Good morning or good afternoon, all, and welcome to the Ingevity Third Quarter 2023 Earnings Call and Webcast. My name is Adam, and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing Star followed by one on your telephone keypad. I will now hand the floor over to John Nypaver to begin. John, please go ahead when you are ready. Thank you, Adam. Good morning, and welcome to Ingevity's Third Quarter 2023 Earnings Call. Early this morning, we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.ingevity.com under Events and Presentations. Also, throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are included in our earnings release and are also in our Form 10-K. We may also make forward-looking statements regarding future events and future financial performance of the company during this call, and we caution you that these statements are just projections and actual results or events may differ materially from these projections as further described in our earnings release. Our agenda is on slide three. Our speakers today are John Fortson, our President and CEO, and Mary Hall, our CFO. Our business leads, Ed Woodcock, President of Performance Materials, Rich White, President of Performance Chemicals, and Steve Hulme, President of Advanced Polymer Technologies, are available for questions and comments. John will start us off with some highlights for the quarter, and Mary will follow with a review of our consolidated financial performance and the business segment results for the third quarter. John will then provide an update on guidance, followed by remarks addressing our announcement last night regarding the repositioning of our Performance Chemicals segment and its expected impact. With that, over to you, John. Thanks, John, and hello, everyone. Let's begin on slide 4. As you know, we made an announcement last night to reposition and restructure the company, and this includes the closure of our DeRidder, Louisiana, facility, among other actions. These decisions are consistent with our objective of being a top-tier specialty chemicals company and are part of the execution of our long-term growth strategy. We are committed to maximizing the profitability and earnings stability of the company, and later in the call, I'll go into detail about how these actions get us closer to our goals. But first, a few comments on our third quarter performance. To level set, last year's third quarter revenue and EBITDA were the highest ever for our company. Our Performance Chemicals and Advanced Polymer Technologies segments led the way last year, with both posting record quarters in a very robust demand environment. This quarter, this year, our strongest performing segment was Performance Materials, which posted EBITDA margins north of 50%. We saw modest revenue growth and strong EBITDA drop-through due to increased demand of our automotive activated carbon in both North America and Asia Pacific. Impacts in the quarter from the auto industry strike were very limited. Additionally, the increased demand for hybrids over battery electric vehicles benefited the segment and bodes well for the segment longer term as well. Advanced Polymer Technologies saw their volume drop in all business lines across all regions due to the continued industrial slowdown, but the team maintained their focus on profitability, improving their EBITDA margins by nearly 1,000 basis points. The team is using this time to advance the adoption of our products in new economy markets like bioplastics, where our Capa products enable biodegradability in areas such as packaging, agriculture, and sustainable fibers for apparel. In Performance Chemicals, pavement had another great quarter as international expansion continues with strong adoption of our products progressing in South America. I would say the number of projects the team saw in the U.S. was not as robust as we had hoped, as funding from the infrastructure bill was slow to make its way into local levels. But we do expect those dollars will be put to work, and our teams are ready to deliver solutions that use less energy during the paving process, make roads last longer, and improve safety for drivers and pedestrians through more reflective markings. Industrial Specialties continues to feel the impacts from the lack of rosin demand, particularly in the adhesives end markets. During the quarter, we also saw a slowdown in drilling activity, which resulted in weaker oil field sales. The price we're paying for CTO, as expected, increased in the quarter, reaching approximately 25% of the company's total cost of goods sold. As a result, even with the addition of Ozark, Performance Chemicals saw lower sales and a sharp drop in EBITDA. I'll speak more on these market dynamics and how we are responding after Mary finishes a review of Q3 financials. Mary? Thanks, John, and good morning, all. Please turn to slide 5. Sales were down 7.5% versus last year, as all segments experienced weaker volumes as compared to last year's record quarter. The drop in volume was offset somewhat by better product mix in Performance Materials and the addition of Ozark sales within Performance Chemicals. Gross profit was down primarily due to higher CTO costs that impacted the Performance Chemicals segment. SG&A, excluding depreciation and amortization, improved to 7.6% of sales, compared with 10.8% in the prior year, as we began to see the positive impact of cost savings actions taken earlier in the year. Adjusted EBITDA for the quarter was down 20.1% to $110.4 million, but we maintained adjusted EBITDA margin of 24.8%, which is in the top quartile of specialty peers... Diluted adjusted EPS of $1.21 is lower than the prior year, due primarily to weaker results in Performance Chemicals, as well as higher interest expense associated with the Ozark acquisition. Turning to slide 6, you'll see we generated free cash flow of $73 million for the quarter as slower CapEx spending and improved accounts receivable turnover offset the inventory challenges we continue to have with CPO and rosin. With the free cash flow generated, we prioritized debt repayment and were able to hold leverage flat to last year, even though EBITDA is lower. Last quarter, we announced cost-saving actions expected to result in $35 million in annualized savings, with $20 million expected to be realized this year, and we are on track to reach this target. Turning to Performance Chemicals on slide 7, revenue was down 4.3% as the volume drop in industrial specialties was only partially offset by the addition of Ozark and higher pricing in pavement. Segment EBITDA was down 62.4%. As you see in the waterfall, the impact of lower volume was mostly offset by price, but we were unable to recoup the higher cost of CPO. Similar to last quarter, lower volumes are the result of global weakness, primarily in rosin-based end markets and particularly adhesives, but also printing inks. We attribute approximately two-thirds of the decline to demand weakness and the remaining one-third to product substitution. On the TOFA side, we began to see weakness in oil field with lower drilling activity during the quarter. Legacy pavement sales were up as a result of higher prices and increased technology, technology adoption in South America, and Ozark continues to have good results with their paint portfolio, although their thermoplastics business line was slower than expected as competitors gained share through price concessions. Our sales teams are taking the steps necessary to drive thermoplastic growth as we head into next year's paving season. Turning to slide 8, sales for Advanced Polymer Technologies were down 38.4% on lower volumes. The volume drop was across all end markets and all regions, as John mentioned. We estimate 70% of the decline is attributed to lower end market demand, as customers do not appear to be restocking inventory. The remaining 30%, we estimate, is a combination of lower-priced product substitution in certain end markets like footwear and competitors moving into our end markets where they normally don't participate, but it's pivoted to in order to move their product. We believe these are temporary headwinds, and as industrial demand picks up, we'll see a rebound in volumes. In fact, we have seen incremental improvements since the middle of Q3, which gives us some hope we've seen the bottom. However, customer order patterns are such that we don't have visibility longer than a few weeks out. Even with lower revenue, segment EBITDA was flat, resulting in margins of 26.2%, a 990 basis point improvement over last year. The improvement is primarily due to pricing and lower energy and raw material costs, but also includes benefits from the cost savings actions announced earlier this year. Steve and his team have done a terrific job improving the profitability of this segment, and we expect, as volumes pick up, that they will be able to sustain mid-twenties margins over the long term. On slide 9, you'll find results for Performance Materials. Revenue was up 1.6%, while EBITDA increased 21.7%, benefiting from improved product mix and cost savings actions. While we're pleased with the margins, we do not expect the segment will maintain 50%+ margins on a consistent quarterly basis. We'll likely have to settle for margins only in the mid- to upper-forties, which is a nice problem to have. The quarter benefited from an improved sales mix of our higher-margin activated carbon into auto applications. As we track battery electric vehicle adoption rates, it does appear that hybrids are becoming more preferred from a consumer standpoint. In Europe, for every BEV registered, there were 2.2 hybrids registered. Similarly, in the U.S., there are nearly, nearly 1.3 hybrids sold for every BEV. This trend benefits Ingevity since hybrids contain our activated carbon. If these trends continue, this will reaffirm our position, which we articulated at Investor Day, that the path to all-electric vehicles is through hybrids, and this business has a long runway. Results in Asia were strong in the quarter as auto production stabilized and exports increased from China and Korea, while in North America, the auto industry strikes were not meaningful to our third quarter results. Given the recent positive developments in the negotiations, we currently expect nominal impact of the strikes on our Q4 results. I'll now turn the call back over to John for an update on guidance and for more detail on our repositioning of Performance Chemicals. Thanks, Mary. Please turn to slide 10. We do not expect industrial markets to recover in the fourth quarter. Therefore, we are lowering 2023 full-year EBITDA guidance to be between $375-$390 million, free cash flow to between $75-$85 million, and the net leverage target to remain near these Q3 levels. Directionally, we are seeing our normal Q4 seasonality amplified by the weaker economy. We did see very limited impacts of the UAW strike in October. It is possible that these will be made up over the rest of the year, but it could be in Q1 of next year. The paving season in the Northern Hemisphere will end as the weather turns cold. If this fourth quarter plays out as last year's did, we expect Performance Chemicals and APT customer buying patterns to slow as we move into the year-end. While specific impacts of our restructuring actions will be very limited in the quarter and begin in earnest in Q1 of 2024, we will be selling excess CTO in the quarter and expect losses on those sales as we rebalance our inventories and manage our working capital. Turning to slide 12, we will go into more detail on the repositioning of Performance Chemicals and what it means to Ingevity as a whole. I will start by saying that these actions do not change the strategy we have articulated, and that is to be a best-in-class specialty chemical company. As the business is being impacted by significant structural changes, we are accelerating our execution to refocus on our Performance Chemicals segment on our most profitable markets. By taking these actions, we are focusing our resources on our higher-margin, higher-growth products in less cyclical markets. These products include our pavement technologies business, both our legacy pavement, but also our road markings business, and certain industrial and oilfield markets. We are exiting non-specialty, more commoditized markets that have proven to be very cyclical and price-sensitive, many of which are rosin-based, such as printing inks and adhesives, but also certain oilfield markets. The margins of the PC business have been under significant pressure. By making these changes, we can improve these margins back to the mid-teens as AFA sales ramp up. We are reducing our dependence on CTO. This raw material, while integral to our past, has undergone dramatic structural cost changes due to its use in the regulatory-driven European biofuels market. These step function changes in demand and its effects on pricing are not going away. Ironically, the TOFA from CTO has become so expensive that its use in biofuels is very limited right now, as they have cheaper alternatives. But still, this has driven up CTO prices to inefficient levels that can't be supported in lower-margin chemical markets. We do believe CTO prices will come down from today's levels, but we do believe also that they will remain high by historical standards and the pricing will remain volatile. Only select products can absorb this new cost structure and remain high margin. By closing DeRidder, we will operate a two-plant network with dual feedstocks. We will operate the Charleston refinery on CTO for now, and Crossett will run on AFA. I would draw a distinction between our refinery and other options to produce products for pavement and other markets in Charleston. The derivatization capabilities to support our target markets exist in Charleston, independent of the refinery of CTO. Our ability to expand production at both sites, and Crossett in particular, ensures we have capacity to address both the recovery in our target markets, but also to grow as demand for our products grows. Both will be focused on these specialty markets and will support the customer with chemistries from a variety of feedstocks, optimized based on cost and availability. If and when it becomes economic for us to enter the biofuels market, we have the capability to do that. The cost savings we expect to realize from our actions are significant: $65 million-$75 million of annual savings beginning in 2024. Exiting a facility of DeRidder's size takes time, and we expect to cease operations in the first half of next year. I was in DeRidder yesterday afternoon, and I would like to take a moment now to say that DeRidder was an integral part of Ingevity's history, operating since 1947. They are a terrific group of people, and we thank them for their service to Ingevity. As we move into 2024, we will continue to assess our plant network and our cost structure to ensure we best support our specialty businesses. The end result of these actions is a stronger, more focused Ingevity. We will be able to focus our capital and resources on our most profitable growth markets, including exciting growth opportunities in Performance Materials and APT. Full company EBITDA margins will improve to the upper 20% range. As a part of these moves, we are streamlining Ingevity overall and restructuring our business and support functions to align with our new focus on specialty markets. On slide 13, you will see the breakdown of the company by segment and business line. We expect the repositioning of Performance Chemicals will result in approximately $300 million less revenue in the industrial specialties business line... What will remain is a company with a revenue mix that is dominated by our higher-margin businesses like Performance Materials, APT, and Pavement. We will be smaller on the top line, but more nimble and profitable going forward because of this better mix of businesses. This is a significant restructuring. Ingevity's headcount is being reduced by almost 20%. With the DeRidder closure, we expect to incur charges of approximately $280 million, with approximately $180 million of the total charges to be non-cash. Majority of the non-cash charges and 50%-60% of the cash charges are expected to be recognized by the end of the first half of 2024. Slide 14 is our roadmap to the future state of Performance Chemicals. It includes a streamlined manufacturing footprint, fed by multiple raw materials. These sites will focus on producing high-margin, high-growth specialty products. In addition to pavement and road markings, we will continue growing the ag dispersants market and AFA markets, including personal care, home cleaning, and animal feed. We will not support low-margin cyclical markets like inks and most adhesives. The remaining rosin we do produce will be used in higher-margin adhesive products, blended with AFAs to go into substitutes for TOFA or used in road markings. One of the costs associated with this restructuring will be balancing our future CTO needs with the excess we will receive from our contractual obligations. With one less plant to run CTO, we will be long CTO for some time. We will sell this excess CTO in the market to both manage inventory and convert to cash. We do expect, at least initially, to take a loss on these sales and estimate it to be between $30 million-$80 million next year. CTO pricing is in flux, and there are wide bid asks in the market, so this number is hard to pin down now. But as the year progresses, we do expect CTO prices, both for what we pay to purchase CTO and for what we sell it for, to decrease, particularly in the back half of the year. Additionally, the amount we deem excess, meaning what we have to buy versus what we could use, could change. Needless to say, we expect to be sellers of significant volumes of CTO in 2024. However, we view these sales as distinct from the core operations of the segment. As market conditions change and impact CTO resales, we will update you all. In conclusion, our strategy is to focus on end markets that utilize our higher-margin, higher-growth specialty products, diversify our feedstocks, and optimize our manufacturing network. We will be transparent with you each quarter as this repositioning takes place, including sharing our charges and expenses, as well as our CTO position and its financial impacts. We are confident that we have a best-in-class specialty chemical business, and we are working to make it both more stable and profitable. With that, I'll turn it over for questions. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask a question, please ensure your headset is unmuted locally. The first question today comes from Vincent Anderson from Stifel. Vincent, your line is open. Please go ahead. Hi. Yeah, thanks. Good morning, everyone. Hello, John. So let's start with Performance Chemicals. I mean, the margins this quarter really weren't too bad, given pavement and oil field mix, you know, was a bit lighter than we were hoping for. I'm just curious, was this helped by, like, a longer tail of lower priced CTO in the P&L, and then transitioning that into Q4 and the negative guidance change, does some of the CTO excess CTO sales guidance for 2024, some of that also going to be impacting Q4? So what's on the page for CTO resales is really a 2024 number, right? You're correct that the segment, and I think you're going to see this both in Q4 and in Q1, you have to remember one thing is, you know, that segment does not benefit from the seasonality that's tied to the pavement business in those quarters, right? So by definition, those, you know, the quarterly patterns are lower than what you see in Q2, Q3, but it will also be aggravated by rising CTO costs that are, to your point, not in the P&L today, right? We do think those things, those costs, you know, will level out at some point in the first half of next year, slash start coming down. But I would be clear with everyone that Q4 and Q1, we will be dealing with these issues. Okay. And then going back to the planned CTO sales for 2024, I mean, how much of that is just existing inventory, given I thought under at least the public portion of your, of your supply agreement, you had out clauses for the closure of plants, and I'm assuming Crossett being converted to AFAs would also qualify as a closure? We do have out clauses, but they do take time, and we will not be, we will be operating with the volumes that we have today through 2024, right? Or at least that's what we're planning for, right? We will be working to manage this situation. What excess CTO we don't need, we will sell... but we will be buying more CTO than we need through 2024, and potentially into 2025. But, you know, our expectation is that we will try to manage that. So, just to add- Yeah. to that. Okay. Certain contracts do have what I'll call a wind down, such- Based on plant closure. Based on plant closure, such that we're obligated to continue purchasing certain levels of CTO for up to a two-year period. And then, you know, we have more flexibility after that period. So even with the announced closure of DeRidder, we are obligated to take a certain volume of material, and that's why we're saying we will be long CTO in certainly next year and possibly up to two years. And we'll be doing these resales as needed to balance inventory and working capital. Okay. Put it another way- All right. Put it another way, then. And then, The $80 million on that page, just to make sure that everybody's clear on this, right? Would represent the, you know, an estimate between what we think would be the most punitive, buying at a certain price, selling at another, that we could be dealing with over the course of next year. We do want to just reiterate too, that we are continuing discussions with all of our CTO suppliers- Suppliers, right ... to better align those existing contracts with our new, footprint, if you will. I mean, look, we are trying to, as I mentioned in my prepared comments, we're going to be working very hard to manage that number down, have it eventually go away, right? This is over and distinct from, you know, what I would call the operating performance of the sort of core businesses. You know, what's hard to pin is exactly what the year will look like in this regard. Because as I mentioned, we do expect CTO prices to come down, both in terms of what we will pay, right? And then also that will in turn impact what we will sell it for, right? So, I think the first half of the year, you know, we will be incurring these losses on these CTO sales. We would like to think by the back half of the year that we will be more in balance, but I don't want to overpromise to that, so hence we've put up the numbers we have. Okay. Very, very helpful, and I, I know that took a little while to get through, but I wanted to ask, what hopefully- We get it. A pretty quick answer on AFA ramp. We want everybody to understand it. Yeah. So on AFA, maybe a long question with a short answer. So just pinning you down a bit on the ramp-up, you were running, I think you said 15% of your oil field on AFA. Your target is $70 million in sales by year-end, and then full utilization on that, call it 175,000 tons of capacity by mid-next year, and that gets you break even. So what I was hoping we could break all that down into is, you know, what does $70 million of AFA revenues equate to, from an annualized exit rate for 2023? And then roughly, what kind of exit utilization would that look like, so that we know sort of what you're still going to be filling in the first half of next year? So here's what I would say. The numbers that you're dealing with, and none of that has changed, really were contemplated prior to the DeRidder closure, right? We are working now to change/accelerate the adoption of AFA into some of our more traditional legacy markets, to offset or to reposition from TOFA into these AFAs. So I am not prepared to sort of change those numbers right now because we're still working on this, and this is all being contemplated as a part of these actions. But you can expect that as we move into next year, that we will come to you with a better vision on that. But clearly, our strategy is going to be moving the ones that are profitable away from TOFA into AFA. Okay. So no, no change, but future change would probably reflect some attempt at an acceleration. Well, it's going to be more than an attempt. The plan is to accelerate. Right? It's going to be more than an attempt. Well, it's, I don't want to put words... I know you don't want to promise anything. But okay. All right. Thank you, very much. I'll turn the call over. The next question comes from John Tanwanteng from CJS Securities. John, your line is open. Please go ahead. Hi, good morning. Thank you for taking my question. My first one is, what utilization do you expect to have at the remaining CTO facility, number one? And number two, do you expect to keep the DeRidder property, or is it up for sale, for some cash maybe, to do your plans around the facility after you shut it down? So, so we are, John, just to answer the first part or the second part first. We have looked at a pretty full range of options for that asset, and we continue to look at a range of options for that asset. But right now, today, the decision is to shutter it down, right? To get to your other question, you know, what run rate we choose to operate Charleston at will depend on the market environment going forward, right? Currently, we're not actually running the refinery, but we have been running the derivatization plant, right? So that's part of the reason we wanna separate those two from, as you think about this, our expectation is, you know, as we kind of move forward, we're probably not gonna be running at maximums right away because we're managing inventories, and we're gonna have some inventories that are excess as we sort of exit DeRidder. But at some point, we certainly have the capability to run that back up to a full run rate, right? As I said in my comments, we, we've- Got it. Okay. John, we've since checked this, sensitivity checked this pretty hard, and we're pretty comfortable that we have the capacity that we're gonna need going forward to support the markets as they return to a more normalized economic environment, right? What's critical to understanding that, though, is that we're exiting low-margin, cyclical stuff, right? So as the markets recover, we will be able to dial up our capacity both in DeRidder, or excuse me, in Charleston and in Crossett, focused on the markets where we have the highest margin opportunities. John, if I could add to that, this is- Got it. This is Rich. Okay. That Charleston plant has a north and a south plant. One side is the refinery, the other side is derivatization. So out of the refinery, we're making products that feed our pavement business and also within our paper size business and some of our molten adhesives, as well as some of our rubber business. Those businesses are providing us the margin today that we need to sustain the business going forward. But as John mentioned, we have the flexibility to ramp up that refinery to produce even more products as the market, you know, demands. So right now, the market has been in a low state, as many of you can see and have heard from Mary and John's comments on our rosin-derived specific business. But the flexibility that we'll have in Charleston will allow us to toggle as the market demands, increase and/or decrease. Great. Does DeRidder have the capacity to convert to CTO if the demand is there eventually, if, if you don't sell that? Well, we're exiting DeRidder, but DeRidder is a refinery that is not... You know, it, it's- we did it in Crossett. It could be done by us or someone else, but we are exiting DeRidder. I think it's important- Okay, got it. You know, and sometimes- And I know it- Well, John, I think, let me say this, and then if it doesn't get at your question, let us know. Sometimes people think of our plants as just clones of each other, but in fact, they each have unique capabilities. And that DeRidder plant, you know, the legacy was printing inks originally, and then when printing inks as an industry began to die out a couple of decades ago, the pivot was made to oil field and adhesives. As markets have evolved over time, those are the end markets that are lower margin for us, and sometimes high volume, but lower margin, and so that's why the decision was made to exit that DeRidder site. The Charleston site does derivatization, and as Rich mentioned, as we grow, the higher value, more specialty products, we do have the capability to expand and ramp up and then expand Charleston. Well, and as we mentioned, when we were together, for Investor Day, I mean, we have the ability today to double the volume output at Crossett, right? So, we feel comfortable we have the volume need, you know, we have the volume ability to, as I said, capture the recovery in our, you know, markets, but also grow the business. If you're asking why, this is Rich again, John. If you're asking why, with regard to DeRidder and the markets that we play in, when you think about the CTO and the fractionation associated therewith, an adhesive product or an inks product is more than 90% based on rosin, which is CTO heavy. So as we see the inflation on CTO, it drags down the profitability significantly on those markets for us. Understood. Thanks. I'll jump back in queue. The next question comes from John McNulty from BMO Capital Markets. John, your line is open. Please go ahead. Yeah, good morning. Thanks for taking my question. So one thing I just wanted to clarify, so the $65 million-$75 million of annual savings beginning in 2024, is that the run rate at the end of 2024, or is that, is that what you expect in 2024, and then actually the run rate would presumably be higher as you end the year? Like, how should we be thinking about that? We expect those savings to be realized in 2024, fully realized. You know, we're taking the actions now. Some amount of the savings to begin here in the last couple of months of the year. But it's pretty de minimis, right? It's a total with the actions we took earlier this year of about $25 million. But then the $65-$75 million, John, will be fully realized in 2024 and going forward. Okay. So if some of these fixes don't happen till the end of the first half of 2024, is there the presumption that things could be even bigger in terms of savings as you look to 2025? Is that, and things kind of normalize, or is that may be being too optimistic? That is possible. We've laid out, you know, internally, the timelines and the expectations to the best of our ability and feel comfortable with the $65 million-$75 million number. If market dynamics and other factors go our way, could the savings be greater? If that's possible, we're not willing to commit to that today. None of this is tied to a- Got it. Fair enough. ... economic recovery. These are what I would characterize as sort of fixed cost savings. Controllable costs. Controllable costs that we are, Committed to ... committed to and sort of permanently restructuring out of. Okay. No, that makes sense. And then just taking kind of a step back and maybe a higher level look at it. So you spoke to, I think it was on slide 13, about how the repositioning basically takes out, whatever, call it $300 million of revenue out of Performance Chemicals. So if we use, whether it's 2022 or 2023 as a base, that basically says the revenue, you know, the kind of normalized business, is about $800 million or so of revenue. And you're looking for now, you know, once kind of the dust settles on the cost saves, you're looking for a 15%-20% EBITDA margin. So is it fair to think that, again, when the dust settles, you've generated all the, you know, the savings that you're expecting, that the EBITDA run rate for this business is $100 million-$160 million? I mean, I know that's a little overly simplistic, but is that the right way to think about it at this point going forward? Well, it depends on what timeframe, John. I mean, look, I, I think we're, we're not, we're not giving 2024 guidance yet, so let me be clear. All right? You're, you're right in the sense that the business will lose about $300 million, so it's gonna come to about $800 million of revenue, right? We believe that we can get the operating businesses into the 15%-20% range as the AFA business ramps up over the course of, you know, next year into 2025. I think to be realistic, though, and we're trying to make sure that everybody understands this, that's excluding the impacts of the CTO until that situation abates itself, okay? So, you know, if you look at it as a consolidated segment, with including the CTO sales or resales, if you will, it's gonna take a while to get to those margins, but the operating businesses can get to those margins. And then, as the CTO situation sort of unwinds itself, you'll see the segment margin get back to those levels. So I wanna be careful sort of saying that we're just gonna spring back to those types of numbers. I think the other thing that gets lost, and John or Rich, you know, correct me if I don't get the nuance right here. But you know, you can't look at the DeRidder revenue loss that we've said is roughly $300 million. You can't take the average PC margin and apply it to that. Correct. What Rich was, you know, was saying is that the products and the markets that we sell into, the product from DeRidder, the adhesives, certain of the oil field products, the printing inks, those are the lower margin businesses within that segment, and those are the businesses we'll be exiting. So that's what's helping to drive that margin improvement as the dust settles. I would, I would even take it a little bit further, John, just for everybody's complete understanding of the situation. The EBITDA that will be generated in 2023 in the Performance Chemicals segment comes almost exclusively from the Charleston plant. So by exiting the DeRidder plant- Okay. You are removing revenue, but you are not removing profit. Got it. Okay. No, that was, that's, that's hugely helpful. Thanks for, thanks for the color. The next question comes from Daniel Rizzo from Jefferies. Daniel, your line is open. Please go ahead. Hi. Thanks for taking my question, and I just want to change it up a little bit. I know, there's a lot of interest in the restructuring, but just in your Performance Materials segment, you mentioned how strong hybrids are doing. Can you remind us, or have you said how much activated carbon goes into a hybrid car versus a, maybe a traditional ICE car? And also, do hybrids use scrubbers? Go ahead, Ed. Yeah, Dan, this is Ed. They do use activated carbon canisters. They're typically larger because you've got a pressurized fuel tank. ... So to capture those emissions during refueling, you will have somewhere around a 2-liter canister plus a honeycomb attached to it as well. So I think in the past, you said on an SUV in the U.S., you know, it's or just any car, I think it's like $16-$20 per auto, and correct me if I'm wrong on that. I was wondering how that compares to a hybrid? Yeah, you've got a little more content on a hybrid because you've got a pressurized fuel tank. We used to say, Dan- Okay. Oh, thanks for the clarification. Yeah. This is important, Dan. It is important, Dan, and thank you. You know, it was a really good question- Yep ... because we did used to say that we expected that a hybrid vehicle might be a bit less profitable for us because of the amount of carbon. But given how hybrid structures have evolved, and as Ed mentioned, the highly pressurized tank, we've had to evolve our carbon to meet the needs of that different tank structure. And so the value we can get for that now is at least equivalent to what we were getting on just an ICE vehicle previously. Legacy ICE. Is that clear? A legacy ICE. Yes, correct. Okay, that's actually, that's amazingly helpful. Thank you. With thermoplastics, you mentioned competitive pricing, kind of like making it a more difficult market. Are you... and taking share. Are you guys lowering your prices to match that or just kind of giving it up and waiting for things to more normalize? We've been holding in price, but I think we're beginning to. You know, we're seeing some price degradation. I don't think we're all that dissimilar from a lot of other chemical. We've been holding price pretty firm, but candidly, I mean, I think as we move forward in the cycle, price will come down a little bit as volumes start, you know, that helps drive volume. So, our focus really, and I'm very proud of what those guys have done over there, it is really on the margin. They have done a great job of getting that business back to levels of profit. Are you talking about APT? Are you talking about APT, or are you talking about road markings? Ozark. Are you talking about Ozark and road markings- I- ... or are you talking about thermoplastics and APT? I was talking about thermoplastics and APT, but I'll take answers to both. All right. Oh, all right. Listen, I think they've done an incredible job over there, working very, very hard to get those margins back up. And, you know, what I'm most encouraged by is they, you know, they continue to work. They've used this period to really be aggressive in product development and making sure that as the markets do sort of normalize, that we'll get the drop-through that you would expect. Thank you very much. The next question comes from Chris Kapsch from Loop Capital Markets. Chris, your line is open. Please go ahead. Hey, good morning. A follow-up on the PM segment. So, hey, John, I know you've been saying hybrids for many years, and I know that for a while, the macro sentiment was enamored by EV. So you probably have some feeling some validation that the sentiment has shifted towards kind of the world kind of is anti-EV. Well, not, you know, just certainly less enamored- We're just running our business, Chris. ... leave it at that, but- We're just running the business. Right. I know. So, so the question on the follow-up, there's a lot of different hybrid lexicon out there, mild hybrids, plug-in hybrids, hybrids with range extenders. You don't say. Your content per vehicle... What's that? I said, you don't say. Yes, no, I'm curious- There's a lot of different acronyms out there. Yeah. Your, your content per vehicle lift in hybrids, can you just explain where that's relevant? And also, you know, the data I look at actually, you know, while everybody talks about EV penetration in China, it looks, you know, it looks like about a third of the, of the, quote-unquote, "BEVs" in China are hybrid. So curious if your content lift in hybrids is also relevant to China. Yeah, look, I'll start off, and then, Ed, you chime because yes, we do feel a little validated, but the truth of the matter is we're not... Sometimes, and believe it or not, there are some organizations out there that include start/stop technology as a variant of a hybrid, right? Because when you, you know, stop at a stopping light and then you turn, the engine turns off, it runs on your battery, and then it, you know, when you take your foot off the brake, it kicks back on, right? Basically, if it involves an internal combustion engine, right, in some way, shape, or form, it has our technology on it, right? And the traditional hybrid that most people think of, which is a, you know, it has an internal combustion engine and then a battery motor or a larger battery pack, right, is gonna involve where it's switching between the two, right? It's gonna require our technology. And as we said earlier, we're relatively agnostic between if it's only an ICE or if it's got an ICE and an electric motor next to it. So Ed, I don't know if you want to add anything to that. Yeah. From an overall look at the market in China, we've got data across three years that you, you show basically what I call a classic S curve, right? So you've got battery electric vehicles going up, and then you've got this plateau of of- ... battery electric vehicles. But underneath of that, you have a growing, a rapidly growing plug-in hybrid, hybrid platforms in China. And that's getting upwards of 25-30%. And if you think of who's the primary manufacturer of those, it's BYD. And so, you know, we do kind of, like what's happening in China, but it's-- but it's also happening elsewhere. It's in Europe, it's in North America, and you're seeing a lot of people walking away from full battery electric vehicles for what is a more simpler program with plug-in hybrids and mild hybrids. Well, I also think it's a question of affordability, Chris, right? I mean, look, electric vehicles and electrification is here to stay. We fully believe that, right? It's just when you think about a consumer, and you can kind of look at it by geography, right? It's been interesting even in the European market to see the number of Chinese vehicles that are finding their way into the European, Western European markets, right? And it's because of affordability, right? And, you know, these vehicles are so expensive relative to what a-- particularly with interest rates where they are, relative to what a consumer can pay, a hybrid actually is a great solution, right? You can drive on electric power to and from your job, 8-10 miles each way, but when you wanna take the road trip, you can flip over to gas engine. So, yes, we're very encouraged by all this, but it bodes very well for our business over the long term. Right. Right. Well, just to, you know, to be devil's advocate on that cost argument- Mm. Some would say, I totally get it. I'm watching closely the, you know, the EVs trying to get to parity with ICE. But one might also say, though, that, you know, true hybrid has, you know, dual drivetrains, and that's sort of expensive and complex over time. And so is the variant of hybrids that where you're not really truly on two drivetrains, does that require your emissions abatement solution? You have to have an internal combustion engine, John. I mean, or Chris, that's the best way I can think about it, right? If you have an internal combustion- Yep ... engine in there in any way, shape, or form, you're gonna have our technology on there, right? I tell you, listen, I appreciate, and we obviously look very carefully at the cost curves and the argument that, you know, eventually EVs are gonna come down, et cetera, et cetera. But I also think hybrids will continue to come down, because the electric piece of the hybrid will come down, right? And what they're up against is the sunk cost that's already been all the development and all the infrastructure of supporting ICE, right? So I would not underestimate a hybrid's ability to bring its cost down as the EV. This is going to be competitive, and it's gonna come down to consumer sentiment. Fair enough. Just one real quick one on the transformation on PC, and the actions you're taking. Sorry, so as I understand it, going forward, does Crossett now become a swing plant with the ability to do AFA and CTO, or is it still dedicated to AFA? No, Crossett, Crossett will remain- Thank you ... as an AFA facility. Right? I mean, listen, well, I wouldn't say- Got it. Theoretically, we could convert it back to a tall oil, rosin, CTO-running facility, but I do not see that as... It, right now, the plan is to run it on AFA. Yeah, that's right, John. This is Rich. Chris, that Crossett, we took the April first, as you know, we transitioned that. That transition is complete. I would think that before we would transition Crossett back to CTO, that we would consider doing something different at Charleston or somewhere else. Absolutely. Got it. Thank you. And the ability... Listen, and that's something you need to understand, and Mary made this point earlier, which I think is important. People think of these plants as sort of these monolithic, dual-purpose, very similarly structured. Each one of these plants was optimized for different capabilities, right? And we're trying to optimize the network. It would be-- If we were to decide to expand our CTO purchasing and broaden that, there are a number of options available to us at Charleston, and those are separate and away from the refining piece or the derivative piece. The refining is separate from the derivative. So we are in a plant optimization that's going to be driven by focusing on the higher margin products, and we will meet the demands of the higher margin products, higher growth opportunities, and we have the footprint to make that happen. Got it. The pathway there is rationalizing some TOR products, but also some TOFA-based products that are below- That's right, because- average, if not I mean, listen, TOFA has value, Chris. I mean, it has a lot of value. Its problem today is its value... you have to look at crude tall oil versus the value of TOFA and rosin, right? And right now, the rosin is, despite really elevated TOFA prices, the rosin is very, very low price. Frankly, this is inhibiting its use in, TOFA's use in the biofuel market because it's making it unaffordable relative to what other options they have, like used cooking oil.... The beauty of AFA is it does not generate rosin, but this doesn't mean a wholesale exit. However, I want to be upfront, if these market conditions persist and it is uneconomic to operate crude tall oil, a refinery of crude tall oil, not necessarily the products, but a refinery of crude tall oil, then we will reassess our plant position. Got it. Thank you. We have a follow-up from John Tanwanteng from CJS Securities. John, your line is open. Please go ahead. Hi. Yeah, just, a quick one, just on next year, and I know it's early, but would you expect EBITDA to be higher or lower, just directionally, given how you phrased the contribution from Charleston? John, I'm not gonna get into 2024. I know, but listen. Because I know that's non-core. Yeah. Right. I mean, look, I'm not gonna get into 2024, right? What I will say is, as you know, we have a great Performance Materials business that is continuing to grow. We have an APT business that is continuing to grow, and while it's having some macro issues, to the extent the macroeconomy improves, it's got a great, bright future, right? We've laid out for you the roadmap for Performance Chemicals. I do think what's critical for you to understand is, and you've touched on it, is... You know, we believe the operating assets of the Performance Chemicals or the core business of the Performance Chemicals segment, we have made more attractive, right? And as the economy recovers, that business will do very well. We will have to manage through the CTO resales for some period of time. You know that there's a two-year sort of term on the unwind from DeRidder, but there's a lot of dynamics at work in there, and that is, in our view, sort of separate in a way. So that's where we want you to, that's what we want you to focus on. Okay, great. Do you know if the CTO resale impact is gonna be more front-loaded or back-loaded, or is it just impossible to predict at this point? It's hard to say, but I will say that we are going to be, knowing what we've done, right? We are gonna be pretty aggressive sellers of CTO through the first half of 2024. Right? Okay, great. Thank you, guys. We have no further questions, so I'll hand it back to John Fortson for some concluding remarks. Thanks, Adam. Well, everyone, that concludes our call. Thank you for your interest in Ingevity, and we'll talk to you again next quarter. This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.