Willie McLain : Yes, David, this is Willie. I would highlight to your point, basically, in 2022, I’ll call it, the inflationary pressures consumed another roughly $300 million in working capital. As we look at 2023, we see, call it, an absence of that inflationary pressure as well as we optimize the inventory for the new demand levels. We think there’s at least $300 million on that front that we’ll benefit from on a year-over-year basis. Also, as you think about cash earnings, I would say you need to look at higher cash earnings year-over-year as we normalize for the pension and also as you normalize for the variable comp coming back to normal. Those two items should put us at $1.4 billion or above, and higher taxes will bring us back down to the $1.4 billion level. So that’s a high-level bridge for you.
Operator: Our next question today comes from Aleksey Yefremov with KeyBanc Capital Markets.
Aleksey Yefremov : The price of version plastics has been very volatile lately. So has the interest in recycled content that you’re negotiating changed at all given lower version plastic prices and perhaps weaker demand?
Mark Costa : So a good question. We haven’t seen any real change in people’s interest when it comes to recycled content. If you think about it, the brands have set out very aggressive goals in ’25 and 2030. And the pressure out there for why they set those goals is just increasing, not decreasing when it comes to plastic waste. So consumers are very sensitive to this topic. There’s obviously a lot of environmental NGOs putting a lot of pressure on this and politicians, both in Europe and in the U.S. are doubling down on sustainability, climate impact, plastic waste and the policies that they’re putting forward. In Europe, you’ve got extensive policy around plastic waste reduction and recycling that was passed a couple of years ago and the rules are being implemented now that requires you to have 30% recycled content in your packages, if you want to put them on the shelf in ’25 in taxes for whatever it does in every cycle content in it.
So there are significant economic drivers in Europe that are driving brands to be committed to that. In the U.S., the NGO pressure, the social media pressure on brands is pretty high. And you now have at least five states already passing some version of legislation that’s driving change like what’s going on in Europe and some of those are quite big states like California. So the policy pressure and almost requirements to do it are there versus pay a tax and from a brand that’s easier to be sustainable than pay a tax from a choice point of view. So the brands have these commitments. The other challenge I’ve got is the mechanical industry is not remotely capable of supplying the recycled content that’s needed by this 2025 timeframe back into food grade, while material gets recycled down into other applications like textiles and park ventures, et cetera.
But they — but to get it back to food grade that quality mechanical recycling just can’t meet these goals. So the need for our capability is very much there. The brand engagement is very strong. And we’ve seen tremendous success already on the specialty front, as we’ve shared with you with the 1,000 opportunities that we’re pursuing with customers around our first plant here in Kingsport. But on the PET side, like the Pepsi contract that we just accomplished, we see that the central part of actually solving this crisis. The other thing I would note that a drop in demand in short term. Yes. I just forgot to mention one thing on the rPET, if you’re looking at short-term demand and it’s dropping, that’s actually not about packaging. It’s the carpet people and the textile people having such low demand.
They were also buying clear bottles, and they’re not buying those clear bottles anymore for their feedstock. And so that’s why short-term demand is coming off is purely what’s going on in the durables and building construction sector has nothing to do with packaging.
