Frank Mitsch: Got it. All right. And then perhaps if you could — I took a look year-over-year, Europe actually declined less than the United States. Is that really — is that just a function of Europe entered the year in a worse position? Or is there anything that you can talk about in terms of perhaps any sort of green shoots or what have you in that part of the world?
Mark Costa: So part of the reason North America is down as much as it was, it’s just all of Chemical Intermediates sits in North America predominantly. So when you look at all the revenue that came off in Chemical Intermediates, it’s sort of almost all in this country. When it comes to the rest of the portfolio, I’d say we’re more globally diverse and we saw really demand come off and especially sort of across the globe as well as the destocking across the globe. So that was more evenly dispersed. China has got its challenges and so does Europe and the U.S., probably a little bit stronger in the economy than the other two. But from a green shoots point of view, Frank, I wouldn’t — from a — we have this into destocking which is our primary focus right now.
I think it’s way too early to call markets recovering in the consumer discretionary world; so cars, building construction, consumer durables, electronics. There may be some improvement there but I don’t think I have enough data to sort of make that declaration. But the stable markets are definitely growing. Medical is probably going to grow 4% to 5%. I mean there’s still destocking in the first quarter but the underlying market is going to grow 5%. Ag is growing, personal care, water treatment. A lot of the packaging sector as a lot of the consumer brands are now pivoting from price to recovering volume, we’ll benefit from that. So that’s about half of our revenue where you get that modest growth in these markets that are sort of more stable.
Operator: Our next question comes from Patrick Cunningham of Citigroup.
Patrick Cunningham: And maybe just first on Advanced Materials. Can you help us understand the $450 million guide there and maybe the degree of upside beyond that? I think you get $50 million from Kingsport and you’re guiding to $100 million for the first quarter. And just given the extremity of the demand decline, utilization headwinds, destocking of 2023, is there a path to $500 million or more, even in just a modestly positive demand environment from here?
Mark Costa: So first, given sort of the challenges we’ve had in Advanced Materials with pretty rough demand in the fourth quarter of ’22 and the full year ’23, we’re starting with earning our way in our recovery and getting back above $450 million and then working to make it better than that. But just to give you the sort of key tailwinds that go with it, the biggest driver for Advanced Materials recovery is volume and mix, as I sort of pointed out. The corporate level, the story is pretty much an AM story. So 2/3 of that $150 million of a lack of destocking is sort of in the outlook for this segment. I told you durables has already had significant recovery. Medical has great underlying growth. It just had a lot of destocking from a lot of caution in the supply chain crisis that’s still finishing itself out in the first quarter here but we can see that it will be less in the second quarter and then we’ll just have the growth in the back half of the year.
So you’ve got markets that have done a lot of destocking or stabilizing in the lack of destocking helping. Then you’ve got the return to seasonality. So even though the first quarter is still in recovery mode, when you look to the second quarter and beyond, you’ve got this return to normal seasonality to this segment. So Q2, Q3 is always stronger and we expect that to be there. And that order pattern I was talking about, about January, February, March is very much through in Advanced Materials where you can see that progression getting better. You’ve also got the ramp-up of the methanolysis plant, as you noted. So that’s going to get you that incremental $50 million of EBITDA that you just mentioned that shows up in Advanced Materials. The other $25 million is a benefit for corporate other, just to be clear which is where the pre-production expenses of last year have been sitting.
And then, you’ve got the automotive market that even though it’s going to be flat, we have a tremendous track record of growing above that market with our great strength in HUD going into more and more cars, great strength of other premium products, the acoustics, et cetera. And then importantly, even though EV is maybe not growing as fast as everyone hoped, they’re still growing much faster than ICE cars. And we get over 3x the amount of square meters in an EV than we do in an ICE car, very high-value products because there’s a lot of functionality in those products that we sell to them — so there’s a lot of leverage there that goes beyond just destocking where we’re creating our own growth through innovation in circular and automotive that will drive it.
And as I said earlier, we expect the sort of price cost relationship to be somewhat neutral to last year. So that won’t be a source of a tailwind but we don’t expect it to really be a significant headwind either. But all that volume shows up and then with that, you get utilization, right? So you’ve got $100 million asset utilization headwind for managing inventory last year, that becomes a $50 million tailwind this year with this segment. So that also will be a driver for how you get above $450 million. So if you put all that math together, you can get to $450 million, you could get something greater than that. But I’d like to see proof in how the market is recovering and ramps up into the spring before we start getting beyond that.
William McLain: And Mark, the only thing I would add is, as we think about the year-over-year increase and our depreciation expense, a substantial portion of that will go to the Advanced Materials segment.
Patrick Cunningham: That’s very helpful. And maybe just a follow-up on EVs, how much outperformance relative to the market did you see from EV and premium volume mix impact? And given that we’ve seen some of that headline deceleration in EVs and maybe sort of looming consumer weakness, do you see potential that, that mix improvement, outperformance is decelerating into 2024?
Mark Costa: Well, certainly, I think the rate of year-over-year improvement in ’24 to ’23 will be less than it was in ’23 or ’24 for the sort of data you’re citing around EV growth rate. But I don’t think it’s significant, right? There’s still a lot of applications we’re winning. So there’s — okay, there’s a primary demand issue that’s slowing down but we’re also just starting to penetrate all these EV accounts and win share relative to standard interlayers and ICE cars. So you get this leverage within the market, within the EV segment itself that helps. So I don’t want to oversell it. I mean we expect an overall flat production market which I think is sort of consistent with what everyone else is saying but the growth we can get in these premium products is very meaningful in helping us grow above that market.
Operator: Our next question comes from Vincent Andrews of Morgan Stanley.
