Company Overview - The company is a key business unit of China Resources Group, focusing on new materials and listed on the Shenzhen Stock Exchange in October 2021 [1] - Main products include PET and PETG, with production capacities of 2.1 million tons and 50,000 tons respectively [1] - The company serves global clients, including Coca-Cola and Evian, and is recognized for its "Hualei" brand in the food-grade polyester segment [1] Industry Insights - The polyester bottle industry is experiencing a shift from quantity to quality, driven by an oversupply of 4.17 million tons of new capacity expected in 2024, leading to a 23% year-on-year increase in total domestic capacity [2] - The company is adapting its business strategies in response to market dynamics and industry trends, showing improvement in the first three quarters of 2025 compared to the previous year [2] Production and Capacity Utilization - Polyester bottle production decreased by approximately 10% in the first three quarters of 2025, with capacity utilization below the previous year's levels [2] - Future adjustments to capacity utilization will depend on market conditions, equipment maintenance, and industry self-regulation [2] rPET Business Development - The company has been developing rPET technology since 2018, achieving production of rPET with 25% recycled content and completing tests for 50% recycled content [2] - Expected rPET exports for 2024 are 17,000 tons, primarily to countries like Vietnam and Kazakhstan, with significant year-on-year growth in shipments for the first three quarters of 2025 [2] PETG Business Performance - Sales revenue for PETG products increased by 10.4% in 2024, with gross profit rising by 111.65% [3] - The company has successfully entered the daily chemical packaging market and achieved bulk sales in 3D printing and medical applications [3] International Sales - The company adjusts its domestic and international sales ratios based on processing margins, with approximately 32% of total sales being international in 2024 and 37% for polyester bottle sales in the first three quarters of the current year [3] R&D Focus - Future R&D investments will concentrate on high-output products, including high-recycled content rPET and high-performance PETG [3]

Financial Data and Key Metrics Changes - The company is experiencing a significant decline in volume, with advanced materials (AM) expected to be down around 4% and advanced fibers and plastics (AFP) down around 2% on a full-year basis [10][11] - The company anticipates a $100 million cost reduction target for next year, building on $75 million of cost reductions achieved this year [12][76] - The company expects a meaningful increase in revenue from the circular polyester methanolysis plant, contributing positively to EBITDA [13] Business Line Data and Key Metrics Changes - The fibers business is facing challenges, with a $30 million headwind due to tariffs and a cyclical demand change in textiles [34][35] - The company is optimistic about the rPET capacity conversion, expecting significant volume increases and attractive margins from specialty products [19][20] - The CI segment is expected to benefit from more volume and aggressive cost management, although the overall market remains competitive [42][45] Market Data and Key Metrics Changes - Consumer durable demand is projected to be 5%-15% below 2019 levels, impacting the company's ability to launch new products [29] - The North American market is experiencing a mixed impact due to trade wars and lower demand in building construction and consumer durables [44] - The company is seeing some recovery in demand, particularly in specialty plastics, as customers plan for higher orders in Q1 [74] Company Strategy and Development Direction - The company is focused on innovation and cost management to navigate current market challenges, emphasizing the importance of differentiated products [84] - The strategy includes optimizing the asset footprint and leveraging AI for productivity improvements [76][80] - The company is exploring M&A opportunities to evolve its portfolio in response to industry changes [85] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the chaotic market environment and the challenges posed by inventory levels and consumer demand [72][73] - There is cautious optimism about the potential for demand recovery in the coming year, particularly in the context of lower interest rates and tax legislation [11][45] - The company is committed to maintaining its dividend and is confident in its cash flow generation for 2026 and beyond [67] Other Important Information - The company has completed $50 million in buybacks in Q3 and plans to update on future buyback ranges in January [51] - The company is experiencing a manufacturing recession, with no clear precedent for the current market conditions [42] Q&A Session Summary Question: Can you help with the bridge to 2026? - Management discussed the importance of considering full-year EBIT and the impact of cost savings and asset utilization on future earnings [8][10] Question: What is the status of the rPET capacity conversion? - Management confirmed that the Kingsport plant is running well, with 90% yields and plans for a 30% capacity expansion [17][19] Question: How should earnings ramp from Q4 to Q1? - Management indicated that the asset utilization headwind will turn into a tailwind, with expectations for increased orders in Q1 [22][23] Question: What is the outlook for the fibers business? - Management explained that the challenges in the fibers business are cyclical, with expectations for recovery as market conditions stabilize [34][35] Question: What is the status of the Pepsi contract? - Management clarified that the restructuring of the Pepsi contract is aimed at pulling forward volume into next year, reflecting strong interest in rPET [40][41] Question: How does the company view its portfolio moving forward? - Management emphasized the importance of innovation and cost management while remaining open to M&A opportunities to enhance the portfolio [84][85]

Group 1: Market and Production Insights - The overall price of bottle-grade PET is declining, and the company is continuously optimizing its business strategies to ensure long-term stability and growth. The operating performance in the first three quarters of 2025 has significantly improved compared to the same period last year [1] - The production of polyester bottle chips decreased by approximately 10% in the first three quarters of 2025 compared to the previous year, with capacity utilization lower than the same period last year. Future capacity utilization will be adjusted dynamically based on market conditions, equipment maintenance, and industry self-discipline [1] Group 2: rPET Business Development - The company has successfully developed rPET bottle-to-bottle technology with recycled plastic content of 10%, 25%, and 50%. Currently, rPET (25%) is in mass production, and rPET (50%) has completed challenging tests. In 2024, rPET exports are projected to reach 17,000 tons, primarily to Vietnam, Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan [2] Group 3: Specialty Polyester PETG Business Performance - The PETG business is performing well, with sales revenue increasing by 10.4% year-on-year in 2024, and gross profit rising by 111.65%. The focus is on the daily chemical packaging market, with successful sales in new application markets such as 3D printing, medical, home appliances, and films. The company has developed international brand clients and has become a significant supplier in the domestic PETG daily chemical packaging sector [2] Group 4: Employee Incentives and Future Plans - The company is currently implementing the third release period of the 2022 restricted stock incentive plan. It emphasizes the importance of building a core talent team and is considering various factors to determine whether to introduce a new stock incentive plan in the future [2]

Core Insights - The recycling of food contact plastics, particularly the use of recycled PET (rPET) bottles, is recognized as a significant direction for environmental benefits and a crucial pathway for achieving high-quality green development [1][2] Group 1: Recycling and Environmental Impact - China's PET bottle recycling rate is between 96.48% and 97.63%, which is at an internationally advanced level, but most recycled materials are used in non-food sectors [1] - The "same-level recycling" model for PET has been successfully applied internationally, extending the lifecycle of PET and significantly reducing carbon emissions throughout its lifecycle [1] Group 2: Safety and Standards - The EU and the US have established comprehensive safety assessment and approval systems for food-grade rPET, primarily validated through "challenge tests" that simulate extreme contamination scenarios [1] - Domestic research institutions in China are conducting verification studies, showing that standardized domestic rPET recycling processes can meet food safety requirements [1] Group 3: Consumer Acceptance and Education - Over 60% of consumers support the use of rPET in food packaging, and awareness of its benefits in energy saving and resource recycling increases their willingness to pay [2] - Continuous scientific communication and public education are essential for enhancing societal recognition and acceptance of rPET [2] Group 4: Policy and Industry Development - China is the largest producer and consumer of PET bottles globally, yet the same-level utilization of rPET has not been realized [3] - Calls have been made for a clear management mechanism for the production and application of food-grade rPET to eliminate policy bottlenecks and promote high-quality industry development [3] - Currently, food-grade rPET produced in China is primarily exported, leading to resource wastage, as some rPET bottles return through cross-border e-commerce [3]

Group 1 - Wan Kai New Materials plans to orderly reduce PET production and conduct equipment maintenance, affecting 600,000 tons of PET capacity, which accounts for 20% of the company's total capacity [1] - The reduction is a response to industry overcapacity and losses, with peers also deciding to limit production to reduce inventory [1][4] - The company reported a loss last year due to intensified competition and a more than 30% decline in average processing fees, despite stable sales volume [1] Group 2 - In May, China Resources Materials indicated that PET capacity is expected to remain in phase overcapacity until 2025, focusing on cost reduction and quality improvement [2] - The polyester bottle chip capacity is projected to increase from 16.61 million tons at the end of 2023 to 20.43 million tons, a nearly 23% year-on-year increase [3] - Wan Kai New Materials is expanding its overseas capacity with a 300,000-ton production base in Nigeria and plans for a 750,000-ton base in Indonesia [3] Group 3 - In 2024, the company's overseas business revenue reached 6.239 billion yuan, a year-on-year increase of 11.61%, accounting for 36.21% of total revenue [4] - Major companies, including Hainan Yisheng and China Resources Materials, have announced production halts to address domestic overcapacity and optimize resource allocation [4]