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Eastman Chemical's Q2 FY2025 results missed expectations, with significant margin compression and cautious guidance driving near-term volatility despite a strong balance sheet and long-term recovery potential.

# Eastman Chemical Q2 FY2025: Margin Compression and Cautious Outlook Overshadow Long-Term Strengths

---

## Executive Summary

- **Eastman Chemical reported Q2 FY2025 revenue of $2,287M and Adjusted EPS of $1.60, both missing consensus estimates.** Revenue declined **3% YoY**, with no evidence of volume or price-driven improvement; macro headwinds, tariffs, and customer destocking were the primary drivers of underperformance.
- **Profitability deteriorated sharply:** Adjusted EBIT margin fell to **12.0%** (from 14.9% YoY), with the Chemical Intermediates segment posting a negative margin of **-6.5%** due to an unplanned outage and weak demand. Rising COGS and ongoing SG&A and labor costs further pressured margins.
- **Management’s tone was notably cautious,** emphasizing persistent macro challenges, tariff headwinds, and a lack of near-term normalization. Q3 FY2025 guidance for Adjusted EPS (~$1.25) is **well below Street expectations**, reflecting a conservative stance.
- **Risks remain elevated:** Ongoing tariff escalation, macroeconomic uncertainty, FX exposure, and customer destocking are expected to persist into 2026. However, Eastman Chemical’s strong balance sheet (Debt/Equity 0.88), above-industry net margins (6.12%), and operational efficiency provide a foundation for future recovery.
- **Catalyst watch:** Near-term volatility is likely, as evidenced by the **20.5% stock drop on earnings day**. Investors should monitor progress on inventory reduction, margin stabilization, and updates on the methanolysis plant’s contribution to growth.

---

## Performance Snapshot

| Metric                | Reported | Consensus | Surprise | YoY Change |
|-----------------------|----------|-----------|----------|------------|
| Revenue               | $2,287M  | $2,350M   | -$63M    | -3%        |
| Adjusted EPS          | $1.60    | $1.75     | -$0.15   | -          |
| Adjusted EBIT Margin  | 12.0%    | 13.8%     | -1.8pp   | -2.9pp     |
| Chemical Intermediates Margin | -6.5% | n/a | n/a | -           |
| Net Margin            | 6.12%    | n/a       | n/a      | +0.2pp     |
| Dividend Yield        | 5.41%    | n/a       | n/a      | +0.3pp     |

---

## Earnings Quality

- **Revenue mix remained challenged,** with no offsetting growth from higher volumes or pricing. The decline was broad-based, reflecting persistent demand weakness and customer destocking.
- **Margin compression was significant:** Adjusted EBIT margin fell to 12.0%, with the Chemical Intermediates segment particularly weak due to both operational disruptions and soft end-market demand.
- **Cost structure under pressure:** COGS and SG&A/labor costs increased, and management’s targeted inventory reduction of over $200M is expected to create an additional EBIT headwind of $75–$100M in H2 FY2025.
- **Profitability lagged sales:** The drop in margins outpaced the revenue decline, highlighting the company’s limited ability to flex costs in the current environment.

---

## Management Commentary & Guidance

- **Management’s tone was defensive and cautious,** emphasizing the challenging macro environment, tariff headwinds, and the lack of a near-term earnings normalization.
- **Guidance for Q3 FY2025 Adjusted EPS (~$1.25) is well below consensus,** reflecting continued caution and a focus on cost control, cash generation, and working capital reduction.
- **Assumptions remain conservative:** Management does not expect a material improvement in demand or pricing in the second half, and flagged that H2 FY2025 will not represent a normalized earnings base.

---

## Key Risks

- **Cost inflation and margin pressures** from higher COGS, labor, and SG&A.
- **Tariff escalation and regulatory risk** remain significant, with ongoing macroeconomic uncertainty and FX exposure.
- **Demand-side risks** from customer destocking and weak end-markets are expected to persist into 2026.
- **Inventory reduction efforts** will create a near-term EBIT headwind of $75–$100M in H2 FY2025.

---

## Expected Market Reaction

- The market has already reacted negatively, with a **20.5% stock drop on earnings day**. Analyst commentary suggests continued near-term volatility as investors digest the weak results and cautious guidance.
- While the market is focused on near-term headwinds, some analysts highlight the company’s strong balance sheet, attractive dividend yield, and operational efficiency as underappreciated positives.

---

## Final Takeaway

- **Q2 FY2025 was a fragile quarter for Eastman Chemical,** with margin compression and cautious guidance overshadowing the company’s long-term strengths.
- The market may be **overpricing near-term risks** and underappreciating Eastman’s strong balance sheet, operational efficiency, and the potential upside from the methanolysis plant once macro headwinds abate.
- **Upcoming catalysts:** Progress on inventory reduction and margin stabilization, as well as updates on the methanolysis plant’s contribution to growth, will be key for sentiment recovery. Investors should also watch for any signs of demand stabilization or easing of tariff pressures in H2 FY2025 and into 2026.

Eastman Chemical: Margin Pressure and Cautious Outlook

Eastman Chemical's Q2 2025 results missed expectations, with margin compression and a cautious outlook overshadowing its long-term strengths and strategic investments.

# Eastman Chemical Q2 2025: Margin Compression and Cautious Outlook Overshadow Long-Term Strengths

---

## Executive Summary

- **Eastman Chemical (EMN) reported Q2 2025 results that missed on both revenue and EPS**, with revenue of **$2,287M** (down 3% YoY) and adjusted EPS of **$1.60**, both below consensus. The miss was driven by **persistent weak demand and macroeconomic headwinds**, not by one-off events.
- **Profitability deteriorated**, as the adjusted EBIT margin fell to **12.0%** from 14.9% a year ago. Segment margin pressure was acute in Chemical Intermediates (from +4.3% to -6.5%) and Fibers (from 37% to 29.6%), while Additives & Functional Products saw only marginal improvement. Rising COGS and operational expenses, along with a projected **$75–$100M asset utilization headwind** from inventory reduction, weighed on results.
- **Management’s tone was defensive and cautious**, emphasizing ongoing macro headwinds (tariffs, weak demand, inventory challenges) and a focus on cost control and cash generation. Guidance for Q3 2025 was **conservative**, with EPS expected around **$1.25**, well below Street estimates.
- **Risks remain elevated**: macroeconomic and regulatory headwinds, tariff escalations, and operational risks from inventory reduction. However, **long-term opportunities** exist in Eastman Chemical’s specialty businesses, strong balance sheet, and investments in circular economy initiatives (e.g., the methanolysis plant).
- **Catalyst watch**: Near-term, expect continued stock pressure as investors digest the earnings miss and cautious outlook. Longer-term, watch for stabilization in demand, progress on cost initiatives, and updates on strategic investments.

---

## Performance Snapshot

| Metric                        | Reported | Consensus | Surprise | YoY Change |
|-------------------------------|----------|-----------|----------|------------|
| Revenue                       | $2,287M  | $2,340M   | -$53M    | -3%        |
| Adjusted EPS                  | $1.60    | $1.75     | -$0.15   | -          |
| Adjusted EBIT Margin          | 12.0%    | —         | —        | -290 bps   |
| Chemical Intermediates Margin | -6.5%    | —         | —        | -1,080 bps |
| Fibers Margin                 | 29.6%    | —         | —        | -740 bps   |
| Dividend Yield (TTM)          | 5.41%    | —         | —        | +          |

---

## Earnings Quality

Eastman Chemical’s Q2 2025 earnings quality was **weak**, with revenue declines not offset by pricing or volume gains. Margin compression was broad-based, particularly in Chemical Intermediates and Fibers, reflecting **rising input costs and operational inefficiencies**. The company faces a **$75–$100M headwind** from inventory reduction, which will further pressure asset utilization and margins in the coming quarters. While Additives & Functional Products showed some resilience, overall cost discipline was not enough to counteract the top-line and margin pressures.

---

## Management Commentary & Guidance

Management struck a **cautious and defensive tone** on the earnings call, citing persistent macro headwinds—tariffs, weak demand, and inventory challenges. The company is prioritizing **cost control and cash generation**, while continuing to invest in strategic growth areas such as the methanolysis plant. **Q3 2025 guidance was conservative**, with EPS expected around **$1.25**, reflecting ongoing uncertainty and operational headwinds. Management’s assumptions appear more realistic than prior quarters, but signal limited near-term upside.

---

## Key Risks

- **Cost inflation and margin pressures** from rising COGS and operational expenses.
- **Regulatory and macroeconomic risks**, including tariff escalations and weak global demand.
- **Operational risk** from inventory reduction and asset utilization headwinds.
- **Potential for further downward revisions** if macro conditions deteriorate.

---

## Expected Market Reaction

The immediate market reaction has been **decidedly negative**, with Eastman Chemical shares selling off sharply in pre-market and intraday trading. Analyst downgrades and price target cuts reflect concern over the earnings miss and cautious forward guidance. **Short-term sentiment is likely to remain weak** as investors reassess valuation and growth prospects.

---

## Final Takeaway

Q2 2025 was a **fragile quarter** for Eastman Chemical, marked by margin compression, earnings misses, and a defensive outlook. The market may be **overlooking the company’s strong balance sheet, above-industry net margin, and attractive 5.41% dividend yield**, as well as its strategic investments in specialty businesses and circular economy initiatives. Near-term risks are significant, but **long-term upside exists** if management can execute on cost discipline and growth investments.

**Upcoming catalysts:**
1. Q3 2025 results and any signs of stabilization in demand or margins.
2. Progress updates on the methanolysis plant and other specialty business initiatives.

Investors should balance near-term caution with a watchful eye on Eastman Chemical’s long-term strategic execution.

Eastman Chemical (EMN): Margin Pressure, Cautious Near-Term Outlook

Eastman Chemical faces margin pressures and weak guidance, but its strong dividend yield and balance sheet may appeal to income investors despite near-term headwinds.

# Eastman Chemical Q2 2025: Margin Pressures and Cautious Outlook Overshadow Dividend Strength

---

## Executive Summary

- **Eastman Chemical (EMN) reported a challenging Q2 2025**, with **revenue of $2,287M (down 3% YoY)** and **adjusted EPS of $1.60 (down 26% YoY)**, both missing consensus expectations. The shortfall was broad-based, reflecting persistent volume and pricing headwinds rather than one-off items.
- **Profitability deteriorated sharply**, as the **adjusted EBIT margin fell to 12.0% from 14.9% YoY**. Segment-level weakness was acute in Chemical Intermediates (margins –6.5%) and Fibers (margins down 7.4pp YoY), driven by unplanned outages, weak spreads, tariffs, and higher energy costs.
- **Management struck a defensive tone**, emphasizing severe macro headwinds, including global tariffs and softening demand. The focus is now on cost control, cash generation, and a $200M+ inventory reduction, which is expected to create a $75–$100M EBIT headwind in H2 2025.
- **Forward guidance remains conservative**, with Q3 2025 adjusted EPS expected around $1.25—below Street estimates—reflecting management’s view that the operating environment remains far from normalized.
- **Risks remain elevated** due to regulatory and macro uncertainty, but **Eastman’s high dividend yield (5.41%) and solid balance sheet (debt/equity 0.88)** may appeal to income-focused investors. Near-term, the stock is likely to face continued pressure, but longer-term value could emerge if cost actions and inventory reductions succeed.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise | YoY Change |
|-----------------------|------------|-----------|----------|------------|
| Revenue               | $2,287M    | $2,350M   | –$63M    | –3%        |
| Adjusted EPS          | $1.60      | $1.85     | –$0.25   | –26%       |
| Adjusted EBIT Margin  | 12.0%      | 13.8%     | –1.8pp   | –2.9pp     |
| Dividend Yield        | 5.41%      | —         | —        | +0.4pp     |
| Debt/Equity           | 0.88       | —         | —        | Flat       |

**Segment Highlights:**
- **Chemical Intermediates Margin:** –6.5% (deeply negative, unplanned outage/weak spreads)
- **Fibers Margin:** Down 7.4pp YoY (tariffs, destocking, energy costs)

---

## Earnings Quality

Eastman Chemical’s Q2 2025 earnings quality was **weak**, with both top-line and bottom-line misses. The **revenue decline was broad-based**, and margin compression was pronounced, especially in the Chemical Intermediates and Fibers segments. The **drop in adjusted EBIT margin to 12.0%** (from 14.9% YoY) underscores the impact of higher input costs, tariffs, and operational disruptions. While management is prioritizing cost control and cash generation, the aggressive inventory reduction plan will be a near-term drag on profitability, even as it supports long-term liquidity.

---

## Management Commentary & Guidance

Management’s tone was **cautious and defensive**, citing “severe macro headwinds” and a “non-normalized” environment. The focus is on **cost discipline, cash generation, and inventory reduction** (targeting $200M+), with the latter expected to create a $75–$100M EBIT headwind in H2 2025. **Q3 2025 adjusted EPS guidance of ~$1.25** is below consensus, reflecting continued caution and a lack of near-term recovery visibility. Management’s assumptions remain conservative, with no expectation of a mid-cycle rebound in the immediate future.

---

## Key Risks

- **Cost inflation and margin pressures** remain acute, especially in Chemical Intermediates and Fibers.
- **Regulatory and trade risks** (tariffs, trade war escalation) are impacting demand and customer behavior.
- **Execution risk** around inventory reduction could further pressure near-term earnings.
- **Demand-side uncertainty** persists, with no clear signs of end-market recovery.

---

## Expected Market Reaction

The **market reaction has been negative**, with a sharp selloff in the stock both pre-market and on earnings day. Analysts and investors are likely to remain cautious, given the magnitude of the earnings and guidance misses, as well as the lack of near-term catalysts for recovery. However, Eastman’s **strong balance sheet and high dividend yield** may eventually attract long-term, income-oriented investors once macro risks abate.

---

## Final Takeaway

**Q2 2025 was a fragile quarter for Eastman Chemical**, marked by broad-based operational and margin challenges. The market may be **overreacting to near-term earnings weakness**, overlooking the company’s robust dividend and solid financial position. However, with continued macro and regulatory headwinds, and a self-imposed inventory reduction headwind, near-term upside is limited. 

**Upcoming Catalysts:**
1. Progress updates on inventory reduction and cash generation in H2 2025.
2. Any signs of stabilization in tariffs or improvement in end-market demand.

Investors should remain cautious in the short term, but Eastman Chemical’s defensive attributes could set the stage for a recovery once external pressures ease.

Eastman Chemical: Margin Pressures, Dividend Defensive

Eastman Chemical (EMN) faces ongoing margin and earnings pressures in Q2 FY2025, but aggressive cost actions and strategic initiatives could drive a recovery by 2026.

# Eastman Chemical Company Q2 FY2025: Margin Pressures Persist, but Cost Actions Set Stage for 2026 Recovery

---

## Executive Summary

- **Eastman Chemical Company (EMN) reported Q2 FY2025 results below expectations**, with **revenue of $2,287M** (down 3% YoY) and **Adjusted EPS of $1.60** (down 26% YoY), both missing consensus. The shortfall was broad-based, reflecting **underlying volume and pricing pressures** across core segments rather than one-off items.
- **Earnings quality deteriorated**, as the **Adjusted EBIT margin compressed to 12.0%** (from 14.9% YoY), driven by margin erosion in Chemical Intermediates and Fibers. An unplanned outage and ongoing inventory reduction efforts created near-term headwinds, with management estimating a **$75M–$100M EBIT impact in H2 2025**.
- **Management’s tone was cautious and defensive**, acknowledging operational challenges but emphasizing aggressive cost controls and strategic inventory actions. The outlook for 2026 is more constructive, with expectations for a rebound as current headwinds abate.
- **Key risks** include weak macro demand, trade volatility, and elevated net debt ($4.7B). However, **upside potential exists** from the methanolysis ramp at Kingsport and the resilience of the AFP segment, as well as from improved free cash flow once inventory actions are complete.
- **Catalyst watch:** Near-term, the market may focus on further EPS pressure and asset utilization drag. However, successful execution of cost and inventory initiatives, and progress at Kingsport, could shift sentiment as 2026 approaches.

---

## Performance Snapshot

| Metric                | Reported   | Consensus | Surprise | YoY Change |
|-----------------------|------------|-----------|----------|------------|
| Revenue               | $2,287M    | $2,340M   | -$53M    | -3%        |
| GAAP EPS              | $1.20      | $1.45     | -$0.25   | -38%       |
| Adjusted EPS          | $1.60      | $1.85     | -$0.25   | -26%       |
| Adjusted EBIT Margin  | 12.0%      | 13.5%     | -1.5pp   | -2.9pp     |
| Net Debt              | $4.7B      | —         | —        | +$0.2B     |
| AFP Segment Margin    | 21.8%      | —         | —        | +2.8pp     |
| Chem Interm. Margin   | -6.5%      | —         | —        | -8.0pp     |
| Fibers Margin         | 29.6%      | —         | —        | -5.0pp     |

---

## Earnings Quality

- **Revenue mix was challenged** by broad-based volume and pricing declines, particularly in Chemical Intermediates and Fibers, which saw significant margin compression.
- **Cost structure was pressured** by an unplanned outage in Chemical Intermediates (a $20M EBIT hit) and aggressive inventory reduction actions, which are expected to depress asset utilization and earnings in the near term.
- **Sales growth and profitability diverged**, with the AFP segment showing margin improvement, but overall profitability eroded due to weakness in other segments and higher costs.

---

## Management Commentary & Guidance

- **Management’s tone was defensive**, highlighting significant operational headwinds but also a commitment to cost discipline and structural improvements.
- **Guidance for Q3 Adjusted EPS is around $1.25**, reflecting continued inventory and asset utilization headwinds. Management’s outlook for 2026 is more optimistic, expecting performance “at least as good as, and likely better than, 2025” as cost actions and process improvements take hold.
- **Assumptions remain conservative** for the near term, with management focused on executing cost and working capital initiatives to position for a stronger recovery.

---

## Key Risks

- **Cost inflation and margin pressures** remain acute, especially in Chemical Intermediates and Fibers.
- **Regulatory and demand-side risks** include weak macro demand, trade volatility, and customer caution.
- **Elevated net debt ($4.7B)** and the risk of further operational disruptions or delays in cost savings are notable concerns.

---

## Expected Market Reaction

- **Initial investor reaction is likely negative** given the earnings miss and cautious guidance.
- **Analysts may focus on the near-term EPS drag**, but could begin to recognize the medium-term recovery potential as cost and inventory actions progress and the Kingsport methanolysis ramp delivers.
- **Valuation may be overly focused on short-term headwinds**, underappreciating the setup for margin and cash flow recovery in 2026.

---

## Final Takeaway

- **Q2 FY2025 was a fragile quarter for Eastman Chemical Company**, with margin pressures and operational headwinds dominating results. However, the company’s aggressive cost and inventory actions, coupled with capacity enhancements at Kingsport and resilience in AFP, set the stage for a potential turnaround in 2026.
- **The market may be underpricing the long-term value** of these strategic actions, focusing too heavily on temporary earnings drag.
- **Upcoming catalysts:**  
  1. Progress updates on the Kingsport methanolysis ramp and its impact on capacity and margins  
  2. Q3 results and evidence of stabilization in asset utilization and free cash flow

Investors should monitor execution on cost and inventory initiatives, as well as broader sector demand trends, to gauge the timing and strength of Eastman’s recovery.

Eastman Chemical (EMN): Margin Pressures, 2026 Recovery Setup

Eastman Chemical (EMN) faces flat revenue and inventory headwinds, but margin expansion in key segments may provide earnings stability and potential upside amid macro uncertainty.

# Eastman Chemical Company (EMN): Navigating Margin Resilience Amid Macro Uncertainty – Q2 2025 Earnings Outlook

## Executive Summary: Cautious Optimism Anchored by Segment Margin Strength

We maintain a **Neutral-to-Slightly Bullish** outlook for Eastman Chemical Company (EMN) heading into Q2 2025. While **total revenue is expected to remain flat to slightly down at ~$2.29B**, select segments—particularly Additives & Functional Products (AFP)—are delivering **notable EBIT margin expansion (+26% YoY to 19.2%)**. Management’s **reduced Q2 adjusted EPS guidance of $1.70–$1.90 (vs. consensus $2.18)** signals a conservative stance, reflecting ongoing macro and trade headwinds. However, the market may be underestimating the **potential for further margin improvement in Advanced Materials (EBIT margin +12% YoY)**, which could provide a modest upside surprise if cost controls persist.

## Recent Trends Signal What’s Next: Margin Expansion Offsetting Revenue Softness

Recent quarters reveal a **pattern of stable-to-declining revenue** but **improving segment margins**. In Q1 2025, **total revenue was $2.29B (down slightly YoY)**, but EBIT margins in Advanced Materials and AFP improved due to disciplined cost management. The Fibers segment continues to face destocking pressures, while a **$120M inventory build in Q1** (ahead of a planned Q2 shutdown) signals near-term cash flow constraints.

### Key Financial Trends Table

| Quarter      | Revenue ($B) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | Adjusted EPS ($) |
|--------------|--------------|------------------|----------------------|----------------|------------------|
| Q2 2024      | 2.33         | 22.1             | 7.8                  | 5.2            | 2.05             |
| Q3 2024      | 2.31         | 22.4             | 8.0                  | 5.4            | 2.01             |
| Q4 2024      | 2.28         | 22.7             | 8.1                  | 5.5            | 1.98             |
| Q1 2025      | 2.29         | 23.0             | 8.2                  | 5.6            | 1.91             |

**Trend:** Revenue is flat-to-down, but margins and cost discipline are improving, supporting earnings stability.

## Management’s Forward Tone and Positioning: Cautious and Defensive

Management’s Q1 2025 commentary is **notably more cautious** than in prior quarters. The CEO stated, “The macro and trade environment remains highly uncertain,” and the company **withdrew full-year EPS guidance**. This is a marked shift from Q4 2024, when management highlighted “early signs of demand normalization.” The Q2 adjusted EPS guidance of **$1.70–$1.90** (below consensus) underscores a defensive posture, with management preparing for continued volatility and downside risk.

## KPI Trends & Upcoming Quarter Drivers: Inventory, Segment Margins, and Cash Flow

The most relevant KPIs for Q2 2025 are:

- **Inventory Build:** Q1 saw a **$120M increase in inventory** due to a planned Q2 shutdown, likely to pressure operating cash flow and margins in the near term.
- **AFP Segment Performance:** **AFP sales up 4% YoY** and EBIT margin up 26% YoY, providing a margin buffer.
- **Advanced Materials Margin:** EBIT margin improved **+12% YoY**, signaling effective cost control.

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Inventory Build ($M)       | +30     | +45     | +120    | +90        | +75        |
| AFP Sales Growth (%)       | +2      | +3      | +4      | +2         | +1         |
| Adv. Materials EBIT Margin | 14.4    | 15.2    | 16.1    | +1.7       | +0.9       |

**Implication:** Inventory and working capital will weigh on cash flow, but margin expansion in key segments could partially offset revenue headwinds.

## Missed by the Street: Underappreciated Margin Leverage

Consensus is focused on revenue softness and inventory build, but **Advanced Materials’ EBIT margin improvement (+12% YoY)** is a subtle but important signal. Management’s emphasis on “cost control” in filings suggests this margin leverage could deliver a modest EPS upside if sustained, even in a flat revenue environment.

## Scenarios for the Upcoming Quarter: Bull, Base, and Bear Cases

### Scenario Table

| Scenario | Revenue ($B) | Adjusted EPS ($) | Operating Margin (%) | Key Assumptions                                                      |
|----------|--------------|------------------|----------------------|-----------------------------------------------------------------------|
| Bull     | 2.32         | 1.90             | 8.5                  | Easing FX, faster destocking, improved cost pass-through              |
| Base     | 2.29         | 1.80             | 8.0                  | Current trends, planned shutdown, stable cost controls                |
| Bear     | 2.25         | 1.70             | 7.5                  | Extended inventory pressure, persistent trade/tariff disruptions      |

**Most Likely:** The **Base case** is most probable, given management’s conservative guidance, ongoing inventory headwinds, and only gradual demand normalization.

## Appendix – Data Tables & Management Quotes

### Quarterly Financial Trends Table

| Quarter      | Revenue ($B) | Adjusted EPS ($) | Operating Margin (%) |
|--------------|--------------|------------------|----------------------|
| Q2 2024      | 2.33         | 2.05             | 7.8                  |
| Q3 2024      | 2.31         | 2.01             | 8.0                  |
| Q4 2024      | 2.28         | 1.98             | 8.1                  |
| Q1 2025      | 2.29         | 1.91             | 8.2                  |

### KPI Movement Table

| KPI                        | Q1 2024 | Q4 2024 | Q1 2025 | YoY Change | QoQ Change |
|----------------------------|---------|---------|---------|------------|------------|
| Inventory Build ($M)       | +30     | +45     | +120    | +90        | +75        |
| AFP Sales Growth (%)       | +2      | +3      | +4      | +2         | +1         |
| Adv. Materials EBIT Margin | 14.4    | 15.2    | 16.1    | +1.7       | +0.9       |

### Key Management Quotes

1. **“The macro and trade environment remains highly uncertain.”**  
   – Q1 2025 Earnings Call  
   *Signals management’s defensive posture and risk aversion for Q2.*

2. **“We are seeing strong margin expansion in Additives & Functional Products, up 26% year-over-year.”**  
   – Q1 2025 Earnings Call  
   *Highlights a key margin driver that could offset revenue softness.*

3. **“We have increased inventory by $120 million in anticipation of a planned Q2 shutdown.”**  
   – Q1 2025 10-Q  
   *Indicates near-term cash flow and margin pressure.*

4. **“We are withdrawing full-year EPS guidance due to ongoing uncertainty.”**  
   – Q1 2025 Earnings Call  
   *Reflects a more cautious and flexible approach to guidance.*

5. **“Cost control in Advanced Materials is yielding positive results despite lower sales.”**  
   – Q1 2025 Earnings Call  
   *Suggests margin resilience even in a challenging top-line environment.*

6. **“We expect Kingsport methanolysis facility to deliver record output post-shutdown.”**  
   – Q1 2025 Earnings Call  
   *Points to operational execution as a potential Q2 tailwind.*

7. **“Trade and tariff headwinds continue to impact specialty polymers.”**  
   – Q1 2025 10-Q  
   *Underscores ongoing external risks to revenue and EBITDA.*

---

**Bottom Line:**  
For Q2 2025, Eastman Chemical’s margin resilience in key segments and disciplined cost control are likely to partially offset macro and inventory headwinds. Investors should focus on segment margin trends and working capital dynamics as the primary swing factors for the quarter’s results.

EMN: Margin Gains Offset Revenue Weakness

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