Celanese Corp - Series A (CE) — Q2 2025 Earnings Call Transcript

Thanks, Daryl. Welcome to the Celanese Corporation Second Quarter 2025 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Scott Richardson, President and Chief Executive Officer; and Chuck Kyrish, Chief Financial Officer. Celanese distributed its second quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon. As a reminder, we'll discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both the press release and prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Daryl, let's please go ahead and open it up for questions.

Scott, in your prepared comments, you referenced order books beginning to weaken in June and then that trend continuing into July. Can you provide a little more color on really what end markets and you saw that weakening and how severe has that weakening been?

Thanks, David. We talked in early June about starting to see China automotive orders pull back a little bit. That has continued into the third quarter here. The other area in Engineered Materials that we've seen a little bit of weakening versus the second quarter is in European demand. The Americas has remained relatively stable there. And then the other bucket I would call out is in the Western Hemisphere in the Acetyl Chain. I think we've seen volume weakness towards the end of the very end of the quarter, and that has continued into July. I mean those are the really, I would say, kind of the big buckets of where we've seen that demand change.

Very good. And just on the $2 per share quarterly EPS run rate, how do we get there via bridge? And when do we get there, do you think?

I believe that achieving $2 is a realistic target for us. We are having extensive internal discussions about it. This is not a hopeful estimate; we have solid plans to reach this goal. I would categorize these plans into two main areas. The first involves adjustments to our cost structure, and the second focuses on effectively implementing our distinct business models. If we begin with the midpoint of our Q3 guidance of $1.25, we anticipate an increase of about $0.25 to $0.30 heading into next year and into the fourth quarter, influenced by inventory movements and the absence of order timing and pull-ins that we experienced in the second quarter. Additionally, for next year, we have outlined around $0.10 per quarter in extra cost-saving measures. This positions us in the $1.60 to $1.65 range, consistent with what we expected entering the third quarter had Q2 demand remained stable. However, we still see a gap to address, which revolves around four controllable factors. The first pertains to further cost actions and footprint adjustments, some of which are more intricate than those we've already implemented, yet they are achievable and currently being prioritized. The second involves high-impact programs designed to create additional value in high-margin sectors where we enjoy a competitive advantage. The third factor relates to identifying more price opportunities in Engineered Materials, where we are successfully adjusting some pricing but aim to achieve further increases, as certain products and grades are currently priced unsustainably. Lastly, we see potential in the Acetyl Chain, particularly in certain downstream products, to explore additional ways to increase volume or price. These four strategies are under active development and will guide us to the $2 per quarter target. Although it might take a few more quarters to reach this milestone compared to when demand was stronger in Q2, we are confident in our approach. Should demand shift positively, we are prepared to capitalize on that opportunity.

Scott, the $25 million inventory reduction impact in the EM segment you called out specific to 3Q, I mean, I know you're focused on reducing inventory levels, but is the magnitude of the impact a function of just the weaker demand you kind of went through as it relates to order patterns for 3Q and late 2Q?

Yes. I will make a few general comments on that, Ghansham, and then I'll let Chuck go over the specific details. During our fourth quarter earnings call in February, I mentioned that generating free cash flow was our top priority. Regardless of how the year unfolded, we were prepared to adapt in order to drive free cash flow. I am proud of the team's efforts and the actions being taken. Our free cash flow guidance of $700 million to $800 million translates to about $7 per share, which is impressive and robust. I am pleased with the steps we are taking, and we will continue to focus on cash. If we need to adjust to changes in demand, we will do so.

Yes. Ghansham, I want to discuss some impacts on the income statement. Our inventory reduction efforts in emerging markets are part of a multiyear plan, enabling us to operate sustainably with lower inventory while meeting customer reliability standards. We're achieving this through various strategies such as warehouse consolidation, SKU rationalization, safety stock optimization, and raw material reductions. Regarding the sequential headwind in the third quarter, the product mix plays a significant role. Some of our products in emerging markets are produced on a semiannual basis, and we completed one such production campaign in the second quarter for products with higher fixed costs. This resulted in a benefit of about $10 million to $15 million in earnings during the second quarter, which was included in our Q2 earnings guidance. Given current demand trends, we'll be drawing from that inventory in the third quarter, leading to a similar-sized negative earnings impact of $10 million to $15 million. Thus, the net sequential negative impact for Q3 is $25 million. For the full year, the earnings impacts from the second and third quarters essentially offset. We do anticipate a small negative impact in Q4, but nothing significant for the year overall. It's essential to note that we're also contributing to our inventory reduction through areas like raw materials and offtake arrangements, some of which do not affect the income statement from an absorption perspective.

Okay. Very helpful. And just for the second question, as it relates to the 2Q pressure points for the AC segment that you called out, right, so acetate tow and vinyls, how do you expect those two dynamics to evolve sequentially?

Yes. We're not expecting a big change right now, Ghansham. We're expecting that to continue, particularly in tow. I mean as I called out on the first question, we are seeing a little bit of softness in demand to start the third quarter even relative to the second on acetyl non-tow products. So that's really in that vinyls chain. So I think it's relatively similar with potentially a little bit of downside on the volume side. Now that will be offset in acetyls with us not having turnaround. So that's why you've got kind of the sequential guide up versus where we finished in the second quarter.

Are tariffs in China affecting your tow business? That is, is there material that you normally ship into China that's now more difficult because of tariffs or not really?

No, Jeff. Our tow business in China is really done entirely through our joint venture and our joint venture partners. So we're seeing no impact from tariffs.

Okay. And in VAM and acetic acid in China, are you at least breakeven? And of your Asian sales in VAM and acetic acid, is there any that comes from the United States?

Yes, we are breakeven. We're above breakeven still, Jeff. Now what I will say is we are selling less third-party acetic acid than what we have historically. We are, as I called out last quarter, continuing to pivot further into the downstream products like emulsions, redispersible powders because we've seen more pockets of value where we can differentiate ourselves. So we continue looking at that landscape and kind of working that wheel of products that we have, and that's really pushing us further downstream. We are selling a little bit of U.S. material in Asia in certain regions. Now that may be direct ship or it could come through swaps, et cetera. So whether it's actual or virtual, that has been something that we have been doing since we started up the Clear Lake expansion last year.

So just curious, in terms of your third quarter outlook, I recall you had thought you'd get $0.15 to $0.20 or so in cost savings, another $0.15, $0.20 in less turnarounds. Is that still the case, and that would imply sort of this minus $0.50 to get to the midpoint from weaker demand and inventory destocking? So if that's sort of the math, does that minus $0.50, I don't know, maybe come back in the fourth quarter and maybe the seasonality that you typically get isn't as bad as we head into the fourth?

Yes. Thanks, Mike. As we kind of look at this, I mean, if you normalize for the inventory and some of those accelerated orders that we saw in the second quarter, that kind of gets you $0.25 or so up off of the Q2 guide. So that basically puts the third quarter, as we're looking at it, it's really from an enterprise perspective, the underlying company is performing kind of at or even slightly better in the third quarter than what we did in the second quarter because of those cost reductions, not having the turnarounds that you talked about. That's definitely rolling through in the numbers as we work away into the third quarter. It's really just that change in demand. And that is kind of in that $0.25 range as you kind of look at what was in the second quarter to the third quarter. And that's probably somewhere 60% acetyls, 40% Engineered Materials as I would look at it right now.

Got it. I have a quick follow-up. I understand that most of your competitors have mentioned a weaker third quarter and that 2025 is shaping up to be disappointing compared to expectations. Do you see any structural factors in your business that might mean some of the earnings power won't recover, possibly in nylon or certain emerging markets? I never anticipated seeing earnings at this level, so I'm curious if there are structural issues in your businesses that could persist for several years rather than just this year.

Mike, I'm excited about our team's performance this year and our progress on free cash flow. We are developing the enterprise in a way that enhances our earnings potential, and we are prepared for shifts in demand. For instance, in acetyls, our cost structure in the Western Hemisphere is at an all-time low due to the fixed costs we have eliminated, the expansions we've made, and the low-capital improvements we've implemented, along with our low-carbon footprint products. In Engineered Materials, the measures we are taking will result in an S&A plus R&D percentage of sales next year around 8%, which mirrors our pre-COVID performance in 2019 under a different demand landscape. If we adjust that demand environment to our current situation, that percentage would be 100 to 200 basis points lower than 8%. The initiatives we are pursuing will enable us to respond effectively as demand fluctuates. There are certainly areas of the business facing challenges currently, but I am unsure if these challenges are structurally long-term, as we are ready to take the necessary actions. We are focused on maintaining an active approach to managing the company; there's always room for improvement. If a segment of the business isn't performing, we must take decisive action and drive change. This action-oriented mindset is fundamental to our strategy moving forward.

Scott, I wonder if you have any thoughts on the acetic acid business in China and some of the anti-involution policies that have been proposed. Are you seeing or hearing or thinking that there could be some capacity rationalization in the Chinese market as a function of those policies?

Vincent, I can't speculate on what will happen in the market. However, the current situation is quite challenging for the entire industry, and I believe China is aware of this. The recent discussions around anti-involution policies are already bringing about changes in more established and concentrated sectors. For instance, coal prices have increased for three consecutive weeks and are up about 5% over the last month. These initial changes are noticeable. I'm not sure how this will impact our businesses, especially acetic acid, yet. However, coal prices will likely drive costs up over time for everyone. I think it's crucial for us to stay informed about market developments. We will continue to explore different approaches and find areas of opportunity, which may vary from today to next week. Our team needs to focus on executing our daily operations effectively to achieve success.

Okay. And then just as a follow-up, there was a callout in the prepared remarks about medical being weak. And I recall that there had been overstocking during COVID, and that seemed to normalize last year. So is there anything in particular that's causing that end market to be a little sluggish right now?

No, Vincent, it's really just a matter of timing. We experienced slightly stronger volumes earlier in the year compared to what we’re seeing now. However, fundamentally, demand is definitely stronger today than it was after COVID. Everything we observe indicates that inventory through the chain and end-use demand remains quite stable.

I have a follow-up regarding the earnings potential, specifically questions concerning the acetyls business. This appears to have been a significant issue in the second and third quarters. Could you clarify the different components, particularly regarding the impact of inventory destocking? It seems you anticipate this trend continuing for the rest of the year. Additionally, what drives the core acetyls earnings power? Is it utilization, demand, or other factors? How much can you influence these earnings, and to what extent do you need to rely on market conditions, especially considering the shutdown or delayed restart of your Frankfurt facility and the situation in Singapore? Are there further actions needed to address any impaired earnings in this area, or do you believe it's primarily a market-driven issue?

Josh, the team is driving greater than 20% EBITDA in a business that's probably seeing Western Hemisphere demand at the lowest level it's been in 20 years. And that's certainly not easy to do. As we look at the business, in particular tow, we did see higher volumes in the second quarter than we saw in the first. It just wasn't as strong as what we had originally called out. And the order book indicates that kind of those Q2 volumes are going to be pretty similar into the third quarter. We're seeing kind of the weakness I talked about earlier in the other acetyl products in the Western Hemisphere. I do think this is about volume in the Western hemisphere. I mean given the overcapacity in Asia, I mean, we're going to continue to find ways, as I mentioned earlier, to squeeze out more profit there. But for us, this really is about the profitability in the Western Hemisphere. And given how volume is so weak, we do believe that's an area that will change over time. And just to kind of give you an idea of that earnings power and where things are at, a 3% volume change in just the Western Hemisphere non-tow in this business is about $10 million per quarter. So it's not insignificant just as a to give you a rule of thumb, in Engineered Materials, a 3% improvement in that business on a global basis is about $15 million a quarter. So real earnings power from very small volume changes in where these businesses can have success going forward. And we're only improving that equation with the cost structure changes that we're making over time here.

Firstly, I wanted to ask specifically about how we should consider the differences in earnings between Q4 and Q3. You mentioned that there might still be some initiatives for inventory reduction impacting those results. Could you clarify what we should anticipate in Q4, taking into account factors like seasonality and turnarounds? How should we compare Q4 to Q3?

Yes. Thanks, Sal. I think it's important to understand the visibility right now is very short in both businesses. Historically, acetyls, visibility of the order book was kind of 2 to 4 weeks. Today, it's very much on the short end of that. Historically, in Engineered Materials, the visibility and confidence in the order book could be 4 to 6 weeks. Today, I would say the visibility in Engineered Materials is more like 2 weeks of orders you can really count on. And so that's hard to predict what's going to happen in the fourth quarter. We have not seen normal seasonality so far year-to-date in anything right now. So it's hard to say, are we going to see real normal seasonality or not? The inventory value chain is extremely light. We do not see big pockets of inventory really anywhere in the value chain in the areas where we have stronger profitability. Chuck did mention a little bit of an inventory draw in the fourth quarter. It's likely on a sequential basis to be actually a positive when compared to the third quarter because it will be then less than what we're seeing here in Q3 based upon how we're seeing things right now from a demand perspective. So I do think it's hard to say what seasonality will be, but I don't think it's unrealistic to think that Q4 would be similar to what we're seeing in the third quarter or even better depending on how things materialize from a demand perspective.

Perfect. And I wanted to also ask a little bit about the balance sheet. And specifically, we saw that you extended your revolver to 2030, it's $1.75 billion. So is it fair to say that right now, if we do the math, '26, '27 maturities, they could fully be addressed by everything you have on hand, cash, free cash flow and the revolver? Or is there anything else we're missing? And is there any chance, any reason why you cannot draw on the entire $1.75 billion, for example, to repay your 2027 bonds?

Sal, look, we're focusing on paying down our debt maturities through '27 with our free cash flow generation and then our $1 billion of divestiture proceeds. We're not relying on our revolver to pay off those maturities. We have used our revolver temporarily from time to time for a short-term bridge, but then have quickly paid that off. So I would think about paying down those maturities through '27 through our own cash generation and not using the revolver. Now we know that sometimes our cash generation in any given year can be a little bit back-end loaded. So we'll continue to be prudent and opportunistic in the debt capital markets if we need any further refinancing transactions to kind of bridge some of that payment, but think about those '26 and '27 through our own cash generation.

Pretty consistent price declines in Acetyl Chain over the past several quarters. Is the bulk of this from just China oversupply and impact from the upstream pieces of the portfolio? And how would you characterize the optionality model and success for downstream sales? Have you been getting both price and volume there relatively consistently?

Yes, thanks, Patrick. Regarding downstream sales, it's been challenging to achieve pricing increases. This has been more about volume and exploring new opportunities in specific areas, including some product substitutions. We've had successes, especially in parts of Asia. However, we have observed some margin compression since the beginning of the year for certain products in China. Additionally, there has been a slight decline in margins in some areas of the Western Hemisphere, but this has mostly been related to volume rather than a decrease in margins.

Yes. As we entered the year, we looked at a number of demand scenarios. And this goes back to Q4 of last year even, and the commensurate inventory actions around each of those demand scenarios to generate $700 million to $800 million of free cash flow. So yes, as you mentioned, as we've kind of seen demand soften here, we're prepared to take further of those actions and increase the benefit from inventory working capital and kind of are confident in that $700 million to $800 million in any demand scenario.

I also think, Patrick, it's important to clarify, I mean, particularly in the second quarter here, the majority of that free cash flow was generated from operations, not from working capital. Our cash generation is coming from operating cash flow is strong, even despite the fact that we have $650 million to $700 million of interest expense this year. And I think it's that conversion to cash which really shows the strength of these operating models, and that is sustainable. And given that we do believe we're on a multiyear journey of inventory in the Engineered Materials business, even that working capital piece going into 2026 is sustainable. So we feel really good about the cash generation here, and we're going to be continuing to find ways at which to maximize how much cash we're generating from operations.

Scott, you gave some interesting rules of thumb regarding volume movements, impacts on acetyls and EM. Just curious, where do you think we are right now on a volume basis relative to historic norms in both of those segments?

We're significantly lower, Frank. I mean obviously, I called out earlier, I think we're at, at least in the Western Hemisphere in acetyl demand, we're probably at the lowest levels we've seen in 20 years. Engineered Materials certainly is weak. I think first half volumes versus first half last year even I think were down 5% to 6% volumetrically. So I mean, if you just kind of think about those, those are big significant changes that we've seen in the business. Now I know it's just rhetoric right now, but what we are hearing from our customers is that people are looking more at manufacturing in the U.S. We're hearing from customers that going forward, now when this actually hits, we don't know, but that people are looking at making more cars in the U.S. People are looking at making more appliances in the U.S. We are seeing even the German automakers now rolling out their next wave of electric vehicles, which have a really strong ability to win, particularly in the Western Hemisphere. Those things will be really beneficial for our businesses. On the acetyl side of things, whether it's interest rates or more government spending in Europe or stability in Eastern Europe, any catalyst like that, it's our lowest cost part of the world, our highest-margin business, we're going to be able to be able to capture that demand relatively quickly. And so our focus right now is really on in this low-demand environment, what are we doing to ready to ensure that every dollar or every ton we sell in the future is worth more than it was in the past.

Got you. That's very helpful. I must tell you, I was surprised to hear the low level of visibility on your order books seem pretty surprising. So to that end, without much visibility, just curious as to what the general thinking is in terms of the low end or the high end of that $1.10 to $1.40 range for the third quarter. What sort of expectations are embedded on both sides of that?

Frank, for us, I mean, the controllable actions that we're taking and the things that are rolling through the P&L already do give me confidence. Now certainly, where demand could pivot here in the last 6 weeks of the quarter can go a number of different directions. But I think where we're performing from a controllable perspective certainly gives me confidence in our guide right now. And we have to kind of take that mentality and keep that focus going forward. The good thing for us as well is now we're multiple years into this Engineered Materials integration, for example, which means we're now finally starting to get historical Celanese products on M&M assets and historical M&M products on Celanese assets, which gives us a lot better cost to serve. It has kind of given us the ability to lower the inventory. But what it also does is it gives us the ability to do more make-to-order products. And so it's less inventory that we have to carry so we can respond to that demand. And so it's those types of things that I think we're being a lot more efficient with the business broadly, which does give me confidence that no matter what happens with demand, we can find a way to at least hit our cash flow numbers.

Scott, I wanted to ask you about this demand pattern of stronger second quarter, weaker third quarter in EM. Do you have a view of what sort of underlying reason for this? Is this the tariff timing? Is it just weaker volume production schedules or consumer? Or any color here would be great.

Look, I think it's hard to say how much is really driven by tariffs. I think some of the order timing, particularly on volumes that were ordered in China that are made in the U.S., that's probably the majority of that kind of $10 million to $15 million or so that we saw that we think kind of moved into the second quarter. I would characterize demand right now really across both businesses as uncertain, and that's what we hear from our customers. And so in that time, what customers are doing is they're lowering their inventories. And you've seen, obviously, a host of announcements in our sector here this quarter and from our downstream customers and almost everyone is pulling back on inventories. And when they pull back on inventories, it's going to certainly impact how much product we end up selling. And I think it's that uncertainty and whether it's tariffs or geopolitical reasons, people are just certainly being a lot more prudent. Now we saw this as we entered the year. And as we entered the year, we knew it was going to be about cash and lowering inventory. And so that's kind of how we've been operating. And again, as I said earlier, I'm really proud of the actions our team has been taking to really focus on reducing our cost structure and generating cash.

And then filter tow, how much certainty do you have that this is not a share loss but a destock? How much visibility do you have in these competitive dynamics?

From the visibility we've seen thus far, Aleksey, I don't think we've seen significant share loss. I mean there's some additional capacity that's being sold in the market. It is not a new entrant, but just some additional debottleneck capacity that's in the market, but that's not really impacting our demand per se. I think where it's having an impact is customers don't need to hold as much inventory, and at least that's the perception right now. And so I think people have been comfortable operating at lower inventory levels, and that's kind of what materialized through the second quarter.

I want to go back to the bridge, Scott, that you provided from $1.25 to $2. But I think you said the inventory actions, that was maybe $0.25 to $0.30. The current cost program was $0.10 to $0.15, and that got you to $1.65. So I think you then said that that would have gotten you to $2 if it were not for the volume shortfall and then there are the four controllables. So I guess, if volumes do come back, would normalized volumes get you to $0.35? Or given that volumes are at 20-year lows, would normalized volumes get you closer to maybe $3? And then with your controllables, you maybe have like very, very long-term line of sight to north of $3. Is that the right way to think about it? What was the volume kind of shortfall from a normalized perspective?

Yes. Arun, we're waking up every day and just trying to put one foot in front of the other, and we've got to look at what's in front of us right now. And our next milestone is $2. And once we hit $2, then we'll set the next milestone for where things are. And we've been building a plan here that to get to that $2 per quarter level, that is through controllable actions as I kind of walked through. The walk I had done earlier in the year got you in that $1.70, $1.80 range, keeping Q2 volumes flat and through the balance of the year. And that's not what we're seeing right now. It's hard to say what normalized volumes are right now, but just Q2 volumes and that dynamic is worth about $0.25, $0.30. So it kind of gets you into that range certainly, but we're not going to count on that. We have to continue to work the controllable items that we have in front of us to get to that level. And if demand is there, we're going to be poised to capture it. Yes. Let me hit that point first. I mean certainly, the paints, coatings, construction demand in the Western Hemisphere that we're seeing is extremely weak. And so any change there would be pretty attractive from an incremental perspective given that rule of thumb that I mentioned earlier. That's probably the weakest part of the business versus today versus when we started the year. And so certainly, any change that we would see there and anything to catalyze demand on that side of things would be extremely beneficial just because that is our highest-margin area. When it comes to high-impact programs in the Engineered Materials business, I mean, we are committed to broadening and diversifying the business, finding additional pockets of opportunity outside of automotive, within the automotive business. And we have a lot of different examples of the things that the team is working on. And the non-auto, that could be things like drug delivery, performance footwear, fibers, hydrogen clean energy, oil and gas, I mean, these are spaces where we've had wins recently, nice wins, and it's about multiplying those wins. In automotive, EV propulsion, batteries, cooling, advanced suspension systems, these are all unique areas where our products fit extremely well and where we're gaining traction. Now some of those auto opportunities take longer. So it is really about accelerating kind of the full pipeline of opportunities in the hips to ensure that as we get into 2026, we have new demand materializing to the bottom line.

I appreciate the details in the presentation you gave around the Acetyls Chain, and over the years showing us how you've imparted sort of earnings stability and the like and also how 70% now of your revs come from the Western Hemisphere and 70% of those are contracted out. And you're obviously seeing that even in the near-term results, right? I mean the guidance that you gave for Q3 for Acetyl Chain relatively flat with Q2. So my question is, if you sort of take that model and try to incorporate those best practices within the EM side, how would it look? And particularly in light of some of the comments that you just made about hearing rumblings about manufacturing moving more to the Western Hemisphere and the like.

Certainly, there are areas of Engineered Materials that have elements of the acetyls business, particularly in standard grade materials, areas like POM; our polyester business, nylon. The standard spaces do have some of those kind of daily operational elements. And the Engineered Materials team really is looking at the segments of the business within each product line on how we drive and compete. And I think nylon is a perfect example of using some of those elements in looking at do we make versus buy? Do we buy polymer from the market and compound for standard compounded products because that gives us a lower cost structure? Do we find different ways to buy materials cheaper otherwise? Do we pivot materials to our lower-cost elements of production? And we've done some of that through the shutdowns of higher-cost capacity that we've done in maximizing production in our lowest-cost assets. And so there definitely are elements there. Our U.S. footprint that we have in both businesses is extremely low cost, and it is advantaged. And so as we see demand pivot back to the U.S., if that occurs, I think we're as well positioned as anyone in our competitive landscapes to be able to capture that demand very quickly.

Very helpful, Scott. And as a follow-up, I mean, obviously, the macro continues to weaken, a fair degree of uncertainty in the marketplace. And obviously, the chemical industry sort of valuations keep coming down as well. Where do you guys stand with regards to the $1 billion in divestiture that you guys had sort of flagged to sort of accomplish within the next 2.5 years?

Thanks, Hassan. The Micromax process we announced publicly a quarter ago is going very well. We have worked our way through the first round of bids. We narrowed that down to a nice diverse group for the second round. Management presentations are completed. We're working through site visits and expert calls and kind of fully through the diligence process right now, and we expect to have second round bids in the next month or so. And then we'll narrow that further to a third round and work to conclusion, we think, at some point here in the second half of the year. So we feel really good about the Micromax process. I actually asked the Head of M&A yesterday, as a matter of fact. And I said, 'Do you feel more confident today in our non-Micromax projects than you did a quarter ago?' And he said, 'Absolutely.' And I do think we've seen some traction there. I mean a lot of the deals we're working there are a little more complex. Some are with our joint ventures, and those are harder to get done. And so they do take longer, but I do think the work the team is doing to keep the focus on those with the highest degree of profitability, I would say we feel more confident in that today than we maybe did a few months ago.

Selling third-party acetic, previously referred to as parlay, was a crucial element of the acetic acid strategy. Is the decline in third-party sales indicative of a fundamental change in the industry, making it less viable? Or is this a temporary downturn due to the need for working capital, which might not be preferred at this time? Additionally, there might be reduced margins at lower prices. How much of the decline in third-party sales, which was once a core component, can be attributed to cyclical factors versus structural changes?

John, you've covered us for a long time, and you know that this business changes every single day. And is it structural? No, I don't think it's structural. It may take a while for that dynamic to change, but there's a lot of moving parts here and margins are really at unsustainable levels. So I do think that's why you're seeing us make the choices that we're making to further pivot downstream. And I think the work that we've done there in debottlenecking capacity downstream has given us another outlet so that we're not so reliant. And 10, 15 years ago, we were extremely reliant on selling third-party acetic acid, and we're not today. And that business in some years was well over 50% of the end products that we're selling, and now it's less than 30%. So I think for us today, I think having more diversity in the business is a good thing. Certainly, we'd like acetic acid margins to be better than they are. But these things pivot here, and we're going to make sure that we continue to pivot with the market as opportunities present themselves.

And then can you say that the Micromax deal will be simple all cash? Or do you think there might be an earn-out or something a little bit more complicated with that deal?

We're working deals, John, to keep the complexity at a minimum on the deals that we're doing. And I think for us right now, we're quite confident that we won't have an outcome that's super complex.

You mentioned auto is weakening, but could you talk a little bit about the mix within autos? Historically, Celanese has enjoyed some nice tailwinds from things like hybrids and EVs. Are those tailwinds still present? Or are they starting to reverse?

We're not seeing a big reversal right now. Certainly, with demand pulling back in China, our sales into EVs on a global basis are probably a little bit less today just because of more where the end-use demand is. Electric vehicles are definitely here to stay. I think each region is going to be a little bit different. Certainly, EVs are going to play a big role in Europe. And with the future model launches that I think we're going to see in '26 and beyond, EVs, and that is the powertrain of choice is going to be critically important for us. And we feel really good about the portfolio that we have developing from a pipeline perspective there. In the U.S., it's going to be a mixture. There's going to be ICE, there's going to be hybrids and electric. And so we have to make sure that we're remaining nimble and flexible with our customers so that we can meet those needs because I do think it's going to be a changing mix here for the automotive industry.

Okay. Well, thank you, everyone, very much. We'd like to thank everyone for listening today. As always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call.