The operator introduces the Celanese Corporation's second quarter 2024 earnings call and webcast. The host, Bill Cunningham, Vice President of Investor Relations, is joined by CEO Lori Ryerkerk, COO Scott Richardson, and CFO Chuck Kyrish. Non-GAAP financial measures will be discussed and cautionary language regarding forward-looking statements is provided. The call is open for questions and the first question is from Josh Spector of UBS, asking about the moving pieces within Engineered Materials and the market's stability.

The speaker responds to a question about expectations for the company's performance in the third quarter, stating that they are not anticipating significant changes in market conditions. They expect moderate growth in volumes and margins due to their product pipeline and cost savings. They also mention a potential increase in auto builds in China and access to new customers through the integration of Celanese materials. This gives them confidence in their outlook for the second half of the year.

The speaker discusses their company's efforts to identify new customers and orders, particularly in the areas of auto, ICE, Engineered Materials, and hybrids. They mention the success of their applications in electric vehicles with nylon, which was not previously a focus for the company. They expect improvements in the fourth quarter due to synergy capture, the full year impact of Clear Lake, and a change in mix with the acquisition of M&M. They do not anticipate significant changes in market conditions.

The speaker adds that the commercial organization in the Engineered Materials business has been integrated and is starting to show success. They also mention the impact of the macro environment and the resilience of their teams in delivering results. If the situation worsens, they will continue to innovate and find sources of value. They expect stability in Europe for the third quarter and anticipate self-help measures to lift them in 2025. The run rate in the second half of 2025 is expected to continue through the entire year.

The company expects to see continued benefits from various factors, including M&M synergies, productivity from Clear Lake, and interest rate benefits, which will contribute to the 2025 results. However, it is too early to predict the economic conditions in 2025. The company is still in force majeure due to disruptions in the supply chain, but expects to lift it this quarter. They are currently focused on addressing the issues and maintaining good relationships with suppliers, and discussions about restitution will come later. The all-in cost impact for the second quarter was approximately $35 million.

In the next quarter, the company expects to see an additional $5-10 million. There has been some competitive pricing in the market due to lower costs of commodity nylon, but the company's strategy to shut down standard grade polymerization has mitigated the impact. There has also been some margin pressure due to increased raw material costs, especially in palm. The outages at Clear Lake were caused by carbon monoxide issues and there were no other sources of inefficiency in the quarter.

The speaker discusses the company's suppliers and the various raw materials they source. They mention that the issue is broader than just CO and that they buy multiple materials for acetic acid. The speaker also talks about their preference for selling acetic acid and mentions fluctuations in profitability depending on market trends. They mention success in driving growth in Asia through expanded capacities and working with customers in India. The speaker notes a more balanced market in the Western hemisphere.

Lori Ryerkerk, in response to Ghansham's question about the state of the macro environment, states that she believes it is relatively stable. She notes that the automotive industry has been strong in the US and Asia, but has weakened in Europe. Consumer and electronics have also been stable globally, but their own portfolio has seen growth due to project pipeline and team efforts. In acetyls, construction and paints and coatings have remained stable at a low rate, with no expected seasonal uptick in the third quarter.

The speaker discusses the impact of force majeure on the company's earnings, stating that it will result in a reduction of $30-45 million for the full year, equivalent to $0.35 on the EPS line. They also mention that the remaining reduction is estimated to be $0.65 at the midpoint.

Lori Ryerkerk explains that there are four main factors driving the reduction in price and volume for the company. These include supplier issues, productivity, construction and coatings margins, and the ability to pull through lower raw material costs. She also mentions that the company may only get about half of the expected pull-through in lower raw materials this year. Looking ahead to 2025, she expects about half of these factors to come back, and also anticipates additional benefits from synergies and deleveraging.

The speaker is discussing the company's performance in the second half of the year and their expectations for the future. They mention the impact of the Clear Lake supplier issues and the potential for increased productivity and synergies in the coming year. They also mention the potential impact of interest rates and the current weak demand for constructions and coatings. A question is then asked about potential adjustments to production in light of the resumption of production at Clear Lake.

The speaker discusses the company's strategy of matching rates with demand and rebuilding inventories to maximize flexibility. They also address the impact of new assets in China on the global market, noting that excess product from these facilities has primarily affected the Asian market and led to a decrease in European exports due to low margins.

The speaker discusses the economics of demand for their products in Asia and how it has affected their channel to Europe and the US. They also mention potential divestiture opportunities for assets that may be worth more to someone else. They state that they like having an integration in methanol and consistently reevaluate their balance. The company has paid down $500 million in debt in the second quarter and plans to pay down another $500 million in the third quarter, but there are some unknown factors that could affect this in the fourth quarter.

The company expects a decline in interest expenses in the second half of the year due to paying down low-coupon bonds and using cash at good rates. They also plan to focus on controlling what they can control and launching new projects to achieve margin expansion. The Clear Lake expansion is expected to contribute about half of their $100 million target this year and the other half next year.

The speaker, Chuck Kyrish, responds to a question about the company's lowered CapEx range and confirms that maintenance CapEx typically runs between $300 million and $350 million. He also explains the confidence in doubling the synergies in the second half of the year, mainly through cost-cutting measures and the shutdown of the Uentrop facility. The next site closure will occur in the fourth quarter.

During the second half of the year, the benefits of the company's operations are typically more significant than in the first half. The company has seen lower levels of participation in the spot market for acetyls and tow products before the outage, but they expect a ramp-up in the second half. The company's medical business has been stable and focused on growth in areas such as implants and drug delivery.

The speaker discusses the fluctuations in their medical implant business and states that it has been stable and growing. They also mention their focus on maximizing the flexibility to make or buy their products and how it has helped them in situations such as supplier issues and low-priced raw materials. This approach will continue to be their priority in meeting customer demands and navigating operational challenges.

In response to a question about the nylon market, Scott Richardson discusses the three categories of business in the market and the importance of playing in all three. He also mentions that the company has closed over 400 projects in the first half of the year, showing the success of their strategy. He emphasizes the importance of flexibility in building a successful and growing nylon business.

During a conference call, Salvator Tiano from Bank of America asked the operator about the $25 million package and its impact on Q3. Chuck Kyrish explained that the inventory changes were due to footprint actions and normal fluctuations in product demand. Tiano also asked about next year's synergies, and Lori Ryerkerk clarified that they are targeting $150 million for 2024, which is double the amount for 2023. She also mentioned that they are currently focused on achieving these synergies for 2024 and do not have an exact number for 2025 yet.

The company expects their synergy to be based on their actions this year, with a moderate increase in automotive volumes and stable performance in the tow business. They anticipate a full year of CLK productivity and interest rate reductions to contribute to their performance in 2025, but it is too early to provide a confident number for that year. The non-contracted sales for tow were weaker in the second quarter, but the contracted part of the business is performing as expected. The company does not expect this trend to continue.

The speaker discusses the contemporary business model for nylon and how the team has embraced a different way of operating. They are focused on cost control and increasing returns, and are prepared to adapt to changes in the market. The question is then raised about whether the weak carpet and textile markets in China are causing a shift from fiber to plastics in the nylon market.

John McNulty from BMO Capital Markets asks about the expected benefits from lower raw material costs and whether they will be pushed out into 2025. Lori Ryerkerk responds that they were not able to capture the benefits this year and there is no guarantee they will be there next year. She also gives an update on the acetic acid market in China and the potential impact of downstream assets coming online.

In the paragraph, Lori Ryerkerk and Scott Richardson discuss the expected uses of plants and the current demand for acetic acid and other products. They mention that while some plants are up and running, they are not consuming the expected volume of VAM due to weak end-user demand in the construction and solar sectors. This has led to compression in VAM margins. They conclude by thanking listeners and offering to answer any follow-up questions.

This summary was generated with AI and may contain some inaccuracies.