Q2 2024 Huntsman Corp Earnings Call

Speaker Change: Hello and welcome to the Huntsman Corporation's second quarter 2024 earnings call and conference.

Unknown Executive: Power, Earnings, Call, and Conference. At this time, all participants are in listening-only mode. If anyone should require operator assistance, please press star zero.

Operator: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero.

Speaker Change: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero. A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star 1 on your telephone keypad. We ask that you please limit yourselves to one question and one follow-up, then return to the queue. It's now my pleasure to turn the call over to Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead, Ivan.

Unknown Executive: A question and answer session will follow the formal presentation. You may be placing the question queued anytime by pressing star one on your telephone keypad.

Speaker Change: You may be placed into question queue at any time by pressing star 1 on your telephone keypad. We ask that you please limit yourselves to one question and one follow-up, then return to the queue.

Unknown Executive: We ask you, please limit yourselves to one question and one follow-up, then return to the queue.

Ivan Marcusev: It's now my pleasure to turn the call over to Ivan Marcusev, Vice President of this Relations and Corporate Development. Please go ahead.

Speaker Change: It's now my pleasure to turn the call over to Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead, Ivan.

Kevin: Thank you, Kevin.

Ivan Marcuse: Thank you, Kevin. Good morning, everyone.

Peter Huntsman: Good morning, everyone. Welcome to Huntsman's second quarter, 24, 2024 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO of President, and Phil Lister, Executive Vice President, CFO. Last night on August 5, 2024, after the U.S. equity market closed, we released our earnings for the second quarter, 2024, via press release and posted to our website, Huntsman.com. We also posted a set of slides and detailed commentary discussing the second quarter on our website.

Ivan Marcuse: Thank you, Kevin. Good morning, everyone. Welcome to Huntsman's second quarter 24, 2024 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President, and Phil Lister, Executive Vice President and CFO.

Ivan Marcuse: Welcome to Huntsman's second quarter 2024 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President, and Philip Lister, Executive Vice President and CFO. Last night, on August 5th, 2024, after the U.S. equity markets closed, we released our earnings for the second quarter 2024 via press release and posted it to our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the second quarter on our website.

Ivan Marcuse: Last night, on August 5, 2024, after the U.S. equity markets closed, we released our earnings for the second quarter of 2024 via press release and posted it to our website, Huntsman.com. We also posted a set of slides and detailed commentary discussing the second quarter.

Ivan Marcuse: Peter Huntsman will provide some opening comments shortly, and we will then move to the question and answer session for the remainder of the call. During the call, I will remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements, and while they reflect our current expectations, they involve risks and uncertainties that are not guaranteed for future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections and expectations.

Unknown Executive: Peter Huntsman will provide some opening comments shortly, and we will then move to the question-and-answer session for the remainder of the call. During the call, let me remind you that we may make statements about our projections or expectations for the future. Also, statements are for looking statements, and while they reflect our current expectations, they involve risks and uncertainties that are not guaranteed the future performance. You should review our filings with the SEC for more information regarding the fact that could cause actual results to differ materially from these projections and expectations. We do not plan on publicly updating or revising any four looking statements during the quarter.

Speaker Change: on our website. Peter Huntsman will provide some opening comments shortly, and we will then move to the question and answer session for the remainder of the call. During the call,

Speaker Change: Let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements and, while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance.

Speaker Change: You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections and expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter.

Ivan Marcuse: We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, and free cash. You can find the reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website at Huntsman.com. I'll now turn the call over to Peter Huntsman, our Chairman, CEO, and

Unknown Executive: We will also refer to non-gap financial measures, such as adjusted evit doc, adjusted net income, and free cash flow. You can find the reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website at Huntsman.com.

Speaker Change: We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income, and free cash flow.

Peter Huntsman: You can find the reconciliations to the most directly comparable gap financial measures in our earnings release Which has been posted to our website at Huntsman.com. I'll now turn the call over to Peter Huntsman, our Chairman, CEO, and President.

Peter Huntsman: I will now turn the call over to Peter Huntsman, our Chairman, CEO and President.

Peter Huntsman: Ivan, thank you very much, and thank you all for joining us this morning. I find myself in a rather precarious place this morning, as I usually prepare some opening comments the afternoon before these calls. Over the last 24 hours, swords have been rattling in the Middle East, triggering massive potential for raw material volatility. And over the past few hours of trading, trillions of dollars, yens, euros, and RMB have been wiped out, and consumer confidence has been reforecasted more times in the polling data for the upcoming presidential election.

Peter Huntsman: I have been thank you very much, and thank you all for joining us this morning.

Peter Huntsman: Ivan, thank you very much and thank you all for joining us this morning.

Peter Huntsman: I find myself in a rather precarious place this morning, as I usually prepare some opening comments the afternoon before these calls. In the last 24 hours, swords have been rattling in the Middle East, triggering massive potential for raw material volatility. Over the past few hours of trading, trillions of dollars, yen, euros, and RMB have been wiped out, and consumer confidence has been reforecated more times in the pulling data for the upcoming presidential election. All of that being said, after five quarters in the chemical industry of massive inventory adjustments, plummeting margins, and a tidal wave of Asian-based oversupply, these most recent events seem quite calm.

Peter Huntsman: I find myself in a rather precarious place this morning, as I usually prepare some opening comments the afternoon before these calls. Over the last 24 hours, swords have been rattling in the Middle East, triggering massive potential for raw material volatility.

Peter Huntsman: And over the past few hours of trading, trillions of dollars, yens, euros, and RMB have been wiped out, and consumer confidence has been re-forecasted more times in the polling data for the upcoming presidential election.

Peter Huntsman: All of that being said, after five quarters in the chemical industry of massive inventory adjustments, plummeting margins, and a tidal wave of Asian-based oversupply, these most recent events seem quite calm. Our cost initiatives that have been ongoing for the past three years are paying off as we've stayed ahead of inflation. Our focus on cash generation delivered over $50 million of cash flow from our operations in the second quarter.

Peter Huntsman: All of that being said, after five quarters in the chemical industry of massive inventory adjustments, plummeting margins, and a tidal wave of Asian-based oversupply, these most recent events seem quite calm.

Peter Huntsman: Our cost initiatives that have been ongoing for the past three years are paying off as we have stayed ahead of inflation. Our focus on cash generation delivered over 50 million dollars of cash flow from our operations in the second quarter. We outlined plans in the previous earnings call; our volumes year over year and quarter over quarter were up across the entire business by nine and eight percent, respectively. This volume improvement took place as we were able to increase margins and earn what we projected from our previous calls. While I continue to be concerned with Europe's highly successful policy of de-industrialization and excess chemical capacity flowing out of Asia, the single largest catalyst for margin improvement for Huntsman would be a resurgence of commercial and residential construction demand.

Speaker Change: Our cost initiatives that have been ongoing for the past three years are paying off as we've stayed ahead of inflation. Our focus on cash generation delivered over 50 million dollars of cash flow from our operations in the second quarter.

Peter Huntsman: As we outlined in the previous earnings call, our volumes year-over-year and quarter-over-quarter were up across the entire business by 9 and 8 percent, respectively. This volume improvement took place as we were able to increase margins and earn what we projected from our previous calls. While I continue to be concerned with Europe's highly successful policy of deindustrialization and excess chemical capacity flowing out of Asia, the single largest catalyst for margin improvement for Huntsman would be a resurgence of commercial and residential construction demand. However, this will not fully happen until interest rates drop below the current level. I believe that events in the past few weeks have increased the likelihood and timing of a rate decrease.

Speaker Change: We outlined plans in the previous earnings call, our volumes year over year and quarter over quarter were up across the entire business by 9% and 8% respectively.

Speaker Change: This volume improvement took place as we were able to increase margins and earn what we projected from our previous call.

Speaker Change: Well, I continue to be concerned with Europe's highly successful policy of deindustrialization.

Speaker Change: and excess chemical capacity flowing out of Asia. The single largest catalyst for margin improvement for Huntsman would be a resurgence of commercial and residential construction demand.

Peter Huntsman: This will not fully happen until this interest rates drop below the current levels. I believe that events in the past few weeks have increased the likelihood and timing of a rate decrease. Presently, third quarter order patterns seem flatish to the second quarter.

Speaker Change: This will not fully happen until interest rates drop below their current levels.

Speaker Change: I believe that events in the past few weeks have increased the likelihood and timing of a rate decrease.

Peter Huntsman: Presently, third-quarter order patterns seem flattish compared to the second quarter. We remain cautious; we remain cautious regarding the second half of the year. The present time is simply too early to have a clear picture of the fourth quarter. That being said, inventory in the supply chain remains low. Our construction, aerospace, infrastructure, power, and elastomers businesses continue to improve. We will stay focused on cost, and cost management is our priority. With that, let's open the line up for any questions.

Speaker Change: Presently, third quarter order patterns seem flattish to the second quarter.

Peter Huntsman: We remain cautiously, we remain cautious regarding the second half of the year.

Speaker Change: We remain cautious regarding the second half of the year. At present time, it is simply too early to have a clear picture of the fourth quarter.

Peter Huntsman: The present time is simply tourally to have a clear picture of the fourth quarter. That being said, inventory in the supply chain remains low. Our construction, aerospace, infrastructure, power, and the last summer's businesses continue to improve.

Speaker Change: That being said, inventory in the supply chain remains low, our construction, aerospace, infrastructure, power, and elastomers businesses continue to improve.

Peter Huntsman: We will stay focused on costs and cash management; is our priority.

Speaker Change: We will stay focused on cost and cost management is our priority. With that, let's open the line up for any questions.

Unknown Executive: With that, let's open the line up for any questions. Thank you. And now we're conducting your question and answer session. As a reminder, we ask you, please ask one question, one follow-up, then return to the queue. If you'd like to be placing the queue, please press star one at this time. If you'd like to remove yourself from the queue, please press star two. One moment, please. What will you pull for questions?

Operator: Thank you. We will now be conducting your question and answer session. As a reminder, we ask you please ask one question, one follow-up, then return to the queue. If you would like to be placed in the queue, please press star 1 at this time. If you would like to remove yourself from the queue, please press star 2. One moment, please, while we poll for questions. Our first question is coming from Michael Sison from Wells Fargo. Your line is now live.

Speaker Change: Thank you. And now we're conducting a question and answer session. As a reminder, we ask you please ask one question, one follow-up, then return to the queue. If you'd like to be placed in the queue, please press star 1 at this time. If you'd like to remove yourself from the queue, please press star 2.

Michael Sison: Our first question is coming from Michael Sisson. From Wells Fargo, your line is now live.

Peter Huntsman: Hey, good morning. Nice quarter there, Peter. In terms of MDI energy opting rates, I think last quarter you noted that we were at the cost potentially of getting better pricing. I think you said operating rates are in the mid 80s. Any thoughts of where we're at now in July and how you think that's going to shape up as we head into the rest of the second half? Yeah, it's somewhat of a squishy number because there's not a lot of reliable data that's transmitted in real time. I would say that we probably have seen a few percentage points drop in Europe.

Michael Sison: Hey, good morning Peter. In terms of, I think last quarter you noted that we were at the cusp, potentially, of getting better pricing. I think you said operating rates were in the mid-80s. Any thoughts of where we're at now in July and how you think that's going to shape up as we head into the rest of the second half?

Peter Huntsman: Yeah, it's somewhat of a squishy number because there's not a lot of reliable data that's transmitted in real-time. I would say that we probably have seen a few percentage points drop in Europe, probably a few percentage points tightening in Asia, and the Americas basically have stayed flat since the second quarter. I'd say that in the second quarter, we probably were in – first going into the second quarter, we were probably in the mid-'80s, maybe on the weak mid-'80s, and I think now we're probably still in that mid-'80s, but perhaps a few points stronger. Overall, I think we're trending in the right direction, but moving along ever so slowly.

Peter Huntsman: Probably a few percentage points tightening in Asia and the Americas; basically, I'd say stayed flat since the second quarter. I'd say that in the second quarter, we probably were in first going into the second quarter, probably in the mid 80s, maybe on the week mid 80s. And I think now we're probably still in that mid 80s, but perhaps a few points stronger. Overall, I think trending in the right direction, but moving along ever so slowly.

Peter Huntsman: Got it. And, you know, you didn't mention if there is an improvement in construction demand longer term. It's the most important earnings driver for Huntsman. Any thoughts where you think you've had a lot of cost savings, where you think polyurethane EBITDAQ can get back to in the event that hopefully demand and we surges over time? Well, I certainly see, given that if we get back into kind of that normalized construction, that we're looking at the mid upper mid-teens, sort of margins with polyurethanes across the board.

Michael Sison: Got it. And, you know, you did mention if there is an improvement in construction demand longer term, the most important earnings driver for Huntsman. Any thoughts on where you think you've had a lot of cost savings, where you think polyurethane EBITDA can get back to in the event that, hopefully, demand and resurges over time?

Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host

Peter Huntsman: I certainly see, you know, given that if we get back into kind of that normalized construction, that we're looking at the mid to upper mid-teens sort of margins with polyurethanes across the board. But that will require, I think, three basic things to take place. I believe that China will have to see a little bit stronger growth than we've seen in the last year or two. We'll have to see Europe at least start to get some traction and, you know, at a low sort of percentage growth rate on an industrial basis.

Peter Huntsman: That will require, I think, three basic things to take place. I believe that China will have to see a little bit stronger growth than we've seen the last year too. We'll have to see Europe at least start to get some traction in a low sort of percentage growth rate and an industrial basis. Kind of remember that they need to be moving from a tourist economy back to some element of an industrial economy. And then the US, which I feel is in recovery phase right now, we need to see that housing come back. Those three basic things take place.

Speaker Change: You know, that will require, I think, three basic things to take place.

Peter Huntsman: Kind of remember that they need to be moving from a tourist economy back to some element of an industrial economy. And then the U.S., which I feel is in a recovery phase right now, we need to see that housing come back. Those three basic things take place.

Speaker Change: is in a recovery phase right now, we need to see that housing come back. Those three basic things take place. I think you see your things back into that mid-teens plus sort of margin basis.

Peter Huntsman: I think you see Europe ends back into that mid teens plus sort of margin basis.

Operator: Thank you. The next question phase is coming from Jeff Zekauskas from JP Morgan. Your line is now live.

Operator: I think you see urethanes back into that mid-teens plus some sort of margin basis. Your next question today is coming from Jeff Zekauskas from JP Morgan. Your line is now live.

Jeff Zekauskas: Next question is coming from Jeff Zekauskas from JP Morgan; your line is alive. Thanks very much. Your volumes were up, you know, eight or nine percent. Your inventories were down about 10 percent.

Speaker Change: Thanks very much. Your volumes were up.

Peter Huntsman: What, why is that? I think that we've, we've tried to manage caches as carefully as we can. We did have a plan, as we announced three and six months ago, to try to recover some of our volumes that we have lost. I, I don't think to error, but we certainly lost some volumes a year ago, trying to hold on to pricing and demonstrate pricing discipline. We did give up some of the larger, particularly around insulation composite wood, some of the more polymeric commodity sides. We also saw a lot of de-indictorium that took place in elastomer's industrial applications and so forth.

Peter Huntsman: I think that we've tried to manage cash as carefully as we can. We did have a plan, as we announced three and six months ago, to try to recover some of our volumes that we have lost. I don't think through error, but we certainly lost some volumes a year ago trying to hold on to pricing and demonstrate pricing discipline. We did give up some of the larger, particularly around insulation, composite wood, some of the more polymeric commodity sides.

Speaker Change: I think that we've tried to manage cash as carefully as we can. We did have a plan, as we announced three and six months ago, to try to recover.

Peter Huntsman: We also saw a lot of de-inventorying that took place in elastomers, industrial applications, and so forth. So we've gotten some of that volume back. We've seen some regrowth taking place in some of those applications, and we have seen a lot of de-inventorying taking place. I think it's just a capital discipline around supply and demand in production. And, Jeff, just on the numbers, our volume in inventory is down four percent.

Phil Lister: So we've gotten some of that volume back. We've seen some regrowth taking place in some of those applications. And we have seen a lot of the de-inventoring taking place. So I think it's just a capital discipline around supply and demand in production. And Jeff, just on the numbers, our volume in inventory is down 4% overall. He calculated; he calculated that on a DIO basis, with down about 10%, and as Peter says, that's just a real focus on our inventory levels that we have right now.

Philip Lister: And Jeff, just on the numbers, our volume in inventory is down 4% overall; if you calculate that on a DIO basis, we're down about 10%, and as Peter says, that's just a real focus on our inventory levels that we have right now. Do you think your working capital will be a use of cash this year or a benefit to cash on balance? Yeah, I think, Jeff, that's going to come down to revenues in the final course.

Phil Lister: Do you think your working capital will be the use of cash this year or a benefit to cash on balance? Yeah, I think Jeff, that's going to come down to revenues in the final course. I think we'll control our inventory pretty well. I think in general, those will offset with payables as we get to the end of quarter four. And I think it's going to come down to receivables, just the level of activity that we see in quarter four this year versus last year. And as we said in the prepared remarks, we've probably got about a hundred million dollars a year on year, three cash flow benefits outside of any movement that we see in working capital, and that's our focus.

Speaker Change: Do you think your working capital will be

Speaker Change: I think, Jeff, that's going to come down to...

Philip Lister: I think we'll control our inventories pretty well. I think, in general, those will be offset by payables as we get to the end of quarter four. And I think it's going to come down to receivables and just the level of activity that we see in quarter four this year versus last year. And as we've said in the prepared remarks, we've probably got about $100 million of year-on-year free cash flow benefits outside of any movement that we see in working capital. And that's what our focus is.

Peter Huntsman: I will just note, in addition, that the lack of de-inventorying that we're seeing this year versus last year is giving us a little bit better predictability in supply and demand orders and so forth.

Phil Lister: Now, we'll just note in addition, the lack of de-inventoring that we're seeing this year versus last year is giving us a little bit better predictability in supply and demand orders and so forth.

Jeff: I will just note, in addition to that, the lack of de-inventorying that we're seeing this year versus last year is giving us a little bit better predictability in supply and demand orders and so forth.

Operator: Thank you. Our next question today is coming from Patrick Cunningham from Citi. Your line is now live.

Patrick Cunningham: Our next question today is coming from Patrick Cunningham from City; your line is now live. Hi, good morning. So the polyurethane guide is calling for flat issue with quarter on quarter despite maybe 50 to 20 million and discrete headwinds and relatively stable volumes.

Speaker Change: Thank you. Our next question today is coming from Patrick Cunningham from Citi. Your line is now live.

Patrick Cunningham: Hi, good morning. So the polyurethane guide is, you know, calling for a flat issue quarter on quarter, despite maybe 15 to 20 million and discrete headwinds and relatively stable volumes. How should we think about, you know, variable margin improvement throughout the quarter? And are there any particular regions you want to call out that, you know, might be stronger than others?

Peter Huntsman: How should we think about variable margin improvement throughout the quarter, and if there are any particular regions you want to call out that, you know, might be stronger than others. Yeah, I think it's largely going to be flat. I mean, there'll be some give-and-takes. You know, we experience an outage in our Rotterdam facility, in which we're just now starting to restart the facility and coming back online. We've got to rebuild some inventory there. We'll see a little bit of headwinds on the Chinese joint venture that we have around a properly noxide. And, you know, we hope to see some volume growth and pricing momentum that continues into the third quarter.

Patrick Cunningham: relatively stable volumes. How should we think about, you know, variable margin improvement throughout the quarter and if there are any particular regions you want to call out that, you know, might be stronger than others?

Peter Huntsman: Yeah, I think it's largely going to be flat. I mean, there'll be some give and takes. You know, we experienced an outage in our Rotterdam facility, and we're just now starting to restart the facility and come back online.

Speaker Change: You know, I think it's largely going to be flat. I mean, there'll be some give and takes.

Speaker Change: We experienced an outage in our Rotterdam facility in which we're just...

Peter Huntsman: We've got to rebuild some inventory there. And we'll see a little bit of headwinds on the Chinese joint venture that we have with propylene oxide. And, you know, we hope to see some volume growth and pricing momentum that continues into the third quarter. And I think some of that is going to be offsetting each other, a little bit of seasonality. That will mostly be taking place in performance products in the third quarter. So, yeah, I think there will be a lot of give and takes.

Speaker Change: now starting to restart the facility and coming back online. We've got to rebuild some inventory there. We'll see a little bit of headwinds on the Chinese joint venture that we have.

Speaker Change: And, you know, we hope to see some volume growth and pricing momentum that continues into the third quarter. And I think some of that's going to be offsetting each other, a little bit of seasonality.

Peter Huntsman: And I think some of that's going to be offsetting each other a little bit of seasonality. That will mostly be taking place in performance products in the third quarter. So, yeah, I think a lot of give and take. As I said in my prepared remark, it's probably going to be pretty flat.

Speaker Change: that will mostly be taking place in performance products in the third quarter. So yeah, I think a lot of give-and-takes. As I said in my prepared remarks, it's probably going to be pretty flattish.

Peter Huntsman: As I said in my prepared remarks, it's probably going to be pretty flat. One item to consider, Patrick, on the bridge for polyurethanes from Q2 to Q3. We will aim to have an inventory build towards the back end of quarter three. We've got a turnaround in the fourth quarter that will necessitate some inventory build, which will give us a one-time benefit on EBITDA, which will reverse out. And that's probably between $5 and $10 million, which will reverse out in the fourth quarter.

Peter Huntsman: Well, one item to consider, Patrick, on the bridge for polyurethanes from Q2 to Q3. We will we will aim to have an inventory bill towards the back end of quarter three. We've got a turn around in the fourth quarter. That will necessitate some inventory bill, which will give us a one time benefit on a bit, which will reverse out. That's probably the same five and ten million dollars, which will reverse out in the fourth quarter.

Speaker Change: Bridge for polyurethanes from Q2 to Q3. We will we will aim to have an inventory build towards the back end of quarter three we've got a

Speaker Change: turn around in the fourth quarter that will necessitate some inventory build which will give us a one-time benefit on EBITDA which will reverse out and that's probably between five and ten million dollars which which will reverse out in the fourth quarter.

Unknown Executive: Paul Kult. Understood. Very helpful.

Patrick Cunningham: And then, with prices mixed down 10% year on year for advanced materials, were there any areas of structural pricing pressure, or was this mostly mixed impact? And if you have any detail on how we should think about it for the balance of the year, that would be helpful.

Peter Huntsman: And then, with price mix down 10% year on year for advanced materials, were there any areas of structural pricing pressure? Or was this mostly mixed impacts? And if you have any detail on how we should think about it for the balance of the year, that would be helpful. I think that virtually all of that is mixed. Demand trends continue to be very strong in advanced materials, very solid, and we're seeing the gradual recovery of aerospace. I do mean gradual; there are continue to be playing with some supply issues in aerospace, but by and large, it's been a very consistent, very reliable end of the business.

Speaker Change: Understood. Very helpful. And then with price mix down 10% year-on-year for advanced materials, were there any areas in structural pricing pressure or was this mostly mixed impacts? And if you have any detail on how we should think about it for the balance of the year, that would be helpful.

Peter Huntsman: I think that virtually all of that is mixed. Demand trends continue to be very strong, and advanced materials are very solid, and we're seeing the gradual recovery of aerospace. I do mean gradual; there will continue to be problems with some supply issues in aerospace, but by and large, it's been a very consistent, very reliable end of the business.

Speaker Change: I think that virtually all of that is mixed.

Speaker Change: Demand trends continue to be very strong and advanced materials, very solid. And we're seeing the gradual recovery of aerospace. I do mean gradual. There are, continue to be plagued with some supply issues.

Operator: Thank you. The next question is coming from Vincent Andrews from Morgan Stanley. Your line is now live.

Vincent Andrews: Next question is coming from Vincent Andrews from Morgan Stanley; your line is that live? Thank you. Good morning. Peter, in your prepared remarks, you made a comment that lower interest rates, you're not so sure would actually improve your operating environment in Europe. I was wondering if you could just color that in a little bit.

Speaker Change: Thank you. Next question is coming from Vincent Andrews from Morgan Stanley. Your line is now live.

Vincent Andrews: Thank you, good morning. Peter, in your prepared remarks, you made a comment that

Vincent Andrews: Thank you, good morning. Peter, in your prepared remarks, you made a comment that lower interest rates, you're not so sure, would actually improve your operating environment in Europe. I was wondering if you'd just color that in a little bit.

Peter Huntsman: I think the lower interest rates are going to particularly impact North American construction, housing, commercial construction, and so forth. I do think that lower interest rates will impact Europe, though. I just don't believe that it will be nearly as material to the bottom line. We certainly welcome that in Europe, but I don't think it's going to be nearly as big a deal as it will be in the United States. And is that just a function for you of your exposure to building and construction in the U.S. versus Europe, or is there something else that's causing that for you?

Peter Huntsman: No, I, I, okay, maybe I met that they came out a little bit backwards. I think the lower interest rates are going to particularly impact North American construction, housing, commercial construction, so forth. I do think that lower interest rates will impact Europe. I just don't believe that it will be nearly as material to the bottom line. We certainly welcome that in Europe, but I don't think it can be nearly as material as it will be in the United States.

Speaker Change: I think the lower interest rates are going to particularly impact North American construction, housing, commercial construction, and so forth.

Speaker Change: I do think that lower interest rates will impact Europe. I just don't believe that it will be nearly as material to the bottom line. We certainly welcome that in Europe, but I don't think it's going to be nearly as material as it will be in the United States.

Peter Huntsman: And is that just a function for you of your exposure being larger to building a construction in the US versus Europe, or is there something else that's causing that? Yes. I think that we look at and we track multi-family, single-family construction, so forth. And we look at the housing inventory of how many homes are in the market, how many homes are available, go through the typical housing data.

Speaker Change: And is that just a function for you of your exposure being larger to building and construction in the U.S. versus Europe, or is there something else that's causing that? Yes.

Peter Huntsman: Yes, and I think as we look at and track multi-family, single-family construction, so forth, and we look at the housing inventory of how many homes are in the market, how many homes are available, let's go through the typical housing data. The U.S., when it rebounds, I believe it's not going to be a very gradual rebound. It could be a very sudden and strong rebound, again, depending on two things, rate cuts and overall consumer optimism in North America.

Speaker Change: Yes, and I think as we look at and we track multi-family, single-family...

Speaker Change: construction, so forth. And we look at the housing inventory of how many homes are in the market, how many homes are available. Let's go through the typical housing data. The U.S.

Peter Huntsman: The US, when it rebounds, I believe it's not going to be a very gradual rebound. It could be a very sudden and, and, and, and, and strong rebound. Again, depending on two things: on rate cuts and overall consumer optimism for North America. Construction is about a 60% exposure. You're about 50, but it's very different, as Peter says.

Speaker Change: when it rebounds, I believe it's not going to be a very gradual rebound, it could be a very sudden and strong rebound, again depending on two things, on rate cuts and overall consumer optimism.

Unknown Executive: For North America, construction is about a 60% exposure; Europe is about 50%, but it's very different, as Peter says. In Europe, in general, it's aligned with commercial construction, whereas in North America, it's relatively balanced but with a greater proportion of sales into residential.

Speaker Change: For North America, construction is about a 60% exposure. Europe is about 50%, but it's very different, as Peter says. In Europe in general, it's aligned with commercial construction, whereas in North America...

Peter Huntsman: In Europe, in general, it's aligned with commercial construction, whereas in North America, it's relatively balanced, but with a greater proportion of sales into residential.

Peter Huntsman: It's relatively balanced but with a greater proportion of sales inter-residential.

Unknown Executive: Okay. Thanks very much. Appreciate it. Thank you.

Speaker Change: Okay. Thanks very much. Appreciate it.

Frank Mitsch: Next question today is coming from Frank Mitch from From Your Researcher Line.

Operator: Thank you. The next question today is coming from Frank Mitsch from the From Your Researcher line is online.

Speaker Change: Thank you

Speaker Change: Thank you. Next question today is coming from Frank Mitch from Freemium Research. Your line is now live.

Peter Huntsman: Is that live? Hey, good morning. Peter, one of the priorities in 24 was to get the volumes off, and clearly that's been a success. But, you know, price mix in the second quarter faced a very easy comp, and obviously came in on the negative side of the ledger. 3Q faces another easy year of year comp.

Frank Mitsch: Hey, good morning Peter. One of the priorities in 24 was to get the volumes up, and clearly, that's been a success. But, you know, price mix in the second quarter faced a very easy comp and obviously came in on the negative side of the ledger. 3Q faces another easy year-over-year comp. How should we think about the progression of price mix in 3Q and beyond, and what will it take to get it back to neutral, if not positive?

Frank Mitch: Hey, good morning. Peter, one of the priorities in 24 was to get the volumes up and clearly that's been a success.

Frank Mitch: But, you know, Price Mix in the second quarter faced a very easy comp and obviously came in on the negative side of the ledger. 3Q faces another easy year-over-year comp. How should we think about the progression of Price Mix?

Peter Huntsman: How should we think about the progression of price mix in 3Q and beyond, and what will it take to get it back to the neutral? It's not positive. Well, it's going to take a combination of capacitive utilization, overall demand, and mix of the products we're selling; the combination of those three. And as you know, short of a cataclysmic economic event, you know, I remain bullish that we're going to continue to see a gradual improvement that is taking place in the business over the course of the next couple of quarters. I think price mix was mostly built in, Frank. If you look at the sequential quarter ones, quarter two in general, that was relatively neutral.

Speaker Change: in 3Q and beyond and what will it take to get it back to neutral if not positive?

Peter Huntsman: Well, it's going to take a combination of capacity utilization, overall demand, and the mix of the products we're selling, a combination of those three. And as, you know, short of a cataclysmic economic event, I remain bullish that we're going to continue to see a gradual improvement that's taking place in the business over the course of the next couple of quarters. I think price mix is mostly built in, Frank. If you look at the sequential quarter one to quarter two in general, that was relatively, relatively.

Speaker Change: Well, it's going to take a combination of capacity utilization, overall demand, and mix.

Speaker Change: of the products we're selling, a combination of those three. And as, you know, short of a cataclysmic economic event,

Speaker Change: I remain bullish that we're going to continue to see a gradual improvement that is taking place in the business over the course of the next couple of quarters. I think price mix is mostly built in, Frank. If you look at the sequential quarter one to quarter two in general, that was relatively neutral.

Frank Mitsch: That's right, yeah, I did pick that up. And then, you know, North America polyurethane volumes were up nicely in 1Q, up nicely again here in 2Q, you know, over 20% in both of those quarters. Does that continue in 3Q, that level of that level of improvement in polyurethanes in North America?

Unknown Executive: That's right.

Peter Huntsman: Yeah, I did pick that up. And then North America, Paul Yerthing-Bimes, up nicely in one queue, up nicely again, hearing two queue, you know, over 20% in both of those quarters. Is that continuing to re-cute that level of improvement in Paul Yerthings, North America? Most likely, yes.

Frank Mitch: That's right, yeah, I did pick that up.

Speaker Change: And then, you know, North America polyurethane volumes up nicely in 1Q, up nicely again here in 2Q, you know, over 20% in both of those quarters. Does that continue in 3Q, that level of improvement in polyurethane in North America?

Peter Huntsman: Most likely, yes. Again, kind of based on what you said earlier, we're starting on a very low basis as to where we were a year ago. But no, I think that we will continue to defend our market share, and we'll continue to win back business.

Peter Huntsman: Again, kind of basing what you said earlier, we're starting it on a very low basis as to where we were a year ago. But no, I think that we will continue to defend our market share, and we'll continue to win back business.

Speaker Change: Most likely, yes. Again, kind of basing what you said earlier, we're starting it on a very low basis as to where we were a year ago. But no, I think that we will continue to defend our market share and we'll continue to win back business.

Operator: Thank you. The next question today is coming from David Begleiter from Deutsche Bank. Your line is now live.

David Begleiter: Next question today is coming from David Begletter from Don't You Bank Your Line? Is that right? Thank you.

Speaker Change: Thank you. Next question today is coming from David Begwetter from Deutsche Bank. Your line is now live.

David Begleiter: Thank you. Good morning, Peter. If the recent drop in oil prices holds, could there be a beneficial tailwind to your earnings in the back half of the year?

Peter Huntsman: Good morning. Peter, if the recent drop in oil prices holds, could it be a benefit to tell into your earnings the back half a year? I'd like to think that would be the case, but, you know, we are seeing areas around refining where we've seen crude prices coming down and benzene prices going up in some cases. Not today's benzene's down to 350 issues. I look at it today. In the second quarter, it was up around $4. So, yeah, I mean, if I look at some of these prices, I look at some of the published prices around chlorine and coffee, not that I give those published prices much credence.

David Begwetter: Thank you, good morning. Peter, if the recent drop in oil prices holds, could there be a benefit tailwind to your earnings in the back half of the year?

Peter Huntsman: I'd like to think that would be the case. But, you know, we are seeing areas around refining where we've seen crude prices coming down and benzene prices going up in some cases. Now, today's benzene's down to $3.50-ish, as I look at it today. In the second quarter, it was up around $4. So, yeah, I mean, as I look at some of these prices, I look at some of the published prices around chlorine and caustic, not that I give those published prices much credence. But, you know, you are seeing stability in certain areas that are seemingly somewhat detached from crude oil. But I think, by and large, falling crude oil prices should give us some tailwind.

Speaker Change: I'd like to think that would be the case, but we are seeing areas around refining where we've seen crude prices coming down and benzene prices going up in some cases. Now today, benzene's down to $3.50-ish as I look at it today. In the second quarter, it was up around $4.

Speaker Change: So, yeah, I mean, if I look at some of these prices, I look at some of the published prices around chlorine and caustic, not that I give those published prices much credence.

Peter Huntsman: But, you are seeing stability in certain areas that seeming we are somewhat detached from crude oil. But I think by and large, falling crude prices should give us some tailwind. For benzene, David, it settled at $3.80 the contract for August, so it was still relatively high relative to the spot price. We tend to pay the contract price, so it really for us is all about how benzene then moves during the month of August and how it settles for the September and beyond.

Speaker Change: But, you know, you are seeing stability in certain areas that seemingly are somewhat detached from crude oil. But I think, by and large, falling crude prices should give us some tailwind.

Philip Lister: For Benzene, David, it settled at $380 on the contract for August, so it was still relatively high relative to the spot price. We tend to pay the contract price, so it's really all about how Benzene then moves during the month of August and how it settles for September and beyond.

Speaker Change: For Benzene, David, it settled at $380, the contract for August, so it was still relatively high relative to the spot price. We tend to pay the contract price, so it really for us is all about how Benzene then moves during the month of August and how it settles for September and beyond.

David Begleiter: Very good. And just in advanced materials, Peter, when you think about the bridge to 25, could this be a sizable uplift in earnings in the segment as some of the mix issues and raw material issues get grandfathered, and volumes pick back up.

Peter Huntsman: Very good. And just in advance materials, Peter, we're thinking about the bridge at 25. Could this be a sizable uplift in earnings of the segment as some of the mixed issues and warm-shoulder issues get grandfathered, and then volumes picked back up? I certainly hope so. I think that again, we're going to need some tailwind in all of the three areas, but as we look at the cost initiatives pricing, some of the R&D initiatives that will be coming into the market. Yes, I believe that as we get into 2025, again, barring some major change, it ought to be a year of improvement for us.

Peter Huntsman: Very good. And just in Advanced Materials, Peter, when you think about the bridge to 25, could this be a sizable uplift in earnings in the segment as some of the mixed issues and raw material issues get grandfathered and volumes picked back up?

Peter Huntsman: I should certainly hope so. I think that again, we're going to need, you know, some tailwind in all of the three areas. But as we look at the cost initiatives, pricing, some of the R&D initiatives that will be coming into the market, yes, I believe that as we get into 2025, again, barring some major change, it ought to be a year of improvement for us.

Peter Huntsman: I should certainly hope so. I think that, again, we're going to need...

Speaker Change: some tailwind in all of the three areas, but as we look at

Peter Huntsman: The cost initiatives, pricing, some of the R&D initiatives that will be coming into the market. Yes, I believe that as we get into 2025, again barring some major change, it ought to be a year of improvement for us.

Operator: Thank you. The next question is coming from Mike Harrison from Seaport Research Partners. Your line is now live.

Michael Harrison: The next question is coming from Mike Harrison from Seaport Research Partners Relive. Is that live? Hi, good morning. I was hoping that you could talk a little bit about the competitive dynamics that you called out in performance products. You said that those negatively impacted margins. What exactly is going on there, and do you expect that negative impact to persist into the second half?

Speaker Change: Thank you. Next question is coming from Mike Harrison from Seaport Research Partners. Your line is now live.

Michael Harrison: Hi, good morning. I was hoping that you could talk a little bit about the competitive dynamics that you called out in performance products. You said that those negatively impacted margins. What exactly is going on there? And do you expect that negative impact to persist into the second half?

Mike Harrison: Hi, good morning.

Mike Harrison: I was hoping that you could talk a little bit about the competitive dynamics that you called out in performance products. You said that those negatively impacted margins, what exactly is going on there? And do you expect that negative impact to persist into the second half?

Peter Huntsman: Yeah, well, our performance products, mind you, is really in two major product groupings, and then you get into sub-product groupings and geographies from there. That would be our Malay business and our means business. Our means business; it continues to hold up quite well. Malayek and North America, again, this would be raw material going into unsaturated polyester resin and so forth. It's holding up quite well. Where we're getting hit the hardest in performance products is Malayek, specifically in Europe. Where we're seeing a, I think the wording I used was a tidal wave of Asian-based Malayek that's going into Europe.

Peter Huntsman: Yeah, well, our performance products, mind you, are really in two major product groupings, and then you get into sub-product groupings and geographies from there. That would be our malate business and our amines business. Our amines business, it continues to hold up quite well. Malate in North America, again, this would be the raw material going into unsaturated polyester resin and so forth. It's holding up quite well.

Peter Huntsman: Where we're getting hit the hardest in performance products is malate, specifically in Europe. We're seeing, I think the wording I used was, a tidal wave of Asian-based malate that's going into Europe. Europe also has very low duties in comparison to the U.S. for malate. Malate coming into the U.S. has about a 20, 28, 29 percent duty protection, whereas in Europe, I believe it's around a mid-single-digit sort of number. So, again, getting back to that industrial policy, you know, that we look for in Europe and so forth, that's really the area of greatest competition that we're seeing for performance products.

Peter Huntsman: Europe also has very low duties compared to the US and Malayek. The US has about a 20, 28, 29 percent duty protection, whereas in Europe, I believe it's around mid-single digit numbers. Again, getting back to that industrial policy, we look for in Europe and so forth, but that's really the area of greatest competition that we're seeing for performance products.

Speaker Change: that's going into Europe. Europe also has very low duties in comparison to the U.S. and Maliac. Maliac coming into the U.S. has about a 28-29% duty protection, whereas in Europe I believe it's around mid-single-digit sort of numbers.

Speaker Change: So, again, getting back to that industrial policy, you know, that we look for in Europe and so forth, that's really the area of greatest competition that we're seeing for performance products.

Unknown Executive: All right, thank you for that.

Michael Harrison: All right, thank you for that. And then on advanced materials, it really sounds like this is becoming a significant focus area for MMA. Curious what the acquisition pipeline for advanced materials looks like at this point, and could we expect some acquisition activity yet to come this year?

Peter Huntsman: And then on advanced materials, it really sounds like this is becoming a significant focus area for MMA. Curious what the acquisition pipeline in advanced materials looks like at this point, and could we expect some acquisition activity yet to come this year? Well, we're looking at that pipeline probably picking up a bit. I mean, I think there's across the board. There's a lot of assets right now that are owned by private equity that are kind of getting to the end of a multi-year sort of a whole where a lot of these companies, I think, are going to be bringing assets to the market.

Speaker Change: All right, thank you for that. And then on advanced materials, it really sounds like this is becoming a significant focus area for M&A. Curious what the acquisition pipeline in advanced materials looks like at this point, and could we expect some acquisition activity yet to come this year?

Peter Huntsman: Well, we're looking at that pipeline probably picking up a bit. I mean, across the board, there are a lot of assets right now that are owned by private equity that are kind of getting to the end of a multi-year sort of hold where a lot of these companies, I think, are going to be bringing assets to the market. Having said that, Advanced Materials is unique in that if we were to go out and try to buy MDI capacity, for example, in polyurethanes, we wouldn't be able to do that for antitrust purposes.

Speaker Change: Well, we're looking at that pipeline.

Speaker Change: probably picking up a bit. I mean, I think there's, across the board, there's a lot of assets right now that are owned by private equity that are kind of getting to the end of a multi-year

Peter Huntsman: Performance products were already the largest in North America in malic and hydride, and so forth. When we look at Advanced Materials, we see an opportunity for both vertical and horizontal integration that really makes it a target-rich environment. This is a business that I think is extremely core to our business. If we want to look at a business where we want the rest of the business to have the sort of earnings profile of a 20-ish high-teens sort of margin EBITDA margin business,

Peter Huntsman: Having said that, advanced materials is unique in that if we were to go out and try to buy MDI capacity, for example, in polyurethane, we wouldn't be able to do that for antitrust purposes. Performance products were already the largest in North America, Malay, and hydride and so forth. We look at advanced materials. We see an opportunity both of vertical and horizontal integration that really makes it a target-rich environment. This is a business that I think is extremely core to our business. If we want to look at a business where we want the rest of the business to have the sort of earnings profile of a 20-ish, high-teens sort of margin-evidier margin business, and I'd remind you that that business remains very strong in Europe, in spite of all the headwinds and everything that we're seeing in Europe.

Speaker Change: having said that

Speaker Change: We wouldn't be able to do that for antitrust purposes. Performance products were already the largest in North America and Malik and Hydride and so forth. When we look at advanced materials, we see an opportunity both

Speaker Change: The Vertical and Horizontal Integration that really makes it a target-rich environment. This is a business that I think is extremely core to our business. If we want to look at a business where we want the rest of the business to have the sort of earnings profile of a 20-ish, high-teens sort of EBITDA margin business.

Peter Huntsman: And I'd remind you that business remains very strong in Europe in spite of all the headwinds and everything that we're seeing in Europe. So when I think of where we want to be as we continue to evolve as a company, I look at where there's a target-rich environment, and all of those would point to advanced materials. Now, having said all that, I do want to emphasize that just because there are a lot of targets out there does not mean that we're going to be loosening up the barriers that we're setting up as far as the discipline around pricing, value, integration, and what it means to go out and actually buy one of these and what the impact that has on the balance sheet. So we're going to remain very disciplined in that pricing as well.

Speaker Change: And I'd remind you that that business remains very strong in Europe, in spite of all the headwinds and everything that we're seeing in Europe.

Peter Huntsman: So I think of where we want to be as we continue to evolve as a company. I look at whether it's a target-rich environment and all of those who point to advanced materials.

Speaker Change: I think of where we want to be as we continue to evolve as a company. I look at where there's a target-rich environment, and all of those would point to advanced materials. Now, having said all that, I do want to emphasize that just because there are a lot of targets out there, does not mean that we're going to be loosening up.

Peter Huntsman: Having said all that, I do want to emphasize that just because there are a lot of targets out there does not mean that we're going to be loosening up the barriers that we're setting up as far as the discipline around pricing value, integration, and what it means to go out and actually buy one of these and what the impact that has on the balance sheet. We're going to remain very disciplined in that pricing as well.

Operator: Thank you. The next question today is coming from Salvator Tiano from Bank of America. Your line is now live.

Salvator Tiano: Next question today is coming from Salvator Tiano, from Bank of America; your line is now live. Yes, thank you very much. First, I wanted to release a little bit of all of your things, guidance, because actually, I would think when you're taking into account the forced measure or the POM to be turned around, it looks like actually like for like you do have your point is too much higher earnings, it could be that you too. And I'm wondering what you strive with that is essentially the US margin expansion because of the report out there, I guess the big price increase we saw in May and June.

Speaker Change: Thank you. Next question today is coming from Salvador Tiano from Bank of America. Your line is now live.

Salvator Tiano: Yes, thank you very much. First, I wanted to reduce a little bit the polyurethanes guidance because, actually, I think when you're taking into account the force majeure or the POMTP turnaround, it looks like, actually, for like it would have, you're pointing to much higher earnings in Q3 than Q2. And I'm wondering what is driving that? Is it essentially the U.S. margin expansion because of the three port outage of the, I guess the big price increase we saw in May and June? And also, how sustainable is this margin expansion as this report comes back online?

Salvador Tiano: Yes, thank you very much. First, I wanted to review a little bit the polyurethane skydance because actually

Salvador Tiano: think when you're taking into account the force majeure or the POMTP turn around It looks like actually like for like it would have you're pointing to much higher earnings

Speaker Change: at Q3.Q2.

Speaker Change: and I'm wondering what is driving that? Is it essentially the U.S. margin expansion because of the three-port outage and, I guess, the big price increase we saw in May and June? And also, how sustainable is this margin expansion as three-port comes back online?

Peter Huntsman: And also, how sustainable is this margin expansion as report comes back online? Yes, also, you're correct in that we've got the offer down a force measure; we've got a PM to be turned around. I think we said earlier as well, we've got a one-time benefit from what is an intended inventory bill towards the end of September ahead of a turn around in October. Any benefits that we're getting tend to be in P America's when you compare quarter two to quarter three, driven by a little bit of volume, but as you indicate, we've also got some pricing traction in the United States.

Philip Lister: Yes, Sal, so you're correct in that we've got the Rotterdam Force Majeure, and we've got a PMDB turnaround. As I said earlier as well, we've got a one-time benefit from what is an intended inventory bill towards the end of September ahead of a turnaround in October. Any benefits that we're getting tend to be in P.U. Americas when you compare quarter two to quarter three, driven by a little bit of volume, but as you indicate, we've also got some pricing traction in the United States with our price increase, which should improve unit variable margins as we go through the quarter. So it's really North America plus those other pluses and minuses that we gave earlier to bridge the quarter two to quarter three.

Sal: Yes, Sal, so you're correct in that we've got the Rotterdam Force Majeure, we've got a PMDB turnaround.

Speaker Change: I think we said earlier as well we've got a one-time benefit from what is an intended inventory bill towards the end of September ahead of a turnaround in October. Any benefits that we're getting tend to be in P.U. Americas when you compare quarter two to quarter three driven by a little bit of volume, but as you indicate, we've also got some pricing traction in the United States with our price increase, which should improve unit variable margins as we go through the quarter. So it's really North America plus those other pluses and minuses that we gave earlier to bridge.

Phil Lister: It's with our price increase, which should improve unit variable margins as we go through the course. So it's really North America plus those other pluses and minuses that we go only to bridge to bridge the quarter two to quarter three.

Speaker Change: to bridge the Corridor 2 to Corridor 3.

Peter Huntsman: Okay, and can you also a little bit about the adhesives business in the advanced materials that you highlight that can you provide a little bit more call over there about applications is that I spoke based adhesives and also what's the difference I guess in the outlook versus your composite business because I would assume that also that is driven by ira space. So yeah, but you know, the outcome because you said there is much better for this year. Yeah, so I think what we highlighted was our infrastructure coatings business in advanced material. I mean, there's five elements overall to to advance materials are proud business aerospace.

Salvator Tiano: Okay, and can you tell us a little bit about the advocacy? Transcripts provided by Transcription Outsourcing, LLC, of both faiths, adhesives, and also, um, What's the difference, I guess, in the Outlook versus your composite business? Because I would assume that also that is driven by aerospace. So, yeah, but, you know, the Outlook, as you said, is much better.

Speaker Change: Bye-bye.

Speaker Change: Okay, and can I ask also a little bit about the adhesives business in the advanced materials that you highlighted? Can you provide a little bit more cover there about applications?

Unknown Executive: Yeah, Sal, so I think what we highlighted was our infrastructure coatings business in advanced materials. I mean, there are five elements overall to advanced materials.

Speaker Change: Yes, so I think what we highlighted was our infrastructure coatings business in advanced material. I mean there's five elements overall to advanced materials, our power business, aerospace

Unknown Executive: Our power business, aerospace, our automotive business, industrial, and our infrastructure coatings business. The infrastructure coatings business tends to be a little lower margin business, so that drove us down from the price-mix combination.

Peter Huntsman: I want to make a business investor on the structure coatings business. The infrastructure coatings business tends to be a little lower margin business that drove us down from the price mix combination in terms of a D fifth. In terms of a D fifth in particular, that's where we're putting interior applications into aerospace, and that has grown for us pretty much double digit during the course of this year, is offset some of the slower growth that we've seen more on the composite sides going into the wide body aircraft and have given us a lot of heart that I think we said we should expect areas police to return to the pre pandemic levels during the course of 2025.

Speaker Change: [inaudible]

Unknown Executive: In terms of ADESIS, in terms of ADESIS in particular, that's where we're putting interior applications into aerospace. And that has grown for us pretty much double digits during the course of this year. It's offset some of the slower growth that we've seen more on the composite sides going into the wide-body aircraft. And it gives us a lot of heart that I think we should expect aerospace to return to pre-pandemic levels during the course of 2025.

Speaker Change: into aerospace, and that has grown for us pretty much double-digit during the course of this year. It's offset some of the slower growth that we've seen, more on the composite sides going into the wide-body aircraft, and it's given us a lot of heart. I think we've said we should expect aerospace to return to pre-pandemic levels during the course of 2025.

Josh Spector: Thank you, and there's a question today coming from Josh Specter from UBS. Your line is live. Yeah, good morning. I wanted to ask around your early thoughts here around 4Q and not necessarily depending to a specific number, but just thinking about seasonality when we talked about some of the moving parts and polyurethane and you're seeing some pricing.

Unknown Executive: Thank you. Our next question today is coming from Josh Spector from UBS. Your line is now live.

Speaker Change: Thank you. Our next question today is coming from Josh Spector from UBS. Your line is now live.

Joshua Spector: Yeah, hi, good morning. Um, I wanted to ask you about your early thoughts here around 4Q and not necessarily pin them to a specific number, but just thinking about seasonality. When we talked about some of the moving parts and polyurethanes, and you're seeing some pricing, would you expect seasonality to be normal in the fourth quarter? Should that be our base case? Or are there things that you would call out to say why it would be abnormal, maybe closer to stable versus what you typically expect? Thank you

Peter Huntsman: You expect seasonality to be normal in fourth quarter; should that be our base case, or are there things that you would call out to say why it would be abnormal, maybe closer to stable versus what you typically expect. Well, great question. My guess is probably as good as any, Josh. I would suspect this year that seasonality ought to be pretty normal compared to the last couple of years, and the exception of last year. And I base that fully on demand. It's been fairly steady. It hasn't been growing in great days. And it's been fairly steady.

Josh Spector: Would you expect seasonality to be normal in fourth quarter, should that be our base case? Or are there things that you would call out to say why it would be abnormal, maybe closer to stable, versus what you typically expect? Thanks.

Peter Huntsman: Yeah, great question. My guess is probably as good as any, Josh.

Speaker Change: Well, yeah, great question. My guess is probably as good as any, Josh.

Speaker Change: I would suspect this year that seasonality ought to be...

Speaker Change: pretty normal compared to the last couple of years, with the exception of last year.

Peter Huntsman: I would suspect this year that seasonality ought to be pretty normal compared to the last couple of years, with the exception of last year. And I base that solely on demand has been fairly steady, hasn't been going a great deal. It's been fairly steady. There's not a lot of inventory, just anecdotally, that I'm seeing in the supply chain. That's not to say that they're not pockets here and there and so forth.

Speaker Change: And I base that solely on demand has been has been fairly

Peter Huntsman: There's not a lot of inventory; just anecdotally, that I'm seeing in the supply chains. I don't say that they're not pockets here and there and so forth, but typically, at the end of the year, if you're sitting on a lot of inventory, customers in certain geographic areas of the company will take that opportunity to deplete inventory and improve their working capital at the end of the fourth quarter. And seasonally, that coupled with seasonality.

Speaker Change: steady, hasn't been growing a great deal.

Speaker Change: just anecdotally that I'm seeing in the supply chains. That's not to say that they're not pockets here and there and so forth, but typically at the end of the year, if you're sitting on a lot of inventory customers,

Peter Huntsman: But typically, at the end of the year, if you're sitting on a lot of inventory, customers in certain geographic areas of the company will take that opportunity to deplete inventories and improve their working capital at the end of the fourth quarter. That, coupled with seasonality. So from a seasonal point of view, probably a 100% chance of certainty that Christmas and New Year's will come. But there will be a slowdown. As far as whether there will be a massive drawdown of inventory and so forth, it doesn't feel like there's a lot of inventory in the system right now.

Speaker Change: Geographic areas of the company will take that opportunity to deplete inventories and improve their working capital at the end of the fourth quarter.

Peter Huntsman: So from a seasonal point of view, probably 100% chance of certainty that Christmas and New Year's will come about, there will be a slowdown. And as far as will there be a massive drawdown of inventory and so forth, there doesn't feel like there's a lot of inventory in the system right now.

Speaker Change: From a seasonal point of view, probably 100% chance of certainty that

Speaker Change: Christmas and New Year's will come about, there will be a slowdown.

Speaker Change: Will there be a massive drawdown of inventory and so forth?

Peter Huntsman: I think my biggest concern right now would be between now and the end of the year, where you've got kind of a couple of these big macro issues, be they geopolitical issues in the Middle East, U.S. elections, and so forth. Consumer confidence, volatility in the stock market, consumer confidence somehow tanks in the fourth quarter. That could have a reverberating impact on overall demand, and I think that, in my mind, is probably the biggest concern: uncertainty that's out there right now. But aside from that, I don't see at this point a lot of areas of uncertainty and supply that's sloshing around.

Peter Huntsman: I think my biggest concern right now would be between now and the end of the year, where you've got a couple of these big macro issues, either geopolitical issues in the Middle East, U.S. Elections and so forth. Consumer confidence, volatility and stock market, consumer confidence somehow, tanks in the fourth quarter; that could have a reverberating impact on overall demand. And I think that in my mind is probably the biggest uncertainty that's out there right now. But aside from that, I don't see at this point. I don't see a lot of areas of uncertainty in supply that's washing around.

Speaker Change: Ah, there doesn't!

Speaker Change: feel like there's a lot of inventory in the system right now. I think my biggest concern right now would be between now and the end of the year where you've got kind of a couple of these big macro issues, be they geopolitical issues in the Middle East, U.S. elections and so forth. Consumer confidence, volatility in the stock market, consumer confidence somehow tanks in the fourth quarter, that could have a reverberating impact on overall demand.

Speaker Change: And I think that, in my mind, is probably the biggest...

Speaker Change: Uncertainty that's out there right now, but aside from that I don't see at this point I don't see a lot of areas of uncertainty and supply that's sloshing around.

Josh Spector: Thanks, that's helpful. And I just wanted to follow up on the point around cash deployment. So, you know, while your leverage is higher now with depressed earnings, does that really delay any deployment into buybacks or M&A? I mean, I guess if you have normal seasonality, you're probably still on the fours through the rest of this year. So, how do you think about that?

Joshua Spector: Thanks, that's helpful. And I just wanted to follow up on the point around cash deployment. So, you know, while your leverage is higher now with depressed earnings, does that really delay any deployment into buybacks or M&A? I mean, I guess if you have normal seasonality, you're probably still on the fours through the rest of this year. So how do you think about that?

Speaker Change: Thanks, that's helpful. And I just wanted to follow up on the point around cash deployment. So, you know, while your leverage is higher now with depressed earnings, does that really delay any deployment into buybacks or M&A? I mean, I guess if you have normal seasonality, you're probably still on the fours through the rest of this year. So how do you think about that?

Peter Huntsman: I think the cash discipline you've seen in the first half of this year will most likely continue into the second half of this year. I don't think that there'll be a lot of change therein.

Phil Lister: I think the cash discipline you've seen in the first half of this year will most likely continue over to the second half of this year. I don't think there'll be a lot of change there in. Yes, we're going to be very disciplined on capital spend. We're going to be spending freely on areas around safety and reliability. That's how life is to operate. But discretionary spending and so forth, we're going to continue to be very focused on limiting that. If we do M&A, it's going to have to be something that fits very well, that makes a lot of sense of integration and shareholder value creation.

Speaker Change: I think the cash discipline you've seen in the first half of this year will most likely continue over to the second half of this year. I don't think there will be a lot of change therein.

Peter Huntsman: Yes, we're going to be very disciplined on capital spend. We're going to be spending freely on areas around safety and reliability. That's our license to operate. Discretionary spending and so forth; we're going to continue to be very focused on limiting that. If we do M&A, it's going to have to be something that fits very well, that makes a lot of sense in terms of integration and shareholder value creation. We want to make sure that we're able to safeguard the dividend and the balance sheet.

Speaker Change: Yes, we're going to be very disciplined on capital spend. We're going to be spending freely on areas around safety and reliability. That's our license to operate, you know, but discretionary spending and so forth. We're going to continue to be very focused on limiting that. If we do M&A, it's going to have to be something that fits very well, that makes a lot of sense of integration.

Speaker Change: and shareholder value creation and we want to make sure that we are able to guard the dividend and the balance sheet.

Phil Lister: And we want to make sure that we are able to guard the dividend, then the balance sheet. As Peter says, I mean, our dividend right now is at 4.5%, so it's pretty competitive overall from that perspective. And you're right, Josh. I mean, our leverage, net debt leverage, it's four times really of trough, trough EBITDA. I think we'd see ourselves at one and a half billion dollars out of net debt. And if you do average cycles EBITDA, that'll bring us down to the low R2 level, which is what we would try and ensure over and over again.

Philip Lister: Yeah, and as Peter says, I mean, our dividend right now is at 4.5%, so it's pretty competitive overall, from that perspective. And you're right, Josh, I mean, our leverage, our net debt leverage is four times, really, of through EBITDA. I think we'd see ourselves at about $1.5 billion in net debt. And if you do sort of average cycles, EBITDA, that'll bring us down to below our R2 level, which is what we would try and ensure over a cycle.

Speaker Change: Yeah, and as Peter says, our dividend right now is at 4.5%, so it's pretty competitive.

Peter Huntsman: but overall from that perspective. And you're right, Josh. I mean, our net debt leverage is four times really of trough.

Trott-Ebert-Dar: Trott-Ebert-Dar, I think we'd see ourselves at about 1 and 1 half billion dollars of net debts, and if you do sort of average cycles, EBIT-DAR, that'll bring us down to below our 2 level, which is what we try and ensure over a cycle.

Philip Lister: Thank you. The next question is coming from Aleksey Yefremov from KeyBank Capital Markets. Your line is now live.

Aleksey Yefremov: Next question is coming from Aleksey Yefremov from Keybank Albumarka, Driliner Zallah.

Speaker Change: Thank you. Next question is coming from Alexei Yefremov from Key Bank Capital Markets. Your line is now live.

Peter Huntsman: Good morning, everyone. Peter, I was hoping you could update us on your spray foam story. How is your business doing this year? And if that business overall is gaining share from other forms of insulation? Well, I think when I look at the comparison to spray foam versus other products, I look at it first from a very macro basis. And I look at some of the earnings of our peers and so forth. It feels like it's a pretty swagish area of demand right now. And, you know, we're optimistic about some of the government initiatives and standards and so forth that have been set that are becoming in through 2025.

Aleksey Yefremov: Good morning, everyone. Peter, I was hoping you could update us on your spray foam story. How is your business doing this year? And if that business overall is gaining share from other forms of insulation?

Alexei Yefremov: Good morning everyone. Peter, I was hoping you could update us on your spray foam story. How's your business doing this year and if that business overall is gaining share from other forms of insulation?

Peter Huntsman: Well, I think, you know, when I look at the comparison of spray foam versus other products, I look at it first on a very macro basis. And I look at some of the earnings of our peers and so forth. It feels like it's a pretty sluggish area of demand right now. And, you know, we're optimistic about some of the government initiatives and standards and so forth that have been set that will be coming in through 2025.

Peter Huntsman: Well, I think, you know, when I look at the comparison to spray foam versus other

Peter Huntsman: products. I look at it first from a very macro basis.

Speaker Change: and I look at some of the earnings of our peers and so forth, it feels like it's a pretty sluggish.

Speaker Change: area of demand right now.

Speaker Change: and, you know, we're optimistic about some of the government initiatives and standards and so forth that have been set that will be coming in through 2025.

Peter Huntsman: There'll be, you know, as those standards, tax issues, building codes, and so forth really hit the bottom line. I'm quite optimistic about what I see in the pipeline. Presently, you know, higher crude prices, which is kind of where your polyurethane foam is based versus your natural mineral fibers, which are largely based on energy and natural gas prices. It's a competitive market out there right now.

Peter Huntsman: There'll be, you know, as those standards, tax issues, building codes and so forth really hit the bottom line. I'm quite optimistic about what I see in the pipeline. Presently, you know, the higher crude prices, which is kind of where your polyurethane foam is based versus your natural mineral fibers, which are largely based on energy and natural gas prices. It's a, it's a competitive market out there right now.

Speaker Change: I'm quite optimistic about what I see in the pipeline.

Speaker Change: And presently, you know, the higher crude prices.

Speaker Change: which is kind of where your polyurethane foam...

Speaker Change: is based versus your natural mineral fibers, which are largely based on energy, and natural gas prices. It's a competitive market out there right now.

Peter Huntsman: Thanks, Peter. And you reminded us of your commercial versus residential real estate exposure in the US and prepared remarks.

Aleksey Yefremov: Thanks, Peter. And you reminded us of your commercial versus residential real estate exposure in the US and prepared remarks. I was hoping to ask you if you see any signs of a slowdown in commercial real estate and also tell us what the breakdown between maintenance and new is within commercial.

Speaker Change: Thanks, Peter. And you reminded us of your commercial versus residential real estate exposure in the U.S. in prepared remarks.

Peter Huntsman: I was hoping to ask you if you see any signs of slowdown in commercial real estate and also tell us what is the breakdown between maintenance and new within commercial? Yes, it's a little commercial in North America, just looking at the revenues. It's, it's really about, you know, the commercial side, which makes up about 40% of overall business, 45% overall, North American polyurethane's business of that. It'll be split about one third retrofit, two thirds new. Again, that's commercial.

Speaker Change: I was hoping to ask you if you see any signs of slowdown in commercial real estate and also tell us what is the breakdown between maintenance and new within commercial?

Peter Huntsman: Yes, it's really commercial in North America, just looking at the revenues. It's really about, you know, on the commercial side, which makes up about 40% of our overall business, 45% of our overall North American polyurethanes business. Of that, it'll be split about one-third retrofit, two-thirds new. Again, that's commercial.

Speaker Change: Yes, it's really commercial in North America, just looking at the revenues. It's really about...

Speaker Change: You know, on the commercial side, which makes up about 40% of our overall business, 45% of our overall North American polyurethanes business. Of that, it'll be split about 1 3rd retrofit, 2 3rds new, again, that's commercial.

Peter Huntsman: When I look at residential, that's making up about 55% of our polyurethanes business in North America on a revenue basis. That's going to be about. Of that number, it'll be about three-quarters that will be new, and one-quarter that will be retrofit. Thank you. The next question is coming from John Roberts.

Peter Huntsman: When I look at residential, that's, that's making up about polyurethane's business in North America on a revenue basis. That's making up about 55%, and of that, that's going to be about that number. It'll be about three quarters. That will be new and one quarter. That will be retrofit.

Speaker Change: When I look at residential that's that's making up of our polyurethanes business in North America on a revenues basis

Speaker Change: That's making up about...

Speaker Change: Fifty-five percent.

Speaker Change: And of that, that's going to be about, of that number, it'll be about three quarters that will be new and one quarter that will be retrofit.

Operator: Thank you. The next question is coming from John Roberts from Mizzou Security. Your line is now live. Thank you, Peter.

John Roberts: Next question is coming from John Roberts from Azure Security. Your line is now live. Thank you, Peter.

Speaker Change: Thank you. Next question is coming from John Roberts from Mizzou Security. Your line is now live.

John Roberts: In advanced materials, what kind of vertical integration are you interested in?

Peter Huntsman: In advanced materials, what kind of vertical integration are you interested in? I assume it's primarily downstream and not going back into the upstream. No, we spent years getting out of the upstream. It'll definitely not, well, I said never say never, but it'd be in cold day and health with first to go upstream. But I don't know the temperature gauge in Hell, so I can't. But no, it certainly is downstream. It certainly is lateral. I think look at our last couple of acquisitions, and I think we've been able to go lateral. We've been able to buy some chemistries and so forth that have enhanced our core business in advanced materials.

John Roberts: Thank you, Peter. In advanced materials, what kind of vertical integration are you interested in? I assume it's primarily downstream and not going back into the upstream?

Peter Huntsman: No, we spent years getting out of the upstream. It'll definitely not. Well, I should never say never, but it'd be a cold day in hell for us to go upstream. But I don't know the temperature gauge in the house, so I can't look at that.

Speaker Change: No, we spent years getting out of the upstream. It'll definitely not, well I should never say never, but it'd be a cold day in hell for us to go upstream.

Peter Huntsman: But no, it certainly is downstream. It certainly is lateral. I think about our last couple of acquisitions, and I think we've been able to go lateral. We've been able to buy some chemistries and so forth that have enhanced our core business in advanced materials. And I'd like to just go further downstream.

Speaker Change: But I don't know the temperature gauge

Speaker Change: [inaudible]

Peter Huntsman: And I'd like to go further downstream.

Speaker Change: and Advanced Materials, and I'd like to just go further downstream.

John Roberts: Then what has to happen for the long-term effective tax rate to come down to 22 to 24 percent? Is that just geographic normalization? Yes, it is exactly right, John. I mean, we should have 22 to 24 percent. I think as we move back towards mid-Fyco, EBITDA, as you'll see, that coming down. We're actually 23 percent in the second course; we were 27 percent here today. But it's exactly that.

Speaker Change: And then what has to happen for the long-term effective tax rate to come down to 22 to 24 percent? Is that just geographic normalization?

Operator: David Begleiter, Unknown Executive, Salvator Tiano, Unknown Executive, Salvator Tiano

Speaker Change: Yes, it is. Exactly right, John. I mean, we've said 22 to 24 percent, I think, as we move...

Speaker Change: mid-cycle EBITDAs, you'll see that coming down. We're actually 23% in the second quarter, we're 27% year-to-date. It's exactly that. And what we need to see is an improvement in profitability in Europe so ultimately, you can use some of those NOLs.

Peter Huntsman: And what we need to see is a significant improvement in probability in Europe, so ultimately you can use some of those NLs.

Kevin Mccarthy: Next question today is coming from Kevin McCarthy, from Vertical Research Partners; your line is our life. Thank you, and good morning. I wanted to ask you, Peter, regarding performance products, your volume through 8 percent in the quarter, and I think in the prepared remarks, released last night, you referenced some seasonality, but also modest restocking. And I was curious about that. We haven't heard a lot of chemical companies pointing to restocking. You called out coatings and adhesives, and fuels and lubricants.

Kevin Mccarthy: Thank you. The next question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Speaker Change: Thank you. Next question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Kevin Mccarthy: Thank you, and good morning. I wanted to ask you, Peter, regarding performance products: your volume grew 8% in the quarter. And I think in the prepared remarks released last night, you referenced some seasonality, but also modest restocking, and I was curious about that. We haven't heard a lot of chemical companies pointing to restocking. You called out coatings and adhesives, fuels, and lubricants. So I was wondering if you could expand on that and maybe comment on your confidence or visibility that it's restocking related versus, you know, underlying demand polar green shoots.

Speaker Change: chemical companies pointing to restocking. He called out coatings and adhesives and fuels and lubricants. So I wonder if you could expand on that and maybe comment on...

Peter Huntsman: So I forget to expand on that and maybe comment on your confidence or visibility that it's restocking-related versus, you know, underlying demand, pull, or green shoots. Yeah, Kevin, a great question. I think it's - I think in the last earnings call quarter ago, I said that, you know, you've got restocking, you've got demand. Higher demand is going to participate, is going to precipitate, higher restocking. And eventually, if you look at kind of the bell code with each of those on each end, you're going to get, in this gray area in the middle. And that's, I think, an area where we always struggle.

Speaker Change: your confidence or visibility that it's restocking related versus you know, underlying demand polar green shoots.

Peter Huntsman: Yeah, Kevin, a great question. I think it's, I think in the last earnings call a quarter ago, I said that you know, you've got restocking, you've got demand, higher demand is going to participate, is going to precipitate higher restocking. And eventually, if you look at kind of the bell curve with each of those on each end, you're going to get into this gray area in the middle. And that's, I think, an area where we always struggle.

Speaker Change: Yeah, Kevin, a great question. I think it's, I think in the last earnings call a quarter ago, I said that, you know, we've got restocking, you've got demand.

Speaker Change: Higher demand is going to precipitate.

Peter Huntsman: But typically, as demand improves, you are going to see people's confidence improve, and restocking will improve. So, when I talked about modest restocking, we're seeing modest demand improvement coming back. A lot of that, particularly around some of the ag business and construction business around performance products, is going to be around your spring planting, and there's going to be some seasonality in that. That's why I pointed out in the third quarter that we'll probably see some seasonality headwinds in performance products.

Peter Huntsman: But typically, as demand improves, you are going to see people's confidence improve, and restocking will improve. So when I talked about modest restocking, we're seeing modest demand improvement coming back. A lot of that, particularly around some of the ag business in construction business around performance products, is going to be around your spring planting, and that's going to be some seasonality in that.

Speaker Change: A lot of that particularly around some of the ag business and construction business around performance products is going to be around your spring planting and there's going to be some seasonality in that. As I pointed out in third quarter, we'll probably see some seasonality headwinds in performance products.

Peter Huntsman: That's why I point out in third quarter will probably season seasonality headwinds in performance products. But we're also saying a nice return in demand in the fuel and loops additives reminds you that as we look back on 2023, that was an end of the business that unexpectedly got hit very hard. But I should say unexpectedly because a lot of that was inventory-driven. And I think that we've seen inventories normalize, return to demand, come back. And that was a nice area of recovery, which on this past quarter.

Speaker Change: But we're also seeing a nice return in demand in the fuel.

Peter Huntsman: But we're also seeing a nice return in demand for fuel and lubricant additives. And just to remind you that as we look back on 2023, that was an end of the business that unexpectedly got hit very hard. I should say unexpectedly, because a lot of that was inventory-driven. And I think that we've seen inventories normalize, return to demand, and come back, and that was a nice area of recovery we saw in this past quarter.

Speaker Change: and Lube's additives.

Speaker Change: reminds you that as we look back on 2023, that was an end of the business that unexpectedly got hit very hard. I

Unknown Executive: That's helpful.

Kevin Mccarthy: That's helpful. And then, sticking with performance products, I wanted to come back to malaic anhydride. I think you mentioned some of the challenges there in Europe related to import pressure into Europe from Asia. I guess my question is, do you think that that dynamic will improve in the second half of the year, given industry dynamics, as well as, you know, freight rates from Asia to Europe? One of the consultants, at least, I think, pointed to a higher contract price for Malaik in Europe than 3Q versus 2Q. So I'm not sure if you saw that as well or what your expectations are there, but it'd be helpful to understand a bit better. I- I-

Peter Huntsman: And then sticking with performance products, I wanted to come back to Blake and Hydra. I think you referenced. Some of the challenges there in Europe related to import pressure into Europe from Asia. I guess my question is, do you think that that dynamic will improve in the back half of the year given industry dynamics as well as the freight rates from Asia to Europe? One of the consultants, at least I think, pointed to a higher contract price for Malayak in Europe in 3Q versus 2Q. So, not sure if you saw that as well or what your expectations are there, but it would be helpful to understand a bit better.

Speaker Change: That's helpful. And then sticking with performance products, I wanted to come back to malaic anhydride, I think you referenced.

Speaker Change: given industry dynamics as well as you

Speaker Change: pointed to a higher contract price for Malaik in Europe in 3Q versus 2Q. So not sure if you saw that as well or what your expectations are there, but it'd be helpful to understand a bit better.

Peter Huntsman: I have not seen any indications in the third quarter so far, and even going into the fourth quarter, that give me a whole lot of optimism around pricing for Malaik in Europe. That's not to say that we're opposed to that price improving. I'm just not seeing those sort of indications.

Peter Huntsman: I have not seen any indications in the third quarter so far. It's even going in the fourth quarter. Give me a whole lot of optimism around pricing for Malayak in Europe. That's not to say that we're opposed. That price is improving. I'm just not seeing those sort of indications.

Speaker Change: I have not seen any indications in the third quarter so far.

Speaker Change: and even going into fourth quarter, give me a whole lot of optimism around pricing.

Speaker Change: for Malayic in Europe. That's not to say that we're opposed to that price improving. I'm just not seeing those sort of indications.

Peter Huntsman: I think it might be more of a 2025 event. Look, you're going to see when you see some of these trade routes change and shift between going up to the Suez Canal versus going around Africa and so forth. That's going to cause a month or two of pricing volatility, supply and demand. Eventually, the product is going to get there. When you start, you take a bunch of shipments and you put them around Africa versus up through the canal. You'll reopen the canal. You can actually see it yesterday. We get too much coming in at the same time.

Peter Huntsman: I think it might be more of a 2025 event. Look, you're going to see, when you see some of these trade routes change and shift between going up through the Suez Canal versus going around Africa and so forth, that's going to cause a month or two of pricing volatility, supply and demand. But eventually, the product's going to get there, right? And when you start taking a bunch of shipments and putting them around Africa versus up through the canal, and you reopen the canal, you can actually get – you could see a scenario where you get too much coming in at the same time.

Speaker Change: [inaudible]

Peter Huntsman: So I wouldn't put a whole lot of long term cure, if you will, around shipping costs and logistics and routing and so forth. Fundamentally, as the Chinese economy improves and Chinese domestic demand improves, more of that Malayak will stay in China and will not need a home in Europe. And that will probably be what will help European prices more than anything else.

Peter Huntsman: So I wouldn't put a whole lot of long-term cure, if you will, around shipping costs and logistics and routing and so forth. Fundamentally, as the Chinese economy improves and Chinese domestic demand improves, more of that Malaik will stay in China and will not need a home in Europe. And that will probably be what will help European prices more than anything else.

Speaker Change: coming in at the same time.

Speaker Change: cure, if you will, around shipping costs and logistics and routing and so forth. Fundamentally, as the Chinese economy improves,

Speaker Change: and Chinese domestic demand improves, more of that molaic will stay in China and will not need a home in Europe. And that will probably be what will help European prices more than anything else.

Operator: Thank you. The next question is coming from Hassan Ahmed from Olympic Global.

Hassan Ahmed: Next question is coming from Hassan Ahmed from Malayak Global. Your line is now live. Morning, Phil and Peter. Peter, a question I just wanted to revisit volumes in the polyurethane segment. Obviously, on a percentage basis, strong growth over there, particularly in North America. I'm just trying to get a better sense of, despite you mentioned that obviously we're coming off of a low base.

Speaker Change: Thank you. Next question is coming from Hassan Ahmed from Alembic Global. Your line is now live.

Hassan Ahmed: Your line is now live...

Hassan Ahmed: Morning, Phil and Peter. Peter, I have a question. I just wanted to revisit volumes in the polyurethane segment. You know, obviously, on a percentage basis, you know, strong growth over there, particularly in North America. I'm just trying to get a better sense of, you know, despite, you know, you mentioned that obviously we're coming off of a low base. You know, how far away are we, be it by region, be it globally, from reaching more normalized levels of volumes?

Hassan Ahmed: you know obviously on a percentage basis you know strong growth over there particularly in North America. I'm just trying to get a better sense of you know despite you know you mentioned that obviously we're coming off of a low base

Peter Huntsman: How far away are we, be it by region, be it globally, from reaching more normalized levels of volumes? I think that is a good question. I think that you've got to see that normalization. Again, we need to see recovery in the construction, residential construction markets.

Peter Huntsman: I think that is a good question. I think that you've got to see that normalization. Again, we need to see recovery in the construction, residential construction markets. And I believe that as we see that gradual improvement take place, it's certainly something that we would hope would have returned in 2025, as we kind of get through the rest of this year.

Speaker Change: I think that is on good question. I think that you've got to see that normalization. Again, we need to see recovery in the construction, residential construction markets, and I believe that as we see that gradual improvement take place.

Peter Huntsman: And I believe that as we see that gradual improvement take place, it's certainly something that we would hope would have returned in 2025, as we kind of get through the rest of this year. Understood. And just sort of, you know, carrying on with the construction side of things, you know, obviously we saw the rate cut on the ECB side, and it seems, you know, the rate cuts imminent here in the US. I mean, you know, internally as you take a look at, you know, historic trends in your own sort of numbers and the like. I mean, what sort of lag is there between a rate cut and you guys seeing the benefit from that in your, you know, demand numbers, profitability numbers, and the like?

Speaker Change: It's certainly something that we would hope would have returned in 2025, as we kind of get through the rest of this year.

Hassan Ahmed: Understandable. And just sort of, you know, carrying on with the construction side of things. Obviously, we saw the rate cut on the ECB side, and it seems, you know, rate cuts are imminent here in the U.S. I mean, internally, as you take a look at, you know, historic trends and your own sort of numbers and the like, what sort of lag is there between a rate cut and you guys seeing the benefit from that in your, you know, demand numbers, profitability numbers, and the like?

Speaker Change: and it seems, you know, the rate cuts imminent here in the U.S. I mean, you know, internally as you take a look at, you know, historic trends and your own sort of numbers and the like...

Speaker Change: I mean, what sort of lag is there between a rate cut and you guys seeing the benefit from that in your, you know, demand numbers, profitability numbers and the like?

Peter Huntsman: I think it's probably, depending on the time of year, the size of the rate cut and so forth, but you're probably talking about two quarters or so. It's not going to be the next week or the next month. But as the rate cuts come down, you will see optimism among builders. You will see a gradual pickup in inventory, and so forth, as people feel more confident about investing in the future. And again, depending on the time of season and the size of the cut, you're probably looking at at least two quarters to really see an impact on something like that.

Peter Huntsman: I think it's probably, depending on the time of year, the size of the rate cut, and so forth. But you're probably talking about two quarters or so. It's not going to be the next week or the next month. But is the rate cuts come down? You will see optimism among builders. You will see gradual pickup is of inventory and so forth. It's people feel more confident about investing in the future. And again, depending on the time of season and the size of the cut. You're probably looking at least two quarters to build an impact on the money.

Speaker Change: I think it's probably depending on the time of year, the size of the rate cut and so forth. But you're probably talking about two quarters or so. It's not going to be the next week or the next month. But as the rate cuts come down, you will see optimism among builders. You will see gradual pickup of inventory and so forth, as people feel more confident about investing in the future. Again, depending on the time of season and the size of the cut, you're probably looking at at least two quarters, to really see an impact on something like that.

Unknown Executive: Thank you.

Operator: Thank you. The next question is coming from Lawrence Alexander from Jeffreys. Your line is now live.

Next question is coming from Laurence Alexander from Jeffries; your line is now live.

Speaker Change: Thank you. Next question is coming from Lawrence Alexander from Jeffries. Your line is now live.

Unknown Speaker: Hi, this is Dan Rizwan from Lawrence. Thanks for taking my question. You mentioned being disciplined with CAPEX. I was just wondering if you have ample capacity to meet any resurgent needs or resurgent demand that could occur after rate cuts or if things go back to a kind of stronger restock cycle in all three segments.

Dan Rizzo: Hi, this is Dan Rizzo on for Lawrence. Thanks for taking my question. You mentioned being disciplined with CAPEX. I was just wondering if you have ample capacity to meet any resurgent needs, resurgent demand that could occur after rate cuts or if things go back to a kind of a stronger resoc cycle in all three segments.

Peter Huntsman: Yeah, good question, Dan. The simple answer is absolutely.

Speaker Change #100: Good question, Dan. Simple answer is absolutely. We're poised, set, and ready to go.

Peter Huntsman: We're poised. Set and ready to go. Meeting of the Man-Center.

Unknown Speaker: Unknown Speaker Okay. And then you also mentioned you're more dependent upon commercial construction, and the rate cut doesn't have as much of an effect. What do you think needs to happen from a macro standpoint to kind of, again, re-energize that region?

Speaker Change #100: [inaudible]

Speaker Change #102: Okay, and you also mentioned you're being more dependent upon commercial construction and the rate cut doesn't have as big an effect. What do you think needs to happen from a macro standpoint to kind of, again, re-energize that region?

Speaker Change #103: to re-energize the commercial construction.

Peter Huntsman: to re-energize the commercial construction, or Europe. Yeah, I believe that Europe, if the question's around Europe, is going to be a question as much around consumer confidence and rate cuts as it is around anything else, and consumer confidence in Europe is largely going to be predicated on everything from geopoliticals but particularly around energy pricing, energy competitiveness, and when you see your utility bills that are going up 40, 50, 100% year over year, that's a lot of disposable income that's going to pay for a failed energy policy.

Speaker Change #104: or Europe.

Speaker Change #105: Yeah, I believe that Europe, if the question is around Europe, is going to be a question as much around consumer confidence.

Speaker Change #105: and rate cuts as it is around...

Speaker Change #105: anything else. And consumer confidence in Europe is largely going to be predicated on everything from geopoliticals, but particularly around energy pricing, energy competitiveness.

Speaker Change #105: and when you see your utility bills that are going up 40, 50, 100% year over year, that's a lot of disposable income that's going to pay for a failed energy policy.

Operator: Thank you. The next question is coming from Matthew Blair from TPH. Your line is now live.

Speaker Change #106: Thank you. Next question is coming from Matthew Blair from TPH for Linus Now Live.

Matthew Blair: Thank you and good morning. Peter, can you talk about the dynamics on the ground in China for Huntsman's system? Is it fair to say that areas like housing and manufacturing are slowing? And how would you characterize autos in the region?

Matthew Blair: Thank you and good morning. Peter, can you talk about the dynamics on the ground in China for Huntsman's system? Is it fair to say the areas like housing and manufacturing are are slowing and how would you characterize autos in the region?

Peter Huntsman: I, you know, the auto side continues to be a strong demand for us. And, you know, we've got a lot of very good applications and relationships there with a number of the OEMs in the auto industry. I don't really see an area of decline. Obviously, we've seen areas of decline over the last year. So, particularly around residential and construction.

Speaker Change #108: I, you know, the auto side continues to be a strong demand for us.

Speaker Change #109: and we've got a lot of very good applications and relationships here with a number of the OEMs.

Speaker Change #110: in Ottawa. I don't really see an area of decline. Obviously, we've seen areas of decline over the last year or so, particularly around residential.

Speaker Change #110: and construction. I don't think those are particularly getting worse. We're just not seeing any recovery taking place.

Peter Huntsman: I don't think those are particularly getting worse. We're just not seeing any recovery taking place in those areas. But by and large, we are seeing things stay pretty steady. Infrastructure continues to be decent for us, the automotive industry continues to be strong, and consumer confidence and exports, I think, are staying steady.

Speaker Change #110: in those areas, but by and large...

Speaker Change #110: We are seeing, you know, we're seeing things stay pretty steady. Infrastructure continues to be, you know, decent for us. Automotive continues to be strong and consumer confidence and exports, I think, are staying steady.

Peter Huntsman: Sounds good. And then on ADMAT, I think the slides mentioned that aerospace sales are rising due to interior adhesive applications. Do you have any examples of this? And is this something that only applies to wide-body planes, or are you making inroads into other planes as well?

Speaker Change #111: Sounds good. And then on ADMAT, I think the slides mentioned that aerospace sales are arising due to interior adhesive applications. Do you have any examples of this?

Speaker Change #112: Is this something that only applies to the wide-body planes, or are you making inroads into other planes as well?

Peter Huntsman: Now it's safe to say that it's in both wide body and narrow body, and we're seeing a lot of this in the overhead bins and in the galley areas and so forth. When you think of an airline and those large, comfortable bathrooms they have there, all of the components and sidings and everything that are that are glued in there. It's kind of a new and growing area of application for us when we think about aerospace, traditionally, it's been a lot around the composite materials going on on the outer shell and wing and so forth, and the interior adhesive applications. These typically take quite a while to qualify for, and we're seeing, you know, we've been working on that for some time, and we're seeing that our patience is paying off.

Speaker Change #113: No, it's safe to say that it's in both wide body and in narrow body. And we're seeing a lot of this in overhead bins.

Speaker Change #113: and in the galley areas and so forth.

Speaker Change #114: When you think of an airline and those large commodious bathrooms they have there, all of the components and sidings and everything that are glued in there, it's kind of a new and growing area of application for us when we think about aerospace for us. It's been a lot of, traditionally it's been a lot around the composite materials going on, on the outer shell and wing and so forth.

Speaker Change #114: adhesive applications. These typically take quite a while to qualify for these, and we're seeing, you know, we've been working on that for some time, and we're seeing, you know, the patience is paying off.

Operator: Thank you. The next question is coming from Arun Viswanathan from RBC Newsline.

Speaker Change #114: Thank you. Next question is coming from Arun Viswanathan from RBC News.

Operator: Operator, why don't we have this? It's a busy morning for a lot of people. Why don't I have this be the last question? And anybody else that has any other questions or anything, you're more than welcome to call Ivan or Christine.

Speaker Change #115: Operator, why don't we have this, it's a busy morning for a lot of people, why don't I have this be the last question and and anybody else that has any other questions or anything, you're more than welcome to call Ivan or Christine.

Operator: Certainly. Our final question today will come from Arun from RBC. Your line is now live.

Speaker Change #116: Certainly. Our final question today will come from Arun from RBC, your line is now live.

Arun Viswanathan: Great, thanks for taking my question.

Arun Viswanathan: I just wanted to go back to your earlier comments. I understand that the interest rates could help in North America.

Arun Viswanathan: I understand that the interest rates could help in North America and, you know, maybe in 25. But again, I think Hassan was asking maybe where you are kind of in your normal demand levels. Would you say that you're seeing demand at maybe, say, 50 percent of normal? Now, you know.

Speaker Change #118: uh... you know maybe in twenty five

Speaker Change #118: But again, I think Hassan was asking maybe where you are kind of in your normal demand levels. Would you say that you're seeing demand at maybe say 50% of normal or 60% of normal? How much recovery would you expect I guess over the next?

Speaker Change #119: a couple of years, and, you know, what's your visibility on, are there any markers that you've seen recently that would tell you that we're either improving incrementally or getting worse?

Peter Huntsman: Well, certainly, as we look at demands, and we break that down by segment for everything from appliances to composite wood, to flexible foam, insulation, elastomers, automotive spray foam, and we break that down on a case-by-case basis as we look at our internal capacity in the areas of construction, I would say that globally, it's going to vary a bit. We're probably somewhere in the low to mid-80% capacity utilization in those areas of what I would consider to be normalized run rates, so, again, some room for expansion, but certainly a lot better than where we were a year ago.

Speaker Change #120: Well, certainly, as we look at demands, and we break that down on a segment for everything from appliances to composite wood, to flexible foam, insulation, elastomers, automotive spray foam, and we break that down on a base-by-base, case-by-case basis, as we look at our internal capacity around the areas of construction, I would say that globally it's going to vary a bit. You're probably somewhere in the low to mid-80 percent.

Speaker Change #120: [inaudible]

Operator: We've reached the end of our question and answer session, and ladies and gentlemen, that does conclude today's teleconference and webcast, and we will disconnect your line at this time. And have a wonderful day. We thank you for your participation today.

Speaker Change #121: Thank you. We've reached the end of our question and answer session and ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.