Celanese Corporation Price & Performance (CE)

As a reminder, we'll discuss non GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward looking statements. Please review the cautionary language regarding forward looking statements which can be found at the end of both the press release and the prepared comments. Eight ks reports containing all of these materials. Have also been submitted to the SEC. Before we open it up for questions, I'd like to turn the call over to Scott Richardson, for some opening remarks.

Thanks, Bill, and good morning, everyone.

I strongly believe Celanese is a company that has cash generation, productivity and cost reduction its DNA. These core competencies have driven shareholder value over our twenty years as a public company.

We are keenly focused on invigorating and capitalizing on these foundational capabilities. And how we lead, and drive business every day to improve performance and drive value creation.

My first two months as CEO have been about prioritizing and driving action Decisive steps we have taken to date include the following. We have executed on over $75,000,000 worth of cost actions that we outlined in our Q3 earnings call. We have reduced our 2025 capital plan to $300,000,000 to $350,000,000 which is about $100,000,000 reduction versus our spend last year.

We have added a new leader to the engineered materials business in Todd Elliott, to bring a fresh perspective and new energy to reducing complexity, and driving improved results. We have added Chris Keung, Scott Sutton to our Board of Directors to bring additional finance and operational expertise to our Boardrooms. Given the prioritization, cash generation, margin expansion productivity and deleveraging. And we have added a finance and business review committee to the Board of Directors, which Scott Sutton and I will jointly chair.

This committee will help evaluate all options to improve the company's operating model performance drive cash generation and review our portfolio. We are taking the right steps to accelerate shareholder value creation and restore our performance at top decile levels in the industry. We are moving forward with intensity and aggressiveness and are not hesitating to make Bold changes to generate cash and deleverage the balance sheet. We know the journey in front of us is not an easy one. But we are energized by the opportunity ahead. We will share wins no matter the size we progress in the coming months and I look forward to reporting on our progress as we advance our plans to improve performance and drive value creation.

Thank you.

And now, Darryl, let's open the line for questions.

Thank you. We will now be conducting a question and answer session. The star keys. Our first question comes from the line of David Begleiter with Deutsche Bank. Thank you and good morning. Scott, you mentioned some divestitures in the prepared comments. Could you get some sense of potentially the size of these divestitures and when they might occur? Yes. Thanks, David. Look, we've been working aggressively on divestitures for some time now. And we did a transaction a few years ago with the ingredients business and I would look at most of what we're looking at is kind of around that size, some smaller, some maybe slightly a little bit bigger than that.

But that's kind of the right range to look at kind of the opportunities that we have. [indiscernible] one more thing, I know equity raise is not your first choice, but given this the balance sheet is today, what are your thoughts of potentially raising equity at some point to delever the balance sheet?

Our capital structure is to fund our acquisitions with debt. In addition, we're unlocking cash from actions we've taken on the dividend reduction of CapEx, reducing working capital, and we're aggressively working divestitures as I just talked about. Look, equity is extremely dilutive and we don't believe that's a step that's necessary given the strength of the debt market. Yes, David, hey, I can add to that. Look, as Scott mentioned, we're taking numerous actions to reduce leverage. But what you're also going to see us continue to do in the meantime is be proactive in reducing the risk in our debt maturities. We have a plan And we've prepared to access the debt markets quickly and opportunistically and credit markets are very strong right now. The principles around that are going to be to extend a portion of our more near term maturities aligning what remains with our cash generation. And we'll make sure and do that at a prudent and reasonable cost.

Thank you very much.

Thank you. Our next question comes from the line of Frank Mitsch with Birmingham Research. Please proceed with your questions.

Hey, good morning. I want to dive into who your outlook for the first half of the year. As you talked about the second quarter, you indicated that it wouldn't have the $100,000,000 of non repeating items that are impacting the first quarter.

And yet if I look at the dollar increase expected versus the first quarter, that only implies like $20,000,000 or so of improvement from volumes and SG and A etcetera, which frankly looking at 2Q versus 1Q, that really doesn't seem like that much. Can you help explain some of the thinking there? Yes. Thanks, Frank. We're getting some of that here at the end of the first quarter. In that number, not a lot, but a little bit. And so that's that incremental in the second quarter is about that range you talked about. [indiscernible] Most of we'll be on the run rate in the second quarter Celanese to get to the full kind of $80,000,000 that we called out and we're continuing to work additional actions.

Look, it's really important that we look at we see right in front of us and be transparent with that. We're working a number of other actions not just the back half of the year, but also work can get more in Q1, we're going to do it and we're going to do everything we can to make that Q2 number bigger than that dollar you called out. Got you. Thank you. And then the other thing in the prepared remarks was a comment that cash flow for 2025 is expected to be higher than 2024.

And I'm curious if you can kind of go through kind of order of magnitude that Street should be thinking about and how do you get there?

Well, Frank, we haven't given the guide for earnings at this point in time for the year. But what I wanted to lay out are components in free cash flow below the EBITDA line that that we do expect to improve significantly year over year, right? So working capital was a a use of cash last year, expect to be a source of cash. Cash tax will be significantly lower We've lowered CapEx roughly $100,000,000 right. [indiscernible] Before giving a guide for earnings as we're kind of working through several things, I just areas in Precasta that will improve year over year. Thank you.

Thank you. Our next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question. Thanks very much.

Scott Sutton has been brought into the Board of Selene's I was wondering, Scott, if you played a role in bringing him in or what role you played in, Scott coming to the Board?

Look, Scott and I have known each other for a long time and I'm thrilled that Scott agreed to join the Board. I think we have been on a path as a Board that's been very deliberate in how we refresh the Board with capabilities going to help us navigate the landscape that we're in and Scott's the latest ad in that. And he brings unique capabilities and has a track record of accelerating cash generation, deleveraging value creation and I'm really excited that he's going to help us in this journey. [indiscernible] Second question is, in your prepared remarks, what you said was that over time, you reduced costs associated with the M and M Act dollars dollars And then later in the script, what you say is that there's been competitive dynamics in your largest product lines like nylon which offset year over year improvements made to the cost position as well as lower raw materials and manufacturing footprint cost reduction. So when you look at the M and M business from the time that you acquired it, like where do we stand now? Is the EBITDA really no different because price degradation has offset all of the [indiscernible] or can you give us like where did we start and where are we now with the M and M acquisition?

Yes, we have increased the EBITDA from M and M when you look at the synergies versus where it was when we closed the transaction. [indiscernible] We have seen margin degradation in some product lines within the M and M portfolio. We've also seen some margin degradation in some of the product lines in the historical Celanese portfolio.

Also seen several product lines that have expanded margin. This is a critical area of focus for us this year. Reversing this margin compression that we've seen broadly across the standard part of the EM portfolio is a critical action for us that we need to deliver on to kind of lift the second half of the year.

Thank you. Our next question comes from the line of Michael Sasson with Wells Fargo. Please proceed with your questions.

Hey, guys. Good morning. [indiscernible] a follow-up on M and M. Could you maybe just give us your thoughts on is this a good business for Celanese longer term? I mean, what do you think the potential is here? And how do you sort of get it there? And I suspect there's some macro help that you'll need there, but just what is the potential for M and M now going forward?

Yes. Thanks, Mike. I mean, we've seen some challenges, but we've also seen some strength in several of the businesses. I mean, our high temp nylon portfolio that we acquired with the business has been a nice source of growth for us in electric vehicle applications. With things like superior thermal shock characteristics in certain application areas. We have also seen kind of the Alastomeric products that we acquired have been have given us kind of a new growth platform in athletic apparel and footwear that we didn't have [indiscernible] are really nice pockets of opportunity for us and we've got to go really aggressively work that from a project pipeline standpoint. And then there are good parts of the nylon portfolio. We've got to keep kind of keeping this machine moving from a high that we aggressively work the side of the equation, just given where the fundamental macro is at. Got it. And then most folks haven't given an outlook for the full year 2025, I understand that. But should EBITDA be better in the second half versus the first half and maybe if you don't have specifics, what should be better or could be better the second half?

In terms of the walk for a better EBITDA? And then can you just give us your general thoughts on what the economic backdrop we should think about in 2025 for Celanese. Our focus is on moving with urgency, Mike.

To take decisive actions to be able to drive win. The actions that we're taking, we believe will be unique for us to drive value in the out quarters here. We talked about the complexity reduction, dollars 50,000,000 to 100,000,000 of opportunity in EM. We need to make sure that we're fully leveraging the acetyls optionality model. Which was challenging in the second half of last year.

Historically, we've been able to to drive good value by flexing up and down the value chain there. And the third is getting back to this point I just talked about on reversing margin compression. In both the standard parts of the engineered materials portfolio but also in the acetyls business.

Thank you. Our next question is coming from the line of Ghansham Panjabi with Baird Thank you. Good morning, guys. Scott, first off, congrats on your new role and wishes with everything. I guess going back to the EM segment and the new leadership there, just curious as to how we should expect strategy to sort of evolve versus what you have been doing And then relatedly, can you just comment on your view in terms of channel inventory levels downstream to that segment, the customer level, etcetera?

Yes. With Todd Elliott already, it's bringing intensive and focus around everything that we do, looking at cost, and opportunities, whether it be footprint, warehousing, distribution costs, SG and A, etcetera. Also on the customer side, as you talked about. And it really is about looking at the pockets of opportunity that are out there and in some of those higher growth segments like medical like electric vehicles in China future connectivity. And so Really getting to that customer segment level defending the base is going to be important. But then also accelerating growth and driving project wins no matter the Got it. And then then obviously, Scott, we've been in a two year global manufacturing slump. You've been pulling levers on the cost side and working capital the best you can. But what are some of the other contingencies you have at your disposable in this scenario that the current paradigm continues for another year or longer in context of your debt load.

I believe there's always more that can be done, Ghansham. And I think we've shown that with cost, given where The demand landscape is at. We are looking at really all elements of the business. And I just kind of highlighted on the engineering material side of things with those action steps that we're taking to reduce complexity, We have some of the similar things on the acetyl side of the house as well. And so it's really about kind of taking a note stone unturned approach to everything that we're doing and also then looking at really almost every single customer interaction on how we can drive incremental opportunities and then also make sure we're really extracting full value on the margin.

Thank you. Our next question comes from the line of Josh Spector with UBS. Please proceed with your question. Hey, guys. This is James Cannon on for Josh. Thanks for taking my question. I just wanted to ask on earnings power of the acetyl business. I think previously you said 2024 was a typical run rate for the near term. I think if I think about contract resets, that would be an incremental call in $40,000,000 to $50,000,000 headwind this year. Is that the right ballpark or is there something to offset that gets us back to the 1.1?

Look, I'll echo what I just said James. There's always opportunity for us to drive margin. And we had some contract resets The team is working really hard to offset those. That's been hard in Asia with where the demand landscape is at. But we're looking for ways at which kind of leverage our optionality model there and flex up and down the value chain to be able to offset that and get back to those levels that we were at in the first half of last Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Thank you. Has anything changed, Scott, about the scope of assets that you might consider divesting? And I just asked that because you mentioned in the prior answer that the size would probably be similar to the divestiture that was done. The Food Ingredients. And my recollection was that in the past, more recently, we've been talking about maybe multiple smaller divestitures rather than the opportunity to sell a few things or one thing at a larger cost? So are you looking wider or deeper or anything changed in terms of what you're willing to divest?

Yes, we're looking at everything that has that's not critical to kind of our core operating model, Vincent.

And that's really this engineered thermoplastic, thermoplastic elastomer's portfolio in the Engineered Materials business and our optionality model that starts with methanol and acetic acid and goes all the way through re dispersable powders. And if it's not in those operating models, we're taking a look at but it needs to facilitate deleveraging. And so that size I talked about was kind of in that range, but I also said plus minus. So there is a series of smaller ones that we get you that when added up are in that range and then there's there's some opportunities that are a little larger.

Okay.

And then in the prepared remarks, you talked about the dissolution of the JV, which Tayshaun on the Mylar Is there anything else about your asset footprint that you're looking at, maybe areas where you're not as advantaged or places where it might make sense to take capacity out of the market?

We believe in having an efficient footprint Vincent, and ensuring that we fully leverage the strong technical capabilities that we have in house here at Celanese I think we have a long term history of of reducing our footprint, but yet adding capacity at our advantage sites. That principle, that core principle of manufacturing is what we're leveraging to these M and M assets as well. By doing that, you get much greater leverage on fixed costs. And so we're consistently looking at opportunities to do that. We've taken action. We've reduced our footprint by eight sites since we did the acquisition. And we're continuing to look for opportunities to be as efficient as possible.

Thank you. Our next question comes from the line of Arun Vistranathan with RBC Capital Markets. Please proceed with your question.

Great. Thanks for taking my question.

Hope you guys are well.

And congrats on the new roles there.

So I guess two questions. So first off, I know that you've taken actions on eight sites there and evaluating some more options as well. And divesting of other assets. But is it also the case that there has been some structural weakness in the auto market and you guys are potentially overexposed to underperforming regions, such as Europe, Do you think because we've seen this inventory overhang now for two or three quarters and I think you guys have taken decisive action in Q3 and Q4 as well, but it doesn't seem like that's been enough to really clear out the inventory. So do you think the actions in Q1 will result in that inventory reduction or would they linger beyond into Q2 and Q3?

The value chain has too much inventory. We talked about that on our last earnings call and we are working to match our inventory levels with the fundamental demand is at. Demand has held pretty stable here in the first quarter. But the value chain is rebalancing the inventory footprint and that's our channel partners it's the tiers, the molders and the end customers. And so so the line of sight that we had today based upon our outlook is that we would see that come to a closure in the first Okay, great. And then if I can follow-up, just on the guidance, it looks like the Q1 guidance again is in the hundred million dollars or so EBITDA range, maybe slightly below that. Do you expect that to kind of lift up through the year maybe into the $1,500,000,000 to $2,000,000,000 range on an annualized basis And again, that will be more of second half weighted.

Is it mostly those cost and productivity actions that would get you there? Or is it require some recovery and volume growth as well? Thanks.

Look, our focus is on the decisive act that we're taking right now. We can't control what happens in the macro, but we can focus on where we spend money how we drive a level of efficiency, how we interact and access our customers to drive opportunities. And one of the things we we called out a focus on smaller projects. [indiscernible] One of the great things about smaller projects is they tend to be able to be commercialized in six to twelve months. And so it is it's very important that we continue to work that with a level of aggressiveness to be able to improve kind of that outlook in the second Thank you. Our next question is coming from the line of Patrick Cunningham with Citi. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. So some estimates we see on capacity upwards of 3,000,000 tons in 2025. Maybe a little less on the VAM side, but still meaningful capacity in the next few years.

What gives you confidence that there will not be significant incremental [indiscernible] Capacity mean for the utilization rates of your own networks?

We don't see a big change coming in the supply demand landscape, Patrick. And where things are today is is the SBL industry is operating below the cost curve. And that's not sustainable. It's not been historically sustainable. And we haven't seen things degrade further even though we've seen new capacity come into the marketplace from a margin perspective. And so we continue to look at Where are those pockets of opportunity up and down the value chain in acetyl where we can pivot. And the team was successful last year growing for example, our Redisperseable Powders business. Largely outside of China and other parts of Asia like India and Southeast Asia, where there was a strong pull and growth for some unique applications. Such as composite composite insulation systems, large style adhesives. And so it seems like that that are going to be critical where we're partnering with our customers to get the the full pull through of that value chain where we have unique Got it. Understood. And how should we think about incremental benefits from Clear Lake into 2025? I mean, are volumes any sort of offset to contract resets here Is there any reason why run rate utilization should get worse than where you exited the year, whether it's raw material availability or depressed demand levels, trying to understand that The U. S. Operating footprint here Look, we're seeing the full run rate of the expansion as we exit 2024.

And we've seen some obviously some slight offset from some of those resets, which is why we're working other opportunities to offset that. We've got some natural gas headwind in The U. S. This [indiscernible] we've seen higher costs, but we do expect that that will wane and come off as the weather improves we move into the second quarter.

Thank you. Our next question is come from the line of Alexi Yefremov with KeyBanc Capital Markets. Please proceed with your questions.

Thanks. Good morning, everyone.

It sounds like you're deliberately reducing inventory in EM in Q1.

Is it possible to to size it in terms of EBITDA so that we can understand how much could potentially come back in the second quarter from this deliberate action?

It's really not that substantial, Alexi. I wouldn't say it's material like we saw in the the fourth quarter.

Okay. And a follow-up on EM as well. It looks like pricing came down maybe low single digit for the segment in Q4.

What do you expect from price in Q1 and potentially Q2? Another step down or stabilization?

What we are seeing right now is stabilization for the most part. We're having to to be competitive in certain standard grade applications but the team is also working tenaciously on offsets. I mean, this this has been a headwind But again, in these standard grade applications, where margins are at for the industry are really at unsustainable levels. And so we are working on opportunities to be able to turn that best way to do that is improving mix.

That's without the criticality of working the pipeline and continuing to be in some of these more unique higher growth higher margin segments. Thanks, Scott. Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research.

Partners. Please proceed with your question. Scott, are you essentially running Celanese today to maximize cash flow as opposed to maximizing earnings, Or is that not the case? And you're really trying to strike a balance between the two?

Well, cash is the priority, Kevin. Given where our debt is at, we are looking to do everything that we can to unlock cash. And I think some of the actions that we have taken or whether it be the dividend, the reduction of capital, the reduction in working capital and a tenacious focus there. As well as aggressively working on the divestiture side, it is a focus on on cash first.

Okay. And then if I may, I want to follow-up on on asset yields. I think you idled some capacity temporarily in Singapore and Frankfurt as you discussed in the prepared remarks last night. Do you do that because they go temporarily cash negative or perhaps for a different reason? And wondering if you could talk about your specific operating rate at Clear Lake in the fourth quarter and how you expect that trend in the first quarter?

The Essent Steel team wakes up every day, Kevin, and looks at the landscape that it's in and it it pivots. And it pivots up and down the chain, it pivots geographically where it sells and then we match operating rates [indiscernible] the needs to maximize margin and EBITDA across the landscape and to meet our customers' needs. That is a model that, that team will continue to operate on and will continue to focus on striking that right balance between volume and margin.

Thank you. Thank you. Our next question is come from the line of Hassan Ahmed with Alembic Global. Please proceed with your question. Good morning, Scott.

Of all, congratulations on the new role and also congratulations on bringing Scott Sutton on board.

Big fan. First question on the guidance. You guys talked about $0.25 to $0.5 in Q1 EPS.

And $1.25 to $1.5 as demand recovers in Q2.

Now I mean, if there is no change in the macro in the back half of the year, should we consider $1.25 to $1.5 as the run rate?

We're doing everything that we can to drive our run rate much higher than that. Hassan, and it's the actions that we talked about. And our our focus on not giving a guide in the second half is because we have multiple actions that are underway. I talked about the complexity reduction in engineering materials. Writing our asset sale optionality model to a level that was performed better than we saw at the end of last year. And then this margin compression component, In addition to everything else that we're doing broadly across the cost side in SG and A, and the manufacturing footprint. So we believe that there are decisive opportunities and actions that we can take here at Celanese to lift the run rate performance even if we don't see a change in the macro.

Understood.

And in the presentation, one of the things that you guys talked about was, well, I guess you gave six reasons to own Celine's shares today.

And one of them was the strong earnings leverage as obviously demand recovers. So my question to you is, As you take a look at the geographic footprint you guys have as well as the end markets you guys are exposed to. Is the leverage the same today as it was in prior years, particularly as you look at the sort of changing sort of dynamics globally with tariffs out there, with your exposure to EVs, and you guys yourself flagged higher exposure to EVs that China today has and how that today is lower margin business than it was historically.

We have a core principle that we believe in having a very efficient manufacturing footprint. Their footprint was not as efficient. As what we had historically here at Felony. As a combined organization, we are looking at what is the right efficiency profile that we need We're overlaying what we believe and where things are at from a demand perspective geographically. And it's that matching that's that's really critically important. And as a corporation, we are pretty evenly and Asia in terms of where our revenue comes from.

But Asia is growing and Europe is declining. And so it's going to be very critical that we continue to drive that intersection point to a level that allows us to enjoy kind of that operating leverage that we historically have.

Very helpful.

Thank you. Our next question is coming from the line of John McNulty with BMO Capital Markets. Please proceed with your question. Yes, good morning. Thanks for taking my question. So Scott, when you think about the acetyl capacity that's coming on in Asia, have you seen any offsets where you're seeing [indiscernible] assets coming down permanently, it looks like there's a significant amount of more capacity still to come. So just wondering how that gets placed and where it's just going to have to be where we wait for demand to absorb it all.

We haven't seen, I'd say permanent capacity reductions. We definitely have seen the industry operating at lower rates. And I think what's a little bit different about this cycle on fifteen years ago, it was almost all new players to the marketplace. This is about fifty-fifty existing players adding capacity and some new players obviously for those with existing capacity, they're kind of flexing their networks up and down based upon what they need. So we have definitely a little bit more kind of down to match where demand is at.

Okay, fair enough. And then I guess do you see there being any risk that that capacity makes its way more meaningfully into other markets, or does it really kind of stay in the market that it's been over the last, whatever, the last few years?

That arbitrage window is not open and it's kind of stayed right at or below kind of what it cost to move product. And look, shipping is expensive and complex. And storage is complex as well right now in other markets. And And so just given transit times, etcetera, we have not seen a lot of that material move out of the region. Got it. Thanks very much for the color.

Thank you. Our next question has come from the line of Laurence Alexander with proceed with your questions.

Good morning. So first on the divestitures, Are these assets that you've decided you just don't fit in the portfolio and you will exit even if things get better? Or as things get better would you you keep them and focus on deleveraging through other means? And secondly with acetyls, can you elaborate a little bit on kind of the execution issues in the back half of last year And to the extent that they've been changed or fixed, should we see the improvement this summer regardless of the environment? Or do you need a better level of aggregate demand in order to also fix the execution issues that you've identified? Yes, let me hit your second question first.

I wouldn't call them next year the execution issues. I think it was just a length and some [indiscernible] really driven by kind of where demand declined at the end of the year. And look, the team is doing everything we can to really that model up and down the value chain and look for for pockets of opportunity. On your first question around divestitures, look, I think we have identified pieces that are not critical to kind of those core operating models. And And we're looking at and having a lot of conversations. I mean, it has been a tough M and A market for the last several years. And we are very principled and I've heard from a lot of investors that are concerned about us buyer selling assets. We're not in the business of fire selling assets. Our focus is on divestitures to drive deleveraging and it's going to be important that we continue to stick with that principle and be aggressive about doing deals. As they present themselves to us. John, could you check if you're muted, please? Okay. Well, Darryl, it seems like John might be muted. Let's go ahead and make the next We can hear you now, John.

Yes. Sorry. Yes. Congrats, Scott, and welcome back to Scott Sutton. Could you talk about the new JV rules in China? We have other companies with China JVs and I don't recall hearing anything about that. Is it all JVs in China or something specific to the seller Celanese JVs? Yes. Look, I think some JVs have gone through some of this and some haven't. It's really related to the rules they [indiscernible] certain JVs. And really what changed here is that there's a rule that requires an audit to be completed before dividends can be paid. And so that audit gets completed here in the first part of the year. And so we should see dividends starting in Q2. So that that's a rule change that at least our JVs are now subject to.

Okay. Well, Darryl, thanks. Let's make the next question the last one.

Thank you. You got it. Our last question will come from the line of Salvador with Bank of America. Please proceed with your question. So firstly, I want to ask a little bit about as you're thinking here about if you talk a little bit about the buckets of cost savings, I know you mentioned also the $50,000,000 euros to €100,000,000 from complexity and €80,000,000 SG and A, but I think last quarter, we're talking about some of the M and M cost synergies not being realized in 2024 and thus being pushed in 2025 and Clear Lake obviously, the EUR 100,000,000 also not fully realized last year in part due to the Forged Majer So Are These Part Of These Buckets You Already Gave Or Is There Up Side From This, Especially On The Clear Lake side? Look, we achieved $250,000,000 of synergies as we exited last year, Sal. And we still have more that are in our plan to be realized here this year. Clearly, we're on the run rate as we talked about. There's been some offsets from margin compression and that's why I really talked about that as a focus for us on on really reversing that trend as we go forward, so we get the full value of these actions that have already been executed on.

We are looking at driving productivity every single day. Looking at every dollar that goes outside of the company, and where we can save and where we can prioritize. And And this is a focus on cash. And so that tenacity will continue Everything is on the table. [indiscernible] go back to your old exposure to to China, you got a number of questions. I'm just wondering how are things different in China versus Europe and The U. S. When it comes to the OEMs and a big tailwind for Celanis and others has been obviously light weighting and replacing metalhood and other components with plastic. Is there a bigger or a smaller opportunity right now in Chinese autos versus what you had in the the Western Hemisphere over the past couple of decades? Look, there's still a huge opportunity for us in China and it's why we're continuing to put a heavy focus there. I think one of the things that that's really important is that the technical requirements of electric vehicles, particularly from a powertrain standpoint, are becoming a lot more demanding. And there's also a lot of other applications where China is moving up this technical requirement curve this requires materials with higher performance.

Requirements. And we have really we believe the best portfolio to match where our KPBs sit in China, we're about half of where we are in the Western Hemisphere and that's moved up substantially the last several years. But it is critical that we maintain that focus. Just really since the beginning of the year, we've had two sizable technical exchanges with two of the top five Chinese OEMs as a way to Great thing about China Auto is that commercialization time tends to be much shorter, kind of more like six to twelve months.

As opposed to twenty four months in the Western Hemisphere.

And thank you, everyone. We'd like to thank everyone for listening today. As always, we're available after the call for any follow-up questions. Daryl, please go ahead and close-up the call.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.