Jeff Zekauskas: Thanks very much. In your Industrial Intermediates and Infrastructure forecast, you have sales going up sequentially 1% or 2% and you’ve got your EBITDA flat sequentially, and normally, there’s seasonal strength in the various construction markets. Why is your forecast so conservative? And then secondly for Jeff, how many shares will be issued or what’s the amount of options and shares issued that will affect the share count in 2024?
Jim Fitterling: Yeah. Good morning, Jeff. I think the biggest thing when you look from first quarter to second quarter on II&I is because of the Glycol 2 situation in Plaquemine, we had some insurance recoveries in the first quarter that don’t recur in the second quarter. So, that creates what looks like a bit of a headwind. I think the underlying business is good and the underlying demand is good. If you look at polyurethanes and construction chemicals, obviously, we’ve seen a step-up in Europe and in operating rates. Sadara is also doing more of the marketing of some of those materials. And so, we see a little bit less volume coming through Sadara from the — from Dow marketing the Sadara offtake. So that has a little bit of an impact.
But I would say, our view is we’re still seeing construction slightly better and we’re seeing obviously Europe a much better cost position and that’s driving the improved operating rates. And just that insurance delta is probably the biggest thing. Jeff?
Jeff Tate: Good morning, Jeff. In terms of the issuances for the full year and this encaptures options to first stock 401(k) plan as well as on employee stock purchase plans, we’re looking at approximately 11 million shares on a full-year basis.
Operator: Your next question comes from the line of Kevin McCarthy from Vertical Research Partners. Please go ahead.
Kevin McCarthy: Yes, thank you and good morning. Jim, I’d like to ask you about your thoughts on the likely pace of capacity rationalization across the global ethylene chain. You mentioned the cash negative margins in China today. Obviously, we’ve seen some of your competitors announce rationalizations in Europe in recent weeks. So, my question would be, relative to prior cycles, do you think we’re likely to see more supply come out of the equation this cycle based on a combination of, the current energy regime in Europe and obviously a powerful drive to decarbonize?
Jim Fitterling: Yeah, good morning, Kevin. Always hard to predict exactly the pace that things are happening, but we’ve been under pressure on the high-cost assets, have been under pressure from a cash-cost standpoint for some time. So we’re — it’s normal around this time you would start to see retirements. The thing that we should consider when we’re looking at our assets likely to be retired, the age of the asset and the older the asset in general, you get a couple of things. Its unit costs are not as competitive. Its maintenance costs start to ramp up. And so, you have to question putting in big maintenance dollars on top of that asset. And then depending on the environment you’re in, CO2 and the emissions off of those assets and what does that do to you longer term because there is a cost in Europe obviously for CO2.
And if you’re not going to abate that, then you have to take long-term decisions about that. So, I think that’s why Europe has seen the first moves. And obviously, as we’ve talked about before, there are a lot of policies in Europe that are continuing to drive costs up. So, we’ve seen it not just in petrochemicals, but we see it in steel. We see it in other energy-intensive industries. I think we’ve been fortunate that we are advantaged in Europe because of our ability to crack LPGs and that’s helped us tremendously. In China, some of those assets are newer and a lot of state-owned enterprises there. So, it may not be the pace that you would see the changes in Europe, but we just have to keep an eye on that. I think nobody wants to run when you’re bleeding.
The kind of cash that we’re talking about, between $100 and $200 a ton. That’s pretty ugly territory. So, I think you’ll continue to see some changes.
Operator: Your next question comes from the line of Laurence Alexander from Jefferies. Please go ahead.
Kevin Estok: Hey, good morning. This is Kevin Estok on for Laurence. Just to touch back on silicone trends. I was just wondering if you guys have seen any visibility into restocking in Europe and whether you’ve seen maybe any green shoots in construction globally? Thank you.
Jim Fitterling: No, I haven’t seen big signs of restocking in Europe. I would say on construction trends, we are starting to see some positive things happening. When you take a look at existing home sales, even though some of the year-over-year trends are down, we’re starting to see some marginal improvements. Building permits are starting to tick up, which is good. So new homes — there’s a need for new homes in North America for sure. And so, you’re going to start to see that demand. And what the team says to me is that when we start to see interest rate declines, you see a couple of interest rate declines in a row, you tend to start to see pretty immediate uptick in the downstream demand for products that are in our polyurethanes business or silicones business or coatings business.
So, we’re watching closely for that. But I feel like this is more underlying demand driven. Some of the markets I talked about earlier, electronics, data centers, automotive, anything that has to deal with energy and thermal management, those have been strong. Personal care is strong. A fair amount goes into infrastructure. Infrastructure is obviously still good. So, as soon as we see some pickup in the housing, I think we’re going to start to see another step change.
Operator: Your next question comes from the line of Duffy Fischer from Goldman Sachs. Please go ahead.
Duffy Fischer: Yeah, good morning. Just a question around your coatings and monomers business. You had volumes up, but when you look at a lot of your big competitors — not competitors, customers who have announced already PPG, Sherwin, Akzo, their revenue was all down in Q1. What’s your sense for what’s happening in the coatings market this year? Are you guys over-shipping? Do you think in Q1 for where the demand level for paints will be this year? And then just how do you see pricing trending in that business for you guys?
Jim Fitterling: Yeah, good morning, Duffy. I don’t think there’s any over-shipping or stocking going on there. I think, obviously, some customers are more exposed to the contractor business and that’s very much driven by new homes and new construction. And then there’s the DIY segment, and we’re pretty heavily impacted by the DIY segment. So, painting existing homes or when existing homes are sold. And so, we tend to see that, that volume tends to help us. I think, obviously we had a very strong fourth quarter. We’ve had some turnaround activity in first quarter and still had pretty good numbers. So, I think we’re well positioned for the peak of the season in second and third quarter. And also, some of the monomers demand from time to time can be an added positive on that. And so, it doesn’t all necessarily mean it’s downstream coating. Some of the monomers going into other markets can help us out a little bit too.
Operator: Your next question comes from the line of John Roberts from Mizuho. Please go ahead.
John Roberts: And congrats as well to both Pankaj and Andrew on the new roles. Jim, there are some reports about European warehouses and ports being jammed again with your customers’ products. Do you think their supply-chain inventory building again downstream in Europe?
Jim Fitterling: Any particular products, John, that you’re thinking of?
John Roberts: Just the economic magazines you’re talking about because of the Red Sea issues, just a lot of safety stock, I guess, being built up again across some supply chains.
Jim Fitterling: I see. I haven’t seen it in plastics for sure. I don’t know if we’ve seen any of that in polyurethanes or construction chemicals. Our days of inventory are low. I mean, we’re at 41 days of sales in inventory, which is a day better than we were in fourth quarter. So, I’m certainly not seeing it in our case. And we’re pretty focused in Europe on the domestic market. We’re not — we don’t rely on Europe as an export hub. So, I think that’s to our advantage there. The Red Sea, I believe, is going to be the way it is for the next — for the rest of the year probably. I mean, if things were resolved today, I think it would take about six months for the shipping channels to move back around. So I’ll just — we’ll just have to keep an eye on it. It hasn’t had an impact on us so far, and we’re not exporting out there. So — and we’re still expecting good operating rates in second quarter.
Operator: Your next question comes from the line of Patrick Cunningham from Citigroup. Please go ahead.
Patrick Cunningham: Hi, good morning. You called increased demand in functional polymers for the first time in a few quarters. Can you speak to some of the specific areas of strength or products for which you’re seeing increased demand? And you’ve also called it out as the source of some high-return, high-EBITDA contribution, incremental growth projects, how meaningful is that benefit in 2024?
Jim Fitterling: Yeah. Functional polymers is going to primarily be driven by infrastructure markets. I think wiring cable is big. Automotive is big. Golf balls is a big part of it. Footwear sales are improved. So, all those areas are very robust. I’d say the power demand, electric, you hear about it, AI data centers, but just beyond that, the energy transition, electric grids, installations of new, it could be a — it could be wind, it could be offshore wind, it could be a solar farm, it could be a telecom center, it could be a data center, it could be replacement of wiring in an existing grid, all of that takes the products that we sell and we’re the market leader in wiring cable jacketing. So, that’s been big. And then I think, we’re kind of set up for year-over-year improvements on footwear, which was a little bit slow last year.
