EASTMAN CHEMICAL CO Q3 FY2024 earnings call

• Focus on innovation to drive growth across segments. - Stable markets like personal care, aviation, etc., expected to continue modest growth. - Discretionary markets (auto, housing, consumer durables) have pent-up demand and lower interest rates expected to help recovery. - Kingsport methanolysis facility to improve EBITDA, with auto film and cellulosic products driving growth. - Texas plant to incorporate learnings from Kingsport, supported by DOE funding and state incentives, aiming for attractive return. - Cost optimization efforts to improve cost structure, including inventory management and asset base optimization. - Fiber business repurposing for textile growth and food packaging opportunities with Aventa product.

Stable markets (e.g., personal care, aviation, water treatment, Ag) account for approximately 60% of revenue and have been steadily growing at modest rates this year, expected to continue into 2025. Discretionary markets (auto, housing, consumer durables) make up about 40% of revenue currently, down from normal ~50%, with upside as demand returns to normal. AFP had strong performance with heat transfer fluids in various projects globally and coatings shipments worldwide. AM saw volume mix improvement driven by the interlayer business. Performance film was in-line with the market, and specialty plastics were relatively stable. CI saw increased volume mainly in North America after Q2 shutdown constraints.

• Modest underlying growth expected in 2025, with above-market growth driven by innovation. - Volume mix to be a big driver, combining market recovery and innovation. - Cost tailwinds from better cost structure, offsetting some inflation, but energy and gas price headwinds and slight volume decline in fibers as concerns. - Kingsport methanolysis facility expected to improve EBITDA with better uptime and revenue ramp-up. - Texas plant expected to have attractive return around 12% with DOE and state support.

• Macro-economic uncertainty impacting demand and product launches. - Teething issues and lower uptime in methanolysis plant startup affecting EBITDA. - Construction challenges impacting plant startup timelines. - Trade policy changes in Europe affecting France methanolysis project customer contracts. - Inventory management in fibers business due to market decline and customer inventory adjustments.

Q: David Begleiter asks about 2025 volume growth outlook.

A: Mark Costa responds that Eastman is leveraged to economic recovery, stable markets (60% of revenue) growing modestly, discretionary markets (40% of revenue) with upside as demand returns to normal, innovation driving above-market growth, and volume mix a key driver.

Q: Patrick Cunningham inquires about fibers business challenges.

A: Mark Costa states fibers expected to stay stable, some China capacity online, Eastman repurposing assets for textile and food packaging growth, and market decline expected to be 1%-2%.

Q: Duffy Fischer asks about Texas plant differences from Kingsport.

A: Mark Costa says Texas plant incorporates Kingsport learnings, lower cost construction, more infrastructure, DOE funding, and state incentives, aiming for 12% return.

Q: Vincent Andrews asks about methanolysis EBITDA walk-down.

A: Mark Costa says two-thirds due to startup costs and one-third due to volume, with teething issues in plant startup and slower product launches due to macro.

Q: Michael Leithead asks about France methanolysis project.

A: Mark Costa says France project delayed by trade policy on imported waste as recycled content, needing customer contracts for stable margins.