Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **Chinese chemicals industry** and its supply-side structural reforms, particularly in the context of the **petrochemical sector** [1][2]. Core Insights and Arguments - The **Chinese Politburo** meeting on July 30 indicated a shift towards **gradual adjustments** rather than aggressive mandates, suggesting a preference for market-driven solutions to overcapacity and industry 'involution' [1][2]. - The omission of the term "low prices" and the change in language regarding production capacity management indicates a more patient approach to resolving excess capacity issues, relying less on administrative measures [2]. - Key policy focus areas include **fertility subsidies**, **demographic challenges**, **local government debt**, and **international competitiveness**, with supply-side measures expected to be implemented in a measured manner [3]. - The **15th Five-Year Plan (15FYP)** is anticipated to provide clearer directions for these adjustments, with a focus on maintaining overall stability [3]. Company-Specific Insights - The report suggests that the Chinese government will continue to support **coal-based chemical production** and pursue **CTC projects** that are significantly lower in cost compared to naphtha crackers [4]. - For **US petrochemicals**, the likelihood of aggressive structural reforms appears reduced, with expected capacity closures primarily involving higher-cost units being replaced by larger, more efficient ones [4]. - The report identifies **ALB (Albemarle Corporation)** and **LAC (Lithium Americas Corp.)** as favorable investments under current policies, while **EMN (Eastman Chemical Company)** and **MEOH (Methanex Corp.)** would benefit from more aggressive policies [4]. Additional Important Information - The report highlights that the current policies may lead to a longer period of margin pressure in the petrochemical sector, indicating potential risks for investors [1][4]. - The absence of emphasis on profitability or returns on capital suggests that adjustments in the industry could take longer, particularly for older or quasi-utility industries [3]. - The report includes a distribution of ratings for various companies, indicating a majority of **Buy** ratings, with specific companies mentioned such as **CE (Celanese Corporation)** and **DOW (Dow Inc.)** rated as **Hold** [21]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the Chinese chemicals industry and specific companies within the sector.

Core Viewpoint - The performance of Eastman Chemical's international operations is critical for understanding its financial resilience and growth potential, especially in a tightly interconnected global economy [2][3]. Group 1: International Revenue Performance - Eastman Chemical's total revenue for the quarter was $2.29 billion, a decrease of 3.2% from the previous year [4]. - Asia Pacific contributed $583 million, accounting for 25.5% of total revenue, exceeding the consensus estimate of $570.6 million by +2.17% [5]. - Europe, Middle East, and Africa generated $610 million, representing 26.7% of total revenue, which was a slight miss of -1.08% compared to the projected $616.65 million [6]. - Latin America accounted for $131 million, or 5.7% of total revenue, surpassing expectations by +4.35% against the forecast of $125.54 million [7]. Group 2: Future Revenue Predictions - Analysts predict Eastman Chemical will report total revenue of $2.41 billion in the current fiscal quarter, reflecting a decline of 2.2% from the prior year [8]. - For the full year, total revenue is expected to be $9.25 billion, down 1.4% from the previous year, with regional contributions projected as follows: Asia Pacific at $2.28 billion (24.6%), Europe, Middle East, and Africa at $2.45 billion (26.5%), and Latin America at $501.14 million (5.4%) [9]. Group 3: Market Dynamics and Stock Performance - Eastman Chemical's reliance on international markets presents both opportunities and challenges, necessitating close monitoring of international revenue trends for future projections [10]. - The company's stock has declined 26.1% over the past month, contrasting with a 0.6% increase in the S&P 500, and has fallen 24.1% over the past three months compared to an 11.7% increase in the S&P 500 [13].

Core Viewpoint - Eastman Chemical Co. (EMN) experienced a 19% decline in stock price, marking its worst single-day performance since its IPO in the U.S., following a third-quarter earnings guidance that fell short of market expectations [1] Company Summary - The company's third-quarter performance guidance was disappointing compared to market forecasts, leading to a significant drop in stock value [1]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This document is a Quarterly Report on Form 10-Q for Eastman Chemical Company, covering the period ended June 30, 2025, with the company classified as a large accelerated filer [Filing Details](index=1&type=section&id=Filing%20Details) This document is a Quarterly Report on Form 10-Q for Eastman Chemical Company, covering the period ended June 30, 2025, with the company classified as a large accelerated filer and not a shell company - Filing Type: **Quarterly Report (Form 10-Q)** for the period ended June 30, 2025[2](index=2&type=chunk) - Registrant: **Eastman Chemical Company** (Commission file number 1-12626), incorporated in Delaware[2](index=2&type=chunk)[3](index=3&type=chunk) - Filer Status: **Large accelerated filer**[4](index=4&type=chunk) Common Stock Outstanding | Class | Number of Shares Outstanding at June 30, 2025 | | :--- | :--- | | Common Stock, par value $0.01 per share | 114,832,412 | [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines that the report contains forward-looking statements, which are subject to inherent risks and uncertainties, with actual results potentially differing materially from expectations [Nature and Risks of Forward-Looking Statements](index=3&type=section&id=Nature%20and%20Risks%20of%20Forward-Looking%20Statements) This section outlines that the report contains forward-looking statements, which are subject to inherent risks and uncertainties, with actual results potentially differing materially from expectations due to inaccurate assumptions or unrealized conditions, as detailed in the 'Risk Factors' section - Forward-looking statements are identified by terms such as 'anticipates', 'believes', 'estimates', 'expects', 'intends', 'may', 'plans', 'projects', 'forecasts', 'will', 'would', 'could', and similar expressions[10](index=10&type=chunk) - These statements are based on underlying assumptions, internal estimates, market conditions, management expectations, and economic conditions, and are subject to inherent risks and uncertainties[11](index=11&type=chunk) - Known material factors, risks, and uncertainties that could cause actual results to differ are discussed under 'Risk Factors' in Part II, Item 1A[11](index=11&type=chunk) - The Company cautions against undue reliance on forward-looking statements and undertakes no obligation to publicly update or alter them, except as required by law[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Eastman Chemical Company, including statements of earnings, comprehensive income, retained earnings, financial position, and cash flows for the second quarter and first six months of 2025 and 2024, along with detailed notes on significant accounting policies, inventories, income taxes, borrowings, derivative instruments, retirement plans, environmental matters, legal matters, stockholders' equity, earnings per share, asset impairments, share-based compensation, and segment information [Unaudited Consolidated Statements of Earnings, Comprehensive Income and Retained Earnings](index=4&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Earnings%2C%20Comprehensive%20Income%20and%20Retained%20Earnings) This section presents the unaudited consolidated statements of earnings, comprehensive income, and retained earnings, highlighting key financial performance metrics for the second quarter and first six months of 2025 and 2024 Second Quarter Performance (YoY Change) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | 2,287 | 2,363 | (76) | (3.2%) | | Gross profit | 506 | 599 | (93) | (15.5%) | | Net earnings attributable to Eastman | 140 | 230 | (90) | (39.1%) | | Basic EPS attributable to Eastman | 1.22 | 1.96 | (0.74) | (37.8%) | | Diluted EPS attributable to Eastman | 1.20 | 1.94 | (0.74) | (38.1%) | First Six Months Performance (YoY Change) | Metric | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | 4,577 | 4,673 | (96) | (2.1%) | | Gross profit | 1,073 | 1,131 | (58) | (5.1%) | | Net earnings attributable to Eastman | 322 | 395 | (73) | (18.5%) | | Basic EPS attributable to Eastman | 2.80 | 3.37 | (0.57) | (16.9%) | | Diluted EPS attributable to Eastman | 2.77 | 3.33 | (0.56) | (16.8%) | - Retained earnings at the end of the period increased to **$10,143 million** in Q2 2025 from **$9,694 million** in Q2 2024[15](index=15&type=chunk) [Unaudited Consolidated Statements of Financial Position](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Financial%20Position) This section provides the unaudited consolidated statements of financial position, detailing assets, liabilities, and equity at June 30, 2025, compared to December 31, 2024 Financial Position (June 30, 2025 vs. December 31, 2024) | Asset/Liability | June 30, 2025 (Millions $) | December 31, 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total assets | 15,219 | 15,213 | 6 | 0.04% | | Total liabilities | 9,313 | 9,361 | (48) | (0.51%) | | Total equity | 5,906 | 5,852 | 54 | 0.92% | | Cash and cash equivalents | 423 | 837 | (414) | (49.5%) | | Inventories | 2,151 | 1,988 | 163 | 8.2% | | Long-term borrowings | 4,782 | 4,567 | 215 | 4.7% | - Current assets decreased from **$4,101 million** at December 31, 2024, to **$4,021 million** at June 30, 2025, primarily due to a significant decrease in cash and cash equivalents[17](index=17&type=chunk) - Total Eastman stockholders' equity increased to **$5,835 million** at June 30, 2025, from **$5,779 million** at December 31, 2024[17](index=17&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited consolidated statements of cash flows, detailing operating, investing, and financing activities for the first six months of 2025 and 2024 Cash Flow Summary (First Six Months, YoY Change) | Activity | 2025 (Millions $) | 2024 (Millions $) | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 66 | 351 | (285) | (81.2%) | | Net cash used in investing activities | (278) | (300) | 22 | (7.3%) | | Net cash used in financing activities | (214) | (79) | (135) | 170.9% | | Net change in cash and cash equivalents | (414) | (34) | (380) | 1117.6% | - Cash and cash equivalents at the end of the period decreased significantly from **$837 million** at the beginning of the period to **$423 million** at June 30, 2025[20](index=20&type=chunk) [Note 1. Significant Accounting Policies](index=8&type=section&id=Note%201.%20Significant%20Accounting%20Policies) This note details the basis of presentation for the unaudited consolidated financial statements, affirming consistency with the 2024 Annual Report on Form 10-K and GAAP, and covers recently adopted accounting standards, working capital management, off-balance sheet arrangements, and government grants - Eastman adopted **ASU 2023-05 (Joint Venture Formations)** and **ASU 2023-09 (Income Tax Disclosures)** on January 1, 2025, with no significant impact on interim financial statements[28](index=28&type=chunk)[29](index=29&type=chunk) - The Company engages in off-balance sheet, non-recourse accounts receivable factoring programs, selling **$674 million** in Q2 2025 and **$1.4 billion** in H1 2025[32](index=32&type=chunk) - The U.S. Department of Energy terminated an award for the Polyethylene Terephthalate Recycling Decarbonization Project on May 29, 2025, with Eastman receiving **$14 million** in reimbursements in H1 2025 and evaluating the impact[34](index=34&type=chunk) [Note 2. Inventories](index=9&type=section&id=Note%202.%20Inventories) This note provides a breakdown of inventory values, showing an increase in total inventories from $1,988 million at December 31, 2024, to $2,151 million at June 30, 2025, with approximately 50% valued using the LIFO method Inventories (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished goods | 1,475 | 1,321 | | Work in process | 322 | 305 | | Raw materials and supplies | 699 | 737 | | Total inventories at FIFO or average cost | 2,496 | 2,363 | | Less: LIFO reserve | 345 | 375 | | Total inventories | 2,151 | 1,988 | - Inventories valued on the LIFO method constituted approximately **50%** of total inventories at both June 30, 2025, and December 31, 2024[36](index=36&type=chunk) [Note 3. Income Taxes](index=10&type=section&id=Note%203.%20Income%20Taxes) The provision for income taxes for Q2 2025 was $29 million (17% effective tax rate), down from $56 million (20%) in Q2 2024, and for the first six months of 2025, it was $99 million (23%), compared to $105 million (21%) in 2024, with changes influenced by uncertain tax positions and foreign rate variances, and the Company is evaluating the potential impacts of the recently enacted 'One Big Beautiful Bill Act' Provision for Income Taxes and Tax Rate | Period | 2025 (Millions $) | 2025 (%) | 2024 (Millions $) | 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 29 | 17% | 56 | 20% | | First Six Months | 99 | 23% | 105 | 21% | - The Q2 2025 provision includes an increase related to uncertain tax positions offset by a decrease from foreign rate variance due to the Company's mix of earnings[38](index=38&type=chunk) - Unrecognized tax benefits were **$347 million** at June 30, 2025, up from **$321 million** at December 31, 2024[39](index=39&type=chunk) - The Company is evaluating the potential impacts of the 'One Big Beautiful Bill Act' enacted on July 4, 2025, which includes modifications to federal income tax law[40](index=40&type=chunk) [Note 4. Borrowings](index=10&type=section&id=Note%204.%20Borrowings) Total borrowings increased to $5,126 million at June 30, 2025, from $5,017 million at December 31, 2024, driven by issuing $250 million of 5.0% notes and repaying $450 million of 3.80% notes, while maintaining a $1.50 billion revolving credit facility and having $344 million in commercial paper borrowings Borrowings (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total borrowings | 5,126 | 5,017 | | Less: Borrowings due within one year | 344 | 450 | | Long-term borrowings | 4,782 | 4,567 | | Commercial paper and short-term borrowings | 344 | — | | 5.0% notes due August 2029 | 742 | 495 | | 3.80% notes due March 2025 | — | 450 | - In Q1 2025, the Company issued an additional **$250 million** of 5.0% notes due August 2029 and repaid **$450 million** of 3.80% notes due March 2025[41](index=41&type=chunk) - Eastman has access to a **$1.50 billion** revolving credit agreement maturing in February 2029, with no outstanding borrowings at June 30, 2025[43](index=43&type=chunk) - Commercial paper borrowings were **$344 million** at June 30, 2025, with a weighted interest rate of **4.62%**, compared to no commercial paper borrowings at December 31, 2024[43](index=43&type=chunk) - The Company repaid **$100 million** of the 2027 Term Loan in Q1 2025, reducing the outstanding balance to **$150 million**[44](index=44&type=chunk) [Note 5. Derivative and Non-Derivative Financial Instruments](index=11&type=section&id=Note%205.%20Derivative%20and%20Non-Derivative%20Financial%20Instruments) Eastman uses derivative and non-derivative financial instruments to mitigate market risks from foreign currency exchange rates, raw material/energy prices, and interest rates, employing cash flow, fair value, and net investment hedges, with total net derivative liabilities increasing significantly to $201 million at June 30, 2025, primarily due to unrealized losses from euro to U.S. dollar exchange rate changes - Eastman uses derivative instruments (cash flow, fair value, net investment hedges) to manage foreign currency, raw material/energy, and interest rate risks, not for speculative purposes[47](index=47&type=chunk) - In Q1 2025, the Company entered into new fixed-to-fixed cross-currency swaps totaling **$300 million** and terminated/reentered other swaps, resulting in a **$2 million** loss recognized in CTA[55](index=55&type=chunk)[56](index=56&type=chunk) Notional Outstanding of Derivatives (Millions) | Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | EUR/USD Foreign Exchange Forward and Option Contracts | €450 | €428 | | Energy Commodity Forward and Collar Contracts (million british thermal units) | 9 | 10 | | EUR/USD Cross-currency interest rate swaps | €1,449 | €1,543 | | JPY/USD Cross-currency interest rate swaps | ¥7,885 | ¥7,385 | | EUR/USD Non-derivatives designated as net investment hedges | €499 | €499 | Total Net Derivative Assets (Liabilities) (Millions $) | Date | Amount | | :--- | :--- | | June 30, 2025 | (201) | | December 31, 2024 | 35 | - Unrealized losses in Accumulated Other Comprehensive Income (AOCI) increased to **$156 million** at June 30, 2025, from a gain of **$154 million** at December 31, 2024, primarily due to an increase in euro to U.S. dollar exchange rates[71](index=71&type=chunk) [Note 6. Retirement Plans](index=16&type=section&id=Note%206.%20Retirement%20Plans) Eastman maintains defined benefit pension plans and other postretirement benefit plans for eligible employees and retirees, with negligible net periodic benefit cost for pension plans in Q2 and H1 2025, while other postretirement benefit plans incurred costs of $5 million in Q2 2025 and $9 million in H1 2025 - Eastman provides defined benefit pension plans and life insurance/health reimbursement arrangements for eligible retirees[72](index=72&type=chunk) Net Periodic Benefit (Credit) Cost (Millions $) | Period | Pension Plans (U.S.) | Pension Plans (Non-U.S.) | Other Postretirement Benefit Plans | | :--- | :--- | :--- | :--- | | Second Quarter 2025 | — | — | 5 | | Second Quarter 2024 | 1 | 1 | 2 | | First Six Months 2025 | — | 1 | 9 | | First Six Months 2024 | — | 2 | 4 | [Note 7. Environmental Matters and Asset Retirement Obligations](index=17&type=section&id=Note%207.%20Environmental%20Matters%20and%20Asset%20Retirement%20Obligations) Eastman faces environmental liabilities related to hazardous waste sites and remediation, with a total net environmental reserve of $325 million at June 30, 2025, up from $284 million at December 31, 2024, and estimated future remediation costs ranging from $293 million to $502 million, in addition to environmental and non-environmental asset retirement obligations - Eastman is a potentially responsible party (PRP) for hazardous waste site cleanups and incurs costs for environmental remediation and closure/post-closure[76](index=76&type=chunk) Environmental Reserve (Millions $) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Environmental contingencies, current | 15 | 15 | | Environmental contingencies, long-term | 310 | 269 | | Total | 325 | 284 | - Estimated future environmental expenditures for undiscounted remediation costs ranged from **$293 million** to **$502 million** at June 30, 2025[79](index=79&type=chunk) - Environmental asset retirement obligations were **$32 million**, and non-environmental asset retirement obligations were **$55 million** at June 30, 2025[81](index=81&type=chunk)[82](index=82&type=chunk) [Note 8. Legal Matters](index=19&type=section&id=Note%208.%20Legal%20Matters) Eastman is involved in various lawsuits, claims, investigations, and proceedings in the ordinary course of business, with management believing that their ultimate resolution will not have a material adverse effect on the Company's financial position, results of operations, or cash flows - The Company is party to various legal matters including product liability, personal injury, asbestos, patent, environmental, and employment matters[84](index=84&type=chunk) - Management does not believe the ultimate resolution of pending legal matters will have a material adverse effect on the Company's overall financial position, results of operations, or cash flows[84](index=84&type=chunk) [Note 9. Stockholders' Equity](index=19&type=section&id=Note%209.%20Stockholders'%20Equity) Eastman's total equity increased to $5,906 million at June 30, 2025, from $5,852 million at December 31, 2024, driven by net earnings, partially offset by dividends and share repurchases, while accumulated other comprehensive income (loss) decreased due to unrealized losses on derivative instruments Changes in Total Eastman Stockholders' Equity (Millions $) | Item | First Six Months 2025 | First Six Months 2024 | | :--- | :--- | :--- | | Balance at beginning of period | 5,779 | 5,458 | | Net Earnings | 322 | 395 | | Cash Dividends Declared | (192) | (191) | | Other Comprehensive Income (Loss) | (39) | 17 | | Share-Based Compensation Expense | 25 | 35 | | Stock Option Exercises | 2 | 22 | | Share Repurchases | (50) | (100) | | Balance at end of period | 5,835 | 5,627 | Accumulated Other Comprehensive Income (Loss), Net of Tax (Millions $) | Component | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cumulative Translation Adjustment | (315) | (317) | | Unrecognized Prior Service Credits | 3 | 3 | | Unrealized Gains (Losses) on Derivative Instruments | (40) | 1 | | Unrealized Losses on Investments | (1) | (1) | | Total | (353) | (314) | - The period change in Accumulated Other Comprehensive Income (Loss) for the first six months of 2025 was a loss of **$39 million**, compared to a gain of **$17 million** in the same period of 2024[92](index=92&type=chunk) [Note 10. Earnings and Dividends Per Share](index=22&type=section&id=Note%2010.%20Earnings%20and%20Dividends%20Per%20Share) Diluted EPS attributable to Eastman decreased to $1.20 in Q2 2025 from $1.94 in Q2 2024, and to $2.77 in H1 2025 from $3.33 in H1 2024, while cash dividends declared were $0.83 per share for Q2 2025 and $1.66 per share for H1 2025 Earnings Per Share (EPS) Attributable to Eastman | Period | 2025 Basic EPS ($) | 2025 Diluted EPS ($) | 2024 Basic EPS ($) | 2024 Diluted EPS ($) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 1.22 | 1.20 | 1.96 | 1.94 | | First Six Months | 2.80 | 2.77 | 3.37 | 3.33 | - Weighted average shares used for diluted EPS were **116.2 million** in Q2 2025, down from **118.6 million** in Q2 2024[94](index=94&type=chunk) - Cash dividends declared were **$0.83 per share** for Q2 2025 (up from $0.81 in Q2 2024) and **$1.66 per share** for H1 2025 (up from $1.62 in H1 2024)[95](index=95&type=chunk) [Note 11. Asset Impairments, Restructuring, and Other Charges, Net](index=23&type=section&id=Note%2011.%20Asset%20Impairments%2C%20Restructuring%2C%20and%20Other%20Charges%2C%20Net) Total asset impairments, restructuring, and other charges, net, were $13 million in Q2 2025 (up from $0 in Q2 2024) and $22 million in H1 2025 (up from $11 million in H1 2024), primarily including severance related to corporate cost reduction initiatives and restructuring charges for a heat-transfer fluids production line closure Asset Impairments, Restructuring, and Other Charges, Net (Millions $) | Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Severance charges | 10 | — | 11 | 11 | | Restructuring and other charges | 3 | — | 11 | — | | Total | 13 | — | 22 | 11 | - Q2 and H1 2025 severance charges of **$10 million** and **$11 million**, respectively, relate to corporate cost reduction initiatives[97](index=97&type=chunk) - H1 2025 includes **$3 million** in restructuring charges for the closure of a heat-transfer fluids production line in the Additives & Functional Products segment[97](index=97&type=chunk) - Reserves for asset impairments and restructuring decreased from **$26 million** at January 1, 2025, to **$19 million** at June 30, 2025, after provisions and cash reductions[98](index=98&type=chunk) [Note 12. Share-Based Compensation Awards](index=24&type=section&id=Note%2012.%20Share-Based%20Compensation%20Awards) Eastman recognized $2 million in share-based compensation expense (before tax) in Q2 2025, down from $14 million in Q2 2024, and for the first six months of 2025, the expense was $25 million, down from $35 million in H1 2024, with these expenses recorded in 'Selling, general and administrative expenses' Share-Based Compensation Expense (Before Tax, Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Second Quarter | 2 | 14 | | First Six Months | 25 | 35 | - The compensation expense is recognized in 'Selling, general and administrative expenses' and includes awards such as restricted stock, restricted stock units, stock options, and performance shares[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 13. Segment Information](index=24&type=section&id=Note%2013.%20Segment%20Information) Eastman operates in four segments: Advanced Materials (AM), Additives & Functional Products (AFP), Chemical Intermediates (CI), and Fibers, with segment performance evaluated based on Adjusted EBIT, and total sales by operating segment decreased in Q2 and H1 2025, while total assets by operating segment increased at June 30, 2025 - Eastman's four operating segments are **Advanced Materials (AM)**, **Additives & Functional Products (AFP)**, **Chemical Intermediates (CI)**, and **Fibers**[105](index=105&type=chunk) - Segment operating performance is evaluated based on **Adjusted EBIT**, which excludes non-core, unusual, or non-recurring items[105](index=105&type=chunk) Sales by Segment (Millions $) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Advanced Materials | 777 | 795 | 1,496 | 1,543 | | Additives & Functional Products | 769 | 718 | 1,502 | 1,422 | | Chemical Intermediates | 463 | 515 | 1,008 | 1,038 | | Fibers | 274 | 330 | 562 | 661 | | Total Sales by Operating Segment | 2,283 | 2,358 | 4,568 | 4,664 | Adjusted EBIT by Segment (Millions $) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Advanced Materials | 121 | 131 | 237 | 235 | | Additives & Functional Products | 153 | 123 | 294 | 232 | | Chemical Intermediates | (30) | 22 | (11) | 38 | | Fibers | 81 | 122 | 169 | 239 | Assets by Segment (Millions $) | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Advanced Materials | 5,901 | 5,735 | | Additives & Functional Products | 4,809 | 4,608 | | Chemical Intermediates | 1,676 | 1,586 | | Fibers | 1,114 | 1,075 | | Total Assets by Operating Segment | 13,500 | 13,004 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Eastman's financial condition and results of operations, including an overview of its innovation-driven growth model and detailed analysis of sales, EBIT, net earnings, and EPS, along with discussions on non-GAAP financial measures, segment performance, sales by customer location, liquidity, cash flows, debt, capital expenditures, stock repurchases, and critical accounting estimates [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) Management uses non-GAAP financial measures, such as EBIT excluding non-core items, adjusted tax rate, and net debt, to evaluate period-over-period performance and resource allocation, with these measures excluding unusual or non-recurring items to provide a clearer view of core business operations and reconciled to the most comparable GAAP measures - Non-GAAP measures are used by management to evaluate longer-term performance, understand operational performance, and make resource allocation decisions[124](index=124&type=chunk) - Non-core items excluded from non-GAAP earnings include asset impairments, restructuring, acquisition/disposition costs, environmental costs, and mark-to-market pension adjustments[125](index=125&type=chunk) - The non-GAAP measure 'net debt' is defined as total borrowings less cash and cash equivalents, used to assess overall financial position, liquidity, and leverage[129](index=129&type=chunk) Total Non-Core Items Impacting Net Earnings Attributable to Eastman (Millions $) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Second Quarter | 46 | 26 | | First Six Months | 86 | 51 | [Overview](index=33&type=section&id=Overview) Eastman's innovation-driven growth model leverages technology platforms, application development, and market engagement, with a focus on molecular recycling, while sales revenue decreased in Q2 and H1 2025 due to lower sales volume and continued weakness in key end markets, partially offset by growth in the AFP segment, and EBIT excluding non-core items also decreased due to lower sales volume, lower selling prices, and higher costs - Eastman's innovation-driven growth model focuses on world-class scalable technology platforms, differentiated application development, and market engagement, with molecular recycling as a key investment area[136](index=136&type=chunk) Sales and EBIT (Millions $) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | 2,287 | 2,363 | 4,577 | 4,673 | | Earnings before interest and taxes (EBIT) | 222 | 337 | 524 | 600 | | EBIT excluding non-core items | 275 | 353 | 586 | 627 | - Sales revenue decreased in Q2 and H1 2025 primarily due to lower sales volume from weak end markets and an unplanned outage in the CI segment, partially offset by higher volume in AFP[137](index=137&type=chunk) - EBIT excluding non-core items decreased due to lower sales volume, lower selling prices (net of higher raw material/energy costs), and higher maintenance costs, partially offset by lower variable compensation[138](index=138&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Net earnings attributable to Eastman decreased to $140 million in Q2 2025 (from $230 million in Q2 2024) and to $322 million in H1 2025 (from $395 million in H1 2024), with adjusted net earnings also declining, and sales revenue decreasing by 3% in Q2 and 2% in H1 2025, primarily due to volume/product mix effects, while gross profit, SG&A expenses, and EBIT also decreased, and R&D expenses and net interest expense increased Net Earnings and Diluted EPS Attributable to Eastman | Period | 2025 Net Earnings (Millions $) | 2025 Diluted EPS ($) | 2024 Net Earnings (Millions $) | 2024 Diluted EPS ($) | | :--- | :--- | :--- | :--- | :--- | | Second Quarter | 140 | 1.20 | 230 | 1.94 | | First Six Months | 322 | 2.77 | 395 | 3.33 | Sales Revenue Change (YoY) | Period | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | | Second Quarter | (76) | (3%) | | First Six Months | (96) | (2%) | Contributing Factors (H1 2025 vs H1 2024) | Factor | Change ($ Millions) | Change (%) | | :--- | :--- | :--- | | Volume / product mix effect | (85) | (2%) | | Price effect | 6 | 0% | | Exchange rate effect | (17) | 0% | - Gross profit decreased by **16%** in Q2 2025 and **5%** in H1 2025, primarily due to decreases across all segments except AFP[143](index=143&type=chunk) - R&D expenses increased by **12%** in Q2 2025 and **13%** in H1 2025, driven by strategic investment in innovation[147](index=147&type=chunk) - Net interest expense increased slightly by **6%** in Q2 2025 and **3%** in H1 2025 due to higher borrowings[155](index=155&type=chunk) - The adjusted effective tax rate for both Q2 and H1 2025 was **16%**, consistent with the forecasted full year adjusted effective tax rate[156](index=156&type=chunk)[159](index=159&type=chunk) [Summary by Operating Segment](index=38&type=section&id=Summary%20by%20Operating%20Segment) The Advanced Materials segment experienced sales and EBIT decreases in Q2 2025 due to weak demand, but a slight EBIT increase in H1 2025, while the Additives & Functional Products segment showed strong growth with increased sales and EBIT in both periods, driven by higher selling prices and favorable product mix, and Chemical Intermediates saw significant sales and EBIT declines due to lower volume, prices, and an unplanned outage, and the Fibers segment also faced sales and EBIT decreases from lower sales volume and global trade disputes Advanced Materials Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 777 | 795 | (2%) | | EBIT | 121 | 131 | (8%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,496 | 1,543 | (3%) | | EBIT | 237 | 235 | 1% | - AM sales decreased due to weak demand in building/construction and automotive, while H1 EBIT slightly increased due to lower SG&A[164](index=164&type=chunk)[166](index=166&type=chunk) Additives & Functional Products Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 769 | 718 | 7% | | EBIT (excluding non-core) | 153 | 123 | 24% | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,502 | 1,422 | 6% | | EBIT (excluding non-core) | 294 | 232 | 27% | - AFP sales and EBIT increased due to higher selling prices, favorable product mix (care additives, heat transfer fluid projects), and lower SG&A[170](index=170&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk) Chemical Intermediates Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 463 | 515 | (10%) | | EBIT | (30) | 22 | (236%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 1,008 | 1,038 | (3%) | | EBIT | (11) | 38 | (129%) | - CI sales and EBIT decreased significantly due to lower sales volume, lower selling prices (industrial end market), and an approximately **$20 million** impact from an unplanned outage[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) Fibers Segment Performance (YoY Change) | Metric | Q2 2025 (Millions $) | Q2 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 274 | 330 | (17%) | | EBIT | 81 | 122 | (34%) | | Metric | H1 2025 (Millions $) | H1 2024 (Millions $) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | 562 | 661 | (15%) | | EBIT | 169 | 239 | (29%) | - Fibers sales and EBIT decreased due to lower sales volume in acetate tow (destocking, capacity adjustments) and lower textiles sales into China (global trade dispute)[179](index=179&type=chunk)[180](index=180&type=chunk) [Sales by Customer Location](index=41&type=section&id=Sales%20by%20Customer%20Location) Total sales revenue decreased by 3% in Q2 2025 and 2% in H1 2025, primarily driven by lower sales volume and unfavorable product mix in Europe, Middle East, and Africa (EMEA) and United States and Canada (US&C) regions, partially offset by higher sales volume and favorable product mix in Asia Pacific and Latin America Sales Revenue by Customer Location (Millions $) | Region | Q2 2025 | Q2 2024 | Q2 Change ($ Millions) | Q2 Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States and Canada | 963 | 994 | (31) | (3%) | | Europe, Middle East, and Africa | 610 | 650 | (40) | (6%) | | Asia Pacific | 583 | 590 | (7) | (1%) | | Latin America | 131 | 129 | 2 | 2% | | Total Eastman | 2,287 | 2,363 | (76) | (3%) | Sales Revenue by Customer Location (Millions $) | Region | H1 2025 | H1 2024 | H1 Change ($ Millions) | H1 Change (%) | | :--- | :--- | :--- | :--- | :--- | | United States and Canada | 1,983 | 1,963 | 20 | 1% | | Europe, Middle East, and Africa | 1,220 | 1,309 | (89) | (7%) | | Asia Pacific | 1,122 | 1,154 | (32) | (3%) | | Latin America | 252 | 247 | 5 | 2% | | Total Eastman | 4,577 | 4,673 | (96) | (2%) | - Lower sales in EMEA and US&C were partially offset by higher sales in Asia Pacific and Latin America[185](index=185&type=chunk)[186](index=186&type=chunk) [Liquidity and Other Financial Information](index=42&type=section&id=Liquidity%20and%20Other%20Financial%20Information) Eastman's cash provided by operating activities decreased significantly to $66 million in H1 2025 from $351 million in H1 2024, primarily due to lower accounts payable, lower net earnings, and higher variable compensation payouts, while cash used in financing activities increased due to lower net borrowings, and the Company prioritizes capital expenditures, dividends, net debt reduction, and share repurchases, maintaining an investment-grade credit rating, with net debt increasing to $4,703 million at June 30, 2025 Cash Flow Summary (First Six Months, Millions $) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 66 | 351 | | Net cash used in investing activities | (278) | (300) | | Net cash used in financing activities | (214) | (79) | | Net change in cash and cash equivalents | (414) | (34) | - Operating cash flow decreased by **$285 million** in H1 2025, mainly due to lower accounts payable, lower net earnings, and higher variable compensation payout[191](index=191&type=chunk) - Cash used in financing activities increased by **$135 million** in H1 2025 due to lower net borrowings activity[193](index=193&type=chunk) - Priorities for cash use include capital expenditures, quarterly dividends, net debt reduction, and share repurchases[193](index=193&type=chunk) Net Debt (Millions $) | Date | Total Borrowings | Cash and Cash Equivalents | Net Debt | | :--- | :--- | :--- | :--- | | June 30, 2025 | 5,126 | 423 | 4,703 | | December 31, 2024 | 5,017 | 837 | 4,180 | [Critical Accounting Estimates](index=44&type=section&id=Critical%20Accounting%20Estimates) Management's critical accounting estimates, which require significant judgment and impact reported financial amounts, include impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes, with these estimates based on historical experience and reasonable assumptions, but actual results may differ - Critical accounting estimates include impairment of long-lived assets, environmental costs, pension and other postretirement benefits, litigation and contingent liabilities, and income taxes[210](index=210&type=chunk) - These estimates involve significant management judgments and are based on historical experience and various assumptions, with actual results potentially differing[210](index=210&type=chunk) [Recently Issued Accounting Standards](index=44&type=section&id=Recently%20Issued%20Accounting%20Standards) Information regarding the impact of recently issued accounting standards is detailed in Note 1, 'Significant Accounting Policies,' of the unaudited consolidated financial statements - Refer to Note 1, 'Significant Accounting Policies,' for details on recently issued accounting standards[211](index=211&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Eastman is exposed to market risks from foreign currency exchange rates, commodity prices, and interest rates, which it manages through hedging strategies, with a 10% adverse move in the U.S. dollar against foreign currencies potentially resulting in a $51 million loss in fair value from derivative transactions, and a 10% fluctuation in the euro currency rate potentially impacting designated net investment values by $228 million, generally offset by hedging instruments - Eastman manages market risks (foreign currency, commodity prices, interest rates) using pricing, inventory management, and hedging strategies[214](index=214&type=chunk) - A **10%** adverse move in the U.S. dollar relative to foreign currencies could result in a **$51 million** loss in fair value from foreign currency derivative transactions[216](index=216&type=chunk) - A **10%** fluctuation in the euro currency rate could impact designated net investment values in foreign subsidiaries by **$228 million**, generally offset by euro-denominated borrowings or cross-currency interest rate swaps[217](index=217&type=chunk) [ITEM 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20Controls%20and%20Procedures) As of June 30, 2025, Eastman's disclosure controls and procedures were deemed effective by the CEO and CFO, providing reasonable assurance that required information is accumulated and communicated for timely disclosure decisions, with no material changes in internal control over financial reporting during Q2 2025 - As of June 30, 2025, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required for disclosure was accumulated and communicated to management[219](index=219&type=chunk) - No material changes in internal control over financial reporting occurred during Q2 2025[220](index=220&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security sales, other disclosures, exhibits, and signatures for the report [ITEM 1. Legal Proceedings](index=46&type=section&id=ITEM%201.%20Legal%20Proceedings) Eastman is involved in various legal proceedings, including product liability, environmental, and intellectual property matters, handled in the ordinary course of business, with management believing these matters will not materially adversely affect the Company's financial condition, results of operations, or cash flows, and the Company's threshold for disclosing environmental legal proceedings is potential monetary sanctions of $1 million or more - Eastman is involved in various lawsuits, claims, investigations, and proceedings, including product liability, environmental, and intellectual property matters[222](index=222&type=chunk) - Management does not believe the ultimate resolution of these matters will have a material adverse effect on the Company's overall financial position, results of operations, or cash flows[222](index=222&type=chunk) - The Company's disclosure threshold for environmental legal proceedings involving a governmental authority is potential monetary sanctions of **$1 million** or more[222](index=222&type=chunk) - Eastman, through its subsidiary Solutia, is indemnified by Monsanto (now Bayer AG) for certain Legacy Tort Claims[223](index=223&type=chunk) [ITEM 1A. Risk Factors](index=46&type=section&id=ITEM%201A.%20Risk%20Factors) This section refers to the 'Risk Factors' in Part I, Item 1A of the Company's 2024 Annual Report on Form 10-K for information regarding material known risk factors that could adversely affect the Company's business, financial condition, or results of operations - For material known risk factors, refer to 'Risk Factors' in Part I, Item 1A of the Company's 2024 Annual Report on Form 10-K[224](index=224&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Eastman repurchased 643,791 shares of common stock for $50 million during Q2 and H1 2025 under the $2.5 billion 2021 authorization, with $1.1 billion used and approximately $1.365 billion remaining under the plan as of June 30, 2025 - The Board of Directors authorized a **$2.5 billion** common stock repurchase program in December 2021[226](index=226&type=chunk) - The Company repurchased **643,791 shares** for **$50 million** during Q2 and H1 2025[226](index=226&type=chunk) - As of June 30, 2025, **$1.1 billion** has been used under the 2021 authorization, with approximately **$1.365 billion** remaining[226](index=226&type=chunk)[227](index=227&type=chunk) [ITEM 5. Other Information](index=48&type=section&id=ITEM%205.%20Other%20Information) This section confirms that no Rule 10b5-1 trading arrangements or 'non-Rule 10b5-1 trading arrangements' were entered into, modified, or terminated by the Company's directors or officers during the second quarter of 2025 - No Rule 10b5-1 trading arrangements or 'non-Rule 10b5-1 trading arrangements' were entered into, modified, or terminated by directors or officers during Q2 2025[231](index=231&type=chunk) [ITEM 6. Exhibits](index=49&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the report, including corporate governance documents, debt instruments, compensatory plans, various certifications by the CEO and CFO, and Inline XBRL documents - Exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), debt instruments (5.000% Note due 2029), and compensatory plans (Severance Agreement and Waiver)[234](index=234&type=chunk) - Certifications by the CEO and CFO (Rule 13a-14(a) and Section 1350) for the quarter ended June 30, 2025, are filed[234](index=234&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are included[234](index=234&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) The report is duly signed on behalf of Eastman Chemical Company by William T. McLain, Jr., Executive Vice President and Chief Financial Officer, on August 1, 2025 - The report was signed by **William T. McLain, Jr.**, Executive Vice President and Chief Financial Officer, on August 1, 2025[237](index=237&type=chunk)

Group 1 - FDCA is a high-value bio-based compound with a wide range of applications, serving as a substitute for terephthalic acid and enabling the production of high-performance bio-based polymers [2][8] - The synthesis routes for FDCA are diverse, with the HMF route being the most promising and showing significant progress towards industrial production [17][18] - The global FDCA market is expected to grow at a compound annual growth rate (CAGR) of 8.9% from 2021 to 2028, potentially reaching $873.28 million by 2028 [4][51] Group 2 - Internationally, several companies have achieved FDCA production, with significant investments made since 2004, including major players like Coca-Cola, DuPont, and Avantium [3][35] - Domestic research on FDCA began around 2010 and has rapidly advanced, with notable breakthroughs in synthesis and polymerization processes [3][41] - The domestic industry is still in its early stages of commercialization, but there is a growing number of patents and publications, indicating a strong research foundation [3][41] Group 3 - PEF, derived from FDCA and ethylene glycol, exhibits superior properties compared to PET, including higher mechanical strength and better gas barrier performance, making it a promising alternative [5][10] - The application areas for PEF include food packaging, films, and fibers, with significant potential for replacing PET in various markets [5][10] - The production of PEF is expected to expand, driven by the increasing demand for sustainable materials and the growth of the bio-based product market [5][51] Group 4 - Companies like Avantium and Eastman are leading the way in FDCA production technology, with Avantium's YXY technology being a notable example [36][39] - Domestic companies such as Hefei Lif Biological and Zhongke Guosheng are making strides in FDCA production, with innovative processes and significant production capacity planned for the near future [44][45] - The collaboration between research institutions and companies is fostering innovation and accelerating the commercialization of FDCA and its derivatives in China [41][44]

Financial Data and Key Metrics Changes - The company is targeting significant cost savings in 2025 and has reduced capital spending for 2026, indicating a cautious outlook on macroeconomic conditions [7][8] - There is an expected mid-single-digit drop in demand for the second half of the year, influenced by trade dynamics and seasonality [12][16] - The company anticipates a utilization headwind of approximately $75 million to $100 million in the second half of the year due to inventory reduction efforts [13][14] Business Line Data and Key Metrics Changes - The chemical and materials business is facing challenges due to overcapacity from China, impacting profitability [20][21] - The Methanalysis unit is performing well, with expectations of improved profitability through debottlenecking investments [30][32] - The fibers business is experiencing a decline due to tariff impacts and market demand issues, with a projected $20 million headwind from tariffs [56][91] Market Data and Key Metrics Changes - The automotive market is expected to see low single-digit declines in the back half of the year, influenced by tariff concerns and consumer behavior [50][51] - The consumer durables market is particularly affected by trade dynamics, leading to cautious purchasing behavior among customers [41][42] - The textile market has slowed down significantly due to tariffs, impacting overall demand [57][58] Company Strategy and Development Direction - The company is focusing on cash generation and cost management in response to current market uncertainties [13][17] - There is a strategic emphasis on improving the structural strength of the business and enhancing profitability through targeted investments [22][24] - The company is exploring alternative options for its Methanalysis investments, indicating a flexible approach to capital allocation [34][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges significant uncertainty in demand due to trade dynamics and macroeconomic factors, emphasizing the need for cautious forecasting [10][15] - There is optimism about potential stabilization in 2026, driven by pro-growth policies and resolution of trade issues [16][17] - The management is committed to maintaining cost discipline and optimizing working capital to navigate the current challenges [45][62] Other Important Information - The company is experiencing volatility in customer demand, particularly in consumer discretionary markets, which are highly sensitive to trade conditions [70][72] - The company has a strong focus on maintaining price-cost stability in its AFP business, which has contributed to its performance [55][56] Q&A Session Summary Question: How representative of the second half should be when thinking about trough earnings levels? - Management indicated that the second half is heavily impacted by trade situations, making it a poor indicator of overall company performance [8][10] Question: How far along is the investment in the Metapasys unit? - Management confirmed that the investment is progressing well, with expectations of significant profitability improvements [18][30] Question: What triggered the change in customer dialogue in July? - Management noted that the trade pause allowed customers to reassess their inventory and demand outlook, leading to a more cautious approach [39][41] Question: Can you provide more color on the automotive end markets? - Management highlighted that while the aftermarket performed well, the interlayer business faced challenges due to production moderation in response to tariffs [49][50] Question: What is the current state of tariffs and their impact on the fibers business? - Management stated that tariffs have significantly impacted the textile market, leading to a cautious outlook for the fibers segment [56][58] Question: What are the expectations for cash flow next year? - Management indicated that while cash flow may decrease due to pulling forward cash flow this year, they expect to build off a stable platform for future growth [62][63]

Financial Data and Key Metrics Changes - The company is targeting a reduction in capital spending for 2026, indicating a focus on cost savings in 2025 as well [6][14] - There is an expected mid-single-digit drop in demand for the second half of the year, influenced by trade dynamics and seasonality [12][15] - The company anticipates a utilization headwind of approximately $75 million to $100 million in the second half of the year due to inventory reduction efforts [13][16] Business Line Data and Key Metrics Changes - The Chemical Intermediates segment is expected to improve by over $30 million, while the Specialty and Fibers segments are projected to decline by a similar amount [70] - The AFP business saw a 4% year-over-year price increase primarily driven by cost pass-through contracts [54] - The Fibers business is facing a $20 million headwind due to tariffs and a $20 million asset utilization headwind, alongside higher energy costs [95][96] Market Data and Key Metrics Changes - The automotive market is expected to see a low single-digit decline in the back half of the year, with challenges stemming from tariff impacts and consumer behavior [50][51] - The textile market has slowed down significantly due to tariffs, impacting demand and leading to a cautious approach from customers [57][58] - The company is experiencing accelerated demand in certain areas, particularly in mechanical recycling for food-grade packaging applications [35] Company Strategy and Development Direction - The company is focusing on cash generation and cost management in response to current market uncertainties [13][16] - There is an emphasis on improving the structural strength of the business, particularly in the chemical and materials segments [21][22] - The company is exploring debottlenecking investments to enhance operational efficiency and profitability in its methanol system plant [30][31] Management's Comments on Operating Environment and Future Outlook - Management highlighted the chaotic nature of the current operating environment, driven by trade dynamics and consumer caution [12][14] - There is a belief that stability may return in 2026, contingent on resolving trade issues and improving economic conditions [15][16] - The management remains cautious about predicting demand due to ongoing uncertainties in the market [40][81] Other Important Information - The company is targeting additional cost cuts of $75 million to $100 million, which will be detailed in plans for the second half of the year [103] - The methanol system plant is performing well, with expectations for increased profitability as operational efficiencies are realized [30][31] Q&A Session Summary Question: Can you help us understand how representative the second half should be when thinking about trough earnings levels? - Management indicated that the second half is heavily impacted by trade situations, making it a poor measure of overall company performance [7][10] Question: How far along is the investment in the Metapasys unit, and what gives confidence in profitability? - Management discussed ongoing challenges in the chemical and materials business but expressed optimism about improving profitability through strategic investments [20][24] Question: What triggered the change in customer dialogue in July? - Management noted that the trade pause allowed customers to reassess their inventory and demand, leading to a more cautious approach [41][42] Question: Can you provide more color on the weakness in the automotive end markets? - Management confirmed that while the aftermarket performed well, the interlayer business faced challenges due to production moderation in response to tariffs [49] Question: What is the outlook for the Fibers business next year? - Management indicated that the Fibers business is facing headwinds this year but expects stabilization and potential recovery in the following year [94][100]

Core Insights - Eastman Chemical Company (EMN) reported second-quarter 2025 earnings of $1.20 per share, a decline of approximately 38% from $1.94 in the same quarter last year [1] - Adjusted earnings were $1.60 per share, down from $2.15 year-over-year, and below the Zacks Consensus Estimate of $1.72 [1][9] - Revenues for the second quarter were $2,287 million, a decrease of around 3% year-over-year, missing the Zacks Consensus Estimate of $2,289.9 million [1][9] Financial Performance - Cash and cash equivalents at the end of the quarter stood at $423 million, with net debt at $4,703 million [6] - Cash provided by operating activities was $233 million, down approximately 37% year-over-year [6] - The company returned $145 million to shareholders through dividends and share repurchases during the quarter [6] Segment Performance - Advanced Materials segment sales fell 2% year-over-year to $777 million, beating the estimate of $770 million [3] - Additives & Functional Products segment sales increased by 7% year-over-year to $769 million, surpassing the estimate of $732 million [4] - Chemical Intermediaries segment sales decreased by 10% year-over-year to $463 million, missing the estimate of $529 million [5] - Fibers segment reported sales of $274 million, down 17% year-over-year, but beating the estimate of $252 million [5] Market Outlook - The company is facing significant challenges in the second quarter, with only modest signs of seasonal improvement across end markets [2] - EMN anticipates a challenging global macroeconomic environment in the second half, with cautious customer behavior due to changing tariffs and soft demand [7] - The company expects third-quarter adjusted earnings to be approximately $1.25 per share and aims for an operating cash flow of around $1 billion for the full year [7][9] Stock Performance - EMN's shares have declined by 25.5% over the past year, compared to a 22.8% decline in the Zacks Chemicals Diversified industry [10]

2Q 2025 financial results July 31, 2025 Prepared remarks These slides should be reviewed with the accompanying prepared remarks posted on our website. Forward-looking statements The information in this release and other statements by the company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to, among other items: projections and estimates of earnings, revenues, volumes, pricing, margins, cost reductions, expenses, taxes, liquidity, cap ...

Company Performance - Eastman Chemical reported quarterly earnings of $1.6 per share, missing the Zacks Consensus Estimate of $1.72 per share, and down from $2.15 per share a year ago, representing an earnings surprise of -6.98% [1] - The company posted revenues of $2.29 billion for the quarter ended June 2025, which also missed the Zacks Consensus Estimate by 0.13%, and compared to year-ago revenues of $2.36 billion [2] - Over the last four quarters, Eastman Chemical has surpassed consensus EPS estimates three times, but has topped consensus revenue estimates only once [2] Stock Performance - Eastman Chemical shares have lost about 19.6% since the beginning of the year, while the S&P 500 has gained 8.2% [3] - The current status of estimate revisions for Eastman Chemical translates into a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the coming quarter is $1.83 on revenues of $2.41 billion, and for the current fiscal year, it is $7.16 on revenues of $9.25 billion [7] - The outlook for the industry, specifically the Chemical - Diversified sector, is currently in the bottom 6% of over 250 Zacks industries, which may materially impact the stock's performance [8]