John Bruno: We’ll move to the next question, Carla.
Operator: Your next question comes from the line of Ghansham Panjabi. Your line is now open.
Ghansham Panjabi: Okay. Hey, guys. Good morning. Can you hear me?
Tim Knavish: Yes, Ghansham.
Ghansham Panjabi: Okay. Terrific. I guess just given all the moving parts on a macro basis and just kind of building on your last few comments, Tim, can you just give us a sense as to how your volume outlook for 2023 has changed since the last time you reported and which of the businesses are seeing the greatest variability relative to your previous view? And then separately, apart from packaging, are there still any businesses being impacted by inventory destocking in any material way?
Tim Knavish: I’ll answer your last question first, and not really, Ghansham. Destocking is pretty much behind us. And even on the industrial side, they don’t carry a lot of inventory anyways. It’s pretty much a just in time. And then on our performance side, most — any destocking that’s occurred is largely behind us. So what we see outlook wise across the company, so the things that have changed a bit is the recovery in China slower than what we had anticipated and we’re expecting continued improvement in China industrial activity, albeit at a more measured pace going forward. So sequentially improving but not as — not as much of a V shaped as what we had previously projected. Architectural Europe, I’d say the other one that was lower volume than what we expected in Q2.
But a lot of that was driven by kind of one-off social and political events in France, which is one of our largest markets in Europe. So we do believe architectural Europe, I would call it bouncing up the bottom and we’ll start lapping weak comps from last year. And then in the US, architecture — the DIY, not just US, around the world, continues to be soft. But overall, we still got more than half our portfolio that’s very resilient and I would say has positive outlooks. Auto was stronger than we anticipated, refinish was stronger than we anticipated, aero was stronger than we anticipated, PMC was stronger than we anticipated and Mexico continues to just shoot lights out. So a lot of positives there, but those are the ones that were a little different than what we had previously thought in our guide.
Operator: Your next question comes from the line of Josh Spector. Please go ahead.
Josh Spector: Yeah, hi. Thanks for taking my question and congrats on a solid second quarter here. I just wanted to ask some questions on your 3Q assumptions. So specifically, SG&A as a percent of sales and gross margin, I guess my math indicates that midpoint of your guide, gross margins are maybe 40% or lower. You just printed about 41% in the second quarter and similarly in the first quarter. So what would drive gross margins to go down, especially when you’re expecting some raw material benefit? Can you just walk through some of the moving pieces in your assumptions there? Thanks.
Vince Morales: Yeah, Josh, this is Vince. On SG&A, let me take that one first. We did have a little bit of higher SG&A in Q2 than the prior year. Really a couple of elements to that. We talked about higher performance-based incentive comp including total shareholder return compensation. We did have as we communicated in Q1, higher non-cash pension expense for the balance — for all of 2023. That falls in the SG&A bucket on a year-over-year basis. You could see that. And just a reminder, a lot of our China business was shut down in Q2 of 2022 and some of the increased sales creates increased SG&A. So those three elements pushed our SG&A cost up year-over-year. And the incentive comp item was a catch up for both Q1 and Q2. So again, that’s SG&A component.
