Huntsman Corp Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: David Begleiter - Deutsche Bank AG - Analyst : Peter, do you expect MDI assets in Europe to be closed in this iteration of restructuring?

Question: David Begleiter - Deutsche Bank AG - Analyst : Do you expect MDI assets to be closed in Europe in this iteration of restructurings and reviews?

Question: David Begleiter - Deutsche Bank AG - Analyst : No, no, of competitors MDI assets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 3:00PM, HUN.N - Q3 2024 Huntsman Corp Earnings Call

Question: David Begleiter - Deutsche Bank AG - Analyst : Very good. And just on your new restructuring program, Polyurethanes, $50 million. Can you detail the functions and regions where that cost is being removed from?

Question: Jeff Zekauskas - JPMorgan - Analyst : In the quarter, you received a dividend of $35 million related to the SLIC China JV acquisition. I take it that went through cash flow from operations. And are there any more dividends to come from that source?

Question: Jeff Zekauskas - JPMorgan - Analyst : And in terms of your -- can you describe your volume expectations in MDI for the fourth quarter in general and by region?

Question: Patrick Cunningham - Citigroup Inc - Analyst : So you mentioned MDI price increases were rebuffed into 4Q '24. What are your expectations for prices by region in 4Q? And what are you reflecting in terms of raw material declines?

Question: Patrick Cunningham - Citigroup Inc - Analyst : Very helpful. And then in Performance Products, you cited sales volume increases in construction, coatings and adhesives. Was this in line with your expectations? Or are you outperforming the market here? Or is this mostly the absence of destocking?

Question: Mike Sison - Wells Fargo Securities - Analyst : Peter, for polyurethane, you are getting volume growth. The earnings leverage or EBITDA leverage just doesn't seem to be kicking in yet. What level of volume or sales do you think you need to see to start seeing the appropriate leverage for that business going forward?

Question: Mike Sison - Wells Fargo Securities - Analyst : Great. And a quick follow-up on 2025. I know it's a little bit early to give a specific outlook. A lot of the consultants do see margin expanding quite a bit potentially. Do you sort of agree with that cadence? And what type of EBITDA potential or power do you think you should see in Polyurethanes if things pick up next year?

Question: Vincent Andrews - Morgan Stanley - Analyst : Your prepared comments on autos, well, certainly, it wasn't what you expected. You did seem to grow in the third quarter and you had stable EU volumes. And it also looks like autos were better for you in Polyurethanes versus Advanced Materials. So I wonder if you could just comment on all of that, particularly the EU piece just given how weak that market seemed to be and what the sort of sequential outlook is into the fourth quarter. And maybe a bit into the '25 to the extent you have a view.

Question: Vincent Andrews - Morgan Stanley - Analyst : And Peter, if I could just follow up, I'd be curious to get your view on interest rates. I think we all want them to come down. But so far, we haven't seen as much help on the back end of the curve, I think, as people would've hoped for. So if you think -- as you look into '25, if we get to a situation where maybe the front end comes down a lot more than the back end of the curve, where do you think that helps you? And where do you think that maybe slows down the pace of recovery?

Question: Frank Mitsch - Fermium Research - Analyst : Peter, I saw a news item recently about a chemical company doing a capacity expansion of non-PU-based insulation materials, and they're targeting the European market. And the release read positively about future demand for insulating materials in Europe. Now obviously, as I read the prepared remarks and listened to you so far, didn't seem like there was much to get excited about insulating materials in Europe, which obviously would be very helpful for you. What's your take on that market? And when might we see a recovery there?

Question: Frank Mitsch - Fermium Research - Analyst : Okay. Very helpful. And in the prepared remarks, there was also comments about looking at possible M&A in Advanced Materials. And given -- obviously, your leverage is kind of elevated, but that's really more so about the kind of the trough or bottoming levels of EBITDA. But given your stock is close to yielding 5%, what are your thoughts on buybacks?

Question: Josh Spector - UBS - Analyst : I was curious on Europe. The deal that's kind of apparent between Covestro and ADNOC, kind of has them keeping capacity intact in Europe. Is that an impediment to Europe improving for the MDI market for Huntsman? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 3:00PM, HUN.N - Q3 2024 Huntsman Corp Earnings Call

Question: Josh Spector - UBS - Analyst : Yeah, no problem. I think I just thought that there was something where a few years after that would close, something had to stay in place, but I'll move on. I guess maybe sticking with Europe in a different vein. It's just when you've talked about polyurethanes and your earnings power in the past, I think you said when utilization rates are higher, you think maybe a mid-teens margin is what you can achieve. I guess with your commentary around demand, US and China versus Europe it seems like Europe would probably lag and also costs are higher. So I guess the question is, can you achieve that framework if Europe costs stay higher or maybe there isn't any industrial change, would you have a different answer around Huntsman's earnings power?

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc - Analyst : Peter, I wanted to ask you about pricing in MDI. In prepared remarks, you say you don't have much exposure to spot. But I also recall traditionally you don't have much exposure to contract as well as a big chunk of your business tied to just raw materials pass-through. Can you just explain what's the current state of your sort of leverage to contract -- benchmark contract pricing for MDI that we can observe in North America?

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc - Analyst : Very helpful, Peter. In your automotive polyurethanes business, I mean, it appears that European OEMs are losing share. These are some -- traditionally some of your best customers, right, biggest customers in PU. How are you addressing this sort of sea change in the auto world? How are you changing your strategy in terms of going after sort of the emerging OEMs in China and elsewhere?

Question: Salvator Tiano - Bank Of America - Analyst : So firstly, you mentioned your Splitter before on the contract by contract base. I believe earlier in the year, you said that the new Geismar Splitter, wasn't really adding any EBITDA so far. So where do we stand right now? Has it started contributing? And if not, why is that? And what should we expect for 2025 on the splitter?

Question: Salvator Tiano - Bank Of America - Analyst : Okay. Perfect. And I also wanted to check a little bit on the Chinese end market, especially because I guess there's a stock and the new stimulus measures. But they don't really necessarily seem to probe the new housing market. If anything, they seem to be incentivizing new construction to boost, I guess, existing home stock prices. So when we think about your MDI and Polyurethanes business there, can you talk a little bit about your end markets and how they differ versus your US and European business?

Question: John Roberts - Mizuho Securities - Analyst : Peter, since it's election day, do you think Trump versus Harris win will have any impact on Huntsman? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 3:00PM, HUN.N - Q3 2024 Huntsman Corp Earnings Call

Question: Josh Spector - UBS - Analyst : Okay. And then maybe a little bit more lower-level question, but have you set your turnaround plans yet for 2025?

Question: Hassan Ahmed - Alembic Global Advisors - Analyst : Peter and Phil. Not to bore you guys, but just wanted to go back to a bunch of the questions that were asked about the European restructuring is going on, assets being put up for sale and the like. I mean, look, one of the virtues, obviously, of the polyurethane sort of story has been, it's obviously an oligopoly, right? And if I heard your comments correctly, it sounds as if you're leaning towards at least some of these assets being permanently shut down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 3:00PM, HUN.N - Q3 2024 Huntsman Corp Earnings Call So my question, I guess, is that looking at the Covestro deal, and I obviously understand a different company and the like, you have no idea what ADNOC is thinking. But I mean, how do you think about players like ADNOC, other sort of state players or Asian players coming out buying up those assets and fragmenting and otherwise relatively consolidated industry?

Question: Hassan Ahmed - Alembic Global Advisors - Analyst : Fair enough, fair enough. And a question around inventories. Obviously, the last couple of years since COVID has been quite complex. I'm just trying to sort of figure out how one should think about a potential inventory restocking. I mean, going back to the COVID times, it seems demand patterns changed dramatically because of lockdowns and the like. But it also seems now corporates' appetite for holding inventory has changed as well. So how does one think about a restock in light of some of these demand sort of pulls and tugs vis-a-vis maybe potentially companies' sort of thought processes about sort of keeping inventories lean and maybe sort of moving in that direction. I mean, how does one think about a potential restock with all these sort of moving parts?

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Peter, can you speak to how you see international trade flows today in MDI and perhaps maleic anhydride and how they might evolve if tariffs were to escalate in that scenario bilaterally between?

Question: Mike Harrison - Seaport Research Partners - Analyst : You mentioned some new business wins in North America Polyurethanes. I was wondering, I guess, if you can speak to specifically what markets those are occurring in? And if they are in construction, can you maybe just talk about your competitive position within construction and insulation markets? Has that improved compared to a few years ago? Maybe also wrap in an update on spray foam insulation adoption today versus a few years ago.

Question: Mike Harrison - Seaport Research Partners - Analyst : Right. And then within Performance Products, can you talk a little bit or give us an update on the performance amines capacity expansion? I believe there are two projects going on, one for semiconductor applications and the other one in polyurethane catalysts. Are those in qualification right now and you guys are working to get some offtake in place? Just wondering when we can expect to see some commercial contribution from those two projects?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : I guess I just wanted to ask a little bit more about what you see in '25. So both first half and second half of '24, you're around $200 million or so of EBITDA, in that range, maybe a little bit higher. But as you look into '25, I mean, would you say that you took extra inventory out in Q4 or parts of '24 such that you're kind of lean and ready to really grow substantially in a recovery scenario? Or do you see '25 kind of evolving similar to what you saw in '24? We have seen some emerging weakness in auto, industrial and aero. And so I'm just wondering if you would require more destocking in certain of those areas or your customers would, or if you're more poised for -- to really leverage a recovery?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : And if I could just clarify, so the move maybe from Q3, $130 million or so of EBITDA down to $75 million at the midpoint for Q4, how much of that would you characterize? Is that mostly seasonality? Or has there been some -- I imagine there could be some incremental demand weakness in there as well. Or would you say that's mostly seasonality? And is there any like related inventory clearing out charges that are kind of embedded in there as well?

Question: Daniel Rizzo - Jefferies - Analyst : This is Dan Rizzo on for Laurence. So I was seeing that the Boeing strike just ended, and I think you mentioned that strike was a $3 million to $4 million EBITDA headwind in the quarter. So if it ends today or ends within the next couple of days, does that, I mean, provide upside? Or how does that kind of flow through to you guys for Q4 and beyond? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 3:00PM, HUN.N - Q3 2024 Huntsman Corp Earnings Call