Good day everyone and welcome to the second quarter 2025 Eastman Chemical Company conference call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com. We will now turn the call over to Mr. Greg Riddle, Eastman Investor Relations. Please go ahead sir. Thank you, Becky, and good morning, everyone, and thanks for joining us. On the call with me today are Mark Costa, Board Chair and CEO, Willie McLain, Executive Vice President and CFO, and Jake Laroe and Emily Alexander from the Investor Relations team. Yesterday after market close, we posted our second quarter 2025 financial results news release and SEC 8-K filing, our slides, and the related prepared remarks in the Investor section of our website, eastman.com. 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 second quarter 2025 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-K filed for full year 2024 and the Form 10-Q to be filed for second quarter 2025. Second, earnings referenced in this presentation exclude certain non-core items. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the second quarter 2025 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. Becky, let's go ahead and start with our first question, please. Thank you. As a reminder as well, if you did want to ask a question, that is * followed by 1 on a telephone keypad. Now, when preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead. Hi, good morning. Thanks for taking my question. Look, you're reducing capital spend in 2026, you know, now targeting pretty significant cost s aves on top of that are even larger in 2025. This doesn't necessarily signal a you k now, stable to modestly improving macro in 2026. Could you help us understand how. Representative of the second half should be when we're thinking about trough earnings levels. With growth projects deferred and lower for longer macro, has your thinking on mid cycle earnings power changed at all? That's a great question and a large one, and good morning. First of all, when you think about the back half of this year, it's heavily impacted in the decline by the trade situation that we face. That's creating a lot of challenges for this industry, especially for the sort of consumer discretionary side of the house. I don't think that the back half is really a relevant measurement for how the company's doing in total, because you've got a lot of situations around what's going on with the tariff. When you think about us and the tariff and the exposure we have in the back half of the year, there are really three impacts that it could potentially have on any company. The biggest for us is by far what happens with demand. That was also true in 2019. The second factor, of course, is retaliation that happens in other countries and how you work your way through that. We do have some high U.S. asset exposure when it comes to that equation. Third is direct tariff impacts around raw materials and things like that, which we have very little exposure on because North America is, all of our vertical integration and scale in North America is connected back to local raw materials. It really is a big demand question about what's going on in this year and what that then indicates for next year as we think about this whole thing. The trade war is by far the driver of the demand dynamics in the second quarter as well as the back half. As we look at that and think about trade, the first thing I want to say is there are unfair trade practices around the world and there is aggressive dumping by some countries, especially overcapacity out of China and trans shipping to avoid tariffs. There are real issues here for this industry that need to be addressed. Those, while very serious, need a strategic approach. The challenge that we're having broadly right now is that the trade strategy of applying to all countries of the world at the same time may create more economic harm than what's necessary as you try and focus on what the real sources of the trade issues are in the country. We sit here now where there's a lot of uncertainty. What you had happen, even in the GDP data you saw in Q2, a lot of volatility of imports going up, private inventories dropping. People are moving product all over the world to try and get ahead of tariffs, whether it's retailers or the brands or all the supply chain manufacturers that support them, to avoid tariffs, to buy time, to see how things are going to get, sort it out, take advantage of pauses that happen in the second quarter, etc. It's really chaotic to try and understand what's really going on. In market demand, same question you have around consumers, how much do they buy ahead of tariffs potentially impacting prices, you know, in the first half of the year, which is probably why consumer consumption was up versus them being conservative about worries about, you know, what they can afford for the year. Same with customers, what they think about demand. There's a huge amount of chaos that goes into this whole situation that causes some challenges and complexity in Q2 and certainly is why we expect a sort of mid single digit drop in demand for the back half of the year, which is also representing some normal seasonality as well as some of the pre buyers as well as, you know, customers being very cautious for everything I just said. You've got all that complexity, right? I mean a 15% plus or 15% to 40% tariffs as of last night on countries is a big impact to the market. There are reasons to be cautious and careful about the back half of the year. With that, with what our customers are doing and being cautious in July, you know, we sort of built this forecast and, and this, you know, and staying focused just on Q3 as well as, you know, not really trying to forecast the full back half of the year. That is a distortion to try and think about what's going on in demand in general. The second is in that chaos, we've very much decided to focus on cash generation as we told you we would in April. We're taking all the actions we can to pull inventory down, generate cash, which unfortunately when you do this from an accounting point of view, ends up in a utilization headwind. It's not a cash headwind, it's actually generating cash. Utilization headwind is somewhere around $75 million to $100 million in the back half of the year. That distorts the back half as well. You get the normal seasonality, you've got all this trade dynamics and you've got the utilization headwinds. The back half of the year is by no means something you can annualize and think about as representing, you know, what 2026 looks like. Your question is what do we think about 2026 and where demand could go there? The answer is with current chaos, where no one knows where demand's going to go next year. What we can do is with all the trade deals settling in one way or fashion at least we're going to start getting some certainty that is always better than uncertainty to calm everyone down and everyone starts focusing on what they need to do in this context. That will help stabilize things. You've got the, you know, other things that are very pro growth in the U.S. Administration, from the tax bill to less regulation, etc. Lots of other things that I think are pro growth outside of this trade disruption that's going to help stabilize things. Our view is, especially with how challenged demand is this year, on top of what was already a bad situation from 2022 to now, there's the reason to expect stability as you go into 2026, which would be equal to or certainly more likely better than where demand is now. In this context, we have to manage our cost. We have to be, you know, aggressive in how we manage inventory because we don't know where things are going to go. We're going to take every action we can. Great. Appreciate the detailed response. I guess just a quick. One on the metathesis unit. You know, how far are you along? With that investment and what gives you. Confidence on a pretty healthy step up in profitability there? I'm sorry, you broke up for a second. Were you asking about E2P or Methanolysis? I just couldn't hear what you're asking. Which one? O kay, sure. Got it. The chemical intermediates business obviously is facing some pretty significant challenges. They're the classic example, along with the entire commodity chemical industry, of the impact of overcapacity coming out of China and other countries impacting businesses. We certainly see the industry right now at cash cost. Frankly, there's indication some of the products being exported to the world are below cash cost. We feel like we're probably at the bottom of the market, but we're also constantly looking at how do we improve the structural strength of every business we have. We've done a lot of things to improve the CI business over time. We made the RGP investment, we shut our Singapore plant down, constantly looking at how to value up our mix in North America, where our margins are much better than export markets, which at the moment is a challenge because of demand being off, but always looking for every opportunity. We told you all the way back in 2021, we had an idea of doing an ethylene-to-propylene investment to convert one of our existing crackers of the three that are at the site to going from ethylene to propylene. For those who are not familiar with Eastman Chemical Company, we make a lot of ethylene and propylene because that's what crackers do. If we had TDH four decades ago, that's what we would have built. The propylene is where we make all of our specialties. That's where our value sits. Then we're left with a bunch of excess ethylene just to run the crackers. We've always been trying to reduce that. That's why we made the RGP flexibility investment to increase propylene. We still have a bunch of ethylene. What we can do with this investment, we've come up with a lot of insights since 2021 to scale it up to a bigger capability. That allows us to convert ethylene to propylene. When you do that and optimize the asset configuration of the site around that investment, you can dramatically improve the earnings by $50 to $100 million in EBIT over the cycle. It also really reduces volatility because a lot of volatility comes out of the ethylene side of the equation. It's a great investment and it's a great payback. It's a very short payback for building this capability because we're leveraging an existing cracker to do it. Great. Thank you so much. Thank you. Our next question comes from Josh Spector from UBS. Your line is now open. Please go ahead. Good morning. I wanted to ask on the Methanolysis investments and some of the comments you made about it. It seemed like you were thinking about you delay a decision on Longview by maybe two years now, and you're thinking about expanding Kingsport at some point in the future. One, I'm just curious if you could expand on if that's right in terms of how you're thinking about it. Two, what does that mean for the PepsiCo offtake that you have at the Longview facility? Does that move to Kingsport? Does that get pushed out? How should we think about that? Thank you. First of all, we're incredibly excited about how well the Methanolysis plant's running. It's been a long journey from the beginning of this project to getting it built, to getting the startup, and working through a lot of construction issues. It's great to see the plant run well. Incredibly excited to see the rate test. The plant could get up to 105% as it is, and all of that is working really well, which also means our cost benefits this year relative to last year are on track to get that additional $50 million of improvement for the corporation. When we started rate testing it and learning more and more about the facility with its better operational performance, we came across a variety of insights with some very targeted debottlenecking investments that are very manageable. We can debottleneck the plant and have a line of sight to getting the plant to 130%, and we have some ideas to get beyond that. That's fantastic in this environment, right? In this environment where we're trying to always improve our cap, you know, lower our capital intensity in everything we do. This is a capital intensive project. If I can now get 30% or maybe even more than that, I've improved the ROIC efficiency. That is exciting. The second is that additional capabilities, especially right now, allow us to continue to grow the EBITDA to that $200 million that we've told you about and keep going from this facility and have more continuous growth than when we cap out on the capacity of this plant in the original plan and wait for the next plant to start. We can sort of keep the continuous growth going, and that also allows us to, in some sense, pull EBITDA forward from the second plant into the first plant as we continue to fill it out. That allows us to also have time to look at different options. We're certainly not happy about losing the DOE grant, and we're highly engaged to try and get it back. That's a highly uncertain process, and we're focusing on what else we can do. This ability to debottleneck gives us the time to work on alternative ideas. We have a lot of creative ideas about how to take scope out of the project. We have creative ideas of not just looking at how to do it at Longview, but looking at three other sites where we might have some better advantages and how to be efficient. There's a lot of things going on. We can't talk about the details of all that right now because we're in the middle of doing some of it. We're pretty excited about the potential to sort of optimize the footprint and find ways to actually pull forward some benefits that we would have had to wait for the second plant. When it comes to contracts in PepsiCo, our contract with PepsiCo is still intact and we're still confident that they're committed to working with us as we sort of pursue all these different options. We feel sort of good about that. The other thing I note is we're seeing accelerated demand in some cases with some of our customers who are finding mechanical recycling isn't working well on the rPET side for food grade packaging applications. We're getting more and more confident about that. Okay, thank you. I'll leave it there. Thank you. Our next question comes from Vincent Andrews from Morgan Stanley. Your line is now open. Please go ahead. Thank you and good morning. Mark, was there a particular trigger? It sounds like in July all of a sudden the customer dialogue flipped. Is there something in particular that happened, or is it something that they were hearing from their customers, or how do you sort of deconstruct exactly what happened, when it happened? As you look forward into the balance of the year and into next year, what's the catalyst path or what are the events that are going to need to happen for your customers to start feeling differently about their business and about purchasing? Is it just the end of the trade war uncertainty? Is it lower interest rates? What's really changed and what's the path from here? That's a great question. I'd say that the insights developed through the month of June into July as we were working with our customers and trying to understand what their views were. The market that's most impacted is consumer durables, which you can imagine are caught up in the trade war since the vast majority are made in places like China or Southeast Asia and imported here. Our supply chain in serving that market is incredibly long as we make a lot of the products that go into those applications here in the U.S., send them to Asia, they get made in the product, come back. You've got a 9-12 month supply chain on top of this that you're trying to manage. I think that the trade pause allowed everyone in the second quarter to move material around ahead of potential escalation on July 9. Everyone did that. I mean, every company, like I said earlier, from retailers to brands and manufacturers to people like ourselves, because of North America, we had to move things to different places like Asia when we're making it here. That sort of factored into our supply chain being a bit longer and our need to move things being a bit higher because of where we were making it in the U.S. and the risk of retaliation. You're working through all those dynamics with your customers. I think that as they look to the back half of the year, they became cautious. I think the words were holding orders as opposed to canceling, which I think is important to say as a way to sort of wait and see how all the trade situation was going to resolve itself one way or another. They have to naturally factor that into where they think consumer demand is going to go and how they sort of either serve those markets or not. While people are moving inventory around all over the planet, they're also trying not to increase inventory too much in total because they are unsure about the back half economy when the consumer is more likely to be impacted. These tariffs at these rates are likely to show up in inflation. I know there's a lot of debate about that. The margins at least in the consumer durables industry are pretty thin when it comes to the manufacturers in Asia, the retailers here. Some portion of this has to get passed on. It can't be absorbed. Even if it's absorbed, people are going to have to lay off people, which impacts the economy somewhere in the world. This dynamic is going on there. I think it's very much going on in the auto industry. Plenty of news flow on that, but probably likely some pre-buy there that the auto companies have to about as far as what they think demand's going to do in the back half for them and in the building construction segment. Same dynamics. Obviously, we can challenge and that half of our revenue is sort of where we're seeing these impacts. Customers are working with us and I think what we've got in our forecast represents their caution in July. We're assuming things get a little bit better in August and September, with some of this trade certainly coming into place and we're just going to have to see how it goes. The key for us is focus on what you can control: cost, cash, driving Methanolysis forward, finding capital efficiency, keeping our CapEx low, et cetera, and positioning us I think reasonably well for earnings to be materially better next year versus this year on the actions that we're controlling and taking. Thanks very much. I'll pass it along. Thank you. Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Please go ahead. Yes, thank you very much. I wanted to check on the autos and markets. I mean, you and some of them. Other chemical companies today and yesterday did flag, but they were weak in Q2 and Q3 could also remain weak. That seems to be in contrast with both trade consultants and what some of the auto suppliers are saying. This earnings season, can you provide a little bit more color on where you're seeing the weakness? Specifically, in the case o f Eastman, of course, is it more on the aftermarket films or more, for example, on the interlayers or any other products? Good question. On the aftermarket side, Q2 was a solid quarter. We saw good performance in North America, a little bit more challenge in China. Overall, the aftermarket held up reasonably well in Q2, where the interlayers business or the aftermarket or automotive coating business saw some challenges as producers around the world, given the tariff announcements, were moderating production rates in preparation for where demand may go. There's a big question on once again, how much of this tariff is going to get passed on to consumers and inflation and impact demand the back half of the year. You're trying to worry about how much cars you're producing for the back half of the year. You got to be a little careful on that front. Then you've got the dynamic of the pull forward of people buying cars ahead of the potential tariff increases. From what we're seeing, we started the year expecting the auto market to be sort of flat relative to last year or now. Our view is sort of low single digits down, which is principally in the back half of the year as opposed to the first half. I'm not sure we're that different from what I've seen from other car companies in sort of the underlying market assumptions. If it turns out to be flat in production in the back half of the year, it's going to be upside for us relative to what's in the forecast. I hope those people that are sort of predicting that are correct. Perfect. Thank you very much. Thank you. Our next question comes from Jeff Zekauskas from JPMorgan. Your line is now open. Please go ahead. Thanks very much. In your AFP business, your prices were up 4% year over year. Where did that pricing strength come from, either by sector or by product line? In your fibers business, can you discuss the current state of tariffs and whether that's an ongoing impediment to your business or whether it isn't. Sure, Jeff. On the AFP question, most of the increase in price was driven by our cost pass through contracts and our care chemicals business where we buy some raw materials that just have a lot of volatility to them that go into the product. We have very steady margins in supplying our customers in that space, but the fatty alcohols that we buy sort of bounce up and down and that's really what that 4% is primarily driven by. One of the great things about the AFP business that has continued, continues to be proven and valued deeply by us is the stability of the price cost relationship in that business across the portfolio. Quite a bit of it is in cost pass through contracts, keeping that stable, which is great, by the way, in removing a lot of debate and tension with your customers in procurement, which is let's just focus on how we grow together. We don't need to continue debating how raw materials go up and down. It's part of why you see AFP performing well. When it comes to the fibers business and tariffs, the principal impact of tariffs inside the fibers business on a full year basis is certainly the Naia textile business, right? Tow's always been expected to decline to some degree with market and capacity being added in China, et cetera. The textile business was a source of growth and the margins were pretty good, and that offset some of the dynamics in the tow business. It's been extremely helpful in the last four years in improving that segment. What's unusual about this year is we're obviously dealing with some issues in tow, but the textile business was impacted, most of that sold in China and then made in textiles that serve the world. We saw the overall textile market slow down dramatically from tariffs because of the cost of selling fashion goods in the U.S. against those tariffs. That industry was already weak last year, but weakened further. In market demand has come off, customers that we have in China have become more cautious, and that's translated to about a $20 million problem, we think, for the year that's spread across 2Q through 4Q in impacting the fibers business on the tariff side on a short term basis. There is some dynamics of some tow being pulled forward into Q2 in Europe to get ahead of potential tariff risks that will sort of level out. It's not a full year impact, but it's just a tower timing impact. Okay. You described in your remarks trying to lower working capital by $400 million from where we are at mid year. You talk about the earnings penalties this year for changing your operating rates. As a base case, I get it, earnings should rise next year as you move up to more normal operating rates. Is it also true that what should happen is that cash flow next year should decrease? That is, if you're pulling the cash flow forward into this year, does that mean that as a base case, your free cash flow next year will be, or I'm sorry, your cash flow from operations will be less than $1 billion if there's no change in the business conditions. J eff, thanks for the question. Obviously, to your point, I think the last statement that you just made depends on your outlook and the assumption. I think, as Mark has described, both from the economic lens as well as our assumptions, we actually think that you can get to a more stable environment as we see tariffs, etc., unfold. With the actions that we're taking in the first half and the timing obviously being here at mid year, we can't fully optimize our working capital scenario. Actually, working capital is a net headwind this year as we look at it overall compared to what we built in the first half and what we're taking out in the second half. My belief is the $1 billion is the platform at which we'll be able to build off of with higher cash earnings and the potential to still build and optimize our working capital. Great. Thank you so much. Thank you. Our next question comes from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead. Thank you. Good morning, Mark, just on Q4, reading your prepared comments, it sounds like it got into similar to Q3 of around $1.25. Is that fair? Hey, David, I think that's directionally correct. I mean, normally we have seasonality, as you all know, from Q3 to Q4 because Q3 is normally a strong quarter. Obviously, it's not with all the factors that I've described on decline in expected demand and the asset utilization. When you get to Q4, we're very aggressive in our asset management in Q3, so you're going to get a utilization tailwind because it won't be as aggressive in Q4. The seasonality that normally occurs has already been put into Q3 effectively, and we expect things to be somewhat similar. We gotta get through Q3, to be perfectly honest, David, with all the volatility with the trade and see how it all sort of settles out and impacts the markets. Our current expectation is what you said. Got it. Understood. Mark, your volume outlook is a little more severe than what we've heard from some of your peers this earnings season. Do you think that's due to your business mix, your conservatism, or maybe something else? Thank you. I think that when you think about what's going on in the dynamic of Q2 to Q3 in the mid single digits, there are multiple components and it depends on the business that you're looking at. It's important to actually sort of frame it correctly. If you look at Q2 to Q3 and add back the utilization headwind for $50 million, we're basically flat sequentially from Q2 to Q3. When you back out the utilization headwind and then you're okay, what's going on underneath the surface of that? There are two moving parts, right? Chemical intermediates is getting better by greater than $30 million, which means specialties and fibers is going to be down by $30 million within the guide that we're talking about. When you think about advanced materials and the mid single digit decline we're expecting there, what I'd say is about half of that is expected market decline. The other half is this sort of pre-buy dynamic of some materials in Tritan performance film, some other polyesters being pulled ahead of tariff risk into Q2. When you have it there and then the orders don't occur in July for that, you've got that decline. I'd say it's about half and half, market decline, which I think is more in line with what we're hearing from specialty peers, other market participants. The other half is this pre-buy thing. I'd also note that in this segment, especially when you think about it, two-thirds of this is consumer discretionary, between autos, consumer durables, and B&C. Those are the most impacted markets. They're incredibly valuable markets to us. As the volume comes off, it hurts, but when the volume comes back, it's incredibly compelling. That's how I think about the AM part. The fibers part I would pretty much say is all pre-buy in the moderation we're expecting from Q2 to Q3. In AFP, this is sort of more normal for its decline. Normal ag seasonality coming off, timing of HTF projects that got completed in Q2 instead of Q3, and a little bit of pre-buy in some places is what's behind their mid single digit. Again, you back out the pre-buy and the HTF timing and the markets moderating in the very normal, normal way. I think that when we look at it, I don't think we're from an end market point of view sort of misaligned too much, but we do have exposure, especially in advanced materials, to these sort of very sensitive markets to what's going on in the trade environment. Very helpful, thank you. Thank you. Our next question is from Frank Mitsch from Wells Fargo Securities. Your line is now open. Please go ahead. Good morning. If I could just follow up on that, are you sizing the pre-buy at around $20 million or so benefit, 2Q vs 3Q? Any color there would be helpful. Thank you. Hey Frank, that's probably directionally correct. You know, when you follow the math of what I just put out there between fibers and AM, that's going to get you to sort of that number. All right, great. On this $25 point estimate for 3Q, you guys put out a $0.20 range for 2Q. Clearly, the commentary based on tariffs, etc. is that there's a wide range of outcomes for 3Q. This $25, is that kind of at the low end of the range that you're thinking, mid the range you're thinking? How much of a range in your mind do you have in terms of how 3Q can play out? That's a great question, Frank. We put the word around before $21.25. We see upside and risk to that number based on all the trade dynamics that we have in here. In some parts of the bridge, I'd say are pretty predictable. The asset utilization is in our control. We're pretty clear on what that's going to be. Our cost reductions are in our control, clear what that's going to be. We've had phenomenal commercial excellence over the last four years in defending our price costs and our specialties and our market share being held incredibly well over the last four years. We certainly expect to continue that excellence in the back half of this year and into 2026. When I look at all those things that are, to some degree, in our control, Methanolysis running better, etcetera, we feel pretty good about the quality of our guidance. To your point that we just mentioned in the comments I've made in this call, predicting demand and customer consumer behavior in this world right now, there's no predicting it, and we didn't put a range on it, but there is certainly uncertainty in either direction. If people really calm down, we could be up in volume. If these higher trade announcements and rates that just got announced through this week have an impact on the market, on people's behavior, then it could be down. We just don't know. Frankly, no one does. There's no way to predict it. All right, so a wide range around. Best guess today is $1.25. There's a t here's probably a bigger range around it than there was. The range around the 2Q is kind of what I'm hearing right now. I don't know if it's bigger than that range, but I really think we need to get through this next month. Obviously, if we see things really changing in either direction, we'll update people at a conference somewhere along the way. Right now, we're in the middle of trying to digest all these announcements that happened last week and this week. Every customer, every retailer, every consumer is trying to figure out what does this mean for me right now and what am I going to do in this context? We just got to see how it plays out. Okay, gotcha. All right, thanks so much. Thank you. Our next question comes from Aleksey Yefremov from KeyBanc. Your line is now open. Please go ahead. Good morning, Mark. To me, you sound less optimistic about Methanolysis sales this year and at the same time, more optimistic about next year. Could you maybe talk about this contrast, why there's this difference, and any sort of signs of confidence you have into. This ramp and Methanolysis next year? Sure. It's a great question. Obviously, in our prepared remarks, we've acknowledged that things are going a bit slower. The interest in Renew, I think, in recycled content is still very much there from an end market point of view, both in the specialties, which is what the purpose of this current plant is aimed at serving, as well as rPET, which is partially going to be served off of this facility as a way to fill the assets. As we migrate and upgrade specialties, we'll move that PET to the second plant. When I look at the overall underlying dynamics about demand, you are attached to the underlying market. We've proven in Tritan over the last more than a decade that we can grow well above the market by being BPA free and substituting out other materials and taking market share and growing incredibly well. That's true, but there's still some connection you have to the market. If the market's incredibly challenged, it's going to moderate the rate at which your customers launch new products that have your Renew content in it, which we've talked about. That's the short-term dynamic of everything we've been talking about in this call. When it creates that challenge in durables, it slows down the rate at which people are adopting new features and launching new products in that space. Even in luxury cosmetics, that market's also a bit challenged and moving a little bit slower, lower as another key market. What I would say is, we're not seeing any signs where suddenly people think plastic waste is good. A lot of people are debating climate, but I haven't seen anyone debating plastic waste and wanting it out of their environment and not impacting their lives. That's not going away. The rate at which customers want to solve this problem when they're incredibly economically challenged this year from tariffs, where raw materials are buying or market demand that's not that strong, the rate at which they adopt is slowing down. As you get to economic stability, I'm pretty confident that this issue is going to be important. The responsibility that brands have to address their plastic waste and the environment is going to be there, there's going to be continued pressure and there's lots of regulation that's still happening in Europe and the U.S. driving it. In this context, we still have over 100 customers on the specialty side committed and buying and paying premiums. We're just not ramping up orders as fast. We're not seeing order cancellations. We're just not seeing the ramp up as fast as we'd like. As I mentioned the rPET side earlier, we're picking up more interest in demand for next year. We don't have it available this year because we're still in the middle of switching our Tritan line over to making PET, where we'd be selling it now. As we bring that on in the fall and those two of our largest brands, in fact, on the rPET side, committing to meaningful volume next year, what's most interesting about that is it's because mechanical rPET is not working in some of their applications. They're having performance issues, color issues, integrity issues around the product on the mechanical side. They need chemical recycled product, which is identical to virgin, to have recycled content for it not to be brown or yellow relative to other products on the shelf, or not being able to make bottles quickly enough because of integrity issues, etc. That confirmation that we have a differentiated value proposition in our PET with chemical recycling and we're the only player in the world that can do it effectively, I still think it's going to be a big competitive advantage for us and create a lot of value in the future. Thanks, Mark. If you had to guess, next year fiber is flat, up, or down. In terms of earnings. Great question. Thank you for it. It's one we're spending a lot of time on and focusing on the fibers business and the decline we're seeing this year. Certainly more than we expected at the beginning of the year. To sort of frame the fibers conversation, I want to sort of unpack what's going on within the segment. One question already came up which is what's going on in the segment? I highlighted textiles as a $20 million headwind within the segment. In addition to that, there's about a $20 million asset utilization headwind as we're pulling inventory down here to free up cash, just like we're doing in AM and other parts of the portfolio. I would say the utilization impact here is meaningful for the segment. $20 million. Then there's about $10 to $15 million of higher energy cost that's not covered by the cost pass through contracts. When you look at that, you put those all together, that's about 40% roughly of where the decline's headed, roughly. That gets you to thinking about those businesses. Both the asset utilization comes back as a tailwind next year as long as we have growth in textiles and Aventa and other things. The vast majority of that utilization headwind is before you get to spinning tow. It's in the making of the plastic and the stream that feeds into it. Any growth anywhere in the portfolio on cellulosic plastic will actually sort of turn that $20 million into a tailwind for fibers. Then you've got recovery in the Naia textile business that we are moving with our customers outside of China as they're trying to manage their tariff exposures as well as winning business in new accounts around the world and finding ways to get some of our Chinese business back as sort of tariffs have settled a bit. All that sort of becomes an offset relative to whatever happens in the remainder of the decline this year, which is. On the tow side, what I'd say is we don't see a shift in market still declining 1% to 2%. We always expected losing some volume as the Chinese capacity came online and everyone had to adjust their market shares to sort of make room for that capacity. The volume is turning out to be worse than that because there's a bunch of destocking going on as we talked about in prior calls, where people were holding a lot of safety stock and now are feeling a little more safe about not needing as much safety stock and destocking. They were clearly holding a lot more inventory than we expected. There is another dynamic going on as well, which is we had some medium sized customers that were very aggressive in wanting to grow their market share in the cigarette industry and were adding capacity for that and building inventory to fill that capacity and signing contracts that committed them to grow that volume with us and having our support. Unfortunately, these customers were not successful in growing their share and actually ended up losing a little bit of share so far. They are obviously not happy about that and they are trying to take their share back. In this current situation, they are trying to destock the inventory that they built for that growth. That is not playing out. For us, when we had that expectation of that growth and we had sort of given up some share with our price discipline and a few other places in this market context, we had an expectation of how volume would net out that is not playing out the way we expected. There is a range of actions we are planning to take right now to address this situation and be very focused on maintaining stability for us in this market. That is sort of where we, how we got here. We did not really get some of these insights from these medium customers until the second quarter, which is what we are adjusting to now. From a destocking point of view, while there is a lot of destocking certainly going on this year, it is reasonable to expect next year it will be less than this year. From what we can tell, we got all these offsets of things like utilization and textiles, etc., being an offset to this tow dynamic. You put it all together, we think we can stabilize the situation as we go into next year. Thanks, Mark. Thank you. Our next question comes from Kevin McCarthy from Vertical Research Partners. Your line is now open. Please go ahead. Thank you and good morning. Mark, in the prepared remarks that you released last night, I think you mentioned that you're now targeting additional cost cuts of $75 to $100 million. Can you maybe elaborate on the actions that you're taking and how those savings might flow through the financials over the next, I don't know, several quarters here. Willie, hit the cost reduction targets, and then I'll add a couple comments to that. Thanks, Kevin. Good morning. Obviously, in this environment, we're focused on building on the improvements that we've made here in 2025 as we enter 2026. We've got detailed plans that we'll be pulling together in the back half of the year that enable us to again deliver another $75 to $100 million as long as the environment continues to persist. I would also just highlight that our actions do not reflect a change in our strategy as we think about innovation and excellence and how we execute. Having an efficient and effective cost structure goes hand in hand with achieving that and generating returns over the long term. Our actions range from optimizing our contract partners and then the overall usage of that. I think we've shown in multiple economic environments that we ultimately take structure that looks fixed and make it variable. As we think about reliability and maintenance execution, that is a focus as we continue to enhance and deliver reliability over the long term and reduce overall maintenance. As we think about purchasing and MRO in this environment, as we're going through tariffs right now, we're looking at how we optimize that supply chain and ultimately overall mitigate and reduce that cost structure. Energy efficiency, as Mark has highlighted, energy is a headwind this year and that's core and we have opportunities on that front. Obviously, in this type of environment, it will also result in reduced labor cost as we think about year over year performance. What I'd sort of like to add to this is, you know, you came up earlier, where do we view the world next year and are we really worried about getting worse? First of all, as I, to be clear, you can't annualize the back half of this year. With what we're going through, you can't. You've got all this asset utilization headwind that's just distorting. You've got normal seasonality that you'd always have to correct for where we're more 55%, 45% first half to back half normally. You've got the sort of pre-buy dynamic and just the absolute chaos of tariffs and how it's impacting demand behavior in the marketplace. Can't do that. When we think about cost structures and what we're trying to do going into next year and really think about on a full year basis, how do we go from this year to next year, which I think is a better way to think about it, these cost actions are incredibly important. What you didn't hear Willie say is we're shutting down a bunch of plants and rationalizing them. A lot of the industry right now is going, both on the specialty and the commodity side, are rationalizing plants entirely. Because if they're doing that, they don't see that demand coming back in the future. We're not doing that. We're actually confident with our innovation and the way we find ways to value up our facilities and grow and leverage them efficiently like we did from PET to copolyesters to Tritan or standard interlayers to acoustic interlayers to HUD. We believe that our asset base, outside of some tweaks here and there, is well positioned for the growth that we would expect to have in 2026 and 2027 and beyond. When you think about that $100 million, that helps improve earnings next year to this year. When you think about the asset utilization once again focused on cash and discipline, that $75 to $100 million headwind becomes a tailwind. The way to think about that as a tailwind, if the demand is really as bad as the back half of this year, it's a $50 million tailwind in utilization next year. If it gets back to the front half of this year, it's $100 million tailwind relative to this year, just how those utilization numbers work. To be clear, the demand was not strong in the first half of this year with all the dynamics that we're facing. We feel good about that being a tailwind for next year. We've got all the innovation going on across the portfolio, growing, of course, the revenue on the Kingsport plant. As we talked about, there's growth that we have and can see in new interlayers on the Aventa products gaining traction and being key to driving that utilization in the cellulosic additives stream. New products in cosmetics and specialty plastics, etcetera, recovering. Nia, we do think, you know, we'll continue to have great discipline on managing our price cost, and so that won't be a headwind or a tailwind, but, you know, good to defend and manage and prove out the value of our products by doing that. Four years into a difficult world, regional expectorant will be some recovery in CI, and, of course, with our cash discipline and improving operating cash flow next year versus this year, more cash to return to shareholders. Especially since we're able to delay the step up of the next Methanolysis plant due to the advantages we have in the bottleneck and the current one. I think we're well positioned to recover next year. As I said earlier, no one can predict where the absolute economy is going to go at this stage. Appreciate all the color there. Just to follow up on your add on comment, Mark, in listening to you, is it fair to say that as the U.S. moves into this new tariff regime you do not anticipate any large changes in terms of portfolio composition? Reason I ask is in the second to last paragraph of the remarks there was some commentary about addressing underperforming parts of the portfolio and a reminder that you've divested certain businesses in the past. It doesn't sound like you have anything larger than a bread box under consideration right now. Is that fair. In the short term? I think that's fair, Kevin. I mean, I think that, you know, just to be clear, there's optimizing capacity and then there's thinking about what businesses belong in the portfolio, which are two very different questions. On the first question around optimizing capacity, we've done things like optimize some production inside our Massachusetts site and interlayers. We shut the Singapore plant down and optimized some capacity in heat transfer fluids to align with market conditions. None of those are big significant cost cut steps, but it's just being conscious of managing cost structure and we'll continue doing things like that across the portfolio. That's part of what Willie's talking about. When we have network asset optimization, the E2P investment in CI is a structural investment to improve that site's performance. As we are more prepared to get into the details of that, we'll give you more insight on what that means. Again, we're not shutting the entire site down. Like in Europe, there are just major sites all being shut down by companies left and right. Probably going to be the 30% shutdown by the end of the year over the last four years. We're not seeing that. When it comes to portfolio, we're always disciplined. I think we've proven that. We've proven it with adhesives and tires and the CEDIC asset plan, if you want to go back far enough in history, proved it from 2006 to 2012 in divesting a lot of underperforming businesses. We'll always keep an eye on that and look at what belongs in our portfolio and be open minded to things that can be segregated and separated from the company. Integration does create constraints on that, but certainly right now at the bottom of the market is not a time where you look at doing things like that. Perfect. Thank you. Let's make the next question the last one, please. No worries. The next question is from Laurence Alexander from Jefferies Your line is now open. Please go ahead. Just to follow up on the innovation points you brought up, what are you? Seeing in terms of customers delaying versus canceling or accelerating their investments in evaluating new alternatives or innovative products? Is the uncertainty leading to a freeze? In activity or is it helping you on that front? That's a great question. You're talking about across the portfolio because I think I've already hit. Yes across the portfolio just for your customers. That's always been one of your differentiations. Just curious, is it becoming a demand pull for 2027, 2028, 2029 or is it becoming more of a concern? What's interesting across the portfolio, I'd say, is customers are still highly engaged. They, like us, realize that to get out of a weak environment, you have to create your own growth. You can't just sit there and wait for things to get better. You also want to maintain your differentiation against competition. Whether it's next generation HUD and different versions of that, we're seeing very strong engagement in the auto industry as well as specialized products necessary for the EVs, which are still growing in lots of parts of the market. You see a lot of engagement there, a lot of engagement around Aventa as a solution. Polystyrene is being banned in a lot of food tray, protein tray applications or straws and this and the other. The retailers or the food service companies need products to sort of solve those problems. The engagement there has been very good, along with new products we're always launching, especially specialty plastics. We have a product that replaces polyethylene coatings for paper cups and other paper food applications that has strong engagement. Across the circular platforms, across the automotive space, personal care space, etc., we're definitely seeing engagement. The rate at which they're adopting is still constrained by economic reality here in the short term. With all this, everyone's just focused on how you manage costs and get through these tariffs. The great news is it has not resulted in a pause on engagement or innovation. Thank you. Thank you very much, everyone, for joining us today. We appreciate your time. Hope you have a great rest of the day and a great weekend. Thanks again.