Mark J. Costa
Chairman and Chief Executive Officer at Eastman Chemical
Thanks, David. It's a good question. We're obviously spending a lot of time focusing first on getting through this year and delivering earnings, but obviously, we're all now looking towards next year as well. The story for Eastman has always been over the last several years the sort of volume and mix story is our biggest driver of some of the challenges we faced as well as the opportunity that's now in front of us. Eastman is clearly leveraged to an economic recovery and we can accelerate it with our innovation.
When you think about just the last couple of years, we've had incredibly high inflation, interest rates as everyone knows, and we've been in a manufacturing recession that really started in the summer of '22. But we've had almost 2.5 years now of no improvement in end-market demand, especially in the discretionary markets. And when you think about the area under that curve of low demand, if you will, there's a lot of pent-up demand that has not been served even when you consider some of the overstimulation in '21. So the macro is clearly uncertain right now. We all know that. What we do know, I think at this point is that the customer inventory destocking is over and we're recorrect -- we sort of reconnected to primary demand.
We can also say that in the sort of what we call our stable markets, things like personal care, aviation, water treatment, Ag. Those markets have all been sort of steadily growing at modest rates this year, and we expect that to continue into next year. So that I think will continue in this year, that's about 60% of our revenue.
The discretionary markets, which are auto, housing, consumer durables, that's where we see demand has not really improved very much. And this year, that's about 40% of our revenue. Normal would be closer to 50%. So a lot of upside here as we sort of return to normal. The lower interest rates are for sure going to help improve the affordability of cars, affordability of homes. When you think about the U.S. home market right now, we're at 1995 [Phonetic] levels, 30% below 2019, and Europe and China is also challenged. So when interest rates start to become more affordable, which we expect will happen through next year at some point, you're going to see that starting to improve and that will certainly drive upside for us. Same is true in auto, where you'll see lower interest rates helping affordability and same thing, demand has not been very good for quite some time.
On the consumer durable front, same thing, well below 2019 levels this year from an end-market point-of-view, a lot of pent-up demand since the summer of '22. Recovery in housing will certainly help influence purchases, less inflation pressure on everyday life will open up the opportunity for people to start replacing and upgrading consumer durable products are now starting to get pretty old. So we see modest growth across all these markets. I don't want to oversell it. But what we expect and are going to plan for is a modest growth year along with the stable market. So clearly, that's going to help drive revenue and increase.
And then you get to our programs to create our own growth. You've got the Kingsport methanolysis facility. Obviously, in three weeks we'll give you a lot more detail about how we think that EBITDA will improve, but it will be a substantial improvement both on the revenue side as well as on a cost tailwind relative to this year. You've got a -- the auto film business, the auto interlayer business always creating their own growth, especially interlayers is doing quite well with their product portfolio right now. We've got a whole range of cellulosic products starting to deliver some innovation growth. Naia continue to grow.
We already have commercial orders and event in food applications and expect that to accelerate in a variety of other programs, which we'll also tell you about at the Deep Dive Day coming up. And then there's a variety of smaller but helpful innovation programs around semiconductors and coatings in the AFP segment. So overall, I'd say revenue is going to improve in a modest way from a market point of view, accelerated by innovation, giving us some good growth. And just to finish off the bridge, we do expect price to raw material costs to be relatively stable as we go into next year. On the specialty side, we think we'll have a spread tailwind at olefins, and then on cost structure, we are going to take a set of actions to drive costs, you know, lower than just offsetting inflation. So you'll have a tailwind there. And then there'll be two sort of modest headwinds. We expect energy and natural gas prices to go up and so there's always a lag in catching up to them as well as some -- a bit lower volume in fibers as the markets adjust down in some inventory management.
So when you put it all together, I think volume mix is going to be a big driver. And it's a combination of market and innovation, on top of a structure that is favorable on cost and -- and when you're netted together, I think that translates into pretty substantial improvement in EPS over this year.
