Eastman Chemical Q1 2025 Earnings Report

Eastman Chemical EPS Results

• Actual EPS: $1.91
• Consensus EPS: $1.89
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $1.61

Eastman Chemical Revenue Results

• Actual Revenue: $2.29 billion
• Expected Revenue: $2.35 billion
• Beat/Miss: Missed by -$63.14 million
• YoY Revenue Growth: -0.90%

Eastman Chemical Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: After Market Closes
• Conference Call Date: Friday, April 25, 2025
• Conference Call Time: 8:00AM ET

Eastman Chemical (NYSE:EMN) Company operates as a specialty materials company in the United States, China, and internationally. The company's Additives & Functional Products segment offers amine derivative-based building blocks, intermediates for surfactants, metam-based soil fumigants, and organic acid-based solutions; specialty coalescent and solvents, paint additives, and specialty polymers; and heat transfer and aviation fluids. It serves transportation, personal care, wellness, food, feed, agriculture, building and construction, water treatment, energy, consumables, durables, and electronics markets. Its Advanced Materials segment provides copolyesters, cellulosic biopolymers, cellulose esters, polyvinyl butyral sheets, and window and protective films for value-added end uses in the transportation, durables, electronics, building and construction, medical and pharma, and consumables markets. The company's Chemical Intermediates segment offers olefin and acetyl derivatives, ethylene, and commodity solvents; and primary non-phthalate and phthalate plasticizers, and niche non-phthalate plasticizers for industrial chemicals and processing, building and construction, health and wellness, and food and feed. Its Fibers segment provides cellulose acetate tow, triacetin, cellulose acetate flake, acetic acid, and acetic anhydride for use in filtration media primarily cigarette filters; natural and solution dyed acetate yarns, and staple fiber for use in consumables, and health and wellness markets; and wet-laid nonwoven media, specialty and engineered papers, and cellulose acetate fibers for transportation, industrial, agriculture and mining, and aerospace markets. The company was founded in 1920 and is headquartered in Kingsport, Tennessee.

Eastman Chemical Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, everyone, and welcome to the First Quarter '20 '20 '5 Eastman Conference Call. Today's conference is being recorded. This call is being broadcast live on the Eastman website, www.eastman.com. We'll now turn the call over to Mr. Greg Riddle, Eastman Investor Relations.

[Operator]

Please go ahead, sir.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Thank you very much, Becky, and good morning, everyone, and thanks very much for joining us today. On the call with me are Mark Costa, Board Chair and CEO Willie McClain, Executive Vice President and CFO and Jake LaRoe and Emily Alexander from the Investor Relations team. Yesterday, after market close, we posted our first quarter twenty twenty five financial results news release and SEC eight ks filing, our slides and the related prepared remarks in the Investors 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.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Actual events or results could differ materially. Certain factors related to future expectations are or will be detailed in our first quarter twenty twenty five financial results news release, during this call, in the preceding slides and prepared remarks and in our filings with the SEC, including the Form 10 ks filed for full year 2024 and the Form 10 Q to be filed for first quarter twenty twenty five. 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, available in the first quarter twenty twenty five 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 and A.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Becky, please let's start with our first question.

[Operator]

Thank Our first question comes from Patrick Cunningham from Citigroup. Your line is now open. Please go ahead.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Hi, good morning. First, just on the lower sales guide for Renew. I guess, first, what has been the sales and EBITDA contribution in the first quarter? And I'm just curious on the level of confidence in the low end of the sales guide. How much visibility do you have into order books?

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

And is there a floor for that EBITDA contribution just based on cost performance and volume that's already contracted?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Certainly. And good morning, Patrick. When it comes to the overall Methanalysis program with Kingsport, things are actually going quite well on the operational side. We've had a very successful quarter of running the facility at high rates. We've maintained an 85% yield on the DMT feedstock from the hard recycle stream or we're finding ways to use even cheaper versions of feedstock.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So operations are really good. If you annualize sort of the production rate that we had in the first quarter, we're very much on track for that 2.5 greater production volumes. So when you put that together with the absence of the startup costs in the first quarter, it's generated a considerable amount of earnings in the corporate other area around $25,000,000 in that absence. When you look at the overall cost program we're on for a full year basis, we're pretty much on track to get our $50,000,000 of EBITDA from the manufacturing cost side of the equation out of the original 75,000,000 to $100,000,000 guide. So I'd say on the operational side that $50,000,000 certainly showed up in the first quarter as expected and expect will continue to show up through the year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

When it comes to the renew side of things, on the revenue side, we originally had given you a guide back to the deep dive of 75,000,000 to $100,000,000 of renewed revenue. That was based on the assumption around the economy being relatively stable in consumer durables, stable modest growth in packaging for food applications etcetera. So basically a continuation of the dynamics we had for 2024 would continue into 2025. And that was for sure true through the first quarter. But what happened is with the trade dispute tensions developing and the discussions of tariffs, especially the tensions between China and The U.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

S. And where the tariffs have now gone. The rate and growth of the consumer durable market that is largely made in China and shipped to The U. S. Is now in question about how that market is going to hold up, right?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

With the level of tariffs that we currently have, it's not economic to import those kind of products. So the revision that we've given you from 50,000,000 to 75,000,000 of revenue now versus the higher rate is purely an end market estimation of the impact of tariffs. It has nothing to do with the engagement we're seeing in the marketplace, but we certainly don't expect the same kind of growth in those kind of products for the year. When it comes to engagement, customers are still very much engaged as we said on the durable side. We have over 100 customers.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

The economic tensions are certainly slowing the rate of product launches. If you can't import a product from China, you can't launch a new product. So that reduces the rate at which the new product launches or the new content can be brought to market. So that factor is being managed. We've only had a few customers revert back to normal Triton because of the premium that they're trying to avoid in this economic time.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So I would say market engagement there is still good. It's just a question of where these tariff disputes go. If they're resolved soon this quarter then things would start to recover and get back to normal. They'll actually have to restock because they're pulling inventory down below normal levels right now to avoid paying the tariff. So we certainly aren't sitting on a big amount of finished good inventory in the plant given we've been in a recession for a while.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And then what I'd say on the food packaging side on our pet engagement is also good. The brands are really facing some significant limitations on mechanical recycling in a variety of applications and are very much engaged in trying to find ways to buy some ARPAT for us and applications where there's high quality aesthetics required or certain technical performance requirements that mechanical can't meet. So we're still making good progress to be able to sell ARPAT in the back half of the year as we convert that Triton line over to making PET that we discussed before. So overall, say we're in good shape and it's just a market question around tariffs.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Very helpful, Mark. And then maybe just on fiber, it seems to be getting double hit on some tariff related impact and persistent destocking. How long do you anticipate this destocking to persist? And how should we think about contract performance in the next couple of years and potential further normalization from here?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yes. So certainly, the overall Fibers business has some challenges to it. As you said, there are sort of two separate challenges. I'll start with the destocking one first. First, there's no change we've seen in the in market growth rates.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So that is not part of what's going on as far as we can tell. So market growth rates are still modest in the one to 2% rate as the traditional cigarette market is declining in the 2% to 3% range, but the heat not burn cigarettes offsetting it. We've talked about that in the past. So that part is actually quite stable. Our contract rate for the year of this year is around 90%, which has put the prices in place for the year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So we're in very solid shape on a pricing point. So as you said, you know, it's really a question of, you know, what's driving the volume decline. But if the markets are stable, then by definition, you know, it's a dynamic around customer destocking as the principal driver of what's going on. You know, as I said before, tow is incredibly small percent of the final price of a cigarette, about 2%. So the cost of it is not a high priority when you're selling cigarettes that are greater than six 60% gross margins.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

You know, the focus always starts with security of supply. And when the market got incredibly tight in that 2122 time frame, customers were building inventory. And as we've now discovered, building a lot more inventory than we fully understood. One of the challenges with customers when you're in situations like a very tight market is no one wants to tell you how much inventory they have because they're afraid you will not supply material to them, you know, as much as they might need going forward. So you get this dislocation of, you know, inventory, and we certainly lived through that in the 2223 time frame where we discovered just how much inventory people had built over time.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And so the destocking is going a bit longer than than we expected. And the reason the destocking started, I should have mentioned, is the market has loosened up a little bit. So there's some capacity that's been added in China. If you look at it from a 23 to 25 of view, that capacity is around 5% of the ex China market. So the capacity utilizations have now moved down into that lower, you know, 90% range 95% range.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And with that room, the customers feel safe in destocking. And that's what we see going on. And and what we're going to see in the second quarter is something similar to the first quarter. I've learned my lesson around predicting how long destocking is going to last. Certainly, we expect some of it to continue in the back half of the year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And we're still working with our customers to truly understand exactly where, you know, where this all sits. But the good news is the fundamentals are there. The capacity utilization is still, you know, in the nineties. You know, the markets are not declining in some significant way, And I think that gives us stability. The contracts, as you asked, are about 80% for next year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

You know, most of those are multiyear contracts, some are annual. They generally include pricing, a lot of it's CPT pricing that actually gives customer protection on, you know, making sure the margins are tracking with, you know, raw materials. So overall, I'd say we feel like the market, you know, is certainly facing that challenge and it's going to continue a bit more than we expected. It's good to remember there are a couple of other dynamics driving earnings down. We had a discontinued product from customers of about $10,000,000 and energy is a bit of a headwind this year relative to last year and outflows in.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

The second part of this discussion of course is around the impact on the tariffs with China. We do have two products that go into China. One is the textiles, the naya product, which has been a great growth story for us and half of nai that we sell is in China, the other half is outside of China. It's a huge market. So it's a time based issue for us to if these tariffs last for a period of time of just winning market share in mills outside of China to replace what we do in China.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So that one is manageable and we have some inventory in place to mitigate some of those issues now. When it comes to the flake, this is, you know, cellulose flake that you spin into fiber, and we do this with the Chinese national tobacco company. Obviously, the rates are, you know, pretty high there, and and so we'll have to just see how those tariffs evolve over time. So that's a more specific thing around, you know, what's going on with the tariffs, and we'll have to just see how long the tariffs last with China. When you put them together, obviously, creates a bit more challenge for this year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

It's still extraordinary earnings compared to our past and great cash flow that comes out of this business.

[Patrick Cunningham, Vice President, Senior Analyst at Citigroup]

Very helpful. Thank you.

[Operator]

Thank you. Our next question comes from David Begleiter from Deutsche Bank. Your line is now open. Please go ahead.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you. Good morning. And first, congrats on being recognized for your support of veterans and active duty service members. Very well done.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Thank you.

[David Begleiter, Managing Director at Deutsche Bank]

Mark, on your China sales of the portion roughly 60% supply from The U. S, if these tariffs stay in place, how much is at risk do you think of perhaps just going away? I know you addressed Fibers, but how about AM and AF and P? Thank you.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

David, a lot of these questions are really sort of situational specific to the segment. So I just suggest that address the fibers part, where half of it is very much adjustable to move out of the country, rather mitigating actions we're pursuing around the flake supply. So I think there's lots of different ways over time to manage the fiber side of the equation. When it comes to CI, just to be clear, no exposure. Nothing to worry about there, frankly, probably upside in CI, which is primarily selling in North America and the tariffs that we have coming in this country from products around the world that sort of set the price in the marketplace, you know, over time will give us some some lift there.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But in the short term, modest just because of the competitive situation. When it comes to AFP, the exposure in AFP is more limited. Similar to Fibers, it's around $200,000,000 of revenue in 2024. But a lot of the segment does not have exposure to China from a U. S.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Production point of view. So our Specialty Fluids business, have production outside Europe. When it comes to all of our amines business in Care and Ag, we've got assets in The US, but, you know, our largest assets in Europe, so we have more and assets in China. So we have lots of different ways to serve those markets locally around the world. And a lot of the coating related products, we don't really sell into China.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But there are a couple of very high value specialty products like our cellulose additives that go into a wide range of coatings from, you know, cars to pharmas to some other packaging applications, and that that is exposed. It is a proprietary product that only we make. The margins on this business are pretty high. So short term, it's hitting us in Q2 because our customers are well stocked on inventory because it's so important they carry a lot of inventory in their formulations. And so we certainly see them not buying this quarter hoping for a resolution between The US and China discussions.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But it's a very important functional product where there really isn't a substitute. And then so we have an ability to pass on some of that duty cost if we need to and find ways to work with our customers, you know, when they get back to, you know, ordering after they've used up their their stock. So I think that one is also the category of of manageable over time. In advanced materials, is obviously the largest segment from a revenue point of view in China, there are really three businesses that have different stories. Interlayers makes the products in China, so no issue there.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Performance Films historically has used a lot of product made in The U. S, but that's why we did the acquisition of DaiLand to have our own Performance Films manufacturing capability in China. We also did an expansion of our capability in Germany. And so those two assets are in the middle of ramping up for this specific reason of being more local and diversified how to serve the market. And so we'll have some that we're not going to have that much impact this quarter because of the inventory in place for performance films.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

We'll have some impact as we balance out the ramp up of these assets relative to what we make in The U. S. But we can supply that market long term from other locations in The U. S. And then Specialty Plastics clearly has exposure when they're made here in The U.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

S. And those products were sent to China. On that front, we're also not getting that much of an impact this quarter because the customers are sitting on inventory. And the real question in especially plastics is a lot of what we sell into China, especially Triton, is then re exported back to The U. S.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And Europe and other markets, and a lot of it into The U. S. So the main issue is how long do the tariffs stay in place that make it very expensive to buy an appliance or water bottle or whatever else in The U. S. That's made in China.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So there's some uncertainty and risk around how those supply chains adjust to that. All these companies that make all these appliances have to get the product from somewhere. The retail clients need products from somewhere. A huge amount of effort going on around the world right now to, you know, find ways to source and make these products, you know, ramp up production, and we'll follow the customers wherever they move around the planet, you know, because Triton is a unique product. There is no easy substitute for Triton.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

There are different plastics you can use, but they all come with significant compromise. You either if you go to polypropylene, it's very cloudy and not clear. If you go to a variety of different styrenics, the toughness or the chemical resistance, you know, from other products all create failure modes in how well the product performs in the market. So you can go if you want to compromise your product on the shelf, but otherwise, you really want to keep using Triton. And so we'll certainly feel some of that risk and impact if these tariffs stay in place through the back half of the year as these supply chains move around and the market here in The U.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

S. Has been impacted. So overall, that's sort of where we stand. When you put it all together, we've told you there's about a $30,000,000 impact in Q2. It's honestly with all these uncertainties around tariffs and where they may negotiate, it's hard to predict what this impact is in the back half of the year.

[David Begleiter, Managing Director at Deutsche Bank]

Very good. And just lastly on Longview and the DOE funding. I know you've been getting some funding every quarter the last couple of quarters. What's your level of confidence in this funding continuing under the current administration?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

We feel good about the executive order. Sorry, I just lost my track of thought. We feel very good about where we are with the DOE. They have been highly engaged with us. We think that we've got a good relationship there and we think that our project actually holds up well in the way President Trump thinks about US manufacturing.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

When you look at it, we're focused on growing U. Manufacturing. It is a serious issue. Manufacturing hasn't grown here in this country. It's been growing around the world.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And the vertical integration and all the products that go into manufacturing of finished products is equally important if you want to have national and economic security. So there's actions that I think we should be taking. Strategic transactions that are focused on specific issues around this topic make a lot of sense. We need a lot of regulation that reduces, you know, the difficulty and cost of building here, you know, tax and other incentive policy workforce. A variety of things I think we're very aligned with, You know, the current administration is important, and this project fits all of these criteria.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

When you look at these circular investments, we're building infrastructure to deal with plastic waste. Right? And it's also a national security way to make raw materials for food packaging, medical, etcetera. It's on touring jobs from Asia because most of all the PET business has now gone to China. And you're creating revenue way beyond just our facility and supporting it to grow the recycling infrastructure behind us and being a better supplier to local manufacturing of plastic related products in the market.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So it checks all the boxes on that front. It also is a version of energy independence. Plastic waste is basically oil sitting above ground and you're reusing it instead of throwing it away. And this process is advantaged relative to Paris Island at any oil price above $60 So economically advantaged as well. And from a voter point of view, there's no one there's lot of debate on climate, but there's no debate that people don't like plastic waste in their environment no matter which side of the aisle they sit on.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So we think we're in really good shape on this. The so far everything I just said seems to be aligned with what the DOE is looking for in the conversations we've had with them. We've been receiving our funds in Q4 and Q1. There's a lot of staff change going on in the DOE right now. So we're moving a little slow in how we sort of finalize the next phases of the contract.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But we're not getting any indication that the project is at risk.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you very much.

[Operator]

Thank you. Our next question comes from Aleksey Yefremov from KeyCorp. Your line is now open. Please go ahead.

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Thank you. Good morning. I wanted to ask you, there's a lot of concern about consumer health in the businesses where your products end up in consumer, I guess, such as auto films. Are you seeing any meaningful slowdown in demand?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

On auto demand? Just consumer discretionary demand across

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

the Consumer related demand. Right.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yes.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Look, in our Q2 guide, we basically called out two dynamics that took us from where we were originally to now, both of which are trade related. So I already covered the impacts the direct impacts of trade, which is at $30,000,000 But the other impact, as we tried to explain in our prepared remarks, is seasonal growth is typically really strong for our portfolio when you go from Q1 to Q2. And that is what drives going from 1.9 dollars to some higher EPS in a normal situation. We still see seasonal growth now, but we don't expect it to be as strong as what would have been normal. And that is very much related to consumers being concerned about the world and what's going on.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

You can see the confidence decline. You can certainly see consumer purchases on discretionary items right now increasing, right? People are buying cars, people are buying blenders, whatever else because they're worried about tariffs coming. So the consumer data would lead you to believe that there's a certain amount of growth going on. But in some sense, what you're doing is you're pulling forward consumer demand from the second half into now.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And there's people worried and being cautious about what they want to spend in general. That's creating a lot of fog in what's really going on. But as a company, whether it's us or our customers, you have to be considering multiple scenarios right now, one of which is freight gets resolved quickly and everything's okay. But you also have to prepare the more difficult scenario where these tariffs stay in place for a longer period of time and impact demand. And so we can see customers being a little bit more cautious on just how much inventory they want to build.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And that's sort of the dynamic we're looking at here in the second quarter is not seeing as much growth. I mean there is a risk where we don't make much progress on some of these trade issues and you start getting people more nervous about when this is going to get resolved and you could see some more destocking towards the back end of the quarter. But we'll just have to see how that all plays out.

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Thanks, Mark. And just listening to your remarks about how tariffs are impacting your businesses, it seems like initially you maybe had some inventory in China that allowed you to mitigate it. Is it fair to say that if this tariff does not change in the second half, you may see a larger negative impact, direct negative impact from the tariff? That is not the case because you have some other mitigating measures? I just couldn't quite understand the net result of these two.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Sure. So again, guys, but I got to go segment by segment because it's a different story. So I don't think there's any additional risk in the Fibers business. With the mitigating actions we have in place, I would expect that number to be relatively steady as you go through the rest of the year if things are not resolved. Same is really true of AFP.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I think there may be some modifications or mitigations there, but where things are a bit better in the back half of the year versus where we are now where the customers aren't buying at all. And then so it's got probably some moderate upside. And then when it comes to the Advanced Materials segment, that's a little bit more complicated, right? Again, Interlayer is fine. Performance Films does have inventory in the marketplace right now, so that will run out at some point as you go in the back half of the year.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But they're ramping up plants to replace a bunch of inventory from being made in China or in Europe. So hard to say exactly how that balances out, but I'd say that the headwind in back half is a little bit more than the first half on And then on Specialty Plastics, you know, the headwind there would be more than where we are now, you know, with the second quarter. You know, people stop buying, you know, all these appliances and consumer durables. We'll have downside on the durable side, and then we'll have upside on selling more PET in the back half versus the first half as we start taking that to market. Obviously, that's lower margin, so it's not gonna be a total offset.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So some more exposure on SP in the back half versus the first.

[Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Thanks a lot, Larry.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I would note there are mitigating actions, you know, that we're taking that are a lot broader across, you know, just, you know, inventory. So we certainly have done that. We're ramping up plans. We're definitely working with a lot of customers around how they're moving to other parts of the world to make products. So there's a lot of that going on right now.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

You know, if we're under pressure, imagine what it's like being someone sourcing a blender, you know, from China right now. You know, they're highly motivated to find solutions and we'll follow them where they go. There's gonna be pricing opportunities that we're gonna find across the portfolio. And there's gonna be volume growth opportunities that we've you know, that we can realize here in The US. We've got opportunities when it comes to, you know, direct competition being a bit more expensive as it's being imported.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

You know, so we're gonna see some benefits, you know, in in those kind of areas. You know, for example, in specialty plastics, we'll see some of those benefits when it comes to, you know, thinking about parts of the portfolio in in AFP. We'll see some benefits around ag and even things in CI we'll see benefits like FloorTile. So there's a bunch of different examples moving around where there'll be some growth we should realize in The U. S.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I mean we are the ultimate company with a low cost structure to serve the North American market across all these different products that we make.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Let's go to the next question, please.

[Operator]

Thank you. Yes. Our next question is from Vincent Andrews from Morgan Stanley. Your line is now open. Please go ahead.

[Vincent Andrews, Managing Director at Morgan Stanley]

Thank you and good morning. Mark, could you talk a little bit about the CapEx reduction and sort of what triggered the decision you made on, I guess, of deferring that CapEx at Longview? And are there any sort of costs associated with doing that in terms of the overall cost of the plant? Seems like timing is not changing, but just curious there.

[William McLain, SVP & CFO at Eastman Chemical Company]

Morning, Vincent. Thanks for the question. So as we're looking across the scenarios that Mark has outlined, obviously being prepared for the potential downside of an extended trade dispute, we looked at now as the right time to optimize both efficiency and effectiveness of the CapEx reduction. Obviously, we're in the engineering phase of the Longview, Texas project. And we can go through that detailed engineering and basically get more complete before we start to solidify the commitments without affecting the timelines of the completion of the project.

[William McLain, SVP & CFO at Eastman Chemical Company]

So as you think about the midpoint, we reduced our capital from roughly $750,000,000 to $550,000,000 I would again note that our CapEx from a maintenance standpoint is about $350,000,000 and we're still investing in this environment slightly above our DNA. So we're confident in our strategy, but we want to make sure that we're also prepared for those downside scenarios and making sure we deploy it efficiently. I would also highlight that the Texas project is the largest project, but it's still a little bit less than half of the reduction. And most of that is the remainder is across a combination of other business growth and timing the key maintenance.

[Vincent Andrews, Managing Director at Morgan Stanley]

Okay. And then if I could ask you, I know in the sort of March conference season, you had some concern over March orders, then it sort of turned out that they were, I guess, better than feared or better than expected. I'm not sure which it is. But just curious what happened there because usually when there starts to be hiccups in the order book, they don't reverse. So what any color there?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yes. So we are certainly with all the trade talk even in the first quarter, you have to remember, we still had 20% tariffs being put on place in China, etcetera. There was a lot of caution that developed around customers and what they wanted to order. And so we're reading into that as we were getting into March and then frankly just surprised in how people sort of bought more. Think it wasn't really a lot of pre tariff buying.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I'm sure there was a little bit of that at the March. But what's comforting around that question is April orders are are similar to March. So if they were really pre buying, you know, you would have seen a drop off in in May in in April as you as you as you've gone from March. We've seen that before in our past, and right now we're not seeing that. So that's that's encouraging.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And the order books are holding up in in in April. May looks okay. You know, June 2 June is just too far away for us to really assess when it comes to sort of our order visibility. But I do think, you know, we're we're in solid shape, but there is, you know, uncertainty risk, obviously, in June with with how all these discussions around the world go.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Let's have the next question, please.

[Operator]

Thank you. Our next question comes from Jeff Zekauskas from JPMorgan. Your line is now open. Please go ahead.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Thanks very much. You abandoned your annual earnings guidance,

[Jeff Zekauskas, Analyst at JPMorgan Chase]

you

[Jeff Zekauskas, Analyst at JPMorgan Chase]

didn't but you're still guiding for annual cash flow. Why is that? Why would the cash flow for the year be more forecastable than the earnings? Or why do you have more certainty around the cash flow?

[William McLain, SVP & CFO at Eastman Chemical Company]

Yes. Good morning, Jeff. Thanks for the question. Obviously, as we've highlighted in our prepared remarks and even in the Q and A this morning, it is highly uncertain and we pivoted to an emphasis on cash generation ahead of a potential recession. As I think through the levers that we have, whether it be the cash earnings obviously, but we have a broader set of working capital and operating set of solutions and also how we manage variable resources across our global asset base.

[William McLain, SVP & CFO at Eastman Chemical Company]

And in that, we've got flexibility that I think gives us a narrower range on the cash outcomes versus all the accounting ramifications that comes in with an earnings estimate when you're trying to deal with these choices. As we've highlighted, if the trade dispute is resolved in the short term, ultimately we'll have higher cash earnings and less working capital actions. If it's drawn out, then ultimately it could cause a recession. But the dynamic between EBITDA and the OCF that we're going to deliver ultimately will be based on that trade scenario. But we do have higher confidence and I think we've done that across multiple economic environments in the past.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yes. I think that we're really proud of the fact that we try and look forward and see what's coming and be prepared to take whatever actions are necessary to sort of weather storms. I mean, this industry has been, you know, facing a lot of storms over the last, you know, seven years, and it's well over machine on how to react to it at at at Eastman. You know, the reality is if if if the focus on cash is is not needed because the economy is snapping back and recovering, then that's upside. It's easy to run the plants, you know, harder in the back half of the year and catch up.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

We have the excess capacity at this point. So, you know, I think this is the prudent way to approach things and we'll, you know, obviously adjust as the macro economy and sort of trade related matters sort of evolve.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Okay. And then secondly, what you did is you estimated the tariff impact at $30,000,000 in the second quarter. How do you calculate that? Is that lost sales? Is that tariffs that you're paying?

[Jeff Zekauskas, Analyst at JPMorgan Chase]

What and could you describe where it seems that you're paying the tariffs or whether you're being reimbursed for your customers? Where are the tariffs actually touching you? And is it China mainly? Or is it other regions as well? Can you sort of get to the bottom of this $30,000,000 number and what it might be in the third quarter if things continued?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So Jeff, when it comes to the impacts on tariffs in the second quarter, it is an impact on volume as opposed to an impact on duty. Right? So when you have a 25% duty into China, and there's a hope that the trade it will get settled in between the two countries. Customers, you know, don't wanna buy a lot with that adder. So that's the impact you're seeing in fibers where we're projecting less sale of, you know, of flake for the tow JV, less Naya textile fibers being purchased while people wait to see what plays out in this quarter.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So that's what happened there. Same thing I said in AFP, the high value cellulosic additives that go into all these coatings and pharma applications, some other applications. Those customers carry a huge amount of inventory because it is such an important product for them for them the product they make, and it's such a small percentage of the total cost of these products in in these sales additives and AFP that, you know, they're not gonna take any risk. And so they had inventory, months of it, and so they can, you know, through this quarter, just not order. So they, you know, are pulling inventory down.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Right? And then it's the same dynamic in in in Advanced Materials, but just less because we have a lot of inventory available in that marketplace, you know, for we make it in interlayers there. We, you know, already explained everything around and and and SP. The real risk there is ability to sell what they make as a finished product back to China, and I think people are everyone in that whole supply chain is sort of trying to figure out what they're gonna do on on that dynamic. So it's a it's a volume hit as opposed to a tariff hit.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I mean, what I'd also notice Yep. You know, while we have this exposure because we're you know, we make a lot of product here in The US and we export around the world. We're also vertically integrated, and this is a very unique competitive advantage for us on that integration, which is most of the material raw materials that we use across the company are sourced in North America. So we're not facing much tariff risk of what we have to pay for on the raw material side of things. Even PX, which we buy around the world, we have sourcing from all countries around the world so that we can flex on where we get our PX.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And obviously, PX prices are very low right now. So, you know, we don't like a lot of companies who buy a lot of raw materials, but may not have as much exports to China where they're having that problem they have to manage or if we're buying auto parts and the auto industry or whatever else, you know, we don't have that issue. Our issue is, you know, this primarily China related matter right now as far as the second quarter is concerned. And I think I already addressed, you know, how it trends, you know, into the back half of the year in my answer ahead of you.

[Jeff Zekauskas, Analyst at JPMorgan Chase]

Okay, great. Thank you so much.

[Operator]

Thank you. Our next question comes from Kevin McCarthy from VRP. Your line is now open. Please go ahead.

[Kevin McCarthy, Partner at Vertical Research Partners]

Yes. Thank you, and good morning. Mark, I wanted to come back to the discussion around the Fibers segment and the issue of destocking. I think what you said in the past and you alluded to again this morning is that a high percentage of the volume is under contract. And obviously, the implication of that is that the business should be relatively stable volumetrically.

[Kevin McCarthy, Partner at Vertical Research Partners]

So I'm trying to weigh those two things, more severe destocking and contractual protection. And so maybe you can kind of talk through the first quarter volume was down 12%. Do you think that could be indicative of the year? Or do you have sort of take or pay provisions in some of these contracts whereby maybe there'll be destocking in the first half, but then customers become obligated to meet minimum volume requirements as the year progresses. Any thoughts along those lines to frame out or bracket the volume risk would be much appreciated?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Sure. So on the volume side of the equation, price by way is just pretty predictable and locked in. So this is really a volume question for this year than a price question with these contracts. But on the volume, there's always a band of volume that customers can buy within from a low to high range. You know, typically, middle of the range is what they're aiming to do.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

And we have customers, you know, buying, you know, in the first and second quarter at the low end of the of the volume rate. So they're not violating the contract. They're just at the low end of the band across, you know, the customer base. What what's changed, I'd say, from December and early January to now is it's a broader set of customers who are now destocking than what we originally had expected in January to where we are today. So no one sort of violating a contract, but they're just more customers moving to do some destocking and move to lower end of their band than than we were originally notified, if you will, in in January as we built the forecast in versus where we are now.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So as you think about it and you're going back in the second half, this just comes to question with each customer and just how much inventory do they really have to do stock and where they would then start moving back up into the band to to normal or staying, you know, at the lower level. And I think that it's going to be a challenging year. I would expect maybe it gets modestly better in the back half versus the first half as some customers address their inventory issues. But we're just going to have to see how it evolves.

[Kevin McCarthy, Partner at Vertical Research Partners]

Okay. And then secondly, if I may, on the subject of tariffs, appreciate the various headwinds that you articulated. I am curious though, are there examples of product lines within Eastman's portfolio where the tariffs may be helping you in chemical intermediates, for example, or otherwise? Or is that just simply not the case and the overall economic environment impact is sort of overwhelming any such benefits?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Certainly. So I would say the opportunities are still emerging. So it's early days to sort of have a definitive view on this as these tariffs are still being debated and implemented. Performance films for example does have upside in North America. We are by far the largest player in the performance films business, but we still have a lot of different competitors out there.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

All of our product is made in The US, so we are advantaged in in the having larger scale, you know, US manufacturing base. Our competitors are sourcing some film domestically, but a lot of it is being sourced abroad including places like China, etcetera, where they're facing tariffs. So we think there's going to be opportunities there to win some share, but it sort of depends on where the auto market sales are going and how those net together in the short term, but certainly a place where relative to the market we will do better. And especially plastics, there are definitely opportunities where we have imported products that we have to compete against. So the shrink labels around the packaging for beverage bottles as an example, even some of the consumer durables, there are manufacturing capabilities in The U.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

S. That some of our customers have and they're ramping that up and we're going to sort of see growth there in in volume that they have, you know, that could be advantageous for us. The ag space is another place where we're gonna have opportunity. The our ag customers were facing a lot of downs competition with formulated Ag crop protection products being imported and really frankly dumped in America at very low prices. So the tariffs are going to create some relief for them and ability to sort of regain some market share.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So that's another place where I think we'll see some benefits about our customers growing relative to exports out of China and some other countries. Even in building construction, are opportunities like floor tiles, which use our plasticizers. A lot of that got offshore to China and supplied by Chinese manufacturers that make DOTP. We have a number of customers who are now looking to bring that production back here. This is a place where capacity does exist to ramp up in U.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

S. Manufacturing. So there's a bunch of places. It's not uniform across the portfolio. And I think ultimately there'll be price benefits across the CI portfolio when you get some additional, you know, settlement of just the competitive dynamics that are going on right now.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So CI is a little complicated because you have a lot of companies that were exporting chemicals and now they can't export them as easily. And so there's a dynamic there that's settling itself out. But over time, there should be upside.

[Kevin McCarthy, Partner at Vertical Research Partners]

Perfect. Thanks, Mark.

[Operator]

Thank you. Our next question comes from Frank Mitsch from Fermium Research. Your line is now open. Please go ahead. Sorry.

[Operator]

Frank's line has just been closed. Let me just reopen it for him.

[Frank Mitsch, President at Fermium Research]

Hello?

[Operator]

Frank.

[Frank Mitsch, President at Fermium Research]

Hello. Can you hear

[Jeff Zekauskas, Analyst at JPMorgan Chase]

me? Hey, Frank.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Yes. Yep.

[Frank Mitsch, President at Fermium Research]

Hey. Good morning. Hey. Good morning. Sorry about that.

[Frank Mitsch, President at Fermium Research]

I don't know what happened. But given the number of ways things can go, certainly can't fault the pulling of annual guidance. I want to focus on the second quarter. As I think about Eastman, more of a less cyclical than most companies that I follow, That range of 1.7 to $1.9 is rather large. So can you talk about the of the puts and takes to hit the low end and the high end?

[Frank Mitsch, President at Fermium Research]

What are you embedding in terms of that wide range?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

To put it simply, it's a question around demand in June and, you know, to some degree, May. But with the uncertainty of everything we've discussed on this call, you know, how orders trend with customers is just heavily connected to that. And we're very encouraged that April's holding up, which is great. So, you know, we're off to, you know, a solid start to the quarter. But, you know, how customers behave and how many orders get placed creates the range on that uncertainty.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

I mean, there are other smaller things around trends on natural gas prices and currency and this, and the other. But the principal question is just a demand question in the back half of the quarter.

[Frank Mitsch, President at Fermium Research]

Interesting. I want to drill into that the positive take on April trending in line with March. As I might have thought that historically April I don't want to be too granular, but I would have thought that April would have been a little bit better than March given building and construction, etcetera. But it seems like it's kind of one for one. And is that typically the norm at Eastman?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

It is typical for April to be similar to March in a good year or a solid year, I mean, not a great year or a bad year. What happens, you got to remember, the result of a quarter is three months, right? So every quarter typically starts out where the beginning is weak and it gets stronger through the quarter. So the last quarter, you know, March, June, September, all tend to be the stronger month of the year of the quarter. And and so the fact that April saw in a similar to March, which is is a strong month, is good.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Right? So you're building off of that performance because March was better than January and April I'm sorry, January and February. But, know, so I would put this in sort of a normal start to a q two as opposed to good or bad.

[Frank Mitsch, President at Fermium Research]

Okay. Got you. Got you. And then just following up on a lot of discussion on volumes in tow obviously. But back to your earlier point about how small tow is as percent of the cigarette.

[Frank Mitsch, President at Fermium Research]

And so raising tariffs, raising the price by 145% or something like that. Who is who when you sell to CNTC, are they paying will they be paying that tariff and you're maintaining price? Or conversely, if you're having to eat some of the tariff or what have you, what would prevent you from raising price given how small it is as a percent of the total?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

That's a great question. So technically, when you're going into a country, you're the one paying the duty and you have to decide to raise the price to cover the duty or not the way that that works. The conversations of the joint venture between the Chinese National Tobacco Company and us, you know, has an obligation to buy flake from us, But we can they can jointly decide with us that if the price is too high for the flake that they can they will reduce production, you know, if it's not economic at that price to sell the toe. And so that is where the the the volume risk comes, you know, with this flake sales is that price is much higher than the other plants that the CNTC has. Right?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Remember they have a spectrum of joint ventures making toe. All joint ventures with us or, you know, a lot with Celanese and some other players. Those are making the both the flake and the toe in China. So we're the only ones importing flake into China. So they can flex up, you know, the run rate of those other assets and reduce the run rate of this asset if our flake is too expensive.

[Frank Mitsch, President at Fermium Research]

Okay. Gotcha. Fingers crossed that ninety days from now on your next call, this whole conversation will have been moot and we'll be back to normal. But thanks so much.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Thank you, Frank. And it's a good point, Frank. I mean, if we get these things, all this tariff to moderate back to sort of more rational levels and let's just say 10% to 20% range versus, you know, where we're at now, I don't think we should fantasize about everything going to zero. You know, I do think things can normalize and get a lot better and, you know, we would be able to snap back, towards our original forecast for the back half of the year from January. But you do need to get some of this extreme tension taken out of the system.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Let's go to the next question, please. Thank

[Operator]

you. Our next question comes from Mike Sison from Wells Fargo. Your line is now open. Please go ahead.

[Michael Sison, Managing Director at Wells Fargo Securities]

Hey, good morning. Mark, you sort of gave a soft recession sort of outlook, I guess, in your prepared remarks. How do you think the Eastman portfolio should hold up or perform if The US does go into recession. You know, in '23, your volumes took a pretty big hit for Advanced Materials and AFP, but, know, a lot of destocking there. So just, you know, where do you think volumes would would sort of mirror in if we do go that route, unfortunately, this year?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yeah. It's a good question, Mike. And I think there's there's a lot of mitigating actions we're taking. But to to answer your question first, I think that the demand situation this year will be considerably different and less potentially than what happened in the '22 time frame. So we've been in a manufacturing recession since the summer of twenty twenty two, and we have not come out of it.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Right? I mean, demand has been challenged as we all know with the inflation and the interest rate hikes, etcetera, that especially on the consumer discretionary demand side of the equation, you know, cars, homes, autos, you know, we're still below 19 02/2019 levels. And at the same time, there's been no driver for restocking in these markets. So the inventory levels that are sitting around the planet right now are not that high. Right?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

They're they're at appropriate levels for this low demand scenario. And the people have only had a couple months to react to this tariff risk. So there's not a lot of time to sort of build inventory ahead of ahead of, you know, this tariff risk, you know, through the first quarter, and you're worried about recession. So everyone's trying to balance, you know, just how much inventory do I wanna have. What's happened is the the low the geographic location and inventory has changed a lot.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Right? So anyone had blenders and and TVs in China, got them in the West, but that doesn't mean they, you know, made twice as much. And same thing, we got materials into China. So, you know, materials have moved around, but I don't think we're sitting on a huge amount of inventory right now for a destocking event. And I don't think demand has a big step down because we're already at a relatively low level of demand compared to a normal recession.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So, you know, there are extreme differences, you know, obviously between The US and China economies being dislocated at these tariff rates that you guys then factor in. So hard to put it all together, but you just don't have that sort of mountain of risk in absolute volumes I think this time relative to where we were in 2022. So I think that's important to keep in mind. The second thing I'd say is there will be a tailwind on the price cost relationship if you go into recession. Similar to the demand situation, don't think the tailwind will be as significant because we've already been at sort of stressed levels in pricing with raw materials.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

But but I do think, you know, you'll have a tailwind there to offset, you know, that demand dynamic. And there's just a lot you can do to manage, you know, through this in the actions you take. Right? So as we've said, we've already focused on making sure we're we're we're gonna be sort of cash generative in in in how we're performing. There's a whole list of mitigating actions around tariffs I've already mentioned.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

There is still innovation that's allowing us to grow above markets. The commercial excellence of our teams is phenomenal in defending pricing and value for products which we've demonstrated over the last three years and we'll continue to do. And Methanolis is a unique upside to Eastman where we've got you know, that $75,000,000 of EBITDA as a way to offset some of all these challenges we've been talking about. And, of course, we'll be, you know, prudent on the on the CapEx front so that, you know, from a free cash flow point of view, we're we're in good shape. So a lot of things that we're doing to manage through it, I think, you know, I would not recommend just running a proxy analysis on demand for for '22, you know, and '23 relative to this scenario, for the reasons I just mentioned.

[Michael Sison, Managing Director at Wells Fargo Securities]

Got it. And as a quick follow-up, if, if the tariffs are resolved and we get back to that $8.08 75 run rate for the second half, what what what what was the volume assumptions that AFP and AM could do? Like low mid single digits, is that sort of what we were hoping for initially?

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

Yeah. That's about right, Mike. I I I think that the, you know, people are really draining stock right now to avoid the tariffs, which means, you know, inventory is gonna be a lot lower than what is normal if we're going back to a normal economy. So you would hope end markets continue to come back to some stability. There's going to be friction from all these tariffs.

[Mark Costa, Chairman & CEO at Eastman Chemical Company]

So if we're at 10 to 20% tariff, you know, there is gonna be some consumer friction around that and what people can afford to pay or people managing headcount costs if there are you know, companies are absorbing the, you know, the hit that will have an impact on the economy, you know. But you'll have a restocking of bringing Ford back to more normal levels that will certainly help volumes in the second half be better.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

You. Let's make the next question the last one, please.

[Operator]

Of course. Our next question is from Josh Spector from UBS. Your line is now open. Please go ahead.

[James Cannon, Equity Research Analyst at UBS Group]

Hey, guys. This is James Kennen on for Josh. Thanks for taking my question. Just given all the uncertainty in the market, I just wanted to focus on some of the more controllable items. And looking at the guidance that baked in the $20,000,000 headwind from turnarounds, could you just help level set how the turnaround schedule is expected to look into the back half?

[William McLain, SVP & CFO at Eastman Chemical Company]

Yes. So what I would highlight, it is unique for us to have the scheduled turnarounds here in the first half in Q2 specifically. So we've got the sequential $20,000,000 headwind. I would say sequentially into Q3 it will be at similar levels and Q4 would actually be an improvement. So we basically have some higher cost in Q2 versus Q4.

[William McLain, SVP & CFO at Eastman Chemical Company]

Obviously, in this uncertain environment that also helps us get ahead as we look at inventory and generating cash flow because taking actions here in Q2 and Q3 ultimately defines the year in cash.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Thank you. Did you have a follow-up question? Okay. Thanks everyone for joining us. Yeah.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Yeah. Appreciate it. Yep. Thanks everyone for joining us. I appreciate you joining this call.

[Gregory Riddle, VP - IR & Corporate Communications at Eastman Chemical Company]

Hope you have a great rest of your day.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Gregory Riddle, VP - IR & Corporate Communications
• Mark Costa, Chairman & CEO
• William McLain, SVP & CFO

Analysts

• Patrick Cunningham, Vice President, Senior Analyst at Citigroup
• David Begleiter, Managing Director at Deutsche Bank
• Aleksey Yefremov, Managing Director & Equity Research Analyst at KeyBanc Capital Markets
• Vincent Andrews, Managing Director at Morgan Stanley
• Jeff Zekauskas, Analyst at JPMorgan Chase
• Kevin McCarthy, Partner at Vertical Research Partners
• Frank Mitsch, President at Fermium Research
• Michael Sison, Managing Director at Wells Fargo Securities
• James Cannon, Equity Research Analyst at UBS Group