Huntsman Corp Q4 2024 Earnings Call Transcript

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

Question: Patrick Cunningham - Citi - Analyst : In the midst of the restructuring actions, it seems like the downstream piece is a big part of this. But in the past, you kind of talked about this being part of the business you like. You've already gone through a lot of fixed cost takeout. First, can you help us understand the size and scope of these actions. Why is this an area of focus of (inaudible) If there's any concern in being able to fulfill that demand improvement when it does come.

Question: Patrick Cunningham - Citi - Analyst : Understood. Very (inaudible) Commentary. And I know you don't guide for the full year, but in Performance Products, you seem to talk about margins improving earlier this year. I know you have some investments there that are adding to the EBITDA line. But what are the markets driving this volume improvement? Or is it a significant mix improvement just anything underpinning that level of confidence in material margin improvement?

Question: David Begleiter - Deutsche Bank - Analyst : Peter, on your maleic announcement today, can you provide some more color as to why now given maybe a potential rebound in European construction. How much is that business, I assume a negative EBITDA? How negative is it -- and what's the potential cash cost for showing that business down?

Question: David Begleiter - Deutsche Bank - Analyst : Very good. And just on polyurethane, you mentioned some share gains as well as additional growth from the splitter in 2025. Can you provide some more color as to what's driving those share gains and potential uplift from those actions in '25?

Question: Frank Mitsch - Fermium Research - Analyst : At the risk of playing an armchair psychologist, Peter, it sounds like you're more optimistic than we've heard you in quite some time. So I'm curious as to what might be more specific in terms of what's driving that optimism if I'm reading that correctly. Is it -- what you're seeing out of China post New Year's. I mean, any sort of color there would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 3:00PM, HUN.N - Q4 2024 Huntsman Corp Earnings Call

Question: Frank Mitsch - Fermium Research - Analyst : That's very comprehensive. If I could follow up on the U.S. and MDI and China, the U.S. is looking at a preliminary antidumping probe on Chinese MDI coming in. I'm curious if you have any thoughts as to how that may play out. And what might be the impact and when might be the impact for you guys? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 3:00PM, HUN.N - Q4 2024 Huntsman Corp Earnings Call

Question: Jeffrey Zekauskas - JPMorgan - Analyst : I think your EBITDA projection in performance products is about -- is 25% to 35% for the first quarter, so call it 30%. And last year, you did 42%. So why are we down 30% then performance products. And are we going to continue at that level in 2025. Can you analyze the EBITDA decrease for the first quarter?

Question: Jeffrey Zekauskas - JPMorgan - Analyst : And in Polyurethanes, what's the year-over-year volume growth either that you expect in the first quarter of '25 or that you've experienced

Question: Vincent Andrews - Morgan Stanley - Analyst : Wondering if you could speak a bit more to volume expectations in the European market. You had some recovery there last year and just obviously, with all the uncertainty there. Just wondering what you're expecting in Europe.

Question: Vincent Andrews - Morgan Stanley - Analyst : Okay. And then if I could just ask on a follow-up on all of your pricing commentary, which was very helpful. If I heard what you said it correctly, it sounds like you're suggesting it's possible that there could be some good price achievement this year that would not come at the expense of volume, meaning that the volume needs to go up with sort of just the overall recovery in the market. But that you might still also be able to get price. So there wouldn't be any trade-off between the two. Is that a correct interpretation of what you said?

Question: John Roberts - Mizuho Securities - Analyst : Do you think the reciprocal tariffs will change the trade flows for your customers that could impact you? Or do you think it's just going to change price and there'll be minimal change in trade flows at your customers?

Question: John Roberts - Mizuho Securities - Analyst : Okay. And then the 2025 supply chain financing program, is that a standard factoring program? So the free cash flow increase is temporary until you decide to end that program?

Question: Salvator Tiano - Bank of America - Analyst : I wanted to follow up a little bit on tariffs and get a better understanding, specifically because the China tariffs should already be in effect. So is there anything you're seeing with regard to, for example, imported MDI or that you would expect in the weeks ahead because this is not theoretical scenario is something that already is in place? And secondly, as we talk about potential antidumping duties for MDI and also for boxes in the U.S., how do you think this will play out together with the standard tariffs, meaning would this be implemented on top of the tariffs? Would it be one or the other? So the 10% China tariff goes away if the U.S. goes with antidumping GTs. How do this work out? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 3:00PM, HUN.N - Q4 2024 Huntsman Corp Earnings Call

Question: Salvator Tiano - Bank of America - Analyst : Okay. Perfect. And I want to follow up a little bit on potential strategic reviews. I mean, in the past few years, including now, the focus has been on underperforming assets. I'm trying to see whether something can be divested or needs to be shut down. But what about considering options for assets that are actually performing well like your Advanced Materials division that, as you've highlighted, the margins have been stable despite the turmoil. And even where your surprises, the valuation for Huntsman, perhaps it would make more sense instead of focusing on underperforming assets to focus on realizing the value that the market does not see enhancement in your best assets is something that you would consider?

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Peter, would you comment on MDI industry operating rates by region and where you see the tightest and loosest market conditions today?

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Understood. And then as a follow-up, in the prepared remarks that you released yesterday evening, Peter, I think you talked about escalation of energy in Europe and specifically natural gas in the region around $15 per MMBtu. How are you and just competitors broadly handling that? In other words, do you foresee a return to some sort of surcharge regime? Are you dealing with it through normal course pricing. Maybe you could talk about the next quarter or two and how that might evolve?

Question: Hassan Ahmed - Alembic Global - Analyst : Peter and Phil, a question around volumes. You certainly sound a little more positive with regards to the destocking being behind us. You mentioned within polyurethanes. It seems pricing may have dropped out, maybe beginning to pick up a little bit. And in your prepared remarks, you talked about how in 2024, volumes were up 6% across your portfolio, but yet well below normal levels, right? So I'm just trying to get a sense of as and when the recovery happens, factoring in, restocking, factoring in market growth, what that volumetric uptake may look like, just to get us back to normal and then obviously, they'd be market growth.

Question: Hassan Ahmed - Alembic Global - Analyst : Very helpful, Peter. And as a follow-up, in a world with tariffs, certain product areas, antidumping duties and the like. As you look at your portfolio, I mean, it's obviously more global than your competitors from a sort of positioning perspective in this sort of tires antidumping duty environment, would you consider the geographic positioning of your portfolio as a major advantage relative to your competitors?

Question: Joshua Spector - UBS - Analyst : First, I just wanted to ask on the corporate cost for 2025. I mean the costs haven't come down in the last few years despite the cost savings. Can you just go through why?

Question: Joshua Spector - UBS - Analyst : Yes. So just why haven't your corporate costs come down from $165 million over the last 2 to 3 years despite the cost savings?

Question: Joshua Spector - UBS - Analyst : Okay. Fair enough. If I could follow up from an earlier question, just specifically around Europe and the downstream system houses that you're making some changes to I just want to clarify, what's your plan for Europe then with that business? Do you sell more polymeric and monomeric MDI and less formulations and your services costs are lower and therefore, that's how you get back to profitability? Or is there a different strategy at play to how you approach that region?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Peter, thanks for your commentary on MDI pricing in the U.S. And I realize that there isn't just one price out there. You described that. Nevertheless, on (inaudible) Announced a $0.15 per pound increase here. So could you maybe approximately size the order of magnitude of what you are trying to achieve or what do you see your competitors trying to achieve relative to maybe that $0.15 per pound for 1 of the grades are we talking about $0.05 per pound, $0.10 or $0.15 that you're hoping to achieve by, let's say, middle of the year?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Very helpful. As a follow-up, I wanted to ask you about (inaudible) . So you're describing qualification initiatives. So can you maybe tell us what's been achieved with (inaudible) in '24 and whether your outlook and timeline for commercial scale-up of this product has changed?

Question: Michael Sison - Wells Fargo - Analyst : I understand difficulty in looking beyond the first quarter. But Peter, is there a potential that 2Q EBITDA sequentially should be better than 1Q or maybe the way to ask it is, what do you think needs to happen to see a sequential improvement. Are you seeing any hints from customers that demand seasonally should uplift in 2Q? So just kind of your general thoughts of how EBITDA could get better as the year unfolds. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 3:00PM, HUN.N - Q4 2024 Huntsman Corp Earnings Call

Question: Michael Sison - Wells Fargo - Analyst : Got it. And then just a quick follow-up. I think you mentioned that China MDI prices are a 3-year highs. I don't suspect that China MDI margins are a 3-year high. So if they're not, maybe you can give us a thought where they are and what needs to happen for the margins to improve.

Question: Matthew Blair - Tudor, Pickering, Holt & Co. - Analyst : On Slide 13, the dividend from equity affiliate guidance for 2025 shows a $75 million headwind year-over-year. It seems like a pretty large number in the context of your contribution from the China PO MTBE plant, I think, was about $39 million of equity income in 2024. So could you help us understand the moving parts on the $75 million

Question: Matthew Blair - Tudor, Pickering, Holt & Co. - Analyst : Great. And then could you also clarify on the European notes that will be repaid in the first quarter, is that going to be a straight payoff with cash? Or do you expect to refinance those notes?

Question: Laurence Alexander - Jefferies - Analyst : I have 2 questions. One is if the U.S. construction market recovers and U.S. MDI becomes relatively tight, if there isn't a broader inflation cycle to destroy demand or some other demand shock. What would you see as the natural break point for the regional spread in margins? Is there any safety valve, any obvious product substitution that we should be thinking about in terms of what would regulate the -- where U.S. margins sit relative to the rest of the world. And then secondly, if things do tighten back up, just extrapolating from your green shoots and maybe I'm being too optimistic and you get a return to a decent run rate on free cash flow. What are your priorities in terms of capital returns, deleveraging portfolio shifts to reduce cyclicality going forward?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : I guess I just wanted to ask about capital allocation. So obviously, you've undergone a review here in Europe. I think you've mentioned it in the past. Are there other kind of cleanup that you'd like to pursue? And then I guess -- maybe you can discuss leverage and the dividend. Are you still committed there?