Thank you, and good morning. My name is Dave Begleiter of the U.S. Chemicals team here at Deutsche Bank. Next up is the team from Celanese, led by Scott Richardson. Scott was named -- became CEO January 1. He spent over 20 years at Celanese in various roles in Asia and the U.S., driving value and outcomes.
So a lots happening at Celanese in the last couple of years. We'll have Scott make a few brief comments around where they are today, and we'll go into the fireside portion of the chat. So Scott, all yours.
Thank you, David. And thank you, everyone, for joining us today. It's great to be here and talk about what we're doing at Celanese. And that word do is, I think, the important one. Our focus is on execution. And really around three key focus areas. I mean it starts with EPS and EPS growth. And the way we're thinking about things is how do we find ways at which to drive incremental EPS every single quarter and be adding to that.
In this environment, that means we have to focus on the things that we're doing and that we can control, and we can't rely on that broader macro to be driving that. And here in the second quarter, we had guided to $1.30 to $1.50 of EPS, which is up about $1 over -- or about $0.80, $0.90 above what we did in the first quarter.
And that range is still where we see things in the quarter. And that's with some improvement in demand certainly started in March, kind of continued in April and May. And June is pretty similar to where we're seeing things overall in -- where we saw things in April and May.
The second area of focus is about cash. How do we turn that EPS into free cash flow? We're focused heavily on working capital reduction, the things that we can control, we significantly have cut capital expenditures in a way where we're driving free cash flow. And we called out a guide of $700 million to $800 million of free cash flow this year.
But cash, we believe, can come from divestiture proceeds as well. And we're targeting the $3.5 billion of maturities we have coming up before the end of 2027. And that includes the Micromax transaction that we began marketing here over the last month. And we believe we have a nice portfolio of options and opportunities for divestitures even beyond the Micromax transaction.
And that's going to yield the third element of focus, which is aggressively deleveraging the balance sheet. We did a refinancing transaction in the first quarter, which pushed out maturities. But we're targeting the $3.5 billion of maturities we have coming up before the end of 2027.
We're targeting to pay that off with free cash flow and divestiture proceeds. And that means that we need to continue to grow that free cash flow number that I talked about.
But aggressively bringing the leverage down on the balance sheet is a critical area of focus for us. We're starting here even this quarter. We have a delayed draw term loan that comes due in the early part of '26, and that has largely paid off with cash flow that we generated already this quarter.
So the team is going to keep taking things one quarter at a time, but those are really the three elements of focus. And everything that we're doing across the organization is really focused on those three areas.
Thank you, Scott. Perfect. Scott, so a segue on that point, you've been seeing now for 5 months, discuss your transition to the role, the changes you've made versus your predecessor and some of the other management and Board changes you've made over the last few months as well?
Well, look, it is that we do that I talked about earlier is an important one. We have to be action oriented. And I think we made the decision to make a change with Engineered Materials.
And our commercial model there is critically important. We drive projects that meet unique solutions for our customers. And we felt like we were kind of through the big heavy lifting elements of the integration. But lifting us to the next level, we felt like we needed to make some changes across the organization.
And bringing Todd Elliott into the organization has been a great [ re-add ] with him coming back and really taking a hard look at everything that we're doing and making sure that our resources are pointing on those areas of opportunity, making sure we have reenergized our project pipeline growth model and are really focused on those areas of high impact.
We call them high-impact programs on where we can be successful going forward, things that are going to commercial quickly, areas where we can build unique moats. And Todd is bringing that element to things.
At the Board level, we've actually -- we have 6 new Board directors in the last 18 months. And we're really focused on folks that know the industry, know how to create value in these types of markets, both in kind of the chemical side of things and acetyls or in the Engineered Materials business and those end uses. And so we have a number of new adds, including most recently bringing Scott Sutton back to the company in a Board role.
And I think it's all been additive. We created a committee on the Board called the Finance and Business Review Committee, which really gives me and the management team an ability to work with the Board and really fully utilize the unique talents we have on the Board to really be driving in these three areas of focus that I talked about and really aggressively deleveraging the balance sheet so we can increase optionality going forward.
Very good. Going forward to business trends, Q2, where are you seeing the improvement by region, by end market, by product?
Well, I'm careful with the word improvement. What I would say is it's all a little bit relative. I mean where it's improved versus Q1 is largely auto, largely in Europe. We saw an end to destocking, as we called out on our earnings call, started in February, really continued into April.
We're not seeing, I would say, real improvement in anything else through the quarter. Certainly, that auto stability in the Western Hemisphere is good. It's -- we haven't seen -- even with the China tariff pause, we haven't seen that really drive any kind of inflection or improvement in demand anywhere else.
And in fact, probably a little bit of softness in China demand, which it's pretty low margin for us. So it really doesn't have much of an impact. But certainly, volumetrically, I think it -- there is definitely some weakness there in the Chinese market.
You mentioned June continuing some of the positive trends in May. How are your June order book? Are you seeing any strength or stable or even weakness?
Yes. Typically, the last month of the quarter for us is the strongest volumetric quarter -- or volumetric month. I would say June, right now, it's pretty similar to what we saw in April and May, which is kind of what we have more or less baked in.
And I think that similar nature is some of what I talked about a little bit with where China volumes are. I don't think they're going to be necessarily as strong as we finish the quarter as maybe they have been in previous quarters. But certainly, as I talked about, it shouldn't have much margin impact to us.
Got it. You were at ACC the last few days in Colorado. How is the sentiment amongst your peer CEOs? Pessimistic -- that was optimistic than maybe it was, but how was the sentiment out there?
Look, I think the amount of visibility that we have as an industry right now is pretty limited. We don't even know where orders will end up for June and where things are. And that's very different for us as an industry.
I mean, typically, most parts of this value chain, you would have at least a month or in some cases, 2 or 3 months of visibility as to where that order book will ultimately land. And that visibility is limited because of the uncertainty that's out there really on a macro basis.
And I think that has led a lot of our customers to not be overcommitting in terms of where they're going to need product and when they're going to need it.
And so it just has kind of reduced that visibility time that we have. And the industry has had to certainly take stock of that. And we, as an industry in periods like this, tend to make changes, we tend to do restructurings, look at where our footprint needs to be.
And I think that much like at Celanese, where we have talked very openly about the things we're doing to drive self-help, I think as an industry broadly, I think that's a lot of what I heard in the last week.
Q2 guide, good to hear it's still on track. Is there a bias to the upper half or lower half of the range sitting here right now?
Look, I wouldn't over-rotate on that. At the end of the day, we gave $1.30 to $1.50. I mean that's $25 million at the end of the day on an EPS basis for us. So that's a pretty narrow number. I mean one barge shipment of a product in acetyls can be $2.5 million one way or the other. So it's -- at the end of the day, it's a pretty narrow range. I wouldn't over-rotate too much.
Okay. Very good. On the cost savings, back in May, you increased your target from 80 to 120, [ $120 million ]. What's driving that increase? And what's the cadence of those savings going forward?
Yes, it's split about half, that $40 million, half acetyls, half Engineered Materials. And it's about -- it should be pretty evenly split between Q3, Q4, maybe a little heavier weighted towards the fourth quarter, particularly in Engineered Materials.
In acetyls, a lot of it is operational things, elements and steps were taken around block operating certain assets. So if we saw a demand environment that improved, I mean, that's one, some of that you may actually see it come back, whereas the changes that we're doing in Engineered Materials are really permanent in nature.
And it's really kind of that first step, those additional opportunities that we talked about in our February earnings call of a target of at least $50 million to $100 million of additional Engineered Materials cost savings. And so this is $20 million of that.
And so on a full-year basis, that's certainly bigger, but there's still more opportunity and things that Todd Elliott and team are continuing to work on to be able to get to the upper end of that range as we get into next year.
Got it. On the tariff impact, you called out about $15 million per quarter during Q3. Where are these impacts coming from? And what are you doing to offset them?
Yes. So that is really the direct impact of tariffs, and it's related to some products that we make in the U.S. and ship directly to China. So you can imagine with the pause that we saw happened a few weeks ago, that number in the second half of the year is closer to zero per quarter than it is $15 million just because we're able to take some steps from a logistics perspective now during this period.
So I think, for us, the direct impact of tariffs is really the small one. It's -- what happens to demand, that's the bigger concern and question. And it is leading to some of that uncertainty that I talked about for the industry broadly.
Yes. On that issue, what's the next step to resolving this uncertainty, getting more clarity for you and your customers? Is it just a U.S.-China trade deal? Is it a U.S.-EU trade deal? What do you need to see for that certainty to be reduced?
Well, I think it's just what are the rules going to be going forward, one way or the other. I think that we, as an industry and our customers do a really good job, I think, of working together to come up with solutions, depending on where things are at. And so once we know what they are, then we'll go work those solutions.
And I think mitigating elements and finding ways at which to reduce our cost to serve the customers is something our team is certainly brainstorming with different permutations. But just kind of once we get to a finality, and I think that's sooner rather than later, certainly would be good.
Okay. The key question I get from people is on your full-year guide or the exit rate. So on the Q1 call, you reaffirmed a $2 per share quarterly run rate exit rate for this year. Let's say you make $1.40 in Q2 midpoint of the range, what's the bridge from $1.40 in Q2 to $2 per share exit run rate this year?
Yes. Let me just kind of take a step back. I think that $2 that I talked about is -- it's important. I wanted to talk about it publicly because that's how we're managing things internally. It's kind of that next step, next plateau for us as a team. That's what we did the last couple of years.
On average, we actually did a little better than that. But getting back to that in a macro that's much worse than where it was through self-help actions and cost reduction elements that are sustainable and will continue into the future is very critical and kind of where we're orienting things.
And we know we have to continue to build -- rebuild credibility on where we are and our performance. But for me, I think if we were getting in that level, then we start to get a valuation of what we're doing. And what we're going to do going forward as opposed to being valued on what we've done. And I think that's really important that we kind of hit that milestone.
So that's where we're pushing the organization, and that's where we're driving actions. And once we get there, then we'll put another target in place, whether that's $2.50 a quarter or $3 a quarter, wherever it goes to, but that's where we want to be.
$1.40 in the second quarter, you get about $0.15 to $0.20 from not having the turnarounds. We have a heavy turnaround quarter here in the second quarter. You get about around -- you get a little bit from Acetate Tow seasonality as well. And then you get another $15 million to $20 million from incremental cost actions. And so that kind of gets you in that $1.75, $1.80 range.
And then what's that bridge to that last $0.20 or so? Some of it -- and it could be a number of different things, working these high-impact programs and commercialization there and getting additional volume from our pipeline and having that flow-through and not be offset by other things like -- which has happened the last several years, and making sure that we've kind of put a bottom on those other things.
It could be pricing. We've talked very heavily about the unsustainable nature of margins in standard grade materials and Engineered Materials.
And so we've been very focused on with the price action we took in the first quarter. We got a little bit from that, but we felt like we needed another catalyst and another push. And so we issued a second announcement in the second quarter. And getting price and getting to a point where returns are just even at acceptable levels for standard grade materials is very critical.
So those are some of the big levers, but we're not stopping on the cost reduction side as well. So as I talked about, we have additional things we're working in Engineered Materials and then across the functional side of the portfolio to be able to drive additional cost reduction.
And what's the macro guidance on putting that -- some macro assumption on putting that $2 per share run rate? Is it just flattish volumes from here?
Yes. I mean in this range. And we know they're going to move around a little bit, but it's somewhere in this range. And look, by no means are volumes strong here in the second quarter. They're better than they were in the first quarter, certainly better than they were in Europe, which is our highest margin region in the fourth quarter of last year.
And for us, and we've been pretty open about this, I mean, the majority of our profitability is generated in the Western Hemisphere, not in Asia. And so even some of the volume declines I talked about a little bit earlier and concerned around China demand is really less impactful.
And to be clear, the $2 per share exit rate is not -- doesn't mean you're going to make $2 in Q4. It means you're going to exit the year. So should we think about '26 as an $8 per share type year in the current macro? Or what do we need to get to $8 per share for the full year '26?
David, if I could answer that question, I would be in Las Vegas, not sitting here with you in New York. No, I mean, look, that's why getting into that range of $8 or -- plus/minus is really important for us because it is a very different valuation if we are, and then the growth off of that is very different.
The cash flow generation is also substantially more. I mean we talked about generating $700 million to $800 million of free cash flow this year. I mean if you're run rating on a full year basis in that range, that's several hundred million dollars more free cash flow generation.
And that just is going to allow us to deleverage the balance sheet that much faster. And I was talking to a group of investors a couple of weeks ago, and I said simple rule of thumb, how I think about it is every $1 billion of debt we pay off is worth around $0.50 of earnings.
And that power is -- certainly, I don't love having over $600 million of interest expense, but it's an opportunity. If we can just whittle away at that, I mean, we're really generating EPS, generating additional cash flow. And as quick as we can get that number down and be able to start having a more balanced deployment of cash in the future is really critical.
Good segue into your balance sheet, remain levered obviously. What's your -- you also push on maturities in the next couple of years. So what's your delevering strategy? And what's your confidence in having no liquidity issues going forward?
Look, the team has done a great job of refinancing, and we've been able to do that a couple of times over the last several years. And we'll continue to be opportunistic. And if the market is there and we can push out maturities, we will. But we need to be paying off debt, and that's the priority here.
And it's a priority for us generate cash first from operations and very quickly be able to reduce the debt, as I talked about. We've been able to reduce some debt this quarter. And then how do we look at divestitures as a way to accelerate that.
And we have certain parts of the portfolio that are not critical to our operating models, either in acetyls or Engineered Materials. And so the value of those assets may be worth more to someone than how they're valued at Celanese today. And so we're looking for things that we can do along those lines to accelerate that. Micromax was one.
We've been very open about finding ways to monetize our joint ventures, where they come in on the equity earnings line really at net income and it's net income after tax. And so it's an extreme discount over our share of the EBITDA that those JVs generate. Now it's hard to sell portions of joint ventures. And so -- but we're going to keep focused and work on that because we think we can unlock value there.
Very good. I guess on Micromax, it's been about a month since the announcement. How has interest been in that asset?
Interest has been very strong. We have never signed more NDAs on any process we've ever run, which is great. We have a high degree of interest, both from sponsors as well as strategics and interest from around the world. So it's a very big process, a pretty diverse process.
So -- and that's why we announced it publicly. I mean we haven't announced a divestiture publicly in a long time, but we did because we -- there was a high likelihood this was going to leak, and we felt like it was important both for investors, but also for our employees to be able to be ahead of that message and be able to message appropriately.
So that gets you probably to half of your $1 billion divestiture target, give or take, my guess?
I'm not going to limit the possibilities, David. But certainly, I think you can get us a good chunk of the way there.
Okay. And the next step, is it 1 or 2 more assets? Is it -- how should we think about the next -- why is it more than $1 billion? You have numerous JVs in Asia, in China. Does it all makes sense for Celanese longer term?
Look, I think it's important to probably weight that number. And certainly, if we can drive value lifting transactions, it's more than $1 billion, we will. But I also want to make sure that we get back to doing what we say we're going to do. And that is a really important mantra for us as a leadership team, not just on what we're doing from a divestiture perspective, but also in terms of our earnings.
Are there other cash or deleveraging actions that could be done, either working capital or other hidden value that could accelerate deleveraging?
Yes. Working capital continues to be a big opportunity for us. We still have higher levels of inventory than I think we need. And there's also work being done on the cost reduction side from our network optimization projects within Engineered Materials, which should also drive working capital opportunities as well.
And as we look at making sure we've got footprint in the right spot, we will take working capital into account as we look at that. We're targeting at least $100 million of inventory reduction in Engineered Materials this year, but we're going to push for more.
And even in the second quarter, I mean, we're taking the opportunity to bring inventories down. We were very open on the earnings call that even with volumes better in the second quarter than they were in the first, we're not taking our plant rates up. It's important that we're very prudent on the inventory side of things right now.
And even if we have a little bit of an absorption hit, we feel like that's worth it to drive incremental free cash flow.
Very good. Let me see if any questions in the audience. If you have a question, please just raise your hand, and I'll keep on going. Scott, just on the cash flow guidance, it sounds like it was still on track for $7 million to $8 million of free cash flow this year. Is that fair?
Yes.
Now on CapEx, you're down to maintenance levels this year. How long should we think about staying here before we go back on to some modest growth activities?
Yes. At the $300 million to $350 million CapEx level, I mean, that's maintenance capital plus a little bit of very quick return productivity projects. And so I would look at this being kind of where we're going to be for the next several years. I mean it's -- I think we can stay at this level for the next several years.
We don't -- we've spent a lot of money. We spent a lot of money on growth capital over the last several years. We spent a lot of money on acquisitions. We're now in a return on capital improvement cycle.
If you -- I liken it to when the company went through the Blackstone LBO and came out of that. If you look at where leverage was and you include the unfunded pension liability that we had, which was sizable at the time, leverage is pretty similar then to where it is today in the 2005, 2006 time frame.
And we went through a period where it really was about harvesting and driving returns, very prudent cash spending and whether it's on expenses, but also important on the capital side.
And that's where we're going to be here. This is about harvesting returns, driving the return profile of the company upwards and driving free cash flow and getting the debt paid down. And once that is done and we get into a different cycle where the company is, then we can look at driving that capital number up.
Very good. Switching to the businesses, on Engineered Materials, you talked about a rebound a bit in European automotive. What's driving that? And what are you seeing in China auto as well as U.S. auto this quarter?
Yes. I don't know it's as much of a rebound as it is just kind of an end to the destock that we saw. And I mean there was inventory that was built, our inventory, our customers' inventory all through the value chain, our supply chain partners, our distributors.
When Q2 volumes were stronger than expected, and there was an expectation that was going to continue in Q3, and it didn't happen. And it took a while to kind of unwind from that, and we really didn't see things start to get better until March.
Volumes have kind of normalized now in the last few months, but it's normalized at a lower level, certainly lower than where we were in the first half of last year. And we're very confident that, that has happened. We look at where our distributor sales have been in the last several months, they've been kind of very consistent from month-to-month. So it's a good sign that we've kind of got the inventories flushed through that value chain.
In the U.S., things have been very stable through the quarter and continuing. Certainly, sales of dealer lots has been pretty okay through the quarter. We haven't really seen that turn into increased production as of yet. So volumes continue to be very stable.
And then China, a little bit of volume weakness. You've seen some things account publicly from some of the OEMs there in China. And so a little bit of volume weakness, nothing substantial.
But I think as we look into the second half, we're not predicting any kind of big increases per se at this point. And kind of how we baked -- what we baked into our free cash flow guide for the year was the auto forecast that were out there back when we did our earnings call, which was expecting some dip in the second half of sales.
Very good. You mentioned -- talk about your efforts to sharpen and accelerate the project pipeline model in Engineered Materials. Talk about that as well as the opportunity that might lead to with the Chinese automakers and EV players there.
Look, not all projects are created equal. There's a very different value that's there. I mean, certainly, with some of the overcapacity that we see in China for everything, our ability to win in standard-grade projects is probably going to be less likely than our ability to win in more specialty applications.
And so it's very important that we have our resources tuned to be able to work on those projects around the globe that are going to have a higher level of return. And it was just kind of recasting that.
And also kind of using data, and we have a lot of pipeline data now for many years that we have been able to create a scoring system and really kind of crosschecking where is industry growth, where is the attractiveness of our applications there and kind of where do those points intersect and making sure that our entire team knows that.
And so they know kind of where to be putting those incremental resources that we have. And that's what the leadership team in Engineered Materials has been working on now for the last several months and just making sure that, that is tuned.
Us being successful in China is very important. It's important for several reasons. One, we're going to continue to see the technical requirements of vehicles in China move up. And that plays really well for our specialty opportunities. And so we have to be winning there.
But also China is an innovator. China is an innovator in some of our key end uses, not just selected vehicles, it is, but also in other areas, I mean things around AI and data centers. There is a lot happening there.
And as customers in the Western Hemisphere driving innovation, there's a lot of success that we're going to have in China and it's kind of -- now there's always innovation that's happening in the West and it meant to our customers into China, kind of an outside-in model. There's a lot more of an inside-out mentality to it today.
And so it's critically important that the team kind of can go both ways and so the things we're having success on that we're driving translation opportunities over into the Western Hemisphere as well.
What's your share of the Chinese automakers versus European or U.S. automakers?
Yes, it is lower. And it's about 40% to 50%, depending on the OEM, at most. I mean -- but there are some OEMs where we have, quite honestly, about the same amount of volume we have with some of our customers in the Western Hemisphere. Now -- but overall, it's kind of in that 40% to 50%.
Now I do think it can be higher, but I also -- we have to be realistic about where the competition is at. And if we have competitors that are willing to sell at or below cost for standard-grade materials, then we're probably not going to win that business.
So we have to kind of recalibrate that a bit. And it's not just going to be about share, it's really about value. And what's very encouraging is if we have like-for-like specialty applications, China versus Europe or China versus the U.S., the margins we make on that is equivalent. It's not like we're having to drive a discount there. So we definitely can get value when we bring it into certain application sets in China.
What is your content value on a U.S., European auto right now?
It just kind of depends. I mean we tend to -- we haven't talked as much about kilograms per vehicle because weight doesn't matter as much in every single application area.
So I would say, I think it's been one that hasn't grown a lot in terms of the value over the last several years just because there has not been as much -- as many kind of new model overhauls and launches in the Western Hemisphere because there's a lot of uncertainty as to what vehicle mix would need to look like, particularly here in the U.S., ICE versus EV.
And I think as some of those questions on what consumer demand is going to be are starting to be answered, I think we're going to see a lot more new model launches, particularly in the U.S. and Europe. And that creates a lot more opportunity for us to drive more innovation. So I do think we have an opportunity for that to grow.
We grew our business in EVs in China last year by about 20% on a year-over-year basis, which is a little bit lower than the overall EV growth in China. But actually, when you look at that standard grade equation I talked about earlier and the fact that the premium segment is still very small and still developing in China, that was actually a lot of growth for us. And so being able to keep that moving is critically important.
And on that point, thinking about the value opportunity on EV versus traditional ICE vehicle, how much larger, greater is that for you guys?
Yes. I mean it's about -- we've said about 50% or so more of addressable space in that range. And it depends on the model. Certainly, those that are kind of more in the standard model vehicles, it's a lot less in terms of opportunities. We tend to play in kind of more of the middle of the market or the premium segments where the technical requirements for vehicles is higher.
And so certainly, there is more addressable space, but we have to make sure we're being successful there. And certainly, hybrids present a much greater opportunity because it has both powertrains. And that is an area here in the U.S. if that's kind of where things continue to move, that's certainly very good for us.
On nylon, you highlighted on the Q1 call, the profit degradation in the nylon portfolio. You've already closed some plant here or to help that. You announced some price increases as well. What do you need to see nylon profitability improve? And how impactful can these price increases be for both the nylon and nylon products in the portfolio?
There's a lot of opportunity here. And I don't know exactly what the end equation is going to end up being. Certainly, plant footprint was part of that with the closures that we announced last year and carried out in Europe. Footprint will be -- continue to be an area that we look at and analyze at all times to say how much polymer do we want to be versus buying.
Buying is not necessarily a bad thing given where things are at from a length in the marketplace, and variabilizing the business is not a bad thing either. And so that could be an equation.
Pricing is certainly an element -- standard grade pricing is at unsustainable levels for the industry, and we've seen that through some competitive actions that have happened in the marketplace. And so we know that margins need to move up. And so there's an element here.
There's also top line volume growth opportunity. Nylon 66 is a really good, strong polymer, and there's a lot of specialty applications for nylon 66. I think a lot of people look at it and say "Okay, that's a commodity polymer." It's not. There are a lot of standard grade applications for that business, maybe more so than other polymers.
But there's also some really good differentiated opportunities. And it is about putting that focus on continuing to work with customers in this good, strong workhorse polymer for opportunities.
But it doesn't have to just be nylon 66. I mean our nylon 66 business improvement may actually come from being successful in other polymers and us growing other polymers because the profitability is stronger there or we can drive different customer solutions and growing end uses stronger there.
So we're not just we want and need to improve the profitability of the Nylon 66 business. But at the end of the day, what really matters is that the whole EM business is moving upwards and profitability.
Right. No, very clear. Just briefly on acetyls, there's been some new supply coming on in China. There's been some investor focus on that. This is not your first rodeo. How are you dealing with a company with new additional Chinese supply in acetyls?
Our team has done a really nice job of being able to kind of push and add capacity downstream. The acquisition of our redispersable powders business, we've continued to add vinyl emulsion capacity. So actually, right now, about 65% of what gets sold to an end customer in the acetyl chain business is not acetic acid or VAM on a global basis.
And so by going further downstream, we get a little bit more differentiation, particularly in emulsions and powders, and we can kind of tailor formulations for what customers need a little bit differently in those businesses, which is just -- which is a little more different than selling acetic acid or VAM.
Look, there's been a lot of capacity added, all really in China. And that product is mainly staying in Asia today because the arbitrage windows just really aren't open, given where pricing is at around the world.
And so that's not a bad thing. But our markets in the West have been pretty depressed. Paints, coatings and construction demand has been pretty weak. Existing home sales, which is one of the most important things that we watch around the world, has been very low, not just here in the U.S., but also in Europe and really low in China. And when people move, people paint, redo a bathroom, usually buy at least one appliance.
And so when that is not happening and those existing home sale transactions are very weak, you just don't have a pull for that demand, and that's really kind of core acetyl demand. And so we're kind of stable at low levels overall. But certainly, the margins have been pretty balanced.
And lastly, how should we think about foundational or mid-cycle earnings for acetyls?
Look, we are kind of focused on putting one foot in front of the other. And that's why I kind of talked at the very beginning about every quarter kind of moving up. And the good thing is I think folks are starting to believe that we can go execute on the things that we say we're going to do in the quarter.
And so we're getting a lot more questions about that. And we'll work to outline that for folks. I think a lot of it is really around the self-help actions. not knowing what the macro is going to do.
Our focus is what does that range of outcomes look like in the future based on if the world didn't change and demand stayed where it was, what would that be based on the things that we can go do? And as we kind of work those actions through the end of this year and get into next year, I think we'll be able to provide a little more clarity.
Excellent. With that, we'll end there. Scott, thank you very much. Thank you all.
