So, we’re not manufacturing a lot of new material. So, we’re not buying anything. So, we’re looking at somewhere north of a $400 million drop in accounts payable at year-end. I mean simply $180 million drop in the EBITDA guidance and a $400 million drop in accounts payable basically wipes out the free cash flow we had guided for this year. Now as you pointed to, free cash flow is pretty lumpy. And as you cross, time periods can swing pretty rapidly. We do expect that as we move into more normalized conditions in ’24, that we would see a rebound in free cash flow. We’d see a rebuilding of payables. We’d see a reduction in inventory, and we get back to a more normal collection cycle, more balance between the halves of the year. So we have nothing that makes us feel any different about our long-term goal and expectation that we should operate this business at a 70% plus rolling average free cash flow generation.
It’s just these — the rapidity of these adjustments in this channel inventory reset this year is just too much to overcome unfortunately, in the six-month period. So that’s the reality of free cash flow. But again, I think we feel very confident about the cash-generating capability of this business over the long term, and you will see that rebound as the situation normalizes.
Operator: We have our next question comes from Salvator Tiano from Bank of America.
Salvator Tiano: So the first thing I want to understand is, you mentioned how farmer applications seem to be flat year-on-year holding up. Can you talk a little bit about your — how you go in trying to understand what farmers are doing and what confidence level you have here? Because obviously, what farmers ultimately do is the critical point in understanding how much of this volume decline is true demand decline versus actual destocking.
Mark Douglas: Yes, sure. I mean, there’s different methodologies for us to be able to have some insight into what is happening at the grower level. First of all is acreage that gets planted. Obviously, you’re planting, you’re using crop protection products. So, that’s something that we look at around the world, and it’s well recorded and many independent consultants look at that. The second is there are other independent sources that we put information in and the rest of the industry puts information in and then you get an aggregate output, which tells you what the market is doing. That’s particularly strong in Brazil. It’s particularly strong in the U.S., less so in Europe and less so in Asia. So, it’s a couple of things. It’s our understanding on the ground of what’s getting planted and then what is being applied and then also third-party independent sources, which are available to everybody.
Salvator Tiano: Great. Thank you. And my follow-up is a little bit on trying to understand a little bit what’s happening with your diamide partners. So firstly, you’re talking about the destocking. So essentially, in your view and your understanding is that diamide demand, whether it’s branded products or from your partners, is holding up, but your partners like UPL are going above and beyond to lower their AI purchases firstly. And secondly, I think UPL specifically entered the U.S. market with its Shenzi product a few months ago. What is the impact for this to your own branded business in the U.S.?
Mark Douglas: Well, a couple of things. So, first of all, when we talk about supply and technical grade diamides to our partners, think of us as essentially a raw material supplier. So, they’re treating us as a raw material supplier, the same as we’re treating our raw material suppliers. So, it’s nothing more than that. It is a simple case of they obviously have demands on their inventories that they’re having to reduce, and we are part of that. We do that to our own suppliers and are doing it right now. So, you see that. From a demand perspective, we don’t think their demand is slowing down at all, neither is ours, as we just commented on. To the second part of your question with regards to competition in the U.S., we’ve seen competition for some time in many parts of the world with the diamides.
What we do know is that our branded products and the new introductions that we’re making of new formulations are moving the needle. In other words, we’re not selling the same products that we were selling five years ago. We’re selling more sophisticated, higher concentration formulations to our current customers. So, where generics are coming in with a certain type of product, we’re not selling those products anymore. We’re selling something completely different. So, it’s very much a case of our product life cycle management that we’ve been going through and we’ve been talking about for the last five years, it is now bearing fruit in terms of how our product mix is changing for our branded diamides.
Operator: We have our next question comes from Vincent Andrews from Morgan Stanley.
