Surabhi Varshney - VP, IR Mark Rohr - Chairman and CEO Chris Jensen - CFO Scott Sutton - COO.

Robert Koort - Goldman Sachs Duffy Fischer - Barclays David Begleiter - Deutsche Bank Frank Mitsch - Wells Fargo Securities P.J.

Juvekar - Citi Laurence Alexander - Jefferies Jeff Zekauskas - JPMorgan Mike Sison - KeyBanc Vincent Andrews - Morgan Stanley John Roberts - UBS Kevin McCarthy - Vertical Research Partners Arun Viswanathan - RBC Hassan Ahmed - Alembic Global Jim Sheehan - SunTrust.

Good morning. And welcome to the Celanese's Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only-mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Surabhi Varshney, Please go ahead..

Thank you, Denise. Welcome to the Celanese Corporation Third Quarter 2017 earnings conference call. My name is Surabhi Varshney and with me today are Mark Rohr, Chairman, and Chief Executive Officer; Chris Jensen, Chief Financial Officer; and Scott Sutton, Chief Operating Officer.

Celanese Corporation's third quarter 2017 earnings release was distributed via Business Wire yesterday after market closed. The slides and all prepared comments for the quarter were also posted on our website www.celanese.com in the Investor Relations section.

As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, Celanese Corporation's future objectives and results. Please note the cautionary language contained in our posted slides.

Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included with the press release and are on our website in the Investor Relations section under Financial Information.

The earnings release and the non-GAAP reconciliations have been submitted to the SEC on a Form 8-K. The slides and prepared comments have also been submitted to the SEC on a separate Form 8-K. This morning, we'll begin with introductory comments from Mark Rohr and then open-up for your questions. I'd now like to turn the call over to Mark now..

Thank you, Surabhi, and welcome to everyone. We posted our prepared remarks along with earnings yesterday. So I'll limit my comments and then open the line for questions. Starting with Hurricane Harvey, all three of our Texas sites, Clear Lake, Bay City and Bishop directly affected by the storm.

All units were quickly restarted, but logistics disruptions proved to be a challenge. We estimate $11 million in direct expenses and another $20 million to $30 million in loss profit opportunity as a result of the hurricane and flooding. It took extraordinary supply chain and commercial actions to overcome these headwinds.

And we are very proud of our teams who worked tirelessly to overcome this disaster and to deliver strong results this quarter. Regarding the tow venture with Blackstone, we have filed for regulatory approval in all six jurisdictions and have already received approval in Mexico.

We anticipate that the European Commission will continue to assess the tow JV over the coming months with a final decision potentially in late spring of 2018. For consolidated results in the quarter, 2017 GAAP earnings were $1.68 per share with adjusted earnings of $1.93 per share.

Record adjusted earnings per share came in at 16% above the level last year despite the hurricane. We also returned $260 million of cash to investors of which $200 million went to share repurchase and $62 million to dividends. The Acetyl Chain core income of $157 million in the third quarter improved 44% year-over-year on sales of $863 million.

We were positioned for an improvement and environment for the Acetyl's business in the second half of the year and solid uplift occurring before the storm. Segment income margin for the Acetyl intermediates was an all-time high this quarter of 19.6%, primarily driven by acetic acid pricing in Asia.

Material Solutions showed record net sales of $730 million in the third quarter. Segment income in AEM increased 16% year-over-year to $147 million on net sales of $543 million both records. In the quarter, we commercialized 585 projects, which set us to up to deliver more than 2,100 projects for the full year.

In Consumer Specialties, segment income in the third quarter was $79 million with segment income margin of 42%. Tow price and volume decline in the quarter versus the third quarter of 2016 due to lower industry utilization rates that we’ve previously discussed.

Affiliate earnings in material solutions were $71 million for the quarter, up 18% year-over-year. Now taking our first look at next year, in AEM we expect new project commercializations, M&A and base business volume growth net of the planned site turnarounds to add $0.50 to $0.60 to adjusted earnings per share in 2018.

In the Acetyls Chain, we expect commercial momentum to create additional value uplift of $0.35 to $0.45 of earnings per share. Along with other growth related cost in the range of $0.15, we contemplate year-over-year adjusted earnings growth in the range of 9% to 13% in 2018.

We'll provide a more detailed look and updated view of 2018 earnings during the January call. Closing out the year, we expect the sustained improvements in the Acetyl’s Chain and materials core to continue. Offset a bit by typical fourth quarter seasonality.

Considering these factors, we are confident in our ability to end the year at the end of our 9% to 11% range for 2017..

Thank you, Mark. I'd like to request all callers to please limit to one question and a follow-up. Denise, please open the line for questions now..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question this morning will be from Robert Koort of Goldman Sachs. Please go ahead. .

Thank you, good morning. I was just wondering, in your commentary you mentioned M&A still being a component of the AEM growth.

Can you give us some sense of scale of assets or properties you're looking at and how much might be baked into that guidance for next year?.

Yes, well there is nothing new baked into the guidance beyond what we currently have in the accretion of the current acquisitions that we've done.

And I carry folks back to the Investor Day we had a few years ago where we put forth this objective of 8 to 8.50 in that the difference between 8 and the 8.50 was the incremental M&A, using $100 million of M&A profit. And of course there was $100 million more tow in that number. So we really on a corrective basis are more like 7.50 in that.

So what I would say is that to push on to the 8.50 number we probably need some additional M&A to help us close that gap. What we’re looking for in scope I think we're not limiting ourselves to just bolt-ons, but Bob that's where most of our activity is these days as continue to look forward in finding and we hope having soon more bolt-on properties.

.

And would you expect those deals to continue to be -- I don't want to call it niche, but less of the high volume lower price stuff and more of the high price lower volume stuff.

Or is it do you have the potential and obviously you gotten into that line of business little bit could you be looking at some higher volumes engineering resins?.

Yes..

Got it, thank you..

And I think directionally we're practicing this process, the team is getting very good at it, we've approached a few deals as you’ve suggested there maybe it's not worked out for us, but yes that scenario for us that we continue to look at..

Great, thank you..

Thank you..

The next question will come from Duffy Fischer of Barclays. Please go ahead..

Yes, good morning fellows..

Good morning, Duffy..

Question obviously terrific growth in AEM, first time in a while it looks like you're having to put some meaningful capital with expansions, how should we think about the incremental returns on that capital, how much will it cost to keep growing kind of at the rate we've seen in the last couple of years?.

Hi Duffy, it's Chris. Typically our organic growth capital was the highest returning investment that we have higher than M&A. So if you conservatively put our cost of capital at 10%, it's far in excess of that..

Okay.

And then on the segment EPS increase that you talked about, is that using a like-on-like share count or is that assuming some benefit from the share buyback when we think about that rolling through the segments?.

So I think we've said in the prepared remarks that sort of the below the business stuff is an incremental of $0.15. So that net of some benefit of share repurchases, but not new share repurchases, rather the rollover of some of the share repurchases that we did in 2017..

Terrific, thanks guys..

Thank you, Duffy..

The next question will come from David Begleiter of Deutsche Bank. Please go ahead..

Thank you, Mark.

Can you discuss the acetic acid market right now, how it's progressing for the year and specifically what's happening in China from your perspective?.

Yes, I'll make a few comments and ask Scott actually to weigh in here, but we started out this year and we gave our projections for the year. The first our range, we're very careful to know to everyone that we anticipated, expected based on what we saw the business to improve as we went through the year.

And so we've taken steps early and we're prepared for that and in fact we saw this, so we have seen an improving trends in this business, particularly in China, and that's prompted, it allowed us really to take advantage of our global supply chain and the systems that we have in place to differentiate it.

Scott you want to provide maybe more local color on China..

Yes, I will, and David, I mean, China is an improving environment in acetyls and it's particularly improving in acidic acid which really drives acetyls in China which drives acetyls globally as well.

I mean, one of the reasons that it's improving is I mean China is having to run more in a real business environment, right, you see regulatory things come in, you see environmental things come in you see a drive for profit and all of those things are driving up instantaneous capacity utilization of acid, right that's different, the nameplate capacity utilization.

But it's running at a much more comfortable level and that gives us the ability to apply our model quickly and you see that result coming through and we expect it to continue..

Mark you’ve discussed in the past perhaps doing an Acetyl like transaction with acetyls acidic acid, how is the potential looking for 2018?.

Well, I mean, that's been awful specific on day, so I think we're working hard to -- with all of our businesses which we think each one leads the world in its own way. We're looking hard to find ways to continue to sure up and monetize those in a way that is additive to [ph] our shareholders.

So what I would say is that we're working that equation, but I wouldn’t go so far as to put a date on it..

Thank you..

The next question will come from Frank Mitsch of Wells Fargo Securities. Please go ahead..

Yes, hi good morning..

Good morning, Frank..

Mark, two weeks ago one of your competitor suffered an outage, can you talk about how that has impacted your business over the past couple of weeks and what the outlook would be?.

Well, I’d really -- yes there was an event, you guys are aware of the event and fortunately I think really got axed on it partner but it was hurt out of that event and the community wasn’t impacted, so that's really positive thing.

We haven't really seen that bigger impact of that it really is the function of how long that event last, and whether really rolls itself through the market in a big way I think is time will tell that..

Alright. What sort of lingering effects if any are you seeing from Harvey? You obviously size the impact in September.

How should we think about that in Q4?.

Well, as we speak today, we're still trying to get barge traffic to Bay City. We have four dredges. I'm looking at Scott I think wind up outside the plant site trying to drudge a last few miles of the silted up Colorado River.

We've been supplying that plant site with trucks and rails and mill trains and anything else that logistics team can get in place to give material down during the product out. So there is a cost, ongoing cost impact to that, we're able to run it fairly successfully though or we found our ways to run it fairly successfully.

So I think largely the ripple effects are over from that storm. And I wouldn't anticipate losses this quarter, material losses this quarter as a result of it. .

Alright, thank you so much. .

The next question will come from P.J. Juvekar of Citi. Please go ahead..

Hi, good morning. .

Good morning P. J. .

Mark, you're introducing over 2,000 projects that's almost 10 projects a day, and you're going to 3,000 next year. So how much of these projects are cannibalizing existing products versus how much would you say new products like your Hammer Handle example..

Well I don't think there is any cannibalization going on. I mean by definition it had to be new, so it's a new application or a new customer that we're going in and put an application into. So having said that there may be some substitution where a person is going from moving in a lateral way. So but largely I think it's their new.

Scott would you agree with that?.

I mean all of those projects are new. I mean, it's true P.J. there is some attrition in the business right. As model changed and models go away, but very rarely do we have a new project that actually replaces something that we were already doing and that's called the project.

I mean it's really new growth, which helps offset normal attrition that's going on in the business.

Are we answering your question?.

Yes, that's good. And what is the typical margin uplift from these new products. And wondering why you didn't see a margin uplift actually margins declined.

Whether that due to raw materials with the hurricanes?.

Yes, I mean as far as the margin slight decline that you see P.J. I mean we do have some impacts in this business from Harvey in the quarter. We lost some sales and have some cost there. But it is the M&A and the fact that we're selling heavily into Asia that's the real margin issue. I kind missed the first part of that question that you had though..

I was asking for what is the typical margin uplift from these new products that you're introducing. .

Yes, margin uplift I got it. All the new projects coming at a quite a high contribution margin right, but on the other hand, we continue to support the growth for growth and that adds a bit of cost. And that's why we get back to this guidance that if you think about the base business including the acquisitions we do.

So that's without affiliate earnings. An okay margin to think about there from an EBIT standpoint is around 20% trying to hold that level..

Okay. .

The next question will come from Laurence Alexander of Jefferies. Please go ahead. .

Good morning.

I guess first, could you characterize what you're seeing in terms of year-end shutdowns or any noise you think about the bridge from Q4 to Q1 or how customers are behaving given the turbulence this year?.

Yes, I don't think Laurence anything unusual with that. We're coming off a pretty volatile quarter. And so I don't want to forecast exactly what's going on there, but typically folks tend to comp down a little bit as you get the holiday season and things tend to moderate a bit.

But I'm not aware of -- I am looking it on the table I'm not aware of any big outage anyway that's really going to have a major impact on us one way or the other. .

And it's Mark. I would just say it's kind of your normal collection. I mean every quarter there is some and the Q4 is not going to be that different..

And then secondly on the trends in China, could you flash out a little bit you're thinking currently about the degree of demand pull for AEM in China and there is degree which need to build capacity specifically there to serve that market?.

Yes sure. So this is Scott again, I mean, look the demand pool in Asia, particularly in China is strong in our Engineered Materials business. I mean all market segments are up, in fact globally for us all market segments are up.

But especially in China, you see good growth, in consumer you see -- we are starting to see some traction in medical there, the rest of the world as well. So it really is a combination of two things; one, there is great demand; number two, the China market is hungry for our model, where we can really go in and offer a whole bunch of unique solutions.

And so I see that trend continuing. .

Yes, thank you. .

The next question will come from Jeff Zekauskas of JPMorgan. Please go ahead. .

Thanks very much. I had a question about your cash flow slide, in that what you say is to anticipate cash generation of $6.2 billion between 2016 and 2020, including the dividend of $1.6 billion from the JV. So if we subtract out the JV dividend of $1.6 billion, there is $4.6 billion left.

So, is what you are saying that over a five year period, you’re going to generate $4.6 billion in cash, or $920 million a year or is that a four year period, how do you do the calculation?.

Yes Jeff, it is five year. So if you think our current strategy period of 2018 to 2020 that we’ll talk about early next year in our Investor Day. For that three year period this is $2.9 billion or $3 billion of free cash flow across three year. So you are about right on that average..

Okay, great. And then for my follow-up, there is a Chinese initiative to have E10 nationwide in 2020.

Is that something that would benefit Celanese or is it relevant to Celanese, as it actually enacted, or do you think it will be enacted?.

Yes, and so this is Scott, and you’re right. It is actually, I think it’s probably going to happen one year or earlier, that’s the intention from China is to make that happen one year earlier, where 10% of all the cars sold are EVs right.

And there is we see a big push there, I don’t know that they will be completely successful to get to 10%, but it is a pretty dynamic change.

And that kind of move is good for Celanese, because we offer a lot of solutions into the EV market, not just the car itself, because the car is our new that helps, but also the batteries as well, so it’s a positive trend for us..

Okay great, thank you so much. .

Thank you, Jeff. .

The next question will come from Mike Sison of KeyBanc. Please go ahead. .

Hey, good morning nice quarter. .

Thanks Mike. .

Mark when you think about AEM, the new project growth continues to be pretty impressive.

Can you maybe talk about some of the markets particularly as you look to get to 3,000 next year? What are the areas that are looking to replace so the materials with polymers and you need to find new markets at this point, given you’ve maybe saturated some of these areas?.

Well I don’t know, we have saturated anything, but Mike there is just tremendous desire on the part of all manufacturers so consumer goods to continually evolve and update and make more contemporary of their goods, so that evolution is ongoing.

What I will say is that medical continues to be a big area of focus for us, we put more attention there, we think there is a lot of opportunities in medical. So that’s a growing segment for us.

The Electronic segment that we have set up recently of course now lots of big player in electronic, we had been focused on as much as legacy Celanese and that’s an area of real growth for us.

Now let’s say broadly in consumer applications, we gave an example in the handout that we did hammer handle I know it sounds somewhat a little bit low tech, but it’s a pretty impressive opportunity to use some of our technology. And we are seeing lots of interest on players like that really to upgrade in many ways.

Automotive remains important for us and we are demonstrating really strong growth in automotive in spite of global trends and that really is also one of that continual upgrade that we talked about earlier. So I would list those four as areas of real focus..

Okay.

And then when you think about $0.50 to $0.60 EPS per share growth in AEM in ‘18 versus ‘17, is the turnarounds a big negative impact and then how much of that growth will come from the Ibn Sina production expansion?.

So we have -- we do have some turnarounds slated in materials next year that takes away from that tow volume. So absent those it could be another $0.05 to $0.10 higher I would think in there in the base business. So we've been seeing that contribution is -- we haven’t said what that is, but it's not de minimis..

Yes, it's not de minimis. This is Scott, I mean, I would tell you will see less of that we have been seeing a POM contribution through equity income and a little bit more that's in our base business because it basically supplies some of those products to our base business to go out and execute projects by..

Got it, thank you..

Thank you, Mike..

The next question will come from Vincent Andrews of Morgan Stanley. Please go ahead..

Thanks very much.

Chris just on the working capital comments this year vis-à-vis your free cash flow targets, is that a new level of working capital based on the growth rate or some of the stuff that’s just been reversed next year and help free cash flow next year?.

Yes, let me sort of take that in two pieces. So first, we're as you know we came out now and said look we're going to be towards the higher end of our guidance. We've had some nice growth across the business and along with that when it’s the top-line growth comes and investment in working capital.

The other thing that's driving that you heard Scott talk about strength in Asia and when our business is growing in Asia quickly as it is right now in acetyls and has been for a couple of years in engineered materials you're growing in a region of the world that typically has longer payment terms for accounts receivable.

So that's why we've come out and said look working capital maybe a little higher than we thought. To answer the second part of your question, I think that continues on into 2018 provided that business stays strong in Asia and raw material price stay a little bit elevated if those things reverse, then yes your working capital would reverse..

Okay. And then shockingly no one has asked about acetate tow yet, so I will. It sounds like you're expecting the segment to be flat next year, because your comment on where price negotiations are for the uncontracted portion of your volume.

And then any thoughts or comments you have about the FDA’s recent indication they would like to take nicotine out of cigarettes over some period of time. And what would impact that might have, I can see some good things and bad things from that for your business plan how it shakes out, so any thoughts would be great..

Yes and so Vince this is Scott. Look as far as contract season and so forth, some part of that business is locked for another year or two, another part we've already been through negotiations on, there is a smaller part still yet to be finalized.

And there is still a competitive nature in that industry, there is some price pressure, but generally speaking, I mean I think you’ll see us come out with 2018 relatively flat compared to 2017. So it's really at this trough state. On your second -- the second question there, the FDA coming out with a proposal right to be move out nicotine.

I think it's unknown how that will impact the industry, the reality is depending on the delivery system, the demand for cigarettes could either go up to get the same amount of nicotine or go down. So we really don't know..

Okay, thank you very much..

Thank you, Vince..

The next question will be from John Roberts of UBS. Please go ahead..

Thank you, can you hear me?.

Yes, John..

I’d like to go back to Jeff’s earlier question, which Scott I think you answered as an electric vehicle question in China, but I thought he had asked about, which is another announcement that China had back in September.

And I would think if they’re going to go coal based that’s something you would know about, but it doesn't seem to make sense for them to go corn based given they imports.

So do you have any thoughts on that announcement?.

Okay. Yes, okay sorry, I heard, EV, but I think he said E10, got it. Yes, on ethanol how will it go? Look that's kind of a no impact for us; we don't expect that to be material to us in either way..

And then on the Celstran polyacetal in the ultrahigh molecular weight polyethylene expansions, with the capital required their scale off of past reactor capacities or is there anything that would make those more or less capital efficient projects for you?.

Yes, I mean, look as far as the ultrahigh molecular weight polyethylene part of that is incrementally expanding capacity and another part of that is a substantial additional system at a site where we already produce that. So you can think all of those expansions as being incremental.

The other part of that the LFT part is effectively just another line at a site where we already produce it..

Okay, thank you. .

The next question will come from Kevin McCarthy of Vertical Research Partners. Please go ahead. .

Yes, good morning. Question on capital deployment, you bought back $200 million of stock in the third quarter yet in your prepared remarks, I think you commented that you do not expect additional repurchases unless they're opportunistic or related to tow JV.

So I was wondering if you could clarify some of the thinking around the opportunistic piece of that.

And how you're weighing your options for capital deployment through year end?.

This is Chris; we're always looking for buying opportunities. But in general now that we've completed the $500 million of share repurchases that is what we set out to do this year. So that's likely the ending point for the year. I just don’t want to ever say never and just depending on what kind of opportunities we have.

The piece that's tie to the JV that really is repurchases that will be timed together with the proceeds that come from the day one dividend on that joint venture. .

Understood. And then as a follow-up, Mark, I was wondering if you could speak to the margin outlook in AEM. You've obviously had some mix effects related to your acquisitions. Perhaps you could elaborate on what's going on with the underlying margins and your efforts to raise the margins on the acquired properties..

Well those businesses as we've said earlier were and to be honest most of the businesses we look at unfortunately have much lower margins than we do. So there is a process shift to go through to rebuild those margins to get them to our area.

Two elements of that one is just pure productivity, which is certainly underway and that helps that also includes loading the assets up in some of the expansions that the team rolled out last week help us loaded these assets and dilute the cost associated with the operation on the third parties mix upgrade.

And we're going through a process now of really upgrading the quality of the products that are produced in the -- by that and the marginal contribution quality of the products that are produced away from some of the low end products and in the products that are we can think -- we are consistent with selling these.

So those three things are underway, I think we've said the 20% to 22% range is the range where we want to be in that process. We're a little bit lower than that this quarter. So I think you'll see us move back as we get into next year and start pushing that back up a little bit.

And be mindful we had another deal or two you’re going to see more down with pressure from that. But net-net we should be able -- that's a kind of target we have as we go through this acquisition period to be in that low 20s range..

Perfect, thank you very much. .

Yes, sir. .

The next question will come from Arun Viswanathan of RBC. Please go ahead. .

Good morning, thank you. Just had a question on the Acetyl’s Chain. Maybe you can just help us understand the $0.35 to $0.45 growth for next year.

What's kind of embedded on a pricing outside standpoint? Do you see do you expect some of the recent pricing to be sustained through next year?.

Yes sure Arun this is Scott. I mean we have momentum going into next year. So the biggest part of that $0.35 to $0.45 a share will be continued margin expansion. The other efforts we have underway have a little bit more to do with growth. So at the same time we'll be bringing in volume growth.

Margin expansion in number one, number two will be some volume growth. .

And similarly on the tow side, what gives you guys the confidence that that will be neutral now after couple of years of declines?.

Well I think just our position with where we are in terms of knowing the outlook for next year already. Some contracts done some recently were being done right now a few more to do; we know we have a very good view of where we're going to be next year. There is still work to do there.

We still have to have a little bit of productivity to get there, but we're working on that. So it's a decent view. .

And so if you were to roll it up, I mean, what would you say are some of the swing factors that would kind of push you towards the 13% projected growth for next year?.

Well I think organic comes back to hitting in all businesses. I think we have a lot of momentum in acetyls we can preserve that we have to see how long we can preserve it at the same level. Engineered materials you already see is stepping up our project outlook to be 3,000.

And then we don't have this giant headwind on top of as like we have before with tow. So if you put all those things together and then things line out then we get to the -- closer to the upper end of that guidance. .

Great, thanks. .

Thank you. .

The next question will be from Hassan Ahmed with Alembic Global. Please go ahead. .

Good morning, Mark. Just wanted to sort of bring up the 2018 guidance again, back obviously in end 2015 you guys were guiding to long-term call it 2018 guidance of 8 to 8.50. If I do comparing contrast where we were in '15 relative to where we are right now obviously a couple of moving parts.

It seems to me China seems to be a bit better, Europe seems to be a bit better, U.S. seems to be a bit better economy wise. But obviously back then maybe tow wasn't as bad as it looks today.

So just want to figure out this sort of newer guidance that you're giving of call it 8.04 to 8.24, where the deltas were versus what you've guided to 8 to 8.50 back in end 2015?.

Well just first off, what we classically do this time of year to share our first look at next year. So I would call it a little bit short of annual guidance that is just the range as we look at our data today that rolls up. And we will give to the extent there is an official guidance we will give that in January for the year.

Nonetheless when we look at it we rolled up the numbers we put forth that frankly I think we do believe we could do at 8 to 8.50 had a bunch of factors in there most predominantly was growing the materials business.

And we were putting out numbers at that time of just starting to new project introductions and there was a lot of skepticism we could do that and I think the team has shown we have the ability to grow that quite handsomely and that has been one of the strongest stories of that three year period.

I think the second piece to that was the Chain business, how we get the Chain business to move up from trough numbers in the low double-digit kind of range. And we gave a range I think a 12% to 16% earnings on that, we're starting to demonstrate and we will stay what we think the appropriate range is going forward next year.

But we've shifted that up with a lot of activity and lot of things to numerous dimension over this call that it really stabilize our business a lot and give us more global reach with that business.

So those two things were big, big factors in pushing it forward and gave us that concept to the range we were very clear that to do the high end of that 8 to 8.50 we need a material M&A, material.

So you could translate that and say that we were thinking maybe $0.50 of M&A, which should be $100 million and of course currently we're maybe a third of that kind of levels where the deals that we've done. So if you want to deduct and you are to deduct that $0.30 off of that for that region alone.

And then of course tow was not expected to be down from where we were it's actually expected to be flat to up. So that's another probably $0.50. So I think on a apples-to-apples basis it should be like 7.50 next year. So this is doing better. We're creating more value, and we're still are trying to do deals.

So we're not walking out from anything we said in the past. But right now we see ourselves being kind of in the middle of it..

Understood, very helpful. Now as a follow-up, obviously a bunch of moving parts around sort of naphtha, whether it's going to be sort of disbanded or certain amendment whatever the case maybe. And at least as I take a look at your sort of 2016 revenues call it 2% of sales from Canada, another 4% from Mexico.

Just would love to hear your thoughts about any changes to naphtha or a disbanding of naphtha would that impact you guys at all?.

No. We've recently talked about that, we don't see any big impact positive or negative relative to that.

I mean, I think the -- for us it really gets down to -- say it again, it’s not how many vehicles were build, it’s a fact that vehicles are being modified and upgraded continually and that’s kind of the space that we played and to that effect we’re showing very strong growth in that business, in spite of the fact that business is not growing or shrinking depending on which part of the world that you are in.

So whether we build a bit more or less and Mexico doesn’t really seem to matters to us or Canada, we don’t care where they’re built..

I understood. Very helpful. Thanks so much, Mark..

Denise, let’s take one more question and it will be the last for the call. .

Thank you and that will be from Jim Sheehan of SunTrust. Please go ahead. .

Thanks.

You have had a management departure in Acetyl Chain change, who’s going to be running that business going forward and what’s you’re thinking on the planning and management there?.

Gentleman name Todd Elliot, you know Todd is running the commercial operations of the corporation for a long time, has been also growing our European operations and he has taken that role..

Great. And on the bridge to 2018 EPS, with respect to the tow JV, I think you initially indicated that there would be cost synergies that would be offsetting interest costs for that. And I think today you are framing it as interest costs are kind of being offset by the share buyback activity.

If you could just reconcile that a little bit and are you assuming here a mid-year close for the JV, or what would be the timing for it to make the bridge work?.

Yes, just for planning purpose, we have talked about mid-year, just to make the math easier to do. We think there’ll be a little bit of EBIT contribution from that there would be no EPS contribution on the annualized basis. Because the interest costs would be covered by share repurchases.

So that’s how we are -- so from an EPS point of view on the numbers this range we’ve given you is really not in that. The timing of that’s pretty critical though and dependent on how it happens and how fast we got to market you could see a little bit of movement around intra year because of that. .

And synergies will eventually offset the costs of interest it’s just there is a gap in the time..

That’s right. .

Thank you very much. .

Thank you. .

And at this time we will conclude the question-and-answer session. I would like to hand the conference back over to Surabhi Varshney, for her closing remarks..

Thanks, Denise. We will wrap up the call now. Thank you everybody for your questions and for listening in this morning. We will be around, if you have any further questions after the call. Denise please close the call..

Thank you. Ladies and gentlemen, the conference has now ended. Thank you for attending today’s presentation. At this time you may disconnect your line..