Celanese Corporation (CE) Q3 2026 Earnings Call Transcript

Operator: Greetings, and welcome to Celanese's Q3 26 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the brief remarks. Please note that this conference is being recorded. I will now turn the conference over to Bill Cunningham. Thank you, Bill. You may begin.

William Cunningham: Thanks, Daryl, and welcome to the Celanese Corporation Third Quarter 26 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Scott A. Richardson, President and Chief Executive Officer and Chuck Kyrish, Chief Financial Officer. Celanese's distributed its third 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 will 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 the prepared comments. Form 8 ks reports containing all of these materials have also been submitted to the SEC. With that, Daryl, let's go ahead and open it up for questions.

Operator: Thank you. We will now be conducting a question and answer session. Our first questions are coming from the line of Ghansham Panjabi with Baird. Please proceed with your questions.

Ghansham Panjabi: Thank you, operator. Good morning, everybody. I guess first off, in terms of the EBITDA underpinning your $700 million to $800 million free cash flow assumption for next year, can you just give a sense as to what you are assuming in terms of underlying assumptions Is it basically some version between 2025 and 2026 adjusting for the cost savings? What is your initial view on that?

Scott A. Richardson: Yes. Thanks, Ghansham. Let me start and then I will turn it to Chuck to talk a little bit about how he is thinking about free cash flow generation. The team is really being very intentional about how we engage with customers right now to finish the year. So we can plan and position for, you know, what is still some uncertainty as we go into 2027. I think Acetyl Chain continues to focus on contracting business and with some of the benefits that we have seen from the reliability of supply, getting that business contracted for 2027 and engineered materials being really deliberate and intentional with how we build the pipeline with high quality, particularly in some of these growth segments. And so I think with that, when you combine kind of that focus of top line with the cost actions that we called out, pushing approximately $100 million between costs and interest next year, we do feel like we can make 2026 a base that we can build off of going into 2027.

Chuck Kyrish: Yep. Thanks. And, Ghansham, look, I think we are demonstrating our capability to generate 7 to 800 million of free cash flow in 2 very different environments the last couple of years. Right? And whereas the last couple of years, there is a few different scenarios that we can get in and see that the earnings or some leverage that we have on working capital So we are. We are confident in this 7 to 800 range for next year. Little bit more context, I think to start, there is really no need to increase our CapEx. At those levels, we are able to maintain reliability, safety, and, but still pursuing a very targeted low capital investments in either productivity or very targeted growth areas. I think going forward into 2027 from 2026, there are still a lot of opportunity in working capital because if you look at our inventory values, I mean, they are still elevated. And we would still have structural opportunities there as well. In addition, I would point out that at Celanese, it is productivity every day. But, you know, a lot of the large cost savings programs that needed large cash outlays. They are kind of running their course. Right? So that cash outlay for restructuring activities should continue to decline next year, you know, say $30 million to $40 million, right? So all those things considered Ghansham, we feel that $700 million to $800 million is really the right range for next year.

Ghansham Panjabi: Perfect. And then just for my second question, on the electronics and healthcare piece, obviously, that is had substantial growth and profit mix is clearly quite favorable and that some of the offset towards perhaps auto OEM and some of the mix backdrop there the forecasters are calling out in terms of builds, etcetera, certainly for Q4. But as we think about 2027, you are gonna have tougher comps for those 2 verticals. Just your thoughts as it relates to the momentum on the sales side for both electronics and healthcare into 2020 would be helpful. Thank you.

Scott A. Richardson: Yeah. Our EM team is staying very close to customers right now. And staying close to customers and matching our capabilities that we have, which we believe are immense. With the opportunity sets that are out there. And it really is a focus on quality and quality into the pipeline and moving that through as quickly as possible to get to commercialization. And when you look at electronics and medical, we still see tailwind going into next year, Ghansham. And we do not think that stops. And certainly, we are working, many different end use areas and we continue to partner with customers on some of the really interesting new development programs really across every end use that we have. But certainly medical and electronics has been a bright spot for us this year and we expect that to continue into 2027. Okay. Perfect. Thanks so much.

Operator: Our next questions come from the line of Patrick Cunningham with Citi.

Analyst: Hi, good morning. Thanks for taking my questions. Really compelling slide on some margin contribution from downstream derivatives in the Western Hemisphere. Do you need to build any more capacity there if you have any line of sight into North America building and construction demand? And then I am just curious on the downstream capacity specifically, how would you assess the risk longer term of those businesses being disrupted by Asian supply?

Scott A. Richardson: Yeah. Thanks for the question, Patrick. Our operating model in the Acetyl Chain has been 1 that we have continued to enhance. Over the course of the last several years. And where the opportunity set has been has really been further downstream. And you know, specifically in our emulsions and powders part of the portfolio. You know, as that business continues to penetrate further with differentiated opportunities particularly in the Western Hemisphere, you know, there could be a need for, you know, additional investment. We will be very thoughtful about that. As we announced earlier in the year, we have added another reactor for the emulsions business in Europe and we have continued to debottleneck our re dispersible powders assets with very low or no capital. Over the course of the last 18 months. So we are. We will continue to do that and then, you know, we are very thoughtful about investment. But even if we needed to make investment, we still believe it will fall between kind of the--our capital will fall between the $300 million and $350 million. You know, 1 of the reasons to answer your second part, that 1 of the reasons why we like the downstream portfolio is because it allows us to have more differentiation with products, partner with customers, formulate develop solutions that fit their needs in some of these key growing end markets. And that provides us with a little more resiliency even with the global length that we have seen more upstream, particularly out of China. Got it. Very helpful. And then, you know, you characterized the, you know, Asian Acetyls environment as a bit more dynamic in the quarter and it is been a volatile year overall. I guess with the exit rate maybe a bit better towards the end of the quarter, can you help us with what is embedded in guidance in terms of the direction of prices and spreads there? And how much upside there would be if we sort of see persistent movements in prices and spreads here? Our Acetyl Chain team wakes up every single day ready to tackle whatever, is in front of them. And it is a team that works to stay very globally connected as well because oftentimes there will be connections between what happens in 1 product you know, and it moves downstream or in what happens in 1 region impacting another region. And so that tightness and readiness is really the hallmark of that team. And so, you know, they have approached this quarter much like they you know, approach every quarter, which is be ready and be ready to. No matter what transpires as we started the quarter, We have had a healthy margin environment. We have got an unexpected turnaround from 1 of our key pipeline suppliers in China that is having to take an extended outage due to, you know, some government inspection that was unplanned. And so we are, you know, running at lower rates here in the quarter because of that, outage. And then, you know, we do have margins coming off through the quarter and finishing at lower levels at the end of quarter. And so that is what we have embedded into the guidance, Patrick. And you know, if either of those 2 things were to change, and certainly, you know, that would potentially drive a little higher margins in the back half. Thank you.

Operator: Our next questions come from the line of Jeffrey Zekauskas with JPMorgan. Please proceed with your questions.

Jeff Zekauskas: Thanks very much. It seems that the EU is dropping the tariffs on VAM into the EU from the US? Is that a benefit to you? Or it goes to the customer? How do you see that?

Scott A. Richardson: Yeah. Jeffrey, right now, we are not seeing a huge impact to the bottom line for us of some of those changing dynamics. We do not see it really being material at this point. And, you know, oftentimes, you know, that ends up flowing through over time.

Jeff Zekauskas: And can you tell us how your auto related businesses in Engineered Materials have performed through the years? Through the year? How much are volumes down what is going on in the nylon business? what is going on in the polymer business? And what is your outlook?

Scott A. Richardson: Yeah. Jeffrey, as we look at the auto business, we like the quality of our auto business today better than we did a couple of years ago. Now our volumes are down this year in automotive largely driven by China. And with the builds declining in China, that is been the biggest driver. Things have been pretty stable in the Western Hemisphere, both from a builds perspective as well as our overall business. But the quality of the pipeline continues to improve and the mix has improved, really, in specific auto this year. The team's done a great job with the changes that we have had in our manufacturing footprint. it is really given us a lot more flexibility to be less focused on grabbing volume and really focus on developing those more differentiated applications and continuing to push for value. So the quality is strong and we are exiting the year I think from an auto perspective certainly better on an overall mix and portfolio than when we entered the year. How about nylon? Nylon fits very much in that, Jeffrey, because of the changes that we have made around our footprint and the fact that we are buying as opposed to making more polymer, we just have a lot more flexibility there and margins have significantly improved. And the pipeline continues to be good for nylon in key applications both within auto but also outside of auto. Thank you.

Operator: Thank you. Our next questions come from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.

Kevin McCarthy: Yes, thank you very much and good morning. A couple of questions on your joint ventures. Maybe on the operational side, curious to hear your thoughts about Ibn Sina. We have seen MTB prices very volatile, first in a good way and now kind of coming off a little. So does that create a surge in Q4? And maybe an ebb to start next year? And then the second question on JVs is as you have inked a deal regarding NutraNova, expected to bring in, I think, $152 million. Maybe you could just talk a little bit about that deal and prospects for other similar sort of cash-generative transactions as you see it today?

Scott A. Richardson: Yes. Thanks, Kevin. Let me hit the Ibn Sina part first. Ibn Sina as we view that as a very important kind of natural hedge or offset in the engineered materials business. So when energy prices rise, Ibn Sina, you know, tends to do better. Energy prices fall, then we see those earnings decline. but the base business tends to kind of move in a counterbalance way to that. So we kind of provides that. With the kind of low operating rates that Ibn Sina had earlier in the year, it was not providing that offset that we have seen historically. I think as you go into the fourth quarter, you will see more of that. Ibn Sina, you know, is on a 1-quarter lag for us. There was better performance, in Q3, which will roll into the fourth quarter. We continue to see inconsistent operating rates, I would say, with Ibn Sina, Shipping out continues to be very difficult, particularly in some products. And so it has been operating but it has been operating inconsistently. I think last quarter, we expected EM affiliates to be down about $10 million, year over year. And now we would see, EM affiliates being pretty flat. On a year-over-year basis, on an adjusted basis to what we had last year. Then on to your question about NutraNova, you know, it is certainly a good partnership we have with Mitsui, both with the Methanol Joint Venture In Clear Lake and now with the partnership we have on the NutraNova joint venture. They were interested in taking a larger share, and so, you know, we came to an agreement to sell an additional share, where we are going to get a little over $150 million of proceeds. And we have talked about it is likely to get to close the gap on the remaining 350 or so, $340 million of additional divestiture proceeds that we have called out by the end of 2027 that it is a series of transactions probably in the range or maybe smaller or a little bit bigger than what we just announced with NutraNova. And so a continued emphasis continues to be around joint ventures to where we could extract more value and not impact kind of our base operating models. Thank you very much.

Operator: Thank you. Our next question has come from the line of Frank Mitsch with Fermium Research. Please proceed with your questions.

Frank Mitsch: Hey, good morning. I would be curious as to how you think about the Acetyl Chain business for the full year. Of 2026. Obviously, year was very disappointing. However, you know, you posted some eye popping results you know, in the post COVID environment. I just took a quick look. If I--if I average out, you know, the 2019 and 2020, if I average out those 2 years, you are basically where you are in 2026. So I am curious as to what your thoughts are. Was 2026 a year that you over earned? And if so, you know, by how much? I mean, how do you think about that?

Scott A. Richardson: You know, Frank, I see the. And I said this to our Acetyl Chain team. I believe this is the business that never sleeps. it is a business that really has to be on point every single day given how we have created this operating model to be able to flex. And I do not think we are gonna put labels on 2026. Our team is really focused heavily on looking forward, finishing the year very strong. And then looking forward, to how we can build on 2026 going into 2027. We are going to cost savings from the Lanaken shutdown. We are only gonna get about a third of those in 2026 and the other 2-thirds rolling into next year. We have contracted new business by showing that we can be the most reliable supplier of acetyl in the Western Hemisphere. You know, we are leveraging our flex network and maximizing our low cost base. We continue to work a number of reliability and productivity projects in the US Assets to be able to get more out of those assets as we go into next year to hopefully improve margins. And we are we are doing some really creative things around AI. To help the manufacturing with that focus around reliability and productivity. So those are just some of the things that, you know, we are focused on right now, getting executed here in the fourth quarter and the early part of next year, to hopefully provide some tailwind to offset what could be some headwinds particularly from the strong Q2 that we had.

Frank Mitsch: Got you. Okay. Okay. And then, yeah, just coming back to EM, you highlighted 3 projects that I think are going to be commercialized the first half of 2027, 2 in Asia, 1 in Europe. Curious as to what sort of order of magnitudes might investors expect to see out of these 3 EM projects?

Scott A. Richardson: You know, human ingenuity never stops, Frank. And our Engineered Materials team is really focused on partnering with customers on unique solutions, differentiated products that we offer to be able to provide kind of a long term and sustainable growth base for the corporation. And these 3 projects are necessary because of the great work the team has done to continue to grow in some of these high margin areas, particularly in electronic and medical. And those 3 investments that we have made are really a focus on specifically electronics and medical application areas. And so as we go forward, it is really about how we use again 2026 as the base to continue to grow. I mean, we are gonna grow when you adjust for Micromax, EBITDA is approximately 20% or so on a year over year basis versus 2025. And even if you included Micromax, that EBITDA growth would be up about 15%. And so it is how do we continue to kind of get that moving into 2026 and. Or to 2027, which is important for us from a corporation standpoint to be able to build off of the EPS that we generated here in 2026. Understood. Thank you.

Operator: Thank you. Our next questions come from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions.

Vincent Andrews: Thanks. Maybe just to start off with, could you talk a little bit about the seasonality you are expecting in the fourth quarter? And is it different by region? like, in other words, are you expecting Europe to be softer than maybe North America? And just sort of what you have baked in there. Obviously, Europe is going to struggle with the higher energy costs, plus there is been a backup in freights from Q3 to Q4. So I would be curious, number 1, hear your thoughts on seasonality. And then 2, the press release or the sorry, the prepared comments mentioned relationship you have formed with, I think, a company called Vigor and robotics. So I would be curious to hear a little bit more about that. I suspect that is with your palm molecule, and I am just kind of wondering when you think that would become interesting to your P and L, is that a 2028, 2029, 2030 plus, what is the opportunity set is there?

Scott A. Richardson: Yeah. Let me hit the second 1 first Vincent, and then I will come back to your first question. Look, we believe we have really enabling capabilities. In our engineered materials business. And it is how do you match those enabling capabilities with kind of that--it includes really the most vast you know, polymer offerings that anyone has. In the space? And how do you match that with customer needs? The robotics example there is a good 1 in that. And it is not just about 1 product. it is really about kind of a multi-product offering. And, you know, we gave the example, I think, of the continuous glucose monitor in the prepared comments where it is not just about 1 part, and it is not just about 1 polymer that we are selling. it is about a myriad of offerings there. And so by building that relationship, by really being at the bench, with the customer in the development part of that process is not just about winning 1. And that is how we believe we can scale this business and how we can build that quality we can build that differentiation because of the offerings that we have And by being a part of that design team with customers. And so we are excited, you know, as we look forward about areas like robotics, which is really about you know, how do you turn, you know, artificial intelligence from the digital form into the physical form. And that is really what robotics is about. And, you know, that is 1 example with 1 customer that we are working and we are working with a number of customers around the world on those types of application areas. Now to get to seasonality, you know, I think what we have baked in, Vincent, quite honestly, is very similar to what we have seen historically. So in engineered materials, I think we have got between about a 6% to 7% volume decline baked in to the fourth quarter. that is pretty much right on what we have seen historically. And I think the early indication for the order book towards the end of November and December, you know, would certainly match up with that forecast. In the Acetyl Chain, it is usually about a $25 million plus minus decline from Q3 into Q4, largely driven by paints and coatings and building and construction seasonality. That really is pretty heavily contained to both the US And Europe and is pretty evenly split I would say. We are seeing pressure from raw materials. We are seeing pressure on cost from the low Rhine River water levels and we have baked both of those into that seasonality guide that we put out. Thank you.

Operator: Our next questions come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions.

Hassan Ahmed: Good morning, Scott. Scott, a question on AC. 1 of the things that obviously transpired with both the Middle East conflict was a fairly rapid escalation in methanol prices. And unlike certain other commodity chemicals, we really have not seen much volatility there. Methanol continues to remain fairly high. Expectation is that at least for the next couple of quarters, it will stay there. So just how have you managed those higher methanol prices And I know in the past, you guys have talked about how potentially sort of volatility in feedstock prices, methanol in particular, you know, tends to be a positive for you guys. So just trying to reconcile those high methanol prices, those strong Acetyl Chain results that you have gotten with the net short global methanol position you guys have?

Scott A. Richardson: You know, our philosophy on methanol, Hassan, is to be about 40-50% integrated. And we have a methanol joint venture in Clear Lake and then we have got the joint venture in Saudi Arabia with Ibn Sina which also produces methanol. So those are our 2 kind of investment positions that we have in methanol. And we believe being a merchant buyer of you know, a little bit more than 50% of our global needs is the right position to have, and I would expect that to continue to be the strategic, you know, path forward that we have. What we have seen occur specifically in the third quarter was a very rapid escalation in the beginning of the quarter. We saw margin compression that occurred at the very beginning of the quarter. And then over the course of the quarter, we were able to move pricing up to where we saw margin expansion overall as we exited the quarter. We have seen some on that as we started here the fourth quarter, through most of the month of October, but we are still seeing margins at elevated levels. And I think for us as we go forward, certainly, we are going to do everything we can to hold here. Just with the potential for length in the back part of the quarter, we have baked in margin in the Acetyl Chain into our guide here for, kind of the balance of the quarter as we move forward. So if we can hold margins and pricing, then certainly there could be some upside as we exit the quarter. But as I mentioned earlier, we do have that unexpected outage from our supplier in Asia and then we are seeing some cost pressure in Europe from both energy as well as from the Rhine. River levels. And so, you know, with kinda all that, that is kind of where we netted out on the Q4 guide. Fair enough. And Scott, as a follow-up, with the cost cutting sort of exercises that you guys have carried out, productivity improvements and the like, just trying to get a sense of what that equates to in terms of EBITDA tailwinds for 2027? Yeah. Let me let me start, and then I will let Chuck get into the details. We never stop looking for ways to be more effective and efficient. I think, you know, I have been with the company now for over 20 years. And I think it is been a part of our DNA to focus on driving as much productivity as we possibly can and getting creative. And, you know, once we have implemented a project that creates a new normal and then how do we optimize around that and continue to get creative. And some of the things that we are doing we kind of call next generation productivity. So how do we use technology like AI within our manufacturing assets to get better at raw material efficiency, get better at energy efficiency, you know, get, you know, lower our maintenance costs, etcetera. And we are starting to see early returns from that. And you know, we would expect to be able to build on that to create new opportunities into 2027 and beyond. So that is kind of how we philosophically think about productivity and cost reduction. Chuck, you want to hit 2027?

Chuck Kyrish: Yep. Hey, Hassan. So with the cost and actions that we have already done in both Engineered Materials and the Acetyl Chain, we are seeing right now $70 million flow through this year. But with just those same actions, we have another $30 million to $40 million that will hit us next year in cost savings. And Hassan, the vast majority of that is EBITDA. We also expect functional cost to normalize somewhat in 2027 you know, call it $20 million or so that is EBITDA Below EBITDA, we also do expect interest expense savings to begin, and that is $40 million on a net basis, not an EBITDA, but certainly another cost saving. Very helpful. Thank you so much.

Operator: Thank you. Our next questions come from the line of Joshua Spector with UBS. Please proceed with your questions.

Joshua Spector: Yes. Hi, good morning. I would be curious if you can characterize where Engineered Materials price cost is in the second half. I know in the prepared remarks, you said in 3Q, you offset it through mix and some other factors. But if we just think where pricing is relative to cost, is there still a meaningful gap to close in second half as we look into 2027? Or where does that stand?

Scott A. Richardson: Yes. Thanks, Joshua. If we go back pricing was a critical part of the second quarter. And we talked very openly about the need to exit the second quarter with strong pricing to be able to offset you know, the cost headwind that was gonna hit us with kind of the delayed flow through of raw materials in the third quarter. And that is exactly what happened. And as you can see from the numbers, we were able to get a little bit more incremental price in the third quarter, as well, to help offset some of those cost pressures that we saw. We are seeing, after seeing a stabilization of costs in the third quarter, we are seeing, you know, some costs start to rise. And that cost, you know, particularly, you know, methanol has been mentioned here. Energy costs in Europe, and several other raw materials are moving up now again here as we work our way through the fourth quarter. And so the team continues to be very focused on price, and pushing more price because of that kind of next wave of raw material increases that we are seeing. And so that is gonna be important that we push to get some of those key price areas as we exit this year because those raw materials are going to flow through in Q1. Okay.

Joshua Spector: And I wanted to follow-up just on the supply side and engineered materials. I mean, we say the market is kind of flat. Is still the supply set up better or worse for you into next year? And can you keep differentiated products differentiated against potential supply out of China, other parts of Asia, etcetera? Thanks.

Scott A. Richardson: Our EM team never stops working this equation, Joshua. I mean, you do have a fair amount of the business that churns out you know, every quarter, every year. And so it is important that innovation engine is always running, hard and is pushing to get that differentiation. I mean, we have been very open about the fact that there has been new capacities that have been added in Asia, and we have seen more competition on the standard grades. And so, you know, we tried to get ahead of that with the footprint actions that we have taken, and I think that is really kind of playing out as the right move for us because it does not push that volume equation as being as critical for us as we move forward. And it really allows us to focus on development of the pipeline in those more differentiated areas. And so, we cannot stop there, and we have to continue to be focused, with customers in the areas where we have better products, we have more differentiated products. And we are very clear about that value proposition. To customers to where we become the supplier of choice. And I think with the growth that we have seen in certain pockets of the business, both electronics medical. I would also say the quality of the auto business as well has been, you know, certainly, very good this year, you know, relative to past years. And so those 3 areas, I think, are giving us some tailwind as we finish 2026 and go into 2027. Okay. Thank you.

Operator: Thank you. Our next question is from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

David Begleiter: Scott, you mentioned some earnings tailwinds for next year. Any cost headwinds you would point out not including raw materials? That you see right now? Thank you.

Scott A. Richardson: Yeah. David, we have to continue to find more. Because there is always things that you do not predict that could happen. You know, we are going to see, we believe, an, inflationary environment on some of our costs at the plant and some of our administrative costs. And so we work the productivity angle there hard. You know, we are targeting $150 million of gross productivity. To offset inflation going into 2027. So it is really that we build out that pipeline from a manufacturing and procurement standpoint to be able to offset that inflation. Now we are gonna push to do higher than that 150 million of gross so that we can hopefully put some of that to the bottom line. Just because I do think we are gonna continue to see inflationary pressures there. We do have to and I know you did not ask about this, but I do think we have to continue to stay above this ahead of this price cost environment because it has been dynamic and it has been volatile. We saw stabilization of ROS, but now ROS has started to move in certain regions as well as energy prices have moved. So it is really important that we work ways, to more than offset that as well in order to build off of the EPS that we are driving in 26. Very good.

David Begleiter: And just on the divestitures, once you reach the billion dollar target, are you essentially done with divestments? Thank you.

Scott A. Richardson: David, we are always gonna be open and willing And certainly, if something adds value, and it helps us accelerate deleveraging or give us more flexibility going forward. We are not gonna stop working divestitures. I mean, we had set that target because we believe, 1, it is the right target. We believe it is a realistic target and 1 that we could hit and was also very important for us on our deleveraging journey. But we are not gonna necessarily stop working things that make sense to create value. Thank you.

Operator: Thank you. Our next questions come from the line of Matthew DeYoe with Bank of America. Please proceed with your questions. Matthew, would you be able to see if you are self-muted?

Matthew DeYoe: Sorry. I was on mute. Good morning, everyone. I want to talk a little bit about the tow market for 2027. You know, I know there is some idiosyncrasies across companies and how they have handled some of the capacity and competition. I know you talked about Lanikan as a tailwind there, but ex that, perhaps, what are you expecting for earnings from the underlying tow business and price competition? Do you think you can keep prices flat for the year? Do you think you can grow volumes? How does that look?

Scott A. Richardson: Matthew, our team in acetate tow has been keenly focused on actions that are controllable to drive year over year improvement for it. And, you know, the Lanaken decision was a difficult 1. But it was 1 that was necessary for us going into next year to be able to drive, you know, controllable cost improvement to help offset, you know, some of the challenges we have seen. I mean, the tow market conditions have been challenging. And you know, as we have kinda worked our way through this year, you know, we are seeing a bit of a stabilization, I would say, of tow, you know, volume and margins as we finish 2026 versus where we started the year. And as we go into next year, our belief is that overall tow performance should be improved, driven by the cost actions that we have taken that are controllable. You know, from a from a market and industry perspective, you know, we do expect you know, a continued stabilization, you know, as we work our way forward. But we are also looking for ways at which to drive improvement at the variable margin line over time. So we kind of look at year over year improvement really being driven by cost. Okay.

Matthew DeYoe: And then if I could, what is your-- like, what is the general sensitivity on the European footprint to gas? I would assume most of that is in AC, but, do not know if you have ever given numbers around that or if you would feel comfortable giving numbers around So Matthew, we have worked our manufacturing footprint optimization as a company now for over 20 years.

Scott A. Richardson: I mean, we have been very focused on investing in parts of the world that have the lowest cost inputs in the US. We have been focused on investing in parts of the world where growing demand centers like Asia and China, And, you know, Europe has been a manufacturing footprint, a region that has continued to get smaller for Celanese over time. As we started 2026, the largest exposure we had to in Europe was the Lanaken facility. So now with Lanaken out of our network, you know, the plant that we have in Germany, is the largest exposure to gas, but to be honest, the gas usage is at a lower level. And so our exposure really is kinda split pretty evenly between both Engineered Materials and the Acetyl Chain. But in the grand scheme of things, when you look at the entirety of the corporation, it is a pretty low percentage of our energy exposure that we have. Thank you.

Operator: Thank you. Our next questions come from the line of John McNulty with BMO Capital Markets. Please proceed with your questions.

John McNulty: Yes, good morning. Just wanted to dig into the electronics growth in EM a little bit more. I guess, could you help us to think about how much of it was driven by just the end markets accelerating from Q2 to Q3? And how much of it was tied to maybe more successful penetration of those existing end markets? I guess how should we be thinking about that?

Scott A. Richardson: Yes. John, we believe it is really being driven by growth. I mean, we are seeing kind of a generational spike in demand coming from kind of the global data center build out around AI. And we believe that is gonna be a multi-year kind of tailwind that we should see. And I think, you know, what we have seen that what we have seen happen over the course of the last 3 to 4 quarters is that has certainly been accelerating You know, based upon how, you know, our order book has developed for the fourth quarter, I mean, we are seeing that kinda continue at similar levels to what we saw in the third quarter, and we expect that to continue to grow as we work our way into 2027. Got it.

John McNulty: So when we think about going forward, it is really about the end market growth, maybe a little bit less about just new applications, things that you are targeting. Is that the right way to think about it? Or is your ability to target additional pieces of the market, also going to be a decent sized growth driver going forward?

Scott A. Richardson: No. Look, the market dynamics are creating opportunities for selling these products for penetration because of the capabilities that we have. And, you know, I talked earlier about it is really about how we look at markets and match our capabilities and then find ways at which to penetrate it. So it is really both things that are happening here, John. it is the market is growing. We are penetrating with different opportunities. I mean, if you look at, for example, a traditional server, you know, we would have sold kind of 1, maybe 2 polymer families into that server. You look at an AI data center server, that we have got, you know, multiple product families that have opportunity sets within that. And then there is additional volume for each of those polymer families on that because of the requirements that are there. So it really is about finding those application areas with high technical requirements where our capabilities are a really good match. Great. Thanks very much for the color.

Operator: Thank you. Our next question comes from the line of Alexey Yefremov with Barclays. Please proceed with your questions.

Aleksey Yefremov: Thanks. Good morning. Coming back to your EU specialty compounding project, could you just help us understand what is the term specialty compounding? I presume this is a differentiated type of compounding. And if so, in what way? And is there generally a shortage of compounding in EU?

Scott A. Richardson: No, Aleksey. It really is about putting in a line that is more focused on some of these smaller high value areas. You know, oftentimes, you know, the high value areas have lower volumes, and so you wanna make those on lines that have that are a little bit smaller and have specific capabilities. And so with the growth that we have seen this year, particularly in medical and electronics, you know, we have. We are getting to the point of kind of, you know, filling out that capacity that we have that can that is really appropriately focused on those materials. And so putting in some additional lines that have those capabilities is something that you know, we identified and the team moved very quickly. You know, to go and solve for that here at the end of the year. Thanks, Scott.

Aleksey Yefremov: And I recall last quarter you mentioned $45 million inventory related impacts in nylon 66. I think you are seeing those in the second half of this year. Should we think about that amount I guess, a, is this still a good amount to use? And b, is this a tailwind fully next year?

Chuck Kyrish: Hey, Alexi. So the our Nylon optimization efforts are right on track. We have seen some delay in inventory reductions and from what softer demand in certain end uses. So that $45 million, let's call it closer to maybe $30 million for this year, Aleksey. And we are still looking at 2027 action plans there, and we can update, you know, on that number for next year as we go forward.

Scott A. Richardson: Thank you. Daryl, we will make the next question our last 1, please.

Operator: Thank you so much. Our final questions will come from the line of John Ezekiel Roberts with Mizuho. Please proceed with your questions.

John Roberts: Thank you. 2 questions here. Blackstone is selling its tow business to a Chinese company. Does that portend some share shift that may be coming in tow? Do you think it is just a new owner in status quo?

Scott A. Richardson: John, as I mentioned earlier, tow market conditions have been challenging. We took action, you know, with the Lanaken facility. And now we are seeing others take other actions. With that announcement that you alluded to. You know, Our focus is going to continue to be unchanged. We cannot predict what is gonna happen in the market. We are gonna continue to be a reliable supplier to our customers and we are gonna constantly work to take action to elevate the return profile of this product line because it has been over the course of the last year or 2 at levels that are lower than we believe they should be. And so we need to continue to work to drive growth there and our team is continually looking at ways to do that.

John Roberts: And then secondly, you have always had among the lowest tax rates in the sector. Will the regional shift and the portfolio actions affect future tax rate in any meaningful way?

Scott A. Richardson: No. I do not expect those shifts to impact that, John. Well, thanks everybody. We would like to thank you for listening in today. As always, we are available after the call for any follow-up questions. Daryl, let's go ahead and close out the call.

Operator: Ladies and gentlemen, thank you so much for participating in today's call. You may disconnect your lines at this time. And enjoy the rest of your day.