Oct 30, 2026 earnings call — DOE-backed Kingsport circular expansion
The DOE will probably cover 30% to 50% of the combined capital for the Kingsport expansion and second methanolysis plant.
Revenue $2.4B (est $2.4B) · EPS $1.84 (est $1.93)
Key quotes
"When you put it all together, it basically says to complete the expansion and debottlenecking of the first plant and building this second plant, the DOE will probably cover 30% to 50% of the capital cost associated with that combined investment."
"So we'll probably have about a $15 million headwind that's really associated with a bit in Q3 at the end of the quarter and mostly in Q4."
"we ran into some issues with some bad pumps that had to be replaced and delayed us by about a month in getting the line started up."
Analyst Q&A 15
DOE grant use and recycling plans
Q (Vincent Andrews · Morgan Stanley): Asked how the DOE grant can be allocated to the Kingsport expansion and what restoring underutilized recycling assets means (chemical recycling like methanolysis or traditional).
A: Management said the DOE reinstatement covers debottlenecking the current methanolysis plant, expanding feed processing and polymer/infrastructure, and also supports building a second plant. They said DOE can pay for up to 50% of capital for targeted investments, and they plan to acquire shut recycling and polymer assets to reduce new-build capital. Management expects the second methanolysis plant to be built at much lower capital due to learnings and reuse of existing assets.
"When you put it all together, it basically says to complete the expansion and debottlenecking of the first plant and building this second plant, the DOE will probably cover 30% to 50% of the capital cost associated with that combined investment." — Mark Costa (CEO·CHAIR)
AM price/cost and startup delays
Q (Patrick Cunningham · Citi): He asked where Advanced Materials stands in price versus cost and how much planned price recovery has been achieved, plus whether the Tritan and polymer line startup delays are material or carry into next year and their earnings impact.
A: Management said commercial teams recovered much of the raw-material cost earlier in the year but recent PX strength creates a roughly $15 million headwind mainly in Q4 versus prior expectations. They said the two delayed lines had about a one-month startup delay each, both are now up and running, and the impact was limited to Q3 (extra costs and missed Q3 orders) rather than a continuing issue for Q4.
"So we'll probably have about a $15 million headwind that's really associated with a bit in Q3 at the end of the quarter and mostly in Q4." — Mark Costa (CEO·CHAIR)
Confidence in meeting volume targets
Q (Joshua Spector · UBS): He asked what gives management confidence to reiterate 3% volume mix growth for the year and what will drive the needed fourth-quarter pickup.
A: Management said full-year Advanced Materials volume mix of about 3% is strong given two-thirds exposure to discretionary markets, and innovation (like interlayer and Tritan wins) and broader market position drove that growth. They said Q4 benefits from Renew volume pickup (much of the circular revenue is expected in Q4), innovation in durables and stability in some markets, which together should support better year-over-year volume.
"Overall, for the full year, we expect to be about 3% up in volume mix in Advanced Materials, which is a really impressive performance in the context of the year that we're in." — Mark Costa (CEO·CHAIR)
Circular revenue outlook and cash flow change
Q (Frank Mitsch · Fermium Research): He asked why 2027 circular revenue might be similar to 2026 instead of higher, and why full-year operating cash flow guidance fell from $900 million to $850 million and expectations for 2027.
A: Management said circular revenue has two parts: specialty (steady mid-single-digit growth) and packaging (big step-up as converted line is available for full year and customer commitments progress), and they view $100 million as a minimum for next year but remain conservative given macro uncertainty. For cash flow, management said higher inflation and working capital buildup influenced the change; they expect about $850 million in operating cash flow this year and stronger cash flow in 2027 if conditions normalize.
"So I would say $100 million is a minimum for what we need to deliver next year relative to this year when you look at that momentum, but it's early, and we don't know what the state of the economy is going to be with the Iran war." — Mark Costa (CEO·CHAIR)
E-to-P metathesis project timing and value
Q (John Ezekiel Roberts · Mizuho): He asked why the ethylene-to-propylene (metathesis) project reemerged after delay and whether it would have added to 2026 EBITDA if online.
A: Management said earlier capital discipline favored circular projects over the metathesis investment, but time allowed them to scale the project and create more value; the project is capital-efficient with payback of 1 to 2 years and reduces earnings volatility. They ran numbers and said if capacity had been online all year in 2026 it would have added about $100 million of earnings in the current volatile context, and they expect it online mid-2028.
"And the capacity had been online all year, it would have added coincidentally about $100 million of earnings to this year in this current volatile context." — Mark Costa (CEO·CHAIR)
AFP pricing mechanics and spreads
Q (Salvator Tiano · KeyBanc): He asked how AFP pricing mechanisms (contract pass-throughs) reconcile with widening price-cost spreads, and why Q3 showed 4% more price sequentially despite stable inflation.
A: Management said roughly half of AFP pricing is contractual pass-throughs and half are commercial price choices; the commercial team executed well and AFP serves many stable markets which helped pricing hold up. They also noted seasonality, a lack of Q2 shutdown headwinds and operational strength contributed to sequential performance, and CPTs provided tailwinds amid raw-material volatility.
"So roughly half is CPT, if you will, and the other half is where we make price choices like everywhere else in the portfolio." — Mark Costa (CEO·CHAIR)
Acetate tow price and volume outlook
Q (Ryan Weiss · Barclays): He asked how much price degradation is expected in acetate tow in 2027, whether volumes can grow in a competitive market with lower inventories, and about a competitor's European asset purchases.
A: Management said this year many industry contracts were open and some were at high prices, causing price degradation while volumes stayed stable with mid-single-digit declines; they believe volume will improve next year as destocking finishes and they regain share. They expect another mid-single-digit decline in prices in 2027, offset by improved volume and utilization and other growth programs, allowing earnings to be stable year-over-year.
"So we expect another mid-single-digit decline in prices, but differently, an improvement in volume." — Mark Costa (CEO·CHAIR)
(analyst unmute)
Q (Jeffrey Zekauskas · JPMorgan): Analyst attempted to ask a question but was briefly unmuted; no substantive management answer occurred in this turn.
A: No management answer was given in this exchange; the analyst was confirming he was unmuted and began his question.
CapEx trajectory with DOE grant and inventories
Q (Jeffrey Zekauskas · JPMorgan): He asked if the DOE grant changes the trajectory of capital spending over the next 3 years and whether inventories will require lower operating rates to reduce them.
A: Management said the first phase investments expand Kingsport methanolysis and feedstock processing and are incremental but expected to remain within planned 2027 CapEx, with DOE covering roughly 50% of additional investments going forward. On inventories, management said they added raw materials for security, have been managing finished goods, expect inventory to normalize and release in Q4, and that days inventory fell from about 115 at year-end 2025 to about 105 at Q3 end, setting up tailwinds into 2027.
"We expect to have and also had a planned turnaround in Q3. That planned turnaround got pushed out into Q4" — William McLain (CFO)
Propane/propylene spread impact and circular earnings
Q (David Begleiter · Deutsche Bank): He asked why the propane-propylene spread should be temporary, and what impact that spread has on Q4 and the rest of the portfolio; he also asked expected incremental earnings from circular sales in 2027.
A: Management said the current arb between Asia and U.S. is unusually wide and historically closes quickly; supply reductions and shifts to export derivatives should help close it, so Q4 is a poor proxy for next year and some return toward historical spreads is logical. For circular, management said up to $100 million of circular revenue this year yields roughly $20 million of incremental earnings, and they expect to build on that into 2027.
"So David, what I would first highlight is with the up to $100 million this year, we think the earnings on an incremental basis is going to be around $20 million." — William McLain (CFO)
Interlayer capacity and 2027 CapEx level
Q (Matthew DeYoe · BofA): He asked about potential interlayer capacity expansions from Japanese competitors and asked for clarity on absolute CapEx planned for 2027.
A: Management said they do not see material capacity expansions from those Japanese competitors given challenged demand. They said 2026 CapEx was about $400 million this year and the baseline starting point for 2027 CapEx will be around $500 million, while noting DOE funds will reduce some methanolysis-related investments and they will remain disciplined.
"On the absolute amount, I would expect with the -- this year coming in at $400 million is where we expect to be. Also as we think about some of the -- how do we move forward within the circular as we think about the broader feedstock assets and we look at the metathesis, I would say the baseline starting point will be around $500 million." — William McLain (CFO)
CI assumptions and Q4 spreads
Q (Abigail Eberts · Wells Fargo): She asked for clarification on Chemical Intermediates assumptions, noting full-year Brent implies lower Q4 oil but CI spreads are expected to be a tailwind; she asked underlying assumptions.
A: Management said the Q4 average Brent price is higher than the full-year average, and overall the oil and feedstock picture has been volatile this year so averages smooth out the swings. They noted the market has been a roller coaster driven by Q1 weakness, the Iran conflict spikes, and summer price collapse, and those dynamics explain the assumptions.
"I would just point out, Abigail, on the assumption, I think you're looking at the full year average. The Q4 average is actually quite a bit higher than the full year." — William McLain (CFO)
Weakness: demand vs destocking
Q (Kevin Estok · Jefferies): He asked how much recent weakness in auto and consumer durables is end-market demand deterioration versus customer destocking or delayed orders, and what management assumes for early 2027 end markets.
A: Management said end markets have been challenged since 2022 and autos and housing remain down, but demand has not worsened much this year—it has stayed weak rather than deteriorated further. They said customers are more cautious and ordering patterns reflect smaller, more frequent orders and some destocking; if demand holds next year some restocking would occur, and management expects to continue delivering revenue growth via innovation, Renew, and improved utilization.
Functional amines outlook and metathesis cost
Q (Kevin McCarthy · Vertical Research Partners): He asked whether functional amines will be appreciably better or worse into 2027 based on agricultural customers, and asked an estimated cost for the metathesis plant.
A: Management said the functional amines acquisition has delivered consistent year-over-year earnings growth and is on track for a record year; ag customers currently expect a stable year with modest growth so no big change is seen yet. On metathesis capital, management pointed to the earlier comment that a 1-year payback at the high end and 2-year at the low end gives a good range on capital, without giving a specific dollar here.
"So our functional amines business, first of all, it's been a phenomenal acquisition and delivered consistent earnings growth just year-over-year since we've had it." — Mark Costa (CEO·CHAIR)
Volume outlook and destocking vs primary demand
Q (Arun Viswanathan · RBC): He asked to clarify whether management expects slightly higher volumes next year in AM and AFP specifically, and whether that would be primary demand growth or restocking after destocking.
A: Management said they expect volume growth in Advanced Materials, AFP, and Fibers next year versus this year, and volumes in CI will be similar to this year. They said current customer caution and smaller, more frequent orders point to some destocking now that could require restocking if demand holds next year, so the expected volume growth will be a mix of primary demand and replenishment as destocking plays out.
"So yes, we are expecting volume growth in AM, AFP, and Fibers next year relative to this year, and we'd expect volumes to be similar to this year in CI." — Mark Costa (CEO·CHAIR)