Q3 2024 Huntsman Corp Earnings Call
Greetings and welcome to Huntsman Corporation 3rd quarter 2024 earnings conference call. At this time all participants around a listen only mode, a question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: I would now like to turn the conference over to your host, Ivan Marcuse. Thank you. You may begin.
Ivan Marcuse: Thank you, Robin. Good morning, everyone. Welcome to Huntsman's 3rd Quarter 2024 Attorney's Call. Joining us on the call today are Peter Huntsman, Chairman, CEO, President, Phil Lister, Executive Vice President, CFO.
Speaker Change: Yes, last night, November 4, 2024, after the U.S. equity markets closed, we released our earnings for the third quarter of 2024 via press release and posted to our website, Huntsman.com. We also posted a set of slides and detailed commentary discussing the third quarter 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, let me remind you that we may make statements about our projections or expectations for the future.
Speaker Change: 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. 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 or expectations.
We do not plan on publicly updating or revising any forward-looking statements during the quarter.
Speaker Change: We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income, or loss.
Speaker Change: and Peter Huntsman, Chairman, CEO.
Peter Huntsman: Ivan, thank you very much and thank you all for taking the time to join us this morning. We've got quite a few people in line for questions, so I'm just going to be very brief.
Peter Huntsman: The third quarter ended about where we expected it to finish, and we're now focused on the fourth quarter and year-end. We expected the year to be better than it's shaping up to be. There's still a number of positives as we move from quarter three to quarter four and year-end.
We said to many of you during our investor conferences, an improvement in North American housing and construction will be the single most impactful change in our earnings.
Speaker Change: I'm heartened to see that interest rates are dropping and both U.S. presidential candidates for making new housing may be part of the economic platform for improvement.
Speaker Change: We are hopeful that another rate cap between now and the end of the year will continue to improve the dynamic growth we're still seeing today. In addition to falling interest rates over the past few quarters, we've seen a return of more traditional NDI growth that exceeds the rate of GDP growth.
As we have said in past quarters, we need to see demand growth improve and capacity utilization rates increase before we see meaningful margin expansion.
The demand growth is moving in the right direction, but I was disappointed to see our recent Q4 NDI price increases get little traction with customers.
Speaker Change: We continue to see very low inventories across the board, and rising demand will eventually support price increases and margin expansion.
Speaker Change: Additionally, we see a record amount of global chemical assets, especially in Europe, that are on the market.
Speaker Change: I would personally be surprised if all of these assets are sold. So I imagine that very few of these are actually making money.
Given Europe's desire to rid itself of manufacturing, which I see reflected in its adherence to anti-growth energy and regulatory policies, I doubt the prospects will change any time soon.
Speaker Change: We may well see a number of facilities closed due to a combination of regulatory and high-cost structures.
Longer term, I think there will be a much-needed consolidation in a number of chemical products in Europe.
Speaker Change: Having returned recently from visiting government leaders, customers, and partners in Malaysia, China, Saudi Arabia, and Korea, I believe that these markets are seeing relatively low growth.
Speaker Change: But as they continue to sort out their conflicts and housing bubbles, we'll continue to see opportunities grow. 2025 should be a year of gradual improvement across Asia and the Middle East.
We continue to look at all of our production sites and examine our cost structures, supply agreements, and operating rates.
For the end of the year, we will be initiating a further 50 million dollar cost reduction program in our global polyurethane business.
Speaker Change: This is in addition to the 280 million dollars in costs we've taken out of the entire company over the past few years
Speaker Change: and energy efficiency in home and building materials.
Speaker Change: Well, too early to say much about 2025. I believe lower interest rates, pent-up housing demand, Asian stimulus announcements, lower inventories and greater political certainty in Europe and the U.S. all work towards improving market conditions.
Speaker Change: With that, Operator, why don't we open the lineup for any questions.
Speaker Change: Thank you. At this time we'll be conducting a question and answer session.
Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: We ask that you please limit to one question and one follow-up.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please, while we poll for questions.
Speaker Change: My first question comes from David Beglier with Deutsche Bank. Please proceed with your question.
David Beglier: Thank you. Good morning.
David Beglier: Peter, do you expect MDI assets in Europe to be closed in this iteration of restructuring?
Speaker Change: News.
Speaker Change: of Huntsman's restructuring? No, no, of competitors MDI assets.
Speaker Change: Oh, look, I simply have no idea what our competition is doing.
Speaker Change: Thank you.
Speaker Change: As I look around the world, you look at the the cost curve in Asia, I think given the size and the relative...
Speaker Change: recent instruction of the capacities of NDI in Asia.
Speaker Change: This is a relatively flat cost curve in Asia. I think Wanhua has an advantage just simply because of the scale.
Speaker Change: in an integration that they enjoyed, but it's a pretty flat cost curve. I think it's pretty similar in the US where you have
Speaker Change: a handful of players that all have about the same size facilities, single site locations and so forth. Europe continues to operate multiple smaller facilities and multiple, across multiple countries.
Speaker Change: And as I look at that, and you look at the raw material costs, energy costs,
Speaker Change: transportation costs, regulatory costs, everything else across Europe.
Speaker Change: U.S. vs. Asia vs. Europe, and certainly Europe is the outlier, but again, I haven't any idea what goes on in the competition.
Speaker Change: Very good. And just on your new restructuring program of polyurethanes, $50 million, can you detail the functions and regions where that cost is being removed from?
Speaker Change: Yeah, most of that is going to be in Europe. It will be centered around our automotive in construction. We'll be giving some more detail about this during our fourth quarter call in a couple of months.
Speaker Change: But safe to say, this will be about a $50 million cost savings over the next few years.
Speaker Change: The majority of this ought to be seen on a run rate basis by the end of next year. And the cost, typically, when you're looking at these sort of programs, it pretty much costs you the same as the savings. So there's about a one-year, give or take a quarter, a one-year payback on this.
Speaker Change: Thank you.
Speaker Change: Thanks for watching!
Speaker Change: Our next question comes from Jeff Sikakis with J.P. Morgan. Please proceed with your question.
Jeff Sikakis: Thanks very much. In the quarter you received a dividend of $35 million related to the SLIC China JV acquisition.
Jeff Sikakis: I take it that went through cash flow from operations and are there any more dividends to come from that source?
Speaker Change: Yeah, thanks for the question, Jeff. Correct, $35 million from...
Jeff Sikakis: The liquidation of the Chinese joint venture, you'll recall we did that restructuring.
Speaker Change: in the first quarter of this year. We're now moving through the liquidation process.
Speaker Change: liquidated about $65 million. $65 million of that can be recorded as a dividend which impacts free cash flow.
Jeff Sikakis: and Alistair Duggan, which is open itself.
Jeff Sikakis: over the lifetime of the JV, $30 million was simply capital re-injection. There's about $300 million RMB left to liquidate out of that JV. We expect that to occur during 2025. None of that will be recorded as a dividend. It can't be for accounting purposes, and therefore it wouldn't impact recash flow.
Speaker Change: Thank you. Bye bye.
Speaker Change: Okay.
Speaker Change: Oh
Speaker Change: and in terms of your, can you describe your volume expectations in MDI for the fourth quarter, you know, in general and by region?
Speaker Change: Thank you for watching!
Speaker Change: I think that as we look at this, you know, we'll see a seasonal decline that's usually about 15 to 20 percent depending on year-end inventory stock and so forth.
Speaker Change: Jeff, I'm not trying to evade a direct answer on this, but typically in the middle of November, in the next week or two,
Speaker Change: we'll start to see, you know, just how much...
Speaker Change: People are trying to cut inventories and try to preserve working capital and so forth. And it literally, as you start to see this in the last four to six weeks of the year,
Speaker Change: of Colorado.
Speaker Change: of Merritt, California.
Speaker Change: Thank you. Bye. Bye.
Speaker Change: Thank you. Bye.
Speaker Change: Our next question comes from Patrick Cunningham with Citi. Please proceed with your question.
Speaker Change: Well, I think that if we look at pricing for MDI in Q4,
Patrick Cunningham: It's looking pretty flat.
Patrick Cunningham: spot market, you know, a little bit of upward.
Speaker Change: Pressure in China, but as I look at the stock prices in Europe and the U.S., it's flat to down a little bit.
Speaker Change: and tracking the cost of benzene. So, I think we'll pick up a little bit of benefit from benzene but that will not wholly but partially be offset by flat pricing and probably higher natural gas prices.
Speaker Change: Thank you. Bye-bye.
Speaker Change: Very helpful. And then in performance products, you cited sales volume increases in construction, you know, coatings and adhesives. Was this in line with your expectations or are you outperforming the market here or is this mostly the absence of de-stocking?
Speaker Change: I think in performance products, right now, the good side about that business is its margins on a per pound basis remain fairly strong. Our biggest issue there is around demand.
Speaker Change: and you typically see, again, seasonality in that business like you do other businesses.
Speaker Change: Our next question comes from Mike Sison with Wells Fargo. Please proceed with your question.
Mike Sison: Hey guys
Mike Sison: Good morning. Peter...
Mike Sison: You know, for polyurethane, you are getting volume growth, the earnings leverage, EBITDA leverage just doesn't seem to be kicking in yet. What level of volume or sales do you think you need to see to start seeing the appropriate leverage for that business going forward?
Speaker Change: Thank you.
Speaker Change: It's an excellent question and one that we ask ourselves.
Speaker Change: quite often as well, is we really see in this market, we start getting leverage when capacity utilization gets, you know, in the high 80s. Now, you know, exactly what segment of the market does that have to hit and so forth, that's
Speaker Change: of the World President.
Speaker Change: Yeah, if we continue to see this sort of growth and demand and recovery in MDI that we've seen this past year, I believe that we ought to be seeing, you know, some expansion in pricing and margins early in 2025. Again, that's predicated upon demand continuing to improve, particularly in North America around housing.
Speaker Change: But it's, look, we're coming off of a very low base of where we were last year. So when we look at the demand, I'm happy with the demand I've seen in 2024 in MDI, but we need to see that continue to get out of the hole that we got into the end of 2022 and 2023. And of course, during that time period, we've also seen capacity additions that have come into the market.
Speaker Change: So, I think all of that offsetting each other as we look into 2025.
Speaker Change: I'm hopeful that as we kick off 2025, post-Chinese New Year's, start getting into construction season, hopefully we'll start to see orders in the February-March time frame start picking up materially.
Speaker Change: Great, and a quick follow-up on 2025. I know it's a little bit early to give a specific outlook. A lot of the consultants do see margin expanding quite a bit potentially. Do you sort of agree with that cadence and, you know, what type of
Speaker Change: EBITDA potential or power do you think you should see in polyurethanes if things pick up next year?
Speaker Change: I think, again, I would agree with that. I mean, we talk about margin expansion 2025. A lot of that's going to be predicated, again, about what sort of...
Speaker Change: Demand we see in North America housing
Speaker Change: China we've got to see consumer confidence return and Europe's just got to see some sort of return to some element of sanity when it comes to manufacturing
Speaker Change: policy around energy and and so forth.
Speaker Change: and Europe continues to lag behind.
Speaker Change: I do believe fundamentally that we're seeing a lot of capacity utilization.
Speaker Change: and probably a couple of other materials.
Speaker Change: that are moving to the U.S., moving to the Middle East, or moving to Asia.
Speaker Change: I think that you are seeing a global dislocation from Europe to other regions, and so you might actually see an improvement take place in North America and Asia before you do Europe. So, I'm not sure that it's necessarily going to be an even tide in all regions simultaneously, as we've seen in the past.
Speaker Change: Our next question comes from Vincent Andrews with Morgan Stanley. Please proceed with your question.
Vincent Andrews: Hi. Thank you. Good morning, everyone. Your prepared comments on autos, well, certainly it wasn't what you expected.
Vincent Andrews: You didn't seem to grow in the third quarter and you had stable EU volumes and it also looked like autos were better for you in polyurethanes versus
Speaker Change: advanced material. So I wonder if you could just comment on all that, particularly the EU piece, just given how weak that market seemed to be, and what the sort of sequential outlook is into the fourth quarter and maybe a bit into the 25, to the extent you have a view.
Speaker Change: a little bit of a slowing during the quarter. If you break down our exposure around the world for also, which is about 15% of our portfolio, about 40% is into Asia, and that's been relatively strong, and relatively strong in our polyurethanes.
Speaker Change: Division.
Speaker Change: division for us, about 30% into Europe, that slowed a little, and then 20% into North America, 10% rest of the world, and North America definitely did come off.
Speaker Change: as we went through the third quarter and as we head into the fourth quarter here. I mean, look, we look at the numbers. We had 90 million production bills.
Speaker Change: last year in 2023, I think most of the forecast for about 88 million for this year, so a little bit down overall. In general, we're agnostic to whether it's ice, whether it's PEV, or whether it's hybrid, and are able to pick up.
Speaker Change: pick up sales across either platform. But in general, a little bit slower, but in general, pretty good for us in Asia.
Speaker Change: And Peter, if I could just follow up, I'd be curious to get your view on on interest rates, you know I think we all want them to come down but
Speaker Change: So far we haven't seen as much help on the back end of the curve I think is as people would hope for so if you think is you're looking at 25 If we get into a situation where maybe the front end comes down a lot more than the back end of the curve Where do you think that helps you and where do you think that you know, maybe slows down the pace of recovery?
Speaker Change: Well, it's got to be able to hit in both areas. One, it's got to be able to hit on consumer confidence.
Speaker Change: and consumer spending in that.
Speaker Change: singularly has been the engine of growth for the U.S. economy.
Speaker Change: Yeah, there are a lot of levers of the U.S. economy, but I believe that the consumer confidence has been probably the biggest differential between U.S. and Asia has been the U.S. consumer. They continue to spend money on a smaller scale around consumer confidence items.
Speaker Change: Shipping and so forth versus larger scale, which I would consider that to be Home buying and and business charges Phil mentioned in automotive and the and the
Speaker Change: particularly in the third quarter.
Speaker Change: We need one to continue to keep the U.S. consumer stimulated in spending. We need the other one, more importantly I believe for our company, mortgage rates need to come down to stimulate housing demand.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Frank Mish with Fernham Research. Please proceed with your question.
Frank Mish: Thank you and good morning. Peter, I saw a news item recently about a chemical company doing a capacity expansion of non-PU based insulation materials and they're targeting the European market and the release read positively about future demand.
Frank Mish: For Insulating Materials in Europe. Now, obviously, as I read the prepared remarks and listened to you so far, it didn't seem like, you know, there was much to get excited about insulating materials in Europe, which obviously would be very helpful for you. What's your take on...
Speaker Change: on that market, and when might we see a recovery there?
Speaker Change: To be honest with you, I'm rather frustrated with Europe, as you can probably tell, Frank. In one of the areas where you would think, with higher energy prices,
Speaker Change: Europe would be one of the most proactive areas on legislating construction materials and insulation standards. In reality, virtually every state in the United States has a higher and tougher energy conservation
Speaker Change: standard than most European countries do.
Speaker Change: So, when they get their act together, they really want to start looking at...
Speaker Change: You know, how do you conserve?
Speaker Change: as much as, you know, put that into an active energy policy, I believe that there's some real upside there. I think that we're sitting in a position. We have
Speaker Change: blending facilities in Europe we can make.
Speaker Change: These days it is hard to find polyurethane spray foam materials. But we know that we can export it from the U.S. Keeping in mind that we can also make it there using our own technology and polyols available,
Speaker Change: and we've got a real opportunity in Europe. But without the correct incentives, inducements and regulatory environment, I don't think we're going to see the sort of growth in Europe that we've been able to see in the U.S.
Speaker Change: Thank you.
Speaker Change: Okay, thank you, very helpful. And, you know, in the prepared remarks there was also comments about, you know, looking at possible M&A in advanced materials and you know, given, you know, obviously your leverage is kind of elevated but that's really more so about, you know, the, you know, kind of the trough or bottoming levels of EBITDA, but...
Speaker Change: Given your stock is close to yielding 5%, what are your thoughts on buybacks?
Speaker Change: Thank you.
Speaker Change: Preserve the dividend, we keep a strong balance sheet, we stay focused on our investment grade ratings, and then when we see an improvement in free cash flow we'll divvy that up between the potential of share buybacks for M&A.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question comes from Josh Spector with UBS, please proceed with your question
Josh Spector: Yeah, hi, good morning. I was curious on Europe. There's the deal that's kind of apparent between Covestro and Adnok, kind of has them keeping capacity intact in Europe. Is that an impediment to Europe improving for the NDI market for Huntsman?
Speaker Change: I've got, I'm not trying to evade an answer, I've just got no idea what...
Speaker Change: but I'm just speculating at that. So, look, I'd always rather see less capacity than more capacity, all things being equal, but I've got no idea what they're planning to do.
Speaker Change: I guess with your commentary around demand, U.S. and China versus Europe
Speaker Change: It seems like Europe would probably lag and also costs are higher, so I guess the question is can you achieve that framework if Europe costs stay higher or maybe there isn't any industrial change? Would you have a different answer around Huntsman's earnings power?
Speaker Change: Thank you for watching. We'll see you next time.
Speaker Change: I'd like to, you know, I'd like to think that whatever is lost in Europe can be made up in Asia and North America. I think if Europe continues on the path that it is now, it's going to have a higher cost structure.
Speaker Change: than the Americas and Asia.
Speaker Change: on competitive structure that might exist in Europe. But I think until the reality of the market hits and pricing hits and global trade...
Speaker Change: I'm just speculating at this point, but I don't believe that fundamentally that there's been any sort of major shift in those dynamics.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Lexi Reckboff with KeyBank Capital Markets. Please proceed with your question.
Lexi Reckboff: Good morning everyone. Peter, I wanted to ask you about pricing in MDI. In prepared remarks you say you don't have much exposure to spot.
Speaker Change: but I also recall traditionally don't have much exposure to contract as well with a big chunk of your business tied to just raw materials path through.
Speaker Change: Can you just explain what's the current state of your sort of leverage to contract benchmark contract pricing for MDI that we can observe in North America?
Speaker Change: Yeah, I think that, well, I'll just touch on all three regions, so I consider
Speaker Change: and I don't want to oversimplify this but so forgive me but let's just put it in kind of three buckets one is is how much is this spot
Speaker Change: And that's what you oftentimes will read in ISIS or these sort of publications.
Speaker Change: The other one is going to be around formula pricing, and the other one around, I would say, variable pricing, which is going to be, MDI is more than just three buckets of pricing. That variable pricing, depending on if it's pure MDI or if it's a formulated product or whatever, it's going to be all over the place.
Speaker Change: So if you look at spot materials, it's typically around 10% Europe, 10% Europe and about 40%.
Speaker Change: in China. As you look at formula pricing, it's around 20% of our total volume globally. That's going to be preponderantly in North America, it's going to be around 40%. And in Europe, it'll be lesser than that, and in China, it'll be lesser than that.
Speaker Change: And then that third bucket on the variable side, that's what's coming out of the splitter, for the most part, or into formulations or into pure MDI.
Speaker Change: That pricing is going to be on a contract, it's going to be on a customer-by-customer, very little of that is going to be throughput pricing, and that's going to be on a negotiated basis, customer-to-customer. So that's kind of the three buckets.
Speaker Change: I do think people have a tendency probably to read too much into published pricing. I think it's probably a good macro indicator, but you've just got to remember that MDI, unlike ethylene, benzene, or some of the other chemicals that are traded, the pricing of which.
Speaker Change: is regional and it is all over the place.
Speaker Change: Thanks, very helpful. Peter, in your automotive polyurethanes business, I mean it appears that
Speaker Change: European LEMs are losing share. These are some, traditionally some of your best customers, right, biggest customers in PU.
Speaker Change: How are you addressing this sort of sea change in the auto world? How are you changing your strategy in terms of going after sort of the emerging OEMs in China and elsewhere?
Speaker Change: probably four years ago, five years ago, we made more money in European auto than we did the other two regions combined.
Speaker Change: Today, that can be said about Asia, the relationships that we have with Asians, be it anything from a Hyundai in Korea to a BYD in China and so forth, the relationship and the applications, not just in traditional applications like seating, but also now with more EVs and the sound insulation and the materials and the battery and so forth. As we look at Asia, we make more money, even though that's only 40% of our...
Speaker Change: I think that as we look at our automotive business, it continues to be very stable for us.
Speaker Change: But, again, I think under the water, there are a lot of very fast-moving currents between ice and EV, between Europe and Asia, U.S.
Speaker Change: You know, but rest assured that I think we have very good platforms.
Speaker Change: to address EB&I and to address the regional formations. And that's how we've been organized and will continue to be organized.
Speaker Change: Our next question comes from Salvo D'Orontiano with Bank of America. Please proceed with your question.
Salvo D'Orontiano: Yes, thank you very much. So, firstly, you know, you mentioned your splitter before and the contract-by-contract base. I believe earlier in the year you said that
Speaker Change: the new Geismar splitter wasn't really adding any bidas so far. So where do we stand right now? Has it started contributing? And if not, why is that and what should we expect for 2025 on the splitter?
Speaker Change: Yeah, Sal, so where was we bought the...
Speaker Change: Splitter
Speaker Change: investment efforts.
Speaker Change: Guys, Mark, what really needs to happen to get the...
Speaker Change: Full benefits of that splitter is a return from a consumer perspective.
Speaker Change: on areas such as Furniture.
Speaker Change: also needs to be quite a bit stronger in North America as well.
Speaker Change: and some of our adhesive and coating, some of which ends up on the consumer side. And that really needs to be a lot stronger in order to benefit substantially from that splitter investment. We still expect that to happen over time. That's not the issue. It's all around timing. It's all around the consumer confidence.
Speaker Change: that Peter spoke about. If you think about next year, maybe $10 to $15 million year-on-year benefit, but that's really dependent upon how our furniture market develops, how automotive develops, as well as how Adidas and Coatings develop.
Speaker Change: Okay, perfect.
Speaker Change: And I also wanted to check a little bit on...
Speaker Change: on the Chinese end market, especially because I guess there's always, there is a stock in these new stimulus measures, but they don't really necessarily seem to probe the new housing market. If anything, they seem to be disincentivizing new contraction to.
Speaker Change: to boost, I guess, existing home stock prices. So, when we think about your MDI and polyurethanes business there, can you talk a little bit about your end markets and how they differ versus your US and European business?
Speaker Change: Well, I think in China we are, again, we see a very much, a very fast-growing automotive market and that's an area of benefit for us.
Speaker Change: We're pretty small there in residential housing.
Speaker Change: Again, it's a growing market for us, we look at the installation side of it and the building material side of it and so forth.
Speaker Change: consumer spending has been rather anemic in China. We also spend, or also sell quite a bit in the large infrastructure projects. So you think about central heating, central insulation, you know water
Speaker Change: maintenance, pipeline maintenance and so forth, electrical build out infrastructure. That's obviously in some of the other areas outside of polyurethanes as well. But as we look at those large projects that are going across China, we continue to see a lot of demand in that. So for us, infrastructure spending, automotive, we're both very good right now as we look in.
Speaker Change: in Asia. We're seeing some good growth in the ace markets.
Speaker Change: adhesives, coatings, elastomers, markets.
Speaker Change: But again, as we look into 2025, I hope that we start to see some recovery in the housing market.
Speaker Change: in China, and that will obviously be the catalyst for furniture, appliances, a lot of consumer spending and so forth, and that kind of just has that knock-on effect. But it's going to be, as I said in my earlier comments, it's going to be a slow and gradual recovery in this area in China.
Speaker Change: Thank you.
Speaker Change: Our next question comes from John Roberts with Mizzou host securities. Please proceed with your question
John Roberts: Thanks, Peter. Since it's Election Day, do you think a Trump versus Harris win will have any impact on Huntsman?
Speaker Change: No, not really. As I look, it's definitely going to be Donald Trump versus Donald Trump. I mean, I think 80% of the people voting are probably either voting for or against Donald Trump. So, it'll really be interesting to see which Donald Trump wins or loses the election.
Speaker Change: But as you kind of come out, I think both candidates, when you really look at it, have pretty similar views.
Speaker Change: Tariffs and trade, surprisingly, as much as the rhetoric that's been going along both lines. Trump put in a number of tariffs, and I'm not sure that Biden changed any of those tariffs over the last four years. And energy conservation is probably going to be very high on both of their lists.
Speaker Change: So, I think, you know, housing, terrace, energy, conservation, probably pretty common between the two. I think there's a split on, obviously, regulation.
Speaker Change: you know, the IRA and carbon tax and so forth.
Speaker Change: you know there's some real differences on that and unfortunately I don't think either candidate is beginning to address you know the the 900 pound grill in the room which is our national debt
Speaker Change: business plan here over the course of the next year or so.
Speaker Change: Okay, and then maybe a little bit more lower level question, but have you set your turnaround plans yet for 2025?
Speaker Change: Hello
Speaker Change: I believe that we have, I'm not sure that I have that right in front of us, I think that the one that we do have on the docket is at the end of the first quarter, I believe.
Speaker Change: We've got what we call the cluster.
Speaker Change: turn around. It's been called a whole variety of things involving the word cluster. But as you look at Rotterdam, our site there, there's
Speaker Change: four or five very large chemical plants that all come down at the same time. None of us can operate until the
Speaker Change: The last one, when the first one shuts down, the last one starts up.
Speaker Change: And so we may have a record.
Speaker Change: turn around maintenance timing and be set and ready to go when somebody's caught a small leak in a pipeline somewhere and delays everything by a week or two. But right now that is one that we're planning for at the end of the first quarter of next year.
Speaker Change: Our next question comes from Hassan Ahmed with Alembic Global. Please proceed with your question.
Hassan Ahmed: Good morning Peter and Phil.
Hassan Ahmed: You know, not to bore you guys, but just wanted to go back to a bunch of the questions that were asked about, you know, the European restructurings going on, assets being put up for sale and the like.
Speaker Change: I mean, look, one of the virtues, obviously, of the polyurethane sort of story has been, you know, it's obviously an oligopoly, right?
Speaker Change: And, you know, if I heard your comments correctly, you know, it sounds as if you're leaning towards, you know, at least some of these assets being permanently shut down.
Speaker Change: But, I mean, how do you think about, you know, players like ADNOC, other sort of, you know, state players or Asian players coming out, you know, buying up those assets and fragmenting an otherwise relatively consolidated industry?
Speaker Change: in the time that it would take to build a facility somewhere, even if it's in addition to an existing site, given the opposition that you see in large-scale chemical production and so forth.
Speaker Change: So, I'm really not sure that, unless you saw a splintering that took place of a company, I'm not sure that the whole AdNoc-Covestro deal really changes those dynamics any.
Speaker Change: Fair enough, fair enough. And, you know, a question around inventories, obviously the last couple of years since COVID have been quite complex.
Speaker Change: You know, I'm just trying to sort of figure out...
Speaker Change: You know how one should think about a potential inventory restocking, you know, I mean going back to the COVID times it seems
Speaker Change: You know, demand patterns changed dramatically because of lockdowns and the like.
Speaker Change: But it also seems now, you know, corporate's appetite for hoarding inventory has changed as well. So how does one think about a restock?
Speaker Change: you know, in light of some of these demands, sort of pulls and tugs.
Speaker Change: vis-a-vis, you know, maybe potentially, you know, companies' sort of thought processes about sort of keeping inventories lean and maybe sort of, you know, moving in that direction. I mean, how does one think about a potential restock with all these sort of moving thoughts?
Speaker Change: Well, we came out of, that's an excellent question, Tom, we came out of COVID.
Speaker Change: obviously with the supply chain was busted in many areas around the world.
Speaker Change: and I think that there was a, capital was relatively cheap.
Speaker Change: And companies had large amounts of inventory while demand was strong. Inventories were very high. And people thought they typically do during these sort of times that these things are going to continue forever. I think that when you look at the environment today, it's 180 degrees difference.
Speaker Change: Capital now is king. It's expensive. People don't want to tie inventory up or capital up.
Speaker Change: Demand seems to be anemic in a lot of areas of the world, so why keep a lot of inventory?
Speaker Change: And until I see demand picking up, there's no point in restocking.
Speaker Change: and on top of all that, in spite of conflicts in the Middle East and so forth, energy prices have been relatively flat for the last... well, I shouldn't say flat, they've been relatively stable.
Speaker Change: over the course of the last year or so. And you haven't seen a terribly volatile market that way. So...
Speaker Change: Until there's genuine demand in a particular region, I'm not sure that there's going to be widespread restocking.
Speaker Change: predict though that if and when that does happen, the chemical industry usually needs a lot more time to build up our supply. If you all of a sudden you saw
Speaker Change: interest rates drop and all of a sudden housing takes off in North America. These are supply chains that typically take a quarter to to get going and that's usually what
Speaker Change: of Illinois.
Speaker Change: So there's usually a mismatch between how quickly that restocking and panic buying takes place and the actual catalyst that causes that.
Speaker Change: Subs by www.zeoranger.co.uk
Speaker Change: Our next question comes from Kevin McCarthy with Vertical Research Partners. Please proceed with your question.
Speaker Change: Yeah, I think they'll probably remain pretty much the way they are today. You know, the U.S. has about a 30% tariff, give or take a few points on MDI and on malaic and...
Speaker Change: a number of other products and so you're, those people that are importing in today
Speaker Change: I don't see tariffs going up through the roof. I don't see them disappearing or necessarily coming off. Depending on some some recently filed cases and certain products and so forth, you might see them go up a bit.
Speaker Change: largely with the exception of
Speaker Change: of Wanhua in China that has all their production in China, with the exception of a single European site. They're obviously moving product around the world. They have for years, and they'll continue to do so. But the trade flows for most of the producers of MDI that have regional production.
Speaker Change: I see that as continuing and there's not a great deal of trade flow in MDI from one region to the next.
Speaker Change: I would say the same is probably true with Malaik and with most of the other products we produce.
Speaker Change: I would say the exception of that with Malayak would be what you see in China, there is quite a lot of overcapacity in China for Malayak.
Speaker Change: that was supposed to be the raw material for a biodegradable plastic that's coming on stream a little bit slower than I think most people anticipated.
Speaker Change: but nonetheless some of that maleic is spilling over into Europe. Other than that I think most most products are staying within region.
Speaker Change: Our next question comes from Mike Harrison with Seaport Research Partners. Please proceed with your question.
Speaker Change: Please.
Mike Harrison: Hi, good morning. You mentioned some new business wins in North America, polyurethanes. I was wondering, I guess, if you can speak to, you know, specifically what markets those are occurring in. And if they are in construction, can you maybe just talk about your competitive position?
Mike Harrison: within construction and insulation markets. Has that improved compared to a few years ago? Maybe also wrap in an update on spray foam insulation adoption today versus a few years ago. Thank you.
Speaker Change: Yeah, in construction, it's mostly, and I would say, kind of three buckets, if you will. One is going to be what we see in...
Speaker Change: The third area I would say would also be furniture and appliances and so forth. While we don't supply a lot of material that goes into appliances and some of the low-end furniture applications, others do, and that sucks a lot of MDI out of the market that goes into that kind of third bucket of construction, oftentimes.
Speaker Change: When we focus on construction, we're talking about OSB, but construction and housing also takes up a lot of MDI in other areas that aren't necessarily big markets for Huntsman but are for others, and it's a good drain for the product generally.
Speaker Change: Thank you. Thank you.
Speaker Change: Right, and then within performance products, can you talk a little bit or give us an update on the performance amines capacity expansion? I believe there are two projects going on. One for
Speaker Change: semiconductor applications and the other one in polyurethane catalysts. Are those in qualification right now and you guys are working to get some off taking place? Just wondering when we can expect to see some commercial contribution from those two projects.
Speaker Change: and the means expansion in Petrudo-Hungary.
Speaker Change: We believe that that project should be done around year-end, and then you're looking for a couple of months.
Speaker Change: and we are completed with...
Speaker Change: our other performance products expansion that's going to ultra-pure.
Speaker Change: Solvents and the mean products will be going into the cleaning and the treatment of chip production, and we're in qualifying phases right now with those materials. That project is done, is operating, and as we get those products qualified, there's not a given time on that. It usually is anywhere from three to,
Speaker Change: to nine months on those, and we started that process this past summer. So, I would say early next year that we ought to start seeing, you know, some revenues coming in from the Ultra Pure Amines production.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Arun Viswanathan with RBC Capital Markets. Please proceed with your question.
Arun Viswanathan: Great, thanks for taking my question.
Arun Viswanathan: I hope you're doing well. I guess I just wanted to ask a little bit more about what you see in 25. So, you know, both first half and second half of 24, you're around 200 million or so.
Arun Viswanathan: of Ibida.
Speaker Change: you know, in that range, maybe a little bit higher.
Speaker Change: Do you see 25 kind of evolving similar to what you saw in 24? We have seen some, you know, emerging weakness in auto, industrial, and aero.
Arun Viswanathan: And so I'm just wondering if you'd require more destocking in certain of those areas or your customers would, or if you're more poised to really leverage a recovery. Thanks.
Arun Viswanathan: and I just.
Speaker Change: Don't think it's our responsibility to be building up inventories of cushion for our customers. We'll have sufficient product to supply them.
Arun Viswanathan: But at the same time, I'm going to tie up our capital and hoping that they eventually come about.
Speaker Change: to buy the materials.
Speaker Change: As we look at automotive again, I think that we'll probably see a
Speaker Change: pretty flat
Speaker Change: US-Europe sort of environment, and I think that we're going to continue to see strong demand coming out of Asia and China in particular, and the rest of the world.
Speaker Change: is a major driver. North America is going to be around housing. China, the areas where I see where you can see material growth, it's going to affect our bottom line. And that's going to be around housing in North America. It's going to be around consumer confidence.
Speaker Change: in China and eventually is going to see a resurgence of European GDP and European spending just across the board.
Speaker Change: And, again, I see more opportunities for that to happen. There seems to be a pent-up demand right now, particularly in housing in North America. As many people have been speculating about this now for the last couple of years.
Speaker Change: and I would say the same also with China. Since the COVID lockdowns have ended in China, we really haven't seen consumer confidence and consumer spending return to China.
Speaker Change: and I think there's quite a bit of catalyst and opportunity for growth on that. As we go into 2025, we're going to be taking costs out of our business, we're going to have low inventories, and we're going to be running very lean.
Speaker Change: And if I could just clarify, thanks for that. If I can just clarify, so the move maybe from Q3 $130 million or so down to $75 at the midpoint for Q4.
Speaker Change: How much of that would you characterize as, is that mostly seasonality or has there been some...
Speaker Change: I imagine there could be some incremental demand weakness in there as well, or would you say that's mostly seasonality? And is there any, like, related inventory clearing out charges that are kind of embedded in there as well?
Speaker Change: Yeah, there'll be some inventory charges in that number that will be kind of reversals as a benefit that we saw in Q3. But most of this is going to be seasonal.
Speaker Change: If we don't see that seasonal slowness, there might be some upside here. I would personally, you know, we typically always see seasonal slowness in the fourth quarter.
Speaker Change: There's been one or two fourth quarters in the last 15 years, we haven't seen that, but I think given where we are today, you know, I think we feel
Speaker Change: Get in here to the end of the the year, you know, we look at the stimulus. It's taking place in China
Speaker Change: We look at the rate cuts around housing and that housing stock that I mentioned earlier.
Speaker Change: And, you know, I think as we also look at the MDI capacity utilization.
Speaker Change: continuing to improve.
Speaker Change: I think, you know, going into 2025, personally, I have a lot more optimism than I do pessimism.
Speaker Change: The cost actions that we've taken in the past, you know, year on year, our SG&A is flat in spite of over the last 12 to 18 months.
Speaker Change: a multi decaden-long inflationary high, and we continue to have a very strong balance sheet. And so, that we've closed as 2025 racist, I have a lot more optimism and pessimism.
Speaker Change: Operator, why don't we take one more question? I think we're coming to the top of the hour here.
Speaker Change: Absolutely. And that question comes from Lawrence Alexander with Jeffries. Please proceed with your question.
Speaker Change: Hey, this is Dan Rizwan from Lawrence. Thank you for fitting me in at the last second here. So I was seeing that the Boeing strike just ended and I think you mentioned that that strike was a three to four million dollar even a headwind in the quarter. So if it ends today or ends within the next couple days, does that, I mean, provide upside or how does that kind of flow through to you guys for Q4 and beyond?
Speaker Change: I'd love to see it.
Ryan Connolly: Ryan Connolly.
Ryan Connolly: A lot of our inventory is sitting in wings that are waiting to go on planes. The planes are being delayed because they're waiting for a...
Ryan Connolly: where more and more of the construction of an airplane is now being subbed out to third parties. This strike will not necessarily be back to normal in a week or two. I think we'll be lucky to get back.
Ryan Connolly: Our demand starts picking up. The customers that we supply are the customers that then subsequently supply Boeing. By the time that hits us, it's probably going to be closer to year end than it is today.
Ryan Connolly: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you. Thank you.
Ryan Connolly: Thank you.
Speaker Change: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.