Greetings, welcome to the Celanese first quarter 2023 earnings 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. At this time, I'd like to turn the call over to Brandon Ayache, Vice President of Investor Relations. Thank you. You may begin. Thank you, Darryl. Welcome to the Celanese Corporation first quarter 2023 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 distributed its first quarter earnings release via Business Wire and posted prepared comments on our investor relations website yesterday afternoon. As a reminder, we'll 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 both the press release and prepared comments. Form 8-K reports containing all these materials have also been submitted to the SEC. Since we published our prepared comments yesterday, we'll go ahead and ask you, Darryl, to open it up 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 to remove yourself 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 yourselves 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 Michael Leithead with Barclays. Please proceed with your questions. Great. Thanks. Good morning, guys. First question, Lori, just high level on the full year EPS guide. You're doing about $4.50 of EPS in the first half, which implies about $7 in the second half. I assume synergies, Clear Lake, a few other things are helping in that back half. I guess, is a way to broadly characterize what you're assuming for market demand recovery in the second half versus, say, controllable actions? Yeah. Thanks for the question, Mike. I mean, you know, you're right. We need about, you know, on average, a $1 lift in Q3 and Q4 from where we were in the first half. You know, our focus really is on controllable actions to the extent we can. I mean, M&M volume recovery, you know, we saw about a 10% lift from Q4 to Q1, a similar lift from Q1 to Q2. We continue to expect volume recovery in the M&M business as well. Productivity, which is coming in at the top of our range for all of our businesses, you know, M&M price optimization, synergies which we'll see building across the quarter. We also do expect some improving demand again for in its entirety. We were up about 10% in the first quarter. You know, we'll have some increase again in Q2, but we do expect things to get better still in the back half of the year, as we see kinda the EU and Asia competitive dynamic improving and see the end of destocking in the U.S. We should have some tailwinds from raw materials and energy cost moderation, which should help lift margins in all of our businesses, and especially in EM, as we see those costs flow through to inventory and start to hit the P&L. You know, I think that's kinda, you know, what we're in control of. In terms of where we see the markets going, if we take it first by region, in China, you know, we do expect modest demand improvement in Q2 and into the second half. We do see markets recovering in China, especially auto. We continue to see some improvement in utilization in acetyls and hopefully get acetyls coming off the cost curve, especially now as we're going into some turnarounds in Asia. We do see some upward price movement and some margin expansion in acetyls. In Europe, we do expect continued modest demand improvement as well. We saw that through Q2. We expect that continue at a slow pace into the second half. As I said, you know, we would expect as Asia improves, we see less imports from Asia into Europe, which should help margins in Europe get back to a better level. In the U.S., you know, again, we know a lot of people are calling out recession. We're not seeing that in our in our order books. I mean, you know, however you wanna define recession. What we're continuing to see is, you know, general recovery across a lot of markets. We still had some destocking in Q2, but we expect that destocking to be mostly over as we go into the second half of the year. If you look at end markets, you know, auto has continued to be quite resilient in the EM portfolio. That's helping both our legacy businesses as well as our M&M businesses. 2023 auto build, we still expect to be up 3%-4% off 2022, and we're at a run rate right now that already achieved that. We, you know, we are seeing our own auto volume recovery at a pace significantly better than that. Really building on the project pipeline and all the work that's been done in the last several years to build that pipeline, both for the transition to EV as well as increasing our content per vehicle. You know, we see auto being a fairly robust end market for us this year, even with just a moderate growth in the actual builds themselves. I would say the most sluggish sector we still see and has baked into our forward look is construction. Although we see some modest improvements in Europe and Asia, in Europe, mostly on the renovation market, Energy efficiency regulations come into effect. You know, we still see it to be quite slow in the U.S. and in China, where we've not seen any recovery and really commercial construction yet at this time. You know, the other non-auto durables, I would say, you know, electronics, electrification, is improving. You know, there's a lot of need for more electrification around the world. We see that as a growing market this year. In consumer electronics and other consumer appliances, we still see that lagging 2022, especially in the U.S. Finally, you know, packaging. We do see resilient growth in packaging, especially in the U.S. You know, think about Amazon and everything that's getting shipped, you know, from online shopping, and also the push for sustainable packaging solutions. Paints and coatings is a bit slow tied to construction. That's probably a bit more than you were looking for, Mike, but that's a little bit of a summary kind of where we see things going in the second half and the underlying trends that support our confidence in that $11-$12 range that we put out for the year. Great. That's super helpful. Then maybe second, you talked in the prepared commentary, Laurie, a bit about some of the integration actions you're taking in Nylon 6,6. I was just hoping you could expand a bit about how you're currently thinking about your approach to the six,six value chain and just maybe how Celanese going forward might be operating differently than, say, M&M standalones, nylon polymerization business, or just even the legacy Celanese compounding business there. Thank you. Yeah. Let me talk a little bit about 6,6 in general, starting with what we're doing immediately around 6,6. You know, in the past, Celanese has not been backward integrated in 6,6, so we were just a purchaser of nylon polymer, which, you know, is great when prices are low, not so great when prices are high. You know, with DuPont, we've been able to add the backward integration. What we're doing differently is we've been able to secure a different raw material contract, and instead of being forced to produce PA 6,6 polymer, we have options. We have flexibility, we have optionality. We can choose to produce backward integrated nylon polymer when it makes sense. We can make less and buy nylon polymers from others if that makes more sense. We can make less of it if we see the demand profile not supporting higher production rates, and we can make more of it if we see a sudden resurgence of demand. So that flexibility, which is much more like we run our other businesses like GUR and POM and even, you know, acetal, gives us a degree of flexibility and ability to make value across a wide range of market conditions that, you know, DuPont really didn't have or really didn't exercise. So we've already done that. We've gotten most of the Celanese nylon grades already certified to start with the DuPont polymer. We've been using DuPont polymer out of inventory, raw polymer, compounding it to make the Celanese branded products. We've been flexing that to really start managing some of the inventories that had been built last year for both raw and for finished polymers in the DuPont product line. You know, that's a degree of flexibility and a way of running the business which is different. We've also talked about how we're pricing differently, pushing price on more differentiated grades, lowering prices in some case on more standard grades to really get our inventory in line with the demand profile, and therefore the cost profile of our inventory in line with the demand profile. That's kind of the immediate things we're doing. As we think about PA 6,6 longer term, and of course, we, you know, spent a lot of time studying this before we went into this deal. You know, we know a lot of people are like, "Well, PA 6,6 is under hood. That's gonna decline." You know, we don't see it that way. I mean, if we look at electric vehicles, as they're coming on the market, we find that the addressable content per vehicle is almost double compared to what we've traditionally have in ICE. We think a lot of those new opportunities in electric vehicles also extend to PA 6,6, as we see performance requirements increasing for electric vehicles. You know, longer battery life, higher heat, management required. These things are very suited to PA 6,6. If you think about parts that PA 6,6 is suited for in EVs, you know, things where you replace metal for light weighting when you need the strength of a PA 6,6. Things like battery cell frames and end plates, the brackets and the mounts for the electric motors, and then things in the electrical system like high voltage connectors. It's the PA 6,6, you know, the standard grades, but also the high temperature nylon grades, which are particularly applicable here and which we didn't have in our portfolio prior to the acquisition of M&M. You know, I would say for our legacy EM business, we're about halfway to capturing the addressable content for EVs. Obviously, the M&M business was not as focused there, and so not as far as long, but we are using our project pipeline to also drive these applications of PA 6,6 into EVs now that we have those molecules available to us. I would think if you think about PA 6,6 beyond electric vehicles, there are huge applications there in electrical and electronics, which was an area that M&M was really underrepresented in historically. If you think about electrification and the need for not just electrification for vehicles, but for all everything. you know, you think about people wanting to get out of natural gas for homes, you know, but basically the electrification of everything. you know, the all the outlooks would say electrification, electricity demand is gonna more than double in the next five years. With that comes data management centers, power distribution centers, all of these things require polymer, and specifically, all of them can benefit from the availability of PA66. We think there's gonna be a strong pull-through for PA66 as the demand grows for building out our electric, electrical infrastructure. Again, this is an area Celanese has been in for some years, and now we're able to apply that market knowledge, and that in-end use knowledge to the PA66 profile and pull those volumes through using the project pipeline model. Thank you. Our next question has come from the line of Jeff Zekauskas with JPMorgan. Please proceed with your questions. Thanks very much. I think you reduced your earnings per share goal by $1. What was the source of the decrease? Jeff, you know, if we look at the first half, our first half came in about where we, in total, where we expected the first half to come in, with 1 Q being up because of some unanticipated commercial opportunities for spot market volumes, as well as some pull forward from the second quarters, especially in auto, a few parts for auto and a few for medical implants. Since we don't expect those, we're not counting on those unexpected opportunities reoccurring in the second quarter, expect second quarter has been a little bit lower. We are seeing the demand in the second quarter not build as quickly as we had thought at this time last quarter. That reduction to $11-$12 really reflects that slower demand growth that we're seeing across second quarter going into third quarter and just accounting for that in our outlook for the second half. Is it fair to say that as a base case, second quarter volumes and prices are flat sequentially? I expect for volumes, for Engineered Materials, we should see the volumes, you know, increasing moderately across the second half, especially in M&M, as we have market share recovery and just, you know, base business demand increasing and, you know, automotive and some of the other end applications. I think for acetyls, we also expect moderate growth into the second quarter as we start seeing more recovery in the end market. You know, right now for acetyl, pricing is a little challenged, although we are seeing some early green shoots on China acetic pricing and margin expansion. It's very new though, so although we've baked what we've seen so far into our projections, you know, we think there's still some more room there, possible upside there. I think for Engineered Materials, we do expect some margin expansion as we go to the second half, particularly as we see the lower raws and energy costs from the first half pulling through the volume and inventory, which will help with margin expansion in the second half. Thank you. Our next question has come from the line of Ghansham Panjabi with Baird. Please proceed with your questions. Thank you. Good morning, everyone. Hey Lori Ryerkerk, maybe you could just give us a bit more color on the demand spike that you saw in March. You know, maybe stepping back, was there any sort of theme in particular that you can hone in on, any region in particular that saw that increase? As you kind of step back, was it more so of a pull forward from 2 Q that's, you know, that benefited March, do you think? Yeah. Ghansham, let me talk about that a little bit. As we, you know, saw in March, what we saw in March is we saw, you know, our books starting to really, at the time of the call, you know, we were really seeing good volume showing up on our books for in our base businesses, and you know, that gave us some confidence about second quarter. I think the unanticipated commercial opportunities that we saw, though, at the end of March, which really got us above our guidance, was, you know, a number of things. One, there was some unusually high spot demand at the end of the quarter, so things like POM and nylon, also tow and RDP, so it was across both of our businesses. I think because of our flexibility we have in our supply chain and our operations, you know, we were able to capture a significant share of that unexpected volume that arose at the end of the quarter. I would say, you know, that was the majority of that pull of that. I think, though, we also did see accelerated buying in a few products in auto and in medical implants, which was a little unusual because we had expected quite a big headwind from medical implants and in fact had some orders come in. In the case of medical, I think that's probably pull forward from Q2. In auto, we think it's also some pull forward from Q2 in anticipation of better demand in Q2. You know, I think on that one, is it pull forward or is it just quicker demand recovery? Not sure yet. That's not clear. We're kind of characterizing it as pull forward until we see if that's a sustainable trend. Got it. Then as it relates to the U.S. and your comments on destocking, you know, just a bit more color there in terms of which particular end markets. I assume construction's part of that, but curious to hear your thoughts. Then just judging by, you know, destocking that's occurred in other, you know, geographies, including Europe, what do you think is a reasonable timeline in terms of the destocking event? Is it two quarters, three quarters? How are you thinking about it now? Yeah. What I would say, Jim, is we really saw, you know, the end of destocking in Europe and Asia for the most part, as we moved into the second quarter. Where we've really seen destocking continue is in the U.S., and there, you know, auto is pretty robust, I would say, across all of the areas. I think, you know, there we see destocking continuing in consumer goods and industrial for the most part. Right now, our projection is, you know, we think that's gonna continue through second quarter but be, you know, pretty much over as we move into the third quarter, and that's some of the uplift we expect to see in the second half. Thank you. Our next question has come from the line of Michael Sison with Wells Fargo. Please proceed with your questions. Hey, good morning. Lori or maybe Scott, you know, you started the first quarter with negative free cash flow. Can you help us walk into the $1.4? You maintain free cash $1.4. How does that sort of unfold? Do we turn positive in 2Q or is it more second half loaded? Yeah. I mean, we expected to be negative just kinda coming off of where Q4 was from a sales perspective, and then kind of when we had the interest payment. As we walk into the second quarter, you know, you've got higher levels of earnings coming through. We also had really abnormally high CapEx from a cash perspective in the quarter as well as cash taxes being higher. That goes away at a higher level. We're at more normalized levels in the balance of the year. With the higher earnings levels coming through now in the balance part of the year, we would expect to be able to kinda get up and average much higher levels, you know, as we go forward. You know, that sequential walk from Q1 into Q2, is about a $700 million lift from where we were in, the first quarter, when you kind of put all those things together. Got it. Okay. I think in your prepared remarks, you said that 50% of the first quarter EPS came in March. you know, April's at $1. no, I'm sorry, March is at $1. you know, if you think about April, May, June, it typically is better than March I think. what happened, do you think, in terms of the deceleration of the April, May and June? you know, I thought maybe that $1 could have sustained throughout the quarter. Yeah. Again, Mike, I would say, you know, a significant portion, or a portion I should say of that dollar in March really was related to the unanticipated and spot-like opportunities we were able to capture in March. We, you know, we've not seen those repeat in April, and we haven't baked them in as repeating later in the quarter, whereas the base level of earnings, you know, will continue to grow moderately across the month. You know, I think we're just trying to be realistic in terms of what we think is repeatable and what was, you know, fortunate. Again, we're positioned to take advantage of those spot opportunities if they were to arise again, but we don't wanna bake that into our forecast. Thank you. Our next question has come from the line of Matthew DeYoe with Bank of America. Please proceed with your questions. Morning. It looks like you beat your 1Q M&M EBITDA guidance and 2Q is expected to accelerate. The prepared comments no longer mention that lift to like $700 million-$750 million in EBITDA. Are you walking away from that level? What do you kind of expect M&M can deliver this year for EBITDA? Thanks, Matt. We're really happy with how the integration's going and the value uplift we're starting to see in the M&M assets. Our concern at this point is, you know, the fact that second quarter is not accelerating at the pace that we thought across all of our businesses. We're going into the second half at a little lower demand rate than we had originally called out last quarter. That applies to M&M as well. What we're really focused on now. What I would say is, you know, if that plays out the way we see now, I would say we're kind of at the lower end of that $700-$750 that we called out. What we're really trying to get our teams to focus on is making sure we're delivering growth so that as we get towards the end of the year, we are basically on track for an EPS neutral quarter going into twenty twenty... You know, either sometime in the second half or going into 2023, which would be at that kind of $200 million EBITDA range, including synergies. Thanks. Can you talk a little bit more about the product flow out of China and POM into Europe? POM is not really a product I have a ton of line of sight into, so maybe kinda, do you have an idea of where margins are in Europe now versus China or what the theoretical kinda compression risk looks like to the European business? How far along we are on maybe some of that are closing from European products or Chinese products? Sure. you know, really started back in the fourth quarter and, when we really started seeing, well, really even through the third quarter last year, when we really started seeing the very high energy prices in Europe, you know, that raised the price of POM in Europe and provided an arbitrage opportunity for POM coming out of Asia, both China and Korea, out of Asia into Europe, because demand was very low in Europe. you know, those molecules found a home in Europe where it could be highly competitive, even with the shipping costs to be there. Obviously, with, the COVID resurgence in December, you know, and going into the first quarter, we saw those volumes still flowing in the first quarter, even as we started to see energy prices coming down, in Europe. Because of the lack of demand in Asia, there was still an opportunity to move project into Europe. While we still see volumes moving in the second quarter, we really expect as now demand is coming back up in Asia, that those molecules will find a home again in Asia. Prices are down and competitive in Europe with that on a landed basis. We should see those prices stabilizing again in Europe, I think, as we move through this quarter and into the third quarter. Thank you. Our next question has come from the line of Josh Spector with UBS. Please proceed with your questions. Yeah. Hi, thanks. two questions that maybe I'll roll into 1 here is, you know, you seem to pull a lot of levers to basically keep free cash flow in the range that you provided, you know, despite the cut to earnings. Just curious, you know, what, one, what levers are left if things don't play out as you see it? Two, as you look at your guidance, I mean, you're talking about demand improving. I guess, does the lower end of your range reflect a scenario where demand doesn't really improve from 2Q levels, or would that be another cut that we need to consider? Thanks. Yeah. Let me start with your kinda last question first. You know, I think the lower end is a range that we feel is achievable, even with only really moderate growth. There's some areas we know, like auto, we feel quite comfortable will continue to grow this year at a very moderate pace because of the pent-up demand for auto. I would say, you know, we feel very confident in the $11, you know, short of a global recession, on the $11 end if our outlook and our cash flow reflects that. I mean, you know, if we were to, say, go into a global recession, we have a really unexpected downturn here, you know, well beyond anything any of us are imagining right now. There are still levers within cash flow, and we saw that in 2020 with COVID. You know, if we really see that kind of scenario develop and our demand goes down, one, we'll have more working capital release 'cause the value of inventory goes down. We'll be able to go down to even more minimum inventories. We would also have cost savings as we would take steps similar to what we did during COVID to slow production rates, possibly even shut down plants for a period of time, and you have cost-saving benefits that come from that. I mean, you know, I think, you know, we feel very comfortable in our ability to deliver the level of cash flow that we've indicated given the steps that we've already called out. Okay, thanks. Just a quick follow-up just on the inventory adjustment in 2Q. Kind of thinking along, again, similar scenarios here. Is that something contained within 2Q, or is that something that drags into the second half? Just what's baked into the outlook there? We're assuming a working capital release from inventory of $300 million or more. If you think about 2Q, that's the $100 million reduction in working capital, that comes with the $30 million-$35 million impact on EBIT. As we go forward, you know, you would expect to see that same impact continue through the second half as we take other inventory adjustments. Obviously, you know, different inventory adjustments come at a different EBIT depending what pricing is doing, I would expect to see some impact from inventory as we move through the year. Yeah. And Josh, and that's all baked into the guide that we gave. Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your questions. Good morning. Lori, would you elaborate on your acetyl outlook in China? If we look at some of the consultant assessments of acetic acid prices, they really haven't done a whole lot over the last two months or so. In listening to your commentary, it sounds like maybe there's some upward tension building there. If that's correct, you know, would you attribute that to, you know, some of your competitors' outages over the next month or two, or do you foresee a more sustained cyclical uplift as the year plays out? Thanks for the question, Kevin. You know, acetyls in fourth quarter was definitely sub-foundational, and I think we talked about that. I mean, we're really essentially at the cost curve, and in some periods of time during the quarter, in fourth quarter and even into first quarter, even below the cost curve from time to time. What's happened is if you look at coal pricing in China, coal pricing, you know, while asset pricing has remained at about the same level for the last several months, we've actually seen coal pricing come down from Q4 to Q1. Coal pricing came down about 20%. You see some uplift in the actual margin. Now we're still very close to the cost curve in terms of margin, but it, you know, it stabilized a little bit through first quarter. Then some of the turnarounds which we expected to happen in first quarter got pushed to second quarter. We're starting to see those turnarounds start. As that takes capacity out of the system, that further tightens, you know, the, the supply demand situation. We see margins slowly creeping up. Just really in the last five days, we've started to see a slow increase in acetic acid pricing, which, you know, we bake that into our guidance, that small increase that we've seen. I'd say, you know, it's still early. We need to see if that stays sustained. We think there is a chance that is sustained with now the more normal level of outages we expect going forward. I mean, the last six months have been remarkably stable in the acetic acid world. I mean, not a lot of unplanned downtime, not a lot of increases in demand, not a lot of planned downtime. I think we're going into a more typical period now where we will have occasional outages, both planned and unplanned, which will give us periods of market tightness that, you know, we'll be able to take advantage of. Thank you for that. Secondly, for Scott, can you speak to your debt reduction target for this year? You affirmed your free cash flow or at least endorsed free cash flow of $1.4 billion. I think that number excludes the proceeds that you expect from your Mitsui deal, which I understand to be $400 million or more. So, you know, can you put that into context in terms of, you know, how you can attack the balance sheet over the next eight or nine months here? Thanks, Kevin. You know, if you go back, we had stated a goal of reducing net debt by $1 billion in 2023. You know, with the cash flow that we expect, you know, we'll certainly do that. When you layer in the Mitsui proceeds on top of that, you know, you know, certainly will well exceed that net debt reduction target that we had when we first announced the deal one year ago, of $1 billion. We feel good about where we finished the year from a net debt perspective. You know, given what Lori Ryerkerk talked about earlier on, where we would expect from an earnings trajectory to exit the year, as we drive cleanup of the inventory on the balance sheet, and we start expensing much lower cost inventory, as we go into the second half and then exit the year, you know, we feel good about the earning trajectory to get to that three times target that we had initially stated by the end of 2020. Thank you. Our next question has come from the line of John McNulty with BMO Capital Markets. Please proceed with your questions. Hi, good morning. This is Bhavesh Lodaya for John. would like to hear your thoughts on the competitive landscape in Europe between your businesses. In your prepared remarks, you mentioned some price concessions you offered there in EM. Any changes to your competitors or perhaps a change in the product mix that is happening there? Then on acetyls, not all your competitors have the level of flexibility you mentioned of moving product from Asia. Assuming things are not as easy as you for your competitors, any changes in market share or capacity there? Yeah. In terms of the competitive landscape in Europe, I think the real challenge there has been imports from Asia, again, reflecting the low demand in Asia and the improved cost position Asia had compared to Europe when they had much higher energy prices. You know, I should say, you know, Europe energy prices have come down significantly, they are still high relative to the rest of the world. Again, we see that situation improving, especially now with increased demand developing in Europe. We really see that having improved now at the end of the first quarter, going into the second quarter, further improving in the second half of the year. On acetyls competitiveness, you know, it has been a very stable market. It's been very competitive. It's also been a period of seasonably low demand for acetyls as well as some of the impacts of, you know, China holidays and just lower China demand and the slowdown in the construction industry globally and the impact that has on acetyls. As we start to see recovery, even slight recovery in Europe and Asia in construction, as we start to see normal levels of shutdown, you know, we do see an opportunity there to capture additional margin in the acetyls space. You know, the ability to capture additional market share is really based upon our commercial model and the optionality and flexibility we have to take advantage of when there are spot opportunities by moving molecules around the globe, by flexing up and down our product chain. You know, in first quarter, we took advantage of the stronger market for emulsions and RDP further down the chain, which helped boost our profitability in the first quarter. As we start to see some movement in the asset price in China, there'll be an opportunity to take advantage of it there. It really is all around more so than market share. It's more around the flexibility and optionality and the ability to capture in any given market in any given time, any upside potential that exists. Got it. Secondly, on Clear Lake, congrats on the commissioning there. You mentioned $100 million worth earnings contribution next year. Is this all incremental to your overall global earnings level? Will some of it be offset by, say, reduced operating rates somewhere, perhaps in China where you're running close to your cost curve? The $100 million is on top of our already kind of $1.3 billion level of foundational earnings for acetyl. That's raising the total global acetyl foundational earnings from $1.3 billion to $1.4 billion. If you think about it's really about 50% based on what I call ratable productivity. Things like reduced catalyst costs, reduced energy costs, reduced maintenance costs, et cetera. About 50% of it is based on having kind of built-in turnaround and outage coverage in the network by having two units at Clear Lake. Obviously, there's additional upside to that if we were to get in a period of higher demand and higher pricing to basically raise our output from in totality of our acetyl chain. Thank you. Our next questions come from the line of Frank Mitsch with Fermium Research. Please proceed with your questions. Yes, good morning. Congratulations on the mechanical completion for the Clear Lake acetic acid facility. I know you gave some earnings projections for the balance of the year and for next year. I was just curious as to how this is going to impact your operating rates at some of your other facilities. How should we think about the industry overall and the impact that this may have? Yeah. Thanks, Frank. We are happy to have the mechanical completion behind us, and we're moving now into the commissioning phase and anticipate production in Q3. Look, at the lower natural gas prices we're seeing which greatly you know, advantages our location there in Clear Lake, I would anticipate you would see that facility running at higher rates, which could reduce rates because of global demand. For, you know, reduce our operating rates in China and Singapore as we continue to supply Europe from the US, and we'll be able to supply Europe even at higher volumes entirely now coming out of the US, and it's cost effective to do so. I don't know that you'll really see opportunistic shipments to Asia, although that's possible in the second half. The volume of that, though, is limited. I mean, there are other supply constraints around availability of vessels and availability of receiving tankage, et cetera. You know, that arbitrage could open up as well. You know, I think what we need to realize is Clear Lake is not only the lowest cost producer of acetic acid now in the world, and will be able to produce a significant volume of it, but it has also the lowest carbon footprint producer acetic acid in the world. You know, we think that, is gonna bring open up a lot of opportunities for Clear Lake and, you know, we, you know, From the impact on the industry, clearly, I think it will, you know, make some impact in terms of volumes you see moving from Asia to Europe, as we'll be able to service volumes in Europe much more cheaply, from the U.S. Got you. The intent would be to run that flat out and ramp up some of your other facilities. Where do you think operating rates are in acetic acid, you know, as we look at the second quarter? Of course, you guys recently restarted your Nanjing VAM facility. If you could talk about operating rates in the VAM area as well, that would be helpful. Yeah. Industry operating rates for both globally, for both acetic acid and VAM are still kind of in that 90% range. You know, maybe from time to time a bit lower, but, you know, are still kind of trending towards that 90% range. It just has been so stable, which is a little bit unusual in this business, for the last 6 months, that people have gotten comfortable at those operating levels. You know, demand has been down, again, normal seasonality. You know, it feels quite comfortable. At 90%, I mean, we are now positioned to take advantage of really any either planned or unplanned downtimes that occur, globally in either acid or VAM or any of the downstream derivatives. That's really where we've seen the opportunity in the past, is when we start getting some either regional or, you know, short term, misallocation between supply and demand. Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions. Thank you. I wanted to follow up on that a little bit on the demand side of the equation, 'cause one of the issues I've been having in our own S&D models here is trying to sort of reconcile what I think the underlying demand number is versus what shipments have been, you know, to try to account for. Obviously, we had a lot of issues with unplanned outages over the last few years, but we also had very strong building and construction demand, you know, in the acetyl chain. How do you reconcile that when you sit here today and think about what the actual underlying instant demand is versus shipments and maybe how much shipments might have overstated demand in the past and maybe understating demand now in terms of thinking through what operating rates can look like over the next couple of years? Yeah. Look, it's been a bit of a confusing time, Frank, I would say. You know, if we look at fourth quarter last year when prices were very low, we started seeing demand really coming off, particularly, you know, in Asia. You know, although operations were fairly stable, you know, we certainly still saw some molecules moving as people anticipated different things. You know, as we go forward, you know, we also saw a lot of shipment and people carrying higher inventories before that because of all of the supply chain issues that existed around the world. You would call, like in the first half of 2022, VAM and emulsions, I mean, there just wasn't even enough molecules out there to meet the customer demand. You know, people were carrying a lot higher inventories when we saw the reduction in demand through the fourth quarter. We saw people really destocking in the fourth quarter. We called that out at the last earnings call. You know, I would say now as we've moved through the first quarter and especially March and beyond, we do see demand recovery coming back for fibers, for other end uses. Construction is still, I'd say, the weak spot, although even in, you know, like in Asia, we're seeing a little bit of recovery in construction. In Europe, we're seeing recovery in construction, not so much in new builds, but in renovation for energy efficiency, where a lot of our downstream derivatives, products go. You know, we are seeing the demand coming back, again, with a few exceptions, and so that is starting to bring the volumes up. We're not really seeing restocking occurring yet as people feel fairly comfortable because we've been in such a stable period and haven't had the supply chain issues. I think customers feel fairly confident they can get the materials they want. As we see demand continue to increase, I expect we'll see some level of restocking, and with that higher demand, we should see some tightening of pricing and seeing some pricing uplift, across all the regions. Thanks very much. I'll leave it there. Thank you. Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your questions. Great. Thanks for taking my question. I guess the first thing was, you know, you noted about a $1 of uplift from 2Q into 3Q and 4Q. Would that be split kind of evenly I mean, the $2 be split evenly, so you're looking at 3Q, 4Q, about equivalently, or is 3Q typically seasonally higher? Related, relatedly, how much of that $1 uplift, I guess, is under your control? I know you feel very comfortable with the $11 level for the full year, maybe if you could just walk through the walk from $2.50 to $3.50, you know, say how much would be coming from M&M synergies and how much would be coming from volume and how much would be coming from, you know, internal cost reductions or something like that. That'd be helpful. Thank you. Sure. I would say, you know, let me again start with the end. You know, probably of that, you know, dollar uplift, you know, the $0.75 at the bottom end of the range, which would get us kind of to the $11, we feel very much that's in our control. That's within our ability to see. I mean, again, assuming markets develop moderately in the way that we're calling out now, combined with the controllable action, combined with what we've seen with raw materials and energy, those things all continue as we've called out, you know, we clearly have a line of sight to that $11. I think to get to the upper end of the range, which would be more like, you know, $3.75 a quarter, you know, would require some further demand improvement across the end markets. You're right. Usually, in terms of timing, usually Q3 is a bit higher than Q4. I think we don't really have a lot of visibility on that yet, but I would say I actually wouldn't expect them to be that much different this year. We typically get seasonality in Q4, that seasonality is in the Western Hemisphere. With the acquisition, we have much more exposure in Asia, which tends to be very strong in Q4. I would expect for Engineered Materials, for example, that those would be similar levels in Q3 and Q4. In fact, you know, if we're in recovery, we've had some very healthy Q4s before when we've been in recovery. As well as we have synergies building throughout the year so that, you know, our highest number for synergy will be in Q4. I right now would say I would expect Q3 and Q4 to be similar, although typically Q3 has been a higher month, higher quarter than Q4. Great. Thanks. Just as a follow-up, you're gonna be exiting the year, theoretically at around, a $7 second half level of earnings. you know, next year, and still that would be maybe reflective of, you know, just a modest demand environment. Would you expect kind of continued growth as you look into 2024, and, you know, similar to that second half and growing from there? Is that a fair starting point? Thank you. Yeah. Look, I think that's a fair starting point. I mean, obviously, we'll have some quarter-to-quarter variation, because of seasonality and other things. You know, assuming, you know, a steady demand environment, we will continue to get additional benefits from M&M. We've historically grown our own Engineered Materials business in kind of a double-digit range, year-on-year, and we will get the further benefits from having Clear Lake online, as well as some of the other expansions, including the integration of tow into uncertain, which will continue to grow on a year-on-year basis as we move forward. I think that's not an unreasonable place to start when you're thinking about 2024. Come from the line of Hassan Ahmed with Alembic Global Advisors. Please proceed with your questions. Morning, Lori and Scott. You know, question around some of the guided to sort of, self-help sort of, you know, measures to boost EBITDA. I mean, you know, earlier you were talking about being able to attain around $130 million in 2023 worth of M&M synergies, as well as slightly north of $140 million from the tow business overall. How is that tracking? Are those numbers still sort of attainable, beatable? Where do we stand with that? Yeah. We had called out before $100 million-$135 million of M&M synergies. We fully expect to be at the top end of that range. You know, we are on track for that. In the second quarter, we had about $10 million of synergy from M&M. There's another $10 million or $20 million that will be added to that in the second quarter, and continue to build through the year. We feel very comfortable in achieving that $135 million of M&M synergies this year. We feel very comfortable that we have achieved the uplift from tow. That was very obvious in the first quarter, and we also got an additional $10 million or $20 million of uplift in the first quarter from tow spot sales, which was part of our model going forward that we wanted to be able. Those won't be there every quarter, but I think it shows the value of having integrated it into Asset Hills and running it in a different way. It gives us more options to capture upside than we've had in the past. I feel very comfortable with that number on tow. I think the other thing is productivity. You know, we've historically achieved $100 million-$150 million a year of gross productivity. Through the first quarter, we are on track to achieve at or above that top end of that range on productivity, and this is productivity separate from M&M synergies. I think, you know, when we talk about self-help, we feel like we're really delivering on all of these areas as well as delivering on the volume recovery in M&M, the pricing recovery, and all those things that we've laid out relative to the deal. Fair enough. Very helpful. As a follow-up, you know, you had a nice sort of bump up in EM businesses, EBITDA margins, Q4 to Q1. You know, around 20% EBITDA margins, you know, you guys reported for Q1, and obviously you gave some near-term sort of guidance showing the uplift in EBITDA in that business. From a margin perspective, longer term, as we look at sort of 2024 and beyond, where do you see EM business sort of EBITDA margins going? You know, historically pre-M&M, you know, you guys were sort of reporting sort of EBITDA margins well into the sort of low to mid 30% range. I mean, should we eventually expect a sort of move towards those sort of levels of margins? Look, you know, in Q1, the combined Engineered Materials was about 20%. We expect that to move up across the year, really as we lift the EBITDA margins on the M&M business. By the end of the year, I think, you know, we should be more around that 23% range for the year. I fully expect as we continue to grow M&M, as we continue to grow our base business, as we continue to high grade the portfolio and, you know, realize the value of the synergies, that we will move into that more historical level of 25%-30% EBITDA margins, which is actually about where we've been the last few years. Thank you. Our next questions come from the line of Jaideep Pandya with On Field Investment Research. Please proceed with your questions. Thanks. Just wanna say, you know, it's very commendable that you guys have loaded the balance sheet with debt and not gone for a right issue. You know, since the deal, the world has changed quite significantly, and you're doing everything you can to right-size the business. Just wanna understand the legacy EM business, how are you making sure you're not starving this of capital? Because there's a lot of focus on M&M. That's my first question. The second question is on the competitive landscape in China. There's a lot of nylon six and 6,6 polymerization capacity coming in China. Just putting in context of the value chain, do you actually benefit because the chain is going long in polymerization in China, or is this gonna create headaches on the pricing for you? Thanks a lot. Thanks. Look, on the like question around legacy EM, I think, the thing to realize is we've really focused in the last six months in forming one Celanese team. We have put an organization in place that brings all of our businesses, including Santoprene, together under, you know, new business line groups, under the best set of leaders that we could pick out of the combined organization. We've really focused on developing a culture of one Celanese. We're not looking. Although, you know, for the benefits of this call, we do talk about how we're doing in each part of the business, we're not running it as two separate businesses. We're running it as one business. We have everybody on the same sales platform. We have everybody in the project model. We look at our capital processes have been combined, so we look at it in the same way. I don't think we're at any risk of, you know, ignoring one part of the business to the benefit of the other, 'cause we really are running it as one business now, even though because we currently still have two financial systems until we can integrate the IT systems, you know, we are able to track it separately. In terms of how we're running it, their combined sales team, we're approaching customers as one Celanese with a full slate of products. you know, and if you look at, you know, you may be concerned because of some of the costs we've done in the reduction of CapEx. Really if you look at that reduction of CapEx, it's really just about reassessing the timing of our projects to really align with the revised demand outlook we have now, and also integrating the M&M capacity we have into these project views to say, you know, we may now have capacity on the ground, we don't need to go build it. Really optimizing the combined capacity we have, which has let us delay or eliminate some of the projects that we had thought we would need to do to gain capacity. We haven't really canceled any material projects. We haven't, you know, made any significant cuts to our, you know, reliability and maintenance and those things that make us a reliable supplier for our customers. This is really about optimizing the new footprint and adjusting our CapEx to go with the new demand forecast we have going forward. On the question on polymerization of PA66, I mean, there is a lot of PA66 capacity coming on in Asia. I think one thing to remember is a very small portion of PA66 production actually goes into engineered materials. The vast majority of it goes into fibers. It's, you know, it doesn't all dump into engineered materials. I mean, that is really a function of compounding and others. It is, though, one of the reasons we have been so focused on building optionality into our supply chain of raw material polymer so that we can have a choice in terms of make versus buy, whichever is the most economically attractive. It's why, you know, do we have a contract that allows us more flexibility? It's why we're trying to get our inventories back to a level of control. It's why we're really looking at the totality of our footprint to really be able to take advantage of low PA 6,6 raw material prices, if that's available, or to make it if we see an advantage to continue to produce ourselves. Darryl, we'll take one more question, please. Thank you. Our next question comes from the line of John Roberts with Credit Suisse. Please proceed with your questions. Great. Thank you. You converted M&M over to the Celanese project pipeline and backlog model. How would you characterize their number of new projects versus the legacy Celanese and backlog? That's a good question. I'm not sure I have a number in front of me. What I'd say is, you know, we've been pleased with their willingness to use the model, if you will, and their understanding of how this adds value to the new Celanese. You know, I'd say the, projects that are being entered are growing as we move through this transition and people really understand, you know, what we're looking for. Look, again, it helps that we have combined everybody into one organization. We have one sales team. I, you know, our growth in the project pipeline is good. We are a little bit separate from that, but we also are finding, you know, a lot of interesting things in the M&M T&I portfolio that we hope to be able to bring to market. I think I would just expect to see it accelerate over time as we get everybody fully on board and, you know, adjusted to the Celanese way of working. You've restarted the VAM unit in Germany. If there's a cold winter or some sort of energy supply disruption, have you made enough changes to keep that plant up in that scenario, or will you just shut it down again if we get an energy spike? John, I would say, you know, it was still economically attractive to run it last year when we shut it down. You know, on its own, it would've been economically attractive, but the situation there was the global demand was so low, it was more economically attractive to shut it down and supply material out of the U.S. It really is a question of total demand profile across the globe. It is, it is an attractive unit. It is, it is cost efficient. It really was related to the high energy prices we saw there. You know, our intent would be to run it. We hope demand would keep up with that, but we will always look at our entirety of our portfolio and make decisions about what to run and what not to run based on what's most economically attractive. Thank you. There are no further questions at this time. I'd like to hand the call back over to Brandon Ayache for any closing remarks. Thank you. We'd like to thank everyone for listening in today. As always, we're available after the call for any follow-up questions you may have. Darryl, 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 day.