Yahoo Finance

Question and Answer Session

Operator

Thank you. (Operator Instructions)
Our first questions come from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

David Begleiter

Thank you, good morning. Scott, you mentioned some of the bestures in the prepared comments. Could you get some sense of potentially the size of these divestitures and when they might occur?

Scott Richardson

Yeah, thanks David. We've been working aggressively on (inaudible) for some time now, and you know we did, a transaction a few years ago with the food ingredients business, and you know I would look at, most of what we're looking at is kind of around that size, some smaller, some maybe slightly a little bit bigger than that, but that's kind of the right range to look at, kind of, the opportunities that we have.

David Begleiter

And one more thing, I know equity raise is not your first choice, but, given this, what the balance sheet is today, what are your thoughts on potentially raising equity at some point to help deliver the balance sheet?

Scott Richardson

Our capital structure is to fund our acquisitions with debt. In addition, we're unlocking cash from actions. We've taken on the dividend, reduction of CapEx, reducing working capital, and we're aggressively working divestitures as I just talked about. Look, equity is extremely diluted, and we don't believe that's a step that's necessary given the strength of the debt market. Yeah.

Chuck Kyrish

Hey, I can add to that, look. As Scott mentioned, we're taking numerous actions to reduce leverage, but what you're also going to see us continue to do in the meantime is to proactive in reducing the risk in our debt maturities. We have a plan, and we prepared to access the debt markets quickly and opportunistically and credit markets are very strong right now.
The principles around that are going to be to extend the portion of our more near-term maturities, aligning what remains with our cash generation, and we'll make sure to do that at a prudent and reasonable cost. Thank you very much.

Operator

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

Frank J. Mitsch

Hey, good morning. I want to dive into your outlook for the first half of the year. As you talked about the second quarter, you indicated that it wouldn't have the $100 million of non-repeating items that are impacting the first quarter.
And yet if I look at the dollar increase expected versus the first quarter, that only implies like $20 million or so of improvement from volumes and SG&A, etc. Which, frankly, looking at two versus one Q, that really doesn't seem like that much. Can you help explain some of the thinking there?

Scott Richardson

Yeah, thanks, Frank. Look, we're getting some of that here at the end of the first quarter in that number, not a lot, but a little bit. And so that's that incremental in the second quarter is about that rate range you talked about. There's, most of we'll be on the run rate in the second quarter certainly to get to the full kind of $80 million that we called out. And we're continuing to work additional action.
So, look, it's really important that we look at what we see right in front of us and be transparent with that. We're working a number of other actions to list, not just the back half of the year but also work we can get more in one, we're going to do it and we're going to do everything we can to make that Q number bigger than that dollar you called out.

Frank J. Mitsch

Gotcha. Thank you. And then the other thing in the prepared remarks was a comment that free cash flow for 2025 is expected to be higher than 2024, and I'm curious if you can kind of go through, kind of order of magnitude that the streets should be thinking about and how do you get there. Well.

Chuck Kyrish

Frank, we haven't given the guide, at this point in time for the year, but what I wanted to lay out are components. In free cash flow below the EEA line that we do expect to improve significantly year over year, right? So, working capital was a use of cash last year expected to be a source of cash.
Cash tax would be significantly lower, we've lowered CapEx, roughly $100 million right? So those, before giving a guide for earnings as we're kind of working through several things, I just wanted to lay out areas in free cast that will improve year over year below. Thank you.

Operator

Thank you. Our next question comes from the line of Jeff Zekauskas with JP Morgan. Please proceed with your questions.

Jeff Zekauskas

Thanks very much. Scott Sutton has been brought into the board of Selene. I was wondering, Scott, if you played a role in bringing him in or what role you played in Scott coming to the board.

Scott Richardson

Scott and I have known each other for a long time and I'm thrilled that Scott has agreed to join the board. I think, we have been on a path as a board that's been very deliberate in how we refresh the board with capabilities. They're going to help us navigate the landscape that we're in and Scott's.
Add in that and you know he brings unique capabilities and has a track record of accelerating cash generation deleveraging value creation and I'm really excited that he's going to help us in this journey.

Jeff Zekauskas

Second question is, in your prepared remarks, what you said was that over time you reduced costs associated with the M&M acquisition by about $250 million. And then later in the script, what you say is that there's been competitive dynamics in your largest product lines like nylon which offset year over year improvements made to the cost position, as well as lower raw materials and manufacturing footprint cost reduction.
So, when you look at the M&M business from the time that you acquired it, like where do we stand now? Is the EBITDA really no different because price degradation has offset all of the cost improvements or, can you give us like where did we start and where are we now with the M&M acquisition?

Scott Richardson

We have increased the EBITDA from M&M when you look at the synergies versus where it was when we closed the transaction, Jeff, and we have seen margin degradation in some product lines within the M&M portfolio.
We've also seen some margin degradation in some of the product lines in the historical Salone portfolio. We've also seen product lines that have expanded margins, this is a critical area of focus for us this year, reversing this margin compression that we've seen, broadly across the standard part of the EM portfolio is a critical action for us that we need to deliver on to kind of lift the second half of the year.

Jeff Zekauskas

Thanks so much.

Operator

Thank you. Our next questions come from the line of Michael Sison with Wells Fargo. Please proceed with your questions.

Mike Sison

Hey guys, good morning, I maybe a follow up on M&M. Could you maybe just give us your thoughts on. Yeah, is this a good business for Sony's longer term? I mean, what do you think the potential is here and how do you sort of get it there? And I suspect there's some macro help that you'll need there, but just, what is the potential for Eminem now going forward?

Scott Richardson

Yeah, thanks Mike. I mean we've seen some challenges, but we've also seen some strength in several of the businesses. I mean our high temp nylon portfolio that we acquired with the business has been a nice source of growth for us in electric vehicle applications, with, things like superior thermal shock characteristics in certain applications. Areas, we have also seen kind of the Alaska Mic products that we acquired, have been, have given us kind of a new growth platform in athletic apparel and footwear that we didn't have before.
So, there are, really nice pockets of opportunity for us and we've got to go really aggressively work that from a project pipeline standpoint. And then you know there are good parts of the nylon portfolio as well and so we've got to keep kind of keeping this machine moving from a pipeline standpoint and we've also got to make sure that we aggressively work the cost side of the equation just given where you know the fundamental macro is at.

Mike Sison

Got it. And then, most folks haven't given an outlook for the full year '25. I understand that but should EBITDA be better in the second half versus the first half and maybe if you don't have specifics, what should be better or could be better in the second half.
In terms of, the walk for a better EBITDA and then can you just give us your general thoughts on what the economic backdrop we should think about in '25 for Celanese.

Scott Richardson

Our focus is on moving with urgency, Mike, to take decisive actions to be able to drive wins. The actions that we're taking, we believe, will be unique for us to drive value in the out quarters here. We talked about the complexity reduction $50 to $100 million of opportunity in EM. We need to make sure that we're fully leveraging the assettes optionality. Model which was challenging in the second half of last year.
Historically we've been able to drive good value by flexing up and down the value chain there. And the third is getting back to this point I just talked about on reversing margin compression in both the standard parts of the engineering materials portfolio but also in the assets business.

Operator

Thank you. Our next questions come from the line of Ghansham Punjabi with Baird. Please proceed with your questions.

Thank you. Good morning, guys. Scott, first off, congrats on your new role and best wishes with everything. I guess, going back to the EM segment and the new leadership there, just curious as to how we should expect strategy to sort of evolve, versus what you have been doing and then relatedly, can you just comment on your view in terms of channel inventory levels downstream to that segment, the customer level, etc.

Scott Richardson

Yeah, look, Todd Elliott already is bringing intensity and focus on everything that we do, looking at cost and opportunities, whether it be footprint, warehousing, distribution costs, SGNA, etc. But also, on the customer side as you talked about, and it really is about looking at the pockets of opportunity that that are out there.
And accelerating in some of those higher growth segments like medical, like electric vehicles in China, future connectivity and so you're really getting to that customer segment level, defending the base is going to be important, but then also accelerating growth and driving, project wins no matter the size.

Got it. And then, obviously, Scott, we've been in a two year global manufacturing slump, you've been pulling levers on the cost side and working capital as best you can. But what are some of the other contingencies you have at your disposable in the scenario that, the current paradigm continues for another year or longer in context of your debt load? Thanks.

Scott Richardson

But I believe there's always more that can be done, Ghansham, and you know I think we've shown that with cost given where the demand landscape is at we are looking at, really all elements of the business, and I just kind of highlighted on the engineering material side of things with those those action steps that we're taking to reduce complexity we have some of the similar things on.
On the asset side of the house as well and so it's really about kind of taking a no stone unturned approach to everything that we're doing and also then looking at really almost every single customer interaction on how we can drive incremental opportunities and then also make sure we're really extracting full value on the margin side.

Operator

Okay.

Scott Richardson

Thank you.

Operator

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

Josh Spector

Hey guys, this is James Cannon. I'm for Josh. Thanks for taking my question. I just wanted to ask on the earnings power of the acetal business. I think previously you said 2024 was a typical run rate for the near term. I think.
If I think about the contract resets, that would be an incremental call at $40million to $50 million dollar headway this year, is that the right ballpark, or is there something to offset that gets us back to the 1.1?

Scott Richardson

Look, I echo what I just said, James, there's always opportunity for us to drive margins, and you know we had some contract resets. The team is working really hard to offset those. That's been hard in Asia with where the supply demand landscape is at, but we're looking for ways in which kind of leverage our, optionality model there and flex up and down the value chain to be able to offset that and get back to those levels that we were at in the in the first half of last year.

Operator

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

Vincent Andrews

Thank you. Has anything changed, Scott, about the scope of assets that you might consider divesting? And I just ask that because you mentioned in the.
That in the past, more recently we've been talking about maybe multiple smaller divestitures rather than the opportunity to sell a few things or one thing at a larger cost. So, are you looking wider or deeper or anything changed in terms of what you're willing to divest?

Scott Richardson

Yeah, we're looking at everything that has that's not critical to kind of our core operating models, Vincent, and that's really, this engineered thermoplastics, thermoplastic elastomer's portfolio in in the engineered materials business and our optionality model that starts with methanol and acetic acid and goes all the way through.
Redispersable powders and if it's not in those operating models we're taking a look at it, but it needs to facilitate the leveraging and so you know that size I talked about was kind of in that range, but I also said plus minus so there is a series of smaller ones that you know would get you that when added up are in that range and then there's some opportunities that are a little larger.

Vincent Andrews

Okay, and then, in the prepared remarks you talked about the dissolution of the JV with Taishan on the Mylar. Is there anything else about your asset footprint that you're looking at, maybe areas where you're not as advantaged or places where it might make sense to take capacity out of the market?

Scott Richardson

We believe in having an efficient footprint, Vincent, and ensuring that we fully leverage the strong technical capabilities that we have in house here at Celanese and I think, we have a long-term history of reducing our footprint, but yet adding capacity at our advantage sites and that that principle that core principle of manufacturing.
Is what we're leveraging to these M&M assets as well. By doing that you get much greater leverage on fixed costs and so we're consistently looking at opportunities to do that. We've taken action we've reduced our footprint by eight sites since we did the acquisition and we're continuing to look for opportunities to be as efficient as possible.

Operator

Thank you. Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your question.

Arun Viswanathan

Thanks for taking my question. Hope you guys are well, and congrats on the new roles there. So, I guess two questions. So first off, I know that you've taken actions on eight sites there and evaluating some more options as well and divesting of other assets, but is it also the case that there's been some structural weakness in the auto market and you guys are potentially overexposed to underperforming regions such as Europe?
Do you think because we've seen this inventory overhang now for second or third quarters, and then I think you guys have taken decisive action in Q3 and Q4 as well, but it doesn't seem like that's been enough to really clear out the inventory, so. Do you think the actions in Q1 will result in that, inventory reduction or would they linger beyond in Q2 and Q3?

Scott Richardson

The value chain had too much inventory. We talked about that on our last earnings call, and we are working to match, our inventory levels with where, the fundamental demand is at. Demand has held pretty stable here in the first quarter. But the value chain is rebalancing the inventory footprint and that's our channel partners. It's the tiers, the molders, and the end customers and so you know the line of sight that we have today based upon, our outlook is that we would see that come to a to a close here in the first quarter.

Arun Viswanathan

Okay, great. And then if I can follow up just on the guidance, it looks like the Q1 guidance again is in, the $400 million or so EBITDA range, maybe slightly below that.
Do you expect that to kind of lift up through the year, maybe into the $1.5billion to $2 billion range on an annualized basis and again that would be, more of second half weighted. Is it mostly those costs and productivity actions that would get you there, or is it require, some recovery and volume growth as well? Thanks.

Scott Richardson

But our focus is on the decisive actions that we're taking right now. We can't control what happens in the macro, but we can focus on, where we spend money, how we drive a level of efficiency, how we interact and access our customers to drive opportunities, and one of the things we called out is, a focus.
On smaller projects in engineering materials, one of the great things about smaller projects is that they tend to be able to be commercialized in in 6 to 12 months. And so it is, it's very important that we continue to work that with a level of aggressiveness, to be able to improve kind of that outlook in the second half.

Operator

Thank you. Our next questions come from the line of Patrick Cunningham with Citi. Please proceed with your question.

Patrick Cunningham

Hi, good morning. Thanks for taking my questions. Some, so some estimates we see on, a seated capacity, upwards of 3 million tons in 2025, maybe a little less on the ban side but still meaningful capacity in the next few years. You know what gives you confidence that there will not be, significant incremental impact from near term capacity and what does this capacity mean for the utilization rates of your own network?

Scott Richardson

We don't see a big change coming in the supply demand landscape, Patrick, and you know where things are today is the STL industry is operating below the cost curve, and that's not sustainable. It's not been historically sustainable, and we haven't seen things degrade further even though we've seen new capacity come into the marketplace from a margin perspective and so we continue to look at where are those.
Pockets of opportunity up and down the value chain and as a field where we can hit it, and the team was successful last year, growing, for example, our redispersable powders business, largely outside of China and other parts of Asia like India and Southeast Asia, where there was a strong pull and growth for, some unique applications such as compositive composite insulation systems. Large style adhesive and so it seems like that that are going to be critical where we're partnering with our customers to get the full pull through of that value chain where we have unique technology.

Patrick Cunningham

Got it. Understood and how should we think about, incremental benefits from Clear Lake into 2025? I mean, are volumes any sort of offset to contract resets here? Now, is there any reason why run rate utilization should get, worse than where you exit the year, whether it's raw material availability or depressed demand levels just trying to understand that the US operated footprint here.

Scott Richardson

Look, we're seeing the full run rate of the expansion as we exit 2024, and we've seen some obviously some slight offset from some of those contract resets, which is why we're working other opportunities to offset that, we've got some natural gas headwind in the US to start the year that is we've seen higher costs, but we do expect that that will wane and come off as the weather improves and we move into the second quarter. Great thank you.

Operator

Thank you. Our next question comes from the line of Aleksey Yefremov with Key Bank Capital Markets. Please proceed with your questions.

Aleksey Yefremov

Thanks. Good morning, everyone. So, it sounds like you're deliberately reducing inventory in EM in Q1. Is it possible to size it in terms of PBA so that we can understand how much could potentially come back in the second quarter from this deliberate action?

Scott Richardson

It's really not that substantial, Aleksey, I wouldn't say it's kind of material like we saw in the fourth quarter.

Aleksey Yefremov

Okay, and a follow up on EM as well. It looks like pricing came down maybe low single digit for the segment in Q4. What do you expect from price in Q1 and potentially Q2, another step down or a stabilization?

Scott Richardson

What we are seeing right now is stabilization for the most part, we're having to be competitive in certain standard grade applications, but the team is also working tenaciously on offsets. I mean this has been a headwind, but again in the standard grade applications.
Where margins are at for the industry are really at unsustainable levels and so we are working on opportunities to be able to turn that pot. The best way to do that is improving mix, and that's where the criticality of working the pipeline and continuing to be successful in some of these more unique higher growth, higher margin segments.

Aleksey Yefremov

Thanks, Scott.

Operator

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

Kevin McCarthy

Yes, thank you and good morning. Scott, are you essentially running Celanese today to maximize cash flow as opposed to maximizing earnings or is that not the case and you're really trying to strike a balance between the two?

Scott Richardson

Well, cash is a priority, Kevin, given where our debt is at, we are looking to do everything that we can to unlock cash, and I think some of the actions that we have taken, or whether it be the dividend, the reduction of capital, the reduction in working capital, and a tenacious focus there, as well as aggressively working on the divestiture side, it is a focus on cash first.

Kevin McCarthy

Okay, and then if I may want to follow up on assets. I think you idled some capacity temporarily in Singapore and Frankfurt as you discussed in the prepared remarks last night.
Do you do that because they go temporarily cash negative or perhaps for a different reason, and I'm wondering if you could talk about your specific operating rate at Clear Lake in the fourth quarter and how you expect that to trend in the first quarter.

Scott Richardson

The (inaudible) wakes up every day, Kevin, and looks at the landscape that it's in, and it pivots, and it pivots up and down the chain. It pivots geographically, where it sells, and then we match operating rates to the needs to maximize, margin and EBITDA do across the landscape and to meet our customers' needs and that that is a model that that team will continue to operate on and will continue to focus on, striking that right balance between volume and margin.

Operator

Thank you. Thank you. Our next questions come from the line of Hassan Ahmed with Alembic Global, Please proceed with your questions.

Hassan Ahmed

Morning, Scott. First of all, congratulations on the new role and also congratulations on bringing Scott Sutton on board, big fan. First question on the guidance, you guys talked about $0.25 to $0.50 in Q1, EPS and $1.25 to $1.50 as demand recovers in Q2. Now, I mean, if there is no change in the macro in the back half of the year, should we consider $1.25 to $1.50 as the run rate?

Scott Richardson

We're doing everything that we can to drive our run rate much higher than that, Hassan, and it's the actions that we talked about and our focus on not giving a guide in the second half is because we have multiple actions that are underway. I mean, I talked about the complexity reduction in engineering materials, driving our ascites optionality model to a level that was that performed better than we saw.
The end of last year and then this margin compression component in addition to everything else that we're doing broadly across the cost side in SGNA and the manufacturing footprint so we believe that there are decisive opportunities and actions that we can take here at Seleny's to lift the run rate performance even if we don't see a change in the macro.

Hassan Ahmed

Understood. And in the presentation, one of the things that you guys talked about was, well, I guess you gave 6 reasons to own selling these shares today, and one of them was the strong earnings leverage, as obviously demand recovers.
So, my question to you is, as you take a look at the geographic footprint you guys have as well as the end markets you guys are exposed to. Is the leverage the same today as it was in prior years, particularly, as you look at the sort of changing sort of dynamics globally with tariffs out there with your exposure to EVs, and you guys yourself flagged, the higher exposure to EVs that China today has and how that today is Lower margin business than it was historically.

Scott Richardson

We have a core principle that we believe in having a very efficient manufacturing footprint. When we acquired the M&M business, their footprint was not as efficient as what we had historically here at Celanese. As a combined organization we are looking at what is the right efficiency profile that we need and we're overlaying what we believe and where things are at from a demand perspective geographically and it's that matching that's really critically important and you know as a corporation we are pretty evenly.
Between America, Europe, and Asia in terms of where our revenue comes from, but Asia is growing and Europe is declining, and so it's going to be very critical that we continue to drive that intersection point to a level that allows us to enjoy kind of that operating leverage that we historically have.

Operator

Thank you. Our next question comes from the line of John McNulty with BMO Capital Markets. Please proceed with your question.

John McNulty

Yeah, good morning. Thanks for taking my question. So Scott, when you think about the acetyl capacity that's coming on in Asia, have you seen any offsets where you're seeing closures, assets coming down permanently? It looks like there's a significant amount of more capacity still to come. So just wondering how that gets placed and where if it's just going to have to be where we wait for demand to absorb it all.

Scott Richardson

We haven't seen, I'd say permanent capacity reductions. We definitely have seen the industry operating at lower rates, and I think what's a little bit different about this cycle on capacity ads versus what we saw 15 years ago it was all almost all new players to the marketplace. This is about 50/50 existing players adding capacity and and some new players and so obviously for those with existing capacity they're kind of flexing their networks up and down based upon what they need. So we have definitely seen probably a little bit more kind of down to match where demand is at.

John McNulty

Okay, fair enough. And then I guess do you see there being any risk that that capacity makes its way more meaningfully into other markets, or does it really kind of stay in the markets that it's been over the last, whatever the last few years?

Scott Richardson

That arbitrage window is not open and you know it's kind of stayed right at or below kind of what it costs to move products and look shipping is expensive and complex and storage is complex as well right now in other markets and and so you know just given transit times, etc. We have not seen a lot of that material move out of the region.

John McNulty

Got it thanks very much for the call.

Operator

Thank you. Our next question comes from the line of Lawrence Alexander with Jeffrey. Please proceed with your questions.

Laurence Alexander

Good morning. So first, on the divestitures, are these assets that you've decided you just don't fit in the portfolio and you will exit even if things get better, or as things get better, would you? You know keep them and you know focus on deleveraging through other means.
And secondly, with acetys, can you elaborate a little bit on Kind of the execution issues in the back half of last year and to the extent that they've been Changed or fixed, should we see the improvements this summer regardless of the environment, or do you need a better level of aggregate demand in order to also fix the execution issues that you've identified?

Scott Richardson

Yeah, let me hit your second question first. I wouldn't call them necessarily execution issues. I think it was just a length in supply demand really driven by kind of where demand declined at the at the end of the year. And look, the team's doing everything we can to really flex that model up and down the value chain and look for pockets of opportunity.
On your first question around divestitures, look, I think we have identified pieces that are not, critical to kind of those core operating models, and and we're looking at and having a lot of conversations. I mean, it has been, a tough M&A market the last several years, and you know we are very. And I've heard from a lot of investors that are concerned about, us fire selling assets. We're not in the business of fire selling assets. Our focus is on divestitures to drive the leveraging, and it's going to be important that we continue to stick with that principle and be aggressive about doing deals as they present themselves to us.

Operator

Thank you. Our next questions come from the line of John Roberts with Please proceed with your questions.
Yeah, can you check if you're muted, please?

John Roberts

Okay, well, Darr, it seems like John might be muted. Let's go ahead and make the next, question.

Scott Richardson

We can hear you now.

John Roberts

Oh yeah.

Scott Richardson

Sorry, yeah, congrats, Scott, and welcome back Scott Sutton. Did you talk about the new JV rules in China? We have other companies with China JVs, and I don't recall hearing anything about that. Is it all JVs in China or something specific to the felonies JVs?
Yeah, I like, I think some JBs have gone through some of this and some haven't. It's really related to the rules that govern certain JVs and really what changed here is that there's a rule that requires an audit to be completed before dividends can be paid. And so that audit gets completed here in the first part of the year and so we should see dividends starting in Q2' so that that's a rule change that at least our JB are now subject to.

John Roberts

Okay, well, Darryl, thanks. Let's make the next question the last one.

Operator

Thank you got it. Our last questions will come from the line of Salvador Tiano with the Bank of America. Please proceed with your questions.

Salvator Tiano

Yes, thank you. So, firstly, I want to ask a little bit about, as you're thinking here about, if you can talk a little bit about the packages of cost savings, I know you mentioned also the $50 million, the. Sorry, the $50 million to $100 million from complexity and the$ 80 million SGNA, but I think last quarter we're talking about some of them and then, cost synergies not being realized in 2024 and that's being pushed in 2025 and clearly, obviously the $100 million also not fully realized last year in part due to the fourth measure.
So, are this part of this baggage you already gave or is there upside, from this, especially on the Clear Lake side?

Scott Richardson

Look we achieved $250 million of synergies as we exited last year, Sal, and, we still have more that are that are in our plan to be realized here this year. Clear like we're on the run rate as we talked about there's been some offsets from from margin compression and and that's why I really talked about that as a critical element of focus for us on on really reversing that trend as we go forward so we get the full value of of these actions that have already been executed on.
We are looking at driving productivity every single day, looking at every dollar that goes outside of the company and where we can save and where we can prioritize, and this is a focus on cash and so that tenacity will continue. Everything is on the table.

Salvator Tiano

Perfect, and I want to go back to you to your auto exposure to China. You got a number of questions. I'm just wondering, how are things different in China versus Europe and the US when it comes to the OEMs and, a big tailwind for Celanese and others has been obviously light weighting and replacing metal hood and other components with plastic. Is there a bigger or a smaller opportunity right now in Chinese, all those versus what you had in the Western Hemisphere over the past couple of decades?

Scott Richardson

Look, there's still a huge opportunity for us in China, and it's why we're continuing to put a heavy focus there. I think, one of the things that's really important is that the technical requirements of electric vehicles, particularly from a power train standpoint, are becoming a lot more demanding and there's also a lot of other applications where China's moving up this technical.
Requirement curve, this requires materials with higher performance requirements, and we have, really, we believe the best portfolio to match that and you know where our you know KPBs sit in China, we're about half of where we are in the Western Hemisphere and that's moved up substantially the last several years, but it is critical that we maintain.
That focus just really since the beginning of the year we've had you know two sizable technical exchanges with two of the top five you know Chinese OEMs as a way to accelerate and drive business. Great thing about China Auto is that commercialization time tends to be much shorter, kind of more like 6 to 12 months as opposed to 24 months in the Western Hemisphere.
Perfect thank you very much.

Bill Cunningham

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

Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.