pleased with where we are on financing. But we have been looking at, you know, how do we offset that from a cash flow basis. You know, we're looking at capital, we're looking at working capital, we're looking at other forms of generating cash. Obviously, our better performance within Celanese this year and our belief of that continuing through next year, will also help in terms of really offsetting that on a cash performance. I think if we look at, you know, DuPont's M&M performance, I mean, we're seeing the same numbers you are, so we don't have any insight into Q2. You know, I would say, you know, we are, you know, disappointed. That said, you know, we assume they've had some of the same headwinds we've had in EM, inflation, currency, certainly Asia Automotive, which they're exposed to, and the volatility there. You know, we're gonna be watching their performance. I have to say, personally, I'm more interested in what they do in the second half and the momentum that they can build as we move through the second half and towards the time of the acquisition. Obviously, we're very focused as we look at synergies and early synergy capture and, you know, looking at what steps, similar to what we did with Santoprene, what steps can we take immediately upon closure of the acquisition, to try to get their earnings up to the level that we expected at the time of the deal. Okay. Just as a follow-up, could you just talk a little bit about sort of the differential in acetic acid pricing between Asia and the United States? It just seems to be at a pretty wide level. What is your expectation for sort of how that spread is gonna play out? I think what we saw in the second quarter is, you know, utilization, although it was pretty robust in Asia, we saw some demand come off due to COVID. All the producers were operating pretty well. We did see demand softening as we moved through the second quarter. As we look at the third quarter, we expect it to probably, you know, stay in that kind of $450 per ton that we're still seeing for China acid. I think the story in the Western Hemisphere is a little different. You know, demand has continued to be fairly strong, really everywhere in the Western Hemisphere. We have had some producer outages in the Western Hemisphere continuing into now the third quarter. I think that's where you see the price differential. Maybe what's a little different is, you know, so, you know, with the logistics issues in the world today and availability of boats, I think it's been a little bit harder for people to move, some of our competitors, I would say, to move Asia out of Asia and into other areas of the world which has kept that differential high and I expect that differential to continue as we move into third quarter. Thank you very much. Thank you. Our next question comes from the line of Mike Leithead with Barclays. Please proceed with your questions. Great. Thanks. Good morning. First one, Lori, I was hoping you could expand upon, in the prepared remarks, you talk about strategic overhaul of the acetate tow business. Just how you're thinking about potentially rethinking your commercial approach there. Sure. You know, if we look at our performance of acetate tow, I mean, you know, while historically, you know, we were really focused on, you know, delivering our customers with, you know, kind of unparalleled quality and security of supply, both of which came with longer term contracts, we've clearly seen in this period of rapid raw material price escalation and rapid escalation of energy pricing that this method of using fixed contracts is really unsustainable. I mean, overall demand remains fairly robust in the industry but we clearly cannot and will not continue to run a business that is losing money. So, you know, we would like to build in more optionality to that business. We need to become more nimble. We need to move towards more dynamic pricing. Much like we did in past years with VAM and emulsions and RDP, we really want to relook at what are our commercial contracts, how do we source, how do we manufacture, all of the logistics, just everything, how do we produce, you know, or provide enhanced optionality versus what we have today. We're really confident there's value in doing so. Like we said, we have experience having done that with some of the downstream derivatives of acetic acid. We think by running this business in a similar way, we'll be able to deliver much, you know, greater value in the years ahead. Great. That's super helpful. Maybe second, just for Scott, I just wanted to clarify some of the interest expense comments you made in the prepared remarks. If I just read it correctly, I believe you're adjusting the M&M interest out of adjusted EPS, but that's still included in your free cash flow guidance. Is that correct? Just what is the incremental interest versus maybe what you thought last quarter from the debt raise? Yeah. We are gonna adjust ahead of close that out of EPS, Mike. You're correct on that. We have included it 'cause we have not adjusted free cash flow. It is included there as that cost to carry. That cost to carry is still very similar to what we had originally baked into the deal. Even though interest costs have risen, the ability to reinvest that money ahead of close now we're in a higher return than expected previously. The net interest on the carry is basically about the same as what we had originally anticipated for the deal. Overall interest costs based on the financing right now on an annualized basis going forward post-close, we would expect to be in that $250 million per year range. You know, we are continuing to look for ways to bring that down, and we have some plans that we plan to implement in subsequent quarters. Great. Thank you. Thank you. Our next question has come from the line of Jeff Zekauskas with J.P. Morgan. Please proceed with your questions. Thanks very much. In your debt financing, do you have an ability to easily refinance the different portions of the debt if interest rates come down? Or are you more constrained? Yeah. Yeah. Jeff, what we did on that financing is we did try to weight a good portion of that financing to the short end of the curve on the fixed debt. We have a larger amount on the 2- and 3-year, which will allow us to either not just refinance, but hopefully delever and pay that off with the cash flow in the early parts of the deal. We also have term loans which are variable in the amount of about $1.5 billion as well, which will give us the ability to refinance that earlier on. We're also looking at different cross-currency options on a go-forward basis. As we look to and get better understanding of where earnings are gonna be in the next several years, we do have the ability to do some cross-currency swaps like we had previously done a few weeks ago to additional euro opportunities as well as yen opportunities to best match where the earnings exposure will be. For my second question, when you think about the acetyl chain in 2023, if we, you know, again go into a, you know, a pronounced economic slowdown, we seem to be in a different place because oil prices are so much higher, you know, whether they stay at where we are or whether they come down somewhat. When you think of the, you know, the earnings level or the earnings power of the acetyl chain in a 2023 recession, where do you think we would be? Or what range? Yeah, I think the question you're really asking, Jeff, is, you know, where do we see a level of foundational earnings? You know, although we may be in a recessionary environment next year, I think, you know, personally, I think it will be more shallow and the impact on our business, while we're not immune to it, we think is at this point manageable. I think, you know, if you look at the first half of this year and you look at the trailing, you know, the trailing twelve months, you know, we've been at a $2 billion a year level for the acetyl chain. Clearly, that is not foundational. Clearly, you know, we've seen some fairly exceptional conditions these last few years. We do expect moderation. You know, if you go back a year or so, we were guiding to about $1 billion a year prior to the lift from the Clear Lake expansion as our foundational earnings. You know, we've continued to improve our business over the last few years. You know, we've built in a lot of additional optionality. We added Ateva and the RTP capability. We've continued to enhance our commercial agility in acetyl chain. You know, we have seen improved global supply-demand balances. You know, we see that even in China today, where, I mean, prices certainly have moderated, I'd say, back to more typical levels. You know, we're still at kind of 85%-90% utilization in China. You know, overall, we feel very confident. We've lifted our foundational earnings above that $1 billion a year level. You know, clearly, like I said, in China, we're seeing the acetic acid moderation. I expect at some point we'll start to see some of that in the Western Hemisphere as well. The moderation in, for example, you know, paints and coatings, but still robust to historical. I don't have an exact number at this point. What I would tell you is, you know, we continue to look at this and, you know, we'd like to kind of see how the third quarter develop. As we typically do, we'll be coming out with some guidance for 2023 in the October timeframe. Okay, great. Thanks so much. Thank you. Our next question has come from the line of Josh Spector with UBS. Please proceed with your questions. Yeah. Hi, thanks for taking my question. Curious if you could talk about some of the end market volumes that you're seeing in EM, kind of as you went from the end of second quarter into three Q. Like auto, consumer durables, where you're seeing more weakness and how pronounced that weakness is in that market versus your performance. Thanks. Yeah, I think, you know, if we look at EM, you know, we are seeing slight softness, I'd say, across all regions. I mean, in Asia With the COVID lockdown, you know, we saw a little bit of softness there, although surprisingly, auto continued to be very strong for us in Asia, even though the market was down, I think 13% in China in terms of builds, we were actually up about 8%. You know, obviously in Asia, we need a little more visibility kind of post the COVID recovery here now, to really assess the fundamental demand that's gonna exist for some of the other areas. I'd say, you know, in the US, we're seeing consumer spending stay up, really holding up the best of all of the regions, which is supporting certainly auto build, but also, industrial demand and some of the electronics and electricity. In E.U., I'd say we're seeing some signs that inflation and energy uncertainty is starting to impact demand, but you know, fairly weak signal still at this point. If you look at the different end markets, you know, in auto, what I would say is, you know, right now it's pretty hard for us to imagine a scenario where demand is what's gonna drive auto. We really think it's gonna continue to be driven by availability of raw materials, specifically chips. Our outlook is, you know, chip availability gets slightly better every quarter and will continue to do so through the end of 2023. We believe demand is pretty robust. We're seeing that in all segments of the world, big backlogs, low inventory. Auto, we think is just really being driven by chip availability, and that's true in all sectors. I think maybe the thing to think about in auto though is, you know, new autos today use a lot more chips, especially EVs. And so although more chips are become available as they are prioritized to more premium autos and to EVs, that probably still translates to less auto builds than maybe traditionally would've been seen from that. I think the real softness we've seen has been more in appliances and consumer electronics. Maybe not surprising because everybody seemed to have bought a new computer and a new phone during COVID, and I think, you know, there's not the pent-up demand there. I would characterize it though as modest softness, just a few%. Could also be the impact of inflation. Medical, I would say actually our medical business as a total is back at pre-COVID levels, in terms of level of earnings. That is even without implants, being back at their pre-COVID level. We're seeing much stronger, you know, much stronger demand in medical for other elements of our medical portfolio like long dosage delivery devices and that sort of thing. You asked about EM, but I would just say, you know, on the acetyl side, the softness we're seeing is more in paints and coatings, and construction, but I would say that's off a historical high versus necessarily off what we would consider a typical level of demand. Thanks. Just in terms of EM earnings, I think, you know, some of your competitors have maybe been a bit more vocal about the FX impact and how that changed their outlook. Did anything change from your perspective versus your planning basis? Obviously, rates are worse, but I'm not sure what was embedded in your guidance. Thanks. Yeah. I mean, certainly we're seeing the FX impact in Engineered Materials. If you look at, say, this second quarter of this year versus last year, it's about $10 million just for EM. So we're certainly seeing it. It was a little higher this quarter than we had originally planned, but, you know, I think only to the tune of $2 million for EM. You know, look, I think this is really where you see the strength of our pipeline model in Engineered Materials as well as, you know, really the commercial agility of our EM employees. I mean, they have been out there, you know, managing product mix, managing pricing, doing all those things to really cover the cost of raw materials and cover the ForEx headwinds that we've been seeing throughout this quarter and all the quarters in front of it and all the quarters to come. You know, I think that's where you really see the strength of Celanese and the people at Celanese. Okay. Thank you. Thank you. Our next question has come from the line of Ghansham Panjabi with Baird. Please proceed with your questions. Hi, everyone. Good morning. I guess for my first question, you know, on your comments, Lori, in your prepared comments about, you know, inventory levels having sort of normalized in many end markets, verticals along the supply chain, does that by definition create less opportunities for the AC segment in terms of just sort of flexing the chain and, you know, maximizing molecular profitability or is that not the case? You know, I would characterize this, Ghansham. I think, you know, our folks in the acetyl chain have done a tremendous job, really flexing the chain, over the last, you know, call it two years, to really respond to the difference in, you know, Western Hemisphere economics versus China, and to really move as much down the chain as we can. You know, what I would say is, as we see soft China pricing, you saw last quarter we moved a lot of material out of Asia, into Europe, and we did that in the first quarter as well. We'll continue to do that. What I would say is, though, we're probably, you know, reaching our limits of how much more flexibility we have in the chain just because we're really full in downstream derivatives. We're running full capacity in VAM, VAE, RDP. We'll continue to take commercial actions to try to take advantage of other opportunities we see in the market. I think, you know, we've really been pushing the boundaries of the optionality we have within the acetyl chain, if you really, especially if you look at second quarter. Okay, terrific. Then, you know, on the recession sort of scenario, how do you see volumes playing out for your EMs segment in context of the fact that, you know, many end markets such as autos which are quite large never fully recovered? Would you expect also the same for M&M? I understand you don't own it yet and so on, but just given the nature of the end market matrix for that business as well? My view on auto, and I just talked about it a little bit. My view on auto is, you know, we probably have three years pent-up demand in auto. I mean, if you order a car in Europe, you wait a year to get it. If you order one in Japan, you wait one to two years, even in the U.S. I mean, it's, you can wait quite a long time if you're looking for something specific. I think there's a lot of pent-up demand in auto. You know, especially for premium vehicles, which we have a stronger presence in, and EVs, which we have a stronger presence in, while in a recessionary environment, you would normally expect that given we have been so long now and have this large pent-up demand, I think auto is gonna be relatively unaffected. Again, I don't see anything through the end of 2023 that's gonna impact auto demand other than the shortage of chips, and other raw materials, but primarily chips. I think we will continue to see softness if we go into more recessionary environment on consumer durables, things that people can put off buying, consumer electronics. People will wait to buy, you know, their next iPhone. But medical and pharma is a very resilient market. I don't expect to see any impact there, and we're not seeing any impact in industrial, and some of the, you know, electronics into 5G and things like that. I really expect those build outs for 5G and that sort of thing to continue for power generation. I mean, with the way the world's moving, more electric vehicles, more infrastructure, more, you know, Internet of Things, I don't really see those being impacted. The real impact I expect is what we're starting to see the softening in, which is consumer durables and consumer electronics, which, you know, for us is a fairly small part of our portfolio. Again, I don't own M&M, but we do know that the vast majority, you know, the kind of 50% of their materials roughly goes into auto. I would expect that to continue to be a pretty robust market, as we go forward, even in a recessionary environment as well. Thanks so much, Lori. Thank you. Our next questions come from the line of Michael Sison with Wells Fargo. Please proceed with your questions. Hey, good morning. Nice quarter and outlook. Lori, I guess, with the added financing, and I know you guys do a really good job of offsetting a lot of negatives, though. I think you'd hope the deal would be accretive by a couple dollars in the first year. Is that—I mean, it seems like hard to do, but is it still gonna be accretive and are there things for you to do to offset the EPS dilution of the deal or of the financing? Yeah, Mike, I would just say it's too early for me to give you a definitive answer on that. I mean, we are really, you know, we think, as I said, right now we've been focused on the cash side of that equation, really maximizing cash flow. We do see we have meaningful opportunities also in the size and timing of our synergies. We think, as we've done with Santoprene, we'll be able to pull things forward and increase the amount of synergies we can do in the first year. As I said, on the cash side, working capital expenditures, also the performance of our businesses. We need to get a better view on 2023, which we're working through right now. I would say from an accretion standpoint, it's just too early to call. Again, I would expect we should have a revised update we can share with all of you in the October timeframe. Got it. You know, it sounds, you know, to the prepared remarks that, you know, the disappointment M&M results so far. When you sort of, I know you don't have the business yet, but when you think about how the business has performed, do you sort of see it as more external and the end markets are more difficult? Or is it maybe some ways they operate that you can, you know, immediately improve and the results maybe should have been better? You know, that's a tough question to answer, Mike. Look, you know, within Celanese, we expect our business to be world-class operators. We expect them to be commercially agile. We sell our products into highly differentiated and specified end applications. You know, we work very hard in Celanese to really preserve profitability, despite external disruptions and through periods of volatility. You know, as we kinda say, you'll never hear someone in Celanese use the excuse for underperformance by saying that the market is cyclical or that we had too many headwinds. I think that's how we operate in Celanese. Now, we know there's a lot of great people coming from M&M, but I think we know the value of our models, and we know, you know, we know the value of our culture, and we believe we'll be able to apply that all to M&M and get differentiated performance from that asset as well. That's really our focus as we work through integration and move towards the close. Thank you. Thank you. Our next question has come from the line of P.J. Juvekar with Citi. Please proceed with your questions. Yeah. Hi, good morning, Lori and Scott. Quick question on your natural gas exposure in Europe. You gave some details about Germany and your waste-to-energy deal. If the supply is severely curtailed in the winter, is it possible that maybe you can shut down your Frankfurt plant and supply those customers from either Europe or Asia? Yeah, look, you know, as we said in our notes, you know, our natural gas exposure in Europe is focused in Frankfurt, Germany. I would say 30% of our global sales come out of Germany in 2021, and that's pretty typical, normally. Because of waste to energy, we also have projects that we can use fuel oil in IPH. I think, you know, it is highly unlikely we would want to or would need to shut down IPH in the winter. Obviously, on acetals, you know, we have the option to bring materials from Asia or from Europe, but we don't produce a lot of that there. It's really just POM production, you know, is the main thing we make as well, as some other things in IPH. I don't think it's highly likely we will need to. We may re-run at reduced rates, I think is the more likely thing. Again, POM is the big energy consumer there. A lot of the other things we produce there don't use nearly the amount of energy. I think, you know, there are other places in Europe, outside of Germany, that may be more impacted, although we are working to look at the plans to mitigate at all of our critical locations in Europe. Yeah, flexing capacity is something we do every day, PJ. We've talked a lot about it in the acetal business, but we do it in engineered materials as well. If there is opportunities where we have excess capacity that is lower cost in other regions, we can move that around if the logistics are there, as Lori mentioned, and we will always look to maximize profitability if that opportunity exists. Great. Thank you. In automotive, you know, many chemical companies and others thought that there is a quick snapback, but as you rightly said, there are constraints on the chip side and all that. What's the more realistic outlook? Can you talk about maybe like a global build number that is more reasonable? Well, look, you may recall, when we went into this year, we actually, despite IHS having a fairly optimistic number, I don't remember what it was, 8% or maybe even higher than that, of build growth from 2021 to 2022, we actually based our 2022 forecast on flat auto builds from 2021 to 2022. I think if you look at where we are, I think we're just under 2% growth now according to IHS for global auto builds. Although they're still calling out 4%, we still think a flat was a pretty good prediction. Because we really based it on chip recovery and the fact that vehicles use more chips now, so, you know, you need more recovery in chips in order to fill the same number of vehicles. We still think flat versus 2021 is a pretty good estimate. You know, maybe a few percent of growth here in the second half as we see chips becoming more and more available. But I think flat. You know, the interesting thing is, here in North America, you would think with energy prices that, though we'd be starting to see the transition to more demand for more fuel-efficient vehicles. But in fact, we're not. We're still seeing plenty of trucks and SUVs being the primary models being built. These tend to be higher-end, more premium vehicles and require a lot of chips. Great. Thank you for the color. Thank you. Our next question has come from the line of. It's Kevin McCarthy with Vertical Research Partners. Please proceed with your questions. Yes, good morning. Scott, I was wondering if you could address your latest thoughts on the capital budget. Last quarter, I think you indicated $550 million, but in reading the prepared remarks last night, it sounds like you're actively evaluating options to reduce that number. What kind of levers could you pull if necessary? Do you have any early thoughts on how that number could trend in 2023 as you complete your expansion at Clear Lake? Yeah. I think that $550 million range for this year is still likely where we'll be. As we look forward next year, I mean, in our original modeling with the combined enterprise with M&M, we had baked in a higher amount of capital than we would likely need. As we continue to understand that business better, I think there's going to be additional opportunities to bring that capital number down. We'll provide a little more color on where we think that's gonna be on a combined basis as we get into October. It likely is gonna be one of those important elements to offset that incremental $250 million of interest that we talked about in the prepared remarks. I think we won't be able to offset it all through capital versus our original plan, but we'll certainly be able to get a good chunk of it from capital. Okay. Lori- Sorry. Oh, sorry, go ahead. If I could add to that, I mean, because you did ask, you know, where might it come from. I think like we saw this year, you know, given the large number of assets that we are getting from DuPont, you know, we will be evaluating, you know, where do we think we'll be able to get more capacity more efficiently out of the DuPont assets, versus new build. You know, we'll be evaluating that, and we do think there are some synergy opportunities there. I think like you saw us do during COVID, you know, with higher material pricing right now for steel and everything else, although we start to see it coming down, with, you know, trying to get a clearer view of demand in 2023, we think there's gonna be some opportunity to delay some of the larger capital projects and use that time like we did with Clear Lake to get some efficiencies and savings in terms of construction costs and how we actually contract for the construction of those facilities. You know, I'd say it's nothing dramatic. We're not cutting to the bone. We still think use of capital for organic growth is a really good use of cash. But, you know, we are going to be cautious with how we invest in light of, you know, the uncertainty around the economics for next year. Okay. Lori, you know, in reading your remarks, it sounds like you're comfortable enough with the order books as you see them in here in July anyway. You know, in a scenario where the macro environment continued to move against, so to speak, how do you think about portfolio composition? In other words, do you see any levers that you could pull in terms of non-core assets that may be useful to accelerate the process of deleveraging if necessary? Yeah. Look, you know, it's something we look at all the time. We're always reviewing our portfolio, and as you've seen, you know, we've made a number of moves over the last several years, whether it's an opportunistic move like the PPC divestiture that we did or some of the smaller divestitures we did around PP and some other composites. You know, what I would say is, you know, first, we have sufficient financing capacity on our balance sheet today to finance the deal with cash and committed debt. We don't need to sell anything in the near term. And, you know, although that said, you know, we will be opportunistic. Interestingly enough, we have actually had a reasonably large amount of inbound calls about some of our assets, versus what we've typically seen in the last few years. Although the equity market has slowed down, we are getting a lot of calls, and that has given us the opportunity to look at a variety of our assets and really see if there's some opportunistic ability to monetize any of those. Again, similar to what we did for Polyplastics. You know, it's something we're looking at, but not something we have to do. Understood. Very helpful. Thank you. Thank you. Our next question has come from the line of John Roberts with Credit Suisse. Please proceed with your questions. Thank you. You called out the performance of Santoprene in the quarter. How did POM do? You've got a key competitor that's orphaned right now. I would think this is a pretty good environment for you to gain some share in POM. Yeah. Look, I'd say on POM, you know, I think POM is performing as we had expected it to perform for the year. You know, it continues to go into a lot of high-value end applications. I wouldn't say we see any real difference in demand or margins on POM now versus what we expected. How did Ibn Sina do in the quarter? I would think this was a really good environment for them. Yeah. Obviously with higher methanol prices last quarter, we saw that roll through on Ibn Sina. I think we called that out on our comments. We had, you know, a good bump up from Ibn Sina, but mostly offset up at about $5 million, offset by the KEPCO restructuring. You know, it's done well. Again, remember, Ibn Sina is on a one quarter lag, so we should continue to see help from Ibn Sina as we move into the third quarter as well. Okay. Thank you. Thank you. Our next question's come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions. Morning, Lori and Scott. You know, question around the trajectory of volumes within the acetyl chain. You know, I take a look at the sequential uptake in volumes from Q4 to Q1, and it was 8%, even though, if I remember correctly, there were a couple of turnarounds in Q1. Then I take a look at the sequential sort of downtake in Q2, it was a 3% downtake. I'm just trying to get a better sense of that trajectory from Q4 to Q1 to Q2. Obviously, keeping in mind, you know, the Europe situation, which is obviously prevalent in the first quarter as well. Yeah. Look, the Q1 to Q2 is fairly straightforward. I mean, we did have some small turnarounds in Q1 at Clear Lake. We had some larger impacts in Q2, which then we had to declare force majeure because of raw material outages at some of our raw material suppliers for Clear Lake. That difference in volume you see Q1 to Q2 is really caused by that force majeure event in Clear Lake. Understood. Now just on the strategic overhaul that you guys talked about within acetate tow. I mean, would a potential sale be, you know, considered? I obviously, you know. I have memories of you guys sort of walking down that path earlier, you know, but that was obviously a very different time as well. Would that be something that you guys would think about as well? Maybe potentially some of these inbound calls, are they related to the AT business as well? What I'd say is, you know, when we've talked about it on these calls before, we would certainly consider a sale, but we think we would come up against the same problems with anti-competition in Europe that we had previously on the deal that was contemplated. I'd say, you know, we're really focused at this point on actions that we can take that are under our own control to improve the performance of that business. Yeah. Hassan, just to add to that. We've had a lot of value that's been created by operating our acetyl chain as an integrated value chain and ensuring that in the downstream derivatives, the full value of the upstream is captured and contained in how we price the products. We believe there's a lot more overall enterprise value to be created by operating that business more integrated on a go-forward basis. Very helpful. Thanks, guys. 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, Scott, back to M&M. What have you learned over the last few months in your integration work that makes you more positive about the combination? Anything you've learned that may be not as hopeful as you would have thought initially? Yeah, a couple of things. You know, one, I have to say, having gotten to meet a good number of people now in the M&M organization, I am very positive about the people who will be joining the company, their passion for the business, and frankly, their excitement about joining Celanese and this opportunity we have to really make this world leader in engineered materials company by putting our assets together. You know, I think with any large M&A, you always have to worry about the cultural integration. I would say, you know, what we see is for the folks who work in M&M, we think they're actually much closer to us in terms of culture than we'd probably thought before. Obviously, there's things we need to look out for and all that, but we're actually very excited about the folks that we're getting and how they're gonna, you know, how we can come together to really take the best of both companies and really have an outstanding engineered materials business. I would say also, as we continue to dig into synergies and Scott may want to try to comment more, but as we dig into synergies, you know, the synergies that we had called out are real, they're there. We think we'll be able to probably get more, and we think we'll probably be able to get them faster. We're working through all those steps now. You know, therefore, we think there is even more value to be had. I think some of the things that the premises we had around how we can, you know, continue to commercially build that business, take advantage of the pipeline model and those things. I think we again feel very positive about the value that can be generated with those molecules and using the pipeline model that we have used so effectively here in Celanese. Yeah, just on that synergy point, I think, we had originally baked in $150 million in the first year and $150 million in the second year of cost to achieve synergies. We think we're actually gonna be able to spend less than that in year one especially, and still get at or above the original synergy target of $75 million in that first year. There's a lot more lower cost synergies or no cost synergies early on, as we model that out, which we're excited about. One other thing to add is just the commercial teams. I think what we've learned is, you know, how we're structured, how M&M is structured, very similar in terms of how to approach customers. Yet, kind of maybe the governance of how we do it and they do it is very complementary. There's some things that we believe are gonna be things that enhance and evolve our model. We've talked now for five, six years about the continual evolution of our pipeline model, and we think bringing M&M in is gonna be a nice accelerator in that evolution, which should create some market opportunities going forward. Oh, great. That's very helpful. Just quickly, incredibly, Lori, what's been the reaction from your customers to this new strategy, or is it too early to get full feedback yet? Yeah, I think it's too early. I mean, we're still working internally to you know develop our models and how exactly that works. We'll see more, I guess, in the second half as we go out with some changes to our customers. 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 questions. Morning, everyone. Just in general, seeing a pretty significant number of acetyl outages over the last 24 months. You know, not just Celanese, kind of industry-wide and at a frequency we're not used to seeing. What's the issue here? I mean, is this like everybody took ownership to their CO units and it's become a problem? Are they underinvested? Why does everybody keep going down? It's an interesting question, and I have to see the data 'cause I'm not. If I'm looking, thinking in my own memory, I'd actually say within Celanese, our acetyl units are running probably more reliably than they have in their history. So, you know, I'd have to look at the industry numbers to see if that's really accurate. I don't think there's any common themes here. I mean, I do think, coming out of COVID, we saw people running facilities very hard because there was that sudden uptick in demand. So I think turnarounds were pushed off and those sorts of things, and you're seeing people now either having to take those turnarounds or maybe having pushed a bit too long and having unplanned downtime. There's no other kind of systematic kind of failure in the system that I see that would support that there's an issue. I think it may just be timing and maybe just recency bias in terms of you know always thinking things are worse today than they were in the past. The one thing I would add, though, Matthew, I think it's important. We've brought this up on other calls. We are starting to see, you know, with some of the logistical challenges, we're seeing more Western Hemisphere downstream demand come back online and the demand is higher. Yet it's harder to get product out of Asia, particularly China, into the Western Hemisphere. I think we've talked now for a number of years about the need for capacity in Asia to flow to the Western Hemisphere to keep things balanced, and that's been really challenged in this period of time. I think without that coming over into the West, that has kind of made some of these outages, you know, more visible in the market than maybe what they had been historically. That's a fair point. Yeah. How much revenue did KEPCO Switch and Santoprene add to EM in the second quarter? So versus second quarter last year, Santoprene, about $15 million, versus last year when we didn't have Santoprene. KEPCO was pretty minimal. It's pretty immaterial. It's not far off from that Santoprene number, but it was pretty minimal. That was KEPCO. If I could, was that KEPCO? Was that like a full quarter or was there a partial quarter there? It's a partial quarter because there's still inventory that needed to be sold out of the JV, so it was pretty small in the quarter. Remember, then it actually came out of equity earnings as well. It's kind of netted out in the total bottom line. Sure. I was just trying to get a clear read on volumes for EM on the quarter. Sure. Thank you. Our next question has come from the line of Matthew Blair with TPH&Co. Please proceed with your questions. Hey, good morning. With all the volatility in oil, nat gas and coal, has the cost curve changed for acetyls? Do you have a sense on operating rates by region? Yeah, I don't think the cost curve has really switched. I mean, the only place I would say you really see kind of things really out of whack, I mean, things have tended to move in parity, but the thing that's really out of whack, of course, is natural gas in Europe compared to oil. If you look at natural gas prices today with the cutback in the Nord Stream and everything, I mean, it's probably the equivalent of $350 oil. Now, again, not a big factor for us on acetyls, but bigger factor for engineered materials. So I would say, you know, for acetyls, the cost curve continues to be, even at these higher natural gas prices in the U.S., still significant advantage in U.S. Gulf Coast acetyl production. Oil in Singapore and coal in China remain about the same. Europe's a little bit upside down, but that's not a big factor for us on acetyls. Yeah, I think it's also important to think about landed cost curve, because ultimately that's what really matters. Because of that logistical, dynamic that I talked about a few minutes ago, I mean, that certainly is holding things up because it's really expensive to move product right now, even if you can get the boats, out of China into Europe or the U.S. Got it. Lori, I think you mentioned the currency headwind of about $10 million in the second quarter. Do you have a similar number for 2022 that's embedded in your guidance? Yeah. The $10 million was just for EM. If you actually look at, you know, quarter-over-quarter, currency was almost $25 million just from Q1 2022 to second quarter 2022. We do have a number embedded in the full year guidance. I'm not sure what it is right off the top of my head, but Scott, you may have it. Yeah, I mean, just from a general rule of thumb, about a one cent change in the euro is, you know, call it about $7 million of earnings per quarter. So it's sizable on an annualized basis. As Lori talked about earlier in the call, the teams, both in engineered materials and acetyls, have done a phenomenal job of offsetting that. So it's sizable, and it's been a pretty significant impact on us for the full year. Now, we've effectively baked in, you know, very similar euro rates to what we're seeing today into our back half guidance. Great. Thank you. Thank you. Our next question has come from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your questions. Great. Thanks for taking my questions. Good morning. I guess first off, you know, you went through some nice commentary in your prepared remarks on natural gas in Europe, and you just kind of addressed that a little bit as well as being somewhat out of whack. I guess, you know, given some of those actions you have taken, it does appear that, you know, you're expecting this level of pricing to remain on a structurally higher basis, you know, in the foreseeable future. Is that the case? I guess, if so, how do we think about EM and the impact from these higher costs in the next couple years? Yeah. Look, I think the energy surcharge that was put in place by the Engineered Materials group has been very effective in helping us maintain margins. Our customers understand it and, you know, aren't necessarily happy, but have been willing to pay it. We haven't seen any major impact on volume because of the higher price. Now, as we move forward, and if we continue to stay at this kind of $60 per million BTU we're seeing today as we move into the winter period, you know, I do think we will see energy pricing, not necessarily the pass-through on our materials, but just energy pricing for producers of goods in Europe being negatively impacted by energy, whether it be price or even availability at a certain point in time. I think that's more likely that price at their own facilities is more likely to lead to demand destruction for EM than necessarily the energy cost pass-through that we're putting on our products. Okay. That's all. As a follow-up, you know, similarly, you noted there is a CapEx reduction here, you know, and potentially even greater in 2023. Could you just describe that a little bit more? I guess, you know, you said you'd get to the three times leverage, you know, in a couple years. I'm just wondering if you have greater levers to reduce CapEx by even more to stay on track with that deleveraging or if it's not really dependent on that. Thanks. Yeah. Look, we could cut our CapEx in half if we needed to. We've done it before. We did it when COVID happened. We're not gonna cut it so far that we can't maintain and run our facilities in a safe and reliable way. I also don't think it's gonna be necessary to do that in order to meet the financial objectives that we set out around this deal. We always have those levers to further delay projects or, you know, cancel projects. Again, we're really looking at what is the long-term health of this business, and there's a lot of, you know, in engineered materials, there's a lot of expansions we wanna do, and polymers that, you know, aren't coming over from DuPont. Just our base polymers. Just like in acetyls, we wanna continue our expansions in VAE and VAM. Of course, we're gonna finish the Clear Lake project. You know, there are additional levers if we were to need them. If we were to get into, you know, a significant recession, which we're not really seeing the signs of now, and significant demand destruction. Obviously, there are more levers we can pull. The kind of levers, the kind of levels we're talking about now, $50 million this year, maybe $50 million-$100 million next year, you know, these kind of levels are things that we think it makes sense to do just in light of the deal and the opportunity we may have to more efficiently produce from the DuPont assets, and in light of current high prices for contractors, for steel, and for all of those other things, just by delaying a bit. Yeah. Just to provide a little more color for you, Arun. We had baked in $800 million of combined capital in 2023 for our base business plus M&M. Just given some of the dynamics that Lori talked about, we don't see needing to spend nearly that level. We know we're gonna be able to get a chunk of that back in cash to be able to offset some of the higher interest expense we talked about. Great. Thanks. Daryl, make the next question our last one, please. Thank you. Our final question comes from the line of Steve Richardson with Evercore ISI. Please proceed with your questions. Hello. Hi. This is, Kishan on for Steve. I'm looking at engineered materials. It's undergone quite an impressive transformation. I was just wondering if you could touch a little bit more on what drove your EM results, especially in China, in terms of your EV exposure, and where do you see that going through year-end? Yeah. As I said earlier, you know, we actually saw very high demand in China despite a significant slowdown in auto build because of the issues with COVID. I think there's a couple things. One is, you know, it's our great folks in China who are out there. We also tend to, you know, really continuing to push the commercial models and new volume which comes from the project pipeline. It's also the fact that we tend to go in premium vehicles, which tend to be prioritized over other vehicles. And then certainly EVs in China, where we have a very large presence. EVs continue to be prioritized by the automakers, and we continue to see a lot of material going into the EV market, especially for GUR into lithium-ion battery separator film. Great. Thank you so much. 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 always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your week.