Josh Spector: Yes, thanks. I mean, that’s helpful. Maybe I could try a bit another way is that if you’re talking about volumes kind of flattish, just upload single and reinforcement, you’re talking about performance similar to fourth quarter levels. So most of the improvement looking at next year, if you have EBIT up $80 million to $100 million, maybe $20 million of that is annualizing performance, the residual, that’s kind of how I get to that price cost and reinforcement. Is that a fair way to think about it, or are there other moving pieces that I should be building into the bridge for next year?
Sean Keohane: Yes, well, I think there are a lot of moving parts. I, certainly we are expecting that volumes would be up low single digits off 2023. And as I commented, the negotiations that we’ve completed so far are coming with price increases. But then I think there are a number of other factors here. Certainly China overall and how the China market behaves is a big factor, with them making almost 40% of the world’s tires. And then there are other factors here in terms of FX interest rates and where commodity prices are. And so all of those factors don’t move at the same direction in the same time. So you have to think through all of these factors, and we have and believe our range accommodates for those. But there are a lot of moving factors here, and so we want to lay out a range that we have confidence in. But one that we think is appropriate given the many uncertainties that are out there right now.
Operator: Thank you. One moment, please, for our next question. And our next question comes from the line of Laurence Alexander with Jefferies.
Laurence Alexander: Good morning. Just a couple of things. First, what are you factoring in, if anything, in terms of the impact in Europe from shifting away from Russian imports and carbon black this summer or next summer?
Sean Keohane: Hi, Lawrence. Well, that certainly is a factor as I walk through the overall environment that certainly is a factor in the discussions with customers. Because Russia had been a significant supplier to the European rubber and tire industry, and with sanctions coming into effect midway through the calendar year, 2024, I think customers clearly are looking at supply security as an important factor here. I think the other thing that’s important for customers beyond the supply security is ultimately this notion of sustainability. And I think the European producers operate at a different level of sustainability than the Russian players and across the whole industrial complex in Europe. There are moves afoot to introduce things like carbon border adjustment taxes and these things because they know that suppliers outside the region aren’t performing at the same level.
So I think the supply security and the sustainability aspects are important for our customers and they’re certainly factors that are driving customers to value more the regional supply. So, I can’t comment or isolate a specific amount to that variable, but it is certainly something that is important in the customer negotiations and important to our customers.
Laurence Alexander: Speaking of sustainability, can you give an update on how the elastomer composites program is going with the rubber black applications and when would be the earliest that you think you would see any real demand impact from methanolysis if that technology pans out?
Sean Keohane: Sure, yes. So we’re excited about the progress in our elastomer composite through our E2C technology platform here. And I think clearly there continues to be penetration and success with this technology in the off the road tire segment, which is a very high value segment for tire producers, and we continue to see good progress there. We’re also seeing success with customers as they try to extend this technology into parts of the TBR, the truck and bus segment here. And we think in the long-term, this technology certainly has potential to penetrate that part of the market and that would open up the total addressable market in a pretty significant way for E2C. Exactly trying to pin down the rate of commercialization or the timing is difficult here.
The tire industry is, I think, appropriately cautious around new technology development. They take time, run extended road tests and the like to make sure that performance is there before putting these products, particularly consumer products, out on the marketplace. And so that timeline can certainly take some time here. We did see revenues grow this year in this segment in E2C, which I think is supportive of the trend, as I said in OTR and some encouraging signs on the TBR side of things. I think complementing E2C is also our EVOLVE technology platform launch this year. You could think about both of these as really sustainability plays in the tire space. E2C really very much focusing on improving wear as well as the rolling resistance or fuel economy potential of tires.
And then our EVOLVE technology platform really looking at sustainability angles like circularity and trying to enhance that. So you could think about these as very complementary and I think very clearly technologies that our customers care about because they’re really pushing hard in this space around sustainability. So we’re excited about the long-term here and see good signs, but clearly the timing to materiality in this industry, it just takes a bit longer. But we’re seeing encouraging signs that are causing us to continue to invest in these spaces and we think that’s the right thing to do for the long-term in this business.
Laurence Alexander: Just on the methanolysis.
Sean Keohane: I’m sorry, Lawrence, what was that?
Laurence Alexander: Sorry on the methane paralysis, the kind of timing. If we are going to see a market impact, what would be the earliest that you would see it?
Sean Keohane: Well, difficult to tell because while there is a carbon material that comes out of that process, it is not carbon black, it is not an engineered carbon black the way that the tire industry has become accustomed to and formulated around. So I think there remain questions there with respect to the success of that technology. And we feel strongly that working on the elements of our EVOLVE technology platform are a very viable approach for our customers to drive up circularity and improve the footprint of the reinforcing carbons that they need in their materials. Because I think critically, one of the things that customers care about is producing materials at industrial scale. Our approach here, both between E2C and our EVOLVE Technology platform, we think is the right approach.
Laurence Alexander: Thank you.
Operator: Thank you. One moment, please, for our next question. Our next question comes from the line of Chris Kapsch with Loop Capital Markets.
Chris Kapsch: Hi. Good morning. So, following up on the RM segment and not focus so much on pricing, but more on the characteristically, but perhaps underappreciated resiliency and stability of that business. So in a year like 2023, say, volumes were down 5%. Obviously there was some destocking and just simply weaker demand. But curious if you had any sort of historical data which might inform how the business tends to perform in the year subsequent to one like 2023. Just wondering if we should think about low single digit volume per 2024 as somewhat derisked assumption based on the historical context.
Sean Keohane: Yes. So Morning, Chris. So I think clearly there’s been significant destocking this year. I think across the industrial landscape. I think many are saying it’s probably the most significant destocking cycle that we have seen. So I think while there’s always been these sort of micro cycles of destocking and restocking, I think it was definitely much more pronounced as we came out of COVID and saw things accelerate in 2021 and 2022 and lots of supply chain disruptions and people really perhaps over buying just to have product. And now, while that’s been unwinding across 2023, so it’s a bit of a different environment, I would say, than historical. But normally what you do see is that you see that destocking come back because customers have to operate at normalized inventory levels.
