Good day, everyone, and welcome to the Q3 2021 Eastman Chemical conference call. Today's conference is being recorded. This call is being broadcast live on Eastman's website, www.eastman.com. We will now turn the call over to Mr. Greg Riddle of Eastman Chemical Company, Investor Relations. Please go ahead, sir. Thank you, Mary, and good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, Board Chair and CEO, Willie McLain, Senior Vice President and CFO, and Jake LaRoe, Manager, Investor Relations. Yesterday after market close, we posted our Q3 2021 financial results news release and SEC 8-K filing, as well as our slides and the related prepared remarks in the investor section of our website, www.eastman.com. Now before we begin, I'll cover two items. First, during this presentation, you will hear certain forward-looking statements concerning our plans and expectations. Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in our Q3 2021 financial results news release, during this call in the preceding slides and prepared remarks, and in our filings with the Securities and Exchange Commission, including the Form 10-Q filed for Q2 2021 and the Form 10-Q filed for Q3 2021. Second, earnings referenced in this presentation excludes certain non-core and unusual items. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of excluded and adjusted items, are available in the Q3 2021 financial results news release. As we posted the slides and accompanying prepared remarks on our website last night, we will now go straight into Q&A. Mary, please let's start with our first question. Thank you. We'll now take our first question from Vincent Andrews of Morgan Stanley. Please go ahead. Thank you and good morning, everyone. Thank you for the updated outlook on 2022. To that effect, if I could just ask you, Mark, what are you assuming for auto production in 2022 versus 2021? Good morning, Vince. What we're assuming is that the auto production situation remains pretty challenged as it has been the back half of this year as we go into next year. Things get sort of modestly better through the year, especially in the back half. There's no sort of heroic assumptions about auto recovery next year versus this year in the forecast. You know, depending on everyone's view, you can adjust up or down, relative to that assumption. Okay. If we just look at the Q3, can you sort of help us bridge sort of how the specialty portfolio volume would have performed if you x out the impact from auto? So what the other businesses are doing on an underlying rate? Go ahead, Willie. Yeah, Vincent. You know, what I would highlight first of all is, you know, again, we have mix included in that for the quarter, specifically in our Advanced Materials, which is more exposed to the OE-OEM. If you back that out, volumes would have actually been down because we had very favorable mix in the quarter as we think about year-over-year performance, especially. Sequentially, it was definitely down in the premium areas. Yeah, if you think about it, you know, first half of the year, mix was incredibly strong in driving a lot of variable margin growth and margin improvement. There was a mix, you know, shift a bit in the Q3. It wasn't just autos; it was also outbound logistics constraints on our specialty plastics business of getting high value products like Tritan to the market. Demand's incredibly strong out there, but logistics, as you all know, are also challenging. You know, the earnings could have been considerably better with those two factors if they were a bit better. Thank you very much. We can now take our next question from David Begleiter of Deutsche Bank. Please go ahead. Thank you. Good morning. Mark, again, thank you for the 2022 guidance. On that guidance, can you just walk through the segments and how you expect them to perform in 2022 versus 2021? Sure. Good to hear from you, David. You know, when you think about the overall segments, obviously, when you start with, you know, the specialty businesses, as we've noted here, there's just tremendous growth that we see possible, on a number of factors, right? Where you've got volume and mix, that should be a significant driver, with the economy, you know, to some degree growing with the markets in it. There's also a lot of pent-up demand out there, to drive additional growth versus GDP as consumers fulfill desires that they can't get due to supply chain constraints, and we're restocking inventory, which has not at all happened yet in this year. That's all, you know, quite positive. When you think about that, especially the pent-up demand part, I think that's more significant in the AM segment. We've given you a breakdown of AM being about 70% of that, terrific margin improvement versus AFP. The innovation is also incredibly strong, especially in AM, where we're gonna continue to outperform the underlying markets in a significant way. You've seen this in this year, you saw it last year in AM, you've seen it for the last decade. The circular offerings are also accelerating, a lot of growth for us in the SP business. You know, you've seen $600 million new business revenue from innovation. That's a good momentum that we take into next year. Again, those are a bit more biased towards the AM and AFP businesses as they gain traction. Then market segment strategies, we continue to sort of focus on the markets that are growing, whether it's luxury EVs, water treatment, you know, care chemicals, where we pick up a lot of just natural market growth. Importantly, to keep in mind, you know, a lot of the growth I just described, all of it is high-value mix, both within the segment and certainly at the corporate level. There's a lot of leverage to have AM have a significant increase in earnings next year, when you think about those elements, and that's also true, and for AFP to have good solid growth. Then on the spread side, it's the same thing. You've got, you know, really, headwinds obviously this year and prices catching up to raws through the year. There will be, you know, with the price actions we're taking through the Q4 and a lot of effective price increases on January 1 in businesses, you're gonna see a pretty big step-up in earnings there from spreads getting better as long as you believe raw materials are gonna plateau relative to the back half of this year and then trend off in the back half of next year, which is sort of our underlying assumption. You pick up a pretty significant spread tailwind. It's the same thing. AFP's, you know, done a better job of sort of keeping pace with prices this year because they have a lot more cost pass-through contracts. You know, half of the price increase in Q3 was CPTs and AFP, whereas AM, the interlayers business in particular, has a lot of annual price contracts, so it takes a while to get those prices, you know, moving up. Again, that sort of supports that 70 to 30 split, on the spread side too. Those businesses are both going to deliver, you know, considerable growth in earnings, in AM as well as when you look at AFP on a recasted basis minus the divestitures. That's a lot of the growth there. Fibers, you know, I think will also be renegotiating, putting prices in on probably more than half of their revenue, come January 1, and so earnings will improve there. Then, of course, in CI, you've got normalization that's going to happen in that business. It's, you know, gonna be offset by volume growth that'll be pretty substantial next year relative to this year in ag, plasticizers, and some other you know, growth opportunities that we have as well as less shutdowns. That all helps out. Of course, there's the cost tailwinds that we've given to you that spread across all of these segments that give them sort of added growth. That's sort of how it balances out. David? Perfect. Just on buybacks, Mark, could buybacks approach $1 billion next year? Go ahead, Willie, take that one. No, David, thanks for the question. You know, maybe a little bit as we think about every year, you know, we're focused on growing free cash flow to that $1 billion level. As we go into 2022, obviously, we'll have the impact of the divested EBITDA. We believe, you know, fundamentally with the working capital abating, given the raw material assumptions that Mark just outlined, right now, year to date, we've had roughly $450 million of inflationary pressures on working capital. We see that reverting. Also, as we continue to invest in circular and you know, growth in our capacity assets, net-net, we think excluding the dividend, debt being back, we'll have $600 million of free cash flow. If you take proceeds from our divestitures on top of that, it definitely is possible. Very good. Thank you very much. We can now take our next question from Kevin McCarthy of Vertical Research Partners. Please go ahead. Yes, good morning. Mark, you announced a nice deal to divest the adhesives business, and of course, the Crystex deal is still pending. I was wondering if you could just walk us through at a high level what your thoughts are on, you know, capital redeployment and just the portfolio composition moving forward. Does this bring the company to a reasonably steady state in 2022, or is there more work to do, you know, in terms of the mix in the portfolio over the next couple of years? Yeah. We certainly like the portfolio we now have. We think that AM and AFP businesses are very well positioned to deliver strong growth in earnings and increasingly improving margins. You know, the fibers and the olefins part or the CI part of the business is an integral part of our integration scale, cash flow, et cetera. We like the portfolio as it's configured right now as we look at deploying capital, to your question, Kevin, on delivering more growth from the total company. When it comes to capital deployment, obviously our free capital remains incredibly strong, and our balance sheet now is also strong with delevering being in our rearview mirror. As we look forward, I think we should think about how we deploy capital on sort of multiple fronts. First, you should expect CapEx to increase a bit next year, as we have the combination of specialty growth and the first methanolysis plant that we're building here in Kingsport. Normal CapEx growth to support our specialty strategies in that $500 to 600 million range. And then, of course, you've got a good portion of that $250 million of the Kingsport plant being spent next year. Now we're balancing some of the specialty CapEx, you know, between next year and pushing some of it to 2023 to keep this sort of in balance across the two years. You know, CapEx will be a bit higher for that. After that, you look at how am I gonna deploy my balance sheet and cash? There's really sort of four buckets. The first is the potential to continue investing in the circular economy. We're pursuing multiple projects beyond this first plant. If we can achieve the conditions that we've talked about in the past about those being very attractive investments and very stable, you know, sources of earnings. You know, those projects could be very accretive to earnings and ROIC. They're very attractive from a return point of view, and that could be a use of where we go with our balance sheet. The second, of course, is bolt-on M&A, where we'd like to ramp up that level from where we've been in the last couple of years. There's returning cash to shareholders, which I think will be significant as we move forward, and of course, a growing dividend. It'll be a balance of capital deployment, I think, like we've always had across these areas. There's a lot of attractive investment opportunities for us right now, and we're really excited about how we can sort of deploy capital and create growth for our shareholders. Great. Thank you very much. We can now take our next question from Frank Mitsch of Fermium Research. Please go ahead. Hey, good morning, and congrats on the divestitures. Just to follow up, Mark, you did talk about uses of cash and possible bolt-on M&As. You know, what are the current valuation levels like, and you know, what does your current pipeline look like in that regard? The bolt-on M&A pipeline, you know, there's a number of ideas that we have that can be attractive in Advanced Materials and AFP as we try and build out our additive portfolio in AFP and accelerate our access to additional markets in Advanced Materials especially, and especially plastics. But as you've noted, Frank, you have to be careful. There's a lot of you know buy side interest in pursuing M&A right now as everyone has improved balance sheets and cash. We're gonna be disciplined as always. We're proud of the fact that we don't overpay for assets, whether it's at the you know the large ones we've done in the past or the bolt-ons we're focusing on now. We'll see. You know, there may be some constraints because we're just not gonna run around and overpay. Got you. If I could come back to the automotive piece, you know, you referenced, you know, that you are doing better than you had back in 2018. Obviously with builds being off, where do you stand in the interplay between your sales into the automotive space versus where the build rate is today, and how should investors think about that interplay going into next year? In Advanced Materials, our OEM exposure is, you know, bigger than AFP. That's another one of the differences. AFP's, you know, their automotive exposure is about half refinish and half OEM, so they're a lot more balanced in the OEM production drama as refinish is, you know, just continuing to improve. On the OEM side, you know, the supply chain is really short between OEM production and the production of our interlayers. You know, that actually happens pretty quickly. As they're adjusting their production rates weekly, you know, we're adjusting right there with them. You know, we're realizing that in a pretty quick fashion. The Performance Films business has actually done really well, you know, through the Q3, because, you know, companies were, you know, the dealers, you know, the auto dealers were out there trying to upgrade the value they were getting on each car. Selling our paint protection films, window films was a nice adder to the few cars that they have to sell. Even that's, you know, started to catch up to us on the, you know, what they have to sell right now. We're feeling a bit of that as we go into the Q4. I think that as they have more cars to sell or produce more cars, you're gonna see that pickup in sales happen pretty quickly for us, 'cause there's really no inventory in the channel between us and the primary market. That I think is good news, you know, as supply chains, you know, at some point are gonna, you know, start getting back in control and production will be there. Clearly, end market demand is quite strong, so there's plenty of pent-up demand of people who wanna buy cars. When you look at just how much they're paying for used cars right now, you know, they're clearly, you know, there's a lot of demand out there. I think, you know, if we have recovery, it'll be pretty fast. It's a little bit slower in AFP 'cause that supply chain is longer. Uh, Fermium is gonna do its- down and up. Great. Fermium is gonna do its part to increase car sales. So just so you know. Looking forward to December seventh. Thanks so much, Mark. You bet. We can now take our next question from Viswanathan of RBC Capital Markets. Please go ahead. Great. Thanks. I just wanted to, I guess, talk about 2022 initially, or at least your initial comments there. What are you expecting as on the last question as far as global auto production? And you know, it appears to us that many companies in your position are actually assuming rates below the IHS recovery. So maybe you can just comment on that first. Thanks. Yeah. On a 4Q basis, I think our view is below IHS. I think IHS is, from what I can tell, moderating their view downward for the Q4. Production obviously, you know, what we're assuming is, you know, similar to maybe a little bit better than the Q3, but, you know, not any significant change, you know, to help in the quarter. When it comes to next year, you know, let's be honest, it's anyone's guess, right? When the supply chain on components is gonna improve and production's gonna improve. I think we are being cautious and not assuming much improvement in the first half of the year. We do assume that, you know, eventually these issues are gonna get addressed, and so there'll be some, you know, modest improvement in demand in the back half of the year. You know, our guidance is not based on some substantial improvement in auto demand. Thanks for that. I just wanted to also ask about strategy, I guess, going forward. Following the sale of Crystex here, are there other properties within the portfolio that you think are non-core anymore? Thanks. No, not at this time. You know, we're very happy with the AM/AFP portfolio. You know, the two obvious questions that come up in the past is fibers and olefins. On the fibers front, I remind everyone that it is deeply integrated into our overall cellulosic biopolymers business. We have a lot of biopolymers, especially as we're selling off of the stream in Advanced Materials and AFP. With the significant change in the world's view around waste plastic and climate, we just have tremendous growth opportunities in front of us in both AM and AFP with that integrated stream. You're gonna learn a lot more about that at Innovation Day, where we're gonna identify a bunch of new opportunities we're pursuing that can be quite substantial. Textiles growth in itself and fibers has been actually quite strong. It's incredible how the textile growth, you know, been 80% up year-over-year, obviously on the challenged market, but still tremendous growth, offsetting not just tow market decline, but also that discontinued product, you know. That's business, you know, as well is at the position now where textile growth will offset, tow market decline or better, and where in fact, demand's exceeding our expectations, where we're having to pull forward conversion of tow assets to making textiles. That business is on track, and it generates a huge amount of cash flow that, you know, supports all the investments we're making in growth in AM and AFP. Olefins, it's a bit of a similar story, where we're dramatically improving the quality of the earnings in that business. Obviously, it's doing really well, but we've been taking a lot of actions over the last three years to improve, you know, what is a new normal for this business, which is more likely probably around $300 million. There are things like closing the Singapore plant where we had a very disadvantaged raw material and energy position, that's a big upgrade in the quality of that business with it closed. A lot of operational cost transformation work that we're doing across the company does flow into the big assets that flow into Chemical Intermediates. The RGP investment's giving us flexibility to reduce ethylene when it's not attractive and make propylene, you know, when it is, that it reduces sort of volatility around that. We've got a new investment we'll tell you about at Innovation Day for modest capital that will significantly improve our olefin production flexibility. Mix is getting better, right? The you know the amines business inside that overall portfolio is great, growing and stable. We've you know we have a lot of our businesses on cost pass-through contracts that give us a certain amount of stability, probably about 40% of revenues. There's a lot of things in the olefin space we've done to improve it. You know we're obviously you know disciplined about our portfolio. As you look at the significant growth opportunities we have in front of us, and that balance sheet strength that we wanna leverage to deploy and grow the company, the cash from both fibers and olefins, you know, creates a lot of value. You know, when we look at the portfolio today for what we wanna do, now, this is the right portfolio to grow. We're gonna take our next question from PJ Juvekar of Citi. PJ, go ahead. Excuse me. Good morning, Mark. Morning. You know, congrats on being named in the Fortune magazine. I think you're one of the few chemical companies. Also, you're creating these specialty brands with circular economy, you know, in the circular economy products like Tritan, on one hand, and then you have to fight commoditizing businesses on the other hand, like adhesives and tire additives. Like many other chemical companies, you have to constantly fight that battle between businesses commoditizing and then innovating. Given that you think you have the right portfolio to move that portfolio solidly into specialties, would you look at making a big specialty acquisition, or would you look at just sort of continuing more bolt-ons? It's a fair question, PJ. You know, we're always looking at how to, you know, enhance our portfolio. Obviously, we did significant portfolio change, you know, way ahead of many, with the addition of Solutia to Taminco and divesting a lot of, you know, commodity businesses. You know, it's easy to forget history, sometimes, but, you know, we moved out about $3.5 billion of commodities and added $4.2 billion of revenue in specialties out of $10 billion is a huge portfolio change. We do really like the portfolio we have now. Yes, we had to optimize it around some underperforming businesses. I'm proud of our teams delivering on that restructuring activity, which is never easy, you know, to sort of get to where we are. We don't really feel the need to get a lot bigger. You know, we think we're at a good scale to continue to invest in fundamental R&D, product development, as well as application development to grow. I think that the circular economy on top of very attractive specialty growth, and where we could take that with multiple plans is a game changer for, you know, how we can grow the company and how it could be valued. We really are focusing a lot on how we focus on circular. You know, we've got two extremely advantaged streams. You know, polyester and the way we can do the circular economy is a very advantaged stream to grow in this current macro environment that wants to get rid of plastic waste and improve our impact on climate. The cellulosic stream is also incredibly compelling. There's just a tremendous amount of opportunities when you've got a polymer that's 60% biopolymer, and with our new recycling technology there, 40% recycled plastic waste. The biodegradability of the product is tunable for different applications. That last part about biodegradability is increasingly important, and we'll tell you more about that in Innovation Day and some of the opportunities in front of us. We see a lot of growth in capital deployment in that direction to deliver a lot of organic growth from the portfolio we have right now, where we don't really feel the pressure to run out and do some large M&A. You know, at the prices today for large M&A, that's really attractive. You know, you're gonna have a challenged situation in getting a good return. We're not really focusing on that. Okay, great. You know, you made more propylene in the quarter using your refinery propylene investment, and you had to buy less propylene as a result, you know, propylene had spiked. When you look back, looks like that refinery investment made a lot of sense. When you look back, what kind of returns do you think you achieved on that? Can you just talk about that? Thank you. Yeah, PJ, this is Willie. That paid off in less than a year, and we're at multiples now. It's a great investment, and we're gonna be excited to tell you about some additional options that we have to further raise the floor as we think about the long term, because of our ability to optimize our ovens at the Longview site. Again, the modest investment that Mark talked about is another option that we think similar to RGP that will be multiples. Again, most of our capital, as Mark just highlighted, is focused on the specialties and the new vector of circular, but we're still gonna make the right optimizations to improve the quality of the portfolio long term. Great. Thank you, Willie. We can now take our next question from Aleksey Yefremov of KeyBanc. Please go ahead. Thank you. Good morning, everyone. Could you discuss free cash flow conversion? What kind of conversion in terms of% of EBITDA, what% of net income could we see next year? Yeah, Aleksey, this is Willie. You know what I would say is, you know, again, at a growing EBITDA number, we strive to be around that 50% level. If you think about $1 billion, $1.1 billion and $2.2 billion of EBITDA, pre-divestiture, and we're gonna grow back to that level is our focus based on our 2022 bridge that we gave you earlier. Think around that 50% level. Thanks, Willie. Mark, a question for you on circular polymers business. You know, feedstock availability is a major issue, as you know. Could you discuss, you know, what progress you're making this year in securing access to necessary waste streams to grow that business? Sure. Yeah, we're making great progress. The advantage we have right now is, you know, we're pretty much ahead of the industry in going to commercial scale in building, you know, the largest molecular recycling plant, you know, plant on the planet, I think, at this point. So that gives us an advantage in how we show up, you know, with different suppliers for what we need. You know, there's no doubt that there's plenty of plastic waste. I mean, when you look at polyester just in the US, you've got over 20 billion pounds of plastic waste a year. About 40% of that is packaging, and, you know, only about 25% to 30% of that can be recycled today. Yeah, and when it gets recycled, frankly, most of it goes into textiles, not bottle-to-bottle. As you tap into that stream, and the advantage of methanolysis is it can use, you know, what can't be mechanically recycled from packaging, but it can also use carpet, textiles, which almost all end up in landfill. Accessing, you know, 100,000 tons of feedstock out of, you know, that significantly large number when you're the first showing up to sort of secure it is, you know, challenging but doable. The infrastructure out there clearly needs to improve in the US as we, you know, get consumers to recycle more and policy to support it and infrastructure in place to sort of recycle it, you know, as we look at, you know, plants 2, 3, and 4. As we look at the first one, we're confident that we can do this. We will provide more detail in Innovation Day. You're going to hear that a lot today about you'll get more detail at Innovation Day, it's a better forum to provide more detail on this question, which is incredibly important, and we're very focused on it. We can now take our next question from Mike Sison of Wells Fargo. Please go ahead. Hey, good morning, guys. I didn't know you had a lot of material on AM and AFP, but in terms of AFP, can you maybe talk about each of the businesses? You noted in the prepared remarks that you felt these are businesses that are well positioned to grow, and maybe just talk about some of the growth prospects for each of the remaining businesses in AFP. For next year, Mike? Yeah, for next year. When you think about it in the specialty plastics world, we have just tremendous growth in Tritan. You know, market demand exceeding our logistics capability serving the market, and we're even capacity constrained, you know, into the Q2, which is why we converted a line over to serve Tritan. Now we've got that capacity coming online through the Q3 and positioned to serve growth next year. It's coming from a range of markets. There are the traditional markets that are being driven with accelerated growth with our renewed recycled content like hydration that's delivering a lot of growth, and housewares, those traditional markets that we've always grown in are being accelerated. on top of that, we're getting access to new markets that we wouldn't have normally had. You know, the story we shared with you at Stanley Black & Decker is a great example. It's a power tool. We're not normally in power tools. We normally go into optical clarity kind of applications with Tritan. but you know this is a you know the housings for power tools. that customer you know adopted us because one they're committed to addressing their Scope 3 climate from suppliers, and recycled content was a way to start making progress on that, especially as our technology has a lower carbon footprint in a meaningful way relative to a normal fossil fuel process. you know they wanted to maintain their quality right? In a lot of these applications, you can't use mechanical recycling at all because when you're just blending mechanical recycling with virgin, the quality of the product goes down on multiple dimensions, and you can't have that kind of a compromise in a power tool. We were able to provide recycled content, carbon footprint improvement, and zero compromise on the performance of the product. That's an incredibly important aspect of why we're growing. Then the third part of it was, you know, actually partnership for them. They wanted to make sure they were aligned with a company that could scale with them, and it was gonna be a reliable supplier of this product. There's a lot of, you know, companies starting up out there, but they're startups, right? They haven't scaled up their technology. When we can show up and provide a product where we've been, you know, have a 40-year history in doing methanolysis, and we've got 100 years of history of supplying products to people, you know, very reliably, you know, that's what's incredibly important to them and who they're gonna choose. You know, and we've had 10 other brands sign up in this quarter, in the Q3, you know, for those sort of similar set of reasons, you know, which we'll tell you more about. We're really well positioned, and it's not just Tritan, it's, you know, Cristal Renew, which is our high clarity copolyester recycled content in cosmetic packaging. It's a wide spectrum of things, including our cellulosics into eyewear, et cetera. A lot of growth in SP. Obviously, you know, the interlayers and Performance Films businesses are tied to the auto production recovery, as we discussed. You know, mix is still important, and we still see, you know, the mix improving faster than the absolute volume in production because the first thing that the OEMs are gonna produce are more luxury high-end value cars, you know, when they start addressing their chip and component shortages, and we'll pick up that volume with our, you know, products that are aligned with that market. The mix value of that is also incredibly important. A lot of growth that can occur, you know, across the entire segment. Hey, Mark, you might want to do something similar to that for Additives and Functional Products as well. Sure. Yeah. Wow. Question from my own team. That's a new one. Greg, on AFP, I think it's the same thing. Coatings has had tremendous growth this year, and that growth will continue, and there's a lot of pent-up demand in coatings, as you all know, with our customers struggling significantly with supply chain challenges. Odds of them ramping up just to build inventory to serve the seasonal demand next year is good as the supply chain issues, you know, continue to get resolved on availability point of view. I think we'll continue to see very strong growth there. You know, the Care Chemicals business has great steady growth, same with Water Treatment. That'll continue going into next year. Animal Nutrition's really accelerating their growth in higher value formulated solutions through the 3F acquisition, and there's of course recovery in the aviation business. There's a lot of different vectors across the entire segment, you know, that's well positioned for growth in the markets that it serves. Of course, we've got innovation like Tetrashield into packaging that'll be a vector of growth and continued growth in some of the care chemical opportunities and some really exciting new ones that we'll tell you about on Innovation Day. Great. Just a quick follow-up on chemical intermediates. EBIT margins have been in the high teens for the last couple quarters. It sounds like it'll stay maybe in that range for maybe the next three quarters. I think the prepared remarks, you mentioned that you felt it would normalize in the second half. Just curious what normal means these days. Any thoughts of where that level kind of settles in versus, you know, much, much lower levels in the past? Yeah, Mike. You know, I think that when we think about normalized, you know, we think that's going to be around $300 million. Obviously, there's a path to normal as we go through next year, where we expect at least in the first half, market conditions to stay, you know, relatively tight. Obviously, you know, there's some loosening of those markets even as we go into the Q4 based on our guidance. A lot of it is we had tremendously high value spot sales and incredibly tight market conditions when you look at the second and Q3. As supply, you know, demand gets a little bit more sort of balanced, you know, those spot sales go away, and that's a bit of that headwind you're going to see from 3Q to 4Q for CI. The overall fundamental dynamics of these markets, you know, at the derivative level in particular, I think we expect to remain reasonably tight as we go into the first half of next year. Then, you know, assume normalization towards that $300 million level, you know, in you know, long term. You know, I already went through all the details of how we've raised that, you know, what is normal up in the actions that we've taken. I don't want to repeat it, but there's a lot of things we've done to improve this business, and this new investment will be another step change improvement, you know, when it comes online. Thank you. We can now take our next question from Matthew DeYoe of Bank of America Securities. Please go ahead. Morning, thanks. I want to hammer in a little bit more on the strategy to offset dilution given all these sales. Will you look to pay off any debt given the lost earnings? Is it all buyback? If it's the latter, I guess, why not execute more aggressively on a buyback now ahead of proceeds collection just given your cash balance? Thanks for the question. You know, let me frame it this way, which is, you know, we expect total proceeds to be about $1.8 billion from these transactions and actually $1.7 billion of that over the next few months. As we look ahead also, this was about, you know, 8% of our EBITDA. As you think about the flow through market cap, you know, we're looking at, you know, roughly $1.2 billion. I look at that as, you know, probably the floor. As you think about offsetting dilution and paying taxes, that'll raise the number up to, you know, roughly $1.5 billion or so. We're gonna put that money to work starting here in Q4 with the tires closing, which we expect here in the near term. With that, also given our balance sheet on the tires position, we don't expect to pay down any debt related to that. Obviously, as we look at, you know, 2022, we'll see at the timing of getting the proceeds and also managing our debt ladder. As we look at 2022, we'll have a refinancing in the August time frame and have plenty of time to optimize that when we get there. Okay. I know COVID obfuscates this a little bit, but if we were to look between, I don't know, 2015 or 2018 and 2021, you know, what would pro forma growth for AM/AFP have been ex, you know, the problem child with Crystex and adhesives just given, you know. Maybe even a better question, but what should we expect as a pickup in organic growth in the next five years versus the last five, given the lapse in expenses. Yeah. If you looked at, you know, and we will be providing a recast, so you can see it, you know, in specific numbers. But roughly what you'd see between 2018 and 2021 is a roughly flat similar to EBIT from 2018 to 2021, when you have excluded, you know, sort of the one-third of AFP as we've been discussing it. I think that's, you know, quite stable when you consider the China trade war and then pandemic and sort of recovering out of it. That is based on, you know, when you look at it relative to 2021, an improvement in volume and mix that's been meaningful. Spreads are, you know, probably a bit challenged, you know, relative to 2018 just as pricing is still catching up to raws. Overall, very well-positioned segment to deliver pretty strong earnings growth next year relative to that recast number. That volume mix comes from everywhere. It's coatings, it's Animal Nutrition, it's chemicals, water treatment, even specialty fluids, you know, except for aviation in 2021. That will obviously start correcting itself as well as you go into 2022 on that front. It's an across the board sort of volume mix story. All right. Thanks, Jonathan. We can now take our next question from Laurence Alexander of Jefferies. Please go ahead. Thank you. Good morning, guys. Mark, quick question on your portfolio. I mean, it has definitely changed over the years, but you still have a mix of specialty and non-specialty businesses. If you look over the course of, I don't know, 12-18 months, are higher raw materials good or bad for you, or is it neutral over time? If you look at it, on a combined basis, it's probably from a raw material point of view, you know, I would say you got to then convert that to spreads. You know, raw materials are up everywhere, but obviously prices are up more than raw materials in CI, where we're lagging, price-wise, in the specialties. Those two do hedge each other out. That actually provides earnings stability. If you're focused on earnings stability, you know, a bit of a balance when you've got, you know, CI at just 20% of your earnings actually provides some benefits in times like this, you know, as your prices are catching up to specialties. The opposite will be true next year as the price and spreads, you know, will improve in the specialties. Obviously, you're gonna have some, you know, spread normalization in CI. You know, the important part of our strategy and our story is not spread, right? We've been very clear about this, right? Our strategy is growing volume and high value mix in that volume against of an asset base that we continue to upgrade, you know, with that mix to deliver increasing ROIC, as well as deploying more capital for that high value mix. That's how you drive value long term, right? It's not to have spreads bouncing up and down. You know, they actually sort of hedge each other out and provide some balance, and that will be true of next year, like it is, has been this year. Okay. Thank you. A quick follow-up on, I mean, you've talked about like bolt-on M&As. Like, is the focus mainly in the US or are there opportunities ex-US? Yeah. As we look at the pipeline, we're focused globally. As Mark highlighted previously, it's obviously looking at our specialty plastics business and across the new AFP portfolio. We're focused on that and also on our circular projects from a growth standpoint. It's about focus now that we've completed, you know, the two-thirds action or the actions on the one-third, so that you can see the value of the new AFP. Okay. Thank you. We can now take our next question from Robert Koort, Goldman Sachs. Please go ahead. Thank you very much. Mark, I was just observing that over the last six months, you know, the 21 earnings for you guys seem to have climbed about 14 or 15%, at least the estimates, and the stock's gone the opposite. It's down about 15%. You've had this B rating that seems very consistent with commodity companies, commodity chemicals like a Dow or a LyondellBasell. They sort of seem that same B rating. Yet you've been on this evolution to upgrade the portfolio. There seems to be a pretty stark dislocation from the market perception or appreciation of those efforts and what I would guess are the internal expectations and perceptions there. I guess at some point, does the board decide to get more aggressive or consider an LBO or maybe as Matt suggested, do an ASR before the market catches on to what I would suspect you guys believe internally? Well, you know, I'm not gonna answer that question, Bob, but, you know what I can tell you is the board's incredibly excited about our strategy and the value creation opportunity that it presents. You know, in the end, you, the market decide what the company is worth, not us. But as we focus on what we're doing, especially as you noted, I think we're gonna demonstrate incredibly strong growth next year relative to this year in that part of the portfolio. I think we're gonna manage, you know, capital deployment in a responsible way to deploy it in ways that create a lot of very attractive ROIC growth, leveraging the core technologies and platforms that we have. You know, you pile on the circular, where we can deploy significant capital if we can get these projects, you know, done under the conditions that we have that they provide. You know, stable earnings is a significant vector of new growth that isn't remotely factored into our evaluation from what I can see at this point. There's a huge amount of upside, as you're pointing out, you know, in where I think our stock price can go from today. You know, as that all plays out, and our balance sheet strength, you know, that is quite significant now going forward gets deployed, there's a huge amount of upside. You know, we're confident investors are gonna see that value and invest in the company. That's why we're doing our Innovation Day in December, lay that all out for you to make sure all of you can see sort of, you know, how that can create compounded growth in earnings and cash flow as we go forward. Got it. You mentioned in Advanced Materials a decent chunk of contracts that reset annually. I was wondering if you could give us a more description there. Is that typically or exclusively the automakers? Is there any opportunity to shorten up those contract durations so you can have more market-based pricing, or give us some sense of that? Thanks. Yeah, these contracts are between us and the glass companies, right? We don't sell to the OEMs. We're selling to the glass companies that use our films for laminating that glass. It's been a traditional structure in this market, you know, since we bought it, with these annual contracts. We are looking at, you know, how we negotiate both price and structure to these contracts going forward. You know, obviously in years of declining raw materials, we like them. In years where raw materials spike up, especially when they spike up like this, it's a problem. It's the same issue in fibers, where you've got these annual or multi-annual contracts where the prices are, you know, locked in. When you have that huge spike up in energy and raw materials in the back half of this year, you know, you're gonna sort of, you know, have to wait, you know, until January to sort of recover it. We are aggressively going out with the price increases in both interlayers and fibers gen one. Great. Thanks. We can now take our next question from Paritosh Mishra of Bernstein. Please go ahead. Thanks. Good morning. With regard to your PRT startup next year, it sounds like there's a big demand for recycled plastic. Can you give us a sense as to what percentage of volumes are already booked or contracted? Would you announce an expansion if you say are 70% to 80% booked? The uptake in engagement from brands has far exceeded our expectations on the specialty side. We were thinking we have swing assets where we can make our specialty plastics or PET for packaging. We thought we'd actually be selling a lot of PET for packaging, and that's looking like it's not gonna be the case because the specialty demand is so strong. I think we're in very good position for loading the asset, you know, pretty quickly into the markets. We're not gonna disclose the specific percent number, but I think it's gonna be quite robust and quick. As regards to demand that goes beyond our first plant, yes, the demand is very much there. That's why we're working so diligently right now with countries and brands around the world, especially in US and Europe right now, who wanna solve, you know, those challenges. You know, when the brands look at this, you know, situation, right? They've got two goals. They've got to address packaging waste, specifically, plastic waste is getting a lot of attention. If you switch to plastic something else, you still got to manage that waste. As you look at this, you know, they've committed to very high recycled content targets, and there isn't remotely enough mechanical recycling product out there to supply that need reliably. In addition, the price of mechanically recycled rPET is going up dramatically in Europe and now as well in the US The brands are worried about how much that's gonna keep going up. They, you know, are also doing life cycle analysis on the carbon footprints of not just plastic, but alternative materials that they could consider. Unfortunately, you run into a problem, which is all the alternative materials have a worse climate footprint. You recently saw Wendy's switch from coated paper cups to plastic because plastic's got a much better climate footprint and can be recycled where the coated paper cannot be recycled. The brands are very focused on how to recycle plastic for a lot of applications, and realizing that molecular recycling is the only way forward, especially long term. If you want to keep your product quality the same, then mechanical recycle is limited in how it can be used, and it degrades over time. If you want an infinite solution, you know, you've got to have molecular recycling as part of the solution. Engagement's strong. The need to build more plants is there, and we're driving to find a way to do that under the right conditions. You know, they are attracted to us because our scale, our technology is scalable now, where the startups are still, you know, sort of piloting and trying to figure out how to scale up. That's also drawing a lot of attention to us. We feel good about where we're at. We're excited about doing this. To be clear, we're not going to build any additional plants, you know, unless we get these sort of contractual commitments for offtake to give us a stable earnings. Got it. Just as a follow-up, because CRT process can take a lot more different types of plastic than PRT, so how should we think about the PRT versus CRT mix as both these processes start ramping up in the years ahead? Yeah. Well, first of all, they're actually a great complement as technologies together at this site because we have a unique proprietary way to separate, you know, unsorted waste plastic that just separates it from polyester to everything else, at a much lower cost. That's one of the feedstock sourcing advantages that we have that I should have mentioned earlier. That allows us to, you know, take that mixed waste plastic in a CRT, take it into our acetyl stream and make, you know, cellulosic biopolymers. That gives us a lot of sourcing flexibility. We see both technologies creating a lot of value. The CRT is also, you know, through the cellulosics, you know, drawing a lot of attention, right? We've always had, you know, a biopolymer for 100 years if you want to go back to acetate film with Kodak, and we've created this huge spectrum of applications off of that core technology in AM, AFP, and fibers. With the recent change, you know, in focusing on climate, focusing on plastic waste, you know, instead of recycling, you can also have biodegradable products as a way to sort of have circular life. That's drawing a lot of attention around the cellulosic stream. We can take back polymer and put it back in the CRT, or we can also provide ones that biodegrade based on the application. You know, a lot of interesting growth there as well that we're really excited about. Thanks, Mark. We can now take our next question from John Roberts of UBS. Please go ahead. Thank you. I thought the formic acid business was also in the underperforming category. I may be confusing underperforming with non-core. Has that improved a lot now and is part of the core operations? John, this is Willie. On the formic side, yes, it's a much smaller component. It's a fraction of the size of the two businesses that we sold. As we've taken operational and transformational in the operations there, we think we've got the results that we need and the performance is adequate. Okay. Are automotive films and automotive coatings ingredients being impacted equally by the automotive curtailments? From the films' point of view in Advanced Materials, the interlayers and the you know aftermarket Performance Films are more impacted. They're more OEM exposed than our coating additives, where about half of it goes into refinish. Therefore, that's you know obviously a lot more stable in the current situation. We feel more of an impact on the film side. Thank you. Let's make the next question the last one, please. Thank you. We can now take our final question from JD Pandya of Onfield Research. Please go ahead. Thanks a lot. Just one question really is on your guidance for 2022. I mean, hearing the call and hearing you talk about so many factors that are, you know, going to catch up and be beneficial, just wondering, you know, are you being just very conservative with regards to your, EPS range of $9.5 to 10? Because considering all the sort of, you know, catch up on raw materials and the volume leverage that you are talking about in your specialty businesses, I'm just trying to understand, you know, what is the conservatism, if there is. Thank you. Yeah. You know, look, I wouldn't call it conservative or optimistic at this point. You know, I think what I'd say is we're sharing our best thinking with you right now of what we know. Obviously, there's a lot of uncertainty in the future. Things we're certain about is we know we can control our costs, right? We have a very aggressive transformation program, you know, going that, you know, when you look at operational transformation, cost cutting, plus, you know, variable comp tailwind, you know, that's about $200 million of tailwind that offsets about $80 to 100 million of inflation. We know that, you know, we're going to invest in growing this business. We have tremendous growth opportunities right there, you know, across our portfolio. We have growth investments, you know, in that sort of $50 to 75 million range. You know, that is controllable. We can control the pace of that based on how the market's doing. That does include some preproduction expense on starting up. Methanol and some other plants when you think about that number. But those are controllable. Obviously, there's uncertainty about where CI is gonna go. I think we've got a reasonable assumption, but, you know, we'll see. You know, we'll defer to some other companies on that and where the markets are. You know, on the specialty side, what I'd say is we do feel good about you know, the growth potential, the innovation to create levered growth on these markets, and that spreads will be a tailwind. There's still a lot of uncertainty about automotive demand, as many of these questions have highlighted. There's uncertainty about where raw materials are gonna trend, you know, and how they progress, you know, from where we are now into next year, as well as distribution costs. You know, there's a lot of uncertainties out there that, you know, none of us can frankly predict. What we're confident is if you look at it in three buckets, you know, you've got divested earnings offset by share repurchases. You got a bucket of, you know, CI spread normalization offset by cost reductions. You're asking a question which is, can specialties grow next year relative to this year in variable margin? I think we've laid out a case where we think the answer to that is very much yes. I'm not gonna get into, you know, trying to, you know, be more precise about that, you know, until we get to January and have a better, you know, look at the world we live in at that point. Great. Well done on the Crystex deal. Thank you. Thank you. Thank you. Just to wrap up, what I'd like to say is, you know, I deeply appreciate the questions, the interest in the company. We're incredibly excited about Innovation Day coming up in December. It's been a while since we've had that kind of opportunity to really get more into the detail with investors on how we're gonna grow this company and deploy our balance sheet to create a lot of very attractive growth. We're excited. You know, when we look at the board and I, we're having this conversation in our last meeting in the beginning of October, and this is the most exciting time I think we've had when we think about all the different ways we can grow this company and create value. We look forward to sharing that with you in December. Hopefully, it will be virtual, but I hope I will get as many people as possible show up in person as well as be available online, so we can, you know, have a better chance to interact with all of you. Thank you. Thanks again for joining us this morning. I hope everybody has a great day. That's the end of the call. Thank you. This concludes today's conference call. Thank you all for your participation. You may now disconnect.