Scott: In terms of your first question, I would go back to the answer to Jeff's question, is the majority of, you know, the opportunities that we're seeing are more downstream from acetic acid in, you know, the vinyls chain. And so, you know, as we look at Clear Lake operating rates, you know, we've got, you know, both of those assets that we have there kind of dialed in at the right level to get the optimal usage, etc., and efficiency that we want from both assets and being able to pivot up or down as needed. So really, it's more of a downstream opportunity that we're seeing as opposed to, you know, fundamental acetic acid demand.
Hassan Ahmed: Thank you.
Daryl: Thank you. Our next questions come from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.
David Begleiter: Thank you. Good morning. Scott, some of your peers have talked about nine to 12 months until supply chains normalize post the end to the conflict. It looks like you're targeting maybe a shorter timeline, sorry, through normalization. Can you talk to that timeline you're looking at? Thank you.
Scott: Yeah, thanks, David. Look, it's about scenario planning, and there's a lot of different scenarios that could play out. And as you kind of look at you know, the assumptions that we've made here that, you know, we start to things begin to unwind. And that begin of that unwinding, it just depends on what that kind of decline curve looks like in terms of volume and price based upon, you know, the speed of that unwinding. And I think that is uncertain. right now, but we felt like it was important to be prudent in terms of how things could play out because there's also a potential offset to demand with feedstock prices high and where they are, you know, there could be an impact to underlying demand. And so, you know, we kind of put all those things out there and again, you know, felt like it was the prudent, you know, guide for the second half. But also, as I said earlier, you know, look, we are ready and our team has done a great job of responding to the environment and here in the second quarter. And if we see that environment continue, then we'll go capture that upside.
David Begleiter: Very good. And just on EM, you've announced some price increases. So what's the cadence of price costs as we go through Q2? Are you ahead, behind, or neutral? And how's it going to the back half of the year? Thank you.
Scott: Yeah, we're starting to get some of that price flowing through, you know, as it is a kind of a slow uptick here in the second quarter. But it's important that, you know, we really begin to achieve that because the cost, while flowing through a little bit here in Q2, is going to hit us heavier. in Q3. And I think we should see that, you know, hopefully fully materialize in the P&L in the third quarter. And so it's important, you know, as we exit Q2 that we're achieving the maximum amount of that price. So we're certainly on the trajectory there. But, you know, the next six weeks here as we finish the quarter, it would be really important in that equation.
David Begleiter: Thank you.
Daryl: Thank you. Our next question has come from the line of Frank Mitch with Fermium Research. Please proceed with your questions.
Frank Mitch: Terrific. Thank you. And actually, David's question leads nicely into what I wanted to ask about, and that's on the acetyl side of things. I mean, as you look at the second quarter, my assumption, and please correct me and expand upon it, is that you're raising price in the acetyls upstream and downstream, and the expectation would be that you're going to end the second quarter at a higher price level than what the 2Q average would be such that we're going to start 3Q at a higher level. I mean, so a couple of questions. Is that how you're thinking about it as well? And, you know, based on your prudent guidance, are you factoring some measure of price degradation in the third quarter or how? How do you think about the price balance on acetyls and how we're going to enter the second half?
Scott: Yeah, Frank, I don't know on a global basis that that necessarily is the right assumption. We've already seen pricing in China start – to moderate from where it was at the beginning of April. So actually, I don't think on a global basis that's actually kind of the case of where things will be. I think we'll probably see that price in Asia stay where it is or possibly moderate a little more as we work our way through the quarter. In the Western Hemisphere, where pricing is now is probably similar to where it will be at the end of the quarter, you know, depending on where, you know, competitive dynamics are. So I actually think, you know, where we were in April was probably the higher watermark, just as we look at the cadence today.
Frank Mitch: I understand what you're saying about China. My understanding is that some of that was also demand destruction, so they actually don't have – you can't sell the products downstream, at least here in the near term. But in the Western world, would you assume that in North America that you would give back something on price in the third quarter?
Scott: I think it's TBD, Frank. I think volume, we've got a moderation of margins in price as you work your way through the third quarter. Just from a normal seasonality standpoint, Q2 tends to be the highest quarter from a volumetric perspective, typically in acetyl. So you would normally have you know, some volume, you know, come off in Q3 from a seasonality perspective through the holiday period. And so, you know, we've kind of factored, you know, some of that into the assumptions for Q3.
Frank Mitch: Thank you so much, Scott. Appreciate it.
Daryl: Thank you. Our next question has come from the line of Hassan Ahmed with Olympic Global. Please proceed with your questions.
Hassan Ahmed: Morning, Scott. You know, just wanted to sort of dig a little deeper about this sort of uneven sort of pricing dynamic regionally that you guys talked about within a CTEK. I mean, my understanding is that, you know, as I take a look at the raw material side of things, you know, just in the Middle East alone, there seems to be 26 to 27 million tons of methanol capacity that is offline, right? And obviously, methanol pricing across the globe has risen quite rapidly, including China, right? So I'm just trying to understand this recent dip that we've seen, particularly in Chinese spot acetic pricing. You know, where are the margins there? Are operating rates still relatively elevated? Just trying to sort of make sense of this uneven sort of pricing environment by region.
Scott: Yeah, Hasan, I think that's a good time to really call out the decisive actions that our team in asset deals has taken around the world in the quarter. They responded really quickly at the end of Q1 in order to take advantage of, you know, the margins started to move up there in China in particular. And that's really the only place that we saw, you know, benefit from some of the supply chain disruption in Q1. But they were really working to position for the second quarter. And as we kind of look at it, your margins were highest probably here in Q2 in China at the very beginning of the quarter, and they've come off. But we're certainly not at margin levels where they were at the beginning of 2026. So you're kind of in between where they were at the beginning of April and where they were when we started um the year and so it's it's somewhere in that that zone um you know we did see you know china was in holiday uh last week um came back uh today uh pricing did move up a little bit so we're gonna have to kind of see where how that holds and where demand is but demand is held relatively steady from what we can tell um you know through the value chain uh in china
Hassan Ahmed: Very helpful, Scott. And as a follow-up, can you just give us an update on where you guys stand with regards to any further potential divestitures?
Chuck: Yeah, Hasan. Yeah, we continue to work that, you know, very aggressively. And I would say, you know, the current events haven't helped the M&A market. But regardless, we do feel good about signing another deal this year. It could be a smaller deal, but we're working hard to get one signed. We have not baked in any assumption for cash proceeds from a deal, just from the uncertainty of, you know, kind of signing versus closing.
Hassan Ahmed: Very helpful. Thank you so much.
Daryl: Thank you. Our next question has come from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.
Kevin McCarthy: Thank you, and good morning. Scott, can you speak to your mix of contract versus spot business within Acetyls on a pre-war basis and speak to how that is evolving, if it's changing at all post-war? For example, if we consider VAM and some of the parabolic price action there, is your philosophy to sort of strike while the iron is hot and take advantage of this windfall opportunity, you might say? Or is it to really focus on upgrading your contracts and the terms and the mix, you know, with an eye toward the medium to longer term or some balance of those? Maybe you can just kind of talk through that and how you're thinking about it.
Scott: Yeah, let me just kind of step back a minute, Kevin. Our team is first focused on being the most reliable supplier in each region, in each product. And I think we've developed a network pretty deliberately for over many, many years that can achieve this and give us flex to be able to respond to what happens and what kind of landscape changes happen. you know, the pricing mechanisms that we have are different in each region, in each product, to be honest. You know, we've got, you know, some formula pricing in certain regions, particularly VAM in the United States that we've talked about. It kind of moves with raw materials, gives us a nice space, gives us cost pass-through. We've got a lot more, you know, contracted business in Asia, but moves with how the market is moving, you know, very quickly. And then we've got blends in the balance of the business in the US and in Europe on different mechanisms. And so this is about being ready in an environment like we are now. And so being able to flex with some extra volume gives us that ability to be that reliable supplier for customers and for new customers that are just coming to Celanese or just coming back to Celanese. And so it is about how do we get that business secured longer term? And we are securing business that we didn't have under agreement. For the second half. And so, you know, as that process works here in the second quarter, you know, give us better clarity on what the third and fourth quarter are going to look like as we are able to utilize this flex capacity that we have.
Kevin McCarthy: Thank you for that. And then secondly, I want to ask about your new strategic initiatives in nylon that you announced last night in the U.S. and Singapore. I think you're targeting incremental cost savings of $30 million. So maybe you can step through what you're doing there and comment on the cash cost to achieve those savings and the timing of the flow through of the $30 million in coming quarters or years.
Scott: Yeah, let me hit kind of the philosophy and the strategy around the changes, Kevin, and then I'll turn it to Chuck to talk about some of the details. You know, when it comes to Nylon 6-6, we've been very open about this now for more than a year. And as we said in the past, our value is in the compounding step of the process. And that's not changing here. And in fact, we're enhancing that. our compounding capabilities and our specialty products where we need to, to ensure the reliability of supply to our customers. And we've had a very thoughtful step plan to ensure the short and long-term sustainability of how we get polymer. And so being able to optimize this make versus buy on polymer is critically important And so these announcements around polymer capacity for us is really the next big wave of that commitment to improving the fundamental profitability of the nylon six, six business. And we believe these are the right moves for us right now. Um, you know, I think, you know, as we go forward, you know, we would expect about $30 million of savings. As you mentioned about a third of that will probably hit here in the second half of the year. And I'll turn it to Chuck to talk about other details.
Chuck: Yeah, thanks, Kevin. Yeah, like Scott said, about a third of that 30-minute chart is rolling in this year. Your question on the cash costs, think about that as sort of less than a one-year payback of that 30 million. That's been in our free cash flow forecast this year, so nothing incremental there.
Kevin McCarthy: Thanks so much.
Daryl: Thank you. Our next questions come from the line of Lawrence Alexander with Jefferies. Please proceed with your questions.
Lawrence Alexander: Good morning. Just wanted to flesh out how you're thinking on working capital, how much you think in your base case working capital will be a use of cash for this year. And as you think about this year and next year, is working capital just ebbing and flowing with your expectations around input costs or is there going to be some net drag on EBITDA at some point to work that to reduce your working capital position?
Chuck: Yeah, thanks, Lawrence. You know, let me talk about free cash flow this year and sort of talk about working capital within that. You know, if you look at our midpoint of our earnings guide, that's about a few hundred million of EBITDA growth this year. That will translate into free cash flow, but it is likely that it'll be split between 26 and 27 as it works its way through working capital. Right now, to simplify, we're assuming we collect about half of that increased EBITDA this year and half next year. So that would mean about half of that gets tied up in working capital. I think before that, we were assuming this year, actually, that working capital would be a a source of cash of, say, call it $100 million as we continue to reduce inventory and EM. So maybe working capital in this scenario is closer to flat for the year. And then I think you kind of ebb and flow with demand. But we do expect to continue to take inventory out of the system and generate tailwinds in working capital.
Lawrence Alexander: Thank you.
Daryl: Thank you. Our next question has come from the line of John McNulty with BMO. Please proceed with your questions.
Frank Mitch: Yeah, good morning. Thanks for taking my question. So on EM, with all the work that you've been doing and I guess some incremental work even this year, I guess, is there a way to think about maybe this year is not necessarily a normal year, I guess. Is there a way to think about what you think the mid-cycle earnings power of the business is now just given the you know, given all the changes that you're, that you're completing and also maybe a more normalized demand environment.
Scott: Yeah. Thanks, John. Um, you know, the words that we used in the prepared comments, I think are, are important to think about here. It's, it's really about growth and Fortify. And as we, as we think about the Fortify piece, I mean, that's, you know, we've been working that hard with the cost reduction actions that we've taken out, the efficiency, that we've been able to drive, how we're adding technology to the business with our Camille platform. We are strengthening this business and positioning it to be able to ready to respond to customer needs. The other thing that the team has been working really hard on is kind of building a really deep segment approach focused on where we can win and where we can hold that business. So where we have a differentiated offering in growth sub-segments in things like medical, electronics, data centers, some key growth industrial applications, high performance, athletic wear, there's just a lot of really great work the team's been doing in these high growth areas. And so positioning well there, building the pipeline so that we can hit that growth piece going forward. And look, growth is always hard. Growth is even harder when the world around you isn't growing broadly. But there are pockets of growth here, and that's really where that focus is. And so it's hard to say what mid-cycle will look like. We do not believe we're anywhere near mid-cycle demand in kind of our historical key end uses, as well as you know, some of these emerging growth areas. So as we work that, as we continue to build out what we think the addressable market space is there, then we'll provide that color in the future.
Frank Mitch: Great. Thanks very much for the call.
Daryl: Thank you. Our next question has come from the line of Matthew Deyo with the Bank of America. Please proceed with your questions.
Matthew Deyo: Good morning. To touch a little bit on this, right, I think there's a desire amongst investors, really sell side as well, to just get a better handle on what EM is now, given just the kind of asset aggregation and enclosures and repolymerizations and closures. I get the core identity and thesis behind Fortify. But at the end of the day, what is – an achievable, I don't know, I don't want to call it mid-cycle because it's not necessarily a pure commodity business, but what should the people or what should the market think about as a reasonable expectation on profitability for this business under normal demand, normal kind of market structure?
Scott: Yeah, thanks, Matt. There's a lot to unpack there. What I would say is this is a business that is customer focused with an eye towards building unique solutions. And it's a business that we've been working hard over the last three and a half years to make sure that we're well positioned in the environment that we're now in globally with a lot of the competitive landscape that's changed to be able to win. And it's a business that has unique capabilities. It has unique products and it has a unique ability to be able to get polymer solutions to do just about anything. And we've got a great model that I think ensures that the things that we're working on are going to drive the profitability on our worth, the time and effort that it takes to work these solutions. And so it, I think what we've been able to do now is take a business that was performing, you know, on an EBITDA basis in the low teens now to one that's now consistent performing, you know, north of 20%. And the idea is to keep moving that upward. Even if the world around us is not growing, we are focused on growth. And when you look at and kind of back into, you know, our assumptions for this year and you normalize out Micromax, and the $40 or so million of EBITDA that comes out of that, this is a business that's going to grow year over year, even though its end markets are not growing. And so I think that's the way to think about it. It's a business that should be able to grow like we did in the past, going back five, 10 years ago, at 5% to 10% minimum on the EBITDA line, and a business that's consistently going to find a way to be able to deal with whatever the global environment is. And if we see a normalization of demand back to mid-cycle, and it's hard to say what that looks like because the world's changed quite a bit, then I think you also possibly get kind of a hockey stick lift on that at some point. So it's about being consistent. It's about being ready. And it's about continuing to take the hard steps to ensure that we have the cost structure in place to be able to win in a very competitive landscape.
Matthew Deyo: All right. Thank you for that. And If I could just ask on the acetic side, I've never really trusted some of the consultants when it came to U.S. acetic prices. But to your point, Asia's off-peak, and that would lead me to believe absent another leg higher, it remains maybe a bit curiously below Western markets. So how does that sustain? Well, first off, is that right? Because again, I don't have confidence in the U.S. pricing, I guess. But how does this sustain? And then How does weaker acid pricing not translate to weaker VAM or would that weaker acid back up into methanol? Like how possible is this just stays kind of relegated to one market? I would assume it's not, but I just want to hear you opine on it.
Scott: Yeah, Matt, as you know, I'm old and I've been here at Celanese for 21 years. And when I joined Celanese, you are, what we now call acetyl chain business was an acetic acid business. And now it is an acetyl chain business. And it's a business that doesn't rely on us just selling acetic acid in order to be successful. And back then, 20 years ago, over half of what we sold to an end customer in this business was acetic acid. That is very much not the case anymore. And so some of the dynamics that you talk about, we are very much less susceptible to those acetic acid movements. And yes, you are going to see acetic acid pricing in some regions roll through into the downstream, but it usually takes some time, both on the way up and on the way down. And so it's about managing that. And it's also then continuing to position for the pockets of growth that are in this business. And yes, they've been small, but there have been pockets of growth for us in the vinyl emulsions part of the business, as well as in redispersible powders. And in the environment we're in now, we're finding ways of which to expand that. As I mentioned earlier, with some of the switching that customers want to do away from oil-based systems, this is giving us a nice advantage. And the opportunity is now for us to go get that business, get it contracted, and extend it into next year and beyond.
Daryl: All right. Thanks, Scott. Thank you. Our next question has come from the line of John Roberts with Mizuho. Please proceed with your questions.
Edwin Rodriguez: Thank you. This is Edwin Rodriguez for John. Good morning, everyone. A quick one, Scott. So in this inflationary environment, like how concerned are you about demand disruption in the later parts of the year? And related to that, are you seeing any signs of pre-buying by customers that are trying to get ahead of price increases that they're seeing coming?
Scott: Yeah, thanks for the question. Yeah, look, it's something that we're very much concerned about and we're watching very closely. And it factors into the scenarios that we put out for the second half. And there's no doubt that's something that we are looking at. And we put it in our prepared comments that, you know, particularly in engineered materials, that, you know, we may be seeing a front loading of some of that volume. And so that certainly factors into the guide that we made for the second half. I don't think we're seeing much of that in acetyls, to be honest with you. I mean, the products that we have there largely are liquid bulk chemicals, and they have some element of shelf life as well as storage limitations around the world. So I don't think it's much of a factor there, but it's certainly something that we're cognizant of on the engineering materials side of the house. Okay, perfect. That's all I have. Thank you.
Celanese Management: Daryl, we'll make the next question our last one, please.
Daryl: Thank you. Our final questions will come from the line of Josh Spector with UBS. Please proceed with your question.
Chris Perrella: Hi, good morning. It's Chris Perrella on for Josh. Can you size the palm turnaround impact in the second quarter there? You might have missed that earlier. And is the later restart dependent on the ability to get feed out of Evensina, or can you make the economics work buying methanol to feed the plant there? And I guess the corollary is, are you seeing raw material sourcing issues, particularly in Asia at this point?
Scott: Yeah, Chris, let me start and I'll let Chuck fill in the details. Let me hit the second part of your question first. No, we have already moved and we are moving methanol from our plant in the United States over to Europe. So, you know, our POM unit in Europe, you know, either uses source methanol from the market or uses our own cost-based U.S. natural gas-based material.
Chuck: Yeah. And let me talk about... kind of walk Q1 to Q2, both the turnaround and some of the other inventory. So in Q1, we built POM inventory, hit the income statement, $25 million benefit in Q1. Now in Q2, we're going to draw that POM inventory down, but we will build some nylon for the transitions that we've talked about. Expect a net $10 million absorption hit to the income statement in Q2, plus about $15 million of turnaround expense. As you know, From the guide, we do expect to offset the majority of that $50 million sequential headwind through the volume improvement and pricing actions we've talked about.
Celanese Management: Perfect. Thank you. Well, thank you, everyone. We'd like to thank you for listening in today. And as always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call.
Daryl: Ladies and gentlemen, thank you so much for your participation. This does conclude today's teleconference and webcast. Please disconnect your lines at this time and have a wonderful day.
